October 2, 2025 • 38 mins
Chuck Zodda and Mike Armstrong are concerned there is not being enough attention paid to the collapse of First Brands, why the company found itself in its current mess, and if this is a bigger problem brewing. Luke Kawa (Sherwood News) joins the show to share what is driving the recent market rally. Taiwan rejects U.S. proposal for ’50-50′ chip production, says trade talks focused on tariffs.
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:12):
Chuck, Mike and Tucker with you here and kicking things off.
Speaker 3 (01:16):
Stocks has now shifted.
Speaker 2 (01:18):
Into negative territory across the three major indices. Dows off
one hundred and four points, about a quarter percent, SMP
is down fourteen points, about a quarter percent, Nasdaq down
eight points about three hundredths of a percent, So tech
continuing to hold up.
Speaker 3 (01:33):
Well. I'll tell you that.
Speaker 2 (01:37):
It's kind of interesting what we're seeing in markets right now,
and I'm trying to wrap my head around it what
it means, because I see a couple things that generally
get my antenna perking up a little bit when they happen.
The first started yesterday and what actually started earlier this week.
(02:00):
Financial stocks have been puking, and specifically a lot of
these like asset manager stocks have been puking, but it
even spilled over into just like your broader banks yesterday
and and you know, lenders like Capital One. And I'm
just trying to make heads or tails of this because
when I see financials down and the rest of the
(02:22):
market is ripping, it kind of makes me look at
things and be like, what's what's happening here? Like what
do they know that we don't. It's just kind of
something that I've gotten from experience. The other piece that's
interesting to me is when stocks continue to make new
all time highs, but the VIX, the volatility index, stays firm.
(02:46):
You kind of sit out there and you're like, Okay,
what's going on here? Like, who who is Who's making
this bid that there's going to be increased volatility even
as stocks are making all time highs. That doesn't really
give me warm and fuzzies either. Now, this could all
turn out to be nothing, and it most likely is,
but it's just like a couple things where you look
(03:07):
at and you're like, that's not really the kind of
behavior that you love to see, and so you know,
we'll see what we get there. Taking a look at
the around other markets, though, tenure US Treasury right now
is currently up four tenths of a basis point to
four point one one percent. When we go and start
(03:31):
digging through commodity markets, oil continuing to fall down seventy
nine cents a barrel to sixty dollars and ninety nine
cents on West Texas. Intermediate gas prices trip a national
average haven't checked in a while because they haven't been moving.
They still have not been moving. We're three fifteen and
nine tenths. We've been between three ten and three twenty
for almost this entire year. Gas prices just have not
(03:52):
budged this year. They are still down from last year,
but not by as much now because this time last
year we were nineteen. So we've pretty much been in
this range for about a full year now. After prices
came down mid to late summer last year, we've been
sitting three ten to three twenty a gallon nationally, and
that's kind of what it suggests we're.
Speaker 3 (04:15):
Going to be at going forward.
Speaker 2 (04:16):
Gold down thirty five dollars anounced to thirty eight sixty
two and fifty cents. I guess even gold has to
take a break sometime for making new all time high.
So it's gonna do that along with stocks today and
we'll see how that continues as.
Speaker 3 (04:30):
We go through the day.
Speaker 2 (04:32):
Mike, last week I started we were covering a show
I think Paul was on with me, and I mentioned
that we were starting to see some.
Speaker 3 (04:41):
Ugly stuff bubbling up through the auto sector.
Speaker 4 (04:43):
Yeah, we had that Tricolor company that does a bunch
of lending in the subprime auto lending space go chapter
seven on us.
Speaker 3 (04:52):
Which maybe I was doing this with you, yeah, could.
Speaker 4 (04:54):
Have been, and basically sold off everything they have and
then lo and behold.
Speaker 3 (05:00):
Earlier this week, we have another auto company, and.
Speaker 2 (05:02):
This one started popping up last week, First Brands. They
are the makers of fram oil filters, autolite, sparkplugs, a
bunch of car parts and things like that.
Speaker 3 (05:13):
And last week.
Speaker 2 (05:15):
Some of the peripheral businesses around them started, you know,
declaring bankruptcy because they were like, we don't know if
First Brands is going to be able to pay us,
and so we're we're gonna call it first First Brands
on Sunday declared bankruptcy themselves. And it's it's not anything
where you look at this and say, okay, like this
(05:37):
in and of itself is the problem, because First Brands
has about twelve billion dollars in debt, which is big,
but nothing.
Speaker 3 (05:48):
Like crazy crazy crazy.
Speaker 2 (05:51):
But it's the combination of that, with Tricolor going under,
Andy had CarMax report some really bad earnings last week,
you've got Ford's saying, hey, we need to start going
down market with our lending standards. On f one fifties.
And I made a comment last week that like, something
stinks in the auto sector. I don't know like how
big it is or what it means, but something stinks there.
(06:14):
And I want to dig in more on this First
Brands item, because the big thing with First Brands is
they took a plate a page right out of.
Speaker 3 (06:23):
The freaking Lehman Brothers handbook.
Speaker 2 (06:26):
I gotta tell you, whenever I see this stuff, I
keep coming back to it. There's only two things that
blow you up in finance, and it's the same things
every time. It's securitization and leverage. And usually it's the
leverage that ends up blowing you up, because if you
just securitize things that aren't leveraged, you're fine. But no
one wants to do that because all the money's made
(06:47):
with the leverage, and so people like.
Speaker 3 (06:48):
Borrow other people's money to make it more valuable. Exactly.
Speaker 2 (06:51):
So Lehman Brothers back in the run up to the
financial crisis, before they went belly up, they used a
program called REPO one oh five. And REPO one oh
five was a fancy way of saying, hey, we're going
to sign a short term repurchase agreement where we sell
off a bunch of assets in this case, you know
money that like things that we've lent, and we're going
(07:14):
to take cash from this, and it makes our books
look better because it doesn't look like we have a
bunch of non performing loans on our books. It looks
like we've got a bunch of cash on our books.
And Leeman would do this at the end of quarters
in order to make their books look better and lo
and behold, this is basically what First Brands was doing.
With a bunch of off balance sheet loans that they'd have.
They just kind of like cycle through and oh, like,
(07:36):
we'll sell this one off for a little bit and
take cash back so we can borrow more. And this
is how a company that, by the way, was not
you know, as big anywhere near as big as the
amount of debt that they had outstanding, ended up like
taking on nine hundred million dollars in annual debt servicing
costs on five billion dollars in revenue.
Speaker 4 (07:57):
So I agree that this spells some ugly stuff for
the auto sector as a whole. They're already struggling with
real business issues such as tariffs and lack of demand
for the types of cars that they were building, a
consumer that has weakened a number of auto loans that
were connected to people who were already not in good shape,
some of whom were recently deported. All sorts of issues
(08:20):
that are coming to the forefront here for the auto industry.
My question that I asked early on in this because
on Monday we didn't really know how much actual debt
was out there, and we seem to have a bit
more clarity. The estimates that were out there on Monday
were somewhere between ten and forty billion, without a real
knowledge of where that was. We think it's twelve now,
we think it's twelve now, which is we're still not sure.
Speaker 3 (08:41):
Yeah, less of an issue.
Speaker 4 (08:43):
My question at the time was, is this some sort
of spark that you could have in the auto sector
where the lenders here and you spoke about financials being
under pressure start to take a good hard look at
their books of private credit that's out there. And that's
to me the more important question, because somebody's still going to.
Speaker 3 (09:02):
Make spark plugs. At the end of the day.
Speaker 4 (09:04):
If this company has to go through bankruptcy and sell
off assets, somebody's still going to manufacture that stuff. I'm
pretty sure we still want to buy them. If a
bunch of financers start to realize that they are way
over extended on the loans that they have been making,
then you start to have questions about not just the
auto sector, I guess would be my point.
Speaker 2 (09:24):
So this is basically where my head went over the
last few days when I said, Okay, so you got
these problems showing up in the auto sector and now financials,
and in particular, like when we look at financials, there
are all kinds of different companies that get classified as financials.
You've got banks, you've got payment services, you've got asset managers,
(09:48):
you've got insurance companies, you've got financial data providers. When
you look at what is getting bludgeoned over the last.
Speaker 3 (10:01):
They call it weaker two.
Speaker 2 (10:04):
The ones that are getting hit hardest are the asset managers,
specifically in that private space. Think you're kkrs of the world,
your Apollo Global Management, Blackstone, Blue Owl. Those are the
names where you're sitting there being like ew, why you
off like fifteen percent?
Speaker 3 (10:25):
Like what what gives? Like what's what's happening?
Speaker 2 (10:28):
And so the place that this is going to come
to a head in my opinion is in that.
Speaker 3 (10:33):
Private credit space because.
Speaker 2 (10:38):
Nobody has any idea what anyone else has borrowed and
owes to anyone else, because I'm sure that First Brands
was not the only company using these kinds of arrangements.
And now everyone's out there looking at the loans they've
made and they're like, well, what do.
Speaker 3 (10:53):
We think this is worth?
Speaker 2 (10:55):
Because if this company actually has the same problems First
Brands did, then gosh, like, this doesn't really.
Speaker 3 (11:03):
Look like a performing loan anymore.
Speaker 2 (11:06):
And so I gotta tell you, the scale probably smaller,
but we don't know because no one knows how big
the private credit industry actually is. Like the estimates that
I've seen are anywhere between one and a half trillion
and four trillion dollars. That's a big range for how
(11:26):
big private credit could be.
Speaker 4 (11:27):
Yeah, the main thing we do know is that it
makes up a boatload more of the total debt out
there that's below investment grade than it did back in
the early two thousands.
Speaker 2 (11:36):
Which also means that debt is not on public markets,
so it does not get traded daily, and you don't
know how much it's actually worth according to the market.
You can't market to market. Let's take a quick break.
When we come back, we're gonna be joined by Luke
Cowa from Sherwood News. We're also gonna talk more about this.
I'm sure Luke can talk a little bit about it
as well. But let's take a quick break and then
(11:57):
Luke joins us right after this.
Speaker 1 (11:59):
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Speaker 2 (12:39):
All right, as promised, we're joined now by Luke Kawa
from Sherwood News, here to take us through what's going
on in markets.
Speaker 3 (12:45):
Luke, how you doing today? Doing great?
Speaker 5 (12:48):
How about yourself?
Speaker 3 (12:49):
We are doing well.
Speaker 2 (12:50):
I know the S and P five hundred is off
very modestly today, but for the purposes of this conversation,
we got stocks basically at all time highs. Luke's been
driving the rally the last couple of weeks.
Speaker 5 (13:02):
Yeah, no, hey, like I'll whenever we're within two percent,
let's just call it all time highs.
Speaker 3 (13:07):
There we go.
Speaker 5 (13:08):
Yeah, I'm on board with that. I think a lot
of the rally in the past few weeks, well, you
can't ignore the the AI part of the story. It
seems like we don't get effectively a day or a
week that goes by without a one to ten to
three hundred million, three hundred billion rather dollar announcement related
(13:29):
to just the continued build out that's expected to play
out over the coming months, years, and you know, half
decade supposedly, you know, it all goes according to plan.
So I think that is a kind of a big
source of shoring up confidence and at the very least
the bottom line outlook for a lot of these companies
that are very heavily invested in the theme for the
(13:50):
next year. You know, after that you start to look
at you know, purchase obligations or kind of non binding
agreements and maybe water down the element somewhat, but it
keeps the floor looking pretty firm. I would say the
second big, big part is of course, the Federal Reserve
delivered its rate cut as expected, and you know that
(14:12):
was a lot of it is priced in ahead of time.
But one thing you definitely have seen, and this is
outside of the S and P five hundred, mainly, I
would say it's mainly in the Russell two thousand. I
think a lot of people like to look at that
index as kind of a better gauge of the US economy.
I don't share that view. I think the Russell is
full of a lot of speculative growth stocks, a lot
(14:35):
of companies that have a higher embedded risk of default
than a lot of the bigger names, and a lot
of companies that have higher floating rate debts. So when
short term rates come down, those companies benefit, their embedded
risk of default goes down. And if we look at
some of the pockets of the market that have just
performed extremely well, you know quantum computing, you've seen satellite companies,
(14:56):
these kind of names go absolutely gangbusters, and that's you know,
associated with I would say, a kind of renewed about
of speculation and willingness to buy into these companies' long
term growth potential.
Speaker 3 (15:10):
Looke. When we look at the S and P. Five hundred.
Speaker 2 (15:12):
One of the things that we have seen is a
clear divergence between anything AI related as far as the
earnings projections and the rest of the S and P.
Speaker 3 (15:21):
What about looking at the rest of the S and P.
Speaker 2 (15:23):
Five hundred as the proxy for the US economy, because
when you look there, it does seem like we're seeing
some kind of nasty things. When you strip out those
AI companies from the S and P.
Speaker 3 (15:34):
Five hundred, I would.
Speaker 5 (15:36):
Say, less nasty. And then I think you'd have to
do a kind of further division within that between the
cyclical parts of the market and the kind of more
defensive pockets of the market. I would say the more
defensive pockets of the market also look to be the
ones that are showing worse earnings trends, or at least
the least supportive earnings trends. And kind of the areas
(15:59):
like staples, healthcare, etc. Are you know that things are
going to need no matter what, no matter how good
or bad the economy is, those have been I would say,
the most underwhelming parts of the stock market.
Speaker 3 (16:10):
And on the other hand, you.
Speaker 5 (16:11):
Have seen you know, financials at a you know, a
pretty darn good past earning season. We'll see what what
this one brings. But you've even seen equal right retail,
do you know? Pretty darn well? Which is you know,
if you had told me, you know, in early April
that equal weight retail would be doing as well as
it has, I would have said, Terriss would have completely
gone away. Noah, just turns out that the the idea
(16:34):
I'm leaning in hard is to explain this is just
the we have severely underestimated the degree of the quote
unquote K shaped economy. The idea that we already know
that the top forty percent of earners drives more than
sixty percent of spending in the US economy, and they
they are really kind of doing a number in kind
of keeping that aggregate number afloat, even as we know
(16:57):
that there's you know, not everyone's enjoying the rising tide,
so to speak.
Speaker 2 (17:02):
You mentioned financials in there. One of the things we've
seen during this last week or so run two all
time highs is financials breaking down a little bit, particularly
the asset managers. And this comes on the back of,
you know, a few kind of surprising stories out of
the auto industry between Tricolor and First Brands, and Mike
(17:23):
and I were talking the last segment, like what does
this mean for like that whole private credit space and
is there something to worry about there? Are we getting
any signals on that front.
Speaker 5 (17:32):
I think the signal that you're getting is coming straight
from the stock market, right like this is the private
credit pe space has been I would say a bit
of a slow burn this entire cycle in terms of
kind of the lack of ability to find attractive opportunities
(17:52):
or to necessarily find the returns for investors and searching
for a new investor base.
Speaker 3 (17:57):
I e.
Speaker 5 (17:58):
Now retail to try to you know, shift a lot
of this exposure to and the kind of the more
and more that happens. It just seems like you once
every three to six to nine months, you have a
an episodic event that causes and you know, in this case,
you've highlighted well what it is to kind of those
(18:19):
lending troubles that causes people to exit that asset class
pretty abruptly.
Speaker 3 (18:25):
So it just seems to me.
Speaker 5 (18:27):
At least that that private credit has been the slow
burn of people have been worrying about it for a
long time. It's by the nature of the business. Something
that's a little tougher to get your head around. And
you know, the the entire private space it doesn't have
public marks, but the companies that operate the most in
the space, they certainly do. And people do vote in
(18:48):
with their feet when they see signs of worry in
that sector, and it has been very prone to sharper
draw downs whenever you see kind of signs of struggling
in one pocket of the industry or concerns about the economy.
Speaker 2 (19:00):
Rit large, Luke, appreciate you joining us. Hope you have
a great rest of the day and we'll catch up
with you soon.
Speaker 5 (19:06):
Hey, last thing, go Yanks go oh.
Speaker 2 (19:09):
Boy, whoa yikes from a Canadian yikes.
Speaker 3 (19:15):
Well, I'm glad we got that out of the way.
It was good.
Speaker 2 (19:18):
So in any case, big thanks to Luke for joining
us again. He's always great. He always has some really
good insights into what's going on in markets.
Speaker 4 (19:27):
There.
Speaker 2 (19:27):
Let's take a quick break. When we come back, we
got trivia. We got Wall Street Watch after.
Speaker 1 (19:31):
This, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time Now for Wall Street Watch, a complete
(19:53):
look at what's moving markets so far today Right here
on the Financial Exchange Radio Network, we.
Speaker 6 (20:00):
Are mixed on day two of the government shutdown as
investors are left wondering about the state of the labor market,
with the shutdown pausing economic data releases, including the September
job support that was slated to be published tomorrow morning.
Right now, the Dow is down by about a quarter
percent or one hundred and ten points lower. SMP five
hundred is down nearly two tenths of one percent, Nasdaq
(20:22):
actually up by about a tenth of a percent or
twenty points higher. Russell two thousand down about a tenth
of a percent. Ten year Treasure reeled flat at four
point one zero two percent. In crude oil down one
and a quarter percent, right at sixty one dollars a barrel.
Following media reports from earlier this week, Warren Buffett's Berkshire
(20:42):
Hathaway officially announced it reached a deal to buy Occidental
Petroleum Is petro chemical unit OXYCIM for nine point seven
billion dollars in cash. Berkshire stock is dipping, while Oxy
shares are down by six percent. Meanwhile, Tesla reported third
corter deliveries of north of four hundred and ninety seven
thousand vehicles, above street expectations and seven percent higher over
(21:06):
the year prior. Deliveries in the period got a boost
as some customers rushed to buy cars ahead of the
expiration of a key federal tax credit. Tesla stock is
down nearly two percent. Elsewhere, fair ISAAC shares are surging
twenty two percent after the credit analytics company unveiled the
system that allows mortgage lenders direct access to Fiico scores,
(21:29):
allowing resellers to bypass credit bureaus. TransUnion and Equifact shares
are down on that news, and after yesterday's near nine
percent leap, shares in Western Digital retreating about half a percent. Today,
Nick reported, citing CEO Irving Tan, that the data storage
company will invest one billion dollars in Japan over the
(21:50):
next half decade. I'm Tucker Silva and that is Wall
Street watch in. We still have to do trivia here,
so let's go. Last night, the New York Yankees beat
the Boston Red Sox in Game two of the Wildcard
Series and didn't frustrate me whatsoever. The Red Sox and
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(22:11):
our trivia question today, how many times have the Red
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Speaker 2 (22:44):
Mike, we got a pc it from CNBC. Taiwan rejects
the US proposal for fifty to fifty chip production, says
trade talks focused on tariffs effectively, uh, the United States
was pushing for Taiwan's semiconductor to make half of the
chips the US needs in the United States, and Taiwan
(23:05):
basically said, no, we're not interested in that, which I
understand from their perspective.
Speaker 4 (23:11):
Yeah, from a geopolitical perspective, I mean they refer to
it has been referred to as the Silicon shield. The
idea that Taiwan is so strategically important to the global
supply of semiconductors that China can't invade and retake the
territory out of fear for what that would do to
(23:32):
global supply. I am sure that Taiwan could be convinced
of this, but the trade off would probably be some
form of long term defense commitment, security guarantee, security guarantee
from the United States that is far and away more
than what we do currently, which is what's the official
stance on Taiwan, that we officially do not support Taiwan independence,
(23:57):
Taiwanese independence from China. I don't know the exact framing
of it, but I know the Chinese are pushing for
something more structured on that more dedicated from the White
House on the status of Taiwan, and from their perspective, right,
the only thing that is keeping us safe here is
the inability of the United States, or a large part
of it is the inability of the United States to
(24:18):
successfully manufacture these semiconductors. So until you get that, I
don't know that they're going to be willing to move on.
Speaker 2 (24:25):
That, which makes total sense from their perspective, right, it's like, Okay,
what's in it for us?
Speaker 4 (24:31):
If you get to fifty to fifty, then it is
very easy for the United States to then get to
one hundred if we need to, which therefore directly hits
at Taiwanese security.
Speaker 3 (24:44):
Yeah, it's kind of a big deal. Yeah, so we'll
see where this goes.
Speaker 4 (24:47):
But I don't know that that other scenarios trade off
the United States would be willing to make to say, yeah,
we're going to run in the face of everything that
we're trying to accomplish with China in order to provide
Taiwan a long term security guarantee.
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Speaker 2 (26:07):
The incredibly shrinking pool of publicly traded companies, peace from barons,
and look what we have right now. There are just
over four thousand publicly traded companies available on US markets
right now. If you go back to nineteen ninety six,
thirty years ago, there were about eighty one hundred, So
(26:29):
there are about half as many companies that are publicly
traded in the US today as there were thirty years ago.
Is this few different things? The first is the reasons
for doing so. Why would companies generally? There are two
reasons why this can happen companies staying private.
Speaker 3 (26:48):
Longer or permanently.
Speaker 2 (26:52):
Number two more consolidation within publicly traded markets. They are
good reasons for both of those things to have happened
in the last thirty years.
Speaker 4 (26:59):
Yeah, so you're saying that the existing companies on public
traded markets are bigger and more consolidated, checks out economies
of scale pay. And we're also saying that something structurally
has changed since the nineteen nineties to allow big companies
to stay private and fund themselves longer than they could previously.
Speaker 3 (27:19):
That piece, I know exists.
Speaker 4 (27:21):
I don't really understand why it exists in a way
that it didn't in the nineties, but I do know
that the prevalence of private equity and the ability for
these companies to fund themselves is far beyond what they
could do back then.
Speaker 2 (27:31):
This then brings us to I think what the really
interesting question is, which is is.
Speaker 3 (27:36):
This good, bad, or neutral? Probably all the above for
different parties. Who's it good for?
Speaker 4 (27:45):
It may be good for the companies themselves to not
have to focus quite as much on quarter to quarter
guidance and publicly traded things. I think being private may
allow if you're staying private, if you're staying private longer term.
I think of big is an example of a big
company who very much lives and breeze by the idea
that they are privately held and they don't need to
(28:06):
respond to shareholders in the same way, and they consider
that to be a competitive advantage. Sure, So I think
for companies themselves, you can make an argument, Yeah, not
being beholden to public shareholders and public reports, reporting requirements
makes us more competitive maybe in some cases, yes, in
some cases.
Speaker 3 (28:22):
Now for the public.
Speaker 2 (28:22):
Companies, you could say the greater consolidation is helped with
margins and you know, greater stability and things along those lines.
Speaker 3 (28:29):
So I think you can make that case.
Speaker 2 (28:32):
I think then you can also make the case that
in general for the average investor this has resulted in
better outcomes as well. Where I'll go on that is
again the returns that private markets offer to people that
can get in early with you know, good managers are robust.
(28:54):
Like there's a reason why ultra high net worth people
look for you know, whether it's VC private dec there's
a reason why they're attracted to that. Likewise, if you
look at how consolidation has impacted public markets, corporate profit
margins have risen dramatically in the last thirty years from
about seven percent of GDP to around twelve percent of GDP,
(29:16):
even if you look within specific industries. As much as
I like to rip on the airlines, the reason why
they're finally investable for the last fifteen years is because
we allowed a tremendous amount of consolidation and got rid
of a bunch of competition, which allows them to be
more profitable. I'm not saying that's good for you and
me flying on them, but for investors it is correct.
(29:36):
So I think you can make a case that this
has generally been pretty good for the average investor.
Speaker 3 (29:42):
Who has it been bad for?
Speaker 2 (29:46):
I think you can make a case that for the
person that is like looking for that needle in a
haystack that you know is you know, hey, this is
going to be the next big thing. Those companies are
coming to market later without the same growth opportunities. We
talked about Amazon a lot. Amazon iPod was like one
hundred million dollar company. No, no good tech company? Does
(30:07):
that open? AI is five hundred billion dollars in private
and not even thinking about going public.
Speaker 3 (30:13):
So I'm wondering.
Speaker 4 (30:16):
I don't know how to determine who that hurts, but
we will probably hear fewer of those stories of the
average person hitting an absolute grand slam on stock investing
by investing in whatever the next version of Apple was
in nineteen ninety.
Speaker 2 (30:32):
The counter to that and why it may not matter.
There are different markets now where you can do that
if you want to go and yolo on crypto and
that's your thing. Sure they're not securities, but hey, the
SEC's basically said, have at it.
Speaker 3 (30:45):
We won't have your back.
Speaker 2 (30:47):
Yep, But go for it and do whatever you want
there and buy your fart coin and you know whatever
it is that you you know, your meme of the
week and whatever the heck it is.
Speaker 3 (30:57):
I don't know, it's not far off. Okay, there was
a poop coin at one point, wasn't park hilarious?
Speaker 4 (31:06):
Like?
Speaker 3 (31:08):
Is there a fart coin? Probably? Yeah, I mean, can.
Speaker 2 (31:11):
You research this and just find out if there's one,
I will google fark coin.
Speaker 3 (31:16):
Please block it, Please block it our our systems. There
is a pretty good chance. Yeah, the firewall might catch
it before you even get that immediate. Yes there is one.
Speaker 4 (31:25):
Yeah, it's training at sixty six sense.
Speaker 3 (31:29):
How many shrewd bucks is that? Don't don't know. So
not much volume on what a world do you.
Speaker 2 (31:36):
There actually exists something that you can buy called fart coin.
Speaker 4 (31:40):
You know how I know the crypto market is dominated
by teenage boys.
Speaker 3 (31:44):
What's the market cap? Pot a tucker, I don't know,
let's look it up.
Speaker 2 (31:51):
This is just insanely amusing to me that it actually exists.
Speaker 4 (31:55):
Sixty eight cents. That can't be right, that's the price.
I think it's sitting at a mark cap around two
hundred million bucks.
Speaker 3 (32:01):
Chuck, two hundred million.
Speaker 2 (32:02):
I mean that people have put that much money into
something called fart coins.
Speaker 3 (32:05):
It's a lot of fark coins. I could be looking
at this wrong.
Speaker 4 (32:10):
I don't frequently look up uh cryptos, but that was
what I was seeing here.
Speaker 2 (32:19):
Is there a broader flatulence index out there?
Speaker 3 (32:22):
Okay?
Speaker 2 (32:24):
I mean, my goodness, there's something called fart coin with
a two hundred million dollar market cap out there?
Speaker 3 (32:29):
Like, what do I do? What do I do with that?
What am I doing with my life? What are we
doing here?
Speaker 4 (32:36):
According to coin market cap, which I've never used as
a source before, actually it's calling it a six hundred
and sixty seven million.
Speaker 3 (32:43):
Dollar market cap.
Speaker 4 (32:44):
Even worse, I don't I wouldn't use that as a
source normally, as the first result that came up. Maybe
Forbes would be more reliable in this in this source, but.
Speaker 3 (32:55):
Peace from CNBC.
Speaker 2 (32:56):
Next in our stack tokenization of real world assets. This
is an unstoppable freight train coming to major markets. Robinhood, CEO,
Let's go to break stack room.
Speaker 3 (33:05):
That is next.
Speaker 1 (33:07):
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Speaker 6 (33:51):
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Speaker 3 (34:26):
Mike, what do you got for me? For Stackroo? I
want to talk about Amazon's ring video doorbells. You have one?
Speaker 4 (34:32):
Uh no, Tucker, I got the the Google one there.
So I've got a ring video doorbell and I do
like it. I find it convenient. Every once in a
while I'm not home and somebody's ringing the doorbell. I
get to check out my kids maybe when they get back,
et cetera. Started very convenient. They're rolling out a new
real friendly feature to help you find your lost dog.
So here's how it works. Your dog runs away, you
(34:54):
make an alert on your ring. It will then, using
artific intelligence of some sort, automatically identify the same looking
dog on your neighbor's radio video doorbells in the general
area and send an alert to their phone saying, hey,
your neighbor lost their dog and based on this video
on your on your doorbell, it might be the dog.
(35:16):
Would you mind if we shared it with that neighbor?
And you know, you guys can connect and find this dog,
which is nice and cheery and friendly.
Speaker 3 (35:25):
Hate it and also hate it.
Speaker 4 (35:27):
Is really close to our dystopian future where a crime
gets committed, the police go to Amazon say, handover all
of the AI generation of this looking person across the
video doorbells in your network, which they're apparently already pretty
close to doing. Amazon has some pretty close relationships with
some local police forces. And yeah, I don't know that
(35:50):
this is avoidable, and we're already kind of here given
the level of you know, closed circuit and open circuit
cameras that are in major cities. But this is again
just kind of naturally where we're headed, right It is. Yes,
hopefully there would be required to have a court order
and all sorts of things, but we're getting to the
(36:10):
point where there's not many spaces in public today that
you can go find that are not in some way covered.
Speaker 3 (36:18):
By video capture. Hate it. Yeah, it's pretty dystopian.
Speaker 2 (36:23):
Speaking of dystopian, door Dash unveils Dot, the delivery robot
powered by its autonomous delivery platform to accelerate local commerce.
Speaker 3 (36:32):
Oh but she is cute. It's a rolling tomato is
basically what it looks like. Assim Dot is female. It's
a robot.
Speaker 2 (36:41):
Yeah, I don't think there's gender when it comes to robots.
I think, you know, they don't. Disney would beg to differ.
They don't procreate the way you think. Let's talk a
little bit about the problems with this first. It can
travel up to twenty miles an hour. So the good
news is that it can outrun someone who's trying to
steal your food. The bad news, I'm not sure if
(37:03):
this thing is baseball bat resistant, because you better believe
that people are going to be trying to break into
these things. It's specifically is designed for, you know, close
quarters urban areas, and as someone you know who lived
in Somerville for quite some time, porch pirates were really
a thing where people would try to steal your packages.
You think they're not going to try to take food
(37:24):
out of a door Dot robot. Now you'll then say, oh, well,
they'd have cameras on it, and you think that they
haven't thought of that. So on one hand, I just
look at this and I'm like, Okay, this is just
opening up more opportunities for theft.
Speaker 3 (37:37):
Yeah.
Speaker 2 (37:37):
The other piece is, hey all you people that have
you know, bought into that whole side hustle thing the
last decade.
Speaker 3 (37:44):
See Elena, You're getting screwed by the very company that
brought you that side hustle. Yeah.
Speaker 4 (37:50):
I find this also dystopian and less concerning than the
Amazon ring doorbell bot. Agree, same boat, But yeah, this one,
I'm not as much concerned about the privacy concerns.
Speaker 3 (37:59):
As I am about it's going to replace a lot
of guys. Here's the thing.
Speaker 2 (38:05):
The next fifteen to twenty years, a lot of us
are going to be replaced. It might be me, it
might be Mike, it might be like, I don't know
that anyone's one hundred percent safe on this, So take
it for what it is. Quick break for the rest
of the day. We'll see you tomorrow for a not
jobs report.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
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(00:42):
your world. Stay informed and up to date about economic
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heroes by visiting dav five K dot Boston and making
a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:12):
Chuck, Mike and Tucker with you here and kicking things off.
Speaker 3 (01:16):
Stocks has now shifted.
Speaker 2 (01:18):
Into negative territory across the three major indices. Dows off
one hundred and four points, about a quarter percent, SMP
is down fourteen points, about a quarter percent, Nasdaq down
eight points about three hundredths of a percent, So tech
continuing to hold up.
Speaker 3 (01:33):
Well. I'll tell you that.
Speaker 2 (01:37):
It's kind of interesting what we're seeing in markets right now,
and I'm trying to wrap my head around it what
it means, because I see a couple things that generally
get my antenna perking up a little bit when they happen.
The first started yesterday and what actually started earlier this week.
(02:00):
Financial stocks have been puking, and specifically a lot of
these like asset manager stocks have been puking, but it
even spilled over into just like your broader banks yesterday
and and you know, lenders like Capital One. And I'm
just trying to make heads or tails of this because
when I see financials down and the rest of the
(02:22):
market is ripping, it kind of makes me look at
things and be like, what's what's happening here? Like what
do they know that we don't. It's just kind of
something that I've gotten from experience. The other piece that's
interesting to me is when stocks continue to make new
all time highs, but the VIX, the volatility index, stays firm.
(02:46):
You kind of sit out there and you're like, Okay,
what's going on here? Like, who who is Who's making
this bid that there's going to be increased volatility even
as stocks are making all time highs. That doesn't really
give me warm and fuzzies either. Now, this could all
turn out to be nothing, and it most likely is,
but it's just like a couple things where you look
(03:07):
at and you're like, that's not really the kind of
behavior that you love to see, and so you know,
we'll see what we get there. Taking a look at
the around other markets, though, tenure US Treasury right now
is currently up four tenths of a basis point to
four point one one percent. When we go and start
(03:31):
digging through commodity markets, oil continuing to fall down seventy
nine cents a barrel to sixty dollars and ninety nine
cents on West Texas. Intermediate gas prices trip a national
average haven't checked in a while because they haven't been moving.
They still have not been moving. We're three fifteen and
nine tenths. We've been between three ten and three twenty
for almost this entire year. Gas prices just have not
(03:52):
budged this year. They are still down from last year,
but not by as much now because this time last
year we were nineteen. So we've pretty much been in
this range for about a full year now. After prices
came down mid to late summer last year, we've been
sitting three ten to three twenty a gallon nationally, and
that's kind of what it suggests we're.
Speaker 3 (04:15):
Going to be at going forward.
Speaker 2 (04:16):
Gold down thirty five dollars anounced to thirty eight sixty
two and fifty cents. I guess even gold has to
take a break sometime for making new all time high.
So it's gonna do that along with stocks today and
we'll see how that continues as.
Speaker 3 (04:30):
We go through the day.
Speaker 2 (04:32):
Mike, last week I started we were covering a show
I think Paul was on with me, and I mentioned
that we were starting to see some.
Speaker 3 (04:41):
Ugly stuff bubbling up through the auto sector.
Speaker 4 (04:43):
Yeah, we had that Tricolor company that does a bunch
of lending in the subprime auto lending space go chapter
seven on us.
Speaker 3 (04:52):
Which maybe I was doing this with you, yeah, could.
Speaker 4 (04:54):
Have been, and basically sold off everything they have and
then lo and behold.
Speaker 3 (05:00):
Earlier this week, we have another auto company, and.
Speaker 2 (05:02):
This one started popping up last week, First Brands. They
are the makers of fram oil filters, autolite, sparkplugs, a
bunch of car parts and things like that.
Speaker 3 (05:13):
And last week.
Speaker 2 (05:15):
Some of the peripheral businesses around them started, you know,
declaring bankruptcy because they were like, we don't know if
First Brands is going to be able to pay us,
and so we're we're gonna call it first First Brands
on Sunday declared bankruptcy themselves. And it's it's not anything
where you look at this and say, okay, like this
(05:37):
in and of itself is the problem, because First Brands
has about twelve billion dollars in debt, which is big,
but nothing.
Speaker 3 (05:48):
Like crazy crazy crazy.
Speaker 2 (05:51):
But it's the combination of that, with Tricolor going under,
Andy had CarMax report some really bad earnings last week,
you've got Ford's saying, hey, we need to start going
down market with our lending standards. On f one fifties.
And I made a comment last week that like, something
stinks in the auto sector. I don't know like how
big it is or what it means, but something stinks there.
(06:14):
And I want to dig in more on this First
Brands item, because the big thing with First Brands is
they took a plate a page right out of.
Speaker 3 (06:23):
The freaking Lehman Brothers handbook.
Speaker 2 (06:26):
I gotta tell you, whenever I see this stuff, I
keep coming back to it. There's only two things that
blow you up in finance, and it's the same things
every time. It's securitization and leverage. And usually it's the
leverage that ends up blowing you up, because if you
just securitize things that aren't leveraged, you're fine. But no
one wants to do that because all the money's made
(06:47):
with the leverage, and so people like.
Speaker 3 (06:48):
Borrow other people's money to make it more valuable. Exactly.
Speaker 2 (06:51):
So Lehman Brothers back in the run up to the
financial crisis, before they went belly up, they used a
program called REPO one oh five. And REPO one oh
five was a fancy way of saying, hey, we're going
to sign a short term repurchase agreement where we sell
off a bunch of assets in this case, you know
money that like things that we've lent, and we're going
(07:14):
to take cash from this, and it makes our books
look better because it doesn't look like we have a
bunch of non performing loans on our books. It looks
like we've got a bunch of cash on our books.
And Leeman would do this at the end of quarters
in order to make their books look better and lo
and behold, this is basically what First Brands was doing.
With a bunch of off balance sheet loans that they'd have.
They just kind of like cycle through and oh, like,
(07:36):
we'll sell this one off for a little bit and
take cash back so we can borrow more. And this
is how a company that, by the way, was not
you know, as big anywhere near as big as the
amount of debt that they had outstanding, ended up like
taking on nine hundred million dollars in annual debt servicing
costs on five billion dollars in revenue.
Speaker 4 (07:57):
So I agree that this spells some ugly stuff for
the auto sector as a whole. They're already struggling with
real business issues such as tariffs and lack of demand
for the types of cars that they were building, a
consumer that has weakened a number of auto loans that
were connected to people who were already not in good shape,
some of whom were recently deported. All sorts of issues
(08:20):
that are coming to the forefront here for the auto industry.
My question that I asked early on in this because
on Monday we didn't really know how much actual debt
was out there, and we seem to have a bit
more clarity. The estimates that were out there on Monday
were somewhere between ten and forty billion, without a real
knowledge of where that was. We think it's twelve now,
we think it's twelve now, which is we're still not sure.
Speaker 3 (08:41):
Yeah, less of an issue.
Speaker 4 (08:43):
My question at the time was, is this some sort
of spark that you could have in the auto sector
where the lenders here and you spoke about financials being
under pressure start to take a good hard look at
their books of private credit that's out there. And that's
to me the more important question, because somebody's still going to.
Speaker 3 (09:02):
Make spark plugs. At the end of the day.
Speaker 4 (09:04):
If this company has to go through bankruptcy and sell
off assets, somebody's still going to manufacture that stuff. I'm
pretty sure we still want to buy them. If a
bunch of financers start to realize that they are way
over extended on the loans that they have been making,
then you start to have questions about not just the
auto sector, I guess would be my point.
Speaker 2 (09:24):
So this is basically where my head went over the
last few days when I said, Okay, so you got
these problems showing up in the auto sector and now financials,
and in particular, like when we look at financials, there
are all kinds of different companies that get classified as financials.
You've got banks, you've got payment services, you've got asset managers,
(09:48):
you've got insurance companies, you've got financial data providers. When
you look at what is getting bludgeoned over the last.
Speaker 3 (10:01):
They call it weaker two.
Speaker 2 (10:04):
The ones that are getting hit hardest are the asset managers,
specifically in that private space. Think you're kkrs of the world,
your Apollo Global Management, Blackstone, Blue Owl. Those are the
names where you're sitting there being like ew, why you
off like fifteen percent?
Speaker 3 (10:25):
Like what what gives? Like what's what's happening?
Speaker 2 (10:28):
And so the place that this is going to come
to a head in my opinion is in that.
Speaker 3 (10:33):
Private credit space because.
Speaker 2 (10:38):
Nobody has any idea what anyone else has borrowed and
owes to anyone else, because I'm sure that First Brands
was not the only company using these kinds of arrangements.
And now everyone's out there looking at the loans they've
made and they're like, well, what do.
Speaker 3 (10:53):
We think this is worth?
Speaker 2 (10:55):
Because if this company actually has the same problems First
Brands did, then gosh, like, this doesn't really.
Speaker 3 (11:03):
Look like a performing loan anymore.
Speaker 2 (11:06):
And so I gotta tell you, the scale probably smaller,
but we don't know because no one knows how big
the private credit industry actually is. Like the estimates that
I've seen are anywhere between one and a half trillion
and four trillion dollars. That's a big range for how
(11:26):
big private credit could be.
Speaker 4 (11:27):
Yeah, the main thing we do know is that it
makes up a boatload more of the total debt out
there that's below investment grade than it did back in
the early two thousands.
Speaker 2 (11:36):
Which also means that debt is not on public markets,
so it does not get traded daily, and you don't
know how much it's actually worth according to the market.
You can't market to market. Let's take a quick break.
When we come back, we're gonna be joined by Luke
Cowa from Sherwood News. We're also gonna talk more about this.
I'm sure Luke can talk a little bit about it
as well. But let's take a quick break and then
(11:57):
Luke joins us right after this.
Speaker 1 (11:59):
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(12:21):
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Speaker 2 (12:39):
All right, as promised, we're joined now by Luke Kawa
from Sherwood News, here to take us through what's going
on in markets.
Speaker 3 (12:45):
Luke, how you doing today? Doing great?
Speaker 5 (12:48):
How about yourself?
Speaker 3 (12:49):
We are doing well.
Speaker 2 (12:50):
I know the S and P five hundred is off
very modestly today, but for the purposes of this conversation,
we got stocks basically at all time highs. Luke's been
driving the rally the last couple of weeks.
Speaker 5 (13:02):
Yeah, no, hey, like I'll whenever we're within two percent,
let's just call it all time highs.
Speaker 3 (13:07):
There we go.
Speaker 5 (13:08):
Yeah, I'm on board with that. I think a lot
of the rally in the past few weeks, well, you
can't ignore the the AI part of the story. It
seems like we don't get effectively a day or a
week that goes by without a one to ten to
three hundred million, three hundred billion rather dollar announcement related
(13:29):
to just the continued build out that's expected to play
out over the coming months, years, and you know, half
decade supposedly, you know, it all goes according to plan.
So I think that is a kind of a big
source of shoring up confidence and at the very least
the bottom line outlook for a lot of these companies
that are very heavily invested in the theme for the
(13:50):
next year. You know, after that you start to look
at you know, purchase obligations or kind of non binding
agreements and maybe water down the element somewhat, but it
keeps the floor looking pretty firm. I would say the
second big, big part is of course, the Federal Reserve
delivered its rate cut as expected, and you know that
(14:12):
was a lot of it is priced in ahead of time.
But one thing you definitely have seen, and this is
outside of the S and P five hundred, mainly, I
would say it's mainly in the Russell two thousand. I
think a lot of people like to look at that
index as kind of a better gauge of the US economy.
I don't share that view. I think the Russell is
full of a lot of speculative growth stocks, a lot
(14:35):
of companies that have a higher embedded risk of default
than a lot of the bigger names, and a lot
of companies that have higher floating rate debts. So when
short term rates come down, those companies benefit, their embedded
risk of default goes down. And if we look at
some of the pockets of the market that have just
performed extremely well, you know quantum computing, you've seen satellite companies,
(14:56):
these kind of names go absolutely gangbusters, and that's you know,
associated with I would say, a kind of renewed about
of speculation and willingness to buy into these companies' long
term growth potential.
Speaker 3 (15:10):
Looke. When we look at the S and P. Five hundred.
Speaker 2 (15:12):
One of the things that we have seen is a
clear divergence between anything AI related as far as the
earnings projections and the rest of the S and P.
Speaker 3 (15:21):
What about looking at the rest of the S and P.
Speaker 2 (15:23):
Five hundred as the proxy for the US economy, because
when you look there, it does seem like we're seeing
some kind of nasty things. When you strip out those
AI companies from the S and P.
Speaker 3 (15:34):
Five hundred, I would.
Speaker 5 (15:36):
Say, less nasty. And then I think you'd have to
do a kind of further division within that between the
cyclical parts of the market and the kind of more
defensive pockets of the market. I would say the more
defensive pockets of the market also look to be the
ones that are showing worse earnings trends, or at least
the least supportive earnings trends. And kind of the areas
(15:59):
like staples, healthcare, etc. Are you know that things are
going to need no matter what, no matter how good
or bad the economy is, those have been I would say,
the most underwhelming parts of the stock market.
Speaker 3 (16:10):
And on the other hand, you.
Speaker 5 (16:11):
Have seen you know, financials at a you know, a
pretty darn good past earning season. We'll see what what
this one brings. But you've even seen equal right retail,
do you know? Pretty darn well? Which is you know,
if you had told me, you know, in early April
that equal weight retail would be doing as well as
it has, I would have said, Terriss would have completely
gone away. Noah, just turns out that the the idea
(16:34):
I'm leaning in hard is to explain this is just
the we have severely underestimated the degree of the quote
unquote K shaped economy. The idea that we already know
that the top forty percent of earners drives more than
sixty percent of spending in the US economy, and they
they are really kind of doing a number in kind
of keeping that aggregate number afloat, even as we know
(16:57):
that there's you know, not everyone's enjoying the rising tide,
so to speak.
Speaker 2 (17:02):
You mentioned financials in there. One of the things we've
seen during this last week or so run two all
time highs is financials breaking down a little bit, particularly
the asset managers. And this comes on the back of,
you know, a few kind of surprising stories out of
the auto industry between Tricolor and First Brands, and Mike
(17:23):
and I were talking the last segment, like what does
this mean for like that whole private credit space and
is there something to worry about there? Are we getting
any signals on that front.
Speaker 5 (17:32):
I think the signal that you're getting is coming straight
from the stock market, right like this is the private
credit pe space has been I would say a bit
of a slow burn this entire cycle in terms of
kind of the lack of ability to find attractive opportunities
(17:52):
or to necessarily find the returns for investors and searching
for a new investor base.
Speaker 3 (17:57):
I e.
Speaker 5 (17:58):
Now retail to try to you know, shift a lot
of this exposure to and the kind of the more
and more that happens. It just seems like you once
every three to six to nine months, you have a
an episodic event that causes and you know, in this case,
you've highlighted well what it is to kind of those
(18:19):
lending troubles that causes people to exit that asset class
pretty abruptly.
Speaker 3 (18:25):
So it just seems to me.
Speaker 5 (18:27):
At least that that private credit has been the slow
burn of people have been worrying about it for a
long time. It's by the nature of the business. Something
that's a little tougher to get your head around. And
you know, the the entire private space it doesn't have
public marks, but the companies that operate the most in
the space, they certainly do. And people do vote in
(18:48):
with their feet when they see signs of worry in
that sector, and it has been very prone to sharper
draw downs whenever you see kind of signs of struggling
in one pocket of the industry or concerns about the economy.
Speaker 2 (19:00):
Rit large, Luke, appreciate you joining us. Hope you have
a great rest of the day and we'll catch up
with you soon.
Speaker 5 (19:06):
Hey, last thing, go Yanks go oh.
Speaker 2 (19:09):
Boy, whoa yikes from a Canadian yikes.
Speaker 3 (19:15):
Well, I'm glad we got that out of the way.
It was good.
Speaker 2 (19:18):
So in any case, big thanks to Luke for joining
us again. He's always great. He always has some really
good insights into what's going on in markets.
Speaker 4 (19:27):
There.
Speaker 2 (19:27):
Let's take a quick break. When we come back, we
got trivia. We got Wall Street Watch after.
Speaker 1 (19:31):
This, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time Now for Wall Street Watch, a complete
(19:53):
look at what's moving markets so far today Right here
on the Financial Exchange Radio Network, we.
Speaker 6 (20:00):
Are mixed on day two of the government shutdown as
investors are left wondering about the state of the labor market,
with the shutdown pausing economic data releases, including the September
job support that was slated to be published tomorrow morning.
Right now, the Dow is down by about a quarter
percent or one hundred and ten points lower. SMP five
hundred is down nearly two tenths of one percent, Nasdaq
(20:22):
actually up by about a tenth of a percent or
twenty points higher. Russell two thousand down about a tenth
of a percent. Ten year Treasure reeled flat at four
point one zero two percent. In crude oil down one
and a quarter percent, right at sixty one dollars a barrel.
Following media reports from earlier this week, Warren Buffett's Berkshire
(20:42):
Hathaway officially announced it reached a deal to buy Occidental
Petroleum Is petro chemical unit OXYCIM for nine point seven
billion dollars in cash. Berkshire stock is dipping, while Oxy
shares are down by six percent. Meanwhile, Tesla reported third
corter deliveries of north of four hundred and ninety seven
thousand vehicles, above street expectations and seven percent higher over
(21:06):
the year prior. Deliveries in the period got a boost
as some customers rushed to buy cars ahead of the
expiration of a key federal tax credit. Tesla stock is
down nearly two percent. Elsewhere, fair ISAAC shares are surging
twenty two percent after the credit analytics company unveiled the
system that allows mortgage lenders direct access to Fiico scores,
(21:29):
allowing resellers to bypass credit bureaus. TransUnion and Equifact shares
are down on that news, and after yesterday's near nine
percent leap, shares in Western Digital retreating about half a percent. Today,
Nick reported, citing CEO Irving Tan, that the data storage
company will invest one billion dollars in Japan over the
(21:50):
next half decade. I'm Tucker Silva and that is Wall
Street watch in. We still have to do trivia here,
so let's go. Last night, the New York Yankees beat
the Boston Red Sox in Game two of the Wildcard
Series and didn't frustrate me whatsoever. The Red Sox and
Yankees have met in the playoffs five times before this series,
with the most recent coming in twenty twenty one. So
(22:11):
our trivia question today, how many times have the Red
Sox beat the Yankees in a playoff series? Once again?
How many times have the Red Sox beat the Yankees
in a playoff series? Be the fourth person today to
text us at six one seven three six to two
thirteen eighty five with the correct answer, and you win
a Financial Exchange Show T shirt once again. The fourth
(22:32):
correct response to text us to the number six one
seven three, six to two thirteen eighty five will win
that T shirt. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (22:44):
Mike, we got a pc it from CNBC. Taiwan rejects
the US proposal for fifty to fifty chip production, says
trade talks focused on tariffs effectively, uh, the United States
was pushing for Taiwan's semiconductor to make half of the
chips the US needs in the United States, and Taiwan
(23:05):
basically said, no, we're not interested in that, which I
understand from their perspective.
Speaker 4 (23:11):
Yeah, from a geopolitical perspective, I mean they refer to
it has been referred to as the Silicon shield. The
idea that Taiwan is so strategically important to the global
supply of semiconductors that China can't invade and retake the
territory out of fear for what that would do to
(23:32):
global supply. I am sure that Taiwan could be convinced
of this, but the trade off would probably be some
form of long term defense commitment, security guarantee, security guarantee
from the United States that is far and away more
than what we do currently, which is what's the official
stance on Taiwan, that we officially do not support Taiwan independence,
(23:57):
Taiwanese independence from China. I don't know the exact framing
of it, but I know the Chinese are pushing for
something more structured on that more dedicated from the White
House on the status of Taiwan, and from their perspective, right,
the only thing that is keeping us safe here is
the inability of the United States, or a large part
of it is the inability of the United States to
(24:18):
successfully manufacture these semiconductors. So until you get that, I
don't know that they're going to be willing to move on.
Speaker 2 (24:25):
That, which makes total sense from their perspective, right, it's like, Okay,
what's in it for us?
Speaker 4 (24:31):
If you get to fifty to fifty, then it is
very easy for the United States to then get to
one hundred if we need to, which therefore directly hits
at Taiwanese security.
Speaker 3 (24:44):
Yeah, it's kind of a big deal. Yeah, so we'll
see where this goes.
Speaker 4 (24:47):
But I don't know that that other scenarios trade off
the United States would be willing to make to say, yeah,
we're going to run in the face of everything that
we're trying to accomplish with China in order to provide
Taiwan a long term security guarantee.
Speaker 6 (25:00):
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Speaker 2 (26:07):
The incredibly shrinking pool of publicly traded companies, peace from barons,
and look what we have right now. There are just
over four thousand publicly traded companies available on US markets
right now. If you go back to nineteen ninety six,
thirty years ago, there were about eighty one hundred, So
(26:29):
there are about half as many companies that are publicly
traded in the US today as there were thirty years ago.
Is this few different things? The first is the reasons
for doing so. Why would companies generally? There are two
reasons why this can happen companies staying private.
Speaker 3 (26:48):
Longer or permanently.
Speaker 2 (26:52):
Number two more consolidation within publicly traded markets. They are
good reasons for both of those things to have happened
in the last thirty years.
Speaker 4 (26:59):
Yeah, so you're saying that the existing companies on public
traded markets are bigger and more consolidated, checks out economies
of scale pay. And we're also saying that something structurally
has changed since the nineteen nineties to allow big companies
to stay private and fund themselves longer than they could previously.
Speaker 3 (27:19):
That piece, I know exists.
Speaker 4 (27:21):
I don't really understand why it exists in a way
that it didn't in the nineties, but I do know
that the prevalence of private equity and the ability for
these companies to fund themselves is far beyond what they
could do back then.
Speaker 2 (27:31):
This then brings us to I think what the really
interesting question is, which is is.
Speaker 3 (27:36):
This good, bad, or neutral? Probably all the above for
different parties. Who's it good for?
Speaker 4 (27:45):
It may be good for the companies themselves to not
have to focus quite as much on quarter to quarter
guidance and publicly traded things. I think being private may
allow if you're staying private, if you're staying private longer term.
I think of big is an example of a big
company who very much lives and breeze by the idea
that they are privately held and they don't need to
(28:06):
respond to shareholders in the same way, and they consider
that to be a competitive advantage. Sure, So I think
for companies themselves, you can make an argument, Yeah, not
being beholden to public shareholders and public reports, reporting requirements
makes us more competitive maybe in some cases, yes, in
some cases.
Speaker 3 (28:22):
Now for the public.
Speaker 2 (28:22):
Companies, you could say the greater consolidation is helped with
margins and you know, greater stability and things along those lines.
Speaker 3 (28:29):
So I think you can make that case.
Speaker 2 (28:32):
I think then you can also make the case that
in general for the average investor this has resulted in
better outcomes as well. Where I'll go on that is
again the returns that private markets offer to people that
can get in early with you know, good managers are robust.
(28:54):
Like there's a reason why ultra high net worth people
look for you know, whether it's VC private dec there's
a reason why they're attracted to that. Likewise, if you
look at how consolidation has impacted public markets, corporate profit
margins have risen dramatically in the last thirty years from
about seven percent of GDP to around twelve percent of GDP,
(29:16):
even if you look within specific industries. As much as
I like to rip on the airlines, the reason why
they're finally investable for the last fifteen years is because
we allowed a tremendous amount of consolidation and got rid
of a bunch of competition, which allows them to be
more profitable. I'm not saying that's good for you and
me flying on them, but for investors it is correct.
(29:36):
So I think you can make a case that this
has generally been pretty good for the average investor.
Speaker 3 (29:42):
Who has it been bad for?
Speaker 2 (29:46):
I think you can make a case that for the
person that is like looking for that needle in a
haystack that you know is you know, hey, this is
going to be the next big thing. Those companies are
coming to market later without the same growth opportunities. We
talked about Amazon a lot. Amazon iPod was like one
hundred million dollar company. No, no good tech company? Does
(30:07):
that open? AI is five hundred billion dollars in private
and not even thinking about going public.
Speaker 3 (30:13):
So I'm wondering.
Speaker 4 (30:16):
I don't know how to determine who that hurts, but
we will probably hear fewer of those stories of the
average person hitting an absolute grand slam on stock investing
by investing in whatever the next version of Apple was
in nineteen ninety.
Speaker 2 (30:32):
The counter to that and why it may not matter.
There are different markets now where you can do that
if you want to go and yolo on crypto and
that's your thing. Sure they're not securities, but hey, the
SEC's basically said, have at it.
Speaker 3 (30:45):
We won't have your back.
Speaker 2 (30:47):
Yep, But go for it and do whatever you want
there and buy your fart coin and you know whatever
it is that you you know, your meme of the
week and whatever the heck it is.
Speaker 3 (30:57):
I don't know, it's not far off. Okay, there was
a poop coin at one point, wasn't park hilarious?
Speaker 4 (31:06):
Like?
Speaker 3 (31:08):
Is there a fart coin? Probably? Yeah, I mean, can.
Speaker 2 (31:11):
You research this and just find out if there's one,
I will google fark coin.
Speaker 3 (31:16):
Please block it, Please block it our our systems. There
is a pretty good chance. Yeah, the firewall might catch
it before you even get that immediate. Yes there is one.
Speaker 4 (31:25):
Yeah, it's training at sixty six sense.
Speaker 3 (31:29):
How many shrewd bucks is that? Don't don't know. So
not much volume on what a world do you.
Speaker 2 (31:36):
There actually exists something that you can buy called fart coin.
Speaker 4 (31:40):
You know how I know the crypto market is dominated
by teenage boys.
Speaker 3 (31:44):
What's the market cap? Pot a tucker, I don't know,
let's look it up.
Speaker 2 (31:51):
This is just insanely amusing to me that it actually exists.
Speaker 4 (31:55):
Sixty eight cents. That can't be right, that's the price.
I think it's sitting at a mark cap around two
hundred million bucks.
Speaker 3 (32:01):
Chuck, two hundred million.
Speaker 2 (32:02):
I mean that people have put that much money into
something called fart coins.
Speaker 3 (32:05):
It's a lot of fark coins. I could be looking
at this wrong.
Speaker 4 (32:10):
I don't frequently look up uh cryptos, but that was
what I was seeing here.
Speaker 2 (32:19):
Is there a broader flatulence index out there?
Speaker 3 (32:22):
Okay?
Speaker 2 (32:24):
I mean, my goodness, there's something called fart coin with
a two hundred million dollar market cap out there?
Speaker 3 (32:29):
Like, what do I do? What do I do with that?
What am I doing with my life? What are we
doing here?
Speaker 4 (32:36):
According to coin market cap, which I've never used as
a source before, actually it's calling it a six hundred
and sixty seven million.
Speaker 3 (32:43):
Dollar market cap.
Speaker 4 (32:44):
Even worse, I don't I wouldn't use that as a
source normally, as the first result that came up. Maybe
Forbes would be more reliable in this in this source, but.
Speaker 3 (32:55):
Peace from CNBC.
Speaker 2 (32:56):
Next in our stack tokenization of real world assets. This
is an unstoppable freight train coming to major markets. Robinhood, CEO,
Let's go to break stack room.
Speaker 3 (33:05):
That is next.
Speaker 1 (33:07):
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The Financial Exchange is life on Series XM's business radio
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(33:29):
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Speaker 6 (33:51):
The Financial Exchange is a proud partner of the Disabled
American Veterans Department of Massachusetts and this year's DAV five
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Speaker 3 (34:26):
Mike, what do you got for me? For Stackroo? I
want to talk about Amazon's ring video doorbells. You have one?
Speaker 4 (34:32):
Uh no, Tucker, I got the the Google one there.
So I've got a ring video doorbell and I do
like it. I find it convenient. Every once in a
while I'm not home and somebody's ringing the doorbell. I
get to check out my kids maybe when they get back,
et cetera. Started very convenient. They're rolling out a new
real friendly feature to help you find your lost dog.
So here's how it works. Your dog runs away, you
(34:54):
make an alert on your ring. It will then, using
artific intelligence of some sort, automatically identify the same looking
dog on your neighbor's radio video doorbells in the general
area and send an alert to their phone saying, hey,
your neighbor lost their dog and based on this video
on your on your doorbell, it might be the dog.
(35:16):
Would you mind if we shared it with that neighbor?
And you know, you guys can connect and find this dog,
which is nice and cheery and friendly.
Speaker 3 (35:25):
Hate it and also hate it.
Speaker 4 (35:27):
Is really close to our dystopian future where a crime
gets committed, the police go to Amazon say, handover all
of the AI generation of this looking person across the
video doorbells in your network, which they're apparently already pretty
close to doing. Amazon has some pretty close relationships with
some local police forces. And yeah, I don't know that
(35:50):
this is avoidable, and we're already kind of here given
the level of you know, closed circuit and open circuit
cameras that are in major cities. But this is again
just kind of naturally where we're headed, right It is. Yes,
hopefully there would be required to have a court order
and all sorts of things, but we're getting to the
(36:10):
point where there's not many spaces in public today that
you can go find that are not in some way covered.
Speaker 3 (36:18):
By video capture. Hate it. Yeah, it's pretty dystopian.
Speaker 2 (36:23):
Speaking of dystopian, door Dash unveils Dot, the delivery robot
powered by its autonomous delivery platform to accelerate local commerce.
Speaker 3 (36:32):
Oh but she is cute. It's a rolling tomato is
basically what it looks like. Assim Dot is female. It's
a robot.
Speaker 2 (36:41):
Yeah, I don't think there's gender when it comes to robots.
I think, you know, they don't. Disney would beg to differ.
They don't procreate the way you think. Let's talk a
little bit about the problems with this first. It can
travel up to twenty miles an hour. So the good
news is that it can outrun someone who's trying to
steal your food. The bad news, I'm not sure if
(37:03):
this thing is baseball bat resistant, because you better believe
that people are going to be trying to break into
these things. It's specifically is designed for, you know, close
quarters urban areas, and as someone you know who lived
in Somerville for quite some time, porch pirates were really
a thing where people would try to steal your packages.
You think they're not going to try to take food
(37:24):
out of a door Dot robot. Now you'll then say, oh, well,
they'd have cameras on it, and you think that they
haven't thought of that. So on one hand, I just
look at this and I'm like, Okay, this is just
opening up more opportunities for theft.
Speaker 3 (37:37):
Yeah.
Speaker 2 (37:37):
The other piece is, hey all you people that have
you know, bought into that whole side hustle thing the
last decade.
Speaker 3 (37:44):
See Elena, You're getting screwed by the very company that
brought you that side hustle. Yeah.
Speaker 4 (37:50):
I find this also dystopian and less concerning than the
Amazon ring doorbell bot. Agree, same boat, But yeah, this one,
I'm not as much concerned about the privacy concerns.
Speaker 3 (37:59):
As I am about it's going to replace a lot
of guys. Here's the thing.
Speaker 2 (38:05):
The next fifteen to twenty years, a lot of us
are going to be replaced. It might be me, it
might be Mike, it might be like, I don't know
that anyone's one hundred percent safe on this, So take
it for what it is. Quick break for the rest
of the day. We'll see you tomorrow for a not
jobs report.
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