November 3, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss scarce chips are just the tip of big auto's disruption. Amazon agrees to massive deal with OpenAI. Is OpenAI becoming too big to fail? Risky loans from housing bust era is making a comeback. Are tariffs going to hammer shoppers this holiday season? Why the future of coffee doesn't belong to Starbucks.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Chuck Zada and Mike Armstrong, your exclusive look
at business and financial news affecting your day, your city,
(00:42):
your world. Stay informed and up to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting dav five K on Boston and making
a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Mike Armstraw.
Speaker 2 (01:10):
Chuck Mike Tucker with you here, and as we kick
off November, we've got stocks very much mixed. The S
and P right now is up five points, has been
up as many as forty today and down as many
as eighteen, so still seeing a considerable amount of intraday
volatility at the moment. The SB also right now has
(01:31):
two hundred and thirty five more stocks down than up,
to a very narrow rally taking place there, led mostly
by Amazon up about four and a half percent, Tesla
up two point seven percent, and Nvidia up two point
seven percent. When we take a look at the Dow,
it's down two hundred and three points about half a percent,
and the NASDAK composite is up ninety one points, or
(01:51):
about point three eight percent. Bonds continuing to sell off
very modestly today, Tenure Treasury up eight ten of a
basis point, so not too much movement, but a little
bit there. So we're continuing to see, you know, interest
rates on bonds moving up very very modestly. Dollar Index
a point zero seven percent, so dollar firming up just
(02:14):
a touch there. And we've got gold up twenty three
seventy one ounce to four twenty dollars and twenty cents,
so back above four thousand. We'll see if it ends
up holding that level over the course of the day.
Crude oil down four cents a barrel to sixty dollars
and ninety four cents triple A national averageur gas price
is flat today at three oh three and six tenths
(02:37):
of a cent. Tucker, can you dial up the old
time machine. We gotta go back about four years or so.
We're heading back to twenty twenty one if you could,
thank you always good to get the fux capacitor fired
up on a Monday. Scarce chips are just the tip
of big autos disruption. Yes that's right, talking computer chips
(03:02):
for cars again. And oh yeah, it's it's it's the
summer of twenty twenty one. There's no cars and you
got to hop on the bus with four thousand other
people piled on top of each other. It's kind of sweaty,
and there's not even any ac because there's chips needed
for that too.
Speaker 3 (03:20):
And use cars.
Speaker 2 (03:21):
The salami is melting and kind of gross ew Use
cars twenty one, the new ones. So here's the deal.
There is a company by the name of Nextperia Holdings.
You've never heard of them. They're based out of the Netherlands,
and they are a semiconductor manufacturer that doesn't make you know,
cutting edge and video chips. They make really boring, really
(03:44):
cheap ones.
Speaker 3 (03:45):
That make your windshield wipers go.
Speaker 2 (03:46):
Yes, they make your windshield wipers go. They make you know,
your sound go on and off in your car, and
like bait, really basic simple stuff and it's like it's
not high end stuff, but someone has to it. It's
kind of like there's a company that makes paper clips
and it's not complicated, but you need the paper clips
(04:07):
if you're in office. So here's the deal. Back in
twenty twenty one and twenty two, we obviously, you know,
had long stories about you know, semiconductor problems with production
because of the pandemic in this and that, and it
was something where car companies went through a couple of
years of you know, really just trying to get their
act together on this stuff, and it finally seemed like
(04:30):
they had gotten there. Well, here's the deal with next Baria.
They've got a little bit of a dispute that's going
on between them and the EU specific well, specifically the Dutch.
And here's the thing. The Dutch about a month ago,
UH decided basically to take over the EU subsidiary of
(04:55):
this company that was it's run by a group of
Chinese companies, and pretty much they said, look, we think
there is a real problem here with potential industrial espionage
going on. We think there's a problem that could potentially
lead to chips not being able to be produced as well.
And this is a whole thing to which Knicks Barry
(05:17):
is basically like, okay, fine, We're just not going to
produce the chips anyways. Then, and quite honestly, when you
hear China and industrial espionage mentioned in the same sentence,
my mind usually goes to, oh g you think. And
so ultimately it gets to a point now where you've
got these disruptions that are taking place. It's starting to
(05:40):
disrupt production predominantly in Europe but also into the US.
And it seems like maybe things are thawing a little
bit this weekend, but we're on the verge of potentially
semiconductors for cars being a thing again.
Speaker 4 (05:55):
Yep, And again these are not immensely complicated, So could
a carmaker eventually switch over to something else. Yes, but
it just doesn't happen overnight. These things get tested for
years before autoregulators get comfortable with them controlling important systems
for vehicles, and so there is no backup plan like
(06:16):
much of the fragile supply chains that we learned about
during COVID, And when you're talking about something as complicated
to manufacture as a car with thousands of individual components,
anyone disruption, as we're seeing again can throw it all
into a question mark.
Speaker 2 (06:34):
So we'll see where this develops again. Over the weekend,
it seemed like there was some progress being made on
the issue, so maybe some of those worst case scenarios
can be taken off the table. But yes, we are
now talking auto related semiconductors again, and I hope that
the next time we're talking about this there's more than
(06:55):
a four year gap between this and that.
Speaker 4 (06:59):
Can we go back then to what you mentioned about
Amazon this morning?
Speaker 2 (07:03):
Amazon, Yes, they're up five percent because they agreed to
a deal with open Ai to sell them thirty eight
billion dollars worth of computing power powered by Nvidio chips.
Speaker 4 (07:16):
So again, keeping all this straight becomes a lot. But
open Ai has a pretty deep partnership with Microsoft so
far as I know, for the exact same purpose.
Speaker 2 (07:25):
They've got deep partnerships with everyone because they're trying to
integrate themselves so deeply into the system that they can't
like blow up.
Speaker 4 (07:31):
So in any case, we have more of the Midas touch,
you know, whatever, whatever effect you want to call it,
the Halo effect, the Midas touch. When it comes to
this privately held company, open Ai, where they announce a
deal with one of the largest companies in the world
and it's enough to move their stock up four and
a half percent in early trading. I continue to see
(07:52):
these deals, and it's not to say that this, you know,
is a bad deal for either company, or a deal
that won't come to fruition, or a deal that won't
be trans formative to Amazon's business. I don't think it
would really be transformative to their business. But I am
unclear about how Amazon signing some small deal with open Ai,
it's not a small thirty eight billion dollars with a
(08:14):
company that may or may not ever be able to
actually pay them for it, actually moves the stock price.
Speaker 2 (08:21):
And look, here's the thing, because like no one wants
to say it, so I'm just gonna say it, this
is bull loney. Do you know how much money open
aiye is on the hook for over the next seven
years now in terms of cut No, what's the right
I say contracts because I don't believe any of these
(08:42):
are real. It's one point five trillion dollars. It's one
point five trillion freaking dollars.
Speaker 4 (08:50):
Man, That is the point tount of dollars that open
ai a privately held company with really no checks and
balances on thirteen billion dollars in.
Speaker 2 (09:00):
For the last twelve months, where you're gonna get one
point five trillion dollars? Do you know how much Microsoft? Microsoft?
I'll say it again Microsoft, Do you know what Microsoft's
expenses were? Okay? Just like again, I'm just trying to
like contextualize this when when we look at it Microsoft,
(09:23):
do you know what their expenses were over Do you
want to do like twelve months?
Speaker 4 (09:28):
Like, yeah, let's give me a twelve months and I'm
gonna go, uh, let's see another Capex was there.
Speaker 2 (09:35):
Let's call it two hundred billion, two hundred billion. You're saying, okay,
hang on, I'm looking at quarterly. Give me just a second.
Carry the one we gotta get to just annualize the quarter.
I'm getting there, sixty five billion dollars total expenses. Sixty
five billion dollars. Actually, no, sorry, that's operating expenses. If
we get through the rest of it, it's like another
(09:59):
it's basically double that. Okay, okay, So like one, where
the heck is open AI going to find two hundred
and fifty billion dollars a year for the next six
seven years to pay for this stuff? The answer I
have the answer, By the way, I want everybody to
(10:20):
write this down off balance sheet special purpose vehicles specifically
designed to get the money off the balance sheet of
the companies so it doesn't look like they have a
lot of debt, even though they have a boatload of debt.
Because this is where we're going, Michael, and you know
(10:41):
it's serious. When I say, Michael, like there is no
way for open AI sound like my mother. I might be.
I'm not. But in any case, so there's no way
for open AI to pay for this. They don't have
the money, so they're going to have to borrow it
or someone is is you cannot finance this through cash
(11:04):
flow if your open AI, because they don't have any
cash flow. Their cash flow is negative, their profit is negative,
their revenue growing, but still not big enough to support
one point five trillion dollars in spending the next six
to seven years.
Speaker 4 (11:17):
So when does it matter it we're getting to this,
It hasn't mattered. It's enough to move this stock price
four and a half percent. On how big is Amazon
at two trillion dollar company today.
Speaker 2 (11:28):
I think we're getting to the point where its nearly
three trillion dollars. I think we're getting to the point
where it does. And my evidence on this, because again
one must produce evidence to substantiate their claims, is if
we look at some of the debt that was issued
last week. Just as an example, Meta who put out
(11:51):
a bond that is a forty year bond. It comes due,
It comes due November fifth, teenth of twenty sixty five.
That bond is down one percent today.
Speaker 3 (12:04):
Okay.
Speaker 2 (12:05):
Now you can say, okay, like, is this just because
you know treasury rates are up in this and that
in a small you know, relatively small move means that
you know the bond trades down that much. You could.
But the other question asks is, okay, like why why
are you seeing this funding pressure in this place Oracle bonds.
Oracle issued a thirty year bond back in May to
(12:27):
try to pay for some of this stuff. It's now
down six percent in the last week and a half. Like,
I think we're getting to the point now where at
least the bond market is starting to look at this
and say, I don't know about that one. And does it,
you know ever matter inequities? Maybe maybe not. I have
(12:50):
no idea, But what I can tell you Open AI
committing to one point five trillion dollars in shrewd buck
eye over the next six seven years. Like, what are
we doing here at this point? And there is a
whole piece that we can talk about from the Wall
Street Journal on this is open AI becoming too big
(13:11):
to fail. I don't know how you're gonna be too
big to fail if you're that small.
Speaker 4 (13:18):
Do we give that more of a conversation. Yes, let's
say quick break, we got to do trivia. But when
we come back, is open AI becoming too big to fail?
And what does that even mean?
Speaker 3 (13:28):
Next? On the Financial Exchange.
Speaker 1 (13:31):
The Financial Exchange is Life on Series XM's Business Radio
Channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
and around the world, and keep up to date on
how it might affect your wallet. That's the Financial Exchange
weekdays from eleven to noon on Series XM's business radio
channel one thirty two. Face He's the Financial Exchange Radio Network.
(13:55):
The Financial Exchange streams live on YouTube. Subscribe to our
page and stay up to date on breaking business news
all morning long. Face is the Financial Exchange Radio Network.
Speaker 5 (14:08):
Time for sure, here on the Financial Exchange and on
this day. Back in nineteen eighty eight, President Reagan signed
the Credit Card Disclosure Bill, or the Fair Credit and
Charge Card Disclosure Act. The first widely used credit card
was created in nineteen fifty eight, years before Visa and
MX launched their own cards. So chrivia question today, what
(14:30):
was the first widely used credit card in the US?
Once again, what was the first widely used credit card
in the US? Be the second person today to Texas
at six one seven three six two thirteen eighty five.
With the correct answer, you'd win a Financial Exchange Show
T shirt.
Speaker 2 (14:48):
Once again.
Speaker 5 (14:48):
The second correct response to Texas to the number six
one seven three six two thirteen eighty five will win
that T shirt. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (15:00):
We got this piece from the Wall Street Journal that
we wanted to dig into more. Is open AI becoming
too big to fail? I made the quote last segment,
they're too small to be too big to fail.
Speaker 3 (15:11):
But let's talk.
Speaker 4 (15:12):
About the context of too big to fail in the
first place, and the main context we all have is
the banks. Why were they too big to fail? It
wasn't because they were integral to the stock market. They were,
but that was not the crux of the issue. The
crux of the issue was that without America's largest lending
institutions one, there'd be a massive loss of deposits on
the consumer side of things, and there would be no
(15:35):
real ability to I guess fund anything that happens in
the United States. So from a real structural part of
the economy, they were deemed too big to fail. My
missing some key components there. To me, it had everything
to do with customer deposits and lending facilities.
Speaker 2 (15:55):
Yeah, I mean, look, it's basically, Hey, if the credit
system of the United States dries up and it's facilitated
by these banks, then you can't let them fail. Okay,
And we don't.
Speaker 4 (16:04):
Right, So how on earth would that apply to I
guess forget about that. What would be the ramifications today
of open AI coming out and saying we don't have
funding to continue, we are declaring bankruptcy and canceling all
outstanding contracts.
Speaker 2 (16:21):
So if open A let's let's and let's say it's
much hypothetical if open AI today said you know what,
we're not gonna make it like we can't get financing
to continue operations, like we're gonna have to close up shop.
I mean, first of all, you're not gonna get it just.
Speaker 3 (16:38):
Out of nowhere.
Speaker 2 (16:39):
Like, but if it happened today, SMP right now is
it's sixty eight forty five, SMP's back to five thousand
by end a day.
Speaker 3 (16:49):
It'd be a massive Well we'd hit circuit breakers before
it happened, but.
Speaker 2 (16:52):
SMP's down twenty percent in one day. Yeah, because like
quite literally, you're going to end up shaving probably a
third of the value off of your big tech companies.
And with that, I mean again just like you look
at the math and do it out and you're like, okay,
that's like fifteen sixteen percent for the SMP on its
(17:13):
own and everything else getting dragged five six percent along
with it, wouldn't be surprised because here's the thing. If
an open AI announcement can be enough to rally Amazon
by five percent.
Speaker 3 (17:27):
It can certainly be enough.
Speaker 2 (17:28):
The lack like the revocation of said announcement has to
be able to drop the stock by five Otherwise, quite honestly,
then we're just not really playing with real numbers.
Speaker 4 (17:39):
And so therefore, yes, you have all sorts of funds
and institutions going belly up that are betting on this
thing in one direction or another. But it gets me
back to your question, which does that mean that the
government steps in to support it?
Speaker 3 (17:53):
I don't think so.
Speaker 4 (17:54):
It means that the stock market loses a tremendous amount
of value. But is it too big to fail? I
deem it a national security risk if it fails. I
don't believe that funding for people's home purchases and bank
accounts would just disappear overnight. Four rowin k's would take
a massive hit, Pensions funds would take a massive hit,
Insurance companies might take a massive hit. But I don't
(18:17):
know that you would go after the company the source
of all of it.
Speaker 2 (18:22):
Here here's the the case for doing it. And I'm
not saying that I'm in favor of this or not,
but in any economy that's based on consumer spending where
you know, wage growth has been not great, you could
make a case that if you saw, you know, a
bear market in that situation, consumer spending probably gets hit
(18:43):
pretty hard and the US economy goes into recession. Does
that mean that you like bail them out? No, but
I could see see the case being made that, well,
if we don't you know, support this, like, it's gonna
be really bad stuff for you know, the economy. And
I think that's a crappy argument because ultimately, look, you
(19:05):
could pay every single American one thousand dollars a day
to go and dig holes, and then you could pay
them a thousand dollars a day next week to go
and fill all those holes in that doesn't mean that
you've built anything productive, and throwing bad money after good
is malinvestment and not something that represents any kind of
meaningful long term improvement and living standards. And so yeah,
(19:27):
open A is trying to build itself into that. I
really hope it doesn't work. Quick Break, we got the
trivia answer.
Speaker 1 (19:36):
Next, 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 markets so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (19:57):
Markets mixed to begin the week as trader is ready
for a new batch of earnings from the likes of AMD, Palanteer,
McDonald's and many more major names this week. Right now,
the Dow is down by three tenths of one percent
to one hundred and thirty six points. SMP five hundred
is up about a tenth of a percent or ten points.
NASDAC up nearly half a percent or one hundred and
(20:20):
eight points, Russell two thousands down three quarters of a percent,
ten year Treasure reeled up one basis point at four
point one one two percent, and crude oil is up
about three quarters of a percent. Trading it's sixty one
dollars in forty one cents a barrel. Major news in
the tech space this morning after open Ai signed a
thirty eight billion dollar deal with Amazon where Amazon Web
(20:42):
Services will provide the chat GPT maker with access to
hundreds of thousands of videographics processor units as part of
a seven year deal. Amazon up over four percent. Meanwhile,
Kimberly Clark announced this morning it's reached an agreement with
talent on maker Kenview in a deal value at forty
eight point seven billion dollars, which would create a consumer
(21:05):
staples giant. Kimberlee Clark shares a down twelve percent, while
ken Bustock is up about fifteen percent. Elsewhere, Ford, Kia,
and Hundai reported moments ago that they saw substantial declines
in electric vehicle sales last month after the EV tax
credit expired. Year over year, Ford saw a twenty five
percent drop in EV sales in October, while Kia and
(21:28):
Hyundai said their EV sales sank between fifty two and
seventy one percent from a year ago. Ford is down
by one percent. The stock that is in recent memestock
in alternative meat producer Beyond Meat delayed its earnings results,
saying it needs more time to calculate a material, non
cash impairment charge related to certain long lived assets. Beyond
(21:51):
Stock is now plunging over sixteen percent. I'm Tucker Silvan,
that is Wall Street Watch, and in the previous segment,
we asked you the trivia question, what was the first
widely used credit card in the US, that would be
diners Club. Martin from Berkeley, Mass is our winner today,
tinghm a Financial Looks Change Show t shirt. Congrats to
Martin and we play trivia every day here in the
(22:13):
Financials Change See complete contest rules at financialoks Change Show
dot com.
Speaker 2 (22:19):
Risky loan from Housing bust Era is making a comeback.
I can file this one under the category of technically
true but also not problematic. So this is like, you know,
this is one of those pieces where oh, like, you know,
supposed to scare you because hey, adjustable rate mortgages were
you know, used heavily during the housing bust, and so
(22:41):
this could be a problem.
Speaker 4 (22:42):
The problem wasn't alone that people got adjustable rate mortgages.
The problem in the housing market ahead of the Great
Financial Crisis was they got many of them and there
was no income or asset verification being done by the broker,
and then banks that bought the loans.
Speaker 2 (23:02):
And then the loan rates adjusted upward and they got
at that point as well.
Speaker 4 (23:05):
So it was a contributing factor. But the root cause
of the big problems here.
Speaker 2 (23:11):
Was about underwriting.
Speaker 4 (23:12):
Was terrible underwriting, and then securitization and leverage and all
the things that come with a financial crisis. But the
root cause, you know, going and taking the story and saying, oh,
look out because people are getting adjustable rate mortgage. Adjustable
rate mortgages are fine if you have the ability to
pay them. If the rate goes up, that's not really
(23:34):
an issue. Now, are there people today who are buying
armed who are buying homes with arms and are not
prepared for the rate to shoot up five years from now. Absolutely,
But again we're talking about a very different situation.
Speaker 2 (23:46):
And the other thing that's different is just the scale.
I'll quote here about ten percent of purchase mortgage applications
were for arms in the week ending on October third,
the highest rate since twenty twenty three. In early twenty one,
when rates from your historic lows less than three three
percent of applications were for arms. Well, if you go
and actually look at the data, what you find is
that during like that five through seven period, our usage
(24:10):
peaked at like north of forty percent in some weeks.
So we're still very low in terms of usage. Even
even if you believed that arms are the problem, right,
it still is something that you would say, well, we're
no like we're less than a quarter of the peak
you know that we saw back during the housing crisis.
And when you look at actual transaction volume, remember back
(24:35):
during the build up to the housing crisis the United
States at one point, like if you look at new
home construction and say, say, like, ge, how many homes
were being built? You know at the peak, you get
amazed by what you find because you realize, gee, we
were building like north of two million homes a year
(24:56):
in two thousand and five. Today housing starf to running
it like one point three million, and the population is
way bigger than it was then. Right, So it wasn't
just you know, the underwriting and everything. It was also hey,
there was a bunch of debt being used by builders,
construction loans and things like that in order to build properties,
and those went bad also, and that caused a huge
(25:17):
bunch of a whole bunch of problems that's not present
today either.
Speaker 3 (25:22):
Yeah.
Speaker 4 (25:23):
Again, these stories keep getting written about the housing market
because prices are high and so it's fun to write
stories about it. The lending standards being used by banks
and the loans being taken out by individuals in other
than a few rare instances is not a problem today.
Speaker 2 (25:41):
Now, if you want to talk about some of the
nasty stuff that we are seeing in housing, there's stuff
to talk about. All you put to gorder. Listeners out
there raise your hands. Not if you're driving, sure, but
if you're just raised one hand raised, Yeah, as long
as the other one's on the wheel and in two Mike, Well,
you know, sometimes you just gotta go at midnight or noon,
(26:02):
depending on you know, what side of the world you're
on at a in particular point in time, put to
Gorda price is now twenty point five percent off their peak.
Speaker 3 (26:11):
Wow.
Speaker 2 (26:12):
So this does start to present some problems if you
are trying to sell a property and put to Gorda
and you bought in twenty one or twenty two, because
you say, okay, you know, maybe I put a twenty
percent down payment in.
Speaker 3 (26:24):
Maybe I didn't.
Speaker 2 (26:26):
I've eaten through that down five Well, even let's work
through twenty Okay, I've eaten through that. But hey, it's
been three years. And even though I'm paying mostly you
know interest at this point, Okay, I've picked up you know,
five six percent in equity, but then I gotta pay
five six percent to a broker in order to sell
the place. So if I put a twenty percent down
payment in and I'm trying to sell three years after
(26:48):
buying a punt A Gorda, odds are that down payment's gone. Yeah,
And so what you end up with theirs are people
who say, you know what, can't list right now, and
so you're not even getting all the inventory on that
you would. But you also then have the people who
are looking at put To Gorda who might have been
watching for the last year or so saying, well, a
year ago that place was listed for six hundred thousand,
(27:11):
and now it's five point fifty. Honey, why don't we
give it one more year and we'll see if it
gets down to five hundred. And this is the problem
with falling home prices is that action of falling home prices,
it dissuades both buyers like for you know, their use
and investors from buying into that market. And put To
Gorda is not the only place that's seeing this. Austin
(27:32):
prices down about sixteen percent, Cape Coral down about fifteen, Bradenton,
Sarasota down about ten. You go through you know, the
thirty worst performing housing markets from you know since the
peak it's predominantly Farda in Texas, but it's starting to
be broaden out as well. California's got a few names
on the list, Arizona's got a couple on the list. Colorado.
(27:54):
So you kind of look at this and this is
what we've been saying. The inventory has been building, and
in order for pricing to get to where it needs
to be to clear this inventory, it's going to have
to get worse before it gets better.
Speaker 3 (28:06):
Check.
Speaker 4 (28:06):
This is a great segue into our actual brand new
guide from Armstrong for the month of November, which is
all about owning real estate and retirement.
Speaker 3 (28:16):
And I want to ask you, I mean, there's some.
Speaker 4 (28:18):
Rules of thumb out there that I think are pretty useless,
but one that I like is maintenance costs on a home.
I generally think it's safe to say that, depending on
the age of your home and the state of your home,
you can expect to spend what do you think, between
one and three percent of its value annually maintaining that home.
Speaker 2 (28:34):
I think one is a pretty good benchmark for most folks.
As you get into retirement and do less, it gets
close to that two or three. I mean, do less
of the workers yeah, when it's like, oh, like, I
don't you know, I'm seventy six, I don't want to
mow the lawn anymore. When I mean, I'm seventy eight
and I'm tired of dealing with plowing the driveway.
Speaker 3 (28:52):
You know, other pieces to all of this.
Speaker 4 (28:55):
You know, there's always this desire or oftentimes a desire
to go south during the winter, and the question comes
up all the time of do I buy or do
I rent? Obviously some people are learning a lesson about
that right now with home prices in some of those
Sun Belt areas, but just generally, how do you assess
a decision like that, whether to buy or rent?
Speaker 2 (29:17):
Well, I think, quite honestly, the first thing is assessing, Hey,
do I want one property your multiple ones? And generally
as people get older, the answer is one sure, And
so then it becomes Okay, how much time do I
want to spend in this place? What do the financials
look like compared to renting and versus buying? Do I want?
You know, is it cheaper for me to rent in
(29:38):
one location than the other? Like, you've got this whole
series of calculations that you need to look into.
Speaker 3 (29:43):
It's before you even get to questions like residency, and
it can.
Speaker 2 (29:46):
Get pretty like complicated as you try to navigate this.
Speaker 4 (29:49):
We've got a brand new guide all on this one
subject owning redial estate in retirement. How to make that
assessment for yourself as your headed to that stage. Maybe
you've already owned two homes. Maybe you're considering relocating or
buying a vacation home in retirement. Get our guide before
you do it. The phone number is eight hundred three
nine three four zero zero one. You can also request
(30:10):
your free copy online at Armstrong Advisory dot com, but
that number again is eight hundred three nine three four
zero zero one.
Speaker 1 (30:18):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong Guide a specific financial, legal, or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (30:34):
Piece from CNBC. Trump tariffs could add forty billion to
holiday shoppers and sellers costs. Lending Tree warns First lending Tree,
thank you for reminding me that you exist, cause quite
honestly didn't know they were still around. Do you remember
when that whole peer to peer finance thing was, you know,
getting really big back in the twenty tens.
Speaker 3 (30:52):
Yeah, must we heard from them.
Speaker 2 (30:54):
It's been a little while. Second, I think that when
doing this, they're trying to say, Okay, based on like
the spending data that we saw last year, and let's
extrapolate this based on like average tariff rates. Guys, Like,
I don't think this is your wheelhouse. I'm not saying
it will or won't be this, but like they're saying, Okay,
(31:17):
it's gonna be like one hundred and thirty two dollars
per American family in tariff costs. Okay, Well, it kind
of depends what you buy. And quite honestly, I don't
know about you, guys. I'm seeing some pretty good deals
out there this year, because I get the sense that
even though consumer spending has been no, consumer spending has
been good. But I like, I'm seeing some kind of
(31:40):
wild deals that make me wonder how some of these
companies are staying profitable. Like I've basically finished my Christmas
shopping at this point, I can't tell you how many
legitimate like because again, you got to kind of look
at you know, Okay, what would this normally be priced at?
But legitimate like things I've been watching for like six
months or so, forty to fifty percent offers I've been
(32:02):
seeing on stuff, and I don't know, Like I don't
remember seeing a ton of those last year, but that's
just me, so I don't know, Like people have just
been predicting doom and gloom on consumer spending for too long,
and the trend is still robust like it is. And
(32:24):
I'm not saying that everyone's feeling good about the economy.
I'm not saying that like everyone has to. But what
I am saying is, across the board, we're seeing consistent
four to six percent increases in spending year over year.
Inflation's running about three, which means one to three percent
real gains in spending. I've seen nothing to dissuade me
that that's happening. Agreed to take a quick break when
(32:45):
we come back stack Roulette after this.
Speaker 1 (32:50):
Find daily interviews in full shows of The Financial Exchange
on now our YouTube page. Subscribe to our page and
get caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. The Financial Exchange
is now available every day from eleven to noon, Non
Serious XMS Business Radio Channel one thirty two stay informed
(33:10):
about the latest from Wall Street, fiscal policy, and breaking
business news. Every day. The Financial Exchange is life on
Serious XM's Business Radio Channel one thirty two. This is
the Financial Exchange Radio Network.
Speaker 5 (33:28):
This segment of the Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. Your next
incredible vacation is a click away, and if you act fast,
you could be on Saint Croix to experience their Crucian
Christmas Festival taking place this December through early January. Discover
the magic of this long standing tradition with incredible food,
(33:50):
music and entertainment. Or just go to soak up the
sun strong long white sand beaches and feel the rhythm
of the Harpy of the Islands. The USBI is a
because Cribbean Paradise. Playing your escape now at visit USVII
dot com. That's visit USVII dot com.
Speaker 2 (34:07):
Mike, what do you got for stack roulettes?
Speaker 3 (34:09):
Starbucks?
Speaker 4 (34:10):
Whilst your journal Why the future of coffee doesn't belong
to Starbucks? Younger drinkers love it icy, sweet and made
for a drive through selfie. Specifically, they're talking about a competitor,
Dutch Bros. Who really focuses on a different segment of
the coffee market. But it made me kind of think
about the non alcoholic but like the drink segment generally,
(34:32):
and the fact that it's growing really rapidly.
Speaker 3 (34:36):
So in a small.
Speaker 4 (34:37):
Town that we live in, they have a Starbucks, we've
got a couple other coffee shops. We also have, you know,
a smoothie bar. And then what just opened a few
months ago was like a boba.
Speaker 3 (34:54):
Tea type place.
Speaker 2 (34:55):
What is that exactly?
Speaker 4 (34:57):
It's it's like milk tea with a little tapioca balls
in it.
Speaker 2 (35:01):
What's milk tea? Tea out of milk?
Speaker 3 (35:04):
I don't know, but it's sweet. It's got a bunch
of different flavors.
Speaker 4 (35:08):
The kids like it because it's like these little tapioca
balls that pop in your mouth. And you know, my
kids don't drink caffeinated beverages at Starbucks, but they would
oftentimes like, oh, can we go to Starbucks and get
some sort of pink drink And instead there's this new
competition from this place.
Speaker 3 (35:25):
That I don't I don't know.
Speaker 4 (35:26):
My simpleness is that it probably my senses that it
probably wouldn't have existed a decade ago.
Speaker 3 (35:31):
I don't think there was the demand. I think it
was too unknown.
Speaker 4 (35:34):
And today we're all kind of there's a huge segment
now of these different types of beverages that you can
go get and it's direct competition for Starbucks.
Speaker 2 (35:46):
When we talk about the human body, do you think
we're close to reaching peak liquid?
Speaker 3 (35:54):
You know?
Speaker 2 (35:54):
Because it's like all we hear about is, oh, there's.
Speaker 4 (35:58):
Taiwanese drink made of a eat milky tea bass mixed
with chewy tapioca pearls.
Speaker 2 (36:03):
Like all we're hearing about is who was the restaurant?
Was a McDonald's that came out with their own like
drink only restaurant, And like all these companies are trying
to pour money into drinks and there's only so much
liquid that I want to consume. And look, I'm kind
(36:26):
of a weirdo on this because I get it, like
if I'm not drinking alcohol, I'm only drinking water. Like
that's just I've never been like, oh, like let me
get like a fun drink to cheer me up, Like no,
I just it's not me so I get that I'm
not that person, but like the human body just has
(36:49):
limitations on how much liquid you can take in.
Speaker 4 (36:52):
I think the real issue for Starbucks is that there
were always there was always plenty of coffee shop competition.
Speaker 3 (36:59):
That was never going to change, but they manage that.
Where they grew was the non coffee stuff.
Speaker 4 (37:06):
And now there's other kids going to get their pink
drinks that, you know, all the crazy stuff that they
can get on their menu, and now because of Starbucks
there's a lot more competition.
Speaker 2 (37:16):
There can that competition survive? I guess is what I'm
asking though, is I.
Speaker 4 (37:22):
Think that each individual brand is probably a fad because
like this, it doesn't matter.
Speaker 2 (37:26):
The twenty tens, we're all about, hey, look at all
these microbreweries that popped up, yea, and now we're seeing
the stories well like you know, changed and like a
lot of them are struggling. And so I guess I
kind of wonder is the same thing happening here? Because
liquid is a zero sum game. The human body will
not suddenly become ninety percent water just because we like
(37:47):
all these actual shops open, you know, like there's there's
there's a physical limitation on how much of this you
can do.
Speaker 4 (37:54):
I don't think we're approaching the physical limitation. I do
think some of these things are probably too fatty. And
I don't mean fat yeah, I mean they are a
fad and they won't.
Speaker 2 (38:02):
It's like exercise machines, you know. It's if I had
a dime for every bowflex or peloton in an attic
collecting dust, I'd be able to buy all the bobats.
Let's take a quick break for the rest of the day.
We'll see you tomorrow on the Financial Exchange
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
any investment decisions. Armstrong Advisory and the advertisers heard on
this program do not endorse each other or their services.
Armstrong and Money Matters Radio do not compensate each other
for referrals and are not affiliated. This is the Financial
Exchange with Chuck Zada and Mike Armstrong, your exclusive look
at business and financial news affecting your day, your city,
(00:42):
your world. Stay informed and up to date about economic
and market trends plus breaking business news every day. The
Financial Exchange is a proud partner of the Disabled American
Veterans Department of Massachusetts. Help us support our great American
heroes by visiting dav five K on Boston and making
a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Mike Armstraw.
Speaker 2 (01:10):
Chuck Mike Tucker with you here, and as we kick
off November, we've got stocks very much mixed. The S
and P right now is up five points, has been
up as many as forty today and down as many
as eighteen, so still seeing a considerable amount of intraday
volatility at the moment. The SB also right now has
(01:31):
two hundred and thirty five more stocks down than up,
to a very narrow rally taking place there, led mostly
by Amazon up about four and a half percent, Tesla
up two point seven percent, and Nvidia up two point
seven percent. When we take a look at the Dow,
it's down two hundred and three points about half a percent,
and the NASDAK composite is up ninety one points, or
(01:51):
about point three eight percent. Bonds continuing to sell off
very modestly today, Tenure Treasury up eight ten of a
basis point, so not too much movement, but a little
bit there. So we're continuing to see, you know, interest
rates on bonds moving up very very modestly. Dollar Index
a point zero seven percent, so dollar firming up just
(02:14):
a touch there. And we've got gold up twenty three
seventy one ounce to four twenty dollars and twenty cents,
so back above four thousand. We'll see if it ends
up holding that level over the course of the day.
Crude oil down four cents a barrel to sixty dollars
and ninety four cents triple A national averageur gas price
is flat today at three oh three and six tenths
(02:37):
of a cent. Tucker, can you dial up the old
time machine. We gotta go back about four years or so.
We're heading back to twenty twenty one if you could,
thank you always good to get the fux capacitor fired
up on a Monday. Scarce chips are just the tip
of big autos disruption. Yes that's right, talking computer chips
(03:02):
for cars again. And oh yeah, it's it's it's the
summer of twenty twenty one. There's no cars and you
got to hop on the bus with four thousand other
people piled on top of each other. It's kind of sweaty,
and there's not even any ac because there's chips needed
for that too.
Speaker 3 (03:20):
And use cars.
Speaker 2 (03:21):
The salami is melting and kind of gross ew Use
cars twenty one, the new ones. So here's the deal.
There is a company by the name of Nextperia Holdings.
You've never heard of them. They're based out of the Netherlands,
and they are a semiconductor manufacturer that doesn't make you know,
cutting edge and video chips. They make really boring, really
(03:44):
cheap ones.
Speaker 3 (03:45):
That make your windshield wipers go.
Speaker 2 (03:46):
Yes, they make your windshield wipers go. They make you know,
your sound go on and off in your car, and
like bait, really basic simple stuff and it's like it's
not high end stuff, but someone has to it. It's
kind of like there's a company that makes paper clips
and it's not complicated, but you need the paper clips
(04:07):
if you're in office. So here's the deal. Back in
twenty twenty one and twenty two, we obviously, you know,
had long stories about you know, semiconductor problems with production
because of the pandemic in this and that, and it
was something where car companies went through a couple of
years of you know, really just trying to get their
act together on this stuff, and it finally seemed like
(04:30):
they had gotten there. Well, here's the deal with next Baria.
They've got a little bit of a dispute that's going
on between them and the EU specific well, specifically the Dutch.
And here's the thing. The Dutch about a month ago,
UH decided basically to take over the EU subsidiary of
(04:55):
this company that was it's run by a group of
Chinese companies, and pretty much they said, look, we think
there is a real problem here with potential industrial espionage
going on. We think there's a problem that could potentially
lead to chips not being able to be produced as well.
And this is a whole thing to which Knicks Barry
(05:17):
is basically like, okay, fine, We're just not going to
produce the chips anyways. Then, and quite honestly, when you
hear China and industrial espionage mentioned in the same sentence,
my mind usually goes to, oh g you think. And
so ultimately it gets to a point now where you've
got these disruptions that are taking place. It's starting to
(05:40):
disrupt production predominantly in Europe but also into the US.
And it seems like maybe things are thawing a little
bit this weekend, but we're on the verge of potentially
semiconductors for cars being a thing again.
Speaker 4 (05:55):
Yep, And again these are not immensely complicated, So could
a carmaker eventually switch over to something else. Yes, but
it just doesn't happen overnight. These things get tested for
years before autoregulators get comfortable with them controlling important systems
for vehicles, and so there is no backup plan like
(06:16):
much of the fragile supply chains that we learned about
during COVID, And when you're talking about something as complicated
to manufacture as a car with thousands of individual components,
anyone disruption, as we're seeing again can throw it all
into a question mark.
Speaker 2 (06:34):
So we'll see where this develops again. Over the weekend,
it seemed like there was some progress being made on
the issue, so maybe some of those worst case scenarios
can be taken off the table. But yes, we are
now talking auto related semiconductors again, and I hope that
the next time we're talking about this there's more than
(06:55):
a four year gap between this and that.
Speaker 4 (06:59):
Can we go back then to what you mentioned about
Amazon this morning?
Speaker 2 (07:03):
Amazon, Yes, they're up five percent because they agreed to
a deal with open Ai to sell them thirty eight
billion dollars worth of computing power powered by Nvidio chips.
Speaker 4 (07:16):
So again, keeping all this straight becomes a lot. But
open Ai has a pretty deep partnership with Microsoft so
far as I know, for the exact same purpose.
Speaker 2 (07:25):
They've got deep partnerships with everyone because they're trying to
integrate themselves so deeply into the system that they can't
like blow up.
Speaker 4 (07:31):
So in any case, we have more of the Midas touch,
you know, whatever, whatever effect you want to call it,
the Halo effect, the Midas touch. When it comes to
this privately held company, open Ai, where they announce a
deal with one of the largest companies in the world
and it's enough to move their stock up four and
a half percent in early trading. I continue to see
(07:52):
these deals, and it's not to say that this, you know,
is a bad deal for either company, or a deal
that won't come to fruition, or a deal that won't
be trans formative to Amazon's business. I don't think it
would really be transformative to their business. But I am
unclear about how Amazon signing some small deal with open Ai,
it's not a small thirty eight billion dollars with a
(08:14):
company that may or may not ever be able to
actually pay them for it, actually moves the stock price.
Speaker 2 (08:21):
And look, here's the thing, because like no one wants
to say it, so I'm just gonna say it, this
is bull loney. Do you know how much money open
aiye is on the hook for over the next seven
years now in terms of cut No, what's the right
I say contracts because I don't believe any of these
(08:42):
are real. It's one point five trillion dollars. It's one
point five trillion freaking dollars.
Speaker 4 (08:50):
Man, That is the point tount of dollars that open
ai a privately held company with really no checks and
balances on thirteen billion dollars in.
Speaker 2 (09:00):
For the last twelve months, where you're gonna get one
point five trillion dollars? Do you know how much Microsoft? Microsoft?
I'll say it again Microsoft, Do you know what Microsoft's
expenses were? Okay? Just like again, I'm just trying to
like contextualize this when when we look at it Microsoft,
(09:23):
do you know what their expenses were over Do you
want to do like twelve months?
Speaker 4 (09:28):
Like, yeah, let's give me a twelve months and I'm
gonna go, uh, let's see another Capex was there.
Speaker 2 (09:35):
Let's call it two hundred billion, two hundred billion. You're saying, okay,
hang on, I'm looking at quarterly. Give me just a second.
Carry the one we gotta get to just annualize the quarter.
I'm getting there, sixty five billion dollars total expenses. Sixty
five billion dollars. Actually, no, sorry, that's operating expenses. If
we get through the rest of it, it's like another
(09:59):
it's basically double that. Okay, okay, So like one, where
the heck is open AI going to find two hundred
and fifty billion dollars a year for the next six
seven years to pay for this stuff? The answer I
have the answer, By the way, I want everybody to
(10:20):
write this down off balance sheet special purpose vehicles specifically
designed to get the money off the balance sheet of
the companies so it doesn't look like they have a
lot of debt, even though they have a boatload of debt.
Because this is where we're going, Michael, and you know
(10:41):
it's serious. When I say, Michael, like there is no
way for open AI sound like my mother. I might be.
I'm not. But in any case, so there's no way
for open AI to pay for this. They don't have
the money, so they're going to have to borrow it
or someone is is you cannot finance this through cash
(11:04):
flow if your open AI, because they don't have any
cash flow. Their cash flow is negative, their profit is negative,
their revenue growing, but still not big enough to support
one point five trillion dollars in spending the next six
to seven years.
Speaker 4 (11:17):
So when does it matter it we're getting to this,
It hasn't mattered. It's enough to move this stock price
four and a half percent. On how big is Amazon
at two trillion dollar company today.
Speaker 2 (11:28):
I think we're getting to the point where its nearly
three trillion dollars. I think we're getting to the point
where it does. And my evidence on this, because again
one must produce evidence to substantiate their claims, is if
we look at some of the debt that was issued
last week. Just as an example, Meta who put out
(11:51):
a bond that is a forty year bond. It comes due,
It comes due November fifth, teenth of twenty sixty five.
That bond is down one percent today.
Speaker 3 (12:04):
Okay.
Speaker 2 (12:05):
Now you can say, okay, like, is this just because
you know treasury rates are up in this and that
in a small you know, relatively small move means that
you know the bond trades down that much. You could.
But the other question asks is, okay, like why why
are you seeing this funding pressure in this place Oracle bonds.
Oracle issued a thirty year bond back in May to
(12:27):
try to pay for some of this stuff. It's now
down six percent in the last week and a half. Like,
I think we're getting to the point now where at
least the bond market is starting to look at this
and say, I don't know about that one. And does it,
you know ever matter inequities? Maybe maybe not. I have
(12:50):
no idea, But what I can tell you Open AI
committing to one point five trillion dollars in shrewd buck
eye over the next six seven years. Like, what are
we doing here at this point? And there is a
whole piece that we can talk about from the Wall
Street Journal on this is open AI becoming too big
(13:11):
to fail. I don't know how you're gonna be too
big to fail if you're that small.
Speaker 4 (13:18):
Do we give that more of a conversation. Yes, let's
say quick break, we got to do trivia. But when
we come back, is open AI becoming too big to fail?
And what does that even mean?
Speaker 3 (13:28):
Next? On the Financial Exchange.
Speaker 1 (13:31):
The Financial Exchange is Life on Series XM's Business Radio
Channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
and around the world, and keep up to date on
how it might affect your wallet. That's the Financial Exchange
weekdays from eleven to noon on Series XM's business radio
channel one thirty two. Face He's the Financial Exchange Radio Network.
(13:55):
The Financial Exchange streams live on YouTube. Subscribe to our
page and stay up to date on breaking business news
all morning long. Face is the Financial Exchange Radio Network.
Speaker 5 (14:08):
Time for sure, here on the Financial Exchange and on
this day. Back in nineteen eighty eight, President Reagan signed
the Credit Card Disclosure Bill, or the Fair Credit and
Charge Card Disclosure Act. The first widely used credit card
was created in nineteen fifty eight, years before Visa and
MX launched their own cards. So chrivia question today, what
(14:30):
was the first widely used credit card in the US?
Once again, what was the first widely used credit card
in the US? Be the second person today to Texas
at six one seven three six two thirteen eighty five.
With the correct answer, you'd win a Financial Exchange Show
T shirt.
Speaker 2 (14:48):
Once again.
Speaker 5 (14:48):
The second correct response to Texas to the number six
one seven three six two thirteen eighty five will win
that T shirt. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (15:00):
We got this piece from the Wall Street Journal that
we wanted to dig into more. Is open AI becoming
too big to fail? I made the quote last segment,
they're too small to be too big to fail.
Speaker 3 (15:11):
But let's talk.
Speaker 4 (15:12):
About the context of too big to fail in the
first place, and the main context we all have is
the banks. Why were they too big to fail? It
wasn't because they were integral to the stock market. They were,
but that was not the crux of the issue. The
crux of the issue was that without America's largest lending
institutions one, there'd be a massive loss of deposits on
the consumer side of things, and there would be no
(15:35):
real ability to I guess fund anything that happens in
the United States. So from a real structural part of
the economy, they were deemed too big to fail. My
missing some key components there. To me, it had everything
to do with customer deposits and lending facilities.
Speaker 2 (15:55):
Yeah, I mean, look, it's basically, Hey, if the credit
system of the United States dries up and it's facilitated
by these banks, then you can't let them fail. Okay,
And we don't.
Speaker 4 (16:04):
Right, So how on earth would that apply to I
guess forget about that. What would be the ramifications today
of open AI coming out and saying we don't have
funding to continue, we are declaring bankruptcy and canceling all
outstanding contracts.
Speaker 2 (16:21):
So if open A let's let's and let's say it's
much hypothetical if open AI today said you know what,
we're not gonna make it like we can't get financing
to continue operations, like we're gonna have to close up shop.
I mean, first of all, you're not gonna get it just.
Speaker 3 (16:38):
Out of nowhere.
Speaker 2 (16:39):
Like, but if it happened today, SMP right now is
it's sixty eight forty five, SMP's back to five thousand
by end a day.
Speaker 3 (16:49):
It'd be a massive Well we'd hit circuit breakers before
it happened, but.
Speaker 2 (16:52):
SMP's down twenty percent in one day. Yeah, because like
quite literally, you're going to end up shaving probably a
third of the value off of your big tech companies.
And with that, I mean again just like you look
at the math and do it out and you're like, okay,
that's like fifteen sixteen percent for the SMP on its
(17:13):
own and everything else getting dragged five six percent along
with it, wouldn't be surprised because here's the thing. If
an open AI announcement can be enough to rally Amazon
by five percent.
Speaker 3 (17:27):
It can certainly be enough.
Speaker 2 (17:28):
The lack like the revocation of said announcement has to
be able to drop the stock by five Otherwise, quite honestly,
then we're just not really playing with real numbers.
Speaker 4 (17:39):
And so therefore, yes, you have all sorts of funds
and institutions going belly up that are betting on this
thing in one direction or another. But it gets me
back to your question, which does that mean that the
government steps in to support it?
Speaker 3 (17:53):
I don't think so.
Speaker 4 (17:54):
It means that the stock market loses a tremendous amount
of value. But is it too big to fail? I
deem it a national security risk if it fails. I
don't believe that funding for people's home purchases and bank
accounts would just disappear overnight. Four rowin k's would take
a massive hit, Pensions funds would take a massive hit,
Insurance companies might take a massive hit. But I don't
(18:17):
know that you would go after the company the source
of all of it.
Speaker 2 (18:22):
Here here's the the case for doing it. And I'm
not saying that I'm in favor of this or not,
but in any economy that's based on consumer spending where
you know, wage growth has been not great, you could
make a case that if you saw, you know, a
bear market in that situation, consumer spending probably gets hit
(18:43):
pretty hard and the US economy goes into recession. Does
that mean that you like bail them out? No, but
I could see see the case being made that, well,
if we don't you know, support this, like, it's gonna
be really bad stuff for you know, the economy. And
I think that's a crappy argument because ultimately, look, you
(19:05):
could pay every single American one thousand dollars a day
to go and dig holes, and then you could pay
them a thousand dollars a day next week to go
and fill all those holes in that doesn't mean that
you've built anything productive, and throwing bad money after good
is malinvestment and not something that represents any kind of
meaningful long term improvement and living standards. And so yeah,
(19:27):
open A is trying to build itself into that. I
really hope it doesn't work. Quick Break, we got the
trivia answer.
Speaker 1 (19:36):
Next, 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 markets so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (19:57):
Markets mixed to begin the week as trader is ready
for a new batch of earnings from the likes of AMD, Palanteer,
McDonald's and many more major names this week. Right now,
the Dow is down by three tenths of one percent
to one hundred and thirty six points. SMP five hundred
is up about a tenth of a percent or ten points.
NASDAC up nearly half a percent or one hundred and
(20:20):
eight points, Russell two thousands down three quarters of a percent,
ten year Treasure reeled up one basis point at four
point one one two percent, and crude oil is up
about three quarters of a percent. Trading it's sixty one
dollars in forty one cents a barrel. Major news in
the tech space this morning after open Ai signed a
thirty eight billion dollar deal with Amazon where Amazon Web
(20:42):
Services will provide the chat GPT maker with access to
hundreds of thousands of videographics processor units as part of
a seven year deal. Amazon up over four percent. Meanwhile,
Kimberly Clark announced this morning it's reached an agreement with
talent on maker Kenview in a deal value at forty
eight point seven billion dollars, which would create a consumer
(21:05):
staples giant. Kimberlee Clark shares a down twelve percent, while
ken Bustock is up about fifteen percent. Elsewhere, Ford, Kia,
and Hundai reported moments ago that they saw substantial declines
in electric vehicle sales last month after the EV tax
credit expired. Year over year, Ford saw a twenty five
percent drop in EV sales in October, while Kia and
(21:28):
Hyundai said their EV sales sank between fifty two and
seventy one percent from a year ago. Ford is down
by one percent. The stock that is in recent memestock
in alternative meat producer Beyond Meat delayed its earnings results,
saying it needs more time to calculate a material, non
cash impairment charge related to certain long lived assets. Beyond
(21:51):
Stock is now plunging over sixteen percent. I'm Tucker Silvan,
that is Wall Street Watch, and in the previous segment,
we asked you the trivia question, what was the first
widely used credit card in the US, that would be
diners Club. Martin from Berkeley, Mass is our winner today,
tinghm a Financial Looks Change Show t shirt. Congrats to
Martin and we play trivia every day here in the
(22:13):
Financials Change See complete contest rules at financialoks Change Show
dot com.
Speaker 2 (22:19):
Risky loan from Housing bust Era is making a comeback.
I can file this one under the category of technically
true but also not problematic. So this is like, you know,
this is one of those pieces where oh, like, you know,
supposed to scare you because hey, adjustable rate mortgages were
you know, used heavily during the housing bust, and so
(22:41):
this could be a problem.
Speaker 4 (22:42):
The problem wasn't alone that people got adjustable rate mortgages.
The problem in the housing market ahead of the Great
Financial Crisis was they got many of them and there
was no income or asset verification being done by the broker,
and then banks that bought the loans.
Speaker 2 (23:02):
And then the loan rates adjusted upward and they got
at that point as well.
Speaker 4 (23:05):
So it was a contributing factor. But the root cause
of the big problems here.
Speaker 2 (23:11):
Was about underwriting.
Speaker 4 (23:12):
Was terrible underwriting, and then securitization and leverage and all
the things that come with a financial crisis. But the
root cause, you know, going and taking the story and saying, oh,
look out because people are getting adjustable rate mortgage. Adjustable
rate mortgages are fine if you have the ability to
pay them. If the rate goes up, that's not really
(23:34):
an issue. Now, are there people today who are buying
armed who are buying homes with arms and are not
prepared for the rate to shoot up five years from now. Absolutely,
But again we're talking about a very different situation.
Speaker 2 (23:46):
And the other thing that's different is just the scale.
I'll quote here about ten percent of purchase mortgage applications
were for arms in the week ending on October third,
the highest rate since twenty twenty three. In early twenty one,
when rates from your historic lows less than three three
percent of applications were for arms. Well, if you go
and actually look at the data, what you find is
that during like that five through seven period, our usage
(24:10):
peaked at like north of forty percent in some weeks.
So we're still very low in terms of usage. Even
even if you believed that arms are the problem, right,
it still is something that you would say, well, we're
no like we're less than a quarter of the peak
you know that we saw back during the housing crisis.
And when you look at actual transaction volume, remember back
(24:35):
during the build up to the housing crisis the United
States at one point, like if you look at new
home construction and say, say, like, ge, how many homes
were being built? You know at the peak, you get
amazed by what you find because you realize, gee, we
were building like north of two million homes a year
(24:56):
in two thousand and five. Today housing starf to running
it like one point three million, and the population is
way bigger than it was then. Right, So it wasn't
just you know, the underwriting and everything. It was also hey,
there was a bunch of debt being used by builders,
construction loans and things like that in order to build properties,
and those went bad also, and that caused a huge
(25:17):
bunch of a whole bunch of problems that's not present
today either.
Speaker 3 (25:22):
Yeah.
Speaker 4 (25:23):
Again, these stories keep getting written about the housing market
because prices are high and so it's fun to write
stories about it. The lending standards being used by banks
and the loans being taken out by individuals in other
than a few rare instances is not a problem today.
Speaker 2 (25:41):
Now, if you want to talk about some of the
nasty stuff that we are seeing in housing, there's stuff
to talk about. All you put to gorder. Listeners out
there raise your hands. Not if you're driving, sure, but
if you're just raised one hand raised, Yeah, as long
as the other one's on the wheel and in two Mike, Well,
you know, sometimes you just gotta go at midnight or noon,
(26:02):
depending on you know, what side of the world you're
on at a in particular point in time, put to
Gorda price is now twenty point five percent off their peak.
Speaker 3 (26:11):
Wow.
Speaker 2 (26:12):
So this does start to present some problems if you
are trying to sell a property and put to Gorda
and you bought in twenty one or twenty two, because
you say, okay, you know, maybe I put a twenty
percent down payment in.
Speaker 3 (26:24):
Maybe I didn't.
Speaker 2 (26:26):
I've eaten through that down five Well, even let's work
through twenty Okay, I've eaten through that. But hey, it's
been three years. And even though I'm paying mostly you
know interest at this point, Okay, I've picked up you know,
five six percent in equity, but then I gotta pay
five six percent to a broker in order to sell
the place. So if I put a twenty percent down
payment in and I'm trying to sell three years after
(26:48):
buying a punt A Gorda, odds are that down payment's gone. Yeah,
And so what you end up with theirs are people
who say, you know what, can't list right now, and
so you're not even getting all the inventory on that
you would. But you also then have the people who
are looking at put To Gorda who might have been
watching for the last year or so saying, well, a
year ago that place was listed for six hundred thousand,
(27:11):
and now it's five point fifty. Honey, why don't we
give it one more year and we'll see if it
gets down to five hundred. And this is the problem
with falling home prices is that action of falling home prices,
it dissuades both buyers like for you know, their use
and investors from buying into that market. And put To
Gorda is not the only place that's seeing this. Austin
(27:32):
prices down about sixteen percent, Cape Coral down about fifteen, Bradenton,
Sarasota down about ten. You go through you know, the
thirty worst performing housing markets from you know since the
peak it's predominantly Farda in Texas, but it's starting to
be broaden out as well. California's got a few names
on the list, Arizona's got a couple on the list. Colorado.
(27:54):
So you kind of look at this and this is
what we've been saying. The inventory has been building, and
in order for pricing to get to where it needs
to be to clear this inventory, it's going to have
to get worse before it gets better.
Speaker 3 (28:06):
Check.
Speaker 4 (28:06):
This is a great segue into our actual brand new
guide from Armstrong for the month of November, which is
all about owning real estate and retirement.
Speaker 3 (28:16):
And I want to ask you, I mean, there's some.
Speaker 4 (28:18):
Rules of thumb out there that I think are pretty useless,
but one that I like is maintenance costs on a home.
I generally think it's safe to say that, depending on
the age of your home and the state of your home,
you can expect to spend what do you think, between
one and three percent of its value annually maintaining that home.
Speaker 2 (28:34):
I think one is a pretty good benchmark for most folks.
As you get into retirement and do less, it gets
close to that two or three. I mean, do less
of the workers yeah, when it's like, oh, like, I
don't you know, I'm seventy six, I don't want to
mow the lawn anymore. When I mean, I'm seventy eight
and I'm tired of dealing with plowing the driveway.
Speaker 3 (28:52):
You know, other pieces to all of this.
Speaker 4 (28:55):
You know, there's always this desire or oftentimes a desire
to go south during the winter, and the question comes
up all the time of do I buy or do
I rent? Obviously some people are learning a lesson about
that right now with home prices in some of those
Sun Belt areas, but just generally, how do you assess
a decision like that, whether to buy or rent?
Speaker 2 (29:17):
Well, I think, quite honestly, the first thing is assessing, Hey,
do I want one property your multiple ones? And generally
as people get older, the answer is one sure, And
so then it becomes Okay, how much time do I
want to spend in this place? What do the financials
look like compared to renting and versus buying? Do I want?
You know, is it cheaper for me to rent in
(29:38):
one location than the other? Like, you've got this whole
series of calculations that you need to look into.
Speaker 3 (29:43):
It's before you even get to questions like residency, and
it can.
Speaker 2 (29:46):
Get pretty like complicated as you try to navigate this.
Speaker 4 (29:49):
We've got a brand new guide all on this one
subject owning redial estate in retirement. How to make that
assessment for yourself as your headed to that stage. Maybe
you've already owned two homes. Maybe you're considering relocating or
buying a vacation home in retirement. Get our guide before
you do it. The phone number is eight hundred three
nine three four zero zero one. You can also request
(30:10):
your free copy online at Armstrong Advisory dot com, but
that number again is eight hundred three nine three four
zero zero one.
Speaker 1 (30:18):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong Guide a specific financial, legal, or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (30:34):
Piece from CNBC. Trump tariffs could add forty billion to
holiday shoppers and sellers costs. Lending Tree warns First lending Tree,
thank you for reminding me that you exist, cause quite
honestly didn't know they were still around. Do you remember
when that whole peer to peer finance thing was, you know,
getting really big back in the twenty tens.
Speaker 3 (30:52):
Yeah, must we heard from them.
Speaker 2 (30:54):
It's been a little while. Second, I think that when
doing this, they're trying to say, Okay, based on like
the spending data that we saw last year, and let's
extrapolate this based on like average tariff rates. Guys, Like,
I don't think this is your wheelhouse. I'm not saying
it will or won't be this, but like they're saying, Okay,
(31:17):
it's gonna be like one hundred and thirty two dollars
per American family in tariff costs. Okay, Well, it kind
of depends what you buy. And quite honestly, I don't
know about you, guys. I'm seeing some pretty good deals
out there this year, because I get the sense that
even though consumer spending has been no, consumer spending has
been good. But I like, I'm seeing some kind of
(31:40):
wild deals that make me wonder how some of these
companies are staying profitable. Like I've basically finished my Christmas
shopping at this point, I can't tell you how many
legitimate like because again, you got to kind of look
at you know, Okay, what would this normally be priced at?
But legitimate like things I've been watching for like six
months or so, forty to fifty percent offers I've been
(32:02):
seeing on stuff, and I don't know, Like I don't
remember seeing a ton of those last year, but that's
just me, so I don't know, Like people have just
been predicting doom and gloom on consumer spending for too long,
and the trend is still robust like it is. And
(32:24):
I'm not saying that everyone's feeling good about the economy.
I'm not saying that like everyone has to. But what
I am saying is, across the board, we're seeing consistent
four to six percent increases in spending year over year.
Inflation's running about three, which means one to three percent
real gains in spending. I've seen nothing to dissuade me
that that's happening. Agreed to take a quick break when
(32:45):
we come back stack Roulette after this.
Speaker 1 (32:50):
Find daily interviews in full shows of The Financial Exchange
on now our YouTube page. Subscribe to our page and
get caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. The Financial Exchange
is now available every day from eleven to noon, Non
Serious XMS Business Radio Channel one thirty two stay informed
(33:10):
about the latest from Wall Street, fiscal policy, and breaking
business news. Every day. The Financial Exchange is life on
Serious XM's Business Radio Channel one thirty two. This is
the Financial Exchange Radio Network.
Speaker 5 (33:28):
This segment of the Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. Your next
incredible vacation is a click away, and if you act fast,
you could be on Saint Croix to experience their Crucian
Christmas Festival taking place this December through early January. Discover
the magic of this long standing tradition with incredible food,
(33:50):
music and entertainment. Or just go to soak up the
sun strong long white sand beaches and feel the rhythm
of the Harpy of the Islands. The USBI is a
because Cribbean Paradise. Playing your escape now at visit USVII
dot com. That's visit USVII dot com.
Speaker 2 (34:07):
Mike, what do you got for stack roulettes?
Speaker 3 (34:09):
Starbucks?
Speaker 4 (34:10):
Whilst your journal Why the future of coffee doesn't belong
to Starbucks? Younger drinkers love it icy, sweet and made
for a drive through selfie. Specifically, they're talking about a competitor,
Dutch Bros. Who really focuses on a different segment of
the coffee market. But it made me kind of think
about the non alcoholic but like the drink segment generally,
(34:32):
and the fact that it's growing really rapidly.
Speaker 3 (34:36):
So in a small.
Speaker 4 (34:37):
Town that we live in, they have a Starbucks, we've
got a couple other coffee shops. We also have, you know,
a smoothie bar. And then what just opened a few
months ago was like a boba.
Speaker 3 (34:54):
Tea type place.
Speaker 2 (34:55):
What is that exactly?
Speaker 4 (34:57):
It's it's like milk tea with a little tapioca balls
in it.
Speaker 2 (35:01):
What's milk tea? Tea out of milk?
Speaker 3 (35:04):
I don't know, but it's sweet. It's got a bunch
of different flavors.
Speaker 4 (35:08):
The kids like it because it's like these little tapioca
balls that pop in your mouth. And you know, my
kids don't drink caffeinated beverages at Starbucks, but they would
oftentimes like, oh, can we go to Starbucks and get
some sort of pink drink And instead there's this new
competition from this place.
Speaker 3 (35:25):
That I don't I don't know.
Speaker 4 (35:26):
My simpleness is that it probably my senses that it
probably wouldn't have existed a decade ago.
Speaker 3 (35:31):
I don't think there was the demand. I think it
was too unknown.
Speaker 4 (35:34):
And today we're all kind of there's a huge segment
now of these different types of beverages that you can
go get and it's direct competition for Starbucks.
Speaker 2 (35:46):
When we talk about the human body, do you think
we're close to reaching peak liquid?
Speaker 3 (35:54):
You know?
Speaker 2 (35:54):
Because it's like all we hear about is, oh, there's.
Speaker 4 (35:58):
Taiwanese drink made of a eat milky tea bass mixed
with chewy tapioca pearls.
Speaker 2 (36:03):
Like all we're hearing about is who was the restaurant?
Was a McDonald's that came out with their own like
drink only restaurant, And like all these companies are trying
to pour money into drinks and there's only so much
liquid that I want to consume. And look, I'm kind
(36:26):
of a weirdo on this because I get it, like
if I'm not drinking alcohol, I'm only drinking water. Like
that's just I've never been like, oh, like let me
get like a fun drink to cheer me up, Like no,
I just it's not me so I get that I'm
not that person, but like the human body just has
(36:49):
limitations on how much liquid you can take in.
Speaker 4 (36:52):
I think the real issue for Starbucks is that there
were always there was always plenty of coffee shop competition.
Speaker 3 (36:59):
That was never going to change, but they manage that.
Where they grew was the non coffee stuff.
Speaker 4 (37:06):
And now there's other kids going to get their pink
drinks that, you know, all the crazy stuff that they
can get on their menu, and now because of Starbucks
there's a lot more competition.
Speaker 2 (37:16):
There can that competition survive? I guess is what I'm
asking though, is I.
Speaker 4 (37:22):
Think that each individual brand is probably a fad because
like this, it doesn't matter.
Speaker 2 (37:26):
The twenty tens, we're all about, hey, look at all
these microbreweries that popped up, yea, and now we're seeing
the stories well like you know, changed and like a
lot of them are struggling. And so I guess I
kind of wonder is the same thing happening here? Because
liquid is a zero sum game. The human body will
not suddenly become ninety percent water just because we like
(37:47):
all these actual shops open, you know, like there's there's
there's a physical limitation on how much of this you
can do.
Speaker 4 (37:54):
I don't think we're approaching the physical limitation. I do
think some of these things are probably too fatty. And
I don't mean fat yeah, I mean they are a
fad and they won't.
Speaker 2 (38:02):
It's like exercise machines, you know. It's if I had
a dime for every bowflex or peloton in an attic
collecting dust, I'd be able to buy all the bobats.
Let's take a quick break for the rest of the day.
We'll see you tomorrow on the Financial Exchange
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.