May 14, 2026 • 38 mins
Consumers are feeling pressure from inflation, higher costs, and rising financial stress — but the stock market continues pushing to new highs.
Chuck Zodda and Mike Armstrong break down the growing disconnect between the economy and the market as AI spending and corporate earnings continue to drive gains despite mounting concerns around inflation and global energy risks.
Also covered:
Chuck Zodda and Mike Armstrong break down the growing disconnect between the economy and the market as AI spending and corporate earnings continue to drive gains despite mounting concerns around inflation and global energy risks.
Also covered:
- Why AI spending has become the real engine behind the market rally
- The latest developments from the Trump-Xi summit and the Strait of Hormuz
- Why some Fed officials are discussing the possibility of future rate hikes
- The surprising similarities between today’s AI boom and the late-1990s tech bubble
- Why Cisco suddenly looks like an internet stock all over again
- The debate over large-scale AI data center expansion across the country
- How higher energy costs could eventually challenge the market’s resilience
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Episode Transcript
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Speaker 1 (00:00):
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(00:21):
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(00:43):
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(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
It is Chuck and Mike and Tucker with you, and
we got a piece of you from It's from the
Boston Globe. It's a pretout globe. No, it's it's not
Boston Globe. And the headline is bad news keeps coming.
(01:32):
The stock market is still breaking records. So, uh, this
is a very.
Speaker 3 (01:40):
Party pooper, extraordinary piece.
Speaker 2 (01:42):
And I think that what I have found to be
useful over the last couple of months is being able
to hold two distinct ideas in my head at the
same time that may have some contradictory aspects to them.
Number One, inflation is absolutely going up. The cost of
(02:05):
living is going up. Paychecks are not going up fast enough,
and so the average American is not feeling very good
about their finances right now.
Speaker 4 (02:14):
Yeah, and beyond just surveys with that, ask people how
they're feeling, we have some other evidence to support this fact,
actual numbers on debt delinquencies and things like that, to
back up the idea that, yeah, they're not they're telling
us they're not feeling great about it, and there's some
evidence of that.
Speaker 2 (02:30):
On top of that. If you want to toss some
more bad news on the pile. Straight of Horror moves
still closed. Indeed, Iran did let reportedly about thirty Chinese
affiliated vessels out overnight, which is fascinating, and we'll get
to that in just a little bit. But the Straight
of Horror moves is still closed, which is not good
(02:52):
for the intermediate term energy security of the human race. Sure,
so there's some nega stuff out there, But and I
did just say, butt ladies and gentlemen. What has been
driving the stock market for the last three years is
not you and me spending money going to Walmart or
(03:14):
Target or cracker Barrel or five guys or any of
that stuff.
Speaker 4 (03:19):
Nor is it the profits of oil giants and their
refinery capacity.
Speaker 2 (03:24):
What has been driving this market since the start of
twenty twenty three is artificial intelligence and the capex spending cycle.
And so the two ideas that you need to hold
in your head are things are pretty clearly getting worse
for the average americans financial situation due to stress in
(03:46):
the economy right now. But it also doesn't matter because
that's not what was driving the stock market for the
last three years anyways.
Speaker 3 (03:56):
And tough for me to say that bad news keeps
coming when what about the good news that keeps coming.
Speaker 2 (04:02):
And look, I have been I've been a little divergent
on this and that I'm probably one of the more
negative people you will meet when it comes to the
state of world energy markets.
Speaker 3 (04:15):
Right now.
Speaker 2 (04:16):
I think there is a real bleepstorm coming this summer
that the world is not adequately prepared for. But some
of you, you know, have been listening for a long time,
you know, a month or so. Some of you might
remember that in early to mid April, I said, look,
if you want the positive view on this market, and
(04:37):
this was when the S and P five hundred was
sitting at about seven thousand, maybe seventy one hundred, I said,
here's the positive view. Earnings expectations have continued to grow,
and we've grown into some of the valuation things that
have been problematic. If you thought that stocks were fairly
valued last year, with the S and P five hundred
(04:57):
trading at twenty two times forward earnings, then today, if
you think that you can get to stocks being valued
that same way, the S and P has a clear
path to seventy five hundred and lo and behold, ladies
and gentlemen, we're sitting here right now at seventy four
to seventy one. So I can hold these two divergent
views in my head, which are, hey, there's an energy
problem that is screaming towards the human population over the
(05:22):
next two to three months that may end up disrupting things,
by the way, like I won't say that it won't.
It may end up disrupting the earning story. But the
other thing I can hold in my head at the
same time is, despite that energy problem, the earning story
largely remains intact because it's based on things that are
not driven by the cost of gasoline and the price
(05:44):
of fertilizer. Like again, these are things that don't matter
for building a data center except at like the very
peripheral margin when it comes to how much does it
cost to drive the stuff to the data center and
how much does it cost.
Speaker 3 (05:57):
To feed the people building it? Right, So.
Speaker 4 (06:01):
It comes back to something that we've repeated on the show,
but it might have been a while. The economy is
not the stock market, and the stock market is not
the economy.
Speaker 3 (06:11):
No, and we tend to confuse these things.
Speaker 4 (06:15):
We like to use phrases like, well, you know, markets
hate uncertainty, and you know there's a lot of that
going on right now. There's a lot of global change
going on right now. But I think contextualizing here for
a minute, just how rare it is for the US
and global economy to go through contraction is pretty important.
(06:36):
And I think if there's one thing that's been proven
over the last seventy years, so that the global economy
is pretty resilient to shocks, and we're getting year after
year now pretty big shocks to the system. And clearly
the world economy has not sunk into recession, and the
US economy certainly hasn't. And so again diverging these thoughts
(06:58):
for a moment here, the economy is not the stock
market and will not drive it forward.
Speaker 2 (07:05):
So again I'm not saying this because I'm very much
not Hey, you should just feel better about how you're doing. No,
I'm not saying that. I'm saying that the factors that
are hurting you in your financial situation right now are
not ones that are hurting the stock market, which is
driven by earnings, growth and expectations. Those who have not
(07:29):
been impacted to this point negatively, they just haven't. And
it's not to say that like this isn't across the
board phenomenon. When we look at data from facts at
Earnings Insight, they're an aggregator of earnings data. And when
we take a look at calendar year twenty twenty six
as an example, you take a look at some of
(07:53):
the areas in the economy and you say, okay, like
what you know, what are what are we seeing here
in terms of like, let's look at sales because I
think this is a good place that you know, is
informative on this side, if we will get some of
the sectors of the economy that you would expect to
be impacted. Real estate just as an example, their revenue
growth real estate stocks expected to increase its six point
(08:17):
six percent this year. Before the start of the year
it was I'm sorry, before the start of the quarter
it was seven point two, So okay, yeah, it makes
sense that you know, revenue in you know, a place
like real estate isn't really you know, moving consumer discretionary stocks,
which again the problem with consumer discretionary it's kind of
a broad category that includes anything from Amazon to Tesla
(08:39):
to home deep ott to Booking dot Com. Consumer discretionary
revenue projected to rise seven point seven percent this year
compared to seven to two. So you say, okay, that's
an increase, but a lot of that's being driven by
like airfares going up and other stuff is you know,
coming down to offset that. The real growth that's happening
is in tech, It's in energy and and you know,
(09:00):
to a certain extent, materials. That's where the growth in
revenue and earnings projections is coming from right now. Communication
services to a certain extent, but again kind of a
messed up category that somehow includes both Meta and Verizon
within it. So I find it to be a kind
of useless broad category. But again, you can conceptualize this
(09:23):
where you say, yeah, households are going to have less
money to spend because of higher prices, but household spending
is not the marginal driver of economic activity right now,
and that's why these two things can coexist for now.
You do get to a certain point where, yes, if
(09:43):
you know, gas prices go so high and airfares due
and food prices do, yeah, then you can start to
see you enough drag on the consumer spending side that
maybe it offsets some of the.
Speaker 3 (09:54):
Other growth that you're seeing.
Speaker 2 (09:58):
But you ain't there yet, right, It's just it's not
where we are right now.
Speaker 3 (10:03):
So two thoughts that you got to hold together.
Speaker 2 (10:05):
One Yep, things have gotten harder for American households over
the last couple months. Two American households. We're not driving
this market for the last three years. Why would you
expect them to? Now, Let's take a quick break. When
we come back, let us talk China next.
Speaker 1 (10:23):
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Speaker 2 (11:33):
President Trump has been in China for a little bit
over twenty four hours now and earlier this morning concluded
a one on one visit with President g that lasts
for about two hours and fifteen minutes. Readouts from both
sides indicated basically that, you know, the two countries want
(11:53):
to try to, you know, move forward with you know,
an attitude of stabilia.
Speaker 3 (11:57):
I'll quote here.
Speaker 2 (11:59):
Handled well, relationship between the two countries can maintain overall stability.
If handled poorly, the two countries will collide or even clash,
putting the entire US China relationship in an extremely dangerous situation.
So again, I think my expectations for this summit, relative
to some of the other ones the two have had,
were relatively low. I didn't expect anything major to come
out of it, and to this point it doesn't really
(12:20):
seem like anything.
Speaker 1 (12:23):
Is.
Speaker 2 (12:24):
The two sides did agree that Iran should not control
the Strait of horror moves, but there's probably differences in
terms of what that means to each side. And with
that in mind, I think it's very interesting to talk
about what Iran announced this morning basically shortly after the
g Trump meeting concluded, which is that they had let
(12:48):
thirty Chinese vessels pass through the Strait of Horror Moves overnight.
Speaker 4 (12:54):
I've seen have you seen confirmed reporting that they actually
I've seen four that actually successfully it's so we.
Speaker 3 (13:00):
Haven't seen any confirmed reporting it.
Speaker 2 (13:02):
So with with Iran reporting this, like you always, you know,
have to take it with a grain of salt because
you don't know what's actually true. And also remember that
currently within the Persian Gulf, they're about a thousand ships
that still remain trapped there right now. These are not
all like you know, large crude carriers and things like that.
It's anything from like small resupply vessels, you know, smaller
(13:24):
cargo ships and things like that. So don't think there's
just like a thousand you know, there's not like a
billion barrels of crude sitting there. There is about you know,
one hundred and sixty million from what you know I
can gather.
Speaker 4 (13:35):
But the status quo here was that Iran has said
that they have described a safe permit based shipping corridor
through the Straight of Horn moves at the same time
that the United States has said we're going to blockade
any of those ships to try and navigate it, specifically ones.
Speaker 2 (13:48):
That are Iranian like target, you know, heading to Iran.
So Iran says, hey, we're gonna let thirty ships out
while President Trump and G your meeting. It then puts
remember China does not have, you know, a military force
in the region, you know, active on a naval mission.
So the question that you then have to the US
military is, okay, do we stop these ships, in which
(14:13):
case word probably quickly gets to the Chinese delegation and
g says, why do you stop the ships coming to China?
Speaker 3 (14:20):
Or you let them through and now you're blockade? Is
it really a blockade?
Speaker 2 (14:26):
So this again, I don't know that you're going to
see any sustained move in this direction. I think this
was very clearly to send a message during this meeting.
I would be kind of surprised if you saw it
continue over the next couple of days.
Speaker 4 (14:42):
Here is it a message sent by the Chinese or
the Iranians or does it not matter because to me,
it's a message sent by the Chinese.
Speaker 2 (14:51):
I think, Look, here's the thing. The Iranian form mister
Aragachi was in China a couple of days ago before this.
I suspect there was some coordination here in terms of
it's Look, it's a message from growth. The message from
Iran is hey, you think you control the straight. No,
we control the straight. The message from China is, hey,
(15:13):
the leverage that you had over us was you know
you could maybe, you know, let some of our ships
go through. Well we just you know, we just did
that and took that leverage away. So I don't think
this solves anything in the horror Move situation. It still
remains largely closed. It's certainly is great that you're getting
some ships out, but again we still need an accurate
count from a third party source, which we don't have.
Speaker 3 (15:36):
Well.
Speaker 4 (15:36):
But to be clear, I don't think anyone here domestically
would consider a straight of Horror Moves that is only
open to Chinese flagged vessels as anything resembling good news.
Speaker 2 (15:51):
I so there are a few different things that we
need to unpack there. The first is, as long as
you can get cargo goes out through the strait of
horrorm moves. It doesn't really matter where they go because
commodity markets are global like this, this will if you
can get things out and there going to China. It's
(16:13):
not ideal, but it'll balance at the margin.
Speaker 4 (16:15):
Yes, So from an economic standpoint, I agreed that if
ships are just flowing to China, then you will have
oil prices lower.
Speaker 3 (16:22):
That's not what I'm focused on. Though.
Speaker 2 (16:24):
The piece that quite honestly, no, like the rest of
the region is not going to accept is Iran having
veto power over what goes in and out, because then
Iran is setting oil prices, not opek No, get like,
that's very clearly what it becomes. And so the thing
(16:46):
that needs to get sorted out is, hey, like, what
is going to be allowed to and you know, to
go in and out of hormones and who has the
authority to determine that?
Speaker 4 (16:57):
And is IRN collecting revenue? Like Yeah, a lot of
challenges to US military power in the region of this is.
Speaker 2 (17:04):
And and economic quite honestly, because in order for Ron
to be able to collect any revenue through you know,
reputable through means that actually allow like reputable shipping companies,
not just the the sketchy ones that you know are
happy to skirch sanctions and.
Speaker 3 (17:18):
Things like that. Gotta be Dallas.
Speaker 2 (17:20):
It has to be connected to the swift system basically,
like it's yes, you're you know your Greek tanker companies
that are you know already you know, on sanctioned lists
and things like that. Fine, they're gonna pay in you know,
bitcoin and whatever they can.
Speaker 3 (17:36):
They don't care.
Speaker 2 (17:37):
They're not going to pick up other legitimate cargo. The
ones that do care, you know, the marisks of the
world and things like that. Listen, they need to not
show up on the Treasury sanctions list in order to
be able to operate, and so they can't pay those
tolls anyways. So I think that we go into the
(17:58):
weekend most likely still with more questions as to what
is actually going to happen with the Strait. And this
is your daily reminder that every day that the Strait
remains closed, another twelve million barrels of oil remains shut
in on a daily basis.
Speaker 4 (18:16):
Yeah, the the timing of those ships moving though, is
not a coincidence, not coincidental. It is very obviously a
power move orchestrated by who is a fair question. But yeah,
to see the things ships going to China while the
President is in China on a state visit is very
(18:36):
much a challenge to the president's power.
Speaker 2 (18:39):
The thing's been going on for seven seventy five days.
Now you think that just randomly they're randomly They're like, hey,
you know what, let's let some Chinese ships through today.
It's a great day to go to Beijing. Not a
coincidence is where I tend to land. Let's see, we
(19:02):
got some inflation data over the last couple of days.
It was warm to quite roasty, and so I want
to take a quick break. But when we come back,
the Boston Fed's head Susan Collins talking a little bit about, hey,
what does this mean. Colin's not a voting member this year,
so it doesn't have any influence on policy for you know,
(19:25):
the next eight months. But what could it mean for
how the Fed approaches things going forward? We'll discuss after this.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter at
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Speaker 5 (20:03):
Markets in positive territory, being propelled by strong earnings from Cisco.
Speaker 3 (20:08):
Wall Street's also.
Speaker 5 (20:09):
Falling developments from the summit between President Trump and Chinese
President Jijingping. Right now, the Dow is up about a
half a percent, or two hundred and twenty six points.
SMP five hundred also up about a half a percent
or thirty five points, Nasdaq also up half a percent,
russ A two thousand up about a third of a percent.
Tenure Treasure Reel down two basis points at four point
(20:31):
four five five percent. In Oil up about a third
of a percent, rating right around one hundred and one.
Speaker 3 (20:37):
Dollars a barrel.
Speaker 5 (20:39):
Cisco rallying fourteen percent after the tech firm announcement will
cut fewer than four thousand jobs this quarter, or about
five percent of its workforce, so it can allocate more
resources into high growth areas like AI infrastructure. Meanwhile, Vercent
Media Group saw it's revenue win profit fall in the
second quarter since being spun off from CONC, but they
(21:01):
were better than analysts expected. The company also reported revenue
growth across its content licensing and digital platforms that stock
is jumping over eight percent. Elsewhere, Biogen shares down by
four percent, despite the biopharmaceutical company announcing its experimental Alzheimer's
drug will advance into a Phase three trial. Outdoor products
(21:23):
company YETI impressed with its quarterly results, sending shares up
by five percent. Ticket seller Stubub also beat expectations, sending
shares surging by nineteen percent, and semiconductor equipment maker Applied
Materials will report earnings after the closing bell. I'm Tucker Silva,
and that is Wall Street Watch.
Speaker 3 (21:44):
Mike.
Speaker 2 (21:44):
We got a piece here in the Wall Street Journal.
It's titled Boston Fed's Collins flags rate hike scenario as
inflation risks tilt higher, and basically this is exactly what
it sounds like. The Boston Fed President Susan Collins said that, hey,
depending on how inflation moves, we might need to have
higher rates if there is in fact higher and more
(22:07):
persistent inflation. This is not really a surprise to the market,
which after the last couple of days, is now pricing
in the first move to be a.
Speaker 3 (22:18):
Rate hike rather than a rate cut.
Speaker 2 (22:20):
Now, when we take a look at the CME FED
fund's futures, market that rate hike is being priced in
in October of twenty twenty seven, so sixteen months from now,
which means it's not worth the paper it's printed on, sure,
because things can change a ton over that time span.
Speaker 4 (22:39):
I will say that when you look out at the
December meeting, though, the most likely scenarios that rates aren't
exactly where they are now. But yep, there is a
thirty basically a one to three chance being priced in
that rates could be higher than where they are right now,
which basically no chance of a cut.
Speaker 3 (22:56):
Which is from a month ago. It's a basically complete it.
Speaker 2 (23:00):
A month ago there was about a thirty three percent
chance of one or more cuts being priced in, and
now you've got a thirty six percent chance of one
or more hikes being priced in. So I do think
that the market is waking up to the fact that, hey,
it's kind of hard to cut interest rates When you
know you're at three five on the Fed Funds rate
(23:22):
and inflation's now heading for four it's probably not gonna,
you know, pass the sniff test.
Speaker 3 (23:29):
May I just say that.
Speaker 4 (23:31):
For those that want to use this moment to compare
to the dot com bubble in the late nineties and
early two thousands. There sure are a lot of Don't
get me wrong, There are a lot of differences in
the types of companies that are going public, the revenue
and profit that's being generated from the new technology. But boy,
are there some you know, macro similarities. In June of
(23:55):
nineteen ninety nine, the Federal Reserve had just come off
you know, the last year on a cycle of three
rate cuts.
Speaker 3 (24:02):
Yeah, the matrix had just come out.
Speaker 4 (24:04):
The matrix had just come out, and in June of
nineteen ninety nine, they started saying, hey, things are getting
a little bit frenzy, like green Span was describing the
irrational exuberance.
Speaker 3 (24:16):
I think that might have come a little bit later.
Speaker 4 (24:18):
But the Fed then went on a rate hiking cycle
in the summer and summer of nineteen ninety nine right
through the spring of two thousand, bringing interest rates from
five to six and a half percent yep, after just
cutting rates the previous year and generally moving from a
higher rate environment back in the early to mid nineties
(24:40):
through the late nineties. Again, I know, there's a lot
of differences out there, but you know, what are we
really talking about in markets right now?
Speaker 3 (24:48):
Wow?
Speaker 4 (24:48):
Look at these big IPOs that we're going to see today,
we'll talk about one that just went public yesterday.
Speaker 3 (24:52):
Did you what about the one from today? You mean today?
Was it today that? Yes? So today? Did you see
the number from this morning? No? I did, but they're wild. Yeah,
it just again.
Speaker 4 (25:07):
I was talking to somebody about this yesterday and their
perspective was, it's nothing like that, And I don't think
that quite does it justice.
Speaker 3 (25:16):
It's different.
Speaker 4 (25:16):
It's always different this time, but there are a lot
of echoes of similarities.
Speaker 3 (25:21):
Look, I've said this before.
Speaker 2 (25:22):
And it's not my own quote, so I wish I
had been creative enough to come up with it. But
you've got this reduction of economic risk right now. And
remember economic risk does not mean that like the bad
things end up materializing, but you do have you know
a eventually, guys, like I'm sorry, eventually this semiconductor bubble
is going to pop. It might not be for like
(25:43):
one to three years. It might be a week or
two from now. It might have already popped, like we
don't know, but I can tell you that semiconductor stocks
don't go up eighty percent a month for the rest
of your life.
Speaker 3 (25:53):
Like that's that's not going to happen. Uh.
Speaker 2 (25:56):
So again, you've got this this tech bubble that is
inflating that eventually is going to end badly. When it
ends badly, I don't know, but eventually something will come
of it. To this point, it's cranking, it's humming, and
understand that that can go for a while. Still I'm
saying it's over. I'm just saying there's a problem in tech.
(26:17):
You got this private credit problem that is very reminiscent of,
you know, the housing crisis, but we don't really know
the scale. It's smaller than the housing crisis, but it
still is kind of gnarly. You've got an energy shock
that's reminiscent of the nineteen seventies that's going on right now.
So like you've got nineteen ninety nine, nineteen seventy three,
(26:37):
and two thousand and six all jumbled up here, and
it's kind of like, well, maybe you can escape two
out of the three of these, but one of them
is gonna hit. Like something is going to end badly
here at some point. And what Collins is raising is, look,
the private credit stuff, for all the concern we've had
(26:58):
about it, hasn't shown up in the economic data in
any way shape or for it. At some point it might,
but to this point it just hasn't. Like it's it's
not a thing the tech bubble stuff. By and large,
every time we've had questions about hey, can you know
capex continue has they've been answered affirmatively right and san
Kapex has continued.
Speaker 3 (27:19):
By the way.
Speaker 4 (27:19):
Using the counter argument, here, we have a incoming FED
share that has been very public about wanting lower interest rates.
I think that's wildly inappropriate right now. But you want
an argument for the tech the tech rally continuing, what
if rates come down later this year, like that'd be again,
I think there's no argument for it to happen. I
think it would be the wrong policy maneuver. But plenty
(27:41):
of FED shares could have made stupid policy maneuvers.
Speaker 2 (27:44):
And so Collins raises the point of look the next
move depending on how things resolve in the Middle East.
If this is more persistent, then markets are pricing yeah,
Like remember rate rate hiking cycles and rate cutting cycles
that the word cycles in there for a reason.
Speaker 3 (28:02):
The FED never.
Speaker 2 (28:03):
Goes one and done. They just like it's not how
they behave at least at this point. Like if you
look at like you know, way in the past, like sure,
it's typically okay, we're gonna do this for a meeting
and another and another and will continue until we think
it's appropriate. In the last few years, it's been like
anywhere from like four to five meeting cycles, three to
(28:24):
five meeting cycles, and you're good. The risk to markets
is not that the FED funds rate goes from three
and a half to three seven five. The risk is
that the fun FED funds rate goes from three and
a half to five. Right, it goes from three and
a half to five and a.
Speaker 3 (28:42):
Half, like happened in nineteen ninety nine.
Speaker 2 (28:44):
Because like I've said this before, everyone gets all excited, like,
ooho's the faking to cut a quarter percent?
Speaker 3 (28:49):
Who cares?
Speaker 2 (28:51):
It doesn't matter? A quarter percent rate cut in and
of itself is like me like swatting a fly on
my note in the summer. It doesn't matter to.
Speaker 3 (29:02):
The broader world.
Speaker 2 (29:04):
A quarter percent cut at six consecutive meetings or a
quarter percent hike at six consecutive meetings, that is a
meaningful shift worthy of attention. But everyone's like, oohs, the
figure gonna cut.
Speaker 3 (29:17):
This meeting irrelevant? Who cares?
Speaker 2 (29:20):
Pay attention to the cycle, not to the meeting. Let's
take a quick break here. When we return, let's talk
about uh, you know, speaking of turning it back to
nineteen ninety nine. I gotta tell you when the hottest
two stocks for the last week are Intel and now Cisco. Listen,
if you've been in a coma for the last twenty
(29:41):
seven years and just woke.
Speaker 3 (29:42):
Up, nothing's changed.
Speaker 2 (29:44):
This will make you feel right at home. Quick break,
We're talking Cisco when we come back.
Speaker 1 (29:49):
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(30:10):
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Speaker 2 (30:30):
Cisco reported earnings after the bell yesterday, and the stock, well,
it's it's up fourteen percent right now.
Speaker 3 (30:41):
It was up twenty two percent pre market, but it
has pulled back.
Speaker 2 (30:44):
But Cisco stock is absolutely cranking at the moment and
now has actually surpassed its year two thousand peak just
twenty years later. It actually surpassed it last week. The
big thing though, to remember on this is Cisco, like
(31:08):
many companies, has been going through share buybacks for you know,
much of the last twenty years, and so even though
it reached surpassed a.
Speaker 3 (31:15):
Per share peak, Oh mind me just drop something you
want to tell us talker big news or something like yeah,
he always throws his micro.
Speaker 5 (31:28):
Usy fella, don't worry about me.
Speaker 3 (31:30):
Even though, even though.
Speaker 2 (31:34):
Even though Cisco has surpassed its per share peak, it
still has not yet gotten to its market cap peak
that it hit back in spring of two thousand.
Speaker 4 (31:44):
It's just a me, I mean, Cisco is being described
once again as the picks and shovels of the AI
industry or the plumbing of the AI industry, which is
quite literally the exact terms that were being used in
the nine to describe Cisco when it came.
Speaker 3 (32:01):
To the Internet.
Speaker 4 (32:02):
Now this is not saying it's wrong, but it's the
same company going through the same exact description of their
business model twenty six years later.
Speaker 2 (32:12):
This is a stock that spent the period of two
thousand and one through two thy seventeen without any share
price appreciation, and then spent mid twenty nineteen through mid twenty.
Speaker 3 (32:26):
Four with no share price appreciation.
Speaker 2 (32:29):
So I think again there's been some false starts here,
and I think the real question is, look, is this
actually a rising tide lifting all boats? Or is this
Cisco being late to the game and just you know,
kind of a flash in the pan.
Speaker 3 (32:43):
It's not going to mean much.
Speaker 4 (32:46):
Well, I bet they're gonna sell a whole bunch of stuff.
The question is will they sell a whole bunch of
stuff for a long period of time?
Speaker 3 (32:52):
That's what I mean.
Speaker 4 (32:52):
Yeah, I mean flashing the pan is the right analogy?
I don't know, but I can tell you what happened
in nineteen ninety nine.
Speaker 2 (33:01):
So again, we'll see how things go here, and we'll
take it one day at a time.
Speaker 5 (33:08):
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Speaker 1 (34:16):
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Cushing and Armstrong did not endorse each other and are
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Speaker 3 (34:27):
P's in the Boston Globe.
Speaker 2 (34:28):
Mansfield becomes first town in Massachusetts to pass near total
ban on data centers. Basically with the the article in
the town Bylaws states Now is that only Tier one
data centers facilities using up to two megawatts of electricity,
which is not very much, would be allowed, and only
(34:50):
in certain parts of the town. Tier two and three facilities,
which are basically between two and ten megawatts, and more
than ten megawatts, those would not be allowed anywhere in
the town. So there's a couple of things that I
believe to be true here. The first is, I don't
think we're doing a great job of building out the
support infrastructure for data centers in the form of electrical
(35:14):
and water resources that are needed. The second piece is
that the solution to this is not saying, well, we
can't do that, so we're just not gonna build data
centers like that. This is kind of like if back
in like the nineteen twenties we had been like, hey,
all these cars are taking up the roads for our horses,
(35:35):
so we're not going to allow cars because we haven't
done a good enough job, you know, widening the road
so the horses can be on them too.
Speaker 3 (35:42):
Like it's just not.
Speaker 2 (35:47):
You know how Wayne Gretzky used to skate where the
puck is going. Sure, this is skating analogy, This is
skating towards the vending machine. It's doing what feels comfortable
instead of it's going to push, you know, things forward.
And look, I'm on record saying I don't want like
a data center in my basement, but I would take
a nuclear power plan there, but as I'll take the
(36:10):
data center right, So but like we have a symbiotic
relationship in that way. So ultimately, look, the world is
going to need more data centers in the future. There
is going to be more artificial intelligence usage in the future.
These are incontrovertible facts. I don't think I can like
(36:32):
have much uncertainty around these. You can either choose to
build that out in a responsible and thoughtful manner, or
you can do the opposite. And a ban of large
data center construction is just as destructive to participating in
that future as allowing too many data centers to be
(36:53):
built willy nilly with no control over them at all.
Speaker 4 (36:57):
Did you see the planned Stratus project. It's been getting
attention in Utah.
Speaker 3 (37:02):
No, what's that.
Speaker 4 (37:02):
It's a nine gigawatt, forty thousand acre AI data center
planning one thousand acre. That's two times Manhattan. Just some
comparison there, I thought would be nice. Two thousand Walmart
stores combined, forty thousand acres.
Speaker 2 (37:22):
This is why when people talk about like orbital data centers,
I'm like guys, we can launch like twenty thousand pounds into.
Speaker 3 (37:29):
Orbit at a time. Now, it doesn't seem like it's
gonna work.
Speaker 2 (37:32):
Well, how are you gonna build Manhattan twenty thousand pounds
at a time?
Speaker 3 (37:36):
Two times Manhattan? To be clear, let's start with one first.
Speaker 4 (37:40):
Yeah, it does seem like this is one of those
moments where we need a little bit more coordination about
how this is all going to work, because otherwise you're
going to have a scattershot of different policies and plans
location to location, and that's I don't know, it doesn't
seem like a great red speak for success when it
(38:01):
comes to AI building.
Speaker 3 (38:01):
Bey on this.
Speaker 2 (38:02):
Look, there's a lot of towns in Massachusetts that are
desperate for tax revenue. What if Amazon or Microsoft said, hey,
we'll give you four x the regular property tax rate
if you let us build this here.
Speaker 3 (38:14):
So maybe that's the way it. Yeah, maybe we just
ban them until they come together and say something like that.
Maybe let's take a quick break out or two's coming
up in a bit.
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(00:21):
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(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:10):
It is Chuck and Mike and Tucker with you, and
we got a piece of you from It's from the
Boston Globe. It's a pretout globe. No, it's it's not
Boston Globe. And the headline is bad news keeps coming.
(01:32):
The stock market is still breaking records. So, uh, this
is a very.
Speaker 3 (01:40):
Party pooper, extraordinary piece.
Speaker 2 (01:42):
And I think that what I have found to be
useful over the last couple of months is being able
to hold two distinct ideas in my head at the
same time that may have some contradictory aspects to them.
Number One, inflation is absolutely going up. The cost of
(02:05):
living is going up. Paychecks are not going up fast enough,
and so the average American is not feeling very good
about their finances right now.
Speaker 4 (02:14):
Yeah, and beyond just surveys with that, ask people how
they're feeling, we have some other evidence to support this fact,
actual numbers on debt delinquencies and things like that, to
back up the idea that, yeah, they're not they're telling
us they're not feeling great about it, and there's some
evidence of that.
Speaker 2 (02:30):
On top of that. If you want to toss some
more bad news on the pile. Straight of Horror moves
still closed. Indeed, Iran did let reportedly about thirty Chinese
affiliated vessels out overnight, which is fascinating, and we'll get
to that in just a little bit. But the Straight
of Horror moves is still closed, which is not good
(02:52):
for the intermediate term energy security of the human race. Sure,
so there's some nega stuff out there, But and I
did just say, butt ladies and gentlemen. What has been
driving the stock market for the last three years is
not you and me spending money going to Walmart or
(03:14):
Target or cracker Barrel or five guys or any of
that stuff.
Speaker 4 (03:19):
Nor is it the profits of oil giants and their
refinery capacity.
Speaker 2 (03:24):
What has been driving this market since the start of
twenty twenty three is artificial intelligence and the capex spending cycle.
And so the two ideas that you need to hold
in your head are things are pretty clearly getting worse
for the average americans financial situation due to stress in
(03:46):
the economy right now. But it also doesn't matter because
that's not what was driving the stock market for the
last three years anyways.
Speaker 3 (03:56):
And tough for me to say that bad news keeps
coming when what about the good news that keeps coming.
Speaker 2 (04:02):
And look, I have been I've been a little divergent
on this and that I'm probably one of the more
negative people you will meet when it comes to the
state of world energy markets.
Speaker 3 (04:15):
Right now.
Speaker 2 (04:16):
I think there is a real bleepstorm coming this summer
that the world is not adequately prepared for. But some
of you, you know, have been listening for a long time,
you know, a month or so. Some of you might
remember that in early to mid April, I said, look,
if you want the positive view on this market, and
(04:37):
this was when the S and P five hundred was
sitting at about seven thousand, maybe seventy one hundred, I said,
here's the positive view. Earnings expectations have continued to grow,
and we've grown into some of the valuation things that
have been problematic. If you thought that stocks were fairly
valued last year, with the S and P five hundred
(04:57):
trading at twenty two times forward earnings, then today, if
you think that you can get to stocks being valued
that same way, the S and P has a clear
path to seventy five hundred and lo and behold, ladies
and gentlemen, we're sitting here right now at seventy four
to seventy one. So I can hold these two divergent
views in my head, which are, hey, there's an energy
problem that is screaming towards the human population over the
(05:22):
next two to three months that may end up disrupting things,
by the way, like I won't say that it won't.
It may end up disrupting the earning story. But the
other thing I can hold in my head at the
same time is, despite that energy problem, the earning story
largely remains intact because it's based on things that are
not driven by the cost of gasoline and the price
(05:44):
of fertilizer. Like again, these are things that don't matter
for building a data center except at like the very
peripheral margin when it comes to how much does it
cost to drive the stuff to the data center and
how much does it cost.
Speaker 3 (05:57):
To feed the people building it? Right, So.
Speaker 4 (06:01):
It comes back to something that we've repeated on the show,
but it might have been a while. The economy is
not the stock market, and the stock market is not
the economy.
Speaker 3 (06:11):
No, and we tend to confuse these things.
Speaker 4 (06:15):
We like to use phrases like, well, you know, markets
hate uncertainty, and you know there's a lot of that
going on right now. There's a lot of global change
going on right now. But I think contextualizing here for
a minute, just how rare it is for the US
and global economy to go through contraction is pretty important.
(06:36):
And I think if there's one thing that's been proven
over the last seventy years, so that the global economy
is pretty resilient to shocks, and we're getting year after
year now pretty big shocks to the system. And clearly
the world economy has not sunk into recession, and the
US economy certainly hasn't. And so again diverging these thoughts
(06:58):
for a moment here, the economy is not the stock
market and will not drive it forward.
Speaker 2 (07:05):
So again I'm not saying this because I'm very much
not Hey, you should just feel better about how you're doing. No,
I'm not saying that. I'm saying that the factors that
are hurting you in your financial situation right now are
not ones that are hurting the stock market, which is
driven by earnings, growth and expectations. Those who have not
(07:29):
been impacted to this point negatively, they just haven't. And
it's not to say that like this isn't across the
board phenomenon. When we look at data from facts at
Earnings Insight, they're an aggregator of earnings data. And when
we take a look at calendar year twenty twenty six
as an example, you take a look at some of
(07:53):
the areas in the economy and you say, okay, like
what you know, what are what are we seeing here
in terms of like, let's look at sales because I
think this is a good place that you know, is
informative on this side, if we will get some of
the sectors of the economy that you would expect to
be impacted. Real estate just as an example, their revenue
growth real estate stocks expected to increase its six point
(08:17):
six percent this year. Before the start of the year
it was I'm sorry, before the start of the quarter
it was seven point two, So okay, yeah, it makes
sense that you know, revenue in you know, a place
like real estate isn't really you know, moving consumer discretionary stocks,
which again the problem with consumer discretionary it's kind of
a broad category that includes anything from Amazon to Tesla
(08:39):
to home deep ott to Booking dot Com. Consumer discretionary
revenue projected to rise seven point seven percent this year
compared to seven to two. So you say, okay, that's
an increase, but a lot of that's being driven by
like airfares going up and other stuff is you know,
coming down to offset that. The real growth that's happening
is in tech, It's in energy and and you know,
(09:00):
to a certain extent, materials. That's where the growth in
revenue and earnings projections is coming from right now. Communication
services to a certain extent, but again kind of a
messed up category that somehow includes both Meta and Verizon
within it. So I find it to be a kind
of useless broad category. But again, you can conceptualize this
(09:23):
where you say, yeah, households are going to have less
money to spend because of higher prices, but household spending
is not the marginal driver of economic activity right now,
and that's why these two things can coexist for now.
You do get to a certain point where, yes, if
(09:43):
you know, gas prices go so high and airfares due
and food prices do, yeah, then you can start to
see you enough drag on the consumer spending side that
maybe it offsets some of the.
Speaker 3 (09:54):
Other growth that you're seeing.
Speaker 2 (09:58):
But you ain't there yet, right, It's just it's not
where we are right now.
Speaker 3 (10:03):
So two thoughts that you got to hold together.
Speaker 2 (10:05):
One Yep, things have gotten harder for American households over
the last couple months. Two American households. We're not driving
this market for the last three years. Why would you
expect them to? Now, Let's take a quick break. When
we come back, let us talk China next.
Speaker 1 (10:23):
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Speaker 5 (10:51):
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Speaker 3 (11:00):
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Speaker 2 (11:33):
President Trump has been in China for a little bit
over twenty four hours now and earlier this morning concluded
a one on one visit with President g that lasts
for about two hours and fifteen minutes. Readouts from both
sides indicated basically that, you know, the two countries want
(11:53):
to try to, you know, move forward with you know,
an attitude of stabilia.
Speaker 3 (11:57):
I'll quote here.
Speaker 2 (11:59):
Handled well, relationship between the two countries can maintain overall stability.
If handled poorly, the two countries will collide or even clash,
putting the entire US China relationship in an extremely dangerous situation.
So again, I think my expectations for this summit, relative
to some of the other ones the two have had,
were relatively low. I didn't expect anything major to come
out of it, and to this point it doesn't really
(12:20):
seem like anything.
Speaker 1 (12:23):
Is.
Speaker 2 (12:24):
The two sides did agree that Iran should not control
the Strait of horror moves, but there's probably differences in
terms of what that means to each side. And with
that in mind, I think it's very interesting to talk
about what Iran announced this morning basically shortly after the
g Trump meeting concluded, which is that they had let
(12:48):
thirty Chinese vessels pass through the Strait of Horror Moves overnight.
Speaker 4 (12:54):
I've seen have you seen confirmed reporting that they actually
I've seen four that actually successfully it's so we.
Speaker 3 (13:00):
Haven't seen any confirmed reporting it.
Speaker 2 (13:02):
So with with Iran reporting this, like you always, you know,
have to take it with a grain of salt because
you don't know what's actually true. And also remember that
currently within the Persian Gulf, they're about a thousand ships
that still remain trapped there right now. These are not
all like you know, large crude carriers and things like that.
It's anything from like small resupply vessels, you know, smaller
(13:24):
cargo ships and things like that. So don't think there's
just like a thousand you know, there's not like a
billion barrels of crude sitting there. There is about you know,
one hundred and sixty million from what you know I
can gather.
Speaker 4 (13:35):
But the status quo here was that Iran has said
that they have described a safe permit based shipping corridor
through the Straight of Horn moves at the same time
that the United States has said we're going to blockade
any of those ships to try and navigate it, specifically ones.
Speaker 2 (13:48):
That are Iranian like target, you know, heading to Iran.
So Iran says, hey, we're gonna let thirty ships out
while President Trump and G your meeting. It then puts
remember China does not have, you know, a military force
in the region, you know, active on a naval mission.
So the question that you then have to the US
military is, okay, do we stop these ships, in which
(14:13):
case word probably quickly gets to the Chinese delegation and
g says, why do you stop the ships coming to China?
Speaker 3 (14:20):
Or you let them through and now you're blockade? Is
it really a blockade?
Speaker 2 (14:26):
So this again, I don't know that you're going to
see any sustained move in this direction. I think this
was very clearly to send a message during this meeting.
I would be kind of surprised if you saw it
continue over the next couple of days.
Speaker 4 (14:42):
Here is it a message sent by the Chinese or
the Iranians or does it not matter because to me,
it's a message sent by the Chinese.
Speaker 2 (14:51):
I think, Look, here's the thing. The Iranian form mister
Aragachi was in China a couple of days ago before this.
I suspect there was some coordination here in terms of
it's Look, it's a message from growth. The message from
Iran is hey, you think you control the straight. No,
we control the straight. The message from China is, hey,
(15:13):
the leverage that you had over us was you know
you could maybe, you know, let some of our ships
go through. Well we just you know, we just did
that and took that leverage away. So I don't think
this solves anything in the horror Move situation. It still
remains largely closed. It's certainly is great that you're getting
some ships out, but again we still need an accurate
count from a third party source, which we don't have.
Speaker 3 (15:36):
Well.
Speaker 4 (15:36):
But to be clear, I don't think anyone here domestically
would consider a straight of Horror Moves that is only
open to Chinese flagged vessels as anything resembling good news.
Speaker 2 (15:51):
I so there are a few different things that we
need to unpack there. The first is, as long as
you can get cargo goes out through the strait of
horrorm moves. It doesn't really matter where they go because
commodity markets are global like this, this will if you
can get things out and there going to China. It's
(16:13):
not ideal, but it'll balance at the margin.
Speaker 4 (16:15):
Yes, So from an economic standpoint, I agreed that if
ships are just flowing to China, then you will have
oil prices lower.
Speaker 3 (16:22):
That's not what I'm focused on. Though.
Speaker 2 (16:24):
The piece that quite honestly, no, like the rest of
the region is not going to accept is Iran having
veto power over what goes in and out, because then
Iran is setting oil prices, not opek No, get like,
that's very clearly what it becomes. And so the thing
(16:46):
that needs to get sorted out is, hey, like, what
is going to be allowed to and you know, to
go in and out of hormones and who has the
authority to determine that?
Speaker 4 (16:57):
And is IRN collecting revenue? Like Yeah, a lot of
challenges to US military power in the region of this is.
Speaker 2 (17:04):
And and economic quite honestly, because in order for Ron
to be able to collect any revenue through you know,
reputable through means that actually allow like reputable shipping companies,
not just the the sketchy ones that you know are
happy to skirch sanctions and.
Speaker 3 (17:18):
Things like that. Gotta be Dallas.
Speaker 2 (17:20):
It has to be connected to the swift system basically,
like it's yes, you're you know your Greek tanker companies
that are you know already you know, on sanctioned lists
and things like that. Fine, they're gonna pay in you know,
bitcoin and whatever they can.
Speaker 3 (17:36):
They don't care.
Speaker 2 (17:37):
They're not going to pick up other legitimate cargo. The
ones that do care, you know, the marisks of the
world and things like that. Listen, they need to not
show up on the Treasury sanctions list in order to
be able to operate, and so they can't pay those
tolls anyways. So I think that we go into the
(17:58):
weekend most likely still with more questions as to what
is actually going to happen with the Strait. And this
is your daily reminder that every day that the Strait
remains closed, another twelve million barrels of oil remains shut
in on a daily basis.
Speaker 4 (18:16):
Yeah, the the timing of those ships moving though, is
not a coincidence, not coincidental. It is very obviously a
power move orchestrated by who is a fair question. But yeah,
to see the things ships going to China while the
President is in China on a state visit is very
(18:36):
much a challenge to the president's power.
Speaker 2 (18:39):
The thing's been going on for seven seventy five days.
Now you think that just randomly they're randomly They're like, hey,
you know what, let's let some Chinese ships through today.
It's a great day to go to Beijing. Not a
coincidence is where I tend to land. Let's see, we
(19:02):
got some inflation data over the last couple of days.
It was warm to quite roasty, and so I want
to take a quick break. But when we come back,
the Boston Fed's head Susan Collins talking a little bit about, hey,
what does this mean. Colin's not a voting member this year,
so it doesn't have any influence on policy for you know,
(19:25):
the next eight months. But what could it mean for
how the Fed approaches things going forward? We'll discuss after this.
Speaker 1 (19:42):
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Street watch trecking the stocks, the data and the headlines
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Financial Exchange, Radio network.
Speaker 5 (20:03):
Markets in positive territory, being propelled by strong earnings from Cisco.
Speaker 3 (20:08):
Wall Street's also.
Speaker 5 (20:09):
Falling developments from the summit between President Trump and Chinese
President Jijingping. Right now, the Dow is up about a
half a percent, or two hundred and twenty six points.
SMP five hundred also up about a half a percent
or thirty five points, Nasdaq also up half a percent,
russ A two thousand up about a third of a percent.
Tenure Treasure Reel down two basis points at four point
(20:31):
four five five percent. In Oil up about a third
of a percent, rating right around one hundred and one.
Speaker 3 (20:37):
Dollars a barrel.
Speaker 5 (20:39):
Cisco rallying fourteen percent after the tech firm announcement will
cut fewer than four thousand jobs this quarter, or about
five percent of its workforce, so it can allocate more
resources into high growth areas like AI infrastructure. Meanwhile, Vercent
Media Group saw it's revenue win profit fall in the
second quarter since being spun off from CONC, but they
(21:01):
were better than analysts expected. The company also reported revenue
growth across its content licensing and digital platforms that stock
is jumping over eight percent. Elsewhere, Biogen shares down by
four percent, despite the biopharmaceutical company announcing its experimental Alzheimer's
drug will advance into a Phase three trial. Outdoor products
(21:23):
company YETI impressed with its quarterly results, sending shares up
by five percent. Ticket seller Stubub also beat expectations, sending
shares surging by nineteen percent, and semiconductor equipment maker Applied
Materials will report earnings after the closing bell. I'm Tucker Silva,
and that is Wall Street Watch.
Speaker 3 (21:44):
Mike.
Speaker 2 (21:44):
We got a piece here in the Wall Street Journal.
It's titled Boston Fed's Collins flags rate hike scenario as
inflation risks tilt higher, and basically this is exactly what
it sounds like. The Boston Fed President Susan Collins said that, hey,
depending on how inflation moves, we might need to have
higher rates if there is in fact higher and more
(22:07):
persistent inflation. This is not really a surprise to the market,
which after the last couple of days, is now pricing
in the first move to be a.
Speaker 3 (22:18):
Rate hike rather than a rate cut.
Speaker 2 (22:20):
Now, when we take a look at the CME FED
fund's futures, market that rate hike is being priced in
in October of twenty twenty seven, so sixteen months from now,
which means it's not worth the paper it's printed on, sure,
because things can change a ton over that time span.
Speaker 4 (22:39):
I will say that when you look out at the
December meeting, though, the most likely scenarios that rates aren't
exactly where they are now. But yep, there is a
thirty basically a one to three chance being priced in
that rates could be higher than where they are right now,
which basically no chance of a cut.
Speaker 3 (22:56):
Which is from a month ago. It's a basically complete it.
Speaker 2 (23:00):
A month ago there was about a thirty three percent
chance of one or more cuts being priced in, and
now you've got a thirty six percent chance of one
or more hikes being priced in. So I do think
that the market is waking up to the fact that, hey,
it's kind of hard to cut interest rates When you
know you're at three five on the Fed Funds rate
(23:22):
and inflation's now heading for four it's probably not gonna,
you know, pass the sniff test.
Speaker 3 (23:29):
May I just say that.
Speaker 4 (23:31):
For those that want to use this moment to compare
to the dot com bubble in the late nineties and
early two thousands. There sure are a lot of Don't
get me wrong, There are a lot of differences in
the types of companies that are going public, the revenue
and profit that's being generated from the new technology. But boy,
are there some you know, macro similarities. In June of
(23:55):
nineteen ninety nine, the Federal Reserve had just come off
you know, the last year on a cycle of three
rate cuts.
Speaker 3 (24:02):
Yeah, the matrix had just come out.
Speaker 4 (24:04):
The matrix had just come out, and in June of
nineteen ninety nine, they started saying, hey, things are getting
a little bit frenzy, like green Span was describing the
irrational exuberance.
Speaker 3 (24:16):
I think that might have come a little bit later.
Speaker 4 (24:18):
But the Fed then went on a rate hiking cycle
in the summer and summer of nineteen ninety nine right
through the spring of two thousand, bringing interest rates from
five to six and a half percent yep, after just
cutting rates the previous year and generally moving from a
higher rate environment back in the early to mid nineties
(24:40):
through the late nineties. Again, I know, there's a lot
of differences out there, but you know, what are we
really talking about in markets right now?
Speaker 3 (24:48):
Wow?
Speaker 4 (24:48):
Look at these big IPOs that we're going to see today,
we'll talk about one that just went public yesterday.
Speaker 3 (24:52):
Did you what about the one from today? You mean today?
Was it today that? Yes? So today? Did you see
the number from this morning? No? I did, but they're wild. Yeah,
it just again.
Speaker 4 (25:07):
I was talking to somebody about this yesterday and their
perspective was, it's nothing like that, And I don't think
that quite does it justice.
Speaker 3 (25:16):
It's different.
Speaker 4 (25:16):
It's always different this time, but there are a lot
of echoes of similarities.
Speaker 3 (25:21):
Look, I've said this before.
Speaker 2 (25:22):
And it's not my own quote, so I wish I
had been creative enough to come up with it. But
you've got this reduction of economic risk right now. And
remember economic risk does not mean that like the bad
things end up materializing, but you do have you know
a eventually, guys, like I'm sorry, eventually this semiconductor bubble
is going to pop. It might not be for like
(25:43):
one to three years. It might be a week or
two from now. It might have already popped, like we
don't know, but I can tell you that semiconductor stocks
don't go up eighty percent a month for the rest
of your life.
Speaker 3 (25:53):
Like that's that's not going to happen. Uh.
Speaker 2 (25:56):
So again, you've got this this tech bubble that is
inflating that eventually is going to end badly. When it
ends badly, I don't know, but eventually something will come
of it. To this point, it's cranking, it's humming, and
understand that that can go for a while. Still I'm
saying it's over. I'm just saying there's a problem in tech.
(26:17):
You got this private credit problem that is very reminiscent of,
you know, the housing crisis, but we don't really know
the scale. It's smaller than the housing crisis, but it
still is kind of gnarly. You've got an energy shock
that's reminiscent of the nineteen seventies that's going on right now.
So like you've got nineteen ninety nine, nineteen seventy three,
(26:37):
and two thousand and six all jumbled up here, and
it's kind of like, well, maybe you can escape two
out of the three of these, but one of them
is gonna hit. Like something is going to end badly
here at some point. And what Collins is raising is, look,
the private credit stuff, for all the concern we've had
(26:58):
about it, hasn't shown up in the economic data in
any way shape or for it. At some point it might,
but to this point it just hasn't. Like it's it's
not a thing the tech bubble stuff. By and large,
every time we've had questions about hey, can you know
capex continue has they've been answered affirmatively right and san
Kapex has continued.
Speaker 3 (27:19):
By the way.
Speaker 4 (27:19):
Using the counter argument, here, we have a incoming FED
share that has been very public about wanting lower interest rates.
I think that's wildly inappropriate right now. But you want
an argument for the tech the tech rally continuing, what
if rates come down later this year, like that'd be again,
I think there's no argument for it to happen. I
think it would be the wrong policy maneuver. But plenty
(27:41):
of FED shares could have made stupid policy maneuvers.
Speaker 2 (27:44):
And so Collins raises the point of look the next
move depending on how things resolve in the Middle East.
If this is more persistent, then markets are pricing yeah,
Like remember rate rate hiking cycles and rate cutting cycles
that the word cycles in there for a reason.
Speaker 3 (28:02):
The FED never.
Speaker 2 (28:03):
Goes one and done. They just like it's not how
they behave at least at this point. Like if you
look at like you know, way in the past, like sure,
it's typically okay, we're gonna do this for a meeting
and another and another and will continue until we think
it's appropriate. In the last few years, it's been like
anywhere from like four to five meeting cycles, three to
(28:24):
five meeting cycles, and you're good. The risk to markets
is not that the FED funds rate goes from three
and a half to three seven five. The risk is
that the fun FED funds rate goes from three and
a half to five. Right, it goes from three and
a half to five and a.
Speaker 3 (28:42):
Half, like happened in nineteen ninety nine.
Speaker 2 (28:44):
Because like I've said this before, everyone gets all excited, like,
ooho's the faking to cut a quarter percent?
Speaker 3 (28:49):
Who cares?
Speaker 2 (28:51):
It doesn't matter? A quarter percent rate cut in and
of itself is like me like swatting a fly on
my note in the summer. It doesn't matter to.
Speaker 3 (29:02):
The broader world.
Speaker 2 (29:04):
A quarter percent cut at six consecutive meetings or a
quarter percent hike at six consecutive meetings, that is a
meaningful shift worthy of attention. But everyone's like, oohs, the
figure gonna cut.
Speaker 3 (29:17):
This meeting irrelevant? Who cares?
Speaker 2 (29:20):
Pay attention to the cycle, not to the meeting. Let's
take a quick break here. When we return, let's talk
about uh, you know, speaking of turning it back to
nineteen ninety nine. I gotta tell you when the hottest
two stocks for the last week are Intel and now Cisco. Listen,
if you've been in a coma for the last twenty
(29:41):
seven years and just woke.
Speaker 3 (29:42):
Up, nothing's changed.
Speaker 2 (29:44):
This will make you feel right at home. Quick break,
We're talking Cisco when we come back.
Speaker 1 (29:49):
Remember, you can watch the show live every day on
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our shows. Con It's all there with that click of
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(30:10):
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Speaker 2 (30:30):
Cisco reported earnings after the bell yesterday, and the stock, well,
it's it's up fourteen percent right now.
Speaker 3 (30:41):
It was up twenty two percent pre market, but it
has pulled back.
Speaker 2 (30:44):
But Cisco stock is absolutely cranking at the moment and
now has actually surpassed its year two thousand peak just
twenty years later. It actually surpassed it last week. The
big thing though, to remember on this is Cisco, like
(31:08):
many companies, has been going through share buybacks for you know,
much of the last twenty years, and so even though
it reached surpassed a.
Speaker 3 (31:15):
Per share peak, Oh mind me just drop something you
want to tell us talker big news or something like yeah,
he always throws his micro.
Speaker 5 (31:28):
Usy fella, don't worry about me.
Speaker 3 (31:30):
Even though, even though.
Speaker 2 (31:34):
Even though Cisco has surpassed its per share peak, it
still has not yet gotten to its market cap peak
that it hit back in spring of two thousand.
Speaker 4 (31:44):
It's just a me, I mean, Cisco is being described
once again as the picks and shovels of the AI
industry or the plumbing of the AI industry, which is
quite literally the exact terms that were being used in
the nine to describe Cisco when it came.
Speaker 3 (32:01):
To the Internet.
Speaker 4 (32:02):
Now this is not saying it's wrong, but it's the
same company going through the same exact description of their
business model twenty six years later.
Speaker 2 (32:12):
This is a stock that spent the period of two
thousand and one through two thy seventeen without any share
price appreciation, and then spent mid twenty nineteen through mid twenty.
Speaker 3 (32:26):
Four with no share price appreciation.
Speaker 2 (32:29):
So I think again there's been some false starts here,
and I think the real question is, look, is this
actually a rising tide lifting all boats? Or is this
Cisco being late to the game and just you know,
kind of a flash in the pan.
Speaker 3 (32:43):
It's not going to mean much.
Speaker 4 (32:46):
Well, I bet they're gonna sell a whole bunch of stuff.
The question is will they sell a whole bunch of
stuff for a long period of time?
Speaker 3 (32:52):
That's what I mean.
Speaker 4 (32:52):
Yeah, I mean flashing the pan is the right analogy?
I don't know, but I can tell you what happened
in nineteen ninety nine.
Speaker 2 (33:01):
So again, we'll see how things go here, and we'll
take it one day at a time.
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Speaker 3 (34:27):
P's in the Boston Globe.
Speaker 2 (34:28):
Mansfield becomes first town in Massachusetts to pass near total
ban on data centers. Basically with the the article in
the town Bylaws states Now is that only Tier one
data centers facilities using up to two megawatts of electricity,
which is not very much, would be allowed, and only
(34:50):
in certain parts of the town. Tier two and three facilities,
which are basically between two and ten megawatts, and more
than ten megawatts, those would not be allowed anywhere in
the town. So there's a couple of things that I
believe to be true here. The first is, I don't
think we're doing a great job of building out the
support infrastructure for data centers in the form of electrical
(35:14):
and water resources that are needed. The second piece is
that the solution to this is not saying, well, we
can't do that, so we're just not gonna build data
centers like that. This is kind of like if back
in like the nineteen twenties we had been like, hey,
all these cars are taking up the roads for our horses,
(35:35):
so we're not going to allow cars because we haven't
done a good enough job, you know, widening the road
so the horses can be on them too.
Speaker 3 (35:42):
Like it's just not.
Speaker 2 (35:47):
You know how Wayne Gretzky used to skate where the
puck is going. Sure, this is skating analogy, This is
skating towards the vending machine. It's doing what feels comfortable
instead of it's going to push, you know, things forward.
And look, I'm on record saying I don't want like
a data center in my basement, but I would take
a nuclear power plan there, but as I'll take the
(36:10):
data center right, So but like we have a symbiotic
relationship in that way. So ultimately, look, the world is
going to need more data centers in the future. There
is going to be more artificial intelligence usage in the future.
These are incontrovertible facts. I don't think I can like
(36:32):
have much uncertainty around these. You can either choose to
build that out in a responsible and thoughtful manner, or
you can do the opposite. And a ban of large
data center construction is just as destructive to participating in
that future as allowing too many data centers to be
(36:53):
built willy nilly with no control over them at all.
Speaker 4 (36:57):
Did you see the planned Stratus project. It's been getting
attention in Utah.
Speaker 3 (37:02):
No, what's that.
Speaker 4 (37:02):
It's a nine gigawatt, forty thousand acre AI data center
planning one thousand acre. That's two times Manhattan. Just some
comparison there, I thought would be nice. Two thousand Walmart
stores combined, forty thousand acres.
Speaker 2 (37:22):
This is why when people talk about like orbital data centers,
I'm like guys, we can launch like twenty thousand pounds into.
Speaker 3 (37:29):
Orbit at a time. Now, it doesn't seem like it's
gonna work.
Speaker 2 (37:32):
Well, how are you gonna build Manhattan twenty thousand pounds
at a time?
Speaker 3 (37:36):
Two times Manhattan? To be clear, let's start with one first.
Speaker 4 (37:40):
Yeah, it does seem like this is one of those
moments where we need a little bit more coordination about
how this is all going to work, because otherwise you're
going to have a scattershot of different policies and plans
location to location, and that's I don't know, it doesn't
seem like a great red speak for success when it
(38:01):
comes to AI building.
Speaker 3 (38:01):
Bey on this.
Speaker 2 (38:02):
Look, there's a lot of towns in Massachusetts that are
desperate for tax revenue. What if Amazon or Microsoft said, hey,
we'll give you four x the regular property tax rate
if you let us build this here.
Speaker 3 (38:14):
So maybe that's the way it. Yeah, maybe we just
ban them until they come together and say something like that.
Maybe let's take a quick break out or two's coming
up in a bit.
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