February 18, 2026 • 38 mins
Chuck Zodda and Marc Fandetti examine the unusual disconnect between steady economic growth and slowing job creation. They discuss whether productivity gains and artificial intelligence are allowing companies to expand without hiring, and what that could mean for future wage growth and consumer spending.
Chuck and Marc also break down ongoing market volatility beneath the surface, sector rotation trends, housing affordability concerns, and how shifting labor dynamics may influence Federal Reserve policy in the months ahead.
Chuck and Marc also break down ongoing market volatility beneath the surface, sector rotation trends, housing affordability concerns, and how shifting labor dynamics may influence Federal Reserve policy in the months ahead.
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Chuck Zada and Mark Vandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker kicking things off for you. And we've
got a nice little rally going on today as markets
continue to bounce off of what at least right now
appears to be another interim bottom round sixty eight hundred
on the S and P five hundred touch below. They're
around sixty seven seventy five. It's where we got down
to yesterday. But we're back up sixty nine hundred now,
(01:32):
so again within about one and a half percent of
all time highs in what is just a really narrow
rangebound market right now, where the SMP is about a
quarter percent below where it was in late October. Just
no real movement with any conviction in either direction right now.
But today again like today, has some conviction. You just
(01:55):
can't really string a lot of these together. At the moment.
The Dow's up three hundred and ten points, the the
S and P is up sixty two, NASDAK composits up
three twelve, so anywhere from about a two thirds of
one percent to one in a third percent gain on
your major USN disease. Ten year Treasury rates up just
a little bit point zero two five or two and
(02:15):
a half basis points to four point zero seven seven percent.
When we take a look at what is happening in
other parts of the market, you know, you'd see what's
going on with the dollar, just as an example, up
point two eight percent to ninety seven thirty three. Gold
is up two and a quarter percent, about one hundred
(02:36):
and ten bucks an ounce to five thy sixteen dollars
and sixty cents. We got crude oil up one ninety
nine a barrel on West Text Intermediate to sixty four
to thirty two the sound renewed concerns about potential action
in the Middle East. Triple A national amatur gas price
is up six tens of ascent as well to two
ninety two and three tenths. We've kind of settled in
(02:57):
that load a mid two nineties range in the last
couple weeks after being down in the low two eighties
for most of December and January. And so that is
what is moving in markets today. Let's see what do
we want to talk about. Let's talk a little bit
about the US and Japan. Japan announcing that they are
(03:19):
planning to invest thirty six billion dollars into US oil,
gas and mineral projects. This is the first tranch of
a five hundred and fifty billion dollar commitment under the
trade agreement that it struck with the Trump administration and
Japanese Prime Minister Takaichi basically saying, look, we're trying to
(03:40):
focus on areas that are critical for economic security, mainly
focusing on energy and certain mineral deposits, and the biggest
investment is going to be in a natural gas facility
in Ohio that's expected to generate nine point two gigawatts
of power, or as Doc Brown say, jigawatts. But uh,
(04:03):
back to the.
Speaker 3 (04:04):
Feat, Yeah, I know, I'm trying to.
Speaker 2 (04:05):
One point jigawatts.
Speaker 3 (04:08):
Did he say jigawatts? Gigawatts?
Speaker 2 (04:09):
Yeah? Okay, I don't know if that was intentional, if
that's just how like it was pronounced back then, I
I or maybe it was.
Speaker 4 (04:17):
I don't call other people saying it back then. I
didn't use the gigawatt, was not Oh okay, huh.
Speaker 2 (04:25):
Yeah, we didn't really do much with gigawatts back then.
Speaker 4 (04:28):
Well, I mean they didn't exactly have a scientific advisor
on that movie, So I'm not surprised. You sure corrected him,
pretty sureipher Lloyd wasn't actually a scientistic exactly no, I
mean like an advice, you know, star trek Will physicist
Tony the script.
Speaker 2 (04:44):
Okay, sorry, no, it's it's fine. So in any case,
you've got most of this investment is going to be
into uh that gas plant of the thirty six billion,
thirty three billion is going there. It's gonna be led
by a subsidiary of soft Bank Group SB Energy, And
if that plant does get up to full capacity, it
(05:06):
is in theory enough to power about seven point four
million homes within the United States. So there's that.
Speaker 3 (05:14):
Yeah, I mean, big deal.
Speaker 4 (05:16):
The president running around doing and I would made the
same criticisms of Biden when Gina Ramundo was handing out
capital to semiconductor manufacturers and.
Speaker 3 (05:26):
Stuff like that.
Speaker 4 (05:27):
The job of the federal government ought to be to
just set the general conditions conducive to economic growth, not
try to cut individual deals. There's plenty of capital around
to finance these deals. We extorted this capital from Japan
under the threat of retaliation in the form of tariffs.
Presumably these investments would have happened anyway.
Speaker 2 (05:47):
They might have gone somewhere else within the US, like
into something else.
Speaker 4 (05:51):
Capital is like fungible, It's gonna find its highest and
best use. So this makes for nice theatrics, and the
media dutifully reports that, know, this investment's going to be made,
but we extored it well.
Speaker 2 (06:00):
And I think ultimately you're gonna have to see how
these end up playing out when it's all said and done.
I remember, you go back and look in just about
any presidential administration, you can find things like this. You
go back to the first Trump administration and uh, you
remember all of the fanfare about the fox Con plant
that was going to be built in Wisconsin. Vaguely, there
was a ton of it, and ultimately, like basically the
(06:22):
plant never ended up getting built because they were like, oh,
we're not actually going to do this. You can go
through basically every administration and see, hey, here's a commitment
that you know, we thought was going to happen, but ultimately,
for reasons X, Y, and Z, it never came to fruition.
Speaker 4 (06:37):
Yeah, I'm not saying it's not politically smart. By the way,
you if to create some jobs, don't see are the
jobs that weren't created elsewhere? Because to your point, capital
seeking its highest and best use may not have landed
on a deal that was ultimately decided a location a
project for political reasons. The President's making these, he likes
(07:00):
to be involved. He's a businessman. I get that, but
better off and I'm sure maybe somebody's telling him this
maybe not better off again, just trying to keep regulations modest,
and they're trying to do in other areas.
Speaker 2 (07:12):
Let's talk a little bit about the FED. There's a
piece from Barons and I think this is right in
your wheelhouse mark in terms of, you know, kind of
looking at the big macro picture. Are the Fed's economic
models wrong? What does this?
Speaker 3 (07:25):
Could you be more specific?
Speaker 1 (07:27):
Please?
Speaker 4 (07:27):
No, no, I'm not saying you no, I mean the author.
I find these pieces very frustrating.
Speaker 2 (07:31):
Talk to me about why you find him frustrating.
Speaker 4 (07:33):
Well, look, a model is puts into symbols what you'd
normally say in a sentence. You could have a model
of a little market of demand and supply, and then
play out what you think will happen to demand or
supply or prices when you do something. How will raising
taxes on a good in a particular market effect demand?
You really can't reason that out just talking through it.
(07:55):
You could try. You could if you've ever read like
Adam Smith in college, or something. You should see see
how difficult it is to communicate with words versus symbols.
So a model puts a thought into symbols and then
allows you to reason consistently because it's easier to look
back at what ultimately is an equation or set of
equations and say, ooh, this was not consistent when I'm
writing down now, is not consistent with what I said
(08:16):
two steps ago. I need to correct my thinking. So
a model is just a way of clearly expressing yourself,
and all fields, many fields use them, or they're quantitative obviously,
not just econ. The criticism here is I think directed
at the big models. The furbuss is the acronym used
to describe the dynamic random They call that stochastic general equilibrium,
(08:42):
very fancy way of saying total economy model that takes
into account the fact that the variables as they play
out over time, play out with a great deal of uncertainty.
So the FAT as like you could think of it
as a big computer, even though it's not. Obviously you
put in a bunch of assumptions about we're gonna change
monetary policy a little bit, fiscal policy is going to
(09:03):
do this. There are no shocks hitting the economy from outside.
What happens to economic growth so called GDP? If monetary
policy tightens up, if interest rates go up by a
quarter or a half a percent today, what happens over
the next several quarters. This computer, it's really a model
running on a computer, but you know what I mean,
will spit out the path of say the variable you
(09:26):
want if you want to tweak something else. So when
you say when the author says their models might be flood, yeah,
well no kidding, they're always of course they're flawed. Nobody
would say they weren't. They're arguing against a so called strongman. Economists,
like researchers in any quantitative fielder constantly improving their models.
So I don't really know what that Whenever I hear
(09:47):
criticisms like this, it's invariably there're from people who don't
get the math. Forgive me, but it takes a lot
of math to get to the point, to like years
and years worth to understand these things, and their criticisms
are so vague as to be unhelpful, because economics will
be the first person to tell you that their models
are deeply flawed and they're just a way of sort
of enshrining and improving on your intuition.
Speaker 2 (10:11):
It often economists often get lumped in the same category
as meteorologists for good reason, and that they're really complex
systems where you have models where you try to predict
what's going to happen, but ultimately you're still going to
be wrong. Yeah, because of unforeseen factors and things.
Speaker 3 (10:27):
Yeah, you know, that's a good example.
Speaker 4 (10:28):
Like suppose global warming is changing the way the climate works,
changing the way things interact. If you make predictions using
a model that was a fit to an old climate,
you're going to be wrong. You're going to be wrong
about snowfall totals or something. Climate and snowfall totals or
cerfaent things, of course. But yeah, that that's a good analogy.
And of course meteorology is physics based. Economics, as you
(10:50):
like to point out, doesn't depend on concepts which are
invariant to policy and things like that.
Speaker 2 (10:58):
Let's take a quick break. When we come back, we've
got some trivia and then we'll talk about the housing
market right after this.
Speaker 1 (11:05):
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sure to hit that subscribe button. Time for trivia here
(12:11):
on the Financial Exchange, and it's now official. A boneous
chicken wing does not need to come from a wing.
An Illinois circuit judge ruled against a man who was
suing Buffalo Wild Willing Wings for misleading customers over their
boneous wings. The disgruntled customer was seeking ten million dollars
(12:32):
in damages. So our trivia question today is simply what
city We're Buffalo wings? Popularized in once again, what city
We're Buffalo Wings? Popularized. If I could say that popular
lies in, I can't say that word popular popularz popular ride.
Speaker 2 (12:51):
It's like me with dispensary dispensary.
Speaker 5 (12:54):
You can't say that.
Speaker 2 (12:55):
I have to think about it. We just did, though
it took a lot of brain power. Otherwise I say dispensary,
which sounds like dysentery. Wait, maybe maybe I said it
wrong to begin with.
Speaker 3 (13:06):
I don't know, I forget.
Speaker 4 (13:07):
Now what are you trying to say? Because most people
don't use the word dispensary anymore?
Speaker 2 (13:11):
Is a dispensary? It's not a dispensary you get you
get dysentery, so it's not a dispenser.
Speaker 4 (13:16):
You would go to a dispensary for dysentery, one would hope?
Speaker 3 (13:21):
Right? Wouldn't you get it? Get a drug? Am I
thinking of the right?
Speaker 2 (13:23):
Is that what?
Speaker 3 (13:24):
I just screw it?
Speaker 2 (13:25):
Be the fine?
Speaker 5 (13:25):
Fifth person to text us at six one seven three
six two thirteen eighty five with the correct answer along
with the keyword trivia and you win a financial Shane
showed T shirt once again the fifth correct response to
texts to the number six one seven three six two
thirteen eighty five with correct answer along with the keyword
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(13:48):
at Financial shine show dot com.
Speaker 2 (13:51):
Glad we had that conversation. It's good. Let's talk about
the housing market. There's a piece in uh, the Financial Time.
It's titled the housing market is not getting much better
and neither is inflation. And I think I'm going to
read a couple of pieces here just because there's there's
(14:11):
parts that I kind of agree with. There's a lot
that I don't agree with in here. Uh first part,
the housing market is probably the darkenest corner of the
US economy and it did not get much brighter last month. True,
like it's still in the aggregate, the housing market is
kind of a mess. And to be fair, January data
was probably skewed down because half the country was covered
in snow. So I don't really, you know, put too
(14:34):
much stock in housing activity during the month of January,
which is normally a quiet time. Anyways, you're looking at
me like I have a few heads.
Speaker 4 (14:42):
I've just seen an awesome social media post that ties
into this. Please continue, So no, no, it's on at
all response to you.
Speaker 2 (14:49):
So I think if you want to say, look, housing
is is you know, kind of at a pretty low point.
I think that that is an accurate statement. It's also
this piece then also lays out that allowing any May
and Freddie Mack to purchase a bunch of mortgage backed
securities to reduce mortgage rates probably won't do much, which
I also tend to agree with because generally these things are,
you know, kind of self limiting. If you only have
(15:10):
so much of a pool of money that you can
apply there, it's not gonna do very much. You don't
have an endless bazooka to just keep throwing at the problem.
Institutional investors are not, you know, really the culprit here.
I believe that, you know as well, so like, that's
not gonna have a big impact on home prices. But
(15:30):
what I do believe is that we are starting to
see green shoots in the parts of the housing market
that have been the hardest hit, namely throughout the Southeast.
You're starting to see transaction volumes ticking up in Florida
while inventory starts to come down. That's the sign of
a market that is showing you know, demand at current pricing,
which is good to see given out prices have fallen there.
(15:52):
I suspect you'll start to see that throughout other parts
of the south weast, southwest and southeast and into the
Southwest as we continue through the year. So I don't
think that housing is not, you know, starting to show
signs of improvement. I think it is starting to. I
don't think any of it is policy driven improvement. I
(16:13):
think it's just housing had to go through a correction
phase after going so insanely crazy relative to incomes for
a couple of years because of a bunch of money
pumped into the system in very low interest rates. But
I think that we are getting close to some of
the most damaged housing markets in the country starting to
rebound and pull us through this, though there are parts
(16:36):
that still have to go through that correction phase and
that'll probably take the better part of the next one
to three years. It's just how housing cycles go. They
don't either like they don't happen in you don't see
the problems happen in a span of three months, and
they're not resolved in three months. They take a few
years to play out to the upside and a few
to the downside. And I think we're kind of that
(16:57):
middle point now where housing is in the aggregate bottoming
and over the next couple of years will start to
become a creative to the US economy again. So that's
my fundamental disagreement is this piece is like, oh, everything's
bad in housing, and I'm like, no, I disagree. Things
are starting to improve in parts of the housing market
and will feel that more broadly probably twelve to eighteen
(17:20):
months from now.
Speaker 4 (17:22):
Yeah, I have nothing to add other than that. I
think in several years will think it was silly that
anybody used the phrase housing crisis. I think that because
I suspect the next recession will ring out the excess
demand that's pushed up prices, particularly on the high end.
Speaker 2 (17:40):
You got something that you saw.
Speaker 3 (17:41):
Did you want to see this is?
Speaker 4 (17:42):
It's kind of related, Chuck. I think you'll find this interesting.
Speaker 3 (17:45):
It's brief.
Speaker 4 (17:47):
Why is total housing stock per person so much greater
in some economies than others?
Speaker 3 (17:55):
Somehow some countries are not.
Speaker 2 (17:57):
I've seeing this chart where it's like you look at
developed economies, mostly through the US and Europe, and we
really don't build much housing per capita.
Speaker 4 (18:04):
This is a brilliant explanation. Often explanations can go back centuries.
The guys that won the Nobel Prize in Economics a
few years ago, for example, explained differences in per capita
income today using institutions that were adopted hundreds of years ago,
which were a function of who colonized the country and
what type of economy did they put in place. Was
(18:26):
it a people who are enslaved based economy or was
it like a New England economy? Sure, okay, So breakthrough
type research often comes from looking back in history. There's
a dramatic difference in the housing stock per person in
countries like Ireland, Canada, Australia, the New UK US and
(18:46):
countries like Italy.
Speaker 3 (18:48):
For example.
Speaker 4 (18:49):
Italy does not have a housing crisis, and it's not
just because of demographics. Very suggestive graph I saw that
just sort of blew me away because I can't believe
I didn't think of it or no one else has
publicized the idea. It's based on whether you adhere to
a civil law system where judges sort of decide cases
that becomes precedent, or a common law Excuse me, I'm
(19:10):
getting this backwards. That's common law that I just described.
Civil law would be code based, like Roman based civil law.
It's under common law it's easier to challenge regulations that
restrict home building.
Speaker 3 (19:26):
That's your explanation.
Speaker 1 (19:27):
Yep.
Speaker 2 (19:27):
Let's take a quick break here. When we return, we've
got the Trivia Answer and Wall Street.
Speaker 1 (19:32):
Watch, 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
(19:54):
look at what's moving markets so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (20:02):
I'll have see yesterday's volatility, Marcus Taar and rally Mode
as AI impacted stock's clawback recent losses. Energy markets are
also seeing some attention amid more tensions between the US
and Iran. Right now, the Dow is up about six
tens of a percent, or two hundred and eighty two
points higher, SMP five hundred up nearly nine tenths of
one percent or sixty points higher, Nasdaq up one point
(20:25):
three percent or three hundred and four points. Russell two
thousand up one point two percent. A ten Yere treasureeled
is up two basis points at four point zero seven
five percent. In crewde oil up three and a third percent,
trading at sixty four dollars and thirty eight cents a barrel,
Meta and Now said has expanded its partnership with Nvidia
(20:45):
to use millions of the company's AI chips for its
data center buildouts. In a statement, Meta CEO Mark Zuckerberg
said that the expanded partnership continues his company's push to
deliver personal superintelligence to everyone in the world. The world,
Meta shares are Flatwele and Video stock is up over
two percent. Sticking with the chip sector, where Analog Devices
(21:07):
posted stronger than expected quarterly results and guidance where it's
revenue jump thirty percent last quarter, that stock is up
by three percent. Meanwhile, cybersecurity firm Palo Alto Networks posted
better than expected quarterly results and lifted its annual revenue outlook. However,
the company's earnings per share guidance for the current quarter disappointed,
(21:28):
sending the stock down by six percent. And home builder
Toll Brothers reported stronger than expected quarterly results, boosted by
a jump in land sales revenue. Toll stock is now
edging higher. I'm Tucker Silva and that is Wall Street Watch.
In the previous segment, we asked you the trivia question
what city where Buffalo wings? Popularized in Buffalo Obviously Meghan
(21:52):
from Buzzard's Bay Masses our winner today taking home a
Financial Exchange Show t shirt. Congrats some Meghan and we
play trivia every day here on on the Financial Exchange
See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:05):
A couple of things I found interesting just from uh
Tucker reading Wall Street Watch number one Meta with that
big announcement on additional purchase and this and that, Oh
that one. Yeah, I find it very interesting that, like
that's the kind of announcement that in the last couple
of years would just be driving a stock higher in
(22:28):
the AI space. Meta closed yesterday. It's six thirty nine
and twenty nine cents. It's it's six thirty nine and
sixty two cents right now. It's basically flat.
Speaker 5 (22:36):
Is that related to Zuckerberg's testimony at the moment?
Speaker 2 (22:40):
I don't know.
Speaker 5 (22:40):
I mean the children addictiveness to the platform. What's he
really gonna say, Yeah, probably not much. I just don't
know if that's why it's flat at the moment.
Speaker 2 (22:51):
Either way, Like you make a big announcement like that
about AI a year ago, and the market saying great,
you're on the cutting edge, like we're gonna bid you
up today. The fact that you can't get a reaction
out of it, it's just interesting.
Speaker 3 (23:04):
I think it's a great sign makes sense, like from in.
Speaker 2 (23:08):
This washing out malinvestment potentially but very well put. Yeah,
it might not be the best for market health.
Speaker 4 (23:16):
Well, if you're concerned about valuations, what pushes them up
is exuberance, is the speculative and hopeful buying. The fact
that that doesn't appear to be happening. Limited sample here,
but take it for what it's worth. Is I think encouraging,
as is the dispersion that you were talking about earlier
in the show, tech struggling other sectors kind of picking
up the slack. That's not a perfect way to think
(23:38):
about what happens in financial markets, but it'll do. That's
kind of encouraging too to me.
Speaker 2 (23:44):
The other piece just that I found interesting, Tucker, you
mentioned analog devices.
Speaker 3 (23:48):
I did.
Speaker 2 (23:49):
Isn't it wild? In the age of AI, analog devices
still exists, but Digital Equipment Corporation has been shuttered for
twenty plus years now. Kind of wild, you know, just
a food for thoughts. Let's talk about the job market
and college grads. A lot of ink has been spilled
over the last couple of years about how recent college
(24:11):
grads are having a harder time finding a job right now,
and that their unemployment rate has actually been higher than
the general population recently. And I just think this is
there's a couple things that I find interesting here when
(24:31):
we look at it. The first is this idea that, hey,
the unemployment rate with recent college grads is high. I
do think is a good signal for the overall strength
of the job market, because usually if you are a
company that is trying to hire cheap white collar labor,
that's where you go recent college grads. They're going to
(24:52):
be cheaper than anyone else in the workforce that have
the prerequisites that you want. You may not need a
re in college grad to do the work, but you
may say, hey, like it's it's gonna be safer for
me to hire someone with a college degree as opposed
to someone without, and so you end up hiring them.
What I find interesting is, look, I'm a millennial, and
(25:14):
as a millennial, I'm naturally lazy and love avocado toast.
It's baked into my DNA, like it just is. I
had just have this inherent laziness embedded in me. But
back during the time, right after I graduated from college,
it was one of the worst economies that we had
seen in recorded history. Sorry about that, You're welcome. In
(25:35):
any case, the talk then was, hey, millennials, Like the
unemployment rate for millennials was one thing, but we talked
a lot about the underemployment. It was you know, the
person with you know, the advanced degree who was working
as a barista at Starbucks. What I find interesting right
now is that we're talking more about, Hey, the unemployment
(25:56):
rate is x for you know, millennials, not millennials, but
for recent college grads gen zers. I don't find that
there's a very robust discussion that's going on about the
quality of work that they're finding. And I'm wondering why
that is, because in theory, you would expect to find
a similar conversation to what we found fifteen years ago
(26:18):
in the twenty tens, and there's no discussion about that.
Speaker 1 (26:21):
Really.
Speaker 4 (26:21):
Yeah, if you buy into the idea that companies are
holding off on hiring white collar entry level because they
think those jobs could be I'll just say automated sure
shorthand for AI can do a lot of which it
absolutely can. By the way, a spreadsheet worker, and I
say that affectionately, not to diminish it, because I was
and still am one.
Speaker 3 (26:41):
In many ways. AI can do a lot of it,
but you need an.
Speaker 4 (26:44):
Experienced person to check the work, ask the right questions
to make sure the answers make sense. I can see,
because I have experienced how automation can replace a lot
of what entry level spreadsheet workers do, and that's what
many finance majors and newly minted MBAs, even depending on
the program you went to, might start out doing in
financial services or a corporate job in any company you
(27:10):
spend your day as britcheet. Yeah, you know, those weren't gratifying.
Those not necessarily gratifying jobs unless you really like data analysis.
I happen to some people do. But I don't know, Chuck,
I don't know if i'd describe those as like high
quality and riching jobs.
Speaker 2 (27:27):
I think the thing, though, is, you know a lot
of this talk about youth unemployment or young adult unemployment
focused on the period about, you know, twelve months ago,
like this is when you first started seeing the pieces
written by IT, and I just knowing what we know
now about how AI is being used by companies and
how you know how deeply it's being used or not
(27:48):
in many cases, Yeah, it's hard for me to imagine that,
you know, age twenty to twenty four unemployment moved up
in any meaningful way in like January of last year
because of AI. I just I don't think that's the case.
Where I think that this is coming from, and this
is not my own idea, but it's one that I've
kind of grabbed onto in the last couple weeks is ultimately,
(28:13):
when you look at the period from twenty one through
mid twenty two, it was just a race for any
kind of talent you could get, Like companies were just
hiring like nuts. And we've seen this attempted kind of
normalization of the labor market in the last few years.
And one of the questions that people are asking now
after the last like six to nine months is, hey,
(28:34):
GDP has appeared to be relatively strong despite the labor
market weakness scorching. What gives? And the answer that I
think I'm coming around to is companies over hired during
that time period, and so they have had excess labor
already on their books and now they are trying to
wring all the efficiency possible out of that excess labor,
(28:58):
and that is where the boost to GDP means coming from,
because basically, like the labor, the extra labor that was
added in was so front loaded that it took time
to actually have the work that was ready to be
done by them. And now it's showing they.
Speaker 4 (29:13):
Learned how to work and now they're more efficient. Because
that that also, some people gravitate towards the AI explanation
for the productivity apparent productivity boom. We don't have numbers yet,
but we do know that GDP boomed, and that's not
an understatement. Sometimes hyperbole is yeah, I mean we're growing
it like twice. The most researchers estimate of trend or
(29:33):
potential GDP so economic growth.
Speaker 2 (29:35):
Is we get Q four data on Friday. By way,
we'll see what that shows.
Speaker 4 (29:39):
So we had like no labor force growth and I
talked about this with Mike Armstrong on the other day too,
no labor force growth, but productivity. Excuse me, but GDP
growing it it's sort of exceptional. Is an understatement rates
by definition that means productivity must have exploded. Is that
because everybody started incorporating into their workflow and getting more
(30:02):
out of them. I mean maybe some proponents of AI are
making that claim. You offer a different, not necessarily exclusive.
These two things aboutssary exclusive explanation of what we're seeing
because last year was really weird, very very high growth
and no job growth that normally happens early on.
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Speaker 2 (31:21):
Let's see. I don't want to talk more about artificial
intelligence right now. I'm just I'm good with it for
a bit. We can you know, we spend like half
the show on. I want to talk about restaurants. Piece
of the Financial Times, US restaurants downsized meals to counter
anti obesti drugs and affordability crisis. So I'll quote here
(31:43):
from the Financial Times the super sized servings that have
long defined American dining, or shrinking is. Rising costs and
the growing use of weight loss drugs prompt restaurants to
offer smaller portions. The trend towards lighter and snack sized
main meals across the US also comes as restaurants seek
to entice cash strapped customers who want lower cost options.
I think the latter is true. I don't think offering
(32:06):
smaller meals has anything to do with people on GLP
on a great public service they're doing like, oh, you
want to eat less, give you less, Like I'm sorry,
that's just not the case. Like if you have too
big of a meal for yourself, you take a doggie
bag and bring it home and now you've got lunch tomorrow,
(32:27):
Like no one ever complained. Gee, I'm waiter this this
meal's too big. I'm on a GLP one. Could you
make it smaller for me next time?
Speaker 3 (32:36):
Gladly pay the same price.
Speaker 2 (32:37):
If that person's not hungry because they're on a GLP one,
they're not going to the restaurant. They're not like, oh no,
I couldn't possibly eat that. I know it's they're just
not going out to You.
Speaker 4 (32:49):
Need to fire your public relations people and come up
with a better explanation.
Speaker 2 (32:53):
So I do believe that restaurants are like, hey, we're
trying to figure out how to get more people in
the door. Let's shrink the portions, as every food company,
whether it's restaurants, groceries, or anything else, are doing. But
it is not, oh, well, we think these people eat less,
so let's make the portion smaller so they feel comfortable. No,
(33:13):
you can, you can take that and go.
Speaker 4 (33:14):
Home st off for a pro rated menu right next
to the first column. Next column is half portions, and
you apply a factor of point five.
Speaker 2 (33:22):
To that to the price, which to my knowledge, has
been done, you know in restaurants all over the place forever.
Like you see that stuff done all the time.
Speaker 4 (33:30):
Oh yeah, have you ever seen it late out the
way I just envisioned it? No, but like you can
get a cup of super it's a good idea, by
the way. There you go, you know, you get same
do that same thing.
Speaker 3 (33:38):
You know.
Speaker 2 (33:38):
It's hey, Tucker, last time that you went to dunks,
did the coffee come in one size or do they
have multiple sizes?
Speaker 5 (33:46):
Last I checked, they had multiple size?
Speaker 2 (33:48):
Oh it has the smaller one been cheaper?
Speaker 1 (33:50):
Yes?
Speaker 2 (33:50):
And has that been the case even before people were
on anti obesity drugs? Yes, thank you, it's you're well,
you're welcome to You're extra welcome. Let's take a quick break.
And I'm sorry this this piece just really bothered, Like
it really described my gears stupid. It is like, no,
the reason restaurants are making smaller portions is so that
(34:11):
they can cut their costs and still get people to
come in the door for cheaper prices, it's not because
they want to make the person on Ozebek feel comfortable.
Speaker 4 (34:21):
And no one, no one pushes back, the authors don't
push back on that explanation so patently silly explanation.
Speaker 2 (34:27):
Well, that's what we're here for. We are pushing back
and uh yeah, you're welcome. Quick break, Wall Street watches
next or no.
Speaker 1 (34:37):
No, it's not.
Speaker 2 (34:38):
What's next? Stack re Sorry, I'm all out of sorts
now stack Roulette is next?
Speaker 1 (34:43):
Text does six one seven, twenty six, two one three
eight five with your comments and questions about today's show.
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Speaker 5 (35:06):
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Speaker 2 (35:42):
Mark. What do you got for me?
Speaker 4 (35:43):
For stack Rouleax Bloomberg released the story after we went
on the air, I think this morning. It relates to
something we were just talking about. So all this very
very briefly read the first read a couple relevant excerpts.
The headline is unprecedented jobless boom, which is what we
were just talking about, a test limit of US economic
expansion and the upshot of the well. So by jobless
(36:04):
boom we mean roaring economic growth, which it is by
any accounts, or at least was through the end of
the third quarter, and most, though not all, researchers expect
it to be strong in the fourth quarter as well.
We'll find out on the twentieth when GDP comes out.
But there was no job creation pretty much according to
the payroll, the Establishment Survey and the payroll number right
(36:25):
last year. That means that productivity probably went up by
if indeed twenty twenty five was a very strong growth here,
and by very strong I just mean above trend somewhere
in the mid high twos, maybe even low threes depending
on four Q, that the last outcome would would be
really surprising. But anyway, so strong productivity growth. A question
is does growth catch down to employment. Is the labor
(36:49):
is the lethargic at least in terms of growth in
the labor market. Does that bode ill for GDP growth?
Or is there something AI or other related going on
that will allow us to continue to grow at trend
or above without job creation. And I think the main
explanation there would have to be something like AI or
(37:11):
something something else on the labor supply slash productivity side.
Speaker 3 (37:16):
I don't know.
Speaker 4 (37:16):
These are questions that are huge, They're outstanding and will
presumably get answers to over the next few months.
Speaker 2 (37:23):
I want to talk about this piece from Bloomberg. I'll
quote here. Round Hill Investments has asked the US Securities
and Exchange Commission for permission to launch six ETFs that
would let investors wager on US election outcomes through standard
brokerage accounts the most ambitious attempt yet to bring prediction
markets into mainstream finance. So basically, they would have versions
(37:44):
for the Presidency, the Senate, and the House in which
you could pick which side wins, and it would hold
event contracts that once they settle, they either pay out
one dollar or zero. Like it's basically this happened to
where this didn't look it's here's the thing. In general,
I think that as long as like, you're comfortable with
(38:06):
doing whatever you want to do, have at it. When
you start getting gambling into actual investment accounts, it raises
a bunch of risk because the friction is so low
between investing and gambling. Then to take a quick break
here for the entire rest of the day, but don't worry.
We're back on tomorrow and uh, we'll do better
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts, do not reflect the opinions of Armstrong Advisory
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(00:20):
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(01:03):
This is the Financial Exchange with Chuck Zada and Mark Vandetti, Chuck.
Speaker 2 (01:11):
Mark and Tucker kicking things off for you. And we've
got a nice little rally going on today as markets
continue to bounce off of what at least right now
appears to be another interim bottom round sixty eight hundred
on the S and P five hundred touch below. They're
around sixty seven seventy five. It's where we got down
to yesterday. But we're back up sixty nine hundred now,
(01:32):
so again within about one and a half percent of
all time highs in what is just a really narrow
rangebound market right now, where the SMP is about a
quarter percent below where it was in late October. Just
no real movement with any conviction in either direction right now.
But today again like today, has some conviction. You just
(01:55):
can't really string a lot of these together. At the moment.
The Dow's up three hundred and ten points, the the
S and P is up sixty two, NASDAK composits up
three twelve, so anywhere from about a two thirds of
one percent to one in a third percent gain on
your major USN disease. Ten year Treasury rates up just
a little bit point zero two five or two and
(02:15):
a half basis points to four point zero seven seven percent.
When we take a look at what is happening in
other parts of the market, you know, you'd see what's
going on with the dollar, just as an example, up
point two eight percent to ninety seven thirty three. Gold
is up two and a quarter percent, about one hundred
(02:36):
and ten bucks an ounce to five thy sixteen dollars
and sixty cents. We got crude oil up one ninety
nine a barrel on West Text Intermediate to sixty four
to thirty two the sound renewed concerns about potential action
in the Middle East. Triple A national amatur gas price
is up six tens of ascent as well to two
ninety two and three tenths. We've kind of settled in
(02:57):
that load a mid two nineties range in the last
couple weeks after being down in the low two eighties
for most of December and January. And so that is
what is moving in markets today. Let's see what do
we want to talk about. Let's talk a little bit
about the US and Japan. Japan announcing that they are
(03:19):
planning to invest thirty six billion dollars into US oil,
gas and mineral projects. This is the first tranch of
a five hundred and fifty billion dollar commitment under the
trade agreement that it struck with the Trump administration and
Japanese Prime Minister Takaichi basically saying, look, we're trying to
(03:40):
focus on areas that are critical for economic security, mainly
focusing on energy and certain mineral deposits, and the biggest
investment is going to be in a natural gas facility
in Ohio that's expected to generate nine point two gigawatts
of power, or as Doc Brown say, jigawatts. But uh,
(04:03):
back to the.
Speaker 3 (04:04):
Feat, Yeah, I know, I'm trying to.
Speaker 2 (04:05):
One point jigawatts.
Speaker 3 (04:08):
Did he say jigawatts? Gigawatts?
Speaker 2 (04:09):
Yeah? Okay, I don't know if that was intentional, if
that's just how like it was pronounced back then, I
I or maybe it was.
Speaker 4 (04:17):
I don't call other people saying it back then. I
didn't use the gigawatt, was not Oh okay, huh.
Speaker 2 (04:25):
Yeah, we didn't really do much with gigawatts back then.
Speaker 4 (04:28):
Well, I mean they didn't exactly have a scientific advisor
on that movie, So I'm not surprised. You sure corrected him,
pretty sureipher Lloyd wasn't actually a scientistic exactly no, I
mean like an advice, you know, star trek Will physicist
Tony the script.
Speaker 2 (04:44):
Okay, sorry, no, it's it's fine. So in any case,
you've got most of this investment is going to be
into uh that gas plant of the thirty six billion,
thirty three billion is going there. It's gonna be led
by a subsidiary of soft Bank Group SB Energy, And
if that plant does get up to full capacity, it
(05:06):
is in theory enough to power about seven point four
million homes within the United States. So there's that.
Speaker 3 (05:14):
Yeah, I mean, big deal.
Speaker 4 (05:16):
The president running around doing and I would made the
same criticisms of Biden when Gina Ramundo was handing out
capital to semiconductor manufacturers and.
Speaker 3 (05:26):
Stuff like that.
Speaker 4 (05:27):
The job of the federal government ought to be to
just set the general conditions conducive to economic growth, not
try to cut individual deals. There's plenty of capital around
to finance these deals. We extorted this capital from Japan
under the threat of retaliation in the form of tariffs.
Presumably these investments would have happened anyway.
Speaker 2 (05:47):
They might have gone somewhere else within the US, like
into something else.
Speaker 4 (05:51):
Capital is like fungible, It's gonna find its highest and
best use. So this makes for nice theatrics, and the
media dutifully reports that, know, this investment's going to be made,
but we extored it well.
Speaker 2 (06:00):
And I think ultimately you're gonna have to see how
these end up playing out when it's all said and done.
I remember, you go back and look in just about
any presidential administration, you can find things like this. You
go back to the first Trump administration and uh, you
remember all of the fanfare about the fox Con plant
that was going to be built in Wisconsin. Vaguely, there
was a ton of it, and ultimately, like basically the
(06:22):
plant never ended up getting built because they were like, oh,
we're not actually going to do this. You can go
through basically every administration and see, hey, here's a commitment
that you know, we thought was going to happen, but ultimately,
for reasons X, Y, and Z, it never came to fruition.
Speaker 4 (06:37):
Yeah, I'm not saying it's not politically smart. By the way,
you if to create some jobs, don't see are the
jobs that weren't created elsewhere? Because to your point, capital
seeking its highest and best use may not have landed
on a deal that was ultimately decided a location a
project for political reasons. The President's making these, he likes
(07:00):
to be involved. He's a businessman. I get that, but
better off and I'm sure maybe somebody's telling him this
maybe not better off again, just trying to keep regulations modest,
and they're trying to do in other areas.
Speaker 2 (07:12):
Let's talk a little bit about the FED. There's a
piece from Barons and I think this is right in
your wheelhouse mark in terms of, you know, kind of
looking at the big macro picture. Are the Fed's economic
models wrong? What does this?
Speaker 3 (07:25):
Could you be more specific?
Speaker 1 (07:27):
Please?
Speaker 4 (07:27):
No, no, I'm not saying you no, I mean the author.
I find these pieces very frustrating.
Speaker 2 (07:31):
Talk to me about why you find him frustrating.
Speaker 4 (07:33):
Well, look, a model is puts into symbols what you'd
normally say in a sentence. You could have a model
of a little market of demand and supply, and then
play out what you think will happen to demand or
supply or prices when you do something. How will raising
taxes on a good in a particular market effect demand?
You really can't reason that out just talking through it.
(07:55):
You could try. You could if you've ever read like
Adam Smith in college, or something. You should see see
how difficult it is to communicate with words versus symbols.
So a model puts a thought into symbols and then
allows you to reason consistently because it's easier to look
back at what ultimately is an equation or set of
equations and say, ooh, this was not consistent when I'm
writing down now, is not consistent with what I said
(08:16):
two steps ago. I need to correct my thinking. So
a model is just a way of clearly expressing yourself,
and all fields, many fields use them, or they're quantitative obviously,
not just econ. The criticism here is I think directed
at the big models. The furbuss is the acronym used
to describe the dynamic random They call that stochastic general equilibrium,
(08:42):
very fancy way of saying total economy model that takes
into account the fact that the variables as they play
out over time, play out with a great deal of uncertainty.
So the FAT as like you could think of it
as a big computer, even though it's not. Obviously you
put in a bunch of assumptions about we're gonna change
monetary policy a little bit, fiscal policy is going to
(09:03):
do this. There are no shocks hitting the economy from outside.
What happens to economic growth so called GDP? If monetary
policy tightens up, if interest rates go up by a
quarter or a half a percent today, what happens over
the next several quarters. This computer, it's really a model
running on a computer, but you know what I mean,
will spit out the path of say the variable you
(09:26):
want if you want to tweak something else. So when
you say when the author says their models might be flood, yeah,
well no kidding, they're always of course they're flawed. Nobody
would say they weren't. They're arguing against a so called strongman. Economists,
like researchers in any quantitative fielder constantly improving their models.
So I don't really know what that Whenever I hear
(09:47):
criticisms like this, it's invariably there're from people who don't
get the math. Forgive me, but it takes a lot
of math to get to the point, to like years
and years worth to understand these things, and their criticisms
are so vague as to be unhelpful, because economics will
be the first person to tell you that their models
are deeply flawed and they're just a way of sort
of enshrining and improving on your intuition.
Speaker 2 (10:11):
It often economists often get lumped in the same category
as meteorologists for good reason, and that they're really complex
systems where you have models where you try to predict
what's going to happen, but ultimately you're still going to
be wrong. Yeah, because of unforeseen factors and things.
Speaker 3 (10:27):
Yeah, you know, that's a good example.
Speaker 4 (10:28):
Like suppose global warming is changing the way the climate works,
changing the way things interact. If you make predictions using
a model that was a fit to an old climate,
you're going to be wrong. You're going to be wrong
about snowfall totals or something. Climate and snowfall totals or
cerfaent things, of course. But yeah, that that's a good analogy.
And of course meteorology is physics based. Economics, as you
(10:50):
like to point out, doesn't depend on concepts which are
invariant to policy and things like that.
Speaker 2 (10:58):
Let's take a quick break. When we come back, we've
got some trivia and then we'll talk about the housing
market right after this.
Speaker 1 (11:05):
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Speaker 5 (11:47):
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sure to hit that subscribe button. Time for trivia here
(12:11):
on the Financial Exchange, and it's now official. A boneous
chicken wing does not need to come from a wing.
An Illinois circuit judge ruled against a man who was
suing Buffalo Wild Willing Wings for misleading customers over their
boneous wings. The disgruntled customer was seeking ten million dollars
(12:32):
in damages. So our trivia question today is simply what
city We're Buffalo wings? Popularized in once again, what city
We're Buffalo Wings? Popularized. If I could say that popular
lies in, I can't say that word popular popularz popular ride.
Speaker 2 (12:51):
It's like me with dispensary dispensary.
Speaker 5 (12:54):
You can't say that.
Speaker 2 (12:55):
I have to think about it. We just did, though
it took a lot of brain power. Otherwise I say dispensary,
which sounds like dysentery. Wait, maybe maybe I said it
wrong to begin with.
Speaker 3 (13:06):
I don't know, I forget.
Speaker 4 (13:07):
Now what are you trying to say? Because most people
don't use the word dispensary anymore?
Speaker 2 (13:11):
Is a dispensary? It's not a dispensary you get you
get dysentery, so it's not a dispenser.
Speaker 4 (13:16):
You would go to a dispensary for dysentery, one would hope?
Speaker 3 (13:21):
Right? Wouldn't you get it? Get a drug? Am I
thinking of the right?
Speaker 2 (13:23):
Is that what?
Speaker 3 (13:24):
I just screw it?
Speaker 2 (13:25):
Be the fine?
Speaker 5 (13:25):
Fifth person to text us at six one seven three
six two thirteen eighty five with the correct answer along
with the keyword trivia and you win a financial Shane
showed T shirt once again the fifth correct response to
texts to the number six one seven three six two
thirteen eighty five with correct answer along with the keyword
trivia will win that t shirt. See complete contest rules
(13:48):
at Financial shine show dot com.
Speaker 2 (13:51):
Glad we had that conversation. It's good. Let's talk about
the housing market. There's a piece in uh, the Financial Time.
It's titled the housing market is not getting much better
and neither is inflation. And I think I'm going to
read a couple of pieces here just because there's there's
(14:11):
parts that I kind of agree with. There's a lot
that I don't agree with in here. Uh first part,
the housing market is probably the darkenest corner of the
US economy and it did not get much brighter last month. True,
like it's still in the aggregate, the housing market is
kind of a mess. And to be fair, January data
was probably skewed down because half the country was covered
in snow. So I don't really, you know, put too
(14:34):
much stock in housing activity during the month of January,
which is normally a quiet time. Anyways, you're looking at
me like I have a few heads.
Speaker 4 (14:42):
I've just seen an awesome social media post that ties
into this. Please continue, So no, no, it's on at
all response to you.
Speaker 2 (14:49):
So I think if you want to say, look, housing
is is you know, kind of at a pretty low point.
I think that that is an accurate statement. It's also
this piece then also lays out that allowing any May
and Freddie Mack to purchase a bunch of mortgage backed
securities to reduce mortgage rates probably won't do much, which
I also tend to agree with because generally these things are,
you know, kind of self limiting. If you only have
(15:10):
so much of a pool of money that you can
apply there, it's not gonna do very much. You don't
have an endless bazooka to just keep throwing at the problem.
Institutional investors are not, you know, really the culprit here.
I believe that, you know as well, so like, that's
not gonna have a big impact on home prices. But
(15:30):
what I do believe is that we are starting to
see green shoots in the parts of the housing market
that have been the hardest hit, namely throughout the Southeast.
You're starting to see transaction volumes ticking up in Florida
while inventory starts to come down. That's the sign of
a market that is showing you know, demand at current pricing,
which is good to see given out prices have fallen there.
(15:52):
I suspect you'll start to see that throughout other parts
of the south weast, southwest and southeast and into the
Southwest as we continue through the year. So I don't
think that housing is not, you know, starting to show
signs of improvement. I think it is starting to. I
don't think any of it is policy driven improvement. I
(16:13):
think it's just housing had to go through a correction
phase after going so insanely crazy relative to incomes for
a couple of years because of a bunch of money
pumped into the system in very low interest rates. But
I think that we are getting close to some of
the most damaged housing markets in the country starting to
rebound and pull us through this, though there are parts
(16:36):
that still have to go through that correction phase and
that'll probably take the better part of the next one
to three years. It's just how housing cycles go. They
don't either like they don't happen in you don't see
the problems happen in a span of three months, and
they're not resolved in three months. They take a few
years to play out to the upside and a few
to the downside. And I think we're kind of that
(16:57):
middle point now where housing is in the aggregate bottoming
and over the next couple of years will start to
become a creative to the US economy again. So that's
my fundamental disagreement is this piece is like, oh, everything's
bad in housing, and I'm like, no, I disagree. Things
are starting to improve in parts of the housing market
and will feel that more broadly probably twelve to eighteen
(17:20):
months from now.
Speaker 4 (17:22):
Yeah, I have nothing to add other than that. I
think in several years will think it was silly that
anybody used the phrase housing crisis. I think that because
I suspect the next recession will ring out the excess
demand that's pushed up prices, particularly on the high end.
Speaker 2 (17:40):
You got something that you saw.
Speaker 3 (17:41):
Did you want to see this is?
Speaker 4 (17:42):
It's kind of related, Chuck. I think you'll find this interesting.
Speaker 3 (17:45):
It's brief.
Speaker 4 (17:47):
Why is total housing stock per person so much greater
in some economies than others?
Speaker 3 (17:55):
Somehow some countries are not.
Speaker 2 (17:57):
I've seeing this chart where it's like you look at
developed economies, mostly through the US and Europe, and we
really don't build much housing per capita.
Speaker 4 (18:04):
This is a brilliant explanation. Often explanations can go back centuries.
The guys that won the Nobel Prize in Economics a
few years ago, for example, explained differences in per capita
income today using institutions that were adopted hundreds of years ago,
which were a function of who colonized the country and
what type of economy did they put in place. Was
(18:26):
it a people who are enslaved based economy or was
it like a New England economy? Sure, okay, So breakthrough
type research often comes from looking back in history. There's
a dramatic difference in the housing stock per person in
countries like Ireland, Canada, Australia, the New UK US and
(18:46):
countries like Italy.
Speaker 3 (18:48):
For example.
Speaker 4 (18:49):
Italy does not have a housing crisis, and it's not
just because of demographics. Very suggestive graph I saw that
just sort of blew me away because I can't believe
I didn't think of it or no one else has
publicized the idea. It's based on whether you adhere to
a civil law system where judges sort of decide cases
that becomes precedent, or a common law Excuse me, I'm
(19:10):
getting this backwards. That's common law that I just described.
Civil law would be code based, like Roman based civil law.
It's under common law it's easier to challenge regulations that
restrict home building.
Speaker 3 (19:26):
That's your explanation.
Speaker 1 (19:27):
Yep.
Speaker 2 (19:27):
Let's take a quick break here. When we return, we've
got the Trivia Answer and Wall Street.
Speaker 1 (19:32):
Watch, 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
(19:54):
look at what's moving markets so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (20:02):
I'll have see yesterday's volatility, Marcus Taar and rally Mode
as AI impacted stock's clawback recent losses. Energy markets are
also seeing some attention amid more tensions between the US
and Iran. Right now, the Dow is up about six
tens of a percent, or two hundred and eighty two
points higher, SMP five hundred up nearly nine tenths of
one percent or sixty points higher, Nasdaq up one point
(20:25):
three percent or three hundred and four points. Russell two
thousand up one point two percent. A ten Yere treasureeled
is up two basis points at four point zero seven
five percent. In crewde oil up three and a third percent,
trading at sixty four dollars and thirty eight cents a barrel,
Meta and Now said has expanded its partnership with Nvidia
(20:45):
to use millions of the company's AI chips for its
data center buildouts. In a statement, Meta CEO Mark Zuckerberg
said that the expanded partnership continues his company's push to
deliver personal superintelligence to everyone in the world. The world,
Meta shares are Flatwele and Video stock is up over
two percent. Sticking with the chip sector, where Analog Devices
(21:07):
posted stronger than expected quarterly results and guidance where it's
revenue jump thirty percent last quarter, that stock is up
by three percent. Meanwhile, cybersecurity firm Palo Alto Networks posted
better than expected quarterly results and lifted its annual revenue outlook. However,
the company's earnings per share guidance for the current quarter disappointed,
(21:28):
sending the stock down by six percent. And home builder
Toll Brothers reported stronger than expected quarterly results, boosted by
a jump in land sales revenue. Toll stock is now
edging higher. I'm Tucker Silva and that is Wall Street Watch.
In the previous segment, we asked you the trivia question
what city where Buffalo wings? Popularized in Buffalo Obviously Meghan
(21:52):
from Buzzard's Bay Masses our winner today taking home a
Financial Exchange Show t shirt. Congrats some Meghan and we
play trivia every day here on on the Financial Exchange
See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:05):
A couple of things I found interesting just from uh
Tucker reading Wall Street Watch number one Meta with that
big announcement on additional purchase and this and that, Oh
that one. Yeah, I find it very interesting that, like
that's the kind of announcement that in the last couple
of years would just be driving a stock higher in
(22:28):
the AI space. Meta closed yesterday. It's six thirty nine
and twenty nine cents. It's it's six thirty nine and
sixty two cents right now. It's basically flat.
Speaker 5 (22:36):
Is that related to Zuckerberg's testimony at the moment?
Speaker 2 (22:40):
I don't know.
Speaker 5 (22:40):
I mean the children addictiveness to the platform. What's he
really gonna say, Yeah, probably not much. I just don't
know if that's why it's flat at the moment.
Speaker 2 (22:51):
Either way, Like you make a big announcement like that
about AI a year ago, and the market saying great,
you're on the cutting edge, like we're gonna bid you
up today. The fact that you can't get a reaction
out of it, it's just interesting.
Speaker 3 (23:04):
I think it's a great sign makes sense, like from in.
Speaker 2 (23:08):
This washing out malinvestment potentially but very well put. Yeah,
it might not be the best for market health.
Speaker 4 (23:16):
Well, if you're concerned about valuations, what pushes them up
is exuberance, is the speculative and hopeful buying. The fact
that that doesn't appear to be happening. Limited sample here,
but take it for what it's worth. Is I think encouraging,
as is the dispersion that you were talking about earlier
in the show, tech struggling other sectors kind of picking
up the slack. That's not a perfect way to think
(23:38):
about what happens in financial markets, but it'll do. That's
kind of encouraging too to me.
Speaker 2 (23:44):
The other piece just that I found interesting, Tucker, you
mentioned analog devices.
Speaker 3 (23:48):
I did.
Speaker 2 (23:49):
Isn't it wild? In the age of AI, analog devices
still exists, but Digital Equipment Corporation has been shuttered for
twenty plus years now. Kind of wild, you know, just
a food for thoughts. Let's talk about the job market
and college grads. A lot of ink has been spilled
over the last couple of years about how recent college
(24:11):
grads are having a harder time finding a job right now,
and that their unemployment rate has actually been higher than
the general population recently. And I just think this is
there's a couple things that I find interesting here when
(24:31):
we look at it. The first is this idea that, hey,
the unemployment rate with recent college grads is high. I
do think is a good signal for the overall strength
of the job market, because usually if you are a
company that is trying to hire cheap white collar labor,
that's where you go recent college grads. They're going to
(24:52):
be cheaper than anyone else in the workforce that have
the prerequisites that you want. You may not need a
re in college grad to do the work, but you
may say, hey, like it's it's gonna be safer for
me to hire someone with a college degree as opposed
to someone without, and so you end up hiring them.
What I find interesting is, look, I'm a millennial, and
(25:14):
as a millennial, I'm naturally lazy and love avocado toast.
It's baked into my DNA, like it just is. I
had just have this inherent laziness embedded in me. But
back during the time, right after I graduated from college,
it was one of the worst economies that we had
seen in recorded history. Sorry about that, You're welcome. In
(25:35):
any case, the talk then was, hey, millennials, Like the
unemployment rate for millennials was one thing, but we talked
a lot about the underemployment. It was you know, the
person with you know, the advanced degree who was working
as a barista at Starbucks. What I find interesting right
now is that we're talking more about, Hey, the unemployment
(25:56):
rate is x for you know, millennials, not millennials, but
for recent college grads gen zers. I don't find that
there's a very robust discussion that's going on about the
quality of work that they're finding. And I'm wondering why
that is, because in theory, you would expect to find
a similar conversation to what we found fifteen years ago
(26:18):
in the twenty tens, and there's no discussion about that.
Speaker 1 (26:21):
Really.
Speaker 4 (26:21):
Yeah, if you buy into the idea that companies are
holding off on hiring white collar entry level because they
think those jobs could be I'll just say automated sure
shorthand for AI can do a lot of which it
absolutely can. By the way, a spreadsheet worker, and I
say that affectionately, not to diminish it, because I was
and still am one.
Speaker 3 (26:41):
In many ways. AI can do a lot of it,
but you need an.
Speaker 4 (26:44):
Experienced person to check the work, ask the right questions
to make sure the answers make sense. I can see,
because I have experienced how automation can replace a lot
of what entry level spreadsheet workers do, and that's what
many finance majors and newly minted MBAs, even depending on
the program you went to, might start out doing in
financial services or a corporate job in any company you
(27:10):
spend your day as britcheet. Yeah, you know, those weren't gratifying.
Those not necessarily gratifying jobs unless you really like data analysis.
I happen to some people do. But I don't know, Chuck,
I don't know if i'd describe those as like high
quality and riching jobs.
Speaker 2 (27:27):
I think the thing, though, is, you know a lot
of this talk about youth unemployment or young adult unemployment
focused on the period about, you know, twelve months ago,
like this is when you first started seeing the pieces
written by IT, and I just knowing what we know
now about how AI is being used by companies and
how you know how deeply it's being used or not
(27:48):
in many cases, Yeah, it's hard for me to imagine that,
you know, age twenty to twenty four unemployment moved up
in any meaningful way in like January of last year
because of AI. I just I don't think that's the case.
Where I think that this is coming from, and this
is not my own idea, but it's one that I've
kind of grabbed onto in the last couple weeks is ultimately,
(28:13):
when you look at the period from twenty one through
mid twenty two, it was just a race for any
kind of talent you could get, Like companies were just
hiring like nuts. And we've seen this attempted kind of
normalization of the labor market in the last few years.
And one of the questions that people are asking now
after the last like six to nine months is, hey,
(28:34):
GDP has appeared to be relatively strong despite the labor
market weakness scorching. What gives? And the answer that I
think I'm coming around to is companies over hired during
that time period, and so they have had excess labor
already on their books and now they are trying to
wring all the efficiency possible out of that excess labor,
(28:58):
and that is where the boost to GDP means coming from,
because basically, like the labor, the extra labor that was
added in was so front loaded that it took time
to actually have the work that was ready to be
done by them. And now it's showing they.
Speaker 4 (29:13):
Learned how to work and now they're more efficient. Because
that that also, some people gravitate towards the AI explanation
for the productivity apparent productivity boom. We don't have numbers yet,
but we do know that GDP boomed, and that's not
an understatement. Sometimes hyperbole is yeah, I mean we're growing
it like twice. The most researchers estimate of trend or
(29:33):
potential GDP so economic growth.
Speaker 2 (29:35):
Is we get Q four data on Friday. By way,
we'll see what that shows.
Speaker 4 (29:39):
So we had like no labor force growth and I
talked about this with Mike Armstrong on the other day too,
no labor force growth, but productivity. Excuse me, but GDP
growing it it's sort of exceptional. Is an understatement rates
by definition that means productivity must have exploded. Is that
because everybody started incorporating into their workflow and getting more
(30:02):
out of them. I mean maybe some proponents of AI are
making that claim. You offer a different, not necessarily exclusive.
These two things aboutssary exclusive explanation of what we're seeing
because last year was really weird, very very high growth
and no job growth that normally happens early on.
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Speaker 2 (31:21):
Let's see. I don't want to talk more about artificial
intelligence right now. I'm just I'm good with it for
a bit. We can you know, we spend like half
the show on. I want to talk about restaurants. Piece
of the Financial Times, US restaurants downsized meals to counter
anti obesti drugs and affordability crisis. So I'll quote here
(31:43):
from the Financial Times the super sized servings that have
long defined American dining, or shrinking is. Rising costs and
the growing use of weight loss drugs prompt restaurants to
offer smaller portions. The trend towards lighter and snack sized
main meals across the US also comes as restaurants seek
to entice cash strapped customers who want lower cost options.
I think the latter is true. I don't think offering
(32:06):
smaller meals has anything to do with people on GLP
on a great public service they're doing like, oh, you
want to eat less, give you less, Like I'm sorry,
that's just not the case. Like if you have too
big of a meal for yourself, you take a doggie
bag and bring it home and now you've got lunch tomorrow,
(32:27):
Like no one ever complained. Gee, I'm waiter this this
meal's too big. I'm on a GLP one. Could you
make it smaller for me next time?
Speaker 3 (32:36):
Gladly pay the same price.
Speaker 2 (32:37):
If that person's not hungry because they're on a GLP one,
they're not going to the restaurant. They're not like, oh no,
I couldn't possibly eat that. I know it's they're just
not going out to You.
Speaker 4 (32:49):
Need to fire your public relations people and come up
with a better explanation.
Speaker 2 (32:53):
So I do believe that restaurants are like, hey, we're
trying to figure out how to get more people in
the door. Let's shrink the portions, as every food company,
whether it's restaurants, groceries, or anything else, are doing. But
it is not, oh, well, we think these people eat less,
so let's make the portion smaller so they feel comfortable. No,
(33:13):
you can, you can take that and go.
Speaker 4 (33:14):
Home st off for a pro rated menu right next
to the first column. Next column is half portions, and
you apply a factor of point five.
Speaker 2 (33:22):
To that to the price, which to my knowledge, has
been done, you know in restaurants all over the place forever.
Like you see that stuff done all the time.
Speaker 4 (33:30):
Oh yeah, have you ever seen it late out the
way I just envisioned it? No, but like you can
get a cup of super it's a good idea, by
the way. There you go, you know, you get same
do that same thing.
Speaker 3 (33:38):
You know.
Speaker 2 (33:38):
It's hey, Tucker, last time that you went to dunks,
did the coffee come in one size or do they
have multiple sizes?
Speaker 5 (33:46):
Last I checked, they had multiple size?
Speaker 2 (33:48):
Oh it has the smaller one been cheaper?
Speaker 1 (33:50):
Yes?
Speaker 2 (33:50):
And has that been the case even before people were
on anti obesity drugs? Yes, thank you, it's you're well,
you're welcome to You're extra welcome. Let's take a quick break.
And I'm sorry this this piece just really bothered, Like
it really described my gears stupid. It is like, no,
the reason restaurants are making smaller portions is so that
(34:11):
they can cut their costs and still get people to
come in the door for cheaper prices, it's not because
they want to make the person on Ozebek feel comfortable.
Speaker 4 (34:21):
And no one, no one pushes back, the authors don't
push back on that explanation so patently silly explanation.
Speaker 2 (34:27):
Well, that's what we're here for. We are pushing back
and uh yeah, you're welcome. Quick break, Wall Street watches
next or no.
Speaker 1 (34:37):
No, it's not.
Speaker 2 (34:38):
What's next? Stack re Sorry, I'm all out of sorts
now stack Roulette is next?
Speaker 1 (34:43):
Text does six one seven, twenty six, two one three
eight five with your comments and questions about today's show.
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Show podcast drops every day on Apple, Spotify, and iHeartRadio.
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Speaker 5 (35:06):
The Financial Exchange is incredibly proud to be a partner
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Speaker 2 (35:42):
Mark. What do you got for me?
Speaker 4 (35:43):
For stack Rouleax Bloomberg released the story after we went
on the air, I think this morning. It relates to
something we were just talking about. So all this very
very briefly read the first read a couple relevant excerpts.
The headline is unprecedented jobless boom, which is what we
were just talking about, a test limit of US economic
expansion and the upshot of the well. So by jobless
(36:04):
boom we mean roaring economic growth, which it is by
any accounts, or at least was through the end of
the third quarter, and most, though not all, researchers expect
it to be strong in the fourth quarter as well.
We'll find out on the twentieth when GDP comes out.
But there was no job creation pretty much according to
the payroll, the Establishment Survey and the payroll number right
(36:25):
last year. That means that productivity probably went up by
if indeed twenty twenty five was a very strong growth here,
and by very strong I just mean above trend somewhere
in the mid high twos, maybe even low threes depending
on four Q, that the last outcome would would be
really surprising. But anyway, so strong productivity growth. A question
is does growth catch down to employment. Is the labor
(36:49):
is the lethargic at least in terms of growth in
the labor market. Does that bode ill for GDP growth?
Or is there something AI or other related going on
that will allow us to continue to grow at trend
or above without job creation. And I think the main
explanation there would have to be something like AI or
(37:11):
something something else on the labor supply slash productivity side.
Speaker 3 (37:16):
I don't know.
Speaker 4 (37:16):
These are questions that are huge, They're outstanding and will
presumably get answers to over the next few months.
Speaker 2 (37:23):
I want to talk about this piece from Bloomberg. I'll
quote here. Round Hill Investments has asked the US Securities
and Exchange Commission for permission to launch six ETFs that
would let investors wager on US election outcomes through standard
brokerage accounts the most ambitious attempt yet to bring prediction
markets into mainstream finance. So basically, they would have versions
(37:44):
for the Presidency, the Senate, and the House in which
you could pick which side wins, and it would hold
event contracts that once they settle, they either pay out
one dollar or zero. Like it's basically this happened to
where this didn't look it's here's the thing. In general,
I think that as long as like, you're comfortable with
(38:06):
doing whatever you want to do, have at it. When
you start getting gambling into actual investment accounts, it raises
a bunch of risk because the friction is so low
between investing and gambling. Then to take a quick break
here for the entire rest of the day, but don't worry.
We're back on tomorrow and uh, we'll do better
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