November 25, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss retail sales finally land but uncovers some red flags. Don't trust American consumers when they say they are going to reign in spending. Powell's allies provide opening for December rate cut. Why Google's soaring stock is defying fears of an AI bubble. Poll finds Massachusetts voters are eager for a change in rent control.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Mike Armstrong and Paul Lane, your exclusive look
at business and financial news affecting your day, your city,
(00:43):
your world. Stay informed and of to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting DAV five dot Boston and making a
donation today. This is the Financial Exchange with Mike Armstrong
(01:06):
and fall Lane.
Speaker 2 (01:11):
Good morning, happy Tuesday before Thanksgiving here on the Financial Exchange.
We've got the government reopens, so data starting to flow again.
We've got some information on retail sales to go through.
We're gonna be talking Google and semiconductors, sorry, Alphabet and
their semiconductor business and what seems to be getting some attention.
(01:31):
And then we're also going to be talking about the
tried and true method of controlling prices, which would be
or bringing down prices, which would be rent control, because
we know how well that one works and apparently need
to retest that here in Massachusetts. So first things first, though, Mike,
Paul and Tucker with you here on the Tuesday ahead
(01:52):
of the holiday. Markets mixed as we open up here,
Dow in positive territory, SMP and Nasdaq in negative territory.
We've had a vault few weeks here, and so I
think investors are a bit on edge here even as
we head into the holidays, wondering about this AI trade,
and we'll be talking about that some more later in
the program. But I want to start off with retail sales.
(02:13):
They have been well paused, the data for it for
a while, and the data that we're getting Now again
we have to just acknowledge here and stress that this
is data for September.
Speaker 3 (02:24):
It is two months old. Now.
Speaker 2 (02:26):
It is not the most useful statistic that we can
use to try and garner what people how people are
feeling about the economy.
Speaker 3 (02:33):
But one thing you can say is that.
Speaker 2 (02:36):
Trends oftentimes continue themselves, and so what we saw in
September could continue through October and November.
Speaker 3 (02:41):
Perhaps.
Speaker 2 (02:42):
But taking a look at this report here again, this
tries to measure how much people are spending and what
they are spending it on. We did see a modest,
a very modest increase for retail sales in the month
of September. They increased on a month over month basis
zero point one six percent. That comes off the heels
(03:03):
of an August increase of zero point six percent, and
July was about the same, so pretty significant slow down.
We did see a lot of that coming from gas stations,
personal care stores, miscellaneous retailers as well. Motor vehicle sales
fell for the first time in four months, which maybe
(03:25):
somewhat notable here. Maybe that's going to peak back up
though in the holiday car shopping season. What else did
you take away from this report, Paul, in terms of
American spending activity.
Speaker 4 (03:36):
It's hard Mike, going back to September, and I've spent
the last thirty seconds just thinking about the Earth Wind
and Fire song. Do you remember, Yeah, twenty September. That's
it's been bouncing around in my mind. I'm just not
sure how much weight we should put into this, like
you said, just because it is so backward looking. The
numbers pale in comparison to some of the prior months.
(03:57):
But we sit really in the holiday shopping season right now,
and this is data that goes back, like we said,
to even pass the back to school season. Here some
of the areas that stuck out to me. You know,
you did see a little bit of drop on the
appliance and electronics side of things, about a half percent
drop there. Clothing dropped, and you saw some declines as
(04:19):
well in sporting goods, hobby, musical instruments, and bookstores. But
overall as a whole, it's it is sort of just
yesterday's news. Really, we now turn our focus much more
and we'll get into this in just a second here.
In terms of inflation in the labor market, those really
are the two primary concerns. Obviously, the consumer has been
(04:41):
holding up its end of the bargain for years now,
so it's not like we shouldn't cover this type of data.
But the problem with this government shutdown is it is
so backward looking that I'm not going to put too
much stock into it just yet.
Speaker 2 (04:53):
Yeah, thank you to all you retirees who are feeling
extra wealthy and paying for first class plane tickets and
family vacationations and new cars because you are keeping this
economy afloat here. I think it's worth mentioning. Right when
you strip out we tend to strip out things like gasoline.
Gas prices fluctuate a lot, and so you strip it
out of the numbers. You tend to strip out things
(05:16):
like motor vehicle and parts because those are very big
ticket items that people are not purchasing every single month.
You know, you purchase one every five years or so,
and for me maybe closer to ten to fifteen, but
I'm sure nonetheless it's a rare purchase. That's a big
ticket item. So when you strip all those items out,
retail sales barely budged in September, So you know that's
(05:40):
the piece to take away here is we saw a
slow down from the last several months. Is that because
sentiment worsened? Is it because there I doubt it's because
there was a fear of a government shut down?
Speaker 3 (05:51):
But is there some reason behind that?
Speaker 2 (05:53):
Or is this just a trend in the data that's
going to reverse itself, Because you know, you don't have
to go terribly far back to see a similar in
the data. Back in what was it back in May
of this year? We saw an eight tens of percent
drop At that point in time, we were blaming it
mainly on tariff fears. Is there something similar to blame
it on now? Doesn't really come to mind for me,
but you know, could this Here's who cares about this?
Speaker 3 (06:17):
Target?
Speaker 2 (06:18):
Walmart, a bunch of other companies do care about this.
They probably have better data on what their consumers are
doing than we do. But you know they're probably looking
at this and saying, Okay, this is where people cut
back in September. Are we going to see this stuff
surge again for the holiday shopping season? Or for instance,
our sporting goods store is going to be in tough
shape because of this pullback that we are seeing here.
(06:39):
One you know, glimmer of hope here of good news.
Spending on food services and drinking places and increase seven
tenths of percent.
Speaker 1 (06:46):
Yep.
Speaker 2 (06:47):
It's not big ticket items, but you know, people are
treating themselves a little bit in the month of September.
I do like to see that spending on that type
of service and that that does go a long way
for things.
Speaker 3 (06:59):
So I think that that's a good indication of it. Yeah.
Speaker 4 (07:02):
Yeah, it's hard on the retailers that you mentioned their
quarterly earnings, which would encompass, you know, even more data
than this September retails report was kind of mixed. You
saw Walmart had a pretty strong success, Target has continued
to struggle that business has really been muddling along for
the last year or so, and others. It was just
hard to point through as a clear through picture. Home
(07:24):
Depot did see you decline in same source sales, mentioning
just a weakening market for the real estate sector. So
we'll continue to digest more information as it comes out,
but just one data point. We don't want to go
too far ahead of ourselves here.
Speaker 2 (07:39):
Yeah, I will, you know, I'll bring a story that
we're going to cover later to the front though the
Boston Globes reporting that US consumers plan to cut their
Black Friday spending for the first time since twenty twenty one.
I just don't believe them. I think that they are
lying both to the reporters and to themselves. I think
that that's genuine I'm not tell that. I'm not telling
(08:01):
folks out there that they genuinely don't think they're going
to cut back on their spending. But we see this
every year where you go out and you survey consumers
on the street and they say, oh, you know, that
credit card bill last year was way too much. I'm
going to cut it back, And unless they literally lose
their job, they don't cut back.
Speaker 3 (08:20):
So I'm just not buying it.
Speaker 4 (08:21):
The only argument I could see is that it feels
like Black Friday is not a Black Friday creep. It's
not as special as it as it once was. Because
these companies spread it out over such an extended period
of time. It seems like that perhaps that one day
isn't as significant as it used to be.
Speaker 3 (08:37):
Yeah, I will, I will admit that that.
Speaker 2 (08:40):
You know, perhaps there's been enough Black Friday creep that
it's just going to But that doesn't.
Speaker 3 (08:45):
Ano Cyber Monday.
Speaker 4 (08:46):
You know, it's just it becomes more of a extended
period of sales.
Speaker 2 (08:51):
While I agree, I don't think it's significantly different from
last year.
Speaker 3 (08:55):
And so true.
Speaker 2 (08:55):
You know, we had Black Friday creep last year. I
doubt we're going to see sales drop. And yeah, I
don't know. I tend to think that whenever you survey consumers.
So the Deloitte survey that they did, they survey twelve
hundred Americans. They found that the shoppers planned to spend
an average of six hundred and twenty two dollars between
Black Friday and Cyber Monday.
Speaker 3 (09:15):
God, that's a lot of money. That would be down
four percent from last year. It's just not how it works.
Speaker 4 (09:21):
It would be like asking anybody you're going to try
and lose some weight this year's I'm gonna put on a.
Speaker 2 (09:27):
Bunch of muscle mass and lose weight and U and
my hair is gonna grow. No, that's not how it works.
And uh yeah, I'm gonna be six foot by the
end of twenty twenty six. Paul, It's gonna be great.
We're all gonna be really happy about it, and my
financial house will be in order. Let's take a quick
break when we come back a little bit of FED talk.
(09:48):
When we head into this December meeting, investors seem to
be quite split on what the FED is going to
end up doing. So to hint at what we were
referring to earlier, Right now, when you take a look
at the Chicago Work and Tile Exchange, Uh, there is
right now an eighty five percent chance of a rate
(10:09):
cut at that next December meeting, in spite of j
Powell coming out and very publicly saying and then a
bunch of his governor's coming out and saying that it
is not a foregone conclusion. Where was that a few
weeks ago? And will they actually end up cutting next year?
On the Financial Exchange Nice this.
Speaker 1 (10:25):
Is your home for the most comprehensive coverage of the
economy and the trends on Wall Street. Face 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 in full shows. This is your
home for the latest business and financial news in New
(10:48):
England and around the country. This is the Financial Exchange
Radio Network.
Speaker 5 (10:55):
This segment of the financial exchange is brought to you
by the US Virgin Islands Department of Tourism. Your next
incredible vacation is a click away, and if you act fast,
you could be on Sant Croix to experience their crucing
Christmas Festival taking place this December through early January. Discover
the magic of this long standing tradition with incredible food,
music and entertainment. Or just go soak up the sun
(11:17):
strong a long white sand beaches and feel the rhythm
of the heartbeat of the islands. The USVII is America's
Caribbean paradise. Plan your escape now at visit USVII dot com.
That's visit USVII dot com.
Speaker 2 (11:29):
Over the course of the last month, with some market volatility,
there's been two main things that have been pointed to
as contributing factors, and I would tell you that really
only one of them matters. But one has been new
suspicions about the AI trade, how much it's going to cost,
whether the payoff will come. Second, has been changing narrative
around where interest rates are going. FED has cut interest
(11:50):
rates twice this fall. They were widely expected to do
so again at the upcoming December meeting. There was a
month ago, back in October, there's a ninety two two
percent likelihood that they were going to cut. No, sorry,
there was a ninety five percent chance that they were
going to cut at that next meeting. A week ago
it was a fifty to fifty chance, And so I
(12:13):
don't know how much that contributed to sentiment about markets.
But higher interest rates make some investors nervous. They discount
their future cash flows when it comes to a company
at a higher interest rate, and so it changes valuations.
I suspect that the nervousness about the AI trade was
a larger contributing factor than interest rates. But I don't
think we can minimize the impact of what the FED
(12:35):
has to say about the economy because they have provided
a lifeline on several occasions when things have gotten messy.
What has been happening to cause this kind of shift
in thinking?
Speaker 3 (12:47):
One, you did have J.
Speaker 2 (12:49):
Powell at the last meeting come out and say it
is far from a foregone conclusion that we will be
cutting interest rates at the next meeting. Following that, you
had several other FED members that pretty much said the
same thing. Right since then, though, since the last week
or so. Again, now you've had more FED speeches and
they have come out and left the door open for
(13:10):
that additional rate cut.
Speaker 3 (13:12):
I myself, you know, sitting here looking at everything, if
we are.
Speaker 2 (13:16):
Not going to have any new government data on the
state of the labor market, on the state of inflation,
really on the state of a whole slew of different things,
and you've been cutting interest rates into this economy based
on the previous data you had. I have a tough
time justifying why you would pause now by any account, right,
you've got some fragility and markets very clearly, you've got
(13:37):
some nervousness about private credit that's relatively new, and so
were I in those shoes today. You know, again, based
on the day that we have to day, based on
the narrative that we are looking at today, I would
probably continue with another twenty five basis point rate cut.
I don't see how you know the changing narrative has
driven you away from that standpoint. But clearly there are
(14:00):
at least some FED members, and there were some FED
members at the last meeting who said, no, that's really
not justified based on three percent inflation where we are
right now, and the labor market hasn't weakened yet, so
you know why go lower.
Speaker 4 (14:11):
Yeah, there's two paths that they could take here. One
of them is the one that you were just sort
of alluding to that you cut rates of the December
tenth meeting and then just sort of posture your sentiment
to say that the bar going for is going to
be very high for future cuts, that you're really going
to need to see a lot of indications that would
substantiate more cuts, because this is sort of what you
(14:32):
had telegraphed before as to be the policy is to
continue with these rate cuts. The areas of concern out
there for people perhaps in the dissenting party that you
mentioned on the FED governor side is that we're in
a bit of a difficult situation for the FED where
there is elevated inflation. We're sitting at that three percent
level the Fed's target is too, So that's typically an
(14:56):
area where you would not be too behind the idea
of cutting rates into a more inflationary environment. But two
percent isn't a hard and fast rule. Three percent is
higher than a ten And also on the job growth
side of things, to in favor of the idea of
cutting rates. You had a September job support that came
out that did see the unemployment rate tick up to
(15:18):
four point four percent. The number of jobs at in
the month was relatively high, but we know that that
can be revised down further. So it seems as if
all these indicarriors lead to steady as she goes. It's interesting.
I believe, like you had mentioned, it had got down
to a fifty to fifty shot. Then the New York
Fed President John Williams spoke on Friday basically reiterating their
(15:40):
prior stances. We're going to move policy down more towards
the neutral rate. So that's sort of where we sit
on this front. The other alternative would be to not
cutting rates, would be, hey, leave them as they are
and revisit in January under the premise that, hey, we're
going to get some more data. But the problem that
you run there is over that seven week span, if
(16:01):
you don't get any conclusive data that points in one
direction or another, you've effectually you wasted time.
Speaker 2 (16:07):
Yeah, yeah, you know more, I guess ammunition for the
FED two cut rates. The Conference Board came out this
morning with their consumer confidence reading, not something that Fed
genuinely takes into consideration with their decisions. But you know, again,
in the absence of other data, you look for anything,
you get your fingers on. The gauge for consumer confidence
decreased six point eight points, down to eighty eight point seven.
(16:32):
I've said before I don't think that these readings on
consumer confidence are terribly useful, especially not when comparing them
to previous decades. We've talked about how it just didn't
make a lot of sense to me that consumer confidence
in twenty twenty four was worse than what we were
seeing in twenty ten, right, Like, just on the surface,
(16:52):
tough to make sense of those numbers. But what I
think is notable about this one. The consumer confidence level
dropped the lowest level since April.
Speaker 3 (17:01):
What was going on in April? Well, everyone and their
mother was terrified of terrorists.
Speaker 2 (17:04):
How many calls were you getting about, Oh, should I
buy that car that I was thinking about because I'm
worried that superup prices are going to go through the
roots time. This is an interesting turn because again it's
weakening in the face of an absence of from what
I can tell, really bad news.
Speaker 4 (17:21):
No, I don't know what you would point to as
to why it would be so much as weak as
it was in April.
Speaker 2 (17:27):
That was understandable, which is interesting to me because it's
the exact same thing we saw out of the markets, right.
You saw a turn for the worst over the corporate
of course, the last few weeks that was not set
off by a big news story that we were able
to point to, right, I mean, the biggest news story
that you could point to for setting off markets were
(17:47):
comments from the likes of Sunder Pachai, Michael and others
to say, oh, we're pretty suspicious of.
Speaker 3 (17:54):
This Ai trade and where it's going to go.
Speaker 2 (17:57):
Whereas you took a look at offs in April, for example,
it was because we literally proposed forty percent average tariffs
on every country in the world, and so it completely
reshifted the narrative. So I find this reading to be interesting.
The other data point that came out just this morning
the Producer Price Index, again not the most heavily looked
(18:17):
at item.
Speaker 3 (18:18):
Only if it were.
Speaker 2 (18:19):
To surge through uncomfortable levels do I think the FED
would really pay attention to this number? Excluding food and energy,
the PPI rose slightly less than forecasts from August climb
two point six percent from a year ago, smallest gain
since July twenty twenty four.
Speaker 3 (18:34):
I think this is a nothing story.
Speaker 2 (18:35):
You shuffle it to the back of the deck and say, Okay,
PPI doesn't indicate any problems on inflation.
Speaker 4 (18:40):
Yeah, just for listeners. Producer price index is what is
the producer paying for a set of goods that they
will eventually sell to you, the end consumer. So it
often can be sometimes paired with the CPI, the consumer
price index data, but that is the one that is
far more significant. What are the consumers paying, not the producers.
Speaker 3 (18:57):
We have got to take a quick break.
Speaker 2 (18:59):
When we come back, we're gonna have a full market
update with Wallstreet Watch, and then we are talking Google.
Speaker 1 (19:23):
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.
Speaker 6 (19:34):
We're proud to announce that circle K is now the
official convenience store of the dav Department of Massachusetts. At
circle K, Supporting those who bravely served our country isn't
just a commitment, it's a heartfelt mission. Circle K is
honored to stand with the dav Department of Massachusetts to
ensure that veterans receive the care and recognition they deserve.
If you'd like to do your part, please visit DAVMA
(19:55):
dot org. Thank you for standing with circle K and
the dav Department of Massachusetts, and thank you veterans.
Speaker 1 (20:01):
For all you've done. Time now for Wall Street. Watch
a complete look at what's moving markets so far today
right here on the Financial Exchange Radio Network.
Speaker 5 (20:18):
Well after yesterday's rally, markets today are mixed as investors
react to more economic data points from September. The Producer
Price Index mostly came in line with expectations, while retail
sales for September climbed zero point two percent, softer than
estimates of zero point four percent. Right now, the Dow
is up nearly six tenths of a percent, or two
(20:39):
hundred and sixty four points. SMP five hundred is edging
five points higher, NASDAC retreating over a third of a
percent or eighty two points lower. Russell two thousand is
up nearly nine tenths of one percent, Tenure Treasure reeled
down two basis points at four point zero one one percent.
In crude oil down nearly three percent lower, trading just
(21:00):
above fifty seven dollars a barrel According to the information,
Meta is in talks to spend billions on Google's AI chips.
As Google steps up steps up its efforts to compete
directly with Nvidia. Shares in Alphabet are up again today
another two and a half percent higher, while in Video
shares of falling over six percent. On the heels of
(21:22):
that report. Other chip makers, including AMD, are seeing sympathy losses. Meanwhile,
Best Buy shares a rising four percent after the consumer
electronics retailer hiked its full year sales in earning's outlook
after beating earnings expectations during the previous quarter. The retailer
saw customers upgrade tech devices and splurge on new computers,
(21:43):
gaming consoles, and smartphones elsewhere. After naming a new CEO, yesterday,
Coles reported better than expected third quarter results with a
surprise profit. Coles also upped its annual guidance, sending shares
in the struggling retailer surging thirty one percent. It's more
retailer earnings after Dick Sporting Goods beat street expectations for
(22:04):
the previous quarter. However, the company announced it will shutter
some footlocker stores as part of a larger restructuring so
that the sneaker company doesn't weigh on Dick's profits. That
stock is down by three percent and Zoom jumping eleven
percent after the video conferencing company beat earnings forecast, while
it's fourth quarter earnings guidance was also better than expected.
(22:27):
I'm Tucker Silva and that is Wall Street Watch. And
if you missed any of our shows this week, you
can find them on our YouTube page. We stream the
show live every day, but also archive every hour and
all of our most newsworthy interviews. Just go to YouTube,
search the Financial Exchange and hit that subscribe button.
Speaker 2 (22:46):
I got some tips for you on that YouTube thing, Tucker.
What I feel like you could use AI to make
all of your hosts a lot handsomer.
Speaker 5 (22:54):
We could do that.
Speaker 2 (22:55):
We could have you know, might wave thestud if you
matter quite as much for the audio format. But you know,
if you're trying to push us out on YouTube, sure
you know, six inches taller, stronger chin, I think you'd,
I think you'd really clear clear things out there.
Speaker 4 (23:11):
Just called Tom Brady's plastic surgeon.
Speaker 3 (23:13):
Yeah, you know again we don't need to AI, right surgery.
Speaker 2 (23:20):
Speaking of artificial intelligence, I want to try and frame
this conversation properly, and to start it off, here's what
you should know. In Vidia's stock over the course of
the last thirty days is down a little bit over
ten percent. Now it's down five percent six percent today alone.
Alphabet stock, on the other hand, over the last thirty
days up twenty one percent.
Speaker 3 (23:42):
What again, The narrative that's been dominating markets over.
Speaker 2 (23:45):
The last thirty days is what if this AI trade
doesn't work out the way we think it does, doesn't
really explain why Google is shooting up by twenty percent
if the people are worried about the AI trade as
a whole. So what is Google benefiting from right now.
Speaker 4 (23:59):
To try and simplify best as possible, is investors have realized,
particularly with some of the recent announcements that came out
today with Meta potentially buying Google's chips, as well as
Anthropic another company out there committing to buy a million
of Google's chips, that Google is the best vertically integrated
(24:19):
business out there within the artificial intelligence space. And let
me try and explain that a little bit. So there
are different parts of all this artificial intelligence trade. Why
we've talked about in video so much on the show,
for the last two or three years is that if
you wanted to create a large language model like chat
gipt that many of us have probably used or messed
around with, and videos chips are the have been the
(24:40):
best game in town to do that by far and away, and.
Speaker 2 (24:43):
There was really no evidence that anybody else could compete with.
We had one story in February or March of this
year with deep Seek, a Chinese made AI tool coming
out where we suspect that it might have been trained
without using in video chips, But then there was also
cross stories that well, no, they probably just imported them
I legally and trained at using them anyway. And videous
chips have been the only game in town.
Speaker 4 (25:04):
Seventy percent gross margins that they command on these, they
really had a I won't say a monopoly, but they
had significant market share.
Speaker 3 (25:12):
Yeah.
Speaker 4 (25:12):
What has happened more recently is this idea that there
could be room for another competitor. Google and the story
that Tucker mentioned on Wall Street Watch and its chips
have been pretty similar in terms of performance, and also
the large language model that Google has Gemini three came
out recently that is built upon Google's chips performed equally
(25:36):
as well, or some people have argued better than Chat GPT.
Speaker 2 (25:40):
So frankly, you know there's been this debate, Hey, is
Gemini three better than Chat GPT five point one.
Speaker 3 (25:46):
I don't have an answer for you.
Speaker 2 (25:47):
Yeah, I mean, you know, there's been a lot of
people that have been testing the two and trying to
get some comparable answers and see which one's better. Frankly,
even if it is remotely competitive with GPT five point one,
that's probably enough for investors to get excited.
Speaker 4 (26:01):
It's a really big deal. And so clearly is when
I go further along this vertical integration is okay. And
Video's got the chips, it's got the data setter, but
in video doesn't have a large language model at all.
It doesn't have Chat GPT. Google has Gemini the large
language model. It has the chips we just spoke about.
They also have the data centers and all of the
cloud infrastructure. They also have a bunch of users on
(26:24):
their platform. They still have ninety percent market share in
the search space. Oh, by the way, they have three
billion users on Android, and they have another three billion
users who use Docs and Gmail and Maps and other
interfaces out there that they could integrate some of this
artificial intelligence, and they're just well positioned compared to some
of its competitors.
Speaker 3 (26:43):
If this ends up being a bubble that bursts, as
Alphabet's own CEO soonder pitch, I put it Google out.
Can we just call them Google? Yeah, I'm so frustrated
by this. Google will not.
Speaker 2 (26:55):
Avoid problems if this is an AI bubble that ends
up popping. But I think people find really attractive about
this business is like you mentioned, they're fully integrated within
the AI space. They have a massively profitable non AI
business to fund all of these endeavors.
Speaker 4 (27:12):
Research any five billion revenue a year.
Speaker 2 (27:15):
They also have this you know, this solid business by
the way, that continue that can continue to partner with
Apple and get paid massive amounts of money by Apple.
They might have the best AI general of AI tool
out there.
Speaker 3 (27:29):
And by the.
Speaker 2 (27:30):
Way, on top of all that, if you are really
excited about automation and robotics, they also happen to own
the you know, far and away best US self driving
car business out there. Right, I'm not saying you should
be excited about that. Like, I think there's some serious
questions as to how that ends up working. But they
are the leader in the clubhouse there too. And so
I think what's been happening is if you are an
(27:51):
investor that's been getting nervous about the pure play, what
happens if you know, in Nvidia is commoditized, you've turned
around and said, oh, well, let's check out this other
business that. You know what, even if AI ends up
being you know, commoditized business that is not that valuable,
Alphabet still exists. They still got a massively profitable business elsewhere.
Speaker 4 (28:12):
And there are guys are of cash flow, you know
they are in terms of their competitors. They're still spending,
don't get me wrong, ninety one billion to ninety three
billion in terms of capital expense this year, but their
debt load relative to some of their peers out there
is lower just because they're able to spin out so
much cash.
Speaker 3 (28:29):
Remember like sixty days ago when they argued in court
that their business.
Speaker 4 (28:32):
So I want to cover that too, because it's hard
not to mention that after this recent decision that we had,
what was that late September that that decision came out.
Speaker 2 (28:42):
Explain, there's a monopoly case brought against Alphabet that attempted
to break them up, and they were declared to monopoly
by the judge. But in their defense, they argued that
AI was going to ruin their search business and really
take a big chunk out of their or way of
doing business.
Speaker 4 (29:01):
Right, the Department of Justice says, your monopoly. They come
out with a decision that basically the judge that ru
and the judge too, and they come out and basically
give what is a very light slap on the wrist
in terms of any sort of punishments to Google at all.
And the only reason that Google was basically able to
dodge a more stiffer ruling, I feel, is because of
(29:23):
the threat of our official intelligt to a source business.
And here we sit three months later, me giving this
whole diet tribe as to how they're so well positioned
to potentially take the biggest market share of our official
intelligence because they're so well vertically integrated that's allowed to
stay intact because of this ruling a mere two months ago.
Speaker 3 (29:43):
Let's take quick break.
Speaker 2 (29:44):
When we come back, we're going to turn to a
completely different subject because according to a recent poll, a
majority of Massachusetts voters say the support ballot ballot measures
re establishing rent control in Massachusetts. We're talking rent control
next on The Financial Exchange.
Speaker 1 (30:00):
Miss any of the show. The Financial Exchange Show podcast
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
button and leave us a five star review. This is
the Financial Exchange Radio Network. 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
(30:21):
everything you might have missed. This is the Financial Exchange
Radio Network.
Speaker 5 (30:34):
This segment of The Financial Exchange is powered by circle
K Convenience Stores. CIRCLEK is now the official convenience store
of the dav Department of Massachusetts. On behalf of circle K.
Thank you veterans for all you've done.
Speaker 2 (30:50):
We talk a lot about on the show how it
seems like we just need to have these moments every
once every twenty thirty, forty fifty years where we retest
things that were pretty dumb and proven to be stupid,
and you know, we'd say, it's been a little while,
everybody that had tried that was dead now, so let's
try it again and see if it works this time.
(31:11):
A poll of five hundred likely Massachusetts voters found that
more than sixty percent of those indicated they would back
measures that would re establish rent control in the Commonwealth
of Massachusetts. Back in nineteen ninety four, rent control was
banned across the state at a time when only Boston, Brookline,
(31:31):
and Cambridge had it in place, and it appears that
the ballot initiative at least got enough signatures in Massachusetts
to put rent control back into place, or at least
allow cities to push rent control. I don't know if
this would mandate rent control across the entire state, but
(31:51):
I think it actually would based on the language that
I read in the ballot.
Speaker 3 (31:55):
It's a ballot.
Speaker 2 (31:56):
There's a lot of questions about the legality of the ballot,
of the signatures, and obviously the advertising that would be
run against or for the ballot leading into it, But
here is what I have read about this ballot initiative.
The ballot would cap annual rent increases at five percent
per year or CPI.
Speaker 3 (32:16):
Okay, higher of the two higher of the.
Speaker 2 (32:18):
Two newly built apartments would be exempt from rent control
for the first decade after construction, and if you were
in an owner occupied building with fewer than four units,
you would also be exempted from this. So basically nobody's
exempt there are very few exemptions out there. If you
(32:40):
own one apartment on this ballot initiative and it's not
new construction, you are going to be subject to rent.
Speaker 4 (32:46):
Control of those less than four units.
Speaker 3 (32:50):
If you're living in an owner occupied Oh, if you live.
Speaker 4 (32:53):
In it, yes, ah, okay, yeah, goddess.
Speaker 2 (32:56):
So if you live in your building and then you
rent out two other units in the building, execs.
Speaker 3 (33:00):
If you do, you have a.
Speaker 4 (33:01):
Three family Nope, this is such a bad This is
such a bad idea.
Speaker 3 (33:07):
Why it's a bad idea? First things First, there are
no sorts of exemptions for buildings that are completely rehabbed. Right.
Speaker 2 (33:16):
So I go in and I'm looking at my place
in Summerville that I've rented out for thirty years, and
I want to go pour half million dollars into it
to modernize it, because you know, what was a pretty
rough area thirty years ago is now a growing area
with new shopping available and all sorts of you know,
gentrification going on. There's no way I'm doing that because
(33:37):
I can only raise my rent from one thousand dollars
a month to one thousand.
Speaker 3 (33:44):
Help me do the math on thousand and fifty.
Speaker 2 (33:47):
No, not going to cover that the other thing I'm
going to do if I'm worried that, you know, even
if I don't think that rent should go up by
five percent, if I'm worried that I can never raise
it more than five percent every year. Every year, it's
going up five percent. Yeah, furthermore. Okay, so we just
talked about. Okay, there's now a very small incentive built
(34:07):
in for you to maintain your places and improve upon them. So,
like you've seen in other places that have rent control,
you're going to have a stock of housing that is new,
an exempt from rent control and nice and pretty. You're
gonna have another stock of housing where getting your landlord
to do anything is going to be fighting tooth and
nail because they can't charge you market rent. It's also
(34:31):
going to prevent areas of the state that might develop
into you know, there's been a big push into Worcester,
for example, you know, bringing Worcester, more people commuting from
Worcester to Boston, and more people relocating there because the
cheaper cost of housing. It's going to pause development in
cities like that because developers aren't going to go in.
It doesn't matter that there's a ten year exemption from
(34:52):
this because at the end of the day, you're still
facing that cliff where at the end of ten years
you are subject to rent control again. I'll continue to
lay out my arguments concisely as to why I think
this is a stupid idea, but frankly, I think voters
in Massachusetts are feeling probably a bit empowered after the
(35:12):
millionaire's tax that passed and quite honestly, had less of
an impact on business and the state of things in
the Commonwealth than I would have anticipated. You know, I
talked about publicly that hey, you know, pretty small state here.
If I'm a small business owner and I want to
relocate to New Hampshire, I can do that fairly easily.
Quite honestly, the millionaires tax has brought in way more
(35:34):
revenue than even the lawmakers estimated it would, and so
we have not seen that impact yet. What I think
voters are missing here is that it takes decades for
these policies to be fully felt, and we are creating
an environment in Massachusetts that is well less and less
(35:55):
business friendly, I guess, is how I would put it.
Speaker 4 (35:58):
The rent control used to suspend back to that. No,
these voters, whoever on the side of this are not
anticipating the unattended consequence that this is going to have.
It's just get it just sounds like a free launch.
It sounds like this great deal. Oh you'll have to
pay lower costs. This is going to work on your
favorite but doesn't recognize the economic realities with real estate development.
(36:22):
And ultimately this is going to lead a shrinking supply.
And by the way, the vacancy rate in the Boston
area is one of the lowest in the nations. If
you're looking for an apartment, this is not going This
does not help that at all. This does not encourage
people to build more multi family units and to build
more options out there forgetting Yeah, okay, you can argue
ten year exception, but that's just not going to do it. It
(36:43):
won't justify the long term time horizon of real estate investors,
whether they're a conglomerate you know, a bigger institutional investor
or not. It's just frustrating.
Speaker 2 (36:52):
Yeah, when you try to cap prices. I I know
that not everybody studies em it's not everybody studies this,
but when.
Speaker 3 (37:02):
You cap prices, the result is shortages.
Speaker 4 (37:06):
And lows you options too. It's what's gonna happen, You're
gonna have these dilapidated buildings that people aren't gonna want
to invest to make nicer.
Speaker 2 (37:13):
Yeah, I genuinely so. I don't own rental property anywhere.
I genuinely would be taking a very if I did,
I would be genuinely taking a very hard look at
this and saying I'm out.
Speaker 3 (37:25):
You know, is this a market that I.
Speaker 2 (37:26):
Can still rely upon for for you know, predictable income
and future growth if something like this passes. And I
don't really know how to assess the likelihood of the
passing at this point. We're still a year away from
this election and this happening, and we've seen how you know.
Speaker 3 (37:45):
Public can shift it on this stuff. But I don't know.
Speaker 2 (37:49):
I mean, doesn't this kind of feel a little bit
like the sentiment around the millionaire's tax, like it won't
affect me? And I get you know, I get it.
We could use the uh, we could use the help
with prices.
Speaker 3 (38:01):
I don't know. Maybe I don't feel like this should
play as well as the millionaires tax did with voters,
but you.
Speaker 4 (38:08):
Can grab some low hanging fruit of people who aren't informed.
Speaker 2 (38:10):
You're right, Yeah, we still see but yeah, it looks
like rent control back on the ballot for the first time,
probably the first time ever, but back in consideration for
the first time in a few decades in the state
of Massachusetts.
Speaker 3 (38:22):
Quick break, A lot more to cover in the second hour.
Will be right back
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Mike Armstrong and Paul Lane, your exclusive look
at business and financial news affecting your day, your city,
(00:43):
your world. Stay informed and of to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting DAV five dot Boston and making a
donation today. This is the Financial Exchange with Mike Armstrong
(01:06):
and fall Lane.
Speaker 2 (01:11):
Good morning, happy Tuesday before Thanksgiving here on the Financial Exchange.
We've got the government reopens, so data starting to flow again.
We've got some information on retail sales to go through.
We're gonna be talking Google and semiconductors, sorry, Alphabet and
their semiconductor business and what seems to be getting some attention.
(01:31):
And then we're also going to be talking about the
tried and true method of controlling prices, which would be
or bringing down prices, which would be rent control, because
we know how well that one works and apparently need
to retest that here in Massachusetts. So first things first, though, Mike,
Paul and Tucker with you here on the Tuesday ahead
(01:52):
of the holiday. Markets mixed as we open up here,
Dow in positive territory, SMP and Nasdaq in negative territory.
We've had a vault few weeks here, and so I
think investors are a bit on edge here even as
we head into the holidays, wondering about this AI trade,
and we'll be talking about that some more later in
the program. But I want to start off with retail sales.
(02:13):
They have been well paused, the data for it for
a while, and the data that we're getting Now again
we have to just acknowledge here and stress that this
is data for September.
Speaker 3 (02:24):
It is two months old. Now.
Speaker 2 (02:26):
It is not the most useful statistic that we can
use to try and garner what people how people are
feeling about the economy.
Speaker 3 (02:33):
But one thing you can say is that.
Speaker 2 (02:36):
Trends oftentimes continue themselves, and so what we saw in
September could continue through October and November.
Speaker 3 (02:41):
Perhaps.
Speaker 2 (02:42):
But taking a look at this report here again, this
tries to measure how much people are spending and what
they are spending it on. We did see a modest,
a very modest increase for retail sales in the month
of September. They increased on a month over month basis
zero point one six percent. That comes off the heels
(03:03):
of an August increase of zero point six percent, and
July was about the same, so pretty significant slow down.
We did see a lot of that coming from gas stations,
personal care stores, miscellaneous retailers as well. Motor vehicle sales
fell for the first time in four months, which maybe
(03:25):
somewhat notable here. Maybe that's going to peak back up
though in the holiday car shopping season. What else did
you take away from this report, Paul, in terms of
American spending activity.
Speaker 4 (03:36):
It's hard Mike, going back to September, and I've spent
the last thirty seconds just thinking about the Earth Wind
and Fire song. Do you remember, Yeah, twenty September. That's
it's been bouncing around in my mind. I'm just not
sure how much weight we should put into this, like
you said, just because it is so backward looking. The
numbers pale in comparison to some of the prior months.
(03:57):
But we sit really in the holiday shopping season right now,
and this is data that goes back, like we said,
to even pass the back to school season. Here some
of the areas that stuck out to me. You know,
you did see a little bit of drop on the
appliance and electronics side of things, about a half percent
drop there. Clothing dropped, and you saw some declines as
(04:19):
well in sporting goods, hobby, musical instruments, and bookstores. But
overall as a whole, it's it is sort of just
yesterday's news. Really, we now turn our focus much more
and we'll get into this in just a second here.
In terms of inflation in the labor market, those really
are the two primary concerns. Obviously, the consumer has been
(04:41):
holding up its end of the bargain for years now,
so it's not like we shouldn't cover this type of data.
But the problem with this government shutdown is it is
so backward looking that I'm not going to put too
much stock into it just yet.
Speaker 2 (04:53):
Yeah, thank you to all you retirees who are feeling
extra wealthy and paying for first class plane tickets and
family vacationations and new cars because you are keeping this
economy afloat here. I think it's worth mentioning. Right when
you strip out we tend to strip out things like gasoline.
Gas prices fluctuate a lot, and so you strip it
out of the numbers. You tend to strip out things
(05:16):
like motor vehicle and parts because those are very big
ticket items that people are not purchasing every single month.
You know, you purchase one every five years or so,
and for me maybe closer to ten to fifteen, but
I'm sure nonetheless it's a rare purchase. That's a big
ticket item. So when you strip all those items out,
retail sales barely budged in September, So you know that's
(05:40):
the piece to take away here is we saw a
slow down from the last several months. Is that because
sentiment worsened? Is it because there I doubt it's because
there was a fear of a government shut down?
Speaker 3 (05:51):
But is there some reason behind that?
Speaker 2 (05:53):
Or is this just a trend in the data that's
going to reverse itself, Because you know, you don't have
to go terribly far back to see a similar in
the data. Back in what was it back in May
of this year? We saw an eight tens of percent
drop At that point in time, we were blaming it
mainly on tariff fears. Is there something similar to blame
it on now? Doesn't really come to mind for me,
but you know, could this Here's who cares about this?
Speaker 3 (06:17):
Target?
Speaker 2 (06:18):
Walmart, a bunch of other companies do care about this.
They probably have better data on what their consumers are
doing than we do. But you know they're probably looking
at this and saying, Okay, this is where people cut
back in September. Are we going to see this stuff
surge again for the holiday shopping season? Or for instance,
our sporting goods store is going to be in tough
shape because of this pullback that we are seeing here.
(06:39):
One you know, glimmer of hope here of good news.
Spending on food services and drinking places and increase seven
tenths of percent.
Speaker 1 (06:46):
Yep.
Speaker 2 (06:47):
It's not big ticket items, but you know, people are
treating themselves a little bit in the month of September.
I do like to see that spending on that type
of service and that that does go a long way
for things.
Speaker 3 (06:59):
So I think that that's a good indication of it. Yeah.
Speaker 4 (07:02):
Yeah, it's hard on the retailers that you mentioned their
quarterly earnings, which would encompass, you know, even more data
than this September retails report was kind of mixed. You
saw Walmart had a pretty strong success, Target has continued
to struggle that business has really been muddling along for
the last year or so, and others. It was just
hard to point through as a clear through picture. Home
(07:24):
Depot did see you decline in same source sales, mentioning
just a weakening market for the real estate sector. So
we'll continue to digest more information as it comes out,
but just one data point. We don't want to go
too far ahead of ourselves here.
Speaker 2 (07:39):
Yeah, I will, you know, I'll bring a story that
we're going to cover later to the front though the
Boston Globes reporting that US consumers plan to cut their
Black Friday spending for the first time since twenty twenty one.
I just don't believe them. I think that they are
lying both to the reporters and to themselves. I think
that that's genuine I'm not tell that. I'm not telling
(08:01):
folks out there that they genuinely don't think they're going
to cut back on their spending. But we see this
every year where you go out and you survey consumers
on the street and they say, oh, you know, that
credit card bill last year was way too much. I'm
going to cut it back, And unless they literally lose
their job, they don't cut back.
Speaker 3 (08:20):
So I'm just not buying it.
Speaker 4 (08:21):
The only argument I could see is that it feels
like Black Friday is not a Black Friday creep. It's
not as special as it as it once was. Because
these companies spread it out over such an extended period
of time. It seems like that perhaps that one day
isn't as significant as it used to be.
Speaker 3 (08:37):
Yeah, I will, I will admit that that.
Speaker 2 (08:40):
You know, perhaps there's been enough Black Friday creep that
it's just going to But that doesn't.
Speaker 3 (08:45):
Ano Cyber Monday.
Speaker 4 (08:46):
You know, it's just it becomes more of a extended
period of sales.
Speaker 2 (08:51):
While I agree, I don't think it's significantly different from
last year.
Speaker 3 (08:55):
And so true.
Speaker 2 (08:55):
You know, we had Black Friday creep last year. I
doubt we're going to see sales drop. And yeah, I
don't know. I tend to think that whenever you survey consumers.
So the Deloitte survey that they did, they survey twelve
hundred Americans. They found that the shoppers planned to spend
an average of six hundred and twenty two dollars between
Black Friday and Cyber Monday.
Speaker 3 (09:15):
God, that's a lot of money. That would be down
four percent from last year. It's just not how it works.
Speaker 4 (09:21):
It would be like asking anybody you're going to try
and lose some weight this year's I'm gonna put on a.
Speaker 2 (09:27):
Bunch of muscle mass and lose weight and U and
my hair is gonna grow. No, that's not how it works.
And uh yeah, I'm gonna be six foot by the
end of twenty twenty six. Paul, It's gonna be great.
We're all gonna be really happy about it, and my
financial house will be in order. Let's take a quick
break when we come back a little bit of FED talk.
(09:48):
When we head into this December meeting, investors seem to
be quite split on what the FED is going to
end up doing. So to hint at what we were
referring to earlier, Right now, when you take a look
at the Chicago Work and Tile Exchange, Uh, there is
right now an eighty five percent chance of a rate
(10:09):
cut at that next December meeting, in spite of j
Powell coming out and very publicly saying and then a
bunch of his governor's coming out and saying that it
is not a foregone conclusion. Where was that a few
weeks ago? And will they actually end up cutting next year?
On the Financial Exchange Nice this.
Speaker 1 (10:25):
Is your home for the most comprehensive coverage of the
economy and the trends on Wall Street. Face 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 in full shows. This is your
home for the latest business and financial news in New
(10:48):
England and around the country. This is the Financial Exchange
Radio Network.
Speaker 5 (10:55):
This segment of the financial exchange is brought to you
by the US Virgin Islands Department of Tourism. Your next
incredible vacation is a click away, and if you act fast,
you could be on Sant Croix to experience their crucing
Christmas Festival taking place this December through early January. Discover
the magic of this long standing tradition with incredible food,
music and entertainment. Or just go soak up the sun
(11:17):
strong a long white sand beaches and feel the rhythm
of the heartbeat of the islands. The USVII is America's
Caribbean paradise. Plan your escape now at visit USVII dot com.
That's visit USVII dot com.
Speaker 2 (11:29):
Over the course of the last month, with some market volatility,
there's been two main things that have been pointed to
as contributing factors, and I would tell you that really
only one of them matters. But one has been new
suspicions about the AI trade, how much it's going to cost,
whether the payoff will come. Second, has been changing narrative
around where interest rates are going. FED has cut interest
(11:50):
rates twice this fall. They were widely expected to do
so again at the upcoming December meeting. There was a
month ago, back in October, there's a ninety two two
percent likelihood that they were going to cut. No, sorry,
there was a ninety five percent chance that they were
going to cut at that next meeting. A week ago
it was a fifty to fifty chance, And so I
(12:13):
don't know how much that contributed to sentiment about markets.
But higher interest rates make some investors nervous. They discount
their future cash flows when it comes to a company
at a higher interest rate, and so it changes valuations.
I suspect that the nervousness about the AI trade was
a larger contributing factor than interest rates. But I don't
think we can minimize the impact of what the FED
(12:35):
has to say about the economy because they have provided
a lifeline on several occasions when things have gotten messy.
What has been happening to cause this kind of shift
in thinking?
Speaker 3 (12:47):
One, you did have J.
Speaker 2 (12:49):
Powell at the last meeting come out and say it
is far from a foregone conclusion that we will be
cutting interest rates at the next meeting. Following that, you
had several other FED members that pretty much said the
same thing. Right since then, though, since the last week
or so. Again, now you've had more FED speeches and
they have come out and left the door open for
(13:10):
that additional rate cut.
Speaker 3 (13:12):
I myself, you know, sitting here looking at everything, if
we are.
Speaker 2 (13:16):
Not going to have any new government data on the
state of the labor market, on the state of inflation,
really on the state of a whole slew of different things,
and you've been cutting interest rates into this economy based
on the previous data you had. I have a tough
time justifying why you would pause now by any account, right,
you've got some fragility and markets very clearly, you've got
(13:37):
some nervousness about private credit that's relatively new, and so
were I in those shoes today. You know, again, based
on the day that we have to day, based on
the narrative that we are looking at today, I would
probably continue with another twenty five basis point rate cut.
I don't see how you know the changing narrative has
driven you away from that standpoint. But clearly there are
(14:00):
at least some FED members, and there were some FED
members at the last meeting who said, no, that's really
not justified based on three percent inflation where we are
right now, and the labor market hasn't weakened yet, so
you know why go lower.
Speaker 4 (14:11):
Yeah, there's two paths that they could take here. One
of them is the one that you were just sort
of alluding to that you cut rates of the December
tenth meeting and then just sort of posture your sentiment
to say that the bar going for is going to
be very high for future cuts, that you're really going
to need to see a lot of indications that would
substantiate more cuts, because this is sort of what you
(14:32):
had telegraphed before as to be the policy is to
continue with these rate cuts. The areas of concern out
there for people perhaps in the dissenting party that you
mentioned on the FED governor side is that we're in
a bit of a difficult situation for the FED where
there is elevated inflation. We're sitting at that three percent
level the Fed's target is too, So that's typically an
(14:56):
area where you would not be too behind the idea
of cutting rates into a more inflationary environment. But two
percent isn't a hard and fast rule. Three percent is
higher than a ten And also on the job growth
side of things, to in favor of the idea of
cutting rates. You had a September job support that came
out that did see the unemployment rate tick up to
(15:18):
four point four percent. The number of jobs at in
the month was relatively high, but we know that that
can be revised down further. So it seems as if
all these indicarriors lead to steady as she goes. It's interesting.
I believe, like you had mentioned, it had got down
to a fifty to fifty shot. Then the New York
Fed President John Williams spoke on Friday basically reiterating their
(15:40):
prior stances. We're going to move policy down more towards
the neutral rate. So that's sort of where we sit
on this front. The other alternative would be to not
cutting rates, would be, hey, leave them as they are
and revisit in January under the premise that, hey, we're
going to get some more data. But the problem that
you run there is over that seven week span, if
(16:01):
you don't get any conclusive data that points in one
direction or another, you've effectually you wasted time.
Speaker 2 (16:07):
Yeah, yeah, you know more, I guess ammunition for the
FED two cut rates. The Conference Board came out this
morning with their consumer confidence reading, not something that Fed
genuinely takes into consideration with their decisions. But you know, again,
in the absence of other data, you look for anything,
you get your fingers on. The gauge for consumer confidence
decreased six point eight points, down to eighty eight point seven.
(16:32):
I've said before I don't think that these readings on
consumer confidence are terribly useful, especially not when comparing them
to previous decades. We've talked about how it just didn't
make a lot of sense to me that consumer confidence
in twenty twenty four was worse than what we were
seeing in twenty ten, right, Like, just on the surface,
(16:52):
tough to make sense of those numbers. But what I
think is notable about this one. The consumer confidence level
dropped the lowest level since April.
Speaker 3 (17:01):
What was going on in April? Well, everyone and their
mother was terrified of terrorists.
Speaker 2 (17:04):
How many calls were you getting about, Oh, should I
buy that car that I was thinking about because I'm
worried that superup prices are going to go through the
roots time. This is an interesting turn because again it's
weakening in the face of an absence of from what
I can tell, really bad news.
Speaker 4 (17:21):
No, I don't know what you would point to as
to why it would be so much as weak as
it was in April.
Speaker 2 (17:27):
That was understandable, which is interesting to me because it's
the exact same thing we saw out of the markets, right.
You saw a turn for the worst over the corporate
of course, the last few weeks that was not set
off by a big news story that we were able
to point to, right, I mean, the biggest news story
that you could point to for setting off markets were
(17:47):
comments from the likes of Sunder Pachai, Michael and others
to say, oh, we're pretty suspicious of.
Speaker 3 (17:54):
This Ai trade and where it's going to go.
Speaker 2 (17:57):
Whereas you took a look at offs in April, for example,
it was because we literally proposed forty percent average tariffs
on every country in the world, and so it completely
reshifted the narrative. So I find this reading to be interesting.
The other data point that came out just this morning
the Producer Price Index, again not the most heavily looked
(18:17):
at item.
Speaker 3 (18:18):
Only if it were.
Speaker 2 (18:19):
To surge through uncomfortable levels do I think the FED
would really pay attention to this number? Excluding food and energy,
the PPI rose slightly less than forecasts from August climb
two point six percent from a year ago, smallest gain
since July twenty twenty four.
Speaker 3 (18:34):
I think this is a nothing story.
Speaker 2 (18:35):
You shuffle it to the back of the deck and say, Okay,
PPI doesn't indicate any problems on inflation.
Speaker 4 (18:40):
Yeah, just for listeners. Producer price index is what is
the producer paying for a set of goods that they
will eventually sell to you, the end consumer. So it
often can be sometimes paired with the CPI, the consumer
price index data, but that is the one that is
far more significant. What are the consumers paying, not the producers.
Speaker 3 (18:57):
We have got to take a quick break.
Speaker 2 (18:59):
When we come back, we're gonna have a full market
update with Wallstreet Watch, and then we are talking Google.
Speaker 1 (19:23):
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.
Speaker 6 (19:34):
We're proud to announce that circle K is now the
official convenience store of the dav Department of Massachusetts. At
circle K, Supporting those who bravely served our country isn't
just a commitment, it's a heartfelt mission. Circle K is
honored to stand with the dav Department of Massachusetts to
ensure that veterans receive the care and recognition they deserve.
If you'd like to do your part, please visit DAVMA
(19:55):
dot org. Thank you for standing with circle K and
the dav Department of Massachusetts, and thank you veterans.
Speaker 1 (20:01):
For all you've done. Time now for Wall Street. Watch
a complete look at what's moving markets so far today
right here on the Financial Exchange Radio Network.
Speaker 5 (20:18):
Well after yesterday's rally, markets today are mixed as investors
react to more economic data points from September. The Producer
Price Index mostly came in line with expectations, while retail
sales for September climbed zero point two percent, softer than
estimates of zero point four percent. Right now, the Dow
is up nearly six tenths of a percent, or two
(20:39):
hundred and sixty four points. SMP five hundred is edging
five points higher, NASDAC retreating over a third of a
percent or eighty two points lower. Russell two thousand is
up nearly nine tenths of one percent, Tenure Treasure reeled
down two basis points at four point zero one one percent.
In crude oil down nearly three percent lower, trading just
(21:00):
above fifty seven dollars a barrel According to the information,
Meta is in talks to spend billions on Google's AI chips.
As Google steps up steps up its efforts to compete
directly with Nvidia. Shares in Alphabet are up again today
another two and a half percent higher, while in Video
shares of falling over six percent. On the heels of
(21:22):
that report. Other chip makers, including AMD, are seeing sympathy losses. Meanwhile,
Best Buy shares a rising four percent after the consumer
electronics retailer hiked its full year sales in earning's outlook
after beating earnings expectations during the previous quarter. The retailer
saw customers upgrade tech devices and splurge on new computers,
(21:43):
gaming consoles, and smartphones elsewhere. After naming a new CEO, yesterday,
Coles reported better than expected third quarter results with a
surprise profit. Coles also upped its annual guidance, sending shares
in the struggling retailer surging thirty one percent. It's more
retailer earnings after Dick Sporting Goods beat street expectations for
(22:04):
the previous quarter. However, the company announced it will shutter
some footlocker stores as part of a larger restructuring so
that the sneaker company doesn't weigh on Dick's profits. That
stock is down by three percent and Zoom jumping eleven
percent after the video conferencing company beat earnings forecast, while
it's fourth quarter earnings guidance was also better than expected.
(22:27):
I'm Tucker Silva and that is Wall Street Watch. And
if you missed any of our shows this week, you
can find them on our YouTube page. We stream the
show live every day, but also archive every hour and
all of our most newsworthy interviews. Just go to YouTube,
search the Financial Exchange and hit that subscribe button.
Speaker 2 (22:46):
I got some tips for you on that YouTube thing, Tucker.
What I feel like you could use AI to make
all of your hosts a lot handsomer.
Speaker 5 (22:54):
We could do that.
Speaker 2 (22:55):
We could have you know, might wave thestud if you
matter quite as much for the audio format. But you know,
if you're trying to push us out on YouTube, sure
you know, six inches taller, stronger chin, I think you'd,
I think you'd really clear clear things out there.
Speaker 4 (23:11):
Just called Tom Brady's plastic surgeon.
Speaker 3 (23:13):
Yeah, you know again we don't need to AI, right surgery.
Speaker 2 (23:20):
Speaking of artificial intelligence, I want to try and frame
this conversation properly, and to start it off, here's what
you should know. In Vidia's stock over the course of
the last thirty days is down a little bit over
ten percent. Now it's down five percent six percent today alone.
Alphabet stock, on the other hand, over the last thirty
days up twenty one percent.
Speaker 3 (23:42):
What again, The narrative that's been dominating markets over.
Speaker 2 (23:45):
The last thirty days is what if this AI trade
doesn't work out the way we think it does, doesn't
really explain why Google is shooting up by twenty percent
if the people are worried about the AI trade as
a whole. So what is Google benefiting from right now.
Speaker 4 (23:59):
To try and simplify best as possible, is investors have realized,
particularly with some of the recent announcements that came out
today with Meta potentially buying Google's chips, as well as
Anthropic another company out there committing to buy a million
of Google's chips, that Google is the best vertically integrated
(24:19):
business out there within the artificial intelligence space. And let
me try and explain that a little bit. So there
are different parts of all this artificial intelligence trade. Why
we've talked about in video so much on the show,
for the last two or three years is that if
you wanted to create a large language model like chat
gipt that many of us have probably used or messed
around with, and videos chips are the have been the
(24:40):
best game in town to do that by far and away, and.
Speaker 2 (24:43):
There was really no evidence that anybody else could compete with.
We had one story in February or March of this
year with deep Seek, a Chinese made AI tool coming
out where we suspect that it might have been trained
without using in video chips, But then there was also
cross stories that well, no, they probably just imported them
I legally and trained at using them anyway. And videous
chips have been the only game in town.
Speaker 4 (25:04):
Seventy percent gross margins that they command on these, they
really had a I won't say a monopoly, but they
had significant market share.
Speaker 3 (25:12):
Yeah.
Speaker 4 (25:12):
What has happened more recently is this idea that there
could be room for another competitor. Google and the story
that Tucker mentioned on Wall Street Watch and its chips
have been pretty similar in terms of performance, and also
the large language model that Google has Gemini three came
out recently that is built upon Google's chips performed equally
(25:36):
as well, or some people have argued better than Chat GPT.
Speaker 2 (25:40):
So frankly, you know there's been this debate, Hey, is
Gemini three better than Chat GPT five point one.
Speaker 3 (25:46):
I don't have an answer for you.
Speaker 2 (25:47):
Yeah, I mean, you know, there's been a lot of
people that have been testing the two and trying to
get some comparable answers and see which one's better. Frankly,
even if it is remotely competitive with GPT five point one,
that's probably enough for investors to get excited.
Speaker 4 (26:01):
It's a really big deal. And so clearly is when
I go further along this vertical integration is okay. And
Video's got the chips, it's got the data setter, but
in video doesn't have a large language model at all.
It doesn't have Chat GPT. Google has Gemini the large
language model. It has the chips we just spoke about.
They also have the data centers and all of the
cloud infrastructure. They also have a bunch of users on
(26:24):
their platform. They still have ninety percent market share in
the search space. Oh, by the way, they have three
billion users on Android, and they have another three billion
users who use Docs and Gmail and Maps and other
interfaces out there that they could integrate some of this
artificial intelligence, and they're just well positioned compared to some
of its competitors.
Speaker 3 (26:43):
If this ends up being a bubble that bursts, as
Alphabet's own CEO soonder pitch, I put it Google out.
Can we just call them Google? Yeah, I'm so frustrated
by this. Google will not.
Speaker 2 (26:55):
Avoid problems if this is an AI bubble that ends
up popping. But I think people find really attractive about
this business is like you mentioned, they're fully integrated within
the AI space. They have a massively profitable non AI
business to fund all of these endeavors.
Speaker 4 (27:12):
Research any five billion revenue a year.
Speaker 2 (27:15):
They also have this you know, this solid business by
the way, that continue that can continue to partner with
Apple and get paid massive amounts of money by Apple.
They might have the best AI general of AI tool
out there.
Speaker 3 (27:29):
And by the.
Speaker 2 (27:30):
Way, on top of all that, if you are really
excited about automation and robotics, they also happen to own
the you know, far and away best US self driving
car business out there. Right, I'm not saying you should
be excited about that. Like, I think there's some serious
questions as to how that ends up working. But they
are the leader in the clubhouse there too. And so
I think what's been happening is if you are an
(27:51):
investor that's been getting nervous about the pure play, what
happens if you know, in Nvidia is commoditized, you've turned
around and said, oh, well, let's check out this other
business that. You know what, even if AI ends up
being you know, commoditized business that is not that valuable,
Alphabet still exists. They still got a massively profitable business elsewhere.
Speaker 4 (28:12):
And there are guys are of cash flow, you know
they are in terms of their competitors. They're still spending,
don't get me wrong, ninety one billion to ninety three
billion in terms of capital expense this year, but their
debt load relative to some of their peers out there
is lower just because they're able to spin out so
much cash.
Speaker 3 (28:29):
Remember like sixty days ago when they argued in court
that their business.
Speaker 4 (28:32):
So I want to cover that too, because it's hard
not to mention that after this recent decision that we had,
what was that late September that that decision came out.
Speaker 2 (28:42):
Explain, there's a monopoly case brought against Alphabet that attempted
to break them up, and they were declared to monopoly
by the judge. But in their defense, they argued that
AI was going to ruin their search business and really
take a big chunk out of their or way of
doing business.
Speaker 4 (29:01):
Right, the Department of Justice says, your monopoly. They come
out with a decision that basically the judge that ru
and the judge too, and they come out and basically
give what is a very light slap on the wrist
in terms of any sort of punishments to Google at all.
And the only reason that Google was basically able to
dodge a more stiffer ruling, I feel, is because of
(29:23):
the threat of our official intelligt to a source business.
And here we sit three months later, me giving this
whole diet tribe as to how they're so well positioned
to potentially take the biggest market share of our official
intelligence because they're so well vertically integrated that's allowed to
stay intact because of this ruling a mere two months ago.
Speaker 3 (29:43):
Let's take quick break.
Speaker 2 (29:44):
When we come back, we're going to turn to a
completely different subject because according to a recent poll, a
majority of Massachusetts voters say the support ballot ballot measures
re establishing rent control in Massachusetts. We're talking rent control
next on The Financial Exchange.
Speaker 1 (30:00):
Miss any of the show. The Financial Exchange Show podcast
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
button and leave us a five star review. This is
the Financial Exchange Radio Network. 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
(30:21):
everything you might have missed. This is the Financial Exchange
Radio Network.
Speaker 5 (30:34):
This segment of The Financial Exchange is powered by circle
K Convenience Stores. CIRCLEK is now the official convenience store
of the dav Department of Massachusetts. On behalf of circle K.
Thank you veterans for all you've done.
Speaker 2 (30:50):
We talk a lot about on the show how it
seems like we just need to have these moments every
once every twenty thirty, forty fifty years where we retest
things that were pretty dumb and proven to be stupid,
and you know, we'd say, it's been a little while,
everybody that had tried that was dead now, so let's
try it again and see if it works this time.
(31:11):
A poll of five hundred likely Massachusetts voters found that
more than sixty percent of those indicated they would back
measures that would re establish rent control in the Commonwealth
of Massachusetts. Back in nineteen ninety four, rent control was
banned across the state at a time when only Boston, Brookline,
(31:31):
and Cambridge had it in place, and it appears that
the ballot initiative at least got enough signatures in Massachusetts
to put rent control back into place, or at least
allow cities to push rent control. I don't know if
this would mandate rent control across the entire state, but
(31:51):
I think it actually would based on the language that
I read in the ballot.
Speaker 3 (31:55):
It's a ballot.
Speaker 2 (31:56):
There's a lot of questions about the legality of the ballot,
of the signatures, and obviously the advertising that would be
run against or for the ballot leading into it, But
here is what I have read about this ballot initiative.
The ballot would cap annual rent increases at five percent
per year or CPI.
Speaker 3 (32:16):
Okay, higher of the two higher of the.
Speaker 2 (32:18):
Two newly built apartments would be exempt from rent control
for the first decade after construction, and if you were
in an owner occupied building with fewer than four units,
you would also be exempted from this. So basically nobody's
exempt there are very few exemptions out there. If you
(32:40):
own one apartment on this ballot initiative and it's not
new construction, you are going to be subject to rent.
Speaker 4 (32:46):
Control of those less than four units.
Speaker 3 (32:50):
If you're living in an owner occupied Oh, if you live.
Speaker 4 (32:53):
In it, yes, ah, okay, yeah, goddess.
Speaker 2 (32:56):
So if you live in your building and then you
rent out two other units in the building, execs.
Speaker 3 (33:00):
If you do, you have a.
Speaker 4 (33:01):
Three family Nope, this is such a bad This is
such a bad idea.
Speaker 3 (33:07):
Why it's a bad idea? First things First, there are
no sorts of exemptions for buildings that are completely rehabbed. Right.
Speaker 2 (33:16):
So I go in and I'm looking at my place
in Summerville that I've rented out for thirty years, and
I want to go pour half million dollars into it
to modernize it, because you know, what was a pretty
rough area thirty years ago is now a growing area
with new shopping available and all sorts of you know,
gentrification going on. There's no way I'm doing that because
(33:37):
I can only raise my rent from one thousand dollars
a month to one thousand.
Speaker 3 (33:44):
Help me do the math on thousand and fifty.
Speaker 2 (33:47):
No, not going to cover that the other thing I'm
going to do if I'm worried that, you know, even
if I don't think that rent should go up by
five percent, if I'm worried that I can never raise
it more than five percent every year. Every year, it's
going up five percent. Yeah, furthermore. Okay, so we just
talked about. Okay, there's now a very small incentive built
(34:07):
in for you to maintain your places and improve upon them. So,
like you've seen in other places that have rent control,
you're going to have a stock of housing that is new,
an exempt from rent control and nice and pretty. You're
gonna have another stock of housing where getting your landlord
to do anything is going to be fighting tooth and
nail because they can't charge you market rent. It's also
(34:31):
going to prevent areas of the state that might develop
into you know, there's been a big push into Worcester,
for example, you know, bringing Worcester, more people commuting from
Worcester to Boston, and more people relocating there because the
cheaper cost of housing. It's going to pause development in
cities like that because developers aren't going to go in.
It doesn't matter that there's a ten year exemption from
(34:52):
this because at the end of the day, you're still
facing that cliff where at the end of ten years
you are subject to rent control again. I'll continue to
lay out my arguments concisely as to why I think
this is a stupid idea, but frankly, I think voters
in Massachusetts are feeling probably a bit empowered after the
(35:12):
millionaire's tax that passed and quite honestly, had less of
an impact on business and the state of things in
the Commonwealth than I would have anticipated. You know, I
talked about publicly that hey, you know, pretty small state here.
If I'm a small business owner and I want to
relocate to New Hampshire, I can do that fairly easily.
Quite honestly, the millionaires tax has brought in way more
(35:34):
revenue than even the lawmakers estimated it would, and so
we have not seen that impact yet. What I think
voters are missing here is that it takes decades for
these policies to be fully felt, and we are creating
an environment in Massachusetts that is well less and less
(35:55):
business friendly, I guess, is how I would put it.
Speaker 4 (35:58):
The rent control used to suspend back to that. No,
these voters, whoever on the side of this are not
anticipating the unattended consequence that this is going to have.
It's just get it just sounds like a free launch.
It sounds like this great deal. Oh you'll have to
pay lower costs. This is going to work on your
favorite but doesn't recognize the economic realities with real estate development.
(36:22):
And ultimately this is going to lead a shrinking supply.
And by the way, the vacancy rate in the Boston
area is one of the lowest in the nations. If
you're looking for an apartment, this is not going This
does not help that at all. This does not encourage
people to build more multi family units and to build
more options out there forgetting Yeah, okay, you can argue
ten year exception, but that's just not going to do it. It
(36:43):
won't justify the long term time horizon of real estate investors,
whether they're a conglomerate you know, a bigger institutional investor
or not. It's just frustrating.
Speaker 2 (36:52):
Yeah, when you try to cap prices. I I know
that not everybody studies em it's not everybody studies this,
but when.
Speaker 3 (37:02):
You cap prices, the result is shortages.
Speaker 4 (37:06):
And lows you options too. It's what's gonna happen, You're
gonna have these dilapidated buildings that people aren't gonna want
to invest to make nicer.
Speaker 2 (37:13):
Yeah, I genuinely so. I don't own rental property anywhere.
I genuinely would be taking a very if I did,
I would be genuinely taking a very hard look at
this and saying I'm out.
Speaker 3 (37:25):
You know, is this a market that I.
Speaker 2 (37:26):
Can still rely upon for for you know, predictable income
and future growth if something like this passes. And I
don't really know how to assess the likelihood of the
passing at this point. We're still a year away from
this election and this happening, and we've seen how you know.
Speaker 3 (37:45):
Public can shift it on this stuff. But I don't know.
Speaker 2 (37:49):
I mean, doesn't this kind of feel a little bit
like the sentiment around the millionaire's tax, like it won't
affect me? And I get you know, I get it.
We could use the uh, we could use the help
with prices.
Speaker 3 (38:01):
I don't know. Maybe I don't feel like this should
play as well as the millionaires tax did with voters,
but you.
Speaker 4 (38:08):
Can grab some low hanging fruit of people who aren't informed.
Speaker 2 (38:10):
You're right, Yeah, we still see but yeah, it looks
like rent control back on the ballot for the first time,
probably the first time ever, but back in consideration for
the first time in a few decades in the state
of Massachusetts.
Speaker 3 (38:22):
Quick break, A lot more to cover in the second hour.
Will be right back
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.