October 27, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss AI spending boosting the economy but their are many companies are still in survival mode. Austin's housing bust is just what America needs. Ray Dalio says America is developing a 'dependency' on the top 1%. There's a reason electricty prices are rising. And it's not data centers.
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Episode Transcript
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Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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Exchange with Chuck Zada and Mike Armstrong, your exclusive look
at business and financial news affecting your day, your city,
(00:42):
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a donation today. This is the Financial Exchange with Chuck
(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you, and we got stocks rallying,
though I relatively narrow rally. Sm P five hundred is
up almost one percent, but basically has an equivalent number
of stocks up and down today. It's just the bigger
ones happen to be the ones that are really chucking ahead.
You look at some of your big movers. Tesselas up
three percent and Videos up two and a half. Google's
(01:31):
up two and a half, Microsoft Meta both up one
point eight. So that's kind of driving things where. Yeah,
that kind of overpowers the fact that hey Ford's down
three and Eli Lilly's down one and home Depots down one. Again,
not saying this is good, bad, or anything else, but
just that, yeah, it's kind of the story that we
saw for much of twenty three, in the first half
(01:52):
of twenty four, and I was kind of returned in
the second half of twenty five, which is tech is
leading the way and that's driving the index higher even
as you have other equities you know, that are kind
of lagging a bit. It's not necessarily bad for equity performance.
It's been a great three years for stocks now, but
it's something where you know, you do look at it
(02:13):
and say, hey, if that leadership ever falters, yeah, you
might have some concerns at that point, but that leadership
has just not faulted for any extended period of time
in the last three years. Other things that are moving
today tenure US treasury up three point one basis points
to four point h two eight percent, still hanging out
in that low four range, so no major movement on
(02:33):
that front. We've got gold continuing its recent selloff after
breaking out to all new all time highs about a
week and a half ago. Has not been easy sledding
for gold since then, down one hundred and thirty six
dollars and sixty cents an ounce to four thousand and
one dollars per ounce right now. It's about a ten
percent pullback on gold over the last week and a
(02:53):
half or so. We've got crude oil West Texas Intermediate
a forty four cents a barrel to sixty one one
ninety four TRIPAA National Avagur gas prices coming down a
tenth of ascent, though this as a major refinery gets
back up and running in the Midwest. That should hopefully
quell some of the higher prices that have been moving
through Michigan, Indiana, and Ohio over the last several weeks there.
(03:19):
So that is what is moving in markets. I want
to just highlight something for a moment here.
Speaker 3 (03:26):
So it was a few weeks ago now, but Tuesday,
October seventh was when the new Chinese rare earth restrictions
were announced. Really, you know, late Tuesday our time, Wednesday
into Wednesday. Wednesday was the first trading day that this
stuff was known. Friday, President Trump, so that's Friday October, Yeah, Friday,
(03:47):
October tenth, or maybe it was Thursday, October ninth. He
announced one hundred percent tariffs on China. And at the time,
both of us looked at this stuff and said, doesn't
this just feel like posturing a few weeks ahead of
a big negotiation between.
Speaker 2 (04:00):
The US and China.
Speaker 3 (04:01):
Big We did say that US and China, and at
the time they canceled the meeting and said it's not
going to happen.
Speaker 2 (04:07):
Lo and behold, three.
Speaker 3 (04:08):
Weeks later, we sit here and markets have more than
made up all the losses that they incurred on that
Friday October tenth, where markets were down by three percent.
But Lo and behold, we're still having a meeting between
President Trump and President She. We're not realistically talking about
one hundred percent tariffs. We are, in fact talking about
potential slight trade deals. And yeah, lo and behold. Things
(04:30):
look exactly like they did in my opinion, at least
prior to the announcement that China made on rare earth restrictions.
We think again, we gonna have this meeting Thursday. That
kind of throws all that into question again. But for
the time being, that's a lot like what it's looking.
I mean, hasn't the rare earth thing come up three
or four times this year? Like don't you don't you
(04:50):
kind of feel like we're just going to be back
here again in like January or February.
Speaker 2 (04:53):
Yes, And it's because China knows they have something that
no one else can deal with right now, zi, oh,
you want us to do this? Okay, here, We're gonna
throw this rareer thing at you again. And that's the
result of you know, twenty five to thirty five years
of mismanagement of these resources, thinking that you can depend
(05:15):
on China and not responding to their anti competitive pushes
when you know they start dumping rare earths at you know,
below cost in order to maintain their market share. Yeah,
like we're paying for it now. It cames back. It
comes back to the same thing.
Speaker 3 (05:32):
The economic ties between the United States and China run
very deep, and you can have this debate over who
has more leverage than the other person, but ultimately I'm
just not sure it matters. Because both countries have leverage
over one another, they both have the ability to cripple
the other's economy, and so what's likely to happen. Well,
the likely outcome, in my mind, is probably the status quo,
(05:54):
because both countries recognize that there's this uncomfortable fragility between
the relationship, and both countries realize that the other one
could decimate the other's economy.
Speaker 2 (06:03):
Let's talk about this piece from CNBC AI spending is
boosting the economy, but many businesses are in survival mode.
And look, it's whenever you talk about the economy now,
like you say the economy is good, and someone who
like is struggling is like, no, it's not. And then
you say, like, the economy is bad, and someone who's
business is booming is like, no, it's not. And the
(06:26):
fact is, like the economy even good ones or bad
ones like not everything is always moving in one direction.
You know, if you go back to twenty ten, which
was a horrible economy by just about any metric out there,
you could still find, you know, certain businesses where it's like, hey,
Uber's going through like one hundred percent growth, like everything's
(06:46):
great for us, and it's like, okay, well, you guys
aren't the whole economy.
Speaker 3 (06:49):
For Michael Armstrong, it was the best economy that he
had ever experienced because it was the first time he
had paid compensation in any real, meaningful way.
Speaker 1 (06:57):
Right.
Speaker 2 (06:57):
You could talk to some people in twenty eighteen who
are saying, oh, no, like this economy isn't good because
I work in the you know, washing machine repair business,
and all my costs have gone up because of washing
machine tariffs, and everyone else is in there like, no,
this economy is humming along. It's great. So what I
want everyone listening to like realize is like what I'm
(07:18):
about to say here isn't like personal. I don't know
all of you, and it's okay if the economy isn't
quite you know, doing what you're personally experiencing, except for Jeff,
because everyone takes it personally like this personally, Jeff, but
you literally say like the economy is bad, and it's like, oh,
the economy's not bad. You say it's good, and it's like, oh,
the economy's not good. It's like, guys, like not everything's
(07:40):
even Like even the title of this piece tells you
that AI spending is boost in the economy, but many
businesses are in survival mode. That is a tale of
two Cities, and even it says many businesses, not all businesses,
because I'm sorry, but we get these like texts in
and it's just like, guys, I can't I can't respond
to all three hundred and thirty million of you because
I'm just one person.
Speaker 3 (08:01):
I think what it comes back to for me is
we started this year off with an idea that we
have to have a way of measuring what success actually
means for this economy and what failure means. And you know,
it's really difficult to measure something like some businesses being
in survival mode and others not. So I think it's
(08:22):
important for us to maintain those measurements and say, yeah, objectively,
where did inflation start the year, where is it now?
Where did unemployment start the year? Where is it now?
Where was GDP? Where is it now?
Speaker 2 (08:32):
I don't know any of these things because the government
shut down, agreed, But.
Speaker 3 (08:36):
Like, you have to have some way of measuring this,
and we you know, we we asked the audience, like, hey,
come up with other measurements. Somebody came up with, you know,
how many regulations are in whatever federal register maintains all
the federal regulations, like.
Speaker 2 (08:49):
Whatever your government's shut down, whatever.
Speaker 3 (08:51):
Your confines are, whatever your measurement stick is, you have
to have a consistent way of measuring it, because if
you don't, then you're just gonna let your own biases.
Speaker 2 (08:59):
Then when economy feelings and feelings are they're not helpful.
They could be useful in certain situations. Trying to figure
out how good the economy is is not one of them.
So here's what we do know. Let's talk about just
like places that are doing well. Let's let's just build
a list of bis like industries and sub industries that
are doing well and ones that are doing badly. Let's
(09:20):
start first on the good side. AI obviously human.
Speaker 3 (09:24):
Anything that is marginally attached to the AI, whether that
is the construction of data centers and electricity.
Speaker 2 (09:30):
Generatity construction, utility, generation, distribution, all that stuff is humming
right along. Uh if you are, let's see if we're
talking like other things that are like really strong right now,
what else do you have, Like, let's let's be honest
about this, because I'll go through the stuff that's not doing.
Speaker 3 (09:51):
Financial services is doing well. Yes, it's a broad statement.
I think I'm willing to say financial services is cranking.
High net worth people are are still spending and which helps.
Speaker 2 (10:02):
High end travel is cranking absolutely, like through the roof
right now. You can even say real estate in the
Northeast and Midwest still moving pretty well. I actually, again,
when you think about the sectors ata though, and it's
it's fine, yeah, But again, if you talk about the
(10:23):
sectors that rely on the real estate market, there's no volume.
So I'm not sure that you can say real estate
is good for the economy right now. Well, nothing selling
and nobody's hiring people to you know, fix up their
houses right now. So I'm not sure that I would
be willing to say real estate in the Northeast good.
But you talk to like real estate agents in the
Northeast and they're like, yeah, like I'm able to like
move the units that are out there, like you know,
(10:45):
it's it's generally fine. Things that aren't good right now.
Real estate everywhere else gener in the Midwest right aside
from the northeastern Midwest generally bad sure uh. Low end
travel bad uh. And athing related to importing yep, not
even logistics. Trucking freight volumes right now are done seventeen
(11:07):
percent year over year. If you talk to anyone in
the trucking business, not good.
Speaker 3 (11:11):
Really anything manufacturing or you know, retail generally, I think
you can broadly say it's struggling. And if you know retail,
retail's like another retail's fine. Like you look at the
retail data, either aggregate or company level, it's hard to
(11:31):
find retailers other than like Target and Macy's that you're like, oh,
things are bad there.
Speaker 2 (11:36):
Yeah, you know, I know that. You know so and
so who's listening is like, well, I run this shop
and we're not doing well. I get that. Again, we
can't talk about every specific but the retail data generally
has been fine. Credit Card data has been good on
that side, so like retail, I think has actually been
a net positive this year. So again, it's kind of
this mixed economy where there's some good, some bad, and
(12:00):
there's no clear trend. I think is what we have here,
and the trend is something way together. Actually, I don't
know how to define. Would you define auto is good
or bad? Right now? It's more nuanced than that, right,
you can't New vehicle production and sale is good, fantastic.
In fact, used vehicle sale and financing is bad and
(12:21):
really ugly.
Speaker 3 (12:22):
Yeah, it's just so nuanced to try and answer the
question is the economy good?
Speaker 2 (12:27):
Right now? I have to say yes, which is why
I think that you get to the point where you
just say yeah, like absent any of these things that
are actually dragging the economy, you know, pulling it apart. Yeah,
you have to say that it's good, even though you say,
I'm watching these areas. Yeah, it's kind of where I
get to as well. Let's take a quick break. When
we come back, We've got trivia next.
Speaker 1 (12:49):
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Speaker 4 (13:25):
It's time for trivia here on the Financial Exchange. In
in honor of the spookiest day of the year, we
will do a week's worth of Halloween trivia here on
the show. So let's get started here on this Monday.
Before pumpkins, that's just ah, this is great. Before pumpkins,
(13:47):
which root vegetable did the Irish and Scottish carve on Halloween?
Once again? Before pumpkins, which root vegetable did the Irish
and Scottish carve on Halloween? Be the third person today
the Texas at six one seven three six two thirteen
eighty five with the correct answer, and you win a
Financial Exchange Showed T shirt once again. The third correct
(14:10):
response to Texas to the number six one seven three
six two thirteen eighty five, we'll win that T shirt.
See complete contest rules at Financial Exchange show dot com.
Speaker 2 (14:19):
Can we talk about the pumpkin situation a little bit?
What's the situation, Chuck, I got a real problem right now.
Did you buy one? Not one like a whole bit.
Speaker 4 (14:30):
You probably got twenty eight or something.
Speaker 2 (14:32):
Not twenty eight. It's probably like fifteen to twenty eight,
two dozen, you know, most not big ones like little
ones and stuff, the little guys. Yeah, no, we have
like sure, we have two big ones that we carved,
and then the rest are you know, all six inches
or smaller in diameter. Okay, the squirrels this year have
been eating them in a fashion that I have never
(14:54):
seen before. I'm coming back from mois Is Nod in
her heads, come Ois the the truth. I'm coming back
from a run the other day and my neighbor, my
neighbor's fence. I know a good time too, do youv?
Five k's in two weeks? So I got to put
up the times. But in any case, this squirrel is
(15:14):
running along my neighbor's fence carrying the top half of
a pumpkin in its mouth back to its nest or whatever.
And I'm sitting there and I'm just like, yours not mine,
like theirs have all been eaten too, So they're not discriminating.
They're going after all of them. But to be fair.
So we have maybe a dozen pumpkins outside, maybe maybe eighteen,
(15:35):
and we kind of alternate typical orange one, a white one,
and then like a Gordy you know, gross kind of one. Right. Yeah,
there's maybe like fifteen of them. All five of the
orange pumpkins have been eaten. The squirrels have decided they
love the orange ones. The white ones they're working through
right now. They have not touched the ones with the
little warts and stuff on them. Chuck.
Speaker 3 (15:57):
I feel as though a dog or a BB gun
would put a real quick end to this.
Speaker 2 (16:04):
There are like eight dogs in the neighborhood, and I
don't think you're allowed to shoot squirrels technically.
Speaker 1 (16:10):
Yeah allowed. I mean.
Speaker 2 (16:14):
All I'm saying, I'm trying to maintain good relations with
the neighbors, you know.
Speaker 3 (16:18):
Yeah, well saying I got solutions, you know, but in
any case, they beyond that.
Speaker 2 (16:27):
Even I got a couple of mums I put out front.
The deer ate the front half off of one of
my moms, so there are no I had to turn
the thing around and I'm waiting for the deer to
eat the other half again. Same solution with you, Mike.
Michael's just like Hey, a.
Speaker 3 (16:47):
Bb gun is not going to in any meaningful way
harm a deer.
Speaker 2 (16:50):
Which is why it's like even useless to even do
the squirrel. But I think that I think the bb
gun might scare the deer away.
Speaker 3 (16:58):
But again, legal, I'd say it's a great area that
implies that it's happening when I'm awake.
Speaker 2 (17:05):
Austin's housing bust is just what America needs. Interesting title
and interesting piece from Connorson in Bloomberg Opinion, and basically
what he argues is, look, with all the pandemic era construction,
you had a ton of housing that was built in
Austin that has opened up one of the two channels
to people buying more houses, increasing affordability. The problem in
(17:26):
Austin is that prices are still falling, and so A
investors and B homeowners are kind of like, no, I
don't want to either list or buy right now because
it doesn't feel like an opportune time to do so.
But on the affordability side, you're starting to get there.
The problem is it basically requires a localized housing bust
(17:46):
in order to do so, which is not good for
the surrounding housing adjacent businesses. Right.
Speaker 3 (17:51):
But again to Connor's point, I think that is extraordinarily
healthy so long as it does not right, so long
as it doesn't take down a system. And I think
very clearly at this stage, I'm fairly comfortable saying that
a housing bust in Austin with prices still falling, is
not likely to sink a national bank, or not likely
(18:11):
to sink a national lender because of underwater.
Speaker 2 (18:14):
Homes or anything along those lines. I could be wrong
about all of the say, but it hasn't been very long.
Speaker 3 (18:20):
It is not so. I know that there's been a
lot of development in these areas. I'm sure that there's
a lot of you know, corporate owned single family How
many companies did we talk about over the last five
years who were buying real estate for the express purpose
of renting it back out, specifically in the single family space.
I'd be willing to bet a lot of those purchases
(18:41):
happened in Austin, and some of those are underwater now.
But again, I'm always worried about the contagent or contagion
or spillover effect, and I'm honestly not all that concerned
about that.
Speaker 2 (18:51):
Here we say that now, and I'm not saying that
there is isn't. But home prices started going down in
a lot of metros in like five and oh six,
and it wasn't until like two three years later that
was like, oh, like this is a problem. Now, very
different situation. I'm not saying this is going to lead
to a housing crisis. Again, show me the leverage in
(19:12):
the housing market. But what I am saying is I like,
if you haven't seen a go full cycle, it's tough
for me to be like, yes, this is good. Yeah,
but I guess that's why I'm not buying a house
in Austin. Right now, let's take a quick break. When
we come back, we got the trivia answer in Wall Street.
Speaker 1 (19:30):
Watch, 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
(19:51):
look at what's moving markets so far today. Right here
on the Financial Exchange Radio Network.
Speaker 4 (19:56):
Markets are in rally mode to begin the big week ahead.
This investors away to flurry of big tech earnings, a
FED meeting, and a pivotal meeting between President Trump and
Chinese President g on Thursday. Right now, the Dow is
up about a half a percent or two hundred and
forty five points, SMP five hundred up nearly one percenter
(20:18):
sixty five points, Nasdaq up one point six percent or
three hundred and seventy three points. Russell two thousand is
up a quarter percent. Tenure Treasure Reeled is up two
basis points at four point zero two percent, to Incrude
Oil up about a half a percent, rating at sixty
one dollars and eighty one cents a barrel. Rare Earth stalks,
(20:39):
including MP Materials, Critical Medals and USA Rare Earth are
seeing losses on the day after US officials said they
expect China to delay introducing export controls on critical minerals
as part of a broader trade deal. Chip stocks including Nvidia,
AMD and others are also seeing gains following optimistic comments
from both the US USC and China following trade talks
(21:01):
over the weekend, and VideA up about two percent, while
AMD shares are up modestly. Some breaking news from Qualcom
this morning after the chip maker announced that it will
release new AI accelerator chips. Qualcom shares are jumping twelve
percent on that news. Meanwhile, shares in curic doctor Pepper
climbing over seven percent after the beverage company beat third
(21:23):
quarter revenue forecast and also raised its full year guidance.
Lululemon up by about three percent after the athletic apparel
maker said it was partnering with the NFL and Fanatics
to launch an apparel collection for all NFL teams. And
for the earnings calendar this week, Visa United Health will
report tomorrow. Wednesday, Microsoft, Alphabet, Meta and Caterpillar will report Thursday.
(21:47):
We have Apple, Amazon and MasterCard. And on Friday we'll
see earnings from Exon Mobile and Chevron. I'm Tucker Silva
and that is Wall Street Watch. And in the previous
segment we asked you the trivia question before pumpkins, which
root vegetable did the Irish in Scottish carve on Halloween?
Speaker 2 (22:05):
That would be turnips.
Speaker 4 (22:06):
John from New Bedford, Mass is our winner today taking
home a Financial Exchange Show T shirt. Congrats John. We
play trivia every day here in the Financial Exchange. See
complete contest rules at Financial exchine Show dot com. Ray
Dalio says America is developing a dependency on the top
one percent of workers, while the bottom sixty percent are
struggling and unproductive. I'm gonna tie this also to a
(22:29):
piece that's titled affluent Retirees.
Speaker 2 (22:31):
Are affluent you can take your pick. Are spending more
because of rising markets? What's the common thread here?
Speaker 3 (22:38):
Man?
Speaker 2 (22:38):
So let's talk about that wealth effect first.
Speaker 3 (22:40):
There have been dozens of economic studies over the years
to try and sort out, like how much do people
actually increase their spending when they get wealthier? And quite honestly,
I'm not sure that there is a consensus other than
studies have indicated anywhere from two to fifteen one studies
have indicated that it does exist. Right, people do spend
more when they feel wealthier when they are wealthier on paper, sure,
(23:03):
And two the estimates run anyway from two cents of
additional spending for every dollar of wealth all the way
up to like fifteen cents of additional spending per dollar
of wealth. And I would guess that it varies based
on your home price versus your crypto wallet versus your
four oh one k.
Speaker 2 (23:18):
But the effect does exist.
Speaker 3 (23:20):
And there's a claim here that for you know, retirees,
in particular folks over the age of sixty, that increases
in spending come along by about eleven cents for every
dollar of wealth, which again falls into that range that
we had outlined. Sure, the point that Raydalio is making
is watch out because if that wealth effect reverses, then
(23:41):
it could dramatically sink the economy because that's where all
of the increased spending is coming from. You have this
baseline for the ninety nine percent, and then the growth
is coming from that top one percent, or we've talked
about the top ten percent, and you can kind of
take your pick there.
Speaker 2 (23:56):
It gets kind of it. You know, in business, you
hear about the idea of the eighty twenty rule that
you know, eighty percent of your sales happened from twenty
percent of your customers, and the question that you run
into is, look, depending on how concentrated your businesses, Hey,
if one of those big customers walks away, you know,
how impacted is your business to a certain extent. It's
kind of the same argument being made about the economy,
(24:18):
which is, yeah, like you can technically grow an economy
with a smaller portion of people driving the gains, but
it creates two different problems. The first is, hey, if
that smaller group falters, which it's it's easier if it's
a smaller group or you know, something to uniformly affect
that group. Think just think of it this way. If
you have a thousand different people driving gains as opposed
(24:40):
to two. Hey, if if one of those two ends up,
you know, having something happen to them, it's a bigger
impact than one out of a thousand. The other piece is, hey,
as you concentrate more and more wealth, unfortunately, the thing
that you do tend to see is social unre Generally
people are like, hey, why are all those rich guys
doing whatever they can? And I'm you know, buying burritos
(25:00):
on you know credit.
Speaker 3 (25:02):
See the Massachusetts millionaire millionaire's tax correct? Right, that is
a common you know backlash to that sense of unfairness.
Speaker 2 (25:13):
Well that's the again, that's even before you get to like, no,
I'm going to vote all you people out right and like,
you know, change things even further. So I think that
when we look at this, there are some real risks there,
but it's also fair to say, look, they're just risks
right now. They haven't actually materialized to this point because
stocks have continued to move up, and generally when you
(25:37):
talk about you know, how the economy is behaving, right,
now it has not seen a real drop off in
consumer spending because of that.
Speaker 3 (25:46):
Yeah, the other piece to me that is just I
think distorted our view of this wealth effect is the
recent history. The S and P five hundred has returned
six hundred and seventy six percent from twenty ten through
September of twenty twenty five. That's a fourteen percent annualized
gain and one of the best fifteen year time periods
(26:08):
we've ever seen in the stock market.
Speaker 2 (26:10):
Right, You're talking like top one percent returns ever.
Speaker 3 (26:13):
And so for anyone that you know was retiring close
to this, they have this distorted view of how the
next fifteen years I think is likely to play out.
And that's a real focus that I work on with
you know, people that I'm working with in our day job.
It's it's resetting those expectations because people need to understand
(26:34):
just how miraculously the stock market has performed over the
course of.
Speaker 2 (26:38):
The last decade and a half.
Speaker 3 (26:40):
Right, there are so many investors today that have not
been through what I would deem a real deep procession
like eight or one or one of those other big,
you know, prolonged periods of time. Sure, if you are
approaching retirement and unsure of how to model out these scenarios. Right,
we're performing in the top one percent of fifteen year
(27:01):
stock market returns.
Speaker 2 (27:02):
How do I model out for the next.
Speaker 3 (27:04):
Fifteen years if I'm heading to retirement or heading to
that period of time where I'm going to start pulling
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Give the folks at Armstrong Advisory Group a call. We
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(27:26):
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Speaker 1 (27:45):
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Speaker 2 (28:01):
Piece here from the Washington Post, as I see underlined
twice by Tucker, just to make sure I got it
this time, there's a reason electricity prices are rising, and
it's not data centers. And basically what this piece makes
the argument of is that the reason why electricity costs
are rising are because of the prices of electricity, like
(28:25):
electrical equipment like poles, wires and stuff like that, and
it's not actually data centers driving it. And I have
two points on this. The first is, the amount of
data center construction that's coming in the next three years
is going to dwarf what has already come online, So
I don't know that the past is necessarily predictive. The
(28:47):
second piece is that to this point, most of the
data center construction has been in areas that we're increasing
power already quite dramatically. You talk about Texas and places
like that. That's not necessarily the case going forward, and
so yes, this might have potentially been true. Again, they
even acknowledged a look in some cases, this is not
you know what we're seeing.
Speaker 3 (29:07):
I think it's a fair thought exercise to go through
and say, hey, how much would power rates be up
in the absence of all this data center construction, And
you obviously can't prove that out, but.
Speaker 2 (29:16):
You can run some estimates.
Speaker 3 (29:18):
My main thing has been it's really difficult to see
a scenario where prices moderate over the next five.
Speaker 2 (29:24):
Years because more data is going to be huge.
Speaker 3 (29:28):
I think they also make a fair point that, hey,
you know, when researchers looked at a period of twenty
nineteen to twenty twenty four, you know, states that saw
much larger demand growth ended up seeing lower power prices
than the rest of the country. And I think that's
a fair perspective that if we get out seven years
from now and successfully build out these data centers and
the capacity of the electricity to deliver it, then I
(29:51):
think we might actually see those areas have moderating electricity costs.
Speaker 2 (29:56):
But it's going to take a long time to get there.
But in the piece SiGe just keep coming back to
is if you look at the total amount spent on
data centers in the US from twenty nineteen through twenty
twenty three, it's basically equivalent to what we're going to
spend next year.
Speaker 3 (30:15):
Yeah, I think one piece that I'll acknowledge, AI data
centers are a really easy scapegoat for all of us,
having cumulatively voted to not reinforce our power infrastructure for
the last thirty years. Like, Yes, the part of the
reason that this is so expensive is because we have
done a bad job of maintaining infrastructure in this nation.
(30:38):
And you know, power generation is just one of those things.
But you know, every single winter around here, for example,
you have power lines go down that should very easily
be buried and not do that. You have Texas every
summer there grid fails and you can't and some winter
homes and some winters like that is a big piece
of this story that has not been talked about right
(31:00):
now because AI data centers are a very easy scapegoat.
Speaker 2 (31:04):
Two things can be true. Yep, we've done a bad
job of maintaining and properly growing our electrical grid over
the last thirty years. And I don't want to spend
an extra couple cents to kill a wide hour because
Tucker needs to make a video of a duck wearing
a snorkel eating a flamingo. Hey, what's wrong with that? Yeah,
send you a bill. Let's take a quick break. When
(31:25):
I come back, carving a turn up into a picture
of Jimmy Hoffa. Let's take a quick break, and when
we return stack roulette.
Speaker 1 (31:35):
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Speaker 4 (32:08):
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Speaker 2 (32:44):
Mike, what do you got for stack roulettes?
Speaker 3 (32:46):
One of those that I'm willing to laugh at only
because nobody died. Twenty hikers were rescued after getting stuck
in snowy conditions on Mount Washington in New Hampshire. For once,
I can take some pride in that it's not all
about Massachusetts residence doing stupid things. But there was at
least one group of Canadian hikers that was at the
summit trying to get into the summit building in sweatpants
(33:07):
and sneakers. There were several more who had symptoms of hypothermia.
And I just cannot imagine trying to hike the highest
peak on the East Coast.
Speaker 2 (33:19):
That is, I mean, correct me if I'm wrong.
Speaker 3 (33:21):
Doesn't everybody know that the weather at the top of
Mount Washington is consistently some of the worst in the
country and can change in like three minutes, So you know,
there was you know, two degrees with the wind chill,
just a bunch of conditions that people.
Speaker 2 (33:34):
Were apparently not prepared for.
Speaker 3 (33:36):
And I just reiterate, like, if you do not spend
a ton of time in the mountains, which I'll raise
my hand, I do not anymore, then spend a lot
of time preparing for your next hike that you go
on because the fact that you know, these folks needed
to be fortunately they were able to be rescued via
the COG Railway, that it needed to actually send rescue
teams out there and fly them out or anything like that.
Speaker 2 (33:57):
So it was a relatively low cost option. But don't
be one.
Speaker 3 (34:03):
Of those people that gets printed up in the Boston
Globe and you know, it gets and it makes a
bad name for all the rest of us for going
into the mountains completely unprepared and ends up needing to
be rescued or worse, dying like many have. Yeah, so
there's my public service announcement of the day.
Speaker 2 (34:18):
I got another debt problem from this one from Friday,
Bloomberg publishing this one. Equipment share Bond Sync is ousted
board member alleges fraud. Now, it's never good when you're
ousted board members alleging fraud because board members usually have
some insight. They tend to know things. And so here's
the deal. A company has about a billion dollars in
(34:40):
debt that's outstanding equipment share. They rent construction equipment that
has tracking technology in it. And apparently the one of
the board members who has a twenty three percent stake
is now accusing the family that owns the the majority
(35:00):
share of using company cash for personal perkson insider deals.
And so basically you have, you know, these privately held
bonds that apparently are falling in value on the secondary market.
And all I can think of, like, it's not the
auto business, but does it just seem like there's a
lot of fraud. We don't know anything about this yet, sure,
(35:22):
but it just seems like that, like with these private
debt obligations that are like sitting out there, the thing
that's bringing down a lot of them is fraud. And like,
what what gives here? Man?
Speaker 3 (35:36):
Is?
Speaker 2 (35:36):
I guess my question like, do you think it's uniquely
different than any other point in time? To me, doesn't
it feel more fraudy? I don't know. Before I'm not,
I'm not sure.
Speaker 3 (35:46):
To me, it feels like every moment where there is
a ready stream of cash waiting to be invested there's
always a bunch of fraudsters that take advantage of that,
whether that's twenty twenty when we approve a bunch of
stimulus and you know, paycheck Protection program loans without a
whole bunch of checks, like, there's always whenever the money
is flowing easily, there's always corrupt individuals who are more
(36:11):
than willing to take advantage of that. And that's what
you can say about private credit and private equity is
that there have been a lot of companies to write
the check, and so whenever there is, there's usually a
bunch of fraud attached to it. And I'm just I'm
not sure that this situation now is any uniquely different
(36:32):
than other periods of time where we've seen the cash flow.
Speaker 2 (36:34):
And like in I guess what, Okay, what does make
it different and potentially more dangerous than some of the
other ones. Scale is different. It's the scale and that
it's in debt markets, Like if there I'm not saying
this is good or bad, but if there was fraud
on like paycheck protection program, okay, company collected a whole
bunch of extra money, yep. If there's fraud in lending,
(36:59):
the debt can't be paid back and then you don't
know who's hurting on the back end. Right, Like we
all as taxpayers ended up paying for the extra you know,
money that was destroyed the paycheck protection program. Yep, I'm
not saying it was costless. I'm saying like we ended
up paying for it, but ultimately like it didn't become
anything else. Right, you didn't have it boil over to
(37:19):
banks because banks weren't involved. This is like you're looking
at It's like, Okay, if there's enough problems in private credit,
then you've got like the holders of that debt that
are then sitting there saying I have obligations I need
to pay for and I might not be able to. Yeah.
Speaker 3 (37:30):
I go back to what we talked about recently, which
is we don't yet know if this is an issue.
It rings pretty similar to other the bank failure of
Spring twenty twenty is that four or three three twenty
twenty three, And I think we just have to wait
a few weeks or months before, probably months before we
find out if there is actually something systemically problematic.
Speaker 2 (37:52):
I just saw on Bloomberg that BTS is going to
be doing its biggest world tour ever next year. Well,
that's how we'll have to close it out. Then little
KP to finish things up. Yeah, honestly, it looked pretty fun.
Might have to go.
Speaker 4 (38:05):
I didn't even know what you're talking about.
Speaker 2 (38:07):
BTS. They're the Korean boy band, I don't know. Sounds
great to me. Let's take a quick break and when
we return tomorrow we'll have a whole bunch of earnings
to discuss, getting ready for some of the big ones
later in the week.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
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Armstrong and Money Matters Radio do not compensate each other
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Exchange with Chuck Zada and Mike Armstrong, your exclusive look
at business and financial news affecting your day, your city,
(00:42):
your world. Stay informed and up to date about economic
and market trends, plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
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heroes by visiting dav five K DOC Boston and making
a donation today. This is the Financial Exchange with Chuck
(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you, and we got stocks rallying,
though I relatively narrow rally. Sm P five hundred is
up almost one percent, but basically has an equivalent number
of stocks up and down today. It's just the bigger
ones happen to be the ones that are really chucking ahead.
You look at some of your big movers. Tesselas up
three percent and Videos up two and a half. Google's
(01:31):
up two and a half, Microsoft Meta both up one
point eight. So that's kind of driving things where. Yeah,
that kind of overpowers the fact that hey Ford's down
three and Eli Lilly's down one and home Depots down one. Again,
not saying this is good, bad, or anything else, but
just that, yeah, it's kind of the story that we
saw for much of twenty three, in the first half
(01:52):
of twenty four, and I was kind of returned in
the second half of twenty five, which is tech is
leading the way and that's driving the index higher even
as you have other equities you know, that are kind
of lagging a bit. It's not necessarily bad for equity performance.
It's been a great three years for stocks now, but
it's something where you know, you do look at it
(02:13):
and say, hey, if that leadership ever falters, yeah, you
might have some concerns at that point, but that leadership
has just not faulted for any extended period of time
in the last three years. Other things that are moving
today tenure US treasury up three point one basis points
to four point h two eight percent, still hanging out
in that low four range, so no major movement on
(02:33):
that front. We've got gold continuing its recent selloff after
breaking out to all new all time highs about a
week and a half ago. Has not been easy sledding
for gold since then, down one hundred and thirty six
dollars and sixty cents an ounce to four thousand and
one dollars per ounce right now. It's about a ten
percent pullback on gold over the last week and a
(02:53):
half or so. We've got crude oil West Texas Intermediate
a forty four cents a barrel to sixty one one
ninety four TRIPAA National Avagur gas prices coming down a
tenth of ascent, though this as a major refinery gets
back up and running in the Midwest. That should hopefully
quell some of the higher prices that have been moving
through Michigan, Indiana, and Ohio over the last several weeks there.
(03:19):
So that is what is moving in markets. I want
to just highlight something for a moment here.
Speaker 3 (03:26):
So it was a few weeks ago now, but Tuesday,
October seventh was when the new Chinese rare earth restrictions
were announced. Really, you know, late Tuesday our time, Wednesday
into Wednesday. Wednesday was the first trading day that this
stuff was known. Friday, President Trump, so that's Friday October, Yeah, Friday,
(03:47):
October tenth, or maybe it was Thursday, October ninth. He
announced one hundred percent tariffs on China. And at the time,
both of us looked at this stuff and said, doesn't
this just feel like posturing a few weeks ahead of
a big negotiation between.
Speaker 2 (04:00):
The US and China.
Speaker 3 (04:01):
Big We did say that US and China, and at
the time they canceled the meeting and said it's not
going to happen.
Speaker 2 (04:07):
Lo and behold, three.
Speaker 3 (04:08):
Weeks later, we sit here and markets have more than
made up all the losses that they incurred on that
Friday October tenth, where markets were down by three percent.
But Lo and behold, we're still having a meeting between
President Trump and President She. We're not realistically talking about
one hundred percent tariffs. We are, in fact talking about
potential slight trade deals. And yeah, lo and behold. Things
(04:30):
look exactly like they did in my opinion, at least
prior to the announcement that China made on rare earth restrictions.
We think again, we gonna have this meeting Thursday. That
kind of throws all that into question again. But for
the time being, that's a lot like what it's looking.
I mean, hasn't the rare earth thing come up three
or four times this year? Like don't you don't you
(04:50):
kind of feel like we're just going to be back
here again in like January or February.
Speaker 2 (04:53):
Yes, And it's because China knows they have something that
no one else can deal with right now, zi, oh,
you want us to do this? Okay, here, We're gonna
throw this rareer thing at you again. And that's the
result of you know, twenty five to thirty five years
of mismanagement of these resources, thinking that you can depend
(05:15):
on China and not responding to their anti competitive pushes
when you know they start dumping rare earths at you know,
below cost in order to maintain their market share. Yeah,
like we're paying for it now. It cames back. It
comes back to the same thing.
Speaker 3 (05:32):
The economic ties between the United States and China run
very deep, and you can have this debate over who
has more leverage than the other person, but ultimately I'm
just not sure it matters. Because both countries have leverage
over one another, they both have the ability to cripple
the other's economy, and so what's likely to happen. Well,
the likely outcome, in my mind, is probably the status quo,
(05:54):
because both countries recognize that there's this uncomfortable fragility between
the relationship, and both countries realize that the other one
could decimate the other's economy.
Speaker 2 (06:03):
Let's talk about this piece from CNBC AI spending is
boosting the economy, but many businesses are in survival mode.
And look, it's whenever you talk about the economy now,
like you say the economy is good, and someone who
like is struggling is like, no, it's not. And then
you say, like, the economy is bad, and someone who's
business is booming is like, no, it's not. And the
(06:26):
fact is, like the economy even good ones or bad
ones like not everything is always moving in one direction.
You know, if you go back to twenty ten, which
was a horrible economy by just about any metric out there,
you could still find, you know, certain businesses where it's like, hey,
Uber's going through like one hundred percent growth, like everything's
(06:46):
great for us, and it's like, okay, well, you guys
aren't the whole economy.
Speaker 3 (06:49):
For Michael Armstrong, it was the best economy that he
had ever experienced because it was the first time he
had paid compensation in any real, meaningful way.
Speaker 1 (06:57):
Right.
Speaker 2 (06:57):
You could talk to some people in twenty eighteen who
are saying, oh, no, like this economy isn't good because
I work in the you know, washing machine repair business,
and all my costs have gone up because of washing
machine tariffs, and everyone else is in there like, no,
this economy is humming along. It's great. So what I
want everyone listening to like realize is like what I'm
(07:18):
about to say here isn't like personal. I don't know
all of you, and it's okay if the economy isn't
quite you know, doing what you're personally experiencing, except for Jeff,
because everyone takes it personally like this personally, Jeff, but
you literally say like the economy is bad, and it's like, oh,
the economy's not bad. You say it's good, and it's like, oh,
the economy's not good. It's like, guys, like not everything's
(07:40):
even Like even the title of this piece tells you
that AI spending is boost in the economy, but many
businesses are in survival mode. That is a tale of
two Cities, and even it says many businesses, not all businesses,
because I'm sorry, but we get these like texts in
and it's just like, guys, I can't I can't respond
to all three hundred and thirty million of you because
I'm just one person.
Speaker 3 (08:01):
I think what it comes back to for me is
we started this year off with an idea that we
have to have a way of measuring what success actually
means for this economy and what failure means. And you know,
it's really difficult to measure something like some businesses being
in survival mode and others not. So I think it's
(08:22):
important for us to maintain those measurements and say, yeah, objectively,
where did inflation start the year, where is it now?
Where did unemployment start the year? Where is it now?
Where was GDP? Where is it now?
Speaker 2 (08:32):
I don't know any of these things because the government
shut down, agreed, But.
Speaker 3 (08:36):
Like, you have to have some way of measuring this,
and we you know, we we asked the audience, like, hey,
come up with other measurements. Somebody came up with, you know,
how many regulations are in whatever federal register maintains all
the federal regulations, like.
Speaker 2 (08:49):
Whatever your government's shut down, whatever.
Speaker 3 (08:51):
Your confines are, whatever your measurement stick is, you have
to have a consistent way of measuring it, because if
you don't, then you're just gonna let your own biases.
Speaker 2 (08:59):
Then when economy feelings and feelings are they're not helpful.
They could be useful in certain situations. Trying to figure
out how good the economy is is not one of them.
So here's what we do know. Let's talk about just
like places that are doing well. Let's let's just build
a list of bis like industries and sub industries that
are doing well and ones that are doing badly. Let's
(09:20):
start first on the good side. AI obviously human.
Speaker 3 (09:24):
Anything that is marginally attached to the AI, whether that
is the construction of data centers and electricity.
Speaker 2 (09:30):
Generatity construction, utility, generation, distribution, all that stuff is humming
right along. Uh if you are, let's see if we're
talking like other things that are like really strong right now,
what else do you have, Like, let's let's be honest
about this, because I'll go through the stuff that's not doing.
Speaker 3 (09:51):
Financial services is doing well. Yes, it's a broad statement.
I think I'm willing to say financial services is cranking.
High net worth people are are still spending and which helps.
Speaker 2 (10:02):
High end travel is cranking absolutely, like through the roof
right now. You can even say real estate in the
Northeast and Midwest still moving pretty well. I actually, again,
when you think about the sectors ata though, and it's
it's fine, yeah, But again, if you talk about the
(10:23):
sectors that rely on the real estate market, there's no volume.
So I'm not sure that you can say real estate
is good for the economy right now. Well, nothing selling
and nobody's hiring people to you know, fix up their
houses right now. So I'm not sure that I would
be willing to say real estate in the Northeast good.
But you talk to like real estate agents in the
Northeast and they're like, yeah, like I'm able to like
move the units that are out there, like you know,
(10:45):
it's it's generally fine. Things that aren't good right now.
Real estate everywhere else gener in the Midwest right aside
from the northeastern Midwest generally bad sure uh. Low end
travel bad uh. And athing related to importing yep, not
even logistics. Trucking freight volumes right now are done seventeen
(11:07):
percent year over year. If you talk to anyone in
the trucking business, not good.
Speaker 3 (11:11):
Really anything manufacturing or you know, retail generally, I think
you can broadly say it's struggling. And if you know retail,
retail's like another retail's fine. Like you look at the
retail data, either aggregate or company level, it's hard to
(11:31):
find retailers other than like Target and Macy's that you're like, oh,
things are bad there.
Speaker 2 (11:36):
Yeah, you know, I know that. You know so and
so who's listening is like, well, I run this shop
and we're not doing well. I get that. Again, we
can't talk about every specific but the retail data generally
has been fine. Credit Card data has been good on
that side, so like retail, I think has actually been
a net positive this year. So again, it's kind of
this mixed economy where there's some good, some bad, and
(12:00):
there's no clear trend. I think is what we have here,
and the trend is something way together. Actually, I don't
know how to define. Would you define auto is good
or bad? Right now? It's more nuanced than that, right,
you can't New vehicle production and sale is good, fantastic.
In fact, used vehicle sale and financing is bad and
(12:21):
really ugly.
Speaker 3 (12:22):
Yeah, it's just so nuanced to try and answer the
question is the economy good?
Speaker 2 (12:27):
Right now? I have to say yes, which is why
I think that you get to the point where you
just say yeah, like absent any of these things that
are actually dragging the economy, you know, pulling it apart. Yeah,
you have to say that it's good, even though you say,
I'm watching these areas. Yeah, it's kind of where I
get to as well. Let's take a quick break. When
we come back, We've got trivia next.
Speaker 1 (12:49):
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(13:10):
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Speaker 4 (13:25):
It's time for trivia here on the Financial Exchange. In
in honor of the spookiest day of the year, we
will do a week's worth of Halloween trivia here on
the show. So let's get started here on this Monday.
Before pumpkins, that's just ah, this is great. Before pumpkins,
(13:47):
which root vegetable did the Irish and Scottish carve on Halloween?
Once again? Before pumpkins, which root vegetable did the Irish
and Scottish carve on Halloween? Be the third person today
the Texas at six one seven three six two thirteen
eighty five with the correct answer, and you win a
Financial Exchange Showed T shirt once again. The third correct
(14:10):
response to Texas to the number six one seven three
six two thirteen eighty five, we'll win that T shirt.
See complete contest rules at Financial Exchange show dot com.
Speaker 2 (14:19):
Can we talk about the pumpkin situation a little bit?
What's the situation, Chuck, I got a real problem right now.
Did you buy one? Not one like a whole bit.
Speaker 4 (14:30):
You probably got twenty eight or something.
Speaker 2 (14:32):
Not twenty eight. It's probably like fifteen to twenty eight,
two dozen, you know, most not big ones like little
ones and stuff, the little guys. Yeah, no, we have
like sure, we have two big ones that we carved,
and then the rest are you know, all six inches
or smaller in diameter. Okay, the squirrels this year have
been eating them in a fashion that I have never
(14:54):
seen before. I'm coming back from mois Is Nod in
her heads, come Ois the the truth. I'm coming back
from a run the other day and my neighbor, my
neighbor's fence. I know a good time too, do youv?
Five k's in two weeks? So I got to put
up the times. But in any case, this squirrel is
(15:14):
running along my neighbor's fence carrying the top half of
a pumpkin in its mouth back to its nest or whatever.
And I'm sitting there and I'm just like, yours not mine,
like theirs have all been eaten too, So they're not discriminating.
They're going after all of them. But to be fair.
So we have maybe a dozen pumpkins outside, maybe maybe eighteen,
(15:35):
and we kind of alternate typical orange one, a white one,
and then like a Gordy you know, gross kind of one. Right. Yeah,
there's maybe like fifteen of them. All five of the
orange pumpkins have been eaten. The squirrels have decided they
love the orange ones. The white ones they're working through
right now. They have not touched the ones with the
little warts and stuff on them. Chuck.
Speaker 3 (15:57):
I feel as though a dog or a BB gun
would put a real quick end to this.
Speaker 2 (16:04):
There are like eight dogs in the neighborhood, and I
don't think you're allowed to shoot squirrels technically.
Speaker 1 (16:10):
Yeah allowed. I mean.
Speaker 2 (16:14):
All I'm saying, I'm trying to maintain good relations with
the neighbors, you know.
Speaker 3 (16:18):
Yeah, well saying I got solutions, you know, but in
any case, they beyond that.
Speaker 2 (16:27):
Even I got a couple of mums I put out front.
The deer ate the front half off of one of
my moms, so there are no I had to turn
the thing around and I'm waiting for the deer to
eat the other half again. Same solution with you, Mike.
Michael's just like Hey, a.
Speaker 3 (16:47):
Bb gun is not going to in any meaningful way
harm a deer.
Speaker 2 (16:50):
Which is why it's like even useless to even do
the squirrel. But I think that I think the bb
gun might scare the deer away.
Speaker 3 (16:58):
But again, legal, I'd say it's a great area that
implies that it's happening when I'm awake.
Speaker 2 (17:05):
Austin's housing bust is just what America needs. Interesting title
and interesting piece from Connorson in Bloomberg Opinion, and basically
what he argues is, look, with all the pandemic era construction,
you had a ton of housing that was built in
Austin that has opened up one of the two channels
to people buying more houses, increasing affordability. The problem in
(17:26):
Austin is that prices are still falling, and so A
investors and B homeowners are kind of like, no, I
don't want to either list or buy right now because
it doesn't feel like an opportune time to do so.
But on the affordability side, you're starting to get there.
The problem is it basically requires a localized housing bust
(17:46):
in order to do so, which is not good for
the surrounding housing adjacent businesses. Right.
Speaker 3 (17:51):
But again to Connor's point, I think that is extraordinarily
healthy so long as it does not right, so long
as it doesn't take down a system. And I think
very clearly at this stage, I'm fairly comfortable saying that
a housing bust in Austin with prices still falling, is
not likely to sink a national bank, or not likely
(18:11):
to sink a national lender because of underwater.
Speaker 2 (18:14):
Homes or anything along those lines. I could be wrong
about all of the say, but it hasn't been very long.
Speaker 3 (18:20):
It is not so. I know that there's been a
lot of development in these areas. I'm sure that there's
a lot of you know, corporate owned single family How
many companies did we talk about over the last five
years who were buying real estate for the express purpose
of renting it back out, specifically in the single family space.
I'd be willing to bet a lot of those purchases
(18:41):
happened in Austin, and some of those are underwater now.
But again, I'm always worried about the contagent or contagion
or spillover effect, and I'm honestly not all that concerned
about that.
Speaker 2 (18:51):
Here we say that now, and I'm not saying that
there is isn't. But home prices started going down in
a lot of metros in like five and oh six,
and it wasn't until like two three years later that
was like, oh, like this is a problem. Now, very
different situation. I'm not saying this is going to lead
to a housing crisis. Again, show me the leverage in
(19:12):
the housing market. But what I am saying is I like,
if you haven't seen a go full cycle, it's tough
for me to be like, yes, this is good. Yeah,
but I guess that's why I'm not buying a house
in Austin. Right now, let's take a quick break. When
we come back, we got the trivia answer in Wall Street.
Speaker 1 (19:30):
Watch, 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
(19:51):
look at what's moving markets so far today. Right here
on the Financial Exchange Radio Network.
Speaker 4 (19:56):
Markets are in rally mode to begin the big week ahead.
This investors away to flurry of big tech earnings, a
FED meeting, and a pivotal meeting between President Trump and
Chinese President g on Thursday. Right now, the Dow is
up about a half a percent or two hundred and
forty five points, SMP five hundred up nearly one percenter
(20:18):
sixty five points, Nasdaq up one point six percent or
three hundred and seventy three points. Russell two thousand is
up a quarter percent. Tenure Treasure Reeled is up two
basis points at four point zero two percent, to Incrude
Oil up about a half a percent, rating at sixty
one dollars and eighty one cents a barrel. Rare Earth stalks,
(20:39):
including MP Materials, Critical Medals and USA Rare Earth are
seeing losses on the day after US officials said they
expect China to delay introducing export controls on critical minerals
as part of a broader trade deal. Chip stocks including Nvidia,
AMD and others are also seeing gains following optimistic comments
from both the US USC and China following trade talks
(21:01):
over the weekend, and VideA up about two percent, while
AMD shares are up modestly. Some breaking news from Qualcom
this morning after the chip maker announced that it will
release new AI accelerator chips. Qualcom shares are jumping twelve
percent on that news. Meanwhile, shares in curic doctor Pepper
climbing over seven percent after the beverage company beat third
(21:23):
quarter revenue forecast and also raised its full year guidance.
Lululemon up by about three percent after the athletic apparel
maker said it was partnering with the NFL and Fanatics
to launch an apparel collection for all NFL teams. And
for the earnings calendar this week, Visa United Health will
report tomorrow. Wednesday, Microsoft, Alphabet, Meta and Caterpillar will report Thursday.
(21:47):
We have Apple, Amazon and MasterCard. And on Friday we'll
see earnings from Exon Mobile and Chevron. I'm Tucker Silva
and that is Wall Street Watch. And in the previous
segment we asked you the trivia question before pumpkins, which
root vegetable did the Irish in Scottish carve on Halloween?
Speaker 2 (22:05):
That would be turnips.
Speaker 4 (22:06):
John from New Bedford, Mass is our winner today taking
home a Financial Exchange Show T shirt. Congrats John. We
play trivia every day here in the Financial Exchange. See
complete contest rules at Financial exchine Show dot com. Ray
Dalio says America is developing a dependency on the top
one percent of workers, while the bottom sixty percent are
struggling and unproductive. I'm gonna tie this also to a
(22:29):
piece that's titled affluent Retirees.
Speaker 2 (22:31):
Are affluent you can take your pick. Are spending more
because of rising markets? What's the common thread here?
Speaker 3 (22:38):
Man?
Speaker 2 (22:38):
So let's talk about that wealth effect first.
Speaker 3 (22:40):
There have been dozens of economic studies over the years
to try and sort out, like how much do people
actually increase their spending when they get wealthier? And quite honestly,
I'm not sure that there is a consensus other than
studies have indicated anywhere from two to fifteen one studies
have indicated that it does exist. Right, people do spend
more when they feel wealthier when they are wealthier on paper, sure,
(23:03):
And two the estimates run anyway from two cents of
additional spending for every dollar of wealth all the way
up to like fifteen cents of additional spending per dollar
of wealth. And I would guess that it varies based
on your home price versus your crypto wallet versus your
four oh one k.
Speaker 2 (23:18):
But the effect does exist.
Speaker 3 (23:20):
And there's a claim here that for you know, retirees,
in particular folks over the age of sixty, that increases
in spending come along by about eleven cents for every
dollar of wealth, which again falls into that range that
we had outlined. Sure, the point that Raydalio is making
is watch out because if that wealth effect reverses, then
(23:41):
it could dramatically sink the economy because that's where all
of the increased spending is coming from. You have this
baseline for the ninety nine percent, and then the growth
is coming from that top one percent, or we've talked
about the top ten percent, and you can kind of
take your pick there.
Speaker 2 (23:56):
It gets kind of it. You know, in business, you
hear about the idea of the eighty twenty rule that
you know, eighty percent of your sales happened from twenty
percent of your customers, and the question that you run
into is, look, depending on how concentrated your businesses, Hey,
if one of those big customers walks away, you know,
how impacted is your business to a certain extent. It's
kind of the same argument being made about the economy,
(24:18):
which is, yeah, like you can technically grow an economy
with a smaller portion of people driving the gains, but
it creates two different problems. The first is, hey, if
that smaller group falters, which it's it's easier if it's
a smaller group or you know, something to uniformly affect
that group. Think just think of it this way. If
you have a thousand different people driving gains as opposed
(24:40):
to two. Hey, if if one of those two ends up,
you know, having something happen to them, it's a bigger
impact than one out of a thousand. The other piece is, hey,
as you concentrate more and more wealth, unfortunately, the thing
that you do tend to see is social unre Generally
people are like, hey, why are all those rich guys
doing whatever they can? And I'm you know, buying burritos
(25:00):
on you know credit.
Speaker 3 (25:02):
See the Massachusetts millionaire millionaire's tax correct? Right, that is
a common you know backlash to that sense of unfairness.
Speaker 2 (25:13):
Well that's the again, that's even before you get to like, no,
I'm going to vote all you people out right and like,
you know, change things even further. So I think that
when we look at this, there are some real risks there,
but it's also fair to say, look, they're just risks
right now. They haven't actually materialized to this point because
stocks have continued to move up, and generally when you
(25:37):
talk about you know, how the economy is behaving, right,
now it has not seen a real drop off in
consumer spending because of that.
Speaker 3 (25:46):
Yeah, the other piece to me that is just I
think distorted our view of this wealth effect is the
recent history. The S and P five hundred has returned
six hundred and seventy six percent from twenty ten through
September of twenty twenty five. That's a fourteen percent annualized
gain and one of the best fifteen year time periods
(26:08):
we've ever seen in the stock market.
Speaker 2 (26:10):
Right, You're talking like top one percent returns ever.
Speaker 3 (26:13):
And so for anyone that you know was retiring close
to this, they have this distorted view of how the
next fifteen years I think is likely to play out.
And that's a real focus that I work on with
you know, people that I'm working with in our day job.
It's it's resetting those expectations because people need to understand
(26:34):
just how miraculously the stock market has performed over the
course of.
Speaker 2 (26:38):
The last decade and a half.
Speaker 3 (26:40):
Right, there are so many investors today that have not
been through what I would deem a real deep procession
like eight or one or one of those other big,
you know, prolonged periods of time. Sure, if you are
approaching retirement and unsure of how to model out these scenarios. Right,
we're performing in the top one percent of fifteen year
(27:01):
stock market returns.
Speaker 2 (27:02):
How do I model out for the next.
Speaker 3 (27:04):
Fifteen years if I'm heading to retirement or heading to
that period of time where I'm going to start pulling
more money out of my portfolio, or maybe helping a
kid or a grand kid out with their first home purchase.
Give the folks at Armstrong Advisory Group a call. We
will put numbers to paper to help you map this
stuff out and make sure the decisions that you are
making are sustainable for your future. I know it's easy
(27:26):
to kind of set it and forget it when markets
are doing what they have done recently, but I'm here
to tell you that that will not always be the case.
The numbers eight hundred three to nine three for zero
zero one. We have offices scattered throughout New England, happy
to sit down close to you, but take the first
step and call at eight hundred three nine three for
zero zero one.
Speaker 1 (27:45):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial legal or tax advice. Consult
your own financial tax into state planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advice reservices.
Speaker 2 (28:01):
Piece here from the Washington Post, as I see underlined
twice by Tucker, just to make sure I got it
this time, there's a reason electricity prices are rising, and
it's not data centers. And basically what this piece makes
the argument of is that the reason why electricity costs
are rising are because of the prices of electricity, like
(28:25):
electrical equipment like poles, wires and stuff like that, and
it's not actually data centers driving it. And I have
two points on this. The first is, the amount of
data center construction that's coming in the next three years
is going to dwarf what has already come online, So
I don't know that the past is necessarily predictive. The
(28:47):
second piece is that to this point, most of the
data center construction has been in areas that we're increasing
power already quite dramatically. You talk about Texas and places
like that. That's not necessarily the case going forward, and
so yes, this might have potentially been true. Again, they
even acknowledged a look in some cases, this is not
you know what we're seeing.
Speaker 3 (29:07):
I think it's a fair thought exercise to go through
and say, hey, how much would power rates be up
in the absence of all this data center construction, And
you obviously can't prove that out, but.
Speaker 2 (29:16):
You can run some estimates.
Speaker 3 (29:18):
My main thing has been it's really difficult to see
a scenario where prices moderate over the next five.
Speaker 2 (29:24):
Years because more data is going to be huge.
Speaker 3 (29:28):
I think they also make a fair point that, hey,
you know, when researchers looked at a period of twenty
nineteen to twenty twenty four, you know, states that saw
much larger demand growth ended up seeing lower power prices
than the rest of the country. And I think that's
a fair perspective that if we get out seven years
from now and successfully build out these data centers and
the capacity of the electricity to deliver it, then I
(29:51):
think we might actually see those areas have moderating electricity costs.
Speaker 2 (29:56):
But it's going to take a long time to get there.
But in the piece SiGe just keep coming back to
is if you look at the total amount spent on
data centers in the US from twenty nineteen through twenty
twenty three, it's basically equivalent to what we're going to
spend next year.
Speaker 3 (30:15):
Yeah, I think one piece that I'll acknowledge, AI data
centers are a really easy scapegoat for all of us,
having cumulatively voted to not reinforce our power infrastructure for
the last thirty years. Like, Yes, the part of the
reason that this is so expensive is because we have
done a bad job of maintaining infrastructure in this nation.
(30:38):
And you know, power generation is just one of those things.
But you know, every single winter around here, for example,
you have power lines go down that should very easily
be buried and not do that. You have Texas every
summer there grid fails and you can't and some winter
homes and some winters like that is a big piece
of this story that has not been talked about right
(31:00):
now because AI data centers are a very easy scapegoat.
Speaker 2 (31:04):
Two things can be true. Yep, we've done a bad
job of maintaining and properly growing our electrical grid over
the last thirty years. And I don't want to spend
an extra couple cents to kill a wide hour because
Tucker needs to make a video of a duck wearing
a snorkel eating a flamingo. Hey, what's wrong with that? Yeah,
send you a bill. Let's take a quick break. When
(31:25):
I come back, carving a turn up into a picture
of Jimmy Hoffa. Let's take a quick break, and when
we return stack roulette.
Speaker 1 (31:35):
Here the Financial Exchange every day from eleven to noon
non Serious XM's Business radio channel one thirty two. Keep
it here for the latest business and financial news and
the trends on Wall Street. The Financial Exchange is now
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Thanks He's the Financial Exchange Radio Network. The Financial Exchange
(31:57):
streams live on YouTube. Subscribe to our page and stay
up to date on breaking business news all morning. Long
Face is the Financial Exchange Radio Network.
Speaker 4 (32:08):
The Financial Exchange is a proud partner of the Disabled
American Veterans Department of Massachusetts and this year's DAV five
K's coming up Saturday, November eighth at Castle Island. The
race is sold out, but you can still take part
by making a donation to support our great American heroes.
Please visit DAV fivek dot Boston to make your gift today.
(32:30):
Your participation helped provide vital services like free transportation to
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Donate today at dav fivek dot Boston. That's dav five
k dot Boston.
Speaker 2 (32:44):
Mike, what do you got for stack roulettes?
Speaker 3 (32:46):
One of those that I'm willing to laugh at only
because nobody died. Twenty hikers were rescued after getting stuck
in snowy conditions on Mount Washington in New Hampshire. For once,
I can take some pride in that it's not all
about Massachusetts residence doing stupid things. But there was at
least one group of Canadian hikers that was at the
summit trying to get into the summit building in sweatpants
(33:07):
and sneakers. There were several more who had symptoms of hypothermia.
And I just cannot imagine trying to hike the highest
peak on the East Coast.
Speaker 2 (33:19):
That is, I mean, correct me if I'm wrong.
Speaker 3 (33:21):
Doesn't everybody know that the weather at the top of
Mount Washington is consistently some of the worst in the
country and can change in like three minutes, So you know,
there was you know, two degrees with the wind chill,
just a bunch of conditions that people.
Speaker 2 (33:34):
Were apparently not prepared for.
Speaker 3 (33:36):
And I just reiterate, like, if you do not spend
a ton of time in the mountains, which I'll raise
my hand, I do not anymore, then spend a lot
of time preparing for your next hike that you go
on because the fact that you know, these folks needed
to be fortunately they were able to be rescued via
the COG Railway, that it needed to actually send rescue
teams out there and fly them out or anything like that.
Speaker 2 (33:57):
So it was a relatively low cost option. But don't
be one.
Speaker 3 (34:03):
Of those people that gets printed up in the Boston
Globe and you know, it gets and it makes a
bad name for all the rest of us for going
into the mountains completely unprepared and ends up needing to
be rescued or worse, dying like many have. Yeah, so
there's my public service announcement of the day.
Speaker 2 (34:18):
I got another debt problem from this one from Friday,
Bloomberg publishing this one. Equipment share Bond Sync is ousted
board member alleges fraud. Now, it's never good when you're
ousted board members alleging fraud because board members usually have
some insight. They tend to know things. And so here's
the deal. A company has about a billion dollars in
(34:40):
debt that's outstanding equipment share. They rent construction equipment that
has tracking technology in it. And apparently the one of
the board members who has a twenty three percent stake
is now accusing the family that owns the the majority
(35:00):
share of using company cash for personal perkson insider deals.
And so basically you have, you know, these privately held
bonds that apparently are falling in value on the secondary market.
And all I can think of, like, it's not the
auto business, but does it just seem like there's a
lot of fraud. We don't know anything about this yet, sure,
(35:22):
but it just seems like that, like with these private
debt obligations that are like sitting out there, the thing
that's bringing down a lot of them is fraud. And like,
what what gives here? Man?
Speaker 3 (35:36):
Is?
Speaker 2 (35:36):
I guess my question like, do you think it's uniquely
different than any other point in time? To me, doesn't
it feel more fraudy? I don't know. Before I'm not,
I'm not sure.
Speaker 3 (35:46):
To me, it feels like every moment where there is
a ready stream of cash waiting to be invested there's
always a bunch of fraudsters that take advantage of that,
whether that's twenty twenty when we approve a bunch of
stimulus and you know, paycheck Protection program loans without a
whole bunch of checks, like, there's always whenever the money
is flowing easily, there's always corrupt individuals who are more
(36:11):
than willing to take advantage of that. And that's what
you can say about private credit and private equity is
that there have been a lot of companies to write
the check, and so whenever there is, there's usually a
bunch of fraud attached to it. And I'm just I'm
not sure that this situation now is any uniquely different
(36:32):
than other periods of time where we've seen the cash flow.
Speaker 2 (36:34):
And like in I guess what, Okay, what does make
it different and potentially more dangerous than some of the
other ones. Scale is different. It's the scale and that
it's in debt markets, Like if there I'm not saying
this is good or bad, but if there was fraud
on like paycheck protection program, okay, company collected a whole
bunch of extra money, yep. If there's fraud in lending,
(36:59):
the debt can't be paid back and then you don't
know who's hurting on the back end. Right, Like we
all as taxpayers ended up paying for the extra you know,
money that was destroyed the paycheck protection program. Yep, I'm
not saying it was costless. I'm saying like we ended
up paying for it, but ultimately like it didn't become
anything else. Right, you didn't have it boil over to
(37:19):
banks because banks weren't involved. This is like you're looking
at It's like, Okay, if there's enough problems in private credit,
then you've got like the holders of that debt that
are then sitting there saying I have obligations I need
to pay for and I might not be able to. Yeah.
Speaker 3 (37:30):
I go back to what we talked about recently, which
is we don't yet know if this is an issue.
It rings pretty similar to other the bank failure of
Spring twenty twenty is that four or three three twenty
twenty three, And I think we just have to wait
a few weeks or months before, probably months before we
find out if there is actually something systemically problematic.
Speaker 2 (37:52):
I just saw on Bloomberg that BTS is going to
be doing its biggest world tour ever next year. Well,
that's how we'll have to close it out. Then little
KP to finish things up. Yeah, honestly, it looked pretty fun.
Might have to go.
Speaker 4 (38:05):
I didn't even know what you're talking about.
Speaker 2 (38:07):
BTS. They're the Korean boy band, I don't know. Sounds
great to me. Let's take a quick break and when
we return tomorrow we'll have a whole bunch of earnings
to discuss, getting ready for some of the big ones
later in the week.
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