May 16, 2025 • 39 mins
Chuck Zodda and Mike Armstrong discuss the housing market has been strange and ugly to start the year. Consumer sentiment falls in May as Americans’ inflation expectations jump after tariffs. Walmart's price hikes op the door for every other company. Nvidia has gone on a wild ride this year. Is the storm over? Meta is delaying the release of its flagship AI model. Can we just go back to it being HBO again?
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Speaker 1 (00:00):
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(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike, and talker with you here as we look
to wrap up the week here on the Financial Exchange,
and I want to start things off just talking a
little bit about some of the data that we got
this morning.
Speaker 3 (01:23):
Couple pieces that came out.
Speaker 2 (01:25):
At eight thirty we got housing starts and building permits,
and at ten am we got the latest iteration of
the University of Michigan Consumer Sentiment data also typically just
known as consumer sentiment. And Mike, which one of those
two pieces do you want to start with?
Speaker 4 (01:41):
Uh, you can get the first one out of out
of the way, the builders stuff, because the sentiment one
is fairly big news.
Speaker 2 (01:49):
So you want to just leave me with the crap. Yeah, yeah,
I respect that.
Speaker 3 (01:53):
Yeah.
Speaker 2 (01:54):
So, building permits came in at an annualized pace of
one point four one two million. The previous was one
point four were eight one million, So it was about
a like five percent annualized decline in permits that were pulled.
Speaker 3 (02:09):
Not entirely surprising.
Speaker 2 (02:10):
This is data for the month of April, and certainly
there was some uncertainty in the month of April. So
I think this is another one that I kind of
file in as like, hey, great, we got.
Speaker 3 (02:19):
This, but I don't know what it means.
Speaker 2 (02:22):
So let's wait until next month and housing starts kind
of in the same boat. One point three six to
one million on an annualized basis versus one point three
three nine slight improvement but a little bit under expectations
of one point three seven. So I think overall, again,
you're gonna hear us unfortunately saying this quite a bit,
(02:43):
just because the policy evolved on April second, and then
again meaningfully on May twelfth, and so I think April
data you can kind of take and say, Okay, let's
put this to the side, and it doesn't necessarily represent
the way the world works now, So.
Speaker 4 (03:01):
Anything else to say on that MiCT No, housing market
is continuing to be weird and ugly this year, with
whide divergence place to place, and so we're gonna talk
about things in the housing market. I feel like this
year that don't make a ton of sense to people
living here in the Northeast until they, you know, take
a trip down to Florida and see all the four
(03:22):
sale signs.
Speaker 2 (03:23):
There's nothing, you know, particularly great or bad in the
housing market right now. It's kind of just it's very
men It's a very slight drag on the US economy
right now in my opinion.
Speaker 3 (03:34):
Yep.
Speaker 2 (03:35):
It's not something that's really contributing or detracting in either way.
Speaker 3 (03:39):
It has the potential.
Speaker 2 (03:41):
Here's the remarkable thing about the housing market though right now,
and this is I guess you could say this about
the entire economy, but the housing market is kind of
a microcosm for this. Like, if for some reason interest
rates go down by half a percent and you get
you know, thirty or fixed rate mortgages at six and
a half, housing's got potentially be a significant tail went
(04:01):
from there.
Speaker 3 (04:02):
Yeah, I gets ripping.
Speaker 2 (04:03):
For housing to rip, you gotta get mortgages into the
low sixes.
Speaker 3 (04:06):
But here's happening.
Speaker 5 (04:07):
You need to have unemployment at right five verse six percent.
Speaker 2 (04:10):
Here's the rub is the only way you get mortgages
that low is if the US economy does end up
going into recession. And if it does, that's typically not
a great time for housing. Uh. And so you kind
of look at it and you're like, okay, like that
could be you know, potentially bad news there.
Speaker 3 (04:25):
So this is one of those rare instances.
Speaker 2 (04:28):
Normally we talk about how housing in the US historically,
for the last like seventy eighty years, housing is the
business cycle. It leads both into and out of recessions.
This is one time where I think you could make
a case housing might not be the primary driver of
the business cycle.
Speaker 4 (04:47):
Yeah, I mentioned this yesterday, Chuck, But I feel like
I would be willing to guess that if you looked
back over the last forty years, there has never been
a time where housing prices could fall by twenty percent
and fewer people would be underwater on their homes.
Speaker 3 (05:02):
Yeah.
Speaker 2 (05:03):
Yeah, I mean it's look when you talk about yeah,
it's because prices have gone up so much since most
people bought their homes.
Speaker 3 (05:10):
It's something where.
Speaker 2 (05:13):
You've got a ton of equity and even if someone
needed to you know, let's say someone lost a job
and had to sell a place, in most of the country,
you can do that without a short sale right now.
That the parts of the country that are concerning are
the ones that have been you know, hottest in twenty
twenty one, twenty two, twenty three, and those are the
areas where inventory is building for a number of different reasons.
(05:34):
And so I think in those areas, especially if you
were someone who did buy at that peak in twenty one,
twenty two, twenty three. Hey, if you were in Austin,
Texas buyer in twenty twenty three, like late twenty two,
early twenty three, and you got to sell your place,
you know, I don't know, call it like basically anytime
now you're you're taking a short sale in order to
(05:55):
get out of it. Most likely if you had a
standard twenty percent down, because in the Austin Texas market,
you're already about fifteen percent off the peak. Then you
factor in your agent commission. Now you're down twenty and
you're like, Okay, I've eaten through my entire down payment
and I might have to do a short sale when
anything else is accounted for, as far as any other
fees and stuff that I might need to pay there.
Speaker 3 (06:16):
So that's the.
Speaker 2 (06:17):
Only market in the country right now that has that issue.
In Austin, Texas is not going to be the driver
for the US economy, likely not. So let's go now
and talk a little bit about this consumer sentiment data
that we saw.
Speaker 3 (06:33):
What did the number show, Michael.
Speaker 4 (06:35):
The numbers showed the second worst print that we have
ever seen on consumer sentiment from the University of Michigan,
which has been taking this data since the nineteen sixties.
The number dropped to fifty point eight from fifty two
point two. This is a survey done in the month
of May, so we are getting closer to current data.
The expectations for inflation increased as well, So you had
(06:58):
a inflation expectations, which again are important to models, so
we bring them up, but they never actually end up
resulting in the type of inflation that people are expecting.
Speaker 3 (07:09):
You're ahead.
Speaker 4 (07:09):
Inflation expectations surged from six and a half percent last
month to seven point three percent in this month. This
month's rise was seen both among Democrats and Republicans. Interestingly,
so this is a highly political survey and you see
the results in that way. They did a whole study
on this, the University of Michigan did, and it's been
(07:31):
more partisan over the last few years compared to previously.
But in this case, both Republicans and Democrats said, yeah,
in inflation expectations moving upward. Here's the thirty trillion dollar question.
Does it mean anything? Yeah, I don't have an answer
to that. It means that people are less optimistic. It
(07:54):
means that people might be anticipating higher inflation, but I
don't know that it means they're going to go buy
things now and drive those prices higher.
Speaker 5 (08:04):
I So I can't conclude that.
Speaker 2 (08:06):
Yeah, I I just don't know what this what this
means at this point. And look, it's a worthwhile question, Hey,
is this even something that we should be paying attention
to because it's reliability in recent history has not been good,
and it's its long term reliability is not really you know,
(08:27):
the most useful either. So I think, like, yes, Like
it's it's clear that we're getting these indications that in
this is the main numbers. Now, so this was done
you know, over the first you know, part of this month.
It's clear that Americans are pretty nervous and pretty downbeat
on the economy right now.
Speaker 3 (08:46):
Does that tell us anything about.
Speaker 2 (08:48):
Where it's going to be going over the you know,
the next year or two, And is the inflation expectations
component in here is it reliable enough to tell us,
you know, anything about how Americans may actually behave there
simply because we get other measures of this that that
are out there as well. The New York Fed captures
a whole bunch of inflation expectations data. Even if you
(09:10):
look at financial markets and there's a tool that you
can use forward inflation swaps that basically you know you're
betting pretty much on what you think inflation is going
to be over different time periods. These all do not
necessarily give the same picture, and none of them are
right all the time either. So I think it's it's
kind of like I tend to say this a lot,
(09:32):
but hey, throw it on the pile.
Speaker 3 (09:34):
You know, at it as you know, one data point.
Speaker 2 (09:37):
But if you're making if you're making investment or you know,
economic or financial decisions based on the University of Michigan
consumer sentiment data, good luck. Not really sure that's going
to work out for you. That's true of most single
data points.
Speaker 4 (09:52):
By the way, the record low ever on this index
was reached back in June of twenty twenty two, just
to give you a frame of reference for this, and
it was only eight tenths of a eight tents of
a point worse than it is right now. So this
is very close to the all time lows. And I
don't think I need to remind folks what the economy
was feeling like back in June of twenty twenty two.
(10:13):
It was bad. Stock market was down, economy was slowing.
We did not get a recession, we did not result
in job loss. Inflation kind of peaked at that point
in time. I think June actually twenty twenty two, inflation
did peak.
Speaker 3 (10:28):
So it did.
Speaker 4 (10:29):
Yeah, it's not a perfect indicator of what's to come
in the future.
Speaker 5 (10:33):
But that one.
Speaker 4 (10:35):
Piece inflation expectations, why they matter is because if those
expectations actually convince people that prices are going to go
up and I'm going to go now and load up
on items early, because I'm worried about prices increasing, then
that matters. It just didn't matter last time around.
Speaker 2 (10:54):
The other thing that I'll point out on the University
of Michigan Consumer Sentiment survey. But do you guys know
why Michigan, like the university University of Michigan even does this.
Speaker 4 (11:07):
Only because they've been doing it since sixties. I don't
know why they initially since the forties actually forties. Do
you know why they got board.
Speaker 5 (11:15):
Manufacturing hub Michigan, I don't know on.
Speaker 3 (11:19):
The right track.
Speaker 2 (11:19):
So World War two, US government wanted some way to
figure out, Hey, what's going on in the US economy,
So we can mobilize for war effectively and direct resources
you know, within the country. University of Michigan, given where
the automakers were and given you know, how integral they
were in being able to ramp up, you know, production
of basically anything related to the war effort, University of
(11:41):
Michigan became that hub for economic data. And that's why,
to this day has one of the best economics departments
out of any school in the country. Is it's a
legacy that dates back to World War Two. So there
you go, and now we're questioning whether or not it matters.
Speaker 1 (11:56):
Huh.
Speaker 2 (11:57):
So here's the thing. They interview the University of Michigan
Consumer Sentiment Server. They interview I think it's six hundred
people on a monthly basis. Ye, And like here's I
guess the question that I ask, Like, they've always had
six hundred people.
Speaker 3 (12:10):
They don't change it up or down.
Speaker 2 (12:13):
There's a one of the things that they note is
and they note this, you know, consistently, how many people
are you know, providing unsolicited positive or negative comments on
government economic policy? Just one Like they basically like track
like they give you a section to put in, you know,
any other comments and they say you know, say what
(12:34):
you want to say. And here here's the piece that's
interesting is that historically there have not been you know,
dramatic swings either way in terms of the percentage of
people that have been making positive or negative comments. But
these swings in terms of the percentage that have been
making comments in that direction, have they've expanded over the
(12:58):
last twenty years.
Speaker 3 (13:00):
And part of.
Speaker 2 (13:01):
Me looks at this because again, this was remarkably consistent
dating back to you know, like you look all the
way through like the mid two thousands, and generally there
wasn't much skew in terms of you know, the comments
that people we were making. All of a sudden in
the mid two thousands, like right around two thousand and seven,
two thousand and eight, you started seeing the percentage of
(13:23):
people making you know, comments about specifically negative comments about
the economy ratcheting up. And part of me wonders, did
smartphones break this again? Like is this another thing that
smartphones broke? Because now we all just have to express
our opinion, and is our opinion actually worth anything? Right, Like,
(13:45):
it's just something I wonder about. I have nothing to
back it up. But you never really used to see
anything meaningful, and now it's you're getting all these you know,
sky high readings for the last decade or so, and
you're kind of like, well, this is another thing that
you can like overlay smartphone growth on, and this is
other factor in it. I don't really know. Let's take
a quick break here. When we come back, let's talk
(14:06):
a little bit more about what Walmart said yesterday about
price increases.
Speaker 1 (14:11):
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Speaker 2 (15:11):
Mike a piece of the Wall Street Journal here. It
touches a little bit on what we covered yesterday. It's
it's titled Walmart's price hikes open doors increases from everyone
from everybody else, And we talked about this that Look,
if Walmart is signaling, hey, we're going to raise prices,
you better believe everyone else has covered to do so
as well.
Speaker 3 (15:31):
Yeah.
Speaker 5 (15:31):
I don't want to overblow this though.
Speaker 4 (15:33):
You know, when we talk about Walmart rising prices, you know,
on average across their entire basket of goods, we might
be talking about a couple percentage point increases here and there.
It would be my total guest, because remember, you know,
they are not paying tariffs on every product they get
into their store. The tariff rates that they are paying
(15:55):
differ place by place, and usually the strategy that companies
like this deploy as they say, Okay, you know, we
are seeing pretty high price increases on shoe wear, for example,
but we can spread that cost out across multiple items
to make it not quite felt in the same way
on just one specific item that you know, could drive
our customers elsewhere. And so I do expect that they
(16:18):
are going to, you know, raise prices on things that
aren't even affected by tariffs with the goal of.
Speaker 5 (16:23):
Maintaining margins across the store.
Speaker 4 (16:25):
But yeah, absolutely if you are Target or you know, TJX,
or really any company across the board. Here you're saying, okay, well,
if Walmart's doing it, I certainly think I can too
without too much blowback.
Speaker 2 (16:39):
And and by the way, they have to like, let's
let's make this clear when it comes to these companies
you mentioned. TJX is another one. Walmart we covered a
little bit yesterday. TJX probably the best operator in the
consumer space. They have one of the widest margins that
you have out of anyone, and they're running, you know,
(16:59):
eleven percent in that space. Walmart, we said yesterday, I
think they're like four and a half if you go
when you take a look again, I haven't looked at this,
but I'm just pulling it up, and I suspect I'll
find something similar. Target five and a quarter percent margins,
and Target is one of the most exposed companies to
China as far as where their inventory comes from.
Speaker 3 (17:19):
Five below.
Speaker 2 (17:20):
Another one that we've touched on previously eight percent margins.
So if you're seeing your you know, your your input
cost rising by you know, ten, fifteen to twenty percent,
whatever it might be, you got to deal with that.
And remember the cost is not just the increase in
costs in the tariff.
Speaker 3 (17:38):
Have either of you guys seen.
Speaker 2 (17:39):
All the stuff going on in terms of the number
of bookings coming out of China now for cargo space
on ships.
Speaker 5 (17:47):
No, but that's going to add cost as well.
Speaker 2 (17:49):
The bookings have rebounded like three hundred percent, so that
there's not enough room on all the ships, and so
obviously shipping costs end up going up. Now, is that
something that you know doubles your cost? No, it's not,
but it's still something else that you need to factor in.
And so these are things that these companies that they
don't have room to simply absorb a ten percent increase
(18:11):
and just say yeah, like everything will be fine. It
each through a huge percentage of their profits. And so
this is the one where I think I'm really interested
to see what we get over the next couple quarters
is how do they manage this as far as trying
to maintain margins versus you know, what they can pass
through without alienating customers. It's a big one for all
(18:32):
these goods related companies and even service related companies.
Speaker 3 (18:36):
Hey, you got costs that go up as well.
Speaker 2 (18:38):
You run a restaurant and you got to replace ah,
you know, you got to replace a stove or something
three months from now right, it is the cost higher
or lower than it was before. And how do you
you know, factor that into what you're actually making in
your services business?
Speaker 4 (18:54):
Yeah. The other piece that you know, this is reminiscent
of what we saw during COVID too, And I just
do want totally what do we hear from executives during
conference calls?
Speaker 5 (19:02):
Are we hearing them? I used the word bragging yesterday.
Speaker 4 (19:05):
Maybe bragging is not the right word, but you know,
patting their profit margins on these expectations around tariff's is
a huge question for where inflation goes.
Speaker 2 (19:14):
Yeah, it's and I have no idea exactly what we're
going to see. There a million different permutations and this
is before again we even get into the question of
where are tariff's going to be three, six, nine, twelve
months from now right? Quick break here when we return,
We've got Wall Street Watch, and then we're talking in
video after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
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on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today, right here on the Financial Exchange Radio Network.
Speaker 6 (20:00):
Well, at the moment, markets are pretty much flat as
the SMP five hundred attempts to extend its winning streak
to five. Wall Street this morning is reacting to the
latest Michigan consumer sentiment index as well as inflation expectations.
Right now, the Dow is up by four points, that's right,
just four points, SMP five hundred up by one point,
(20:22):
and the NASDAC now actually down by eight points. RUSS
thousand is up by two tenths of a percent, ten
year treasure yield down by three basis points now at
four point four to two percent, and crude oil is
up about a quarter percent higher, trading just below sixty
two dollars. A barrel big news in the media world
this morning after two of the largest cable companies in
(20:43):
the country, Charter and Cox Communications, have greed to merge
in a twenty one point nine billion dollar deal. Charter
Communication stock is up by about two percent on that news. Meanwhile,
we Go via nozempic maker Novo Norda announced its CEO
is stepping down, citing recent market challenges, a pullback in
(21:06):
the pharmaceutical company's stock price, and increasing competition. That stock
is retreating by about three percent Elsewhere, Applied Material shares
down seven percent after the chip equipment makers quarterly results
narrowly missed expectations and said the trade war has not
significantly changed demand. Video game maker Take two Interactive said
(21:30):
it would report a full year loss in lower than
expected sales after a delay to the highly anticipated video
game Grand Theft Auto six has been multiple delays on
that one. Take two Interactive shares are down by about
a third of a percent. Constellation Brands up by about
half a percent after Warren Buffett's Berkshire Halfway disclosed it
(21:51):
doubled its stake in the beer importer, bringing its total
position in the company to about two point two billion
dollars in share in Mediterranean restaurant chain Caba down by
five percent after it said it expected same restaurant sales
growth to moderate during the year. I'm Tucker Silvan. That's
Wall Street Watch, Mike.
Speaker 2 (22:12):
Let's talk a little bit about in Vidia h simply
because this year twenty twenty five has been quite the
roller coaster for them. So the shares of Nvidia opened
on January second at one hundred and thirty five bucks
a share and promptly went up over ten percent, getting
into the mid one fifties. I call one fifty three
(22:34):
the mid one fifties. They then promptly, for a couple
different reasons, puked down to one sixteen on January twenty seventh.
Speaker 3 (22:43):
That was right after the Deep Seak announcement where.
Speaker 2 (22:46):
Everyone got nervous that hey, maybe you know, you don't
need as many chips are as much firepower in order
to you know, ratchet up these models for artificial intelligence.
Speaker 3 (22:56):
As you previously thought.
Speaker 2 (22:59):
It rebounded from that and went back up to one
hundred and forty three, so it rallied, you know, more
than twenty percent. Then into early March, it puked another
almost thirty percent, heading down to about one hundred and
four dollars a share. This on the first tariff concerns
that came up. Then it rebounded almost twenty percent to
(23:19):
one hundred and twenty two dollars. Then it fell about
thirty percent from there down to eighty six, and now
it's rallied about fifty percent from that bottom up to
one hundred and thirty four. So it's been freaking wild,
especially like here. Here's the thing that you got to
say about like a company like this and its price movements.
It's one thing when you see, you know, weekly ten
(23:42):
to fifteen percent price movements on a company that has
a market cap of you know, five billion dollars. This
is a three point three trillion dollar company that's seeing these,
and it just speaks to the amount of money that
is moving on both sides of these trades, to on
which way things are flowing.
Speaker 4 (24:01):
And infects all of you because it's trading places with
Microsoft for the first or second largest company in the
world every couple of weeks. So you know, when you
talk about any index that fund that you could possibly own,
it's driving the volatility there as well.
Speaker 2 (24:17):
Yeah, it's it's like six plus percent of the S
and P five hundred. The only companies that are in
the same ballpark are Apple and Microsoft. So you get
this piece from Bloomberg here in video Shares roarback is
clouds hanging over chip maker fades.
Speaker 3 (24:32):
So couple things that we have here. Obviously, look just about.
Speaker 2 (24:35):
Every stock, I don't want to say I want to
say every stock, but I haven't looked at every stock,
so I don't know, but just about every stock has
bounced off of that April seventh, April eighth bottom. So
clearly you had that going on, you know, prior to
this week. This week, then you have President Trump visiting
number of different Middle Eastern countries and one of the
(24:56):
big things that has been touted it just about every
stop is hey, we're gonna be you know, supplying uh,
you know, in Vidia signing a deal to supply x
thousand number of chips to develop AI data centers in
these different countries. And so here's I guess one of
the things that this potentially does, depending on, you know,
(25:17):
how much these actually scale up and what actually happens here.
But if these actually come to fruition, what it does is,
you know, one of the questions out there foreign video is, hey,
you basically have had like four or five companies that
have been the primary buyer of their chips, like you
and I don't go out and say hey, Like, should
(25:37):
we buy an Nvidia AI chip?
Speaker 4 (25:39):
Like you can't do it any time with one of
them anyways, coster.
Speaker 2 (25:45):
Little pricey little price, you know, turn it upside down
just so it doesn't get you know, soaked. We've been wondering, okay,
like if these companies stop buying, not stop, but if
they slow down their their pace of buying from how
quickly it's been ratcheting up, where are the next people
to buy? And the answer can potentially be provided by
(26:08):
the governments of various different Middle Eastern countries, so it
potentially solves that problem for them. We'll still have to
see how this ends up going. And the other thing
that I will say is if there's one thing that
I do think you can kind of consistently point to
the money that comes from sovereign wealth funds in the
(26:30):
Middle East. Two things actually that you can say, hey,
probably comes with a bunch of strings attached to it.
Speaker 3 (26:36):
Yep.
Speaker 2 (26:37):
B historically not great at timing when the best time
to invest in various things are. As an example of this,
the Saudi's decided to pour a bunch of money into
Lucid Motors back in twenty twenty one. Has it worked
out great for them, stocks down like ninety seven percent
since ipoing, and they're you know, they make fantastic cars apparently,
(27:00):
but they're just not you know, like it was a
poorly timed investment if you actually care about the return.
Speaker 4 (27:06):
Yeah, like these sales likely witch sorry, which raises the
question do they care about the return? And Michael, I
have a whole new thesis that's been developing over the
course of this week. Now, Okay, Mike, what's one of
the big problems that we've been talking about in US
markets over the last month.
Speaker 3 (27:29):
I know there's a lot of them, and that's kind
of a big question.
Speaker 5 (27:32):
Why did you answer your own question?
Speaker 2 (27:33):
What's one of the underlying questions that we've been wondering
about in US markets over the past month as it
relates to stability.
Speaker 4 (27:44):
Foreign buyers of a sovereign is foreign owners of dollars
that may or may not continue to pour them into
the market.
Speaker 5 (27:51):
Yeah, know, what are you getting at?
Speaker 2 (27:52):
Yeah, I'm getting to bond two things, bond yields and
and by you know, default then you know dollar strength. Sure,
and so he like, here's the thought that just kind
of passed through my head as as I'm looking at
what's going on this week. The Middle East obviously wants,
you know, to be able to diversify long term away
from you know, only relying on oil revenue.
Speaker 3 (28:13):
They've they've told this.
Speaker 2 (28:15):
They also want access to all the latest and greatest stuff,
which to this point the US has been kind of, Hey,
we're not sure we really want to give you, you know,
the latest and greatest in Vidia chips, and even when
we send you military technology, it might be one level
removed from what we keep for ourselves and you know,
like stuff like that.
Speaker 4 (28:32):
Yeah, this deal appears to have opened some floodgates on
that front.
Speaker 2 (28:36):
So I guess the question that I have is, Okay,
if Saudi Arabia or the UAE or Qatar is receiving,
you know, the ability to purchase tens of thousands of
chips from in Vidia, what's the US ask coming back, Hey,
we we got some some deficit.
Speaker 3 (28:56):
Issues over here.
Speaker 5 (28:57):
Keep those rates low for.
Speaker 3 (28:58):
Toss a couple bones to us.
Speaker 2 (28:59):
And by the way, it is not the first time
that the Middle East has been used in this fashion.
The whole concept of you know, the petro dollar and
that oil can only be bought and traded in dollars
comes from deals that the US made back in the
nineteen seventies to basically link the price.
Speaker 3 (29:13):
Of oil to the US dollars.
Speaker 2 (29:15):
Why the US and the Saudi in the Saudis basically
have the relationship that we do. So I think the
the interesting thing to me on this is when you
hear about, you know, these countries talking about, oh, we're
agreeing to invest you know, X dollars in the US.
First of all, the actual totals are pure poppycock.
Speaker 5 (29:33):
Poppingcock.
Speaker 2 (29:33):
You say, Mike, do you know what Quitar's GDP is now?
Two hundred and twenty billion dollars? Yeah, How are they
going to invest one point two trillion dollars in the
United States?
Speaker 3 (29:44):
What are they going to do? Take their entire GDP
for six years and throw it to us?
Speaker 5 (29:48):
No lever it up?
Speaker 2 (29:50):
Right, Who's going to lend a trillion? Who's got a
trillion dollars? They're just waiting to lend out, you know.
So here's where I kind of get to is, Hey,
these might not come in the form of an investments
into the US to like build stuff in the US.
Investing in the US could be as simple as buying
US bonds, and I kind of look at this and
(30:11):
I wonder, okay, is that where this is going in
terms of something that a lot of these Middle Eastern
countries want, something that the US wants. Hey, here's how
you end up, you know, kind of meeting in the
middle on this. It's the thought that's been rattling around
in my head as I've watched you know, what's gone
on over the course of this week, anything else on
this before we move on.
Speaker 4 (30:31):
No, I do wonder how Israel is going to feel
about US selling a lot of these chips out.
Speaker 3 (30:37):
To sounds like based on the early indications.
Speaker 4 (30:41):
But yeah, probably not terribly happy about these negotiations.
Speaker 2 (30:45):
Well, I don't think Israel and the Saudi's necessarily have
a whole space between them. You know, they were pretty
close to normalizing relations before the October seventh attacks a
couple of years ago. The one that the israelis you're
gonna have a problem with his Katar, given Qatar's relations
with Iran, And that's one where they're gonna be like, oh, hey,
(31:08):
like this is not really you know, we're not feeling this,
and you know, we'll see how this ends up playing out.
Just take a quick break. We'll stick with a little
bit of AI chatter after this. We'll talk about what's
going on with Meta in the AI universe when we return.
Speaker 1 (31:23):
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Speaker 6 (31:47):
This segment of the Financial Exchange is brought to you
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Speaker 2 (32:22):
Mike, we got some news from Meta that when they
announced it yesterday, the stock fell a couple percentage points
immediately after the headline in the Wall Street Journal is
Meta is delaying the rollout of its flagship AI model.
Speaker 3 (32:37):
This is titled Behemoth.
Speaker 2 (32:41):
I mean, gosh, with a name like that, Like, who
couldn't get excited?
Speaker 4 (32:45):
If you're listening right now and you're by a computer
or have your phone with you and you're not driving,
can you just image search Lama for Behemoth and the
photo that they have of the chief product officer standing
in front of the develop a conference, because I just
don't really agree with the stylistic choices for the Lama
(33:07):
avatar that they created for this thing, which.
Speaker 3 (33:11):
Yeah, nightmare. Here's the thing.
Speaker 2 (33:14):
It's it's kind of this, You're playing into every fear
that everyone has about artificial intelligence. It's this gothic lamahead
with horns on top of kind of a jacked looking human.
Speaker 3 (33:26):
Body and kind of jacked what. I'm pretty ripped these days.
Speaker 5 (33:34):
I just I drew an arrow and I just said,
why why would you do this?
Speaker 3 (33:40):
Everyone?
Speaker 5 (33:41):
I don't.
Speaker 4 (33:42):
I just I know you're looking to take on the competition,
and you're trying to, you know, get people excited about
this Lama that's apparently going to go fight in the
Chronicles of Narnia, But like, what are we doing here?
Speaker 2 (33:56):
I think you know, there's something interesting that's happening, Mike,
with these large language models. So I'm gonna quote also
here chat. GPT five, one of open AI's next big
technological leaps forward, was initially expected around mid twenty twenty four.
In December, the journal report development on the model was
running behind schedule, obviously if it was December and it
was supposed to be done halfway through last year. In
(34:18):
February they said it would be released as as GPT
four point five, and GPT five was still months away.
Anthropic has been running behind on new model updates. I
don't know if you guys saw what happened with GROC
over the last couple of days that they actually had
to issue a public apology for Yeah you told me
about it, yeah, where it was basically answering every question
(34:39):
in relation to like white genocide from South Africa. And
so what's kind of interesting to me right now is
that it seems like the incremental gains on these models
are becoming harder and harder to achieve, which is not surprising,
by the way, if you are a sprinters trying to
(35:00):
run the one hundred yard dash.
Speaker 3 (35:02):
It's a lot easier to go.
Speaker 2 (35:03):
From running nineteen seconds to eighteen seconds than it is
to go from eleven to ten. True, Like, the incremental
improvement is much easier.
Speaker 3 (35:10):
It's the same thing. Think about when you're driving on
the highway.
Speaker 2 (35:13):
It's a lot easier to go from sixty to seventy
miles an hour than eighty to ninety.
Speaker 5 (35:17):
This is what I was gonna say, zero to sixty
than sixty to one hundred twenty. I don't know how
you're driving.
Speaker 2 (35:22):
I haven't been to one hundred and twenty in a
long long time, Michael. It's I'm the guy who does
sixty three in the right lane, trying to maximize fuel
economy at this point, so I know my place.
Speaker 4 (35:33):
Well, they turned into Barry, we know exactly, and then
I accelerate off the off ramp just you know, for
the fun of that one.
Speaker 3 (35:40):
Curve that you hit.
Speaker 2 (35:41):
So I think that what we're seeing here is that
there's some limitations on this as to how far they
can actually go. And it does get back to that
question with in video, which is, hey, like, our company's
going to continue increasing capex in this fashion because this
is kind of the whole thing that powers the entire
ecosystem to this point. And ultimately, I think we're getting
(36:03):
to the point now where the incremental drive has to
come from companies actually committing to more spend on AI
products from AI providers. Yeah, it's not just going to
come from more high school students using chat GPT to
answer their their you know, homework. It has to come
(36:24):
from companies that say, yes, we are willing to pay
you x thousand dollars for X license for why licenses
so that we can either a make our current employees
more you know, profitable, or be reduce headcount but maintain
the same productivity.
Speaker 4 (36:40):
Yeah, that's what you are looking for, and you haven't
been getting a lot of it recently.
Speaker 5 (36:46):
But I'll also say that.
Speaker 4 (36:49):
The deep seek News, for example, was a giant leap
in seeming productivity, and they can come all at once
without happening for a while.
Speaker 2 (36:58):
Can we speed run a couple stories here? Of course,
this HBO rebrand is just great. I forgot so we
didn't just go from HBO Max to Max and now back.
Speaker 3 (37:09):
To HBO Max. No, we also had HBO.
Speaker 2 (37:12):
Now at one point we had HBO go like it's
been through five or six different brands in the last
you know, seven or eight years, and I'm telling you,
Tucker put it on the board. By the end of
twenty twenty eight, No, end of twenty seven, it's gonna
be just HBO again.
Speaker 4 (37:29):
Are they struggling so much with success here that they've
needed to change the name? I mean, I know they
went through the whole ownership change, and I get that
they were a mismanaged for a period of time, but
I'm just not sensing that they were having such a
problem with the Max brand that they had to change
it back to HBO Max.
Speaker 5 (37:48):
I just don't get it.
Speaker 3 (37:49):
Yeah, I don't really know. The other one that I
just want to touch on.
Speaker 2 (37:54):
Uber has basically reinvented the bus YEP they had, and
like They're big thing is, oh, like this is cheaper
than taking a regular Uber, but you're gonna have to
like walk to you in from some spots and hey,
we'll give you a discount if you buy like a
month's worth of fairs.
Speaker 3 (38:08):
Oh, just like a regular bus does.
Speaker 2 (38:11):
Yes, but this is a Uber but this is more
expensive than a bus.
Speaker 3 (38:17):
So I'm still struggling to figure out what this solves.
Speaker 2 (38:21):
Yeah, well, maybe something quick break here hour two coming
up in just a bit.
Speaker 4 (38:33):
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Taking the lives of one in three.
Speaker 2 (38:38):
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For too long, heart disease and stroke have taken the
lives of the women we love.
Speaker 3 (38:46):
But we're not giving up because we have something better.
Speaker 1 (38:49):
Stronger, more powerful.
Speaker 2 (38:51):
We have each other.
Speaker 3 (38:53):
When we come together and go read, the more power
we have against our greatest health threat.
Speaker 1 (38:58):
Visit go Red for Women dot org today to learn more.
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Speaker 2 (39:05):
Trying to fit in exercise, eating right, and prioritizing self
care can feel next to impossible. While we can't add
more hours to the day, we do have a great
resource to help. Go Red for Women has easy tips,
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Speaker 1 (39:19):
So to all the moms, aunts, grandmothers, and amazing women
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Speaker 4 (39:24):
All, visit goreadfowomen dot org slash momlife today.
Speaker 1 (39:27):
You take care of them. Go Red for Women will
take care of you.
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a donation today. This is the Financial Exchange with Chuck
(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike, and talker with you here as we look
to wrap up the week here on the Financial Exchange,
and I want to start things off just talking a
little bit about some of the data that we got
this morning.
Speaker 3 (01:23):
Couple pieces that came out.
Speaker 2 (01:25):
At eight thirty we got housing starts and building permits,
and at ten am we got the latest iteration of
the University of Michigan Consumer Sentiment data also typically just
known as consumer sentiment. And Mike, which one of those
two pieces do you want to start with?
Speaker 4 (01:41):
Uh, you can get the first one out of out
of the way, the builders stuff, because the sentiment one
is fairly big news.
Speaker 2 (01:49):
So you want to just leave me with the crap. Yeah, yeah,
I respect that.
Speaker 3 (01:53):
Yeah.
Speaker 2 (01:54):
So, building permits came in at an annualized pace of
one point four one two million. The previous was one
point four were eight one million, So it was about
a like five percent annualized decline in permits that were pulled.
Speaker 3 (02:09):
Not entirely surprising.
Speaker 2 (02:10):
This is data for the month of April, and certainly
there was some uncertainty in the month of April. So
I think this is another one that I kind of
file in as like, hey, great, we got.
Speaker 3 (02:19):
This, but I don't know what it means.
Speaker 2 (02:22):
So let's wait until next month and housing starts kind
of in the same boat. One point three six to
one million on an annualized basis versus one point three
three nine slight improvement but a little bit under expectations
of one point three seven. So I think overall, again,
you're gonna hear us unfortunately saying this quite a bit,
(02:43):
just because the policy evolved on April second, and then
again meaningfully on May twelfth, and so I think April
data you can kind of take and say, Okay, let's
put this to the side, and it doesn't necessarily represent
the way the world works now, So.
Speaker 4 (03:01):
Anything else to say on that MiCT No, housing market
is continuing to be weird and ugly this year, with
whide divergence place to place, and so we're gonna talk
about things in the housing market. I feel like this
year that don't make a ton of sense to people
living here in the Northeast until they, you know, take
a trip down to Florida and see all the four
(03:22):
sale signs.
Speaker 2 (03:23):
There's nothing, you know, particularly great or bad in the
housing market right now. It's kind of just it's very
men It's a very slight drag on the US economy
right now in my opinion.
Speaker 3 (03:34):
Yep.
Speaker 2 (03:35):
It's not something that's really contributing or detracting in either way.
Speaker 3 (03:39):
It has the potential.
Speaker 2 (03:41):
Here's the remarkable thing about the housing market though right now,
and this is I guess you could say this about
the entire economy, but the housing market is kind of
a microcosm for this. Like, if for some reason interest
rates go down by half a percent and you get
you know, thirty or fixed rate mortgages at six and
a half, housing's got potentially be a significant tail went
(04:01):
from there.
Speaker 3 (04:02):
Yeah, I gets ripping.
Speaker 2 (04:03):
For housing to rip, you gotta get mortgages into the
low sixes.
Speaker 3 (04:06):
But here's happening.
Speaker 5 (04:07):
You need to have unemployment at right five verse six percent.
Speaker 2 (04:10):
Here's the rub is the only way you get mortgages
that low is if the US economy does end up
going into recession. And if it does, that's typically not
a great time for housing. Uh. And so you kind
of look at it and you're like, okay, like that
could be you know, potentially bad news there.
Speaker 3 (04:25):
So this is one of those rare instances.
Speaker 2 (04:28):
Normally we talk about how housing in the US historically,
for the last like seventy eighty years, housing is the
business cycle. It leads both into and out of recessions.
This is one time where I think you could make
a case housing might not be the primary driver of
the business cycle.
Speaker 4 (04:47):
Yeah, I mentioned this yesterday, Chuck, But I feel like
I would be willing to guess that if you looked
back over the last forty years, there has never been
a time where housing prices could fall by twenty percent
and fewer people would be underwater on their homes.
Speaker 3 (05:02):
Yeah.
Speaker 2 (05:03):
Yeah, I mean it's look when you talk about yeah,
it's because prices have gone up so much since most
people bought their homes.
Speaker 3 (05:10):
It's something where.
Speaker 2 (05:13):
You've got a ton of equity and even if someone
needed to you know, let's say someone lost a job
and had to sell a place, in most of the country,
you can do that without a short sale right now.
That the parts of the country that are concerning are
the ones that have been you know, hottest in twenty
twenty one, twenty two, twenty three, and those are the
areas where inventory is building for a number of different reasons.
(05:34):
And so I think in those areas, especially if you
were someone who did buy at that peak in twenty one,
twenty two, twenty three. Hey, if you were in Austin,
Texas buyer in twenty twenty three, like late twenty two,
early twenty three, and you got to sell your place,
you know, I don't know, call it like basically anytime
now you're you're taking a short sale in order to
(05:55):
get out of it. Most likely if you had a
standard twenty percent down, because in the Austin Texas market,
you're already about fifteen percent off the peak. Then you
factor in your agent commission. Now you're down twenty and
you're like, Okay, I've eaten through my entire down payment
and I might have to do a short sale when
anything else is accounted for, as far as any other
fees and stuff that I might need to pay there.
Speaker 3 (06:16):
So that's the.
Speaker 2 (06:17):
Only market in the country right now that has that issue.
In Austin, Texas is not going to be the driver
for the US economy, likely not. So let's go now
and talk a little bit about this consumer sentiment data
that we saw.
Speaker 3 (06:33):
What did the number show, Michael.
Speaker 4 (06:35):
The numbers showed the second worst print that we have
ever seen on consumer sentiment from the University of Michigan,
which has been taking this data since the nineteen sixties.
The number dropped to fifty point eight from fifty two
point two. This is a survey done in the month
of May, so we are getting closer to current data.
The expectations for inflation increased as well, So you had
(06:58):
a inflation expectations, which again are important to models, so
we bring them up, but they never actually end up
resulting in the type of inflation that people are expecting.
Speaker 3 (07:09):
You're ahead.
Speaker 4 (07:09):
Inflation expectations surged from six and a half percent last
month to seven point three percent in this month. This
month's rise was seen both among Democrats and Republicans. Interestingly,
so this is a highly political survey and you see
the results in that way. They did a whole study
on this, the University of Michigan did, and it's been
(07:31):
more partisan over the last few years compared to previously.
But in this case, both Republicans and Democrats said, yeah,
in inflation expectations moving upward. Here's the thirty trillion dollar question.
Does it mean anything? Yeah, I don't have an answer
to that. It means that people are less optimistic. It
(07:54):
means that people might be anticipating higher inflation, but I
don't know that it means they're going to go buy
things now and drive those prices higher.
Speaker 5 (08:04):
I So I can't conclude that.
Speaker 2 (08:06):
Yeah, I I just don't know what this what this
means at this point. And look, it's a worthwhile question, Hey,
is this even something that we should be paying attention
to because it's reliability in recent history has not been good,
and it's its long term reliability is not really you know,
(08:27):
the most useful either. So I think, like, yes, Like
it's it's clear that we're getting these indications that in
this is the main numbers. Now, so this was done
you know, over the first you know, part of this month.
It's clear that Americans are pretty nervous and pretty downbeat
on the economy right now.
Speaker 3 (08:46):
Does that tell us anything about.
Speaker 2 (08:48):
Where it's going to be going over the you know,
the next year or two, And is the inflation expectations
component in here is it reliable enough to tell us,
you know, anything about how Americans may actually behave there
simply because we get other measures of this that that
are out there as well. The New York Fed captures
a whole bunch of inflation expectations data. Even if you
(09:10):
look at financial markets and there's a tool that you
can use forward inflation swaps that basically you know you're
betting pretty much on what you think inflation is going
to be over different time periods. These all do not
necessarily give the same picture, and none of them are
right all the time either. So I think it's it's
kind of like I tend to say this a lot,
(09:32):
but hey, throw it on the pile.
Speaker 3 (09:34):
You know, at it as you know, one data point.
Speaker 2 (09:37):
But if you're making if you're making investment or you know,
economic or financial decisions based on the University of Michigan
consumer sentiment data, good luck. Not really sure that's going
to work out for you. That's true of most single
data points.
Speaker 4 (09:52):
By the way, the record low ever on this index
was reached back in June of twenty twenty two, just
to give you a frame of reference for this, and
it was only eight tenths of a eight tents of
a point worse than it is right now. So this
is very close to the all time lows. And I
don't think I need to remind folks what the economy
was feeling like back in June of twenty twenty two.
(10:13):
It was bad. Stock market was down, economy was slowing.
We did not get a recession, we did not result
in job loss. Inflation kind of peaked at that point
in time. I think June actually twenty twenty two, inflation
did peak.
Speaker 3 (10:28):
So it did.
Speaker 4 (10:29):
Yeah, it's not a perfect indicator of what's to come
in the future.
Speaker 5 (10:33):
But that one.
Speaker 4 (10:35):
Piece inflation expectations, why they matter is because if those
expectations actually convince people that prices are going to go
up and I'm going to go now and load up
on items early, because I'm worried about prices increasing, then
that matters. It just didn't matter last time around.
Speaker 2 (10:54):
The other thing that I'll point out on the University
of Michigan Consumer Sentiment survey. But do you guys know
why Michigan, like the university University of Michigan even does this.
Speaker 4 (11:07):
Only because they've been doing it since sixties. I don't
know why they initially since the forties actually forties. Do
you know why they got board.
Speaker 5 (11:15):
Manufacturing hub Michigan, I don't know on.
Speaker 3 (11:19):
The right track.
Speaker 2 (11:19):
So World War two, US government wanted some way to
figure out, Hey, what's going on in the US economy,
So we can mobilize for war effectively and direct resources
you know, within the country. University of Michigan, given where
the automakers were and given you know, how integral they
were in being able to ramp up, you know, production
of basically anything related to the war effort, University of
(11:41):
Michigan became that hub for economic data. And that's why,
to this day has one of the best economics departments
out of any school in the country. Is it's a
legacy that dates back to World War Two. So there
you go, and now we're questioning whether or not it matters.
Speaker 1 (11:56):
Huh.
Speaker 2 (11:57):
So here's the thing. They interview the University of Michigan
Consumer Sentiment Server. They interview I think it's six hundred
people on a monthly basis. Ye, And like here's I
guess the question that I ask, Like, they've always had
six hundred people.
Speaker 3 (12:10):
They don't change it up or down.
Speaker 2 (12:13):
There's a one of the things that they note is
and they note this, you know, consistently, how many people
are you know, providing unsolicited positive or negative comments on
government economic policy? Just one Like they basically like track
like they give you a section to put in, you know,
any other comments and they say you know, say what
(12:34):
you want to say. And here here's the piece that's
interesting is that historically there have not been you know,
dramatic swings either way in terms of the percentage of
people that have been making positive or negative comments. But
these swings in terms of the percentage that have been
making comments in that direction, have they've expanded over the
(12:58):
last twenty years.
Speaker 3 (13:00):
And part of.
Speaker 2 (13:01):
Me looks at this because again, this was remarkably consistent
dating back to you know, like you look all the
way through like the mid two thousands, and generally there
wasn't much skew in terms of you know, the comments
that people we were making. All of a sudden in
the mid two thousands, like right around two thousand and seven,
two thousand and eight, you started seeing the percentage of
(13:23):
people making you know, comments about specifically negative comments about
the economy ratcheting up. And part of me wonders, did
smartphones break this again? Like is this another thing that
smartphones broke? Because now we all just have to express
our opinion, and is our opinion actually worth anything? Right, Like,
(13:45):
it's just something I wonder about. I have nothing to
back it up. But you never really used to see
anything meaningful, and now it's you're getting all these you know,
sky high readings for the last decade or so, and
you're kind of like, well, this is another thing that
you can like overlay smartphone growth on, and this is
other factor in it. I don't really know. Let's take
a quick break here. When we come back, let's talk
(14:06):
a little bit more about what Walmart said yesterday about
price increases.
Speaker 1 (14:11):
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Speaker 6 (14:39):
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Speaker 2 (15:11):
Mike a piece of the Wall Street Journal here. It
touches a little bit on what we covered yesterday. It's
it's titled Walmart's price hikes open doors increases from everyone
from everybody else, And we talked about this that Look,
if Walmart is signaling, hey, we're going to raise prices,
you better believe everyone else has covered to do so
as well.
Speaker 3 (15:31):
Yeah.
Speaker 5 (15:31):
I don't want to overblow this though.
Speaker 4 (15:33):
You know, when we talk about Walmart rising prices, you know,
on average across their entire basket of goods, we might
be talking about a couple percentage point increases here and there.
It would be my total guest, because remember, you know,
they are not paying tariffs on every product they get
into their store. The tariff rates that they are paying
(15:55):
differ place by place, and usually the strategy that companies
like this deploy as they say, Okay, you know, we
are seeing pretty high price increases on shoe wear, for example,
but we can spread that cost out across multiple items
to make it not quite felt in the same way
on just one specific item that you know, could drive
our customers elsewhere. And so I do expect that they
(16:18):
are going to, you know, raise prices on things that
aren't even affected by tariffs with the goal of.
Speaker 5 (16:23):
Maintaining margins across the store.
Speaker 4 (16:25):
But yeah, absolutely if you are Target or you know, TJX,
or really any company across the board. Here you're saying, okay, well,
if Walmart's doing it, I certainly think I can too
without too much blowback.
Speaker 2 (16:39):
And and by the way, they have to like, let's
let's make this clear when it comes to these companies
you mentioned. TJX is another one. Walmart we covered a
little bit yesterday. TJX probably the best operator in the
consumer space. They have one of the widest margins that
you have out of anyone, and they're running, you know,
(16:59):
eleven percent in that space. Walmart, we said yesterday, I
think they're like four and a half if you go
when you take a look again, I haven't looked at this,
but I'm just pulling it up, and I suspect I'll
find something similar. Target five and a quarter percent margins,
and Target is one of the most exposed companies to
China as far as where their inventory comes from.
Speaker 3 (17:19):
Five below.
Speaker 2 (17:20):
Another one that we've touched on previously eight percent margins.
So if you're seeing your you know, your your input
cost rising by you know, ten, fifteen to twenty percent,
whatever it might be, you got to deal with that.
And remember the cost is not just the increase in
costs in the tariff.
Speaker 3 (17:38):
Have either of you guys seen.
Speaker 2 (17:39):
All the stuff going on in terms of the number
of bookings coming out of China now for cargo space
on ships.
Speaker 5 (17:47):
No, but that's going to add cost as well.
Speaker 2 (17:49):
The bookings have rebounded like three hundred percent, so that
there's not enough room on all the ships, and so
obviously shipping costs end up going up. Now, is that
something that you know doubles your cost? No, it's not,
but it's still something else that you need to factor in.
And so these are things that these companies that they
don't have room to simply absorb a ten percent increase
(18:11):
and just say yeah, like everything will be fine. It
each through a huge percentage of their profits. And so
this is the one where I think I'm really interested
to see what we get over the next couple quarters
is how do they manage this as far as trying
to maintain margins versus you know, what they can pass
through without alienating customers. It's a big one for all
(18:32):
these goods related companies and even service related companies.
Speaker 3 (18:36):
Hey, you got costs that go up as well.
Speaker 2 (18:38):
You run a restaurant and you got to replace ah,
you know, you got to replace a stove or something
three months from now right, it is the cost higher
or lower than it was before. And how do you
you know, factor that into what you're actually making in
your services business?
Speaker 4 (18:54):
Yeah. The other piece that you know, this is reminiscent
of what we saw during COVID too, And I just
do want totally what do we hear from executives during
conference calls?
Speaker 5 (19:02):
Are we hearing them? I used the word bragging yesterday.
Speaker 4 (19:05):
Maybe bragging is not the right word, but you know,
patting their profit margins on these expectations around tariff's is
a huge question for where inflation goes.
Speaker 2 (19:14):
Yeah, it's and I have no idea exactly what we're
going to see. There a million different permutations and this
is before again we even get into the question of
where are tariff's going to be three, six, nine, twelve
months from now right? Quick break here when we return,
We've got Wall Street Watch, and then we're talking in
video after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today, right here on the Financial Exchange Radio Network.
Speaker 6 (20:00):
Well, at the moment, markets are pretty much flat as
the SMP five hundred attempts to extend its winning streak
to five. Wall Street this morning is reacting to the
latest Michigan consumer sentiment index as well as inflation expectations.
Right now, the Dow is up by four points, that's right,
just four points, SMP five hundred up by one point,
(20:22):
and the NASDAC now actually down by eight points. RUSS
thousand is up by two tenths of a percent, ten
year treasure yield down by three basis points now at
four point four to two percent, and crude oil is
up about a quarter percent higher, trading just below sixty
two dollars. A barrel big news in the media world
this morning after two of the largest cable companies in
(20:43):
the country, Charter and Cox Communications, have greed to merge
in a twenty one point nine billion dollar deal. Charter
Communication stock is up by about two percent on that news. Meanwhile,
we Go via nozempic maker Novo Norda announced its CEO
is stepping down, citing recent market challenges, a pullback in
(21:06):
the pharmaceutical company's stock price, and increasing competition. That stock
is retreating by about three percent Elsewhere, Applied Material shares
down seven percent after the chip equipment makers quarterly results
narrowly missed expectations and said the trade war has not
significantly changed demand. Video game maker Take two Interactive said
(21:30):
it would report a full year loss in lower than
expected sales after a delay to the highly anticipated video
game Grand Theft Auto six has been multiple delays on
that one. Take two Interactive shares are down by about
a third of a percent. Constellation Brands up by about
half a percent after Warren Buffett's Berkshire Halfway disclosed it
(21:51):
doubled its stake in the beer importer, bringing its total
position in the company to about two point two billion
dollars in share in Mediterranean restaurant chain Caba down by
five percent after it said it expected same restaurant sales
growth to moderate during the year. I'm Tucker Silvan. That's
Wall Street Watch, Mike.
Speaker 2 (22:12):
Let's talk a little bit about in Vidia h simply
because this year twenty twenty five has been quite the
roller coaster for them. So the shares of Nvidia opened
on January second at one hundred and thirty five bucks
a share and promptly went up over ten percent, getting
into the mid one fifties. I call one fifty three
(22:34):
the mid one fifties. They then promptly, for a couple
different reasons, puked down to one sixteen on January twenty seventh.
Speaker 3 (22:43):
That was right after the Deep Seak announcement where.
Speaker 2 (22:46):
Everyone got nervous that hey, maybe you know, you don't
need as many chips are as much firepower in order
to you know, ratchet up these models for artificial intelligence.
Speaker 3 (22:56):
As you previously thought.
Speaker 2 (22:59):
It rebounded from that and went back up to one
hundred and forty three, so it rallied, you know, more
than twenty percent. Then into early March, it puked another
almost thirty percent, heading down to about one hundred and
four dollars a share. This on the first tariff concerns
that came up. Then it rebounded almost twenty percent to
(23:19):
one hundred and twenty two dollars. Then it fell about
thirty percent from there down to eighty six, and now
it's rallied about fifty percent from that bottom up to
one hundred and thirty four. So it's been freaking wild,
especially like here. Here's the thing that you got to
say about like a company like this and its price movements.
It's one thing when you see, you know, weekly ten
(23:42):
to fifteen percent price movements on a company that has
a market cap of you know, five billion dollars. This
is a three point three trillion dollar company that's seeing these,
and it just speaks to the amount of money that
is moving on both sides of these trades, to on
which way things are flowing.
Speaker 4 (24:01):
And infects all of you because it's trading places with
Microsoft for the first or second largest company in the
world every couple of weeks. So you know, when you
talk about any index that fund that you could possibly own,
it's driving the volatility there as well.
Speaker 2 (24:17):
Yeah, it's it's like six plus percent of the S
and P five hundred. The only companies that are in
the same ballpark are Apple and Microsoft. So you get
this piece from Bloomberg here in video Shares roarback is
clouds hanging over chip maker fades.
Speaker 3 (24:32):
So couple things that we have here. Obviously, look just about.
Speaker 2 (24:35):
Every stock, I don't want to say I want to
say every stock, but I haven't looked at every stock,
so I don't know, but just about every stock has
bounced off of that April seventh, April eighth bottom. So
clearly you had that going on, you know, prior to
this week. This week, then you have President Trump visiting
number of different Middle Eastern countries and one of the
(24:56):
big things that has been touted it just about every
stop is hey, we're gonna be you know, supplying uh,
you know, in Vidia signing a deal to supply x
thousand number of chips to develop AI data centers in
these different countries. And so here's I guess one of
the things that this potentially does, depending on, you know,
(25:17):
how much these actually scale up and what actually happens here.
But if these actually come to fruition, what it does is,
you know, one of the questions out there foreign video is, hey,
you basically have had like four or five companies that
have been the primary buyer of their chips, like you
and I don't go out and say hey, Like, should
(25:37):
we buy an Nvidia AI chip?
Speaker 4 (25:39):
Like you can't do it any time with one of
them anyways, coster.
Speaker 2 (25:45):
Little pricey little price, you know, turn it upside down
just so it doesn't get you know, soaked. We've been wondering, okay,
like if these companies stop buying, not stop, but if
they slow down their their pace of buying from how
quickly it's been ratcheting up, where are the next people
to buy? And the answer can potentially be provided by
(26:08):
the governments of various different Middle Eastern countries, so it
potentially solves that problem for them. We'll still have to
see how this ends up going. And the other thing
that I will say is if there's one thing that
I do think you can kind of consistently point to
the money that comes from sovereign wealth funds in the
(26:30):
Middle East. Two things actually that you can say, hey,
probably comes with a bunch of strings attached to it.
Speaker 3 (26:36):
Yep.
Speaker 2 (26:37):
B historically not great at timing when the best time
to invest in various things are. As an example of this,
the Saudi's decided to pour a bunch of money into
Lucid Motors back in twenty twenty one. Has it worked
out great for them, stocks down like ninety seven percent
since ipoing, and they're you know, they make fantastic cars apparently,
(27:00):
but they're just not you know, like it was a
poorly timed investment if you actually care about the return.
Speaker 4 (27:06):
Yeah, like these sales likely witch sorry, which raises the
question do they care about the return? And Michael, I
have a whole new thesis that's been developing over the
course of this week. Now, Okay, Mike, what's one of
the big problems that we've been talking about in US
markets over the last month.
Speaker 3 (27:29):
I know there's a lot of them, and that's kind
of a big question.
Speaker 5 (27:32):
Why did you answer your own question?
Speaker 2 (27:33):
What's one of the underlying questions that we've been wondering
about in US markets over the past month as it
relates to stability.
Speaker 4 (27:44):
Foreign buyers of a sovereign is foreign owners of dollars
that may or may not continue to pour them into
the market.
Speaker 5 (27:51):
Yeah, know, what are you getting at?
Speaker 2 (27:52):
Yeah, I'm getting to bond two things, bond yields and
and by you know, default then you know dollar strength. Sure,
and so he like, here's the thought that just kind
of passed through my head as as I'm looking at
what's going on this week. The Middle East obviously wants,
you know, to be able to diversify long term away
from you know, only relying on oil revenue.
Speaker 3 (28:13):
They've they've told this.
Speaker 2 (28:15):
They also want access to all the latest and greatest stuff,
which to this point the US has been kind of, Hey,
we're not sure we really want to give you, you know,
the latest and greatest in Vidia chips, and even when
we send you military technology, it might be one level
removed from what we keep for ourselves and you know,
like stuff like that.
Speaker 4 (28:32):
Yeah, this deal appears to have opened some floodgates on
that front.
Speaker 2 (28:36):
So I guess the question that I have is, Okay,
if Saudi Arabia or the UAE or Qatar is receiving,
you know, the ability to purchase tens of thousands of
chips from in Vidia, what's the US ask coming back, Hey,
we we got some some deficit.
Speaker 3 (28:56):
Issues over here.
Speaker 5 (28:57):
Keep those rates low for.
Speaker 3 (28:58):
Toss a couple bones to us.
Speaker 2 (28:59):
And by the way, it is not the first time
that the Middle East has been used in this fashion.
The whole concept of you know, the petro dollar and
that oil can only be bought and traded in dollars
comes from deals that the US made back in the
nineteen seventies to basically link the price.
Speaker 3 (29:13):
Of oil to the US dollars.
Speaker 2 (29:15):
Why the US and the Saudi in the Saudis basically
have the relationship that we do. So I think the
the interesting thing to me on this is when you
hear about, you know, these countries talking about, oh, we're
agreeing to invest you know, X dollars in the US.
First of all, the actual totals are pure poppycock.
Speaker 5 (29:33):
Poppingcock.
Speaker 2 (29:33):
You say, Mike, do you know what Quitar's GDP is now?
Two hundred and twenty billion dollars? Yeah, How are they
going to invest one point two trillion dollars in the
United States?
Speaker 3 (29:44):
What are they going to do? Take their entire GDP
for six years and throw it to us?
Speaker 5 (29:48):
No lever it up?
Speaker 2 (29:50):
Right, Who's going to lend a trillion? Who's got a
trillion dollars? They're just waiting to lend out, you know.
So here's where I kind of get to is, Hey,
these might not come in the form of an investments
into the US to like build stuff in the US.
Investing in the US could be as simple as buying
US bonds, and I kind of look at this and
(30:11):
I wonder, okay, is that where this is going in
terms of something that a lot of these Middle Eastern
countries want, something that the US wants. Hey, here's how
you end up, you know, kind of meeting in the
middle on this. It's the thought that's been rattling around
in my head as I've watched you know, what's gone
on over the course of this week, anything else on
this before we move on.
Speaker 4 (30:31):
No, I do wonder how Israel is going to feel
about US selling a lot of these chips out.
Speaker 3 (30:37):
To sounds like based on the early indications.
Speaker 4 (30:41):
But yeah, probably not terribly happy about these negotiations.
Speaker 2 (30:45):
Well, I don't think Israel and the Saudi's necessarily have
a whole space between them. You know, they were pretty
close to normalizing relations before the October seventh attacks a
couple of years ago. The one that the israelis you're
gonna have a problem with his Katar, given Qatar's relations
with Iran, And that's one where they're gonna be like, oh, hey,
(31:08):
like this is not really you know, we're not feeling this,
and you know, we'll see how this ends up playing out.
Just take a quick break. We'll stick with a little
bit of AI chatter after this. We'll talk about what's
going on with Meta in the AI universe when we return.
Speaker 1 (31:23):
Breaking business and financial news first throughout the day, only
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Show podcast drops every day on Apple, Spotify, and iHeartRadio.
Hit that subscribe button, then leave us a five star review.
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Speaker 6 (31:47):
This segment of the Financial Exchange is brought to you
in part by Margaritaville Resort, Cape Cod. In Hyannas. Looking
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Speaker 2 (32:22):
Mike, we got some news from Meta that when they
announced it yesterday, the stock fell a couple percentage points
immediately after the headline in the Wall Street Journal is
Meta is delaying the rollout of its flagship AI model.
Speaker 3 (32:37):
This is titled Behemoth.
Speaker 2 (32:41):
I mean, gosh, with a name like that, Like, who
couldn't get excited?
Speaker 4 (32:45):
If you're listening right now and you're by a computer
or have your phone with you and you're not driving,
can you just image search Lama for Behemoth and the
photo that they have of the chief product officer standing
in front of the develop a conference, because I just
don't really agree with the stylistic choices for the Lama
(33:07):
avatar that they created for this thing, which.
Speaker 3 (33:11):
Yeah, nightmare. Here's the thing.
Speaker 2 (33:14):
It's it's kind of this, You're playing into every fear
that everyone has about artificial intelligence. It's this gothic lamahead
with horns on top of kind of a jacked looking human.
Speaker 3 (33:26):
Body and kind of jacked what. I'm pretty ripped these days.
Speaker 5 (33:34):
I just I drew an arrow and I just said,
why why would you do this?
Speaker 3 (33:40):
Everyone?
Speaker 5 (33:41):
I don't.
Speaker 4 (33:42):
I just I know you're looking to take on the competition,
and you're trying to, you know, get people excited about
this Lama that's apparently going to go fight in the
Chronicles of Narnia, But like, what are we doing here?
Speaker 2 (33:56):
I think you know, there's something interesting that's happening, Mike,
with these large language models. So I'm gonna quote also
here chat. GPT five, one of open AI's next big
technological leaps forward, was initially expected around mid twenty twenty four.
In December, the journal report development on the model was
running behind schedule, obviously if it was December and it
was supposed to be done halfway through last year. In
(34:18):
February they said it would be released as as GPT
four point five, and GPT five was still months away.
Anthropic has been running behind on new model updates. I
don't know if you guys saw what happened with GROC
over the last couple of days that they actually had
to issue a public apology for Yeah you told me
about it, yeah, where it was basically answering every question
(34:39):
in relation to like white genocide from South Africa. And
so what's kind of interesting to me right now is
that it seems like the incremental gains on these models
are becoming harder and harder to achieve, which is not surprising,
by the way, if you are a sprinters trying to
(35:00):
run the one hundred yard dash.
Speaker 3 (35:02):
It's a lot easier to go.
Speaker 2 (35:03):
From running nineteen seconds to eighteen seconds than it is
to go from eleven to ten. True, Like, the incremental
improvement is much easier.
Speaker 3 (35:10):
It's the same thing. Think about when you're driving on
the highway.
Speaker 2 (35:13):
It's a lot easier to go from sixty to seventy
miles an hour than eighty to ninety.
Speaker 5 (35:17):
This is what I was gonna say, zero to sixty
than sixty to one hundred twenty. I don't know how
you're driving.
Speaker 2 (35:22):
I haven't been to one hundred and twenty in a
long long time, Michael. It's I'm the guy who does
sixty three in the right lane, trying to maximize fuel
economy at this point, so I know my place.
Speaker 4 (35:33):
Well, they turned into Barry, we know exactly, and then
I accelerate off the off ramp just you know, for
the fun of that one.
Speaker 3 (35:40):
Curve that you hit.
Speaker 2 (35:41):
So I think that what we're seeing here is that
there's some limitations on this as to how far they
can actually go. And it does get back to that
question with in video, which is, hey, like, our company's
going to continue increasing capex in this fashion because this
is kind of the whole thing that powers the entire
ecosystem to this point. And ultimately, I think we're getting
(36:03):
to the point now where the incremental drive has to
come from companies actually committing to more spend on AI
products from AI providers. Yeah, it's not just going to
come from more high school students using chat GPT to
answer their their you know, homework. It has to come
(36:24):
from companies that say, yes, we are willing to pay
you x thousand dollars for X license for why licenses
so that we can either a make our current employees
more you know, profitable, or be reduce headcount but maintain
the same productivity.
Speaker 4 (36:40):
Yeah, that's what you are looking for, and you haven't
been getting a lot of it recently.
Speaker 5 (36:46):
But I'll also say that.
Speaker 4 (36:49):
The deep seek News, for example, was a giant leap
in seeming productivity, and they can come all at once
without happening for a while.
Speaker 2 (36:58):
Can we speed run a couple stories here? Of course,
this HBO rebrand is just great. I forgot so we
didn't just go from HBO Max to Max and now back.
Speaker 3 (37:09):
To HBO Max. No, we also had HBO.
Speaker 2 (37:12):
Now at one point we had HBO go like it's
been through five or six different brands in the last
you know, seven or eight years, and I'm telling you,
Tucker put it on the board. By the end of
twenty twenty eight, No, end of twenty seven, it's gonna
be just HBO again.
Speaker 4 (37:29):
Are they struggling so much with success here that they've
needed to change the name? I mean, I know they
went through the whole ownership change, and I get that
they were a mismanaged for a period of time, but
I'm just not sensing that they were having such a
problem with the Max brand that they had to change
it back to HBO Max.
Speaker 5 (37:48):
I just don't get it.
Speaker 3 (37:49):
Yeah, I don't really know. The other one that I
just want to touch on.
Speaker 2 (37:54):
Uber has basically reinvented the bus YEP they had, and
like They're big thing is, oh, like this is cheaper
than taking a regular Uber, but you're gonna have to
like walk to you in from some spots and hey,
we'll give you a discount if you buy like a
month's worth of fairs.
Speaker 3 (38:08):
Oh, just like a regular bus does.
Speaker 2 (38:11):
Yes, but this is a Uber but this is more
expensive than a bus.
Speaker 3 (38:17):
So I'm still struggling to figure out what this solves.
Speaker 2 (38:21):
Yeah, well, maybe something quick break here hour two coming
up in just a bit.
Speaker 4 (38:33):
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!