December 4, 2025 • 39 mins
Chuck Zodda and Mike Armstrong discuss markets viewing weak jobs data as good news and why that's a problem. The stock market rode AI to record highs. What could knock it down? Marc Benioff makes interesting claims about how Salesforce is using AI. Bond investors warned US Treasury over picking Kevin Hassett as Fed Chair.
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Episode Transcript
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Speaker 1 (00:00):
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(01:05):
Chuck Zada and Mike Armstraw.
Speaker 2 (01:08):
Chuck, Mike Tucker with you here. It is a Thursday,
the first one of December, and as we kick things
off today, gonna take another look at the labor market
to start off. Then we'll talk a little bit more
about AI, because people just love to talk about AI.
(01:29):
Then we'll talk a little bit about the Fed, and
then we're gonna talk about billionaires, lots lots of them.
But let's kick things off with a labor market piece.
Barons has this piece that's up. It's titled markets view
week job data as good news. Why that's a problem, Well,
it's generally because if job data continues to get weaker,
(01:49):
the Fed historically has an uneven track record at being
able to potentially preempt recession through rate cuts. Usually there's
something that helps after the fact.
Speaker 3 (02:00):
Yeah, So, look, we've been through market cycles before where
good news equals bad news and bad news equals good
I'm not really sure if that's what we are in
right now, but you know, the most recent data on
the jobs market. Let's see, we had the September jobs report,
which which actually was quite strong, but the ADP payroll
(02:24):
data for was that for November that just came out
this week was was fairly weak. And you know, it's
all been insinuating and pushing investors to believe that rate
cuts are coming at this December meeting. I guess the
reason that I don't feel as though we're in one
of these cycles is because, you know, this morning, then again,
we got a job's report that was actually quite strong,
(02:46):
the weekly jobless claims numbers, and we don't really have
much moving on the expectations around a rate cut.
Speaker 4 (02:53):
And so I don't know.
Speaker 3 (02:56):
I keep getting this mixed data on the labor market,
and I can tell that it's weakened compared it to
years past.
Speaker 2 (03:02):
I don't think the data is that mixed. I think
the data is pretty unambiguously weak.
Speaker 3 (03:09):
Yeah, but I think when you have stuff, when you
have the data from like Challenger, Gray and Christmas making
all these headlines about.
Speaker 4 (03:15):
The worst labor made, no, No, that looks like garbage to me.
Speaker 3 (03:18):
Whereas you know, yes, it's unambiguously weak, it's weaker than
it has been, it's showing weak job creation. But then
you get this weekly jobless claims number, and yeah, we're
just not seeing anything confirm a free fall.
Speaker 4 (03:33):
In the labor market.
Speaker 2 (03:34):
I guess it's all right. So there's two different things
at play here. The first is we've had a continued
weakening in the labor market since early twenty twenty two, agreed, unambiguous.
It has been a move down in linear fashion, pretty
steadily like that. As you note, there's been no acceleration
down at any point, but it's been a pretty consistent weakening.
(03:57):
And this is backed up like if you just look
recent Okay, and again we haven't been getting you know,
government jobs reports, but like, let's take a look at
the data that we have been been getting ADP, and
let's look at kind of six months now, so let's
say second half of the year ADP has been getting
better or worse, worse bls unemployment again, because we don't
(04:20):
have like everything, but unemployment.
Speaker 4 (04:23):
Better or worse, the rate has been getting worse.
Speaker 2 (04:27):
The answer is worse, continuing jobless claims better or worse, worse.
They've been going up, the rising five percent year over year,
you know, warn notices, warn notices going up, getting worse
Beige books. So what the Fed's actually talking to business
is about getting worse. Indeed, job openings better or worse worse.
(04:49):
Like you go through pretty much everything and the only
piece that's holding up is initial claims. It's the hiring.
Speaker 3 (04:57):
The rate of hires for September pick picked back up
after a week summer.
Speaker 2 (05:02):
It's one month, Like I can't look at it. One month.
The job market is unambiguously worse now than at the
beginning of the year.
Speaker 4 (05:09):
Yep.
Speaker 2 (05:10):
And this is before we even get into what I
do think ultimately is what matters, which is, hey, how
much your people being paid in the aggregate because aggregate
payroll ends up working out to aggregate spending. When we
look at federal FIKA tax withholding, so the tax that
gets withheld for Social Security and Medicare, it's a great
proxy for how much people are getting paid because companies
(05:32):
have to do it right, like it's it's not optional.
When you go set up your payroll system. They don't say, hey,
would you like to pay Social Security tax through this?
It's no like you're you're going to pay Social Security tax.
And what we've seen is over the last five months
July through September, I'm sorry, July through November, we've gone
from seven point four percent year over year growth to
(05:54):
seven to two to four to three to three two.
It's confirming that year over year growth in tax withholding
is slowing. Right, So the labor market, in my opinion,
is unambiguously worsening. And this is not something that's new
this year. This has been going on since twenty twenty two.
(06:15):
So this is not I'm not sitting here being like, well,
this is something that's you know, new this year and
it's you know, the administraate. No, this has been going
on since mid twenty two. It's a three year, four
year trend now, actually since we're almost in twenty six,
so it's a four year trend that's been in place,
and it's been moving in linear fashion, meaning hey, it's
(06:38):
generally slowing at a pretty consistent rate. There has not
been you know what you typically see heading into recession,
which is an acceleration of the worstening and the rate
of job loss picking up. But it's something where it's
pretty consistent where yeah, every quarter job gains are being
reduced on a monthly basis by like fifty to seventy
(07:00):
five K and that's been what we've been seeing for
almost four years now. So the question is does this
actually matter to the economy It does matter to people
that are looking for jobs, no doubt about it. But
I think the question that the FED is asking on
this is does it matter to the economy, And it's
(07:24):
the question all of us should be asking, by the way,
because here's the confusing part of this, and this is
where there is some ambiguity in the data. In my opinion,
despite the worstening of the labor market, slowing job growth,
you know, slowing wage growth, all these things, spending growth
hasn't changed. We've been running consistently for the entire year,
(07:47):
four to six percent spending growth year over year. That's
what the banks are telling us, It's what the credit
card companies are telling us, it's what retailers are telling.
Speaker 4 (07:58):
Us, Macy telling us.
Speaker 2 (08:00):
It's there is no ambiguity on that side. Despite the
labor market weakness, there has been no spending weakness. And
so the question that's really interesting to me personally is why.
And the two theories that I think are possible and
plausible right now are number one, Demographically, we're older than
(08:20):
we've ever been, I mean, and you and I, Mike,
we're older than we've ever been too, like getting older every.
Speaker 4 (08:27):
Day, yep.
Speaker 3 (08:28):
But you know, more of us don't rely on the
job market for our spending, then that's a factor.
Speaker 2 (08:32):
If if there's a higher percentage of spending being driven
by social security, pensions and portfolio withdrawals, does the labor
market matter as much to the economy as it used to?
You know, it's you look at the statistics on social
security just as an example, and when you when again
(08:54):
just looking at kind of the broad you know setup
that you have as far as you know, how many
people are receiving social Security benefits? Seventy two point nine
million people and this is for twenty twenty four. Okay,
the labor force last time I checked, has about one
hundred and sixty million people employed in it. So if
(09:15):
we like do the math, there are half as many
people that are collecting social Security as there are in
the labor force. That's the highest that that ratio has
ever been. Now you go back, I'll have to pull
the data to see, but if you looked back at
like the nineties, instead of being you know, a two
to one ratio, I'm going to go out on a
limit and say it was probably close to a three
to one or three and a half to one. So, like,
(09:37):
does that matter, Like, these are big questions and they're
really interesting ones too, in my opinion.
Speaker 3 (09:43):
Uh, apparently we've got a listener named Mark Fandaddy paying
attention right now because he says the Dallas Fed has
the possible answer. Consumption concentration has increased over the last
thirty years, and the sheriff spending back consumers in the top
twenty percent of the income distribution is up four percentage
points over the last three decades. It's actually ooh less
(10:03):
than I get to.
Speaker 4 (10:06):
Play him when he's not even on the show.
Speaker 2 (10:08):
Those were Fandetti's from yesterday.
Speaker 3 (10:12):
That's actually less than I would have guessed over the
last three decades.
Speaker 2 (10:15):
Oh, we should get that Mark Fandetti guy to do
a show with us sometimes, Yeah, we should.
Speaker 3 (10:20):
I just write, if you had to pin me down,
like how much has consumption concentration increased over the last
three decades, and is this effect like this, this data,
if it's correct, does not really fully explain to me
what's going on in this economy because a four percentage
point increase over three decades. Yeah, just it's not quite
(10:45):
as severe as I would have guessed.
Speaker 2 (10:47):
The other piece that I think is interesting on this
in terms of getting back to that, that question markets
view week job data is good news. Why that's a problem?
Look if if things are if if what drives the
US economy now is different from what it used to be,
What if the Fed changing interest rates doesn't have the
impact that it used to either.
Speaker 3 (11:08):
Sure, I will agree that this very well could be
a problem, but I also want to reiterate to people
that it is a phenomenon good news being bad news
and bad news being good news that we have lived
through almost constantly for the last like fifteen years when
it comes to interest rates.
Speaker 2 (11:27):
Even longer than that, Mike, the example that I brought up,
I think was maybe a month or so ago, early
January of two thousand, the FED did an unexpected fifty
basis point interest rate cut in between meetings. The Nasdaq
had its best day ever, going up fourteen percent on
that cut, and yet by the end of the year
(11:48):
it was still I don't have the exact numbers, it
was somewhere like thirty to fifty percent lower by the
end of the year. And so this is normal to
be able to say, yeah, like the FED cuts are
going to save us, and then usually they don't. Like
if you you look at all of the previous FED
cutting cycles that we've had, and I'll define it as like,
you know, more than a couple percent. Nineteen fifty seven
(12:08):
recessions still happen, nineteen sixty recessions still happen, nineteen sixty
nine recessions still happened, seventy three recession, I'm sorry, eighty
one recession, ninety recession, two thousand recession, two thousand and
seven recession. Like you go through the list, FED does
not have a great track record of avoiding them. The
only one that I see out here that might fit
(12:31):
the bill is nineteen sixty seven, right, And other than that,
it's just generally rate cuts don't usually do it. Seventy
one you could put in there as well, So like
two out of you know, thirteen potential recessions may be averted.
We'll see. Take a quick break here. When we come back,
let's talk AI after.
Speaker 1 (12:49):
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Speaker 2 (13:48):
Peace and barons. The stock market roade AI to record highs.
Here's what could knock it down. AI stock's doing badly.
The last part was my editorialization.
Speaker 3 (14:02):
Yeah, that would do it? Uh, like you like if
good stocks do bad?
Speaker 2 (14:08):
Market do bad?
Speaker 3 (14:09):
I was thinking about how to you know, appropriately phrase
this these days without scaring people. But in reality, if
you are buying a market cap weighted US stock index
these days, like the S and P five hundred, oh,
put it one out there. It's really hard to argue
that you're not making a pretty big bet on artificial
(14:31):
intelligence or it's pretty concentrated bacial intelligence, right, like what
else out there? You know, if I look at the
top ten, what is not a big AI bet? It's
basically Apple.
Speaker 4 (14:41):
Is that the only one?
Speaker 2 (14:42):
Let's see, I'm pulling it up right now just to
get what we have. Uh, top ten Berkshire Hathaway.
Speaker 4 (14:48):
Okay, not a huge AI bet? True? So those are
your two?
Speaker 2 (14:53):
Yeah, because that's hang on one, two, three, four, five, six, seven,
eight nine yeap Berkshire Hathaway is your own choice there.
Speaker 3 (15:01):
Oh well, technically JP Morgan because if you combine alphabet.
Speaker 2 (15:04):
Oh yeah, you get two alphabets, which is wild, like
you should really only have one alphabet. But it's just me.
Uh yeah, so JP Morgan, So yeah, iud to the
top ten and again on a percentage waiting JP Morgan
birks you're half to wear three percent of the index.
So the rest of the top ten is north of
you know, thirty, So it's you know, kind of problematic.
(15:25):
And and this is the thing that we've talked about
a little bit before, which is, look, Mike, if someone
came to you with a portfolio and they said, hey,
I've got you know, seven percent portfolio and two stocks,
and then six percent in another two, and then four
percent in another two. You'd be like, it's a little
concentrated on the high end there. Like generally, you know,
(15:46):
you might be like, hey, anything above five percent concentration
is starting to get you know, a little bit high
for a single stock. And yet when you tell someone hey,
I'm just buying the S and P five hundred, there
you go. People go, oh, like, that's that's fine, You're diversified.
And the fact is, and this has been the case
for the last couple of years, when the big boys
have struggled, the index hasn't been able to get moving.
(16:09):
I know, we have all this talk about, oh, you
want good breadth, and you want you know, a lot
of participation on the upside, and you want, you know,
lots of stocks to go up. The fact is, in
this market since the start of twenty four, twenty three
was a little different, but since the start of twenty four,
when the big ai guys have struggled, the market has
(16:30):
not been able to find its footing. We've had this
on a few different occasions, the most recent one by
the way being look at the last like few weeks,
you know, we hit all time highs in September. Markets
just kind of chopped around recently, and it's because a
lot of these AI guys have been, you know, kind
of chopping around, not being able to keep moving up.
Last July before Jen mcgeddon where the Japanese yen blew
(16:54):
up the carry trade. What was going on in July
yet megacap, you know, AI starting to falter, and you know,
regional banks trying to lead that didn't work, right, you know,
it's I'm not saying that it can't work, but the
underlying market structure right now is not one that is
supportive of It's not one that is supportive of you know,
(17:22):
I'm just curing doctor Pepper being able to drive the index.
You know, it's not supportive of eBay being able to
drive the index. And until that changes, I don't know
that it you know, really can't.
Speaker 4 (17:34):
So US stocks.
Speaker 3 (17:35):
We're in agreement that AI is driving US stocks if
you're looking at a market market cap weighted index, which
is pretty much how almost everybody invests these days. Yeah,
everyone's comparing to the dot com bubble, and part of
the problem during the dot com era. Other than you know,
everyone bidding up stocks that turned out to not really
(17:57):
have any revenue, profit or anything else.
Speaker 4 (17:59):
Was that the the monetization of.
Speaker 3 (18:01):
The Internet and the products that came out, they weren't
very fast. It took a while to really innovate on
this product, right. Google went public in two thousand and four.
Uber wasn't founded until two thousand and nine. Facebook didn't
go public until twenty twelve. Obviously it was used a
lot before then. And so, to me, the multi trillion
(18:21):
dollar question here is, Look, there are plenty of companies
making money on AI, That's not what I'm saying, but
almost nobody's making money by charging individuals and businesses for
developing artificial intelligence related tools. And so to me, that's
the multi trillion dollar question is does it take a
decade like it did with the Internet or is AI different?
(18:44):
And we're going to see this monetization happen on a
much faster pace.
Speaker 2 (18:48):
Did you happen to catch Mark Benioff's comments yesterday from
Salesforces quarterly earnings?
Speaker 4 (18:56):
No, should we cover them now?
Speaker 2 (18:58):
Well, we could cover them now, but I think what's
more appropriate is for us to take a quick.
Speaker 4 (19:03):
Break, do Wall Street Watch.
Speaker 2 (19:04):
Do Wall Street Watch, and then I want to talk
about what he said, because Mark's been talking a lot
about how Salesforce has both been trying to sell and
utilize AI, and I found one of his comments yesterday
particularly interesting. So let's take a quick break here, and
on the back end of it, we are going to
do Wall Street Watch, and then we will talk about
(19:26):
mister Benioff's AI comments and what potentially means for the industry.
Speaker 1 (19:37):
Like us on Facebook and follow us on Twitter at
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on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:57):
All markets are mostly quiet as traders sift through weekly
jobless claims data and ready for the core PC index
for the latest looking inflation, due out tomorrow morning. Right now,
the Dow is up nearly twenty seven points, SMP five
hundred is up one single point, Nasdaq is down one
(20:17):
single point, RUSS two thousand is flat, Tenure treasure reeled
up three basis points at four point zero nine to
two percent, and crude oil up about a third of
a percent higher, trading just above fifty nine dollars a barrel.
Some breaking news from Meta this morning, following reports that
Mark Zuckerberg is expected to meaningfully cut resources for building
(20:40):
the Metaverse, potentially with budget cuts as high as thirty
percent next year. MetaStock rallying four percent on that news. Meanwhile,
Salesforce shares rising about two percent after the software company
hiked its full year of guidance as its AI product
Agent Force gained some traction as for its third quarter
of the company b Earning's forecast, but just miss street
(21:02):
expectations for its revenue. Elsewhere, a cloud software company, Snowflake,
posted a narrow quarterly loss and reported growing demand for
its AI agency. However, its outlook for product revenue growth
for the January quarter disappointed investors. Additionally, Snowflake agreed to
a two hundred million dollars deal with AI startup Anthropic.
(21:25):
Snowflake shares are plunging ten percent and Dollar General shares
jumping ten percent after the discount retailer lifted its full
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Speaker 2 (21:57):
Mike was of the week going to get two on AI. Salesforce.
Mark benioffs right, So here's something that I found interesting
when he was talking. So Salesforce. If you're not familiar
with them, they are a provider of They started off
just doing a customer relationship management CRM software. They've since
bought up a bunch of different companies such as Tableau, Slack,
(22:20):
and so they've got basically a whole suite of business
software that falls under what's called Software as a service
sas as a basically kind of their their platform. They
sell these recurring subscriptions to use their software. It's a
very popular model these days, and one of the things
they've been doing over the last year and a half
is both trying to use AI internally but also now
(22:44):
sell AI tools through what they call their Agent Force platform.
And Benioff made a comment yesterday specifically talking about you know,
how they use AI internally and basically what he said was, look,
all of these platforms are basically the same. We use
(23:05):
whatever's cheapest. And that, to me was the first time
that anyone in a position of power and knowledge as
it relates to artificial intelligence has come out and said that,
because what we've been hearing for the last you know,
few years is oh, you know, this model's newer and
better and it does this, and it does that. And
(23:25):
Benioff's no dummy, like he sees what's going on in
tech and he sees how all of this is working.
And for him to come out and just say, yeah,
we use whatever's cheapest, that's kind of interesting to me.
Speaker 3 (23:38):
Yeah, that's fascinating because he has another cases praised, you know,
Google's Gemini.
Speaker 4 (23:44):
I know he's come out and said that.
Speaker 3 (23:47):
He's also the other commentary that he's made and granted,
this is what you're ready to hear from any CEO
that is pushing AI is basically that, hey, you know,
the customer is just catching up to the pace of
innovation that you know, we're seeing among these tech companies,
and so yeah, it's okay to be skeptical, but the
demand is going to come because of how groundbreaking all
(24:09):
this is, which you know, welcome to every other tech company.
Speaker 4 (24:13):
CEO's earnings calls that piece is interesting.
Speaker 3 (24:19):
That is the that is the other piece of all
of this, which is the ease of switching. I don't
I don't claim to fully understand this, but the ease
of switching between generative AI platforms seems to be a
pretty crucial requirement for these companies, and it leads to
(24:43):
big questions for me, at least about Google or open
AI's ultimate value when it comes to these things.
Speaker 2 (24:50):
Well, and let's this is actually, I think a great topic.
If you're an individual. Let's say that you're not a company.
Let's say that you're just an individual user, and you've decided, Hey,
you know what, I like open ai the best. I'm
gonna I'm gonna pay them twenty dollars a month to
use their platform. Is there anything keeping you on that
platform and preventing you from going to use Gemini? For
(25:14):
I think there. You know Base one is like twenty
or twenty five a month. Is there anything that keeps
you there today?
Speaker 3 (25:20):
No, I suppose one thing that would keep you there,
Like when I use Gemini, I have all the history
of every query that I've done.
Speaker 2 (25:27):
You still have that even if you're not paying for it?
Speaker 3 (25:29):
Right, Yeah, I guess I would. But do they start
to gate keep some of this stuff?
Speaker 2 (25:34):
Maybe? But also like how much do I need my history?
Like as an indipendent, how much do I need my conversation?
Like I've been using llms for I don't know, two
two and a half years now. Sure do you know
how many times I've had to go back and be like, hey,
what was that thing that I like looked up you know,
(25:56):
X long ago?
Speaker 4 (25:57):
Yeah?
Speaker 2 (25:58):
Maybe once or twice.
Speaker 3 (25:59):
It's not like other technologies. It's not Apple, where you
need to be in the Apple universe because all of
your friends and family are and you need to be
seen wearing an Apple product. It's not Facebook where all
of your friends have a social media page and you've
got your history of all your photos and events on
your Facebook or Instagram page. It is unlike any of
(26:21):
those technologies. I suppose it's a bit more like search.
Speaker 2 (26:25):
Which you never go back and like look at your
searchestor where you just search again.
Speaker 3 (26:29):
True, but what let me ask this is Google, the
absolute best search engine that's ever existed. I don't use it,
and yet they have what ninety percent market dominance, so
users can easily switch between search engines they choose not to.
Speaker 2 (26:49):
Or in some cases are defaulted into it.
Speaker 3 (26:52):
Right, So maybe that's the model for this and we're
over and maybe we don't need to be concerned about
that switching effect.
Speaker 2 (27:00):
The count Like the counter to that is, so if
you look at like the areas where there's basically, you know,
a winner takes all situation, search is one operating system
is basically another. And again I say this is someone who,
like I do, own a bunch of Apple products. But
when you look at market share, act doesn't really matter. Yeah,
(27:20):
you know, it's still a tiny fraction relative to Windows
as an operating system. All you Linux people out there,
good luck, But like it's it's something where so you've
got you know, okay, search is kind of a winner
take all situation. Operating system has been a winner take
all situation. Other than that, I'm trying, I'm struggling to
(27:43):
like think of areas where I guess if you're just
looking at like document sharing, like you know, PDFs as
the standard, sure you know is something that's out there.
So they're like there's a few areas, but more often
than not, we've ended up with like three to four
big players in a space, or kind kind of a
smattering of smaller ones. Like there's still consolidation, but it
(28:03):
doesn't get to win or take all. And in all
of those the ones that like you look at operating system,
there's a clear reason why, like you all need to
use the same operating system, right, yep, there's a huge
reason why you don't just let people you know, at
a company like choose, you know exactly what they're doing.
You need compatibility, so I get it there. The search
(28:23):
one is interesting to me because there is no reason
why people should just use Google right Historically, like you
go back twenty years ago and the answer was it
did produce the best search results. I'm just not sure
it does anymore. But that might just be that the
Internet's dying more than anything else. So I guess I
(28:44):
just don't know, but it's it's interesting to me that
if this is going to be commoditized, what you did see,
if you look at like how technology commoditization usually works,
you do end up with like two or three companies
that dominate the space. Think about on the hardware side,
for processing. Like historically for CPUs it's Intel an AMD,
(29:05):
and Intel basically kept AMD alive just so that they
wouldn't get suit for antitrust memory, you've got kind of
the same thing, digital storage, same thing. So like it's
it might not be winner take all, but it's probably
gonna be like top three or four take all just
because of the scale that you get there, right.
Speaker 4 (29:24):
Seems like it.
Speaker 3 (29:26):
But again, the pace at which these models have been
coming out and leapfrogging each other has been fascinating to
watch and really cause into question their ultimate value.
Speaker 2 (29:34):
And you don't know, You still don't know who the
winner's going to be. Remember Google was not the first
search engine. I know, I know one thing for certain
about winners. They're not all going to be winners, correct,
we listen. The market does not give participation trophies. No.
Speaker 4 (29:53):
Right now they.
Speaker 2 (29:54):
Are, Right now they are, and it's making everyone feel
good about themselves. But eventually you got to grow up
and you start keeping score and those participation trophies you
can still hold them, but they're not going to mean
much to you, you know, down the road. Just take
a quick break when we return. I think that's enough.
Like AI and stock bubble talk right like we can
(30:16):
move alone, right like I'm good on AI for now. Uh,
let's talk fed after this.
Speaker 1 (30:24):
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Speaker 4 (31:33):
All right.
Speaker 2 (31:33):
So we got a couple different pieces out, one in
Bloomberg and one of the Financial Times discussing how bond
investors have basically talked to the US Treasury Department and said, hey,
we'd prefer not to see Kevin Hassett running the FED.
And we even have someone on record here, Gregory Peters,
(31:56):
the co chief investment officer at PGM Fixed Income, saying
that they're not sure that Hassen would be able to
deliver what the President is necessarily looking for when it
comes to how the FED would move not just short
term rates, but potentially be able to influence longer term rates.
Speaker 3 (32:17):
Bluster or real action here, because ultimately, I don't see
any move in yields or I mean, I guess I
don't remember when the President more or less acknowledged that
Hassett was the pick. But the lowest we've gotten to
over the last month on the ten year has been
three point nine to nine.
Speaker 4 (32:33):
We're sitting at four to one right now.
Speaker 3 (32:35):
It's not a nothing move, but I don't know that
it actually lines up with it, And I don't know
that this commentary is actually meaningful if they're not acting
upon it.
Speaker 2 (32:45):
Yeah, I'm just not sure that this dog's gonna hunt
Like I just I just don't know that the market
is going to have some kind of freak out about
Hasset being named. If that's the case, I think again,
this has kind of been telegraphed for quite some time now,
you know, I think you know it's it's been something
(33:07):
that's been pretty likely probably for the last four to
six months.
Speaker 3 (33:13):
Is that fair, Mic, Yeah, So if they're not trying
to actually influence things, then they're not placing bets based
on their commentary. What is the purpose of this to
lay a stake in the ground that, hey, the FED
still needs to be independent here and any FED chair
that tries to bring down long term interest rates is
going to fail to do so. Just kind of marking
their territory on this one so that they can quote
(33:36):
it three years from now.
Speaker 4 (33:38):
And I'm just.
Speaker 3 (33:38):
Saying, why do they need to, Like, what's what's the
point of that, Like the you're not actually trying to
get the president to change his mind. It doesn't seem
like you are.
Speaker 2 (33:49):
The President's not going to change his RND, Like he's
going to do what he wants to do on this, right,
And ultimately here's the other thing that like on this
Hassett is going to end up having to do what
the market forces him to do. Like before Scott Besson
came into office as the Treasury Secretary. Bessont said a
(34:09):
lot of stuff over the last year. Some of it
was in relation to, Hey, I don't like how Janet
Yellen is issuing a lot more debt on the you know,
oncertain schedules. I would do things differently.
Speaker 4 (34:26):
Got there did the exact same thing.
Speaker 2 (34:28):
There's been no shift at all in terms of the
maturity schedule for the debt that Besson has been issuing,
because ultimately, when push came to shove, he said, Okay,
this is what's actually demanded by the market, and if
I don't issue this, the market's gonna say you need
to change your mix. And that's how you end up
where you are. So when I look at you know,
(34:49):
whoever it is that's running for a FED chair, whether
it's Hassett, whether it's Warsh, whether it's Waller again Zervos,
like you can go through like the whole laundry list
of people that have been and you know, consider to
throw their hat in the ring. They're all saying yes,
like I want to cut, I want to cut. I
want to cut. And by the way, as I said yesterday,
(35:09):
I'm pretty darn sure that at this point, given what
we are seeing from the US labor market, I'm more
nervous about, you know, needing to cut in twenty twenty
six than you know, needing to hike. I think labor
is going to be the bigger problem next to your
relative to inflation. But also you're gonna be dictated by
what the market shows you. If you have an economy
(35:31):
with high growth and inflation starting to build, you're not
gonna be able to cut, right. If you have an
economy with slowing growth and unemployment starting to build, you're
gonna be able to cut. And so I I don't
think anyone running for FED chair is, you know, to
(35:52):
to the point where they would be like, yeah, even
though inflation's going up, I'm just gonna cut because that's
what I said I was gonna do. No like these are.
They're no du in this list. Like they're all campaigning
in their own way to try to get the president's attention.
But ultimately I don't think anyone that's in the running
here is like an idiot or anything like that.
Speaker 5 (36:14):
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Speaker 2 (37:22):
Mike Grate a peace in Financial Times, How will the
rise in Japanese bond yields effect global markets? I remember
you tell me, Well, here's the thing. So last year
last summer, Japanese bondilds were rising, and that, in conjunction
with a couple other things, kind of broke markets for
a week or two last August. It ultimately, you know,
(37:43):
ended up being something that was a non factor for
the long term, but it caused some pretty significant volatility
for about a week or so. And I'm skeptical something
will happen similarly, just because again, once you've seen a
problem and everyone's aware of it, then you know, mart
WHI has been generally you know, set their portfolios upsets
(38:03):
that they're like, oh, I won't make the same mistake twice.
In doing so, they might make entirely new mistakes. But
it's really kind of rare that you see the same
problem bite markets in the same way, in that I'm
not sure there's a direct spill through to equity markets
the way there was last year. But could rising Japanese
(38:25):
bond yields put pressure on global bond yields and almost
make hassets job tougher? Could it make hasts job tougher.
You darn right it could. It's absolutely a possibility. There,
let's take a quick break. We got our two coming
up in a little bit.
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(01:05):
Chuck Zada and Mike Armstraw.
Speaker 2 (01:08):
Chuck, Mike Tucker with you here. It is a Thursday,
the first one of December, and as we kick things
off today, gonna take another look at the labor market
to start off. Then we'll talk a little bit more
about AI, because people just love to talk about AI.
(01:29):
Then we'll talk a little bit about the Fed, and
then we're gonna talk about billionaires, lots lots of them.
But let's kick things off with a labor market piece.
Barons has this piece that's up. It's titled markets view
week job data as good news. Why that's a problem, Well,
it's generally because if job data continues to get weaker,
(01:49):
the Fed historically has an uneven track record at being
able to potentially preempt recession through rate cuts. Usually there's
something that helps after the fact.
Speaker 3 (02:00):
Yeah, So, look, we've been through market cycles before where
good news equals bad news and bad news equals good
I'm not really sure if that's what we are in
right now, but you know, the most recent data on
the jobs market. Let's see, we had the September jobs report,
which which actually was quite strong, but the ADP payroll
(02:24):
data for was that for November that just came out
this week was was fairly weak. And you know, it's
all been insinuating and pushing investors to believe that rate
cuts are coming at this December meeting. I guess the
reason that I don't feel as though we're in one
of these cycles is because, you know, this morning, then again,
we got a job's report that was actually quite strong,
(02:46):
the weekly jobless claims numbers, and we don't really have
much moving on the expectations around a rate cut.
Speaker 4 (02:53):
And so I don't know.
Speaker 3 (02:56):
I keep getting this mixed data on the labor market,
and I can tell that it's weakened compared it to
years past.
Speaker 2 (03:02):
I don't think the data is that mixed. I think
the data is pretty unambiguously weak.
Speaker 3 (03:09):
Yeah, but I think when you have stuff, when you
have the data from like Challenger, Gray and Christmas making
all these headlines about.
Speaker 4 (03:15):
The worst labor made, no, No, that looks like garbage to me.
Speaker 3 (03:18):
Whereas you know, yes, it's unambiguously weak, it's weaker than
it has been, it's showing weak job creation. But then
you get this weekly jobless claims number, and yeah, we're
just not seeing anything confirm a free fall.
Speaker 4 (03:33):
In the labor market.
Speaker 2 (03:34):
I guess it's all right. So there's two different things
at play here. The first is we've had a continued
weakening in the labor market since early twenty twenty two, agreed, unambiguous.
It has been a move down in linear fashion, pretty
steadily like that. As you note, there's been no acceleration
down at any point, but it's been a pretty consistent weakening.
(03:57):
And this is backed up like if you just look
recent Okay, and again we haven't been getting you know,
government jobs reports, but like, let's take a look at
the data that we have been been getting ADP, and
let's look at kind of six months now, so let's
say second half of the year ADP has been getting
better or worse, worse bls unemployment again, because we don't
(04:20):
have like everything, but unemployment.
Speaker 4 (04:23):
Better or worse, the rate has been getting worse.
Speaker 2 (04:27):
The answer is worse, continuing jobless claims better or worse, worse.
They've been going up, the rising five percent year over year,
you know, warn notices, warn notices going up, getting worse
Beige books. So what the Fed's actually talking to business
is about getting worse. Indeed, job openings better or worse worse.
(04:49):
Like you go through pretty much everything and the only
piece that's holding up is initial claims. It's the hiring.
Speaker 3 (04:57):
The rate of hires for September pick picked back up
after a week summer.
Speaker 2 (05:02):
It's one month, Like I can't look at it. One month.
The job market is unambiguously worse now than at the
beginning of the year.
Speaker 4 (05:09):
Yep.
Speaker 2 (05:10):
And this is before we even get into what I
do think ultimately is what matters, which is, hey, how
much your people being paid in the aggregate because aggregate
payroll ends up working out to aggregate spending. When we
look at federal FIKA tax withholding, so the tax that
gets withheld for Social Security and Medicare, it's a great
proxy for how much people are getting paid because companies
(05:32):
have to do it right, like it's it's not optional.
When you go set up your payroll system. They don't say, hey,
would you like to pay Social Security tax through this?
It's no like you're you're going to pay Social Security tax.
And what we've seen is over the last five months
July through September, I'm sorry, July through November, we've gone
from seven point four percent year over year growth to
(05:54):
seven to two to four to three to three two.
It's confirming that year over year growth in tax withholding
is slowing. Right, So the labor market, in my opinion,
is unambiguously worsening. And this is not something that's new
this year. This has been going on since twenty twenty two.
(06:15):
So this is not I'm not sitting here being like, well,
this is something that's you know, new this year and
it's you know, the administraate. No, this has been going
on since mid twenty two. It's a three year, four
year trend now, actually since we're almost in twenty six,
so it's a four year trend that's been in place,
and it's been moving in linear fashion, meaning hey, it's
(06:38):
generally slowing at a pretty consistent rate. There has not
been you know what you typically see heading into recession,
which is an acceleration of the worstening and the rate
of job loss picking up. But it's something where it's
pretty consistent where yeah, every quarter job gains are being
reduced on a monthly basis by like fifty to seventy
(07:00):
five K and that's been what we've been seeing for
almost four years now. So the question is does this
actually matter to the economy It does matter to people
that are looking for jobs, no doubt about it. But
I think the question that the FED is asking on
this is does it matter to the economy, And it's
(07:24):
the question all of us should be asking, by the way,
because here's the confusing part of this, and this is
where there is some ambiguity in the data. In my opinion,
despite the worstening of the labor market, slowing job growth,
you know, slowing wage growth, all these things, spending growth
hasn't changed. We've been running consistently for the entire year,
(07:47):
four to six percent spending growth year over year. That's
what the banks are telling us, It's what the credit
card companies are telling us, it's what retailers are telling.
Speaker 4 (07:58):
Us, Macy telling us.
Speaker 2 (08:00):
It's there is no ambiguity on that side. Despite the
labor market weakness, there has been no spending weakness. And
so the question that's really interesting to me personally is why.
And the two theories that I think are possible and
plausible right now are number one, Demographically, we're older than
(08:20):
we've ever been, I mean, and you and I, Mike,
we're older than we've ever been too, like getting older every.
Speaker 4 (08:27):
Day, yep.
Speaker 3 (08:28):
But you know, more of us don't rely on the
job market for our spending, then that's a factor.
Speaker 2 (08:32):
If if there's a higher percentage of spending being driven
by social security, pensions and portfolio withdrawals, does the labor
market matter as much to the economy as it used to?
You know, it's you look at the statistics on social
security just as an example, and when you when again
(08:54):
just looking at kind of the broad you know setup
that you have as far as you know, how many
people are receiving social Security benefits? Seventy two point nine
million people and this is for twenty twenty four. Okay,
the labor force last time I checked, has about one
hundred and sixty million people employed in it. So if
(09:15):
we like do the math, there are half as many
people that are collecting social Security as there are in
the labor force. That's the highest that that ratio has
ever been. Now you go back, I'll have to pull
the data to see, but if you looked back at
like the nineties, instead of being you know, a two
to one ratio, I'm going to go out on a
limit and say it was probably close to a three
to one or three and a half to one. So, like,
(09:37):
does that matter, Like, these are big questions and they're
really interesting ones too, in my opinion.
Speaker 3 (09:43):
Uh, apparently we've got a listener named Mark Fandaddy paying
attention right now because he says the Dallas Fed has
the possible answer. Consumption concentration has increased over the last
thirty years, and the sheriff spending back consumers in the top
twenty percent of the income distribution is up four percentage
points over the last three decades. It's actually ooh less
(10:03):
than I get to.
Speaker 4 (10:06):
Play him when he's not even on the show.
Speaker 2 (10:08):
Those were Fandetti's from yesterday.
Speaker 3 (10:12):
That's actually less than I would have guessed over the
last three decades.
Speaker 2 (10:15):
Oh, we should get that Mark Fandetti guy to do
a show with us sometimes, Yeah, we should.
Speaker 3 (10:20):
I just write, if you had to pin me down,
like how much has consumption concentration increased over the last
three decades, and is this effect like this, this data,
if it's correct, does not really fully explain to me
what's going on in this economy because a four percentage
point increase over three decades. Yeah, just it's not quite
(10:45):
as severe as I would have guessed.
Speaker 2 (10:47):
The other piece that I think is interesting on this
in terms of getting back to that, that question markets
view week job data is good news. Why that's a problem?
Look if if things are if if what drives the
US economy now is different from what it used to be,
What if the Fed changing interest rates doesn't have the
impact that it used to either.
Speaker 3 (11:08):
Sure, I will agree that this very well could be
a problem, but I also want to reiterate to people
that it is a phenomenon good news being bad news
and bad news being good news that we have lived
through almost constantly for the last like fifteen years when
it comes to interest rates.
Speaker 2 (11:27):
Even longer than that, Mike, the example that I brought up,
I think was maybe a month or so ago, early
January of two thousand, the FED did an unexpected fifty
basis point interest rate cut in between meetings. The Nasdaq
had its best day ever, going up fourteen percent on
that cut, and yet by the end of the year
(11:48):
it was still I don't have the exact numbers, it
was somewhere like thirty to fifty percent lower by the
end of the year. And so this is normal to
be able to say, yeah, like the FED cuts are
going to save us, and then usually they don't. Like
if you you look at all of the previous FED
cutting cycles that we've had, and I'll define it as like,
you know, more than a couple percent. Nineteen fifty seven
(12:08):
recessions still happen, nineteen sixty recessions still happen, nineteen sixty
nine recessions still happened, seventy three recession, I'm sorry, eighty
one recession, ninety recession, two thousand recession, two thousand and
seven recession. Like you go through the list, FED does
not have a great track record of avoiding them. The
only one that I see out here that might fit
(12:31):
the bill is nineteen sixty seven, right, And other than that,
it's just generally rate cuts don't usually do it. Seventy
one you could put in there as well, So like
two out of you know, thirteen potential recessions may be averted.
We'll see. Take a quick break here. When we come back,
let's talk AI after.
Speaker 1 (12:49):
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(13:10):
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Speaker 2 (13:48):
Peace and barons. The stock market roade AI to record highs.
Here's what could knock it down. AI stock's doing badly.
The last part was my editorialization.
Speaker 3 (14:02):
Yeah, that would do it? Uh, like you like if
good stocks do bad?
Speaker 2 (14:08):
Market do bad?
Speaker 3 (14:09):
I was thinking about how to you know, appropriately phrase
this these days without scaring people. But in reality, if
you are buying a market cap weighted US stock index
these days, like the S and P five hundred, oh,
put it one out there. It's really hard to argue
that you're not making a pretty big bet on artificial
(14:31):
intelligence or it's pretty concentrated bacial intelligence, right, like what
else out there? You know, if I look at the
top ten, what is not a big AI bet? It's
basically Apple.
Speaker 4 (14:41):
Is that the only one?
Speaker 2 (14:42):
Let's see, I'm pulling it up right now just to
get what we have. Uh, top ten Berkshire Hathaway.
Speaker 4 (14:48):
Okay, not a huge AI bet? True? So those are
your two?
Speaker 2 (14:53):
Yeah, because that's hang on one, two, three, four, five, six, seven,
eight nine yeap Berkshire Hathaway is your own choice there.
Speaker 3 (15:01):
Oh well, technically JP Morgan because if you combine alphabet.
Speaker 2 (15:04):
Oh yeah, you get two alphabets, which is wild, like
you should really only have one alphabet. But it's just me.
Uh yeah, so JP Morgan, So yeah, iud to the
top ten and again on a percentage waiting JP Morgan
birks you're half to wear three percent of the index.
So the rest of the top ten is north of
you know, thirty, So it's you know, kind of problematic.
(15:25):
And and this is the thing that we've talked about
a little bit before, which is, look, Mike, if someone
came to you with a portfolio and they said, hey,
I've got you know, seven percent portfolio and two stocks,
and then six percent in another two, and then four
percent in another two. You'd be like, it's a little
concentrated on the high end there. Like generally, you know,
(15:46):
you might be like, hey, anything above five percent concentration
is starting to get you know, a little bit high
for a single stock. And yet when you tell someone hey,
I'm just buying the S and P five hundred, there
you go. People go, oh, like, that's that's fine, You're diversified.
And the fact is, and this has been the case
for the last couple of years, when the big boys
have struggled, the index hasn't been able to get moving.
(16:09):
I know, we have all this talk about, oh, you
want good breadth, and you want you know, a lot
of participation on the upside, and you want, you know,
lots of stocks to go up. The fact is, in
this market since the start of twenty four, twenty three
was a little different, but since the start of twenty four,
when the big ai guys have struggled, the market has
(16:30):
not been able to find its footing. We've had this
on a few different occasions, the most recent one by
the way being look at the last like few weeks,
you know, we hit all time highs in September. Markets
just kind of chopped around recently, and it's because a
lot of these AI guys have been, you know, kind
of chopping around, not being able to keep moving up.
Last July before Jen mcgeddon where the Japanese yen blew
(16:54):
up the carry trade. What was going on in July
yet megacap, you know, AI starting to falter, and you know,
regional banks trying to lead that didn't work, right, you know,
it's I'm not saying that it can't work, but the
underlying market structure right now is not one that is
supportive of It's not one that is supportive of you know,
(17:22):
I'm just curing doctor Pepper being able to drive the index.
You know, it's not supportive of eBay being able to
drive the index. And until that changes, I don't know
that it you know, really can't.
Speaker 4 (17:34):
So US stocks.
Speaker 3 (17:35):
We're in agreement that AI is driving US stocks if
you're looking at a market market cap weighted index, which
is pretty much how almost everybody invests these days. Yeah,
everyone's comparing to the dot com bubble, and part of
the problem during the dot com era. Other than you know,
everyone bidding up stocks that turned out to not really
(17:57):
have any revenue, profit or anything else.
Speaker 4 (17:59):
Was that the the monetization of.
Speaker 3 (18:01):
The Internet and the products that came out, they weren't
very fast. It took a while to really innovate on
this product, right. Google went public in two thousand and four.
Uber wasn't founded until two thousand and nine. Facebook didn't
go public until twenty twelve. Obviously it was used a
lot before then. And so, to me, the multi trillion
(18:21):
dollar question here is, Look, there are plenty of companies
making money on AI, That's not what I'm saying, but
almost nobody's making money by charging individuals and businesses for
developing artificial intelligence related tools. And so to me, that's
the multi trillion dollar question is does it take a
decade like it did with the Internet or is AI different?
(18:44):
And we're going to see this monetization happen on a
much faster pace.
Speaker 2 (18:48):
Did you happen to catch Mark Benioff's comments yesterday from
Salesforces quarterly earnings?
Speaker 4 (18:56):
No, should we cover them now?
Speaker 2 (18:58):
Well, we could cover them now, but I think what's
more appropriate is for us to take a quick.
Speaker 4 (19:03):
Break, do Wall Street Watch.
Speaker 2 (19:04):
Do Wall Street Watch, and then I want to talk
about what he said, because Mark's been talking a lot
about how Salesforce has both been trying to sell and
utilize AI, and I found one of his comments yesterday
particularly interesting. So let's take a quick break here, and
on the back end of it, we are going to
do Wall Street Watch, and then we will talk about
(19:26):
mister Benioff's AI comments and what potentially means for the industry.
Speaker 1 (19:37):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (19:57):
All markets are mostly quiet as traders sift through weekly
jobless claims data and ready for the core PC index
for the latest looking inflation, due out tomorrow morning. Right now,
the Dow is up nearly twenty seven points, SMP five
hundred is up one single point, Nasdaq is down one
(20:17):
single point, RUSS two thousand is flat, Tenure treasure reeled
up three basis points at four point zero nine to
two percent, and crude oil up about a third of
a percent higher, trading just above fifty nine dollars a barrel.
Some breaking news from Meta this morning, following reports that
Mark Zuckerberg is expected to meaningfully cut resources for building
(20:40):
the Metaverse, potentially with budget cuts as high as thirty
percent next year. MetaStock rallying four percent on that news. Meanwhile,
Salesforce shares rising about two percent after the software company
hiked its full year of guidance as its AI product
Agent Force gained some traction as for its third quarter
of the company b Earning's forecast, but just miss street
(21:02):
expectations for its revenue. Elsewhere, a cloud software company, Snowflake,
posted a narrow quarterly loss and reported growing demand for
its AI agency. However, its outlook for product revenue growth
for the January quarter disappointed investors. Additionally, Snowflake agreed to
a two hundred million dollars deal with AI startup Anthropic.
(21:25):
Snowflake shares are plunging ten percent and Dollar General shares
jumping ten percent after the discount retailer lifted its full
year guidance after topping third quarter expectations. I'm Tucker Silva
and that is Wall Street Watch and a reminder you
can watch the show live every day on our YouTube
page while at Breaking Business News, and all of our
(21:45):
content is also archived, so if you want to go
see an interview or discussion about a specific topic, just
search the Financial Exchange on YouTube and hit that subscribe button.
Speaker 2 (21:57):
Mike was of the week going to get two on AI. Salesforce.
Mark benioffs right, So here's something that I found interesting
when he was talking. So Salesforce. If you're not familiar
with them, they are a provider of They started off
just doing a customer relationship management CRM software. They've since
bought up a bunch of different companies such as Tableau, Slack,
(22:20):
and so they've got basically a whole suite of business
software that falls under what's called Software as a service
sas as a basically kind of their their platform. They
sell these recurring subscriptions to use their software. It's a
very popular model these days, and one of the things
they've been doing over the last year and a half
is both trying to use AI internally but also now
(22:44):
sell AI tools through what they call their Agent Force platform.
And Benioff made a comment yesterday specifically talking about you know,
how they use AI internally and basically what he said was, look,
all of these platforms are basically the same. We use
(23:05):
whatever's cheapest. And that, to me was the first time
that anyone in a position of power and knowledge as
it relates to artificial intelligence has come out and said that,
because what we've been hearing for the last you know,
few years is oh, you know, this model's newer and
better and it does this, and it does that. And
(23:25):
Benioff's no dummy, like he sees what's going on in
tech and he sees how all of this is working.
And for him to come out and just say, yeah,
we use whatever's cheapest, that's kind of interesting to me.
Speaker 3 (23:38):
Yeah, that's fascinating because he has another cases praised, you know,
Google's Gemini.
Speaker 4 (23:44):
I know he's come out and said that.
Speaker 3 (23:47):
He's also the other commentary that he's made and granted,
this is what you're ready to hear from any CEO
that is pushing AI is basically that, hey, you know,
the customer is just catching up to the pace of
innovation that you know, we're seeing among these tech companies,
and so yeah, it's okay to be skeptical, but the
demand is going to come because of how groundbreaking all
(24:09):
this is, which you know, welcome to every other tech company.
Speaker 4 (24:13):
CEO's earnings calls that piece is interesting.
Speaker 3 (24:19):
That is the that is the other piece of all
of this, which is the ease of switching. I don't
I don't claim to fully understand this, but the ease
of switching between generative AI platforms seems to be a
pretty crucial requirement for these companies, and it leads to
(24:43):
big questions for me, at least about Google or open
AI's ultimate value when it comes to these things.
Speaker 2 (24:50):
Well, and let's this is actually, I think a great topic.
If you're an individual. Let's say that you're not a company.
Let's say that you're just an individual user, and you've decided, Hey,
you know what, I like open ai the best. I'm
gonna I'm gonna pay them twenty dollars a month to
use their platform. Is there anything keeping you on that
platform and preventing you from going to use Gemini? For
(25:14):
I think there. You know Base one is like twenty
or twenty five a month. Is there anything that keeps
you there today?
Speaker 3 (25:20):
No, I suppose one thing that would keep you there,
Like when I use Gemini, I have all the history
of every query that I've done.
Speaker 2 (25:27):
You still have that even if you're not paying for it?
Speaker 3 (25:29):
Right, Yeah, I guess I would. But do they start
to gate keep some of this stuff?
Speaker 2 (25:34):
Maybe? But also like how much do I need my history?
Like as an indipendent, how much do I need my conversation?
Like I've been using llms for I don't know, two
two and a half years now. Sure do you know
how many times I've had to go back and be like, hey,
what was that thing that I like looked up you know,
(25:56):
X long ago?
Speaker 4 (25:57):
Yeah?
Speaker 2 (25:58):
Maybe once or twice.
Speaker 3 (25:59):
It's not like other technologies. It's not Apple, where you
need to be in the Apple universe because all of
your friends and family are and you need to be
seen wearing an Apple product. It's not Facebook where all
of your friends have a social media page and you've
got your history of all your photos and events on
your Facebook or Instagram page. It is unlike any of
(26:21):
those technologies. I suppose it's a bit more like search.
Speaker 2 (26:25):
Which you never go back and like look at your
searchestor where you just search again.
Speaker 3 (26:29):
True, but what let me ask this is Google, the
absolute best search engine that's ever existed. I don't use it,
and yet they have what ninety percent market dominance, so
users can easily switch between search engines they choose not to.
Speaker 2 (26:49):
Or in some cases are defaulted into it.
Speaker 3 (26:52):
Right, So maybe that's the model for this and we're
over and maybe we don't need to be concerned about
that switching effect.
Speaker 2 (27:00):
The count Like the counter to that is, so if
you look at like the areas where there's basically, you know,
a winner takes all situation, search is one operating system
is basically another. And again I say this is someone who,
like I do, own a bunch of Apple products. But
when you look at market share, act doesn't really matter. Yeah,
(27:20):
you know, it's still a tiny fraction relative to Windows
as an operating system. All you Linux people out there,
good luck, But like it's it's something where so you've
got you know, okay, search is kind of a winner
take all situation. Operating system has been a winner take
all situation. Other than that, I'm trying, I'm struggling to
(27:43):
like think of areas where I guess if you're just
looking at like document sharing, like you know, PDFs as
the standard, sure you know is something that's out there.
So they're like there's a few areas, but more often
than not, we've ended up with like three to four
big players in a space, or kind kind of a
smattering of smaller ones. Like there's still consolidation, but it
(28:03):
doesn't get to win or take all. And in all
of those the ones that like you look at operating system,
there's a clear reason why, like you all need to
use the same operating system, right, yep, there's a huge
reason why you don't just let people you know, at
a company like choose, you know exactly what they're doing.
You need compatibility, so I get it there. The search
(28:23):
one is interesting to me because there is no reason
why people should just use Google right Historically, like you
go back twenty years ago and the answer was it
did produce the best search results. I'm just not sure
it does anymore. But that might just be that the
Internet's dying more than anything else. So I guess I
(28:44):
just don't know, but it's it's interesting to me that
if this is going to be commoditized, what you did see,
if you look at like how technology commoditization usually works,
you do end up with like two or three companies
that dominate the space. Think about on the hardware side,
for processing. Like historically for CPUs it's Intel an AMD,
(29:05):
and Intel basically kept AMD alive just so that they
wouldn't get suit for antitrust memory, you've got kind of
the same thing, digital storage, same thing. So like it's
it might not be winner take all, but it's probably
gonna be like top three or four take all just
because of the scale that you get there, right.
Speaker 4 (29:24):
Seems like it.
Speaker 3 (29:26):
But again, the pace at which these models have been
coming out and leapfrogging each other has been fascinating to
watch and really cause into question their ultimate value.
Speaker 2 (29:34):
And you don't know, You still don't know who the
winner's going to be. Remember Google was not the first
search engine. I know, I know one thing for certain
about winners. They're not all going to be winners, correct,
we listen. The market does not give participation trophies. No.
Speaker 4 (29:53):
Right now they.
Speaker 2 (29:54):
Are, Right now they are, and it's making everyone feel
good about themselves. But eventually you got to grow up
and you start keeping score and those participation trophies you
can still hold them, but they're not going to mean
much to you, you know, down the road. Just take
a quick break when we return. I think that's enough.
Like AI and stock bubble talk right like we can
(30:16):
move alone, right like I'm good on AI for now. Uh,
let's talk fed after this.
Speaker 1 (30:24):
Text guys six one seven three six two one three
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This is the Financial Exchange Radio Network.
Speaker 6 (30:33):
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Speaker 1 (31:00):
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Speaker 4 (31:33):
All right.
Speaker 2 (31:33):
So we got a couple different pieces out, one in
Bloomberg and one of the Financial Times discussing how bond
investors have basically talked to the US Treasury Department and said, hey,
we'd prefer not to see Kevin Hassett running the FED.
And we even have someone on record here, Gregory Peters,
(31:56):
the co chief investment officer at PGM Fixed Income, saying
that they're not sure that Hassen would be able to
deliver what the President is necessarily looking for when it
comes to how the FED would move not just short
term rates, but potentially be able to influence longer term rates.
Speaker 3 (32:17):
Bluster or real action here, because ultimately, I don't see
any move in yields or I mean, I guess I
don't remember when the President more or less acknowledged that
Hassett was the pick. But the lowest we've gotten to
over the last month on the ten year has been
three point nine to nine.
Speaker 4 (32:33):
We're sitting at four to one right now.
Speaker 3 (32:35):
It's not a nothing move, but I don't know that
it actually lines up with it, And I don't know
that this commentary is actually meaningful if they're not acting
upon it.
Speaker 2 (32:45):
Yeah, I'm just not sure that this dog's gonna hunt
Like I just I just don't know that the market
is going to have some kind of freak out about
Hasset being named. If that's the case, I think again,
this has kind of been telegraphed for quite some time now,
you know, I think you know it's it's been something
(33:07):
that's been pretty likely probably for the last four to
six months.
Speaker 3 (33:13):
Is that fair, Mic, Yeah, So if they're not trying
to actually influence things, then they're not placing bets based
on their commentary. What is the purpose of this to
lay a stake in the ground that, hey, the FED
still needs to be independent here and any FED chair
that tries to bring down long term interest rates is
going to fail to do so. Just kind of marking
their territory on this one so that they can quote
(33:36):
it three years from now.
Speaker 4 (33:38):
And I'm just.
Speaker 3 (33:38):
Saying, why do they need to, Like, what's what's the
point of that, Like the you're not actually trying to
get the president to change his mind. It doesn't seem
like you are.
Speaker 2 (33:49):
The President's not going to change his RND, Like he's
going to do what he wants to do on this, right,
And ultimately here's the other thing that like on this
Hassett is going to end up having to do what
the market forces him to do. Like before Scott Besson
came into office as the Treasury Secretary. Bessont said a
(34:09):
lot of stuff over the last year. Some of it
was in relation to, Hey, I don't like how Janet
Yellen is issuing a lot more debt on the you know,
oncertain schedules. I would do things differently.
Speaker 4 (34:26):
Got there did the exact same thing.
Speaker 2 (34:28):
There's been no shift at all in terms of the
maturity schedule for the debt that Besson has been issuing,
because ultimately, when push came to shove, he said, Okay,
this is what's actually demanded by the market, and if
I don't issue this, the market's gonna say you need
to change your mix. And that's how you end up
where you are. So when I look at you know,
(34:49):
whoever it is that's running for a FED chair, whether
it's Hassett, whether it's Warsh, whether it's Waller again Zervos,
like you can go through like the whole laundry list
of people that have been and you know, consider to
throw their hat in the ring. They're all saying yes,
like I want to cut, I want to cut. I
want to cut. And by the way, as I said yesterday,
(35:09):
I'm pretty darn sure that at this point, given what
we are seeing from the US labor market, I'm more
nervous about, you know, needing to cut in twenty twenty
six than you know, needing to hike. I think labor
is going to be the bigger problem next to your
relative to inflation. But also you're gonna be dictated by
what the market shows you. If you have an economy
(35:31):
with high growth and inflation starting to build, you're not
gonna be able to cut, right. If you have an
economy with slowing growth and unemployment starting to build, you're
gonna be able to cut. And so I I don't
think anyone running for FED chair is, you know, to
(35:52):
to the point where they would be like, yeah, even
though inflation's going up, I'm just gonna cut because that's
what I said I was gonna do. No like these are.
They're no du in this list. Like they're all campaigning
in their own way to try to get the president's attention.
But ultimately I don't think anyone that's in the running
here is like an idiot or anything like that.
Speaker 5 (36:14):
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Speaker 2 (37:22):
Mike Grate a peace in Financial Times, How will the
rise in Japanese bond yields effect global markets? I remember
you tell me, Well, here's the thing. So last year
last summer, Japanese bondilds were rising, and that, in conjunction
with a couple other things, kind of broke markets for
a week or two last August. It ultimately, you know,
(37:43):
ended up being something that was a non factor for
the long term, but it caused some pretty significant volatility
for about a week or so. And I'm skeptical something
will happen similarly, just because again, once you've seen a
problem and everyone's aware of it, then you know, mart
WHI has been generally you know, set their portfolios upsets
(38:03):
that they're like, oh, I won't make the same mistake twice.
In doing so, they might make entirely new mistakes. But
it's really kind of rare that you see the same
problem bite markets in the same way, in that I'm
not sure there's a direct spill through to equity markets
the way there was last year. But could rising Japanese
(38:25):
bond yields put pressure on global bond yields and almost
make hassets job tougher? Could it make hasts job tougher.
You darn right it could. It's absolutely a possibility. There,
let's take a quick break. We got our two coming
up in a little bit.
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