December 12, 2025 • 38 mins
Chuck Zodda and Paul Lane discuss how Disney went from AI skeptic to OpenAI investor. Mary Burke (Federal Reserve Bank of Boston) joins the show for a wide ranging interview that covers the beige book, AI impacts on hiring, tariff concerns, and surging beef prices. Ford's car of the future. Paul LaMonica (Barron's) joins the show to chat housing.
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Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
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(00:42):
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(01:06):
and Paul Lane.
Speaker 2 (01:09):
Chuck Paul Tucker with you here, and as we kick
things off, things have gotten pretty gnarly out of there
in equity markets at least, the Dow off one hundred
and ninety seven points, not too bad, less than half percent,
but the S and P five hundred now down one
point one percent, about seventy six points. The Nasdaq is
(01:29):
off four hundred and seventy five points, down almost two
percent right now. This largely on the back of another
earnings report from an AI company, Broadcom, in this case yesterday,
where the quarter was totally fine for them, but just
some of the future guidance must have spooked markets a
little bit, and so broad Calm down eleven percent on
(01:49):
this news. Oracle, by the way, which was down ten
percent yesterday, falling through being down five percent today, so
has not been a good continuation for them as well.
Taking a look at the bondmark, the ten year US
Treasury up four point five basis points to four point
one to eighty six percent, Dollar Index up point one
one percent to ninety eight four fifty five, and we've
(02:12):
got gold up twelve forty announced to forty three twenty
five and forty cents crude oil West Texas Intermediate off
thirty four cents barrel down to fifty seven to twenty six.
And we've got gas prices sliding nationally again, down another
eight tenths of ascent to two ninety three and two
tenths of ascent. So gas price is continuing to fall
(02:35):
right as we are heading into the peak of the
holiday travel season. UH. Yesterday we covered the story that
Disney was going to be investing a billion dollars in
Open Ai and getting a three year licensing agreement from
open Ai UH in return for about two hundred and
(02:58):
so Disney characters to be able to be used in
video generation and on the platform. And we looked at
it and we were like, well, I looked at it
and I said, man, it sure feels like you're not
really protecting your intellectual property. There have been, you know,
a whole bunch of conversations about this over the last
day or so. But we've got a piece in the
(03:19):
Wall Street Journal. It's titled behind the Deal that took
Disney from AI Skeptic to Open Ai Investor. What does
it say about this deal, Well, basically what it talks.
Speaker 3 (03:28):
About is Bob Iger, who is set to stay with
Disney through the end of twenty twenty six. Had developed
a relationship with Sam Altman from open Ai through an
introduction of Josh Kushner from Thrive Capital several years back,
and it seems like open Ai and Disney have been
having kind of ongoing chats as the years have progressed
(03:48):
on how to use some of this IP that Disney has,
And it appears as if Disney has sort of taken
its horse in the race in terms of our official
intelligence with a billion dollar equity investment, and conversely has
come out at Google pretty strong.
Speaker 2 (04:06):
I do love this.
Speaker 3 (04:07):
Yeah. I just say, we're gonna throw a billion bucks
into your biggest competitor, and then we're gonna make it
really hard on you and send our lawyers at you
to Google basically saying that you're using our copyright material
to train your AI systems and it violates copyrights. I mean,
there is going to be a slew of these lawsuits
over the course of the next few years across all IP,
(04:28):
whether it's Disney or any other studio that you can
think of, because these models are trained on this information
that's out there, and it's just going to be really
difficult if you're in the entertainment business to figure out
how to monetize your IP. I'm sure they'll get to it,
but there's gonna be a lot of lawsuits before.
Speaker 2 (04:46):
We get there, can we all? I just want to
go through that timeline on this, just between Disney and Alphabet.
So like three weeks ago, Disney agrees to a deal
with Alphabet to get its channels back on YouTube TV.
Then they sign this licensing deal with Open AI, and
immediately after doing so sue Alphabet.
Speaker 3 (05:10):
Shot across the ball.
Speaker 2 (05:13):
It's just that you can see like exactly how they
were trying to play this, and I find it kind
of It's admirable in kind of a very distasteful sort
of way. But in any case, my continued problem here is, look,
Disney probably thinks it's trying to figure out some way
to ring, you know, some kind of money out of
its IP being used in all of these AI systems,
(05:37):
but ultimately, by participating voluntarily, they're still devaluing their own
IP in my in my opinion.
Speaker 3 (05:44):
Because the SORO could create videos that may pick up
more traction than something Disney would create.
Speaker 2 (05:48):
Basically, I could go and not even more traction. It's
just replicate. If I want to make my own Star
Wars fan fiction where Luke's you know, x Wing gets
shot down in the desk star you know wins, I
can do that now. I don't need Disney to give
me Star Wars content anymore. And I also then had
(06:10):
the realization where, look, if all AI is going to
be able to do is if the best thing it
can do is just make Mickey Mouse videos. Is it
really as transformative a technology as we hope it'll be.
I don't know, but again, these are thoughts that just
passed through my head. Just take a quick break. When
we return, we're gonna be joined by Mary Burke. She
(06:30):
is the principal economist and policy advisor with the New
England Public Policy Center in the Federal Reserve Bank of Boston.
Mary joins us right after this.
Speaker 1 (06:40):
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Speaker 2 (07:31):
All right. As promised, we are now joined by Mary Burke,
who is a principal economist and policy advisor with the
New England Public Policy Center in the Federal Reserve Bank
of Boston. She's an applied economist studying the economics of
health behaviors and health outcomes, education, social norms, and the
gig economy. And Mary earned a BA in mathematics from
(07:54):
Brown University and both an M and PhD in economics
from Johns Hopkins University. And she gives regular briefings on
the New England economy to senior leaders with the Federal
Reserve System and also two public audiences. And she joins
us live now on the Financial Exchange. Mary, thanks for
joining us today. We appreciate it.
Speaker 4 (08:14):
Thank you very much. Chuck.
Speaker 2 (08:16):
First off, let's talk a little bit about the Beige Book,
because this is something that we reference on our program
whenever it comes out, and I think some of our
listeners might say, gee, what is that? So what is
the Bage Book and how does it help to inform
the Fed's monetary policy making.
Speaker 4 (08:34):
So the Beige Book is a Federal Reserve publication. It
is released eight times per year and it has mostly
qualitative information about each FED district's economy. So we report
on regional conditions in each FED district and I lead
the team at the Boston Fed that produces the Beige
Book for the Boston Fed District. The Boston FED District
(08:56):
covers most of New England, with the exception of Fairfield County, Connecticut,
which is part of the New York FEDS District. Okay,
And we speak directly with business and non business contacts
and they tell us what's been happening in their business
in recent weeks and re report on that in the
bag Book.
Speaker 2 (09:12):
And the most recent one was published in late November.
And broadly speaking, what does it tell us about the
state of the New England economy today?
Speaker 4 (09:22):
So what happened recently, say between mid October and late November,
was that there was very slow growth in the New
England economy, just a slight amount of economic expansion. So
that's good, it's you know, it's better than the opposite, Sure,
but it was sluggish when.
Speaker 2 (09:40):
You look at that. Was that distributed, you know, equally
across different areas or were there certain areas that were
slower or faster in the growth?
Speaker 4 (09:48):
Yeah, there was some mixed results. So the strongest piece
was residential home sales, which were up by a decent
margin from the year earlier. Consumer spending was flat, so
that was kind of the we piece. But then say
manufacturing and non financial services and the other industries also
at least a little bit of growth in there in
their revenues and activity.
Speaker 2 (10:08):
Sure. One of the major stories that we've been covering
throughout the last i'd say eighteen months or so is
the impact of artificial intelligence on hiring, and we've seen
different studies that have shown that AI may be holding
back entry level hiring. Do you have any information on
(10:29):
this trend and specifically how it might be impacting recent
graduates looking for those entry level jobs in New England.
Speaker 4 (10:37):
Yeah, So our evidence is anecdotal because we speak with
individual contacts, so we don't have hard data on this,
but we did hear that for at least some firms,
entry level hiring is being held back by AI. Because
of increases in productivity, firms are feeling they don't need
as many entry level employees, so they're just our fewer
(10:58):
jobs and this means it's taking a lot longer for
new college graduates to find a job. In some cases
they might have to take a job outside of their
field of study or not the job they had hoped
to get. So this is a challenging situation right now
for new college grads. We're not sure exactly how much
of the week labor market for new grads is related
(11:19):
to AI, but anecdotally we know that some of it
is driven by that.
Speaker 2 (11:24):
Is that happening in certain industries more than others at
this point.
Speaker 4 (11:28):
Again, our best evidence says it's concentrated in the tech industry.
It jobs, professional and business services, more white collar jobs.
Speaker 2 (11:36):
One of the other things that's been a major topic
of discussion throughout the year is tariffs and tariff related concerns.
Do you see in the latest Bease book tariff related
concerns continuing to show up and in particular how might
they be affecting the New England economy today?
Speaker 4 (11:57):
So tariffs are definitely mentioned. They were mentioned a lot
by contacts they've been mentioned for you know, throughout the year,
some said that sort of uncertainty related to tariffs went
down a bit, but they're still showing up in terms
of price increases. So some firms are having to mark
up their prices to you know, cover the cost of
(12:18):
their tariffs. Some firms have been holding back on that
because of price sensitivity among consumers, but then they have
to absorb those costs somehow, so this means they have
to cut costs elsewhere. This has led to more cautious hiring.
So part of the week hiring the week labor market
is because of costs. Tariffs have driven up costs and
firms are finding other ways to cut their costs.
Speaker 2 (12:41):
When when we talk about how businesses may shift their
pricing in response to these type of things, I know
that one such business that was covered in this report
was a grocery store chain that said, Hey, generally we
have some fairly modest pricing creases that we're seeing, but
price of beef, we've got a mark up. Price of coffee,
(13:02):
we've got a mark up, cocoa, we've got a markup.
Are those tariff related? Are they related to the specific products, Like,
how do we untangle what's driving this.
Speaker 4 (13:12):
Yeah, so tariffs were a factor in all three of
those price increases, but I would say probably not the
largest factor. So there's interesting stories around each one of
those commodities. With beef, the domestic herd size is the
lowest it's been in seventy years. This has to do
with some drought, This has to do with costs going up,
(13:33):
and so herd sizes have been dwindling. But now we
have a situation of very small herd sizes, strong demand.
It turns out related to these keto diets and paleo
diets sure combined with tariffs on imported beef, means that
the domestic beef is still relatively less expensive. So you
have weak supply and strong demand, and that's a recipe
(13:56):
for very high prices.
Speaker 2 (13:58):
What about on the coffee said, I'm not a coffee
drinker myself. Tucker here is, you know, he's oh yeah,
he's been screaming about it.
Speaker 1 (14:05):
A lot of coffee.
Speaker 2 (14:06):
What's been going on in the coffee side.
Speaker 4 (14:08):
Yeah, So coffee is also a combination. So climate change
has played a role, So unpredictable weather patterns in the
places that grow coffee have again hurt their yields. So
again you have low yields that puts pressure upward pressure
on prices. But then there's also been tariffs on coffee,
especially from Brazil. There were very high tariffs on Brazilian coffee.
Now there's multiple sources of coffee, but I also buy
(14:31):
very nice coffee beans, and I've noticed the price has
definitely gone up significantly, and it can be not easy
for to for these prices to come down if they
are facing sort of longer term changes in weather patterns.
Speaker 2 (14:46):
Coco, I gotta tell you on the you know, Halloween
just passed. We just went through the candy season there.
Now my daughters, you know, oh we got to you know,
big brownies and cookies for Christmas. What's the situation with coco, Well.
Speaker 4 (14:58):
Those prices similar to the coffe story. It's also weather,
unpredictable weather patterns related to climate change, droughts and then
excessive rain. And then another factor turns out illegal gold
mining is hurting the land used for cocoa cultivation. So
just a lot of factors pressuring the supply, as well
(15:18):
as tariffs on important cocoa, and there's very few. It's
mainly Ghana and Ivory Coast, so there aren't a lot
of other places you can go for your cocoa, so
you know that's leading to upward pressure on those prices.
Speaker 2 (15:29):
Let's talk a little bit about real estate. I know
we're heading into the quiet season for real estate right
now for the next you know, two and a half months,
But in terms of what we've been seeing in general,
property is staying on the market a little bit longer.
And even though the New England region still has seen
price appreciation where other parts of the country have seen
falling prices, are we starting to get a sense that
(15:53):
maybe there's a change of foot in the New England
housing market and maybe it's starting to tilt more towards
buyers or am I reading too much into that?
Speaker 4 (16:02):
I think I think it's accurate that buyers are feeling
a little bit more like maybe have a little bit
more bargaining power right now. What we've been seeing for
the past several page book reports is that the inventory
of homes up for sale has been growing, and that's
been really important because the inventories have been historically low
and that was part of the story of why prices
(16:22):
were rising so fast in the region. So maybe buyers
feel like they can hold out. They see more choice
out there, and so they're holding out for a better deal. Also,
mortgage rates came down a little bit, which helped with
residential sales activity in the recent period. So prices i'd say,
are kind of leveling out. But it's again going to
(16:43):
be very market specific. I don't expect a huge change
right now, but I you know, I think what you
said is accurate in terms of a little bit more
bargaining power for the buyers.
Speaker 2 (16:54):
And in terms of the impact on the regional economies.
Is it safe to say that the New New England
region is less dependent on new construction than other areas
of the country for its growth.
Speaker 4 (17:08):
I would say we tend to have less construction than
other areas, partly because of stricter zoning regulations and maybe
less available new land left to develop than in say
the West and the South. Construction is still a decent
part of our economy, but yes, because we engage in
less construction, that's been a smaller share than in some
(17:30):
other parts. But if you ask people in the housing market,
they'd say they would love to see like a construction
boom because there's just hasn't been enough construction.
Speaker 2 (17:39):
Finally, last question, we've got about two minutes, the Beige Book.
Everyone wants to know, is there a recession coming? It
seems like people want to ask that question all the time.
Can the Beige Book help predict when a recession's coming?
Speaker 4 (17:53):
So basically the answer to that is yes, no one can,
but no one can predict a recession with certainty, so
it's important to keep that mind, keep that in mind.
I conducted some research together when Nathaniel Nelson, my colleague,
and we were building on some research from the Cleveland
Fad that basically fed Beige Book texts into a large
(18:13):
language model to produce sentiment indexes. So like, you know,
how are people feeling? You know, if you summarize the
Beage Book, is it positive? Is it negative? And you
can use those indexes quantitatively and relate them to recession probabilities.
And it turns out that the Beage Book does a
decent job. It's not one hundred percent accurate, but historically,
if you look back, when sentiment is higher, the chance
(18:35):
of a recession is lower. When sentiment is lower, the
chance of a recession goes up. We've also related this
to you know, a lot of people use financial indicators
like a yield curve to predict recessions, and that's still
really valid. But we did find the bage book can
add a little bit more or slightly different type of
information than you get from those financial indicators. I would
(18:56):
add that these forecasts are very near term, so related
to are we in a session right now or will
we be in a recession the next three months, but
any farther out from that, and then the basebook becomes
less useful.
Speaker 2 (19:09):
Very good, well, Mary, we appreciate you joining us today.
Thank you so much for taking the time to chat
with us.
Speaker 4 (19:14):
Thank you, Chuck, it's been a pleasure again.
Speaker 2 (19:16):
That is Mary Burke. She's a principal economist and policy
advisor with the New England Public Policy Center in the
Federal Reserve Bank of Boston. We're going to take a
quick break right now, but when we return, we are
Talking Ford and Lulu Lemon.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange 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 5 (19:59):
It looks like the tech selloff is accelerating right around
midday here as traders react to more earnings from tech,
including from Broadcom. We're actually impressed on their quarterly results.
We also have major news coming out of the retail
world right now. The Dow is down over half a percent,
or two hundred and sixty one points, SMP five hundred
(20:19):
now down one point three percent or eighty nine points lower,
and the tech heavy Nasdaq selling off nearly two percent
now or four hundred and fifty six points. RUSTED two
thousands down one point two percent, and Oil is down
about half a percent, rating a fifty seven dollars and
thirty three cents a barrel. Broadcom dropping ten percent despite
(20:42):
the chip maker beating earnings and revenue expectations driven by
AI sales. The company also issued a strong forecast for
the current quarter, expecting AI chip sales to double from
a year earlier as AI demand remained strong. Meanwhile, IF Leisure,
where retailer Lulu Lemon, announced CEO Calvin McDonald will step
down in January. Lulu said its board is focus on
(21:04):
identifying a leader with the track record of driving companies
through periods of growth and transformation. To that guy, the
company's next chapter of success, and several cannabis stocks are
rallying following reports that President Trump is expected direct to
direct his administration to move to reclassify marijuana as a
less dangerous drug. Shares in both till Rey Brands and
(21:28):
Canopy Growth are surging anywhere between thirty and thirty five
percent at the moment. I'm Tucker Silva and that is
Wall Street Watch, and we haven't done trivia yet, so
let's get to it. On this day, nineteen eighty, Apple
made its IPO on the stock market with shares priced
at twenty two dollars. Many years after Apple's IPO, it
(21:49):
was the first company to hit the one trillion dollar
valuation mark. So triviy question today, what year did Apple
become the first trillion dollar company? Once again? What year
did Apple become the first trillion dollar company? Be the
fourth person today at textas at six one seven three
six two thirteen eighty five with the correct answer along
(22:10):
with the keyword trivia, and you win a Financial Exchange
Show t shirt once again. The fourth correct response to
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thirteen eighty five with the correct answer and the keyword
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Speaker 3 (22:27):
Pab you like skunks, yes, sir, No, you know not
a Pepela pew fan. I like the throwback to Lockheed
Martin there that they're thrown around here.
Speaker 2 (22:37):
It is so Ford, it has got there. They've got
a secret team working at the Ford skunk Works. Do
you know where that Lockheed Martin name came from? By
the way, Oh jeez, I I do, but I've forgot.
So nineteen forties, the US is trying to develop its
first ever jet fighter. Yep, Lockheed Martin is working on this,
(23:00):
and the factory that they were trying to build the
thing in stunk like something, right, and so they called
it the skunk Works because it smelled really bad there.
So now everyone uses that whenever they have some secretive
thing that they're designing. So Ford is trying to build
like basically a new EV that's going to leapfrog everything
(23:20):
that American automakers have done, and they're doing it in
a secretive skunk works type of way. And the question
is posed here by the New York Times, you know,
is it too late? And I think the answer is, well,
It depends what you guys.
Speaker 1 (23:36):
Make sure.
Speaker 3 (23:38):
It's an interesting story and very interesting how Ford can't
even walk in the doors here, Chuck. Initially when I
saw this piece, I was like, Oh, geez, Ford is
gonna stumble and get in the way of this. But no,
to the Skunkworks point, they are totally isolated off from
any Ford leadership stepping in front of their doors. Internationally,
it's going to be a tremendous uphill climb in order
(23:59):
for them to get market share. As alluded to in
the piece here in the New York Times, they are
very concerned about the Chinese who have taken a significant
market share internationally. Obviously, we don't have access here domestically
to Chinese electric vehicles. So the opportunity in lies here
and is really it seems to be a tremendous focus
of the company and the Ford CEO, Jim Farley, mentions
(24:23):
it several times here. But there is an opportunity here
in the United States domestically. I just wonder how you're
going to compete internationally, just because of how the Chinese
government has subsidized that ev industry so much.
Speaker 5 (24:37):
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Speaker 2 (25:45):
Today is that day each year where we cover Lululemon
in a story and I go to their website and
tell you how expensive all of their stuff is. And
I found a seventy eight dollars T shirt in my.
Speaker 5 (25:58):
Travels seems reasonable.
Speaker 2 (26:00):
The other thing that I found. I'm on their site
and I literally just clicked on like the men button
and shirts. And I don't know how they did it,
but like they've made all of their models look like mannequins,
despite me being pretty sure that they're not, but like
none none of them look alive for some reason. And
I just feel like when you're an athleisure brand, you
(26:23):
don't want to look like you're not alive when you're
modeling the stuff. But somehow they've they've they've done it,
and I don't really know what to make of that.
But there's this piece in Bloomberg Opinion. It's titled making
lolu Lemon cool Again will be a stretch, And yes,
I do see what you did there, Bloomberg, But pretty
much the problem here is twofold lou Lemon is built
(26:47):
on the idea that the brand is cool, and they're
built on the idea that because they're cool, they can
command premium pricing. Thus, if you are not cool, you
can't command premium ricing, and that becomes a problem for you.
Speaker 3 (27:03):
It it just shows how difficult of a business this
is to execute and be successful in for a long
period of time, because it's so hard. It's it's just
it's got to be one of the most difficult businesses
to start and scale. Well, beverages are probably up there too,
But it's just something funny about that.
Speaker 5 (27:23):
No, No, I'm just browsing their website.
Speaker 2 (27:26):
Okay, don't don't there people not look real.
Speaker 5 (27:30):
It's not even that. It's just like, say, obviously it's
you know what, customized for the holiday season. And there's
a tab that says gifts under fifty dollars, and it's
it's a single boxer brief for thirty eight dollars, three
pack of socks for thirty eight dollars, a beanie for
forty eight dollars, again under fifty dollars, and a freaking mug.
Speaker 2 (27:52):
That's it.
Speaker 5 (27:53):
Those are the get oh excuse me, and a belt
bag if you need that, a belt bag. What So,
these are the gimes you can fifty dollars from lulul
You need a bag to carry your belts, that's right.
Speaker 3 (28:05):
They also have a dual poet.
Speaker 2 (28:07):
No, no, no, they.
Speaker 5 (28:07):
Also have a dual pouch wristlet. It's a fanny pack.
They call it an everywhere belt bag.
Speaker 2 (28:13):
Oh okay, so it's not a bag that holds it.
Should just call it a fanny pack. That's not fashionable.
Speaker 5 (28:18):
An everywhere belt bag a belt bag. But it's just like,
that's the that's the problem with this company. Gifts under
fifty dollars and it's like barely anything like that's the
problem with the company.
Speaker 3 (28:28):
Well, I think it is. It does go makes too much.
It goes back to checks point. It's too much if
you're not the coolest brand out there. And the competitors
have really made significant inroads against them are Viory and
I guess Skims. With the Nike launch, it is probably
an alo yoga alo yoga. I feel like I see
everywhere now. I feel like that and Viory have sort
of taken lu Lemon's place. It just, uh, retail and
(28:52):
fashion is a is a tough game. And uh they
were the king of Hill for a while.
Speaker 2 (28:57):
But uh, I mean they're still making like they're problems.
Is it's like their sales and profits are just kind
of flattening out. It's not like the company's collapsing. So
I don't want to make it sound like nobody buys
their stuff anymore, but the growth rate is just kind
of tapping out. And I think it's also just look,
there's a limited pool that you can captured that can
(29:19):
afford to buy this stuff when you're talking about a
seventy eight dollars T shirt, And.
Speaker 3 (29:27):
I will say I have some of the dress pants.
They they are they are good quality, and they're a
lot better than wearing the.
Speaker 5 (29:33):
Typical slash what's at the ABC pant or something, what's
the popular one?
Speaker 2 (29:37):
Yes, is that it that is correct.
Speaker 3 (29:39):
But those were bought for me as gifts, just so
that no one starts thrus shading.
Speaker 2 (29:43):
Sure they were stuffed with garlic for it was literally
about to say it, let's take it coronious. Let's take
a quick break here when we come back. Paul A
Monica from Barons joins us after this.
Speaker 1 (30:00):
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the weekend.
Speaker 5 (30:36):
This segment of the Financial Exchange is powered by Circle
K Convenience Store. Circak is now the official convenience store
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Thank you veterans for all you've done.
Speaker 1 (30:50):
As promised.
Speaker 3 (30:51):
We are joined by Paul Lamonica from Barons to talk
a little bit about the housing market. Paul, thanks so
much for joining us.
Speaker 2 (30:58):
Thank you, Paul.
Speaker 3 (30:59):
I love a great zag and I got to say
here this piece falls into that category. Someone out there
and you are that person, is saying that, hey, maybe
housing could bounce back in twenty twenty six. Whatever commentary
you look at out there, whether it was the Toll
Brothers recent earnings reports that they're going to deliver less
homes this year, there's just been a lot of negative sentiments.
So give us some good news, some posmive sentiment on
(31:22):
a Friday. What could turn this around?
Speaker 6 (31:24):
Yeah, I think we've had obviously the Federal Reserve cutting,
interest rates and mortgage rates have come down, which in theories,
should make your homes a little bit more affordable. Obviously,
there are still concerns about you know, prices, but you know,
you might have what redfinn is calling a normalization of
(31:46):
prices going forward. So they're saying that next year could
be the beginning of the great housing reset, which you know, again,
this is not going to be a gangbuster's recovery like
we saw you know, in the you know, mid two thousands,
you know, and the earlier this decade when housing was
in a much better shape. But it could be, as
(32:07):
they call it, a year's long period of gradual increases
in home sales, which wouldn't be the worst thing in
the world to have a gradual, steady rebound. And I
think that you know, the home builder stocks have been
you know, beaten up enough that you could argue that
they are you know, priced for that modest rebound and
(32:29):
could do well next year.
Speaker 3 (32:30):
You mentioned that interest rates was one lever that could
be pulled on to perhaps increase demand. What are some
of the other levels that Washington, d C. Or or
other areas of the housing market is looking to be
pulled upon to perhaps kind of turn it around in
twenty twenty six.
Speaker 6 (32:45):
Paul, Yeah, I think some of the stimulus that we
already have coming into place, you know, from the you know,
the one big beautiful bill, is you know, potential boost
you know, there's talk of, you know, maybe tax credits
for first time buyers, more incentives for home builders to
(33:07):
try and build more and boost supply. I think that
the President and the administration are you know, keen on
trying to get housing back on track ahead of the
mid term elections. Whether or not that works obviously remains
to be seen, but you have to think that they
are going to, as one of my sources said, throw
(33:27):
the kitchen sink at the problem, because it's you know,
not the worst thing in the world politically to have
a stronger housing market heading into some key elections next novetter.
Speaker 3 (33:37):
In your research for this piece, Paul, what do you
think would be the mortgage interest rate that would really
get a lot of buyers back on the market. Is
it breaking that five percent threshold? Even if it was
in the high fives, that would potentially turn it around
or maybe increase a little bit of activity. Obviously, there's
still so many people out there, like myself luckily sitting
in a position where you're three or sub three on
(33:59):
a al you'r fix, and it just makes it hard
for us to get up and move exactly.
Speaker 6 (34:05):
No, I think that is another part of the equation
that doesn't get discussed as much is that there is
less incentive for people that have a home already in
are paying those lower mortgage rates to try and move
and find a new house that they might want to
purchase because those mortgage rates are going to be higher.
(34:26):
I think though for time new first time buyers, below
six probably is psychologically something that could seem a little
more doable, coupled with the fact that you might see
perspective sellers needing to cut prices, you know, going forward,
and you know that might make homes more affordable as well.
(34:50):
I mean, I think a lot of home buyers homeowners
excuse me, are sitting on pretty decent gains, so that's
helpful if they are looking to But you're right, you know,
but then the question becomes, where do you move to,
you know, and if you are looking to buy again,
you're you're gonna have to have a higher mortgage than
the one you're probably locked into right now.
Speaker 3 (35:12):
Paul Amonica from Baron's joining us to talk about the
housing market. Paul, thanks so much for the time, and
have a fantastic weekend.
Speaker 6 (35:18):
Thanks in to you guys.
Speaker 1 (35:20):
All right.
Speaker 5 (35:20):
Our trivia question in the previous segment was what year
did Apple become the first trillion dollar company? Well, that
would be twenty eighteen. Bill from Natick Mass is our
winner today, taking home a Financial Exchange Show t shirt.
Congrats to Bill and we play trivia every day here
in the Financial Exchange See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (35:41):
Okay, let's see what else do I want to cover
before we finish up today. Don't want to talk about
the Financial Times Person of the Year.
Speaker 5 (35:48):
Just what the market's doing right now.
Speaker 2 (35:51):
It's not doing anything good that great. It's bad. It's
quite bad. So look, I gotta tell you stuff like
this is is what gives me a little bit of
Ajeta from time to time, and that you think about
the last you know, few weeks. And in the tech space,
in Vidia reported earnings, the earnings were good. Company got sold.
(36:15):
The next day. Oracle reported earnings, earnings were good. Company
got sold the next day. Broadcom reported earnings, earnings were good.
Company got sold the next day. When companies report good
news and they can't rally, it makes me perk up
because that can potentially be a turning point in markets.
(36:37):
And I don't know if this will or won't be again.
This market's had a number of wobbles of you know,
three to five percent this year and hasn't really moved
anywhere negatively since early April. But I do pay attention
in particular when market leadership starts having those wobbles, because
I just don't know that you can have this thing,
(36:57):
you know, be strong next year on the backs of
like regional banks and industrial companies.
Speaker 3 (37:05):
No, it's it's kind of a one trick pony the
market spend, so it's gonna have to be. It feels
like technological advancements or strong earnings growth from companies using
artificial intelligence that would kind of get it to turn around.
Because it seems like Nvidia's blowing the cover off the
ball in terms of its core dilemmas, and it's yeah,
it's not enough to do it.
Speaker 2 (37:25):
So I think that again, this is setting up for
in my opinion, twenty twenty six and twenty seven they
are going to be the prove it years for AI. Hey,
you've done the build out, you've spent all the money.
Now are you gonna actually get the revenue and figure
out how to make that revenue profitable? And if you can't,
then we're gonna have to start canceling orders for all
those in vidio chips and all that capex that we've
(37:47):
planned for future years. If you can, great, the party
can keep going. I don't I don't have a dog
in the fight. I don't know which way it's gonna go.
We had these questions heading into this year, and they
answered it with Okay, we can all to all these
Middle Eastern customers, and we can, you know, do this.
How are you gonna answer those questions next year? I
don't know, but this is the setup. So markets remain
(38:10):
sharply negative now, dowz off about three quarters of a percent,
SMP down one and a third, Nasdaq off more than
two percent. Hope you all have a great weekend. We're
gonna see you on Monday. We got a jobs report Tuesday.
Get excited for it. We'll see you a day before then.
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(01:06):
and Paul Lane.
Speaker 2 (01:09):
Chuck Paul Tucker with you here, and as we kick
things off, things have gotten pretty gnarly out of there
in equity markets at least, the Dow off one hundred
and ninety seven points, not too bad, less than half percent,
but the S and P five hundred now down one
point one percent, about seventy six points. The Nasdaq is
(01:29):
off four hundred and seventy five points, down almost two
percent right now. This largely on the back of another
earnings report from an AI company, Broadcom, in this case yesterday,
where the quarter was totally fine for them, but just
some of the future guidance must have spooked markets a
little bit, and so broad Calm down eleven percent on
(01:49):
this news. Oracle, by the way, which was down ten
percent yesterday, falling through being down five percent today, so
has not been a good continuation for them as well.
Taking a look at the bondmark, the ten year US
Treasury up four point five basis points to four point
one to eighty six percent, Dollar Index up point one
one percent to ninety eight four fifty five, and we've
(02:12):
got gold up twelve forty announced to forty three twenty
five and forty cents crude oil West Texas Intermediate off
thirty four cents barrel down to fifty seven to twenty six.
And we've got gas prices sliding nationally again, down another
eight tenths of ascent to two ninety three and two
tenths of ascent. So gas price is continuing to fall
(02:35):
right as we are heading into the peak of the
holiday travel season. UH. Yesterday we covered the story that
Disney was going to be investing a billion dollars in
Open Ai and getting a three year licensing agreement from
open Ai UH in return for about two hundred and
(02:58):
so Disney characters to be able to be used in
video generation and on the platform. And we looked at
it and we were like, well, I looked at it
and I said, man, it sure feels like you're not
really protecting your intellectual property. There have been, you know,
a whole bunch of conversations about this over the last
day or so. But we've got a piece in the
(03:19):
Wall Street Journal. It's titled behind the Deal that took
Disney from AI Skeptic to Open Ai Investor. What does
it say about this deal, Well, basically what it talks.
Speaker 3 (03:28):
About is Bob Iger, who is set to stay with
Disney through the end of twenty twenty six. Had developed
a relationship with Sam Altman from open Ai through an
introduction of Josh Kushner from Thrive Capital several years back,
and it seems like open Ai and Disney have been
having kind of ongoing chats as the years have progressed
(03:48):
on how to use some of this IP that Disney has,
And it appears as if Disney has sort of taken
its horse in the race in terms of our official
intelligence with a billion dollar equity investment, and conversely has
come out at Google pretty strong.
Speaker 2 (04:06):
I do love this.
Speaker 3 (04:07):
Yeah. I just say, we're gonna throw a billion bucks
into your biggest competitor, and then we're gonna make it
really hard on you and send our lawyers at you
to Google basically saying that you're using our copyright material
to train your AI systems and it violates copyrights. I mean,
there is going to be a slew of these lawsuits
over the course of the next few years across all IP,
(04:28):
whether it's Disney or any other studio that you can
think of, because these models are trained on this information
that's out there, and it's just going to be really
difficult if you're in the entertainment business to figure out
how to monetize your IP. I'm sure they'll get to it,
but there's gonna be a lot of lawsuits before.
Speaker 2 (04:46):
We get there, can we all? I just want to
go through that timeline on this, just between Disney and Alphabet.
So like three weeks ago, Disney agrees to a deal
with Alphabet to get its channels back on YouTube TV.
Then they sign this licensing deal with Open AI, and
immediately after doing so sue Alphabet.
Speaker 3 (05:10):
Shot across the ball.
Speaker 2 (05:13):
It's just that you can see like exactly how they
were trying to play this, and I find it kind
of It's admirable in kind of a very distasteful sort
of way. But in any case, my continued problem here is, look,
Disney probably thinks it's trying to figure out some way
to ring, you know, some kind of money out of
its IP being used in all of these AI systems,
(05:37):
but ultimately, by participating voluntarily, they're still devaluing their own
IP in my in my opinion.
Speaker 3 (05:44):
Because the SORO could create videos that may pick up
more traction than something Disney would create.
Speaker 2 (05:48):
Basically, I could go and not even more traction. It's
just replicate. If I want to make my own Star
Wars fan fiction where Luke's you know, x Wing gets
shot down in the desk star you know wins, I
can do that now. I don't need Disney to give
me Star Wars content anymore. And I also then had
(06:10):
the realization where, look, if all AI is going to
be able to do is if the best thing it
can do is just make Mickey Mouse videos. Is it
really as transformative a technology as we hope it'll be.
I don't know, but again, these are thoughts that just
passed through my head. Just take a quick break. When
we return, we're gonna be joined by Mary Burke. She
(06:30):
is the principal economist and policy advisor with the New
England Public Policy Center in the Federal Reserve Bank of Boston.
Mary joins us right after this.
Speaker 1 (06:40):
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Speaker 2 (07:31):
All right. As promised, we are now joined by Mary Burke,
who is a principal economist and policy advisor with the
New England Public Policy Center in the Federal Reserve Bank
of Boston. She's an applied economist studying the economics of
health behaviors and health outcomes, education, social norms, and the
gig economy. And Mary earned a BA in mathematics from
(07:54):
Brown University and both an M and PhD in economics
from Johns Hopkins University. And she gives regular briefings on
the New England economy to senior leaders with the Federal
Reserve System and also two public audiences. And she joins
us live now on the Financial Exchange. Mary, thanks for
joining us today. We appreciate it.
Speaker 4 (08:14):
Thank you very much. Chuck.
Speaker 2 (08:16):
First off, let's talk a little bit about the Beige Book,
because this is something that we reference on our program
whenever it comes out, and I think some of our
listeners might say, gee, what is that? So what is
the Bage Book and how does it help to inform
the Fed's monetary policy making.
Speaker 4 (08:34):
So the Beige Book is a Federal Reserve publication. It
is released eight times per year and it has mostly
qualitative information about each FED district's economy. So we report
on regional conditions in each FED district and I lead
the team at the Boston Fed that produces the Beige
Book for the Boston Fed District. The Boston FED District
(08:56):
covers most of New England, with the exception of Fairfield County, Connecticut,
which is part of the New York FEDS District. Okay,
And we speak directly with business and non business contacts
and they tell us what's been happening in their business
in recent weeks and re report on that in the
bag Book.
Speaker 2 (09:12):
And the most recent one was published in late November.
And broadly speaking, what does it tell us about the
state of the New England economy today?
Speaker 4 (09:22):
So what happened recently, say between mid October and late November,
was that there was very slow growth in the New
England economy, just a slight amount of economic expansion. So
that's good, it's you know, it's better than the opposite, Sure,
but it was sluggish when.
Speaker 2 (09:40):
You look at that. Was that distributed, you know, equally
across different areas or were there certain areas that were
slower or faster in the growth?
Speaker 4 (09:48):
Yeah, there was some mixed results. So the strongest piece
was residential home sales, which were up by a decent
margin from the year earlier. Consumer spending was flat, so
that was kind of the we piece. But then say
manufacturing and non financial services and the other industries also
at least a little bit of growth in there in
their revenues and activity.
Speaker 2 (10:08):
Sure. One of the major stories that we've been covering
throughout the last i'd say eighteen months or so is
the impact of artificial intelligence on hiring, and we've seen
different studies that have shown that AI may be holding
back entry level hiring. Do you have any information on
(10:29):
this trend and specifically how it might be impacting recent
graduates looking for those entry level jobs in New England.
Speaker 4 (10:37):
Yeah, So our evidence is anecdotal because we speak with
individual contacts, so we don't have hard data on this,
but we did hear that for at least some firms,
entry level hiring is being held back by AI. Because
of increases in productivity, firms are feeling they don't need
as many entry level employees, so they're just our fewer
(10:58):
jobs and this means it's taking a lot longer for
new college graduates to find a job. In some cases
they might have to take a job outside of their
field of study or not the job they had hoped
to get. So this is a challenging situation right now
for new college grads. We're not sure exactly how much
of the week labor market for new grads is related
(11:19):
to AI, but anecdotally we know that some of it
is driven by that.
Speaker 2 (11:24):
Is that happening in certain industries more than others at
this point.
Speaker 4 (11:28):
Again, our best evidence says it's concentrated in the tech industry.
It jobs, professional and business services, more white collar jobs.
Speaker 2 (11:36):
One of the other things that's been a major topic
of discussion throughout the year is tariffs and tariff related concerns.
Do you see in the latest Bease book tariff related
concerns continuing to show up and in particular how might
they be affecting the New England economy today?
Speaker 4 (11:57):
So tariffs are definitely mentioned. They were mentioned a lot
by contacts they've been mentioned for you know, throughout the year,
some said that sort of uncertainty related to tariffs went
down a bit, but they're still showing up in terms
of price increases. So some firms are having to mark
up their prices to you know, cover the cost of
(12:18):
their tariffs. Some firms have been holding back on that
because of price sensitivity among consumers, but then they have
to absorb those costs somehow, so this means they have
to cut costs elsewhere. This has led to more cautious hiring.
So part of the week hiring the week labor market
is because of costs. Tariffs have driven up costs and
firms are finding other ways to cut their costs.
Speaker 2 (12:41):
When when we talk about how businesses may shift their
pricing in response to these type of things, I know
that one such business that was covered in this report
was a grocery store chain that said, Hey, generally we
have some fairly modest pricing creases that we're seeing, but
price of beef, we've got a mark up. Price of coffee,
(13:02):
we've got a mark up, cocoa, we've got a markup.
Are those tariff related? Are they related to the specific products, Like,
how do we untangle what's driving this.
Speaker 4 (13:12):
Yeah, so tariffs were a factor in all three of
those price increases, but I would say probably not the
largest factor. So there's interesting stories around each one of
those commodities. With beef, the domestic herd size is the
lowest it's been in seventy years. This has to do
with some drought, This has to do with costs going up,
(13:33):
and so herd sizes have been dwindling. But now we
have a situation of very small herd sizes, strong demand.
It turns out related to these keto diets and paleo
diets sure combined with tariffs on imported beef, means that
the domestic beef is still relatively less expensive. So you
have weak supply and strong demand, and that's a recipe
(13:56):
for very high prices.
Speaker 2 (13:58):
What about on the coffee said, I'm not a coffee
drinker myself. Tucker here is, you know, he's oh yeah,
he's been screaming about it.
Speaker 1 (14:05):
A lot of coffee.
Speaker 2 (14:06):
What's been going on in the coffee side.
Speaker 4 (14:08):
Yeah, So coffee is also a combination. So climate change
has played a role, So unpredictable weather patterns in the
places that grow coffee have again hurt their yields. So
again you have low yields that puts pressure upward pressure
on prices. But then there's also been tariffs on coffee,
especially from Brazil. There were very high tariffs on Brazilian coffee.
Now there's multiple sources of coffee, but I also buy
(14:31):
very nice coffee beans, and I've noticed the price has
definitely gone up significantly, and it can be not easy
for to for these prices to come down if they
are facing sort of longer term changes in weather patterns.
Speaker 2 (14:46):
Coco, I gotta tell you on the you know, Halloween
just passed. We just went through the candy season there.
Now my daughters, you know, oh we got to you know,
big brownies and cookies for Christmas. What's the situation with coco, Well.
Speaker 4 (14:58):
Those prices similar to the coffe story. It's also weather,
unpredictable weather patterns related to climate change, droughts and then
excessive rain. And then another factor turns out illegal gold
mining is hurting the land used for cocoa cultivation. So
just a lot of factors pressuring the supply, as well
(15:18):
as tariffs on important cocoa, and there's very few. It's
mainly Ghana and Ivory Coast, so there aren't a lot
of other places you can go for your cocoa, so
you know that's leading to upward pressure on those prices.
Speaker 2 (15:29):
Let's talk a little bit about real estate. I know
we're heading into the quiet season for real estate right
now for the next you know, two and a half months,
But in terms of what we've been seeing in general,
property is staying on the market a little bit longer.
And even though the New England region still has seen
price appreciation where other parts of the country have seen
falling prices, are we starting to get a sense that
(15:53):
maybe there's a change of foot in the New England
housing market and maybe it's starting to tilt more towards
buyers or am I reading too much into that?
Speaker 4 (16:02):
I think I think it's accurate that buyers are feeling
a little bit more like maybe have a little bit
more bargaining power right now. What we've been seeing for
the past several page book reports is that the inventory
of homes up for sale has been growing, and that's
been really important because the inventories have been historically low
and that was part of the story of why prices
(16:22):
were rising so fast in the region. So maybe buyers
feel like they can hold out. They see more choice
out there, and so they're holding out for a better deal. Also,
mortgage rates came down a little bit, which helped with
residential sales activity in the recent period. So prices i'd say,
are kind of leveling out. But it's again going to
(16:43):
be very market specific. I don't expect a huge change
right now, but I you know, I think what you
said is accurate in terms of a little bit more
bargaining power for the buyers.
Speaker 2 (16:54):
And in terms of the impact on the regional economies.
Is it safe to say that the New New England
region is less dependent on new construction than other areas
of the country for its growth.
Speaker 4 (17:08):
I would say we tend to have less construction than
other areas, partly because of stricter zoning regulations and maybe
less available new land left to develop than in say
the West and the South. Construction is still a decent
part of our economy, but yes, because we engage in
less construction, that's been a smaller share than in some
(17:30):
other parts. But if you ask people in the housing market,
they'd say they would love to see like a construction
boom because there's just hasn't been enough construction.
Speaker 2 (17:39):
Finally, last question, we've got about two minutes, the Beige Book.
Everyone wants to know, is there a recession coming? It
seems like people want to ask that question all the time.
Can the Beige Book help predict when a recession's coming?
Speaker 4 (17:53):
So basically the answer to that is yes, no one can,
but no one can predict a recession with certainty, so
it's important to keep that mind, keep that in mind.
I conducted some research together when Nathaniel Nelson, my colleague,
and we were building on some research from the Cleveland
Fad that basically fed Beige Book texts into a large
(18:13):
language model to produce sentiment indexes. So like, you know,
how are people feeling? You know, if you summarize the
Beage Book, is it positive? Is it negative? And you
can use those indexes quantitatively and relate them to recession probabilities.
And it turns out that the Beage Book does a
decent job. It's not one hundred percent accurate, but historically,
if you look back, when sentiment is higher, the chance
(18:35):
of a recession is lower. When sentiment is lower, the
chance of a recession goes up. We've also related this
to you know, a lot of people use financial indicators
like a yield curve to predict recessions, and that's still
really valid. But we did find the bage book can
add a little bit more or slightly different type of
information than you get from those financial indicators. I would
(18:56):
add that these forecasts are very near term, so related
to are we in a session right now or will
we be in a recession the next three months, but
any farther out from that, and then the basebook becomes
less useful.
Speaker 2 (19:09):
Very good, well, Mary, we appreciate you joining us today.
Thank you so much for taking the time to chat
with us.
Speaker 4 (19:14):
Thank you, Chuck, it's been a pleasure again.
Speaker 2 (19:16):
That is Mary Burke. She's a principal economist and policy
advisor with the New England Public Policy Center in the
Federal Reserve Bank of Boston. We're going to take a
quick break right now, but when we return, we are
Talking Ford and Lulu Lemon.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange 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 5 (19:59):
It looks like the tech selloff is accelerating right around
midday here as traders react to more earnings from tech,
including from Broadcom. We're actually impressed on their quarterly results.
We also have major news coming out of the retail
world right now. The Dow is down over half a percent,
or two hundred and sixty one points, SMP five hundred
(20:19):
now down one point three percent or eighty nine points lower,
and the tech heavy Nasdaq selling off nearly two percent
now or four hundred and fifty six points. RUSTED two
thousands down one point two percent, and Oil is down
about half a percent, rating a fifty seven dollars and
thirty three cents a barrel. Broadcom dropping ten percent despite
(20:42):
the chip maker beating earnings and revenue expectations driven by
AI sales. The company also issued a strong forecast for
the current quarter, expecting AI chip sales to double from
a year earlier as AI demand remained strong. Meanwhile, IF Leisure,
where retailer Lulu Lemon, announced CEO Calvin McDonald will step
down in January. Lulu said its board is focus on
(21:04):
identifying a leader with the track record of driving companies
through periods of growth and transformation. To that guy, the
company's next chapter of success, and several cannabis stocks are
rallying following reports that President Trump is expected direct to
direct his administration to move to reclassify marijuana as a
less dangerous drug. Shares in both till Rey Brands and
(21:28):
Canopy Growth are surging anywhere between thirty and thirty five
percent at the moment. I'm Tucker Silva and that is
Wall Street Watch, and we haven't done trivia yet, so
let's get to it. On this day, nineteen eighty, Apple
made its IPO on the stock market with shares priced
at twenty two dollars. Many years after Apple's IPO, it
(21:49):
was the first company to hit the one trillion dollar
valuation mark. So triviy question today, what year did Apple
become the first trillion dollar company? Once again? What year
did Apple become the first trillion dollar company? Be the
fourth person today at textas at six one seven three
six two thirteen eighty five with the correct answer along
(22:10):
with the keyword trivia, and you win a Financial Exchange
Show t shirt once again. The fourth correct response to
Texas to the number six one seven three six two
thirteen eighty five with the correct answer and the keyword
trivia will win that T shirt. See complete contest rules
at Financial Exchange Show dot com.
Speaker 3 (22:27):
Pab you like skunks, yes, sir, No, you know not
a Pepela pew fan. I like the throwback to Lockheed
Martin there that they're thrown around here.
Speaker 2 (22:37):
It is so Ford, it has got there. They've got
a secret team working at the Ford skunk Works. Do
you know where that Lockheed Martin name came from? By
the way, Oh jeez, I I do, but I've forgot.
So nineteen forties, the US is trying to develop its
first ever jet fighter. Yep, Lockheed Martin is working on this,
(23:00):
and the factory that they were trying to build the
thing in stunk like something, right, and so they called
it the skunk Works because it smelled really bad there.
So now everyone uses that whenever they have some secretive
thing that they're designing. So Ford is trying to build
like basically a new EV that's going to leapfrog everything
(23:20):
that American automakers have done, and they're doing it in
a secretive skunk works type of way. And the question
is posed here by the New York Times, you know,
is it too late? And I think the answer is, well,
It depends what you guys.
Speaker 1 (23:36):
Make sure.
Speaker 3 (23:38):
It's an interesting story and very interesting how Ford can't
even walk in the doors here, Chuck. Initially when I
saw this piece, I was like, Oh, geez, Ford is
gonna stumble and get in the way of this. But no,
to the Skunkworks point, they are totally isolated off from
any Ford leadership stepping in front of their doors. Internationally,
it's going to be a tremendous uphill climb in order
(23:59):
for them to get market share. As alluded to in
the piece here in the New York Times, they are
very concerned about the Chinese who have taken a significant
market share internationally. Obviously, we don't have access here domestically
to Chinese electric vehicles. So the opportunity in lies here
and is really it seems to be a tremendous focus
of the company and the Ford CEO, Jim Farley, mentions
(24:23):
it several times here. But there is an opportunity here
in the United States domestically. I just wonder how you're
going to compete internationally, just because of how the Chinese
government has subsidized that ev industry so much.
Speaker 5 (24:37):
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(25:42):
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Speaker 2 (25:45):
Today is that day each year where we cover Lululemon
in a story and I go to their website and
tell you how expensive all of their stuff is. And
I found a seventy eight dollars T shirt in my.
Speaker 5 (25:58):
Travels seems reasonable.
Speaker 2 (26:00):
The other thing that I found. I'm on their site
and I literally just clicked on like the men button
and shirts. And I don't know how they did it,
but like they've made all of their models look like mannequins,
despite me being pretty sure that they're not, but like
none none of them look alive for some reason. And
I just feel like when you're an athleisure brand, you
(26:23):
don't want to look like you're not alive when you're
modeling the stuff. But somehow they've they've they've done it,
and I don't really know what to make of that.
But there's this piece in Bloomberg Opinion. It's titled making
lolu Lemon cool Again will be a stretch, And yes,
I do see what you did there, Bloomberg, But pretty
much the problem here is twofold lou Lemon is built
(26:47):
on the idea that the brand is cool, and they're
built on the idea that because they're cool, they can
command premium pricing. Thus, if you are not cool, you
can't command premium ricing, and that becomes a problem for you.
Speaker 3 (27:03):
It it just shows how difficult of a business this
is to execute and be successful in for a long
period of time, because it's so hard. It's it's just
it's got to be one of the most difficult businesses
to start and scale. Well, beverages are probably up there too,
But it's just something funny about that.
Speaker 5 (27:23):
No, No, I'm just browsing their website.
Speaker 2 (27:26):
Okay, don't don't there people not look real.
Speaker 5 (27:30):
It's not even that. It's just like, say, obviously it's
you know what, customized for the holiday season. And there's
a tab that says gifts under fifty dollars, and it's
it's a single boxer brief for thirty eight dollars, three
pack of socks for thirty eight dollars, a beanie for
forty eight dollars, again under fifty dollars, and a freaking mug.
Speaker 2 (27:52):
That's it.
Speaker 5 (27:53):
Those are the get oh excuse me, and a belt
bag if you need that, a belt bag. What So,
these are the gimes you can fifty dollars from lulul
You need a bag to carry your belts, that's right.
Speaker 3 (28:05):
They also have a dual poet.
Speaker 2 (28:07):
No, no, no, they.
Speaker 5 (28:07):
Also have a dual pouch wristlet. It's a fanny pack.
They call it an everywhere belt bag.
Speaker 2 (28:13):
Oh okay, so it's not a bag that holds it.
Should just call it a fanny pack. That's not fashionable.
Speaker 5 (28:18):
An everywhere belt bag a belt bag. But it's just like,
that's the that's the problem with this company. Gifts under
fifty dollars and it's like barely anything like that's the
problem with the company.
Speaker 3 (28:28):
Well, I think it is. It does go makes too much.
It goes back to checks point. It's too much if
you're not the coolest brand out there. And the competitors
have really made significant inroads against them are Viory and
I guess Skims. With the Nike launch, it is probably
an alo yoga alo yoga. I feel like I see
everywhere now. I feel like that and Viory have sort
of taken lu Lemon's place. It just, uh, retail and
(28:52):
fashion is a is a tough game. And uh they
were the king of Hill for a while.
Speaker 2 (28:57):
But uh, I mean they're still making like they're problems.
Is it's like their sales and profits are just kind
of flattening out. It's not like the company's collapsing. So
I don't want to make it sound like nobody buys
their stuff anymore, but the growth rate is just kind
of tapping out. And I think it's also just look,
there's a limited pool that you can captured that can
(29:19):
afford to buy this stuff when you're talking about a
seventy eight dollars T shirt, And.
Speaker 3 (29:27):
I will say I have some of the dress pants.
They they are they are good quality, and they're a
lot better than wearing the.
Speaker 5 (29:33):
Typical slash what's at the ABC pant or something, what's
the popular one?
Speaker 2 (29:37):
Yes, is that it that is correct.
Speaker 3 (29:39):
But those were bought for me as gifts, just so
that no one starts thrus shading.
Speaker 2 (29:43):
Sure they were stuffed with garlic for it was literally
about to say it, let's take it coronious. Let's take
a quick break here when we come back. Paul A
Monica from Barons joins us after this.
Speaker 1 (30:00):
The Financial Exchange streams live on YouTube. Subscribe to our
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All morning. Long Face is the Financial Exchange Radio Network.
The Financial Exchange is now available every day from eleven
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Stay informed about the latest from Wall Street, fiscal policy,
(30:21):
and breaking business news. Every day. The Financial Exchange is
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This is the Financial Exchange Radio Network, Ladies and gentlemen
the weekend.
Speaker 5 (30:36):
This segment of the Financial Exchange is powered by Circle
K Convenience Store. Circak is now the official convenience store
of the dav Department of Massachusetts. On behalf of Circle K.
Thank you veterans for all you've done.
Speaker 1 (30:50):
As promised.
Speaker 3 (30:51):
We are joined by Paul Lamonica from Barons to talk
a little bit about the housing market. Paul, thanks so
much for joining us.
Speaker 2 (30:58):
Thank you, Paul.
Speaker 3 (30:59):
I love a great zag and I got to say
here this piece falls into that category. Someone out there
and you are that person, is saying that, hey, maybe
housing could bounce back in twenty twenty six. Whatever commentary
you look at out there, whether it was the Toll
Brothers recent earnings reports that they're going to deliver less
homes this year, there's just been a lot of negative sentiments.
So give us some good news, some posmive sentiment on
(31:22):
a Friday. What could turn this around?
Speaker 6 (31:24):
Yeah, I think we've had obviously the Federal Reserve cutting,
interest rates and mortgage rates have come down, which in theories,
should make your homes a little bit more affordable. Obviously,
there are still concerns about you know, prices, but you know,
you might have what redfinn is calling a normalization of
(31:46):
prices going forward. So they're saying that next year could
be the beginning of the great housing reset, which you know, again,
this is not going to be a gangbuster's recovery like
we saw you know, in the you know, mid two thousands,
you know, and the earlier this decade when housing was
in a much better shape. But it could be, as
(32:07):
they call it, a year's long period of gradual increases
in home sales, which wouldn't be the worst thing in
the world to have a gradual, steady rebound. And I
think that you know, the home builder stocks have been
you know, beaten up enough that you could argue that
they are you know, priced for that modest rebound and
(32:29):
could do well next year.
Speaker 3 (32:30):
You mentioned that interest rates was one lever that could
be pulled on to perhaps increase demand. What are some
of the other levels that Washington, d C. Or or
other areas of the housing market is looking to be
pulled upon to perhaps kind of turn it around in
twenty twenty six.
Speaker 6 (32:45):
Paul, Yeah, I think some of the stimulus that we
already have coming into place, you know, from the you know,
the one big beautiful bill, is you know, potential boost
you know, there's talk of, you know, maybe tax credits
for first time buyers, more incentives for home builders to
(33:07):
try and build more and boost supply. I think that
the President and the administration are you know, keen on
trying to get housing back on track ahead of the
mid term elections. Whether or not that works obviously remains
to be seen, but you have to think that they
are going to, as one of my sources said, throw
(33:27):
the kitchen sink at the problem, because it's you know,
not the worst thing in the world politically to have
a stronger housing market heading into some key elections next novetter.
Speaker 3 (33:37):
In your research for this piece, Paul, what do you
think would be the mortgage interest rate that would really
get a lot of buyers back on the market. Is
it breaking that five percent threshold? Even if it was
in the high fives, that would potentially turn it around
or maybe increase a little bit of activity. Obviously, there's
still so many people out there, like myself luckily sitting
in a position where you're three or sub three on
(33:59):
a al you'r fix, and it just makes it hard
for us to get up and move exactly.
Speaker 6 (34:05):
No, I think that is another part of the equation
that doesn't get discussed as much is that there is
less incentive for people that have a home already in
are paying those lower mortgage rates to try and move
and find a new house that they might want to
purchase because those mortgage rates are going to be higher.
(34:26):
I think though for time new first time buyers, below
six probably is psychologically something that could seem a little
more doable, coupled with the fact that you might see
perspective sellers needing to cut prices, you know, going forward,
and you know that might make homes more affordable as well.
(34:50):
I mean, I think a lot of home buyers homeowners
excuse me, are sitting on pretty decent gains, so that's
helpful if they are looking to But you're right, you know,
but then the question becomes, where do you move to,
you know, and if you are looking to buy again,
you're you're gonna have to have a higher mortgage than
the one you're probably locked into right now.
Speaker 3 (35:12):
Paul Amonica from Baron's joining us to talk about the
housing market. Paul, thanks so much for the time, and
have a fantastic weekend.
Speaker 6 (35:18):
Thanks in to you guys.
Speaker 1 (35:20):
All right.
Speaker 5 (35:20):
Our trivia question in the previous segment was what year
did Apple become the first trillion dollar company? Well, that
would be twenty eighteen. Bill from Natick Mass is our
winner today, taking home a Financial Exchange Show t shirt.
Congrats to Bill and we play trivia every day here
in the Financial Exchange See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (35:41):
Okay, let's see what else do I want to cover
before we finish up today. Don't want to talk about
the Financial Times Person of the Year.
Speaker 5 (35:48):
Just what the market's doing right now.
Speaker 2 (35:51):
It's not doing anything good that great. It's bad. It's
quite bad. So look, I gotta tell you stuff like
this is is what gives me a little bit of
Ajeta from time to time, and that you think about
the last you know, few weeks. And in the tech space,
in Vidia reported earnings, the earnings were good. Company got sold.
(36:15):
The next day. Oracle reported earnings, earnings were good. Company
got sold the next day. Broadcom reported earnings, earnings were good.
Company got sold the next day. When companies report good
news and they can't rally, it makes me perk up
because that can potentially be a turning point in markets.
(36:37):
And I don't know if this will or won't be again.
This market's had a number of wobbles of you know,
three to five percent this year and hasn't really moved
anywhere negatively since early April. But I do pay attention
in particular when market leadership starts having those wobbles, because
I just don't know that you can have this thing,
(36:57):
you know, be strong next year on the backs of
like regional banks and industrial companies.
Speaker 3 (37:05):
No, it's it's kind of a one trick pony the
market spend, so it's gonna have to be. It feels
like technological advancements or strong earnings growth from companies using
artificial intelligence that would kind of get it to turn around.
Because it seems like Nvidia's blowing the cover off the
ball in terms of its core dilemmas, and it's yeah,
it's not enough to do it.
Speaker 2 (37:25):
So I think that again, this is setting up for
in my opinion, twenty twenty six and twenty seven they
are going to be the prove it years for AI. Hey,
you've done the build out, you've spent all the money.
Now are you gonna actually get the revenue and figure
out how to make that revenue profitable? And if you can't,
then we're gonna have to start canceling orders for all
those in vidio chips and all that capex that we've
(37:47):
planned for future years. If you can, great, the party
can keep going. I don't I don't have a dog
in the fight. I don't know which way it's gonna go.
We had these questions heading into this year, and they
answered it with Okay, we can all to all these
Middle Eastern customers, and we can, you know, do this.
How are you gonna answer those questions next year? I
don't know, but this is the setup. So markets remain
(38:10):
sharply negative now, dowz off about three quarters of a percent,
SMP down one and a third, Nasdaq off more than
two percent. Hope you all have a great weekend. We're
gonna see you on Monday. We got a jobs report Tuesday.
Get excited for it. We'll see you a day before then.
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