February 5, 2026 • 38 mins
Chuck Zodda and Mike Armstrong break down the latest tech-led selloff as massive AI capital spending collides with fears of software commoditization and shrinking margins. The hour also examines why layoff headlines often mislead, what the JOLTS data is really signaling about the labor market, and why falling home prices—not subsidies—are the only real path to improved housing affordability.
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Speaker 1 (00:00):
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(00:42):
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(01:05):
Zada and Mike Armstraw.
Speaker 2 (01:09):
Chuck, Mike and Tucker with you here on a busy Thursday.
We've got some earnings to discuss from yesterday, some more
earnings to preview from today. We've also got weekly jobless
claims that we're gonna talk about. We got a Joltz
report that was released two days late after a very
brief government shutdown, and so we're not gonna waste any time.
(01:31):
We're gonna get right into it talking about what is
going on in the tech related area of markets. Basically
anything tech adjacent getting kind of budgeted, and that continues today.
I know that, you know, we have, you know, some
Google earnings that we're gonna get into, but we have
to start there, I think, just because it's moving today.
(01:53):
Google reported earnings are alphabet rather reported earnings yesterday after
the bell. They're down about four and a half percent
right now. They were down as much as seven. They
trim their losses to down too at one point this morning.
But Google stock falling after earnings, and Mike, what's interesting
here to me, It's emblematic of what we're seeing in
(02:13):
tech for the last four months or so, now maybe
five months even which is Google reports their earnings. The
earnings are fine, they're good. Their capex guidance for this
year is insane.
Speaker 3 (02:26):
So here's the deal.
Speaker 2 (02:27):
The expectations were that they were going to have about
one hundred and twenty billion dollars in capex. The high
estimate on the street was a one hundred and thirty
three billion. They came in at one hundred and seventy
five to one hundred and eighty five billion. That's insane,
Like it's basically a doubling of last year's capex. Yes,
(02:49):
we are now at the point where your big four Meta, Microsoft, Alphabet,
and Amazon are going to do somewhere in the ballpark
of six hundred to seven hundred billion dollars in CAPEX
this year, which I do think the market is finally
waking up to and being like, eh, guys, I'm not
(03:09):
sure this is a good idea because the whole premise
of why tech has been a great investment for the
last seven eight years, in particular, Hey, there's not much
CAPEX that's needed. It's a high margin business. Who wouldn't
want that? And now it's well, we're gonna put seven
(03:31):
hundred billion dollars into data centers. Do you need it,
don't know, but it might pay off. And it worked
in twenty three and twenty four and even the first
half of twenty five since October and and I forget
what it was at the time, but there was something
that happened where I was like, guys, I think that
we might be like kind of starting to see the
(03:51):
peak of this since literally that point. And I do
like to toot my own horn when I'm occasionally right.
I'm not always, in fact, a lot of the time
I'm wrong. Occasionally it seems like, you know, I might
get one right, And this one seems like it really
is turning, because the trend for the last three years
has been, hey, just tell people you're gonna build more
(04:11):
data centers and your stock will go up, And that
has completely reversed.
Speaker 3 (04:16):
In the last three to four months. Now.
Speaker 4 (04:18):
Yeah, for evidence in video, stock peaked on October twenty
ninth that two hundred and seven dollars a share. There's
a bunch of pieces of this that I find fascinating, though,
one of which is the Kapax piece that you just mentioned.
Chuck so meta, you know, dramatically expanding their capax. Everyone
looked at that what was it, one hundred and thirty
five billion was their plan somewhere in that range, and
(04:40):
then you know Google comes behind them and just blows
it out of the water. Here in spite of all that,
right in spite of these companies telling you, hey, we're
going to try and spend this much money, you have
Nvidia down today, you have Micron Technology, all the companies
that supply what these guys are going to attempt to
buy also following falling in sympathy with the overall market.
(05:01):
And so there is some logical pieces to this. I'm
sure we're gonna get to the software side of things
where you mentioned all the tech adjacent stuff getting hammered.
But the simultaneously investors seem to be saying, hey, we
kind of doubt whether or not this CAPEX is going
to pay off, while also stating that all the companies
(05:21):
that operate in sectors that you're trying to disrupt are
dead in the water and getting slaughtered right now. And
I have a tough time making sense of those two
statements together, and they don't, Okay, hit me.
Speaker 2 (05:34):
It's the commoditization of AI, which is bad if you're
building a data center because it means, hey, if there
are a bunch of different models that are effectively commoditized
and not much difference between them, why do I need
to pay you premium pricing for that?
Speaker 3 (05:51):
I don't.
Speaker 2 (05:52):
I can hop between them and whatever they're like, there's
no stickiness. I can go and ask Caught a question
today and Chat GPT and Gemini a question, and I
don't need to have had anything loaded into them before
in order to get an answer. I'm not one of
the people who's like talking to it trying to make
a friend. So like, I get if you've like you know,
(06:12):
built a relationship with the thing and everything, Okay, Like
that's that's different, but that's not what we're talking about
for work. Like, no one pays chat GPT extra to
be able to talk to it more, at least not
many people do.
Speaker 3 (06:25):
I think.
Speaker 2 (06:27):
I think that when we look at it, it is.
The answer that's starting to come out of here is, hey,
we're not all going to be winners. The guys that
are building the models are going to be commoditized. And
we see this with how frequently they're all rolling out
updates and competing. That's what commoditization looks like. The other
piece is, hey, the stuff that's going to be produced
(06:50):
by these models is going to be disruptive to the
software stack as it currently exists.
Speaker 4 (06:58):
And by the way, that software stack is maybe not
what you initially think of, right, Like, we can all
paint the picture of why a data aggregator that charges
a whole bunch of money. If you ever heard of
a Bloomberg terminal or Thompson Reuter's, you know these data aggregators.
Oh yeah, if chat you know Chat GPT can better
synthesize that data customized to my business, I can see
(07:20):
how that gets affected. But you had this week were
travel companies Expedia getting hammered, salesforce business software, customer relationship
management software getting absolutely demolished this week, And that was
the piece that I think was alarming to something.
Speaker 3 (07:36):
Wow, it was another one.
Speaker 4 (07:38):
Right, No, like companies in seemingly unrelated industries that are
only loosely tied to the software piece of it getting
absolutely demolished on this, I think, yeah, you're right dueling
assumptions of hey, this is a commoditized business and the
models themselves are going to get cheaper and easier to run.
And by the way, they are also tremendously disruptive.
Speaker 2 (07:58):
Well, and here's the other piece is that what's being
priced in is that software commoditization as well. And there
are two ways that this happens, one of which I
think is more likely than the other. The one that
I think is unlikely is let's say that I am
Chuck big stretch, I know, and I have to do
(08:19):
my taxes every year because I'm an American, and I
have to do my taxes every year. Right now, I
pay turbo tax I don't. I forget. I don't know
exactly how much. It's a few hundred bucks a year. Yeah,
whatever it ends up being. And I say, you know what,
I'm sick of that. Instead, what I'm gonna do. I'm
gonna go to claud Code and I'm gonna say, hey, coud,
here is the IRS code for twenty twenty five. Build
(08:41):
me an app that lets me file my taxes.
Speaker 3 (08:45):
Now.
Speaker 2 (08:45):
The reason I'm not actually gonna do that is because
I have no way to check if it's actually doing
it right, Like that's that's kind of a big one
to be, like, hey, am I personally going to do
this and risk you know, the IRS looking at my taxes?
But because it was filed with you know, Chuck, you
know tax Chuck dot Ai. Yeah, right, Like that's not
(09:07):
what I feel is reasonable for me. Likewise, if you're
a company that uses any you know, CRM service, Redtail Salesforce, HubSpot,
whoever it might be, you're not likely going to have
someone on your team is just like, hey, I'm gonna
vibe code a new CRM.
Speaker 3 (09:25):
You might have someone that talented, but probably you don't.
Speaker 2 (09:28):
And it's a pretty big risk from a data security
perspective to have that, like something completely untested that goes
in there. So I do think, and there are some
people that said this yesterday, Look, it's not that these
companies are going to be replaced by just single people,
you know, vibe coding solutions for themselves. What I do
think is more likely is, let's say that you're one
(09:50):
of the people that got laid off from any of
these companies that have been laying people off. You're you're
a coder in the tech space that's gotten.
Speaker 3 (09:57):
Laid off recently.
Speaker 2 (09:59):
What you might say is, hey, I can go and
I can build something that does what TurboTax does, and
I can do it cheaper because I can vibe code
the whole thing, and I know what to look for
to make it secure, and YadA, YadA, YadA, I.
Speaker 3 (10:15):
Can build that.
Speaker 2 (10:16):
And then because my, my, you know, my number of
humans needed to build that, you know, into it might
have you know, thousands of people working for it, but I.
Speaker 3 (10:24):
Only needed eight people in order to build it.
Speaker 2 (10:27):
Instead of needing to charge you, chuck, you know, X
hundred dollars per year for you know, your tax filing,
I can charge you fifty and I can completely eat
into into its margins. And that's where I think the
real threat is. It's not from everyone trying to vibe
code their own solution. It's from a new generation of
(10:48):
competitors that can build stuff more quickly and more cheaply
than existing ones. And so what you end up with
is not that into it necessarily goes away. But if
their previous growth rate, like let's look it into it
just as an example, just because they've gotten Bludgeon this
week into its five year trailing five year revenue growth
(11:08):
rate is nineteen percent, and they're trailing five year EPs
growth rate is fourteen point six percent. If I make
it so that they're only growing their revenue at five
to ten percent and EPs at five to ten percent.
That means that the whole stock does need to be
rerated down in this way, not because they're going out
of business, but just because their earnings are not gonna
(11:29):
double every five years. They're gonna double every ten now.
And I'm not gonna stick as much of a multiple
on that either. And so instead of trading at you know,
forty x forward earnings, you're gonna trade at twenty x,
and your forward earnings projections are gonna be lower as well.
And that's the rerating that's happening. It's not that these
companies are gonna go out of business. It's just that
(11:51):
the fat margins, when I look it into it right now,
into it is sitting on twenty six percent margins. You
think someone like someone who got laid off from one
of these tech companies can't build a better mouse trap
more cheaply with all these tools. That's what's being priced in.
It's the commoditization of software and models. But the winner,
in my opinion, it's the people who can actually build
(12:12):
the stuff to sell using the models.
Speaker 3 (12:15):
That's my that's my speech.
Speaker 4 (12:19):
Let's uh, we gotta take a break, but let's take
a break. I think there's more to this. The tech
sector as a whole, as you mentioned, has been just
bludgeoned this week, and I want to dive a little
bit deeper here. We've talked about the software companies, We've
talked about the commoditization, but what does it mean for
the industry, the tremendous growth of data centers and all
these different pieces to it, if this is actually a
(12:40):
new normal shaping markets.
Speaker 3 (12:42):
Let's take a quick break. We'll be right back.
Speaker 1 (12:44):
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Speaker 2 (13:40):
Mike, what else do we want to talk about with
tech and software that is just getting popped on the
head by a little bunny foofool all year.
Speaker 4 (13:50):
I guess my question is, so, let's assume that we
buy this theory that, hey, the models themselves, which again
we're speaking in AI speak these days, So the models
being Chat GPT, the model being Google, Gemini or Claude
from Anthropic, Let's assume for a moment that those just
aren't They're just not that important, right, which what the
(14:13):
difference is between them don't seem all that important, and
it's becoming easier to create those. Is that is that
the thesis that's dominating markets right now in your mind?
Speaker 3 (14:22):
I think so.
Speaker 2 (14:23):
I think it's the commoditization and also the fact that
it's happening with the backdrop of increased capex, which means
markets I think again, no one actually knows what that's
been going on, like, none of us know for certain,
But my theory is, hey, they're becoming commoditized the very
same time that this capex is ramping through the roof,
(14:43):
and so market participants are like, you're gonna do what
now when this is happening. And that's that's kind of
my read on it.
Speaker 4 (14:53):
Which makes you know, things like the IPO of chat
gpt are of open Ai.
Speaker 1 (14:58):
Uh, the the.
Speaker 4 (14:59):
IPO of space x which is now tied to xai.
Very interesting given that property to it, Yeah, right, very
very interesting. It does then call into question, you know,
any of those software companies, specifically those that are charging
consumers directly or businesses directly. I see that as a
(15:20):
very interesting question that runs from Microsoft to Bloomberg to
Salesforce to into it. I think it might be a
little bit of a different story if, like the Expedia
one to me is interesting, right, nobody directly pays Expedia
for anything. They get commissions from hotels and airlines. Now,
if you know X y Z coder is able to
(15:41):
develop a new Expedia at a cheaper cost and therefore
lower the fees to those platforms, then maybe there's something there.
The other area I'm trying to think through, like all
the major areas in tech, social media is another big one.
I don't know how disruptive any of this is to
Google's dominance on you Tube or metas dominance with Facebook
(16:02):
and Instagram.
Speaker 3 (16:02):
Can you draw a line there? No, I can't.
Speaker 2 (16:08):
I think some of what you're seeing on those Quite honestly,
in the last couple of weeks, you've seen a number
of foreign governments start to impose regulations on the age
of social media users, and I think that you might
be seeing a little bit of that impact there. It's
on the margins because, like, quite honestly, I can't remember
(16:28):
which ones have done it to this point. I think
Australia was one of them.
Speaker 3 (16:33):
I can't remember.
Speaker 2 (16:33):
There's been like three or four that have done this
now with I think sixteen is minimum age for social
media use, and so I think some of this might be, hey,
like a response to regulatory pressure that's building around social
media as well.
Speaker 4 (16:49):
One thing though, that's dominated all the talk has been
data centers, energy, memory, semiconductors, and nothing about this changing
your shift narrative to me, indicates that the pace of.
Speaker 3 (17:02):
Buildout is going to slow.
Speaker 4 (17:03):
Now, maybe you know, maybe investors pressure Google metage so
much that they have to eventually do so. But for
the time being, it seems to me like all of
these models, which may be commoditized, still need the compute
to be able to run.
Speaker 2 (17:18):
To a point. But remember, CEOs are corporate lemmings. They
look around and see what everyone else is doing, and
they say, oh, we should do that if it's been
either working or not. The best example that I have
of this is in twenty twenty one, there was a
little car company by the name of.
Speaker 3 (17:36):
Tesla, and the car company made evs, and Tesla.
Speaker 2 (17:39):
Stock went through the roof, and everyone in their grandmother
was like, my goodness, we need our stock to do that.
Let's start building evs. You had companies that were committing
to like have no more internal combustion engine vehicles by
twenty thirty, and like three years later after it didn't
do anything for their stocks, and they're spending a bunch
of money, and they're like, oh, gee, the demand that
we thought was gonna be there isn't there. They're like, hey,
(18:03):
are bad, We're gonna not actually do that because it's
it's bad. This is the same thing in that right now,
what you're seeing is the first quarter or two of Hey,
we raised our CAPEX guidance, and you didn't boost our stock.
Speaker 3 (18:17):
What gives?
Speaker 2 (18:18):
At some point, what's going to happen? Because someone always
has to be the first through the wall, whether it's
Sun Debracai, whether it's sat niy Nadella, whether it is
Andy Jassey, whether it's Mark Zuckerberg.
Speaker 3 (18:30):
It's probably not gonna be Zuck because he.
Speaker 2 (18:32):
Just loves spending money, like the guy like lives to
spend money on things that don't return any value. One
of them is gonna say, hey, you know what, let's
see what happens if we guide our capex for the
next twelve months and instead of you know, a forty
percent increase, let's do a five percent decrease in our
(18:52):
CAPEX projections, and the street's.
Speaker 3 (18:56):
Gonna reward it.
Speaker 2 (18:57):
The stock's gonna pop like eight percent on the news,
and every other big CEO is going to say, oh,
that's what we're doing now, and that's how the cycle ends,
like it's how it always happens.
Speaker 3 (19:10):
Now.
Speaker 2 (19:11):
I can't tell you when that's going to happen. I
can't tell you who's gonna be first, because I don't know.
I'm not in their heads. But this is how it
goes because they all follow each other like, it's just
how it works. No one wants to be out on
the limb, you know, for too long by themselves. Corporate
America is very risk averse generally. Let's take a quick break.
When we come back, we've got Wall Street Watch, and
(19:32):
then let's talk labor market after this.
Speaker 1 (19:39):
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 5 (20:03):
Well, the tech selloff has extended for a third consecutive
day as investors continue to show uneasiness around tech stocks.
Wall Street's also reacting to slightly higher than expected jobless
claims data and software than expected job openings data for
the month of December. Right now, the Dow is down
one to in a third percent, or six hundred and
(20:25):
forty nine points lower. SMP five hundred selling off one
and a half percent, Nasdaq, the tech heavy Nasdaq selling
off nearly two percent today just below that, down four
hundred and thirty two points. RUSTED two thousands, down over
eight tenths of a percent. Tenure treas reeled down six
basis points at four point two to one percent, and
(20:46):
crude oil down three percent today trading at sixty three dollars.
Google pair of company Alphabet reported a jump in quarterly
profit where sales rose eighteen percent to nearly one hundred
and fourteen billion dollars in the fourth order. The tech
giant also said it plans to roughly double capital spending
this year to develop AI models and build data centers.
(21:08):
Alphabet stock falling five percent. Meanwhile, Qualcom shares a plunging
nearly ten percent after the semiconductor company provided disappointing earnings guidance,
where blamed an industry wide shortage of memory supply and
price increases. Stay Lauder lifted its adjusted earnings outlook for
the year. However, the beauty company said it still expects
(21:29):
a roughly one hundred billion dollars hit from tariffs. Stay
Latter shares are tanking twenty one percent. According to Bloomberg,
Rio Tinto and Glencore appoys to walk away from a merger.
The mining companies are likely to announce the decision today.
Rio shares a flat, while glen Core stock is down
nearly two percent and more tech earnings after the bell today,
(21:52):
where Amazon will report their anticipated fourth quarter results. I'm
Tucker Silva and that is Wall Street Wall Mike.
Speaker 2 (22:01):
I have a couple of last tech thoughts I'd like
to clean up before we move on to some bad
discussion about the labor market.
Speaker 3 (22:10):
Sounds good. First.
Speaker 2 (22:12):
One other thing that's been going on over the last
week or so with software getting hit is financials have
been getting hit as well. And specifically, if you look
at the part of the financial sector that's been getting hit,
it's not JP Morgan, it's not Bank of America, it's
not your big money center banks.
Speaker 3 (22:33):
It's not Berkshire Hathaway.
Speaker 2 (22:35):
It's Blackstone, it's KKR, it's black Rock, it is Apollo Global.
Those are the ones that are getting hit, all of
your big asset managers that are heavy in the private
equity private credit space, and the theory behind this as
it goes, and again I think I believe this is
(22:59):
a lot of the private It's not a private credit
issue here, it's more of a private equity one, which
is a lot of the businesses that have been bought
up by those companies in the private equity space are
technology and software businesses. Because you say, great, I can
you know, clean this up, strip it down, improve the margins,
and sell it off. You know seven years later. That's
like the whole premise behind private equity. If you've bought
(23:22):
a software business and now software is under threat, you
now have a company that you're holding where you're like, oh,
who's gonna buy this from me? And what's my exit?
And so that I think is what you're seeing on
that side of things there. So I think that's what's
going on with those big asset managers in the financial space.
The other thing that I woke up to that I
(23:44):
found remarkable is that on a total return basis capital
appreciation plus dividends, do you know that Microsoft is now
trailing the S and P five hundred over the last
five years?
Speaker 3 (23:57):
Really? Yeah? Wow, didn't expect to see that.
Speaker 2 (24:02):
No, So just something that that caught my eye where
I said, uh, that's interesting and noteworthy and file that
away for future discussion. Let's talk about the labor market
and bad labor takes. It's that time of the month
where the Challenger, Gray and Christmas firm reports they're a
number of layoffs announced by US employees. And I'll quote
(24:25):
from CNBC US employers announced one hundred and eighty four
hundred and thirty five layoffs for the month, up one
hundred and eighteen percent from the same period a year
ago and up two two hundred and five percent from
December twenty twenty five. The total marked the highest for
any January since two thousand and nine, when the economy
(24:46):
was in the final months of its steepest downturn since
the Great Depression. So like, naturally the world's ending, Yes, okay,
but here's the actual deal. We get the jolt support
every month. We got one this morning.
Speaker 3 (24:57):
Too, and catastrophic. Here's what it showed.
Speaker 2 (25:01):
It showed that for the month of December there were
one point seven to six to two million layoffs that
happened because the adult support.
Speaker 3 (25:09):
It doesn't just look at like announcements. It's no.
Speaker 2 (25:11):
Like again, it's still a survey. But it's okay, here's
how many there were last December. By the way, there
were one point sixty sixty nine million, So it is saying, yeah,
there was an increase from about one point sixty five
to one point seventy five million. Was there a doubling, No,
layoffs did not double, because that's not how any of
this works. I beg of anyone out there. If you
(25:32):
hear the words Challenger Gray and Christmas, or Challenger layoffs
or Challenger job cuts, please please please stop listening immediately.
It's not that their report is untrue. It's just that
it's not looking at the total picture and as a result,
can have significantly outsized moves relative to what's actually happening
(25:53):
in the labor market. I'm not saying all is well
in the labor market. There's still a lot of questions
that need to be answered. But the Challenger report is
just pure bait for people trying to say, oh, look
at how bad things are, and that's not what we
do here.
Speaker 4 (26:07):
The only people it's relevant to are those who are
working for companies that have announced the layoffs. And if
you are only hearing about it through Challenger Gray and
Christmas months later, then quite honestly, you might be deserved
to be laid off.
Speaker 3 (26:22):
Well, no, you haven't been laid off.
Speaker 2 (26:23):
True, you haven't been laid off. You're hearing about it
months after the announcement. Like, no, you're still there.
Speaker 4 (26:30):
So let's talk about the data that actually does matter.
Because there were two releases this morning. Neither of which
were great. So let's talk about the Joltz report. The
piece that you mentioned about layoffs interesting to me. The
continuing decline of job openings is also pretty interesting to me.
So the number of job openings has been trending down
where it now hits six point five million in the
month of December. One statistic that we bring up all
(26:52):
the time regarding this survey is that ratio of unemployed
people two jobs open, and back in April of two
twenty two, we were highlighting this there were two jobs
that you could apply to for every person that was
actually looking for work, arguably led to a bunch of inflation.
As of this reading now there are zero point eighty
(27:13):
five jobs for every person looking for work. That is
a level of labor market tightness that we haven't really
seen since the mid twenty tens. Twenty seventeen is around
the timeframe you need to return to to see that
degree of slack in the labor market by this one measure,
and I think that's worth noting. It's not new, It's
(27:33):
been trending this way for quite some time, but the
trend has been towards a more slack in the labor
market and I think you're seeing that in you know,
new applications for you know, the word of college graduates
and difficulty finding work, as well as all sorts of
things on the hiring side, just you know, employers generally
finding it easier to find employees.
Speaker 2 (27:54):
I'm gonna throw a little bit of cold water on
this ke just because this number was a big miss
to the downside on the openings. Yeah, and there's some
other stuff that looks a little bit funky in here.
And the reason that I also do this is, indeed,
their hiring lab tracks job openings that are out there
on indeed and generally not every month, but the Indeed
(28:16):
numbers and the a JOLTS numbers tend to correlate pretty well.
In this case, indeed has basically been flat month over
month as far as job openings, and this was like
a nine percent decline month over month. Something doesn't like
pass the sniff test on this, and so I'm gonna
(28:36):
kind of say, hey, for whatever reason, you know, whether
it was government shutdown or something else, something in this
JOLT support doesn't quite feel right relative to the other
data that we've been getting. And so I'm just gonna
need to see a couple more of these to see
if this is continued or if this is an aberration,
(28:57):
because it doesn't quite click with what we've been seeing
elsewhere in the labor market, which is not like everything
like going gangbusters, but no meaningful shift in the trend
from before, whereas this Joltz report is a meaningful shift,
suggests like a meaningful downshift in hiring intentions, which doesn't
really click with everything else that's been going on in labor,
(29:20):
which is just kind of holding steady, slow degradation.
Speaker 3 (29:24):
This feels a little unusual to me, fair.
Speaker 2 (29:26):
So I'll I'll take it and I'll put it aside,
and a month from now we'll say, hey, is there
actually any meat on this bone? Or was this just
you know, one weird data collection in December that you know,
something happened.
Speaker 3 (29:41):
And we'll we'll we'll see you later. Let's take a
quick break.
Speaker 2 (29:45):
When we come back, we're going to talk housing affordability
right after this.
Speaker 1 (29:49):
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Speaker 3 (30:18):
All right, we got some some housing market chatter here.
Speaker 2 (30:27):
Let's talk a little bit about this piece from Bloomberg Opinions.
How the affordable housing starts in the labor markets.
Speaker 3 (30:35):
How does that work, Michael?
Speaker 4 (30:36):
It doesn't, Chuck, You don't improve housing affordability by giving
by redistributing income.
Speaker 3 (30:46):
Like, everyone gets this wrong.
Speaker 2 (30:48):
Everyone's like, Hey, if we give people more money, it'll
make housing more affordable.
Speaker 3 (30:52):
No.
Speaker 2 (30:52):
If if there were three houses on the planet and
we gave and everyone started with one hundred dollars, then
those three houses would go for one hundred dollars. If
we said, oh, well that's that's too expensive. Let's give
everyone fifty dollars to cover half of it, the houses
would go for one hundred and fifty dollars. This is
basic math. And everyone's just like, Oh, give people the
(31:13):
money and that'll make housing more affordable. No, if you
don't build more houses, it'll just make it more expensive.
Speaker 4 (31:19):
All right, So let's let's let's make this simpler. Let's
say we're playing musical chairs. Ooh good, Okay, ten kids
is nine chairs.
Speaker 3 (31:26):
Love it.
Speaker 4 (31:26):
And Jenny has been She's a little bit wealthier, she's
been training, she's got, you know, really good sprinting shoes,
whereas Johnny came in his flip flops because that's all
he's got. If there's nine chairs and ten students out
there and now you give them all brand new Nikes,
you might create.
Speaker 3 (31:47):
A faster game of musical chairs, but there's still gonna
be a kid without a chair.
Speaker 4 (31:51):
He doesn't fix the problem to give everybody or redistribute income.
I think the point that she is attempting the author
is attempting to make here is that if incomes increased,
then more people will be able to afford homes, and
therefore someday home builders will build more of them. But
that's just a roundabout way of attempting to fix the
problem with no guarantee that the problem actually gets fixed,
(32:12):
Because if I'm the home builder, I'll gladly take the
fatter profit margin rather than building more homes.
Speaker 3 (32:17):
Which is what they're doing right now.
Speaker 4 (32:18):
So if you want to make houses more affordable, get
the conditions under which you can build more houses, and
I will recognize that we are seeing very small steps
towards this in some parts of the country. I like
the small moves that you've seen here and there to
allow for ADU accessory dewelling units in certain parts. I'm
(32:44):
encouraged here in the town that we're broadcasting from and
need them that they are building one hundred and eighty
nine unit apartment building that used to be a well
closed senior living facility. The MBTA zoning actors is I
think on the margins starting to improve things a little bit,
but we keep coming up with these dumb solutions like
(33:05):
discounting mortgage rates or giving a bear tax deduction, And
I just want to make really clear to everybody the
only thing that's going to do is make homes more expensive.
Oh man, we talk about this every day and it
just does not seem to change anything.
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Speaker 2 (34:32):
So continue to talk about the housing market piece of
New York Times. Voters say housing prices are too high.
Trump wants them higher. And this gets at a question
that he got on housing affordability yesterday, and his quote was,
I don't want to drive housing prices down. I want
to drive housing prices up for people that own their homes.
Speaker 4 (34:52):
This is the exact conundrum that every politician yes refuses
to acknowledge, which is that two cannot be possible at
the same time.
Speaker 2 (35:01):
No, you can't improve housing affordability at the same time
home prices are rising.
Speaker 4 (35:06):
Generally, I get why politicians are scared of this issue
because you cannot have both. You cannot improve housing affordability
and also not hurt some people in terms of their
wealth well.
Speaker 2 (35:17):
And also, if you're talking about local politicians, the tax
base is also based on home prices to go up,
and so they don't want to see home prices go
down because the revenue in most towns comes from property
taxes with the value hopefully going up over time. So
it's kind of a problem that we have here in
that we don't want home prices to go down, but
(35:39):
we want them to go cheaper. I don't know how
we square this circle, because like, this is not a
President Trump issue, This isn't every politician issue like that.
Find me one politician who legitimately like goes out and
is like, yep, I'm cool with home prices falling in
my district, my counting, my city, my state.
Speaker 3 (36:01):
You won't find them.
Speaker 2 (36:03):
They'll all talk about we want to improve housing affordability,
but none of them say that they're willing to let
it happen with home prices falling. And the problem is
that the place is where affordability actually improves, it's.
Speaker 3 (36:16):
Where home prices fall. Yeah, like that's that's the deal.
Speaker 2 (36:22):
If you look at what's going on in the Florida
housing market right now, activity is starting to pick up.
New listings are picking up. They're being scooped up more
quickly than last year. So net listings like out there
are actually down a little bit year over year now.
But it's because in Fort Myers home prices fell fifteen
sixteen percent and now people are looking at them going, oh,
(36:44):
this isn't as bad as I thought it was gonna be.
In Austin, Texas, you still have rising inventories because there
was just so much in the way of you know,
overbuying from a price perspective there, But prices are now
down about twenty percent from the peak, and you're starting
to see signs that you may start to see a
bottom there because people are saying, hey, this isn't as
(37:04):
expensive as I thought it would be. And it's because
those areas built a ton and affordability improved through prices
falling a lot. I know that's not what everyone wants
to hear, but that's why those areas are now set
to be ready to grow their housing markets in a
creative fashion for the next couple of years, whereas other
(37:27):
parts of the country are not there yet. If you
want to improve housing affordability, it has to be through
falling home prices, and that can come in different forms.
By the way it can come through, hey, we're you know,
reducing the permitting cost and time spent in that process,
and so builders can build more because their margins can
(37:49):
be maintained like that. There are ways to do this,
we just don't really want it because hey, give people
money to buy houses.
Speaker 4 (37:56):
Yeah, And I can tell you from a living in
a community that has voted down this stuff. People don't
want the idea of following home prices like they're just
plain and simple. They don't like the traffic, they don't
like the other things that come with it, but they
don't want to see their home prices fall.
Speaker 3 (38:11):
Let's take a quick break.
Speaker 2 (38:12):
When we come back, we got our two coming up
in just a little bit.
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(01:05):
Zada and Mike Armstraw.
Speaker 2 (01:09):
Chuck, Mike and Tucker with you here on a busy Thursday.
We've got some earnings to discuss from yesterday, some more
earnings to preview from today. We've also got weekly jobless
claims that we're gonna talk about. We got a Joltz
report that was released two days late after a very
brief government shutdown, and so we're not gonna waste any time.
(01:31):
We're gonna get right into it talking about what is
going on in the tech related area of markets. Basically
anything tech adjacent getting kind of budgeted, and that continues today.
I know that, you know, we have, you know, some
Google earnings that we're gonna get into, but we have
to start there, I think, just because it's moving today.
(01:53):
Google reported earnings are alphabet rather reported earnings yesterday after
the bell. They're down about four and a half percent
right now. They were down as much as seven. They
trim their losses to down too at one point this morning.
But Google stock falling after earnings, and Mike, what's interesting
here to me, It's emblematic of what we're seeing in
(02:13):
tech for the last four months or so, now maybe
five months even which is Google reports their earnings. The
earnings are fine, they're good. Their capex guidance for this
year is insane.
Speaker 3 (02:26):
So here's the deal.
Speaker 2 (02:27):
The expectations were that they were going to have about
one hundred and twenty billion dollars in capex. The high
estimate on the street was a one hundred and thirty
three billion. They came in at one hundred and seventy
five to one hundred and eighty five billion. That's insane,
Like it's basically a doubling of last year's capex. Yes,
(02:49):
we are now at the point where your big four Meta, Microsoft, Alphabet,
and Amazon are going to do somewhere in the ballpark
of six hundred to seven hundred billion dollars in CAPEX
this year, which I do think the market is finally
waking up to and being like, eh, guys, I'm not
(03:09):
sure this is a good idea because the whole premise
of why tech has been a great investment for the
last seven eight years, in particular, Hey, there's not much
CAPEX that's needed. It's a high margin business. Who wouldn't
want that? And now it's well, we're gonna put seven
(03:31):
hundred billion dollars into data centers. Do you need it,
don't know, but it might pay off. And it worked
in twenty three and twenty four and even the first
half of twenty five since October and and I forget
what it was at the time, but there was something
that happened where I was like, guys, I think that
we might be like kind of starting to see the
(03:51):
peak of this since literally that point. And I do
like to toot my own horn when I'm occasionally right.
I'm not always, in fact, a lot of the time
I'm wrong. Occasionally it seems like, you know, I might
get one right, And this one seems like it really
is turning, because the trend for the last three years
has been, hey, just tell people you're gonna build more
(04:11):
data centers and your stock will go up, And that
has completely reversed.
Speaker 3 (04:16):
In the last three to four months. Now.
Speaker 4 (04:18):
Yeah, for evidence in video, stock peaked on October twenty
ninth that two hundred and seven dollars a share. There's
a bunch of pieces of this that I find fascinating, though,
one of which is the Kapax piece that you just mentioned.
Chuck so meta, you know, dramatically expanding their capax. Everyone
looked at that what was it, one hundred and thirty
five billion was their plan somewhere in that range, and
(04:40):
then you know Google comes behind them and just blows
it out of the water. Here in spite of all that,
right in spite of these companies telling you, hey, we're
going to try and spend this much money, you have
Nvidia down today, you have Micron Technology, all the companies
that supply what these guys are going to attempt to
buy also following falling in sympathy with the overall market.
(05:01):
And so there is some logical pieces to this. I'm
sure we're gonna get to the software side of things
where you mentioned all the tech adjacent stuff getting hammered.
But the simultaneously investors seem to be saying, hey, we
kind of doubt whether or not this CAPEX is going
to pay off, while also stating that all the companies
(05:21):
that operate in sectors that you're trying to disrupt are
dead in the water and getting slaughtered right now. And
I have a tough time making sense of those two
statements together, and they don't, Okay, hit me.
Speaker 2 (05:34):
It's the commoditization of AI, which is bad if you're
building a data center because it means, hey, if there
are a bunch of different models that are effectively commoditized
and not much difference between them, why do I need
to pay you premium pricing for that?
Speaker 3 (05:51):
I don't.
Speaker 2 (05:52):
I can hop between them and whatever they're like, there's
no stickiness. I can go and ask Caught a question
today and Chat GPT and Gemini a question, and I
don't need to have had anything loaded into them before
in order to get an answer. I'm not one of
the people who's like talking to it trying to make
a friend. So like, I get if you've like you know,
(06:12):
built a relationship with the thing and everything, Okay, Like
that's that's different, but that's not what we're talking about
for work. Like, no one pays chat GPT extra to
be able to talk to it more, at least not
many people do.
Speaker 3 (06:25):
I think.
Speaker 2 (06:27):
I think that when we look at it, it is.
The answer that's starting to come out of here is, hey,
we're not all going to be winners. The guys that
are building the models are going to be commoditized. And
we see this with how frequently they're all rolling out
updates and competing. That's what commoditization looks like. The other
piece is, hey, the stuff that's going to be produced
(06:50):
by these models is going to be disruptive to the
software stack as it currently exists.
Speaker 4 (06:58):
And by the way, that software stack is maybe not
what you initially think of, right, Like, we can all
paint the picture of why a data aggregator that charges
a whole bunch of money. If you ever heard of
a Bloomberg terminal or Thompson Reuter's, you know these data aggregators.
Oh yeah, if chat you know Chat GPT can better
synthesize that data customized to my business, I can see
(07:20):
how that gets affected. But you had this week were
travel companies Expedia getting hammered, salesforce business software, customer relationship
management software getting absolutely demolished this week, And that was
the piece that I think was alarming to something.
Speaker 3 (07:36):
Wow, it was another one.
Speaker 4 (07:38):
Right, No, like companies in seemingly unrelated industries that are
only loosely tied to the software piece of it getting
absolutely demolished on this, I think, yeah, you're right dueling
assumptions of hey, this is a commoditized business and the
models themselves are going to get cheaper and easier to run.
And by the way, they are also tremendously disruptive.
Speaker 2 (07:58):
Well, and here's the other piece is that what's being
priced in is that software commoditization as well. And there
are two ways that this happens, one of which I
think is more likely than the other. The one that
I think is unlikely is let's say that I am
Chuck big stretch, I know, and I have to do
(08:19):
my taxes every year because I'm an American, and I
have to do my taxes every year. Right now, I
pay turbo tax I don't. I forget. I don't know
exactly how much. It's a few hundred bucks a year. Yeah,
whatever it ends up being. And I say, you know what,
I'm sick of that. Instead, what I'm gonna do. I'm
gonna go to claud Code and I'm gonna say, hey, coud,
here is the IRS code for twenty twenty five. Build
(08:41):
me an app that lets me file my taxes.
Speaker 3 (08:45):
Now.
Speaker 2 (08:45):
The reason I'm not actually gonna do that is because
I have no way to check if it's actually doing
it right, Like that's that's kind of a big one
to be, like, hey, am I personally going to do
this and risk you know, the IRS looking at my taxes?
But because it was filed with you know, Chuck, you
know tax Chuck dot Ai. Yeah, right, Like that's not
(09:07):
what I feel is reasonable for me. Likewise, if you're
a company that uses any you know, CRM service, Redtail Salesforce, HubSpot,
whoever it might be, you're not likely going to have
someone on your team is just like, hey, I'm gonna
vibe code a new CRM.
Speaker 3 (09:25):
You might have someone that talented, but probably you don't.
Speaker 2 (09:28):
And it's a pretty big risk from a data security
perspective to have that, like something completely untested that goes
in there. So I do think, and there are some
people that said this yesterday, Look, it's not that these
companies are going to be replaced by just single people,
you know, vibe coding solutions for themselves. What I do
think is more likely is, let's say that you're one
(09:50):
of the people that got laid off from any of
these companies that have been laying people off. You're you're
a coder in the tech space that's gotten.
Speaker 3 (09:57):
Laid off recently.
Speaker 2 (09:59):
What you might say is, hey, I can go and
I can build something that does what TurboTax does, and
I can do it cheaper because I can vibe code
the whole thing, and I know what to look for
to make it secure, and YadA, YadA, YadA, I.
Speaker 3 (10:15):
Can build that.
Speaker 2 (10:16):
And then because my, my, you know, my number of
humans needed to build that, you know, into it might
have you know, thousands of people working for it, but I.
Speaker 3 (10:24):
Only needed eight people in order to build it.
Speaker 2 (10:27):
Instead of needing to charge you, chuck, you know, X
hundred dollars per year for you know, your tax filing,
I can charge you fifty and I can completely eat
into into its margins. And that's where I think the
real threat is. It's not from everyone trying to vibe
code their own solution. It's from a new generation of
(10:48):
competitors that can build stuff more quickly and more cheaply
than existing ones. And so what you end up with
is not that into it necessarily goes away. But if
their previous growth rate, like let's look it into it
just as an example, just because they've gotten Bludgeon this
week into its five year trailing five year revenue growth
(11:08):
rate is nineteen percent, and they're trailing five year EPs
growth rate is fourteen point six percent. If I make
it so that they're only growing their revenue at five
to ten percent and EPs at five to ten percent.
That means that the whole stock does need to be
rerated down in this way, not because they're going out
of business, but just because their earnings are not gonna
(11:29):
double every five years. They're gonna double every ten now.
And I'm not gonna stick as much of a multiple
on that either. And so instead of trading at you know,
forty x forward earnings, you're gonna trade at twenty x,
and your forward earnings projections are gonna be lower as well.
And that's the rerating that's happening. It's not that these
companies are gonna go out of business. It's just that
(11:51):
the fat margins, when I look it into it right now,
into it is sitting on twenty six percent margins. You
think someone like someone who got laid off from one
of these tech companies can't build a better mouse trap
more cheaply with all these tools. That's what's being priced in.
It's the commoditization of software and models. But the winner,
in my opinion, it's the people who can actually build
(12:12):
the stuff to sell using the models.
Speaker 3 (12:15):
That's my that's my speech.
Speaker 4 (12:19):
Let's uh, we gotta take a break, but let's take
a break. I think there's more to this. The tech
sector as a whole, as you mentioned, has been just
bludgeoned this week, and I want to dive a little
bit deeper here. We've talked about the software companies, We've
talked about the commoditization, but what does it mean for
the industry, the tremendous growth of data centers and all
these different pieces to it, if this is actually a
(12:40):
new normal shaping markets.
Speaker 3 (12:42):
Let's take a quick break. We'll be right back.
Speaker 1 (12:44):
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Speaker 2 (13:40):
Mike, what else do we want to talk about with
tech and software that is just getting popped on the
head by a little bunny foofool all year.
Speaker 4 (13:50):
I guess my question is, so, let's assume that we
buy this theory that, hey, the models themselves, which again
we're speaking in AI speak these days, So the models
being Chat GPT, the model being Google, Gemini or Claude
from Anthropic, Let's assume for a moment that those just
aren't They're just not that important, right, which what the
(14:13):
difference is between them don't seem all that important, and
it's becoming easier to create those. Is that is that
the thesis that's dominating markets right now in your mind?
Speaker 3 (14:22):
I think so.
Speaker 2 (14:23):
I think it's the commoditization and also the fact that
it's happening with the backdrop of increased capex, which means
markets I think again, no one actually knows what that's
been going on, like, none of us know for certain,
But my theory is, hey, they're becoming commoditized the very
same time that this capex is ramping through the roof,
(14:43):
and so market participants are like, you're gonna do what
now when this is happening. And that's that's kind of
my read on it.
Speaker 4 (14:53):
Which makes you know, things like the IPO of chat
gpt are of open Ai.
Speaker 1 (14:58):
Uh, the the.
Speaker 4 (14:59):
IPO of space x which is now tied to xai.
Very interesting given that property to it, Yeah, right, very
very interesting. It does then call into question, you know,
any of those software companies, specifically those that are charging
consumers directly or businesses directly. I see that as a
(15:20):
very interesting question that runs from Microsoft to Bloomberg to
Salesforce to into it. I think it might be a
little bit of a different story if, like the Expedia
one to me is interesting, right, nobody directly pays Expedia
for anything. They get commissions from hotels and airlines. Now,
if you know X y Z coder is able to
(15:41):
develop a new Expedia at a cheaper cost and therefore
lower the fees to those platforms, then maybe there's something there.
The other area I'm trying to think through, like all
the major areas in tech, social media is another big one.
I don't know how disruptive any of this is to
Google's dominance on you Tube or metas dominance with Facebook
(16:02):
and Instagram.
Speaker 3 (16:02):
Can you draw a line there? No, I can't.
Speaker 2 (16:08):
I think some of what you're seeing on those Quite honestly,
in the last couple of weeks, you've seen a number
of foreign governments start to impose regulations on the age
of social media users, and I think that you might
be seeing a little bit of that impact there. It's
on the margins because, like, quite honestly, I can't remember
(16:28):
which ones have done it to this point. I think
Australia was one of them.
Speaker 3 (16:33):
I can't remember.
Speaker 2 (16:33):
There's been like three or four that have done this
now with I think sixteen is minimum age for social
media use, and so I think some of this might be, hey,
like a response to regulatory pressure that's building around social
media as well.
Speaker 4 (16:49):
One thing though, that's dominated all the talk has been
data centers, energy, memory, semiconductors, and nothing about this changing
your shift narrative to me, indicates that the pace of.
Speaker 3 (17:02):
Buildout is going to slow.
Speaker 4 (17:03):
Now, maybe you know, maybe investors pressure Google metage so
much that they have to eventually do so. But for
the time being, it seems to me like all of
these models, which may be commoditized, still need the compute
to be able to run.
Speaker 2 (17:18):
To a point. But remember, CEOs are corporate lemmings. They
look around and see what everyone else is doing, and
they say, oh, we should do that if it's been
either working or not. The best example that I have
of this is in twenty twenty one, there was a
little car company by the name of.
Speaker 3 (17:36):
Tesla, and the car company made evs, and Tesla.
Speaker 2 (17:39):
Stock went through the roof, and everyone in their grandmother
was like, my goodness, we need our stock to do that.
Let's start building evs. You had companies that were committing
to like have no more internal combustion engine vehicles by
twenty thirty, and like three years later after it didn't
do anything for their stocks, and they're spending a bunch
of money, and they're like, oh, gee, the demand that
we thought was gonna be there isn't there. They're like, hey,
(18:03):
are bad, We're gonna not actually do that because it's
it's bad. This is the same thing in that right now,
what you're seeing is the first quarter or two of Hey,
we raised our CAPEX guidance, and you didn't boost our stock.
Speaker 3 (18:17):
What gives?
Speaker 2 (18:18):
At some point, what's going to happen? Because someone always
has to be the first through the wall, whether it's
Sun Debracai, whether it's sat niy Nadella, whether it is
Andy Jassey, whether it's Mark Zuckerberg.
Speaker 3 (18:30):
It's probably not gonna be Zuck because he.
Speaker 2 (18:32):
Just loves spending money, like the guy like lives to
spend money on things that don't return any value. One
of them is gonna say, hey, you know what, let's
see what happens if we guide our capex for the
next twelve months and instead of you know, a forty
percent increase, let's do a five percent decrease in our
(18:52):
CAPEX projections, and the street's.
Speaker 3 (18:56):
Gonna reward it.
Speaker 2 (18:57):
The stock's gonna pop like eight percent on the news,
and every other big CEO is going to say, oh,
that's what we're doing now, and that's how the cycle ends,
like it's how it always happens.
Speaker 3 (19:10):
Now.
Speaker 2 (19:11):
I can't tell you when that's going to happen. I
can't tell you who's gonna be first, because I don't know.
I'm not in their heads. But this is how it
goes because they all follow each other like, it's just
how it works. No one wants to be out on
the limb, you know, for too long by themselves. Corporate
America is very risk averse generally. Let's take a quick break.
When we come back, we've got Wall Street Watch, and
(19:32):
then let's talk labor market after this.
Speaker 1 (19:39):
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 5 (20:03):
Well, the tech selloff has extended for a third consecutive
day as investors continue to show uneasiness around tech stocks.
Wall Street's also reacting to slightly higher than expected jobless
claims data and software than expected job openings data for
the month of December. Right now, the Dow is down
one to in a third percent, or six hundred and
(20:25):
forty nine points lower. SMP five hundred selling off one
and a half percent, Nasdaq, the tech heavy Nasdaq selling
off nearly two percent today just below that, down four
hundred and thirty two points. RUSTED two thousands, down over
eight tenths of a percent. Tenure treas reeled down six
basis points at four point two to one percent, and
(20:46):
crude oil down three percent today trading at sixty three dollars.
Google pair of company Alphabet reported a jump in quarterly
profit where sales rose eighteen percent to nearly one hundred
and fourteen billion dollars in the fourth order. The tech
giant also said it plans to roughly double capital spending
this year to develop AI models and build data centers.
(21:08):
Alphabet stock falling five percent. Meanwhile, Qualcom shares a plunging
nearly ten percent after the semiconductor company provided disappointing earnings guidance,
where blamed an industry wide shortage of memory supply and
price increases. Stay Lauder lifted its adjusted earnings outlook for
the year. However, the beauty company said it still expects
(21:29):
a roughly one hundred billion dollars hit from tariffs. Stay
Latter shares are tanking twenty one percent. According to Bloomberg,
Rio Tinto and Glencore appoys to walk away from a merger.
The mining companies are likely to announce the decision today.
Rio shares a flat, while glen Core stock is down
nearly two percent and more tech earnings after the bell today,
(21:52):
where Amazon will report their anticipated fourth quarter results. I'm
Tucker Silva and that is Wall Street Wall Mike.
Speaker 2 (22:01):
I have a couple of last tech thoughts I'd like
to clean up before we move on to some bad
discussion about the labor market.
Speaker 3 (22:10):
Sounds good. First.
Speaker 2 (22:12):
One other thing that's been going on over the last
week or so with software getting hit is financials have
been getting hit as well. And specifically, if you look
at the part of the financial sector that's been getting hit,
it's not JP Morgan, it's not Bank of America, it's
not your big money center banks.
Speaker 3 (22:33):
It's not Berkshire Hathaway.
Speaker 2 (22:35):
It's Blackstone, it's KKR, it's black Rock, it is Apollo Global.
Those are the ones that are getting hit, all of
your big asset managers that are heavy in the private
equity private credit space, and the theory behind this as
it goes, and again I think I believe this is
(22:59):
a lot of the private It's not a private credit
issue here, it's more of a private equity one, which
is a lot of the businesses that have been bought
up by those companies in the private equity space are
technology and software businesses. Because you say, great, I can
you know, clean this up, strip it down, improve the margins,
and sell it off. You know seven years later. That's
like the whole premise behind private equity. If you've bought
(23:22):
a software business and now software is under threat, you
now have a company that you're holding where you're like, oh,
who's gonna buy this from me? And what's my exit?
And so that I think is what you're seeing on
that side of things there. So I think that's what's
going on with those big asset managers in the financial space.
The other thing that I woke up to that I
(23:44):
found remarkable is that on a total return basis capital
appreciation plus dividends, do you know that Microsoft is now
trailing the S and P five hundred over the last
five years?
Speaker 3 (23:57):
Really? Yeah? Wow, didn't expect to see that.
Speaker 2 (24:02):
No, So just something that that caught my eye where
I said, uh, that's interesting and noteworthy and file that
away for future discussion. Let's talk about the labor market
and bad labor takes. It's that time of the month
where the Challenger, Gray and Christmas firm reports they're a
number of layoffs announced by US employees. And I'll quote
(24:25):
from CNBC US employers announced one hundred and eighty four
hundred and thirty five layoffs for the month, up one
hundred and eighteen percent from the same period a year
ago and up two two hundred and five percent from
December twenty twenty five. The total marked the highest for
any January since two thousand and nine, when the economy
(24:46):
was in the final months of its steepest downturn since
the Great Depression. So like, naturally the world's ending, Yes, okay,
but here's the actual deal. We get the jolt support
every month. We got one this morning.
Speaker 3 (24:57):
Too, and catastrophic. Here's what it showed.
Speaker 2 (25:01):
It showed that for the month of December there were
one point seven to six to two million layoffs that
happened because the adult support.
Speaker 3 (25:09):
It doesn't just look at like announcements. It's no.
Speaker 2 (25:11):
Like again, it's still a survey. But it's okay, here's
how many there were last December. By the way, there
were one point sixty sixty nine million, So it is saying, yeah,
there was an increase from about one point sixty five
to one point seventy five million. Was there a doubling, No,
layoffs did not double, because that's not how any of
this works. I beg of anyone out there. If you
(25:32):
hear the words Challenger Gray and Christmas, or Challenger layoffs
or Challenger job cuts, please please please stop listening immediately.
It's not that their report is untrue. It's just that
it's not looking at the total picture and as a result,
can have significantly outsized moves relative to what's actually happening
(25:53):
in the labor market. I'm not saying all is well
in the labor market. There's still a lot of questions
that need to be answered. But the Challenger report is
just pure bait for people trying to say, oh, look
at how bad things are, and that's not what we
do here.
Speaker 4 (26:07):
The only people it's relevant to are those who are
working for companies that have announced the layoffs. And if
you are only hearing about it through Challenger Gray and
Christmas months later, then quite honestly, you might be deserved
to be laid off.
Speaker 3 (26:22):
Well, no, you haven't been laid off.
Speaker 2 (26:23):
True, you haven't been laid off. You're hearing about it
months after the announcement. Like, no, you're still there.
Speaker 4 (26:30):
So let's talk about the data that actually does matter.
Because there were two releases this morning. Neither of which
were great. So let's talk about the Joltz report. The
piece that you mentioned about layoffs interesting to me. The
continuing decline of job openings is also pretty interesting to me.
So the number of job openings has been trending down
where it now hits six point five million in the
month of December. One statistic that we bring up all
(26:52):
the time regarding this survey is that ratio of unemployed
people two jobs open, and back in April of two
twenty two, we were highlighting this there were two jobs
that you could apply to for every person that was
actually looking for work, arguably led to a bunch of inflation.
As of this reading now there are zero point eighty
(27:13):
five jobs for every person looking for work. That is
a level of labor market tightness that we haven't really
seen since the mid twenty tens. Twenty seventeen is around
the timeframe you need to return to to see that
degree of slack in the labor market by this one measure,
and I think that's worth noting. It's not new, It's
(27:33):
been trending this way for quite some time, but the
trend has been towards a more slack in the labor
market and I think you're seeing that in you know,
new applications for you know, the word of college graduates
and difficulty finding work, as well as all sorts of
things on the hiring side, just you know, employers generally
finding it easier to find employees.
Speaker 2 (27:54):
I'm gonna throw a little bit of cold water on
this ke just because this number was a big miss
to the downside on the openings. Yeah, and there's some
other stuff that looks a little bit funky in here.
And the reason that I also do this is, indeed,
their hiring lab tracks job openings that are out there
on indeed and generally not every month, but the Indeed
(28:16):
numbers and the a JOLTS numbers tend to correlate pretty well.
In this case, indeed has basically been flat month over
month as far as job openings, and this was like
a nine percent decline month over month. Something doesn't like
pass the sniff test on this, and so I'm gonna
(28:36):
kind of say, hey, for whatever reason, you know, whether
it was government shutdown or something else, something in this
JOLT support doesn't quite feel right relative to the other
data that we've been getting. And so I'm just gonna
need to see a couple more of these to see
if this is continued or if this is an aberration,
(28:57):
because it doesn't quite click with what we've been seeing
elsewhere in the labor market, which is not like everything
like going gangbusters, but no meaningful shift in the trend
from before, whereas this Joltz report is a meaningful shift,
suggests like a meaningful downshift in hiring intentions, which doesn't
really click with everything else that's been going on in labor,
(29:20):
which is just kind of holding steady, slow degradation.
Speaker 3 (29:24):
This feels a little unusual to me, fair.
Speaker 2 (29:26):
So I'll I'll take it and I'll put it aside,
and a month from now we'll say, hey, is there
actually any meat on this bone? Or was this just
you know, one weird data collection in December that you know,
something happened.
Speaker 3 (29:41):
And we'll we'll we'll see you later. Let's take a
quick break.
Speaker 2 (29:45):
When we come back, we're going to talk housing affordability
right after this.
Speaker 1 (29:49):
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(30:10):
Exchange Radio network.
Speaker 3 (30:18):
All right, we got some some housing market chatter here.
Speaker 2 (30:27):
Let's talk a little bit about this piece from Bloomberg Opinions.
How the affordable housing starts in the labor markets.
Speaker 3 (30:35):
How does that work, Michael?
Speaker 4 (30:36):
It doesn't, Chuck, You don't improve housing affordability by giving
by redistributing income.
Speaker 3 (30:46):
Like, everyone gets this wrong.
Speaker 2 (30:48):
Everyone's like, Hey, if we give people more money, it'll
make housing more affordable.
Speaker 3 (30:52):
No.
Speaker 2 (30:52):
If if there were three houses on the planet and
we gave and everyone started with one hundred dollars, then
those three houses would go for one hundred dollars. If
we said, oh, well that's that's too expensive. Let's give
everyone fifty dollars to cover half of it, the houses
would go for one hundred and fifty dollars. This is
basic math. And everyone's just like, Oh, give people the
(31:13):
money and that'll make housing more affordable. No, if you
don't build more houses, it'll just make it more expensive.
Speaker 4 (31:19):
All right, So let's let's let's make this simpler. Let's
say we're playing musical chairs. Ooh good, Okay, ten kids
is nine chairs.
Speaker 3 (31:26):
Love it.
Speaker 4 (31:26):
And Jenny has been She's a little bit wealthier, she's
been training, she's got, you know, really good sprinting shoes,
whereas Johnny came in his flip flops because that's all
he's got. If there's nine chairs and ten students out
there and now you give them all brand new Nikes,
you might create.
Speaker 3 (31:47):
A faster game of musical chairs, but there's still gonna
be a kid without a chair.
Speaker 4 (31:51):
He doesn't fix the problem to give everybody or redistribute income.
I think the point that she is attempting the author
is attempting to make here is that if incomes increased,
then more people will be able to afford homes, and
therefore someday home builders will build more of them. But
that's just a roundabout way of attempting to fix the
problem with no guarantee that the problem actually gets fixed,
(32:12):
Because if I'm the home builder, I'll gladly take the
fatter profit margin rather than building more homes.
Speaker 3 (32:17):
Which is what they're doing right now.
Speaker 4 (32:18):
So if you want to make houses more affordable, get
the conditions under which you can build more houses, and
I will recognize that we are seeing very small steps
towards this in some parts of the country. I like
the small moves that you've seen here and there to
allow for ADU accessory dewelling units in certain parts. I'm
(32:44):
encouraged here in the town that we're broadcasting from and
need them that they are building one hundred and eighty
nine unit apartment building that used to be a well
closed senior living facility. The MBTA zoning actors is I
think on the margins starting to improve things a little bit,
but we keep coming up with these dumb solutions like
(33:05):
discounting mortgage rates or giving a bear tax deduction, And
I just want to make really clear to everybody the
only thing that's going to do is make homes more expensive.
Oh man, we talk about this every day and it
just does not seem to change anything.
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Speaker 2 (34:32):
So continue to talk about the housing market piece of
New York Times. Voters say housing prices are too high.
Trump wants them higher. And this gets at a question
that he got on housing affordability yesterday, and his quote was,
I don't want to drive housing prices down. I want
to drive housing prices up for people that own their homes.
Speaker 4 (34:52):
This is the exact conundrum that every politician yes refuses
to acknowledge, which is that two cannot be possible at
the same time.
Speaker 2 (35:01):
No, you can't improve housing affordability at the same time
home prices are rising.
Speaker 4 (35:06):
Generally, I get why politicians are scared of this issue
because you cannot have both. You cannot improve housing affordability
and also not hurt some people in terms of their
wealth well.
Speaker 2 (35:17):
And also, if you're talking about local politicians, the tax
base is also based on home prices to go up,
and so they don't want to see home prices go
down because the revenue in most towns comes from property
taxes with the value hopefully going up over time. So
it's kind of a problem that we have here in
that we don't want home prices to go down, but
(35:39):
we want them to go cheaper. I don't know how
we square this circle, because like, this is not a
President Trump issue, This isn't every politician issue like that.
Find me one politician who legitimately like goes out and
is like, yep, I'm cool with home prices falling in
my district, my counting, my city, my state.
Speaker 3 (36:01):
You won't find them.
Speaker 2 (36:03):
They'll all talk about we want to improve housing affordability,
but none of them say that they're willing to let
it happen with home prices falling. And the problem is
that the place is where affordability actually improves, it's.
Speaker 3 (36:16):
Where home prices fall. Yeah, like that's that's the deal.
Speaker 2 (36:22):
If you look at what's going on in the Florida
housing market right now, activity is starting to pick up.
New listings are picking up. They're being scooped up more
quickly than last year. So net listings like out there
are actually down a little bit year over year now.
But it's because in Fort Myers home prices fell fifteen
sixteen percent and now people are looking at them going, oh,
(36:44):
this isn't as bad as I thought it was gonna be.
In Austin, Texas, you still have rising inventories because there
was just so much in the way of you know,
overbuying from a price perspective there, But prices are now
down about twenty percent from the peak, and you're starting
to see signs that you may start to see a
bottom there because people are saying, hey, this isn't as
(37:04):
expensive as I thought it would be. And it's because
those areas built a ton and affordability improved through prices
falling a lot. I know that's not what everyone wants
to hear, but that's why those areas are now set
to be ready to grow their housing markets in a
creative fashion for the next couple of years, whereas other
(37:27):
parts of the country are not there yet. If you
want to improve housing affordability, it has to be through
falling home prices, and that can come in different forms.
By the way it can come through, hey, we're you know,
reducing the permitting cost and time spent in that process,
and so builders can build more because their margins can
(37:49):
be maintained like that. There are ways to do this,
we just don't really want it because hey, give people
money to buy houses.
Speaker 4 (37:56):
Yeah, And I can tell you from a living in
a community that has voted down this stuff. People don't
want the idea of following home prices like they're just
plain and simple. They don't like the traffic, they don't
like the other things that come with it, but they
don't want to see their home prices fall.
Speaker 3 (38:11):
Let's take a quick break.
Speaker 2 (38:12):
When we come back, we got our two coming up
in just a little bit.
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