November 14, 2025 • 39 mins
Mike Armstrong and Paul Lane discuss investors dumping tech shares as shutdown relief evaporates. What is going to shift sentiment back in the positive direction? Are we headed for a repeat of the dot com era? Markets no longer view the December rate cut as a sure bet, with Fed officials casting doubts. Walmart CEO Doug McMillon to retire in January after nearly 12 years leading retailer. U.S. to cut tariffs on bananas, coffee and other goods from four countries. Nearly 900,000 new homeowners are underwater on their mortgages, signaling a troubling shift in the housing market. Amazon and Microsoft back effort that would restrict Nvidia’s exports to China.
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Episode Transcript
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Fall.
Speaker 2 (01:07):
Lane, Good morning, Happy Friday, Welcome to the Financial Exchange.
It's Mike, Paul and Tucker with you on a red
day out there on Wall Street. We've got the Dow
currently off over five hundred points, about one point two percent,
and the SMP and NASDAC both down about six tenths
(01:30):
of a percent on continued deterioration. I suppose in the
optimism about the artificial intelligence trade will be diving in
on that, as well as the government reopening and some
new trade deals to be announced as well when it
comes to especially items you might be seeing at the
grocery store. But Paul, I want to hone in here
(01:52):
on the last couple of weeks, really, I think is
where the focus should be when we're talking about the
deterioration of equity markets. And to be clear, you know,
we're not talking about anything extremely severe, but it does
just seem to me that over the course of the
last few weeks, every time that you've made a possible
(02:15):
uh what am I saying upswing in markets, it's been
immediately followed by a downturn. And as of right now,
you know, we're only off a few percentage points from
the all time highs reached back at the end of October,
but we've seen now two days of sell offs, and
I really point to I guess the last two weeks
focusing in on the commentary from Michael Burry and the
(02:39):
commentary from some large bank CEOs, and now it seems
to be all that anyone is talking about is the
AI investment? Is it realistic? Is it going to come
crashing down? Is it the dot com bubble all over again?
That narrative can change again, But you do have to
ask yourself at this point, Okay, if sentiment is shit,
(03:01):
what is going to shift it back in the other direction?
And That's kind of where I'm landing with this is
it seems to me the sentiment has had at least
a temporary shift in terms of what all this means
for the stock market and the economy, and so is
that overblown? Is it going to get shifted in the
other direction? And what might be the cause of a
shift back towards growth in the markets and the optimism
(03:25):
for AI.
Speaker 3 (03:25):
Really where we would have to start, Mike, likely is
earnings reports that have already surpassed but for the next
quarter from some of the hyperscalers, where they report that
particularly on the cloud capacity the cloud revenue, which is
where you'd likely see most of this accrual of sort
of revenue benefits from Microsoft from an Amazon basically stating
(03:48):
that they have seen just tremendous demand and continued frenzy
for uptick of the consumption of this cloud computing. That
would translate to likely more developers in artificial intelligence just
consuming more and more of it.
Speaker 4 (04:03):
On top of that.
Speaker 3 (04:04):
In Nvidia could be another for some reason that the
demand that they see for their next version of the
GPU that's gonna come out maybe later next year, or
anything of that nature. Those would be the areas that
I'd probably point to or some sort of revolutionary change
with chat gipt where it just moves up, it has
(04:25):
a breakthrough to another level in terms of the applications.
I'm pulling its straws a little bit, but not so much.
Speaker 2 (04:31):
I mean, Nvidia is the largest company in the world
now they're reporting earnings Wednesday of next week. That certainly
I think has the ability to shift overall sentiment. I
guess you know what, I started with a presupposition that
you agree with me on this turn in the narrative.
Do you do you see that same turn in the
narrative that I am seeing or am I just being
(04:52):
overly pessimistic about things right now.
Speaker 4 (04:54):
In terms of the coverage of artificial intelligence, Yeah, I.
Speaker 2 (04:57):
Mean it seems to me that over the course of
the last two weeks, especially the coverage of AI, the
skepticism about the payoffs and benefits, and maybe not so
much the technology itself, but the massive spending and where
it's coming from and how much longer it continue can continue,
It seems to me to be called into question more
of the last two weeks than any time in the
last year.
Speaker 4 (05:17):
Definitely has picked up.
Speaker 3 (05:18):
I would more bifurcate it between call it the summer
August sort of the fall is where I've felt September,
October November that there has been much more discussion and
scrutiny on the amount of money being spent by these companies.
It always was, we were always aware that capital expenditures
for Meta and some of these others were increasing, But
(05:39):
it just seems like from a news media coverage standpoint
that there has been a tremendous amount of more focus
on cheefs. This is a lot of money. Are they
going to get the revenue to justify. Obviously, when some
of those announcements came out, that would probably be the
first place that you want to go, But it just
seems like that has been more prevalent recently. That's the
way I would sort of divide it. You're right, then
(06:00):
the last week or two it's picked up even more.
But there's the Oracle Cloud deal is probably a good
example of when was that announced. That was when we
saw that might be a couple a month or two.
Speaker 2 (06:12):
Back, we saw that that was the one with open
Ai and the miracle three hundred billion dollars.
Speaker 3 (06:17):
I believe that they were projecting of, you know, future
revenue growth and the stock went up thirty percent in
one day, and since then it's sold off to levels
lower than it was there. That feels like to me
trying to see if I can get a pinpoint on
when that happened where there was a bit of shift
because they have to finance that with a lot of debt,
and that's where we've had more of these conversations that
you and I were having off eras geez, how much
(06:38):
how much debt is being taken on.
Speaker 4 (06:40):
For this build out?
Speaker 3 (06:42):
And that was September tenth, so that that kind of
moves in lockstep with what I was thinking there.
Speaker 2 (06:48):
Here's here's where I keep landing with all of this stuff.
And you know, the more I read and the more
I look into it, I don't think there's much debate
that AI is going to be a truly transformative technology,
the scale of which is maybe similar to the Internet,
if not greater. I think there's surprisingly like general agreement
(07:09):
on that. I don't hear a lot of people. I
hear a lot of people saying it's going to be
a terrible transformation and detriment there, and detrimental to labor
and to all sorts of negatives. But even there I
see them acknowledging that it will be transformative. So I
don't hear much debate there. Where I start to get
(07:30):
when when you start to ask the companies, you know,
where's the payoff going to come from? That's where I
start struggling. And because they don't know the answer, right,
they're building all this out with the idea that you know, hey,
build it and they will come. And I've heard comments like, oh, well,
we're just waiting on the uber of AI to come around.
(07:53):
The Facebook of artificial intelligence to come and exist, and
then we're going to have this massive customer for all
this build out that we're doing. And then you dive
in a little bit more about you know, what AI
can do, and they're focusing on the business customers that
are going to pay for these services, and AI, you know, honestly,
is really good at some very boring things. You know,
like if you're dealing with I'm trying to think of
(08:17):
a really a really boring but you know, good use
case of artificial intelligence. You're dealing with a couple of
files that have you know, naming conventions that are a
little bit different. AI would be really good at going
through that, which a human being probably does now, and
you know, removing the extra digits on the ZIP code
(08:39):
or something like that to be able to match the
files together. It's not sexy, but you pay somebody to
do that right now, and AI can do it faster, cheaper,
and better. The problem then becomes when you ask these
companies a little bit more like, okay, but what's somebody
going to be willing to pay for that? They then
kind of shift their story over to well, you know,
that's stage one, but then really what we're getting to
(09:00):
is artificial general intelligence. And when they talk about artificial
general intelligence, AGI if you will, I'm I don't know,
I'm getting it's almost people talking about a religious experience.
And that's where I started to get really concerned. It's like, hey,
you know, we have this, we have this thing that
(09:21):
can do some really practical things for businesses and reduce
headcount and make people more efficient. But someday, you know,
what you're really betting on is this idea that you know,
computers are going to get to artificial general intelligence and
then you know it's infinite from there. And I don't know,
(09:42):
I struggle when people make that type of argument to me.
Speaker 4 (09:45):
I can't go yeah, I can't go there.
Speaker 3 (09:47):
It was something that I dove into at first, but
I can't really go that far with it. But let's
fin back to maybe the more elementary version of it is,
you know, if it's going to be a truly transformed technology.
It does seem like most people are on board with
and the parallels to the Internet maybe are too easy
and maybe we lean on them too much, But it
seems the place I always come back to where there
(10:09):
was a bubble that was created in the late nineties.
There was reason for that bubble, though if you look
out the next decade into where our lives are today,
the vision behind it was accurate. It's just the valuations
on the companies got out of whack. And also there
were some companies that benefited from that tremendously, and no
one could have projected how big they were going to
(10:29):
get Google, Amazon, eBay, PayPal, et cetera. And probably the
same happens here in some extent is that there are
going to be some huge winners, but there also will
be some huge losers. And also we may be overbuilding
infrastructure that to this point we don't know where the
revenue or where the innovation is going to come from.
Yet that's what makes it so hard, and that's what
(10:51):
I think made it so difficult with the Internet is
you just you didn't know what it was going to
look like, and that's where you can get valuations out
of whack.
Speaker 2 (10:58):
Let's take a quick break. I want to organize our
thoughts on this AI conversation. It's going to permeate the
show throughout today and throughout the next several weeks. Let's
say a quick break and just final thoughts on where
we've come over the last couple weeks on the AI trade, markets,
optimism for pessimism about it. That's next year on the
Financial Exchange.
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Speaker 2 (12:01):
So before the break, we were wrapping up some conversations
about the the AI trade and.
Speaker 4 (12:07):
We've got to figure it out.
Speaker 2 (12:09):
Yeah, yeah, we have all the answers here at the
Financial Exchange, as you know. But there has been increased
pressure on markets. At least, I don't think there's be
any particularly tough questions of the companies involved. There hasn't
really been the opportunity to ask those questions. But I
think generally speaking, there's been increased scrutiny over the levels
(12:30):
of spending. And again to highlight a few of these
spending items, Open Ai, for example, has pledged to spend
one point four trillion dollars over the course of the
next decade on artificial intelligence build out. And they're a
company that I think at last last look, they're going
to do between fourteen billion and twenty billion dollars of
revenue this year.
Speaker 3 (12:50):
And reported a Q three loss of twelve point six
billion according to micro Sure.
Speaker 2 (12:54):
So, like, you know, these are big, big promises, I think,
is the point that I am making here. And so
the question that I continue to ask myself is are
we headed for a repeat of the dot com era?
And my guess would be not. History rarely repeats itself.
(13:18):
Rhymes in certain ways, it looks similar in certain ways,
but history never exactly repeats itself. But the problem during
the dot com stage was a massive amount of build
out and a bunch of bets on companies that you know,
didn't really have the business models that people thought that
they did. And so the question this time around is
(13:38):
how long does it take for I mean, I don't
think people are wrong to point to the Ubers and
facebooks as those companies that revolutionized the world on top
of the Internet infrastructure. But my question is how long
does it take for that to come about? I don't
you know, I don't supposed to have an answer on
all this, but maybe the maybe the Internet and AI
(14:00):
are completely different and you're going to have those massively
revolutionary new tools rolled out in the next six to
twelve months. And it's not quite the concern that the
dot com bubble was because again, when when did Facebook
go public? Like twelve twenty twelve.
Speaker 4 (14:15):
I created in two thousand and four, sure, but.
Speaker 2 (14:17):
You know years after the you know, the hype of oh.
Speaker 3 (14:21):
Totally I was going to go that with Google. I mean,
Google's probably the best example, like acting as basically.
Speaker 4 (14:25):
The front door for the Internet.
Speaker 3 (14:27):
They were probably early two thousands in terms of when
they really picked up significant momentum. I believe their IPO
is maybe oh four you can you can quote me
on that.
Speaker 2 (14:40):
Wow, August nineteenth of four at eighty five bucks.
Speaker 3 (14:44):
On that, So that's five years removed. I drive a
lot in for this job, listen to podcasts in the car,
but that's far removed from probably the peak valuations that
you saw, and my point, I think that you could
just see a lag between the valuations that some companies
have received today to the actual optimal benefit that you
(15:05):
get from the technology. You're right, maybe it doesn't happen
the same way, but it is reasonable. I feel like
to say that the market perhaps gets ahead of the
true growth of a technology. And maybe that's what we
see is that five years from now businesses operate far differently.
But today the valuations are sort of accounting as if
(15:28):
it's going to happen the next six to twelve months.
Speaker 2 (15:29):
What do I do as the everyday person about this
hold steady?
Speaker 3 (15:34):
No ma with the Google thing or Amazon, you never
want to known, but just the technology did deemed it
ended up being extremely beneficial and changes the way that
we operate our business today.
Speaker 2 (15:47):
It turned out to be worth it.
Speaker 3 (15:49):
I was talking to a client the other day and
just crystallized it for me very simply. And when they
saw a computer on the desk, like what is this box?
And what are we going to do with it? And
now it's on everyone's desk and you know what you're
gonna do with it?
Speaker 2 (15:59):
It's all you don't know what you can do without it?
The other piece that could be different this again. I
don't really buy the arguments that it's different this time.
I never do. But the other piece that is fair
bit different than it was back then. The large companies
that are dominating the story today, that are you know,
really placing a lot of this, have much deeper motes
(16:22):
in much deeper pockets than they did back in nineteen
ninety nine. Right, I don't think they should, right Like
I don't love the idea that Google was deemed a
monopoly and then not broken up. I don't love the
fact that Amazon has been able to avoid any sort
of monopolistic concerns. But these companies are operating on a
scale that's far different than where they were back when
(16:44):
the you know, the similar or comparable tech companies of
the late nineties were, And so again, maybe that makes
it different this time. Maybe it makes it so that
there can't be some new Mark Zuckerberg star like startup
that comes along five years after the in and really
revolutionizes things, because they'll just get bought.
Speaker 4 (17:04):
I don't know that's fair. That's fair.
Speaker 2 (17:07):
Again, history does not repeat itself, But you cannot avoid
anymore the comparisons to the dot com bubble, They are
unavoidable if you if you look at this market today,
you know, based on any valuation metric, the only time
is more expensive was pre dot com bubble, And when
(17:27):
you talk to any serious investor, they are certainly aware
of the comparisons of that point in time. The other
piece of the narrative that I think has shifted a
little bit over the course the last few weeks has
been around interest rates. A few months ago, the idea
of a December rate cut was pretty much baked in.
Over the course of the last several weeks, you've had
FED chair or voting FED member after voting FED member
(17:51):
come out and refute the idea that that is baked in.
At this stage, we are now looking at a fifty
to fifty shot a coin toss of a rate cut
at that December tenth meeting. What do you suppose could
change could shift that? Again? If I think about things
that have changed in markets, this is definitely one of them.
The idea that, hey, rates are not going to come
(18:12):
down as quickly as some had been supposing. We've had
a government shut down for the last month and a half.
I would imagine there could be some data that could
change their minds on this.
Speaker 3 (18:21):
It's going to have to be the November CPI report
if they're able to get that together, which I think
would be released before this tenth meeting. I think it
would come out around the eighth of the ninth if
that was hotter than anticipated, assuming that they were able
to get that out. Plus, the tricky thing will be, Mike,
is if we have some poor labor reports come out
(18:42):
from October or what was it, the September one was
already put together right October, where you don't really have
a chance of getting.
Speaker 2 (18:47):
Made so October, from what I understand, we are going
to get the business side of the survey and not
the household side of the survey, so you'll no job creation,
you won't know unemployment rate in October.
Speaker 4 (18:58):
This to me is going to ship a lot.
Speaker 3 (19:00):
Really simply to put it is because we have a
lot of economic data reports to go through over the
course of the next few weeks. So this fifty to
fifty day is meaningless in a sense, or rather reflects
the uncertainty on where they're going to go, because you
need to have called three to five economic reports come
out before this meetia occurs.
Speaker 2 (19:16):
Let's take a quick break. When we come back mention
equity markets under pressure, We're gonna have a full recap
for you next with Wall Street Watch.
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Speaker 1 (20:22):
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Net.
Speaker 5 (20:30):
Market's in the red again today after yesterday's sell off,
driven by high valuation, concerns in the tech sector, and
uncertainty about interest rates. At the fed's upcoming December meeting. However,
we are seeing some dip.
Speaker 4 (20:43):
Buying right now.
Speaker 5 (20:45):
The Dow is down by over eight tenths of a
percent or four hundred and three points. SMP five hundred
now down three tenths of one percent or twenty points.
NASDAC now down only a tenth of a percent or
thirty eight points. It's lower. Russell two thousands down about
half a percent. Ten year treasurevealed is flat at four
(21:06):
point one point one nine percent. In crude oil up
over two percent higher, trading just above sixty dollars. A
barrel breaking news from Walmart this morning after the retail
giants said CEO Doug McMillan is retiring early next year.
McMillan has served as Walmart's CEO since twenty fourteen. John
Ferner will take over the role and has been the
(21:28):
CEO of Walmart's US business since twenty nineteen. Ferner started
with Walmart in nineteen ninety three as an hourly associate.
Walmart stock is down by two percent. Meanwhile, Applying Materials
reported better than expected quarterly results were driven by the
AI boom. However, the semiconductor maker gave a disappointing outlook
(21:49):
for next year, including modest full year revenue guidance, shares
are down about two percent. Elsewhere, ticket vendor stub Hub
reported a third quarter net loss of about one point
three billion dollars. The company blamed a one time stock
based compensation charge. StubHub also said it would not provide
guidance for the current quarter. StubHub share sinking twenty four percent,
(22:11):
shares of Sidera Therapeutic surging one hundred and five percent
after Murk agreed to buy the company for about nine
two billion dollars, and according to the Wall Street Journal, Paramount,
Comcast and Netflix are preparing bids for Warner Brothers Discovery.
The report also said Warner Brothers Discovery has an initial
deadline for first round bids of November twentieth. Warner up
(22:37):
by over two percent. I'm Tucker Silla, and that is
Wall Street Watch.
Speaker 2 (22:41):
It wasn't planning to go there. But can we talk
about Walmart for a moment here? Sure, I feel like
they've been getting dragged a little bit during the government
shutdown on the Snap benefit conversation. I've just seen them
in social media mentioned as like, hey, you know, why
are there so many people on Snap benefits? It's because
companies like Walmart don't pay their employees enough. And you know,
(23:02):
there's been rumors that as part of the like onboarding
stuff with Walmart, as an employee, you learn how to
file for food stamps because you're eligible for them based
on the hourly wages. I don't know if there's any
truth to those rumors, but I feel like they've been
getting dragged a little bit. I want to mention for
a moment here that Doug McMillan, the current CEO of Walmart,
worked for Walmart throughout his entire career. He started took
(23:25):
his first role for the company as a teenager in
nineteen eighty four. Moved on to be a buyer, but
you know, he was a teenager working at Walmart as
a summer associate and worked his way up through the
corporate ladder. They funded part of his college education and
his MBA. His replacement that was just named John Ferner,
who I didn't know anything about, but Tucker mentioned this
(23:47):
as well, began his career in ninety three as an
hourly store associate. That is kind of unheard of in
the world. That's all business.
Speaker 4 (23:55):
It is really cool.
Speaker 2 (23:56):
Yeah, like founders, sure yep. But when when you're talking
about two CEOs in a row who came up from
starting as hourly employees the lowest level of a company
as large as Walmart, and are now running that company,
you gott applaud that for a moment, definitely, right, Like
(24:17):
that is very impressive to be able to state something
like that to your employees. Like everybody knows Walmart wages
kind of suck. A lot of people look at it
as a job for, you know, an entry level person
to start their career at. But to be able to
say that two of your last CEOs started in that
hourly role and were supported throughout their career to become
(24:41):
CEO of one of the largest employers in the world,
that's pretty damn impressive.
Speaker 3 (24:46):
And they have a lot of examples of managers taking
over that position starting at the lowest level two Like,
we're focusing on the CEO, but this is not uncommon.
They do know that ethos of promoting from within. If
you look at the stock price and that's what you know.
Sam Walden, who's who's passed but in his sort of
you know, dying days, was really proud of just how
much wealth he had created for those employees who were
(25:09):
shareholders in the company over that span of time.
Speaker 2 (25:12):
Again, company's got plenty of faults. I'd been saying that
they're the holy grail of everything, but man, that that
one piece, not to mention like everything else that they
have managed to sidestep. And you know, go look at
Target versus Walmart right now and look at that case study.
It's it's pretty it's pretty uh interesting. But yeah, I
(25:32):
just found that piece to be pretty unheard of in
the world of CEOs and business.
Speaker 3 (25:37):
Is it wrong that I was kind of happy that
stub hub was down twenty five percent just because I
don't like the company and the online ticketing and.
Speaker 4 (25:43):
Yeah, take that. I think that they're based out of
Boston though, right, so.
Speaker 3 (25:47):
I should maybe maybe I should hold that back a
little bit.
Speaker 4 (25:51):
But just concerts have gotten too expensive, come on, yeah,
the fees.
Speaker 5 (25:55):
It's crazy.
Speaker 2 (25:55):
It's we got off track there, Sorry about everybody. Back
in September, the White House shoreshadowed by issuing executive order
the President did saying it would consider reduction in tariffs
on some items that are not produced in the United
States so long as those foreign nations agree to trade
deals with Washington. We're getting a bit of a taste
(26:16):
of that at the grocery stores this morning. The US
plans to eliminate tariffs on bananas, coffee, beef, and certain
apparel and textile products under framework agreements with four Latin
American nations. Senior Administration official told reporters on Thursday. The
move expected to apply to goods from Ecuador, Argentina, l Salvador,
and Guatemala. Part of a pretty big shift here, especially
(26:38):
when it comes to grocery prices. And I don't look
at this as much other than a targeted approach to
trying to find ways to bring down grocery prices, and
frankly makes a fair bit of sense to me. I mean,
we are you can tear iff bananas by seventy percent.
We are not going to have a big banana industry
or coffee industry in the United States unless there's sort
(27:00):
of technological revolution around how you grow this stuff.
Speaker 3 (27:02):
No, the climate's just not therefore it so this to
me seems like really aimed and focused at any inflationary
concerns that may come over the course of the next
couple months. This is from a policy standpoint, the best
that you can do to attack this issue.
Speaker 2 (27:18):
The more interesting side of the terriff. I mean, frankly,
since like June, tariffs have taken a big back seat.
Speaker 3 (27:24):
It's been nice, It's a radio has been nice to
not much.
Speaker 2 (27:29):
And I'll continue to say that we really shouldn't report
on tariffs until we have actual news to report rather
than rumors.
Speaker 4 (27:36):
The Supreme Court.
Speaker 2 (27:36):
Ye, yeah, I mean this piece is an actual announcement
from the White House, so I think it's worth reporting on.
But you know, all of this to me is very
much in question right now as to a whether the
Supreme Court is going to alter what the Trump administration
is able to do on tariffs. That could run anything
from throwing it out and refunding everything that was paid
(27:58):
to some sort of restrictions on what can be used
going forward. And then the follow on question to me
is if that happens. I know the Trump administration is
promised and rumored to look at other strategies to implement
tariffs again, but will they actually do so. It's turned
out to not be an immensely popular policy decision when
(28:20):
it comes to tariffs. It has you know, sparked anger
amongst some donors, and it may you know, if the
Supreme Court does rule it out, I wouldn't be shocked
to see the Trump administration take a step back and say,
you know what, sorry, hands are tied. Unless Congress will
is willing to do something on this, we're just gonna
have to walk away from tariffs.
Speaker 3 (28:38):
Really, you don't think they'll try and pivot and find
because I've read that there's other ways that they could
get there.
Speaker 2 (28:43):
Are they take longer, they'd be you know, more dragged
around by processes, but there are other laws that they
can use to implement tariffs. And a few months ago
I would have told you like, yeah, that's definitely what
we'll see today. I'm just unsure, you know, we we
have gotten so far away from the April announcements. We
keep getting more and more of these negotiations when it
(29:06):
comes to these items, and so I do just openly
wonder if you have, you know, a much more refined
view on tariffs come twenty twenty six. If the Supreme
Court does in fact throw it out. Those are all
a bunch of big ifs, and it's all conjecture at
this stage, but we're just not hearing about it.
Speaker 3 (29:24):
My head would spin as to what that would mean
if they had to be all refunded the tariffs or
if they threw it out. I just can't even go
there on a Friday.
Speaker 2 (29:32):
Hundreds of billions of dollars that you need to figure
out how to refund to individual companies that are sometimes
the size of five employees. Good luck. Yeah, that would
be pretty messy. Let's take a quick break here when
we come back, nine hundred thousand new homeowners underwater on
their homes. Does that signal a problem with the housing market.
We'll be covering next on the Financial Exchange.
Speaker 1 (29:54):
Breaking business news as it happens only here on the
Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
Like our page and stay up to date on breaking
business news All morning Loan. This is the Financial Exchange Radio.
Speaker 2 (30:11):
Network, Chucker. Have you noticed that the more I like
a song, the longer I let it play?
Speaker 4 (30:26):
Let a Brad Baby?
Speaker 2 (30:28):
A couple of nearly nine hundred thousand new homeowners are
underwater on their mortgages. According to market Watch, this is
signaling a troubling sign for the economy. Paul, are you
troubled by the nine hundred thousand homeowners under If I
were one of the nine hundred thousand homeowners. Don't get
(30:50):
me wrong, I would be rather troubled by the.
Speaker 4 (30:52):
Feel for them.
Speaker 3 (30:53):
But when you have what three hundred and thirty million
people in this country and maybe one hundred million households, No,
from a macro economic perspective, not troubled. This is in
different pockets of the country that you could probably guess
where they are Texas, Florida, many homes that have been
purchased in the last three or four years, and many
(31:14):
loans that were the is it faha that yeah faha,
and VA loans where you're basically only putting three and
a half to five percent down as a down payment,
so there's very little equity room to work with in
the first place, unlike your traditional twenty percent down where
there's much more of a buffer if the home value
is to decline.
Speaker 4 (31:33):
So not concerned.
Speaker 2 (31:34):
I was looking for some comparisons of when you do
the math in that nine hundred thousand, it estimates that
about one point six percent of all mortgage holders are
underwater in the United States currently. I was looking for
some sources on this, and according to the Brookings Institute
back in twenty eleven, there were approximately eleven million homes
(31:57):
underwater twenty two to twenty three percent of all mortgage
properties in the country. Obvious concentrations Florida, Nevada, Arizona. I
think Nevada is something like half of all properties we're
underwater at one point in time. We are nowhere near
a problem on this issue, from either a numbers perspective
or a percentage perspective, and I suspect we are not
(32:20):
going to get there.
Speaker 1 (32:22):
No.
Speaker 2 (32:23):
Like again, I cannot emphasize enough how much this is
not an issue that we need to worry about right now.
Plenty of other ones out there, Like, if you want
something to scare you, there's plenty out there for you
to be scared about. I really don't think underwater homes
is going to be the issue that sinks this economy.
I do think that this speaks volumes about the state
(32:43):
of the housing market. I do think we are an
uptick here. I think a year from now, I'd be
willing to bet that there are more homes underwater than
there are today. I think it's a drag on the
economy because there's not going to be as much housing
construction spending that you know that has clearly reversed its
because guess what, These homes are underwater in the exact
places that home builders like to build. But again, back
(33:06):
in the early twenty tens and post Great Financial Crisis,
there was such an immense amount of pressure on the
housing market that we basically didn't build a third as
many homes as we normally would for the course of
a decade. I just don't think we're going to get there.
I just don't see a possibility that we get there.
But nonetheless, inventory is going to continue to tick up
(33:28):
in some of these municipalities and some of these states
there there are under pressure. There could be some deals
to be had. There will be some individuals who are
forced to sell, that have their homes, you know, repossessed
if they lose their job, like all sorts of real
serious issues that will come of this. But I think
what I keep in mind is one point six percent
(33:48):
of all mortgages compared to one in five back in
the early twenty tens. It's just not an issue.
Speaker 5 (33:54):
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Speaker 2 (35:03):
Wall Street Journal Exclusive, Amazon and Microsoft are backing efforts
that would restrict and video's exports over to China. I
assume Paul that this comes from a driving sense of
patriotism that these two companies share in the need to
beat China in the AI race, Right.
Speaker 3 (35:19):
Mike, This would be like if you and I were
doing a forty yard dash and there was some proposition
out there for you to have your legs tied together,
and I would be like, Yes, I think that's a
good idea.
Speaker 4 (35:29):
Man, Mike schev his legs together.
Speaker 3 (35:30):
In this race for big money between the two of us,
that seems very fair to be in something that clearly
the two of them are jumping on the same notion
that can we hamstering our competitor.
Speaker 4 (35:40):
Sure, yeah, we're all for that. That sounds great.
Speaker 2 (35:43):
So Congress is considering this legislation that would further restrict
the sale of chips to China. There's been some reporting
that we'll get into over the course the last few
weeks about how China has been getting around the import
restrictions of Nvidia chips, or the export restrictions rather of
Nvidia chips. But very obviously the only reason Amazon and
Microsoft care about this is because it means that they
(36:05):
can get the access to chips over Chinese customers, and
they can get them at a cheaper price, Right, supply
and demand. Baby, if there is, If there are fewer
buyers of these semiconductors, then you know, even if you
have really deep ties with the company that you are
buying from, you are going to support a restriction of
these chips elsewhere, and you're going to get a better
price and more of them than if you have to
(36:26):
compete with Yeah. Sure, I was trying to come up
with one of the names. Thank you for filling me
in there. The ways in which China has been getting
around these restrictions, though, have been pretty interesting. I think
it was actually the Journal Too that published a piece
on this of how they do so, and ultimately and
Video cannot and does not seemingly sell large numbers of
(36:48):
chips directly to Chinese entities. There'd been a lot of
hot water if they did, and so they don't. They
really don't do it. But you have to remember what
we're talking about here, which is they want to have
access to these chips to be able to run computer programs.
They don't necessarily need to physically have a semiconductor. It's
(37:09):
not a magnet that you need to put into a
device that you run. You just need to have the
computing power and so what the Wall Street Journal alleges
has been happening is, for instance, a company in Indonesia
will buy a bunch of Nvidia chips. They will sell
them to a data company, a data center company in
Indonesia that again is not Chinese owned, but that data
(37:32):
center company that is now running these Nvidia chips will
have a contract with a major Chinese tech company to
run all of their computer programs on this data center
that is, you know, geographically pretty close to China and
has some politically close ties. And when asked about this
type of arrangement, even government officials here in the US
have made the point that it's not terribly clear that
(37:53):
that sort of arrangement is illegal under these terms. And
so there are all these backdoor ways of accessing this stuf.
And it's why Congress is looking at it again, because
this is not your traditional product. It's not a weapon,
it's not a gun that you can easily just restrict
access to. It is this device that is accessed in
(38:14):
the cloud across the Internet, and where it's geographically located
is not necessarily the most important factor to consider.
Speaker 3 (38:23):
The other thing I wonder is just how much enthusiasm
there still remains from China to buy these chips because
there's been a lot of big push to go domestic
in terms of those chips.
Speaker 2 (38:32):
Yep, there has been, and that's been pressuring the market
as well. We've got to take a quick break, but
a lot more to cover. On the Financial exchange, one
of the three major indices has reversed itself into the
positive for the day. We'll be covering that and more
next
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(01:03):
This is the Financial Exchange with Mike Armstrong and Fall.
Speaker 2 (01:07):
Lane, Good morning, Happy Friday, Welcome to the Financial Exchange.
It's Mike, Paul and Tucker with you on a red
day out there on Wall Street. We've got the Dow
currently off over five hundred points, about one point two percent,
and the SMP and NASDAC both down about six tenths
(01:30):
of a percent on continued deterioration. I suppose in the
optimism about the artificial intelligence trade will be diving in
on that, as well as the government reopening and some
new trade deals to be announced as well when it
comes to especially items you might be seeing at the
grocery store. But Paul, I want to hone in here
(01:52):
on the last couple of weeks, really, I think is
where the focus should be when we're talking about the
deterioration of equity markets. And to be clear, you know,
we're not talking about anything extremely severe, but it does
just seem to me that over the course of the
last few weeks, every time that you've made a possible
(02:15):
uh what am I saying upswing in markets, it's been
immediately followed by a downturn. And as of right now,
you know, we're only off a few percentage points from
the all time highs reached back at the end of October,
but we've seen now two days of sell offs, and
I really point to I guess the last two weeks
focusing in on the commentary from Michael Burry and the
(02:39):
commentary from some large bank CEOs, and now it seems
to be all that anyone is talking about is the
AI investment? Is it realistic? Is it going to come
crashing down? Is it the dot com bubble all over again?
That narrative can change again, But you do have to
ask yourself at this point, Okay, if sentiment is shit,
(03:01):
what is going to shift it back in the other direction?
And That's kind of where I'm landing with this is
it seems to me the sentiment has had at least
a temporary shift in terms of what all this means
for the stock market and the economy, and so is
that overblown? Is it going to get shifted in the
other direction? And what might be the cause of a
shift back towards growth in the markets and the optimism
(03:25):
for AI.
Speaker 3 (03:25):
Really where we would have to start, Mike, likely is
earnings reports that have already surpassed but for the next
quarter from some of the hyperscalers, where they report that
particularly on the cloud capacity the cloud revenue, which is
where you'd likely see most of this accrual of sort
of revenue benefits from Microsoft from an Amazon basically stating
(03:48):
that they have seen just tremendous demand and continued frenzy
for uptick of the consumption of this cloud computing. That
would translate to likely more developers in artificial intelligence just
consuming more and more of it.
Speaker 4 (04:03):
On top of that.
Speaker 3 (04:04):
In Nvidia could be another for some reason that the
demand that they see for their next version of the
GPU that's gonna come out maybe later next year, or
anything of that nature. Those would be the areas that
I'd probably point to or some sort of revolutionary change
with chat gipt where it just moves up, it has
(04:25):
a breakthrough to another level in terms of the applications.
I'm pulling its straws a little bit, but not so much.
Speaker 2 (04:31):
I mean, Nvidia is the largest company in the world
now they're reporting earnings Wednesday of next week. That certainly
I think has the ability to shift overall sentiment. I
guess you know what, I started with a presupposition that
you agree with me on this turn in the narrative.
Do you do you see that same turn in the
narrative that I am seeing or am I just being
(04:52):
overly pessimistic about things right now.
Speaker 4 (04:54):
In terms of the coverage of artificial intelligence, Yeah, I.
Speaker 2 (04:57):
Mean it seems to me that over the course of
the last two weeks, especially the coverage of AI, the
skepticism about the payoffs and benefits, and maybe not so
much the technology itself, but the massive spending and where
it's coming from and how much longer it continue can continue,
It seems to me to be called into question more
of the last two weeks than any time in the
last year.
Speaker 4 (05:17):
Definitely has picked up.
Speaker 3 (05:18):
I would more bifurcate it between call it the summer
August sort of the fall is where I've felt September,
October November that there has been much more discussion and
scrutiny on the amount of money being spent by these companies.
It always was, we were always aware that capital expenditures
for Meta and some of these others were increasing, But
(05:39):
it just seems like from a news media coverage standpoint
that there has been a tremendous amount of more focus
on cheefs. This is a lot of money. Are they
going to get the revenue to justify. Obviously, when some
of those announcements came out, that would probably be the
first place that you want to go, But it just
seems like that has been more prevalent recently. That's the
way I would sort of divide it. You're right, then
(06:00):
the last week or two it's picked up even more.
But there's the Oracle Cloud deal is probably a good
example of when was that announced. That was when we
saw that might be a couple a month or two.
Speaker 2 (06:12):
Back, we saw that that was the one with open
Ai and the miracle three hundred billion dollars.
Speaker 3 (06:17):
I believe that they were projecting of, you know, future
revenue growth and the stock went up thirty percent in
one day, and since then it's sold off to levels
lower than it was there. That feels like to me
trying to see if I can get a pinpoint on
when that happened where there was a bit of shift
because they have to finance that with a lot of debt,
and that's where we've had more of these conversations that
you and I were having off eras geez, how much
(06:38):
how much debt is being taken on.
Speaker 4 (06:40):
For this build out?
Speaker 3 (06:42):
And that was September tenth, so that that kind of
moves in lockstep with what I was thinking there.
Speaker 2 (06:48):
Here's here's where I keep landing with all of this stuff.
And you know, the more I read and the more
I look into it, I don't think there's much debate
that AI is going to be a truly transformative technology,
the scale of which is maybe similar to the Internet,
if not greater. I think there's surprisingly like general agreement
(07:09):
on that. I don't hear a lot of people. I
hear a lot of people saying it's going to be
a terrible transformation and detriment there, and detrimental to labor
and to all sorts of negatives. But even there I
see them acknowledging that it will be transformative. So I
don't hear much debate there. Where I start to get
(07:30):
when when you start to ask the companies, you know,
where's the payoff going to come from? That's where I
start struggling. And because they don't know the answer, right,
they're building all this out with the idea that you know, hey,
build it and they will come. And I've heard comments like, oh, well,
we're just waiting on the uber of AI to come around.
(07:53):
The Facebook of artificial intelligence to come and exist, and
then we're going to have this massive customer for all
this build out that we're doing. And then you dive
in a little bit more about you know, what AI
can do, and they're focusing on the business customers that
are going to pay for these services, and AI, you know, honestly,
is really good at some very boring things. You know,
like if you're dealing with I'm trying to think of
(08:17):
a really a really boring but you know, good use
case of artificial intelligence. You're dealing with a couple of
files that have you know, naming conventions that are a
little bit different. AI would be really good at going
through that, which a human being probably does now, and
you know, removing the extra digits on the ZIP code
(08:39):
or something like that to be able to match the
files together. It's not sexy, but you pay somebody to
do that right now, and AI can do it faster, cheaper,
and better. The problem then becomes when you ask these
companies a little bit more like, okay, but what's somebody
going to be willing to pay for that? They then
kind of shift their story over to well, you know,
that's stage one, but then really what we're getting to
(09:00):
is artificial general intelligence. And when they talk about artificial
general intelligence, AGI if you will, I'm I don't know,
I'm getting it's almost people talking about a religious experience.
And that's where I started to get really concerned. It's like, hey,
you know, we have this, we have this thing that
(09:21):
can do some really practical things for businesses and reduce
headcount and make people more efficient. But someday, you know,
what you're really betting on is this idea that you know,
computers are going to get to artificial general intelligence and
then you know it's infinite from there. And I don't know,
(09:42):
I struggle when people make that type of argument to me.
Speaker 4 (09:45):
I can't go yeah, I can't go there.
Speaker 3 (09:47):
It was something that I dove into at first, but
I can't really go that far with it. But let's
fin back to maybe the more elementary version of it is,
you know, if it's going to be a truly transformed technology.
It does seem like most people are on board with
and the parallels to the Internet maybe are too easy
and maybe we lean on them too much, But it
seems the place I always come back to where there
(10:09):
was a bubble that was created in the late nineties.
There was reason for that bubble, though if you look
out the next decade into where our lives are today,
the vision behind it was accurate. It's just the valuations
on the companies got out of whack. And also there
were some companies that benefited from that tremendously, and no
one could have projected how big they were going to
(10:29):
get Google, Amazon, eBay, PayPal, et cetera. And probably the
same happens here in some extent is that there are
going to be some huge winners, but there also will
be some huge losers. And also we may be overbuilding
infrastructure that to this point we don't know where the
revenue or where the innovation is going to come from.
Yet that's what makes it so hard, and that's what
(10:51):
I think made it so difficult with the Internet is
you just you didn't know what it was going to
look like, and that's where you can get valuations out
of whack.
Speaker 2 (10:58):
Let's take a quick break. I want to organize our
thoughts on this AI conversation. It's going to permeate the
show throughout today and throughout the next several weeks. Let's
say a quick break and just final thoughts on where
we've come over the last couple weeks on the AI trade, markets,
optimism for pessimism about it. That's next year on the
Financial Exchange.
Speaker 1 (11:16):
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(11:36):
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Speaker 5 (11:46):
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Speaker 2 (12:01):
So before the break, we were wrapping up some conversations
about the the AI trade and.
Speaker 4 (12:07):
We've got to figure it out.
Speaker 2 (12:09):
Yeah, yeah, we have all the answers here at the
Financial Exchange, as you know. But there has been increased
pressure on markets. At least, I don't think there's be
any particularly tough questions of the companies involved. There hasn't
really been the opportunity to ask those questions. But I
think generally speaking, there's been increased scrutiny over the levels
(12:30):
of spending. And again to highlight a few of these
spending items, Open Ai, for example, has pledged to spend
one point four trillion dollars over the course of the
next decade on artificial intelligence build out. And they're a
company that I think at last last look, they're going
to do between fourteen billion and twenty billion dollars of
revenue this year.
Speaker 3 (12:50):
And reported a Q three loss of twelve point six
billion according to micro Sure.
Speaker 2 (12:54):
So, like, you know, these are big, big promises, I think,
is the point that I am making here. And so
the question that I continue to ask myself is are
we headed for a repeat of the dot com era?
And my guess would be not. History rarely repeats itself.
(13:18):
Rhymes in certain ways, it looks similar in certain ways,
but history never exactly repeats itself. But the problem during
the dot com stage was a massive amount of build
out and a bunch of bets on companies that you know,
didn't really have the business models that people thought that
they did. And so the question this time around is
(13:38):
how long does it take for I mean, I don't
think people are wrong to point to the Ubers and
facebooks as those companies that revolutionized the world on top
of the Internet infrastructure. But my question is how long
does it take for that to come about? I don't
you know, I don't supposed to have an answer on
all this, but maybe the maybe the Internet and AI
(14:00):
are completely different and you're going to have those massively
revolutionary new tools rolled out in the next six to
twelve months. And it's not quite the concern that the
dot com bubble was because again, when when did Facebook
go public? Like twelve twenty twelve.
Speaker 4 (14:15):
I created in two thousand and four, sure, but.
Speaker 2 (14:17):
You know years after the you know, the hype of oh.
Speaker 3 (14:21):
Totally I was going to go that with Google. I mean,
Google's probably the best example, like acting as basically.
Speaker 4 (14:25):
The front door for the Internet.
Speaker 3 (14:27):
They were probably early two thousands in terms of when
they really picked up significant momentum. I believe their IPO
is maybe oh four you can you can quote me
on that.
Speaker 2 (14:40):
Wow, August nineteenth of four at eighty five bucks.
Speaker 3 (14:44):
On that, So that's five years removed. I drive a
lot in for this job, listen to podcasts in the car,
but that's far removed from probably the peak valuations that
you saw, and my point, I think that you could
just see a lag between the valuations that some companies
have received today to the actual optimal benefit that you
(15:05):
get from the technology. You're right, maybe it doesn't happen
the same way, but it is reasonable. I feel like
to say that the market perhaps gets ahead of the
true growth of a technology. And maybe that's what we
see is that five years from now businesses operate far differently.
But today the valuations are sort of accounting as if
(15:28):
it's going to happen the next six to twelve months.
Speaker 2 (15:29):
What do I do as the everyday person about this
hold steady?
Speaker 3 (15:34):
No ma with the Google thing or Amazon, you never
want to known, but just the technology did deemed it
ended up being extremely beneficial and changes the way that
we operate our business today.
Speaker 2 (15:47):
It turned out to be worth it.
Speaker 3 (15:49):
I was talking to a client the other day and
just crystallized it for me very simply. And when they
saw a computer on the desk, like what is this box?
And what are we going to do with it? And
now it's on everyone's desk and you know what you're
gonna do with it?
Speaker 2 (15:59):
It's all you don't know what you can do without it?
The other piece that could be different this again. I
don't really buy the arguments that it's different this time.
I never do. But the other piece that is fair
bit different than it was back then. The large companies
that are dominating the story today, that are you know,
really placing a lot of this, have much deeper motes
(16:22):
in much deeper pockets than they did back in nineteen
ninety nine. Right, I don't think they should, right Like
I don't love the idea that Google was deemed a
monopoly and then not broken up. I don't love the
fact that Amazon has been able to avoid any sort
of monopolistic concerns. But these companies are operating on a
scale that's far different than where they were back when
(16:44):
the you know, the similar or comparable tech companies of
the late nineties were, And so again, maybe that makes
it different this time. Maybe it makes it so that
there can't be some new Mark Zuckerberg star like startup
that comes along five years after the in and really
revolutionizes things, because they'll just get bought.
Speaker 4 (17:04):
I don't know that's fair. That's fair.
Speaker 2 (17:07):
Again, history does not repeat itself, But you cannot avoid
anymore the comparisons to the dot com bubble, They are
unavoidable if you if you look at this market today,
you know, based on any valuation metric, the only time
is more expensive was pre dot com bubble, And when
(17:27):
you talk to any serious investor, they are certainly aware
of the comparisons of that point in time. The other
piece of the narrative that I think has shifted a
little bit over the course the last few weeks has
been around interest rates. A few months ago, the idea
of a December rate cut was pretty much baked in.
Over the course of the last several weeks, you've had
FED chair or voting FED member after voting FED member
(17:51):
come out and refute the idea that that is baked in.
At this stage, we are now looking at a fifty
to fifty shot a coin toss of a rate cut
at that December tenth meeting. What do you suppose could
change could shift that? Again? If I think about things
that have changed in markets, this is definitely one of them.
The idea that, hey, rates are not going to come
(18:12):
down as quickly as some had been supposing. We've had
a government shut down for the last month and a half.
I would imagine there could be some data that could
change their minds on this.
Speaker 3 (18:21):
It's going to have to be the November CPI report
if they're able to get that together, which I think
would be released before this tenth meeting. I think it
would come out around the eighth of the ninth if
that was hotter than anticipated, assuming that they were able
to get that out. Plus, the tricky thing will be, Mike,
is if we have some poor labor reports come out
(18:42):
from October or what was it, the September one was
already put together right October, where you don't really have
a chance of getting.
Speaker 2 (18:47):
Made so October, from what I understand, we are going
to get the business side of the survey and not
the household side of the survey, so you'll no job creation,
you won't know unemployment rate in October.
Speaker 4 (18:58):
This to me is going to ship a lot.
Speaker 3 (19:00):
Really simply to put it is because we have a
lot of economic data reports to go through over the
course of the next few weeks. So this fifty to
fifty day is meaningless in a sense, or rather reflects
the uncertainty on where they're going to go, because you
need to have called three to five economic reports come
out before this meetia occurs.
Speaker 2 (19:16):
Let's take a quick break. When we come back mention
equity markets under pressure, We're gonna have a full recap
for you next with Wall Street Watch.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show breaking business news is always first break here
on the Financial Exchange Radio Network.
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Supporting those who.
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Of Massachusetts, and thank you veterans for all you've done.
Speaker 1 (20:22):
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Net.
Speaker 5 (20:30):
Market's in the red again today after yesterday's sell off,
driven by high valuation, concerns in the tech sector, and
uncertainty about interest rates. At the fed's upcoming December meeting. However,
we are seeing some dip.
Speaker 4 (20:43):
Buying right now.
Speaker 5 (20:45):
The Dow is down by over eight tenths of a
percent or four hundred and three points. SMP five hundred
now down three tenths of one percent or twenty points.
NASDAC now down only a tenth of a percent or
thirty eight points. It's lower. Russell two thousands down about
half a percent. Ten year treasurevealed is flat at four
(21:06):
point one point one nine percent. In crude oil up
over two percent higher, trading just above sixty dollars. A
barrel breaking news from Walmart this morning after the retail
giants said CEO Doug McMillan is retiring early next year.
McMillan has served as Walmart's CEO since twenty fourteen. John
Ferner will take over the role and has been the
(21:28):
CEO of Walmart's US business since twenty nineteen. Ferner started
with Walmart in nineteen ninety three as an hourly associate.
Walmart stock is down by two percent. Meanwhile, Applying Materials
reported better than expected quarterly results were driven by the
AI boom. However, the semiconductor maker gave a disappointing outlook
(21:49):
for next year, including modest full year revenue guidance, shares
are down about two percent. Elsewhere, ticket vendor stub Hub
reported a third quarter net loss of about one point
three billion dollars. The company blamed a one time stock
based compensation charge. StubHub also said it would not provide
guidance for the current quarter. StubHub share sinking twenty four percent,
(22:11):
shares of Sidera Therapeutic surging one hundred and five percent
after Murk agreed to buy the company for about nine
two billion dollars, and according to the Wall Street Journal, Paramount,
Comcast and Netflix are preparing bids for Warner Brothers Discovery.
The report also said Warner Brothers Discovery has an initial
deadline for first round bids of November twentieth. Warner up
(22:37):
by over two percent. I'm Tucker Silla, and that is
Wall Street Watch.
Speaker 2 (22:41):
It wasn't planning to go there. But can we talk
about Walmart for a moment here? Sure, I feel like
they've been getting dragged a little bit during the government
shutdown on the Snap benefit conversation. I've just seen them
in social media mentioned as like, hey, you know, why
are there so many people on Snap benefits? It's because
companies like Walmart don't pay their employees enough. And you know,
(23:02):
there's been rumors that as part of the like onboarding
stuff with Walmart, as an employee, you learn how to
file for food stamps because you're eligible for them based
on the hourly wages. I don't know if there's any
truth to those rumors, but I feel like they've been
getting dragged a little bit. I want to mention for
a moment here that Doug McMillan, the current CEO of Walmart,
worked for Walmart throughout his entire career. He started took
(23:25):
his first role for the company as a teenager in
nineteen eighty four. Moved on to be a buyer, but
you know, he was a teenager working at Walmart as
a summer associate and worked his way up through the
corporate ladder. They funded part of his college education and
his MBA. His replacement that was just named John Ferner,
who I didn't know anything about, but Tucker mentioned this
(23:47):
as well, began his career in ninety three as an
hourly store associate. That is kind of unheard of in
the world. That's all business.
Speaker 4 (23:55):
It is really cool.
Speaker 2 (23:56):
Yeah, like founders, sure yep. But when when you're talking
about two CEOs in a row who came up from
starting as hourly employees the lowest level of a company
as large as Walmart, and are now running that company,
you gott applaud that for a moment, definitely, right, Like
(24:17):
that is very impressive to be able to state something
like that to your employees. Like everybody knows Walmart wages
kind of suck. A lot of people look at it
as a job for, you know, an entry level person
to start their career at. But to be able to
say that two of your last CEOs started in that
hourly role and were supported throughout their career to become
(24:41):
CEO of one of the largest employers in the world,
that's pretty damn impressive.
Speaker 3 (24:46):
And they have a lot of examples of managers taking
over that position starting at the lowest level two Like,
we're focusing on the CEO, but this is not uncommon.
They do know that ethos of promoting from within. If
you look at the stock price and that's what you know.
Sam Walden, who's who's passed but in his sort of
you know, dying days, was really proud of just how
much wealth he had created for those employees who were
(25:09):
shareholders in the company over that span of time.
Speaker 2 (25:12):
Again, company's got plenty of faults. I'd been saying that
they're the holy grail of everything, but man, that that
one piece, not to mention like everything else that they
have managed to sidestep. And you know, go look at
Target versus Walmart right now and look at that case study.
It's it's pretty it's pretty uh interesting. But yeah, I
(25:32):
just found that piece to be pretty unheard of in
the world of CEOs and business.
Speaker 3 (25:37):
Is it wrong that I was kind of happy that
stub hub was down twenty five percent just because I
don't like the company and the online ticketing and.
Speaker 4 (25:43):
Yeah, take that. I think that they're based out of
Boston though, right, so.
Speaker 3 (25:47):
I should maybe maybe I should hold that back a
little bit.
Speaker 4 (25:51):
But just concerts have gotten too expensive, come on, yeah,
the fees.
Speaker 5 (25:55):
It's crazy.
Speaker 2 (25:55):
It's we got off track there, Sorry about everybody. Back
in September, the White House shoreshadowed by issuing executive order
the President did saying it would consider reduction in tariffs
on some items that are not produced in the United
States so long as those foreign nations agree to trade
deals with Washington. We're getting a bit of a taste
(26:16):
of that at the grocery stores this morning. The US
plans to eliminate tariffs on bananas, coffee, beef, and certain
apparel and textile products under framework agreements with four Latin
American nations. Senior Administration official told reporters on Thursday. The
move expected to apply to goods from Ecuador, Argentina, l Salvador,
and Guatemala. Part of a pretty big shift here, especially
(26:38):
when it comes to grocery prices. And I don't look
at this as much other than a targeted approach to
trying to find ways to bring down grocery prices, and
frankly makes a fair bit of sense to me. I mean,
we are you can tear iff bananas by seventy percent.
We are not going to have a big banana industry
or coffee industry in the United States unless there's sort
(27:00):
of technological revolution around how you grow this stuff.
Speaker 3 (27:02):
No, the climate's just not therefore it so this to
me seems like really aimed and focused at any inflationary
concerns that may come over the course of the next
couple months. This is from a policy standpoint, the best
that you can do to attack this issue.
Speaker 2 (27:18):
The more interesting side of the terriff. I mean, frankly,
since like June, tariffs have taken a big back seat.
Speaker 3 (27:24):
It's been nice, It's a radio has been nice to
not much.
Speaker 2 (27:29):
And I'll continue to say that we really shouldn't report
on tariffs until we have actual news to report rather
than rumors.
Speaker 4 (27:36):
The Supreme Court.
Speaker 2 (27:36):
Ye, yeah, I mean this piece is an actual announcement
from the White House, so I think it's worth reporting on.
But you know, all of this to me is very
much in question right now as to a whether the
Supreme Court is going to alter what the Trump administration
is able to do on tariffs. That could run anything
from throwing it out and refunding everything that was paid
(27:58):
to some sort of restrictions on what can be used
going forward. And then the follow on question to me
is if that happens. I know the Trump administration is
promised and rumored to look at other strategies to implement
tariffs again, but will they actually do so. It's turned
out to not be an immensely popular policy decision when
(28:20):
it comes to tariffs. It has you know, sparked anger
amongst some donors, and it may you know, if the
Supreme Court does rule it out, I wouldn't be shocked
to see the Trump administration take a step back and say,
you know what, sorry, hands are tied. Unless Congress will
is willing to do something on this, we're just gonna
have to walk away from tariffs.
Speaker 3 (28:38):
Really, you don't think they'll try and pivot and find
because I've read that there's other ways that they could
get there.
Speaker 2 (28:43):
Are they take longer, they'd be you know, more dragged
around by processes, but there are other laws that they
can use to implement tariffs. And a few months ago
I would have told you like, yeah, that's definitely what
we'll see today. I'm just unsure, you know, we we
have gotten so far away from the April announcements. We
keep getting more and more of these negotiations when it
(29:06):
comes to these items, and so I do just openly
wonder if you have, you know, a much more refined
view on tariffs come twenty twenty six. If the Supreme
Court does in fact throw it out. Those are all
a bunch of big ifs, and it's all conjecture at
this stage, but we're just not hearing about it.
Speaker 3 (29:24):
My head would spin as to what that would mean
if they had to be all refunded the tariffs or
if they threw it out. I just can't even go
there on a Friday.
Speaker 2 (29:32):
Hundreds of billions of dollars that you need to figure
out how to refund to individual companies that are sometimes
the size of five employees. Good luck. Yeah, that would
be pretty messy. Let's take a quick break here when
we come back, nine hundred thousand new homeowners underwater on
their homes. Does that signal a problem with the housing market.
We'll be covering next on the Financial Exchange.
Speaker 1 (29:54):
Breaking business news as it happens only here on the
Financial Exchange Radio Network. The Financial Exchange streams live on YouTube.
Like our page and stay up to date on breaking
business news All morning Loan. This is the Financial Exchange Radio.
Speaker 2 (30:11):
Network, Chucker. Have you noticed that the more I like
a song, the longer I let it play?
Speaker 4 (30:26):
Let a Brad Baby?
Speaker 2 (30:28):
A couple of nearly nine hundred thousand new homeowners are
underwater on their mortgages. According to market Watch, this is
signaling a troubling sign for the economy. Paul, are you
troubled by the nine hundred thousand homeowners under If I
were one of the nine hundred thousand homeowners. Don't get
(30:50):
me wrong, I would be rather troubled by the.
Speaker 4 (30:52):
Feel for them.
Speaker 3 (30:53):
But when you have what three hundred and thirty million
people in this country and maybe one hundred million households, No,
from a macro economic perspective, not troubled. This is in
different pockets of the country that you could probably guess
where they are Texas, Florida, many homes that have been
purchased in the last three or four years, and many
(31:14):
loans that were the is it faha that yeah faha,
and VA loans where you're basically only putting three and
a half to five percent down as a down payment,
so there's very little equity room to work with in
the first place, unlike your traditional twenty percent down where
there's much more of a buffer if the home value
is to decline.
Speaker 4 (31:33):
So not concerned.
Speaker 2 (31:34):
I was looking for some comparisons of when you do
the math in that nine hundred thousand, it estimates that
about one point six percent of all mortgage holders are
underwater in the United States currently. I was looking for
some sources on this, and according to the Brookings Institute
back in twenty eleven, there were approximately eleven million homes
(31:57):
underwater twenty two to twenty three percent of all mortgage
properties in the country. Obvious concentrations Florida, Nevada, Arizona. I
think Nevada is something like half of all properties we're
underwater at one point in time. We are nowhere near
a problem on this issue, from either a numbers perspective
or a percentage perspective, and I suspect we are not
(32:20):
going to get there.
Speaker 1 (32:22):
No.
Speaker 2 (32:23):
Like again, I cannot emphasize enough how much this is
not an issue that we need to worry about right now.
Plenty of other ones out there, Like, if you want
something to scare you, there's plenty out there for you
to be scared about. I really don't think underwater homes
is going to be the issue that sinks this economy.
I do think that this speaks volumes about the state
(32:43):
of the housing market. I do think we are an
uptick here. I think a year from now, I'd be
willing to bet that there are more homes underwater than
there are today. I think it's a drag on the
economy because there's not going to be as much housing
construction spending that you know that has clearly reversed its
because guess what, These homes are underwater in the exact
places that home builders like to build. But again, back
(33:06):
in the early twenty tens and post Great Financial Crisis,
there was such an immense amount of pressure on the
housing market that we basically didn't build a third as
many homes as we normally would for the course of
a decade. I just don't think we're going to get there.
I just don't see a possibility that we get there.
But nonetheless, inventory is going to continue to tick up
(33:28):
in some of these municipalities and some of these states
there there are under pressure. There could be some deals
to be had. There will be some individuals who are
forced to sell, that have their homes, you know, repossessed
if they lose their job, like all sorts of real
serious issues that will come of this. But I think
what I keep in mind is one point six percent
(33:48):
of all mortgages compared to one in five back in
the early twenty tens. It's just not an issue.
Speaker 5 (33:54):
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Speaker 2 (35:03):
Wall Street Journal Exclusive, Amazon and Microsoft are backing efforts
that would restrict and video's exports over to China. I
assume Paul that this comes from a driving sense of
patriotism that these two companies share in the need to
beat China in the AI race, Right.
Speaker 3 (35:19):
Mike, This would be like if you and I were
doing a forty yard dash and there was some proposition
out there for you to have your legs tied together,
and I would be like, Yes, I think that's a
good idea.
Speaker 4 (35:29):
Man, Mike schev his legs together.
Speaker 3 (35:30):
In this race for big money between the two of us,
that seems very fair to be in something that clearly
the two of them are jumping on the same notion
that can we hamstering our competitor.
Speaker 4 (35:40):
Sure, yeah, we're all for that. That sounds great.
Speaker 2 (35:43):
So Congress is considering this legislation that would further restrict
the sale of chips to China. There's been some reporting
that we'll get into over the course the last few
weeks about how China has been getting around the import
restrictions of Nvidia chips, or the export restrictions rather of
Nvidia chips. But very obviously the only reason Amazon and
Microsoft care about this is because it means that they
(36:05):
can get the access to chips over Chinese customers, and
they can get them at a cheaper price, Right, supply
and demand. Baby, if there is, If there are fewer
buyers of these semiconductors, then you know, even if you
have really deep ties with the company that you are
buying from, you are going to support a restriction of
these chips elsewhere, and you're going to get a better
price and more of them than if you have to
(36:26):
compete with Yeah. Sure, I was trying to come up
with one of the names. Thank you for filling me
in there. The ways in which China has been getting
around these restrictions, though, have been pretty interesting. I think
it was actually the Journal Too that published a piece
on this of how they do so, and ultimately and
Video cannot and does not seemingly sell large numbers of
(36:48):
chips directly to Chinese entities. There'd been a lot of
hot water if they did, and so they don't. They
really don't do it. But you have to remember what
we're talking about here, which is they want to have
access to these chips to be able to run computer programs.
They don't necessarily need to physically have a semiconductor. It's
(37:09):
not a magnet that you need to put into a
device that you run. You just need to have the
computing power and so what the Wall Street Journal alleges
has been happening is, for instance, a company in Indonesia
will buy a bunch of Nvidia chips. They will sell
them to a data company, a data center company in
Indonesia that again is not Chinese owned, but that data
(37:32):
center company that is now running these Nvidia chips will
have a contract with a major Chinese tech company to
run all of their computer programs on this data center
that is, you know, geographically pretty close to China and
has some politically close ties. And when asked about this
type of arrangement, even government officials here in the US
have made the point that it's not terribly clear that
(37:53):
that sort of arrangement is illegal under these terms. And
so there are all these backdoor ways of accessing this stuf.
And it's why Congress is looking at it again, because
this is not your traditional product. It's not a weapon,
it's not a gun that you can easily just restrict
access to. It is this device that is accessed in
(38:14):
the cloud across the Internet, and where it's geographically located
is not necessarily the most important factor to consider.
Speaker 3 (38:23):
The other thing I wonder is just how much enthusiasm
there still remains from China to buy these chips because
there's been a lot of big push to go domestic
in terms of those chips.
Speaker 2 (38:32):
Yep, there has been, and that's been pressuring the market
as well. We've got to take a quick break, but
a lot more to cover. On the Financial exchange, one
of the three major indices has reversed itself into the
positive for the day. We'll be covering that and more
next
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