December 3, 2025 • 39 mins
Chuck Zodda and Marc Fandetti discuss home prices inching up and what parts of the country will be most impacted. Can the home affordability crisis be solved? Anthropic taps IPO lawyers as it races OpenAI to go public. Waymo's self-driving cars are suddenly behaving like New York cabbies.
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Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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Exchange with Chuck Zada and Mark Fandetty, your exclusive look
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(00:43):
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donation today. This is the Financial Exchange with Chuck Zada
(01:06):
and Mark Vandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker with you.
Speaker 3 (01:12):
And as we kick things off here, the S and
P five hundreds up eleven points, the Dow is up
one hundred and eighty points, and.
Speaker 2 (01:19):
The NASDAK up nine points.
Speaker 3 (01:21):
So you got a modest move upward indices that is
happening at the moment here again nothing too significant, and
look especially into the end of the year, things tend
to be pretty quiet with some modest upward drift, and
that appears to be what is taking place today in
equity markets. US ten year Treasury is down one point
(01:43):
one basis points to four point oh seven seven percent,
the Dollar index down point thirty nine percent to ninety
eight and point nine oh five. Gold is up thirty
one ten and ounce to forty two to fifty one
and ninety cents, and crude oil up eighty one cents
barrel on West Texas Intermediate to fifty nine to forty
five TRIPA National avatur gas prices as expected under three
(02:08):
dollars a gallon finally at two dollars ninety nine cents
and nine tenths of a cent. So we'll see if
we can hang out under three dollars a gallon nationally
for a little bit here by the way, the other
side of this, what is happening right now, not gas prices.
Don't know if anyone's been paying attention there. The answer
(02:29):
is probably no, because well, no one even knows how
that gas is priced, quite honestly. But we did clear
five dollars on the not gas futures contract today, first
time we have cleared that mark in trying to think
if we got there, yeah, back in twenty twenty two,
(02:50):
we were there, and this represents relative to where we
were last year, about a thirty five percent jump in
that gas price is why this matters. Not gas, big
electricity supply for the United States. Very likely, if we
continue to see this kind of pricing moving through the winter,
(03:12):
it is something that very likely gets us towards even
higher electricity prices in twenty twenty six as a result.
So just something to be aware of on that side
of things. Mark, let's see, I want to kick things
off this hour. I didn't talk to either of you
(03:34):
about this, but I want to talk about housing for
next year, because I think housing in twenty twenty six
is going to be one of the two or three
most important stories in the economy, and this is something
that we've been talking about all year, but we're now
at the point where very likely in Q one of
(03:54):
next year, at the very latest, by Q two, nationally
average home prices are are likely to be negative year
over year in a number of metros. We're already seeing
that that is the case when you look at the
case shill or Home Price Index, and specifically they're twenty
city index that they have out there. A number of
(04:15):
those major metros are already seeing year over year declines
in pricing. Atlanta, is, Dallas's Denver, Vegas, Miami, Phoenix, Portland,
San Diego, San Francisco, Seattle, and Tampa. All those are
negative year over year. The remaining ones in the twenty
city index, Boston, Charlotte, Chicago, Cleveland, Detroit, LA, Minneapolis, New York,
(04:39):
and DC are not negative. They're still positive. Several of
those likely to go negative in the next month or two.
And you've got a few markets that are holding up better,
Minneapolis and Boston kind of being the two best at
holding up to this point in terms of year over
year price growth. But where we are heading next year
(05:00):
is very likely lower prices, but higher volume because of
those lower prices, and it means a couple different things.
The first is if if you're on the financial side
for housing, meaning you're a mortgage originator or you know,
someone along those lines, probably more activity next year is
(05:22):
what you would expect to see. On the other hand,
if you are a builder or someone on the construction side,
lower pricing for housing typically means you're going to struggle
to see you know, new construction numbers moving in the
right direction, and there could be some pain on that side.
There to kind of a tail of you know, the
two sides of the housing industry. But ultimately, I think
(05:45):
this is where we are heading next year, which is
lower volumes. But this is the first time that I'll
go out there and say I think that we're probably
I'm sorry, higher volumes, lower prices. I think we're probably
gonna see higher volumes next year. Maybe by again, we'll
have to see how this develops. But you've got a
potential for you know, ten to fifteen percent volume growth,
(06:08):
and that is good towards restoring an overall healthy market,
even if it comes at the cost of lower prices
for sellers in the short time.
Speaker 4 (06:17):
That's probably the key point restoring I'll just say balance
in some generic sense because this I'm not a housing economist.
There are specialists in this area who I'm sure have
studied this, studied this sort of phenomenon. The phenomenon being
we have had unsustainably high growth in home prices over
(06:38):
the past five years, about fifty percent growth in home prices.
Using the case Shiller index that you talked about, I'm
using the national as opposed to the twenty city but
the results the story is similar. So fifty percent over
the last five is opposed to about half that rate,
and that's that's obviously cumulative in the five years before that.
That's abnormal, that's sustainable. You think about unemployment, we got
(07:03):
to three point what four percent, That is probably i'll
just say unnaturally low below the certainly below the rate
which does not put upward pressure on inflation. The economy
said differently, was running too hot. After COVID, we over stimulated.
This one very tangible result was inflation. There was also
(07:24):
inflation and asset prices, home prices, stock prices the next
several years. And I don't want to oversimplify here because
there will be shocks that come from unforeseeable events that
maybe a favorable shock like AI productivity enhancing the productivity
enhancing adoption of AI boosting growth more than was anticipated,
(07:47):
or some unfavorable shock sapping growth. The point is growth
was probably unsustainably high for several quarters, maybe even a
few years, following COVID, and what we're seeing in different
markets now, with the exception of stocks which are still
kind of on a rampage, is maybe some kind of normalization.
And I don't want to overstate the way the overstate
(08:09):
that notion of the economy settling down, because it never does.
It's fluid, its structure is always changing. But we may
be in for a period. I guess what I should
just say in quick summary is we may be in
for a period of disappointing relative to recent experience a
growth in all areas.
Speaker 2 (08:27):
Yeah, it's look.
Speaker 3 (08:31):
I know everyone always wants the economy to be able
to move only in one direction, but the fact is
that economies they're they're living breathing things. Because they are
made up of living breathing things, they can't just go
at one speed forever. They have these ebbs and flows
that happen. We call it, you know, the business cycle.
There's a reason why those cycles tend to work the
(08:53):
way they do. This one since twenty twenty has been
very different just because it had, you know, a completely
different launch than any other business cycle starting in March
of twenty twenty and kind of going from there. But ultimately,
you the reason why everyone is talking about specifically as
it relates to housing affordability being a problem is because
(09:16):
things are broken on the affordability side of things right now,
and there are different ways that that can happen. What
we're seeing right now is, look, home prices and specifically
monthly payments are too high relative to incomes to support
normal transaction volume in housing, and so housing prices either
have to fall in you know, nominal terms you know,
(09:39):
actually come down, or incomes have to catch up. In
housing you know has to stay flat while incomes grow.
There are two ways that you can get to normalization.
Speaker 1 (09:47):
There.
Speaker 3 (09:48):
It seems like we're heading towards you know, home price
is falling modestly. I don't think that this is anything
that's necessarily huge from a national perspective, but you do
already have individual markets that have fallen fifteen to twenty percent.
You take a look at southeast South sorry, Southwest Florida,
kind of that Fort Myers region, and you've got home
(10:09):
prices off like fifteen to twenty percent from the peak
there at this point already. You're not going to see
that in Burlington, Vermont because things didn't get nutty in
Burlington Vermont over the last you know, fifteen years. But yeah,
like you're going to have this normalization that needs to happen,
(10:29):
and this is how you have this ebb and flow
that happens in housing from time to time. The inverse
of this is what we saw in twenty ten and
twenty eleven, where home prices had crashed following the Great Recession,
and if you were lucky enough to be able to
scoop up deals there like you could and you were
able to buy very cheaply, and that in turn normalized
(10:50):
over you know, a five to seven year period where
I think you could realistically look at like twenty fifteen
through twenty eighteen and say, yeah, those are pretty normal
level of affordability based on historical trends and things like that.
So we've got this thing to sort through now, and
I want to take a quick break here when we
come back.
Speaker 2 (11:10):
What's what's the Oh, well, maybe on the other side.
On the other side. Wow, what a great ease on
the other side. What is it? Are you having a
heart attack? More? When we come back quite day two.
Speaker 1 (11:21):
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for trire you here on the Financial Looks Change In.
Today is Brendan Fraser's fifty seventh birthday. Fraser made his
(13:06):
breakthrough in nineteen ninety two with starring roles in School
Ties and in Ceno Man. After years in Hollywood purgatory,
Fraser reclaimed his stardom by winning Best Actor at the
Academy Awards in twenty twenty three. So Trivia question today
Brendan Fraser's performance in which movie earned him his Oscar
(13:28):
for Best Actor once again. Brendan Fraser's performance in which
movie earned him his Oscar for Best Actor. Be the
fourth person today to text us at six one seven
three six two thirteen eighty five with the correct answer
along with the keyword trivia, and you'll win a Financial
Exchange Show T shirt.
Speaker 2 (13:48):
Once again.
Speaker 6 (13:49):
The fourth correct response to text us to the number
six one seven three six two thirteen eighty five with
the keyword trivia will win that T shirt. See complete
contest rules at Financial Looks Shane Show dot com.
Speaker 2 (14:02):
Was it George of the Jungle?
Speaker 6 (14:04):
No, that was not twenty twenty three? No, it wasn't
that he's actually really good the bummy he wonted for?
Speaker 2 (14:10):
No, No, no, okay.
Speaker 3 (14:12):
Anyways, last segment, we were discussing housing and specifically affordability
of housing relative to long term trends, and Mark said, ooh,
as he was looking at his computer and we didn't
know what he was looking at.
Speaker 2 (14:28):
It was concerned.
Speaker 6 (14:30):
Now Cyber Monday deal extended to today.
Speaker 2 (14:32):
Mark Y.
Speaker 3 (14:33):
So now we're going to see Alexander of Etchkin's nine
hundred and fifth goal.
Speaker 2 (14:38):
No, what do he got for us? Mark?
Speaker 4 (14:40):
Well, one way to think about how overvalued, assuming you
think they are. How's the very phrase overvalued implies that
you think there's a fair value, or that there's been
some departure from I'll just call it trend growth, which
is a reasonable way to look at it if you
define trend very generously, like including the last five years,
which is problematic because it may be in anormally. But
(15:02):
if I include that home prices, you just, based on
this very simple trend fitting curve fitting, so to speak, exercise,
you could conclude that home prices are between ten and
fifteen percent too high relative to their relative to the
long sort of sweep of history. Actually, this database only
goes back to nineteen eighty nine, so it could take
(15:25):
at the pace that includes the last the growth of
the last five years. I'm assuming that's a normal thing,
which is dubious. Potentially it could take a few years
of flat and this is, by the way, would be
an orderly resolution to the excesses of the last five years.
If you accept that there've been excesses, could take a
few years of flat prices to get back to trend,
(15:46):
which is not like disastrous, it's just not what we're
accustomed to.
Speaker 2 (15:49):
It's one of the past that you could take. It's yeah,
thank you.
Speaker 3 (15:52):
And so I think ultimately the path that it seems
like we're heading down at this point. Again, things can
change next year, but we're likely heading towards home prices
falling modestly nationwide, more sharply in some specific markets. And
with that, here here's the implication, Like, let's I want
(16:13):
everyone right now who's listening. I want you to put
on your your home builder hat, which is you know,
sitting in the passenger seat right next to you, and
you're you're a homebuilder right now, and you're trying to
sell the average American home today four hundred thousand dollars.
And you say, okay, I'm selling these houses for four
hundred thousand dollars. Good I can make you know, if
(16:38):
after I get through all my costs, I can make
twenty five thousand dollars on that, you know, about a
six percent margin selling these homes, and and and that's fine.
So now let's look at this from the perspective of, Okay,
you're trying to sell that home, and right now you're
competing against an existing home that's priced at three hundred
(16:59):
and eighty it's cheaper because it's used, someone's lived in it,
someone's used the plumbing, they've used the electricity, the roof
might be a few years older, so it's five percent
cheaper than the new home that you're selling. Now, imagine
a world in which that home that you're competing against,
but there's still someone who's willing to pay that extra
(17:20):
twenty thousand because they want it new when they want,
you know what they want. But now imagine that home
that you're competing against falls from being worth three hundred
and eighty thousand on the open market to three hundred
and sixty thousand, again a modest four to five percent decline. There,
you are now trying to sell your home and the
person who you know previously would have bought your home says,
(17:43):
you know what, I really like this house, but it's
it's four hundred thousand, and there's one in that neighborhood
over there. I know it's ten years old, but it's
forty thousand dollars cheaper. It's gonna cut my monthly payment
from you know, two thousand a month down to eighteen
hundred a month. And that's a big enough difference for me.
I'm gonna go with that other one, and you do
(18:04):
the only thing that you can do because you've you've
spent your money building this house.
Speaker 2 (18:09):
You say, you know what, fine, I'll let this go
for three eighty.
Speaker 3 (18:14):
The issue is, after you've done that, you're sitting there
and you go, well, I was gonna have a twenty
five thousand dollars profit on this house. Now I just
made five grand building a three hundred and eighty thousand
dollars home. That's not really great for me. So the
first thing that you do is you go and you
start squeezing your subcontractors. You say, hey, can you do
anything cheaper than you know what we were just you
(18:38):
know doing, And they might have a little bit of
a wiggle room, but there's only so much that you
can do because you know, your subs have to pay
their people and it's just how it is. And so
where you eventually get to as a GC who's building
these homes is you say, you know what, I can't
have my profits eaten into by eighty percent. I'm just
not going to build as many homes because I can
(19:01):
still sell the four hundred thousand dollars home, but I
might only be able to sell two of them next
year because of where demand is instead of the four
I thought I was going to. And then the ripple
effect is, hey, your subs now don't need as many
people employed because they don't have as much work. You
have layoffs that happen there. And this is why housing
tends to be kind of that that driver of marginal
(19:23):
economic activity.
Speaker 2 (19:25):
And this is.
Speaker 3 (19:25):
Why I'm personally a little bit nervous about where it
could go next year, is because lower home prices very
likely means a further drop in new construction, which means
we start to have employment issues in the trades.
Speaker 4 (19:38):
Is that baked into the cake given the exit what
I'll call the accesses the last several years, like baked
into any way to avoid it, any way to avoid
this outcome that you're referring to.
Speaker 2 (19:47):
Yes, maybe we should talk about that on the other side,
another great teast that.
Speaker 1 (19:52):
Yeah.
Speaker 3 (19:53):
Today, let's take a quick break, and when we return,
mister T's is back.
Speaker 1 (20:10):
Bringing the latest financial news straight to your radio. Every day.
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Speaker 6 (20:29):
Markets A trading modestly hires. Wall Street reacts to the
ADP private payroll report for November, which fell thirty two thousand,
worse than forecasts of an increase of ten thousand. At
the moment, the Dow is up by just over half
a percent, s and P five hundred is up a
quarter percent, NASDAC up a tenth of a percent, Russell
two thousand is up just over one percent higher ten Youre,
(20:51):
treasure Field is flat at four point zero seven nine percent,
and crude oil up one on a third percent, trading
at fifty nine dollars forty two cents a barrel. Macy's
posted its highest quarterly sales in more than three years,
says the department store chain's turnaround strategy showed signs of momentum. Furthermore,
the company raised its full year sales in earnings outlook
(21:13):
for a second consecutive quarter. However, Macy's outlook anticipates challenges
in the holiday quarter, including selective spending by consumers and
higher TIFFs. Macy stock is edging higher. Meanwhile, shares an
American Eagle surging fourteen percent after the retailer beat third
quarter earnings and revenue forecasts, and also raised its same
(21:33):
store sales guidance as it is seeing a strong start
to the holiday shopping period elsewhere. Microsoft down by two
percent after The Information reported that the company has lowered
quotas for AI software as sales after many of its
salespeople missed growth goals in the last fiscal year, and
(21:53):
chipmaker Marvel Technology agreed to by Celestial Ai and three
point twenty five billion dollar deal. Arvel also posted robust
quarterly results in forecasts, sending shares jumping over four percent higher.
I'm Tucker Silva and that is Wall Street Watch and
in the previous segment we asked her the question Brendan
Fraser's performance in which movie earned him his Oscar for
(22:17):
Best Actor? That would be the wail. Nick and Weston
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Speaker 2 (22:33):
Mark, what was the latest thing that you teased last segment?
What were we talking about? I forgot?
Speaker 6 (22:40):
Oh jeez, I'm asking you no, no, because Mark forgot too.
Speaker 4 (22:45):
Sorry I only remember how related making noises.
Speaker 2 (22:49):
No, it wasn't a noise last time, Tucker. Do you
remember what it was?
Speaker 6 (22:54):
I don't know because he did the old tongue roll
thing that I can't do.
Speaker 4 (22:59):
It's like all that's all we all remember is but
it was something that a light went off in your
head and you're like, oh, I got something else.
Speaker 2 (23:08):
Does Ben remember?
Speaker 6 (23:10):
No? I don't think he does.
Speaker 2 (23:12):
Only the only person who should fix how to fix
the problem with home builders doesn't.
Speaker 4 (23:21):
I was here for that.
Speaker 2 (23:22):
I don't think we talked about that either.
Speaker 6 (23:24):
Okay, So Mark asked the question is it already baked in?
And is there still time any way to this fate
the home building? That question to you, Chuck, is there
any way to avoid this fate?
Speaker 2 (23:35):
And then that is that's what we were going to talk.
Speaker 4 (23:36):
Has the die been cast? Yeah, it's not actually that
exciting in.
Speaker 2 (23:39):
Retrospect, but no, it sounds exciting.
Speaker 1 (23:41):
Okay.
Speaker 4 (23:42):
You you were pointing out that a lot of that
quick summary the die is cast.
Speaker 2 (23:47):
So it's going to be.
Speaker 3 (23:50):
It's it's tough to avoid because here's what's happening is
as home prices start to go down, the first thing
that you get is a large your number of potential
sellers saying one of two things, No I'm not going
to sell, I'm going to wait and see if it
gets better, or people pulling listings off the market because
(24:10):
they say, no, I'm not going to take less than
I think my home is worth. Eventually you get to
a point where those non forced sellers become forced sellers
where instead of saying, hey, we'd like to sell, but
only if we can get X, Y or z, eventually
they become, hey, you know what, it's time for us
to move because of these reasons, we gotta list the place.
(24:33):
And that's when you see inventory continue to build it
a faster clip, which means lower prices again needed to
clear that inventory. So I think that there was a
path where you could have gone through the next three
to four years and just said, yeah, maybe home prices just.
Speaker 2 (24:52):
Don't go anywhere that would be ideal, and.
Speaker 3 (24:55):
Wages continue to grow at two to four percent a year,
and you normalize that ten to fifteen percent gap in
historical affordability through wages growing while home prices don't. The
path that it looks like we are heading down now
that we are seeing, you know, continued inventory growth year
(25:17):
over year. At least right now, we're seeing inventory about
sixteen percent above last year and only about five percent
below twenty nineteen levels for this time in the year.
You're seeing inventory continuing to grow on a relative basis,
and with that you are seeing an uptick in new
mortgage applications as well. But if you look at the
(25:38):
size of the mortgage applications, it's declining, which also matches
the decline that we are seeing in price per square
foot four listings. So basically, what we are getting the
message that the market is sending us, and again this
is just you're interpreting what the data is saying. The
market is saying, Hey, people are more willing to list
(25:59):
now and take lower prices on a square per square
foot basis than a year ago rather than trying to
wait for better pricing in the future to sell their home.
And as long as more people are continuing to do that,
home prices are going to continue to decline in those markets,
and price gains and other markets are likely to become
(26:21):
more muted and eventually start declining as well. That's kind
of where we're heading in terms of is like our
equity markets pricing This in I don't think they are now.
Speaker 4 (26:34):
They think the Fed's gonna save the day. They think
we have a demand problem that they can fix.
Speaker 3 (26:38):
And we do have a demand problem, it's just not
one that the Fed can fix without the level of
rate cuts needed that are typically signaled by a recession.
Speaker 2 (26:49):
You know, It's like, I see what you're saying.
Speaker 3 (26:50):
Yeah, if if you get FED funds rate down to
one and a half to two percent, sure that probably
takes the long end down far enough that mortgage rates
come down in the housing mar.
Speaker 4 (27:01):
Certain prices moving versely to that, shouldn't that send price
of skyrocketing again? Isn't that precisely the predicament. Isn't that
precisely how we got into this predicament.
Speaker 3 (27:09):
That's assuming that you think that we're at equilibrium for
pricing now, which I don't think we are. So, like,
let's let's play out the string here. Just as an example.
Let's say that you have prices that are fifteen percent.
Speaker 2 (27:20):
Above where they should be ten.
Speaker 3 (27:22):
Your treasury is at four right now, thirty year fixed
rate mortgages at six and a third. If you get
a recession, the first thing that happens, demand's going to
come down further because demand does come down in a
recession four housing, so that's going to widen that afford
it like that affordability gap for what you need is
going to end up widening there. The other piece is
(27:44):
that the long end, even if the FED cuts by
let's say they cut by another one hundred and fifty
BIPs and they get us down to two and a
half on the on the FED funds rate, tenures not
coming down by that much, you know, the tenures not
coming down.
Speaker 2 (27:58):
To two one for one.
Speaker 3 (28:00):
So maybe you pick up like five to seven percent
on the affordability gap there, but prices still have to
fall another seven to ten percent from there to close
the rest of the gap. So again like it's it's
a really hard path for me to see anything other
now than price. The combination of pricing and wages probably
(28:22):
over a two year period now where wages, you know,
they'll go five percent, prices nationally it'll come down eight
to ten. That kind of gets you where you need
to be, and housing is ready to crank in twenty
twenty eight, again from a construction perspective, but like twenty
six and twenty seven might be really hard for home builders.
Speaker 4 (28:43):
They should be. I hate to say it, they should
be if you think there's validity to looking at the
long term trend and the departure from long term trend
that the last five years resulted in, and assuming that
GAP's got to close your view. Maybe not you, but
people listening well, its structs the economy has changed. I
think that housing should continue to grow at I'm gonna
(29:06):
say four percent, which includes the past five years, so
that might be. That's conservative, that's fair. I think four
to seven percent for housing is fair based on my
little model, my mental model for the structure of the economy,
in which case you don't need a dramatic pullback.
Speaker 2 (29:21):
I just don't know.
Speaker 6 (29:23):
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Speaker 3 (30:37):
Let's see, we got a few other things to talk
about here. Anthropic one of the companies that is on
the forefront of large language models artificial intelligence generative AIRE.
They've apparently hired a law firm to begin working on
(30:57):
a potential IPO for next year them and open AI,
potentially both ipoing in twenty six. Is something that is
interesting from a number of different perspectives. One that I
look at it would be really cool to be able
to actually see their financials on a regular basis and see,
you know, what's actually going on in terms of revenue
(31:20):
and expenses, you know, aside from these you know, random
reports that we get out from private sales and things
like that.
Speaker 2 (31:27):
So that'd be kind of interesting. The other thing that I've.
Speaker 3 (31:29):
Touched on a few different occasions, sometimes when you get
like the big white whale in a specific industry that
goes through an IPO, it can represent a local top
for that industry. We covered it back in twenty twenty
one when Coinbase and Robinhood both went public and it
(31:50):
was kind of the top of the meme stock and crypto.
Speaker 2 (31:52):
Trading, you know era at that point.
Speaker 3 (31:55):
You know, twenty twenty two was very bad for both
of those businesses, and then they've subsequently recovered. We've also
had earlier this year, Core we've went public, had a
ton of trouble, you know, kind of getting things off
the ground, and we saw kind of other AI companies
really struggling heading into April before you got a flurry
of announcements that change the game heading into the summer then.
(32:18):
And so this is kind of interesting to me in that,
you know, it always just raised the question for me,
could it represent a local top for that, you know,
particular industry. Maybe I don't know, but it's something that's
always on my mind when we hear about these big idos.
Speaker 4 (32:32):
Yeah, almost by definition, it would kind of have to.
They want to strike while the iron is hot, and
they think it won't always be this hot. For personal reasons,
they want to cash out.
Speaker 2 (32:40):
There's a reason why they want share.
Speaker 4 (32:41):
Valued at pennies on the public dollar, on the public
valuation dollar. So you're highly motivated. And their people presumably
have all been paid, not in substantially anyway, paid in stock.
So this is their opportunity to cash in and earn
earn money that will keep their family comfortable for generations.
Speaker 2 (33:01):
I guess just look at.
Speaker 1 (33:02):
It that way.
Speaker 4 (33:03):
The other I guess they're voracious appetite for a need
for capital. That's why you go public. It's not all cynical,
it's not all about cashing and it's sure raising money.
Speaker 2 (33:15):
Just take a quick break when we come back.
Speaker 1 (33:17):
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(33:39):
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Speaker 6 (33:59):
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Speaker 2 (34:35):
Mark what do you got for me for stack Roulette?
Speaker 4 (34:37):
Kind of a funny story, maybe a little bit alarming too.
I don't know. Waimo's from the Wall Street Journal. Weimo's
self driving cars are suddenly behaving like cabbies. So apparently
I've never ridden in a Weaimo. You guys autonomous? No, OK,
So these are self driving taxis for those that don't know.
They're known for being cautious. They'll sit behind a driver
(34:58):
that's stopped with their hazards on. They won't pass when
most of us probably would. That kind of stuff. They'll
stop like at a yellow light. Most of us might
might kind of assertively drive through a yellow light, so
kind of annoying stuff if you've hired hailed gab maybe
or in a hurry. So they're changing their programming to
make them more quote human like in their driving behavior,
(35:20):
including more aggressive maneuvers, rushing pedestrians along. I don't know
exactly how you do that, Maybe by not slowing down
and occasionally bending traffic rules, which is I guess a
euphemism because they're actually making illegal U turns. Many people
are documenting this, recording this behavior. So next step in
the evolution of self driving cars, making them more like us, but.
Speaker 2 (35:43):
Hopefully in ways that don't cause problems.
Speaker 3 (35:45):
Because again, here's the thing that I come back to
on self driving vehicles. I'm both pro and anti self
driving vehicle, which is why I think I'm generally in
the right spot. We do need to get past, you know,
commenting on every last thing that a self driving car does,
because if we're gonna be intellectually honest with ourselves, we
(36:09):
don't do that when we're talking about how humans drive.
Of course, we never report on, you know, the one
hundred deaths that happen every day from cars driving around
the United States, which which happens again, we could do
an entire show on. It would be horribly depressing because
all of these people should still be alive with self
(36:29):
driving vehicles, provided that you have, you know, proper disclosures
about you know, how they're operating, what their safety record is,
and that you know you have you know, the right
information out there. Look way Moo for you know, any
concerns that people have about him, has never been involved
in an at fault fatality, like never, and they've they've
(36:50):
driven millions of minds pretty miraculate, which is pretty amazing.
Speaker 2 (36:54):
You know.
Speaker 3 (36:55):
So again this is not to say like every self
driving vehicle is good, but hey, they've they've got a
really good safety record and they're making these changes to
make the driving experience more like what you normally get
and to save time. Like the example, one of the
examples they give is like, hey, if you're on a
two lane road with double yellow lines and there's a
(37:16):
big Amazon truck stopped in front of you, does the
human driver just stop and wait for the Amazon driver
to get out and no, they look see if anyone's coming,
and then.
Speaker 2 (37:25):
You pull around on the double yellow line road.
Speaker 3 (37:28):
WEIMO is now starting to allow its vehicles to do
similar things. So again, I think that provided that we
you know, do the research that's needed and have you know,
appropriate controls in place and accurate data that's coming out
about you know, any accidents or issues that occur. Yeah,
let's continue to develop this. It is going to potentially
(37:51):
impact employment, like we have to know that as well.
But remember productivity growth comes from being able to do
more with fewer inputs, and typically those inputs are labor.
Look at farming in the United States. The number of
pharmacies drop by eighty five percent in the last hundred years,
and yet yields are up so much that we are
continuing to be able to feed the population. So we
(38:14):
have to you know, work to try to support people
who might be displaced by automation where it comes. And
quite honestly, I think a lot of us are unfortunately
in a position where we may be displaced over the
next five to ten years if these technologies pan out
the way some people think they can be. So we're
all gonna have to kind of support each other on
this stuff. But I do like to see, you know,
(38:37):
that we can, you know, maybe get there in some
of these areas too. Market's broadly positive now, with the
Dow and S and P in the green actually negative
and Nasdaq just turn negative again. But we'll be back
tomorrow with more financial exchange
The Financial Exchange is produced by Money Matters Radio and
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donation today. This is the Financial Exchange with Chuck Zada
(01:06):
and Mark Vandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker with you.
Speaker 3 (01:12):
And as we kick things off here, the S and
P five hundreds up eleven points, the Dow is up
one hundred and eighty points, and.
Speaker 2 (01:19):
The NASDAK up nine points.
Speaker 3 (01:21):
So you got a modest move upward indices that is
happening at the moment here again nothing too significant, and
look especially into the end of the year, things tend
to be pretty quiet with some modest upward drift, and
that appears to be what is taking place today in
equity markets. US ten year Treasury is down one point
(01:43):
one basis points to four point oh seven seven percent,
the Dollar index down point thirty nine percent to ninety
eight and point nine oh five. Gold is up thirty
one ten and ounce to forty two to fifty one
and ninety cents, and crude oil up eighty one cents
barrel on West Texas Intermediate to fifty nine to forty
five TRIPA National avatur gas prices as expected under three
(02:08):
dollars a gallon finally at two dollars ninety nine cents
and nine tenths of a cent. So we'll see if
we can hang out under three dollars a gallon nationally
for a little bit here by the way, the other
side of this, what is happening right now, not gas prices.
Don't know if anyone's been paying attention there. The answer
(02:29):
is probably no, because well, no one even knows how
that gas is priced, quite honestly. But we did clear
five dollars on the not gas futures contract today, first
time we have cleared that mark in trying to think
if we got there, yeah, back in twenty twenty two,
(02:50):
we were there, and this represents relative to where we
were last year, about a thirty five percent jump in
that gas price is why this matters. Not gas, big
electricity supply for the United States. Very likely, if we
continue to see this kind of pricing moving through the winter,
(03:12):
it is something that very likely gets us towards even
higher electricity prices in twenty twenty six as a result.
So just something to be aware of on that side
of things. Mark, let's see, I want to kick things
off this hour. I didn't talk to either of you
(03:34):
about this, but I want to talk about housing for
next year, because I think housing in twenty twenty six
is going to be one of the two or three
most important stories in the economy, and this is something
that we've been talking about all year, but we're now
at the point where very likely in Q one of
(03:54):
next year, at the very latest, by Q two, nationally
average home prices are are likely to be negative year
over year in a number of metros. We're already seeing
that that is the case when you look at the
case shill or Home Price Index, and specifically they're twenty
city index that they have out there. A number of
(04:15):
those major metros are already seeing year over year declines
in pricing. Atlanta, is, Dallas's Denver, Vegas, Miami, Phoenix, Portland,
San Diego, San Francisco, Seattle, and Tampa. All those are
negative year over year. The remaining ones in the twenty
city index, Boston, Charlotte, Chicago, Cleveland, Detroit, LA, Minneapolis, New York,
(04:39):
and DC are not negative. They're still positive. Several of
those likely to go negative in the next month or two.
And you've got a few markets that are holding up better,
Minneapolis and Boston kind of being the two best at
holding up to this point in terms of year over
year price growth. But where we are heading next year
(05:00):
is very likely lower prices, but higher volume because of
those lower prices, and it means a couple different things.
The first is if if you're on the financial side
for housing, meaning you're a mortgage originator or you know,
someone along those lines, probably more activity next year is
(05:22):
what you would expect to see. On the other hand,
if you are a builder or someone on the construction side,
lower pricing for housing typically means you're going to struggle
to see you know, new construction numbers moving in the
right direction, and there could be some pain on that side.
There to kind of a tail of you know, the
two sides of the housing industry. But ultimately, I think
(05:45):
this is where we are heading next year, which is
lower volumes. But this is the first time that I'll
go out there and say I think that we're probably
I'm sorry, higher volumes, lower prices. I think we're probably
gonna see higher volumes next year. Maybe by again, we'll
have to see how this develops. But you've got a
potential for you know, ten to fifteen percent volume growth,
(06:08):
and that is good towards restoring an overall healthy market,
even if it comes at the cost of lower prices
for sellers in the short time.
Speaker 4 (06:17):
That's probably the key point restoring I'll just say balance
in some generic sense because this I'm not a housing economist.
There are specialists in this area who I'm sure have
studied this, studied this sort of phenomenon. The phenomenon being
we have had unsustainably high growth in home prices over
(06:38):
the past five years, about fifty percent growth in home prices.
Using the case Shiller index that you talked about, I'm
using the national as opposed to the twenty city but
the results the story is similar. So fifty percent over
the last five is opposed to about half that rate,
and that's that's obviously cumulative in the five years before that.
That's abnormal, that's sustainable. You think about unemployment, we got
(07:03):
to three point what four percent, That is probably i'll
just say unnaturally low below the certainly below the rate
which does not put upward pressure on inflation. The economy
said differently, was running too hot. After COVID, we over stimulated.
This one very tangible result was inflation. There was also
(07:24):
inflation and asset prices, home prices, stock prices the next
several years. And I don't want to oversimplify here because
there will be shocks that come from unforeseeable events that
maybe a favorable shock like AI productivity enhancing the productivity
enhancing adoption of AI boosting growth more than was anticipated,
(07:47):
or some unfavorable shock sapping growth. The point is growth
was probably unsustainably high for several quarters, maybe even a
few years, following COVID, and what we're seeing in different
markets now, with the exception of stocks which are still
kind of on a rampage, is maybe some kind of normalization.
And I don't want to overstate the way the overstate
(08:09):
that notion of the economy settling down, because it never does.
It's fluid, its structure is always changing. But we may
be in for a period. I guess what I should
just say in quick summary is we may be in
for a period of disappointing relative to recent experience a
growth in all areas.
Speaker 2 (08:27):
Yeah, it's look.
Speaker 3 (08:31):
I know everyone always wants the economy to be able
to move only in one direction, but the fact is
that economies they're they're living breathing things. Because they are
made up of living breathing things, they can't just go
at one speed forever. They have these ebbs and flows
that happen. We call it, you know, the business cycle.
There's a reason why those cycles tend to work the
(08:53):
way they do. This one since twenty twenty has been
very different just because it had, you know, a completely
different launch than any other business cycle starting in March
of twenty twenty and kind of going from there. But ultimately,
you the reason why everyone is talking about specifically as
it relates to housing affordability being a problem is because
(09:16):
things are broken on the affordability side of things right now,
and there are different ways that that can happen. What
we're seeing right now is, look, home prices and specifically
monthly payments are too high relative to incomes to support
normal transaction volume in housing, and so housing prices either
have to fall in you know, nominal terms you know,
(09:39):
actually come down, or incomes have to catch up. In
housing you know has to stay flat while incomes grow.
There are two ways that you can get to normalization.
Speaker 1 (09:47):
There.
Speaker 3 (09:48):
It seems like we're heading towards you know, home price
is falling modestly. I don't think that this is anything
that's necessarily huge from a national perspective, but you do
already have individual markets that have fallen fifteen to twenty percent.
You take a look at southeast South sorry, Southwest Florida,
kind of that Fort Myers region, and you've got home
(10:09):
prices off like fifteen to twenty percent from the peak
there at this point already. You're not going to see
that in Burlington, Vermont because things didn't get nutty in
Burlington Vermont over the last you know, fifteen years. But yeah,
like you're going to have this normalization that needs to happen,
(10:29):
and this is how you have this ebb and flow
that happens in housing from time to time. The inverse
of this is what we saw in twenty ten and
twenty eleven, where home prices had crashed following the Great Recession,
and if you were lucky enough to be able to
scoop up deals there like you could and you were
able to buy very cheaply, and that in turn normalized
(10:50):
over you know, a five to seven year period where
I think you could realistically look at like twenty fifteen
through twenty eighteen and say, yeah, those are pretty normal
level of affordability based on historical trends and things like that.
So we've got this thing to sort through now, and
I want to take a quick break here when we
come back.
Speaker 2 (11:10):
What's what's the Oh, well, maybe on the other side.
On the other side. Wow, what a great ease on
the other side. What is it? Are you having a
heart attack? More? When we come back quite day two.
Speaker 1 (11:21):
We're going to Financial Exchange every day from eleven to
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Speaker 5 (11:40):
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for trire you here on the Financial Looks Change In.
Today is Brendan Fraser's fifty seventh birthday. Fraser made his
(13:06):
breakthrough in nineteen ninety two with starring roles in School
Ties and in Ceno Man. After years in Hollywood purgatory,
Fraser reclaimed his stardom by winning Best Actor at the
Academy Awards in twenty twenty three. So Trivia question today
Brendan Fraser's performance in which movie earned him his Oscar
(13:28):
for Best Actor once again. Brendan Fraser's performance in which
movie earned him his Oscar for Best Actor. Be the
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three six two thirteen eighty five with the correct answer
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Speaker 2 (13:48):
Once again.
Speaker 6 (13:49):
The fourth correct response to text us to the number
six one seven three six two thirteen eighty five with
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Speaker 2 (14:02):
Was it George of the Jungle?
Speaker 6 (14:04):
No, that was not twenty twenty three? No, it wasn't
that he's actually really good the bummy he wonted for?
Speaker 2 (14:10):
No, No, no, okay.
Speaker 3 (14:12):
Anyways, last segment, we were discussing housing and specifically affordability
of housing relative to long term trends, and Mark said, ooh,
as he was looking at his computer and we didn't
know what he was looking at.
Speaker 2 (14:28):
It was concerned.
Speaker 6 (14:30):
Now Cyber Monday deal extended to today.
Speaker 2 (14:32):
Mark Y.
Speaker 3 (14:33):
So now we're going to see Alexander of Etchkin's nine
hundred and fifth goal.
Speaker 2 (14:38):
No, what do he got for us? Mark?
Speaker 4 (14:40):
Well, one way to think about how overvalued, assuming you
think they are. How's the very phrase overvalued implies that
you think there's a fair value, or that there's been
some departure from I'll just call it trend growth, which
is a reasonable way to look at it if you
define trend very generously, like including the last five years,
which is problematic because it may be in anormally. But
(15:02):
if I include that home prices, you just, based on
this very simple trend fitting curve fitting, so to speak, exercise,
you could conclude that home prices are between ten and
fifteen percent too high relative to their relative to the
long sort of sweep of history. Actually, this database only
goes back to nineteen eighty nine, so it could take
(15:25):
at the pace that includes the last the growth of
the last five years. I'm assuming that's a normal thing,
which is dubious. Potentially it could take a few years
of flat and this is, by the way, would be
an orderly resolution to the excesses of the last five years.
If you accept that there've been excesses, could take a
few years of flat prices to get back to trend,
(15:46):
which is not like disastrous, it's just not what we're
accustomed to.
Speaker 2 (15:49):
It's one of the past that you could take. It's yeah,
thank you.
Speaker 3 (15:52):
And so I think ultimately the path that it seems
like we're heading down at this point. Again, things can
change next year, but we're likely heading towards home prices
falling modestly nationwide, more sharply in some specific markets. And
with that, here here's the implication, Like, let's I want
(16:13):
everyone right now who's listening. I want you to put
on your your home builder hat, which is you know,
sitting in the passenger seat right next to you, and
you're you're a homebuilder right now, and you're trying to
sell the average American home today four hundred thousand dollars.
And you say, okay, I'm selling these houses for four
hundred thousand dollars. Good I can make you know, if
(16:38):
after I get through all my costs, I can make
twenty five thousand dollars on that, you know, about a
six percent margin selling these homes, and and and that's fine.
So now let's look at this from the perspective of, Okay,
you're trying to sell that home, and right now you're
competing against an existing home that's priced at three hundred
(16:59):
and eighty it's cheaper because it's used, someone's lived in it,
someone's used the plumbing, they've used the electricity, the roof
might be a few years older, so it's five percent
cheaper than the new home that you're selling. Now, imagine
a world in which that home that you're competing against,
but there's still someone who's willing to pay that extra
(17:20):
twenty thousand because they want it new when they want,
you know what they want. But now imagine that home
that you're competing against falls from being worth three hundred
and eighty thousand on the open market to three hundred
and sixty thousand, again a modest four to five percent decline. There,
you are now trying to sell your home and the
person who you know previously would have bought your home says,
(17:43):
you know what, I really like this house, but it's
it's four hundred thousand, and there's one in that neighborhood
over there. I know it's ten years old, but it's
forty thousand dollars cheaper. It's gonna cut my monthly payment
from you know, two thousand a month down to eighteen
hundred a month. And that's a big enough difference for me.
I'm gonna go with that other one, and you do
(18:04):
the only thing that you can do because you've you've
spent your money building this house.
Speaker 2 (18:09):
You say, you know what, fine, I'll let this go
for three eighty.
Speaker 3 (18:14):
The issue is, after you've done that, you're sitting there
and you go, well, I was gonna have a twenty
five thousand dollars profit on this house. Now I just
made five grand building a three hundred and eighty thousand
dollars home. That's not really great for me. So the
first thing that you do is you go and you
start squeezing your subcontractors. You say, hey, can you do
anything cheaper than you know what we were just you
(18:38):
know doing, And they might have a little bit of
a wiggle room, but there's only so much that you
can do because you know, your subs have to pay
their people and it's just how it is. And so
where you eventually get to as a GC who's building
these homes is you say, you know what, I can't
have my profits eaten into by eighty percent. I'm just
not going to build as many homes because I can
(19:01):
still sell the four hundred thousand dollars home, but I
might only be able to sell two of them next
year because of where demand is instead of the four
I thought I was going to. And then the ripple
effect is, hey, your subs now don't need as many
people employed because they don't have as much work. You
have layoffs that happen there. And this is why housing
tends to be kind of that that driver of marginal
(19:23):
economic activity.
Speaker 2 (19:25):
And this is.
Speaker 3 (19:25):
Why I'm personally a little bit nervous about where it
could go next year, is because lower home prices very
likely means a further drop in new construction, which means
we start to have employment issues in the trades.
Speaker 4 (19:38):
Is that baked into the cake given the exit what
I'll call the accesses the last several years, like baked
into any way to avoid it, any way to avoid
this outcome that you're referring to.
Speaker 2 (19:47):
Yes, maybe we should talk about that on the other side,
another great teast that.
Speaker 1 (19:52):
Yeah.
Speaker 3 (19:53):
Today, let's take a quick break, and when we return,
mister T's is back.
Speaker 1 (20:10):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time Now for Wall Street watch a complete look at
what's moving market so far today. Right here on the
Financial Exchange Radio Network.
Speaker 6 (20:29):
Markets A trading modestly hires. Wall Street reacts to the
ADP private payroll report for November, which fell thirty two thousand,
worse than forecasts of an increase of ten thousand. At
the moment, the Dow is up by just over half
a percent, s and P five hundred is up a
quarter percent, NASDAC up a tenth of a percent, Russell
two thousand is up just over one percent higher ten Youre,
(20:51):
treasure Field is flat at four point zero seven nine percent,
and crude oil up one on a third percent, trading
at fifty nine dollars forty two cents a barrel. Macy's
posted its highest quarterly sales in more than three years,
says the department store chain's turnaround strategy showed signs of momentum. Furthermore,
the company raised its full year sales in earnings outlook
(21:13):
for a second consecutive quarter. However, Macy's outlook anticipates challenges
in the holiday quarter, including selective spending by consumers and
higher TIFFs. Macy stock is edging higher. Meanwhile, shares an
American Eagle surging fourteen percent after the retailer beat third
quarter earnings and revenue forecasts, and also raised its same
(21:33):
store sales guidance as it is seeing a strong start
to the holiday shopping period elsewhere. Microsoft down by two
percent after The Information reported that the company has lowered
quotas for AI software as sales after many of its
salespeople missed growth goals in the last fiscal year, and
(21:53):
chipmaker Marvel Technology agreed to by Celestial Ai and three
point twenty five billion dollar deal. Arvel also posted robust
quarterly results in forecasts, sending shares jumping over four percent higher.
I'm Tucker Silva and that is Wall Street Watch and
in the previous segment we asked her the question Brendan
Fraser's performance in which movie earned him his Oscar for
(22:17):
Best Actor? That would be the wail. Nick and Weston
mass Is are winner today taking on the Financial Eks
Shane Show t shirt. Congrats to Nick and we played
trivia every day here on the Financial Looks Shane. See
complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:33):
Mark, what was the latest thing that you teased last segment?
What were we talking about? I forgot?
Speaker 6 (22:40):
Oh jeez, I'm asking you no, no, because Mark forgot too.
Speaker 4 (22:45):
Sorry I only remember how related making noises.
Speaker 2 (22:49):
No, it wasn't a noise last time, Tucker. Do you
remember what it was?
Speaker 6 (22:54):
I don't know because he did the old tongue roll
thing that I can't do.
Speaker 4 (22:59):
It's like all that's all we all remember is but
it was something that a light went off in your
head and you're like, oh, I got something else.
Speaker 2 (23:08):
Does Ben remember?
Speaker 6 (23:10):
No? I don't think he does.
Speaker 2 (23:12):
Only the only person who should fix how to fix
the problem with home builders doesn't.
Speaker 4 (23:21):
I was here for that.
Speaker 2 (23:22):
I don't think we talked about that either.
Speaker 6 (23:24):
Okay, So Mark asked the question is it already baked in?
And is there still time any way to this fate
the home building? That question to you, Chuck, is there
any way to avoid this fate?
Speaker 2 (23:35):
And then that is that's what we were going to talk.
Speaker 4 (23:36):
Has the die been cast? Yeah, it's not actually that
exciting in.
Speaker 2 (23:39):
Retrospect, but no, it sounds exciting.
Speaker 1 (23:41):
Okay.
Speaker 4 (23:42):
You you were pointing out that a lot of that
quick summary the die is cast.
Speaker 2 (23:47):
So it's going to be.
Speaker 3 (23:50):
It's it's tough to avoid because here's what's happening is
as home prices start to go down, the first thing
that you get is a large your number of potential
sellers saying one of two things, No I'm not going
to sell, I'm going to wait and see if it
gets better, or people pulling listings off the market because
(24:10):
they say, no, I'm not going to take less than
I think my home is worth. Eventually you get to
a point where those non forced sellers become forced sellers
where instead of saying, hey, we'd like to sell, but
only if we can get X, Y or z, eventually
they become, hey, you know what, it's time for us
to move because of these reasons, we gotta list the place.
(24:33):
And that's when you see inventory continue to build it
a faster clip, which means lower prices again needed to
clear that inventory. So I think that there was a
path where you could have gone through the next three
to four years and just said, yeah, maybe home prices just.
Speaker 2 (24:52):
Don't go anywhere that would be ideal, and.
Speaker 3 (24:55):
Wages continue to grow at two to four percent a year,
and you normalize that ten to fifteen percent gap in
historical affordability through wages growing while home prices don't. The
path that it looks like we are heading down now
that we are seeing, you know, continued inventory growth year
(25:17):
over year. At least right now, we're seeing inventory about
sixteen percent above last year and only about five percent
below twenty nineteen levels for this time in the year.
You're seeing inventory continuing to grow on a relative basis,
and with that you are seeing an uptick in new
mortgage applications as well. But if you look at the
(25:38):
size of the mortgage applications, it's declining, which also matches
the decline that we are seeing in price per square
foot four listings. So basically, what we are getting the
message that the market is sending us, and again this
is just you're interpreting what the data is saying. The
market is saying, Hey, people are more willing to list
(25:59):
now and take lower prices on a square per square
foot basis than a year ago rather than trying to
wait for better pricing in the future to sell their home.
And as long as more people are continuing to do that,
home prices are going to continue to decline in those markets,
and price gains and other markets are likely to become
(26:21):
more muted and eventually start declining as well. That's kind
of where we're heading in terms of is like our
equity markets pricing This in I don't think they are now.
Speaker 4 (26:34):
They think the Fed's gonna save the day. They think
we have a demand problem that they can fix.
Speaker 3 (26:38):
And we do have a demand problem, it's just not
one that the Fed can fix without the level of
rate cuts needed that are typically signaled by a recession.
Speaker 2 (26:49):
You know, It's like, I see what you're saying.
Speaker 3 (26:50):
Yeah, if if you get FED funds rate down to
one and a half to two percent, sure that probably
takes the long end down far enough that mortgage rates
come down in the housing mar.
Speaker 4 (27:01):
Certain prices moving versely to that, shouldn't that send price
of skyrocketing again? Isn't that precisely the predicament. Isn't that
precisely how we got into this predicament.
Speaker 3 (27:09):
That's assuming that you think that we're at equilibrium for
pricing now, which I don't think we are. So, like,
let's let's play out the string here. Just as an example.
Let's say that you have prices that are fifteen percent.
Speaker 2 (27:20):
Above where they should be ten.
Speaker 3 (27:22):
Your treasury is at four right now, thirty year fixed
rate mortgages at six and a third. If you get
a recession, the first thing that happens, demand's going to
come down further because demand does come down in a
recession four housing, so that's going to widen that afford
it like that affordability gap for what you need is
going to end up widening there. The other piece is
(27:44):
that the long end, even if the FED cuts by
let's say they cut by another one hundred and fifty
BIPs and they get us down to two and a
half on the on the FED funds rate, tenures not
coming down by that much, you know, the tenures not
coming down.
Speaker 2 (27:58):
To two one for one.
Speaker 3 (28:00):
So maybe you pick up like five to seven percent
on the affordability gap there, but prices still have to
fall another seven to ten percent from there to close
the rest of the gap. So again like it's it's
a really hard path for me to see anything other
now than price. The combination of pricing and wages probably
(28:22):
over a two year period now where wages, you know,
they'll go five percent, prices nationally it'll come down eight
to ten. That kind of gets you where you need
to be, and housing is ready to crank in twenty
twenty eight, again from a construction perspective, but like twenty
six and twenty seven might be really hard for home builders.
Speaker 4 (28:43):
They should be. I hate to say it, they should
be if you think there's validity to looking at the
long term trend and the departure from long term trend
that the last five years resulted in, and assuming that
GAP's got to close your view. Maybe not you, but
people listening well, its structs the economy has changed. I
think that housing should continue to grow at I'm gonna
(29:06):
say four percent, which includes the past five years, so
that might be. That's conservative, that's fair. I think four
to seven percent for housing is fair based on my
little model, my mental model for the structure of the economy,
in which case you don't need a dramatic pullback.
Speaker 2 (29:21):
I just don't know.
Speaker 6 (29:23):
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(30:29):
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Speaker 3 (30:37):
Let's see, we got a few other things to talk
about here. Anthropic one of the companies that is on
the forefront of large language models artificial intelligence generative AIRE.
They've apparently hired a law firm to begin working on
(30:57):
a potential IPO for next year them and open AI,
potentially both ipoing in twenty six. Is something that is
interesting from a number of different perspectives. One that I
look at it would be really cool to be able
to actually see their financials on a regular basis and see,
you know, what's actually going on in terms of revenue
(31:20):
and expenses, you know, aside from these you know, random
reports that we get out from private sales and things
like that.
Speaker 2 (31:27):
So that'd be kind of interesting. The other thing that I've.
Speaker 3 (31:29):
Touched on a few different occasions, sometimes when you get
like the big white whale in a specific industry that
goes through an IPO, it can represent a local top
for that industry. We covered it back in twenty twenty
one when Coinbase and Robinhood both went public and it
(31:50):
was kind of the top of the meme stock and crypto.
Speaker 2 (31:52):
Trading, you know era at that point.
Speaker 3 (31:55):
You know, twenty twenty two was very bad for both
of those businesses, and then they've subsequently recovered. We've also
had earlier this year, Core we've went public, had a
ton of trouble, you know, kind of getting things off
the ground, and we saw kind of other AI companies
really struggling heading into April before you got a flurry
of announcements that change the game heading into the summer then.
(32:18):
And so this is kind of interesting to me in that,
you know, it always just raised the question for me,
could it represent a local top for that, you know,
particular industry. Maybe I don't know, but it's something that's
always on my mind when we hear about these big idos.
Speaker 4 (32:32):
Yeah, almost by definition, it would kind of have to.
They want to strike while the iron is hot, and
they think it won't always be this hot. For personal reasons,
they want to cash out.
Speaker 2 (32:40):
There's a reason why they want share.
Speaker 4 (32:41):
Valued at pennies on the public dollar, on the public
valuation dollar. So you're highly motivated. And their people presumably
have all been paid, not in substantially anyway, paid in stock.
So this is their opportunity to cash in and earn
earn money that will keep their family comfortable for generations.
Speaker 2 (33:01):
I guess just look at.
Speaker 1 (33:02):
It that way.
Speaker 4 (33:03):
The other I guess they're voracious appetite for a need
for capital. That's why you go public. It's not all cynical,
it's not all about cashing and it's sure raising money.
Speaker 2 (33:15):
Just take a quick break when we come back.
Speaker 1 (33:17):
Stack rulets find daily interviews and full shows of the
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and get caught up on anything and everything you might
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Financial Exchange is life on Series XM's Business radio channel
one thirty two weekdays from eleven to noon. Get the
(33:39):
latest business and financial news from across the country and
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one thirty two. This is the Financial Exchange Radio Network.
Speaker 6 (33:59):
This segment of the Financial Exchange is powered by circle
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(34:20):
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Speaker 2 (34:35):
Mark what do you got for me for stack Roulette?
Speaker 4 (34:37):
Kind of a funny story, maybe a little bit alarming too.
I don't know. Waimo's from the Wall Street Journal. Weimo's
self driving cars are suddenly behaving like cabbies. So apparently
I've never ridden in a Weaimo. You guys autonomous? No, OK,
So these are self driving taxis for those that don't know.
They're known for being cautious. They'll sit behind a driver
(34:58):
that's stopped with their hazards on. They won't pass when
most of us probably would. That kind of stuff. They'll
stop like at a yellow light. Most of us might
might kind of assertively drive through a yellow light, so
kind of annoying stuff if you've hired hailed gab maybe
or in a hurry. So they're changing their programming to
make them more quote human like in their driving behavior,
(35:20):
including more aggressive maneuvers, rushing pedestrians along. I don't know
exactly how you do that, Maybe by not slowing down
and occasionally bending traffic rules, which is I guess a
euphemism because they're actually making illegal U turns. Many people
are documenting this, recording this behavior. So next step in
the evolution of self driving cars, making them more like us, but.
Speaker 2 (35:43):
Hopefully in ways that don't cause problems.
Speaker 3 (35:45):
Because again, here's the thing that I come back to
on self driving vehicles. I'm both pro and anti self
driving vehicle, which is why I think I'm generally in
the right spot. We do need to get past, you know,
commenting on every last thing that a self driving car does,
because if we're gonna be intellectually honest with ourselves, we
(36:09):
don't do that when we're talking about how humans drive.
Of course, we never report on, you know, the one
hundred deaths that happen every day from cars driving around
the United States, which which happens again, we could do
an entire show on. It would be horribly depressing because
all of these people should still be alive with self
(36:29):
driving vehicles, provided that you have, you know, proper disclosures
about you know, how they're operating, what their safety record is,
and that you know you have you know, the right
information out there. Look way Moo for you know, any
concerns that people have about him, has never been involved
in an at fault fatality, like never, and they've they've
(36:50):
driven millions of minds pretty miraculate, which is pretty amazing.
Speaker 2 (36:54):
You know.
Speaker 3 (36:55):
So again this is not to say like every self
driving vehicle is good, but hey, they've they've got a
really good safety record and they're making these changes to
make the driving experience more like what you normally get
and to save time. Like the example, one of the
examples they give is like, hey, if you're on a
two lane road with double yellow lines and there's a
(37:16):
big Amazon truck stopped in front of you, does the
human driver just stop and wait for the Amazon driver
to get out and no, they look see if anyone's coming,
and then.
Speaker 2 (37:25):
You pull around on the double yellow line road.
Speaker 3 (37:28):
WEIMO is now starting to allow its vehicles to do
similar things. So again, I think that provided that we
you know, do the research that's needed and have you know,
appropriate controls in place and accurate data that's coming out
about you know, any accidents or issues that occur. Yeah,
let's continue to develop this. It is going to potentially
(37:51):
impact employment, like we have to know that as well.
But remember productivity growth comes from being able to do
more with fewer inputs, and typically those inputs are labor.
Look at farming in the United States. The number of
pharmacies drop by eighty five percent in the last hundred years,
and yet yields are up so much that we are
continuing to be able to feed the population. So we
(38:14):
have to you know, work to try to support people
who might be displaced by automation where it comes. And
quite honestly, I think a lot of us are unfortunately
in a position where we may be displaced over the
next five to ten years if these technologies pan out
the way some people think they can be. So we're
all gonna have to kind of support each other on
this stuff. But I do like to see, you know,
(38:37):
that we can, you know, maybe get there in some
of these areas too. Market's broadly positive now, with the
Dow and S and P in the green actually negative
and Nasdaq just turn negative again. But we'll be back
tomorrow with more financial exchange
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