Latest / The Financial Exchange Show / The unexpected winner of rising US tariffs...

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The unexpected winner of rising US tariffs... · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Paul Lane
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Speaker 1: and Mark Vandetti.
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Speaker 2: Kicking off the second hour of the Financial Exchange. Paul Lane,
1:14
Speaker 2: Mark Vendetti, and Tucker Silva here with you as we
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Speaker 2: head into this second to last trading day of the year.
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Speaker 2: Tomorrow will be the last trading day of twenty twenty five.
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Speaker 2: We have markets relatively flat at the moment after the
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Speaker 2: S and P five hundred had posted back to back losses,
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Speaker 2: but overall it has been another very strong year for stocks.
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Speaker 2: We kick off the second hour of our program focusing
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Speaker 2: a little bit more on tariffs, and we are now
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Speaker 2: about close to twelve eight months into the tariffs that
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Speaker 2: we're announced back in April, and one unintended or perhaps
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Speaker 2: unintended consequence of some of these tariffs has been a
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Speaker 2: beneficiary that sits to the south of US, which is Mexico.
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Speaker 2: They have seen a significant uptick in terms of exportation
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Speaker 2: of manufactured goods that exclude auto's. Auto exports to the
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Speaker 2: United States have fallen about six percent from where they
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Speaker 2: were over the twenty twenty four period from January through November,
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Speaker 2: but manufacturing exports of other goods have risen about seventeen
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Speaker 2: percent in that same span of time. We're expected to
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Speaker 2: reach trading goods between the US and Mexico of about
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Speaker 2: nine hundred billion dollars this year. The effective teart rate
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Speaker 2: from Mexico sits at about four point seven percent, and
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Speaker 2: the claim here made by US Trade Representative Jamison Greer
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Speaker 2: is that Mexico has captured about twenty five percent of
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Speaker 2: the reduction in the US trade deficit with China through
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Speaker 2: being sort of the more local provider of goods that
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Speaker 2: are not being exported from China.
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Speaker 3: So where do we go with this? Do we I mean,
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Speaker 3: do we expect to What is what's your sense of
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Speaker 3: the point of tariffs at this stage? What is your
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Speaker 3: sense of the objective?
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Speaker 2: The objective as stated by the administration was to try
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Speaker 2: and bring manufacturing back to the United State.
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Speaker 3: Okay, kind of just on that point, we've lost eighty
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Speaker 3: thousand manufacturing jobs in the last year, more accurately since
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Speaker 3: this administration came into office. So fail, So what I
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Speaker 3: don't know, Okay, So raising revenue I don't know. By
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Speaker 3: the way, I'm not I'm not going to harp on
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Speaker 3: that right now because that could have Yeah.
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Speaker 2: It's too small to sample sized till I'm not wrong, No,
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Speaker 2: it isn't.
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Speaker 3: It's fair though we've lost eighty thousand manufacturers. I'm not
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Speaker 3: ready to grade that out yet, Yeah, but I'm willing
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Speaker 3: to say so. Maybe right raising revenue, We've raised two
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Speaker 3: hundred billion dollars in tariffs, but that wasn't the stated rationale,
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Speaker 3: and he may the administration may have to give that
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Speaker 3: back if the Supreme Court says actually Congress should have
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Speaker 3: approved those tariffs. So we don't know whether.
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Speaker 2: We can keep that right.
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Speaker 1: Right.
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Speaker 3: So shifting in shifting investment into the United States, well,
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Speaker 3: investment actually detracted from GDP in the in the last quarter.
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Speaker 3: So there's no there's no manufacturing employment or investment boom.
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Speaker 3: But as you said, maybe that'll take that year.
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Speaker 2: That I'm willing to give a couple of years before
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Speaker 2: you see that because the announcements, and to be fair,
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Speaker 2: this can cut both ways, right. There can be announcements
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Speaker 2: that there's going to be manufacturing investment, but there can
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Speaker 2: be very slow stall progress to that manufacturing investment, and
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Speaker 2: so at some point you do have to pull out
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Speaker 2: the report card and eventually make an assessment off. But
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Speaker 2: Eli Lilly, there's been other there, you know, pharmaceutical manufacturers
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Speaker 2: that are trying to make investment here. There's other areas
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Speaker 2: of the economy that there has been the semiconductor fabs
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Speaker 2: out in Arizona, there are areas where there has been
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Speaker 2: that that was all.
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Speaker 3: Pre the chips, which I didn't like either right.
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Speaker 2: But ultimately too soon to really to score that out yet.
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Speaker 2: Here's where I'll go is. I was always skeptical on
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Speaker 2: this idea that you could truly bring back a ton
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Speaker 2: of manufacturing to the United States. It's a very difficult
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Speaker 2: challenge to maybe when you're talking about the shortage of
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Speaker 2: labor here relatives to some of the other countries, and
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Speaker 2: the costs that that labor comes with. Whether you're looking
5:12
Speaker 2: at minimum.
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Speaker 3: You'll be willing to pay two hundred dollars for a toaster.
5:15
Speaker 3: Jdvanis thinks you should.
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Speaker 2: Thirty seven hundred bucks for an iPhone. Was one that
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Speaker 2: was thrown out if you wanted to manufacture it here. Domestically.
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Speaker 2: I get it all understood points, and I think that
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Speaker 2: people have to have a realistic view on supply chains
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Speaker 2: that all manufacturing. I think most would acknowledge it. It's
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Speaker 2: not as if all manufacturing can be done here. I
5:34
Speaker 2: am behind this idea that there are certain aspects of
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Speaker 2: the economy for national security purposes that I would like
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Speaker 2: to see more investment in domestic manufacturing to keep our
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Speaker 2: country safe, whether that be on the semiconductor side, those
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Speaker 2: initiatives I can get behind, because I do think that
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Speaker 2: there's a big difference between a chip that goes into
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Speaker 2: an ANDROL droint drone, for example, compared to a T
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Speaker 2: shirt or sweatshirt. You know that that's we have.
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Speaker 3: To make everything that could be viewed as important for
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Speaker 3: national security here?
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Speaker 2: What about about that's broadbush?
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Speaker 3: What about well, I don't, I mean, I say everything
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Speaker 3: some Why why just semiconductors? Why not the steel that
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Speaker 3: goes into tanks?
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Speaker 2: I can't go.
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Speaker 3: Can we make all the steel here that goes into tanks? There?
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Speaker 3: They're important?
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Speaker 2: You have to have diversification. How about that in the supply?
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Speaker 3: What about the fuel that's used for tanks and airplanes?
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Speaker 3: Should we be totally independent when it comes to not
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Speaker 3: just providing for consumption, but but for potential military The.
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Speaker 2: Difference between independence are solely reliant upon you know.
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Speaker 3: So with respected chips, can we buy some chips from
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Speaker 3: abroad even if they have chips with potential military application?
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Speaker 2: To one in office, making these You.
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Speaker 3: Just said there could be exceptions. I'm just wondering where
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Speaker 3: you draw.
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Speaker 2: The line exceptions on which on.
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Speaker 3: Tariffs and what we should be and where we should
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Speaker 3: aim for independence? Autonomy?
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Speaker 2: Uh not autonomy. I say autonomy, so.
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Speaker 3: Some chips we can import?
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Speaker 2: Sure, Okay, to have the capability to be able to
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Speaker 2: do it. You don't agree with having the capability to
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Speaker 2: do things domestic welloth.
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Speaker 3: Fully or just partially.
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Speaker 2: I mean of what use is partially? Of?
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Speaker 3: What use is partial capability in a two ocean war
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Speaker 3: if we're fighting with Europe against Russia in the East,
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Speaker 3: which is entirely conceivable right now, and fighting China over Taiwan,
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Speaker 3: entirely conceivable. In fact, you could argue that the odds
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Speaker 3: of both those scenarios are greater than fifty Those are nods,
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Speaker 3: but the chance is greater than fifty percent in the
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Speaker 3: next five years. Arguably we should be totally And I'm
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Speaker 3: not sure how I feel about this. If war is
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Speaker 3: imminent in Europe, there's already a war in Europe, there
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Speaker 3: could be a war in the Pacific. Are we going
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Speaker 3: to be looked at by posterity as stupid for not
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Speaker 3: being for not aiming for more autonomy. I'm not sure
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Speaker 3: tariffs are the right way to do it, but should
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Speaker 3: there be more urgency. I'm turning the conversation a little
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Speaker 3: bit here because I'm not trying to corner you over tariffs.
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Speaker 3: I mean, I don't like them. No economists likes tariffs
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Speaker 3: for the same reason they don't like price control, like
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Speaker 3: we talked about in the last hour. They stifle innovation,
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Speaker 3: they reduce productivity. They we can never go back to
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Speaker 3: being a manufacturer and economy any sooner than we could
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Speaker 3: revert to being an agricultural economy. These trends are global.
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Speaker 3: But all that aside, I mean, is there a case
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Speaker 3: for more urgency and something more effective than than tariffs?
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Speaker 3: If the rationale is national security, isn't that rationale more
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Speaker 3: compelling than ever? We could be looking at a two
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Speaker 3: front war here in the next five to seven years.
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Speaker 3: This is a little bit more geopolitically than we usually get.
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Speaker 2: But what the heck, I'm ready to punt on the
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Speaker 2: commentary on potential war and.
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Speaker 3: National security is a potential war though.
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Speaker 2: If that's the rationale, so other measures outside of tariffs
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Speaker 2: not for me to decide, Not for me to decide.
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Speaker 3: I have opinions about tariffs that you were ready to.
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Speaker 2: That's the economy, that's the stuff that we cover every
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Speaker 2: single day.
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Speaker 3: Yeah, but I'm saying, are they the most effective way.
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Speaker 2: To I don't think so. I don't think that we
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Speaker 2: definitely agree on I don't think that the most effective way.
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Speaker 3: Yeah, well, I agree, it's like a second or third
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Speaker 3: best solution. If you want to encourage more manufacturing, specifically
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Speaker 3: for military purposes, then just and here, the Department of
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Speaker 3: Defense is making private sector investments. They've done it. It
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Speaker 3: made some it's been on a half measure basis, but.
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Speaker 2: It's the same. It's similar to the real estate conversation
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Speaker 2: that we're having at the end of the first segment.
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Speaker 2: Is that, yeah, you know, controlling prices or you know,
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Speaker 2: establishing rent control or in this case, imputing tariffs into
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Speaker 2: sort of dissuade people from exporting certain items. Here, does
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Speaker 2: that really.
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Speaker 3: Really blunt an imperfect way to do it?
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Speaker 1: Right?
9:41
Speaker 3: And if we're really worried about national security.
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Speaker 2: You should control the focus on the supply side. Initiatives too,
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Speaker 2: give some incentives to have manufacturing mount.
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Speaker 3: Like the idea of government own steel company, which, by
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Speaker 3: the way, we have this administration has a share in
9:53
Speaker 3: the nipon Steel. US steel a combinentity. But just go
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Speaker 3: all out and if I all the steel mills, if
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Speaker 3: that's now in production, will be inefficient. Nobody's gonna want
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Speaker 3: to nobody's gonna want to deal with the federal government.
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Speaker 3: We're making big steel purchases. But if it's if the
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Speaker 3: argument is that compelling, then just do it.
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Speaker 2: We're going to take a break here on the Finished Exchange.
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Speaker 2: When we come back, we're going to be talking a
10:16
Speaker 2: little bit about the housing market as well as the
10:19
Speaker 2: state of electric vehicles. That's right after this break.
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12:23
Speaker 2: Talking a little bit about the housing market here. This
12:27
Speaker 2: is a piece from Bloomberg by Connor Sen. The housing
12:29
Speaker 2: market is moving in favor of gen Z. There has
12:32
Speaker 2: been a lot of negative sentiment about the housing market
12:36
Speaker 2: over the last year or so. In the last year
12:38
Speaker 2: was a pretty dismal year for the housing market in general.
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Speaker 2: But Connor Sen outlines a couple different points in here
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Speaker 2: that perhaps is striking a more optimistic tone for those
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Speaker 2: people in gen Z who those oldest members of gen
12:53
Speaker 2: Z will be turning thirty in twenty twenty seven, so
12:56
Speaker 2: they're sort of reaching that household formation a there. We're
13:01
Speaker 2: seeing that there is more inventory that has been growing
13:04
Speaker 2: over the course of this year, largely due to an
13:08
Speaker 2: oversupply of housing in Florida in the South as well
13:12
Speaker 2: as some of the Sunbelt area. And also what we're
13:15
Speaker 2: seeing is that there is a tremendous amount of the
13:18
Speaker 2: US populations in the baby boomers now its oldest members
13:22
Speaker 2: are turning eighty. So the mortgage giant Freddy Mack estimates
13:26
Speaker 2: that the number of boomers owning households has declined by
13:30
Speaker 2: four hundred thy and twenty twenty five, and that will
13:33
Speaker 2: continue to offer decline in home ownership that will exceed
13:38
Speaker 2: eight hundred thousand a year by twenty thirty. So perhaps
13:42
Speaker 2: some some signs of optimism out there with inventory climbing
13:45
Speaker 2: back up, who knows where we'll go from an interest
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Speaker 2: rate perspective, as well as the shift in demographics going
13:52
Speaker 2: on throughout the country with more baby boomers perhaps stepping
13:56
Speaker 2: away from that single family home residence out there. I'm
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Speaker 2: not sure if I'm willing to ring the victory bell
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Speaker 2: just yet on the housing front, but some reasonable points
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Speaker 2: that perhaps could be a catalyst, perhaps not next year,
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Speaker 2: but maybe the following year for the housing market. The
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Speaker 2: biggest thing that isn't addressed is the supply side piece
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Speaker 2: that really we have not seen tremendous growth in the
14:21
Speaker 2: amount of increased when when on the new construction home.
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Speaker 3: Yeah, yeah, this is one of those be careful what
14:30
Speaker 3: you wish for situations. Home prices coming down may be
14:33
Speaker 3: a result of broader economic weakness. In fact, that's probably
14:37
Speaker 3: going to be the trigger.
14:40
Speaker 2: It certainly could be there. Who knows on the other
14:43
Speaker 2: side of factors with interest rates, if that could perhaps
14:46
Speaker 2: be a catalyst to get more buyers into the market.
14:50
Speaker 2: But that is not the economics, Yeah not if it
14:54
Speaker 2: comes typical home prices increase on employment and decrease on
14:58
Speaker 2: the tenure Treasury. It's it's challenging to see. Yeah, I
15:01
Speaker 2: don't know that would mean a boon for housing.
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Speaker 3: Yeah. Me, I don't have the data in front of me,
15:06
Speaker 3: and the Schiller series only goes back to eighty seven.
15:09
Speaker 3: But I'd be shocked if there was ever a period
15:12
Speaker 3: when home prices were either stable or falling and the
15:18
Speaker 3: broader environment was not characterized by economic weakness. This is
15:22
Speaker 3: a tricky thing. Is it demand or supply? That's and
15:25
Speaker 3: I'm not really asking, it's kind of rhetorical because there
15:28
Speaker 3: are people who specialize in this area. We haven't been
15:31
Speaker 3: able to tease out a satisfactory answer. But is demand
15:34
Speaker 3: too hot or is supply restrained by local restrictions or
15:39
Speaker 3: is it both? Probably both?
15:43
Speaker 2: Yeah, it's challenging. If you look at the dynamics, Like
15:47
Speaker 2: you said, it's hard to grasp which side of it
15:49
Speaker 2: is really making more of an impact from a pricing standpoint.
15:52
Speaker 2: If we look at the US National Home Price Index,
15:56
Speaker 2: it rose just about one point three percent in September
15:59
Speaker 2: from a year ago, So that is below some of
16:01
Speaker 2: the growth that we've seen in average hourly earnings of
16:05
Speaker 2: American workers, But that down payment still looms as a
16:08
Speaker 2: big challenge for a lot of homers out there. Electric
16:11
Speaker 2: vehicles had a bumpy road in twenty twenty five and
16:15
Speaker 2: one pleasant surprise here. Electric vehicles is an area that
16:20
Speaker 2: was of tremendous focus and investment during the Biden administration,
16:23
Speaker 2: but obviously with the sunset of the federal tax credit
16:27
Speaker 2: for seventy five hundred dollars that occurred in the fall
16:30
Speaker 2: of this year, there has sort of been dwindling demand.
16:34
Speaker 2: You also have global pressure. This is not impacting the
16:37
Speaker 2: US market directly, but China is pumping a lot of
16:40
Speaker 2: these very subsidized electric vehicles in Europe and other parts
16:45
Speaker 2: of the global economy, the global sphere, and really on
16:49
Speaker 2: the United States side of things, you just haven't really
16:52
Speaker 2: seen the same demand that was once thought for electric
16:55
Speaker 2: vehicles out there, and as a result, CEOs like GMS
17:00
Speaker 2: what's her name, mar I think is her name are
17:03
Speaker 2: who have reduced investment within the electric vehicle space. Yeah.
17:09
Speaker 3: I guess it's a little harsh to say nobody wants them,
17:12
Speaker 3: because some consumers clearly do. We couldn't buy a nice,
17:15
Speaker 3: cheap ev I don't particularly want one, but we couldn't
17:18
Speaker 3: buy one from say, manufactured in China if we wanted it.
17:22
Speaker 3: Another reason why how another example of how trade restrictions
17:26
Speaker 3: decrease welfare. I can't get something now. I don't personally
17:29
Speaker 3: want one, but I'm sure a lot of people would
17:31
Speaker 3: consider an inexpensive Chinese ev You just can't get it.
17:35
Speaker 3: So the market's so distorted, I guess, is my point,
17:37
Speaker 3: both by trade restrictions and by these wild changes in
17:41
Speaker 3: government policy. You got towns installing chargers, and now the
17:45
Speaker 3: subsidies are being pulled away and fewer people are driving
17:48
Speaker 3: these things. So there's this these vacant spaces with charges
17:52
Speaker 3: on them, and my town of rent them and elsewhere.
17:56
Speaker 3: These wild swings and policy are just not helpful.
18:00
Speaker 2: To the point. On the policy changes, we had Cox
18:04
Speaker 2: Automotive estimate that electric vehicles hit an all time high
18:08
Speaker 2: of eleven point seven percent of the new vehicle market
18:11
Speaker 2: in September, but then sales crashed by fifty percent in October,
18:14
Speaker 2: and that's directly tied to the sunsetting of that seventy
18:17
Speaker 2: five hundred dollars federal tax credit that I was alluded
18:21
Speaker 2: to alluding to earlier. Here it seems as if JD
18:25
Speaker 2: Power indicates that there is some new car shoppers that
18:28
Speaker 2: are still very interested in buying an EV. But to
18:31
Speaker 2: your point, it is challenging to keep up with all
18:33
Speaker 2: of the policy changes. And then you have the infrastructure
18:36
Speaker 2: side of things, which is not perfect in terms.
18:39
Speaker 3: Of always a big impediment or deterrent, maybe more accurately,
18:44
Speaker 3: and now with the radical change in regime from Biden
18:47
Speaker 3: to Trump, clearly this is the sector. This concept, if
18:53
Speaker 3: you will, is out of favor. Would I make an
18:55
Speaker 3: investment like that, not knowing if charging, knowing, if arging
19:00
Speaker 3: infrastructure was going to continue to be developed.
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Speaker 2: Yeah, there certainly has been more focus on those more
19:07
Speaker 2: profitable SUVs from some of the big US car manufacturers
19:10
Speaker 2: out there. Sure to adding into the break here, markets
19:13
Speaker 2: in relatively flat territory really not a ton of action
19:17
Speaker 2: going on there. The metals though, continue to swing up significantly,
19:21
Speaker 2: Silver up eight percent today and gold is up close
19:25
Speaker 2: to one percent as well. We're going to take a
19:27
Speaker 2: quick break here, but when we come back, we'll have
19:29
Speaker 2: Wall Street Watch as well as the answer to the
19:31
Speaker 2: trivia question right after this break.
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Speaker 4: Markets are mixed and quiet, as Wall Straight awaits minutes
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Speaker 2: At two o'clock.
20:07
Speaker 4: Right now, the Dow is down about a tenth of
20:13
Speaker 4: percenter sixty one points, SMP five hundred is edging two
20:16
Speaker 4: points higher, NASDAC up up about a tenth of a percenter,
20:20
Speaker 4: twenty nine points higher, RUSS two thousands down two tenths
20:24
Speaker 4: of one percent ten Your treasury yield is flat at
20:28
Speaker 4: four point one one eight percent, and crude oil is
20:33
Speaker 4: edging higher, trading a fifty eight dollars and nineteen cents
20:36
Speaker 4: a barrel. Some acquisition news from Meta this morning, after
20:39
Speaker 4: the Facebook parent announced it has acquired Singapore based AI
20:42
Speaker 4: startup Manus, The Wall Street Journal reported that Meta is
20:45
Speaker 4: closing the deal at more than two billion dollars. In
20:49
Speaker 4: a statement, Metas said that its acquisition was aimed at
20:52
Speaker 4: accelerating AI innovation for businesses and integrating advanced automation into
20:57
Speaker 4: its consumer and enterprise products and including its Meta AI assistant.
21:02
Speaker 4: Meta shares are up over one percent Meanwhile, Bloomberg is
21:05
Speaker 4: reporting that Walmart customers are having issues accessing the retailers
21:09
Speaker 4: online services. More than six thousand customers reported they were
21:13
Speaker 4: unable to access the app or website around seven o'clock
21:16
Speaker 4: this morning in New York. According to data collected by
21:19
Speaker 4: the Website down Detector, about seventy percent of those problems
21:23
Speaker 4: were linked to the mobile app, while a quarter flagged
21:26
Speaker 4: issues with the website. Walmart shares are dipping at the moment. Elsewhere,
21:31
Speaker 4: Applied Digital set of plans to spin out its cloud
21:33
Speaker 4: business and combine it with Exo Bionics. Applied Digital shares
21:38
Speaker 4: are now up two percent, while XOS stock is rallying
21:42
Speaker 4: one hundred and twenty three percent, and mining stocks including
21:46
Speaker 4: Neumont and Barrack are bouncing back and up anywhere between
21:49
Speaker 4: one and two percent after metals rebounded from yesterday's tumble.
21:54
Speaker 4: I'm Tucker Silva and that is Wallstree watch. In the
21:57
Speaker 4: previous segment, we asked you the Trivi question who entity
22:00
Speaker 4: replaced on the half dollar coin? That would be Benjamin Franklin,
22:05
Speaker 4: ED from Enfield, Connecticut, is our winner today taking on
22:08
Speaker 4: the Financial Exchange Show t shirt. Congrats to Ed and
22:11
Speaker 4: we play trivia every day here in the Financial Exchange.
22:14
Speaker 4: See complete contest rules at Financial Exchange Show dot com.
22:18
Speaker 2: By far, the biggest story of this year from a
22:21
Speaker 2: market perspective has been the artificial intelligence trade, and the
22:24
Speaker 2: AI chip makers have seen a tremendous amount of growth
22:28
Speaker 2: in their revenue, with the semiconductor companies achieving over four
22:32
Speaker 2: hundred billion dollars in combined sales in twenty twenty five.
22:36
Speaker 2: Driven by that AI growth, Goldman Sachs estimates that Nvidia
22:40
Speaker 2: alone will sell more than three hundred and eighty billion
22:43
Speaker 2: in GPUs in twenty twenty six, and the analysts from
22:47
Speaker 2: facts that are anticipating that some of the big companies
22:50
Speaker 2: that do a lot of the chip semiconductor work will
22:52
Speaker 2: top over five hundred and forty billion of sales of
22:56
Speaker 2: chips in twenty twenty six. Really, it's an interesting point.
22:59
Speaker 2: It's probably my favorite story to track and sort of cover,
23:03
Speaker 2: is all of the investment and just significant demand around
23:08
Speaker 2: artificial intelligence. And right now twenty twenty six seems to
23:11
Speaker 2: bode to be moving to a bit of a transition
23:13
Speaker 2: where in video was able to take so much market
23:16
Speaker 2: share and reach these astronomical valuations of four and a
23:20
Speaker 2: half trillion of market cap because of just tremendous revenue growth.
23:23
Speaker 2: Even over the course of the last year it doubled
23:26
Speaker 2: its revenue. It has really been one of the biggest
23:29
Speaker 2: beneficiaries if you look at the artificial intelligence story in general,
23:34
Speaker 2: and they designed the graphics processing units or GPU chips
23:38
Speaker 2: that are used in training all these models. If for
23:40
Speaker 2: people out there that use CHATTBT or any of the
23:44
Speaker 2: other ones, Gemini, any of these artificial large language models,
23:47
Speaker 2: the training portion is really where in Video's chips were
23:51
Speaker 2: used extensively basically training these models on everything that's on
23:56
Speaker 2: the Internet and just copious amounts of texts. And now
23:59
Speaker 2: the shift will be because these models have been relatively
24:02
Speaker 2: well trained, is to one of more what's called inference,
24:05
Speaker 2: which is basically trying to figure out how to respond
24:08
Speaker 2: to a certain question based off all of the knowledge
24:11
Speaker 2: that these large language models have a mass. And so
24:13
Speaker 2: as a result of that, you've seen strategic postering by
24:17
Speaker 2: Nvidia to try and get more of a foothold on
24:20
Speaker 2: the chips that are behind that inference work rather than
24:23
Speaker 2: just being the dominant player in training. And all the
24:28
Speaker 2: other effects that trickle down here are the sort of shovel,
24:33
Speaker 2: the pick and shovel sort of approach to building out
24:36
Speaker 2: these data centers, which could be facing some significant constraints.
24:40
Speaker 2: We've talked a lot about on the program that to
24:42
Speaker 2: build out these data centers that are used within artificial intelligence,
24:46
Speaker 2: it requires, first of all, a significant amount of capital investment,
24:50
Speaker 2: but also there's a lot of materials, whether you're talking
24:53
Speaker 2: about HVAC or just the building materials in general, that
24:57
Speaker 2: are required. So it's a fascinating story to monitor for
25:01
Speaker 2: twenty twenty six, and I do think some of the
25:03
Speaker 2: demand for more of these hard assets such as power
25:06
Speaker 2: and electricity could play a big factor in what we
25:09
Speaker 2: see for twenty twenty six.
25:10
Speaker 3: Here.
25:13
Speaker 2: How do they use inference inferences? So basically, let's think
25:17
Speaker 2: of a much smaller example. All the information that you
25:19
Speaker 2: and I have accumulated throughout our career is our training
25:23
Speaker 2: and being taught on economic textbooks or anything finance related.
25:27
Speaker 2: The inference is going back into your memory reserve and
25:31
Speaker 2: pulling out an answer to a certain response. That is
25:34
Speaker 2: the inference is you've been trained on all this information,
25:38
Speaker 2: it's going back in there and picking out the right
25:39
Speaker 2: pieces of information that will answer a certain question, and
25:43
Speaker 2: so that is a different process than just feeding all
25:47
Speaker 2: of the information to train a model. It's going back
25:50
Speaker 2: and picking out selective So one.
25:52
Speaker 3: Of those areas where I don't think anybody outside of
25:54
Speaker 3: coders knows what they're talking about. So it's very hard
25:57
Speaker 3: for and forgive me, but they don't. It's very hard
25:59
Speaker 3: for an invest person to make a determination as to
26:03
Speaker 3: whether any of this stuff is for real absent tangible
26:08
Speaker 3: results bottom line type results increases in productivity and profits
26:14
Speaker 3: that are directly attributed to some process that was improved
26:18
Speaker 3: by AI. Because the computer part of this is so
26:21
Speaker 3: arcane that only a programmer can make a credible pronouncement
26:29
Speaker 3: about whether or not something is working or is likely
26:32
Speaker 3: to work. So everybody in finance, the people that blow
26:35
Speaker 3: on a writing these data centers, all these folks that
26:38
Speaker 3: Oracle for example, that's effectively become a data center operating
26:43
Speaker 3: management company. As I interpret what's been in the news lately,
26:48
Speaker 3: they're all just sort of taking experts coders words for it,
26:54
Speaker 3: and that to me is just huge gap between the
26:58
Speaker 3: promise and what it's actually going to do for the economy.
27:01
Speaker 3: And there's no way of evaluating whether or not some
27:04
Speaker 3: of the more optimistic claims are bs.
27:09
Speaker 2: That's usually the common refrain. And I'm not saying that
27:12
Speaker 2: there are a million examples out there. It's still in
27:14
Speaker 2: this infancy. But if you look at H. Robinson Worldwide,
27:17
Speaker 2: which is a global logistics provider, they started investing in
27:20
Speaker 2: artificial intelligence systems back in twenty twenty two and have
27:23
Speaker 2: reported recently in their Q three numbers back in the
27:26
Speaker 2: end of October that they did see revenue and productivity
27:30
Speaker 2: gains from the system that they had implemented over the
27:33
Speaker 2: course of the three years. So that's highlighting well, you know,
27:35
Speaker 2: it's attributable to that though they stayed in there. I
27:39
Speaker 2: had to take I can't just say that they're making MIT.
27:42
Speaker 3: Folks at MIT did a study six months ago or so.
27:47
Speaker 3: They concluded that a very small fraction less than five
27:51
Speaker 3: percent of investments in generative AI were actually useful. Now,
27:56
Speaker 3: this is not unusual. By the way, you have to experiment.
28:00
Speaker 3: So I guess if we see more examples like that,
28:02
Speaker 3: it will validate the investment. But it has to be verifiable.
28:07
Speaker 3: That's six A huge focus is going to be and
28:10
Speaker 3: how long will investors be patient? Who can't I certainly
28:14
Speaker 3: don't claim to understand it. I submit that nobody in
28:17
Speaker 3: finance with an MBA or a generalist could understand it
28:21
Speaker 3: because coding is so complicated. We're going to need to
28:26
Speaker 3: see tangible results at some point in the next how
28:30
Speaker 3: many years for investors to continue to throw capital at
28:32
Speaker 3: this and maybe those tangible results are already manifested. And
28:36
Speaker 3: say the big jump in productivity that apparently happened in
28:39
Speaker 3: the second quarter of this year, unemployment went up GDP
28:42
Speaker 3: went up by a lot. The only explanation there is
28:44
Speaker 3: that people are producing more.
28:46
Speaker 4: When the holidays roll in and the cold settles over
28:49
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28:52
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28:55
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28:59
Speaker 4: the Second Land. This December through early January, Saint Croix
29:03
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29:06
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29:13
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29:16
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29:21
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29:23
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29:29
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29:43
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29:47
Speaker 4: Go to visit USVII dot com and book your trip today.
29:51
Speaker 4: That's visit USVII dot com.
29:55
Speaker 2: Not sure how I feel about this next story. The
29:57
Speaker 2: stealth tactic bosses are using to get you back to
30:00
Speaker 2: the office. A piece here out of the Wall Street Journal,
30:02
Speaker 2: where basically the outline there was a huge wave of
30:06
Speaker 2: return to office mandates that were sort of mixed in
30:09
Speaker 2: terms of their results. Now they're pulling out something called
30:12
Speaker 2: a hybrid creep. This is the idea that you could
30:16
Speaker 2: use a combination of carrot and stick approach that will
30:19
Speaker 2: encourage people to get back into the office. So it's
30:21
Speaker 2: tying promotions to office and attendance According to a human
30:26
Speaker 2: resources consultant, Jay Johnson, rewarding someone who shows up more
30:30
Speaker 2: than required sends a message to the whole team. I
30:33
Speaker 2: just don't. I just I'm not behind that. I really,
30:36
Speaker 2: whether someone shows up to the office or not, ultimately,
30:40
Speaker 2: you should be judged on the productivity that you have
30:44
Speaker 2: and just the metrics that you reach within your job.
30:47
Speaker 2: Whether you're there or not, the results are going to
30:49
Speaker 2: speak for themselves. So just because someone shows up to
30:52
Speaker 2: the office more doesn't make them a better more productive
30:56
Speaker 2: employee than someone who doesn't. You have to judge them
30:59
Speaker 2: on the merits of their work, not just some sort
31:01
Speaker 2: of arbitrary thing. Do you show up to the office
31:04
Speaker 2: more than the I think it's like missing the mark.
31:07
Speaker 3: It's mismanagement too, it's managing. It's frontline manager level laziness
31:11
Speaker 3: to an extent. It's easy to track attendance, right, it's
31:15
Speaker 3: easy to quantify. It's inherently it's it's it's it's it's
31:19
Speaker 3: arguably the definition the essence of what's quantifiable, and you
31:23
Speaker 3: don't actually have to dig into somebody.
31:25
Speaker 2: It doesn't improve How does that improve your business? You know?
31:28
Speaker 2: Just tracking someone's attendants? How how can you tie that
31:31
Speaker 2: in no.
31:32
Speaker 3: For for junior. Look, if you're running a big firm
31:36
Speaker 3: like tens of thousands of people junior more junior employees
31:40
Speaker 3: who need to who are effectively learning on the job
31:43
Speaker 3: and through mentoring, of course they have to to be there.
31:46
Speaker 2: I agree with that. Yeah, I agree with that. That's
31:48
Speaker 2: something that when you're starting on your career, there's something
31:51
Speaker 2: to be said about being in the office and getting
31:54
Speaker 2: that face to face contact. But eventually, as you develop
31:56
Speaker 2: in your career, you should just be judged on, you know,
31:59
Speaker 2: whether you're oct none. We're gonna take a quick break
32:02
Speaker 2: here on the Financial Exchange. When we come back, we're
32:04
Speaker 2: gonna be doing a little bit of stack roulette. Stick
32:06
Speaker 2: with us right after this break.
32:08
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32:11
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32:15
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32:42
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32:45
Speaker 4: American Veterans Department of Massachusetts. Planning is well underway for
32:49
Speaker 4: the twenty twenty six DAV five k. And if you
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33:18
Speaker 2: Time for a little bit of stack roulette and Mark,
33:21
Speaker 2: I'll let you bet lead off here.
33:23
Speaker 3: This story comes via Drudge Report, not one of our
33:25
Speaker 3: usual sources, but when I peruse Drudge links to a
33:30
Speaker 3: story about a nineteen ninety eight gallop and USA Today
33:35
Speaker 3: survey asked Americans, what is the probability you think X
33:39
Speaker 3: will occur? With what probability will ex occur by twenty
33:43
Speaker 3: twenty five? Oh interesting, So this is like nearly thirty
33:45
Speaker 3: years ago. So probability that, for example, emergence of a
33:48
Speaker 3: deadly new disease which we kind of had seventy five
33:52
Speaker 3: percent of it. You don't, oh no, no, yeah, okay, okay,
33:55
Speaker 3: yeah yeah, because I was on the fence, I think
33:58
Speaker 3: COVID's pretty dead late seventy five percent interesting, yes, And
34:01
Speaker 3: there are some other sort of socio political things, you know,
34:04
Speaker 3: will this type of marriage be commonplace? Will we have
34:06
Speaker 3: a president from this ethnicity? Most of these things, if
34:10
Speaker 3: a lot of them, are social, not financial, or of
34:12
Speaker 3: broader interest, so I'm not going to get into them.
34:14
Speaker 3: I guess my point here is that most of the
34:16
Speaker 3: things that people and you can find this if you
34:18
Speaker 3: just google, if you're a Drudge viewer, he links to it,
34:22
Speaker 3: or if you just google Gallop nineteen ninety eight what
34:24
Speaker 3: Americans expected to happen by twenty twenty five or something
34:27
Speaker 3: like that, it'll take you to this story. And the
34:30
Speaker 3: headline of this story is Americans were surprisingly I always
34:34
Speaker 3: want to say prescient. It might be prescient, but you
34:36
Speaker 3: know what I mean, they've made pretty good predictions, and
34:40
Speaker 3: indeed we did. It speaks to the wisdom of crowd's idea.
34:44
Speaker 3: It's not really wisdom of crowds, but is.
34:46
Speaker 2: There one other one in there that stands out? People.
34:48
Speaker 3: Yeah, I mean we were wrong about a lot of
34:50
Speaker 3: things too. Illicit drug use marijuana well is common. Sixty
34:55
Speaker 3: five percent of people thought it would be. They also
34:57
Speaker 3: thought cocaine use would be not really socially accepted as
35:01
Speaker 3: marijuana has become so wrong about that. People routinely living
35:05
Speaker 3: to one hundred years old. What would you if you
35:08
Speaker 3: had a big thirty year forecast, you'd probably say more likely,
35:11
Speaker 3: Oh sure, but routinely's a little bit strong. Yeah, sixty
35:13
Speaker 3: one percent thought that they would yep, by now obviously
35:17
Speaker 3: not happening. Life expectancy has creeped up like a couple
35:19
Speaker 3: of years. But wanted one hundred. Sure, So a lot
35:21
Speaker 3: of interesting and many surprisingly they're sort of optimistic predictions.
35:27
Speaker 2: That's that's the way you got to be. This is
35:29
Speaker 2: a fascinating the case of the four hundred thousand dollars
35:32
Speaker 2: Massachusetts lobster heist. So a four hundred thousand truckload of
35:37
Speaker 2: lobster was stolen from a Massachusetts facility with a sophisticated
35:43
Speaker 2: fishing stam scam. No pun intended with that, not a
35:47
Speaker 2: seafood time. But basically what this culprit did is altered
35:51
Speaker 2: the email name of a real trucking company, so took
35:54
Speaker 2: that real trucking company slightly altered it. Then a logistics
35:57
Speaker 2: firm hired this trucking company, which turned out to be
36:01
Speaker 2: fraudulent just because they had tweaked the email a little bit.
36:04
Speaker 2: On December twelfth, the fraudulent the perpetrator arrived to a
36:08
Speaker 2: town and mass cold center and presented a fake commercial
36:12
Speaker 2: drivers a CDL license, and then the culprit's tractor trailer
36:17
Speaker 2: had a real trucking company name on it and a
36:20
Speaker 2: trailer number on the side. He then picked up the
36:22
Speaker 2: lobster meat, which was destined for warehouses for Costco in
36:26
Speaker 2: Minnesota and Illinois, turned off the GPS trackers, and they
36:29
Speaker 2: haven't found the lobsters since the FBI is now involved
36:34
Speaker 2: looking into the incident. I mean, even if they find
36:36
Speaker 2: them now that they're no longer good so who knows
36:39
Speaker 2: what happened to them since then? But the local police
36:42
Speaker 2: department saying that this is not a mom and pop shop,
36:46
Speaker 2: and Costco and the time police department have not responded
36:50
Speaker 2: for for comment. But it moved fastening. Fascinating. Okay, do
36:55
Speaker 2: you know how do you move it?
36:57
Speaker 1: Though?
36:57
Speaker 2: That's great, great question. I mean, what would you and
36:59
Speaker 2: I do with four hundred thousand dollars of lobster? I mean,
37:02
Speaker 2: I can't even think how I could unload that, And
37:05
Speaker 2: you got to do it quickly too. You've got to
37:08
Speaker 2: have some I don't know, contexts in the black market
37:12
Speaker 2: lobster space to be able to unload that much of
37:15
Speaker 2: it a truckload is a pretty significant undertaking. But hats
37:21
Speaker 2: off to the perpetrator for all sorts of the improvement.
37:26
Speaker 2: I don't approve of it. It interesting novel, an interesting story, nonetheless,
37:31
Speaker 2: for the lobster that was yanked away from this ton
37:35
Speaker 2: cold storage facility here. Kyrothsts account for fifteen billion to
37:40
Speaker 2: thirty five billion in annual losses according to the Department
37:44
Speaker 2: of Homeland Security, So who knows whatever happened to those lobsters.
37:49
Speaker 2: Taking a look around at markets as we prepare for
37:51
Speaker 2: the Fed Reserve Meeting minutes to be released at two
37:54
Speaker 2: o'clock this afternoon in relatively mixed territorial and only the
37:58
Speaker 2: slightly down on the S ANDP of four points, the
38:01
Speaker 2: Dow Jones off about one hundred points and the Nasdaq
38:04
Speaker 2: off about eight points. That's all the time that we
38:08
Speaker 2: have for today's show, but we'll be right back at
38:11
Speaker 2: it on Friday of this week. Have a fantastic new year,
38:15
Speaker 2: thank you so much for joining us, and cheers to
38:17
Speaker 2: a great twenty twenty six