August 27, 2025 • 38 mins
Chuck Zodda and Marc Fandetti discuss Nvidia's earnings coming up and how China risks are making investors nervous. S&P 500 index investors have been rewarded so far in 2025. Is it time to diversify? Why Boomers have more money than everyone else. AI skilled 20-somethings are making hundreds of thousands per year. Why fast-casual is losing out to Chili's.
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Chuck Zada, and Mark Vandetti.
Speaker 2 (01:11):
Chuck, Mark and Sucker with you here today, and markets
are modestly. The DAZZ up about one hundred and twenty
one points, the S and P is up ten NASDAC
up twenty three, so anywhere from about a tenth of
a percent to a quarter percent rise in the major
US indices. Not much happening in the bond market right now.
(01:31):
Tenure Treasury is up nine tenths of a basis point
to four points two six five percent. One thing that
we have seen over the last couple of weeks is
a steepening in the yield curve where shorter yield shorter
term bonds are seeing their yields moving down a little bit,
whereas the long end of the curve, the thirty year,
is creeping back up towards five percent. Now. Could be
(01:54):
any one of a number of things. I often don't
like to ascribe, you know, too much to what's going
on with short time treasury moves, because that's how you
get into the problem where you say stuff last year
like oh like, yields must be moving up because of
concerns about the amount of debt that's out there, and
then when yields come down, you're like, oh, did the
debt picture get fixed? And no, it did, and it's
(02:15):
still basically the same. So I think that when we
look at what we're seeing here, at least on the
bond side, it's generally better just to say, hey, here's
what's happening, and let's see what continues, not hey, this
is definitively any one particular thing. In commodity markets, Oil
(02:36):
West Texas Intermediate up fifty six cents of barrel to
sixty three point eighty one the trip a national average four.
Gas prices, by the way, did finally get out of
that three ten to three twenty per gallon range on
a national basis, up two point two cents on the
day to day to three dollars twenty cents and eight
(02:58):
tenths of a cent. This largely on the back of
a refinery outage that is hitting the Midwest and pushing
gas prices up there at the moment. So, as an example,
in Michigan, right now, gas prices on average three point
thirty nine. Even a week ago they were three eighteen
and five tenths of a cent. So this is what
(03:20):
is causing this shift right now. It's not anything dramatic.
It's just, hey, there's a refinery adage that will end
up being you know, fixed, and things will get back
to normal. But the Midwest is facing some higher fuel
prices in the short term, to the tune of an
extra ten to fifteen cents per gallon. At the moment,
gold is up a dollar thirty and ounce to thirty
(03:41):
four thirty four and thirty cents. I'm sure if it
could trade, you know, on individual sense, I'd love to
get thirty four to thirty four to thirty four, but
unfortunately it doesn't do that, and so we're stuck with
thirty four to thirty four thirty big thing that's happening
at four thirty or not four thirty, but after the
close day, we don't know the exact time in video
(04:01):
reports their earnings. And this obviously is a potential market
moving event given the fact that when you look at
the Standard and Pores five hundred, the S and P
five hundred as it's more commonly referred to in vidio
right now is the biggest holding in it at just
over eight percent of the overall index. So for every
(04:22):
dollar you put into the S and P five hundred
right now, eight cents of it goes into in Vidia,
another seven or so goes into Microsoft, six goes into Apple,
four goes into Amazon, three goes into Meta. But in
Vidia is the top dog, and so people pay attention
with their report earnings, which is always about a month
or so after everyone else does.
Speaker 3 (04:43):
And they appear to be in Vidia's chip stew because
they power data centers. As the news articles in our
stack of articles talks about extensively today, there are very
serious people who think this phenomenon of data center building,
related of course to Nvidia and chip sales, is effectively
(05:03):
powering the investment component of economic growth. So this is
of great interest and of great importance to new term
growth in the sense that it is the investment in
data centers data centers, Excuse me, that is a not
insignificant part, how much I don't know. That's not quantified
here for the US. As far as I can tell,
(05:26):
it's powering investment in the short term, so keeping GDP
growing at a round or above trend rate, and in
the long run, of course, it'll be a determinant if
AI and this is a very big if, contributes to
productivity to the extent that optimists think it could. It'll
be a big contributor to long term I don't share that,
by the way, but I'm just sort of reiterating the
(05:50):
company line here, not our company, but the consensus. It's
important for long term economic growth too. So lots of
stake here.
Speaker 2 (05:58):
And I think the big questions with in video for tonight,
and by the way, these are questions that generally in
the last three years they've answered successfully. It's not to
say that they will tonight or in subsequent quarters, but
you know, we've talked about this a lot where oh
and you know, in Vidia's got some questions about, you know,
can they continue to do this or will this happen?
(06:20):
And they've pretty much had answers for all of those
over the last couple of years. The two big ones
that are going to be out there. The first is China. Hey,
in your previous quarter earnings, you indicated that you missed
out on billions of dollars in revenue because you weren't
able to sell to China. What's the situation with China now?
(06:41):
Because the Trump administration has granted the export licenses for
in Nvidia to export their H twenty chips, but the
Chinese government has pretty much said, hey, Chinese companies, stop
buying this stuff. And so what is the reality in
terms of the revenue that you're seeing, the demand that
you're seeing. Talk to us about this, because just reading
(07:02):
between the lines, it seems like things aren't going the
way you would have liked them to. But headlines can
be misleading. We know this, So I think that's part
of it. The other piece is, hey, what are you
seeing in terms of additional demand from non traditional sources?
And what I mean by that is the last three years,
(07:24):
you can count on one hand the number of companies
that really have been driving the needle for Nvidia purchases.
It's Microsoft, it's open Ai, it's Meta, it's Google. Like
those are the names that have been the driving forces.
One of the things that we saw earlier this year,
the Trump administration relaxed export controls of chips to a
(07:45):
number of other countries, most notably to a lot of
the Gulf states. You're talking Saudi Arabia, Oman Uae, you know,
places like that. And so I think that the question
that is out there in my mind is, hey, these
are countries that said that they were going to be
big buyers of this stuff.
Speaker 1 (08:03):
Is any that.
Speaker 2 (08:04):
Starting to show up now where you still supply you know,
supply constraints, so those are pushed out a couple more years.
But what's in the pipeline because in terms of the
growth from those mag seven companies, hey, it's it's still
projected right now. But we've talked about how the economics
of the data center construction might not support the same
(08:25):
rate of increase that we've been seeing the last couple
of years. And if that comes under pressure, do you
have other companies to sell this stuff to.
Speaker 3 (08:32):
Well, we know they can't become the whole economy, so
there's an upper limit.
Speaker 2 (08:35):
Right, We've talked about we are not going to be
the United States of Nvidia.
Speaker 3 (08:41):
Like data centers. But yeah, that oh, that's that's that's
that's an excellent shorthand way of putting it.
Speaker 2 (08:45):
You know, it's like, probably not, We're not all gone.
Speaker 3 (08:48):
I don't know, have they made Trump an offer? I
mean the rebranding, Yeah, I'm just talking about rebranding.
Speaker 2 (08:55):
I'm not talking about Yeah. I think would be a
tough putt. You'd have a better you'd have better luck
with the United States of Amazon, just because you don't
have to change the initials. Then I don't think either
one's really gonna fly. Quite honestly, I think we're we're
in a pretty good spot with the USA and the
branding there. So I think in looking at this, it's
(09:17):
it's one where there are questions that need to be answered,
and video in the last few years has done a
really good job of answering them. But the questions being
asked now are different than the ones from the last
couple of years, and that raises a little bit of
intrigue here. So we'll see what we end up getting
on this. But again, in Nvidia, earnings are going to
be after the bell today at the close, let's take
(09:39):
a quick break here. When we return, Yeah, let's do
a little bit of trivia, and then let's talk a
little bit about just overall market performance this year so
far and kind of what it means, what it doesn't mean.
Right after this.
Speaker 1 (09:56):
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Speaker 4 (10:35):
Time for trivia here on the Financial Exchange. In our
look at the Famous Participants of World War Two continues.
Many of the most famous baseball players of the era
interrupted their careers to serve their country. So trivia question today,
which Boston Red Sox Legends serve three years in World
(10:58):
War Two as a naval aviator? Once again? Which Boston
Red Sox Legend serve three years in World War Two
as a naval aviator? Be the ninth person today to
text us at six one seven three six two thirteen
eighty five with the correct answer, and you win a
Financial Exchange Show T shirt once again. The ninth correct
(11:20):
response to text us to the number six one seven
three six two thirteen eighty five will win that T shirt.
See complete contest rules at Financial look Chainshow dot com.
Speaker 2 (11:32):
Ah good a nice piece from CNBC S and P
five hundred Index investors have been rewarded so far in
twenty twenty five. Why experts say it may be time
to diversify. There's nothing like trying to market time based
on how the index has done over the first eight
months of the year. That's obviously gotta be really reliable.
Speaker 1 (11:52):
Here.
Speaker 2 (11:54):
I'll just quote here just because this is just again
kind of garbage, horrific. Experts say investors would be wise
to watch the risk before pursuing an investment strategy concentrated
in the large cap company focused S and P five
hundred index, which represents about eighty percent of market capitalization. Okay,
there's nothing crazy there so far. We've talked about not
having all eggs in one basket. I got it. Our
(12:16):
advice for people who are looking at their performance on
a one or three year horizon is no, we don't
think the set it and forget it S and P
five hundred strategies. The only is the is the right strategy? Okay,
even that's you know, kind of reasonable here when you
talk about like, yeah, you don't know that this thing
is always going to go up or not. I've talked
at length about how if you pulled investors from like
(12:39):
nineteen ninety through two thousand and five, they'd say, why
am I even invested in the S and P five
hundred emerging markets is where it's at. I've got to
have more inn em and in the subsequent twenty years
that has just not been the case. But then you
get into this kind of stuff here, which is, you know,
the S and P five hundred ad a good second
(12:59):
quarter where profits and margins and the aggregate expanded, but
the remaining three hundred ninety three companies outside of the
mag seven only had three percent market three percent profit growth. Quote.
That's not a healthy market. That's a very narrow market.
And when looking at the S and P today, it's
important to realize that what you're buying now versus what
(13:19):
you're buying ten years ago is changed. And it's basically saying, look,
you're you're buying you know AI today, which is true.
But who's to say that the AI bubble or who's
to say it's even a bubble. Who's to say it
doesn't have another two, three, four or five years to run?
And that this is the exact moment to what would
(13:40):
you not do that?
Speaker 4 (13:41):
What?
Speaker 1 (13:41):
What?
Speaker 2 (13:42):
What was that?
Speaker 4 (13:44):
Is this completely blew into the microphones out there?
Speaker 3 (13:49):
You know what it was? What was there was an
air pocket on one side of my mouth. It was
contained though.
Speaker 2 (13:54):
If you were going to stop talking, just let me know,
And then I could not have been more direct in
some Then I pushed on the other side and it
came out an unexpected part of the orifice.
Speaker 3 (14:05):
Tucker. I'm not a radio professional, Tucker. Maybe I need
retraining on where the.
Speaker 2 (14:10):
Square the headphones and everything solved well.
Speaker 3 (14:12):
But then I'd have to hear that.
Speaker 1 (14:13):
Though.
Speaker 3 (14:13):
Who wants to hear that?
Speaker 1 (14:15):
Not me?
Speaker 2 (14:17):
In any case. I guess what I'm getting at here
is why is now the time to exercise caution around
the S and P five hundred as opposed to a
year ago or two years or three and the other pieces. Hey,
if you do make a change right now, are you
content with the idea that you could be wrong because
this thing could still keep going up and be the
dominant you know, market index for the next two, three, four, five,
(14:40):
ten years. We have no idea.
Speaker 3 (14:42):
Yeah, the market cap weighted by that, I mean the
method that weights stocks according to the value of all
their shares. And Video is the biggest holding in the
S and P, bigger than Microsoft, Apple and some of
the other giants because it shares are worth more. I
know everybody knows that, and It sounds like common sense,
but it was not obvious before the nineteen seventies, when
(15:06):
theory and technology came together and allowed investment banks. They
weren't known as investment banks then, but allowed a bank
to put together at S and P five hundred portfolio
that was based on a theory that had been developed
about a decade before. Maybe you know the name Bill Sharp,
you won a Nobel prize. May have heard Sharp ratio.
Speaker 2 (15:25):
Here's a ratio named after.
Speaker 3 (15:27):
Yeah, that's right. It's very straightforward. So it's so simple,
it's brilliant. But anyway, I don't want to get sidetracked
on Sharp and all of his contributions to finance. The
point is he pointed out that the market cap weighted
portfolio should be every investor's starting point for theoretical reasons
that aren't entirely obvious, but once you learn a little
(15:49):
bit about them, they make perfect sense. So you by
default you start with the S and P five hundred
or the Russell one thousand, which is more purely market
cap weighted in a little better diversified, and almost by definition,
when a sector has a big run up, the index
is going to be driven by that sector. In the
past generation or two, it's been technology. There were times
when it was other sectors like industrials and whatever whatever.
(16:14):
The sector that embodied chemical companies would have been generations ago. Anyway,
my point is the S and P after a big
run up always looks overvalued, and it's epically overvalued in
historical terms right now slightly different matter, and the sector
that has propelled that run up always raises concerns about overconcentration.
(16:39):
So all these arguments to me sound a lot like
arguments that have been made in past eras about the
technology and other sectors. Sometimes they've turned out to be
good warnings that stocks were indeed overvalued, got ahead of themselves.
But like you said, Chuck, you never know until after
the fact, and I'll just reiterate you should always aren't
(17:00):
as a default. You may tilt away from it if
you think that your conviction about another segment of the
market is compelling enough, But start by default with a
market cap weighted index and go from there. And this
is why four or one gay plans typically default you
into something that waits by market cap, because that's viewed
as the most prudent way to invest.
Speaker 2 (17:22):
And look the whole idea of you know again valuation
is you know, a tool to know when to move
into one thing or another. All I got to tell you. Look,
you take a look at emerging markets and European equities.
For the last fifteen years, they've been cheap relative to
their US counterparts. They've also been cheap for a reason.
There has not been very much growth in the equity
(17:44):
markets in Europe or in emerging markets in the aggregate.
Speaker 3 (17:48):
Yeah, and EM, emerging markets are riskier. They should go ahead.
Speaker 2 (17:52):
Yeah, EM like you also get into then things like
you know, jurisdictional risk, which is, hey, does the ruling
person in country XYZ on the other side of the
world suddenly decide they don't like the laws and they
change the rules, and now your investment is worthless because
you know, the lights were turned off one day and
the guy didn't like it, or something like that.
Speaker 3 (18:13):
This is why it's so curious that markets are so
far responding with complacency to threats to FED independence. One
of the problems with emerging markets historically, and the reason
they get a lower risk premium a lower valuation, is
that their policy is less soundly conducted than ours, and
that includes monetary policy, if we're going to be reverting
(18:36):
to some sort of third world like monetary policy, and
that's what you get when you put it all in
the hands of one guy. You could say you like
that arrangement or don't, but you can't have both that
and very high valuations reflective of institutional stability at the
same time.
Speaker 2 (18:51):
Techno look at markets as we head towards the bottom
of the hour. The Dow is currently up one hundred
and thirty five points, the S and P is up eleven,
the Nasdaq is up twenty two, So kind of like
what we've seen all day, just a holding pattern as
we wait for Nvidia earnings after the bell. Bond market
with not much movement either. Tenure Treasury is up three
(19:13):
tenths of a basis point. Again, the bond traders are
just sitting there saying, like, why did I wake up
in the morning for this? There's nothing for me to
do right now. It's given the last week and August,
a lot of people away and stuff like that. It's
a quiet.
Speaker 1 (19:28):
Week in general.
Speaker 2 (19:29):
Quick break here, we've got the trivia answer in Wall
Street Watch. When we returned.
Speaker 1 (19:41):
Bringing the latest financial news straight to your radio. Every
day it's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:00):
Well, we are only a few hours away from a
significant earnings report from chip maker in AI giant Nvidia
after today's closing bell, and markets are narrowly higher right now.
The Dow is up by three tenths of one percent,
or one hundred and twenty eight points higher. SP five
hundred is up nearly two tenths of one percent, NASDAC
(20:20):
up a tenth of a percent or twenty one points higher,
Russell two thousand up over half a percent. Ten year
Treasure reeled up one basis point now at four point
two six nine percent, and crude oil up about half
a percent higher, trading at sixty three dollars and fifty
eight cents a barrel. Cole's jumping nearly eighteen percent after
(20:40):
the retailer surpassed street earnings and revenue expectations despite its
sales declining and its ongoing search for a new CEO.
Coals also reported a better than anticipated full year sales guidance.
Another retailer and Abercrombine Fitch also reported second quarter results
where it's sales growth slowed. During the quarter, Abercrombie sales
(21:01):
slumped five percent, while comparable sales dropped eleven percent. However,
sales from its Hollister brand grew nineteen percent in the quarter,
Abercrombie up over one percent. Meanwhile, CNBC reported that controlling
shareholder of Canada Goose Bain Capital received bids to take
the company private, valuing the retailer at about one point
(21:23):
three five billion dollars. Canada Goose shares are jumping about
fifteen percent hire Elsewhere Octa shares climbing three percent after
the identity security company posted higher quarterly results and raised
its annual guidance. Database platform developer Mango dB surging thirty
three percent after it beat analysts estimates and raised its
(21:46):
annual outlook, and after controversy surrounding its new logo Cracker
Barrel reverted back to its original old timer logo. That
stock rebounding eight percent. Today, I'm Tucker Silva and that
is Wall Street Watch. And in the previous segment, we
asked you the trivia question which Boston Red Sox Legend
serve three years in World War Two as a naval aviator.
(22:08):
That would of course be Ted. Williams Joseph from Yarmouthport,
Mass is our winner today taking home the Financial Exchange
Show t shirt, and we played trivia every day here
in the Financial Exchange See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (22:23):
Mark. We got a piece here from Bloomberg Opinion. It's
titled why boomers have more money than everyone else? Well,
why do they?
Speaker 1 (22:32):
Mark?
Speaker 3 (22:33):
It's probably what you would expect, Chuck. We joked a
little bit about it during the break. They own homes.
They bought their homes at relatively cheap prices, and I
know they're scout. If you're in that age group, you're
scowling when you hear this. You earned it. And the
fact that homes have gotten a lot more expensive relative
to incomes in every other measure is not because you
(22:56):
drove the price up, of course, It's just the nature
of a growing economy bumping up against natural limits on
some things like like housing supply when we zone the
way that we do, etc. So you bought a house
at two times median income, now it's four or five times.
You bought stocks for most of your career at a PE.
(23:17):
We were talking about this in the last segment, and
that by PE I just mean evaluation specifically priced to earnings.
In this example, though you could insert other variables in
there and come to the same conclusion. You bought stocks
relatively cheaply and they've run up by a lot. So
baby boomers and older gen xers to an extent, have
been the beneficiaries of rapidly appreciating asset prices. And maybe
(23:40):
there are some cultural factors there too, maybe they were
better savers didn't have as much student debt, for example,
though there we researchers I think who conducted the study
referred to in this article did not find that student
debt if memory serves, It's been a couple of weeks
since I looked at this. But if memory serves, student
debt was not a big factor. But there may be
other little factors explaining the relative different since say net
worth at this point in their lives of boomers versus
(24:03):
other generations.
Speaker 2 (24:05):
Now, the other thing is that I come back to
this quite often. If you looked at all the literature
written on millennials ten years ago, you know, twenty fifteen,
it was you know, millennials will never amount to anything financially.
They're well behind their parents and Gen X in terms
of where they are at the same point in time.
(24:27):
They're not buying houses, they're not doing anything. They're just
you know, millennials who are avocado toasting their way through life.
And in the last ten years then equity markets went nuts,
housing markets went nuts. Incomes for millennials, you know, moved
up pretty significantly. And now you get the pieces talking about, hey,
millennials actually have you know, a higher rate of home
(24:48):
ownership at the same age than their parents did, and
millennial wealth is caught up in this and that, and gosh,
like what a difference ten years makes on this stuff.
And so I think that all we get at, you know,
when we look at these these studies and these pieces
like that, there's snapshots in time. They don't say anything
about you know, what got you here, which you've outlined
(25:11):
a little bit. But they also don't say anything about
where you're going and whether or not the trends that
got you there are going to continue. And you know,
I think that ultimately, when when we look at this
and look the other thing to point out here, even
amongst the baby boomers, there are vast disparities in wealth.
Guarantee you there are plenty of baby boomers that are
(25:32):
listening to our show right now saying Chuck, I'm, you know,
a boomer, I'm not comfortable financially, like I'm struggling to
make ends meet. That there are plenty that fall into
that category as well. So I think that when we
look at this in the aggregate, we also, you know,
kind of lose some things here in terms of the
actual meaning of this. But I don't know, I caution
(25:53):
people to read too much into this because, you know,
if just to use the boomers as an example, if
you ask the boomers back in you know, nineteen seventy nine, Hey,
how have things gone for you financially, you know, in adulthood,
most of them are probably like, Yeah, this whole economics
thing kind of sucks. Inflation's been high, jobs have been
hard to get, gas prices have been high. You know,
(26:14):
like the first ten years that boomers were in the
workforce were not exactly like an easy time for them.
Were the subsequent forty a nice tail wind that they
could ride? Absolutely, But again, these are just snapshots in time.
It doesn't mean that those trends are going to continue.
Speaker 3 (26:32):
Yeah, and if our institutions continue to deteriorate and change
is a better word, maybe you like these changes. We
talk a lot about fed independence, and I keep bringing
it up because it's critical to the growth of to
the volatility and therefore the growth of the economy. These
old trends that we like to extrapolate from. Those trends
are the product of the conditions that prevailed since the
(26:55):
end of the Second World War, trade liberalization, fed independence, stability,
rule of law prevailing generally, if we're switching to more
of a personalist type approach to being governed, and maybe
you like that, maybe you don't. I don't think you
can assert if we make fundamental changes to the rules
governing the operation of our economy that it will grow
(27:16):
at the same rate. And I don't think, based on
the experience of other countries, you can credibly make the
argument that it will grow faster, because that's not happened
historically when, for example, a politician controls the money supply.
Speaker 4 (27:28):
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Speaker 2 (28:28):
Mark. I am a lazy, avocado toast eating millennial, so
I was too young to be gainfully employed during the
tech bubble when that was going on. But I've read
this piece here in the Wall Street Journal, and I
wanted to get your opinion on it because it talks
about how you have these you know, people in their
(28:50):
early twenties that have effectively, you know, kind of come
of age with generative AI, and they are you know,
getting these big job not for you know, programming generative
AI platforms and things like that, but just because they
know how to use AI and are able to use
it in a job. And it becomes almost you know,
(29:10):
a specialist role that they have, you know, AI specialist
working for a bank or something like that. Did you
see something similar popping up during the tech bubble where
you had like search engines specialists or you know, things
like that that popped up at companies, Because I'm just
wondering if this happens in every technological cycle, if you know,
(29:34):
in the sixties, was.
Speaker 3 (29:35):
There you know, Okay, now you're insulting me.
Speaker 2 (29:38):
I know I'm insulting you, but I but here we go.
But I'm going to continue, you know, like it's hey,
did we have you know, vacuum tube you know special
I know you did then because that was like the
only job. But I guess that when it comes to this,
is this unique to this cycle? Do you think?
Speaker 3 (29:56):
Or if it's parallel. First of all, it's to statement
to how much companies are fumbling with integrating AI into
existing workflows, and actually they don't get it, and very
few are making money. We talked about Mike Armstrong and
I talked about a study done by researchers at MIT yesterday.
They concluded that fewer than five percent of companies that
(30:17):
have spent a lot of money and time on AI
have actually been able to use it profitably. The rest
are just kind of screwing around with it, finding applications
that might be interesting, but they're having trouble integrating them
into their software and workflow. And that's understandable. We've all
encountered this. So the only to answer your question, The
only parallel that comes to mind is Microsoft Excel skills
(30:39):
were at one time toubtable skills, and they would be
part of solicitations, would include them as a qualification that
we're being looked for. You see that sometimes now, and
it seems quaint because you don't have to code in
Microsoft Excel or any Microsoft application. Of course, that's the
whole point. It's all wrapped for you. Sure, that's the
(31:00):
only analog I can think of to that period, Chuck,
I'm sure there were jobs for which I was not
applying or interested in. Jobs for example outside of finance,
where coding skills in Fortran or C plus plus or
whatever language you were proficient in at the time were
more highly prized. But no, this seems odd because this
(31:20):
is just looking for power users of chat GPT. Help
us because we have no idea what we're doing. We're
all in our fifties like me, and are getting staler
and more demented by the day. No offense to my
fellow millennials, but we are gen actress, but we are.
I need to hire a kid who actually gets this stuff.
(31:41):
This smacks of that to me. It's a little pathetic,
you know, like in.
Speaker 2 (31:44):
The nineteen seventies, did you have you know, hey, we
need a photo copy or expert to come.
Speaker 3 (31:49):
Yeah, right, you know, like something like somebody who can
work at xerox machine with all the buttons.
Speaker 2 (31:54):
Here's the thing that's wild. Actually, there have been a
bunch of studies done of companies and like the problems
that they have with gen z ers. And part of
the problem is, hey, they might be really skilled at
the new tech, but they can't use things like photocopiers.
They walk into the room with it and they're like,
what do you want me to do with this, Yes,
very man, which I get. I understand. Like, there's always
so much knowledge that you can pick up as a kid.
(32:17):
It would be like if you ask someone from the
nineteen sixties, Hey, can you drive the horse and buggy
for me? No? Like, I what do you mean drive
the horse and buggies? It's sticker? Is it automatic? You know?
Like it's just yeah, you didn't use it, you know,
it was just it's just a different thing. Let's take
(32:37):
a quick break here and when we return, we'll do
a little bit of stack roulette.
Speaker 1 (32:43):
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(33:04):
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Speaker 4 (33:25):
Now's a great time to register for the dav five k,
taking place Saturday, November eighth at Fort Independence on Castle Island.
The race has sold out each of the past four years,
and slots are continuing to fill it quickly, so don't delay.
Visit DAV five k dot Boston in reserve your spot,
or join our team here at the Financial Exchange by
(33:48):
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year's DAV five k. Sign up now at DAV fivek
dot Boston.
Speaker 2 (34:00):
All right, mark, what do you got from me for
stack roulette today?
Speaker 3 (34:04):
The Chicago Fed every week calculates a national Financial Conditions Index.
It's a pretty comprehensive It covers equity markets, debt markets,
the banking system, money markets, so a pretty comprehensive index.
So a single number that gives you a sense of
how conducive overall capital market and broader economic conditions are
(34:28):
for say, businesses who want to borrow money to expand.
This index and the number itself minus point five to
six is not really meaningful other than it might be
helpful to know that negative numbers are actually good. The
more negative, the better. The more it's very counterintuitive, it
means it means financial conditions are closer again easier for
(34:50):
businesses that need it to get their hands on capital.
This index as you would expect because other markets, because
markets the that underli it that we do talk about
a lot, stock and bond markets are more or less
giving the same signal. This index is at its most
is that its most accommodative, if you will, so loosest
(35:11):
in terms of financial conditions reading of this whole business cycle. Now,
part of that is because markets expect the Fed to
cut short term interest rates when it meets next month.
Market prices obviously reflect that, but it's been low for
quite some time, so not clear that beyond a modest
cut to maybe act as insurance against potential softening of
(35:33):
the labor market, that the Fed's going to need to
do much more than that that is easemodestly next month.
Whether they actually do more, as obviously now more a
function of political considerations and pressure than the state of
the real economy.
Speaker 2 (35:47):
I want to talk a little bit about this piece
that Tucker put in the stack today. It's called splot
goes the slop bowl. The sell better is why fast
casual chains like Chipotle and Cava are losing out to
sit down spots like Chili's. And we've talked a little
bit about this. Just the value is not there when
it comes to Chipotle versus a Chili's or apple Bee's.
(36:09):
It's hey, I can sit down at a Chili's or
Applebee's and get a meal that is the same cost
or cheaper than Chipotle. And I've got you know, a
waiter a waitress bringing me water, and you know, I'm
sitting down and not having to just you know, stand
at this big industrial counter and this and that. We've
talked about that. I want to talk about this. Uh,
this phrasing here though, that goes into it. Tucker, before
(36:31):
the last like month or so, had you heard the
term slop bowl? I've you have.
Speaker 4 (36:37):
Yeah, it's a pile of slop you just throw down
in ten minutes.
Speaker 2 (36:41):
Yeah, just because it's all the stuff like mixed together
in a little bowls is kind of where it comes from. Yep, exactly.
I guess what I'm trying to figure out is like
when this became kind of a thing in terms of
the terminology, because.
Speaker 4 (36:56):
You know, heard of the past year.
Speaker 2 (36:58):
I'd say, so, you think it's kind of coincides with
this since people getting fed up with like, hey, I'm
paying twenty dollars for slop? Is the good deal? Yeah?
I struggle with it. I still think that the value
thing is better. But I'm just curious how language evolves
on this stuff because before this, you know, you go
back like a few years and this stuff was being
(37:20):
talked about. It's like, oh, like it's higher quality than
what you get it, you know, a fast food dice.
And now we're just referring to it as slop, which
I think is interesting to me. And it's kind of
a what came first, the slopp or the egg, you know,
and in this case they're kind of coincidental. But I
just find it interesting how the language evolves on this
(37:41):
stuff because.
Speaker 4 (37:43):
I have no problem with the terminology. I still get
a slop bowl probably once a week, but like that
your mouth water.
Speaker 3 (37:50):
No.
Speaker 2 (37:50):
But the counter to this is if you said, hey, Chuck,
you want a sloppy joe right now, I'd say, you
darn right, I do. Yeah, I'll take a sloppy joe
right now, thank.
Speaker 4 (37:59):
You for I don't know who serves a sloppy joe around.
Speaker 2 (38:02):
Not many people anymore. It's kind of sad. It's the
demise of a great American legend. In my opinion. Dal
Jones up one hundred and three points. S and P's
up thirteen, NASDAC UP forty one. All is still focused
on in Vidio. This afternoon, we're done for the day.
We'll see you tomorrow. Recapping in Vidio earnings
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(00:20):
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(01:03):
This is the Financial Exchange with Chuck Zada, and Mark Vandetti.
Speaker 2 (01:11):
Chuck, Mark and Sucker with you here today, and markets
are modestly. The DAZZ up about one hundred and twenty
one points, the S and P is up ten NASDAC
up twenty three, so anywhere from about a tenth of
a percent to a quarter percent rise in the major
US indices. Not much happening in the bond market right now.
(01:31):
Tenure Treasury is up nine tenths of a basis point
to four points two six five percent. One thing that
we have seen over the last couple of weeks is
a steepening in the yield curve where shorter yield shorter
term bonds are seeing their yields moving down a little bit,
whereas the long end of the curve, the thirty year,
is creeping back up towards five percent. Now. Could be
(01:54):
any one of a number of things. I often don't
like to ascribe, you know, too much to what's going
on with short time treasury moves, because that's how you
get into the problem where you say stuff last year
like oh like, yields must be moving up because of
concerns about the amount of debt that's out there, and
then when yields come down, you're like, oh, did the
debt picture get fixed? And no, it did, and it's
(02:15):
still basically the same. So I think that when we
look at what we're seeing here, at least on the
bond side, it's generally better just to say, hey, here's
what's happening, and let's see what continues, not hey, this
is definitively any one particular thing. In commodity markets, Oil
(02:36):
West Texas Intermediate up fifty six cents of barrel to
sixty three point eighty one the trip a national average four.
Gas prices, by the way, did finally get out of
that three ten to three twenty per gallon range on
a national basis, up two point two cents on the
day to day to three dollars twenty cents and eight
(02:58):
tenths of a cent. This largely on the back of
a refinery outage that is hitting the Midwest and pushing
gas prices up there at the moment. So, as an example,
in Michigan, right now, gas prices on average three point
thirty nine. Even a week ago they were three eighteen
and five tenths of a cent. So this is what
(03:20):
is causing this shift right now. It's not anything dramatic.
It's just, hey, there's a refinery adage that will end
up being you know, fixed, and things will get back
to normal. But the Midwest is facing some higher fuel
prices in the short term, to the tune of an
extra ten to fifteen cents per gallon. At the moment,
gold is up a dollar thirty and ounce to thirty
(03:41):
four thirty four and thirty cents. I'm sure if it
could trade, you know, on individual sense, I'd love to
get thirty four to thirty four to thirty four, but
unfortunately it doesn't do that, and so we're stuck with
thirty four to thirty four thirty big thing that's happening
at four thirty or not four thirty, but after the
close day, we don't know the exact time in video
(04:01):
reports their earnings. And this obviously is a potential market
moving event given the fact that when you look at
the Standard and Pores five hundred, the S and P
five hundred as it's more commonly referred to in vidio
right now is the biggest holding in it at just
over eight percent of the overall index. So for every
(04:22):
dollar you put into the S and P five hundred
right now, eight cents of it goes into in Vidia,
another seven or so goes into Microsoft, six goes into Apple,
four goes into Amazon, three goes into Meta. But in
Vidia is the top dog, and so people pay attention
with their report earnings, which is always about a month
or so after everyone else does.
Speaker 3 (04:43):
And they appear to be in Vidia's chip stew because
they power data centers. As the news articles in our
stack of articles talks about extensively today, there are very
serious people who think this phenomenon of data center building,
related of course to Nvidia and chip sales, is effectively
(05:03):
powering the investment component of economic growth. So this is
of great interest and of great importance to new term
growth in the sense that it is the investment in
data centers data centers, Excuse me, that is a not
insignificant part, how much I don't know. That's not quantified
here for the US. As far as I can tell,
(05:26):
it's powering investment in the short term, so keeping GDP
growing at a round or above trend rate, and in
the long run, of course, it'll be a determinant if
AI and this is a very big if, contributes to
productivity to the extent that optimists think it could. It'll
be a big contributor to long term I don't share that,
by the way, but I'm just sort of reiterating the
(05:50):
company line here, not our company, but the consensus. It's
important for long term economic growth too. So lots of
stake here.
Speaker 2 (05:58):
And I think the big questions with in video for tonight,
and by the way, these are questions that generally in
the last three years they've answered successfully. It's not to
say that they will tonight or in subsequent quarters, but
you know, we've talked about this a lot where oh
and you know, in Vidia's got some questions about, you know,
can they continue to do this or will this happen?
(06:20):
And they've pretty much had answers for all of those
over the last couple of years. The two big ones
that are going to be out there. The first is China. Hey,
in your previous quarter earnings, you indicated that you missed
out on billions of dollars in revenue because you weren't
able to sell to China. What's the situation with China now?
(06:41):
Because the Trump administration has granted the export licenses for
in Nvidia to export their H twenty chips, but the
Chinese government has pretty much said, hey, Chinese companies, stop
buying this stuff. And so what is the reality in
terms of the revenue that you're seeing, the demand that
you're seeing. Talk to us about this, because just reading
(07:02):
between the lines, it seems like things aren't going the
way you would have liked them to. But headlines can
be misleading. We know this, So I think that's part
of it. The other piece is, hey, what are you
seeing in terms of additional demand from non traditional sources?
And what I mean by that is the last three years,
(07:24):
you can count on one hand the number of companies
that really have been driving the needle for Nvidia purchases.
It's Microsoft, it's open Ai, it's Meta, it's Google. Like
those are the names that have been the driving forces.
One of the things that we saw earlier this year,
the Trump administration relaxed export controls of chips to a
(07:45):
number of other countries, most notably to a lot of
the Gulf states. You're talking Saudi Arabia, Oman Uae, you know,
places like that. And so I think that the question
that is out there in my mind is, hey, these
are countries that said that they were going to be
big buyers of this stuff.
Speaker 1 (08:03):
Is any that.
Speaker 2 (08:04):
Starting to show up now where you still supply you know,
supply constraints, so those are pushed out a couple more years.
But what's in the pipeline because in terms of the
growth from those mag seven companies, hey, it's it's still
projected right now. But we've talked about how the economics
of the data center construction might not support the same
(08:25):
rate of increase that we've been seeing the last couple
of years. And if that comes under pressure, do you
have other companies to sell this stuff to.
Speaker 3 (08:32):
Well, we know they can't become the whole economy, so
there's an upper limit.
Speaker 2 (08:35):
Right, We've talked about we are not going to be
the United States of Nvidia.
Speaker 3 (08:41):
Like data centers. But yeah, that oh, that's that's that's
that's an excellent shorthand way of putting it.
Speaker 2 (08:45):
You know, it's like, probably not, We're not all gone.
Speaker 3 (08:48):
I don't know, have they made Trump an offer? I
mean the rebranding, Yeah, I'm just talking about rebranding.
Speaker 2 (08:55):
I'm not talking about Yeah. I think would be a
tough putt. You'd have a better you'd have better luck
with the United States of Amazon, just because you don't
have to change the initials. Then I don't think either
one's really gonna fly. Quite honestly, I think we're we're
in a pretty good spot with the USA and the
branding there. So I think in looking at this, it's
(09:17):
it's one where there are questions that need to be answered,
and video in the last few years has done a
really good job of answering them. But the questions being
asked now are different than the ones from the last
couple of years, and that raises a little bit of
intrigue here. So we'll see what we end up getting
on this. But again, in Nvidia, earnings are going to
be after the bell today at the close, let's take
(09:39):
a quick break here. When we return, Yeah, let's do
a little bit of trivia, and then let's talk a
little bit about just overall market performance this year so
far and kind of what it means, what it doesn't mean.
Right after this.
Speaker 1 (09:56):
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(10:17):
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Speaker 4 (10:35):
Time for trivia here on the Financial Exchange. In our
look at the Famous Participants of World War Two continues.
Many of the most famous baseball players of the era
interrupted their careers to serve their country. So trivia question today,
which Boston Red Sox Legends serve three years in World
(10:58):
War Two as a naval aviator? Once again? Which Boston
Red Sox Legend serve three years in World War Two
as a naval aviator? Be the ninth person today to
text us at six one seven three six two thirteen
eighty five with the correct answer, and you win a
Financial Exchange Show T shirt once again. The ninth correct
(11:20):
response to text us to the number six one seven
three six two thirteen eighty five will win that T shirt.
See complete contest rules at Financial look Chainshow dot com.
Speaker 2 (11:32):
Ah good a nice piece from CNBC S and P
five hundred Index investors have been rewarded so far in
twenty twenty five. Why experts say it may be time
to diversify. There's nothing like trying to market time based
on how the index has done over the first eight
months of the year. That's obviously gotta be really reliable.
Speaker 1 (11:52):
Here.
Speaker 2 (11:54):
I'll just quote here just because this is just again
kind of garbage, horrific. Experts say investors would be wise
to watch the risk before pursuing an investment strategy concentrated
in the large cap company focused S and P five
hundred index, which represents about eighty percent of market capitalization. Okay,
there's nothing crazy there so far. We've talked about not
having all eggs in one basket. I got it. Our
(12:16):
advice for people who are looking at their performance on
a one or three year horizon is no, we don't
think the set it and forget it S and P
five hundred strategies. The only is the is the right strategy? Okay,
even that's you know, kind of reasonable here when you
talk about like, yeah, you don't know that this thing
is always going to go up or not. I've talked
at length about how if you pulled investors from like
(12:39):
nineteen ninety through two thousand and five, they'd say, why
am I even invested in the S and P five
hundred emerging markets is where it's at. I've got to
have more inn em and in the subsequent twenty years
that has just not been the case. But then you
get into this kind of stuff here, which is, you know,
the S and P five hundred ad a good second
(12:59):
quarter where profits and margins and the aggregate expanded, but
the remaining three hundred ninety three companies outside of the
mag seven only had three percent market three percent profit growth. Quote.
That's not a healthy market. That's a very narrow market.
And when looking at the S and P today, it's
important to realize that what you're buying now versus what
(13:19):
you're buying ten years ago is changed. And it's basically saying, look,
you're you're buying you know AI today, which is true.
But who's to say that the AI bubble or who's
to say it's even a bubble. Who's to say it
doesn't have another two, three, four or five years to run?
And that this is the exact moment to what would
(13:40):
you not do that?
Speaker 4 (13:41):
What?
Speaker 1 (13:41):
What?
Speaker 2 (13:42):
What was that?
Speaker 4 (13:44):
Is this completely blew into the microphones out there?
Speaker 3 (13:49):
You know what it was? What was there was an
air pocket on one side of my mouth. It was
contained though.
Speaker 2 (13:54):
If you were going to stop talking, just let me know,
And then I could not have been more direct in
some Then I pushed on the other side and it
came out an unexpected part of the orifice.
Speaker 3 (14:05):
Tucker. I'm not a radio professional, Tucker. Maybe I need
retraining on where the.
Speaker 2 (14:10):
Square the headphones and everything solved well.
Speaker 3 (14:12):
But then I'd have to hear that.
Speaker 1 (14:13):
Though.
Speaker 3 (14:13):
Who wants to hear that?
Speaker 1 (14:15):
Not me?
Speaker 2 (14:17):
In any case. I guess what I'm getting at here
is why is now the time to exercise caution around
the S and P five hundred as opposed to a
year ago or two years or three and the other pieces. Hey,
if you do make a change right now, are you
content with the idea that you could be wrong because
this thing could still keep going up and be the
dominant you know, market index for the next two, three, four, five,
(14:40):
ten years. We have no idea.
Speaker 3 (14:42):
Yeah, the market cap weighted by that, I mean the
method that weights stocks according to the value of all
their shares. And Video is the biggest holding in the
S and P, bigger than Microsoft, Apple and some of
the other giants because it shares are worth more. I
know everybody knows that, and It sounds like common sense,
but it was not obvious before the nineteen seventies, when
(15:06):
theory and technology came together and allowed investment banks. They
weren't known as investment banks then, but allowed a bank
to put together at S and P five hundred portfolio
that was based on a theory that had been developed
about a decade before. Maybe you know the name Bill Sharp,
you won a Nobel prize. May have heard Sharp ratio.
Speaker 2 (15:25):
Here's a ratio named after.
Speaker 3 (15:27):
Yeah, that's right. It's very straightforward. So it's so simple,
it's brilliant. But anyway, I don't want to get sidetracked
on Sharp and all of his contributions to finance. The
point is he pointed out that the market cap weighted
portfolio should be every investor's starting point for theoretical reasons
that aren't entirely obvious, but once you learn a little
(15:49):
bit about them, they make perfect sense. So you by
default you start with the S and P five hundred
or the Russell one thousand, which is more purely market
cap weighted in a little better diversified, and almost by definition,
when a sector has a big run up, the index
is going to be driven by that sector. In the
past generation or two, it's been technology. There were times
when it was other sectors like industrials and whatever whatever.
(16:14):
The sector that embodied chemical companies would have been generations ago. Anyway,
my point is the S and P after a big
run up always looks overvalued, and it's epically overvalued in
historical terms right now slightly different matter, and the sector
that has propelled that run up always raises concerns about overconcentration.
(16:39):
So all these arguments to me sound a lot like
arguments that have been made in past eras about the
technology and other sectors. Sometimes they've turned out to be
good warnings that stocks were indeed overvalued, got ahead of themselves.
But like you said, Chuck, you never know until after
the fact, and I'll just reiterate you should always aren't
(17:00):
as a default. You may tilt away from it if
you think that your conviction about another segment of the
market is compelling enough, But start by default with a
market cap weighted index and go from there. And this
is why four or one gay plans typically default you
into something that waits by market cap, because that's viewed
as the most prudent way to invest.
Speaker 2 (17:22):
And look the whole idea of you know again valuation
is you know, a tool to know when to move
into one thing or another. All I got to tell you. Look,
you take a look at emerging markets and European equities.
For the last fifteen years, they've been cheap relative to
their US counterparts. They've also been cheap for a reason.
There has not been very much growth in the equity
(17:44):
markets in Europe or in emerging markets in the aggregate.
Speaker 3 (17:48):
Yeah, and EM, emerging markets are riskier. They should go ahead.
Speaker 2 (17:52):
Yeah, EM like you also get into then things like
you know, jurisdictional risk, which is, hey, does the ruling
person in country XYZ on the other side of the
world suddenly decide they don't like the laws and they
change the rules, and now your investment is worthless because
you know, the lights were turned off one day and
the guy didn't like it, or something like that.
Speaker 3 (18:13):
This is why it's so curious that markets are so
far responding with complacency to threats to FED independence. One
of the problems with emerging markets historically, and the reason
they get a lower risk premium a lower valuation, is
that their policy is less soundly conducted than ours, and
that includes monetary policy, if we're going to be reverting
(18:36):
to some sort of third world like monetary policy, and
that's what you get when you put it all in
the hands of one guy. You could say you like
that arrangement or don't, but you can't have both that
and very high valuations reflective of institutional stability at the
same time.
Speaker 2 (18:51):
Techno look at markets as we head towards the bottom
of the hour. The Dow is currently up one hundred
and thirty five points, the S and P is up eleven,
the Nasdaq is up twenty two, So kind of like
what we've seen all day, just a holding pattern as
we wait for Nvidia earnings after the bell. Bond market
with not much movement either. Tenure Treasury is up three
(19:13):
tenths of a basis point. Again, the bond traders are
just sitting there saying, like, why did I wake up
in the morning for this? There's nothing for me to
do right now. It's given the last week and August,
a lot of people away and stuff like that. It's
a quiet.
Speaker 1 (19:28):
Week in general.
Speaker 2 (19:29):
Quick break here, we've got the trivia answer in Wall
Street Watch. When we returned.
Speaker 1 (19:41):
Bringing the latest financial news straight to your radio. Every
day it's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:00):
Well, we are only a few hours away from a
significant earnings report from chip maker in AI giant Nvidia
after today's closing bell, and markets are narrowly higher right now.
The Dow is up by three tenths of one percent,
or one hundred and twenty eight points higher. SP five
hundred is up nearly two tenths of one percent, NASDAC
(20:20):
up a tenth of a percent or twenty one points higher,
Russell two thousand up over half a percent. Ten year
Treasure reeled up one basis point now at four point
two six nine percent, and crude oil up about half
a percent higher, trading at sixty three dollars and fifty
eight cents a barrel. Cole's jumping nearly eighteen percent after
(20:40):
the retailer surpassed street earnings and revenue expectations despite its
sales declining and its ongoing search for a new CEO.
Coals also reported a better than anticipated full year sales guidance.
Another retailer and Abercrombine Fitch also reported second quarter results
where it's sales growth slowed. During the quarter, Abercrombie sales
(21:01):
slumped five percent, while comparable sales dropped eleven percent. However,
sales from its Hollister brand grew nineteen percent in the quarter,
Abercrombie up over one percent. Meanwhile, CNBC reported that controlling
shareholder of Canada Goose Bain Capital received bids to take
the company private, valuing the retailer at about one point
(21:23):
three five billion dollars. Canada Goose shares are jumping about
fifteen percent hire Elsewhere Octa shares climbing three percent after
the identity security company posted higher quarterly results and raised
its annual guidance. Database platform developer Mango dB surging thirty
three percent after it beat analysts estimates and raised its
(21:46):
annual outlook, and after controversy surrounding its new logo Cracker
Barrel reverted back to its original old timer logo. That
stock rebounding eight percent. Today, I'm Tucker Silva and that
is Wall Street Watch. And in the previous segment, we
asked you the trivia question which Boston Red Sox Legend
serve three years in World War Two as a naval aviator.
(22:08):
That would of course be Ted. Williams Joseph from Yarmouthport,
Mass is our winner today taking home the Financial Exchange
Show t shirt, and we played trivia every day here
in the Financial Exchange See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (22:23):
Mark. We got a piece here from Bloomberg Opinion. It's
titled why boomers have more money than everyone else? Well,
why do they?
Speaker 1 (22:32):
Mark?
Speaker 3 (22:33):
It's probably what you would expect, Chuck. We joked a
little bit about it during the break. They own homes.
They bought their homes at relatively cheap prices, and I
know they're scout. If you're in that age group, you're
scowling when you hear this. You earned it. And the
fact that homes have gotten a lot more expensive relative
to incomes in every other measure is not because you
(22:56):
drove the price up, of course, It's just the nature
of a growing economy bumping up against natural limits on
some things like like housing supply when we zone the
way that we do, etc. So you bought a house
at two times median income, now it's four or five times.
You bought stocks for most of your career at a PE.
(23:17):
We were talking about this in the last segment, and
that by PE I just mean evaluation specifically priced to earnings.
In this example, though you could insert other variables in
there and come to the same conclusion. You bought stocks
relatively cheaply and they've run up by a lot. So
baby boomers and older gen xers to an extent, have
been the beneficiaries of rapidly appreciating asset prices. And maybe
(23:40):
there are some cultural factors there too, maybe they were
better savers didn't have as much student debt, for example,
though there we researchers I think who conducted the study
referred to in this article did not find that student
debt if memory serves, It's been a couple of weeks
since I looked at this. But if memory serves, student
debt was not a big factor. But there may be
other little factors explaining the relative different since say net
worth at this point in their lives of boomers versus
(24:03):
other generations.
Speaker 2 (24:05):
Now, the other thing is that I come back to
this quite often. If you looked at all the literature
written on millennials ten years ago, you know, twenty fifteen,
it was you know, millennials will never amount to anything financially.
They're well behind their parents and Gen X in terms
of where they are at the same point in time.
(24:27):
They're not buying houses, they're not doing anything. They're just
you know, millennials who are avocado toasting their way through life.
And in the last ten years then equity markets went nuts,
housing markets went nuts. Incomes for millennials, you know, moved
up pretty significantly. And now you get the pieces talking about, hey,
millennials actually have you know, a higher rate of home
(24:48):
ownership at the same age than their parents did, and
millennial wealth is caught up in this and that, and gosh,
like what a difference ten years makes on this stuff.
And so I think that all we get at, you know,
when we look at these these studies and these pieces
like that, there's snapshots in time. They don't say anything
about you know, what got you here, which you've outlined
(25:11):
a little bit. But they also don't say anything about
where you're going and whether or not the trends that
got you there are going to continue. And you know,
I think that ultimately, when when we look at this
and look the other thing to point out here, even
amongst the baby boomers, there are vast disparities in wealth.
Guarantee you there are plenty of baby boomers that are
(25:32):
listening to our show right now saying Chuck, I'm, you know,
a boomer, I'm not comfortable financially, like I'm struggling to
make ends meet. That there are plenty that fall into
that category as well. So I think that when we
look at this in the aggregate, we also, you know,
kind of lose some things here in terms of the
actual meaning of this. But I don't know, I caution
(25:53):
people to read too much into this because, you know,
if just to use the boomers as an example, if
you ask the boomers back in you know, nineteen seventy nine, Hey,
how have things gone for you financially, you know, in adulthood,
most of them are probably like, Yeah, this whole economics
thing kind of sucks. Inflation's been high, jobs have been
hard to get, gas prices have been high. You know,
(26:14):
like the first ten years that boomers were in the
workforce were not exactly like an easy time for them.
Were the subsequent forty a nice tail wind that they
could ride? Absolutely, But again, these are just snapshots in time.
It doesn't mean that those trends are going to continue.
Speaker 3 (26:32):
Yeah, and if our institutions continue to deteriorate and change
is a better word, maybe you like these changes. We
talk a lot about fed independence, and I keep bringing
it up because it's critical to the growth of to
the volatility and therefore the growth of the economy. These
old trends that we like to extrapolate from. Those trends
are the product of the conditions that prevailed since the
(26:55):
end of the Second World War, trade liberalization, fed independence, stability,
rule of law prevailing generally, if we're switching to more
of a personalist type approach to being governed, and maybe
you like that, maybe you don't. I don't think you
can assert if we make fundamental changes to the rules
governing the operation of our economy that it will grow
(27:16):
at the same rate. And I don't think, based on
the experience of other countries, you can credibly make the
argument that it will grow faster, because that's not happened
historically when, for example, a politician controls the money supply.
Speaker 4 (27:28):
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(28:12):
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Speaker 2 (28:28):
Mark. I am a lazy, avocado toast eating millennial, so
I was too young to be gainfully employed during the
tech bubble when that was going on. But I've read
this piece here in the Wall Street Journal, and I
wanted to get your opinion on it because it talks
about how you have these you know, people in their
(28:50):
early twenties that have effectively, you know, kind of come
of age with generative AI, and they are you know,
getting these big job not for you know, programming generative
AI platforms and things like that, but just because they
know how to use AI and are able to use
it in a job. And it becomes almost you know,
(29:10):
a specialist role that they have, you know, AI specialist
working for a bank or something like that. Did you
see something similar popping up during the tech bubble where
you had like search engines specialists or you know, things
like that that popped up at companies, Because I'm just
wondering if this happens in every technological cycle, if you know,
(29:34):
in the sixties, was.
Speaker 3 (29:35):
There you know, Okay, now you're insulting me.
Speaker 2 (29:38):
I know I'm insulting you, but I but here we go.
But I'm going to continue, you know, like it's hey,
did we have you know, vacuum tube you know special
I know you did then because that was like the
only job. But I guess that when it comes to this,
is this unique to this cycle? Do you think?
Speaker 3 (29:56):
Or if it's parallel. First of all, it's to statement
to how much companies are fumbling with integrating AI into
existing workflows, and actually they don't get it, and very
few are making money. We talked about Mike Armstrong and
I talked about a study done by researchers at MIT yesterday.
They concluded that fewer than five percent of companies that
(30:17):
have spent a lot of money and time on AI
have actually been able to use it profitably. The rest
are just kind of screwing around with it, finding applications
that might be interesting, but they're having trouble integrating them
into their software and workflow. And that's understandable. We've all
encountered this. So the only to answer your question, The
only parallel that comes to mind is Microsoft Excel skills
(30:39):
were at one time toubtable skills, and they would be
part of solicitations, would include them as a qualification that
we're being looked for. You see that sometimes now, and
it seems quaint because you don't have to code in
Microsoft Excel or any Microsoft application. Of course, that's the
whole point. It's all wrapped for you. Sure, that's the
(31:00):
only analog I can think of to that period, Chuck,
I'm sure there were jobs for which I was not
applying or interested in. Jobs for example outside of finance,
where coding skills in Fortran or C plus plus or
whatever language you were proficient in at the time were
more highly prized. But no, this seems odd because this
(31:20):
is just looking for power users of chat GPT. Help
us because we have no idea what we're doing. We're
all in our fifties like me, and are getting staler
and more demented by the day. No offense to my
fellow millennials, but we are gen actress, but we are.
I need to hire a kid who actually gets this stuff.
(31:41):
This smacks of that to me. It's a little pathetic,
you know, like in.
Speaker 2 (31:44):
The nineteen seventies, did you have you know, hey, we
need a photo copy or expert to come.
Speaker 3 (31:49):
Yeah, right, you know, like something like somebody who can
work at xerox machine with all the buttons.
Speaker 2 (31:54):
Here's the thing that's wild. Actually, there have been a
bunch of studies done of companies and like the problems
that they have with gen z ers. And part of
the problem is, hey, they might be really skilled at
the new tech, but they can't use things like photocopiers.
They walk into the room with it and they're like,
what do you want me to do with this, Yes,
very man, which I get. I understand. Like, there's always
so much knowledge that you can pick up as a kid.
(32:17):
It would be like if you ask someone from the
nineteen sixties, Hey, can you drive the horse and buggy
for me? No? Like, I what do you mean drive
the horse and buggies? It's sticker? Is it automatic? You know?
Like it's just yeah, you didn't use it, you know,
it was just it's just a different thing. Let's take
(32:37):
a quick break here and when we return, we'll do
a little bit of stack roulette.
Speaker 1 (32:43):
The Financial Exchange streams live on YouTube. Like our page
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Financial Exchange is now available every day from eleven to
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about the latest from Wall Street, fiscal policy, and breaking
(33:04):
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the Financial Exchange Radio Network.
Speaker 4 (33:25):
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and slots are continuing to fill it quickly, so don't delay.
Visit DAV five k dot Boston in reserve your spot,
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(33:48):
registering under Team TFE. That's Saturday, November eighth for this
year's DAV five k. Sign up now at DAV fivek
dot Boston.
Speaker 2 (34:00):
All right, mark, what do you got from me for
stack roulette today?
Speaker 3 (34:04):
The Chicago Fed every week calculates a national Financial Conditions Index.
It's a pretty comprehensive It covers equity markets, debt markets,
the banking system, money markets, so a pretty comprehensive index.
So a single number that gives you a sense of
how conducive overall capital market and broader economic conditions are
(34:28):
for say, businesses who want to borrow money to expand.
This index and the number itself minus point five to
six is not really meaningful other than it might be
helpful to know that negative numbers are actually good. The
more negative, the better. The more it's very counterintuitive, it
means it means financial conditions are closer again easier for
(34:50):
businesses that need it to get their hands on capital.
This index as you would expect because other markets, because
markets the that underli it that we do talk about
a lot, stock and bond markets are more or less
giving the same signal. This index is at its most
is that its most accommodative, if you will, so loosest
(35:11):
in terms of financial conditions reading of this whole business cycle. Now,
part of that is because markets expect the Fed to
cut short term interest rates when it meets next month.
Market prices obviously reflect that, but it's been low for
quite some time, so not clear that beyond a modest
cut to maybe act as insurance against potential softening of
(35:33):
the labor market, that the Fed's going to need to
do much more than that that is easemodestly next month.
Whether they actually do more, as obviously now more a
function of political considerations and pressure than the state of
the real economy.
Speaker 2 (35:47):
I want to talk a little bit about this piece
that Tucker put in the stack today. It's called splot
goes the slop bowl. The sell better is why fast
casual chains like Chipotle and Cava are losing out to
sit down spots like Chili's. And we've talked a little
bit about this. Just the value is not there when
it comes to Chipotle versus a Chili's or apple Bee's.
(36:09):
It's hey, I can sit down at a Chili's or
Applebee's and get a meal that is the same cost
or cheaper than Chipotle. And I've got you know, a
waiter a waitress bringing me water, and you know, I'm
sitting down and not having to just you know, stand
at this big industrial counter and this and that. We've
talked about that. I want to talk about this. Uh,
this phrasing here though, that goes into it. Tucker, before
(36:31):
the last like month or so, had you heard the
term slop bowl? I've you have.
Speaker 4 (36:37):
Yeah, it's a pile of slop you just throw down
in ten minutes.
Speaker 2 (36:41):
Yeah, just because it's all the stuff like mixed together
in a little bowls is kind of where it comes from. Yep, exactly.
I guess what I'm trying to figure out is like
when this became kind of a thing in terms of
the terminology, because.
Speaker 4 (36:56):
You know, heard of the past year.
Speaker 2 (36:58):
I'd say, so, you think it's kind of coincides with
this since people getting fed up with like, hey, I'm
paying twenty dollars for slop? Is the good deal? Yeah?
I struggle with it. I still think that the value
thing is better. But I'm just curious how language evolves
on this stuff because before this, you know, you go
back like a few years and this stuff was being
(37:20):
talked about. It's like, oh, like it's higher quality than
what you get it, you know, a fast food dice.
And now we're just referring to it as slop, which
I think is interesting to me. And it's kind of
a what came first, the slopp or the egg, you know,
and in this case they're kind of coincidental. But I
just find it interesting how the language evolves on this
(37:41):
stuff because.
Speaker 4 (37:43):
I have no problem with the terminology. I still get
a slop bowl probably once a week, but like that
your mouth water.
Speaker 3 (37:50):
No.
Speaker 2 (37:50):
But the counter to this is if you said, hey, Chuck,
you want a sloppy joe right now, I'd say, you
darn right, I do. Yeah, I'll take a sloppy joe
right now, thank.
Speaker 4 (37:59):
You for I don't know who serves a sloppy joe around.
Speaker 2 (38:02):
Not many people anymore. It's kind of sad. It's the
demise of a great American legend. In my opinion. Dal
Jones up one hundred and three points. S and P's
up thirteen, NASDAC UP forty one. All is still focused
on in Vidio. This afternoon, we're done for the day.
We'll see you tomorrow. Recapping in Vidio earnings
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