January 6, 2026 • 38 mins
Mike Armstrong and Paul Lane discuss Venezuela bracing for economic collapse from the US blockade. Two simple ways to fix housing in America. Nvidia details new AI chips and autonomous car project with Mercedes. Mike is excited for the next generation of self-driving cars. GM and Toyota hint at tough year ahead for US auto sales. Tesla is swapping its EV crown for even more promises.
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Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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(00:43):
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(01:03):
This is the Financial Exchange with Mike Armstrong and faull Lane.
Speaker 2 (01:11):
Good morning, Happy Tuesday, and welcome back to the Financial Exchange.
It's the Jobs week here on the Financial Exchange, where
we'll have the monthly jobs report coming out this Friday,
the Joltz Report out tomorrow, and obviously all of that's
been pushed to the side given the news over the
weekend in Venezuela, which we'll continue to discuss today. A
lot of FED talk today as well, and then later
(01:32):
in the program during the second hour, we're gonna be
joined by Matt gangnon CEO of the Main Policy Institute,
talking to us all about about all of the minimum
wage changes across the nation this year and just where
that policy of minimum wage fits into today's political climate.
But now I think about, Paul, is this the first
time you've seen Tucker in twenty twenty six?
Speaker 3 (01:52):
Yes, it is.
Speaker 2 (01:53):
Did you want to wish him a happy New.
Speaker 3 (01:54):
Year or happy? Don't don't care? Happy new You look beautiful.
Speaker 2 (01:58):
I'm finding a way to wish Tucker a happy New
Year every day until mid February.
Speaker 3 (02:03):
I remember you, you hate this right.
Speaker 2 (02:06):
Last Friday, one of the biggest pet peers.
Speaker 3 (02:09):
And when when do you think so? You don't like it?
Speaker 4 (02:12):
Being said at all, you don't have a great I'm
good on New Year's Day, New.
Speaker 5 (02:17):
Year's Eve, day after New Year's that's it. That's all
you get for Happy New Year.
Speaker 2 (02:21):
I'm very excited about finding ways to work this.
Speaker 3 (02:24):
I was dropping it with clients yesterday. So maybe you
were saying that yesterday with people. We were no, no, no,
they were. We were saying that they might have said
it first.
Speaker 2 (02:37):
So long as I haven't seen that person in the
new year, then I get the new Year. I get
to wish it to though, so if I see them
in July for the first time, Happy New Year. Uh.
As we did head into the new year, we finished
up the period that defines the Santa Claus Rally time
period on yesterday. In fact, so the Santa Claus Rally
(02:59):
by death misson is the last five trading days of
the year, followed by the first two of the following year.
We got a Santa Claus Rally out of the Dow,
although the S and P and Nasdaq surprisingly missed out.
This is another one of those meaning I.
Speaker 3 (03:12):
Hate this more than Tucker hates the New Year.
Speaker 2 (03:15):
The Santa Claus Rally.
Speaker 4 (03:16):
Yeah, I know, we have to talk about it every year,
But it's like, what do I do with this? Probably
just what Tucker thinks of what do I do with
Paul telling me, happpy New Year. He probably wants me
to go stick it somewhere, go shove it.
Speaker 2 (03:30):
Yeah, So we did not get a SMP Santa Claus
rally or a Nasdaq when it's a third year in
a row that the S and P has not delivered
on that Santa Claus rally and the third year in
a row of fabulous stock market returns in spite of that.
So I think this is going to fall into the
category of statistics that we can just put in the
closet and not bring out anymore because it is useless
in terms of any sort of indication.
Speaker 3 (03:53):
You know, I'm with you there, Yeah, So there you
have it.
Speaker 2 (03:56):
On your Santa Claus rally. You did get one from
the Dow, but Santa did not come me delivered big
old lump of coal to SMP and Nasdaq investors. And frankly,
what the Dow Jones Industrial Average does is not relevant
to anyone's portfolio, So I don't think.
Speaker 3 (04:08):
You shoud pay attention to it exactly exactly.
Speaker 2 (04:11):
But nonetheless, we are seeing you know what drove that
Dow record, because the Dow did hit a record yesterday
with largely bank stocks pushing it up. Obviously, oil companies
on the on the cusp of the news of Venezuela
over the weekend, which if you missed out market reactions yesterday,
(04:31):
you did have oil prices increasing. Where did we land
about a one and a half percent up. Prices are
down again today now we're sitting at fifty eight dollars
per barrel on the West Texas crude. And I think
will likely be continuing to talk about this story all
week and for the next several weeks. But there is still,
(04:54):
i think, just generally, a lot that is unknown about
this situation, Lots being talked about in political circles about
the context of the trial, and you know what, we'll
be seen in New York as Nicholas Madua faces Those
trials are lots of being compared to Panama in the
late nineteen eighties. But in terms of economic effects, here
(05:18):
are the things that are going through my mind. One,
we are still you know, basically doing a partial blockade
on any oil that is leaving Venezuela, so their entire
funding mechanism has been destroyed recently in Venezuela, so there's
very little cash flow reaching citizens there, probably on the
verge of financial collapse, in addition to a power vacuum
(05:41):
going on there. Any promises of you know, future oil
being drilled out of Venezuela is years away from now.
It will take a long time to repair the infrastructure,
set up deals, set up access to where the oil
would need to be drilled and released from that country.
And then the other big question that I don't have
(06:02):
any answer to is are there retaliations meaningful retaliations from
other countries. Some tiny countries in Africa have revoked visas
and bards US citizens from entering. But are we going
to get a reaction from China in this Other than
you know, voicing concerns at the United Nations, are we
(06:25):
going to get another battle over battery technology and magnets
because of all of this? These are the questions that
I think economically matter at the moment. And other than that,
there's a ton of things that nobody knows. Who's going
to be leading the country. What influence is the United
States going to have? Are we going to need to
put boots on the ground in Venezuela, which I think
(06:45):
almost nobody wants to see. These are open questions that
I think are way too early to answer, and we're
going to have to wait on them. But the things
that matter to me, no real change the status quo
when it comes to oil markets in the interim YEP,
and questions about what sort of retaliatory measures you could
see from meaningful countries with big economic power.
Speaker 3 (07:08):
Yeah, and then also just what does Venezuela do.
Speaker 4 (07:11):
You mentioned they are kind of going to be on
the precipice of an economic collapse. It's estimated that oil
exports are about forty percent of Venezuela's public revenue by
an expert out of University of dever So to have
that effectively cut off. So, just to further Mike's point
on the partial blockade, Chevron is still allowed to export
oil out of Venezuela, but all of the other entities
(07:35):
within Venezuela that export oil are not able to at
this point, and Venezuela doesn't derive a tremendous I believe
Chevron's been told not to pay the Venezuelan government any
revenue on the exports. Specifically, they do pay them for
access to the oil fields, so long and short, they don't.
They've really been cut off at the pass in terms
of any real economic activity. That partial blockade has been
(07:57):
in there since December eleventh, so that in the near
term is something to shake out. You mentioned the bigger,
broader geopolitical issues. That's something that's certainly of tremendous concern
and focus, and then it comes down to on the
oil story, which is a lot of focus for the
energy sector here domestically. To be clear, companies like Exxon
(08:18):
and Conical Phillips have been out of Venezuela since two
thousand and seven, so really the only big domestic player
you're talking about is Chevron that has stayed with it
since two thousand and seven when Venezuela had went in
and declared nationalization on the oil fields. For Exxon and
Conical Phillips, this is going to take a long time
to play out in terms of any economic development on
(08:39):
the energy side for Chevron if they were to benefit.
It's been mentioned that Venezuela has three hundred billion barrels
of oil within its reserves, but getting to that and
harvesting and producing it, that's a whole nother story that
doesn't just happen overnight over the course of a trading
year to have.
Speaker 2 (08:59):
In it doesn't happen at all until there is some
sort of filling of the power vacuum.
Speaker 4 (09:05):
Yeah, that's the thing you keep reading when you go
through all of this is stability and security for companies
to be willing to invest more before you get that progress.
Speaker 2 (09:14):
Let's take a quick break when we come back, moving
on from Venezuela to domestic issue, specifically the housing market
in twenty twenty six. What we anticipate data from our
favorite housing economist, Mike Simonson, as well as a opinion
piece from Connor Sen. That's next here on the Financial Exchange.
Speaker 1 (09:33):
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Speaker 2 (10:30):
There's that Peace and Bloomberg today. Two simple ways to
fix housing in America. I completely disagree with both of them,
but we're going to jump into them anyway. But other
housing is going to be a focus. In twenty twenty six,
inventory has increased fairly dramatically. To give you a sense
for that. According to realtor dot com, who tracks a
lot of this, total active listing counts, in November of
(10:50):
last year, was sitting at one point zero seven two
million listings. Back in November of twenty nineteen, we were
sitting at one point one for three million listings. So
we're within sniffing distance of pre COVID levels of housing inventory.
Mike Simonson, who cited in the article, believes that we're
going to hit twenty seventeen levels in calendar year twenty
(11:14):
twenty six. I don't know what. I'm not sure if
he means lows from twenty seventeen averages or a month
over month numbers.
Speaker 4 (11:21):
But he had set a ten percent inventory increase. Yeah,
I don't know what the number was, but ten percent
growth of it this year. There's going to be more
supply coming on.
Speaker 2 (11:28):
So in either case, we are getting to a housing
market where inventory levels, at least at a national level,
are going to start appearing much more normal. In spite
of that, Connorson accurately points out that there is just
very little activity happening, and it's for the same reasons
that everyone's aware of. People are feeling mortgage locked. They
do not want to give up their three or four
(11:49):
percent mortgage in favor of a six or seven percent one.
There's also some psychology behind this, where you know, sellers
in Florida are really having their brains attuned to the
that people sold two years ago in their same neighborhood,
and it's just not the case anymore. And so Connorson
throws out a couple of government actions that the government
(12:10):
could take in order to make this.
Speaker 3 (12:13):
More palatable, palatable to the seller of the buyer right.
Speaker 2 (12:19):
So his two solutions are first offering tax credits to
sellers of homes that would basically reward them for giving
up a low mortgage rate. So, for example, homeowners could
be offered a credit of up to twenty thousand dollars
for two years, depending on the gap between their old
mortgage and their new mortgage. I'm not gonna judge these yet,
(12:42):
I'm just gonna tell them what they he thinks they
He anticipates that would be about sixty billion dollars for
the tax credits if four million sellers use them in
twenty six and twenty seven.
Speaker 4 (12:53):
So let me just dive into it, like the mechanics
of it. So let's say you have a six percent
mortgage for the new house that you're going to buy.
The monthly mortgage for a five hundred thousand dollars mortgage
would be four grand a month. Hypothetically, in the other instance,
you were sitting on a two point seventy five mortgage
for the same five hundred thousand dollars debt standing out there,
three thousand dollars a month is the monthly mortage Pang.
(13:15):
So what he's proposing is the differential between the three
grand that you're paying today for your existing mortgage and
the four grand for the new house in the future.
That one thousand dollars difference extrapolated out over the course
of the year twelve grand. That's what he's talking about
there with the tax credits, two years of.
Speaker 2 (13:29):
That, which I'm sure would be immensely popular for all
of the people that do not own homes right now
and wouldn't be getting this tax credits. The other option
would be, or the other solution in his mind, would
be offering a time limited mortgage rate buydown for first
time home buyers of new and existing homes. Basically the
government is offering this buy down and allowing for a
(13:50):
lower mortgage rate. That one would cost about thirty six
billion dollars, so between the two of them, approaching one
hundred billion dollars in tax which, to his point is
a small fraction of the annual spending budget. But just
as how we get into this place in the first
place is well, i mean, look where we spend on defense,
(14:11):
So why not just give home buyers and sellers a
bunch of tax credits? And this is exactly how we
get into these deficit problems in the first place.
Speaker 4 (14:20):
Just think about if you're running a business and every
justification was you know, I say to Mike, I'd really
like a slushy machine, you know, out in the lobby.
You don't think about it relative to our annual expenses.
It's a fraction of it. But it still comes down to,
like Paul, that's an idiotic idea. You know, why would
she's just that Just because it's a small percentage of
what a business or a government may spend on an
(14:42):
annual basis doesn't make it right or doesn't make it
that you should just greenlight the approval for it.
Speaker 2 (14:48):
Here's the other piece. The government is very heavily involved
in interfering with free markets when it comes to home
buying and home selling. Let's just acknowledge for a moment
the thirty year mortgage as an idea would not exist
at the rates that you're able to get them without
government intervention. Definitely, Yeah, it wouldn't exist because the only
(15:10):
reason it does exist is because these government organizations Fanny May,
Jenny May, they go in and buy the mortgages from
the banks. Otherwise, there is no way any bank in
the country or the world would be willing to offer
Mike Armstrong a thirty year mortgage at three and a quarter.
Speaker 3 (15:25):
Who wants that risk?
Speaker 2 (15:26):
Yeah, nobody would. The government is willing to accept it.
So I will acknowledge for a minute that this is
not a free market system, but that doesn't mean that
you can't just allow free markets to solve it. This
will be solved by free markets. This problem that we
are experiencing in housing right now, where there is very
little transacting. Buyers and sellers are mismatched in their expectations
(15:46):
on price and mortgage rates. That fixes itself. It takes time.
I'm not saying it will be instantaneous, and it will
be painful. My solutions on housing get the governments, local
and federal out of housing more. If you want to
propose free solutions, you could do things like passing national
(16:08):
laws removing some of the zoning stuff from local municipalities. Ye,
it would be vastly unpopular. I get that. Everybody listening
right now is screaming at the radio saying no, I
want local control of that. But if you want to
free up housing solutions, then say nope. All of the
housing zoning rules are now controlled by the federal government
instead of local municipalities.
Speaker 3 (16:28):
It doesn't cost you anything to.
Speaker 2 (16:29):
Do, cost you nothing. Yeah, and then just.
Speaker 4 (16:31):
Let the free market forces dictate after that. It will
piss off a lot of people.
Speaker 2 (16:35):
Yeah yeah. But in the absence of that, don't pass
a bunch of tax credits on housing for a problem
that we do not have, right Like if housing is
in a free fall and suddenly we have a bunch
of people losing their homes and becoming homeless like we
saw back in two thousand and eight, Okay, great, I
can see a reason why the government needs to step
in and make it so that we don't have a
(16:55):
bunch of homeless people that you're going to be more
costly over the long term to get back into the
workforce and prevent total catastrophe in the absence of an
event like that which we are not experiencing right now,
the government has no place in.
Speaker 4 (17:09):
This right And to further you know this point with
the story here on these two proposed fixes, and this
is just like the student loans story too, where it's like, oh,
forgive ten grand for everybody for student loans. Well, what
happens five years from now when the next tranch of
people are screwed with stud loans. What happens ye, the
same thing applies with these credits here. It's okay, that's
great for now, But what happens when Mike's kids and
(17:33):
Paul's kids go to buy houses and the housing market
is still in a bad spot. You have to just
keep repeating this so it's not one hundred billion dollar costs.
It becomes one hundred billion dollar costs every three to
five years if you don't get the proper amount of
stimulus from this type of.
Speaker 2 (17:49):
You know, endeavor listener question from yesterday, Will future rate
cuts by the FEDS eventually have an indirect effect on
mortgage rates in a downward direction? Take into consideration that
we'll have a new FED share person, and how will
it impact home sales?
Speaker 1 (18:01):
So?
Speaker 2 (18:02):
I think, first things first, if mortgage rates come down,
I would definitely expect home sales to increase, just all
else equal. If mortage rates come down, I would expect
that to happen. And if mortg rates come down for
just about any reason, like the most likely reason in
my mind for mortgage rates come down would be an
economic crash or an economic downturn of some sort, I
would still expect home sales to increase in volume. The
(18:25):
question as whether the FED will have an impact on this,
I'd say it's a coin flip. I'd say it's a
coin flip because historically, when the Federal Reserve has cut
interest rates in an economy where we are not in recession,
it's about a fifty to fifty shot as to whether
or not mortgage rates come down.
Speaker 4 (18:46):
Right, Well, I think it's further to It's important to
note that because I think this is a big misconception
out there, the Federal Reserve decreasing short term interest rates
does not have one to one correlation on the longer
end of the occurred. A lot of people at parties
and get together think that.
Speaker 2 (19:01):
Yeah, this person doesn't they recognize that, Hey, it would
be an indirect effect. And my answer is when you
look at the data historically absent to recession, because in
a recession, interest rates tend to come down, including mortgage rates.
But absent that, it's about a coin flip whether or
not mortgage rates decrease with FED action. And so my answers,
I don't know. I have very little confidence in it,
(19:23):
but if we get a recession, then I do anticipate
mortgage rates coming down quick break when we come back.
Wall Street Watch is up next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter. Act
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:59):
Mark if it's again in positive territory. One day after
the Dow closed at a record high yesterday, right now,
the Dow is up four tenths of a percent or
two hundred and three points higher. SMP five hundred is
up over a third of a percent or twenty five
points higher. NASDAC up nearly half a percent or one
hundred and seven points. Rusted two thousand is up about
(20:22):
a quarter percent. Tenure Treasure reeled is up two basis
points at four point one point eight nine percent, and
crude oil is dipping today, trading a fifty eight dollars
and twenty one cents a barrel. Video shares are up
over one percent after the AI and Chip Giant said
it would begin shipping new and faster AI chips yesterday
(20:42):
at the Consumer Electronics Show in Las Vegas. The reubenships
are being manufactured and will be shipped to customers including
Microsoft and Amazon in the second half of the year.
The company also unveiled new autonomous vehicle software. Meanwhile, in
video competitor AMD also announced a new at cees for
use in smaller corporate data centers. However, AMD shares are
(21:05):
down by two percent. Elsewhere, Vistra shares are climbing four
percent after the power generation companies said it planned by
Cogentrics Energy and a deal valued at about four billion dollars
that will include natural gas generation facilities.
Speaker 3 (21:20):
Metas said this.
Speaker 5 (21:21):
Morning that it's delaying the international expansion of its ray
band display glasses due to inventory constraints and unprecedented to demand.
Speaker 1 (21:31):
In the US.
Speaker 5 (21:32):
Meta shares are mostly flat, and Ford said this morning
that it's US vehicle sales increase six percent last year,
marking the automaker's best annual sales since twenty nineteen. Ford
finished the year as the third largest automaker, behind Toyota
and General Motors. Ford shares are flat today. I'm Tucker
Silva and that is Wall Street Watch. And remember you
(21:54):
can watch the show live every day on our YouTube page.
Well of breaking business news and all of our content
is also archives, so if you want to go back
and see an interviewer discussion about a specific topic, it's
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Speaker 2 (22:13):
We have a TV in the studio here and the
President speaking right now, and it made me realize something
that we have not mentioned as a upcoming major event.
In January February this year, the Supreme Court is expected
to rule on the President's tariffs. So that could be literally,
I mean, I'm guessing it's towards the end of January
and maybe into February, but that could be any day
(22:34):
here that we have the Supreme Court ruling on the
legality of the bulk of the White House tariffs on
goods coming into the United States. So in terms of
events on the calendar, I'm not expecting a huge market effect,
but a huge political effect and a huge economic effect
for a many businesses.
Speaker 3 (22:54):
You don't think it would move markets potentially.
Speaker 2 (22:57):
I don't think substantially, and compared to where we anticipated
tariffs to be. And also based on what the White
House has been saying about their backup plans should the
Supreme Court rule against them, it's not as though they're
just gonna let tariffs walk away. There'll be different types
of tariffs. But yeah, that that ruling could come any
(23:17):
day and we will keep you up, keep you updated
on the financial exchange. Tucker mentioned in VideA, and they
are detailing their new AI chips at the CEES Consumer
Electronics Show, which, by the way, what does in Vidia
have to do with the consumer electronics if we just
call that out for a minute, CEES is not Yeah,
they do have a five thousand dollars toilet that you
can buy that will you do a year analysis for
(23:40):
you on the spot. But you know, when in video
is releasing their stuff at CES, I just don't really
think it's much of a consumer show anymore. But here
is what they've announced is they are developing these new
Vera rubin chips. These are the latest, great and greatest
after the most recent Blackwell release. According to Jensen Long,
(24:00):
companies will be able to train AI models on these
chips with one quarter as many compared to the predecessor.
Given that it'll provide information for chatbots and other II
products at one tenth the cost, as well as a
fraction of the energy usage. We'll see how these actually
test when they are released, and what applications they're put into.
(24:21):
They announced a deal with Mercedes Benz, who's trying to
use them to further develop their own self driving car technology.
It leads me to one big question, though. I mean,
if this proves out to be correct, that these are
basically four hundred percent more efficient than the Blackwells or
however you want to phrase it, what exactly does this
(24:41):
mean for the depreciation schedule and these existing data centers
that are being built with the Blackwells right like something
I thought, I know this is boring, but for a moment,
just entertain me. Here. Companies are raising tens in some
cases hundreds of billions of dollars or borrowing that amount
of money to develop these data centers to run AI
(25:03):
models on old chips that can be purchased today, and
they're assuming that they depreciated a schedule of five to
ten years, at which point they're worthless, and the loans
are being underwritten with that kind of standard. If these
things are so much more efficient, then you're going to
get three years from now and people are gonna say, like,
(25:24):
why would I run my stuff on this old technology
that doesn't actually do what I want it to. What
if it all depreciates a lot faster than we are
currently expecting. Great in terms of new technology development, I'm
not sure what it means for the build out of
data centers, and you know the loans that are being
used to fund it all. So I'll just throw that
piece out there.
Speaker 4 (25:43):
Yeah, I don't I don't know enough about the intricacies
of are they able in existing data centers to add
some of these newer chips in and gradually phase out
some of the older chips. You know, how does that
whole synergy work? And you know, an expert would be
better at sort of outlining that. To me, it's interesting
(26:03):
from the data centerpiece is whenever you're digging shovels into
the ground and all the capital expenditures that you're talking
about there with physical real estate, it's so different from
many iterations of past maybe mos akin to the broadband
stuff in the late nineties, where there's just a lot
more cost in play, and as a result, there's more
risks when you're dealing with that. But on the technology side,
(26:26):
it's to me, from everything that I've heard about these rubenschips,
they do seem to be in again. This could be
self serving from Nvidio, but be very sophisticated chips, something
that they've been working on for three years and sort
of further emphasizes when you're talking about a company that
was responsible for fifteen percent of the SMP's game last year.
They continue to have it seems like the dominant position
(26:50):
in this space, and with the recent deal that they
did with Grock, which is a startup for twenty billion
to license some of their technology, and chips that do
more in inference need to have a very strong foothold,
and it seems like they do have that top spot
even though everyone's chasing them and they're seventy percent gross margins.
This is another step in the direction of the least
(27:10):
holding the line in their ninety percent market share that
they command today.
Speaker 2 (27:14):
Tender gree. It also these questions about power demands. You know,
we're all getting psyched about nuclear power. How much of
it is actually needed given how efficient these chips are getting.
Speaker 4 (27:23):
Again, that was news, that was good news, but another
thought that I had, geez imagine all this electricity story
that we've covered intensely, because the chips innovated such a
fast level and are able to potentially be more efficient,
does that become something that's less of for concerned It's
fascinating this stuff changes so quickly.
Speaker 2 (27:42):
So now that we're done with that discussion, can we
talk about self driving cars? Because I've spent the last
like three weeks figuring out self driving cars and it
was one of the like the key buying decisions for
my next new vehicle was does it have more self
driving capabilities? Really?
Speaker 3 (27:55):
All right?
Speaker 5 (27:55):
Especially a question though, Mike, does anybody you have the
shortest commute to the office, So why do you need
self driving car? Can you not drive the eight miles yourself?
Speaker 2 (28:05):
It's pretty challenging for me, and it's not a drive
closer to it's primarily my wife's car. She's starting a
new commute to Rhode Island from Massachusetts. She's gonna be
she's gonna be on the road a little bit more.
So that was that was a big factor in it.
But under if I'm being completely honest, I'm just a
geek for this technology. I think it's really cool and
(28:26):
im and I'm interested to see what's out there. So
a level zero car is your traditional car from twenty
years ago that does not have cruise control. It doesn't
have any lean keeping technology. It's just you drive at
a level one car comes with like today's standard cruise control,
so adaptive cruise control, you know where it's going to
(28:46):
control some of those things, but you're still driving the car.
You're still responsible for keeping your hands on the wheel
and everything like that. Level two is something like Chevy's
Super Cruise or Test's full self driving or what I'm
purchasing a Ford, the Ford Blue Crews, where they have
some pre mapped highways and things like that, where yeah,
(29:09):
you can take your hands off the wheel on occasion
and really allow the car to change lanes for you
and do a whole lot more than your traditional vehicle
is capable of. Chevy Super Crews, Blue Cruise, Tesla, from
what I understand, are all on this level.
Speaker 3 (29:27):
You have to be on call to jump back.
Speaker 2 (29:29):
In Ford's case, for example, it tracks your eyeballs. Your
eyeballs must be on the road at all times or
else it turns off. In Tesla's case, they make you
shake the wheel a little bit every few minutes. The
first Level three car in the US was released by Mercedes.
Mercedes currently has cars for sale that you can fully
take your eyes and hands off the eyes off the road,
(29:51):
hands off the wheel. I say they've kind of done
it because it's basically on a few highways in California
and Nevada where is actually approved, and it's only under
speeds of forty miles an hour.
Speaker 3 (30:04):
Doesn't that eliminate Yes.
Speaker 2 (30:06):
Okay, it's not terribly useful, but obviously what they're going
for is they want to be able to increase that
speed and increase the number of states that approve the
technology to be used. But for the Mercedes technology, you know,
you want to answer an email or just be playing
on the display, you can do so, and they have
full control of the vehicle. Level four, when you get
(30:27):
to level four and level five it's basically Level five
is just it can drive itself no matter where, no
matter what the conditions. And level four we're not there,
but it's you know, full control for the entire trip
except for some specific conditions. So right now, oh is
in weimo?
Speaker 3 (30:43):
I mean not that you could just buy those, but
that yes.
Speaker 2 (30:46):
Yeah, like wayms are probably around a level four level
five technology. What Mercedes is saying is that hey, with
these new chips, what they need to be able to
do is very quickly make computation on site. They can't
do it at a data center. If you're driving across
a highway at seventy miles an hour, they need to
be able to do it inside the vehicle. And so
(31:08):
obviously the smaller you can make these things with more
computing power that are more efficient from a electricity perspective.
That is the holy grail for things like self driving vehicles.
Speaker 4 (31:18):
Right, And you'd imagine it's just a specialized chip that
only has functionality around self driving, and it doesn't have
to have the wide array of services that like a
traditional GPU chip would have in a data center.
Speaker 2 (31:31):
So we will say I tend to think, in spite
of the fact that Elon Musk has been promising this
for fifteen years, I tend to think with these semiconductor
and AI developments that we've seen over the last five years,
that we are getting much closer to very useful technology
and cars that will be pretty close to handling a
(31:51):
large portion of your trip without a whole lot of
attention to the road. I think that's probably within cars
in the next five to ten years, and I'm personal
I'm pretty excited about it.
Speaker 4 (32:01):
I'm with you, and it brings up a question that
my uncle had posted to me because he has a
younger daughter, like, well they where our kids.
Speaker 2 (32:07):
Even need to know how to drive cars?
Speaker 3 (32:09):
Yeah, it was just interesting to think about.
Speaker 2 (32:12):
It's a great question. Yeah, great question. Let's say a
quick break when we come back. I think I'm good
with data centers, but let's stay on auto sales for
a little bit. We've been getting some warnings from companies
from a number of different areas of the auto market.
What are we expecting for sales and new releases in
twenty twenty six? That's next.
Speaker 1 (32:31):
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Speaker 2 (33:05):
Well, we've seen three solid years of sales growth for
US vehicles, and frankly probably would have seen five years
of it, but the supply chain issues during COVID made
it so impossible to buy a car. I remember buying
a car in twenty twenty two, just a very boring
Honda Civic and how difficult it was to actually get
(33:27):
my hands on new one, which I only wanted because
there were no used ones available, and it would have
been just as pricey to buy a used one as
it was a new one. The probably vehicle sales would
have increased in twenty and twenty one as well, had
there been vehicles that were genuinely available and for sale.
But gmtry that both hinting at tough year ahead. Four
(33:48):
auto sales after again pretty solid numbers, but GM's sales
fell seven percent in the fourth quarter of last year,
with Honda, Hundai, and Mazda also porting declines at the
end of the year. And frankly, I think this just
follows in line with a bunch of other data that
we are seeing about big expensive purchases, which is there's
(34:11):
just a narrower and narrower group of people in the
US that can actually afford them.
Speaker 3 (34:17):
Yeah, it's incredible.
Speaker 4 (34:18):
Just the average age of a vehicle has reached twelve
point three years according to Standard and Poors in terms
of what we see for vehicles on the road today,
and it does seem like you have many consumers that
are hesitant to make those bigger purchases they're projecting. Jdpower
reported that we had sixteen point three million cars sold
(34:39):
in twenty twenty five, that was a two percent increase
from twenty four but projecting that we see a decline
this year too. I believe they had quoted maybe fifteen
point eight million, so the first time, like you were
alluding to a slowdown in vehicle sales, and they have
gotten just ridiculously expensive. I mean, there's finally some pushback
(35:02):
from some of these consumers as to whether to buy
them or not.
Speaker 2 (35:07):
It's tough. The other big challenge here that we can
talk more about is tariffs are really confusing right now
when it comes to cars. Right there's been all sorts
of temporary waivers. Where can I manufacture a car? Can
I do it in Canada? And Canada and Mexico. So
a lot that I think automakers are still trying to
ponder and figure out as we head into twenty twenty six.
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Speaker 2 (36:33):
Now heading to the world's most valuable car company, that
would be Tesla, of course, sitting at one point three
eight trillion dollars whose stock is down three and two
thirds of percent Right now.
Speaker 4 (36:42):
Mike, I just need to get off my why if
you're a testa shareholder, why you holding what is the
optimism behind it? Okay, Robotaxis elon mus Baby, I totally
understand his brilliance and just I'm not sure I do,
but like well some I guess I laud his brilliant
I mean, you have to SpaceX what he's been able
to do with that company, PayPal, you go on on Tesla,
(37:05):
just getting off the ground to where it is today.
But in terms of the future, Bid is crushing them.
In terms of EV sales, they don't really have a
lot of new cars in the pipeline. And then robotaxis
is a market that at least has other significant competitors
in it. And you look at these valuations that I've
never understood the stock for the last eight or nine years,
and I've been dead wrong and maybe I will be again,
(37:27):
But it's just it's a one and a half trillion
dollar company, and I'm just it's hard to see sometimes
the optimism.
Speaker 2 (37:34):
Yeah, there, they did see a spike in third quarter sales,
but then those plummeted in the fourth quarter, So guess
what happened in the third quarter of twenty twenty five.
The ev federally TV tax credit disappeared. So what happened
in the third quarter. A bunch of people that might
have purchased a car in the fourth quarter decided to
do so in the third quarter instead, And so Tesla
is now facing a pace of sales that don't look good.
(37:56):
He has managed, the leader of Tesla has managed to
make a whole bunch of people on both sides of
the aisle pretty upset. And I don't like you said.
Something new needs to impress pretty soon on Tesla because
a lot of their competitors have caught up pretty quickly.
We got a lot more to cover in the second
hour of the financial exchange. We'll be right back, folks,
(38:16):
Stay tuned.
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(01:03):
This is the Financial Exchange with Mike Armstrong and faull Lane.
Speaker 2 (01:11):
Good morning, Happy Tuesday, and welcome back to the Financial Exchange.
It's the Jobs week here on the Financial Exchange, where
we'll have the monthly jobs report coming out this Friday,
the Joltz Report out tomorrow, and obviously all of that's
been pushed to the side given the news over the
weekend in Venezuela, which we'll continue to discuss today. A
lot of FED talk today as well, and then later
(01:32):
in the program during the second hour, we're gonna be
joined by Matt gangnon CEO of the Main Policy Institute,
talking to us all about about all of the minimum
wage changes across the nation this year and just where
that policy of minimum wage fits into today's political climate.
But now I think about, Paul, is this the first
time you've seen Tucker in twenty twenty six?
Speaker 3 (01:52):
Yes, it is.
Speaker 2 (01:53):
Did you want to wish him a happy New.
Speaker 3 (01:54):
Year or happy? Don't don't care? Happy new You look beautiful.
Speaker 2 (01:58):
I'm finding a way to wish Tucker a happy New
Year every day until mid February.
Speaker 3 (02:03):
I remember you, you hate this right.
Speaker 2 (02:06):
Last Friday, one of the biggest pet peers.
Speaker 3 (02:09):
And when when do you think so? You don't like it?
Speaker 4 (02:12):
Being said at all, you don't have a great I'm
good on New Year's Day, New.
Speaker 5 (02:17):
Year's Eve, day after New Year's that's it. That's all
you get for Happy New Year.
Speaker 2 (02:21):
I'm very excited about finding ways to work this.
Speaker 3 (02:24):
I was dropping it with clients yesterday. So maybe you
were saying that yesterday with people. We were no, no, no,
they were. We were saying that they might have said
it first.
Speaker 2 (02:37):
So long as I haven't seen that person in the
new year, then I get the new Year. I get
to wish it to though, so if I see them
in July for the first time, Happy New Year. Uh.
As we did head into the new year, we finished
up the period that defines the Santa Claus Rally time
period on yesterday. In fact, so the Santa Claus Rally
(02:59):
by death misson is the last five trading days of
the year, followed by the first two of the following year.
We got a Santa Claus Rally out of the Dow,
although the S and P and Nasdaq surprisingly missed out.
This is another one of those meaning I.
Speaker 3 (03:12):
Hate this more than Tucker hates the New Year.
Speaker 2 (03:15):
The Santa Claus Rally.
Speaker 4 (03:16):
Yeah, I know, we have to talk about it every year,
But it's like, what do I do with this? Probably
just what Tucker thinks of what do I do with
Paul telling me, happpy New Year. He probably wants me
to go stick it somewhere, go shove it.
Speaker 2 (03:30):
Yeah, So we did not get a SMP Santa Claus
rally or a Nasdaq when it's a third year in
a row that the S and P has not delivered
on that Santa Claus rally and the third year in
a row of fabulous stock market returns in spite of that.
So I think this is going to fall into the
category of statistics that we can just put in the
closet and not bring out anymore because it is useless
in terms of any sort of indication.
Speaker 3 (03:53):
You know, I'm with you there, Yeah, So there you
have it.
Speaker 2 (03:56):
On your Santa Claus rally. You did get one from
the Dow, but Santa did not come me delivered big
old lump of coal to SMP and Nasdaq investors. And frankly,
what the Dow Jones Industrial Average does is not relevant
to anyone's portfolio, So I don't think.
Speaker 3 (04:08):
You shoud pay attention to it exactly exactly.
Speaker 2 (04:11):
But nonetheless, we are seeing you know what drove that
Dow record, because the Dow did hit a record yesterday
with largely bank stocks pushing it up. Obviously, oil companies
on the on the cusp of the news of Venezuela
over the weekend, which if you missed out market reactions yesterday,
(04:31):
you did have oil prices increasing. Where did we land
about a one and a half percent up. Prices are
down again today now we're sitting at fifty eight dollars
per barrel on the West Texas crude. And I think
will likely be continuing to talk about this story all
week and for the next several weeks. But there is still,
(04:54):
i think, just generally, a lot that is unknown about
this situation, Lots being talked about in political circles about
the context of the trial, and you know what, we'll
be seen in New York as Nicholas Madua faces Those
trials are lots of being compared to Panama in the
late nineteen eighties. But in terms of economic effects, here
(05:18):
are the things that are going through my mind. One,
we are still you know, basically doing a partial blockade
on any oil that is leaving Venezuela, so their entire
funding mechanism has been destroyed recently in Venezuela, so there's
very little cash flow reaching citizens there, probably on the
verge of financial collapse, in addition to a power vacuum
(05:41):
going on there. Any promises of you know, future oil
being drilled out of Venezuela is years away from now.
It will take a long time to repair the infrastructure,
set up deals, set up access to where the oil
would need to be drilled and released from that country.
And then the other big question that I don't have
(06:02):
any answer to is are there retaliations meaningful retaliations from
other countries. Some tiny countries in Africa have revoked visas
and bards US citizens from entering. But are we going
to get a reaction from China in this Other than
you know, voicing concerns at the United Nations, are we
(06:25):
going to get another battle over battery technology and magnets
because of all of this? These are the questions that
I think economically matter at the moment. And other than that,
there's a ton of things that nobody knows. Who's going
to be leading the country. What influence is the United
States going to have? Are we going to need to
put boots on the ground in Venezuela, which I think
(06:45):
almost nobody wants to see. These are open questions that
I think are way too early to answer, and we're
going to have to wait on them. But the things
that matter to me, no real change the status quo
when it comes to oil markets in the interim YEP,
and questions about what sort of retaliatory measures you could
see from meaningful countries with big economic power.
Speaker 3 (07:08):
Yeah, and then also just what does Venezuela do.
Speaker 4 (07:11):
You mentioned they are kind of going to be on
the precipice of an economic collapse. It's estimated that oil
exports are about forty percent of Venezuela's public revenue by
an expert out of University of dever So to have
that effectively cut off. So, just to further Mike's point
on the partial blockade, Chevron is still allowed to export
oil out of Venezuela, but all of the other entities
(07:35):
within Venezuela that export oil are not able to at
this point, and Venezuela doesn't derive a tremendous I believe
Chevron's been told not to pay the Venezuelan government any
revenue on the exports. Specifically, they do pay them for
access to the oil fields, so long and short, they don't.
They've really been cut off at the pass in terms
of any real economic activity. That partial blockade has been
(07:57):
in there since December eleventh, so that in the near
term is something to shake out. You mentioned the bigger,
broader geopolitical issues. That's something that's certainly of tremendous concern
and focus, and then it comes down to on the
oil story, which is a lot of focus for the
energy sector here domestically. To be clear, companies like Exxon
(08:18):
and Conical Phillips have been out of Venezuela since two
thousand and seven, so really the only big domestic player
you're talking about is Chevron that has stayed with it
since two thousand and seven when Venezuela had went in
and declared nationalization on the oil fields. For Exxon and
Conical Phillips, this is going to take a long time
to play out in terms of any economic development on
(08:39):
the energy side for Chevron if they were to benefit.
It's been mentioned that Venezuela has three hundred billion barrels
of oil within its reserves, but getting to that and
harvesting and producing it, that's a whole nother story that
doesn't just happen overnight over the course of a trading
year to have.
Speaker 2 (08:59):
In it doesn't happen at all until there is some
sort of filling of the power vacuum.
Speaker 4 (09:05):
Yeah, that's the thing you keep reading when you go
through all of this is stability and security for companies
to be willing to invest more before you get that progress.
Speaker 2 (09:14):
Let's take a quick break when we come back, moving
on from Venezuela to domestic issue, specifically the housing market
in twenty twenty six. What we anticipate data from our
favorite housing economist, Mike Simonson, as well as a opinion
piece from Connor Sen. That's next here on the Financial Exchange.
Speaker 1 (09:33):
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here on the Financial Exchange Radio Network. Thanks to us
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Speaker 5 (09:57):
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Speaker 2 (10:30):
There's that Peace and Bloomberg today. Two simple ways to
fix housing in America. I completely disagree with both of them,
but we're going to jump into them anyway. But other
housing is going to be a focus. In twenty twenty six,
inventory has increased fairly dramatically. To give you a sense
for that. According to realtor dot com, who tracks a
lot of this, total active listing counts, in November of
(10:50):
last year, was sitting at one point zero seven two
million listings. Back in November of twenty nineteen, we were
sitting at one point one for three million listings. So
we're within sniffing distance of pre COVID levels of housing inventory.
Mike Simonson, who cited in the article, believes that we're
going to hit twenty seventeen levels in calendar year twenty
(11:14):
twenty six. I don't know what. I'm not sure if
he means lows from twenty seventeen averages or a month
over month numbers.
Speaker 4 (11:21):
But he had set a ten percent inventory increase. Yeah,
I don't know what the number was, but ten percent
growth of it this year. There's going to be more
supply coming on.
Speaker 2 (11:28):
So in either case, we are getting to a housing
market where inventory levels, at least at a national level,
are going to start appearing much more normal. In spite
of that, Connorson accurately points out that there is just
very little activity happening, and it's for the same reasons
that everyone's aware of. People are feeling mortgage locked. They
do not want to give up their three or four
(11:49):
percent mortgage in favor of a six or seven percent one.
There's also some psychology behind this, where you know, sellers
in Florida are really having their brains attuned to the
that people sold two years ago in their same neighborhood,
and it's just not the case anymore. And so Connorson
throws out a couple of government actions that the government
(12:10):
could take in order to make this.
Speaker 3 (12:13):
More palatable, palatable to the seller of the buyer right.
Speaker 2 (12:19):
So his two solutions are first offering tax credits to
sellers of homes that would basically reward them for giving
up a low mortgage rate. So, for example, homeowners could
be offered a credit of up to twenty thousand dollars
for two years, depending on the gap between their old
mortgage and their new mortgage. I'm not gonna judge these yet,
(12:42):
I'm just gonna tell them what they he thinks they
He anticipates that would be about sixty billion dollars for
the tax credits if four million sellers use them in
twenty six and twenty seven.
Speaker 4 (12:53):
So let me just dive into it, like the mechanics
of it. So let's say you have a six percent
mortgage for the new house that you're going to buy.
The monthly mortgage for a five hundred thousand dollars mortgage
would be four grand a month. Hypothetically, in the other instance,
you were sitting on a two point seventy five mortgage
for the same five hundred thousand dollars debt standing out there,
three thousand dollars a month is the monthly mortage Pang.
(13:15):
So what he's proposing is the differential between the three
grand that you're paying today for your existing mortgage and
the four grand for the new house in the future.
That one thousand dollars difference extrapolated out over the course
of the year twelve grand. That's what he's talking about
there with the tax credits, two years of.
Speaker 2 (13:29):
That, which I'm sure would be immensely popular for all
of the people that do not own homes right now
and wouldn't be getting this tax credits. The other option
would be, or the other solution in his mind, would
be offering a time limited mortgage rate buydown for first
time home buyers of new and existing homes. Basically the
government is offering this buy down and allowing for a
(13:50):
lower mortgage rate. That one would cost about thirty six
billion dollars, so between the two of them, approaching one
hundred billion dollars in tax which, to his point is
a small fraction of the annual spending budget. But just
as how we get into this place in the first
place is well, i mean, look where we spend on defense,
(14:11):
So why not just give home buyers and sellers a
bunch of tax credits? And this is exactly how we
get into these deficit problems in the first place.
Speaker 4 (14:20):
Just think about if you're running a business and every
justification was you know, I say to Mike, I'd really
like a slushy machine, you know, out in the lobby.
You don't think about it relative to our annual expenses.
It's a fraction of it. But it still comes down to,
like Paul, that's an idiotic idea. You know, why would
she's just that Just because it's a small percentage of
what a business or a government may spend on an
(14:42):
annual basis doesn't make it right or doesn't make it
that you should just greenlight the approval for it.
Speaker 2 (14:48):
Here's the other piece. The government is very heavily involved
in interfering with free markets when it comes to home
buying and home selling. Let's just acknowledge for a moment
the thirty year mortgage as an idea would not exist
at the rates that you're able to get them without
government intervention. Definitely, Yeah, it wouldn't exist because the only
(15:10):
reason it does exist is because these government organizations Fanny May,
Jenny May, they go in and buy the mortgages from
the banks. Otherwise, there is no way any bank in
the country or the world would be willing to offer
Mike Armstrong a thirty year mortgage at three and a quarter.
Speaker 3 (15:25):
Who wants that risk?
Speaker 2 (15:26):
Yeah, nobody would. The government is willing to accept it.
So I will acknowledge for a minute that this is
not a free market system, but that doesn't mean that
you can't just allow free markets to solve it. This
will be solved by free markets. This problem that we
are experiencing in housing right now, where there is very
little transacting. Buyers and sellers are mismatched in their expectations
(15:46):
on price and mortgage rates. That fixes itself. It takes time.
I'm not saying it will be instantaneous, and it will
be painful. My solutions on housing get the governments, local
and federal out of housing more. If you want to
propose free solutions, you could do things like passing national
(16:08):
laws removing some of the zoning stuff from local municipalities. Ye,
it would be vastly unpopular. I get that. Everybody listening
right now is screaming at the radio saying no, I
want local control of that. But if you want to
free up housing solutions, then say nope. All of the
housing zoning rules are now controlled by the federal government
instead of local municipalities.
Speaker 3 (16:28):
It doesn't cost you anything to.
Speaker 2 (16:29):
Do, cost you nothing. Yeah, and then just.
Speaker 4 (16:31):
Let the free market forces dictate after that. It will
piss off a lot of people.
Speaker 2 (16:35):
Yeah yeah. But in the absence of that, don't pass
a bunch of tax credits on housing for a problem
that we do not have, right Like if housing is
in a free fall and suddenly we have a bunch
of people losing their homes and becoming homeless like we
saw back in two thousand and eight, Okay, great, I
can see a reason why the government needs to step
in and make it so that we don't have a
(16:55):
bunch of homeless people that you're going to be more
costly over the long term to get back into the
workforce and prevent total catastrophe in the absence of an
event like that which we are not experiencing right now,
the government has no place in.
Speaker 4 (17:09):
This right And to further you know this point with
the story here on these two proposed fixes, and this
is just like the student loans story too, where it's like, oh,
forgive ten grand for everybody for student loans. Well, what
happens five years from now when the next tranch of
people are screwed with stud loans. What happens ye, the
same thing applies with these credits here. It's okay, that's
great for now, But what happens when Mike's kids and
(17:33):
Paul's kids go to buy houses and the housing market
is still in a bad spot. You have to just
keep repeating this so it's not one hundred billion dollar costs.
It becomes one hundred billion dollar costs every three to
five years if you don't get the proper amount of
stimulus from this type of.
Speaker 2 (17:49):
You know, endeavor listener question from yesterday, Will future rate
cuts by the FEDS eventually have an indirect effect on
mortgage rates in a downward direction? Take into consideration that
we'll have a new FED share person, and how will
it impact home sales?
Speaker 1 (18:01):
So?
Speaker 2 (18:02):
I think, first things first, if mortgage rates come down,
I would definitely expect home sales to increase, just all
else equal. If mortage rates come down, I would expect
that to happen. And if mortg rates come down for
just about any reason, like the most likely reason in
my mind for mortgage rates come down would be an
economic crash or an economic downturn of some sort, I
would still expect home sales to increase in volume. The
(18:25):
question as whether the FED will have an impact on this,
I'd say it's a coin flip. I'd say it's a
coin flip because historically, when the Federal Reserve has cut
interest rates in an economy where we are not in recession,
it's about a fifty to fifty shot as to whether
or not mortgage rates come down.
Speaker 4 (18:46):
Right, Well, I think it's further to It's important to
note that because I think this is a big misconception
out there, the Federal Reserve decreasing short term interest rates
does not have one to one correlation on the longer
end of the occurred. A lot of people at parties
and get together think that.
Speaker 2 (19:01):
Yeah, this person doesn't they recognize that, Hey, it would
be an indirect effect. And my answer is when you
look at the data historically absent to recession, because in
a recession, interest rates tend to come down, including mortgage rates.
But absent that, it's about a coin flip whether or
not mortgage rates decrease with FED action. And so my answers,
I don't know. I have very little confidence in it,
(19:23):
but if we get a recession, then I do anticipate
mortgage rates coming down quick break when we come back.
Wall Street Watch is up next.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter. Act
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:59):
Mark if it's again in positive territory. One day after
the Dow closed at a record high yesterday, right now,
the Dow is up four tenths of a percent or
two hundred and three points higher. SMP five hundred is
up over a third of a percent or twenty five
points higher. NASDAC up nearly half a percent or one
hundred and seven points. Rusted two thousand is up about
(20:22):
a quarter percent. Tenure Treasure reeled is up two basis
points at four point one point eight nine percent, and
crude oil is dipping today, trading a fifty eight dollars
and twenty one cents a barrel. Video shares are up
over one percent after the AI and Chip Giant said
it would begin shipping new and faster AI chips yesterday
(20:42):
at the Consumer Electronics Show in Las Vegas. The reubenships
are being manufactured and will be shipped to customers including
Microsoft and Amazon in the second half of the year.
The company also unveiled new autonomous vehicle software. Meanwhile, in
video competitor AMD also announced a new at cees for
use in smaller corporate data centers. However, AMD shares are
(21:05):
down by two percent. Elsewhere, Vistra shares are climbing four
percent after the power generation companies said it planned by
Cogentrics Energy and a deal valued at about four billion dollars
that will include natural gas generation facilities.
Speaker 3 (21:20):
Metas said this.
Speaker 5 (21:21):
Morning that it's delaying the international expansion of its ray
band display glasses due to inventory constraints and unprecedented to demand.
Speaker 1 (21:31):
In the US.
Speaker 5 (21:32):
Meta shares are mostly flat, and Ford said this morning
that it's US vehicle sales increase six percent last year,
marking the automaker's best annual sales since twenty nineteen. Ford
finished the year as the third largest automaker, behind Toyota
and General Motors. Ford shares are flat today. I'm Tucker
Silva and that is Wall Street Watch. And remember you
(21:54):
can watch the show live every day on our YouTube page.
Well of breaking business news and all of our content
is also archives, so if you want to go back
and see an interviewer discussion about a specific topic, it's
all there. With the click of a button. Just searts
the Financial Exchange on YouTube and hit that subscribe button.
Speaker 2 (22:13):
We have a TV in the studio here and the
President speaking right now, and it made me realize something
that we have not mentioned as a upcoming major event.
In January February this year, the Supreme Court is expected
to rule on the President's tariffs. So that could be literally,
I mean, I'm guessing it's towards the end of January
and maybe into February, but that could be any day
(22:34):
here that we have the Supreme Court ruling on the
legality of the bulk of the White House tariffs on
goods coming into the United States. So in terms of
events on the calendar, I'm not expecting a huge market effect,
but a huge political effect and a huge economic effect
for a many businesses.
Speaker 3 (22:54):
You don't think it would move markets potentially.
Speaker 2 (22:57):
I don't think substantially, and compared to where we anticipated
tariffs to be. And also based on what the White
House has been saying about their backup plans should the
Supreme Court rule against them, it's not as though they're
just gonna let tariffs walk away. There'll be different types
of tariffs. But yeah, that that ruling could come any
(23:17):
day and we will keep you up, keep you updated
on the financial exchange. Tucker mentioned in VideA, and they
are detailing their new AI chips at the CEES Consumer
Electronics Show, which, by the way, what does in Vidia
have to do with the consumer electronics if we just
call that out for a minute, CEES is not Yeah,
they do have a five thousand dollars toilet that you
can buy that will you do a year analysis for
(23:40):
you on the spot. But you know, when in video
is releasing their stuff at CES, I just don't really
think it's much of a consumer show anymore. But here
is what they've announced is they are developing these new
Vera rubin chips. These are the latest, great and greatest
after the most recent Blackwell release. According to Jensen Long,
(24:00):
companies will be able to train AI models on these
chips with one quarter as many compared to the predecessor.
Given that it'll provide information for chatbots and other II
products at one tenth the cost, as well as a
fraction of the energy usage. We'll see how these actually
test when they are released, and what applications they're put into.
(24:21):
They announced a deal with Mercedes Benz, who's trying to
use them to further develop their own self driving car technology.
It leads me to one big question, though. I mean,
if this proves out to be correct, that these are
basically four hundred percent more efficient than the Blackwells or
however you want to phrase it, what exactly does this
(24:41):
mean for the depreciation schedule and these existing data centers
that are being built with the Blackwells right like something
I thought, I know this is boring, but for a moment,
just entertain me. Here. Companies are raising tens in some
cases hundreds of billions of dollars or borrowing that amount
of money to develop these data centers to run AI
(25:03):
models on old chips that can be purchased today, and
they're assuming that they depreciated a schedule of five to
ten years, at which point they're worthless, and the loans
are being underwritten with that kind of standard. If these
things are so much more efficient, then you're going to
get three years from now and people are gonna say, like,
(25:24):
why would I run my stuff on this old technology
that doesn't actually do what I want it to. What
if it all depreciates a lot faster than we are
currently expecting. Great in terms of new technology development, I'm
not sure what it means for the build out of
data centers, and you know the loans that are being
used to fund it all. So I'll just throw that
piece out there.
Speaker 4 (25:43):
Yeah, I don't I don't know enough about the intricacies
of are they able in existing data centers to add
some of these newer chips in and gradually phase out
some of the older chips. You know, how does that
whole synergy work? And you know, an expert would be
better at sort of outlining that. To me, it's interesting
(26:03):
from the data centerpiece is whenever you're digging shovels into
the ground and all the capital expenditures that you're talking
about there with physical real estate, it's so different from
many iterations of past maybe mos akin to the broadband
stuff in the late nineties, where there's just a lot
more cost in play, and as a result, there's more
risks when you're dealing with that. But on the technology side,
(26:26):
it's to me, from everything that I've heard about these rubenschips,
they do seem to be in again. This could be
self serving from Nvidio, but be very sophisticated chips, something
that they've been working on for three years and sort
of further emphasizes when you're talking about a company that
was responsible for fifteen percent of the SMP's game last year.
They continue to have it seems like the dominant position
(26:50):
in this space, and with the recent deal that they
did with Grock, which is a startup for twenty billion
to license some of their technology, and chips that do
more in inference need to have a very strong foothold,
and it seems like they do have that top spot
even though everyone's chasing them and they're seventy percent gross margins.
This is another step in the direction of the least
(27:10):
holding the line in their ninety percent market share that
they command today.
Speaker 2 (27:14):
Tender gree. It also these questions about power demands. You know,
we're all getting psyched about nuclear power. How much of
it is actually needed given how efficient these chips are getting.
Speaker 4 (27:23):
Again, that was news, that was good news, but another
thought that I had, geez imagine all this electricity story
that we've covered intensely, because the chips innovated such a
fast level and are able to potentially be more efficient,
does that become something that's less of for concerned It's
fascinating this stuff changes so quickly.
Speaker 2 (27:42):
So now that we're done with that discussion, can we
talk about self driving cars? Because I've spent the last
like three weeks figuring out self driving cars and it
was one of the like the key buying decisions for
my next new vehicle was does it have more self
driving capabilities? Really?
Speaker 3 (27:55):
All right?
Speaker 5 (27:55):
Especially a question though, Mike, does anybody you have the
shortest commute to the office, So why do you need
self driving car? Can you not drive the eight miles yourself?
Speaker 2 (28:05):
It's pretty challenging for me, and it's not a drive
closer to it's primarily my wife's car. She's starting a
new commute to Rhode Island from Massachusetts. She's gonna be
she's gonna be on the road a little bit more.
So that was that was a big factor in it.
But under if I'm being completely honest, I'm just a
geek for this technology. I think it's really cool and
(28:26):
im and I'm interested to see what's out there. So
a level zero car is your traditional car from twenty
years ago that does not have cruise control. It doesn't
have any lean keeping technology. It's just you drive at
a level one car comes with like today's standard cruise control,
so adaptive cruise control, you know where it's going to
(28:46):
control some of those things, but you're still driving the car.
You're still responsible for keeping your hands on the wheel
and everything like that. Level two is something like Chevy's
Super Cruise or Test's full self driving or what I'm
purchasing a Ford, the Ford Blue Crews, where they have
some pre mapped highways and things like that, where yeah,
(29:09):
you can take your hands off the wheel on occasion
and really allow the car to change lanes for you
and do a whole lot more than your traditional vehicle
is capable of. Chevy Super Crews, Blue Cruise, Tesla, from
what I understand, are all on this level.
Speaker 3 (29:27):
You have to be on call to jump back.
Speaker 2 (29:29):
In Ford's case, for example, it tracks your eyeballs. Your
eyeballs must be on the road at all times or
else it turns off. In Tesla's case, they make you
shake the wheel a little bit every few minutes. The
first Level three car in the US was released by Mercedes.
Mercedes currently has cars for sale that you can fully
take your eyes and hands off the eyes off the road,
(29:51):
hands off the wheel. I say they've kind of done
it because it's basically on a few highways in California
and Nevada where is actually approved, and it's only under
speeds of forty miles an hour.
Speaker 3 (30:04):
Doesn't that eliminate Yes.
Speaker 2 (30:06):
Okay, it's not terribly useful, but obviously what they're going
for is they want to be able to increase that
speed and increase the number of states that approve the
technology to be used. But for the Mercedes technology, you know,
you want to answer an email or just be playing
on the display, you can do so, and they have
full control of the vehicle. Level four, when you get
(30:27):
to level four and level five it's basically Level five
is just it can drive itself no matter where, no
matter what the conditions. And level four we're not there,
but it's you know, full control for the entire trip
except for some specific conditions. So right now, oh is
in weimo?
Speaker 3 (30:43):
I mean not that you could just buy those, but
that yes.
Speaker 2 (30:46):
Yeah, like wayms are probably around a level four level
five technology. What Mercedes is saying is that hey, with
these new chips, what they need to be able to
do is very quickly make computation on site. They can't
do it at a data center. If you're driving across
a highway at seventy miles an hour, they need to
be able to do it inside the vehicle. And so
(31:08):
obviously the smaller you can make these things with more
computing power that are more efficient from a electricity perspective.
That is the holy grail for things like self driving vehicles.
Speaker 4 (31:18):
Right, And you'd imagine it's just a specialized chip that
only has functionality around self driving, and it doesn't have
to have the wide array of services that like a
traditional GPU chip would have in a data center.
Speaker 2 (31:31):
So we will say I tend to think, in spite
of the fact that Elon Musk has been promising this
for fifteen years, I tend to think with these semiconductor
and AI developments that we've seen over the last five years,
that we are getting much closer to very useful technology
and cars that will be pretty close to handling a
(31:51):
large portion of your trip without a whole lot of
attention to the road. I think that's probably within cars
in the next five to ten years, and I'm personal
I'm pretty excited about it.
Speaker 4 (32:01):
I'm with you, and it brings up a question that
my uncle had posted to me because he has a
younger daughter, like, well they where our kids.
Speaker 2 (32:07):
Even need to know how to drive cars?
Speaker 3 (32:09):
Yeah, it was just interesting to think about.
Speaker 2 (32:12):
It's a great question. Yeah, great question. Let's say a
quick break when we come back. I think I'm good
with data centers, but let's stay on auto sales for
a little bit. We've been getting some warnings from companies
from a number of different areas of the auto market.
What are we expecting for sales and new releases in
twenty twenty six? That's next.
Speaker 1 (32:31):
The Financial Exchange streams live on YouTube. Subscribe to our
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Business and financial news affecting the markets and your wallet.
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Speaker 2 (33:05):
Well, we've seen three solid years of sales growth for
US vehicles, and frankly probably would have seen five years
of it, but the supply chain issues during COVID made
it so impossible to buy a car. I remember buying
a car in twenty twenty two, just a very boring
Honda Civic and how difficult it was to actually get
(33:27):
my hands on new one, which I only wanted because
there were no used ones available, and it would have
been just as pricey to buy a used one as
it was a new one. The probably vehicle sales would
have increased in twenty and twenty one as well, had
there been vehicles that were genuinely available and for sale.
But gmtry that both hinting at tough year ahead. Four
(33:48):
auto sales after again pretty solid numbers, but GM's sales
fell seven percent in the fourth quarter of last year,
with Honda, Hundai, and Mazda also porting declines at the
end of the year. And frankly, I think this just
follows in line with a bunch of other data that
we are seeing about big expensive purchases, which is there's
(34:11):
just a narrower and narrower group of people in the
US that can actually afford them.
Speaker 3 (34:17):
Yeah, it's incredible.
Speaker 4 (34:18):
Just the average age of a vehicle has reached twelve
point three years according to Standard and Poors in terms
of what we see for vehicles on the road today,
and it does seem like you have many consumers that
are hesitant to make those bigger purchases they're projecting. Jdpower
reported that we had sixteen point three million cars sold
(34:39):
in twenty twenty five, that was a two percent increase
from twenty four but projecting that we see a decline
this year too. I believe they had quoted maybe fifteen
point eight million, so the first time, like you were
alluding to a slowdown in vehicle sales, and they have
gotten just ridiculously expensive. I mean, there's finally some pushback
(35:02):
from some of these consumers as to whether to buy
them or not.
Speaker 2 (35:07):
It's tough. The other big challenge here that we can
talk more about is tariffs are really confusing right now
when it comes to cars. Right there's been all sorts
of temporary waivers. Where can I manufacture a car? Can
I do it in Canada? And Canada and Mexico. So
a lot that I think automakers are still trying to
ponder and figure out as we head into twenty twenty six.
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Speaker 2 (36:33):
Now heading to the world's most valuable car company, that
would be Tesla, of course, sitting at one point three
eight trillion dollars whose stock is down three and two
thirds of percent Right now.
Speaker 4 (36:42):
Mike, I just need to get off my why if
you're a testa shareholder, why you holding what is the
optimism behind it? Okay, Robotaxis elon mus Baby, I totally
understand his brilliance and just I'm not sure I do,
but like well some I guess I laud his brilliant
I mean, you have to SpaceX what he's been able
to do with that company, PayPal, you go on on Tesla,
(37:05):
just getting off the ground to where it is today.
But in terms of the future, Bid is crushing them.
In terms of EV sales, they don't really have a
lot of new cars in the pipeline. And then robotaxis
is a market that at least has other significant competitors
in it. And you look at these valuations that I've
never understood the stock for the last eight or nine years,
and I've been dead wrong and maybe I will be again,
(37:27):
But it's just it's a one and a half trillion
dollar company, and I'm just it's hard to see sometimes
the optimism.
Speaker 2 (37:34):
Yeah, there, they did see a spike in third quarter sales,
but then those plummeted in the fourth quarter, So guess
what happened in the third quarter of twenty twenty five.
The ev federally TV tax credit disappeared. So what happened
in the third quarter. A bunch of people that might
have purchased a car in the fourth quarter decided to
do so in the third quarter instead, And so Tesla
is now facing a pace of sales that don't look good.
(37:56):
He has managed, the leader of Tesla has managed to
make a whole bunch of people on both sides of
the aisle pretty upset. And I don't like you said.
Something new needs to impress pretty soon on Tesla because
a lot of their competitors have caught up pretty quickly.
We got a lot more to cover in the second
hour of the financial exchange. We'll be right back, folks,
(38:16):
Stay tuned.
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