December 11, 2024 • 38 mins
Chuck Zodda and Marc Fandetti discuss why predicting a recession is such a difficult task and predicting the next crash is impossible. Macy’s probe found employee acted alone in $151 million accounting scandal. Alphabet shares jump 6% after Google touts ‘breakthrough’ quantum chip. JetBlue’s turnaround plan: first-class seats and fewer routes.
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Corporation face. He's the Financial Exchange with Chuck Zada and
Mark Vandetti.
Speaker 2 (01:14):
Chuck, Mark and Tucker with you here, and we've got
stocks mostly up for the major indices, but it is
kind of a narrow rally that is taking place. Actually,
it's broadened out a little bit in the last twenty
minutes or so, but still largely being led by big tech,
which again has kind of been the trend for the
last week, week and a half after most of the
(01:36):
second half of the year, Big tech was kind of
lagging for quite a while since the July fourth holiday.
But today we've got the Dow off fifty one points,
the S and P is up forty two, and the
NASDAK up two hundred and seventy six. Nasdak knocking on
the door of twenty thousand today. That's twenty thousand points
(01:57):
for those of you playing at home. We've got the
ten of US Treasury selling off just a little bit,
up to four point two five percent, three basis point
move upward today. Oil West Texas Intermediate up eighty six
cents a barrel to sixty nine to forty five. The
TRIPA national average four gas prices taking back up nine
tens of a cent as well, from three oh one
(02:19):
to one tenth back up to three zero two. So
still can't get that puppy below three dollars a gallon nationally.
We'll see if we can get there eventually, but no
luck to this point. And gold today is up thirty
seven to ninety announced to twenty seven, fifty six and
thirty cents. Market's talking about this piece from CNBC. There's
(02:43):
there's a lot in the headlines and the sub headlines
that I'm trying to figure out. And basically what it
seems is, really they interviewed the chief market strategies for
Jefferies and just asked them a whole bunch of questions,
and that's how you get this Schmorgsborg of different answers. Then,
but he throws out there the first question is, look,
(03:04):
why did everyone have it wrong about recession? Now, granted
not everyone did, but you had things two years ago.
You know, Bloomberg publishes, Hey, there's one hundred percent chance
of a recession coming. You've had Jamie Diamond for the
last couple of years talking about these hurricanes that are
brewing economically, and yet nothing has come of it recession.
(03:25):
This has been the most predicted non recession that I've
ever seen. Why did people have it wrong?
Speaker 3 (03:31):
Those who did, the people you cited, they're not economist.
Zervos is. He's a serious guy PhD. So more qualified
than I am, and is published in big journals on
not necessarily related topics. But the first thing I always
do is I check somebody's credentials. You have to do it,
like should they be talking about this? Even he should.
The person who edited the article probably shouldn't have written
(03:54):
the headline that way, because most serious economists don't try
to predict recessions. The first thing you learn is as
an undergraduate is it's futile. The economy is too complicated
in short. But you all know that. So those who
were predicting recession, I don't know. Jamie Diamond he saw
something in JP Morgan's Yeah, and that's fine, but that's
(04:16):
not You can't necessarily generalize from that. It's like we
talk about when Walmart gives a bad forecast or something.
We say, well, they're a big retailer, but they're not everybody.
It might be specific, the problem might be specific to them.
That's not the case.
Speaker 1 (04:29):
Here.
Speaker 3 (04:29):
I'm just using that as an example, so I don't know,
Chuck to me, the lesson is, don't try to predict
outcomes when something is very complex, like a recession or
even in inflation. People are harping about the potential inflationary
impact of tariffs and deportation of undocumented folks and stuff
like that. Those are predicated on all lse equal assumptions
(04:52):
and might turn out to be wrong. So predictions about
any economic phenomenon. And again, I think professional econmoists largely
get this right. That make the headlines of the hysterical
executives and often non economists who don't have a framework
in mind. They're just kind of going with their gut,
and that's okay. It's a free country. I think the
Celtics gonna wear the next twenty games. Who cares what
I think. I'm not an expert, it's not my domain,
(05:14):
and it's a silly prediction anyway, bad analogy, but you
kind of get the point.
Speaker 2 (05:20):
Let's talk a little bit about another quote from Zervos.
Then he's talking about inflation and says he thinks it's
going to decline next year. He says, quote, take the
tape rewind it, put it back in twenty nineteen, and
let's go from there, basically saying, yeah, I think we're
gonna see low inflation like we did in the first
Trump term.
Speaker 3 (05:37):
This is his area I would respect. I'm looking at
who he's published with and what he's written about. Yeah,
he is no lightweight, So I think when he says
that that the I'll call it the secular stagnation to
steal a term from a different, slightly different context. The
forces that prevailed before COVID didn't go away, they've been
(05:57):
distorted by it is. I think you made the point
better than the article did. Tell me if this is
not what you were trying to get at, we're going
to jump back to the old trend lines for growth
and the resulting trend line for price increases and just
about everything else. The ECONA said differently, the economy's not
changed structurally since twenty nineteen. A bunch of weird things happened,
(06:18):
but we're going to get back on track, so to speak.
That track isn't necessarily desirable in every way, but I
think that's is larger point.
Speaker 4 (06:26):
We get this.
Speaker 2 (06:26):
Another piece that is from is this The Financial Times?
Speaker 4 (06:31):
Yes, yes, it is.
Speaker 2 (06:32):
I always try to identify it by the text and
the headline, like the font they use before checking the
last page, and it.
Speaker 3 (06:41):
Says, ft on that where does it say that it's
in the sub I had the benefit of looking at
it for thirty seconds. It's buried. See you right here
in bold underneath the graphic.
Speaker 4 (06:52):
I see it, and now it's not. I appreciate you
pointing that out. Thanks. I could have just said that
off air, but no, no, it's fine.
Speaker 2 (07:00):
Half our shows are me either like ripping on Paul
or mark for something. So it's good that it comes
back to me occasionally, like if you dished out, you
got to be able to take it.
Speaker 3 (07:08):
Was it a criticism of you? You have to poke
around for it. I had the benefit of it's okay,
like being calmly being able to look for it.
Speaker 4 (07:15):
I know, and make me look dumb like it's fine.
Speaker 3 (07:18):
You just read the headline and you said it's not.
Speaker 4 (07:20):
I know what I meant it is. What did it say, gentlemen,
I don't know what did it say? Back off, Tucker,
were conversation here.
Speaker 3 (07:29):
This is riveting.
Speaker 2 (07:30):
It says accurately predicting the next crash is impossible, and
this gets it exactly what you were talking about. The
piece also references one of the great science fiction works
of all time, which is the Foundation series written by
Isaac Asimov.
Speaker 3 (07:45):
I have not read it.
Speaker 4 (07:46):
You haven't read Foundation.
Speaker 3 (07:47):
No, I don't read fiction.
Speaker 4 (07:49):
You don't read fiction at all.
Speaker 3 (07:50):
No, I can't stick with it. I read some a
little bit of history, which is so you're not more
it's a story. I mean, look, trust me, I think
a lot of people don't read fiction.
Speaker 2 (07:58):
I would say eighty to nine ninety percent of what
I read is nonfiction.
Speaker 3 (08:03):
Yeah, but.
Speaker 4 (08:05):
Not reading fiction.
Speaker 3 (08:07):
Nothing.
Speaker 4 (08:09):
Oh that that hurts my soul.
Speaker 3 (08:10):
What should I be What have you read lightly that
you thought was a good investment of your time? Fiction?
Speaker 4 (08:14):
Well? I would start with Foundation.
Speaker 2 (08:16):
It's it's actually okay, like as long as we're talking
about it, like fantastic.
Speaker 3 (08:20):
What is there a movie I can watch?
Speaker 2 (08:22):
There's a TV series from Apple that the first season
c minus the second a minus okay, rare show that
you know, has a big budget and gets noticeably better
from the first season to the second. But in any case,
if you're familiar with the Foundation book or even the series,
the premise of it is that a man by the
name of Harry Selden developed something called psychohistory that allows
(08:46):
him to analyze basically the large scale events that happened
throughout the universe and basically can predict large scale events,
but not small ones. And it's this whole predictive model
that he uses. And there's a small group of people
that actually can figure out what's going on. That's not
really feasible. It's not really a thing that you can
(09:07):
actually do. And the point on this is, look, you
listen to you know, CNBC long enough for Bloomberg long enough,
and by that I mean for about eight seconds, and
everyone's trying to predict exactly what's going to happen next.
And a there's no scoreboard that shows you how accurately
those people actually do what they're claiming to do, like
(09:29):
whether or not they're actually good at it or not. Yes,
And b CNBC and Bloomberg understand that, Hey, the way
that money is made in the finance world, at least
by the people who really make a lot of it,
it's not by predicting the next thing, but rather it's
by getting you to trade on it, and as such,
they get you know, commissions off the flows and this
(09:51):
and that, and that's where you know the money's actually made,
you know, on a pretty consistent basis.
Speaker 4 (09:57):
So trying to you know, read the.
Speaker 2 (10:00):
News and say, oh, this is gonna be like the
next thing and having any kind of certainty about it, man, Like,
it's a humbling business trying to predict what's coming next.
And it's hard, and you're going against people that have
huge budgets and huge resources. And if you think, oh, like,
I see this coming and I know exactly what's gonna happen. Man,
We've been wrong about so many things the last couple
(10:22):
of years based on oh, like this happened before and
recession came with it, or this happened before and we
avoided recession. Economics. I say this all the time. It's
not physics. It's social science with numbers attached to it,
which makes people think that it has hard and fast rules,
when in fact it's kind of like, hey, here's some
guidelines to follow, but things can deviate from them in
(10:44):
ways that you may not anticipate.
Speaker 4 (10:47):
Yeah.
Speaker 3 (10:47):
I think people know that long term investors know they
have to stay invested to benefit from the return. Generally,
I don't.
Speaker 4 (10:53):
Think the average person knows that mark.
Speaker 3 (10:54):
You don't think they know to buy and hold.
Speaker 4 (10:57):
I'm not saying buying.
Speaker 2 (10:58):
I don't think the average person knows that what is
going to happen isn't predictable. I'm in markets in the economy.
Speaker 3 (11:07):
I bet you they would. They may not act like
they know that, but they would say that. So maybe
I'm being naive. Most would say, well, you can't predict
these things. I think most people would agree with that.
Speaker 2 (11:18):
I think if you gave him a little dose of
truth serum or hooked them up to a uh, what's
the machine that tells if you're lying holograph?
Speaker 4 (11:25):
That's the one.
Speaker 3 (11:26):
Well you knew that answer.
Speaker 2 (11:28):
Tucker's been through a couple of Yeah, it was very
quick with that answer. You know, well, his father in
law is Robert de Niro from The Parents, Meet the Parents.
Speaker 3 (11:36):
All right, yeah, Jack.
Speaker 4 (11:39):
Jack Burns, Yeah, Jack Burns. Jack talked Tie very well.
But in any case, let's take a quick break here.
Speaker 2 (11:44):
I want to have more on this conversation here talking
about Hey, what what is coming in the economy next year?
Because even though we don't know it's you try to say, hey,
what are some clues that we can piece together in
possible paths, because having a few possible paths that you
can take much which better approach, I think than saying
this is or is not going to happen. We'll also
(12:04):
do some trivia right after this.
Speaker 1 (12:07):
Thanks to us six one, seven, three, six two thirteen
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and let us know what you think about the stories
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If you missed any of today's show, catch up whenever
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Speaker 5 (12:38):
The Financial Exchange is a proud partner of the Disabled
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(12:59):
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for your support The dav five K Boston is presented
by Veterans Development Corporation. Let's continue our trivia sleigh ride
to Christmas. So trivia question today, how many ghosts appear
to Ebenezer Scrooge in Charles Dickens at Christmas Carol?
Speaker 4 (13:19):
Once again?
Speaker 5 (13:20):
How many ghosts appeer to Ebenezer Scrooge in Charles Dickens
a Christmas Carol. Be the fifth person today to text
us at six one seven three six two thirteen eighty
five with the correct answer, and you win a Financial
Exchange showed T shirt once again. Be the fifth correct
response today to text us at six one seven three
(13:41):
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See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (13:48):
Mark's looked at me like, I think this might be
one of the few fiction books that Mark's actually read.
Speaker 3 (13:54):
Yeah, because I always sympathize with the Scrooge, which probably
says a lot about me and why I'm alone. But
I get off his back.
Speaker 4 (14:01):
Hold on hell, let's deal it on this all.
Speaker 3 (14:03):
No, No, let's not. Let's don't look into it. Don't
look into it. But I always thought get off his back.
He'll he'll mellow out when he's ready, and.
Speaker 4 (14:11):
He did well because of what happens.
Speaker 3 (14:14):
I know it was going to happen eventually, is my points,
Just like, let er take his course either.
Speaker 4 (14:18):
If you happen to watch UH the UH.
Speaker 2 (14:20):
I think it came out two years ago, The UH,
Will Ferrell and Ryan Reynolds UH Spirited.
Speaker 3 (14:26):
Now I heard it was bad shocker.
Speaker 5 (14:28):
It's okay, filmed in Boston.
Speaker 4 (14:32):
It was filmed in Boston.
Speaker 2 (14:33):
It's it's okay, It's it's got its moments, but overall,
if okay, it's it's fine.
Speaker 4 (14:40):
You know, don't waste your time, don't waste your money
on it. If you're you know, you probably wouldn't. At
this point, I guess let's talk a little bit about
UH next year.
Speaker 2 (14:48):
And there's a piece from Bloomberg here it says Trump
agenda won't hurt global economy as much next year as
in twenty twenty six. So this again is kind of
getting it, like, hey, how does one try to figure
out what's going to happen in the future economically? And
I just I don't know how one can make concrete
predictions about this or that in terms of what's going
(15:10):
to happen when there are things that have been promised
during this political campaign that are inherently contradictory or just
like information that doesn't like click as far as hey,
what terrif rates are we even talking about implementing around
what timeline?
Speaker 4 (15:25):
And things like that.
Speaker 2 (15:26):
I don't know how you can then have a definitive
piece that says, well, this won't hurt as much this
year as it will the year after.
Speaker 3 (15:33):
Yeah. I think the larger point here, and it's one
that we were getting at in the last segment, is
that economic outcomes are not forecastable the way say whether
it is in the short term and the reason for it.
And you learn this if you go on to study economics,
like after college. The first thing they teach you learn
about something called time series forecasting. That's a fancy way
(15:54):
of saying projecting the value of something into the future.
There are various ways of doing it, but the first
thing you learn is that the relationship between something in
its own past values or two different things has to
be steady in order to use it for forecasts. Sure,
the reason is obvious. This doesn't even really need explanation.
If the way say the unemployment rate reflects the same rule.
(16:17):
You and Mike Armstrong talk a lot about the SAM rule,
talked a lot about it. When it was triggered. It
was triggered, there was no recession. Why is that Well,
because the relationship between what unemployment measures and the larger
economy is apparently different now than it was in the past.
That's what makes economic variable so tricky to forecast.
Speaker 2 (16:39):
No, no, no, it's it's basically, look, what are you
basing this conclusion on, and how do you know it
continues to hold up. There are common things that we
see in everyday life. If I go outside and there
are no clouds in the sky, I could say with
pretty strong confidence it's not going to be raining. Yes,
we have like the occasional sunshower caused by rain falling
from a cloud that has since past. But ninety nine
(17:01):
point nine percent of the time, if you walk outside
and it's bright sunshine, there's no rain, it's it's not
raining on you at that point. That's a basic, you
know algorithm that every person uses, which is hey, sunshining,
no rain.
Speaker 4 (17:16):
Okay.
Speaker 2 (17:17):
When you look at economics again, they get more complicated
as you look through this. The three month average of
unemployment has risen half a percent from its previous low
in the last year recession. Like that, That's what the
sum indicator has basically said historically.
Speaker 4 (17:34):
But does it hold true in all cases?
Speaker 2 (17:37):
No, We've we only have what was it like, eleven
instances where we have accurate enough data to have even
been able to measure this in the past, and so
unlike lived human history, which is hey, by the time
you're you know, twenty years old, you've lived was it
seven thousand days? Okay, you've got, you know, a pretty
good track record of Hey, sunny sky, no rain. We
(18:01):
have eleven examples of some indicator firing and recession. Who's
to say that that is the normal, that that should
be how it works. It's not as black and white
as it's made out to be.
Speaker 3 (18:13):
Yeah, I think where it gets confusing for folks maybe
is when you're asked, what is the distinction between economic
forecasting and weather forecasting, because some of the techniques are
similar mathematically, and I'll say it again, I think it's
worth underscoring. It's that the relationships that weather forecasting depends
on for accuracy, and that accuracy is not perfect. We
(18:35):
all know that are far more stable than the relationships
that an economic forecaster would use. So it's appropriate, as
you suggested, I think in the last segment to talk
about the uncertainty associated with your forecast. Just like weather
forecasters do seventy percent chance of rain that ris in
seventy percent of scenarios in which all these forces are
(18:57):
lining up to produce the average that I'm sharing with you,
in seventy percent they result in rain, but in thirty
percent they don't. And we do an okay job of
I think internalizing that and understanding what it means.
Speaker 2 (19:09):
Yeah, we don't do as much of that with the economy.
The economy, when people talk about it, is recession or
not is kind of where we end up, not Hey,
what's the probability of growth accelerating or slowing down?
Speaker 3 (19:22):
Or this is It's not like those errors don't exist.
They're called prediction intervals. You generate them with any prediction.
Speaker 2 (19:27):
Well, and there's quite a bit in between you. It
would be like just saying there's either rainy or sunny weather,
sometimes it's cloudy.
Speaker 4 (19:32):
Quick break here. When we come back, we get the
trivia answer, and then we're talking.
Speaker 1 (19:35):
Macy's bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
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(19:57):
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Speaker 5 (20:08):
I'm gonna go supere to Everneezer, Scrooge and Charles Dickens
a Christmas Carol. That'll be four, which were Jacob Marley,
The Ghost of Christmas Past, Christmas Present, and Christmas Future.
Winner today of the Financial Change Show T shirt was
Kevin from Standish, Maine. Congrats to Kevin there. And we
(20:29):
played trivia every day here on the Financial Exchange. See
complete contest rules at Financial Exchange Show dot com.
Speaker 2 (20:36):
The only version of a Christmas Carol that is worth
anything beyond the original is Muppet Christmas Carol. I'll stand
by that until the day I die.
Speaker 4 (20:47):
Mark. You familiar with Muppet.
Speaker 3 (20:49):
Christmas Carol the concept?
Speaker 2 (20:51):
Yeah, so, Michael Kaine, you're familiar with him. I Am
took the role as Scrooge with the only reason he
took it was because the whoever was producing and directing.
I think it was one of like Jim Henson's brothers
or cousins agreed to let him play the role completely straight,
as if he was acting in a drama, not surrounded
(21:14):
by a bunch of muppets, And and did he do that.
Speaker 4 (21:17):
It's fantastic.
Speaker 2 (21:18):
To this day, I think it is one of the
best acting performances I have seen in any movie, because
you're actually surrounded by live action muppets that are just
like flipping out for the whole movie. And he plays
it as Scrooge, you know, the Scroogiest. Fantastic, and it's
got some good music.
Speaker 3 (21:37):
Probably on Disney. They Disney bought the Muppets, right, Oh, yeah,
it's fun, probably on Disney. Plus.
Speaker 2 (21:42):
Yeah, it's quite fantastic. Actually some good musical number.
Speaker 3 (21:46):
But you like the George C. Scott. Everybody seems to
like the George Scott, which actually was a TV movie.
Speaker 2 (21:51):
But no, you know, Muppet Christmas Carrol is the only
Stewart that stands up in my Listen. I'm a big
Patrick Stewart Stewart fan, but I know Muppet Christmas counter
the one that holds up.
Speaker 4 (22:03):
Let's talk a little bit about Macy.
Speaker 2 (22:04):
So about a month ago they announced, Hey, one of
our employees made a one hundred and fifty one million
dollar accounting error. Basically, this was someone who was in
charge of accounting for the cost of shipping small items
and somehow this this happened. Now at the time, we said, look,
it's gonna be one of two things. Either A it
(22:25):
isn't an individual person or b they probably made a
mistake at some point and then just kept making it
over and over and over with a lack of oversight.
And it appears that's what the case was that back
in twenty twenty one, this person basically misstated the amount
of cost for small parcel delivery and continued making the
(22:45):
same mistake, either know fully and willingly or unknowingly, but
it appears that it was pretty knowingly. I'll quote here
from the Wall Street Journal to hide the air. The
employee continued to intentionally make erroneous accounting entries and falsify
underlying document until the misstatement was discovered this fall. So
it's one of those where look, if they had if
(23:06):
they had just said, hey, I made a mistake, they
probably still have their job right now and there's no
problem because everyone makes mistakes in their job. Unfortunately, they said,
oh no, I'm nervous, this is going to be the
end of my job, and intentionally made the same mistake
for the next four years, which ended up costing them
their job.
Speaker 3 (23:24):
And probably at what point they felt like they were
in too deep and they weren't. For two hundred and
fifty bucks or something, a small loss with the first error,
and then they decided that that was intolerable.
Speaker 4 (23:36):
Yeah, I mean, that's that's how it broke.
Speaker 3 (23:37):
The million dollar mark, and they said, well, we're committed.
Speaker 2 (23:39):
That's how most of this usually ends up happening, when
it's just someone who gets nervous and says, oh, like,
I need to keep doing this. It's rare that you
find someone who I didn't cover it with you. Last
week was with Paul, the Miami couple that launched a
ponzi scheme back in twenty twenty one, got caught by
the SEC, and a month out after getting caught by
(24:00):
the SEC, launched another ponzi scheme like that.
Speaker 4 (24:03):
That's kind of the exception.
Speaker 3 (24:05):
Usually it's wow, real one trick pony. At least mix
it up a little.
Speaker 4 (24:10):
They have no diversification of fraud.
Speaker 3 (24:12):
Yeah, start a crypto firm or something.
Speaker 2 (24:15):
So yeah, this again just appears to be someone who
made an honest mistake, decided that they were going to
try to hide it, and then it became a very
large dishonest mistake.
Speaker 3 (24:25):
It's almost hard to believe, isn't it. I'm not saying
Macy's is lying. I have no basis one way or
the other. It's not hard to believe this. The sums
here are huge. Cumulatively, they're huge. At no point did
this raise a red flag? Huh? Their manager never said, hey,
that costs been constant for six years, Good job, Johnson.
Speaker 2 (24:42):
I do think it speaks to the fact that, hey,
as long as no problems are coming up, Yeah, most
managers are like okay, like fine, like this is what
it is.
Speaker 3 (24:51):
And we don't need to audit. Smithers's he's a good egg.
Speaker 2 (24:55):
So uh yeah, this uh is uh now closed.
Speaker 5 (24:59):
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Saint Thomas, and Saint John. Visit one or all three
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Speaker 1 (26:02):
Mark.
Speaker 2 (26:02):
I want to hop ahead a little bit to this
piece on Alphabet and their quantum computing news from yesterday,
no Tuesday. So on Tuesday yesterday, Well, the Alphabet announced
it on Tuesday.
Speaker 3 (26:15):
That was yesterday.
Speaker 2 (26:16):
Tuesday was yesterday, Today's Wednesday. This is totally the opposite
of last week. Last week, I felt like we got
to Thursday and I'm like, man, it's only Tuesday this week,
It's Wednesday.
Speaker 4 (26:28):
It feels like it should be Friday already.
Speaker 2 (26:29):
I don't know what's going on in the space time continuum,
but this piece might have the key to it. So
Alphabet on Tuesday yesterday announced that they had a quantum
computing breakthrough. Now, if you're sitting there listening wondering, Chuck,
what is quantum computing? The best way I can explain
it is this. A typical computer uses at this point
(26:51):
billions of transistors within its chips in order to compute
different data. The way it does so is by having
each transition either open or closed at any particular point
in time, which allows it to get, you know, with
billions of transistors, different outcomes, and it can calculate.
Speaker 3 (27:09):
Based that's exactly one zero, one zero, correct.
Speaker 4 (27:15):
But a transistor can either be open or closed. With
quantum computing, the premise of it is that a it's
not really a transistor. What they call them are cubits.
Speaker 2 (27:26):
A cubit can both be open and closed at the
exact same time, and so as opposed to having to
go in sequence one zero zero one one one zero zero,
it can do.
Speaker 3 (27:39):
All that at against ventriloquist mouth.
Speaker 4 (27:41):
These are the ventriloquists of computers.
Speaker 3 (27:46):
That was so stupid correct, We're gonna sorry, sorry, serious subject, but.
Speaker 4 (27:50):
The primary subject is that you can go through all
of those states all at once, as opposed to having
to go through them in sequence, so you can do
things much more quickly.
Speaker 2 (28:00):
Now, the reason that this has been hard to actually
do is twofold. The first is actually building the things
that like if you actually google just images of quantum computers,
they kind of have a very like steampunk aesthetic to them,
Like it's a bunch of copper tubes wrapped in circles
and stuff feeding into like a central mind. It's it's
(28:20):
very much like if.
Speaker 3 (28:24):
Oh, yeah, that's what comes up, looks like a chandelier.
It looks like a steam chandelier.
Speaker 4 (28:29):
So it's got that vibe to it.
Speaker 2 (28:31):
So actually, the other problem is that there's a huge
error rate in the computing and so it's kind of like, well,
are we actually getting anything meaningful or not because it's hard.
Speaker 3 (28:42):
To get well.
Speaker 4 (28:44):
It's hard to get something to be open and closed
at the same time.
Speaker 3 (28:48):
Tell me about it.
Speaker 4 (28:49):
It's something that we've all struggled with.
Speaker 2 (28:52):
So Google announced yesterday that they have a chip called
Willow that they said is much faster and has much
better error detection capability than previous chips. The chip has
one hundred cubits, but Google's plan to eventually build a
system with a million cubits. Why not they then, And
this is again just the fact that this is the
(29:14):
fourth paragraph in the CNBC article that talk about burying
the lead. Will brings us closer to running practical, commercially
relevant algorithms that can't be replicated on conventional computers. Google
wrote in a blog post, adding that the experiment is
evidence that suggests that reality is comprised of parallel universes.
Speaker 4 (29:33):
Whoops, wow, talk.
Speaker 2 (29:34):
About totally highly Everyone's like, oh a, Google's stock is
up six percent yesterday, by the way, not even like
realizing that. Hey, Google said we might not be able
to make any money off this for decades, so you know,
talk about efficient market hypothesis. Good, Hey, We've got this
great chip that might do something decades from now.
Speaker 4 (29:52):
Okay, at six percent to Google's market cap. But by
the way, we might have also unlocked the fact that
they are a parallel universe and the variant of Tucker
that is you know, eight feet tall and has three noses,
is gonna come through tomorrow?
Speaker 3 (30:09):
Is he wearing that shirt?
Speaker 2 (30:12):
I mean, I just think the fact that the parallel
University is a little like.
Speaker 3 (30:16):
It's like the good news as we cracked it, bad
news as we opened a portal to a parallel universe
of evil being.
Speaker 4 (30:21):
Chuck with hair is coming and you're not gonna want
to see that. It's just man'.
Speaker 3 (30:28):
That's it is pretty cool though, even though I understand
none of it.
Speaker 2 (30:31):
It's I understand about one percent. I understand enough to
be able to explain how it works. Basically, I have
no idea how it works in practice, no idea how
it works in practice.
Speaker 4 (30:42):
Yeah. This is also kind of the sad thing.
Speaker 2 (30:44):
About where we're going with really high tech stuff these
days is look back in the nineteen eighties, Steve Jobs
and Steve Wasney, like they got together in their garage.
They're like, hey, let's build a computer. You can't get
together in your garage and build a quantum computer. First
of all, we're you're gonna the parts for it. Second,
what if you opened that parallel universe door in your garage.
(31:06):
In your garage, just unplug it and plug it back
in I'm sure, though, well, what if you got a
different one? Then it sounds like there's more than one
of these, so I don't know. It's kind of wild
that twenty twenty four, at the end of the two
years ago, it was Hey, here's chat GPT.
Speaker 4 (31:23):
You can make it.
Speaker 2 (31:24):
You know, it can make cat memes for you. Twenty
twenty four we made a computer that detected parallel universes. Oh,
let's get to twenty five. Then quick break here, we'll
have some stack roulette after.
Speaker 1 (31:36):
This breaking business and financial news first throughout the day.
Only here on the Financial Exchange Radio Network, find daily
interviews and full shows of the Financial Exchange on how
are YouTube page? Get cut up on anything and everything
you might have missed. This is the Financial Exchange Radio Network.
Speaker 4 (32:08):
Mark, what do you got for stack roulet?
Speaker 3 (32:09):
I'll give you two quickies, Chuck. We talk about core
inflation because it strips out the jumpy components that there
are other ways to do that. One of them is median,
which means you trim trim all the outlies. You take
the one in the middle as also trim mean. We
did get median and trim mean. One of the Fed
banks calculates both of these, and they came in about
where Core didn't, for that matter, where Headline did this month.
(32:29):
I don't need to bore you with the details other
than to say stability seems to be the status quo
with respect to inflation. No real progress by these measures either, though,
nothing alarming. Either. I could talk about Amazon and the
car business, or you can do your thing.
Speaker 2 (32:44):
I could do my thing, do your thing. I'm gonna
talk a little bit about jet Blues. So they, after
not being able to buy what was it Spirit Airlines,
are trying to figure out how to get back to profitability.
They've had three billion dollars plus in losses since twenty twenty,
and so what they have announced here is that they
(33:05):
are trying to go up market, and so they're thinning
out some of their routes and so you're seeing, you know,
some cancelations of you know, routes that they previously operated on.
But they are also adding more trips over to Europe,
which obviously have you know, some high end seats that
are on those with their lay flat mint seats and
things like that. But they also announced today that on
(33:27):
domestic flights they are going to begin having a more
conventional domestic first class beginning in twenty twenty six, so
being able to attract higher paying customers who want more space,
more leg room, and things along those lines. So this
to me is, you know, when combined with what we're
seeing from Southwest Airlines, it's basically a concession from the
(33:51):
airlines right now that hey, the budget airline is not
working with today's economics. And that's a pretty stark viversal
from where we were twenty years ago, where in the
two thousands the whole trend was, hey, Jet Blue and
Southwest and Spirit are eating the legacy players lunch. And
I mean like you had the big guys after nine
(34:13):
to eleven again that decade after Granted, part of it
was nine to eleven, and part of it was, you know,
these upstarts, but you had bankruptcies left and right that
ended up resulting in this wave of consolidation that's gotten
us to where we are because the big guys couldn't
compete with the low cost carriers. And now you have
the low cost carriers pretty much saying we got to
turn into the big guys in order to compete.
Speaker 3 (34:33):
Today you're seeing this and you tell me if I'm
wrong here in other industries too, where firms decide to
focus on higher margin I'll just call it products or
product lines. And part of that is a response to
current conditions. Part of it might be the recognition that
if austerity is the order of the day, big federal
government spending cuts, for example, and perhaps slower economic growth
(34:56):
over the next decade, you might have to focus on higher,
more affluent, more profitable consumers, whether it's car manufacturers or
airlines or maybe others that you've come across. As you
I'm going with talk about these stories.
Speaker 4 (35:08):
Demographics being a key factor here as well. There's that, Yeah,
you got all.
Speaker 2 (35:13):
These boomers and I know, I know boomers listening. Are
you know of various different economic stripes. You got a
lot of boomers with a lot of money, and they're retiring,
and they have money to spend. They don't if they
have the money, they don't want to be sitting jammed
in back in economy class if they.
Speaker 4 (35:33):
Can avoid it, of course.
Speaker 2 (35:34):
And so if you have all this money that is
now tied to the stock market and not tied to
you know, how much income a person is making year
to year? Okay, like these are boomers that are saying, hey,
I got ten to fifteen years where I'm going to
be able to spend this money enjoying like what I
do before. I'm not able to do that anymore. Great,
(35:57):
let's spend it. And I think that's a huge thing
that we need to factor in in terms of not
only just these business decisions, but also hey, how do
things like monetary policy, how do their impact shift in
today's economy compared to what it used to be, both
in terms of where's the consumption coming from? And you know,
we've talked at other times about hey, what are we
(36:18):
producing and how is that, you know, impacted by monetary
policy in different ways than it used to be.
Speaker 4 (36:23):
I think the.
Speaker 2 (36:24):
Rise of retired boomers is something that is absolutely a
factor in both of these things.
Speaker 3 (36:29):
Yeah, makes sense.
Speaker 4 (36:30):
Okay, what else you got?
Speaker 3 (36:31):
Thank you? Would you buy a car from Amazon.
Speaker 4 (36:34):
Like a like with an Amazon logo on it?
Speaker 3 (36:38):
I'm sorry, through their website it could.
Speaker 4 (36:39):
Be made, Oh so not an Amazon car?
Speaker 3 (36:41):
So Hundai for examples. Part have you guys heard about
this is I don't claim to be an expert.
Speaker 5 (36:46):
We've talked about here before, but the official launch was yesterday.
Speaker 3 (36:49):
Okay, so you can buy what a Hyundai now on
Amazon in certain markets including Boston? Would you do it?
Can you return it?
Speaker 4 (37:00):
Probably just ship it back on it and we don't
accept return. Take it over to the Whole Foods and stick
it in the way.
Speaker 3 (37:07):
What all the advantages of doing this versus going to
a dealer's website and doing most of the transaction online
with the sort of dedicated expert.
Speaker 5 (37:14):
Saves the nuisance of going to a car dealer.
Speaker 3 (37:17):
But they they've streamlined that process a lot. I'm just wondering,
what are the advantages You're buying through a trusted seller Amazon,
but if you buy through one of our local dealer networks,
they're presumably a trusted as well. I just don't know
what the what what need are they trying to meet?
Speaker 2 (37:30):
And ultimately, all they're doing is taking the dealer inventory
and putting it on right their site, So it's just
another way to aggregate.
Speaker 3 (37:37):
It, which dealers already do.
Speaker 2 (37:39):
So Yeah, I would have to really spend some time
analyzing the pricing, you know, the service contracts, because a
lot of new cars now come with service contracts that
are built in. Is Amazon's better or worse than anywhere else?
It's I'd have to spend some real time figuring out
what you get from this.
Speaker 4 (38:00):
I I really don't know.
Speaker 2 (38:03):
I'm not saying I wouldn't buy a car from Amazon,
but why from Amazon as opposed to any other dealer
or a website.
Speaker 3 (38:11):
I don't know they're there. It's online. You can type
in Hyundai and Amazon and.
Speaker 2 (38:15):
I'm getting I'm getting all the Herb Chambers listings right now.
Speaker 3 (38:19):
I just bought one.
Speaker 4 (38:20):
Oh congratulations. Quick break here. We've got to actually break
for the rest of the day.
Speaker 2 (38:23):
We'll see you tomorrow on the Financial Exchange
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts. Do not reflect the opinions of Armstrong Advisory
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(00:20):
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(00:43):
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(01:06):
Corporation face. He's the Financial Exchange with Chuck Zada and
Mark Vandetti.
Speaker 2 (01:14):
Chuck, Mark and Tucker with you here, and we've got
stocks mostly up for the major indices, but it is
kind of a narrow rally that is taking place. Actually,
it's broadened out a little bit in the last twenty
minutes or so, but still largely being led by big tech,
which again has kind of been the trend for the
last week, week and a half after most of the
(01:36):
second half of the year, Big tech was kind of
lagging for quite a while since the July fourth holiday.
But today we've got the Dow off fifty one points,
the S and P is up forty two, and the
NASDAK up two hundred and seventy six. Nasdak knocking on
the door of twenty thousand today. That's twenty thousand points
(01:57):
for those of you playing at home. We've got the
ten of US Treasury selling off just a little bit,
up to four point two five percent, three basis point
move upward today. Oil West Texas Intermediate up eighty six
cents a barrel to sixty nine to forty five. The
TRIPA national average four gas prices taking back up nine
tens of a cent as well, from three oh one
(02:19):
to one tenth back up to three zero two. So
still can't get that puppy below three dollars a gallon nationally.
We'll see if we can get there eventually, but no
luck to this point. And gold today is up thirty
seven to ninety announced to twenty seven, fifty six and
thirty cents. Market's talking about this piece from CNBC. There's
(02:43):
there's a lot in the headlines and the sub headlines
that I'm trying to figure out. And basically what it
seems is, really they interviewed the chief market strategies for
Jefferies and just asked them a whole bunch of questions,
and that's how you get this Schmorgsborg of different answers. Then,
but he throws out there the first question is, look,
(03:04):
why did everyone have it wrong about recession? Now, granted
not everyone did, but you had things two years ago.
You know, Bloomberg publishes, Hey, there's one hundred percent chance
of a recession coming. You've had Jamie Diamond for the
last couple of years talking about these hurricanes that are
brewing economically, and yet nothing has come of it recession.
(03:25):
This has been the most predicted non recession that I've
ever seen. Why did people have it wrong?
Speaker 3 (03:31):
Those who did, the people you cited, they're not economist.
Zervos is. He's a serious guy PhD. So more qualified
than I am, and is published in big journals on
not necessarily related topics. But the first thing I always
do is I check somebody's credentials. You have to do it,
like should they be talking about this? Even he should.
The person who edited the article probably shouldn't have written
(03:54):
the headline that way, because most serious economists don't try
to predict recessions. The first thing you learn is as
an undergraduate is it's futile. The economy is too complicated
in short. But you all know that. So those who
were predicting recession, I don't know. Jamie Diamond he saw
something in JP Morgan's Yeah, and that's fine, but that's
(04:16):
not You can't necessarily generalize from that. It's like we
talk about when Walmart gives a bad forecast or something.
We say, well, they're a big retailer, but they're not everybody.
It might be specific, the problem might be specific to them.
That's not the case.
Speaker 1 (04:29):
Here.
Speaker 3 (04:29):
I'm just using that as an example, so I don't know,
Chuck to me, the lesson is, don't try to predict
outcomes when something is very complex, like a recession or
even in inflation. People are harping about the potential inflationary
impact of tariffs and deportation of undocumented folks and stuff
like that. Those are predicated on all lse equal assumptions
(04:52):
and might turn out to be wrong. So predictions about
any economic phenomenon. And again, I think professional econmoists largely
get this right. That make the headlines of the hysterical
executives and often non economists who don't have a framework
in mind. They're just kind of going with their gut,
and that's okay. It's a free country. I think the
Celtics gonna wear the next twenty games. Who cares what
I think. I'm not an expert, it's not my domain,
(05:14):
and it's a silly prediction anyway, bad analogy, but you
kind of get the point.
Speaker 2 (05:20):
Let's talk a little bit about another quote from Zervos.
Then he's talking about inflation and says he thinks it's
going to decline next year. He says, quote, take the
tape rewind it, put it back in twenty nineteen, and
let's go from there, basically saying, yeah, I think we're
gonna see low inflation like we did in the first
Trump term.
Speaker 3 (05:37):
This is his area I would respect. I'm looking at
who he's published with and what he's written about. Yeah,
he is no lightweight, So I think when he says
that that the I'll call it the secular stagnation to
steal a term from a different, slightly different context. The
forces that prevailed before COVID didn't go away, they've been
(05:57):
distorted by it is. I think you made the point
better than the article did. Tell me if this is
not what you were trying to get at, we're going
to jump back to the old trend lines for growth
and the resulting trend line for price increases and just
about everything else. The ECONA said differently, the economy's not
changed structurally since twenty nineteen. A bunch of weird things happened,
(06:18):
but we're going to get back on track, so to speak.
That track isn't necessarily desirable in every way, but I
think that's is larger point.
Speaker 4 (06:26):
We get this.
Speaker 2 (06:26):
Another piece that is from is this The Financial Times?
Speaker 4 (06:31):
Yes, yes, it is.
Speaker 2 (06:32):
I always try to identify it by the text and
the headline, like the font they use before checking the
last page, and it.
Speaker 3 (06:41):
Says, ft on that where does it say that it's
in the sub I had the benefit of looking at
it for thirty seconds. It's buried. See you right here
in bold underneath the graphic.
Speaker 4 (06:52):
I see it, and now it's not. I appreciate you
pointing that out. Thanks. I could have just said that
off air, but no, no, it's fine.
Speaker 2 (07:00):
Half our shows are me either like ripping on Paul
or mark for something. So it's good that it comes
back to me occasionally, like if you dished out, you
got to be able to take it.
Speaker 3 (07:08):
Was it a criticism of you? You have to poke
around for it. I had the benefit of it's okay,
like being calmly being able to look for it.
Speaker 4 (07:15):
I know, and make me look dumb like it's fine.
Speaker 3 (07:18):
You just read the headline and you said it's not.
Speaker 4 (07:20):
I know what I meant it is. What did it say, gentlemen,
I don't know what did it say? Back off, Tucker,
were conversation here.
Speaker 3 (07:29):
This is riveting.
Speaker 2 (07:30):
It says accurately predicting the next crash is impossible, and
this gets it exactly what you were talking about. The
piece also references one of the great science fiction works
of all time, which is the Foundation series written by
Isaac Asimov.
Speaker 3 (07:45):
I have not read it.
Speaker 4 (07:46):
You haven't read Foundation.
Speaker 3 (07:47):
No, I don't read fiction.
Speaker 4 (07:49):
You don't read fiction at all.
Speaker 3 (07:50):
No, I can't stick with it. I read some a
little bit of history, which is so you're not more
it's a story. I mean, look, trust me, I think
a lot of people don't read fiction.
Speaker 2 (07:58):
I would say eighty to nine ninety percent of what
I read is nonfiction.
Speaker 3 (08:03):
Yeah, but.
Speaker 4 (08:05):
Not reading fiction.
Speaker 3 (08:07):
Nothing.
Speaker 4 (08:09):
Oh that that hurts my soul.
Speaker 3 (08:10):
What should I be What have you read lightly that
you thought was a good investment of your time? Fiction?
Speaker 4 (08:14):
Well? I would start with Foundation.
Speaker 2 (08:16):
It's it's actually okay, like as long as we're talking
about it, like fantastic.
Speaker 3 (08:20):
What is there a movie I can watch?
Speaker 2 (08:22):
There's a TV series from Apple that the first season
c minus the second a minus okay, rare show that
you know, has a big budget and gets noticeably better
from the first season to the second. But in any case,
if you're familiar with the Foundation book or even the series,
the premise of it is that a man by the
name of Harry Selden developed something called psychohistory that allows
(08:46):
him to analyze basically the large scale events that happened
throughout the universe and basically can predict large scale events,
but not small ones. And it's this whole predictive model
that he uses. And there's a small group of people
that actually can figure out what's going on. That's not
really feasible. It's not really a thing that you can
(09:07):
actually do. And the point on this is, look, you
listen to you know, CNBC long enough for Bloomberg long enough,
and by that I mean for about eight seconds, and
everyone's trying to predict exactly what's going to happen next.
And a there's no scoreboard that shows you how accurately
those people actually do what they're claiming to do, like
(09:29):
whether or not they're actually good at it or not. Yes,
And b CNBC and Bloomberg understand that, Hey, the way
that money is made in the finance world, at least
by the people who really make a lot of it,
it's not by predicting the next thing, but rather it's
by getting you to trade on it, and as such,
they get you know, commissions off the flows and this
(09:51):
and that, and that's where you know the money's actually made,
you know, on a pretty consistent basis.
Speaker 4 (09:57):
So trying to you know, read the.
Speaker 2 (10:00):
News and say, oh, this is gonna be like the
next thing and having any kind of certainty about it, man, Like,
it's a humbling business trying to predict what's coming next.
And it's hard, and you're going against people that have
huge budgets and huge resources. And if you think, oh, like,
I see this coming and I know exactly what's gonna happen. Man,
We've been wrong about so many things the last couple
(10:22):
of years based on oh, like this happened before and
recession came with it, or this happened before and we
avoided recession. Economics. I say this all the time. It's
not physics. It's social science with numbers attached to it,
which makes people think that it has hard and fast rules,
when in fact it's kind of like, hey, here's some
guidelines to follow, but things can deviate from them in
(10:44):
ways that you may not anticipate.
Speaker 4 (10:47):
Yeah.
Speaker 3 (10:47):
I think people know that long term investors know they
have to stay invested to benefit from the return. Generally,
I don't.
Speaker 4 (10:53):
Think the average person knows that mark.
Speaker 3 (10:54):
You don't think they know to buy and hold.
Speaker 4 (10:57):
I'm not saying buying.
Speaker 2 (10:58):
I don't think the average person knows that what is
going to happen isn't predictable. I'm in markets in the economy.
Speaker 3 (11:07):
I bet you they would. They may not act like
they know that, but they would say that. So maybe
I'm being naive. Most would say, well, you can't predict
these things. I think most people would agree with that.
Speaker 2 (11:18):
I think if you gave him a little dose of
truth serum or hooked them up to a uh, what's
the machine that tells if you're lying holograph?
Speaker 4 (11:25):
That's the one.
Speaker 3 (11:26):
Well you knew that answer.
Speaker 2 (11:28):
Tucker's been through a couple of Yeah, it was very
quick with that answer. You know, well, his father in
law is Robert de Niro from The Parents, Meet the Parents.
Speaker 3 (11:36):
All right, yeah, Jack.
Speaker 4 (11:39):
Jack Burns, Yeah, Jack Burns. Jack talked Tie very well.
But in any case, let's take a quick break here.
Speaker 2 (11:44):
I want to have more on this conversation here talking
about Hey, what what is coming in the economy next year?
Because even though we don't know it's you try to say, hey,
what are some clues that we can piece together in
possible paths, because having a few possible paths that you
can take much which better approach, I think than saying
this is or is not going to happen. We'll also
(12:04):
do some trivia right after this.
Speaker 1 (12:07):
Thanks to us six one, seven, three, six two thirteen
eighty five with your comments and questions about today's show
and let us know what you think about the stories
we are covering. This is the Financial Exchange Radio Network.
If you missed any of today's show, catch up whenever
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(12:28):
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Speaker 5 (12:38):
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(12:59):
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by Veterans Development Corporation. Let's continue our trivia sleigh ride
to Christmas. So trivia question today, how many ghosts appear
to Ebenezer Scrooge in Charles Dickens at Christmas Carol?
Speaker 4 (13:19):
Once again?
Speaker 5 (13:20):
How many ghosts appeer to Ebenezer Scrooge in Charles Dickens
a Christmas Carol. Be the fifth person today to text
us at six one seven three six two thirteen eighty
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(13:41):
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Speaker 2 (13:48):
Mark's looked at me like, I think this might be
one of the few fiction books that Mark's actually read.
Speaker 3 (13:54):
Yeah, because I always sympathize with the Scrooge, which probably
says a lot about me and why I'm alone. But
I get off his back.
Speaker 4 (14:01):
Hold on hell, let's deal it on this all.
Speaker 3 (14:03):
No, No, let's not. Let's don't look into it. Don't
look into it. But I always thought get off his back.
He'll he'll mellow out when he's ready, and.
Speaker 4 (14:11):
He did well because of what happens.
Speaker 3 (14:14):
I know it was going to happen eventually, is my points,
Just like, let er take his course either.
Speaker 4 (14:18):
If you happen to watch UH the UH.
Speaker 2 (14:20):
I think it came out two years ago, The UH,
Will Ferrell and Ryan Reynolds UH Spirited.
Speaker 3 (14:26):
Now I heard it was bad shocker.
Speaker 5 (14:28):
It's okay, filmed in Boston.
Speaker 4 (14:32):
It was filmed in Boston.
Speaker 2 (14:33):
It's it's okay, It's it's got its moments, but overall,
if okay, it's it's fine.
Speaker 4 (14:40):
You know, don't waste your time, don't waste your money
on it. If you're you know, you probably wouldn't. At
this point, I guess let's talk a little bit about
UH next year.
Speaker 2 (14:48):
And there's a piece from Bloomberg here it says Trump
agenda won't hurt global economy as much next year as
in twenty twenty six. So this again is kind of
getting it, like, hey, how does one try to figure
out what's going to happen in the future economically? And
I just I don't know how one can make concrete
predictions about this or that in terms of what's going
(15:10):
to happen when there are things that have been promised
during this political campaign that are inherently contradictory or just
like information that doesn't like click as far as hey,
what terrif rates are we even talking about implementing around
what timeline?
Speaker 4 (15:25):
And things like that.
Speaker 2 (15:26):
I don't know how you can then have a definitive
piece that says, well, this won't hurt as much this
year as it will the year after.
Speaker 3 (15:33):
Yeah. I think the larger point here, and it's one
that we were getting at in the last segment, is
that economic outcomes are not forecastable the way say whether
it is in the short term and the reason for it.
And you learn this if you go on to study economics,
like after college. The first thing they teach you learn
about something called time series forecasting. That's a fancy way
(15:54):
of saying projecting the value of something into the future.
There are various ways of doing it, but the first
thing you learn is that the relationship between something in
its own past values or two different things has to
be steady in order to use it for forecasts. Sure,
the reason is obvious. This doesn't even really need explanation.
If the way say the unemployment rate reflects the same rule.
(16:17):
You and Mike Armstrong talk a lot about the SAM rule,
talked a lot about it. When it was triggered. It
was triggered, there was no recession. Why is that Well,
because the relationship between what unemployment measures and the larger
economy is apparently different now than it was in the past.
That's what makes economic variable so tricky to forecast.
Speaker 2 (16:39):
No, no, no, it's it's basically, look, what are you
basing this conclusion on, and how do you know it
continues to hold up. There are common things that we
see in everyday life. If I go outside and there
are no clouds in the sky, I could say with
pretty strong confidence it's not going to be raining. Yes,
we have like the occasional sunshower caused by rain falling
from a cloud that has since past. But ninety nine
(17:01):
point nine percent of the time, if you walk outside
and it's bright sunshine, there's no rain, it's it's not
raining on you at that point. That's a basic, you
know algorithm that every person uses, which is hey, sunshining,
no rain.
Speaker 4 (17:16):
Okay.
Speaker 2 (17:17):
When you look at economics again, they get more complicated
as you look through this. The three month average of
unemployment has risen half a percent from its previous low
in the last year recession. Like that, That's what the
sum indicator has basically said historically.
Speaker 4 (17:34):
But does it hold true in all cases?
Speaker 2 (17:37):
No, We've we only have what was it like, eleven
instances where we have accurate enough data to have even
been able to measure this in the past, and so
unlike lived human history, which is hey, by the time
you're you know, twenty years old, you've lived was it
seven thousand days? Okay, you've got, you know, a pretty
good track record of Hey, sunny sky, no rain. We
(18:01):
have eleven examples of some indicator firing and recession. Who's
to say that that is the normal, that that should
be how it works. It's not as black and white
as it's made out to be.
Speaker 3 (18:13):
Yeah, I think where it gets confusing for folks maybe
is when you're asked, what is the distinction between economic
forecasting and weather forecasting, because some of the techniques are
similar mathematically, and I'll say it again, I think it's
worth underscoring. It's that the relationships that weather forecasting depends
on for accuracy, and that accuracy is not perfect. We
(18:35):
all know that are far more stable than the relationships
that an economic forecaster would use. So it's appropriate, as
you suggested, I think in the last segment to talk
about the uncertainty associated with your forecast. Just like weather
forecasters do seventy percent chance of rain that ris in
seventy percent of scenarios in which all these forces are
(18:57):
lining up to produce the average that I'm sharing with you,
in seventy percent they result in rain, but in thirty
percent they don't. And we do an okay job of
I think internalizing that and understanding what it means.
Speaker 2 (19:09):
Yeah, we don't do as much of that with the economy.
The economy, when people talk about it, is recession or
not is kind of where we end up, not Hey,
what's the probability of growth accelerating or slowing down?
Speaker 3 (19:22):
Or this is It's not like those errors don't exist.
They're called prediction intervals. You generate them with any prediction.
Speaker 2 (19:27):
Well, and there's quite a bit in between you. It
would be like just saying there's either rainy or sunny weather,
sometimes it's cloudy.
Speaker 4 (19:32):
Quick break here. When we come back, we get the
trivia answer, and then we're talking.
Speaker 1 (19:35):
Macy's bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Find daily interviews and full shows of the
Financial Exchange on our YouTube page. Like us on YouTube
(19:57):
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Speaker 5 (20:08):
I'm gonna go supere to Everneezer, Scrooge and Charles Dickens
a Christmas Carol. That'll be four, which were Jacob Marley,
The Ghost of Christmas Past, Christmas Present, and Christmas Future.
Winner today of the Financial Change Show T shirt was
Kevin from Standish, Maine. Congrats to Kevin there. And we
(20:29):
played trivia every day here on the Financial Exchange. See
complete contest rules at Financial Exchange Show dot com.
Speaker 2 (20:36):
The only version of a Christmas Carol that is worth
anything beyond the original is Muppet Christmas Carol. I'll stand
by that until the day I die.
Speaker 4 (20:47):
Mark. You familiar with Muppet.
Speaker 3 (20:49):
Christmas Carol the concept?
Speaker 2 (20:51):
Yeah, so, Michael Kaine, you're familiar with him. I Am
took the role as Scrooge with the only reason he
took it was because the whoever was producing and directing.
I think it was one of like Jim Henson's brothers
or cousins agreed to let him play the role completely straight,
as if he was acting in a drama, not surrounded
(21:14):
by a bunch of muppets, And and did he do that.
Speaker 4 (21:17):
It's fantastic.
Speaker 2 (21:18):
To this day, I think it is one of the
best acting performances I have seen in any movie, because
you're actually surrounded by live action muppets that are just
like flipping out for the whole movie. And he plays
it as Scrooge, you know, the Scroogiest. Fantastic, and it's
got some good music.
Speaker 3 (21:37):
Probably on Disney. They Disney bought the Muppets, right, Oh, yeah,
it's fun, probably on Disney. Plus.
Speaker 2 (21:42):
Yeah, it's quite fantastic. Actually some good musical number.
Speaker 3 (21:46):
But you like the George C. Scott. Everybody seems to
like the George Scott, which actually was a TV movie.
Speaker 2 (21:51):
But no, you know, Muppet Christmas Carrol is the only
Stewart that stands up in my Listen. I'm a big
Patrick Stewart Stewart fan, but I know Muppet Christmas counter
the one that holds up.
Speaker 4 (22:03):
Let's talk a little bit about Macy.
Speaker 2 (22:04):
So about a month ago they announced, Hey, one of
our employees made a one hundred and fifty one million
dollar accounting error. Basically, this was someone who was in
charge of accounting for the cost of shipping small items
and somehow this this happened. Now at the time, we said, look,
it's gonna be one of two things. Either A it
(22:25):
isn't an individual person or b they probably made a
mistake at some point and then just kept making it
over and over and over with a lack of oversight.
And it appears that's what the case was that back
in twenty twenty one, this person basically misstated the amount
of cost for small parcel delivery and continued making the
(22:45):
same mistake, either know fully and willingly or unknowingly, but
it appears that it was pretty knowingly. I'll quote here
from the Wall Street Journal to hide the air. The
employee continued to intentionally make erroneous accounting entries and falsify
underlying document until the misstatement was discovered this fall. So
it's one of those where look, if they had if
(23:06):
they had just said, hey, I made a mistake, they
probably still have their job right now and there's no
problem because everyone makes mistakes in their job. Unfortunately, they said,
oh no, I'm nervous, this is going to be the
end of my job, and intentionally made the same mistake
for the next four years, which ended up costing them
their job.
Speaker 3 (23:24):
And probably at what point they felt like they were
in too deep and they weren't. For two hundred and
fifty bucks or something, a small loss with the first error,
and then they decided that that was intolerable.
Speaker 4 (23:36):
Yeah, I mean, that's that's how it broke.
Speaker 3 (23:37):
The million dollar mark, and they said, well, we're committed.
Speaker 2 (23:39):
That's how most of this usually ends up happening, when
it's just someone who gets nervous and says, oh, like,
I need to keep doing this. It's rare that you
find someone who I didn't cover it with you. Last
week was with Paul, the Miami couple that launched a
ponzi scheme back in twenty twenty one, got caught by
the SEC, and a month out after getting caught by
(24:00):
the SEC, launched another ponzi scheme like that.
Speaker 4 (24:03):
That's kind of the exception.
Speaker 3 (24:05):
Usually it's wow, real one trick pony. At least mix
it up a little.
Speaker 4 (24:10):
They have no diversification of fraud.
Speaker 3 (24:12):
Yeah, start a crypto firm or something.
Speaker 2 (24:15):
So yeah, this again just appears to be someone who
made an honest mistake, decided that they were going to
try to hide it, and then it became a very
large dishonest mistake.
Speaker 3 (24:25):
It's almost hard to believe, isn't it. I'm not saying
Macy's is lying. I have no basis one way or
the other. It's not hard to believe this. The sums
here are huge. Cumulatively, they're huge. At no point did
this raise a red flag? Huh? Their manager never said, hey,
that costs been constant for six years, Good job, Johnson.
Speaker 2 (24:42):
I do think it speaks to the fact that, hey,
as long as no problems are coming up, Yeah, most
managers are like okay, like fine, like this is what
it is.
Speaker 3 (24:51):
And we don't need to audit. Smithers's he's a good egg.
Speaker 2 (24:55):
So uh yeah, this uh is uh now closed.
Speaker 5 (24:59):
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Speaker 1 (26:02):
Mark.
Speaker 2 (26:02):
I want to hop ahead a little bit to this
piece on Alphabet and their quantum computing news from yesterday,
no Tuesday. So on Tuesday yesterday, Well, the Alphabet announced
it on Tuesday.
Speaker 3 (26:15):
That was yesterday.
Speaker 2 (26:16):
Tuesday was yesterday, Today's Wednesday. This is totally the opposite
of last week. Last week, I felt like we got
to Thursday and I'm like, man, it's only Tuesday this week,
It's Wednesday.
Speaker 4 (26:28):
It feels like it should be Friday already.
Speaker 2 (26:29):
I don't know what's going on in the space time continuum,
but this piece might have the key to it. So
Alphabet on Tuesday yesterday announced that they had a quantum
computing breakthrough. Now, if you're sitting there listening wondering, Chuck,
what is quantum computing? The best way I can explain
it is this. A typical computer uses at this point
(26:51):
billions of transistors within its chips in order to compute
different data. The way it does so is by having
each transition either open or closed at any particular point
in time, which allows it to get, you know, with
billions of transistors, different outcomes, and it can calculate.
Speaker 3 (27:09):
Based that's exactly one zero, one zero, correct.
Speaker 4 (27:15):
But a transistor can either be open or closed. With
quantum computing, the premise of it is that a it's
not really a transistor. What they call them are cubits.
Speaker 2 (27:26):
A cubit can both be open and closed at the
exact same time, and so as opposed to having to
go in sequence one zero zero one one one zero zero,
it can do.
Speaker 3 (27:39):
All that at against ventriloquist mouth.
Speaker 4 (27:41):
These are the ventriloquists of computers.
Speaker 3 (27:46):
That was so stupid correct, We're gonna sorry, sorry, serious subject, but.
Speaker 4 (27:50):
The primary subject is that you can go through all
of those states all at once, as opposed to having
to go through them in sequence, so you can do
things much more quickly.
Speaker 2 (28:00):
Now, the reason that this has been hard to actually
do is twofold. The first is actually building the things
that like if you actually google just images of quantum computers,
they kind of have a very like steampunk aesthetic to them,
Like it's a bunch of copper tubes wrapped in circles
and stuff feeding into like a central mind. It's it's
(28:20):
very much like if.
Speaker 3 (28:24):
Oh, yeah, that's what comes up, looks like a chandelier.
It looks like a steam chandelier.
Speaker 4 (28:29):
So it's got that vibe to it.
Speaker 2 (28:31):
So actually, the other problem is that there's a huge
error rate in the computing and so it's kind of like, well,
are we actually getting anything meaningful or not because it's hard.
Speaker 3 (28:42):
To get well.
Speaker 4 (28:44):
It's hard to get something to be open and closed
at the same time.
Speaker 3 (28:48):
Tell me about it.
Speaker 4 (28:49):
It's something that we've all struggled with.
Speaker 2 (28:52):
So Google announced yesterday that they have a chip called
Willow that they said is much faster and has much
better error detection capability than previous chips. The chip has
one hundred cubits, but Google's plan to eventually build a
system with a million cubits. Why not they then, And
this is again just the fact that this is the
(29:14):
fourth paragraph in the CNBC article that talk about burying
the lead. Will brings us closer to running practical, commercially
relevant algorithms that can't be replicated on conventional computers. Google
wrote in a blog post, adding that the experiment is
evidence that suggests that reality is comprised of parallel universes.
Speaker 4 (29:33):
Whoops, wow, talk.
Speaker 2 (29:34):
About totally highly Everyone's like, oh a, Google's stock is
up six percent yesterday, by the way, not even like
realizing that. Hey, Google said we might not be able
to make any money off this for decades, so you know,
talk about efficient market hypothesis. Good, Hey, We've got this
great chip that might do something decades from now.
Speaker 4 (29:52):
Okay, at six percent to Google's market cap. But by
the way, we might have also unlocked the fact that
they are a parallel universe and the variant of Tucker
that is you know, eight feet tall and has three noses,
is gonna come through tomorrow?
Speaker 3 (30:09):
Is he wearing that shirt?
Speaker 2 (30:12):
I mean, I just think the fact that the parallel
University is a little like.
Speaker 3 (30:16):
It's like the good news as we cracked it, bad
news as we opened a portal to a parallel universe
of evil being.
Speaker 4 (30:21):
Chuck with hair is coming and you're not gonna want
to see that. It's just man'.
Speaker 3 (30:28):
That's it is pretty cool though, even though I understand
none of it.
Speaker 2 (30:31):
It's I understand about one percent. I understand enough to
be able to explain how it works. Basically, I have
no idea how it works in practice, no idea how
it works in practice.
Speaker 4 (30:42):
Yeah. This is also kind of the sad thing.
Speaker 2 (30:44):
About where we're going with really high tech stuff these
days is look back in the nineteen eighties, Steve Jobs
and Steve Wasney, like they got together in their garage.
They're like, hey, let's build a computer. You can't get
together in your garage and build a quantum computer. First
of all, we're you're gonna the parts for it. Second,
what if you opened that parallel universe door in your garage.
(31:06):
In your garage, just unplug it and plug it back
in I'm sure, though, well, what if you got a
different one? Then it sounds like there's more than one
of these, so I don't know. It's kind of wild
that twenty twenty four, at the end of the two
years ago, it was Hey, here's chat GPT.
Speaker 4 (31:23):
You can make it.
Speaker 2 (31:24):
You know, it can make cat memes for you. Twenty
twenty four we made a computer that detected parallel universes. Oh,
let's get to twenty five. Then quick break here, we'll
have some stack roulette after.
Speaker 1 (31:36):
This breaking business and financial news first throughout the day.
Only here on the Financial Exchange Radio Network, find daily
interviews and full shows of the Financial Exchange on how
are YouTube page? Get cut up on anything and everything
you might have missed. This is the Financial Exchange Radio Network.
Speaker 4 (32:08):
Mark, what do you got for stack roulet?
Speaker 3 (32:09):
I'll give you two quickies, Chuck. We talk about core
inflation because it strips out the jumpy components that there
are other ways to do that. One of them is median,
which means you trim trim all the outlies. You take
the one in the middle as also trim mean. We
did get median and trim mean. One of the Fed
banks calculates both of these, and they came in about
where Core didn't, for that matter, where Headline did this month.
(32:29):
I don't need to bore you with the details other
than to say stability seems to be the status quo
with respect to inflation. No real progress by these measures either, though,
nothing alarming. Either. I could talk about Amazon and the
car business, or you can do your thing.
Speaker 2 (32:44):
I could do my thing, do your thing. I'm gonna
talk a little bit about jet Blues. So they, after
not being able to buy what was it Spirit Airlines,
are trying to figure out how to get back to profitability.
They've had three billion dollars plus in losses since twenty twenty,
and so what they have announced here is that they
(33:05):
are trying to go up market, and so they're thinning
out some of their routes and so you're seeing, you know,
some cancelations of you know, routes that they previously operated on.
But they are also adding more trips over to Europe,
which obviously have you know, some high end seats that
are on those with their lay flat mint seats and
things like that. But they also announced today that on
(33:27):
domestic flights they are going to begin having a more
conventional domestic first class beginning in twenty twenty six, so
being able to attract higher paying customers who want more space,
more leg room, and things along those lines. So this
to me is, you know, when combined with what we're
seeing from Southwest Airlines, it's basically a concession from the
(33:51):
airlines right now that hey, the budget airline is not
working with today's economics. And that's a pretty stark viversal
from where we were twenty years ago, where in the
two thousands the whole trend was, hey, Jet Blue and
Southwest and Spirit are eating the legacy players lunch. And
I mean like you had the big guys after nine
(34:13):
to eleven again that decade after Granted, part of it
was nine to eleven, and part of it was, you know,
these upstarts, but you had bankruptcies left and right that
ended up resulting in this wave of consolidation that's gotten
us to where we are because the big guys couldn't
compete with the low cost carriers. And now you have
the low cost carriers pretty much saying we got to
turn into the big guys in order to compete.
Speaker 3 (34:33):
Today you're seeing this and you tell me if I'm
wrong here in other industries too, where firms decide to
focus on higher margin I'll just call it products or
product lines. And part of that is a response to
current conditions. Part of it might be the recognition that
if austerity is the order of the day, big federal
government spending cuts, for example, and perhaps slower economic growth
(34:56):
over the next decade, you might have to focus on higher,
more affluent, more profitable consumers, whether it's car manufacturers or
airlines or maybe others that you've come across. As you
I'm going with talk about these stories.
Speaker 4 (35:08):
Demographics being a key factor here as well. There's that, Yeah,
you got all.
Speaker 2 (35:13):
These boomers and I know, I know boomers listening. Are
you know of various different economic stripes. You got a
lot of boomers with a lot of money, and they're retiring,
and they have money to spend. They don't if they
have the money, they don't want to be sitting jammed
in back in economy class if they.
Speaker 4 (35:33):
Can avoid it, of course.
Speaker 2 (35:34):
And so if you have all this money that is
now tied to the stock market and not tied to
you know, how much income a person is making year
to year? Okay, like these are boomers that are saying, hey,
I got ten to fifteen years where I'm going to
be able to spend this money enjoying like what I
do before. I'm not able to do that anymore. Great,
(35:57):
let's spend it. And I think that's a huge thing
that we need to factor in in terms of not
only just these business decisions, but also hey, how do
things like monetary policy, how do their impact shift in
today's economy compared to what it used to be, both
in terms of where's the consumption coming from? And you know,
we've talked at other times about hey, what are we
(36:18):
producing and how is that, you know, impacted by monetary
policy in different ways than it used to be.
Speaker 4 (36:23):
I think the.
Speaker 2 (36:24):
Rise of retired boomers is something that is absolutely a
factor in both of these things.
Speaker 3 (36:29):
Yeah, makes sense.
Speaker 4 (36:30):
Okay, what else you got?
Speaker 3 (36:31):
Thank you? Would you buy a car from Amazon.
Speaker 4 (36:34):
Like a like with an Amazon logo on it?
Speaker 3 (36:38):
I'm sorry, through their website it could.
Speaker 4 (36:39):
Be made, Oh so not an Amazon car?
Speaker 3 (36:41):
So Hundai for examples. Part have you guys heard about
this is I don't claim to be an expert.
Speaker 5 (36:46):
We've talked about here before, but the official launch was yesterday.
Speaker 3 (36:49):
Okay, so you can buy what a Hyundai now on
Amazon in certain markets including Boston? Would you do it?
Can you return it?
Speaker 4 (37:00):
Probably just ship it back on it and we don't
accept return. Take it over to the Whole Foods and stick
it in the way.
Speaker 3 (37:07):
What all the advantages of doing this versus going to
a dealer's website and doing most of the transaction online
with the sort of dedicated expert.
Speaker 5 (37:14):
Saves the nuisance of going to a car dealer.
Speaker 3 (37:17):
But they they've streamlined that process a lot. I'm just wondering,
what are the advantages You're buying through a trusted seller Amazon,
but if you buy through one of our local dealer networks,
they're presumably a trusted as well. I just don't know
what the what what need are they trying to meet?
Speaker 2 (37:30):
And ultimately, all they're doing is taking the dealer inventory
and putting it on right their site, So it's just
another way to aggregate.
Speaker 3 (37:37):
It, which dealers already do.
Speaker 2 (37:39):
So Yeah, I would have to really spend some time
analyzing the pricing, you know, the service contracts, because a
lot of new cars now come with service contracts that
are built in. Is Amazon's better or worse than anywhere else?
It's I'd have to spend some real time figuring out
what you get from this.
Speaker 4 (38:00):
I I really don't know.
Speaker 2 (38:03):
I'm not saying I wouldn't buy a car from Amazon,
but why from Amazon as opposed to any other dealer
or a website.
Speaker 3 (38:11):
I don't know they're there. It's online. You can type
in Hyundai and Amazon and.
Speaker 2 (38:15):
I'm getting I'm getting all the Herb Chambers listings right now.
Speaker 3 (38:19):
I just bought one.
Speaker 4 (38:20):
Oh congratulations. Quick break here. We've got to actually break
for the rest of the day.
Speaker 2 (38:23):
We'll see you tomorrow on the Financial Exchange
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