January 23, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the S&P 500 getting close to setting a new record. What is a stock market bubble? Are we in a market bubble right now? Where economists think the Trump economy is headed. OpenAI's Stargate deal heralds shift away from Microsoft. Fresh fires break out in LA. Is this a continuation of the previous fire or a new one? It matters to insurance companies.
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Speaker 1 (00:00):
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(00:42):
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(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Kicking off Thursday on the Financial Exchange Chuck, Mike and
Tucker with you, and we got the.
Speaker 3 (01:14):
S and P five hundred.
Speaker 2 (01:17):
Knocking on the door of new record highs. That's right,
the S and P five hundred. Yesterday with another leg
up and just you know, went right up to that
sixty one hundred mark.
Speaker 3 (01:30):
And said, ooh, actually it's a little cold in here.
Speaker 2 (01:32):
I think I'm gonna turn around and closed yesterday a
little bit lowered about I think it was sixty eighty two,
but kind of knocking on the door of the highs
that it previously touched in early December. And again we've
we've basically been seeing this chopping between sixty one hundred
on the high side and about fifty eight hundred on
(01:53):
the low side for the better part of the last
two and a half, almost three months now since election day.
And so hey, can you find a way to break
through that sixty one hundred mark or can you find
a way, you know, to break through that fifty eight
hundred mark? Those are the questions, because we're getting bored
just sitting here.
Speaker 4 (02:13):
Man.
Speaker 5 (02:13):
Well, let's talk about the items that could get you there.
We've got more inflation data towards the end of this month,
but nothing that's going to move things much. The earnings
would be the main item.
Speaker 3 (02:25):
Next, big next.
Speaker 5 (02:26):
We got some fun ones kicking off next week, some
big earnings coming up, and so far they've been pretty good.
Beyond that, you then have inflation and unemployment readings for
the month of January, but you won't see those for
another two to three weeks, and so it's it's mainly
the earning story in terms of what could drive things
forward here. So what will we see in the coming
week here from a big name earnings?
Speaker 2 (02:47):
Chuck, So I'll read the list that I have. I
know the last time my list was wrong. So if
Tucker has anything that appears different on his side, uh,
you know, he can let us know, kick things off
with a.
Speaker 3 (02:58):
Big one on Monday and t wrong. No, just kidding,
go keep going.
Speaker 2 (03:02):
Actually no, it is wrong because eighteens he's just not like,
what are they really gonna? Hey, we.
Speaker 3 (03:09):
They might have bought direct TV again.
Speaker 5 (03:11):
The only thing that I could expect from them would
be something really stupid.
Speaker 2 (03:14):
We carried some phone calls back and forth, not to
diminished like what they do, but more just that there's
nothing particularly exciting.
Speaker 3 (03:21):
That happens with them at this point.
Speaker 2 (03:23):
Uh, Tuesday start to get a little bit busier. You
got Raytheon and Boeing and Lockheed Martin, so big aerospace
companies reporting. Then Starbucks also reporting, which is gonna be
interesting first full quarter for what's his name as the
the Brian Nickel.
Speaker 5 (03:37):
I do like the combination of Starbucks with aerospace companies.
Speaker 2 (03:41):
But listen, it's uh, it's it's just the stars companies
that report together. I don't know what else they do together,
focused on the stars exactly. Uh, You've got Wednesday's the
big one, Microsoft, Meta, and Tesla all on Wednesday. So
between the three of them, you got a bet Sizon
trillion dollars in market cap that's going to be reporting
(04:02):
on Wednesday Thursday. This is where I think the list
I have gets dodgy. My list says Apple and Amazon,
but I think they're not till the week after.
Speaker 6 (04:10):
Actually seeing Apple and Visa.
Speaker 2 (04:13):
No Amazon, so okay, Apple's right, and Visa so again
some big names. And this is before you even get
into you know, MasterCards reporting, Blackstone, Caterpillar, Honeywell, Comcast. You
know I didn't even read off some of those. T
Mobile is reporting next week as well, Qualcom ADP, So
there's a lot coming next week and ultimately until we
(04:35):
get you know, further clarity on some of the policies
such as tariffs, taxes, things like that, earnings are going
to be in the driver's seat with you know, some
potential headline risk depending on what types of policies get
an ounced, either to the upside or downside, depending on
you know, what the specific announcements are.
Speaker 5 (04:50):
Yeah, I mean, you hear stories now of whole companies
setting up war teams effectively what they're calling, just to
move through and digest all of the change that is
occurring in the first four days we're gonna half days, yeah,
of the new Trump administration. And you know, as much
as we talk about all those changes, what I found
particularly interesting is the lack of action on certain items,
(05:13):
and to me, the biggest one. There was no day
one tariffs changes anywhere in the world, and so that's
telling to me. We'll see how that continues to develop.
I do believe the Trump administration when they say they're
looking at February one as a target date. But until
Monday of this week, we didn't know of that February
one date, and so I do find a compelling that
(05:34):
there was no day one action even in regard to
trade with China.
Speaker 2 (05:38):
Yeah, and yeah, we'll have to see if things evolve
over the next you know, eight to ten days on
that front. You know, if on February third we come
in and we're like, hey, this is what you know
actually went into place over the weekend, Okay, we can
talk about that. If not, then I kind of I
guess again. I was talking to Paul yesterday about this
and I kind of got out over my ski in
(06:00):
the fall where I said, look, the Trump administration is
talking really seriously about tariffs, like more serious and staffing
up in a way that makes you think that they
are coming. And you know, they were even saying yeah,
like we're going to do this on day one, and
they did a whole bunch of other stuff on day one,
and now they're kind of signaling February first. If we
(06:21):
don't see anything on February first, I then revert to
we'll talk about it when it actually happens. But I
can't pre talk about tariffs anymore. I need to actually
see what's there. And so We'll see what happens over
the next week to ten days. But I can't pre
talk tariffs more.
Speaker 3 (06:42):
Yeah, I can't.
Speaker 2 (06:44):
I'm ready to talk about them if they actually happen,
but I can't talk.
Speaker 3 (06:47):
About what may or may not do anymore.
Speaker 4 (06:49):
Agreed.
Speaker 2 (06:49):
So we've got markets near all time highs, which leads
us to this piece from market Watch. Well, six sad as,
seven conditions are met for a stock mark market bubble.
Speaker 5 (07:01):
So first thing first, does anyone have seven conditions that
they agree upon would designate a stock market bubble?
Speaker 3 (07:09):
Well?
Speaker 5 (07:09):
Is there any defined metric out there that any respectable
entity has ever put together saying these define a bubble?
Speaker 3 (07:17):
In advance?
Speaker 2 (07:18):
If someone actually took a giant bar of soap and
got the New York Stock Exchange covered in a giant bubble,
then you could say it's a stock market bubble for sure.
Speaker 4 (07:28):
Yeah. Other than that, I have a tough time.
Speaker 5 (07:31):
But let's let's run through what he defines as his signals.
Speaker 4 (07:38):
One person signals for a This.
Speaker 2 (07:39):
Is UBS a global equity strategist Andrew Garthwaite, who I
don't know Andrew from Tim and I couldn't tell you
anything about him.
Speaker 4 (07:48):
So this is Tim Gait. Sure there is.
Speaker 2 (07:52):
Somewhere This is not to poop poo Andrew. It's much
more how this is being presented, because I'm very sure
that in Andrew's own words, it's not being said quite like.
Speaker 4 (08:01):
This, right.
Speaker 5 (08:02):
So, first one that he checks the box on end
of a structural bull market. So UBS defines the structural
bull market as when equities outperformed bonds over a ten
year period by at least five percent per year.
Speaker 3 (08:20):
Then that happened.
Speaker 4 (08:21):
I wasn't tracking it. I didn't know that anybody.
Speaker 3 (08:25):
Can't at it. So apparently they say it did.
Speaker 4 (08:28):
Sure, profits under pressure.
Speaker 3 (08:32):
Earnings growth is sloan, particularly in single little sectors. No,
it's not.
Speaker 2 (08:35):
We're projected to see like seventeen percent earnings growth this year.
That's not true. And they were faster growing last year
than the year before.
Speaker 4 (08:44):
So's I mean, maybe Nvidia's earnings growth is slowing.
Speaker 5 (08:48):
Is are you choosing specific companies under specific sectors to
say this? But I don't think you can check the
box on earnings growth slowing when we are projecting what
was it, fourteen percent growth for the year on earnings.
Speaker 2 (09:01):
Let me get you actually factset's most recent data. So
this is from January seventeenth, and what they are projecting.
This is again they take all the consensus analyst estimates
and stuff into a blender, and this is what they
come up with. Is counter your twenty twenty five fourteen
point eight percent earnings growth projected. It seems to be
pretty good. Count of your twenty twenty four was nine
(09:24):
point four So that's an acceleration. That's an acceleration, not
a deceleration. In the year before, in twenty three, I
can't remember what it was, but I can pull it
for you shortly, if you just give me just a minute.
Speaker 5 (09:36):
So he then describes a loss of breadth, so a
handful of technology giants what UBS calls the Magnificent six.
Haven't we been talking about the Magnificent seven for the
last decade?
Speaker 3 (09:47):
Why why would it be the Magnificent six?
Speaker 4 (09:49):
Don't know.
Speaker 3 (09:50):
I think that's not a movie.
Speaker 5 (09:51):
Those are driving the market while smaller stocks lag. That
is true, but it's also been true for most to
the last decade, and specifically the last three years, so
timing wise, I have some issues. My least favorite one
on the list, it's been twenty five years since the
last bubble calendar you're twenty twenty three. Okay, here, here's
(10:13):
earnings growth. Sorry, it got interrupted. Twenty twenty three earnings
growth was point eight percent.
Speaker 3 (10:20):
Okay, so point eight nine point four and now projected
at fourteen.
Speaker 4 (10:25):
That is a very clear acceleration.
Speaker 3 (10:26):
What are we talking about? I'm sorry, but that's fun.
Like this piece is fundamentally wrong.
Speaker 5 (10:31):
My least favorite one here, chuck, though, this is the best.
It's been twenty five years since the last bubble.
Speaker 2 (10:36):
Oh boy, twenty five years since the last bubble.
Speaker 5 (10:39):
Bett shows the number of which it has been twenty
five years since the last bubble, and we are putting
a check mark next to it because we do do Yeah.
Speaker 3 (10:51):
It's just like Ortiz when he's up in the playoffs
would do so.
Speaker 5 (10:55):
Sorry, the definition of this is a stock market bubble?
Are we saying that six o seven was somehow not
a bubble?
Speaker 2 (11:04):
Uh?
Speaker 4 (11:04):
Or twenty twenty one wasn't like inconclusive?
Speaker 5 (11:07):
Okay, Okay, here's one that I will just generally give you,
But I don't know that it defines a bubble.
Speaker 4 (11:15):
That this time is different narrative?
Speaker 5 (11:17):
Well, yeah, and I suspect that whenever somebody says this
time is different that they are wrong. But people have
been saying this time is different for every market cycle ever.
Speaker 2 (11:26):
Well, and even on this it says, I'll read the
next sentence, investors are betting big on generative AI is
a game changer for productivity. Okay, let's let's go back
in time. I don't know, fifteen years or so, and
I remember all of the three D printing bros. That
were like, three D printing is going to be a
game changeer for manufacturing. How much three D printing goes
(11:48):
on right now? There's there's some don't get me wrong,
but it hasn't been you know a thing. You can
go through like all these different you know things, And
just because something gets hype doesn't mean it's a bubble.
I'm not saying that this isn't a bubble, but I'm
saying this is a bad list. And some of these
are fundamentally dumb and or wrong inaccurate.
Speaker 5 (12:08):
It would be Yeah, look, I mean, I will pick
apart any of these pieces, but when you give me
one that has virtually zero statistics attached to it comparing
one market to another, and some of the statistics are wrong,
and some of the statistics are infactually inaccurate.
Speaker 4 (12:26):
Man, this is irresponsible.
Speaker 3 (12:28):
Now I'll allow for this.
Speaker 2 (12:30):
There's a pretty good chance that whoever wrote this piece
for MarketWatch, Stephen Goldstein.
Speaker 4 (12:38):
Did not summarize, did not summarize these properly.
Speaker 2 (12:42):
So I'll allow for that because something might be getting
lost in translation between Andrew and Stephen.
Speaker 3 (12:47):
Yeah.
Speaker 5 (12:47):
I don't necessarily blame Andrew for this one. I doubt
he had, you know, pre published review rights on it.
Speaker 2 (12:54):
But this is why you have to read these things critically,
as some of these things are fundamentally now true and
others why would they matter?
Speaker 5 (13:02):
What is there a set bubble clock? I love that one.
Just Oh, it's been twenty five years, so Mary.
Speaker 2 (13:10):
You got to reset the bubble clock. It's been twenty
five years, all right. I'm eagerly anticipating the stock market
bubble of twenty fifty that I'm sure we will cover
in great detail.
Speaker 3 (13:21):
At that point.
Speaker 4 (13:22):
Yes, we're all very excited.
Speaker 3 (13:23):
Let's take a quick break.
Speaker 2 (13:24):
When we come back, we'll talk about where economists think
the Trump economy is heading.
Speaker 1 (13:28):
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Speaker 2 (14:31):
All right, Mike, we got a piece from the Wall
Street Journal. It's titled where economists think the Trump Economy
is headed and where do they think it's going?
Speaker 3 (14:42):
Mike, is it to Boise? Is it kalamazoo?
Speaker 4 (14:46):
You always bring up Kalamazoo?
Speaker 3 (14:48):
So usually Topeka.
Speaker 5 (14:50):
Generally, economists have coalesced around an idea that the inflation
slight uptick that we saw in the last couple of
months of twenty four may continue into twenty twenty five.
And before we get into where economists now believe inflation
will be, I just want to bring up something that
we've talked about before, which is individual inflation expectations and
(15:12):
how those have shifted. The University of Michigan has been
doing their sentiment survey since the nineteen sixties.
Speaker 3 (15:19):
Is it maybe even fifties.
Speaker 5 (15:21):
Might be fifties or forties, And they ask things like
what do you expect inflation to be over the next
twelve months. When they did this survey back in October,
prior to the elections, Democrats were anticipating only one and
a half percent inflation over the next three twelve months.
That's after the US economy in fact, finished twenty twenty
four with two point nine percent inflation, which.
Speaker 2 (15:43):
By the way, the long term average of inflation since
nineteen eighty is two point nine percent.
Speaker 5 (15:48):
Okay, so right in line Democrats prior to the election,
we're expecting the next twelve months to show about half
of that Republicans, on the other hand, were expecting inflation
to be coming in at three point six percent over
the next twelve months. Sure, okay, fine, we fast forward
to post election Democrats now anticipating inflation coming in for
(16:09):
the next twelve months four point two percent, Republicans zero
point one percent. Chuck, how many times in the last
one hundred years would you guess, outside of a recession
that we've seen inflation at zero point one percent years
outside of a recession, side of a recession in the
last one hundred I don't have the answer, So I'm
just guessing.
Speaker 2 (16:27):
I'm just guessing very rare. We looked at this for
the last like twenty five years. The only time outside
of recession that we saw it basically anywhere near there
was twenty fifteen when Russia decided to pump a ton
of oil and the price of oil fell from ninety
a barrel to thirty. Other than that, you don't really
see inflation at zero.
Speaker 3 (16:45):
So I can.
Speaker 2 (16:47):
Say pretty conclusively, if the US avoids recession this year,
inflation will not be zero.
Speaker 3 (16:52):
So no r anywhere near.
Speaker 4 (16:54):
No.
Speaker 5 (16:55):
I mean lessons here. I just this type of response
to an election is crazy because we.
Speaker 3 (17:02):
See it every time we do.
Speaker 5 (17:04):
Let's be really clear, like Donald Trump has no ability
to wave his wand and bring down gas prices or
egg prices.
Speaker 2 (17:11):
And if he did, Joe Biden would have had the
same wand and would have waived it, and like we
all would be like, oh, like great, like thanks for
waving the wand man.
Speaker 5 (17:18):
So presidents don't do that, Congress doesn't do that, and
prices aren't going to immediately shift based on your political expectations.
Where this gets really dangerous obviously though for investors, is
I do wonder, right, like if you are that group
that says, now inflation's only going to be zero point
one percent because my guy is in office, does it
(17:38):
also influence other things that you do, like your willingness
to quit your job and go find another one, or
your willingness to invest completely differently based on your hopes
with a new White House. And I don't have an
answer to that, but I would just caution people to
check those emotions out that I've.
Speaker 2 (17:56):
Seen firsthand with people I saw back in you know,
twenty sixteen, a whole bunch of people that didn't like
Donald Trump that said, you know what, I'm selling everything
in my portfolio because he's gonna run the country into
the ground. Ye, and if you did that, you missed
out on some pretty significant gains in the market during
his term. And then in twenty twenty, a whole bunch
of people said, oh, I don't like Joe Biden like
it was the other way, and I'm gonna sell everything
(18:17):
and because he's gonna run the country into the ground.
And sure enough, you missed out on some big gains
over you know, that four year period. And it's not
to say that the market always goes up, because it doesn't.
It's much more that, hey, the president doesn't control The
president is not the business cycle, which if I ever
write a book, I'm gonna call it that and it'll
(18:37):
be about phishing, but it'll be titled that.
Speaker 3 (18:39):
Anyways.
Speaker 2 (18:41):
The big thing that I come back to on any
of this stripping aside, like any of the politics, might
I slice it, Emotional investing is bad investing, whether it's
because of politics, whether it's because you're having a bad day,
whether it's because you're having a good day, whether it's
because of anything. If you you are investing emotionally, don't
(19:05):
take a break, get yourself back together and figure out
how to make an unemotional decision, because otherwise you're putting
yourself in a position where you might make some moves
that you end up regretting later on.
Speaker 5 (19:17):
And it's not to say that the success or failure
of the stock market is because of the president.
Speaker 4 (19:22):
It's largely not.
Speaker 5 (19:23):
They might make all the best decisions and be faced
with something like COVID, which shuts down the economy and
tanks the stock market.
Speaker 3 (19:29):
Just take a quick break.
Speaker 2 (19:30):
When we come back, we got Wall Street Watch, and
then we're talking stargate.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look and what's moving markets so
far today right here on the Financial Exchange Change Radio Network.
Speaker 6 (20:01):
Well one day after the SMP five hundred hit aen
intra day high, markets today are in mixed territory as
Wall Street continues to digest more developments from fourth quarter
earning season. Right now, the Dow is up by sixty
eight points, SMP five hundred dipping four points lower, and
the NASDAC off by about a third of a percent,
(20:23):
or sixty seven points russed two thousand is down half
a percent, ten yere treas reeled up by five basis
points at four point six five percent, and crude oil
is up about two thirds of a percent, rating just
below seventy six dollars a barrel. American Airlines posted quarterly
results ahead of the opening bell this morning, beating on
(20:43):
earnings and revenue. However, the carrier projected a weaker than
expected outlook, sending that stock down by nine percent. Meanwhile,
ge Aerospace shares up by six percent after the jet
engine makers quarterly revenue surpassed estimates after an influx of
orders elsewhere. Shares in video game maker Electronic Arts falling
(21:05):
seventeen percent after the company cut its annual outlook, citing
slowing demand for its soccer franchise.
Speaker 3 (21:13):
As well as other titles.
Speaker 6 (21:15):
Al CoA shares down by six percent after the aluminum
producer swung a quarterly profit due to higher prices, but
warned that tariffs threatened by President Trump would hit the
industry's competitiveness. And after today's closing bell, we'll see earnings
from Texas Instruments and CSX. I'm Tucker Silva and that's
Wall Street Watch so earlier.
Speaker 2 (21:37):
This week, I think it was Tuesday, you had Sam
Altman from open Ai, Larry Ellison of Oracle, and Masioshi
Son of SoftBank at the White House for the announcement
of open AI's Stargate project. It's talking about potentially spinning
up to five hundred billion dollars to build new data
(21:58):
centers in the night stints.
Speaker 3 (22:02):
So a couple things on this.
Speaker 2 (22:03):
The first thing that's notable is open Ai, who makes
chat GPT. They have spent the first couple of years
of their public facing life working really closely with Microsoft. Yeah,
did I say that Microsoft had any representation at this meeting.
Speaker 4 (22:23):
No.
Speaker 5 (22:23):
In fact, sad Innadella, the CEO, was halfway around the
world and Davas.
Speaker 2 (22:26):
Wasn't there, and so that's kind of interesting. And the
two companies have kind of been going back and forth
about their relationships. So maybe there's a little bit of
fraying that's happening on that front.
Speaker 5 (22:36):
Yeah, that's been previously reported on Microsoft for whatever reason
it might be. And I don't think any of us
really know without being in the room, concerned about their
relationship with open Ai and developing things in house as
a standalone project. Rather than relying on open ai as
much as they were previously.
Speaker 2 (22:51):
Yeah, and Microsoft basically said, look, we are not going
to allow you to work with anyone else in terms
of cloud computing capacity because we want to have not
we want we have an exclusive agreement with you, and
we are going to hold you to it. Open Ay
I was like, no, you're violating this by not giving
us enough capacity, and so we can go somewhere else.
So it's been a little dodgy for the last six
(23:12):
months or so. So they apparently were talking about doing
this together, but it didn't work out. And so now
open Ai heading to the arms of Oracle and soft
Bank to try to do this. And I talked yesterday
about look soft Bank, which is run by Masiyoshi Son.
They have a long history of I'm trying to think
(23:36):
of what the best way is to phrase this investing
in stuff that doesn't end up panning out? Is I
think the best way that I can phrase it.
Speaker 5 (23:47):
I want to paint it differently, because that's not exclusively
they've been their experience obviously like they have made good investments, and.
Speaker 3 (23:55):
They have, but their recent track record is not great.
Speaker 5 (23:59):
True, And what was let's talk about some of their
big recent flops. We were, well, yeah, which is a
massive investment in that company, Hue.
Speaker 2 (24:10):
It was like twenty or thirty billion dollars and basically
they end up getting nothing out of it. So like
that was you know, a huge issue that they ran
into back in like twenty seventeen, twenty eighteen. Other things
and again just things that they've you know, talked about
getting into and things along those lines. They announced back
(24:33):
in October twenty seventeen that they were going to be
helping Saudi Arabia develop something called Neom, which is basically
this giant city that Saudi Arabia is trying to build
and literally they they can't figure out how to build
the thing in the middle of the desert because it's
freaking hard to build cities just in the middle of
the desert with no resources around them. So, like they've
(24:56):
had some some flops and failures and things like that.
They've had other things I have certainly worked out, you know,
fine for them. Again, it's not to say that all
their investments are failures, but they've had some issues. One
that worked out really well for them, Armholdings. They were
one of the companies that brought them to you know,
kind of from smaller company to IPO and so that,
(25:18):
you know, was something that worked out really well for them.
But Son is kind of a huckster, I think, is
the way that I look at it. You know, like
he after the failure of we Work, he had a
you know, he put out this big slide deck to
investors in this presentation he was giving and I don't
(25:41):
have it like off hand, but one of the pages
was like we're here now and we're gonna go up, up, up,
up up like this, and it's like, okay.
Speaker 3 (25:50):
Like what are we really doing here?
Speaker 2 (25:52):
Sure, So I do think that you have to read
this a little bit critically and take it with a
grain of salt, just because some of this stuff probably
doesn't come to fruition in terms of the size and
scale of it.
Speaker 3 (26:03):
But the piece that's really juicy is.
Speaker 2 (26:08):
Literally the day this is announced by the Trump administration,
Elon Musku is not in the Trump administration, but is
as close as you can be to them without being
officially in it agreed, comes out and tweets they don't
have this money. Actually they got no more than ten
billion dollars committed. No, this isn't actually happening, and so
(26:30):
I'm like, oh boy, juicy. This is juicy because if
there's one thing that I really love, it's seeing billionaires bicker.
Because look, let's be honest, none of them are actually
gonna get hurt. Like they're all gonna be just fine.
You don't sit there and you're like, oh, gee, whoever
comes out of this is gonna like really, they'll all
be fine, like they'll move on to the next way.
But I just I love seeing billionaire, especially like ten
(26:52):
billionaires bickering. You remember when Elon and Zuck We're gonna
have the cage match, Yeah that we never got, which
we said would never happen.
Speaker 5 (26:58):
But yeah, questions like, where does this put Elon Musk
in terms of the crosshairs with Donald Trump For him
to be tweeting about it on the day that it's announced.
Donald Trump was front and center with this deal and
really promoting the idea of it, and Elon Musk coming
out day one. Now, you know, to be clear, he
and Sam Altman have a pretty big history of feuding
(27:22):
and so this isn't entirely surprising. But yeah, I believe
what least one pending lawsuit between the two act. Yeah,
so for Elon must be coming out and throwing this
type of shade, if you will. At at the announcement
on day one, I do wonder about the deterioration of
potential relations between Trump and Musk.
Speaker 2 (27:39):
Yeah, it's and look, this is why generally you don't
want people with giant who also run giant companies working
in or directly adjacent to the federal government is because
it creates all kinds of conflicts of interest for them.
Speaker 5 (27:57):
And this could be the best deal in the world,
right and Elon Musk would hate it, right, like, this
could be amazing, Like none of us know.
Speaker 2 (28:03):
I mean again, like when you're talking about like half
a trillion dollars, like I don't know, like sure, like
it sounds great, Like I have no idea how this
is actually going to end up working out. But Elon
coming out that day being like, and here's his direct quote,
soft Bank has well under ten billion dollars secured. I
have that on good authority. I mean, what are we
(28:26):
really doing here?
Speaker 5 (28:28):
So now, again, should I trust Elon Musk about who
has funding when he has previously been sued by the
SEC for claiming that they had funding secure to take
Tesla private with no actually evidence of that.
Speaker 3 (28:40):
I don't know that I should.
Speaker 2 (28:41):
No, But as I noted, like Son is kind of
a huckster in his own right.
Speaker 3 (28:46):
So you're like, I don't know who to believe on this, Like,
what what do we do with this? I guess we'll
just see how it works out.
Speaker 5 (28:54):
But what are they again, assuming that this is all
legitimates and comes to pass, what are they actually planning
to do? It's the build out of data centers to
support the expansion of artificial intelligence and the massive data
and power that it consumes. Correct, Yes, although nothing on
the electricity side purely, just on the server side of things.
(29:16):
Is what they plan to do with this money should
it actually come to pass. Which the thing I noted
in a couple of weeks ago, it's unclear if you
actually continue to need this much computing power because a
lot of these big AI firms have gotten to the
point where they've kind of said, hey, we've run out
of stuff to train our models on, like we've reached
(29:39):
the end of the Internet. And so if you already
are encapsulating all of the Internet and all of that
information that's out there, you kind of look at it
and you go, well, what do we do?
Speaker 2 (29:51):
What do we need this for? And I think that's
a valid question that's out there. The thing that they're
going to talk about is the move towards it's what
they call artificial general intelligence AGI, not just AI. The
difference between a GI and AI AI right now is trained. Hey, like,
you put something in and it spits out a general
you know, an answer to you based on it's knowledge
(30:15):
in that area. Artificial general intelligence is the idea that
you can make something that actually thinks like a person
and can operate across different environments because it understands the
world man man again, it's the best way I can
(30:37):
It's it's instead of hey, can you build a better
drill that does more stuff? It's can you build me
a robot that can drill for me and then also
put the drill down and hammer and deal with the
plumbing and the electrical and everything. That's what AGI is
as opposed to a better tool. It's something that can
(30:59):
operate a whole by tools, and that's what they're trying
to build, and who knows if they can actually get there,
because to me, AGI feels an awful lot like self
driving cars. Hey, wait, a week away. It's always a
week away, you know, just like Fusion Power. We'll take
a quick break here when we come back. Let's see
we want to talk more about earnings, or we want
(31:21):
to go out to California and talk fires.
Speaker 5 (31:22):
I think we should probably get out to California here,
so let's cover that next year on the Financial Exchange.
Speaker 1 (31:27):
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Speaker 2 (32:09):
All right, So we've got more fires breaking out this
time north of Los Angeles. Actually a couple different ones. Yeah,
there's one here called the Supulvtave fire. Do you guys
know how fires are named in California?
Speaker 4 (32:24):
By the way, is it similar to hurricanes.
Speaker 2 (32:26):
No, they're named by the street that they originate on.
So if anyone's ever wondering, like, hey, why is this
one called this or that interesting, it's because of the
street that they originate on, is how they do the naming.
So you had a couple new ones that broke out here.
Won the Supulvita fire, which is I guess near bell Air,
(32:47):
which was close.
Speaker 5 (32:48):
To the Palisades fire effectively, yes, a couple miles away
the highway of the four h five that it seemingly leaped
over with some presumably embers, that is now closing on
the belt Air Air, which is a pretty heavily populated
area and.
Speaker 4 (33:02):
Burning quickly there.
Speaker 5 (33:03):
And then you also have this other fire, the Huge Fire,
the Huge fire, which has broken out in a less
populated area, but pretty rapidly from what I'm seeing, starting yesterday,
burned about ten thousand acres, which just to give somebody
a sense for that, it's about a third of the
acreage of the city of Boston in I mean, this
(33:25):
thing broke out yesterday afternoon. It was like twelve hours,
so it was very very rapid. Fortunately, has not gotten
down that's in the Santa Clarita area and has not
quite gotten down to that more populated area, So I
guess that part is the fortunate piece. But yeah, this
thing is very clearly not over. And I know they
(33:46):
were either receiving or expecting some rain over the next
coming days, but these winds that they are continuing to
receive is just spreading these fires further.
Speaker 3 (33:54):
Yeah, you got.
Speaker 2 (33:55):
Gusts of up to seventy miles an hour, and so
it's just continuing to spread here.
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Speaker 2 (35:01):
The other piece on this that is just a little
bit pedantic, but unfortunately, like the reality of how the
financial situation is going to play out here, there's a
big deal as to whether or not the fires that
have already happened, the Eaten fire and the Palisades fire,
whether they are one event or two events. And the
(35:23):
reason why this matters is just as an example, there's
an insurance company called Mercury General that operates in California.
They've about six percent of California's homeowners insurgance market. If
this is treated as two events, what Mercury can do
is remember, insurers don't just hold all the risks themselves.
They go out and they buy what's called reinsurance, where
(35:43):
they say, hey, we've you know, insured X, Y and Z,
we want to offload some of that risk to another carrier,
and so there's special reinsurance companies that specifically specialize in
this perture.
Speaker 5 (35:54):
Hathway is a big one, if I'm not mistaken as
his Chubb.
Speaker 3 (35:58):
Yes.
Speaker 2 (35:59):
And so if it's two events, what Mercury can do
is they can say, look, we're going to use our
reinsurance up to the limit of the first event one
point two nine billion dollars, and then we will reinstate
coverage pay paying in order to do so, and we
can get one point two three eight billion for the
second event. And obviously that's like, okay, great, two and
(36:20):
a half billion dollars off their books.
Speaker 4 (36:22):
Right.
Speaker 2 (36:23):
If it's only one event, then they can only offload
half of that, and so they have to come up
with the rest of it from their own pockets and
things like that.
Speaker 5 (36:33):
Based on this is the fact that this is being written,
I am guessing that these contracts do not have a
very clear definition of how you define one fire event
versus multiple It's pretty it's pretty likely, for instance, that
these two fires are connected in some way, shape or form.
They were started and then embers from one fire led
to a start of the second one. Maybe we don't
(36:53):
know it, maybe months before that type of investigation is concluded.
And even if it does clue that that was the case,
it might be unclear as to whether or not that's
defined as one or two events. And so my guess
is that this big type of thing probably gets played
out in the courts in some way, shape or form.
I'm guessing that they won't you know, they might settle
it eventually, but they may be looking towards a judge
(37:15):
or jury to determine are these one or two separate
events and then defining them as such.
Speaker 2 (37:19):
The other thing to remember then is again it insurers
are very good at figuring out how to not lose money,
because again, if they lose too much, they go out
of business like it's they're done. So let's say that
this gets treated as two events. The reinsurance company then
may say, Okay, this is a risk that we now
need to account for. Your reinsurance premiums are going up,
(37:42):
and you're gonna have to pay us more to cover
this because there's a greater likelihood of this occurring in
the future as opposed to how things might have been
treated previously.
Speaker 5 (37:51):
So and that's in part how you see premiums for
insurance across the country going north.
Speaker 3 (37:59):
Yes, so there's that. Let's take a quick break here.
Speaker 2 (38:03):
We still got more to come on the financial exchange,
whole bunch hour two coming up, including we'll kick things
off with a discussion of our tax is too high
or too low. I'll leave you with that, and then
we'll pick that up when we return
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a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Kicking off Thursday on the Financial Exchange Chuck, Mike and
Tucker with you, and we got the.
Speaker 3 (01:14):
S and P five hundred.
Speaker 2 (01:17):
Knocking on the door of new record highs. That's right,
the S and P five hundred. Yesterday with another leg
up and just you know, went right up to that
sixty one hundred mark.
Speaker 3 (01:30):
And said, ooh, actually it's a little cold in here.
Speaker 2 (01:32):
I think I'm gonna turn around and closed yesterday a
little bit lowered about I think it was sixty eighty two,
but kind of knocking on the door of the highs
that it previously touched in early December. And again we've
we've basically been seeing this chopping between sixty one hundred
on the high side and about fifty eight hundred on
(01:53):
the low side for the better part of the last
two and a half, almost three months now since election day.
And so hey, can you find a way to break
through that sixty one hundred mark or can you find
a way, you know, to break through that fifty eight
hundred mark? Those are the questions, because we're getting bored
just sitting here.
Speaker 4 (02:13):
Man.
Speaker 5 (02:13):
Well, let's talk about the items that could get you there.
We've got more inflation data towards the end of this month,
but nothing that's going to move things much. The earnings
would be the main item.
Speaker 3 (02:25):
Next, big next.
Speaker 5 (02:26):
We got some fun ones kicking off next week, some
big earnings coming up, and so far they've been pretty good.
Beyond that, you then have inflation and unemployment readings for
the month of January, but you won't see those for
another two to three weeks, and so it's it's mainly
the earning story in terms of what could drive things
forward here. So what will we see in the coming
week here from a big name earnings?
Speaker 2 (02:47):
Chuck, So I'll read the list that I have. I
know the last time my list was wrong. So if
Tucker has anything that appears different on his side, uh,
you know, he can let us know, kick things off
with a.
Speaker 3 (02:58):
Big one on Monday and t wrong. No, just kidding,
go keep going.
Speaker 2 (03:02):
Actually no, it is wrong because eighteens he's just not like,
what are they really gonna? Hey, we.
Speaker 3 (03:09):
They might have bought direct TV again.
Speaker 5 (03:11):
The only thing that I could expect from them would
be something really stupid.
Speaker 2 (03:14):
We carried some phone calls back and forth, not to
diminished like what they do, but more just that there's
nothing particularly exciting.
Speaker 3 (03:21):
That happens with them at this point.
Speaker 2 (03:23):
Uh, Tuesday start to get a little bit busier. You
got Raytheon and Boeing and Lockheed Martin, so big aerospace
companies reporting. Then Starbucks also reporting, which is gonna be
interesting first full quarter for what's his name as the
the Brian Nickel.
Speaker 5 (03:37):
I do like the combination of Starbucks with aerospace companies.
Speaker 2 (03:41):
But listen, it's uh, it's it's just the stars companies
that report together. I don't know what else they do together,
focused on the stars exactly. Uh, You've got Wednesday's the
big one, Microsoft, Meta, and Tesla all on Wednesday. So
between the three of them, you got a bet Sizon
trillion dollars in market cap that's going to be reporting
(04:02):
on Wednesday Thursday. This is where I think the list
I have gets dodgy. My list says Apple and Amazon,
but I think they're not till the week after.
Speaker 6 (04:10):
Actually seeing Apple and Visa.
Speaker 2 (04:13):
No Amazon, so okay, Apple's right, and Visa so again
some big names. And this is before you even get
into you know, MasterCards reporting, Blackstone, Caterpillar, Honeywell, Comcast. You
know I didn't even read off some of those. T
Mobile is reporting next week as well, Qualcom ADP, So
there's a lot coming next week and ultimately until we
(04:35):
get you know, further clarity on some of the policies
such as tariffs, taxes, things like that, earnings are going
to be in the driver's seat with you know, some
potential headline risk depending on what types of policies get
an ounced, either to the upside or downside, depending on
you know, what the specific announcements are.
Speaker 5 (04:50):
Yeah, I mean, you hear stories now of whole companies
setting up war teams effectively what they're calling, just to
move through and digest all of the change that is
occurring in the first four days we're gonna half days, yeah,
of the new Trump administration. And you know, as much
as we talk about all those changes, what I found
particularly interesting is the lack of action on certain items,
(05:13):
and to me, the biggest one. There was no day
one tariffs changes anywhere in the world, and so that's
telling to me. We'll see how that continues to develop.
I do believe the Trump administration when they say they're
looking at February one as a target date. But until
Monday of this week, we didn't know of that February
one date, and so I do find a compelling that
(05:34):
there was no day one action even in regard to
trade with China.
Speaker 2 (05:38):
Yeah, and yeah, we'll have to see if things evolve
over the next you know, eight to ten days on
that front. You know, if on February third we come
in and we're like, hey, this is what you know
actually went into place over the weekend, Okay, we can
talk about that. If not, then I kind of I
guess again. I was talking to Paul yesterday about this
and I kind of got out over my ski in
(06:00):
the fall where I said, look, the Trump administration is
talking really seriously about tariffs, like more serious and staffing
up in a way that makes you think that they
are coming. And you know, they were even saying yeah,
like we're going to do this on day one, and
they did a whole bunch of other stuff on day one,
and now they're kind of signaling February first. If we
(06:21):
don't see anything on February first, I then revert to
we'll talk about it when it actually happens. But I
can't pre talk about tariffs anymore. I need to actually
see what's there. And so We'll see what happens over
the next week to ten days. But I can't pre
talk tariffs more.
Speaker 3 (06:42):
Yeah, I can't.
Speaker 2 (06:44):
I'm ready to talk about them if they actually happen,
but I can't talk.
Speaker 3 (06:47):
About what may or may not do anymore.
Speaker 4 (06:49):
Agreed.
Speaker 2 (06:49):
So we've got markets near all time highs, which leads
us to this piece from market Watch. Well, six sad as,
seven conditions are met for a stock mark market bubble.
Speaker 5 (07:01):
So first thing first, does anyone have seven conditions that
they agree upon would designate a stock market bubble?
Speaker 3 (07:09):
Well?
Speaker 5 (07:09):
Is there any defined metric out there that any respectable
entity has ever put together saying these define a bubble?
Speaker 3 (07:17):
In advance?
Speaker 2 (07:18):
If someone actually took a giant bar of soap and
got the New York Stock Exchange covered in a giant bubble,
then you could say it's a stock market bubble for sure.
Speaker 4 (07:28):
Yeah. Other than that, I have a tough time.
Speaker 5 (07:31):
But let's let's run through what he defines as his signals.
Speaker 4 (07:38):
One person signals for a This.
Speaker 2 (07:39):
Is UBS a global equity strategist Andrew Garthwaite, who I
don't know Andrew from Tim and I couldn't tell you
anything about him.
Speaker 4 (07:48):
So this is Tim Gait. Sure there is.
Speaker 2 (07:52):
Somewhere This is not to poop poo Andrew. It's much
more how this is being presented, because I'm very sure
that in Andrew's own words, it's not being said quite like.
Speaker 4 (08:01):
This, right.
Speaker 5 (08:02):
So, first one that he checks the box on end
of a structural bull market. So UBS defines the structural
bull market as when equities outperformed bonds over a ten
year period by at least five percent per year.
Speaker 3 (08:20):
Then that happened.
Speaker 4 (08:21):
I wasn't tracking it. I didn't know that anybody.
Speaker 3 (08:25):
Can't at it. So apparently they say it did.
Speaker 4 (08:28):
Sure, profits under pressure.
Speaker 3 (08:32):
Earnings growth is sloan, particularly in single little sectors. No,
it's not.
Speaker 2 (08:35):
We're projected to see like seventeen percent earnings growth this year.
That's not true. And they were faster growing last year
than the year before.
Speaker 4 (08:44):
So's I mean, maybe Nvidia's earnings growth is slowing.
Speaker 5 (08:48):
Is are you choosing specific companies under specific sectors to
say this? But I don't think you can check the
box on earnings growth slowing when we are projecting what
was it, fourteen percent growth for the year on earnings.
Speaker 2 (09:01):
Let me get you actually factset's most recent data. So
this is from January seventeenth, and what they are projecting.
This is again they take all the consensus analyst estimates
and stuff into a blender, and this is what they
come up with. Is counter your twenty twenty five fourteen
point eight percent earnings growth projected. It seems to be
pretty good. Count of your twenty twenty four was nine
(09:24):
point four So that's an acceleration. That's an acceleration, not
a deceleration. In the year before, in twenty three, I
can't remember what it was, but I can pull it
for you shortly, if you just give me just a minute.
Speaker 5 (09:36):
So he then describes a loss of breadth, so a
handful of technology giants what UBS calls the Magnificent six.
Haven't we been talking about the Magnificent seven for the
last decade?
Speaker 3 (09:47):
Why why would it be the Magnificent six?
Speaker 4 (09:49):
Don't know.
Speaker 3 (09:50):
I think that's not a movie.
Speaker 5 (09:51):
Those are driving the market while smaller stocks lag. That
is true, but it's also been true for most to
the last decade, and specifically the last three years, so
timing wise, I have some issues. My least favorite one
on the list, it's been twenty five years since the
last bubble calendar you're twenty twenty three. Okay, here, here's
(10:13):
earnings growth. Sorry, it got interrupted. Twenty twenty three earnings
growth was point eight percent.
Speaker 3 (10:20):
Okay, so point eight nine point four and now projected
at fourteen.
Speaker 4 (10:25):
That is a very clear acceleration.
Speaker 3 (10:26):
What are we talking about? I'm sorry, but that's fun.
Like this piece is fundamentally wrong.
Speaker 5 (10:31):
My least favorite one here, chuck, though, this is the best.
It's been twenty five years since the last bubble.
Speaker 2 (10:36):
Oh boy, twenty five years since the last bubble.
Speaker 5 (10:39):
Bett shows the number of which it has been twenty
five years since the last bubble, and we are putting
a check mark next to it because we do do Yeah.
Speaker 3 (10:51):
It's just like Ortiz when he's up in the playoffs
would do so.
Speaker 5 (10:55):
Sorry, the definition of this is a stock market bubble?
Are we saying that six o seven was somehow not
a bubble?
Speaker 2 (11:04):
Uh?
Speaker 4 (11:04):
Or twenty twenty one wasn't like inconclusive?
Speaker 5 (11:07):
Okay, Okay, here's one that I will just generally give you,
But I don't know that it defines a bubble.
Speaker 4 (11:15):
That this time is different narrative?
Speaker 5 (11:17):
Well, yeah, and I suspect that whenever somebody says this
time is different that they are wrong. But people have
been saying this time is different for every market cycle ever.
Speaker 2 (11:26):
Well, and even on this it says, I'll read the
next sentence, investors are betting big on generative AI is
a game changer for productivity. Okay, let's let's go back
in time. I don't know, fifteen years or so, and
I remember all of the three D printing bros. That
were like, three D printing is going to be a
game changeer for manufacturing. How much three D printing goes
(11:48):
on right now? There's there's some don't get me wrong,
but it hasn't been you know a thing. You can
go through like all these different you know things, And
just because something gets hype doesn't mean it's a bubble.
I'm not saying that this isn't a bubble, but I'm
saying this is a bad list. And some of these
are fundamentally dumb and or wrong inaccurate.
Speaker 5 (12:08):
It would be Yeah, look, I mean, I will pick
apart any of these pieces, but when you give me
one that has virtually zero statistics attached to it comparing
one market to another, and some of the statistics are wrong,
and some of the statistics are infactually inaccurate.
Speaker 4 (12:26):
Man, this is irresponsible.
Speaker 3 (12:28):
Now I'll allow for this.
Speaker 2 (12:30):
There's a pretty good chance that whoever wrote this piece
for MarketWatch, Stephen Goldstein.
Speaker 4 (12:38):
Did not summarize, did not summarize these properly.
Speaker 2 (12:42):
So I'll allow for that because something might be getting
lost in translation between Andrew and Stephen.
Speaker 3 (12:47):
Yeah.
Speaker 5 (12:47):
I don't necessarily blame Andrew for this one. I doubt
he had, you know, pre published review rights on it.
Speaker 2 (12:54):
But this is why you have to read these things critically,
as some of these things are fundamentally now true and
others why would they matter?
Speaker 5 (13:02):
What is there a set bubble clock? I love that one.
Just Oh, it's been twenty five years, so Mary.
Speaker 2 (13:10):
You got to reset the bubble clock. It's been twenty
five years, all right. I'm eagerly anticipating the stock market
bubble of twenty fifty that I'm sure we will cover
in great detail.
Speaker 3 (13:21):
At that point.
Speaker 4 (13:22):
Yes, we're all very excited.
Speaker 3 (13:23):
Let's take a quick break.
Speaker 2 (13:24):
When we come back, we'll talk about where economists think
the Trump economy is heading.
Speaker 1 (13:28):
Breaking business and financial news first throughout the day only
here on the Financial Exchange Radio Network. Miss any of
the show, you can catch up at your convenience by
visiting Financial Exchange show dot com and clicking the on
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(13:50):
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Speaker 6 (13:54):
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Speaker 2 (14:31):
All right, Mike, we got a piece from the Wall
Street Journal. It's titled where economists think the Trump Economy
is headed and where do they think it's going?
Speaker 3 (14:42):
Mike, is it to Boise? Is it kalamazoo?
Speaker 4 (14:46):
You always bring up Kalamazoo?
Speaker 3 (14:48):
So usually Topeka.
Speaker 5 (14:50):
Generally, economists have coalesced around an idea that the inflation
slight uptick that we saw in the last couple of
months of twenty four may continue into twenty twenty five.
And before we get into where economists now believe inflation
will be, I just want to bring up something that
we've talked about before, which is individual inflation expectations and
(15:12):
how those have shifted. The University of Michigan has been
doing their sentiment survey since the nineteen sixties.
Speaker 3 (15:19):
Is it maybe even fifties.
Speaker 5 (15:21):
Might be fifties or forties, And they ask things like
what do you expect inflation to be over the next
twelve months. When they did this survey back in October,
prior to the elections, Democrats were anticipating only one and
a half percent inflation over the next three twelve months.
That's after the US economy in fact, finished twenty twenty
four with two point nine percent inflation, which.
Speaker 2 (15:43):
By the way, the long term average of inflation since
nineteen eighty is two point nine percent.
Speaker 5 (15:48):
Okay, so right in line Democrats prior to the election,
we're expecting the next twelve months to show about half
of that Republicans, on the other hand, were expecting inflation
to be coming in at three point six percent over
the next twelve months. Sure, okay, fine, we fast forward
to post election Democrats now anticipating inflation coming in for
(16:09):
the next twelve months four point two percent, Republicans zero
point one percent. Chuck, how many times in the last
one hundred years would you guess, outside of a recession
that we've seen inflation at zero point one percent years
outside of a recession, side of a recession in the
last one hundred I don't have the answer, So I'm
just guessing.
Speaker 2 (16:27):
I'm just guessing very rare. We looked at this for
the last like twenty five years. The only time outside
of recession that we saw it basically anywhere near there
was twenty fifteen when Russia decided to pump a ton
of oil and the price of oil fell from ninety
a barrel to thirty. Other than that, you don't really
see inflation at zero.
Speaker 3 (16:45):
So I can.
Speaker 2 (16:47):
Say pretty conclusively, if the US avoids recession this year,
inflation will not be zero.
Speaker 3 (16:52):
So no r anywhere near.
Speaker 4 (16:54):
No.
Speaker 5 (16:55):
I mean lessons here. I just this type of response
to an election is crazy because we.
Speaker 3 (17:02):
See it every time we do.
Speaker 5 (17:04):
Let's be really clear, like Donald Trump has no ability
to wave his wand and bring down gas prices or
egg prices.
Speaker 2 (17:11):
And if he did, Joe Biden would have had the
same wand and would have waived it, and like we
all would be like, oh, like great, like thanks for
waving the wand man.
Speaker 5 (17:18):
So presidents don't do that, Congress doesn't do that, and
prices aren't going to immediately shift based on your political expectations.
Where this gets really dangerous obviously though for investors, is
I do wonder, right, like if you are that group
that says, now inflation's only going to be zero point
one percent because my guy is in office, does it
(17:38):
also influence other things that you do, like your willingness
to quit your job and go find another one, or
your willingness to invest completely differently based on your hopes
with a new White House. And I don't have an
answer to that, but I would just caution people to
check those emotions out that I've.
Speaker 2 (17:56):
Seen firsthand with people I saw back in you know,
twenty sixteen, a whole bunch of people that didn't like
Donald Trump that said, you know what, I'm selling everything
in my portfolio because he's gonna run the country into
the ground. Ye, and if you did that, you missed
out on some pretty significant gains in the market during
his term. And then in twenty twenty, a whole bunch
of people said, oh, I don't like Joe Biden like
it was the other way, and I'm gonna sell everything
(18:17):
and because he's gonna run the country into the ground.
And sure enough, you missed out on some big gains
over you know, that four year period. And it's not
to say that the market always goes up, because it doesn't.
It's much more that, hey, the president doesn't control The
president is not the business cycle, which if I ever
write a book, I'm gonna call it that and it'll
(18:37):
be about phishing, but it'll be titled that.
Speaker 3 (18:39):
Anyways.
Speaker 2 (18:41):
The big thing that I come back to on any
of this stripping aside, like any of the politics, might
I slice it, Emotional investing is bad investing, whether it's
because of politics, whether it's because you're having a bad day,
whether it's because you're having a good day, whether it's
because of anything. If you you are investing emotionally, don't
(19:05):
take a break, get yourself back together and figure out
how to make an unemotional decision, because otherwise you're putting
yourself in a position where you might make some moves
that you end up regretting later on.
Speaker 5 (19:17):
And it's not to say that the success or failure
of the stock market is because of the president.
Speaker 4 (19:22):
It's largely not.
Speaker 5 (19:23):
They might make all the best decisions and be faced
with something like COVID, which shuts down the economy and
tanks the stock market.
Speaker 3 (19:29):
Just take a quick break.
Speaker 2 (19:30):
When we come back, we got Wall Street Watch, and
then we're talking stargate.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look and what's moving markets so
far today right here on the Financial Exchange Change Radio Network.
Speaker 6 (20:01):
Well one day after the SMP five hundred hit aen
intra day high, markets today are in mixed territory as
Wall Street continues to digest more developments from fourth quarter
earning season. Right now, the Dow is up by sixty
eight points, SMP five hundred dipping four points lower, and
the NASDAC off by about a third of a percent,
(20:23):
or sixty seven points russed two thousand is down half
a percent, ten yere treas reeled up by five basis
points at four point six five percent, and crude oil
is up about two thirds of a percent, rating just
below seventy six dollars a barrel. American Airlines posted quarterly
results ahead of the opening bell this morning, beating on
(20:43):
earnings and revenue. However, the carrier projected a weaker than
expected outlook, sending that stock down by nine percent. Meanwhile,
ge Aerospace shares up by six percent after the jet
engine makers quarterly revenue surpassed estimates after an influx of
orders elsewhere. Shares in video game maker Electronic Arts falling
(21:05):
seventeen percent after the company cut its annual outlook, citing
slowing demand for its soccer franchise.
Speaker 3 (21:13):
As well as other titles.
Speaker 6 (21:15):
Al CoA shares down by six percent after the aluminum
producer swung a quarterly profit due to higher prices, but
warned that tariffs threatened by President Trump would hit the
industry's competitiveness. And after today's closing bell, we'll see earnings
from Texas Instruments and CSX. I'm Tucker Silva and that's
Wall Street Watch so earlier.
Speaker 2 (21:37):
This week, I think it was Tuesday, you had Sam
Altman from open Ai, Larry Ellison of Oracle, and Masioshi
Son of SoftBank at the White House for the announcement
of open AI's Stargate project. It's talking about potentially spinning
up to five hundred billion dollars to build new data
(21:58):
centers in the night stints.
Speaker 3 (22:02):
So a couple things on this.
Speaker 2 (22:03):
The first thing that's notable is open Ai, who makes
chat GPT. They have spent the first couple of years
of their public facing life working really closely with Microsoft. Yeah,
did I say that Microsoft had any representation at this meeting.
Speaker 4 (22:23):
No.
Speaker 5 (22:23):
In fact, sad Innadella, the CEO, was halfway around the
world and Davas.
Speaker 2 (22:26):
Wasn't there, and so that's kind of interesting. And the
two companies have kind of been going back and forth
about their relationships. So maybe there's a little bit of
fraying that's happening on that front.
Speaker 5 (22:36):
Yeah, that's been previously reported on Microsoft for whatever reason
it might be. And I don't think any of us
really know without being in the room, concerned about their
relationship with open Ai and developing things in house as
a standalone project. Rather than relying on open ai as
much as they were previously.
Speaker 2 (22:51):
Yeah, and Microsoft basically said, look, we are not going
to allow you to work with anyone else in terms
of cloud computing capacity because we want to have not
we want we have an exclusive agreement with you, and
we are going to hold you to it. Open Ay
I was like, no, you're violating this by not giving
us enough capacity, and so we can go somewhere else.
So it's been a little dodgy for the last six
(23:12):
months or so. So they apparently were talking about doing
this together, but it didn't work out. And so now
open Ai heading to the arms of Oracle and soft
Bank to try to do this. And I talked yesterday
about look soft Bank, which is run by Masiyoshi Son.
They have a long history of I'm trying to think
(23:36):
of what the best way is to phrase this investing
in stuff that doesn't end up panning out? Is I
think the best way that I can phrase it.
Speaker 5 (23:47):
I want to paint it differently, because that's not exclusively
they've been their experience obviously like they have made good investments, and.
Speaker 3 (23:55):
They have, but their recent track record is not great.
Speaker 5 (23:59):
True, And what was let's talk about some of their
big recent flops. We were, well, yeah, which is a
massive investment in that company, Hue.
Speaker 2 (24:10):
It was like twenty or thirty billion dollars and basically
they end up getting nothing out of it. So like
that was you know, a huge issue that they ran
into back in like twenty seventeen, twenty eighteen. Other things
and again just things that they've you know, talked about
getting into and things along those lines. They announced back
(24:33):
in October twenty seventeen that they were going to be
helping Saudi Arabia develop something called Neom, which is basically
this giant city that Saudi Arabia is trying to build
and literally they they can't figure out how to build
the thing in the middle of the desert because it's
freaking hard to build cities just in the middle of
the desert with no resources around them. So, like they've
(24:56):
had some some flops and failures and things like that.
They've had other things I have certainly worked out, you know,
fine for them. Again, it's not to say that all
their investments are failures, but they've had some issues. One
that worked out really well for them, Armholdings. They were
one of the companies that brought them to you know,
kind of from smaller company to IPO and so that,
(25:18):
you know, was something that worked out really well for them.
But Son is kind of a huckster, I think, is
the way that I look at it. You know, like
he after the failure of we Work, he had a
you know, he put out this big slide deck to
investors in this presentation he was giving and I don't
(25:41):
have it like off hand, but one of the pages
was like we're here now and we're gonna go up, up, up,
up up like this, and it's like, okay.
Speaker 3 (25:50):
Like what are we really doing here?
Speaker 2 (25:52):
Sure, So I do think that you have to read
this a little bit critically and take it with a
grain of salt, just because some of this stuff probably
doesn't come to fruition in terms of the size and
scale of it.
Speaker 3 (26:03):
But the piece that's really juicy is.
Speaker 2 (26:08):
Literally the day this is announced by the Trump administration,
Elon Musku is not in the Trump administration, but is
as close as you can be to them without being
officially in it agreed, comes out and tweets they don't
have this money. Actually they got no more than ten
billion dollars committed. No, this isn't actually happening, and so
(26:30):
I'm like, oh boy, juicy. This is juicy because if
there's one thing that I really love, it's seeing billionaires bicker.
Because look, let's be honest, none of them are actually
gonna get hurt. Like they're all gonna be just fine.
You don't sit there and you're like, oh, gee, whoever
comes out of this is gonna like really, they'll all
be fine, like they'll move on to the next way.
But I just I love seeing billionaire, especially like ten
(26:52):
billionaires bickering. You remember when Elon and Zuck We're gonna
have the cage match, Yeah that we never got, which
we said would never happen.
Speaker 5 (26:58):
But yeah, questions like, where does this put Elon Musk
in terms of the crosshairs with Donald Trump For him
to be tweeting about it on the day that it's announced.
Donald Trump was front and center with this deal and
really promoting the idea of it, and Elon Musk coming
out day one. Now, you know, to be clear, he
and Sam Altman have a pretty big history of feuding
(27:22):
and so this isn't entirely surprising. But yeah, I believe
what least one pending lawsuit between the two act. Yeah,
so for Elon must be coming out and throwing this
type of shade, if you will. At at the announcement
on day one, I do wonder about the deterioration of
potential relations between Trump and Musk.
Speaker 2 (27:39):
Yeah, it's and look, this is why generally you don't
want people with giant who also run giant companies working
in or directly adjacent to the federal government is because
it creates all kinds of conflicts of interest for them.
Speaker 5 (27:57):
And this could be the best deal in the world,
right and Elon Musk would hate it, right, like, this
could be amazing, Like none of us know.
Speaker 2 (28:03):
I mean again, like when you're talking about like half
a trillion dollars, like I don't know, like sure, like
it sounds great, Like I have no idea how this
is actually going to end up working out. But Elon
coming out that day being like, and here's his direct quote,
soft Bank has well under ten billion dollars secured. I
have that on good authority. I mean, what are we
(28:26):
really doing here?
Speaker 5 (28:28):
So now, again, should I trust Elon Musk about who
has funding when he has previously been sued by the
SEC for claiming that they had funding secure to take
Tesla private with no actually evidence of that.
Speaker 3 (28:40):
I don't know that I should.
Speaker 2 (28:41):
No, But as I noted, like Son is kind of
a huckster in his own right.
Speaker 3 (28:46):
So you're like, I don't know who to believe on this, Like,
what what do we do with this? I guess we'll
just see how it works out.
Speaker 5 (28:54):
But what are they again, assuming that this is all
legitimates and comes to pass, what are they actually planning
to do? It's the build out of data centers to
support the expansion of artificial intelligence and the massive data
and power that it consumes. Correct, Yes, although nothing on
the electricity side purely, just on the server side of things.
(29:16):
Is what they plan to do with this money should
it actually come to pass. Which the thing I noted
in a couple of weeks ago, it's unclear if you
actually continue to need this much computing power because a
lot of these big AI firms have gotten to the
point where they've kind of said, hey, we've run out
of stuff to train our models on, like we've reached
(29:39):
the end of the Internet. And so if you already
are encapsulating all of the Internet and all of that
information that's out there, you kind of look at it
and you go, well, what do we do?
Speaker 2 (29:51):
What do we need this for? And I think that's
a valid question that's out there. The thing that they're
going to talk about is the move towards it's what
they call artificial general intelligence AGI, not just AI. The
difference between a GI and AI AI right now is trained. Hey, like,
you put something in and it spits out a general
you know, an answer to you based on it's knowledge
(30:15):
in that area. Artificial general intelligence is the idea that
you can make something that actually thinks like a person
and can operate across different environments because it understands the
world man man again, it's the best way I can
(30:37):
It's it's instead of hey, can you build a better
drill that does more stuff? It's can you build me
a robot that can drill for me and then also
put the drill down and hammer and deal with the
plumbing and the electrical and everything. That's what AGI is
as opposed to a better tool. It's something that can
(30:59):
operate a whole by tools, and that's what they're trying
to build, and who knows if they can actually get there,
because to me, AGI feels an awful lot like self
driving cars. Hey, wait, a week away. It's always a
week away, you know, just like Fusion Power. We'll take
a quick break here when we come back. Let's see
we want to talk more about earnings, or we want
(31:21):
to go out to California and talk fires.
Speaker 5 (31:22):
I think we should probably get out to California here,
so let's cover that next year on the Financial Exchange.
Speaker 1 (31:27):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Like us on YouTube and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. Miss any of
the show. Catch up at your convenience by visiting Financial
Exchange show dot com and clicking the on demand icon,
where you'll find all of our interviews and full shows.
(31:50):
This is your home for the latest business and financial
news in New England and around the country. This is
the Financial Exchange Radio Network.
Speaker 2 (32:09):
All right, So we've got more fires breaking out this
time north of Los Angeles. Actually a couple different ones. Yeah,
there's one here called the Supulvtave fire. Do you guys
know how fires are named in California?
Speaker 4 (32:24):
By the way, is it similar to hurricanes.
Speaker 2 (32:26):
No, they're named by the street that they originate on.
So if anyone's ever wondering, like, hey, why is this
one called this or that interesting, it's because of the
street that they originate on, is how they do the naming.
So you had a couple new ones that broke out here.
Won the Supulvita fire, which is I guess near bell Air,
(32:47):
which was close.
Speaker 5 (32:48):
To the Palisades fire effectively, yes, a couple miles away
the highway of the four h five that it seemingly leaped
over with some presumably embers, that is now closing on
the belt Air Air, which is a pretty heavily populated
area and.
Speaker 4 (33:02):
Burning quickly there.
Speaker 5 (33:03):
And then you also have this other fire, the Huge Fire,
the Huge fire, which has broken out in a less
populated area, but pretty rapidly from what I'm seeing, starting yesterday,
burned about ten thousand acres, which just to give somebody
a sense for that, it's about a third of the
acreage of the city of Boston in I mean, this
(33:25):
thing broke out yesterday afternoon. It was like twelve hours,
so it was very very rapid. Fortunately, has not gotten
down that's in the Santa Clarita area and has not
quite gotten down to that more populated area, So I
guess that part is the fortunate piece. But yeah, this
thing is very clearly not over. And I know they
(33:46):
were either receiving or expecting some rain over the next
coming days, but these winds that they are continuing to
receive is just spreading these fires further.
Speaker 3 (33:54):
Yeah, you got.
Speaker 2 (33:55):
Gusts of up to seventy miles an hour, and so
it's just continuing to spread here.
Speaker 6 (34:00):
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Speaker 2 (35:01):
The other piece on this that is just a little
bit pedantic, but unfortunately, like the reality of how the
financial situation is going to play out here, there's a
big deal as to whether or not the fires that
have already happened, the Eaten fire and the Palisades fire,
whether they are one event or two events. And the
(35:23):
reason why this matters is just as an example, there's
an insurance company called Mercury General that operates in California.
They've about six percent of California's homeowners insurgance market. If
this is treated as two events, what Mercury can do
is remember, insurers don't just hold all the risks themselves.
They go out and they buy what's called reinsurance, where
(35:43):
they say, hey, we've you know, insured X, Y and Z,
we want to offload some of that risk to another carrier,
and so there's special reinsurance companies that specifically specialize in
this perture.
Speaker 5 (35:54):
Hathway is a big one, if I'm not mistaken as
his Chubb.
Speaker 3 (35:58):
Yes.
Speaker 2 (35:59):
And so if it's two events, what Mercury can do
is they can say, look, we're going to use our
reinsurance up to the limit of the first event one
point two nine billion dollars, and then we will reinstate
coverage pay paying in order to do so, and we
can get one point two three eight billion for the
second event. And obviously that's like, okay, great, two and
(36:20):
a half billion dollars off their books.
Speaker 4 (36:22):
Right.
Speaker 2 (36:23):
If it's only one event, then they can only offload
half of that, and so they have to come up
with the rest of it from their own pockets and
things like that.
Speaker 5 (36:33):
Based on this is the fact that this is being written,
I am guessing that these contracts do not have a
very clear definition of how you define one fire event
versus multiple It's pretty it's pretty likely, for instance, that
these two fires are connected in some way, shape or form.
They were started and then embers from one fire led
to a start of the second one. Maybe we don't
(36:53):
know it, maybe months before that type of investigation is concluded.
And even if it does clue that that was the case,
it might be unclear as to whether or not that's
defined as one or two events. And so my guess
is that this big type of thing probably gets played
out in the courts in some way, shape or form.
I'm guessing that they won't you know, they might settle
it eventually, but they may be looking towards a judge
(37:15):
or jury to determine are these one or two separate
events and then defining them as such.
Speaker 2 (37:19):
The other thing to remember then is again it insurers
are very good at figuring out how to not lose money,
because again, if they lose too much, they go out
of business like it's they're done. So let's say that
this gets treated as two events. The reinsurance company then
may say, Okay, this is a risk that we now
need to account for. Your reinsurance premiums are going up,
(37:42):
and you're gonna have to pay us more to cover
this because there's a greater likelihood of this occurring in
the future as opposed to how things might have been
treated previously.
Speaker 5 (37:51):
So and that's in part how you see premiums for
insurance across the country going north.
Speaker 3 (37:59):
Yes, so there's that. Let's take a quick break here.
Speaker 2 (38:03):
We still got more to come on the financial exchange,
whole bunch hour two coming up, including we'll kick things
off with a discussion of our tax is too high
or too low. I'll leave you with that, and then
we'll pick that up when we return
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