November 12, 2025 • 38 mins
Chuck Zodda and Paul Lane discuss why you should treat the stock rally with skepticism. Luke Kawa (Sherwood News) joins the show for a discussion on AI valuations. Car loan delinquencies hit record for riskiest borrowers. Airline problems will linger even if shutdown ends. Will a 50-year mortgage make homes more affordable?
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Episode Transcript
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Speaker 1 (00:00):
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a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Paul Lane.
Speaker 2 (01:08):
It is the Financial Exchange with Chuck Zada and Paul Lane.
We've also got Tucker running the board for US. And
it's a lovely Wednesday here as we broadcast the show.
Markets are mixed, however, with the Dow Jones Industrial Average
(01:28):
up three hundred and sixty five points. Bet you didn't
think I was gonna say that one. The S and
P five hundred, though, down four and a half points,
and the Nasdaq struggling the most, down about half a
percent one hundred and twenty six points and change. So
mixed markets with tech lagging. It's been just kind of
a choppy market the last few weeks with nothing really
able to gain any foothold. You know, we hit those
(01:53):
all time highs on the S and P five hundred
back on I want to say was, yeah, the twenty
eighth of October is when we got there for the
all time high close, and we've just kind of been
chopping around for the last two weeks now, like, haven't
really gone down too far, haven't really come back up
to those all time highs. It's just kind of chop chop,
(02:17):
chopping around, and I guess that's what we're doing right now,
so no conclusive movement in markets, but some choppiness out there.
What else is moving? Bond market back open today after
having yesterday off in observance of Veterans Day. The bond
market is open today and the US Tenure Treasury is
down four point one basis points to four point oh
six nine percent. Dollar index, though moving up a touch
(02:41):
up point oh two percent to ninety nine thirty four.
We've got gold up seventy two dollars and forty cents
an ounce to forty one point eighty seven and seventy cents,
and we've got crude oil down two dollars and twelve
now to fifty eight ninety two, so continuing to spend
(03:03):
some time in the high fifties. Despite that, Gas prices
up another three tenths of ascent overnight to three oh
seven and five tenths, So no major movement there. Still
hanging out in the low threes, but can't quite get
that national average below three dollars a gallon right now,
Peace in Bloomberg. This is why you should treat the
(03:24):
stock rally with skepticism, Paul, Why should you treat the
stock rally with skepticism?
Speaker 3 (03:32):
Well, Chuck, in this piece here it outlines the case
on a technical study. You know, I don't really typically
put too much creens into technicals.
Speaker 2 (03:41):
I know, so you're saying that the article is a
load of crap. I wouldn't go that far.
Speaker 3 (03:46):
I'm not saying that on the the perhaps the methodology
behind it, or the reason that they're citing.
Speaker 2 (03:52):
I'm not sure if.
Speaker 3 (03:52):
I quote me on that. I would quote me if
you I don't know.
Speaker 2 (03:56):
If i'd quote me on that.
Speaker 3 (03:57):
Being this negative divergence, which is a technical study that
they mentioned that the number of the stocks in the
S and P five hundred making a one year low
has been rising even as the market is rallying, that
this could create this potential falloff having those two kind
of contrary indicators. The bottom line is, it's the crux
(04:18):
of this piece is the same thing that we've talked
about before. Valuations are really high. However, you want to
look at a price to earnings, price to sales, price
to book, any ratio you throw out there, stocks are
overpriced on evaluation perspective, and so it is fair to
mention that we're trading at a premium. But I'm not
so sure if I'm going to buy what they're selling.
(04:41):
Here chuck on the technical analysis as to the reason
why the market will you know, fall off anytime soon.
Speaker 2 (04:49):
And you know, along that, along that line of thinking, Paul,
back in twenty twenty three, you know, after the decline
of twenty twenty two, where valuation still high, yes they were,
And in twenty twenty four, after the growth of twenty
(05:10):
twenty three, where valuation still.
Speaker 3 (05:12):
High, yes they were.
Speaker 2 (05:13):
And at the beginning of this year, after the growth
of twenty twenty four, where valuation still high. All three
years and they've continued to go up. So again, stocks
are not physics. They're not bound by the laws of physics.
They're not bound by any rules at all other than
what you need to do in order to be a
(05:34):
publicly traded company, and you know, the regulations that you
need to follow so that you don't you know, defraud
investors and do all of that bad stuff. But in general,
like stocks can do whatever they want. This is how
you get wacky quantum computing companies that have no revenue
going parabolic, until you get wacky nuclear power companies that
have never made a single reactor going parabolic worth tens
(05:56):
of billions of dollars. I'm not saying any of this
is bad, but I have parts of markets where I
kind of get old fogy and like I certainly can
be like, hey, this looks a little bubbly. I'm a
little skeptical on like this particular thing. You heard it
from me back about you know, all the ev SPACs
in twenty twenty one and twenty two. Even now I
(06:18):
look at, you know, some of the stuff that's going
on in parts of the market, and I'm like, okay,
like this is just a little bit, you know, to
out there. But ultimately, like you can do any of
this stuff so long as it's it's legal. And the
idea that valuation is this like north Star that everything
(06:39):
comes back to. Quite honestly, like that's a really short
story in the time of in like the broad history
of markets, valuations only become an important driving story in
like the last seventy eighty years. Before that, it it
wasn't a thing like that's just not how people thought
(06:59):
about this stuff, you know, It's just not how it
was done. So ultimately, asset prices of all kinds, whether
it's stocks, real estate, collectibles, beanie babies, la boo boos,
Did I say that right?
Speaker 4 (07:16):
I think so?
Speaker 2 (07:17):
Are you a big latle boo boo fan?
Speaker 3 (07:19):
Mike had to tell me what it was. My kids
aren't at that age range yet. I now am aware
of what it is. But tucker you into the.
Speaker 2 (07:26):
Latle boo boos.
Speaker 4 (07:27):
Oh, I don't even know.
Speaker 5 (07:27):
What the hell it is.
Speaker 3 (07:28):
You don't know what a boie baby.
Speaker 2 (07:31):
They look like gremlins. It will not enter my house.
Speaker 4 (07:36):
We'll see about that, No, it won't.
Speaker 2 (07:38):
I'm getting you away Christmas. I'm getting you a boo
boo for Christmas.
Speaker 3 (07:45):
Your kids are gonna be.
Speaker 2 (07:46):
It's gonna be a La boo boo from Lechoo Choo
and you're gonna love it. You're gonna love your la
boo boo. Anyways, Ascid pricing of all kinds, it's it's
determined by stories like the guy who wants to buy
a property on the coast of Florida and says, I'm
willing to pay two million dollars for that, when if
(08:08):
you go a mile inland you can pay a third
of that. It's because the story he tells himself is wow,
I can't wait to look at that sunset out there.
And also, hey, someone else is gonna want to pay
for that after I'm gone, and so this is a
good investment. The person who buys the rundown, you know,
(08:30):
dilapidated home in Detroit two, you know, a decade ago
for eight grand who says, hey, Detroit's not always gonna
be like this. He's telling himself a story about what
that can be. The person that buys the rolex, partly
because they're like, hey, this looks cool, and I can
you know, you know, tell people how cool I am.
(08:53):
They're doing that because they're telling themselves a story too.
And so just because assets are over priced doesn't mean
that they fall immediately. Is where I'm going with all
the lab Boo Boo talk. Take a quick break. When
we come back, Luchuchu is going to be joined by
La Lulu lu Kawa from Sherwood News joins us right
(09:13):
after this. Not talking to La Boo Boo's, We're talking
AI and other things with Luke.
Speaker 1 (09:20):
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Speaker 2 (10:56):
As promised. We're now joined by Lukawa from Sherwood News. Luke,
how you doing today?
Speaker 4 (11:02):
Not too bad?
Speaker 7 (11:03):
Congrats on the five three beat down yesterday of my leaf.
So I'm recovering from that, hopefully better than Austin Matthews
I was.
Speaker 2 (11:10):
I was told we're going to answer the age old question.
Is Fraser Minton the next Patrice bergeron during this show?
Your thoughts?
Speaker 7 (11:19):
I uh, we're just hoping this trade doesn't go down
as bad as the two karasque one.
Speaker 4 (11:25):
But you know, hey, he looks great.
Speaker 7 (11:28):
Cheering for him, but cheering for him less than I
would be if he were wearing different colors.
Speaker 4 (11:32):
I'll put it that way.
Speaker 2 (11:33):
I appreciate that, Luke. Let's talk a little bit about
artificial intelligence here. Last couple of weeks, it seems like
the idea of valuations on AI companies has at least
entered the chat. And this is something that just hasn't
really been present for the last couple of years. It's
just been Hey, every time you increase CAPEX, your stock
(11:54):
has gone up, and so like, why wouldn't you keep
pushing that button? Like I under stand all of the
financial incentives driving this, But the last couple of weeks
it seems like there's been a different tenor to the conversations,
and I'm wondering if you can give a little bit
of color to that and some idea as to whether
or not this does matter, will matter, or will continue
(12:16):
to not matter.
Speaker 7 (12:18):
Yeah, it's it's very interesting to me. I think it
mainly came about, you know, somewhat last week, I would
say early last week, when there was an investment conference
in Hong Kong and a couple of big Wall Street
head haun shows, including at Goldman Sachs.
Speaker 4 (12:33):
Basically, Warren give a generic.
Speaker 7 (12:35):
Loud warning about you know, high valuations, the risk of
a market kind of pull back in the ten to
fifteen percent range at some vague, indiscriminate point in the future.
Speaker 4 (12:47):
As sort of a catalyst for that, you know.
Speaker 7 (12:49):
Along that, you also have Michael Berry raising some alarms
about the space, which does tend to generate a lot
of newsflow. But when I think of the the AI
boom in aessing whether it's a bubble or not, I
have to go to Okay, let's look at SMB five
hundred major company valuations right now. Companies with a higher
(13:10):
forward price to earnings ratio than Nvidia include Costco, Walmart,
and Starbucks. I think, inasmuch as there is a valuation,
or inasmuch as there are bubble concerns within AI, it
should lay much more on the idea of an earnings bubble,
the idea that, hey, the very outsize returns that are
(13:32):
going to be generated in a boom obviously aren't going
to last forever this degree of growth, and what does
growth look like on the other side of that, That,
to me is where the biggest idea of an AI
bubble looks.
Speaker 4 (13:44):
It doesn't look as much in the valuations.
Speaker 7 (13:47):
In other words, I'm saying, if we're going to be
worried about an AI bubble even more, it's probably going
to have to come with a lot more work on
the valuation side, and those alarm bells getting a lot
louder and a lot more blaring. Bank of America, for instance,
yesterday basically said they had their global option strategists come
(14:08):
out and say that, you know, single stock volatility is rising,
but not really as high as the dot com bubble,
and we think we're going there. Therefore valuations and volatility
should be rising. So that's actually a part of the
leg that I would presume as long as the earning
side cooperates gets worse rather than gets better in terms
(14:30):
of the kind of cries and concerns, it's eliciting.
Speaker 2 (14:33):
So is that kind of the My view where I've
kind of evolved to is like most technology, I believe
that we're going to use way more AI over the
next five to ten years than we're using today. But
it's also like most technology going to become commoditized, because
that's kind of what generally happens with most technologies, see
(14:55):
the personal computer, smartphones aside from Apple, that the margins
shrink into you know, oblivion, and you say, okay, we
have to have a bunch of M and A in
order to you know, save whatever's out there. But is
this you know, kind of where we end up going,
which is, yeah, we can use a lot more AI
in the future, but in doing so, does it become
(15:17):
commoditized and the margins get hit on that.
Speaker 7 (15:21):
Oh man, you're you're speaking my language completely here. Yeah,
the time where you have the most pricing power and
in theory have the best margins is during the boom.
It's now so when you when you look at you know,
for instance, the core weaves and the Nebuises of the world,
which are saying, hey, like, we're even right now able
to lease old versions of chips like the H one hundreds,
(15:44):
for instance, in Vidia's chips at rates that aren't too
far off what we booked the initial contracts at. You see, Hey,
that's that sounds great, right, This sounds like longer useful life,
some decent pricing power. And then you kind of have
to remember that this is probably as good as it
ever gets in terms of the demand outstripping supply providing
(16:05):
for that pricing power. So yeah, I'm totally on board
with that idea and that kind of loops in what
Jensen Wong talked about recently, and I think was really
a point of emphasis for him at GtC speaking in DC,
he was talking a lot about the efficiency improvements that
are going to be a part of every generation of
(16:26):
Nvidia chips going forward and so effectively, what he's saying
is like, Hey, this isn't just about giving better AI compute.
We're also trying to drive costs lower and try and
provide that ongoing protection over time. Whether or not that's
enough to offset kind of the more generalized loss of
pricing power that you would expect to see as supply
(16:48):
continue to get built built out, built out, and we
get a better handle in terms of right sizing that
to demand.
Speaker 4 (16:53):
I think that's a very open question.
Speaker 7 (16:55):
But in terms of your view, is basically saying, is
Core we eve more like a high growing software firm
or is it more like say a classic US utility company.
Probably over time it starts to look and act a
lot more like the latter than like than like the former,
And you know it's it's definitely more lumped in, I
(17:16):
would say, with the former in terms of how it's priced.
Speaker 2 (17:19):
So when we talk about kind of bucketing winners and losers,
the question that I have outstanding and I haven't looked
at this, So I'm gonna ask I'm gonna ask you
to look at this, Luke, And maybe you have already.
Right now, you've got the providers of picks and shovels
that are being projected as winners, the suppliers of the
(17:39):
actual AI are being projected as winners, and the users
of AI are being projected as winners. Basically, if you
make the chips, if you make the models, or if
you use the models, your stock has generally gone up
shortly after announcements relating to those things. When this shakeout
eventually occurs, which could be whatever I mean, I have
(18:01):
no clue who typically ends up coming out in the
best shape from those three groups, because right now they're
all projected to win.
Speaker 7 (18:11):
I would say, if we look at it from a
kind of holistic historical perspective, I would say the the
end users are or the most downstream that can apply
the technology consistently after the boom are generally the ones
that you would expect to be kind of having more
benefits accrue to them over time, whereas just the the
(18:32):
one off boost or the kind of more tempor temporarily
limited boost comes from the picks and shovel space. I
would say, though that speaking kind of more recently to
recent price action there has been I would say a
degree of more nuance in the space.
Speaker 4 (18:47):
I think the best example is meta Meta.
Speaker 7 (18:50):
Is the kind of biggest of the publicly traded hyperscalers,
the biggest one that doesn't really have a cloud business.
So it's gotten to the point of META is in
a place where it's much more downstream, I would say,
in the AI game than others, And because of that,
I would say, it's kind of prove it on the spend.
(19:10):
The expery on that option is a lot closer than
it is for you know, a Google or an Amazon,
so to speak, because they have to effectively show that,
you know, we have ways of making money off this
quickly and directly, whereas you know, Amazon, the Googles they
can say, what, we just need somebody else to look
at this and say we might be able to make
(19:30):
money off of this.
Speaker 4 (19:31):
So I would say that's.
Speaker 7 (19:32):
Been one kind of interesting part of nuance in the
AI space lately is that I point to kind of
meta as a kind of chief cause of worries downstream,
and hey, if you're worried about downstream, eventually you probably
get worried about upstream. Not saying that time is now,
especially with you know, Nvidia and Jensen.
Speaker 4 (19:53):
Pointing to five hundred billion in.
Speaker 7 (19:55):
Sales in the pipeline for Flagship Chips, A good one
to watch, Gotta run, Luke appreciate the time We'll catch
up with this year.
Speaker 2 (20:02):
And Luke Cowa from Sherwood.
Speaker 1 (20:03):
News bringing the latest financial news straight to your radio
every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street. Watch a complete
look at what's moving markets so far today. Right here
(20:25):
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Speaker 6 (20:27):
Markets are mixed, with the Dow well into positive territory
as Wall Street readies for a vote and the likely
end to the government shutdown later this evening. Right now,
the Dow is up by about three quarters of a percent,
or three hundred and forty six points higher, SMP five
hundred completely flat, Nasdaq down by four tenths of a percenter,
(20:48):
ninety five points lower, Russell thousands down about a tenth
of a percent, ten year Treasure Reel down four basis
points at four point zero six five percent, and crude
oil down over three and a half percent lower, trading
at fifty eight dollars in eighty two cents a barrel.
AMDs jumping nine percent after CEO Lisa Sue said during
its investor Day that the company anticipates the total market
(21:11):
for AI data center parts and systems will reach one
trillion dollars by twenty thirty. So Who also said that
AMD should see revenue growth accelerate in the coming years
due to strong data center demand. Meanwhile, shares in Swiss
sneaker maker on Holding surging twenty percent after the company
raise its guidance for the third time in a row
(21:32):
after beach street expectations on the top and bottom lines. Elsewhere,
nuclear energy startup Auclow saw its loss wide and last
quarter as the company spent more on research and development
to advance its plans to launch a commercial plants shares
are up five percent in after today's close, we'll see
earnings from Cisco Systems and gambling operator Flutter Entertainment. I'm
(21:55):
Tucker Silva and that is Wall Street Watch and we
haven't done trivial yet, so let's get to it. Today
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Once again.
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Speaker 2 (22:48):
Let's talk a little bit about subprime auto delinquencies, Paul,
what are we seeing on that side of things?
Speaker 3 (22:54):
We've seen a pretty significant uptick here. Obviously, subprime moto
got into the major focus of the investment world back
when First Brands and some of these other companies defaulted
or bank you know, filed for bankruptcy here. And so
what we've seen is the share of sub barers who
(23:14):
are at least sixty days past due on their auto
loans has risen to six point sixty five percent in October.
There are various factors for this one. They cite the
return of student loan bills causing some car owners to
have difficulty getting to their monthly payment number. The other
is just we've seen average prices for a new car
(23:35):
recently top fifty thousand bucks for the first time. And
you have some other trade ins out there that were
bought back in you know, twenty one, twenty two that
are being turned in with negative equity. So there's just
a bunch of different factors out here that's leading to it.
The prices are very expensive, and you've got just an
area of the market that is under relative stress at
(23:58):
this point.
Speaker 2 (24:00):
And yet it still doesn't mean anything for the broader economy.
Speaker 4 (24:03):
No, it doesn't.
Speaker 3 (24:04):
It's such a small subset of the lending that you'd
see in the mortgage market. And if you the companies
that we talk about every single day, even if you
want to drill down just to the financials, the Goldman Sachs,
the JP Morgans, the Bank of America very little if
any exposure to this sector. You get down to some
of the regional banks, you see some impact, but not
(24:25):
in terms of the typical S and P five hundred
companies that we're used to speaking about so frequently.
Speaker 2 (24:30):
Yeah, it's just kind of kind of I mean, look,
this is a story we've been talking about, you know,
not this one specifically, but how many different parts of
the economy were like, eh, this doesn't seem great, but
like none of it matters. Yeah, the overall economic data
continues to chug along. Even though you can point to,
you know, some of these different areas and be like
(24:51):
that's a little concerning. It hasn't mattered to the broader economy,
and you know, it kind of has you wonder like, okay,
like what would it take for something to matter? Because
it's just not showing up in the broader data right now,
even though there are pockets under the surface that are,
you know, not great folks. The Armstrong Advisory Group has
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Speaker 2 (26:41):
The House of Representative is going to be voting at
seven pm tonight or approximately seven pm to reopen the government.
My assumption is that that vote will not fail, but
you never know. Airlines indicating that, hey, even if the
shutdown ends today, it still is going to take them
a little bit of time to get things spooled back up,
because when you've been changing flight schedules for the last
(27:02):
week or so to reduce the number of flights, you
don't just push a button and have every crew exactly
where they need to be in order to get back
up to full speed. So they're indicating it might be
seven to ten days to get there, which means next
week might still be a little bit bumpy, but you
should be back towards full speed by the week of
Thanksgiving for the heaviest of the holiday travel.
Speaker 3 (27:23):
Really important obviously for the Thanksgiving holiday travel. I read
somewhere that in the ten day period in and around Thanksgiving,
thirty one million Americans are set to get that out
there and travel, so really important that that gets resolved.
We saw the disruption peak in terms of flight cancelations
this past Sunday, when about one to ten scheduled flights
did not take off. That meet at the fourth worst
(27:44):
day of the year for flight for fight cancelations, according
to the New York Times here, So hopefully that gets
resolved when everyone is heading to home or wherever they're
going for the Thanksgiving season.
Speaker 2 (27:57):
Here other things. We still have this problem where we
just don't have enough air traffic controllers. Yeah, the estimate
is that we're about three thousand short. There are fourteen
thousand employed nationwide, so we're about twenty percent short of
where we'd like to be. Here. Here's the deal in
terms of, you know, what it takes to be an
air traffic controler. Just in terms of like basic requirements.
(28:20):
Number one, you got to be a US citizen. Number two,
you have to be younger than thirty one years old.
FAA doesn't want to train you as a forty year
old just to have you retire in twenty years. Interesting,
we got to be younger than thirty one. Obviously, you
have to be fluent in English when you know talking
about you know, communication skills and things like that. You
(28:40):
need to have either a bachelor's degree or three years
of progressively more responsible work experience or a combination you
know thereof that equates to it. Uh And basically like
those are the basic things that you need. Then you
have to go through the FA Air Traffic Skills Assessment Program,
(29:02):
pass a background check and medical exam. Pass a psych
eval as well, and then go into the FAA Academy,
which means you're gonna spend about three months living in
Oklahoma City and then you get to go and do
a bunch of on the job training under supervision for
you know, usually it's like two to four years. Think
of it as basically the equivalent of residency for becoming
(29:26):
a doctor, like you want to be, you know, working
under a senior air traffic controller for those two to
four years and then you get to actually be an
air traffic controller. So it's a pretty arduous process. And
this is before you even get into the long hours,
the high stress and all that, which is why despite
having three hundred and thirty million people in the United States,
(29:46):
we can't find another three thousand who want to be
air traffic controllers at the moment.
Speaker 3 (29:52):
Yeah, looking up the compensation here, it looks like the
start compensation is good, but not once you get it.
So it's like once you get there, you know, and
you just alluded to how long it takes to get there,
that in training you're making forty one to fifty K.
After certification, you get between seventy and ninety once you
get experience you're making more than one hundred and fifty
k annually. But to your point, what was that three
four years, five years before? You're kind of up and
(30:14):
running long process to get there. Quite honestly, you got
to pay them more, right, you got to pay them more.
Think about the jobs that you are competing against for
these people, Honestly, you gotta bump those pay ranges up
by twenty five to thirty percent. Yeah, particularly the seventy
to ninety after you get the certification. It's just it's
just not enough for the stress of the job.
Speaker 2 (30:35):
You can make. You can make seventy to ninety grand
as like an associate manager at this like a fast
food restaurant, right, you know, like and you don't have
the stress of being an air traffic controller. Sure, you know,
think about what you're comparing this to if you're working
at an Amazon warehouse, just as an example, you're getting
out of there with like forty grand a year if
(30:57):
you're doing full time, maybe fifty depending on the market
that you're in. Granted, it's like highly physical work and everything.
But you sit there and you say, okay, or I
can go be an air traffic controller, and for the
first you know year or so I'm basically gonna make
the same amount with all this stress that i'm and
then I've got this path to making more. But you've
got paths to making more doing other stuff too. So look,
(31:18):
quite honestly, they're going to have to raise the pay
ranges on these these jobs in order to fill them.
Speaker 4 (31:24):
I know that.
Speaker 2 (31:25):
Like, I know, no one wants to be like, oh,
like that's the answer, but you gotta pay these people
more otherwise. The I don't think people appreciate just how
much of what we take for granted today revolves around
air traffic controllers being able to operate efficiently and quite honestly,
(31:46):
near perfectly.
Speaker 3 (31:47):
They do.
Speaker 2 (31:48):
They do. It's it's an incredibly demanding, high stress job,
and we're doing a disservice to them by not providing
enough pay so that they're not overworked and you know, potentially,
you know, causing problems that are avoidable if you properly
staff these places. Quick break when we come back at
stack Roulette.
Speaker 1 (32:08):
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Speaker 2 (33:41):
Paul, what do you got for stack roulette?
Speaker 4 (33:43):
Chack?
Speaker 3 (33:43):
We talked about this a little bit on yesterday, so
some fall up on the idea that got float around
by President Trump of a fifty year mortgage. A nice
piece done here in the Wall Street Journal breaking down
just sort of what that would mean from a cost perspective.
Again yesterday's show, I was mentioning that I just didn't
think it was a great idea a road to go down.
(34:06):
There's just all sorts of complexities that come with it.
They do a nice job here of lining out that
if you had a four hundred thousand dollars home with
a twenty percent down payment, let's say six point two
percent mortgage rate over a fifty year mortgage versus the
thirty year with the same terms and structure, you would
save two hundred dollars a month on the principal and
interest with that fifty being stretched out longer versus the
(34:29):
thirty year, but you would up end up shelling out
three hundred and thirty five thousand more in cumulative interest
over that fifty year period rather than the thirty and
you'd walk away if you sold it after ten years
with thirty eight thousand less inequity. You know, that's just
some of the issues here. But the other issue is
on the lender side of things. Puts them in a
(34:51):
really tough spot to lend out money to you over
a thirty year period. Just more risks that can occur,
whether death, divorce, job loss, all sorts of stuff that
they're on the hook for if you're no longer able
to pay that mortgage. Plus, we don't really have the
securities that are tied to back this, so a lot
would need to happen to you know, put this in
(35:13):
a place, and it doesn't solve the issue of the
twenty percent down. This is just really eroding at some
of the monthly payment just by a little bit here.
Speaker 2 (35:23):
Everyone like talks about all this and you know, they're
like trying to analyze it in terms of, Okay, if
this is the price, but blah blah blah blah blah
blah blah, and everyone's missing. Like the first problem that
you run into on the idea of a fifty year mortgage,
which the idea is to get down to the down
payment lower. Sure that that's the idea, is okay, if
you add you know, more payments, you can get the
(35:45):
down payment lower. The estimates are that it might reduce
the down payment by like seven to ten percent. If
everyone now has the ability to buy a property with
seven to ten percent more purchasing power, the value of
those properties will move up in accordance. Because the way
(36:07):
most people buy homes is not this. They don't do this. Well,
the most that we should spend on our house is,
you know, thirty six percent of our debt to income,
so we're gonna spend twenty. No, the way it generally
works is, hey, I want to buy this house. How
much does it cost bank? Can we afford this? Yes,
but it's at the top end of what you can afford. Okay, great,
(36:28):
we'll do it. Like most people are maxing out what
they can spend on marriage. Good financial advisor. It's true,
but like this is what you generally see. Like if
the problem is, hey, we can't afford to buy more
house and now you give people. If you give everyone
the ability to buy more house, Okay, that four hundred
thousand dollars home might now go for four to twenty
(36:49):
five and your mortgage payment is the same. It's not
more affordable, right, This is shuffling the deck chairs on
the Titanic, not really the Titanic. They I don't think
housing's in this, like saying cataclysmic, you know, like thing,
I think housing prices are just not really gonna go
anywhere for three to five years. It's just we got
to burn off this excess inventory and higher pricing. But
(37:12):
the way that you fix this is not being like, hey,
just you know, take out a fifty year mortgage, because
if it's the same thing as hey, let's give down
payment assistance to first time home buyers, Well, if you
give everyone twenty five thousand dollars, he's just gonna need
to do you know what smart sellers do. They say, Hey,
we're gonna raise the price by twenty five thousand because
you just gave everyone more money.
Speaker 3 (37:33):
Not to mention you'd have to do it again in
another cycle for the next person.
Speaker 2 (37:36):
So great, ten years from now, we can do seventy
year mortgages. You know, you won't ever be able to
pay it off because you'll be dead.
Speaker 3 (37:45):
My son will be good to go in five years,
but start him at ten, Right Like.
Speaker 2 (37:49):
If if you start your kids on their seventy year
mortgage for their get buy your kids a house for
their fifth birthday, and it'll be paid off, you know
when they're you know, finally getting ready to move out
of it. I mean, it's just like you have to
think of this in terms of just you know, human
life cycles and stuff as well. Mark Zuckerberg, there's an
(38:11):
article about him, What's it mean? Says he's picking your
pick for staff. Says I didn't read this one. It
says he's picking group think over a godfather.
Speaker 3 (38:25):
He's more focused on products rather than research on the
artificial intelligence fronts. He let go of one of the
leading scientists.
Speaker 4 (38:32):
In the space.
Speaker 3 (38:33):
You let go with a godfather, one of the godfathers,
Paul Young, Pinton and Lukun.
Speaker 2 (38:38):
You never go against the family. That's what I'm talking about.
We're gonna take a quick break. We'll be back tomorrow
on the Financial Exchange,
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts, do not reflect the opinions of Armstrong Advisory
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a donation today. This is the Financial Exchange with Chuck
(01:05):
Zada and Paul Lane.
Speaker 2 (01:08):
It is the Financial Exchange with Chuck Zada and Paul Lane.
We've also got Tucker running the board for US. And
it's a lovely Wednesday here as we broadcast the show.
Markets are mixed, however, with the Dow Jones Industrial Average
(01:28):
up three hundred and sixty five points. Bet you didn't
think I was gonna say that one. The S and
P five hundred, though, down four and a half points,
and the Nasdaq struggling the most, down about half a
percent one hundred and twenty six points and change. So
mixed markets with tech lagging. It's been just kind of
a choppy market the last few weeks with nothing really
able to gain any foothold. You know, we hit those
(01:53):
all time highs on the S and P five hundred
back on I want to say was, yeah, the twenty
eighth of October is when we got there for the
all time high close, and we've just kind of been
chopping around for the last two weeks now, like, haven't
really gone down too far, haven't really come back up
to those all time highs. It's just kind of chop chop,
(02:17):
chopping around, and I guess that's what we're doing right now,
so no conclusive movement in markets, but some choppiness out there.
What else is moving? Bond market back open today after
having yesterday off in observance of Veterans Day. The bond
market is open today and the US Tenure Treasury is
down four point one basis points to four point oh
six nine percent. Dollar index, though moving up a touch
(02:41):
up point oh two percent to ninety nine thirty four.
We've got gold up seventy two dollars and forty cents
an ounce to forty one point eighty seven and seventy cents,
and we've got crude oil down two dollars and twelve
now to fifty eight ninety two, so continuing to spend
(03:03):
some time in the high fifties. Despite that, Gas prices
up another three tenths of ascent overnight to three oh
seven and five tenths, So no major movement there. Still
hanging out in the low threes, but can't quite get
that national average below three dollars a gallon right now,
Peace in Bloomberg. This is why you should treat the
(03:24):
stock rally with skepticism, Paul, Why should you treat the
stock rally with skepticism?
Speaker 3 (03:32):
Well, Chuck, in this piece here it outlines the case
on a technical study. You know, I don't really typically
put too much creens into technicals.
Speaker 2 (03:41):
I know, so you're saying that the article is a
load of crap. I wouldn't go that far.
Speaker 3 (03:46):
I'm not saying that on the the perhaps the methodology
behind it, or the reason that they're citing.
Speaker 2 (03:52):
I'm not sure if.
Speaker 3 (03:52):
I quote me on that. I would quote me if
you I don't know.
Speaker 2 (03:56):
If i'd quote me on that.
Speaker 3 (03:57):
Being this negative divergence, which is a technical study that
they mentioned that the number of the stocks in the
S and P five hundred making a one year low
has been rising even as the market is rallying, that
this could create this potential falloff having those two kind
of contrary indicators. The bottom line is, it's the crux
(04:18):
of this piece is the same thing that we've talked
about before. Valuations are really high. However, you want to
look at a price to earnings, price to sales, price
to book, any ratio you throw out there, stocks are
overpriced on evaluation perspective, and so it is fair to
mention that we're trading at a premium. But I'm not
so sure if I'm going to buy what they're selling.
(04:41):
Here chuck on the technical analysis as to the reason
why the market will you know, fall off anytime soon.
Speaker 2 (04:49):
And you know, along that, along that line of thinking, Paul,
back in twenty twenty three, you know, after the decline
of twenty twenty two, where valuation still high, yes they were,
And in twenty twenty four, after the growth of twenty
(05:10):
twenty three, where valuation still.
Speaker 3 (05:12):
High, yes they were.
Speaker 2 (05:13):
And at the beginning of this year, after the growth
of twenty twenty four, where valuation still high. All three
years and they've continued to go up. So again, stocks
are not physics. They're not bound by the laws of physics.
They're not bound by any rules at all other than
what you need to do in order to be a
(05:34):
publicly traded company, and you know, the regulations that you
need to follow so that you don't you know, defraud
investors and do all of that bad stuff. But in general,
like stocks can do whatever they want. This is how
you get wacky quantum computing companies that have no revenue
going parabolic, until you get wacky nuclear power companies that
have never made a single reactor going parabolic worth tens
(05:56):
of billions of dollars. I'm not saying any of this
is bad, but I have parts of markets where I
kind of get old fogy and like I certainly can
be like, hey, this looks a little bubbly. I'm a
little skeptical on like this particular thing. You heard it
from me back about you know, all the ev SPACs
in twenty twenty one and twenty two. Even now I
(06:18):
look at, you know, some of the stuff that's going
on in parts of the market, and I'm like, okay,
like this is just a little bit, you know, to
out there. But ultimately, like you can do any of
this stuff so long as it's it's legal. And the
idea that valuation is this like north Star that everything
(06:39):
comes back to. Quite honestly, like that's a really short
story in the time of in like the broad history
of markets, valuations only become an important driving story in
like the last seventy eighty years. Before that, it it
wasn't a thing like that's just not how people thought
(06:59):
about this stuff, you know, It's just not how it
was done. So ultimately, asset prices of all kinds, whether
it's stocks, real estate, collectibles, beanie babies, la boo boos,
Did I say that right?
Speaker 4 (07:16):
I think so?
Speaker 2 (07:17):
Are you a big latle boo boo fan?
Speaker 3 (07:19):
Mike had to tell me what it was. My kids
aren't at that age range yet. I now am aware
of what it is. But tucker you into the.
Speaker 2 (07:26):
Latle boo boos.
Speaker 4 (07:27):
Oh, I don't even know.
Speaker 5 (07:27):
What the hell it is.
Speaker 3 (07:28):
You don't know what a boie baby.
Speaker 2 (07:31):
They look like gremlins. It will not enter my house.
Speaker 4 (07:36):
We'll see about that, No, it won't.
Speaker 2 (07:38):
I'm getting you away Christmas. I'm getting you a boo
boo for Christmas.
Speaker 3 (07:45):
Your kids are gonna be.
Speaker 2 (07:46):
It's gonna be a La boo boo from Lechoo Choo
and you're gonna love it. You're gonna love your la
boo boo. Anyways, Ascid pricing of all kinds, it's it's
determined by stories like the guy who wants to buy
a property on the coast of Florida and says, I'm
willing to pay two million dollars for that, when if
(08:08):
you go a mile inland you can pay a third
of that. It's because the story he tells himself is wow,
I can't wait to look at that sunset out there.
And also, hey, someone else is gonna want to pay
for that after I'm gone, and so this is a
good investment. The person who buys the rundown, you know,
(08:30):
dilapidated home in Detroit two, you know, a decade ago
for eight grand who says, hey, Detroit's not always gonna
be like this. He's telling himself a story about what
that can be. The person that buys the rolex, partly
because they're like, hey, this looks cool, and I can
you know, you know, tell people how cool I am.
(08:53):
They're doing that because they're telling themselves a story too.
And so just because assets are over priced doesn't mean
that they fall immediately. Is where I'm going with all
the lab Boo Boo talk. Take a quick break. When
we come back, Luchuchu is going to be joined by
La Lulu lu Kawa from Sherwood News joins us right
(09:13):
after this. Not talking to La Boo Boo's, We're talking
AI and other things with Luke.
Speaker 1 (09:20):
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Speaker 2 (10:56):
As promised. We're now joined by Lukawa from Sherwood News. Luke,
how you doing today?
Speaker 4 (11:02):
Not too bad?
Speaker 7 (11:03):
Congrats on the five three beat down yesterday of my leaf.
So I'm recovering from that, hopefully better than Austin Matthews
I was.
Speaker 2 (11:10):
I was told we're going to answer the age old question.
Is Fraser Minton the next Patrice bergeron during this show?
Your thoughts?
Speaker 7 (11:19):
I uh, we're just hoping this trade doesn't go down
as bad as the two karasque one.
Speaker 4 (11:25):
But you know, hey, he looks great.
Speaker 7 (11:28):
Cheering for him, but cheering for him less than I
would be if he were wearing different colors.
Speaker 4 (11:32):
I'll put it that way.
Speaker 2 (11:33):
I appreciate that, Luke. Let's talk a little bit about
artificial intelligence here. Last couple of weeks, it seems like
the idea of valuations on AI companies has at least
entered the chat. And this is something that just hasn't
really been present for the last couple of years. It's
just been Hey, every time you increase CAPEX, your stock
(11:54):
has gone up, and so like, why wouldn't you keep
pushing that button? Like I under stand all of the
financial incentives driving this, But the last couple of weeks
it seems like there's been a different tenor to the conversations,
and I'm wondering if you can give a little bit
of color to that and some idea as to whether
or not this does matter, will matter, or will continue
(12:16):
to not matter.
Speaker 7 (12:18):
Yeah, it's it's very interesting to me. I think it
mainly came about, you know, somewhat last week, I would
say early last week, when there was an investment conference
in Hong Kong and a couple of big Wall Street
head haun shows, including at Goldman Sachs.
Speaker 4 (12:33):
Basically, Warren give a generic.
Speaker 7 (12:35):
Loud warning about you know, high valuations, the risk of
a market kind of pull back in the ten to
fifteen percent range at some vague, indiscriminate point in the future.
Speaker 4 (12:47):
As sort of a catalyst for that, you know.
Speaker 7 (12:49):
Along that, you also have Michael Berry raising some alarms
about the space, which does tend to generate a lot
of newsflow. But when I think of the the AI
boom in aessing whether it's a bubble or not, I
have to go to Okay, let's look at SMB five
hundred major company valuations right now. Companies with a higher
(13:10):
forward price to earnings ratio than Nvidia include Costco, Walmart,
and Starbucks. I think, inasmuch as there is a valuation,
or inasmuch as there are bubble concerns within AI, it
should lay much more on the idea of an earnings bubble,
the idea that, hey, the very outsize returns that are
(13:32):
going to be generated in a boom obviously aren't going
to last forever this degree of growth, and what does
growth look like on the other side of that, That,
to me is where the biggest idea of an AI
bubble looks.
Speaker 4 (13:44):
It doesn't look as much in the valuations.
Speaker 7 (13:47):
In other words, I'm saying, if we're going to be
worried about an AI bubble even more, it's probably going
to have to come with a lot more work on
the valuation side, and those alarm bells getting a lot
louder and a lot more blaring. Bank of America, for instance,
yesterday basically said they had their global option strategists come
(14:08):
out and say that, you know, single stock volatility is rising,
but not really as high as the dot com bubble,
and we think we're going there. Therefore valuations and volatility
should be rising. So that's actually a part of the
leg that I would presume as long as the earning
side cooperates gets worse rather than gets better in terms
(14:30):
of the kind of cries and concerns, it's eliciting.
Speaker 2 (14:33):
So is that kind of the My view where I've
kind of evolved to is like most technology, I believe
that we're going to use way more AI over the
next five to ten years than we're using today. But
it's also like most technology going to become commoditized, because
that's kind of what generally happens with most technologies, see
(14:55):
the personal computer, smartphones aside from Apple, that the margins
shrink into you know, oblivion, and you say, okay, we
have to have a bunch of M and A in
order to you know, save whatever's out there. But is
this you know, kind of where we end up going,
which is, yeah, we can use a lot more AI
in the future, but in doing so, does it become
(15:17):
commoditized and the margins get hit on that.
Speaker 7 (15:21):
Oh man, you're you're speaking my language completely here. Yeah,
the time where you have the most pricing power and
in theory have the best margins is during the boom.
It's now so when you when you look at you know,
for instance, the core weaves and the Nebuises of the world,
which are saying, hey, like, we're even right now able
to lease old versions of chips like the H one hundreds,
(15:44):
for instance, in Vidia's chips at rates that aren't too
far off what we booked the initial contracts at. You see, Hey,
that's that sounds great, right, This sounds like longer useful life,
some decent pricing power. And then you kind of have
to remember that this is probably as good as it
ever gets in terms of the demand outstripping supply providing
(16:05):
for that pricing power. So yeah, I'm totally on board
with that idea and that kind of loops in what
Jensen Wong talked about recently, and I think was really
a point of emphasis for him at GtC speaking in DC,
he was talking a lot about the efficiency improvements that
are going to be a part of every generation of
(16:26):
Nvidia chips going forward and so effectively, what he's saying
is like, Hey, this isn't just about giving better AI compute.
We're also trying to drive costs lower and try and
provide that ongoing protection over time. Whether or not that's
enough to offset kind of the more generalized loss of
pricing power that you would expect to see as supply
(16:48):
continue to get built built out, built out, and we
get a better handle in terms of right sizing that
to demand.
Speaker 4 (16:53):
I think that's a very open question.
Speaker 7 (16:55):
But in terms of your view, is basically saying, is
Core we eve more like a high growing software firm
or is it more like say a classic US utility company.
Probably over time it starts to look and act a
lot more like the latter than like than like the former,
And you know it's it's definitely more lumped in, I
(17:16):
would say, with the former in terms of how it's priced.
Speaker 2 (17:19):
So when we talk about kind of bucketing winners and losers,
the question that I have outstanding and I haven't looked
at this, So I'm gonna ask I'm gonna ask you
to look at this, Luke, And maybe you have already.
Right now, you've got the providers of picks and shovels
that are being projected as winners, the suppliers of the
(17:39):
actual AI are being projected as winners, and the users
of AI are being projected as winners. Basically, if you
make the chips, if you make the models, or if
you use the models, your stock has generally gone up
shortly after announcements relating to those things. When this shakeout
eventually occurs, which could be whatever I mean, I have
(18:01):
no clue who typically ends up coming out in the
best shape from those three groups, because right now they're
all projected to win.
Speaker 7 (18:11):
I would say, if we look at it from a
kind of holistic historical perspective, I would say the the
end users are or the most downstream that can apply
the technology consistently after the boom are generally the ones
that you would expect to be kind of having more
benefits accrue to them over time, whereas just the the
(18:32):
one off boost or the kind of more tempor temporarily
limited boost comes from the picks and shovel space. I
would say, though that speaking kind of more recently to
recent price action there has been I would say a
degree of more nuance in the space.
Speaker 4 (18:47):
I think the best example is meta Meta.
Speaker 7 (18:50):
Is the kind of biggest of the publicly traded hyperscalers,
the biggest one that doesn't really have a cloud business.
So it's gotten to the point of META is in
a place where it's much more downstream, I would say,
in the AI game than others, And because of that,
I would say, it's kind of prove it on the spend.
(19:10):
The expery on that option is a lot closer than
it is for you know, a Google or an Amazon,
so to speak, because they have to effectively show that,
you know, we have ways of making money off this
quickly and directly, whereas you know, Amazon, the Googles they
can say, what, we just need somebody else to look
at this and say we might be able to make
(19:30):
money off of this.
Speaker 4 (19:31):
So I would say that's.
Speaker 7 (19:32):
Been one kind of interesting part of nuance in the
AI space lately is that I point to kind of
meta as a kind of chief cause of worries downstream,
and hey, if you're worried about downstream, eventually you probably
get worried about upstream. Not saying that time is now,
especially with you know, Nvidia and Jensen.
Speaker 4 (19:53):
Pointing to five hundred billion in.
Speaker 7 (19:55):
Sales in the pipeline for Flagship Chips, A good one
to watch, Gotta run, Luke appreciate the time We'll catch
up with this year.
Speaker 2 (20:02):
And Luke Cowa from Sherwood.
Speaker 1 (20:03):
News bringing the latest financial news straight to your radio
every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street. Watch a complete
look at what's moving markets so far today. Right here
(20:25):
on the Financial Exchange Radio Network.
Speaker 6 (20:27):
Markets are mixed, with the Dow well into positive territory
as Wall Street readies for a vote and the likely
end to the government shutdown later this evening. Right now,
the Dow is up by about three quarters of a percent,
or three hundred and forty six points higher, SMP five
hundred completely flat, Nasdaq down by four tenths of a percenter,
(20:48):
ninety five points lower, Russell thousands down about a tenth
of a percent, ten year Treasure Reel down four basis
points at four point zero six five percent, and crude
oil down over three and a half percent lower, trading
at fifty eight dollars in eighty two cents a barrel.
AMDs jumping nine percent after CEO Lisa Sue said during
its investor Day that the company anticipates the total market
(21:11):
for AI data center parts and systems will reach one
trillion dollars by twenty thirty. So Who also said that
AMD should see revenue growth accelerate in the coming years
due to strong data center demand. Meanwhile, shares in Swiss
sneaker maker on Holding surging twenty percent after the company
raise its guidance for the third time in a row
(21:32):
after beach street expectations on the top and bottom lines. Elsewhere,
nuclear energy startup Auclow saw its loss wide and last
quarter as the company spent more on research and development
to advance its plans to launch a commercial plants shares
are up five percent in after today's close, we'll see
earnings from Cisco Systems and gambling operator Flutter Entertainment. I'm
(21:55):
Tucker Silva and that is Wall Street Watch and we
haven't done trivial yet, so let's get to it. Today
is Ryan Gosling's forty fifth birthday. Gosling got his start
in acting when he was cast on The Mickey Mouse
Club alongside future stars Britney Spears, Christina Aguilera, Kerrie Russell,
among others. So are our trivia question today, which boy
(22:16):
band legend was Ryan Gosling's castmate on The Mickey mouse Club?
Once again, which boy band legend was Ryan Gosling's castmate
on The Mickey mouse Club. Be the seventh person today
to text us at six one seven three six two
thirteen eighty five with the correct answer and win a
Financial Exchange Show T shirt.
Speaker 2 (22:37):
Once again.
Speaker 6 (22:37):
The seventh correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (22:48):
Let's talk a little bit about subprime auto delinquencies, Paul,
what are we seeing on that side of things?
Speaker 3 (22:54):
We've seen a pretty significant uptick here. Obviously, subprime moto
got into the major focus of the investment world back
when First Brands and some of these other companies defaulted
or bank you know, filed for bankruptcy here. And so
what we've seen is the share of sub barers who
(23:14):
are at least sixty days past due on their auto
loans has risen to six point sixty five percent in October.
There are various factors for this one. They cite the
return of student loan bills causing some car owners to
have difficulty getting to their monthly payment number. The other
is just we've seen average prices for a new car
(23:35):
recently top fifty thousand bucks for the first time. And
you have some other trade ins out there that were
bought back in you know, twenty one, twenty two that
are being turned in with negative equity. So there's just
a bunch of different factors out here that's leading to it.
The prices are very expensive, and you've got just an
area of the market that is under relative stress at
(23:58):
this point.
Speaker 2 (24:00):
And yet it still doesn't mean anything for the broader economy.
Speaker 4 (24:03):
No, it doesn't.
Speaker 3 (24:04):
It's such a small subset of the lending that you'd
see in the mortgage market. And if you the companies
that we talk about every single day, even if you
want to drill down just to the financials, the Goldman Sachs,
the JP Morgans, the Bank of America very little if
any exposure to this sector. You get down to some
of the regional banks, you see some impact, but not
(24:25):
in terms of the typical S and P five hundred
companies that we're used to speaking about so frequently.
Speaker 2 (24:30):
Yeah, it's just kind of kind of I mean, look,
this is a story we've been talking about, you know,
not this one specifically, but how many different parts of
the economy were like, eh, this doesn't seem great, but
like none of it matters. Yeah, the overall economic data
continues to chug along. Even though you can point to,
you know, some of these different areas and be like
(24:51):
that's a little concerning. It hasn't mattered to the broader economy,
and you know, it kind of has you wonder like, okay,
like what would it take for something to matter? Because
it's just not showing up in the broader data right now,
even though there are pockets under the surface that are,
you know, not great folks. The Armstrong Advisory Group has
(25:12):
a new guide out this month. It is all about
owning real estate in retirement. In fact, it's titled owning
real Estate in Retirement. What kinds of questions does this
guide answer? Hey, if you've got a mortgage outstanding, what
are some considerations for whether you should or shouldn't pay
that off prior to retiring? Do you want to continue
(25:35):
to be a homeowner in retirement or do you want
to consider renting? Maybe that could be a more advantageous
position for you. If you have a second home, How
do you decide if you want to keep it or not?
Or downsize to a single property? And what about owning
rental property in retirement? What are some of the different
ways you can think about that. All these questions and
more are answered in the guide titled owning real Estate
(25:58):
in Retirement. How do you request it? Two different ways.
Number one, you can go to Armstrong Advisory dot com
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is titled owning real Estate in Retirement, and the way
to request it is by going to Armstrong Advisory dot
(26:19):
Com or by calling eight hundred three nine three for
zero zero one.
Speaker 1 (26:25):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal, or tax advice. Consult
your own financial, tax into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (26:41):
The House of Representative is going to be voting at
seven pm tonight or approximately seven pm to reopen the government.
My assumption is that that vote will not fail, but
you never know. Airlines indicating that, hey, even if the
shutdown ends today, it still is going to take them
a little bit of time to get things spooled back up,
because when you've been changing flight schedules for the last
(27:02):
week or so to reduce the number of flights, you
don't just push a button and have every crew exactly
where they need to be in order to get back
up to full speed. So they're indicating it might be
seven to ten days to get there, which means next
week might still be a little bit bumpy, but you
should be back towards full speed by the week of
Thanksgiving for the heaviest of the holiday travel.
Speaker 3 (27:23):
Really important obviously for the Thanksgiving holiday travel. I read
somewhere that in the ten day period in and around Thanksgiving,
thirty one million Americans are set to get that out
there and travel, so really important that that gets resolved.
We saw the disruption peak in terms of flight cancelations
this past Sunday, when about one to ten scheduled flights
did not take off. That meet at the fourth worst
(27:44):
day of the year for flight for fight cancelations, according
to the New York Times here, So hopefully that gets
resolved when everyone is heading to home or wherever they're
going for the Thanksgiving season.
Speaker 2 (27:57):
Here other things. We still have this problem where we
just don't have enough air traffic controllers. Yeah, the estimate
is that we're about three thousand short. There are fourteen
thousand employed nationwide, so we're about twenty percent short of
where we'd like to be. Here. Here's the deal in
terms of, you know, what it takes to be an
air traffic controler. Just in terms of like basic requirements.
(28:20):
Number one, you got to be a US citizen. Number two,
you have to be younger than thirty one years old.
FAA doesn't want to train you as a forty year
old just to have you retire in twenty years. Interesting,
we got to be younger than thirty one. Obviously, you
have to be fluent in English when you know talking
about you know, communication skills and things like that. You
(28:40):
need to have either a bachelor's degree or three years
of progressively more responsible work experience or a combination you
know thereof that equates to it. Uh And basically like
those are the basic things that you need. Then you
have to go through the FA Air Traffic Skills Assessment Program,
(29:02):
pass a background check and medical exam. Pass a psych
eval as well, and then go into the FAA Academy,
which means you're gonna spend about three months living in
Oklahoma City and then you get to go and do
a bunch of on the job training under supervision for
you know, usually it's like two to four years. Think
of it as basically the equivalent of residency for becoming
(29:26):
a doctor, like you want to be, you know, working
under a senior air traffic controller for those two to
four years and then you get to actually be an
air traffic controller. So it's a pretty arduous process. And
this is before you even get into the long hours,
the high stress and all that, which is why despite
having three hundred and thirty million people in the United States,
(29:46):
we can't find another three thousand who want to be
air traffic controllers at the moment.
Speaker 3 (29:52):
Yeah, looking up the compensation here, it looks like the
start compensation is good, but not once you get it.
So it's like once you get there, you know, and
you just alluded to how long it takes to get there,
that in training you're making forty one to fifty K.
After certification, you get between seventy and ninety once you
get experience you're making more than one hundred and fifty
k annually. But to your point, what was that three
four years, five years before? You're kind of up and
(30:14):
running long process to get there. Quite honestly, you got
to pay them more, right, you got to pay them more.
Think about the jobs that you are competing against for
these people, Honestly, you gotta bump those pay ranges up
by twenty five to thirty percent. Yeah, particularly the seventy
to ninety after you get the certification. It's just it's
just not enough for the stress of the job.
Speaker 2 (30:35):
You can make. You can make seventy to ninety grand
as like an associate manager at this like a fast
food restaurant, right, you know, like and you don't have
the stress of being an air traffic controller. Sure, you know,
think about what you're comparing this to if you're working
at an Amazon warehouse, just as an example, you're getting
out of there with like forty grand a year if
(30:57):
you're doing full time, maybe fifty depending on the market
that you're in. Granted, it's like highly physical work and everything.
But you sit there and you say, okay, or I
can go be an air traffic controller, and for the
first you know year or so I'm basically gonna make
the same amount with all this stress that i'm and
then I've got this path to making more. But you've
got paths to making more doing other stuff too. So look,
(31:18):
quite honestly, they're going to have to raise the pay
ranges on these these jobs in order to fill them.
Speaker 4 (31:24):
I know that.
Speaker 2 (31:25):
Like, I know, no one wants to be like, oh,
like that's the answer, but you gotta pay these people
more otherwise. The I don't think people appreciate just how
much of what we take for granted today revolves around
air traffic controllers being able to operate efficiently and quite honestly,
(31:46):
near perfectly.
Speaker 3 (31:47):
They do.
Speaker 2 (31:48):
They do. It's it's an incredibly demanding, high stress job,
and we're doing a disservice to them by not providing
enough pay so that they're not overworked and you know, potentially,
you know, causing problems that are avoidable if you properly
staff these places. Quick break when we come back at
stack Roulette.
Speaker 1 (32:08):
Here the Financial Exchange every day from eleven to noon,
Non Serious XM's Business radio Channel one thirty two. Keep
it here for the latest business and financial news and
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(32:29):
streams live on YouTube. Subscribe to our page and stay
up to date on breaking business news all morning long
Face is the Financial Exchange Radio Network.
Speaker 6 (32:40):
This segment of The Financial Exchange is brought to you
by the US Virgin Islands Department of Tourism. Your next
incredible vacation is a click away, and if you act fast,
you could be in Saint Croix to experience their Crucian
Christmas Festival taking place this December through early January. Discover
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(33:01):
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the heartbeat of the Islands. The USVII is America's Caribbean paradise.
Plan your escape now and visit USVII dot com. That's
visit USVII dot com. And our trivia question we asked
in the prior segment was which boy band legend was
(33:23):
Ryan Gosling's castmate on The Mickey Mouse Club. That would
of course be justin Timberlake. Kevin from Standish, Maine is
our winner today taking on a Financial Exchange Show T shirt.
Congrats to Kevin. We play trivia every day here in
the Financial Exchange. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (33:41):
Paul, what do you got for stack roulette?
Speaker 4 (33:43):
Chack?
Speaker 3 (33:43):
We talked about this a little bit on yesterday, so
some fall up on the idea that got float around
by President Trump of a fifty year mortgage. A nice
piece done here in the Wall Street Journal breaking down
just sort of what that would mean from a cost perspective.
Again yesterday's show, I was mentioning that I just didn't
think it was a great idea a road to go down.
(34:06):
There's just all sorts of complexities that come with it.
They do a nice job here of lining out that
if you had a four hundred thousand dollars home with
a twenty percent down payment, let's say six point two
percent mortgage rate over a fifty year mortgage versus the
thirty year with the same terms and structure, you would
save two hundred dollars a month on the principal and
interest with that fifty being stretched out longer versus the
(34:29):
thirty year, but you would up end up shelling out
three hundred and thirty five thousand more in cumulative interest
over that fifty year period rather than the thirty and
you'd walk away if you sold it after ten years
with thirty eight thousand less inequity. You know, that's just
some of the issues here. But the other issue is
on the lender side of things. Puts them in a
(34:51):
really tough spot to lend out money to you over
a thirty year period. Just more risks that can occur,
whether death, divorce, job loss, all sorts of stuff that
they're on the hook for if you're no longer able
to pay that mortgage. Plus, we don't really have the
securities that are tied to back this, so a lot
would need to happen to you know, put this in
(35:13):
a place, and it doesn't solve the issue of the
twenty percent down. This is just really eroding at some
of the monthly payment just by a little bit here.
Speaker 2 (35:23):
Everyone like talks about all this and you know, they're
like trying to analyze it in terms of, Okay, if
this is the price, but blah blah blah blah blah
blah blah, and everyone's missing. Like the first problem that
you run into on the idea of a fifty year mortgage,
which the idea is to get down to the down
payment lower. Sure that that's the idea, is okay, if
you add you know, more payments, you can get the
(35:45):
down payment lower. The estimates are that it might reduce
the down payment by like seven to ten percent. If
everyone now has the ability to buy a property with
seven to ten percent more purchasing power, the value of
those properties will move up in accordance. Because the way
(36:07):
most people buy homes is not this. They don't do this. Well,
the most that we should spend on our house is,
you know, thirty six percent of our debt to income,
so we're gonna spend twenty. No, the way it generally
works is, hey, I want to buy this house. How
much does it cost bank? Can we afford this? Yes,
but it's at the top end of what you can afford. Okay, great,
(36:28):
we'll do it. Like most people are maxing out what
they can spend on marriage. Good financial advisor. It's true,
but like this is what you generally see. Like if
the problem is, hey, we can't afford to buy more
house and now you give people. If you give everyone
the ability to buy more house, Okay, that four hundred
thousand dollars home might now go for four to twenty
(36:49):
five and your mortgage payment is the same. It's not
more affordable, right, This is shuffling the deck chairs on
the Titanic, not really the Titanic. They I don't think
housing's in this, like saying cataclysmic, you know, like thing,
I think housing prices are just not really gonna go
anywhere for three to five years. It's just we got
to burn off this excess inventory and higher pricing. But
(37:12):
the way that you fix this is not being like, hey,
just you know, take out a fifty year mortgage, because
if it's the same thing as hey, let's give down
payment assistance to first time home buyers, Well, if you
give everyone twenty five thousand dollars, he's just gonna need
to do you know what smart sellers do. They say, Hey,
we're gonna raise the price by twenty five thousand because
you just gave everyone more money.
Speaker 3 (37:33):
Not to mention you'd have to do it again in
another cycle for the next person.
Speaker 2 (37:36):
So great, ten years from now, we can do seventy
year mortgages. You know, you won't ever be able to
pay it off because you'll be dead.
Speaker 3 (37:45):
My son will be good to go in five years,
but start him at ten, Right Like.
Speaker 2 (37:49):
If if you start your kids on their seventy year
mortgage for their get buy your kids a house for
their fifth birthday, and it'll be paid off, you know
when they're you know, finally getting ready to move out
of it. I mean, it's just like you have to
think of this in terms of just you know, human
life cycles and stuff as well. Mark Zuckerberg, there's an
(38:11):
article about him, What's it mean? Says he's picking your
pick for staff. Says I didn't read this one. It
says he's picking group think over a godfather.
Speaker 3 (38:25):
He's more focused on products rather than research on the
artificial intelligence fronts. He let go of one of the
leading scientists.
Speaker 4 (38:32):
In the space.
Speaker 3 (38:33):
You let go with a godfather, one of the godfathers,
Paul Young, Pinton and Lukun.
Speaker 2 (38:38):
You never go against the family. That's what I'm talking about.
We're gonna take a quick break. We'll be back tomorrow
on the Financial Exchange,
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