Even Nvidia can't rescue the Dow!

Paul Lane and Marc Fandetti look at why markets tanked on Thursday. What does Nvidia's stock split mean for the Dow? Where is the last $6B in CHIPS Act money going to? Scarlett Johansson vs OpenAI will have major ramifications. What happens to ticket prices if Live Nation loses in court? Why are Auto and Home insurance costs soaring?

Episode Transcript

(00:00):
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five K Boston is presented by VeteransDevelopment Corporation. FACE is the Financial Exchange
with Paul Lane and Mark Fandebti.Welcome, Welcome to this edition of the
Friday Exchange Financial Exchange Show. Aswe head into a long weekend, Paul
Lane, Mark Fendetti, and BenKitchen here with you, and as we

(01:25):
start our show today, we recapthe market performance from yesterday, which for
the Dow Jones was the worst dayof the year since March of twenty twenty
three, so really negative day onthe Dow. Yesterday. We had phenomenal
Nvidia earnings, which we'll get into, but a very weak market performance.
They were unable to capture the momentumfrom Nvidia's earnings and take it through yesterday's

(01:49):
trading cycle. So we'll start theshow with a little bit of a recap
on some of the trading activity thatwe've seen over the last day or two
here where it's been a little bitof weakness and otherwise what's been a very
positive market year to date. Andit comes off the heels of a FED
Meeting Report minutes or FED Meeting Minutesreport that was released on Wednesday of this

(02:12):
week. And it's important to notewith the Fed Meeting minutes that this is
minutes from a report and a meetingthat occurred on April thirtieth, and May
one, we're getting it three weekslater, so things can change over that
period of time, including the factthat we got a CPI inflation report during
that time span after that meeting.But the meeting minutes indicated that the FED,

(02:36):
like most of the investors out there, were concerned during that meeting about
inflation's resiliency and had mentioned the dauntingpotential for the idea of hiking rates at
some point in the future if inflationcontinue to remain as resilient, and so
Mark I think that's probably a goodplace to start in terms of what we've

(02:57):
seen largely tied to inflation and sortof that top down look that we have
here. Yeah, inflation year overyear. I'll use the Consumer Price Index,
which comes out monthly. It's themost widely followed measure. There are
others, including the Fed's preferred measure, which comes out next week, but
let's just stick to CPI Consumer PriceIndex year over year through the end of
April, which is the most recentdata. We have three point four percent,

(03:22):
so a lot lower than it's yearover year peak from June of twenty
twenty two of eight point nine eightpercent. We'll just round up and say
that was nine so inflation year overyear for what it is worth. And
there are problems with looking backward likethat because they that year over year number,
though it's what you read in thehistorical record when you look back on

(03:43):
the seventies or whatever. When you'redoing forecasting, you're more concerned about shorter
term trends and what they may indicate. But let's just use year over year.
Call it three to three and ahalf. The Fed's goal is two,
so much higher than they thought itwould be only a year or two
years ago. At this time,it's easy to forget that they thought inflation
would be back to two percent twoyears ago, and even a year ago

(04:06):
they thought it would be far closer. So their forecasts have been way off,
so have a lot of people's.So inflations come down a lot,
but not nearly as much as everybodywas expecting. Why is that. Well,
early on in the COVID, whenCOVID lockdowns were lifted, supply chains
were snarled. Everybody knows this.We saw the container ships piling up at

(04:29):
ports, We saw bare aisles attarget, your furniture was taking six months
to a year, these crazy delaysthat none of us have seen in our
lifetime. Since then, those snarlshave sort of been ironed out, if
that's the right way to finish thatmetaphor. But we've had a lot of
demand, hot job market, continuedspending down of COVID, stimulus, productivity

(04:57):
increasing is a source of increased demand. It's good source, but it's a
source nevertheless. So inflation has changedin the last couple of years. It
started out as a so called supplyshock, which happens when oil spikes.
Supply shock is a generic term economistsuse when there are issues of getting goods
into stores for whatever reason. Maybeit's a storm, which is a very
brief supply shock. Maybe it's somethinglike COVID putting pressure on the world's supply

(05:23):
chains, which was a more prolongedsupply shock. So first we had supply
shock related inflation. Then, ofcourse, all the stimulus payments under the
last two administrations, including the presentone trillions of dollars injected into the economy
in the face of these supply constraints, and we're still feeling the lingering effects
of the massive surge and demand thatcharacterized the early stages of the lifting of

(05:47):
COVID lockdown. So inflation is changedin character, which is what makes it
hard. It makes it interesting tolook at. It also makes it very
hard to forecast and explains why theFed's forecasts have been wrong and why they
continue to why getting a handle onthis continues to elude them. Right.
It really comes down to the shiftin consumer spending and that ties into the

(06:09):
supply chain piece, where during COVIDthere was a lot of focus on these
discretionary purchases for home improvement and otherareas of your life that were durable good
focused and as a result you sawsupply chains really get into a very difficult
bind. What has happened is notonly have the supply chains corrected themselves,

(06:29):
but demand has waned for those typeof items. When you look at the
earnings from home depot and lows outthere, there is a consistent theme that
there is a lot less focus forpeople to do it yourself. Projects are
shrinking in scale. The renovation productsprojects for homes are not nearly as large
as what they were in twenty oneand twenty two and twenty There is now

(06:55):
much more focus on spending on theleisure and hospitality side of things, service
side of things, and when youlook at the inflation reports, the data
reflects it as such, where wehave seen a reasonably steady decline. As
Mark mentioned and allude to, thedeceleration of inflation has come off the backs
of the durable goods side. Thatpiece of things has seen deceleration, while

(07:16):
the services side has remained quite stubborn, and it continues to as the consumer
continues to spend on those types ofitems going forward. And so we sit
in a position now where there wastremendous progress the FED as of December of
twenty twenty three thought was going tocontinue into twenty four with inflation. It

(07:38):
hasn't. We have sort of stalledout. Is that a fair word to
say in terms of the deceleration progressthat we've seen relative, No question,
it's flattened. Then you hit thenail on the head, it's services inflation.
I'm not a big fan of decomposinginflation into individual categories and saying if
we can just get home insurance down, because inflation is ultimately as the great

(07:59):
Milton Friedman some of you know whohe is, as he once said,
it is ultimately monetary, it's toomuch money resulting in too much demand.
It could be fiscal policy too,So let's just say it's too much demand,
whether you think it's monetary or fiscal. So pointing at individual categories is
not always constructive because you missed theforest for the trees. But it's impossible.
I'm gonna drive Ben kitchen crazy.I'm gonna show you guys at chart

(08:22):
that nobody else can see. Servicesinflation was a mountain that peaked at over
ninety over eighteen percent nearly nineteen percentin twenty twenty two. Services inflation,
goods inflation. Pardon me, goodsinflation, which is the whole damn point.
Pardon me, Paul was just sayingthis and we all experienced it.
So goods inflation running it nearly twentypercent year over year in the year after

(08:43):
the lifting of the COVID lockdowns.Services inflation at that time was running only
four percent year of Vietna. Notonly that's way higher than pre COVID,
Goods inflation has come way down.Most recent read was negative three point two
percent. Goods inflation year v yearhas been negative since April of last year.
Services inflation though has remained elevated inthe five to six percent range,

(09:09):
looks like it's leveled off at around five and a third or so for
the past roughly eighteen months. Solike like you said, Paul, services
is where the problem is right now, though I don't like thinking about it
that way because it masks the underlyingcause, which is ultimately too much demand.
Right And I'm not saying that thisis the solution. Oh, if
we just get services back under control, then will be smooth sailing. It's
more so just commentary of this iswhat is I mean, if we can

(09:31):
accounting sense, it is right,but it's something else could pop up.
It's like when there's too much demandinflation. It's just going to say,
when there's too much inflation, it'swhack a mole, and people keep scratching.
Oh my god, I thought itwas shelter, and I said six
months ago, if we just geta lot of people were saying six months
ago, shelter's going to come undercontrol. That's what I kept reading.

(09:52):
That's what we kept hearing and reading, and a good economist at the time
would have pointed out that, no, it's too ultimately too much demand and
there's still too much demand in thesystem, so to speak, and unfortunately,
the historical cure for that it's beenlabor market. Yeah, unemployment and
recession unfortunate, and we just haven'tseen that yet. So we step back

(10:13):
for just a moment, say thisis what has been going on in markets.
There was certainly a lot of optimismthat fueled the first quarter off the
heels of the Fed coming out reallyin my view, unnecessarily in saying that
they were going to potentially cut threetimes this year. None of those cuts
have gone through just yet. We'realmost halfway through the year and it doesn't
look like, certainly over the courseof the next FED meeting, that we'll

(10:37):
see a cut. The sooner youget closer you get to election cycle,
the more dubious we are that theywould perhaps go ahead and make any time.
Funny thing is, the more themarket gets enthusiastic about the prospect of
rate cuts, the drew wealth effects. Stocks go up, people spend money,
yeah, housing prices go up,people take out equity, spend money.
This is well documented. Wealth effectscan be very large. These wealth

(11:01):
effects make it harder, ironically,for the Fed to do its job.
So the more the FED stokes optimismit's going to cut rates. Arguably,
the harder it makes for the FEDto cut This is not my insight,
it's actually fairly common sensical and we'veseen it with the market performance here to
day, where the market you know, yep, eleven percent year to data
on the S and P five hundredover a pretty you know, not so

(11:24):
great inflationary year. That was whatwas supposed to be sort of a catalyst,
but really what has been the catalystis in Vidia. And we're going
to talk about in Vidia after thebreak here. But what we saw from
then was a tremendous earnings report comeout the other day. We're going to
take a quick break. When wecome back, we're going to dive into
that earnings report and talk about whatit means for the overall market in Vidia

(11:46):
chatter that's right after this break.Miss any of the show. Catch up
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(12:52):
and I in the previous segment talkedabout sort of big picture what the market
has looked like this year and theeconomic concerns that we've been monitoring, and
inflation sums it up pretty well.And what we had explained is that inflation,
while had made tremendous progress through theend of twenty three, has stalled
out or the deceleration has stalled outa bit. In twenty twenty four.

(13:13):
Here the Fed has tabled the ratecuts that it had alluded to at the
end of twenty three and perhaps wewill see one to none over the course
of this year. But against thatbackdrop, we have a stock market that
has been quite resilient up close toten or eleven percent year to date.
And if someone were to ask myselfor Marcus to the reason behind why the

(13:35):
market momentum has continued, and Vidiahas to be mentioned as part of the
reason for the resiliency that we've seenfrom the stock market. And Vidia designs
chips that are utilized for AI computationand they are the clubhouse leader in the
space. They have a really dominantposition in their design and Vidia previously made
these GPU chips for video games,but has pivoted its business model to make

(14:00):
these chips now solely focused to dothe computational work that it is required to
do all of the AI work.And what we saw from Nvidia yesterday was
again just a blowout quarter. Theyhave had pressure raised against them to continue
to beat really significant benchmarks in termsof revenue growth, and they have continued
to meet it. Last quarter theydid twenty six billion in revenue that was

(14:24):
triple from what they did a yearearlier. Their net profit was seven times
larger where they did fourteen billion ofnet profit compared to about two billion in
the year prior. It just continuesto be a tremendous story of growth in
the AI space and really the biggestcustomers for Nvidia. If you're asking who
is buying these chips, it's notMark and I sure as heck not because

(14:46):
they cost, you know, thirtygrand a pop to buy these chips.
It is Google, Microsoft, Amazon. It's these big tech companies that have
huge budgets in order to spend onamassing as many chips as they need to
build out their AI computations. Tenbillion of the data center revenue from in
Vidia was tethered to those big companieshere. And as we look forward from

(15:11):
a price to earnings perspective, MarkI had believed I look at video before
it was trading at ninety times Nowit sits today closer at sixty times its
current earnings. As a forward lookingprice to earnings, it's trading at about
forty two. To be clear forthe audience out there, the Microsofts and
Apples of the world trade between twentyfive and thirty five times earnings, so

(15:33):
it's still trading quite expensive, butif they keep putting up these numbers,
they're starting to at least grow intothat valuation a little bit. The question
just becomes, at what point dosome of these big providers of expense towards
R and D of Google, Microsoftand Apple and Amazon pull back and not
spend as aggressively. That could bethe slowing factor for VideA. Looking at

(15:56):
the best performers in the S andP five hundred index year to date,
two are info tech stock, specificallychip makers, one called super micro Computer,
which is a relatively small company andas a market cap which is the
value of all of its stock ofabout fifty one billion. That sounds like
a lot, But the market cap, which is the value of everything in

(16:18):
an index or whatever, of thetotal market is fifty trillion. So a
trillion is one thousand billion. Abillion is a thousand million. If I'm
thinking about things correctly, I thinkI am. You just add three zeros
each time. So this super microComputer best performing stock up tw hundred percent
year to date, is a isa tadpole in the scheme of things.
In Nvidia is a two point fivetrillion dollar company. Now is I think

(16:42):
you pointed out? If not todayIt's probably been said many times on this
program. It's up over one hundredpercent year to just so the question is
how far ahead of itself. Howoptimistic does that suggest investors are about Nvidia's
continued ability to grow and the answerscaptured in the PE ratio that you talked

(17:02):
about. If last twelve months ofearnings divided into price, for Nvidia,
you said it is about sixty.For other semiconductor companies like AMD, it's
much higher, over two hundred andforty. They have also had spectacular revenue
growth over the last say five years, nearly thirty percent for AMD, nearly
forty percent for in Vidia. Soin some cases, I guess what I'm

(17:26):
trying to get at here summing itall up, is it's easy to see
why investors are very excited about inVidia and other producers of i'll just say
microchips, even though it's more nuancedthan that. Revenue growth has been extraordinarily
high relative to other components of thesector or the broader index. At the
same time, you can't sustain thatgrowth rate forever, and a PE ratio

(17:51):
of more than double the average forthe sector. Now, I'll just be
broader and say, infotech suggest thatinvestors think that these very high rates of
can be sustained, you know,almost indefinitely, and we all know that
they can't. It's expensive, it'spricey from historical perspective. Does that mean
it reverts back to that mean ofother semiconductors tomorrow, No, it doesn't.

(18:11):
This could carry on for several morequarters as long as they have customers
that are continuing to willing to spendit. It seems like they do at
least for the next couple quarters comingup here. But it certainly is been
really the bell weather for strength.And if you look at the earnings growth
within the S and P five hundred, they're leaning heavily on the earnings growth
of companies like and Nvidia to justifythe valuations that the SMP is tradiant,

(18:36):
which again are pricey. Two.Given where they sit today, they're also
go ah. No. The otherpiece that was mentioned here is that they
are going through a stock split atten to one split. They could be
added to the DOW. To me, the DOO is like the scoreboard at
Fenway. It's nice that they doit old school style with sliding in the
slots versus doing it digital, butit's really not something that you need or

(18:59):
could. You don't need to followit that way. There's other ways to
do it, and that's kind ofthe way I think of a Dow having
a price weighted index. It's justkind of our cake. It's nice historically,
but yeah, I don't I wasgonna say I don't get it.
I mean I do. It's beencalculated the way you know, it's too
boring a subject. I don't enfeel like getting into it. I mean,
we all know the flaws in theDow market cap weighted in disease.

(19:21):
That is to say, an indexthat values a stock based on it's the
proportion of the worth of its overalluh uh number, the overal number of
shares relative to the market. We'regoing to take a quick break here,
but when we come back, we'llbe doing a little bit of chip Talk
and a little more on AI.Like us on Facebook and follow us on

(19:45):
Twitter at TFE show. Breaking businessnews is always first right here on the
Financial Exchange Radio Network. Time nowfor Wall Street. Watch a complete look
and what's moving market so far todayright here on the Financial Exchange Radio Network.
All Right, markets are in positiveterritory the nasdac's up one hundred and

(20:07):
twenty five points, the S andP five hundreds up twenty seven points,
and the Dow Jones is up justunder forty seven points as it looks to
recover from its worst session since Marchtwenty twenty three. Into It, the
TurboTax parent company, is down sevenand a half percent after issuing weaker than
expected fiscal fourth quarter guidance. IntoIt forecast adjusted earnings of a dollar eighty

(20:32):
per share to a dollar eighty fiveper share, while analyst surveyed expected a
dollar ninety two. Workday, theenterprise management company, is down thirteen percent
after subscription revenue guidance for the secondquarter slightly undershot analyst estimates. Workday forecast
subscription revenue of one point eight ninefive billion, while the consensus forecast called

(20:53):
for one point nine billion. Cashfrom operations also disappointed, coming in at
three hundred seventy two million while analystsanticipated three hundred and ninety seven million.
Shares of the shoe and imperil company, Deckers is up thirteen percent after a
big fiscal fourth quarter beat. Deckersreported four dollars and ninety five cents in

(21:14):
earnings. Per share on nine hundredand sixty million dollars in revenue. Analysts
surveyed we're looking for two dollars andeighty nine cents in earnings per share on
eight hundred and eighty eight million dollarsin revenue. And finally, biotechnology company
Garden Health is up seven point twentyfive percent after the US Food and Drug
Administration determined the benefits from the company'scolorectal cancer blood test shield outweigh the risk.

(21:37):
I am ben Kitchen and that isWall Street Watch. The Chips Act
is an act that has been passedthrough to try and develop semiconductor manufacturing within
the United States. If you lookat the semi conductor market manufacturing at the
moment, it is largely tied toTaiwan Semiconductor based out of Taiwana, and

(21:59):
Samsung and South Korea. Those aretwo of the biggest manufacturers of semiconductors.
The United States does very little inthe way of manufacturing and as such,
this Chips Act was passed where closeto forty billion dollars was allocated to the
development of semiconductor manufacturing throughout the UnitedStates, and a lot of that money
has been deployed about thirty three billiondollars of it has gone to Intel,

(22:22):
Taiwan Semiconductor, Samsung, and Microunand Taiwan Semiconductor. To be clear,
while it is a Taiwanese based company, they're developing a manufacturing plant in Arizona.
That's where a lot of the moneyhas gone to. There is six
billion dollars remaining to be allocated inthe Chips Act, and mark with a

(22:42):
country that has thirty four and ahalf trillion dollars of debt. These sorts
of spending endeavors to me. WhileI understand the national security focus with this
type of spending, I just havevery little optimist on government initiatives like this,
just because I feel as if theprivate markets do a much better job

(23:06):
of spending capital efficiently rather than spendinggovernment handouts. I tend to agree with
that, but that's an ideological belieffor me. The evidence is kind of
mixed, Okay. It used tobe the case. It was very popular,
especially in the eighties and nineties whenfree market economics was acendant. Reagan
Thatcher Revolution really started in the seventies. The recognition that government did generally botch

(23:33):
things. Just think the British HealthService and British Airways and the British they
nationalized everything after World War Two andefficiency suffered. So the general view when
I was sort of coming of ageand became aware of these things was that
the market, hands down, wassuperior allocating resources. I still tend to
believe that, and I do too. I still tend if they just look
at the public sector, right,no offense by the way. Their objectives

(23:56):
are different. I'm not criticizing whatI think are the on average, really
good public services we get here inMassachusett's given the constraints that government operates under.
Put them under the profit motive,and they behave differently. They'd hire
different people, they have a differentculture. So I'm not pointing fingers at
the people in charge. Necessarily.The question is why are we shout So

(24:17):
Yeah, that's like the ideological argument. There's an empirical dimension to it,
which nobody's ever going to agree onbecause methods differ and conclusions differ. I'll
put that aside because economists disagree.What does sort of make me bang my
head against the wall on this isthat we are lavishing Taiwan Semiconductor with subsidies
they have fifty billion dollars in cashand equivalents on their balance sheet. We

(24:40):
are lavishing Micron with prefermance subsidies tenbillion on their balance sheet cash and equivalent.
Now, it's not quite It's notlike they have a big pile sitting
around that they're just waiting to spend. But they could deploy this money differently
than say, share a purchase.I'm not even looking at how much they've
repurchased and shares and give them backto stockholders over the past three years.
Intel Again, we are showering themwith subsidies. They have eight billion in

(25:03):
cash, seven billion in cash ontheir balance sheet. There's no evidence that
I can see that there's a shortageof capital. Why do they need these
inducements? Otherwise they build a factoryin China, Well, you know what
the heck with them? Then whenwe ask when tensions get escalated with China,
you may lose that asset. That'sa business risk. I'll tell you
the reason that they likely wouldn't doit on their own. It's because it's

(25:26):
really capital intensive and the returns onit. They're just it's going to be
a very uphill client and that's probablywhy the government needs had to step in
here because Taiwan Semiconductor has a hugedominance in the space. Them and Samsung
and others account for almost eighty toninety percent of manufacturing of semiconductor chips.
So you're facing an uphill client.If you're looking at your balance sheet,

(25:48):
it's probably not the most efficient wayto deploy capital to stake you know,
stakes in the ground in Arizona forsomething that's maybe going to be up and
running in the late twenty twenties.Here, it's it's a long uphill climb
these these these so called investments.And I'll just be generous and use the
word investments, even though, asyou point out, most of this cash

(26:10):
is probably gonna go the way thecash that we lent to Celindra and lord
Town Lordstown Motors went, which wrapup, you know, flesh down a
toilet. Basically, there are examplesof successes, so I'm not being entirely
even handed, but on average,as we talked about at the beginning of
this little segment, yeah, governmentdoesn't allocate capital efficients efficiently. They don't

(26:30):
have any incentive to jeez, wherewas I going with basically my ranting again,
my view is that it's expensive propositionto build your own factories. That's
why the government's giving them money todo it, so that the US has
a presence, so that we're notsolely reliant upon Yeah, that's the that's
the hole. But we'll see.It's tough because I can't refute that.

(26:53):
I can't say it's not a goodIt won't in five years have been a
great idea to be in related fromgeopolitical factors in terms of supply of semiconductors.
But I also worry about not personally, but some people worry about baby
formula access. We're still dependent onforeign suppliers for that, for certain medical

(27:15):
technologies. I'm sure there are plentyof goods that could be considered essential that
we rely on trade to provide.I just don't know where this stops.
But it's very hard to in advancesay that this will have been a stupid
idea, though the odds are pointingto that the intention is fine, but
we'll see what the execution looks like. And that was one of the major

(27:38):
takeaways from COVID in general, isthat you don't want to be overly reliant
upon one supplier or one area ofthe world for certain goods and services out
there. That's really been a hugetakeaway from COVID and some of those supply
chain issues that we dealt with acouple of years back. A quick recap
on the scarletor Hansen battle with openAi. Open Ai is the we will

(28:03):
do it quickly. Open Ai isthe company that Microsoft has invested heavily in.
They are sort of at the forefrontof AI with the release of chat
GPT and I believe that was Novemberof twenty three or twenty two. They're
in the headlines recently because they unleasheda chatbot that had allegedly ripped off,

(28:25):
or come very close to ripping offScarlett Johansson's voice. And these are the
type of legal battles that will wageon for years. Mark as the AI
technology continues to get developed, isgetting artists or creative's permission to utilize their
voice or likeness, image, allthese different things. And this particular story,
they used what seemed to be closeto her voice, though that hasn't

(28:48):
been fully proven out. Lawyers sentout letters saying to take it down.
They have since taken it down.But Sam Altman finds himself in controversy again,
embroiled with the likeness and AIQ concernsthat are going to come up with
Hollywood. You feel for her,not too badly because she's she's gonna be
okay. But what a, whatA? What a sleazy move on behalf

(29:11):
of open AI. Why not justdo it? And then what's that old
saying ask forgiveness? It's easier toask for forgiveness than it is for permission?
Is that psion? I was alittle bumper sticker issue, a little
bit shorter. But yeah, sowhy did all this ham fisted approach by
open AI? First they asked her, she said no, and they did

(29:32):
it anyway exactly. If they hadjust not asked and ripped her voice off,
they probably would have had a moreplausible they would have had more deniability.
There was what's obvious that they stolea voice, right exactly. There
was another quote in here that saidmove fast and break things. And that's
kind of the way AI has beenoperating that the Internet in general, that's
sort of the way it goes,right, is it? They just you
know, whether it's Napster or allthese historical examples, it's just can we

(29:53):
retire that can we retire, movefast and break things because only dork say,
let's be honest. Can we retireit's a feature not a bug?
Can we retire that phrase? Andmaybe if you maybe you have other Ben?
What's our text line? Six oneseven six gets? I feel like
I'm stepping on Tucker, So Ithought, sorry, Ben Kitchen, sorry
about that. I'm so offended hedidn't. Can we can we do a

(30:15):
little? Can I suggest a polltoday? It's a there's a lot of
levity today because it's momar can suggestanything. It's my version of levity six
one seven, thirteen eighty five.What what phrases should we be retiring because
they're so trite and tired. That'sa good one. That's a good one.
So we have asked forgiveness, notpermission, which is very which sounds

(30:36):
very twenty ten to me. Wehave it's a feature not a bug,
which the president says, all that'snot why I don't like it. But
he says it all the time.I'm not sure he knows what he's referring
to, but he does say itfrequently. So that's teleprompter. May let
let's retire, Yeah, let's retirethat one? What else can we retire.
We're gonna take a quick break herebrainstorm some of the things that we

(30:56):
can retire. But when we comeback, we're gonna be talking a little
bit more about auto insurance and theinflationary impact it's had, as well as
Live Nation gouging ticket purchasers out there. That's right after this break, breaking
business and financial news first throughout theday, only here on the Financial Exchange

(31:17):
Radio Network. The Financial Exchange Showpodcast drops every day on Apple, Spotify,
and iHeartRadio. Hit that subscribe button, then leave us a five star
review. You're listening to the FinancialExchange Radio Network. Who is making money
on your concert tickets? It's notjust Taylor Swift. That's a title of

(31:41):
a Wall Street Journal piece here.The Justice Department has been going after Live
Nation in an antitrust suit, asit has claimed allegedly that they are choking
the competition for ticketing promotion venues anddriving up prices for fans out there,
and this is something the antitrust Thenthe Justice Department has a lot of different

(32:02):
suits going on right now. Thisis one of them that I can certainly
get behind. Live Nation is aresult of a merger with Ticket Master that
occurred in twenty ten. They wereunder strict government watchs to make sure that
they didn't, you know, sortof embed any monopolistic practices in their businesses.

(32:22):
Now we sit fourteen years later,they have three hundred and seventy global
venues that they do exclusive ticketing dealswith, and they operate sort of a
pinwheel of operations where they do thepromoting, sponsorships, the ticketing, all
of that is tied to Live Nation. It's hard not to see when you
have seventy or eighty percent of ticketsales in a given market that you're not

(32:45):
a monopoly. It's really made itdifficult for consumers out there. What ticket
Master and Live Nation has been tryingto do is minimize the secondary ticket market
where I buy a ticket where itcomes out for a concert, then wait
till supply is limited, repost it, and try to make a profit it.

(33:06):
They've been trying to narrow down thosemargins and keep it in their pocket.
But as a result, concert pricesof just skyrocket and anything live has
just been extremely expensive over the lastcouple of years. No, thank god,
the Biden Administration's cracking down on thisurgent public issue. Junk fees in
look, I don't mean yeah,I do mean to minimize it. Actually,

(33:27):
there's a lot of the article talksabout a number of antitrust actions initiated
by the administration against Live Nation,as you just explained Apple, Amazon and
others that we've talked about over thelast couple months and years here on the
Financial Exchange. This is the mostaggressive campaign against alleged monopoly practices in really

(33:52):
in generations, and so far it'scome up empty. Right as far as
I know, not one success inlitigating any of these claims. And I
don't have the expertise that there areobviously as dress lawyers. I'm neither a
lawyer nor an anti trust economist,so I can't speak to the merits.
But casual reading of this, whichis all we can do, is generalists

(34:15):
doesn't strike me as that compelling.Now, Live Nation. If you define
the market, you have to define, as I understand it from anti trust
economics a long time ago, youdefine a market first, and that can
be contested, like if you defineAmazon's market as companies with blue vans that
do next day delivery, which ispretty close to what to what FTC tried

(34:37):
to do with them. They definethe market so narrowly has to be said
to dominate it. Is this anothersort of very selective market definition that allows
them to pursue live nation or isthis sort of widely Is it right,
widely recognized they dominate the space,and thus can they're exploiting consumers charging higher
prices than would be tolerated in acompetitive market. No, no, I

(35:00):
feel as if that's the case,but obviously time will tell as to what
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investment services. Cushing and Armstrong didnot endorse each other and are not affiliated.
One item that has gone up significantlyfor many families' budgets across the United
States is auto and home owners insurance. Anyone you talk to Mark has been
really negatively impacted in terms of theincreases that we've seen. Motor vehicle costs
are up about twenty three percent froma year ago. And there's all sorts

(36:28):
of stories on the homeowner side ofthings. If you live anywhere, whether
it be Florida in the hurricane beltor if you live in Texas as another
story here, which is an areathat is subject to storms, home owners
have been pulling out of those homeowers' insurance providers have been pulling out of
those markets left and right. It'sjust been really a challenging period of time

(36:50):
from a end consumer point to getappropriate insurance at reasonable levels. And you
get concerned in California and Florida whenthe state is subsidizing coverage, what sort
of recourse they would have if amassive storm came through. Yeah, the
insurance, the home and auto insurance, excuse me, rate increases have been
pretty shocking, as was pointed outin this article as the government measures it

(37:13):
in the Consumer Price Index sub indexfor this category up about twenty three percent
year over year. That's the highestsince the late nineteen forties, which was
the maximum for this series that Icould find. It goes back to nineteen
forty eight, thirty two point twopercent. In nineteen forty eight, I
don't know what was that people weregetting their Model ts back out on the
road. I guess do I'm kiddingof The Model T would have been about
twenty years outdated at that point.But anyway, this was post war.

(37:36):
Everybody was going bonkers, just happyto be driving back in the States,
drinking and driving in whatever people didwhile they were driving in those days that
wasn't illegal. So yeah, theaverage post war five point six percent,
so twenty three percent is a shocker. I guess the good news is some
so called experts, and I saythat because I don't know how good their
forecasting ability is, think it willlevel off. Yeah, we'll see here.

(37:58):
It's really been tethered to higher vehicleprices, increased costs for repairs,
and just more accidents. That reallyhas been the fuel behind the increases that
we've seen on the auto insurance front. We're going to take a quick break
here, taking a look at marketsall up in positive territory as we head
towards the long weekend. We'll beright back after this break.