November 6, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss Jensen Huang's comments about China winning the AI race and why Chuck thinks that comment might have to pierced the AI bubble. Is China really going to win the AI race? US to reduce flight traffic by 10% at 40 airports due to the ongoing shutdown. Supreme Court's skepticism on Trump tariffs means uncertainty reigns. Builders are offering mortgage-rate discounts. Home buyers aren't biting.
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Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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(00:42):
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(01:06):
and Mike Armstraw.
Speaker 2 (01:09):
Chuck Mike Tucker with you here today. And as we
continue through the first week of November, we are now
into day thirty six of actually technically day thirty seven
of the government shut down, and no end in sight
at this point. Betting Market's actually at this point Calci
(01:30):
now is saying, hey, we're betting not where. But you know,
Calci Markets saying forty eight point three days, which you
do the math out that gets you to like the
Tuesday before Thanksgiving, and that's cutting it pretty close to
be able to say you're gonna have everything all, you know,
hunky dory on that side for you know, people trying
to get places at that time. But this is where
(01:53):
we are. We're gonna get to more on the flight
side of things and what's going on with airlines. But
I want to things off talking a little bit about
artificial intelligence. And forgive me if you know, it feels
like we've talked about this before, because what do you mean, Jack, Look,
quite honestly, quite honestly, for about seven hundred and ten
(02:15):
out of the last seven hundred and fifty trading days,
we've covered something AI related on our show.
Speaker 3 (02:21):
Probably, so I get it.
Speaker 2 (02:22):
If you're like, oh, boy, like here it goes again,
blah blah blah blah blah blah. No, I'm here to
tell you that November fifth, twenty twenty five is a
day that will go down in history because I think
this is the popping mic.
Speaker 3 (02:39):
Really, yes, yesterday was the popping of the bubble. Yes,
here's what we had yesterday.
Speaker 2 (02:45):
Jensen Wang does an interview with The Financial Times and
he says China's gonna win the AI race. He then
issued a correction, you know, shortly after like being like, oh, well,
what I meant is, you know, we're running really fast,
but we've got to keep it up.
Speaker 3 (02:58):
By the way, if China wins the AI race, which
they are not using any Nvidia chips, we are talking
about the leader of the largest company in the world,
and definitely his stuff doesn't matter, right, So, like, it's
the exact.
Speaker 2 (03:13):
Thing I was gonna say. It's like, okay, so you're
saying China's gonna win the AI race, Let's unpack what
this means. They're not using your technology and you think
they're going to win, why should we buy your technology then?
And there's no answer to that. Question, there is no answer. Now,
I'm not saying that in video chips are bad like
there again, like by all accounts, and again I'm not
(03:36):
the expert here, but by all accounts, they are the
cream of the crop. They are the best technology in
the AI space. But if you don't need the best
technology to win the AI race, then why would you
buy the best technology to win the AI race? That's
like the question that you ask. He then tries to,
you know, walk it back and say his quote is,
as I've long said, China is nanoseconds behind America and AI.
(03:56):
It's vital that America wins by racing ahead and winning
developers world war? What does it mean to win AI? Like,
it doesn't just end. It's like fashion, like you always
have like something new. It's like no one ever looked
at you know, technology is like, oh gee, we got
to Windows ninety five. I guess it's over.
Speaker 3 (04:15):
Yeah. I feel like people were probably asking the same
question during the nuclear arms race, what's it mean to
win this? And then we got to mutually assured destruction
and that's what kind of got there.
Speaker 2 (04:27):
Right, So here's like, hey, guys are going to destroy
each other.
Speaker 3 (04:30):
I don't know, I'm unclear about what that means.
Speaker 2 (04:33):
Yeah, so you got you got Jensen saying this, which
basically also comes off as like kind of begging, like hey,
like someone's got to help me out, and it's kind
of quite honestly, I'm starting to get kind of sick
of it. It's like I can't deal with this every week,
like him asking for more help and more money in
this Like, dude, you run a semiconductor company. It's not
(04:55):
my responsibility to make sure that you're a copasthetic.
Speaker 3 (04:59):
Well, and the comment itself, if we take it, let's
not take it as off the cuff remark that he
honestly believes. Let's take it as CEO of a company
is trying to achieve something with a comment like that,
what you are trying to achieve is the US government
getting more involved in your business and opening up either
(05:22):
faster ways to produce the chips or I guess getting
away to get them into China, because his comment was
basically that we are selling no chips in China now.
Speaker 2 (05:34):
And this is where we get to the part that
I find really problematic from yesterday. Mike, do you know
who Sarah Fryar is?
Speaker 3 (05:42):
The name sounds familiar.
Speaker 2 (05:45):
I didn't before yesterday at full disclosure, she's the CFO
of open AI.
Speaker 3 (05:49):
Oh yes, okay, that's where it came from.
Speaker 2 (05:50):
Yep, she's the CFO of open AI, so she runs
the business side and make sure the numbers add up.
And she was at a Wall Street conference yesterday and said,
in no uncertain terms, this is her direct quote. I'll
read the piece from Bloomberg. Speaking of a Wall Street
Journal business conference, Open AIICFO Sarah Fryar explained that government
(06:13):
backing could help attract the enormous investment needed for a
computing and infrastructure given the uncertain life span of AI
data centers. This is where we're looking for. An ecosystem
of banks, private equity, maybe even governmental federal loan guarantees
would really drop the cost of financing, she explained. And
this is where I gotta go full stop. Quite honestly,
(06:33):
I am livid at these freaking people that think that
you and me and everyone else living in the country
should preemptively, not even because of like something you know,
financial crissy or anything, preemptively be like, oh, yeah, let's
have the federal government backstop loans to artificial intelligence companies.
(06:57):
Because yeah, let's backstop the owns for the companies that
are trying to take all of the jobs. What what
a what a rich comment? Like what a load of crap?
What a load of crap. I hope that this never happens.
It should Like I am so upset, I can't.
Speaker 1 (07:16):
Like.
Speaker 2 (07:16):
I read this and I was just like, you're so
you're you're asking for taxpayers to be on the hook
proactively if loans to buy your magic machine data center.
Woo who whippy could do? Like, I'm so cool, I
built a seal surfing video flops. Give me a freaking break.
(07:39):
They know there's nothing there. I feel like, quite honestly,
after yesterday, I feel like they're all just carnival barkers.
It feels like all they want is all of the money.
And I'm tired of it now. I am tired of it.
Speaker 3 (07:58):
It doesn't buy the mean that they want all of
the money. It bothers me that they want the federal
government to backstop their loans.
Speaker 2 (08:04):
Well that's what I mean. It's it's like, what why
do you need that? Why do you need a federal
government backstop for AI loans? Do you think the loans
are gonna go bad, because if you think the loans
are gonna go bad, then there's absolutely no reason to
do it. So like, I saw this yesterday and I
gotta tell you, like, I mean again, It's it's like
(08:24):
twenty four hours later, and I'm still coming down from this,
you know, like the audacity to be like, yeah, we
could really use a federal government backstop. And of course
she backtrackedor is like, oh, like that's not what I meant.
It's like, well, these are your words.
Speaker 3 (08:38):
Man, lady.
Speaker 2 (08:42):
You know, like what are we doing here? So I
just look at this and it's like, I don't know,
Like when the CFO of the company that's committed to
spend a one point five trillion dollars says, yeah, a
government guarantee could really drop the cost of financing. No kidding,
(09:05):
you don't have the money. You don't have the money,
is what you're telling us. So I'm with you there.
Can we go back to the Nvidia comments here for
a moment. You and I have talked about this at
length and maybe not enough on the show itself, about
the US versus China and artificial intelligence, and I feel
(09:26):
like one of the biggest stories of the year has
been completely now forgotten and swept under the rug. What
was the name of the company earlier this year out
of China that produced PEP Seek Deep Seek.
Speaker 3 (09:38):
Go check your records on It was back earlier this year,
and effectively, this company came out and produced an incredibly
compelling generative AI. They claimed to do it on no
in Nvidia chips. It was probably done on some Nvidia chips.
But here I think is genuinely Jensen Wang's concern China
(10:01):
seems to be well, he knows that they're not buying
any of his chips, at least directly. Maybe they're getting
around some of the export restrictions. He knows that the
Chinese government is preventing them from being sold domestically in
the country out of security concerns, but other concerns. And
he's seeing that domestic companies there are able to produce
(10:21):
really compelling tools using artificial intelligence. And finally he's looking
at the US situation and saying it's going to take
a decade to get power plants on board. Everything moves
much slower here, and so yeah, maybe it was an
intentional comment to get the government motivated to get in
(10:43):
the fight with artificial intelligence in some way kind of
like open AI asked for more directly. But maybe it's
coming out of genuine concern that, yeah, China is going
to win this race. And I don't know what that
means practically speaking, but one thing it might mean is
that China floods the market with cheap semiconductors do seventy
five to eighty percent or more sure of what Invidia
(11:03):
chips do. And if that happens again today, Chuck, you
tell me what portion of the S and P five
hundred is comprised of Nvidia alone eight and a half? Okay,
shot across the bow of that business model, right, If
China chooses to flood the market with cheap semiconductors that
(11:23):
can do most of what in videos can, then there
isn't a great business model there.
Speaker 2 (11:28):
And look again, it's all kind of coalescing this week.
Like I'm sorry if I'm just like pulling things like together,
you know all you know that don't go together. But
you add Satya Nadella saying, hey, the bottleneck is no
longer in compute, it's in power. Okay, Like that's another
Like again, it's fitting into this whole story. You've got Oracle.
(11:49):
Do you remember Oracle a month and a half ago,
stock popped from I want to get the numbers right
just so that I have it square stock pop from
two hundred and forty bucks a share to three hundred
and four five when they reported earnings because magically, like
three hundred billion in additional revenue commitments appeared on their
you know, projections. Oracle as of today has given all
(12:11):
of that pop back two months later. Yeah, and so
this is all like kind of coalescing for me where
I'm looking at it, and you know, again, in the
last like week or two, you've got open AI being like, yeah,
we're gonna allow adult users to get into erotica, and
it's it's just, is any of this pointing towards like
(12:33):
truly transformational stuff like that? The And again, I'm I'm
not trying to like poo poo the whole thing. I
use artificial intelligence. I think it's useful. I think there
are huge use cases. And I think that you can
hold two views, one of which is I think we'll
be using a lot more AI five years from now,
(12:53):
and that this like something about this last couple of
weeks doesn't feel good for the AI story right, yep,
you're asking for loan guarantees. You're saying China's winning without
your technology. You got stocks falling. Another CEO of one
of the major companies saying, it's not about compute anymore.
It's about electricity, like the something feels broken there and granted,
(13:16):
maybe they can get it back together. I mean, we
were saying the same thing in March of this year,
in February, and what we saw was in May, June, July,
this whole like line of a new partnerships and oh
you can sell to these countries and that, and that
kind of led the next leg up. So maybe there
is like you know, this is just maybe this is
just a pause and six to nine months from now
(13:38):
we're like, oh, this is what the new models can do,
and here's you know, the transformation. But man, like, I
don't like being sold by the company saying yeah, we're
gonna spend a trillion and a half dollars the idea
of hey, how about a government backstop for us. Oh,
give me a break, go out and take the risk,
like you know every other business has to.
Speaker 3 (13:57):
But that's just me.
Speaker 2 (14:00):
Take a quick break. When we come back, we'll wrap
up some thoughts there, and then we'll talk about the
situation in US air travel.
Speaker 1 (14:07):
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(14:28):
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Speaker 4 (14:31):
This year's DAV five k is sold out, but you
can still help our great American heroes. The race is
this Saturday at Castle Island, and.
Speaker 2 (14:38):
You can visit DAV fivek dot.
Speaker 4 (14:41):
Boston to make a donation of any amount to support
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Speaker 2 (14:58):
My Transportation Secretary Duffy announced yesterday that the FAA was
going to begin ordering air traffic to be reduced by
ten at forty major airports UH starting this Friday. This
as air traffic controllers work without pay due to the
government shutdown. And look, we're now into unprecedented territory. We
(15:20):
have never had a government shutdown that has lasted this long,
and so you know, you start getting into things that
you know, we haven't necessarily seen before, this being one
of them. Obviously, we've had you know, localized issues where
for short periods of time there's been ground stops issued
because of a lack of staffing, but this will be
(15:40):
the first broad based one that we've seen. And it
comes as we are three weeks to the day out
from Thanksgiving and about two and a half weeks out
from Thanksgiving travel really kicking off, and so you've got
you know, again taking cock out there to say, hey,
are you going to be able to get something done
before Thanksgiving? Betting markets are saying it's going to be
another week and a half of this before something gets done.
(16:02):
I don't think there's any unique insight there. I don't
think they have, you know, any edge because if you
look at betting markets, you know, a month ago they
were saying it was gonna be twenty days. So it's
it's just kind of nobody knows anything, and it doesn't
seem like any progress is being made. But this is
something where hey, if you start having three million passengers
a day where three hundred thousand of them are being disrupted, Eh,
(16:25):
that's not really great heading into Thanksgiving, people are gonna
talk about that at the dinner table. Yeah, and you
do wonder how this all works, right, So if they
start canceling flights, we're talking about forty five between thirty
five and forty five hundred flights a day, depending on
which day you're measuring. But that's about the flight volume
that we see across the US. I would assume you
only start with canceling the immediate upcoming flights, but you know,
(16:49):
the airlines need to maintain their schedules here and if
we're not, I just wonder how far in advance you
cancel something, right, because I mean you're being told, hey,
this plane is not going to fly the government still
shut down, then you probably want to notify those passengers
sooner than later. Well, it very much this could easily
(17:10):
turn into a cascading issue for airlines because again, it's
being able to get your flight crews and equipment to
the locations that you need. And like part of me
looks at this, and I'm like, are the schedules for
the major airlines? Is the overtime that they make going
to offset the lack of pay for air traffic controllers?
Because if you're working for United or Delta, like any
(17:31):
of the airlines, and you're trying to figure this out
over the next week or so, I don't even know
where you start. Yeah, I mean, I'm sure they have,
you know, computer systems that can help with this. But
remember when Southwest had their big problems a couple of
years ago. The problem was that the system that was
used in order to reschedule pilots was phone in only,
(17:54):
you know, like airlines for all of like the technological
prowess in this and that in order like old airplanes
and get from point A to point B. The system
for getting Southwest pilots to the right place was, Hey,
call this number and we'll tell you where you're supposed
to be.
Speaker 3 (18:10):
Movie phone from Seinfeld.
Speaker 2 (18:11):
It's it's it's kind of wild. So now, so you know,
don't you just tell me the name of the movie.
It's fantastic. So I think ultimately we're getting to the
point now where there's a lot of publicly facing stuff
that people are gonna start noticing about the shutdown and
(18:34):
this it's ten percent. Now, I mean this could get worse.
And again, how do you know this doesn't lead to
cascading issues where okay, sure ten percent of flights are canceled,
but forty percent of flights are delayed by an hour
or more.
Speaker 3 (18:45):
Now you know, Tucker Chuck either be flying for Thanksgiving?
Speaker 2 (18:49):
No, no, nope either, not a chance.
Speaker 3 (18:53):
I am. I am excited. We broke a record though
for the armstrong or the armstrong Elie. That's just say
I'm the name one hundred and one people attending this
year's Thanksgiving. What do you having a four hundred pound turkey?
I think we've got four or five twenty pounders.
Speaker 2 (19:09):
Do you get one of those giant pumpkins from like
a state fair that you're gonna do for pumpkin pie? Oh?
Speaker 3 (19:13):
I like that idea, Like that idea. We have not.
Speaker 2 (19:16):
But it's a big table, by the way.
Speaker 3 (19:18):
Yeah yeah, well.
Speaker 2 (19:19):
It's a good person table. I think there might be
a tent in. It's a punk table. That's the potatos
Jamie over here. All right, let's take a quick break.
When we come back. We've got Wall Street watch and
then we're talking tariffs.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look and what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
It's in negative territory this morning as traders continue to
keep a close eye on AI stocks, which have seen
some volatility this week over high valuation concerns. Wall Street's
also awaiting developments from the Supreme Court's hearing on tariffs.
Right now, the Dow is down about half a percent,
or two hundred and nineteen points. SMP five hundred is
(20:21):
down six tenths of one percent or forty one points.
Nasdaq selling off over one percent now or two hundred
and fifty one points lower. Russell two thousand down eight
tenths of one percent. Ten year Treasure Reel down six
basis points at four point zero nine five percent, in
crude oil down about seven tenths of one percent, trading
right above fifty nine dollars a barrel. Qualcom shares down
(20:45):
two percent after the semiconductor maker reported stronger than projected earnings. However,
the company took a five point seven billion dollar non
cash charge linked to the One Big Beautiful Bill. Sticking
with the chip sector, where Marvel technology as are jumping
nearly three percent after Bloomberg reported that japan SoftBank has
(21:05):
explored a potential takeover of the chip maker. Meanwhile, Carmac
shares a sinking twelve percent after the used car retailer
announced a weak preliminary outlook for its current fiscal quarter
and said CEO Bill Nash would be unexpectedly stepping down. Elsewhere,
door Dash posted mixed third quarter results. The food delivery
company also said it expects to send several hundred million
(21:28):
dollars a new initiatives in development in twenty twenty six.
That stock is down by thirteen percent. App Love and
stock is up one percent after the advertising platform form
posted stronger than expected quarterly results. In issued an optimistic
fourth quarter outlook, and Peloton is recalling its original Bike
Plus after receiving reports that the seat post broke and
(21:51):
detached from the equipment during use, leading to two injuries
that according to the Consumer Product Safety Commission. In a
news release earlier, the Sad Morning, Peloton down by three percent.
I'm Tucker Silva and that is Wall Street Watch.
Speaker 3 (22:06):
Can we check in on how much a Peloton bike costs? Sure,
So I'm looking at the most expensive one, which is
the bike plus, because again, if you're charging me, yeah,
twenty seven hundred dollars and the thing is falling.
Speaker 2 (22:19):
Apart in front of me, it's not great. Bob.
Speaker 3 (22:22):
By the way, I was looking because my wife's a
runner and we've been talking about, you know, getting a treadmill,
which I'm not going to do for Christmas because you know,
that seems like a bad Christmas gift. It seems like
a Peloton commercial. Yeah, it seems like a Peloton commercial.
The treadmills sixty seven hundred dollars?
Speaker 2 (22:41):
What, like, what's a normal treadmill cost? Like, I don't
have a point of comparison.
Speaker 3 (22:45):
I went to Wirecutter to go look at like, hey,
what's what do you think is the best ranked treadmill
out there? And it was like two grand Yeah, so.
Speaker 2 (22:53):
Like a third of it. Look, and this is why
I've said for a while, if there was every like
a marriage that you could have, it would be Apple
buying Peloton because Apple commands a premium price point even
though they don't have the best product. Peloton's trying to
do the same thing. But it's just, yeah, I'm.
Speaker 4 (23:16):
Seeing a couple of treadmills for like three hundred bucks.
Speaker 2 (23:19):
By the way, Yeah, I'm sure.
Speaker 3 (23:21):
I'm sure you can go on Facebook find a cheap
treadmill or at Walmart. But like, yeah, I just I
don't don't get it. Don't get it.
Speaker 2 (23:31):
I'm very anti treadmill personally too, like as someone who.
Speaker 3 (23:36):
I'm anti exercising in general.
Speaker 2 (23:38):
No, Like I so listen, Mike, we got this, We
get this dav five k race on Saturday, right, and
you know last Saturday Sunday I did back to back
seven mile runs getting ready for it, and it was great.
Like I just basically I'm like, okay, I'm gonna go
run for you know, almost.
Speaker 3 (23:53):
An hour, and do you not know how to calculate,
you know, do the formula for kilometers to miles? Is
that why we're doing seven miles on a five k, Michael?
When you're competing again, okay, one has to go above
and beyond. Oh I see, And so like no problem
at all, Like I'll be running for like fifty sixty.
Speaker 2 (24:15):
Minutes and I'm like, this is cool, this is fine.
I get on a treadmill three minutes, and I'm like,
what do I do? I'm like moving the incline up
and down every thirty seconds.
Speaker 3 (24:26):
I'm like, cause you don't have a peloton instructor screaming
at you in the in the display.
Speaker 2 (24:31):
I want anyone to scream at me. I work out
and there's no noise. That's like the nice thing, you know.
It's just like it's it's me just being there with
my feet.
Speaker 3 (24:41):
I see.
Speaker 2 (24:42):
And when I get on a treadmill, it's like, Nope,
don't like this board already, so take it for what
it is. Let's talk a little bit about tariffs. Yesterday
was oral arguments at the Supreme Court on the case
two whether or not to throw out the tariffs imposed
(25:02):
by the Trump administration using the nineteen seventy seven International
Emergency Economic Powers Act. And I know that this is
not all of the tariffs that the President has imposed,
but it's a broad swath of them. It's it's the
ones for different countries. It's not the ones for specific industries.
Those have used different approaches in order to manage those
(25:25):
in some cases. But the question is, hey, does the
executive branch have the authority to impose these tariffs based
on you know, just saying it's an emergency is pretty
much the question that's out there. And again during the
show yesterday, like I said, look, we're not listening to
the arguments, we're not watching them because we can't. We
(25:46):
don't know what's going to happen. What I can tell
you is that betting markets we're following and watching this
or at least participants on betting markets, and during these arguments,
the probability of the tariffs fell from a thirty forty
percent chance to a twenty five twenty eight percent chance,
and so the probability of the tariffs.
Speaker 3 (26:06):
Being upheld being upheld, got it.
Speaker 2 (26:08):
And so basically the sense that you get in reading
articles about what happened yesterday is that many of the
justices were asking questions with skeptical tones. And so obviously
you get people you know, reading into well, they're they're
skeptical about this, and so we think it's going to
be struck down. That still maybe the case, but we
(26:28):
don't know. Again, a twenty five percent chance one in
four if I told you, hey, you wake up today
and there's a one in four chance that you're gonna
get hit by a bus when you're going to work.
You'd be like, I think I'll call in sick for
the day, you know, Like it's how still.
Speaker 3 (26:40):
A bet like that exists because there's not just a
yes no on these terraffs, right. They could they could
hypothetically come out there and say, hey, you need to
define the emergency and put a time limit on it.
You They could pause the tariffs until Congress has time
to look at that. Like, there's not just a yes
no there. I'm sorry. Markets are here.
Speaker 2 (27:00):
This is the rule. I'm just gonna read from the page.
This is from poly market. This market will resolve to
yes if the Supreme Court of the United States issued
a decision that reverses, vacates, or otherwise overturns the US
Court of Appeals for the Federal Circuits August twenty ninth
decision in Vos Selections versus Trump, in which the Federal
Circuit held that the tariffs imposed by executive orders blah
(27:20):
blah blah exceeded the authority under the International Emergency Powers Act. Otherwise,
this will resolve to know if the Supreme Court dismisses
the case as improvidently granted, denies cert grant's vacates remand
without deciding the merits of the IEEPA authorization, it will
resolve to know for purposes of this market. If the
(27:41):
government prevails. The government prevails if the Supreme Court rules
on the merits that the tariffs are authorized or otherwise
reverses or vacates the federal circuits holding that they are unauthorized,
regardless of whether the Court romanks for further proceedings or
scope of relief.
Speaker 3 (27:57):
Got it.
Speaker 2 (27:57):
The government does not prevail if the Supreme Court affirms
the decision, even if the Court modifieser vacates portions of
the judgment relating only to remedy or injunctive relief.
Speaker 3 (28:07):
How many people betting on this thing do you think
actually read that?
Speaker 2 (28:11):
Six?
Speaker 3 (28:12):
Yeah, so, okay, we've been seeing a healthy dose of
skepticism from the Supreme Court judges. A lot of that
is framed by the media that reports it, but I
think both from left leaning and right leaning media, I've
heard it reported that. Yeah, there's a healthy dose of
skepticism from the judges that the president has these powers.
In terms of what it could mean. Well, let's lay
(28:37):
out the options, right, One, option is that it's the
status quo. The terrorists are in place now, remain in place,
and we've been living with that for the last several months.
In terms of alternatives, there there's a lot of them.
They could be forced to reimburse tariffs. They could be
forced to reimburse tariffs, but only to specific industries or companies.
They could just rule that this is not viable going forward,
(29:00):
they don't have to reimburse. They could basically they can
go in a number of different directions.
Speaker 2 (29:07):
And even there you get into the questions then of okay,
let's say that it is reversed. How many class action
suits do you see from individuals who bought products at
XYZ saying okay, I want my piece of you know,
the tariff revenue that was reversed. Right, Like, it could
get quite complicated, but this is one of the things
where you say, okay, does the federal government have to
(29:29):
refund a couple hundred billion dollars of tariff revenue that,
by the way, they don't have because surprise, federal government
has spent it, you know, like it's it's not like
it's just sitting there. So it's one where you say, okay,
does the federal government have to issue additional debt and
in order to do so, what does that do? Because
(29:49):
the projections were that, you know, over the next ten
years this would bring in like three trillion dollars in revenue.
If that's not coming in, deficits become large or do
the bond vigilantes show up again being hey, pay us more,
you know.
Speaker 3 (30:02):
So there's a lot of downstream impact. Yesterday equity markets
were up on maybe that was part of the news.
Maybe it was just a reversal of Tuesday sell off
as well. But yeah, I think the only thing I'm
comfortable saying right now is that many are looking at
this and thinking that the justices are leaning in the
(30:24):
throw it out direction.
Speaker 2 (30:25):
Yeah, I'd say that's where the vast majority of opinion
is now. In terms of the timeline, the estimates that
I've seen late December to early January, so we're probably
two to three months away from a ruling on this.
That's kind of the called two months away from a
ruling on this. Again, I don't personally have any idea
(30:46):
what's going to happen. I know so little about law
that I just don't have an informed decision here or
an informed take on this, and I think that's fine, Like,
we don't all have to pretend to be constitutional law
scholars for the day. Sometimes it's okay to just be like, hey,
(31:06):
there are other people that spend their lives researching this,
and yeah, let's take a quick break here, and when
we return, let's see, do we want to talk about
automakers looking for chips? We already covered that a little
bit earlier this week. I don't know that I have
much new stuff. There's talk about builders, talk about home builders.
(31:26):
I think there's a little bit of meat on that bone.
And we'll discuss when we come back.
Speaker 1 (31:30):
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. Long. Base is the Financial Exchange
Radio Network, Pace, the.
Speaker 2 (31:55):
Wall Street Journal. Builders are offering alders are offering mortgage
rate discounts. Home buyers aren't biting what are we seeing?
Speaker 3 (32:07):
Pretty low mortgage rates being offered by these buyer builders.
So they're they're, you know, buying up discounts for their customers.
Some of them, the largest ones out there, have their
own mortgage originations and so they're able to do this.
But Dr Horton France, for instance, is offering mortgages as
low as three point nine to nine percent through their
financing arms. Others such as Lenar offering buyers incentives worth
(32:30):
sixty four thousand dollars on the average home sales. What
I'm hearing reported also is that even with these discounts,
it's not quite attracting. You know, for years we've been
talking about institutional buyers of single family homes, right, and
you have not seen the corporate buyers come out yet.
You have not clearly seen the individual buyers come out yet.
(32:53):
But wow, a three point nine nine percent mortgage in
this market is pretty darn attractive.
Speaker 2 (32:58):
I'd say beyond pretty an't attractive. Yeah, And so this
gets at the question of why is this the case?
Right like it's it's it's The reasonable question answer to
ask is, hey, if you're getting mortgage rates that are
being offered that low, why are people not snapping them up?
(33:19):
And the place I come back to is, look, the
place that a lot of these developers are offering this
stuff is in place where home prices are falling and
home prices falling is usually a signal to most people
that it's not a great time to start buying real estate.
Speaker 3 (33:32):
Yet, in my opinion, yeah, I don't think it's all
that complicated. Supplies outstripping demand and there's a lot of
buyer skepticism about this market right now in those areas
where new homes have actually been built over the last
few years. So it's not an amazingly complicated question. But
it's definitely a bad sign when home builders have well
(33:55):
a lot of sitting on a lot of inventory. Wasn't
it the largest amount of inventory, since.
Speaker 2 (33:59):
It's the highest inventory level since June of two thousand
and nine, which is not really the copy want no,
not only economically you don't want to hear last time
since two thousand and nine. Yeah, yeah, any comparison to
that point of time when it comes to business or
economics is not a great comparison point.
Speaker 4 (34:18):
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Speaker 2 (35:29):
Peace in the Wall Street Journal, this famous method of
valuing stocks is pointing towards some rough years ahead. The
valuation method that they're talking about is what's known as
the CAPE, the cyclically adjusted pe ratio. This was popularized
by Robert Shiller. It's often known also as the Shiller
PE ratio, and basically what it does it looks at
ten years of earnings and adjusts them for inflation, so
(35:50):
you get a whole business cycle of earnings adjusted for inflation, Like,
how much is actually companies growing their earnings? How much
is inflation? And then say, okay, what's the pe ratio
based on that?
Speaker 3 (36:02):
Right?
Speaker 2 (36:03):
And pretty much what you're seeing right now is that
the Shiller pe is at the Again, you don't want
to compare things to two thousand and nine. You don't
really like, you know, nineteen ninety nine two thousand is
a comp for valuations, but we're basically at the highest
level of valuation that we've seen since September of two thousand.
Speaker 3 (36:17):
Yeah, and we've talked about this a few times because
we've been hitting these milestones throughout this year. Right, one
of them was the price to revenue ratio on the
S and P five hundred. Hadn't seen that since the
late nineties. Now we've got the cape price to earnings ratio.
What are we comfortable saying about this then? Right, like, yeah,
(36:37):
you're not in great company when when stocks hit the
price point that you've only once seen in US history,
which was during the lead up to the dot com bubble.
Not great company. But what are we actually comfortable saying
about this? Because I don't think it's a story of timing. No,
it's a horrible timing mechanism. The first time that we
hit this level was December of nineteen ninety eight. The
(37:00):
party continued for two more years and valuations went even higher.
So this is not something and valuations, I say this
quite often, valuations are not useful in any way, shape
or form as a timing signal as to like should
I do this or should I do that? They can
give you some rough guidance, and even there it's this
is not physics, like this is not this happens, and
(37:22):
then this happens. It's here's what we've observed observed previously,
but unlike physics, where those relationships are stable relationships, and
markets can evolve over time based on different conditions and
different sets of circumstances. So I think you can incorporate
this into any you know, mosaic and any matrix that
you're using to figure out, hey, how should I personally
(37:43):
be investing?
Speaker 2 (37:44):
But the idea that this should be used is like,
oh no, like we've reached this level, now you have
to sell. Well, that's just you know, useless as saying well,
things have gotten really cheap, now I need to buy. Well,
sometimes they're cheap for a reason see Emerging markets for
the last fifteen years. So I think, yes, this is
signaling some potential issues, but I keep coming back to
(38:04):
it's a horrible timing mechanism, and relationships can change over time.
They're not always stable in markets. Quick Break Hour two
coming up in a little bit.
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(00:20):
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(01:06):
and Mike Armstraw.
Speaker 2 (01:09):
Chuck Mike Tucker with you here today. And as we
continue through the first week of November, we are now
into day thirty six of actually technically day thirty seven
of the government shut down, and no end in sight
at this point. Betting Market's actually at this point Calci
(01:30):
now is saying, hey, we're betting not where. But you know,
Calci Markets saying forty eight point three days, which you
do the math out that gets you to like the
Tuesday before Thanksgiving, and that's cutting it pretty close to
be able to say you're gonna have everything all, you know,
hunky dory on that side for you know, people trying
to get places at that time. But this is where
(01:53):
we are. We're gonna get to more on the flight
side of things and what's going on with airlines. But
I want to things off talking a little bit about
artificial intelligence. And forgive me if you know, it feels
like we've talked about this before, because what do you mean, Jack, Look,
quite honestly, quite honestly, for about seven hundred and ten
(02:15):
out of the last seven hundred and fifty trading days,
we've covered something AI related on our show.
Speaker 3 (02:21):
Probably, so I get it.
Speaker 2 (02:22):
If you're like, oh, boy, like here it goes again,
blah blah blah blah blah blah. No, I'm here to
tell you that November fifth, twenty twenty five is a
day that will go down in history because I think
this is the popping mic.
Speaker 3 (02:39):
Really, yes, yesterday was the popping of the bubble. Yes,
here's what we had yesterday.
Speaker 2 (02:45):
Jensen Wang does an interview with The Financial Times and
he says China's gonna win the AI race. He then
issued a correction, you know, shortly after like being like, oh, well,
what I meant is, you know, we're running really fast,
but we've got to keep it up.
Speaker 3 (02:58):
By the way, if China wins the AI race, which
they are not using any Nvidia chips, we are talking
about the leader of the largest company in the world,
and definitely his stuff doesn't matter, right, So, like, it's
the exact.
Speaker 2 (03:13):
Thing I was gonna say. It's like, okay, so you're
saying China's gonna win the AI race, Let's unpack what
this means. They're not using your technology and you think
they're going to win, why should we buy your technology then?
And there's no answer to that. Question, there is no answer. Now,
I'm not saying that in video chips are bad like
there again, like by all accounts, and again I'm not
(03:36):
the expert here, but by all accounts, they are the
cream of the crop. They are the best technology in
the AI space. But if you don't need the best
technology to win the AI race, then why would you
buy the best technology to win the AI race? That's
like the question that you ask. He then tries to,
you know, walk it back and say his quote is,
as I've long said, China is nanoseconds behind America and AI.
(03:56):
It's vital that America wins by racing ahead and winning
developers world war? What does it mean to win AI? Like,
it doesn't just end. It's like fashion, like you always
have like something new. It's like no one ever looked
at you know, technology is like, oh gee, we got
to Windows ninety five. I guess it's over.
Speaker 3 (04:15):
Yeah. I feel like people were probably asking the same
question during the nuclear arms race, what's it mean to
win this? And then we got to mutually assured destruction
and that's what kind of got there.
Speaker 2 (04:27):
Right, So here's like, hey, guys are going to destroy
each other.
Speaker 3 (04:30):
I don't know, I'm unclear about what that means.
Speaker 2 (04:33):
Yeah, so you got you got Jensen saying this, which
basically also comes off as like kind of begging, like hey,
like someone's got to help me out, and it's kind
of quite honestly, I'm starting to get kind of sick
of it. It's like I can't deal with this every week,
like him asking for more help and more money in
this Like, dude, you run a semiconductor company. It's not
(04:55):
my responsibility to make sure that you're a copasthetic.
Speaker 3 (04:59):
Well, and the comment itself, if we take it, let's
not take it as off the cuff remark that he
honestly believes. Let's take it as CEO of a company
is trying to achieve something with a comment like that,
what you are trying to achieve is the US government
getting more involved in your business and opening up either
(05:22):
faster ways to produce the chips or I guess getting
away to get them into China, because his comment was
basically that we are selling no chips in China now.
Speaker 2 (05:34):
And this is where we get to the part that
I find really problematic from yesterday. Mike, do you know
who Sarah Fryar is?
Speaker 3 (05:42):
The name sounds familiar.
Speaker 2 (05:45):
I didn't before yesterday at full disclosure, she's the CFO
of open AI.
Speaker 3 (05:49):
Oh yes, okay, that's where it came from.
Speaker 2 (05:50):
Yep, she's the CFO of open AI, so she runs
the business side and make sure the numbers add up.
And she was at a Wall Street conference yesterday and said,
in no uncertain terms, this is her direct quote. I'll
read the piece from Bloomberg. Speaking of a Wall Street
Journal business conference, Open AIICFO Sarah Fryar explained that government
(06:13):
backing could help attract the enormous investment needed for a
computing and infrastructure given the uncertain life span of AI
data centers. This is where we're looking for. An ecosystem
of banks, private equity, maybe even governmental federal loan guarantees
would really drop the cost of financing, she explained. And
this is where I gotta go full stop. Quite honestly,
(06:33):
I am livid at these freaking people that think that
you and me and everyone else living in the country
should preemptively, not even because of like something you know,
financial crissy or anything, preemptively be like, oh, yeah, let's
have the federal government backstop loans to artificial intelligence companies.
(06:57):
Because yeah, let's backstop the owns for the companies that
are trying to take all of the jobs. What what
a what a rich comment? Like what a load of crap?
What a load of crap. I hope that this never happens.
It should Like I am so upset, I can't.
Speaker 1 (07:16):
Like.
Speaker 2 (07:16):
I read this and I was just like, you're so
you're you're asking for taxpayers to be on the hook
proactively if loans to buy your magic machine data center.
Woo who whippy could do? Like, I'm so cool, I
built a seal surfing video flops. Give me a freaking break.
(07:39):
They know there's nothing there. I feel like, quite honestly,
after yesterday, I feel like they're all just carnival barkers.
It feels like all they want is all of the money.
And I'm tired of it now. I am tired of it.
Speaker 3 (07:58):
It doesn't buy the mean that they want all of
the money. It bothers me that they want the federal
government to backstop their loans.
Speaker 2 (08:04):
Well that's what I mean. It's it's like, what why
do you need that? Why do you need a federal
government backstop for AI loans? Do you think the loans
are gonna go bad, because if you think the loans
are gonna go bad, then there's absolutely no reason to
do it. So like, I saw this yesterday and I
gotta tell you, like, I mean again, It's it's like
(08:24):
twenty four hours later, and I'm still coming down from this,
you know, like the audacity to be like, yeah, we
could really use a federal government backstop. And of course
she backtrackedor is like, oh, like that's not what I meant.
It's like, well, these are your words.
Speaker 3 (08:38):
Man, lady.
Speaker 2 (08:42):
You know, like what are we doing here? So I
just look at this and it's like, I don't know,
Like when the CFO of the company that's committed to
spend a one point five trillion dollars says, yeah, a
government guarantee could really drop the cost of financing. No kidding,
(09:05):
you don't have the money. You don't have the money,
is what you're telling us. So I'm with you there.
Can we go back to the Nvidia comments here for
a moment. You and I have talked about this at
length and maybe not enough on the show itself, about
the US versus China and artificial intelligence, and I feel
(09:26):
like one of the biggest stories of the year has
been completely now forgotten and swept under the rug. What
was the name of the company earlier this year out
of China that produced PEP Seek Deep Seek.
Speaker 3 (09:38):
Go check your records on It was back earlier this year,
and effectively, this company came out and produced an incredibly
compelling generative AI. They claimed to do it on no
in Nvidia chips. It was probably done on some Nvidia chips.
But here I think is genuinely Jensen Wang's concern China
(10:01):
seems to be well, he knows that they're not buying
any of his chips, at least directly. Maybe they're getting
around some of the export restrictions. He knows that the
Chinese government is preventing them from being sold domestically in
the country out of security concerns, but other concerns. And
he's seeing that domestic companies there are able to produce
(10:21):
really compelling tools using artificial intelligence. And finally he's looking
at the US situation and saying it's going to take
a decade to get power plants on board. Everything moves
much slower here, and so yeah, maybe it was an
intentional comment to get the government motivated to get in
(10:43):
the fight with artificial intelligence in some way kind of
like open AI asked for more directly. But maybe it's
coming out of genuine concern that, yeah, China is going
to win this race. And I don't know what that
means practically speaking, but one thing it might mean is
that China floods the market with cheap semiconductors do seventy
five to eighty percent or more sure of what Invidia
(11:03):
chips do. And if that happens again today, Chuck, you
tell me what portion of the S and P five
hundred is comprised of Nvidia alone eight and a half? Okay,
shot across the bow of that business model, right, If
China chooses to flood the market with cheap semiconductors that
(11:23):
can do most of what in videos can, then there
isn't a great business model there.
Speaker 2 (11:28):
And look again, it's all kind of coalescing this week.
Like I'm sorry if I'm just like pulling things like together,
you know all you know that don't go together. But
you add Satya Nadella saying, hey, the bottleneck is no
longer in compute, it's in power. Okay, Like that's another
Like again, it's fitting into this whole story. You've got Oracle.
(11:49):
Do you remember Oracle a month and a half ago,
stock popped from I want to get the numbers right
just so that I have it square stock pop from
two hundred and forty bucks a share to three hundred
and four five when they reported earnings because magically, like
three hundred billion in additional revenue commitments appeared on their
you know, projections. Oracle as of today has given all
(12:11):
of that pop back two months later. Yeah, and so
this is all like kind of coalescing for me where
I'm looking at it, and you know, again, in the
last like week or two, you've got open AI being like, yeah,
we're gonna allow adult users to get into erotica, and
it's it's just, is any of this pointing towards like
(12:33):
truly transformational stuff like that? The And again, I'm I'm
not trying to like poo poo the whole thing. I
use artificial intelligence. I think it's useful. I think there
are huge use cases. And I think that you can
hold two views, one of which is I think we'll
be using a lot more AI five years from now,
(12:53):
and that this like something about this last couple of
weeks doesn't feel good for the AI story right, yep,
you're asking for loan guarantees. You're saying China's winning without
your technology. You got stocks falling. Another CEO of one
of the major companies saying, it's not about compute anymore.
It's about electricity, like the something feels broken there and granted,
(13:16):
maybe they can get it back together. I mean, we
were saying the same thing in March of this year,
in February, and what we saw was in May, June, July,
this whole like line of a new partnerships and oh
you can sell to these countries and that, and that
kind of led the next leg up. So maybe there
is like you know, this is just maybe this is
just a pause and six to nine months from now
(13:38):
we're like, oh, this is what the new models can do,
and here's you know, the transformation. But man, like, I
don't like being sold by the company saying yeah, we're
gonna spend a trillion and a half dollars the idea
of hey, how about a government backstop for us. Oh,
give me a break, go out and take the risk,
like you know every other business has to.
Speaker 3 (13:57):
But that's just me.
Speaker 2 (14:00):
Take a quick break. When we come back, we'll wrap
up some thoughts there, and then we'll talk about the
situation in US air travel.
Speaker 1 (14:07):
After this missed one of our shows, catch up anytime
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(14:28):
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Speaker 4 (14:31):
This year's DAV five k is sold out, but you
can still help our great American heroes. The race is
this Saturday at Castle Island, and.
Speaker 2 (14:38):
You can visit DAV fivek dot.
Speaker 4 (14:41):
Boston to make a donation of any amount to support
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Speaker 2 (14:58):
My Transportation Secretary Duffy announced yesterday that the FAA was
going to begin ordering air traffic to be reduced by
ten at forty major airports UH starting this Friday. This
as air traffic controllers work without pay due to the
government shutdown. And look, we're now into unprecedented territory. We
(15:20):
have never had a government shutdown that has lasted this long,
and so you know, you start getting into things that
you know, we haven't necessarily seen before, this being one
of them. Obviously, we've had you know, localized issues where
for short periods of time there's been ground stops issued
because of a lack of staffing, but this will be
(15:40):
the first broad based one that we've seen. And it
comes as we are three weeks to the day out
from Thanksgiving and about two and a half weeks out
from Thanksgiving travel really kicking off, and so you've got
you know, again taking cock out there to say, hey,
are you going to be able to get something done
before Thanksgiving? Betting markets are saying it's going to be
another week and a half of this before something gets done.
(16:02):
I don't think there's any unique insight there. I don't
think they have, you know, any edge because if you
look at betting markets, you know, a month ago they
were saying it was gonna be twenty days. So it's
it's just kind of nobody knows anything, and it doesn't
seem like any progress is being made. But this is
something where hey, if you start having three million passengers
a day where three hundred thousand of them are being disrupted, Eh,
(16:25):
that's not really great heading into Thanksgiving, people are gonna
talk about that at the dinner table. Yeah, and you
do wonder how this all works, right, So if they
start canceling flights, we're talking about forty five between thirty
five and forty five hundred flights a day, depending on
which day you're measuring. But that's about the flight volume
that we see across the US. I would assume you
only start with canceling the immediate upcoming flights, but you know,
(16:49):
the airlines need to maintain their schedules here and if
we're not, I just wonder how far in advance you
cancel something, right, because I mean you're being told, hey,
this plane is not going to fly the government still
shut down, then you probably want to notify those passengers
sooner than later. Well, it very much this could easily
(17:10):
turn into a cascading issue for airlines because again, it's
being able to get your flight crews and equipment to
the locations that you need. And like part of me
looks at this, and I'm like, are the schedules for
the major airlines? Is the overtime that they make going
to offset the lack of pay for air traffic controllers?
Because if you're working for United or Delta, like any
(17:31):
of the airlines, and you're trying to figure this out
over the next week or so, I don't even know
where you start. Yeah, I mean, I'm sure they have,
you know, computer systems that can help with this. But
remember when Southwest had their big problems a couple of
years ago. The problem was that the system that was
used in order to reschedule pilots was phone in only,
(17:54):
you know, like airlines for all of like the technological
prowess in this and that in order like old airplanes
and get from point A to point B. The system
for getting Southwest pilots to the right place was, Hey,
call this number and we'll tell you where you're supposed
to be.
Speaker 3 (18:10):
Movie phone from Seinfeld.
Speaker 2 (18:11):
It's it's it's kind of wild. So now, so you know,
don't you just tell me the name of the movie.
It's fantastic. So I think ultimately we're getting to the
point now where there's a lot of publicly facing stuff
that people are gonna start noticing about the shutdown and
(18:34):
this it's ten percent. Now, I mean this could get worse.
And again, how do you know this doesn't lead to
cascading issues where okay, sure ten percent of flights are canceled,
but forty percent of flights are delayed by an hour
or more.
Speaker 3 (18:45):
Now you know, Tucker Chuck either be flying for Thanksgiving?
Speaker 2 (18:49):
No, no, nope either, not a chance.
Speaker 3 (18:53):
I am. I am excited. We broke a record though
for the armstrong or the armstrong Elie. That's just say
I'm the name one hundred and one people attending this
year's Thanksgiving. What do you having a four hundred pound turkey?
I think we've got four or five twenty pounders.
Speaker 2 (19:09):
Do you get one of those giant pumpkins from like
a state fair that you're gonna do for pumpkin pie? Oh?
Speaker 3 (19:13):
I like that idea, Like that idea. We have not.
Speaker 2 (19:16):
But it's a big table, by the way.
Speaker 3 (19:18):
Yeah yeah, well.
Speaker 2 (19:19):
It's a good person table. I think there might be
a tent in. It's a punk table. That's the potatos
Jamie over here. All right, let's take a quick break.
When we come back. We've got Wall Street watch and
then we're talking tariffs.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look and what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
It's in negative territory this morning as traders continue to
keep a close eye on AI stocks, which have seen
some volatility this week over high valuation concerns. Wall Street's
also awaiting developments from the Supreme Court's hearing on tariffs.
Right now, the Dow is down about half a percent,
or two hundred and nineteen points. SMP five hundred is
(20:21):
down six tenths of one percent or forty one points.
Nasdaq selling off over one percent now or two hundred
and fifty one points lower. Russell two thousand down eight
tenths of one percent. Ten year Treasure Reel down six
basis points at four point zero nine five percent, in
crude oil down about seven tenths of one percent, trading
right above fifty nine dollars a barrel. Qualcom shares down
(20:45):
two percent after the semiconductor maker reported stronger than projected earnings. However,
the company took a five point seven billion dollar non
cash charge linked to the One Big Beautiful Bill. Sticking
with the chip sector, where Marvel technology as are jumping
nearly three percent after Bloomberg reported that japan SoftBank has
(21:05):
explored a potential takeover of the chip maker. Meanwhile, Carmac
shares a sinking twelve percent after the used car retailer
announced a weak preliminary outlook for its current fiscal quarter
and said CEO Bill Nash would be unexpectedly stepping down. Elsewhere,
door Dash posted mixed third quarter results. The food delivery
company also said it expects to send several hundred million
(21:28):
dollars a new initiatives in development in twenty twenty six.
That stock is down by thirteen percent. App Love and
stock is up one percent after the advertising platform form
posted stronger than expected quarterly results. In issued an optimistic
fourth quarter outlook, and Peloton is recalling its original Bike
Plus after receiving reports that the seat post broke and
(21:51):
detached from the equipment during use, leading to two injuries
that according to the Consumer Product Safety Commission. In a
news release earlier, the Sad Morning, Peloton down by three percent.
I'm Tucker Silva and that is Wall Street Watch.
Speaker 3 (22:06):
Can we check in on how much a Peloton bike costs? Sure,
So I'm looking at the most expensive one, which is
the bike plus, because again, if you're charging me, yeah,
twenty seven hundred dollars and the thing is falling.
Speaker 2 (22:19):
Apart in front of me, it's not great. Bob.
Speaker 3 (22:22):
By the way, I was looking because my wife's a
runner and we've been talking about, you know, getting a treadmill,
which I'm not going to do for Christmas because you know,
that seems like a bad Christmas gift. It seems like
a Peloton commercial. Yeah, it seems like a Peloton commercial.
The treadmills sixty seven hundred dollars?
Speaker 2 (22:41):
What, like, what's a normal treadmill cost? Like, I don't
have a point of comparison.
Speaker 3 (22:45):
I went to Wirecutter to go look at like, hey,
what's what do you think is the best ranked treadmill
out there? And it was like two grand Yeah, so.
Speaker 2 (22:53):
Like a third of it. Look, and this is why
I've said for a while, if there was every like
a marriage that you could have, it would be Apple
buying Peloton because Apple commands a premium price point even
though they don't have the best product. Peloton's trying to
do the same thing. But it's just, yeah, I'm.
Speaker 4 (23:16):
Seeing a couple of treadmills for like three hundred bucks.
Speaker 2 (23:19):
By the way, Yeah, I'm sure.
Speaker 3 (23:21):
I'm sure you can go on Facebook find a cheap
treadmill or at Walmart. But like, yeah, I just I
don't don't get it. Don't get it.
Speaker 2 (23:31):
I'm very anti treadmill personally too, like as someone who.
Speaker 3 (23:36):
I'm anti exercising in general.
Speaker 2 (23:38):
No, Like I so listen, Mike, we got this, We
get this dav five k race on Saturday, right, and
you know last Saturday Sunday I did back to back
seven mile runs getting ready for it, and it was great.
Like I just basically I'm like, okay, I'm gonna go
run for you know, almost.
Speaker 3 (23:53):
An hour, and do you not know how to calculate,
you know, do the formula for kilometers to miles? Is
that why we're doing seven miles on a five k, Michael?
When you're competing again, okay, one has to go above
and beyond. Oh I see, And so like no problem
at all, Like I'll be running for like fifty sixty.
Speaker 2 (24:15):
Minutes and I'm like, this is cool, this is fine.
I get on a treadmill three minutes, and I'm like,
what do I do? I'm like moving the incline up
and down every thirty seconds.
Speaker 3 (24:26):
I'm like, cause you don't have a peloton instructor screaming
at you in the in the display.
Speaker 2 (24:31):
I want anyone to scream at me. I work out
and there's no noise. That's like the nice thing, you know.
It's just like it's it's me just being there with
my feet.
Speaker 3 (24:41):
I see.
Speaker 2 (24:42):
And when I get on a treadmill, it's like, Nope,
don't like this board already, so take it for what
it is. Let's talk a little bit about tariffs. Yesterday
was oral arguments at the Supreme Court on the case
two whether or not to throw out the tariffs imposed
(25:02):
by the Trump administration using the nineteen seventy seven International
Emergency Economic Powers Act. And I know that this is
not all of the tariffs that the President has imposed,
but it's a broad swath of them. It's it's the
ones for different countries. It's not the ones for specific industries.
Those have used different approaches in order to manage those
(25:25):
in some cases. But the question is, hey, does the
executive branch have the authority to impose these tariffs based
on you know, just saying it's an emergency is pretty
much the question that's out there. And again during the
show yesterday, like I said, look, we're not listening to
the arguments, we're not watching them because we can't. We
(25:46):
don't know what's going to happen. What I can tell
you is that betting markets we're following and watching this
or at least participants on betting markets, and during these arguments,
the probability of the tariffs fell from a thirty forty
percent chance to a twenty five twenty eight percent chance,
and so the probability of the tariffs.
Speaker 3 (26:06):
Being upheld being upheld, got it.
Speaker 2 (26:08):
And so basically the sense that you get in reading
articles about what happened yesterday is that many of the
justices were asking questions with skeptical tones. And so obviously
you get people you know, reading into well, they're they're
skeptical about this, and so we think it's going to
be struck down. That still maybe the case, but we
(26:28):
don't know. Again, a twenty five percent chance one in
four if I told you, hey, you wake up today
and there's a one in four chance that you're gonna
get hit by a bus when you're going to work.
You'd be like, I think I'll call in sick for
the day, you know, Like it's how still.
Speaker 3 (26:40):
A bet like that exists because there's not just a
yes no on these terraffs, right. They could they could
hypothetically come out there and say, hey, you need to
define the emergency and put a time limit on it.
You They could pause the tariffs until Congress has time
to look at that. Like, there's not just a yes
no there. I'm sorry. Markets are here.
Speaker 2 (27:00):
This is the rule. I'm just gonna read from the page.
This is from poly market. This market will resolve to
yes if the Supreme Court of the United States issued
a decision that reverses, vacates, or otherwise overturns the US
Court of Appeals for the Federal Circuits August twenty ninth
decision in Vos Selections versus Trump, in which the Federal
Circuit held that the tariffs imposed by executive orders blah
(27:20):
blah blah exceeded the authority under the International Emergency Powers Act. Otherwise,
this will resolve to know if the Supreme Court dismisses
the case as improvidently granted, denies cert grant's vacates remand
without deciding the merits of the IEEPA authorization, it will
resolve to know for purposes of this market. If the
(27:41):
government prevails. The government prevails if the Supreme Court rules
on the merits that the tariffs are authorized or otherwise
reverses or vacates the federal circuits holding that they are unauthorized,
regardless of whether the Court romanks for further proceedings or
scope of relief.
Speaker 3 (27:57):
Got it.
Speaker 2 (27:57):
The government does not prevail if the Supreme Court affirms
the decision, even if the Court modifieser vacates portions of
the judgment relating only to remedy or injunctive relief.
Speaker 3 (28:07):
How many people betting on this thing do you think
actually read that?
Speaker 2 (28:11):
Six?
Speaker 3 (28:12):
Yeah, so, okay, we've been seeing a healthy dose of
skepticism from the Supreme Court judges. A lot of that
is framed by the media that reports it, but I
think both from left leaning and right leaning media, I've
heard it reported that. Yeah, there's a healthy dose of
skepticism from the judges that the president has these powers.
In terms of what it could mean. Well, let's lay
(28:37):
out the options, right, One, option is that it's the
status quo. The terrorists are in place now, remain in place,
and we've been living with that for the last several months.
In terms of alternatives, there there's a lot of them.
They could be forced to reimburse tariffs. They could be
forced to reimburse tariffs, but only to specific industries or companies.
They could just rule that this is not viable going forward,
(29:00):
they don't have to reimburse. They could basically they can
go in a number of different directions.
Speaker 2 (29:07):
And even there you get into the questions then of okay,
let's say that it is reversed. How many class action
suits do you see from individuals who bought products at
XYZ saying okay, I want my piece of you know,
the tariff revenue that was reversed. Right, Like, it could
get quite complicated, but this is one of the things
where you say, okay, does the federal government have to
(29:29):
refund a couple hundred billion dollars of tariff revenue that,
by the way, they don't have because surprise, federal government
has spent it, you know, like it's it's not like
it's just sitting there. So it's one where you say, okay,
does the federal government have to issue additional debt and
in order to do so, what does that do? Because
(29:49):
the projections were that, you know, over the next ten
years this would bring in like three trillion dollars in revenue.
If that's not coming in, deficits become large or do
the bond vigilantes show up again being hey, pay us more,
you know.
Speaker 3 (30:02):
So there's a lot of downstream impact. Yesterday equity markets
were up on maybe that was part of the news.
Maybe it was just a reversal of Tuesday sell off
as well. But yeah, I think the only thing I'm
comfortable saying right now is that many are looking at
this and thinking that the justices are leaning in the
(30:24):
throw it out direction.
Speaker 2 (30:25):
Yeah, I'd say that's where the vast majority of opinion
is now. In terms of the timeline, the estimates that
I've seen late December to early January, so we're probably
two to three months away from a ruling on this.
That's kind of the called two months away from a
ruling on this. Again, I don't personally have any idea
(30:46):
what's going to happen. I know so little about law
that I just don't have an informed decision here or
an informed take on this, and I think that's fine, Like,
we don't all have to pretend to be constitutional law
scholars for the day. Sometimes it's okay to just be like, hey,
(31:06):
there are other people that spend their lives researching this,
and yeah, let's take a quick break here, and when
we return, let's see, do we want to talk about
automakers looking for chips? We already covered that a little
bit earlier this week. I don't know that I have
much new stuff. There's talk about builders, talk about home builders.
(31:26):
I think there's a little bit of meat on that bone.
And we'll discuss when we come back.
Speaker 1 (31:30):
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. Long. Base is the Financial Exchange
Radio Network, Pace, the.
Speaker 2 (31:55):
Wall Street Journal. Builders are offering alders are offering mortgage
rate discounts. Home buyers aren't biting what are we seeing?
Speaker 3 (32:07):
Pretty low mortgage rates being offered by these buyer builders.
So they're they're, you know, buying up discounts for their customers.
Some of them, the largest ones out there, have their
own mortgage originations and so they're able to do this.
But Dr Horton France, for instance, is offering mortgages as
low as three point nine to nine percent through their
financing arms. Others such as Lenar offering buyers incentives worth
(32:30):
sixty four thousand dollars on the average home sales. What
I'm hearing reported also is that even with these discounts,
it's not quite attracting. You know, for years we've been
talking about institutional buyers of single family homes, right, and
you have not seen the corporate buyers come out yet.
You have not clearly seen the individual buyers come out yet.
(32:53):
But wow, a three point nine nine percent mortgage in
this market is pretty darn attractive.
Speaker 2 (32:58):
I'd say beyond pretty an't attractive. Yeah, And so this
gets at the question of why is this the case?
Right like it's it's it's The reasonable question answer to
ask is, hey, if you're getting mortgage rates that are
being offered that low, why are people not snapping them up?
(33:19):
And the place I come back to is, look, the
place that a lot of these developers are offering this
stuff is in place where home prices are falling and
home prices falling is usually a signal to most people
that it's not a great time to start buying real estate.
Speaker 3 (33:32):
Yet, in my opinion, yeah, I don't think it's all
that complicated. Supplies outstripping demand and there's a lot of
buyer skepticism about this market right now in those areas
where new homes have actually been built over the last
few years. So it's not an amazingly complicated question. But
it's definitely a bad sign when home builders have well
(33:55):
a lot of sitting on a lot of inventory. Wasn't
it the largest amount of inventory, since.
Speaker 2 (33:59):
It's the highest inventory level since June of two thousand
and nine, which is not really the copy want no,
not only economically you don't want to hear last time
since two thousand and nine. Yeah, yeah, any comparison to
that point of time when it comes to business or
economics is not a great comparison point.
Speaker 4 (34:18):
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Speaker 2 (35:29):
Peace in the Wall Street Journal, this famous method of
valuing stocks is pointing towards some rough years ahead. The
valuation method that they're talking about is what's known as
the CAPE, the cyclically adjusted pe ratio. This was popularized
by Robert Shiller. It's often known also as the Shiller
PE ratio, and basically what it does it looks at
ten years of earnings and adjusts them for inflation, so
(35:50):
you get a whole business cycle of earnings adjusted for inflation, Like,
how much is actually companies growing their earnings? How much
is inflation? And then say, okay, what's the pe ratio
based on that?
Speaker 3 (36:02):
Right?
Speaker 2 (36:03):
And pretty much what you're seeing right now is that
the Shiller pe is at the Again, you don't want
to compare things to two thousand and nine. You don't
really like, you know, nineteen ninety nine two thousand is
a comp for valuations, but we're basically at the highest
level of valuation that we've seen since September of two thousand.
Speaker 3 (36:17):
Yeah, and we've talked about this a few times because
we've been hitting these milestones throughout this year. Right, one
of them was the price to revenue ratio on the
S and P five hundred. Hadn't seen that since the
late nineties. Now we've got the cape price to earnings ratio.
What are we comfortable saying about this then? Right, like, yeah,
(36:37):
you're not in great company when when stocks hit the
price point that you've only once seen in US history,
which was during the lead up to the dot com bubble.
Not great company. But what are we actually comfortable saying
about this? Because I don't think it's a story of timing. No,
it's a horrible timing mechanism. The first time that we
hit this level was December of nineteen ninety eight. The
(37:00):
party continued for two more years and valuations went even higher.
So this is not something and valuations, I say this
quite often, valuations are not useful in any way, shape
or form as a timing signal as to like should
I do this or should I do that? They can
give you some rough guidance, and even there it's this
is not physics, like this is not this happens, and
(37:22):
then this happens. It's here's what we've observed observed previously,
but unlike physics, where those relationships are stable relationships, and
markets can evolve over time based on different conditions and
different sets of circumstances. So I think you can incorporate
this into any you know, mosaic and any matrix that
you're using to figure out, hey, how should I personally
(37:43):
be investing?
Speaker 2 (37:44):
But the idea that this should be used is like,
oh no, like we've reached this level, now you have
to sell. Well, that's just you know, useless as saying well,
things have gotten really cheap, now I need to buy. Well,
sometimes they're cheap for a reason see Emerging markets for
the last fifteen years. So I think, yes, this is
signaling some potential issues, but I keep coming back to
(38:04):
it's a horrible timing mechanism, and relationships can change over time.
They're not always stable in markets. Quick Break Hour two
coming up in a little bit.
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