September 23, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss the often asked question if the stock market is overvalued. Miran is contradicting himself on the case for big rate cuts. China floods the world with cheap exports after Trump's tariffs. Nvidia to invest up to $100B in OpenAI. Spirit Airlines furloughing one-third of its flight attendants.
Mark as Played
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:06):
Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Happy Tuesday, and welcome back to the Financial Exchange.
We've got an interesting marketing market shaking out here in
early training. The Nasdaq currently off by about a third
of percent, whereas the Dow is up by what's that
two thirds of percent? Of the S and P's flat.
We've got some Nvidia news to cover today. We've got
every FED official that can make it in front of
(01:32):
a microphone speaking yesterday and today. So Powell will be
talking today at twelve forty five, I believe it is.
And Mark Vandetti's rolling his eyes. In terms of the Nasdaq,
as I mentioned in videos, moving down, we've got some
news to cover on them, and an investment in open Ai,
owner of chat GPT. I was just looking at the
(01:53):
Dow because you know, pretty easy to look at thirty
stocks and figure out what might be moving. But Boeing
had some news that broke three m moving up, Caterpillar, Chevron,
bunch of stocks really moving up in that two percent
range today, and not a whole lot of components in the.
Speaker 3 (02:09):
Negative, although you do have oh I forgot that is
Nvidia a Dow component? Now?
Speaker 2 (02:15):
Yeah, I guess they are but not as much of
a waiting as they would in the overall market, given
that the Dow is a price weighted index rather than
a market cap weighted index.
Speaker 4 (02:23):
So yeah, we'll be what do they do, like we
were talking about this, should we my mind, I can't
let go of this now. Very briefly, they add all
the prices together and then it's just like if you
have ten stocks, they're all trading at ten dollars a year,
every stock gets weighted at ten percent, very straightforward, as
opposed to market cap, which weaits based on the value
of the shares in totally those sound like the same things,
(02:46):
but they're they're different.
Speaker 3 (02:48):
They are very different.
Speaker 2 (02:49):
And uh yeah, it's why we tend to not really
quote the Dow even though no, you know, it's it's
just been such a long running index that everybody likes
to look at.
Speaker 3 (02:58):
But it's important to.
Speaker 2 (02:59):
Wreckgnize that it really doesn't have a whole lot of
actual representation of the US well because.
Speaker 4 (03:05):
It isn't investible the same way say the S and
P is. Everybody in the world could buy a little
slice of the S and P and our portfolios would
all look the same. That's the beauty of a market
cap weighted index. The same is not true of the
DOO or other indices that depart from market cap weighted construction.
It's a subtle point, but it's really the reason modern
finance looks the way that it does, with the S
(03:28):
and P or a Russell one thousand being the anchor
of portfolios.
Speaker 2 (03:31):
It also makes it so that some companies that are
too high in terms of share price either need to
do a stock split to be considered to be included,
or just can't be included because, oh, you know, Berkshire
Halthaway's share prices are too expensive, so they can never
be in there, for example. So anyway, it's just an
interesting day. We don't frequently see NASDAC slightly up, Dow
(03:52):
slightly NASAC slightly down, Dow slightly up, But that's what
we are getting today anyway, speaking of of just where
markets are and different components.
Speaker 3 (04:04):
The is this market watch that's asking if the market
is overvalued?
Speaker 2 (04:08):
Barons Barons asks the question is the stock market overvalued?
And then they seemingly answer the question with We're about
to find out, And they then do not allude at
all in the article as to why we would be
about to find out, and I would debate the idea
as to whether or not we're about to find out,
But give me some fundamentals mark here, because everyone and
(04:30):
their mother is comparison comparing this market to the dot
com bubble right now, at least in terms of pricing,
and I think that's a reasonable comparison point to make.
Speaker 3 (04:39):
So let's do it.
Speaker 2 (04:40):
Where do we stand in terms of priciness of this
stock market in terms of you know, other markets that
we've seen, or just against itself across the.
Speaker 4 (04:49):
When you're buying or selling a house, you can look
at price per square foot. Everybody quotes it. It's an
easy to calculate and relate to measure the The equivalent
with stocks is probably the trailing twelve month price to
earnings ratio, which is exactly what it sounds like. You
take the current price and you divide it by the
(05:10):
last twelve months earnings profits that is of the company
in question.
Speaker 2 (05:14):
Easier to do on a single company, more complicated form
to do on five hundred of them, but very easy.
Speaker 4 (05:21):
To do with modern with with computers.
Speaker 3 (05:24):
Since we're not using applicantses anymore, it's pretty easy.
Speaker 4 (05:26):
Yeah, Since the nineteen eighties, everybody's had this technology on
their desktop, very easy to calculate, even easier to buy
or get for free from many online services. So price
to earnings is usually what people refer to when they
are looking for a gauge of how expensive are stocks
relative to each other, relative to themselves over time.
Speaker 3 (05:46):
Relative to other country stocks, relative to directors.
Speaker 4 (05:49):
And there are problems with those comparisons that make them inapt.
They're not quite apples to apples because P to E
should represent risks involved at the country level, political risk,
institutional risk. Anyway, we can get into that at a
different time. That's not really the point of this article.
Point is, by any measure, let's just use price to earnings.
Sure stocks are at near record price to earnings ratios
(06:14):
one way to translate that, and by many measures of
price to earnings. You could put a lot of different
earnings calculations in that denominator that we were talking about, right, Mike,
and you can get basically the same conclusion, get to
the same conclusion, which is stocks are epically expensive. High
PE equates to being expensive investors are willing to pay
(06:35):
more today. That's the P and the P TOE for
prospective earnings, because the P is known, the E is
only known in the past. You're only paying for what
a company can do, not for what it did. It's
where that old expression great company, lousy stock price, Well,
that's not quite the expression. I kind of made that up,
but a lot of people have made that sentiment, and
(06:58):
for good reason. So stocks are by any measure, historically
eye poppingly epically expensive.
Speaker 2 (07:06):
What does that mean, depending on how you measure, we're
in the ninety eighth percentime.
Speaker 3 (07:10):
Yeah, we do that.
Speaker 4 (07:11):
I run that every couple of weeks for the group
internally ninety fifth on the so called chiller pe which
takes the last ten years worth of runnings of justin
for inflation and takes an average to smooth out business
cycle effects.
Speaker 2 (07:21):
But yeah, yeah, So next question is obviously, when were
they more pricey? And the answer is right before the
dot com we were very excited about another emerging technology
and how it was going to change the world in business,
and everyone.
Speaker 4 (07:34):
Was changing the world to me. I know, I said
this last time I was on But what made it
different was to me, having lived through it, that was
changing the world. Every eighteen months we all got a
new laptop we all got. Our software was updating every
six months. We went from working in the office all
the time to being able to work remotely, from never
seeing your clients to being able to video call them.
It was really dramatic in the late night.
Speaker 2 (07:56):
And granted, Mark, you knows as you know, and I
try and bring up frequently I am significantly younger than you.
Speaker 3 (08:01):
But to me, I think the I think that the.
Speaker 4 (08:07):
Hey, SCREWBOPI I.
Speaker 3 (08:08):
Actually have no idea how fifty three year I say
it all the time.
Speaker 4 (08:11):
I was born in nineteen seventy two.
Speaker 2 (08:13):
But I think that those differentiations are a little bit
tougher to tease out right, Like, is can you point
to the internet as being way more, way more impactful
than artificial intelligence is right now? I have a tougher
time teasing that out. Then, I think you'd Oh.
Speaker 4 (08:31):
But we know what the productivity. We know what productivity
was doing in nineteen ninety nine. We didn't know it
in nineteen ninety nine, but we know now that it
had doubled.
Speaker 3 (08:39):
That's kind of my point is we may not.
Speaker 2 (08:41):
Yeah, I could see a compelling argument where five years
from now you look back on productivity and say, oh, Wow,
it did dramatically increase as a result of artificial intelligence,
and we won't know for a long time.
Speaker 4 (08:51):
But there were but it was tangible. Then I'm just
I mean, I'm not dead yet. I still have my senses.
I know how my life's changing or why are you snicker?
I know I can see what people are you know,
doing with technology, etc. And how it's changing their workflow.
And I mean, have you seen it? You know, one
of you guys.
Speaker 3 (09:11):
On the artificial yeah intelligence side.
Speaker 4 (09:13):
Do you use anything day to day dramatically more efficiently
you think than you did. So some of the changes
are subtle and gradual, so it's hard to say like
searchers are quicker and stuff like that, But.
Speaker 2 (09:23):
I will say that on the search side of things, yes,
I do think that my ability to gain answers to
questions that are relatively accurate on a pretty quick basis
compared to clicking through links has changed fairly dramatically just
over the last twelve months.
Speaker 3 (09:40):
And I don't know.
Speaker 2 (09:42):
The more and more I see on the AI side,
the more I see how it maybe more in my
but and I think that would be the argument if
I'm going to take the other side of this argument
and justify a price earnings ratio that has only once
been eclipped during the dot com bubble. It would be
more mark, Mike, You're just on the very cusp of
(10:03):
what artificial intelligence can do, and so therefore it is
still being undervalued and it is going to I can't.
Speaker 4 (10:10):
Refute that it's a prospective argument. It starts to sound
a lot like bitcoin to me. Though any day now
bitcoin is going to have a compelling so called use case.
We're still waiting.
Speaker 2 (10:19):
The flip side to all of this that we can
tease that for longer. But I don't really think that
anybody debates that the Internet was revolutionary in just about
every single way. Revolutionized it was business and revolutionized how
we went on vacation at revolutionized raid stocks.
Speaker 4 (10:36):
Everything went from telephones to online in two years or so.
Speaker 2 (10:41):
Even as revolutionary as that technology was, the stock market
had to go through but didn't have to, but did
go through a bubble and then a pop in order
to get to where we are with modern technology that
relies upon the Internet. And so I just don't The
most common argument that I get is, Mike, you're missing
the boat. You're missing the point on how significant artificial
(11:02):
intelligence is it's going to revolutionize everything. And my counterpoint
would be great, that doesn't mean the stock market isn't overvalued.
Speaker 4 (11:08):
More than electricity did. I mean it took decades. And
if you're interested in this, the guy's name is Robert Gordon.
He wrote a great book in which he summarized a
bunch of his papers. The Rise and Fall of American
Growth is the name of the book. If you're interested
in how the industrial revolution, the steam revolution to electricity
trickled into everyday life through air conditioning and all the
(11:29):
other conveniences that we enjoy, how long it took, and
how it didn't dramatically change the long term trend in
GDP growth because it did take so long to permeate
the economy. There are some useful lessons there. This could
take decades to play out stock Some stock investors seem
to think it's going to play out in the next
three to five years. That would be unusual historically speaking.
Speaker 2 (11:51):
Let's take a quick break when we come back. As
I mentioned, every Fed governor that can find a microphone
has been chatting up their views on the economy will
be and a few of them next year on the
Financial Exchange.
Speaker 1 (12:03):
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Speaker 5 (12:31):
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Speaker 2 (13:03):
All right, Mark, Well, last week the Fed cut rates
by a quarter of one percent. We are now sitting
at a target rate on FED funds of between four
and four and a quarter percent. I remain surprised by
how certain investors seem to be that rates are going
to continue to come down at this stage given announcements
that we've heard, but we will see what FED governors
(13:24):
say over the course of the next few weeks.
Speaker 3 (13:26):
Here.
Speaker 2 (13:26):
The next meeting is not until October twenty ninth, at
which point the Schicygomercantyle Exchange is pricing in a ninety
two percent likelihood of another twenty five basis point rate
cut at that meeting. Following that, we'll have one more
before year end on December tenth, and there's currently nearly
a little bit more than a three quarters chance that
(13:48):
rates our fifty basis points lower at that meeting. We
can talk about the unlikelihood of that, because I think
there's been a lot of governors who since the meeting
have been coming out and saying we might not need
any more rate cuts, and so I think there's a
real potential for a supprise on the rate cutting cycle.
But before we go there, Stephen Myron, the new FED appointee,
(14:11):
was giving a speech yesterday and talking about his views
on the economy, and look, Stephen Myron is the newest appointee.
He is a member of the White House. He set
on the he sits on the Economic Council, of Advisors
for the White House and took a leave of absence
for this role because his appointment as Fed Governor will
(14:33):
expire at the.
Speaker 3 (14:34):
End of January. I believe it is if.
Speaker 2 (14:36):
He's reappointed, I would expect that he would resign, but
who knows. But he has been He voted for a
fifty basis point rate cut at the most recent meeting,
and he's been fairly outspoken in agreeing with the President
that rates need to be significantly lower. My problem with
his viewpoints on all this. You know, he lays out
a bunch of arguments. One of his arguments is, look,
the policy from the Trump White House is one that
(15:00):
is going to be less.
Speaker 3 (15:02):
Inflationary in the future.
Speaker 2 (15:04):
We are going to see, for instance, you know, the
tariff revenue coming in is not going to raise prices
on consumers significantly. And I think, regardless of your view
on tariffs, you could make a compelling argument that the
very leads the tariffs would be a one time price adjustment.
Speaker 3 (15:19):
Many have done so.
Speaker 2 (15:20):
I don't find the argument to be terribly compelling, but
that is the argument. Another argument that deportations are going
to reduce housing demand. If it does happen, we certainly
haven't seen it yet, but okay, Like another argument for that.
The problem that I take with his arguments is that
he has very recently argued the opposite side on financial
(15:45):
conditions and rates. So in twenty twenty four, less than
eighteen months ago, here were his arguments for raising interest
rates and being very suspicious of inflation. First, that globalization
was going to reverse and there's going to be a
new era of conflict emerging in its place. Is there
(16:08):
anyone that would look around today and say that globalization
seems to be increasing now compared to eighteen months ago,
right or wrong? I don't think you know, we're talking
about increased barriers to trade.
Speaker 3 (16:19):
We're talking about ten turns.
Speaker 4 (16:20):
Of dollar volume. It's going up, but yeah, barriers are
being erected.
Speaker 3 (16:23):
Yeah.
Speaker 2 (16:25):
The other argument was, hey, eighteen months ago, Stephen Byron's
argument was there's about to be a boom in capital
intensive hardware spending to power the AI revolution. So he's right, like,
we've seen a massive increase in spending, we've seen data
center construction, investments in artificial intelligence. But again, eighteen months
(16:45):
ago he argued that was going to be inflationary, and
now is seemingly saying it's not important. Many US households
enjoy fixed rate mortgages locked in around four percent, and
therefore are going to be unwilling to sell their homes
and will continue to have dollars to spend because of
those fixed rate mortgages. That has also not changed. And
so I guess where I lead to with Steven Myron
(17:09):
is like I'll be the first to say, I really
genuinely do not know if today the bigger risk is
inflation or unemployment. I think both are looking at us
right now as a potential threat. Hiring has been extremely
weak over the last six months, Inflation has remained at
three percent. My only point is, you know, after reading
through Stephen Myron's arguments and listening to his speech yesterday,
(17:32):
I really don't find any of his arguments for lowering
rates to be compelling and much else other than finding
excuses to do so.
Speaker 4 (17:39):
Yeah, I don't believe that he believes them the models
he's using, and I haven't seen precisely what assumptions he's
plugging in, but I know them generally. It's very difficult
to get to the conclusions that he's reached using traditional
economic or even somewhat aggressive assumptions in in traditional economic models.
I think he's carrying water for the administration. That's why
(18:01):
he was put there for I'm sorry, but he is.
It's why he was put there. And I'm not, by
the way, judging that. I you Trump, the President has
said he wants lower interest rates. You may think that's great,
you may think that will lead to higher inflation, but
it just is. Let's just take that as a fact.
Myron is now saying that he sees demand slowing. All
those factors you ticked off early on would result in
(18:23):
slower overall demand. That's something the Fed can do if
you really believe that, and I don't believe that he does,
nor do I think the White House does. Nobody's forecasting
a recession in the White House, and they would reject
that implication of these arguments, but it's behind them. The
Fed can do something about slowing demand. It can print
money to lower interest rates, which result in increased investment
(18:45):
and consumption. That's what's making its way through the economy
right now as a result of the recent series of
rate cuts, and apparently there will be more of them.
The danger, Mic, as you pointed out, is that if
demand grows faster than the economy's productive capacity. More simply,
if demand grows faster then supply, you get inflation. We
experience that in twenty twenty one, twenty twenty two, when
(19:07):
demand quickly outpaced supply.
Speaker 3 (19:09):
YEP.
Speaker 2 (19:10):
So look, as I pointed out, I think there's a
compelling argument on either side that hey, we're headed for
a period of higher unemployment or we're heading for a
period of higher inflation. But the arguments that are being
laid out by Meyern in particular, I just don't find compelling.
Speaker 3 (19:26):
Let's take a quick break.
Speaker 2 (19:27):
When we come back, Wall Street watches up next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
Well markets our mixed territory at the moment, after all
three major averages recorded all time highs yesterday. Coming up
early this afternoon, Wall Street will monitor Jerome poll speaking
engagement in Rhode Island. Actually, right now, the Dow is
up by four tenths of one percent, or one ninety
eight points higher, SMP five hundred is dipping by only
(20:24):
three points, Nasdaq is up, is down excuse made three
tenths of one percent or sixty six points lower. Russell
two thousand is actually up nine tenths of one percent.
Tenure Treasure brailed is flat and currently at four point
one four to three percent, and crude oil up nearly
two percent higher Training at sixty three dollars in forty
five cents a barrel. Some more big news from Nvidia
(20:46):
emerged yesterday afternoon with the announcement that the AI in
chip giant said it would invest one hundred billion dollars
into open Ai, where open Ai will build in deploy
systems using in videos graphics processing units. In Video stock
jumped four percent yesterday on that news, but is giving
back one and a half percent today. Meanwhile, Boeing shares
(21:08):
a climbing three percent after Isbekistan Airways Airways excuse me,
said it would buy fourteen seven eighty seven to nine
Dreamliner jets, with options for eight more and a deal
worth over eight billion dollars. Separately, Bloomberg Als reported that
the US and China are in the final stages of
negotiations for a huge Boeing aircraft order, according to US
(21:33):
Ambassador to China David Purdue. Elsewhere, after its seven percent
decline yesterday, Kenbyew shares a rebounding over four percent today.
The Tailanal parent company is preparing for lawsuits after the
Trump administration said prenatal exposure to Tailanol's active ingredient might
cause autism. Auto owne down by about a third of
(21:55):
a percent after the auto parts retailers saw its gross
profits and earnings share fall below street expectations for its
recent quarter despite an increase in same store sales, and
after today's closing bell, we'll see earnings from Micron Technology.
That stock is currently up over two percent. I'm Tucker Silvan.
Speaker 1 (22:15):
That is Wall Street.
Speaker 3 (22:16):
Watch, Tucky. You've ever flown on Huzbekistan Uzbekistan aras No?
Speaker 1 (22:20):
I can't say that.
Speaker 3 (22:21):
I have no.
Speaker 5 (22:22):
Yeah, I can say Jet Blue is my primary.
Speaker 3 (22:25):
Could you find it on a map?
Speaker 1 (22:27):
Probably not bike.
Speaker 3 (22:28):
I couldn't either, I just I just did. So they
are unfortunately.
Speaker 2 (22:32):
Also, I was curious they are not part of any
Alliance frequent flyer programs, So if you do fly on
ZoZ Pakistan, you're not going to earn your American Airlines points.
Speaker 4 (22:43):
Darns shucks. They give you discount if if you're willing
to sit next to a chicken.
Speaker 2 (22:47):
Though, I think, uh, China flooding the world.
Speaker 3 (22:55):
You're cheap exports after the tariff.
Speaker 2 (22:57):
So do we actually have any reliable numbers mark in
terms of year of a year US imports from China
dollar value or.
Speaker 4 (23:07):
I guess, has the trade deficit gone down?
Speaker 3 (23:09):
Yeah? I mean I don't really.
Speaker 2 (23:11):
I'm not so sure about the deathicsit, but just in
terms of dollar value of imports, I don't know if
we have any reliable data yet on twenty twenty five,
since the announcement of terrorists.
Speaker 3 (23:19):
I'd imagine the answer is down.
Speaker 2 (23:22):
We're buying less stuff from China in twenty twenty five
compared to twenty twenty four. But I get surprised by
what seems like common sense frequently.
Speaker 4 (23:31):
Yeah, so they did contract pretty dramatic. The answer to
your question is yes. The series is called Imports of
Goods by Customs Basis from China. I'm just pulling this
from our usual database. It fred in January the number
was forty two billion dollars. That level that that bottom
did about twenty so down by more than fifty percent
(23:52):
as of June. But it's since tick back up, though
not all the way, not even close to about twenty seven.
So yeah, it did go down dramatically.
Speaker 2 (24:00):
So the United States obviously buying a fair bit less
stuff from China, and in response, seemingly I don't know
how intentional is on the part of China versus just
naturally this is what happens. But China seems to be
flooding the rest of the world with relatively cheap exports
as a result of the United States not buying this stuff.
(24:21):
Not surprising on that front. But at the same time,
you have now a bunch of countries who are trying
to figure out, Okay, what do we do about this?
If suddenly China is going to begin dumping everything from
steel cars and car parts to solar panels into our market,
what do we do? Because you know, if you're Volks,
(24:43):
if you're Germany, for example, I would imagine you have
a pretty vested interest in making sure that you can
still manufacture cars in your country, and a big threat
of a bunch of Chinese made vehicles and solar panels
and everything else is going to potentially threaten that industry.
But I think at the same time, a lot of
these countries are saying, can we really afford to negotiate
(25:05):
with the United States on tariffs at the same time
that we would need to fight with China on tariffs?
And so so far you have seen very little action
on this. Mexico was floating tariffs as high as fifty
percent on Chinese made products, including cars, auto parts, and steel.
Speaker 3 (25:20):
Indian authorities have.
Speaker 2 (25:23):
Been receiving applications in recent weeks from companies doing business
in India investigating into good.
Speaker 3 (25:29):
Goods stumping from China.
Speaker 2 (25:32):
I just when I look at this, I know this
is largely bad news for some of these countries. I
look at this and say, what an amazing opportunity the
United States has to build something here?
Speaker 3 (25:42):
Right Like if most would agree, would you agree? Mark that?
Speaker 1 (25:46):
Like?
Speaker 2 (25:46):
The real problem child that we're trying to address with
a lot of this stuff, at least historically, has been China.
I don't know, I personally have a.
Speaker 4 (25:53):
Currency manipulator, yeah, which I think. Look, I think most
Americans are willing to let China compete as long as
the playing field is level, but when they're keeping their
currency artificially low, that is, allowing their imports to be
cheaper than they would be if the market was allowed
to set currency rates. And we're going to get to
this when we talk about Argentina two and the problems
it's causing there. Then Yeah, Mike, I think getting them
(26:16):
to stop manipulating their currency to give them an unfair
to give them even more of an advantage.
Speaker 3 (26:20):
Yeah.
Speaker 2 (26:21):
My main two things real economic issues, currency manipulation and
intellectual property theft. Oh that those two things, you know,
amazing disrespect for those two kind of capitalism.
Speaker 4 (26:36):
A huge cultural difference there. I'm sorry, but there is.
Speaker 2 (26:38):
And so the way I look at this is, look,
what an amazing opportunity if many how many countries I
guess would say, yeah, we are willing to slap tariffs
on Chinese made products, so long as it means free
trade with the United States.
Speaker 4 (26:55):
I know we're not on the table and have to
be se point three way we'd have to get involved.
We'd have to offer and China is doing it right
now with Europe and elsewhere.
Speaker 2 (27:04):
And that's my part, that's precisely my point is, yes,
the United States would need to.
Speaker 3 (27:08):
Offer this sort of yeah, yeah, yeah, proactive trading partners.
But I don't know.
Speaker 2 (27:13):
I would gladly, uh, you know, agree to a you know,
free trade agreement with India and most of Europe and
Canada and Mexico if it meant that they were all
going to proactively look at China in the same way
that we seem to be today. And and they're just
they can't.
Speaker 4 (27:31):
Like there are terms of trade are so different, their
comparative advantage relative to China relative to US is different.
Wouldn't make sense to cut off what they buy from China.
The reason they're buying it from China in the first
place is that China can make it in a relative sense,
not an absolute sense, more cheaply than they can. So
they focus on what they're relatively better at. And similarly,
they trade with the US for the same reason. It's
not like you could swap out one trading partner.
Speaker 2 (27:53):
Agree for If you just simply cut off trade from China,
then there will be a global recession on the scale
of which we haven't seen.
Speaker 4 (28:00):
One of the reasons we're doing what we're doing with
Argentina right now, we're offering a bail that I know
we're going to get to the story later. But this
is related, is because China is offering them support for
their currency. We'll talk about the fundamentals that are driving
people away from the Argentine pay so later, but we
are trying to preempt, if you will, uh, China offering
a helping hand there and further entrenching themselves in that region.
Speaker 3 (28:22):
Marcus chomping at the bit here.
Speaker 4 (28:24):
I know, no, no, no, but it's related.
Speaker 3 (28:26):
It is related. So let's take a quick break. When
we come back.
Speaker 2 (28:29):
Want to talk about the pretty regular catastrophes that strike Argentina,
but what seems to be happening right now and where
the US may get involved in Argentina's fiscal situation.
Speaker 3 (28:39):
Next on the Financial Exchange.
Speaker 1 (28:41):
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
tekst US six one seven, three six two thirteen eighty five.
With your comments and questions about today's show, and let
us know what do you think about the stories we
are covering. This is the Financial Exchange Radio Network.
Speaker 2 (29:10):
All right, well, I am going to break my promise here.
We said we're gonna talk about Argentina, but we don't
think we can do a justice in the time we have,
So tune into our next segment in just a few minutes,
where we talk a little bit about the Argentina crisis
that is ongoing and where the US involvement might be.
But before we get there, I do want to talk
about in Nvidia. So stock is down a little bit today.
(29:31):
Tucker mentioned during Wall Street Watch they announced that they're
going to be investing one hundred up to one hundred
billion dollars not necessarily one hundred billion, but up to
one hundred billion dollars in open AI to support their
data center and power capacity. Now, why would a company
like in video want to do something like this. The
answer seemingly is because in order to build that data
(29:51):
center and power capacity and all the stuff, they are
going to fill it to the brim with Nvidia chips.
And this is the stuff to me that like, you know,
on the surface, you look at it like, oh wow,
they must be really confident in the technology that Chappy
GPT is producing. When the answer is yeah, maybe or
(30:11):
maybe the spiggott is running dry enough that the pre
eminent company that people talk about in artificial intelligence is
feeling as though they need to invest a whole bunch
of money in one of their largest customers to keep
the ball rolling.
Speaker 4 (30:30):
Yeah. This is like McDonald's investing in a company that
makes statins for cholesterol, isn't it. Yeah, I'm only half kidding.
They're going to stuff these centers with their chips. Yeah,
I mean this little bit circular.
Speaker 3 (30:44):
It is very circular. Like, yes, I can.
Speaker 4 (30:47):
See yes, McDonald's, by the way, which I love. It's
just the first example they came to mind.
Speaker 3 (30:51):
Sorry, they're with my kids every Sunday evening.
Speaker 2 (30:54):
The logic though on this it's it's just so easy
to connect the dots on this one. Like hmm, okay,
you know the main player in generative AI, which has
grown the user base faster than any tech platform in history.
By the way, they have reached I don't remember how
many users they have now, but they have reached that
(31:16):
user base faster than any tech company in world history. Yeah,
and they can't find the cash to keep buying these chips.
They're needing to go to their biggest supplier of the chips.
It's it's not illegally. I have no concerns about any
of that. I am pretty genuinely concerned about what it
(31:37):
says exactly about the business model here that in Nvidia
feels it is a good business decision to go invest
this much money in if not their single largest than
one of their largest customers out there.
Speaker 4 (31:51):
Yeah, shareholders apparently don't like it, at least those on
the margin. The stocks down a couple percentage, right.
Speaker 2 (31:56):
I think it's again and you know sometimes we've seen
these announcements come and go and with you know, AI companies,
the stock movement is not terribly logical today.
Speaker 3 (32:04):
I think it is.
Speaker 2 (32:05):
You have a stock price moving down based on bigger
best and it doesn't seem like a really great Yeah,
this was the best use.
Speaker 4 (32:12):
Of their capital. Right on the margin, they had a
bunch of ideas in front of them. This is the
one they picked. What does that tell us?
Speaker 3 (32:18):
Yeah?
Speaker 2 (32:18):
Right, because I mean, you know, that's what businesses do,
is they have a bunch of cash from sales that
they're probably sitting on, uh, and they're saying, what is
the best investment that we can make with this?
Speaker 3 (32:28):
Is it improving our product? Right?
Speaker 2 (32:31):
Is it making the next generation AI chip that's going
to power these things even faster to keep pace with
the competition from China.
Speaker 3 (32:39):
Is it buying back some of our own.
Speaker 2 (32:40):
Shares because we find the story so compelling with Nvidia
that we're going to buy back our own shares. Is
it paying a dividend out to our shareholders, Uh, in
order to reward them for.
Speaker 4 (32:50):
Keeping the growth in line with street That's that's what
you're going on.
Speaker 3 (32:54):
Yeah, I wasn't going there. That's that's precisely.
Speaker 4 (32:57):
They need to hit these growth targets to keep the
share price.
Speaker 2 (33:00):
Investors rely on our projections on share prices, and the
only way that we can keep our sales going. This
is one of the arguments that in Video could be
making at the CEO level, is to give the money
to the biggest customer. Who's Yeah, I mean it was,
by the way, by all accounts, probably vastly unprofitable.
Speaker 3 (33:21):
In video is not and video has a ton of profit.
Speaker 2 (33:23):
But I mean you take a look at open Ai,
who is a privately held company, which is why this
one hundred billion dollar investment is going the way it is. Yeah,
to me, this rings I guess I don't want to
say alarm bells. I'm not there.
Speaker 3 (33:39):
It's not ringing alarm bells, but you take a look
at it and say.
Speaker 4 (33:42):
Hmm, it suggests peak growth maybe past us.
Speaker 3 (33:45):
It does suggest that that could be.
Speaker 4 (33:47):
It did just suggest it. There are many factors that
perhaps point in the other direction. This is not my area, but.
Speaker 2 (33:52):
Yeah, it suggests something that is just yeah, definitely gives
you pause and definitely makes you want to look at
over the next few quarters to say, Okay, fine, but
where's that next spurt of growth going to come from?
Speaker 5 (34:04):
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Speaker 1 (35:06):
The proceeding was paid for and the views expressed are
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Cushing and Armstrong did not endorse each other and are
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Speaker 2 (35:18):
Spirit Airlines furlowing one third of their flight attendants cannot
be a good story for their longevity in this world.
So Spirit Airlines announced that they are furlowing these flight attendants.
They've also been getting some voluntary furloughs here and there.
I was debating this. I don't know if you were
(35:39):
on the program, Mark, but we are looking at flights
to or Lando next year in either one of the
two winter school vacation I guess winter spring vacation weeks,
and Spirit Airlines was an option for that February break,
and we were doing the mental gymnastics of like, hmm, okay,
(36:00):
so if I book with my credit card and they
go bankrupt, I'm gonna get my money back. But what
if they go bankrupt in January, now I have to
book on Delta for I would I would assume would
be like three x the cost of what I could
pay right now. We even went through the mental gymnastics
of like, hey, okay, do we buy fully refundable tickets
on Delta also buy the Spirit Airlines ones and then
(36:24):
cancel the Delta tickets if they don't go out of business.
But hm, this this to me seems like a bit
of a snowball effect here. Maybe I'm different, maybe other
people aren't paying as close attention to this, but I
would have a very difficult time booking myself on a
flight for Spirit Airlines right now, unless it were in
(36:44):
the next week.
Speaker 4 (36:45):
What's the pilot's going to be on monster dot com
the whole time?
Speaker 3 (36:48):
Right? Yeah?
Speaker 4 (36:48):
You might on LinkedIn posting about his skills. Yeah, you
don't want to be on the last planeload of an
airline that's named after what happens to you when you die?
I always work? Isn't that the stupidest?
Speaker 3 (37:03):
Oh?
Speaker 1 (37:06):
Stupid?
Speaker 4 (37:06):
Oh that's what McKenzie came up with for them, So
I don't know if it was mackenzie.
Speaker 2 (37:12):
I'm gonna come at this from one other perspective, how
was this company not allowed to merge with jet Blue? Like, honestly,
they told you that they were going to go belly up.
If they're not allowed to merge, they clearly don't have
much of a business model. Jet Blue is struggling too,
And so instead what we get is, hey, Google, you
are totally allowed to still put your search engine on
(37:34):
Apple's devices and pay them whatever you want to do
so and run your search business. Don't split up anything.
Because what about AI? It was the entire argument from
the judges. I know you did a bunch of wrong
stuff in the past, and I totally agree that it
was wrong and you were acting like monopoly. But I'm
not going to break you up because what if AI
disrupts your business model a little bit? And I don't
want to hurt Apple because you know they're not involved.
Speaker 3 (37:56):
In this case. And then at the same time, we
can turn around and say Spirit and jet Blue merging together.
That would be disastrous for the world. We cannot allow
that to happen. Just seems like something that I can't
fully understand.
Speaker 2 (38:09):
We gotta take a quick break, but a lot more
to cover in the second hour, including h one B,
Visus and the State of Argentina. That's next on the
financial change
The Financial Exchange is produced by Money Matters Radio and
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the hosts. Do not reflect the opinions of Armstrong Advisory
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(00:20):
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(01:06):
Mike Armstrong and Mark Vandetti.
Speaker 2 (01:10):
Good morning, Happy Tuesday, and welcome back to the Financial Exchange.
We've got an interesting marketing market shaking out here in
early training. The Nasdaq currently off by about a third
of percent, whereas the Dow is up by what's that
two thirds of percent? Of the S and P's flat.
We've got some Nvidia news to cover today. We've got
every FED official that can make it in front of
(01:32):
a microphone speaking yesterday and today. So Powell will be
talking today at twelve forty five, I believe it is.
And Mark Vandetti's rolling his eyes. In terms of the Nasdaq,
as I mentioned in videos, moving down, we've got some
news to cover on them, and an investment in open Ai,
owner of chat GPT. I was just looking at the
(01:53):
Dow because you know, pretty easy to look at thirty
stocks and figure out what might be moving. But Boeing
had some news that broke three m moving up, Caterpillar, Chevron,
bunch of stocks really moving up in that two percent
range today, and not a whole lot of components in the.
Speaker 3 (02:09):
Negative, although you do have oh I forgot that is
Nvidia a Dow component? Now?
Speaker 2 (02:15):
Yeah, I guess they are but not as much of
a waiting as they would in the overall market, given
that the Dow is a price weighted index rather than
a market cap weighted index.
Speaker 4 (02:23):
So yeah, we'll be what do they do, like we
were talking about this, should we my mind, I can't
let go of this now. Very briefly, they add all
the prices together and then it's just like if you
have ten stocks, they're all trading at ten dollars a year,
every stock gets weighted at ten percent, very straightforward, as
opposed to market cap, which weaits based on the value
of the shares in totally those sound like the same things,
(02:46):
but they're they're different.
Speaker 3 (02:48):
They are very different.
Speaker 2 (02:49):
And uh yeah, it's why we tend to not really
quote the Dow even though no, you know, it's it's
just been such a long running index that everybody likes
to look at.
Speaker 3 (02:58):
But it's important to.
Speaker 2 (02:59):
Wreckgnize that it really doesn't have a whole lot of
actual representation of the US well because.
Speaker 4 (03:05):
It isn't investible the same way say the S and
P is. Everybody in the world could buy a little
slice of the S and P and our portfolios would
all look the same. That's the beauty of a market
cap weighted index. The same is not true of the
DOO or other indices that depart from market cap weighted construction.
It's a subtle point, but it's really the reason modern
finance looks the way that it does, with the S
(03:28):
and P or a Russell one thousand being the anchor
of portfolios.
Speaker 2 (03:31):
It also makes it so that some companies that are
too high in terms of share price either need to
do a stock split to be considered to be included,
or just can't be included because, oh, you know, Berkshire
Halthaway's share prices are too expensive, so they can never
be in there, for example. So anyway, it's just an
interesting day. We don't frequently see NASDAC slightly up, Dow
(03:52):
slightly NASAC slightly down, Dow slightly up, But that's what
we are getting today anyway, speaking of of just where
markets are and different components.
Speaker 3 (04:04):
The is this market watch that's asking if the market
is overvalued?
Speaker 2 (04:08):
Barons Barons asks the question is the stock market overvalued?
And then they seemingly answer the question with We're about
to find out, And they then do not allude at
all in the article as to why we would be
about to find out, and I would debate the idea
as to whether or not we're about to find out,
But give me some fundamentals mark here, because everyone and
(04:30):
their mother is comparison comparing this market to the dot
com bubble right now, at least in terms of pricing,
and I think that's a reasonable comparison point to make.
Speaker 3 (04:39):
So let's do it.
Speaker 2 (04:40):
Where do we stand in terms of priciness of this
stock market in terms of you know, other markets that
we've seen, or just against itself across the.
Speaker 4 (04:49):
When you're buying or selling a house, you can look
at price per square foot. Everybody quotes it. It's an
easy to calculate and relate to measure the The equivalent
with stocks is probably the trailing twelve month price to
earnings ratio, which is exactly what it sounds like. You
take the current price and you divide it by the
(05:10):
last twelve months earnings profits that is of the company
in question.
Speaker 2 (05:14):
Easier to do on a single company, more complicated form
to do on five hundred of them, but very easy.
Speaker 4 (05:21):
To do with modern with with computers.
Speaker 3 (05:24):
Since we're not using applicantses anymore, it's pretty easy.
Speaker 4 (05:26):
Yeah, Since the nineteen eighties, everybody's had this technology on
their desktop, very easy to calculate, even easier to buy
or get for free from many online services. So price
to earnings is usually what people refer to when they
are looking for a gauge of how expensive are stocks
relative to each other, relative to themselves over time.
Speaker 3 (05:46):
Relative to other country stocks, relative to directors.
Speaker 4 (05:49):
And there are problems with those comparisons that make them inapt.
They're not quite apples to apples because P to E
should represent risks involved at the country level, political risk,
institutional risk. Anyway, we can get into that at a
different time. That's not really the point of this article.
Point is, by any measure, let's just use price to earnings.
Sure stocks are at near record price to earnings ratios
(06:14):
one way to translate that, and by many measures of
price to earnings. You could put a lot of different
earnings calculations in that denominator that we were talking about, right, Mike,
and you can get basically the same conclusion, get to
the same conclusion, which is stocks are epically expensive. High
PE equates to being expensive investors are willing to pay
(06:35):
more today. That's the P and the P TOE for
prospective earnings, because the P is known, the E is
only known in the past. You're only paying for what
a company can do, not for what it did. It's
where that old expression great company, lousy stock price, Well,
that's not quite the expression. I kind of made that up,
but a lot of people have made that sentiment, and
(06:58):
for good reason. So stocks are by any measure, historically
eye poppingly epically expensive.
Speaker 2 (07:06):
What does that mean, depending on how you measure, we're
in the ninety eighth percentime.
Speaker 3 (07:10):
Yeah, we do that.
Speaker 4 (07:11):
I run that every couple of weeks for the group
internally ninety fifth on the so called chiller pe which
takes the last ten years worth of runnings of justin
for inflation and takes an average to smooth out business
cycle effects.
Speaker 2 (07:21):
But yeah, yeah, So next question is obviously, when were
they more pricey? And the answer is right before the
dot com we were very excited about another emerging technology
and how it was going to change the world in business,
and everyone.
Speaker 4 (07:34):
Was changing the world to me. I know, I said
this last time I was on But what made it
different was to me, having lived through it, that was
changing the world. Every eighteen months we all got a
new laptop we all got. Our software was updating every
six months. We went from working in the office all
the time to being able to work remotely, from never
seeing your clients to being able to video call them.
It was really dramatic in the late night.
Speaker 2 (07:56):
And granted, Mark, you knows as you know, and I
try and bring up frequently I am significantly younger than you.
Speaker 3 (08:01):
But to me, I think the I think that the.
Speaker 4 (08:07):
Hey, SCREWBOPI I.
Speaker 3 (08:08):
Actually have no idea how fifty three year I say
it all the time.
Speaker 4 (08:11):
I was born in nineteen seventy two.
Speaker 2 (08:13):
But I think that those differentiations are a little bit
tougher to tease out right, Like, is can you point
to the internet as being way more, way more impactful
than artificial intelligence is right now? I have a tougher
time teasing that out. Then, I think you'd Oh.
Speaker 4 (08:31):
But we know what the productivity. We know what productivity
was doing in nineteen ninety nine. We didn't know it
in nineteen ninety nine, but we know now that it
had doubled.
Speaker 3 (08:39):
That's kind of my point is we may not.
Speaker 2 (08:41):
Yeah, I could see a compelling argument where five years
from now you look back on productivity and say, oh, Wow,
it did dramatically increase as a result of artificial intelligence,
and we won't know for a long time.
Speaker 4 (08:51):
But there were but it was tangible. Then I'm just
I mean, I'm not dead yet. I still have my senses.
I know how my life's changing or why are you snicker?
I know I can see what people are you know,
doing with technology, etc. And how it's changing their workflow.
And I mean, have you seen it? You know, one
of you guys.
Speaker 3 (09:11):
On the artificial yeah intelligence side.
Speaker 4 (09:13):
Do you use anything day to day dramatically more efficiently
you think than you did. So some of the changes
are subtle and gradual, so it's hard to say like
searchers are quicker and stuff like that, But.
Speaker 2 (09:23):
I will say that on the search side of things, yes,
I do think that my ability to gain answers to
questions that are relatively accurate on a pretty quick basis
compared to clicking through links has changed fairly dramatically just
over the last twelve months.
Speaker 3 (09:40):
And I don't know.
Speaker 2 (09:42):
The more and more I see on the AI side,
the more I see how it maybe more in my
but and I think that would be the argument if
I'm going to take the other side of this argument
and justify a price earnings ratio that has only once
been eclipped during the dot com bubble. It would be
more mark, Mike, You're just on the very cusp of
(10:03):
what artificial intelligence can do, and so therefore it is
still being undervalued and it is going to I can't.
Speaker 4 (10:10):
Refute that it's a prospective argument. It starts to sound
a lot like bitcoin to me. Though any day now
bitcoin is going to have a compelling so called use case.
We're still waiting.
Speaker 2 (10:19):
The flip side to all of this that we can
tease that for longer. But I don't really think that
anybody debates that the Internet was revolutionary in just about
every single way. Revolutionized it was business and revolutionized how
we went on vacation at revolutionized raid stocks.
Speaker 4 (10:36):
Everything went from telephones to online in two years or so.
Speaker 2 (10:41):
Even as revolutionary as that technology was, the stock market
had to go through but didn't have to, but did
go through a bubble and then a pop in order
to get to where we are with modern technology that
relies upon the Internet. And so I just don't The
most common argument that I get is, Mike, you're missing
the boat. You're missing the point on how significant artificial
(11:02):
intelligence is it's going to revolutionize everything. And my counterpoint
would be great, that doesn't mean the stock market isn't overvalued.
Speaker 4 (11:08):
More than electricity did. I mean it took decades. And
if you're interested in this, the guy's name is Robert Gordon.
He wrote a great book in which he summarized a
bunch of his papers. The Rise and Fall of American
Growth is the name of the book. If you're interested
in how the industrial revolution, the steam revolution to electricity
trickled into everyday life through air conditioning and all the
(11:29):
other conveniences that we enjoy, how long it took, and
how it didn't dramatically change the long term trend in
GDP growth because it did take so long to permeate
the economy. There are some useful lessons there. This could
take decades to play out stock Some stock investors seem
to think it's going to play out in the next
three to five years. That would be unusual historically speaking.
Speaker 2 (11:51):
Let's take a quick break when we come back. As
I mentioned, every Fed governor that can find a microphone
has been chatting up their views on the economy will
be and a few of them next year on the
Financial Exchange.
Speaker 1 (12:03):
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Speaker 5 (12:31):
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Speaker 2 (13:03):
All right, Mark, Well, last week the Fed cut rates
by a quarter of one percent. We are now sitting
at a target rate on FED funds of between four
and four and a quarter percent. I remain surprised by
how certain investors seem to be that rates are going
to continue to come down at this stage given announcements
that we've heard, but we will see what FED governors
(13:24):
say over the course of the next few weeks.
Speaker 3 (13:26):
Here.
Speaker 2 (13:26):
The next meeting is not until October twenty ninth, at
which point the Schicygomercantyle Exchange is pricing in a ninety
two percent likelihood of another twenty five basis point rate
cut at that meeting. Following that, we'll have one more
before year end on December tenth, and there's currently nearly
a little bit more than a three quarters chance that
(13:48):
rates our fifty basis points lower at that meeting. We
can talk about the unlikelihood of that, because I think
there's been a lot of governors who since the meeting
have been coming out and saying we might not need
any more rate cuts, and so I think there's a
real potential for a supprise on the rate cutting cycle.
But before we go there, Stephen Myron, the new FED appointee,
(14:11):
was giving a speech yesterday and talking about his views
on the economy, and look, Stephen Myron is the newest appointee.
He is a member of the White House. He set
on the he sits on the Economic Council, of Advisors
for the White House and took a leave of absence
for this role because his appointment as Fed Governor will
(14:33):
expire at the.
Speaker 3 (14:34):
End of January. I believe it is if.
Speaker 2 (14:36):
He's reappointed, I would expect that he would resign, but
who knows. But he has been He voted for a
fifty basis point rate cut at the most recent meeting,
and he's been fairly outspoken in agreeing with the President
that rates need to be significantly lower. My problem with
his viewpoints on all this. You know, he lays out
a bunch of arguments. One of his arguments is, look,
the policy from the Trump White House is one that
(15:00):
is going to be less.
Speaker 3 (15:02):
Inflationary in the future.
Speaker 2 (15:04):
We are going to see, for instance, you know, the
tariff revenue coming in is not going to raise prices
on consumers significantly. And I think, regardless of your view
on tariffs, you could make a compelling argument that the
very leads the tariffs would be a one time price adjustment.
Speaker 3 (15:19):
Many have done so.
Speaker 2 (15:20):
I don't find the argument to be terribly compelling, but
that is the argument. Another argument that deportations are going
to reduce housing demand. If it does happen, we certainly
haven't seen it yet, but okay, Like another argument for that.
The problem that I take with his arguments is that
he has very recently argued the opposite side on financial
(15:45):
conditions and rates. So in twenty twenty four, less than
eighteen months ago, here were his arguments for raising interest
rates and being very suspicious of inflation. First, that globalization
was going to reverse and there's going to be a
new era of conflict emerging in its place. Is there
(16:08):
anyone that would look around today and say that globalization
seems to be increasing now compared to eighteen months ago,
right or wrong? I don't think you know, we're talking
about increased barriers to trade.
Speaker 3 (16:19):
We're talking about ten turns.
Speaker 4 (16:20):
Of dollar volume. It's going up, but yeah, barriers are
being erected.
Speaker 3 (16:23):
Yeah.
Speaker 2 (16:25):
The other argument was, hey, eighteen months ago, Stephen Byron's
argument was there's about to be a boom in capital
intensive hardware spending to power the AI revolution. So he's right, like,
we've seen a massive increase in spending, we've seen data
center construction, investments in artificial intelligence. But again, eighteen months
(16:45):
ago he argued that was going to be inflationary, and
now is seemingly saying it's not important. Many US households
enjoy fixed rate mortgages locked in around four percent, and
therefore are going to be unwilling to sell their homes
and will continue to have dollars to spend because of
those fixed rate mortgages. That has also not changed. And
so I guess where I lead to with Steven Myron
(17:09):
is like I'll be the first to say, I really
genuinely do not know if today the bigger risk is
inflation or unemployment. I think both are looking at us
right now as a potential threat. Hiring has been extremely
weak over the last six months, Inflation has remained at
three percent. My only point is, you know, after reading
through Stephen Myron's arguments and listening to his speech yesterday,
(17:32):
I really don't find any of his arguments for lowering
rates to be compelling and much else other than finding
excuses to do so.
Speaker 4 (17:39):
Yeah, I don't believe that he believes them the models
he's using, and I haven't seen precisely what assumptions he's
plugging in, but I know them generally. It's very difficult
to get to the conclusions that he's reached using traditional
economic or even somewhat aggressive assumptions in in traditional economic models.
I think he's carrying water for the administration. That's why
(18:01):
he was put there for I'm sorry, but he is.
It's why he was put there. And I'm not, by
the way, judging that. I you Trump, the President has
said he wants lower interest rates. You may think that's great,
you may think that will lead to higher inflation, but
it just is. Let's just take that as a fact.
Myron is now saying that he sees demand slowing. All
those factors you ticked off early on would result in
(18:23):
slower overall demand. That's something the Fed can do if
you really believe that, and I don't believe that he does,
nor do I think the White House does. Nobody's forecasting
a recession in the White House, and they would reject
that implication of these arguments, but it's behind them. The
Fed can do something about slowing demand. It can print
money to lower interest rates, which result in increased investment
(18:45):
and consumption. That's what's making its way through the economy
right now as a result of the recent series of
rate cuts, and apparently there will be more of them.
The danger, Mic, as you pointed out, is that if
demand grows faster than the economy's productive capacity. More simply,
if demand grows faster then supply, you get inflation. We
experience that in twenty twenty one, twenty twenty two, when
(19:07):
demand quickly outpaced supply.
Speaker 3 (19:09):
YEP.
Speaker 2 (19:10):
So look, as I pointed out, I think there's a
compelling argument on either side that hey, we're headed for
a period of higher unemployment or we're heading for a
period of higher inflation. But the arguments that are being
laid out by Meyern in particular, I just don't find compelling.
Speaker 3 (19:26):
Let's take a quick break.
Speaker 2 (19:27):
When we come back, Wall Street watches up next.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
Well markets our mixed territory at the moment, after all
three major averages recorded all time highs yesterday. Coming up
early this afternoon, Wall Street will monitor Jerome poll speaking
engagement in Rhode Island. Actually, right now, the Dow is
up by four tenths of one percent, or one ninety
eight points higher, SMP five hundred is dipping by only
(20:24):
three points, Nasdaq is up, is down excuse made three
tenths of one percent or sixty six points lower. Russell
two thousand is actually up nine tenths of one percent.
Tenure Treasure brailed is flat and currently at four point
one four to three percent, and crude oil up nearly
two percent higher Training at sixty three dollars in forty
five cents a barrel. Some more big news from Nvidia
(20:46):
emerged yesterday afternoon with the announcement that the AI in
chip giant said it would invest one hundred billion dollars
into open Ai, where open Ai will build in deploy
systems using in videos graphics processing units. In Video stock
jumped four percent yesterday on that news, but is giving
back one and a half percent today. Meanwhile, Boeing shares
(21:08):
a climbing three percent after Isbekistan Airways Airways excuse me,
said it would buy fourteen seven eighty seven to nine
Dreamliner jets, with options for eight more and a deal
worth over eight billion dollars. Separately, Bloomberg Als reported that
the US and China are in the final stages of
negotiations for a huge Boeing aircraft order, according to US
(21:33):
Ambassador to China David Purdue. Elsewhere, after its seven percent
decline yesterday, Kenbyew shares a rebounding over four percent today.
The Tailanal parent company is preparing for lawsuits after the
Trump administration said prenatal exposure to Tailanol's active ingredient might
cause autism. Auto owne down by about a third of
(21:55):
a percent after the auto parts retailers saw its gross
profits and earnings share fall below street expectations for its
recent quarter despite an increase in same store sales, and
after today's closing bell, we'll see earnings from Micron Technology.
That stock is currently up over two percent. I'm Tucker Silvan.
Speaker 1 (22:15):
That is Wall Street.
Speaker 3 (22:16):
Watch, Tucky. You've ever flown on Huzbekistan Uzbekistan aras No?
Speaker 1 (22:20):
I can't say that.
Speaker 3 (22:21):
I have no.
Speaker 5 (22:22):
Yeah, I can say Jet Blue is my primary.
Speaker 3 (22:25):
Could you find it on a map?
Speaker 1 (22:27):
Probably not bike.
Speaker 3 (22:28):
I couldn't either, I just I just did. So they
are unfortunately.
Speaker 2 (22:32):
Also, I was curious they are not part of any
Alliance frequent flyer programs, So if you do fly on
ZoZ Pakistan, you're not going to earn your American Airlines points.
Speaker 4 (22:43):
Darns shucks. They give you discount if if you're willing
to sit next to a chicken.
Speaker 2 (22:47):
Though, I think, uh, China flooding the world.
Speaker 3 (22:55):
You're cheap exports after the tariff.
Speaker 2 (22:57):
So do we actually have any reliable numbers mark in
terms of year of a year US imports from China
dollar value or.
Speaker 4 (23:07):
I guess, has the trade deficit gone down?
Speaker 3 (23:09):
Yeah? I mean I don't really.
Speaker 2 (23:11):
I'm not so sure about the deathicsit, but just in
terms of dollar value of imports, I don't know if
we have any reliable data yet on twenty twenty five,
since the announcement of terrorists.
Speaker 3 (23:19):
I'd imagine the answer is down.
Speaker 2 (23:22):
We're buying less stuff from China in twenty twenty five
compared to twenty twenty four. But I get surprised by
what seems like common sense frequently.
Speaker 4 (23:31):
Yeah, so they did contract pretty dramatic. The answer to
your question is yes. The series is called Imports of
Goods by Customs Basis from China. I'm just pulling this
from our usual database. It fred in January the number
was forty two billion dollars. That level that that bottom
did about twenty so down by more than fifty percent
(23:52):
as of June. But it's since tick back up, though
not all the way, not even close to about twenty seven.
So yeah, it did go down dramatically.
Speaker 2 (24:00):
So the United States obviously buying a fair bit less
stuff from China, and in response, seemingly I don't know
how intentional is on the part of China versus just
naturally this is what happens. But China seems to be
flooding the rest of the world with relatively cheap exports
as a result of the United States not buying this stuff.
(24:21):
Not surprising on that front. But at the same time,
you have now a bunch of countries who are trying
to figure out, Okay, what do we do about this?
If suddenly China is going to begin dumping everything from
steel cars and car parts to solar panels into our market,
what do we do? Because you know, if you're Volks,
(24:43):
if you're Germany, for example, I would imagine you have
a pretty vested interest in making sure that you can
still manufacture cars in your country, and a big threat
of a bunch of Chinese made vehicles and solar panels
and everything else is going to potentially threaten that industry.
But I think at the same time, a lot of
these countries are saying, can we really afford to negotiate
(25:05):
with the United States on tariffs at the same time
that we would need to fight with China on tariffs?
And so so far you have seen very little action
on this. Mexico was floating tariffs as high as fifty
percent on Chinese made products, including cars, auto parts, and steel.
Speaker 3 (25:20):
Indian authorities have.
Speaker 2 (25:23):
Been receiving applications in recent weeks from companies doing business
in India investigating into good.
Speaker 3 (25:29):
Goods stumping from China.
Speaker 2 (25:32):
I just when I look at this, I know this
is largely bad news for some of these countries. I
look at this and say, what an amazing opportunity the
United States has to build something here?
Speaker 3 (25:42):
Right Like if most would agree, would you agree? Mark that?
Speaker 1 (25:46):
Like?
Speaker 2 (25:46):
The real problem child that we're trying to address with
a lot of this stuff, at least historically, has been China.
I don't know, I personally have a.
Speaker 4 (25:53):
Currency manipulator, yeah, which I think. Look, I think most
Americans are willing to let China compete as long as
the playing field is level, but when they're keeping their
currency artificially low, that is, allowing their imports to be
cheaper than they would be if the market was allowed
to set currency rates. And we're going to get to
this when we talk about Argentina two and the problems
it's causing there. Then Yeah, Mike, I think getting them
(26:16):
to stop manipulating their currency to give them an unfair
to give them even more of an advantage.
Speaker 3 (26:20):
Yeah.
Speaker 2 (26:21):
My main two things real economic issues, currency manipulation and
intellectual property theft. Oh that those two things, you know,
amazing disrespect for those two kind of capitalism.
Speaker 4 (26:36):
A huge cultural difference there. I'm sorry, but there is.
Speaker 2 (26:38):
And so the way I look at this is, look,
what an amazing opportunity if many how many countries I
guess would say, yeah, we are willing to slap tariffs
on Chinese made products, so long as it means free
trade with the United States.
Speaker 4 (26:55):
I know we're not on the table and have to
be se point three way we'd have to get involved.
We'd have to offer and China is doing it right
now with Europe and elsewhere.
Speaker 2 (27:04):
And that's my part, that's precisely my point is, yes,
the United States would need to.
Speaker 3 (27:08):
Offer this sort of yeah, yeah, yeah, proactive trading partners.
But I don't know.
Speaker 2 (27:13):
I would gladly, uh, you know, agree to a you know,
free trade agreement with India and most of Europe and
Canada and Mexico if it meant that they were all
going to proactively look at China in the same way
that we seem to be today. And and they're just
they can't.
Speaker 4 (27:31):
Like there are terms of trade are so different, their
comparative advantage relative to China relative to US is different.
Wouldn't make sense to cut off what they buy from China.
The reason they're buying it from China in the first
place is that China can make it in a relative sense,
not an absolute sense, more cheaply than they can. So
they focus on what they're relatively better at. And similarly,
they trade with the US for the same reason. It's
not like you could swap out one trading partner.
Speaker 2 (27:53):
Agree for If you just simply cut off trade from China,
then there will be a global recession on the scale
of which we haven't seen.
Speaker 4 (28:00):
One of the reasons we're doing what we're doing with
Argentina right now, we're offering a bail that I know
we're going to get to the story later. But this
is related, is because China is offering them support for
their currency. We'll talk about the fundamentals that are driving
people away from the Argentine pay so later, but we
are trying to preempt, if you will, uh, China offering
a helping hand there and further entrenching themselves in that region.
Speaker 3 (28:22):
Marcus chomping at the bit here.
Speaker 4 (28:24):
I know, no, no, no, but it's related.
Speaker 3 (28:26):
It is related. So let's take a quick break. When
we come back.
Speaker 2 (28:29):
Want to talk about the pretty regular catastrophes that strike Argentina,
but what seems to be happening right now and where
the US may get involved in Argentina's fiscal situation.
Speaker 3 (28:39):
Next on the Financial Exchange.
Speaker 1 (28:41):
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
tekst US six one seven, three six two thirteen eighty five.
With your comments and questions about today's show, and let
us know what do you think about the stories we
are covering. This is the Financial Exchange Radio Network.
Speaker 2 (29:10):
All right, well, I am going to break my promise here.
We said we're gonna talk about Argentina, but we don't
think we can do a justice in the time we have,
So tune into our next segment in just a few minutes,
where we talk a little bit about the Argentina crisis
that is ongoing and where the US involvement might be.
But before we get there, I do want to talk
about in Nvidia. So stock is down a little bit today.
(29:31):
Tucker mentioned during Wall Street Watch they announced that they're
going to be investing one hundred up to one hundred
billion dollars not necessarily one hundred billion, but up to
one hundred billion dollars in open AI to support their
data center and power capacity. Now, why would a company
like in video want to do something like this. The
answer seemingly is because in order to build that data
(29:51):
center and power capacity and all the stuff, they are
going to fill it to the brim with Nvidia chips.
And this is the stuff to me that like, you know,
on the surface, you look at it like, oh wow,
they must be really confident in the technology that Chappy
GPT is producing. When the answer is yeah, maybe or
(30:11):
maybe the spiggott is running dry enough that the pre
eminent company that people talk about in artificial intelligence is
feeling as though they need to invest a whole bunch
of money in one of their largest customers to keep
the ball rolling.
Speaker 4 (30:30):
Yeah. This is like McDonald's investing in a company that
makes statins for cholesterol, isn't it. Yeah, I'm only half kidding.
They're going to stuff these centers with their chips. Yeah,
I mean this little bit circular.
Speaker 3 (30:44):
It is very circular. Like, yes, I can.
Speaker 4 (30:47):
See yes, McDonald's, by the way, which I love. It's
just the first example they came to mind.
Speaker 3 (30:51):
Sorry, they're with my kids every Sunday evening.
Speaker 2 (30:54):
The logic though on this it's it's just so easy
to connect the dots on this one. Like hmm, okay,
you know the main player in generative AI, which has
grown the user base faster than any tech platform in history.
By the way, they have reached I don't remember how
many users they have now, but they have reached that
(31:16):
user base faster than any tech company in world history. Yeah,
and they can't find the cash to keep buying these chips.
They're needing to go to their biggest supplier of the chips.
It's it's not illegally. I have no concerns about any
of that. I am pretty genuinely concerned about what it
(31:37):
says exactly about the business model here that in Nvidia
feels it is a good business decision to go invest
this much money in if not their single largest than
one of their largest customers out there.
Speaker 4 (31:51):
Yeah, shareholders apparently don't like it, at least those on
the margin. The stocks down a couple percentage, right.
Speaker 2 (31:56):
I think it's again and you know sometimes we've seen
these announcements come and go and with you know, AI companies,
the stock movement is not terribly logical today.
Speaker 3 (32:04):
I think it is.
Speaker 2 (32:05):
You have a stock price moving down based on bigger
best and it doesn't seem like a really great Yeah,
this was the best use.
Speaker 4 (32:12):
Of their capital. Right on the margin, they had a
bunch of ideas in front of them. This is the
one they picked. What does that tell us?
Speaker 3 (32:18):
Yeah?
Speaker 2 (32:18):
Right, because I mean, you know, that's what businesses do,
is they have a bunch of cash from sales that
they're probably sitting on, uh, and they're saying, what is
the best investment that we can make with this?
Speaker 3 (32:28):
Is it improving our product? Right?
Speaker 2 (32:31):
Is it making the next generation AI chip that's going
to power these things even faster to keep pace with
the competition from China.
Speaker 3 (32:39):
Is it buying back some of our own.
Speaker 2 (32:40):
Shares because we find the story so compelling with Nvidia
that we're going to buy back our own shares. Is
it paying a dividend out to our shareholders, Uh, in
order to reward them for.
Speaker 4 (32:50):
Keeping the growth in line with street That's that's what
you're going on.
Speaker 3 (32:54):
Yeah, I wasn't going there. That's that's precisely.
Speaker 4 (32:57):
They need to hit these growth targets to keep the
share price.
Speaker 2 (33:00):
Investors rely on our projections on share prices, and the
only way that we can keep our sales going. This
is one of the arguments that in Video could be
making at the CEO level, is to give the money
to the biggest customer. Who's Yeah, I mean it was,
by the way, by all accounts, probably vastly unprofitable.
Speaker 3 (33:21):
In video is not and video has a ton of profit.
Speaker 2 (33:23):
But I mean you take a look at open Ai,
who is a privately held company, which is why this
one hundred billion dollar investment is going the way it is. Yeah,
to me, this rings I guess I don't want to
say alarm bells. I'm not there.
Speaker 3 (33:39):
It's not ringing alarm bells, but you take a look
at it and say.
Speaker 4 (33:42):
Hmm, it suggests peak growth maybe past us.
Speaker 3 (33:45):
It does suggest that that could be.
Speaker 4 (33:47):
It did just suggest it. There are many factors that
perhaps point in the other direction. This is not my area, but.
Speaker 2 (33:52):
Yeah, it suggests something that is just yeah, definitely gives
you pause and definitely makes you want to look at
over the next few quarters to say, Okay, fine, but
where's that next spurt of growth going to come from?
Speaker 5 (34:04):
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Speaker 1 (35:06):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
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Speaker 2 (35:18):
Spirit Airlines furlowing one third of their flight attendants cannot
be a good story for their longevity in this world.
So Spirit Airlines announced that they are furlowing these flight attendants.
They've also been getting some voluntary furloughs here and there.
I was debating this. I don't know if you were
(35:39):
on the program, Mark, but we are looking at flights
to or Lando next year in either one of the
two winter school vacation I guess winter spring vacation weeks,
and Spirit Airlines was an option for that February break,
and we were doing the mental gymnastics of like, hmm, okay,
(36:00):
so if I book with my credit card and they
go bankrupt, I'm gonna get my money back. But what
if they go bankrupt in January, now I have to
book on Delta for I would I would assume would
be like three x the cost of what I could
pay right now. We even went through the mental gymnastics
of like, hey, okay, do we buy fully refundable tickets
on Delta also buy the Spirit Airlines ones and then
(36:24):
cancel the Delta tickets if they don't go out of business.
But hm, this this to me seems like a bit
of a snowball effect here. Maybe I'm different, maybe other
people aren't paying as close attention to this, but I
would have a very difficult time booking myself on a
flight for Spirit Airlines right now, unless it were in
(36:44):
the next week.
Speaker 4 (36:45):
What's the pilot's going to be on monster dot com
the whole time?
Speaker 3 (36:48):
Right? Yeah?
Speaker 4 (36:48):
You might on LinkedIn posting about his skills. Yeah, you
don't want to be on the last planeload of an
airline that's named after what happens to you when you die?
I always work? Isn't that the stupidest?
Speaker 3 (37:03):
Oh?
Speaker 1 (37:06):
Stupid?
Speaker 4 (37:06):
Oh that's what McKenzie came up with for them, So
I don't know if it was mackenzie.
Speaker 2 (37:12):
I'm gonna come at this from one other perspective, how
was this company not allowed to merge with jet Blue? Like, honestly,
they told you that they were going to go belly up.
If they're not allowed to merge, they clearly don't have
much of a business model. Jet Blue is struggling too,
And so instead what we get is, hey, Google, you
are totally allowed to still put your search engine on
(37:34):
Apple's devices and pay them whatever you want to do
so and run your search business. Don't split up anything.
Because what about AI? It was the entire argument from
the judges. I know you did a bunch of wrong
stuff in the past, and I totally agree that it
was wrong and you were acting like monopoly. But I'm
not going to break you up because what if AI
disrupts your business model a little bit? And I don't
want to hurt Apple because you know they're not involved.
Speaker 3 (37:56):
In this case. And then at the same time, we
can turn around and say Spirit and jet Blue merging together.
That would be disastrous for the world. We cannot allow
that to happen. Just seems like something that I can't
fully understand.
Speaker 2 (38:09):
We gotta take a quick break, but a lot more
to cover in the second hour, including h one B,
Visus and the State of Argentina. That's next on the
financial change
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