May 8, 2026 • 38 mins
The latest jobs report came in stronger than expected, challenging growing fears that the economy is starting to crack.
Chuck Zodda and Mike Armstrong break down why hiring remains surprisingly resilient despite slowing growth, rising inflation pressure, and continued concern around AI-driven job disruption.
Also covered:
Chuck Zodda and Mike Armstrong break down why hiring remains surprisingly resilient despite slowing growth, rising inflation pressure, and continued concern around AI-driven job disruption.
Also covered:
- Why the unemployment rate rose even with solid job creation
- The hidden demographic shift reshaping the labor market
- Why transportation and freight activity are suddenly surging
- How rising prices are eating away at consumer spending power
- Why the Michigan Consumer Sentiment survey may no longer be useful
- The growing debate over whether AI is distorting the economy
- How cybersecurity risks are accelerating as AI tools become more powerful
- Why SpaceX’s upcoming IPO could reshape markets and index investing
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:20):
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(00:42):
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donation today. This is the Financial Exchange with Chuck Zada,
(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
It is Chuck and Mike and Ben with you here,
and we're gonna start today with a discussion of the
jobs report, because quite honestly, we can't start every show
talking about energy prices.
Speaker 3 (01:25):
We'll get there.
Speaker 2 (01:28):
We haven't started with AI in a while. We spend
like a third of the show covering it usually, but
it's it's unusual that we start with it because we
have to maintain control over the robots. We can't if
we give them the open mic, Yeah, the whole show.
Speaker 4 (01:46):
Yeah, they take next.
Speaker 2 (01:47):
If you give a robot a cookie, it's gonna want
a cup of milk to fry its circuits.
Speaker 4 (01:53):
Got it.
Speaker 2 (01:54):
So we had a job report this morning, and here's
what we saw. One hundred and fifteen thousand jobs created
versus estimate of sixty two. The prior month was I'm sorry,
February was revised down by twenty three thousand, March revised
up by seven.
Speaker 3 (02:09):
It's no meaningful change about.
Speaker 2 (02:11):
Sixteen thousand jobs difference, but that's just not a meaningful number.
And ultimately the unemployment rate stayed at four point three percent.
If you'll get the unrounded number, it did move up
from four point two six to four point three four.
We could talk about why that's the case as we
go through here, and so I think you will get
the headline numbers and you say, pretty good. You know,
(02:35):
right now, the break even estimate for the unemployment rate
to not move up is somewhere in the ballpark of
probably twenty to sixty thousand jobs needed each month because
the baby boomers are retiring and there's not enough gen
zers to replace them, and immigration is probably close to
net zero on an annual basis, we don't know exactly where,
(02:57):
and so there's just not much labor force growth, if any,
right now.
Speaker 5 (03:01):
So we came into this report kind of guessing that
we wouldn't get any alarm bells. I think it's fair
to say that this report showed no alarm, no alarms,
no big surprises here compared to you know, what we've
been getting from weekly jobless claims numbers, what we've been
getting from jolts and other surveys of the labor market,
(03:22):
which again good news, but unsurprising in terms of what
we got reported here.
Speaker 2 (03:27):
I think if you're looking for some stories that you
know as you dig through the data in terms of okay,
so like what do we get underneath the surface. The
participation rate in the labor force dropped again from sixty
one point nine down to sixty one point eight percent,
which again not entirely unsurprising because you have more baby
(03:48):
boomers retiring and that is included.
Speaker 4 (03:51):
This is not like a discouragement story.
Speaker 5 (03:52):
This is a total labor force participation rate, which measures
you know, every living person, and so as we as
saiety age, we anticipate that coming down.
Speaker 2 (04:02):
The age twenty five to fifty four stayed level at
eighty three point eight percent.
Speaker 3 (04:06):
So no change there.
Speaker 2 (04:08):
So again it's it's demographics that are explaining that drop
in the labor force participation rate. Now, the interesting thing
I mentioned that the unemployment rate on an unrounded basis
went from four to two six to four three four,
So it just missed rising from you know, four point
three percent to four point four. You might say, well,
how could the unemployment rate rise when there were one
(04:30):
hundred and fifteen thousand jobs added and that's above the
supposed break even number. The answer once again comes back
to the fact that the jobs report we receive it's
two surveys. The unemployment rate comes from a survey of households.
The jobs created number comes from a survey of businesses.
The household survey showed a net reduction actually of two
(04:52):
hundred and twenty six thousand jobs. Now this is neither
right nor wrong. Again, these are both surveys. So generally
what you want to see is the surveys pointing in
the same direction. Occasionally for a month, a quarter, or
sometimes even longer, they might give you different views because
of how the numbers are imputed through the models. Remember
(05:12):
how many of you listening raise your hands, even if
you're driving, you can raise one because none of you
are going to raise one hand. No, because none of
you are going to raise it. Okay, how many of
you have ever been surveyed by the Bureau of Labor Statistics.
Speaker 4 (05:25):
No one in Here's right, I don't know a single.
Speaker 3 (05:27):
Person that actually has.
Speaker 2 (05:29):
Now I know that they do it, but again they
ask like, you know, fifty thousand Americans a month. There
are a lot of Americans, and that's not you know
many that they actually survey. So this is why you
have this you know, short term thing where hey, hundred
and fifteen thousand jobs created, but the unrounded unemployment rate
went up. It's because of differences in the survey methodology.
(05:51):
Neither one's right, neither one's wrong. Don't read too much
into any one particular month, so I'm not overly concerned
about that. We'll see how things go here other data
points when we dig into some of the underlying information.
Manufacturing consistent with what we've been seeing from the This
(06:11):
is actually wild. The ism manufacturing is showing that manufacturing
output is jumping right now, but that employment is dragging.
This match that two thousand manufacturing jobs lost for the
month not entirely surprising.
Speaker 3 (06:26):
It's just kind of what we've been seeing.
Speaker 4 (06:27):
The big gains.
Speaker 5 (06:29):
Healthcare continues to be the big gainer year after year now,
and then transportation and warehousing also some big gains, followed
by retail. So thirty plus thousand both transportation and healthcare.
Speaker 2 (06:40):
I want to talk about the transportation housing. This is
back to back months now that transportation and warehousing has
been ripping.
Speaker 3 (06:46):
And if you happen to follow.
Speaker 2 (06:48):
Craig Fuller, who we had on our show a bunch
last year during the pul tariff Kerfluffel, Craig runs a
a data service. He does a bunch of stuff, but
one of the things he does is he runs a
data service that shows a bunch of freight information, and
basically he's been saying, look, since the start of the year, like,
freight's been going absolutely nuts. There's this huge manufacturing restocking
(07:10):
cycle that's going on, and so freight's been crazy. This
data is matching what we are seeing in terms of
freight activity around the United States. So it's absolutely a
real thing that is matching up with some of the
other data. Other pieces that we saw, one of my
favorite ones that I use as a proxy for consumer
demand is what's known.
Speaker 3 (07:30):
As aggregate payroll growth.
Speaker 2 (07:33):
Aggregate payroll growth is this you only get half the
picture if you're looking at how many jobs were added.
You only get half the picture. If you're looking at
wage growth. If you want to see how much more
money is going into Americans pockets overall, you will get
aggregate payrolls, which is wage growth times payroll growth. And
so what we see here is for the last twelve months. Again,
this is really it's a volatile series month to month,
(07:55):
So the month to month is not useful, but the
twelve month number is, in my opinion, aggregate payroll growth
over the last twelve months. Uh is now running at
a pace of three point nine percent, which is not great. Generally,
we like to see that running somewhere between four and
(08:17):
a half and five and a half percent. That gives you,
you know, enough spending growth from actual payrolls that you
know you can you can you know, have some meaningful
growth there. You get to this point, and historically it's
been a little bit iffy. You can, you know, at
a caveat that Hey, generally we haven't seen the same
(08:38):
kind of labor supply issues that we've had the last
year or so, So maybe three to nine is a
level which the economy can still sustain itself.
Speaker 5 (08:48):
I think it's pretty clear though, at that pace, consumers
cannot afford the inflation that's being passed.
Speaker 2 (08:54):
This is why when you look at it Q two,
GDP is probably going to be somewhere close to zero.
If inflation's running four percent and nominal GDP ends up
running somewhere around four, inflation's going to eat up all
of the GDP there for the quarter. Okay, Like this
is I just don't think that you're going to have
much in the way of GDP for Q two. I'm
(09:16):
not saying that that's like a permanent thing or you
know something that's that's going to be a huge problem.
I'm just telling you it's where I think you're probably
going to end up is with not much in the
way of real GDP growth because inflation is likely to
eat through most of it. Yeah, that's just kind of
where we're going for the quarter. Beyond that, it's going
to depend on the horror moves reopening. See we got
(09:37):
through fourteen minutes of a show without mentioning it once.
Speaker 5 (09:39):
The last just observation that I want to continue to
make about our aging population is the healthcare and social
services sector of the labor force, because it has been
a major driver of employment for the last frankly decade.
Speaker 4 (09:55):
And in terms of where we were, we were.
Speaker 5 (09:58):
At about nineteen million people working in those sectors a
decade ago. We're now at about twenty three point eight.
And when you chart it against the population of Americans
over the age of sixty five, it's just a perfect
one for one. And we know where that population of
(10:20):
folks over the age of sixty five is going higher
for the next several decades. And it's tough for me
to envision a scenario given just where we are with automation, robotics,
et cetera, where this does not follow a straight line higher.
I think the demand for nurses, social workers of different
sorts is just going to be on a straight line upwards.
(10:41):
And unfortunately for those aging folks you know, turning sixty
five now and looking forward at the cost of healthcare
over the next few decades, and specifically the cost of
long term care, I really struggle to envision a scenario
where it's not straight line upwards further.
Speaker 3 (10:56):
Yeah, let's be honest.
Speaker 2 (10:58):
Also, if you believe like I do, that artificial intelligence
is going to be able to take over more and
more of the thinking and through robotics, more and more
of the doing.
Speaker 3 (11:10):
Yep.
Speaker 2 (11:11):
The place that you land in terms of like where
the majority of people will actually have jobs in the
future is people taking care of people. Yeah, Like, that's
where it points to. I'm not saying this is good
or bad. I'm just saying it probably is. Let's take
a quick break. When we return. Let's see, we're gonna
(11:33):
talk to AA.
Speaker 3 (11:34):
We gotta come.
Speaker 4 (11:35):
Yeah, a distortion baby.
Speaker 3 (11:36):
All right.
Speaker 2 (11:37):
If you don't like artificial intelligence, you'll hate what comes next.
Speaker 1 (11:42):
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Speaker 6 (12:13):
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Speaker 2 (12:47):
Before we go further into talking about AI, can we
talk about the other data point that we just got
a couple minutes ago, which was the Michigan consumer sentiment data.
Speaker 4 (12:58):
So long as you know the actual report.
Speaker 3 (13:01):
Yeah, what do you mean.
Speaker 4 (13:02):
I didn't look at it yet. So as long as
you're ready to come.
Speaker 2 (13:05):
To guys, I gotta be honest. This report is broken.
We can't use it anymore. Yeah, and it consistently gets
cited as like a good report. The data coming out
of it is hot garbage. So what I mean by
this is one of the questions that gets asked. They
(13:26):
asked to a bunch of you know, inflation expectations one
and one of the questions they ask is what is
your expected price change? Not just this year, but they
ask in the future in the next five to ten years.
And Mike, last year, when tariff Mania was gripping the nation,
which was the biggest mania since Beatlemania, the you mish
(13:50):
five to ten year inflation expectation came in at four
point four percent in April. Okay, okay, expecting inflation to
average four point four percent when you look.
Speaker 3 (14:00):
That five to ten year period.
Speaker 2 (14:01):
Okay, this year, with gas prices ripping and you know,
all kinds of changes to other pricing that's happening now,
it's at three four. I'm sorry, but we're just too
stupid to answer this survey.
Speaker 4 (14:22):
Okay, I'll take it more broadly.
Speaker 5 (14:25):
No, No, I recognize, Mike, this is a complex I'm
not defending the survey, so.
Speaker 2 (14:30):
I know, but like, let me just put into perspective
what we just got as a result here. A year
ago exactly, household said, Hey, because we're nervous about tariffs,
which has never been implemented in their lifetime and most
of which have since been called back, we expect inflation
to be four and a half percent for the five
(14:51):
to ten year period. Yeah, and today, with actual gas
prices fifty percent higher than they were three months ago,
people are saying that's only gonna be three point four percent, Like,
we're just not capable of understanding prices.
Speaker 4 (15:07):
I'll take it. You know.
Speaker 5 (15:09):
Again, there's the prices piece of all of this, which
I think people are confused about. But I'm just gonna
take overall sentiment which they measure here. Yes, it's giving
you readings now that are as bad or occasionally worse,
worse than two thousand and eight, right in two thousand
and nine when unemployment was like eleven percent. This is
(15:30):
fundamentally not a usable survey for that reason.
Speaker 3 (15:33):
A lot it's broken.
Speaker 2 (15:34):
It is like something I know they changed the methodology
a couple of years ago to move to online only,
and maybe that's what did it, because the people.
Speaker 3 (15:42):
Who hang out online are trolls.
Speaker 2 (15:46):
I don't know, Like it just very emotionally edgy, like
what's the right way to phrase, just like, quite honestly,
you spend too much time time online, like it affects
how you think about things.
Speaker 5 (16:00):
Yeah, I don't know what to make of this survey.
I don't even know if it's terribly useful on a
month of a month basis, but very clearly using it
to indicate anything about today's economy compared to times over
the last few decades is contextually useless.
Speaker 3 (16:16):
I don't think we can use it anymore.
Speaker 5 (16:17):
Quite honestly, it's which is a shame because it's one
of the longest running surveys that we have right.
Speaker 2 (16:22):
This is like the gold standard of sentiment surveys historically,
and I'm pretty sure it's completely useless right now, because
how do you reconcile this consumer sentiment like current conditions,
consumer sentiment is basically printing as bad as it's ever printed,
right at the same time that you have consumer spending
(16:43):
continuing to run four to seven percent.
Speaker 4 (16:45):
Year over year growth unimpeded. Yeah, you can't square those
two other than.
Speaker 2 (16:53):
Even if you want to say, hey, consumer spending is
being driven by the wealthy, so people can feel bad
but they're fine. That still makes this a useless sur right, Like,
either way, it's not giving me anything useful at this point.
Speaker 5 (17:05):
Yeah, I don't know what the cause. I don't know
if it's because of a bunch of people online not
being unhappy.
Speaker 4 (17:09):
I don't know if it's.
Speaker 5 (17:10):
Because people are increasingly responding to these surveys in a
political fashion, which they clearly are, because we can measure
the democrat versus Republican response to these surveys and tell
you how dramatically they flip every time there's a new president.
But some combination of things makes it so that these
surveys do not indicate anything. So if you see it
(17:33):
flashing against your screen that new Michigan Consumer Sentiment did X,
Y or Z, I would really encourage you to throw
it out, because it's just maybe it'll tell us again
something again in the future. But right now, again, there's
no useful context for me to be telling you that
the consumer Sentiment survey right now is giving you a
reading that's worse than it was in May of two
(17:54):
thousand and nine.
Speaker 2 (17:56):
Which is, Look, you can think whatever you want about
the economy.
Speaker 5 (18:02):
It's better than it was in May of two thousand.
It's better than it was in May of two thousand
and nine.
Speaker 4 (18:05):
Yep, just full stop.
Speaker 3 (18:08):
You can have your own feelings, but you don't have
to share them.
Speaker 2 (18:10):
Yeah.
Speaker 4 (18:11):
Yeah, it's definitively better than it was in May of
two thousand and nine.
Speaker 1 (18:17):
You can be a.
Speaker 2 (18:17):
Title to your own opinion, but you're not entitled to
that opinion being right. And the economy is better than
it was in May of two thousand and nine.
Speaker 4 (18:24):
Yeah, yeah, we can agree on that.
Speaker 2 (18:26):
You know. It's like that's that's just where it is,
speaking of you know, economic statistics that don't make sense
peace in the Wall Street Journal. AI is distorting practically
everything about the economy, is it.
Speaker 5 (18:41):
It depends on your definition of distorting. I think it's
fair to say that GDP and other things are being
influenced by capital expenditis from giant companies more than they
in other times. You might be able to blame a
you know, investment drop in places like housing and office
(19:02):
buildings and factories partly on the crowding out effect of
the AI spend. I think that's an interesting story. I
don't know if any of that's distortion though, right Like
you know that's saying like, oh, like when the automobile
was invented, it totally distorted the horse based economy.
Speaker 4 (19:22):
It's changing things.
Speaker 5 (19:23):
Yes, we gotta talk a little bit more about this.
Let's say quick break. Wall Street Watch is coming up next.
Speaker 1 (19:40):
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 t no full Wall
Street Watch trekking the stocks, the data, and the headlines
driving markets so far today right here on the Financial
Exchange Radio nedwork well.
Speaker 6 (20:02):
Markets are reacting positively to this morning's job support that
came in better than expected. The Dow Jones is curry
currently up seventy five points or zero point one five percent.
The S and P five hundreds up fifty points or
just under seven tenths of a percent. The Nasdaq is
up just under three hundred points or one point one
five percent. Gold continuing its rally, up twenty three points
(20:22):
or half a percent, Silver up a percent and a half.
Cloud infrastructure company Core Weave is seeing a share price
drop ten percent as its second quarter revenue guidance disappointed
Wall Street. Core We've sees revenue ranging from two point
four five billion dollars to two point six billion dollars.
The midpoint of a two point five to three billion
(20:43):
fell short of the two point sixty nine billion consensus call.
Upwork shares tumbling nineteen percent after the company announced a
restructuring plan that includes reducing its workforce by twenty four percent.
Upwork said that it is doing this to make sure
the company remains profitable as work evolved. It also reported
first quarter earnings and revenue that came in slightly lower
than expected. Expedia shares are down eight and a half
(21:06):
percent after the online travel agency called for second quarter
revenue of four point one to one billion of four
point one to nine billion, compared to the four point
one two anticipated by analysts. Booked room nights in the
first quarter missed expectations, landing at one hundred and thirteen
point nine billion dollars versus the consensus of one hundred
and seventeen. Wendy's Company stock is up five point seven
(21:29):
percent after reporting better than expected revenue of five hundred
and forty point six million dollars in its first quarter
financial report. Analysts polled estimated revenue would be five hundred
and eighteen million dollars. Earnings also came in above estimates,
and the company also announced the plan to build up
to one thousand restaurants in China over the next decade.
Speaker 3 (21:49):
I am Ben Kitchen and that was Wall Street Watch Mike.
Speaker 2 (21:52):
During the last segment, we were covering a piece from
the Wall Street Journal titled AI's distorting practically everything about
the economy.
Speaker 4 (22:00):
So we agreed that distortions not really the right term.
Speaker 2 (22:04):
It's impacting the economy in ways that you know, we're
not the economy would look different. But I mean that's
like saying, well, if you know, Applebee's didn't have, you know,
the burger on their menu, then you wouldn't be able
to order it. Like, it's not really a useful counterfactual.
Speaker 4 (22:22):
Yeah, it's not.
Speaker 5 (22:24):
I think what we can say is, you know, most
of the time through the last when would you argue
that we turned more from a manufacturing to a consumer
based economy eighties. Yeah, in the last forty years or so,
it's been getting driven by the consumer and housing as
a major investment area, and neither of those two are
(22:48):
currently the growth engine of the economy. The growth engine
of the economy. To be really clear about this, I
know plenty of people don't use it day to day,
but the growth engine of the economy is seven hundred
billion dollars that the four major tech companies that are
spending on AI are spending this year and the one
point one trillion dollars that's estimated to be spent next year.
Speaker 4 (23:09):
And it is not to say that.
Speaker 5 (23:12):
It's either good or bad, but it is crowding out
other areas of investment. It is leading to employment in
new areas of the economy, and it is leaned to
higher prices and other things that we are all starting
just starting now to feel right like, you know, the
higher spending and AI is inarguably driving up the cost
(23:35):
of computers, iPhones and other technology that we hold on to,
and we will feel that for a few years now.
Is that a good thing or a bad thing?
Speaker 4 (23:43):
Is it distortion? You know, what would the economy look
like without it?
Speaker 5 (23:46):
I don't find those to be useful exercises, but you know,
I could certainly make an argument that housing would be
stronger if AI investments didn't exist the way that it
does today.
Speaker 3 (24:00):
Yeah.
Speaker 2 (24:01):
Yeah, Look, I don't know why we look at like
AI spending an AI investment like it's this foreign thing
that it's like, oh, like this is making the economy
look different from how it would be otherwise.
Speaker 5 (24:16):
Well, we do it with everything, but we don't though. Well,
I compare it to when we build lots of houses.
Speaker 2 (24:22):
We don't go, oh, these houses are making the economy
look different. No, we're like, hey, there's like a housing
boom going like we just call it like a boom
and we accept that there's more economic activity there.
Speaker 5 (24:34):
So I compare it to, for instance, all the talk
of the healthcare workers over the course of the last
decade and all these people who are saying, well, the
labor market would look like crap if we didn't hire
all these nurses over the last ten years. My point is, yeah,
but we did and we're going to continue to do so,
so it's not distorting things. You can't just remove it
(24:54):
from the employment. We do it inflation too. Oh, you know,
inflation would be so much better if it just wasn't
Shelter costs increasing by six percent year over years, then
spent the money somewhere else, Like, you can't just remove
the impact of an economic phenomenon and say, look at
what the economy would look like otherwise, this is the.
Speaker 4 (25:15):
Reality that we're in.
Speaker 5 (25:17):
And if you want to point out that, hey, an
increasing percentage of GDP and stock market growth is being
attributed to a boom in a new technology, and the
risk is that it turns out to be a bust
in some way and that spending disappears. Sure, that's true,
but you've got you've got to prove it out to
(25:39):
me that that's actually what's going to be happening, and
that that's an actual reason for concern.
Speaker 4 (25:45):
And also, I'm just done.
Speaker 5 (25:47):
With all of these stories like the one that we've
got from MarketWatch here about AI coming for your job.
After all the announcements that have been made, there.
Speaker 2 (25:57):
Are companies that over hired during the pandemic and are
now correcting that using AIS cover because they may also
be getting some productivity increases from AI.
Speaker 5 (26:07):
But AI is coming for your job if you work
in like three to six industries, and not even industries,
like specific roles within those industries.
Speaker 4 (26:17):
Let's let's not go too far in that direction. It's
coming for every job on what time frame is the
relevant question?
Speaker 3 (26:23):
Not right now.
Speaker 5 (26:25):
And if you're a web designer, and if you are
a paralegal, I think that they're coming for your job
very quickly.
Speaker 4 (26:32):
Yes, in just about every other area. I just don't
see it.
Speaker 1 (26:35):
Right.
Speaker 2 (26:36):
If you're a shrimp o captain, you're good for a while.
If you are the one of.
Speaker 4 (26:43):
The guys who's shrimp.
Speaker 2 (26:45):
If you sit on the back of the truck putting
the cones down on the highway, you're probably.
Speaker 3 (26:51):
Good for a while.
Speaker 4 (26:52):
Yeah.
Speaker 2 (26:52):
But if you are someone who makes your living, you know,
if you're a technical writer okay for those of you
who don't know what a technical writer is, they're the
ones that take what the engineers at Microsoft give you
and translate it into the manual that all of us
can understand. Yeah, you probably are gonna have a tough
time because AI is literally built to be like, hey,
(27:14):
take this information and turn it into this right. But
for everyone else right now, it's not really a threat.
What is a threat, okay, is for companies that have
over hired in the last five years, they're absolutely gonna
use it as an excuse to cut headcount. Doesn't mean
that every job is gonna go away.
Speaker 3 (27:35):
Sure, you know.
Speaker 2 (27:37):
Mark Andresen wrote yesterday that companies have overstaffed by two
to four x for the last twenty years, which fundamentally
doesn't make sense because ultimately you need it. It's like, Okay, yeah,
if we had AI twenty years ago, I guess we
might have been overstaffed if we could make it do
all this stuff. But talk to anyone who's worked in
a business in the last twenty years, and they're not
(27:59):
gonna be like, yeah, we could have done this with
eighty percent fewer people. That statement is just fundamentally dishonest. Yeah,
I guess, so it just doesn't make sense what I
will say. Do you remember back about a month ago
when Anthropic rolled out It's Mythos platform, Yes, and people
(28:22):
were like Even on our show, we were like, hey,
because they rolled what happened.
Speaker 5 (28:27):
They rolled it out, and then they had a meeting
with Scott Bessent and J Powell came to a meeting
with a bunch of bank executives and we were like, huh,
that doesn't happen very often. They warned a bunch of
tech executives that they needed to do something and we
were less scratching our heads, like this is a pretty
good pr move, but it does look like there's something
fundamentally serious about this too, So it was.
Speaker 2 (28:50):
Kind of like, hey, are they just you know, hiding
this from us to say how powerful it is? Or
is this like a real thing, And here's the first
example that we've seen that it's real. Mozilla who still exists.
Speaker 4 (29:07):
They may have to look that up.
Speaker 5 (29:09):
I chucked on me that this morning, and I was
not aware that Mozilla, who operates Firefox is still around.
Speaker 2 (29:13):
They make the Firefox web browser, which back in the
twenty and twenty tens was huge. I don't think it's
very big anymore, but it still is around on the
edges last year on average, because every month they roll
out a list of Hey, here are the bugs that
we fixed in order to improve our product security bugs specifically,
last year in twenty twenty five, they averaged twenty one
(29:35):
point five fixes per month for security issues, which for
the full year makes two hundred and fifty eight. In
April they fixed four hundred and twenty three security bugs,
which is one and a half times what they did
all of last year, and this was after they had
access to meat miffs. Now, the other thing that they
(29:58):
said is they provided list of like twenty of the
things that they fixed, and a bunch of them were like, oh,
this was, you know, from production that we put into
effect back in you know, two thousand and six, and
like this was just identified as a problem. So they're
literally fixing things that have been present in their code
for fifteen to twenty years that no one knew was
(30:20):
a problem before this.
Speaker 5 (30:23):
This makes me immensely concerned about antiquated industries like the
banking industry and like the healthcare industry. These are industries
that are famous for having antiquated systems that are full
of bugs. They are constantly the targets of cyber attacks.
Education systems would be a third one here.
Speaker 2 (30:44):
Did you see that Canvas got hacked yesterday? So again
I don't know, you know, I don't have kids that
use it, but Canvas is a learning management system. Yeah,
and basically it got hacked yesterday, and so throughout like
a bunch.
Speaker 3 (31:03):
Of colleges and school systems and everything.
Speaker 2 (31:06):
It's basically like not usable in a lot of cases
right now for teachers and students to manage their workloads,
because this is how it's managed today.
Speaker 5 (31:13):
All indications are that this is going to get way
worse before it gets better in terms of the breaches
and cyber attacks that are going to be out there
using these new tools.
Speaker 2 (31:22):
Yeah, let's take a quick break here. When we return,
let's talk SpaceX right after this.
Speaker 1 (31:31):
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Speaker 2 (32:04):
So SpaceX has an IPO that's coming up sometime in
the next probably four to six weeks. We don't have
exact dates yet. But here's the deal. SpaceX had bought
or merged with or whatever XAI, which is Elon Musk's
artificial intelligence company, which is now renting out data center
(32:26):
space to Anthropic because basically they didn't have enough demand
to do anything with.
Speaker 5 (32:31):
Do you know if XAI actually owned Grock because I
know it lived on Twitter, which is X Mike.
Speaker 2 (32:36):
I can't make sense. I have no idea. I didn't either,
I just did. Yeah, but here's the deal, so pretty
much shut it down. XAI in and of itself is
a standalone entity, is now fully shut down. So even
within SpaceX's it's not an official unit anymore. And basically
the company now is going to be space XAI and.
Speaker 3 (33:01):
That's what it's gonna be.
Speaker 4 (33:04):
You gotta stop.
Speaker 5 (33:05):
Changing these names if you're gonna be a publicly traded company.
It's listen, it can't be once every six months. This
is what everyone does now. Man, it used to be Facebook,
now it's Meta. Used to be Google, now it's alphabets.
I am still waiting for Mark Zuckerberg to change Meta's
name again now that the metaverse is not central to their.
Speaker 4 (33:24):
Kind of think, they'd have to write, but we'll see.
Speaker 3 (33:27):
I mean, isn't it kind of a joke?
Speaker 2 (33:29):
I mean, that would be like if we were still
sitting here, you know, in twenty twenty six, being like, man,
it's amazing how many cars Edsel sold. You know, like
you don't keep the name of your flopped product as
your company name.
Speaker 5 (33:43):
Yeah, yeah, that would be surprising. The IPO itself. You know,
when we talk about this thing, we are talking about
one that we have never seen before. The company's targeting
evaluation of two trillion dollars. That puts them with only
like six companies that are publicly traded today that are
larger than SpaceX. If it actually goes off of that
(34:03):
value be a seventy five billion dollar raise.
Speaker 4 (34:07):
A lot of complexities here.
Speaker 5 (34:09):
There's been talks of favoring some early Tesla customers and
other brand loyalists to Elon Musk's other brands. So really
confusing to me as to how this IPO is all
going to go off. But if it does and does successfully,
I mean, I'm just trying to brains from off the
top of my head here, Chuck Apple, Amazon, No, Amazon's
not two trillion, are they? Amazon might be like one
(34:31):
nine there, they're in the Microsoft, Nvidia, Apple, Amazon, Apple, Goo, Meta, Google. No,
Meta's not there, So yeah, it's Google. There's the only
companies that would be exceeding the size of this.
Speaker 4 (34:46):
Giant space company.
Speaker 5 (34:47):
So it will be fascinating to see if it does
go off this year.
Speaker 3 (34:52):
Yeah, there are some things that are.
Speaker 2 (34:57):
A little dodgy about how this is all going going
down in terms of what some of the indices and
exchanges are doing to try to encourage listings. Yes, none
of it really gives me the warm and fuzzies.
Speaker 5 (35:13):
And well, I can tell you firsthand the number of
advertisements that I see both in my email box and
on social media about hey, invest in this fund to
get pre IPO access to these x y Z companies.
And I'm sitting here saying, boy, something seems just off
about all of this.
Speaker 2 (35:34):
I'm gonna there's a piece from a guy by the
name of Dave Natig. He he's a big ETF guy,
like he basically knows more about ETFs and trading in
general than anyone like out there, in my opinion, just
like the the mechanics of how they work. It's not
like he's not like a great trader or anything. He
understands like, Hey, this is what this all means. I'm
(35:55):
just gonna quote from him.
Speaker 4 (35:56):
First.
Speaker 2 (35:56):
Under the new rules, simply because an IPO is big
enough to crack the top four, the company can skip
the three month aging window and be included in the
Nasdaq one hundred and just fifteen days. Used to be,
you had to you know, have a certain time period
before you could be included in there.
Speaker 3 (36:10):
Uh.
Speaker 2 (36:11):
Second, because SpaceX is floating such a minuscule amount of
the firm they abandon the old floor of how small
the float could be and just added any megacap at
three x there implied float, so basically SpaceX. When they
first list, not all the shares are available to be sold.
Most of them aren't because company insiders are not allowed
to sell during a certain lock up period at first,
(36:32):
and they're doing just a tiny, tiny little float in
order to seventy five billion. I was talking right, it's
seventy five billion, so ninety five percent is not going
to be tradable, and typically, like the Nasdaq's like no, like,
we don't allow low float shares to be like included
in the Nasdaq one hundred because they don't represent adequate
price discovery. Native here is basically like, yeah, you're not
(36:55):
going to get adequate price discovery because if all these
index funds have to go and buy from that pool
of seventy five billion that's outstanding, the price is gonna
get jacked up until everyone else has the ability to sell.
So pretty much he's looking at this, and that's just
the Nasdaq. The S and P five hundred typically has
to have companies wait a year to be considered for inclusion.
(37:18):
They have to have a ten percent free float and
need to have, you know, financial viability. The SMP is
thinking about abandoning that in order to get SpaceX listed
into the S and P, and so again it's kind
of like, what are we actually doing here and how
is this going to work out? We'll see, I don't know,
(37:39):
but he just points out that these are things that mechanically,
mechanically are not going to give you a good sense
of how SpaceX is worth at the beginning because of
forced bids that ultimately will end up disappearing and then
the real price discovery can take place.
Speaker 3 (37:55):
So there's that. Let's take a quick break here.
Speaker 2 (37:58):
When we return, we got our two coming up, and
we'll talk a little bit about the Middle East, talk
about China, President Trump heading to China next week, what
kind of expectations do we have, and a whole lot
more in our two
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(01:06):
and Mike Armstrong.
Speaker 2 (01:09):
It is Chuck and Mike and Ben with you here,
and we're gonna start today with a discussion of the
jobs report, because quite honestly, we can't start every show
talking about energy prices.
Speaker 3 (01:25):
We'll get there.
Speaker 2 (01:28):
We haven't started with AI in a while. We spend
like a third of the show covering it usually, but
it's it's unusual that we start with it because we
have to maintain control over the robots. We can't if
we give them the open mic, Yeah, the whole show.
Speaker 4 (01:46):
Yeah, they take next.
Speaker 2 (01:47):
If you give a robot a cookie, it's gonna want
a cup of milk to fry its circuits.
Speaker 4 (01:53):
Got it.
Speaker 2 (01:54):
So we had a job report this morning, and here's
what we saw. One hundred and fifteen thousand jobs created
versus estimate of sixty two. The prior month was I'm sorry,
February was revised down by twenty three thousand, March revised
up by seven.
Speaker 3 (02:09):
It's no meaningful change about.
Speaker 2 (02:11):
Sixteen thousand jobs difference, but that's just not a meaningful number.
And ultimately the unemployment rate stayed at four point three percent.
If you'll get the unrounded number, it did move up
from four point two six to four point three four.
We could talk about why that's the case as we
go through here, and so I think you will get
the headline numbers and you say, pretty good. You know,
(02:35):
right now, the break even estimate for the unemployment rate
to not move up is somewhere in the ballpark of
probably twenty to sixty thousand jobs needed each month because
the baby boomers are retiring and there's not enough gen
zers to replace them, and immigration is probably close to
net zero on an annual basis, we don't know exactly where,
(02:57):
and so there's just not much labor force growth, if any,
right now.
Speaker 5 (03:01):
So we came into this report kind of guessing that
we wouldn't get any alarm bells. I think it's fair
to say that this report showed no alarm, no alarms,
no big surprises here compared to you know, what we've
been getting from weekly jobless claims numbers, what we've been
getting from jolts and other surveys of the labor market,
(03:22):
which again good news, but unsurprising in terms of what
we got reported here.
Speaker 2 (03:27):
I think if you're looking for some stories that you
know as you dig through the data in terms of okay,
so like what do we get underneath the surface. The
participation rate in the labor force dropped again from sixty
one point nine down to sixty one point eight percent,
which again not entirely unsurprising because you have more baby
(03:48):
boomers retiring and that is included.
Speaker 4 (03:51):
This is not like a discouragement story.
Speaker 5 (03:52):
This is a total labor force participation rate, which measures
you know, every living person, and so as we as
saiety age, we anticipate that coming down.
Speaker 2 (04:02):
The age twenty five to fifty four stayed level at
eighty three point eight percent.
Speaker 3 (04:06):
So no change there.
Speaker 2 (04:08):
So again it's it's demographics that are explaining that drop
in the labor force participation rate. Now, the interesting thing
I mentioned that the unemployment rate on an unrounded basis
went from four to two six to four three four,
So it just missed rising from you know, four point
three percent to four point four. You might say, well,
how could the unemployment rate rise when there were one
(04:30):
hundred and fifteen thousand jobs added and that's above the
supposed break even number. The answer once again comes back
to the fact that the jobs report we receive it's
two surveys. The unemployment rate comes from a survey of households.
The jobs created number comes from a survey of businesses.
The household survey showed a net reduction actually of two
(04:52):
hundred and twenty six thousand jobs. Now this is neither
right nor wrong. Again, these are both surveys. So generally
what you want to see is the surveys pointing in
the same direction. Occasionally for a month, a quarter, or
sometimes even longer, they might give you different views because
of how the numbers are imputed through the models. Remember
(05:12):
how many of you listening raise your hands, even if
you're driving, you can raise one because none of you
are going to raise one hand. No, because none of
you are going to raise it. Okay, how many of
you have ever been surveyed by the Bureau of Labor Statistics.
Speaker 4 (05:25):
No one in Here's right, I don't know a single.
Speaker 3 (05:27):
Person that actually has.
Speaker 2 (05:29):
Now I know that they do it, but again they
ask like, you know, fifty thousand Americans a month. There
are a lot of Americans, and that's not you know
many that they actually survey. So this is why you
have this you know, short term thing where hey, hundred
and fifteen thousand jobs created, but the unrounded unemployment rate
went up. It's because of differences in the survey methodology.
(05:51):
Neither one's right, neither one's wrong. Don't read too much
into any one particular month, so I'm not overly concerned
about that. We'll see how things go here other data
points when we dig into some of the underlying information.
Manufacturing consistent with what we've been seeing from the This
(06:11):
is actually wild. The ism manufacturing is showing that manufacturing
output is jumping right now, but that employment is dragging.
This match that two thousand manufacturing jobs lost for the
month not entirely surprising.
Speaker 3 (06:26):
It's just kind of what we've been seeing.
Speaker 4 (06:27):
The big gains.
Speaker 5 (06:29):
Healthcare continues to be the big gainer year after year now,
and then transportation and warehousing also some big gains, followed
by retail. So thirty plus thousand both transportation and healthcare.
Speaker 2 (06:40):
I want to talk about the transportation housing. This is
back to back months now that transportation and warehousing has
been ripping.
Speaker 3 (06:46):
And if you happen to follow.
Speaker 2 (06:48):
Craig Fuller, who we had on our show a bunch
last year during the pul tariff Kerfluffel, Craig runs a
a data service. He does a bunch of stuff, but
one of the things he does is he runs a
data service that shows a bunch of freight information, and
basically he's been saying, look, since the start of the year, like,
freight's been going absolutely nuts. There's this huge manufacturing restocking
(07:10):
cycle that's going on, and so freight's been crazy. This
data is matching what we are seeing in terms of
freight activity around the United States. So it's absolutely a
real thing that is matching up with some of the
other data. Other pieces that we saw, one of my
favorite ones that I use as a proxy for consumer
demand is what's known.
Speaker 3 (07:30):
As aggregate payroll growth.
Speaker 2 (07:33):
Aggregate payroll growth is this you only get half the
picture if you're looking at how many jobs were added.
You only get half the picture. If you're looking at
wage growth. If you want to see how much more
money is going into Americans pockets overall, you will get
aggregate payrolls, which is wage growth times payroll growth. And
so what we see here is for the last twelve months. Again,
this is really it's a volatile series month to month,
(07:55):
So the month to month is not useful, but the
twelve month number is, in my opinion, aggregate payroll growth
over the last twelve months. Uh is now running at
a pace of three point nine percent, which is not great. Generally,
we like to see that running somewhere between four and
(08:17):
a half and five and a half percent. That gives you,
you know, enough spending growth from actual payrolls that you
know you can you can you know, have some meaningful
growth there. You get to this point, and historically it's
been a little bit iffy. You can, you know, at
a caveat that Hey, generally we haven't seen the same
(08:38):
kind of labor supply issues that we've had the last
year or so, So maybe three to nine is a
level which the economy can still sustain itself.
Speaker 5 (08:48):
I think it's pretty clear though, at that pace, consumers
cannot afford the inflation that's being passed.
Speaker 2 (08:54):
This is why when you look at it Q two,
GDP is probably going to be somewhere close to zero.
If inflation's running four percent and nominal GDP ends up
running somewhere around four, inflation's going to eat up all
of the GDP there for the quarter. Okay, Like this
is I just don't think that you're going to have
much in the way of GDP for Q two. I'm
(09:16):
not saying that that's like a permanent thing or you
know something that's that's going to be a huge problem.
I'm just telling you it's where I think you're probably
going to end up is with not much in the
way of real GDP growth because inflation is likely to
eat through most of it. Yeah, that's just kind of
where we're going for the quarter. Beyond that, it's going
to depend on the horror moves reopening. See we got
(09:37):
through fourteen minutes of a show without mentioning it once.
Speaker 5 (09:39):
The last just observation that I want to continue to
make about our aging population is the healthcare and social
services sector of the labor force, because it has been
a major driver of employment for the last frankly decade.
Speaker 4 (09:55):
And in terms of where we were, we were.
Speaker 5 (09:58):
At about nineteen million people working in those sectors a
decade ago. We're now at about twenty three point eight.
And when you chart it against the population of Americans
over the age of sixty five, it's just a perfect
one for one. And we know where that population of
(10:20):
folks over the age of sixty five is going higher
for the next several decades. And it's tough for me
to envision a scenario given just where we are with automation, robotics,
et cetera, where this does not follow a straight line higher.
I think the demand for nurses, social workers of different
sorts is just going to be on a straight line upwards.
(10:41):
And unfortunately for those aging folks you know, turning sixty
five now and looking forward at the cost of healthcare
over the next few decades, and specifically the cost of
long term care, I really struggle to envision a scenario
where it's not straight line upwards further.
Speaker 3 (10:56):
Yeah, let's be honest.
Speaker 2 (10:58):
Also, if you believe like I do, that artificial intelligence
is going to be able to take over more and
more of the thinking and through robotics, more and more
of the doing.
Speaker 3 (11:10):
Yep.
Speaker 2 (11:11):
The place that you land in terms of like where
the majority of people will actually have jobs in the
future is people taking care of people. Yeah, Like, that's
where it points to. I'm not saying this is good
or bad. I'm just saying it probably is. Let's take
a quick break. When we return. Let's see, we're gonna
(11:33):
talk to AA.
Speaker 3 (11:34):
We gotta come.
Speaker 4 (11:35):
Yeah, a distortion baby.
Speaker 3 (11:36):
All right.
Speaker 2 (11:37):
If you don't like artificial intelligence, you'll hate what comes next.
Speaker 1 (11:42):
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Speaker 2 (12:47):
Before we go further into talking about AI, can we
talk about the other data point that we just got
a couple minutes ago, which was the Michigan consumer sentiment data.
Speaker 4 (12:58):
So long as you know the actual report.
Speaker 3 (13:01):
Yeah, what do you mean.
Speaker 4 (13:02):
I didn't look at it yet. So as long as
you're ready to come.
Speaker 2 (13:05):
To guys, I gotta be honest. This report is broken.
We can't use it anymore. Yeah, and it consistently gets
cited as like a good report. The data coming out
of it is hot garbage. So what I mean by
this is one of the questions that gets asked. They
(13:26):
asked to a bunch of you know, inflation expectations one
and one of the questions they ask is what is
your expected price change? Not just this year, but they
ask in the future in the next five to ten years.
And Mike, last year, when tariff Mania was gripping the nation,
which was the biggest mania since Beatlemania, the you mish
(13:50):
five to ten year inflation expectation came in at four
point four percent in April. Okay, okay, expecting inflation to
average four point four percent when you look.
Speaker 3 (14:00):
That five to ten year period.
Speaker 2 (14:01):
Okay, this year, with gas prices ripping and you know,
all kinds of changes to other pricing that's happening now,
it's at three four. I'm sorry, but we're just too
stupid to answer this survey.
Speaker 4 (14:22):
Okay, I'll take it more broadly.
Speaker 5 (14:25):
No, No, I recognize, Mike, this is a complex I'm
not defending the survey, so.
Speaker 2 (14:30):
I know, but like, let me just put into perspective
what we just got as a result here. A year
ago exactly, household said, Hey, because we're nervous about tariffs,
which has never been implemented in their lifetime and most
of which have since been called back, we expect inflation
to be four and a half percent for the five
(14:51):
to ten year period. Yeah, and today, with actual gas
prices fifty percent higher than they were three months ago,
people are saying that's only gonna be three point four percent, Like,
we're just not capable of understanding prices.
Speaker 4 (15:07):
I'll take it. You know.
Speaker 5 (15:09):
Again, there's the prices piece of all of this, which
I think people are confused about. But I'm just gonna
take overall sentiment which they measure here. Yes, it's giving
you readings now that are as bad or occasionally worse,
worse than two thousand and eight, right in two thousand
and nine when unemployment was like eleven percent. This is
(15:30):
fundamentally not a usable survey for that reason.
Speaker 3 (15:33):
A lot it's broken.
Speaker 2 (15:34):
It is like something I know they changed the methodology
a couple of years ago to move to online only,
and maybe that's what did it, because the people.
Speaker 3 (15:42):
Who hang out online are trolls.
Speaker 2 (15:46):
I don't know, Like it just very emotionally edgy, like
what's the right way to phrase, just like, quite honestly,
you spend too much time time online, like it affects
how you think about things.
Speaker 5 (16:00):
Yeah, I don't know what to make of this survey.
I don't even know if it's terribly useful on a
month of a month basis, but very clearly using it
to indicate anything about today's economy compared to times over
the last few decades is contextually useless.
Speaker 3 (16:16):
I don't think we can use it anymore.
Speaker 5 (16:17):
Quite honestly, it's which is a shame because it's one
of the longest running surveys that we have right.
Speaker 2 (16:22):
This is like the gold standard of sentiment surveys historically,
and I'm pretty sure it's completely useless right now, because
how do you reconcile this consumer sentiment like current conditions,
consumer sentiment is basically printing as bad as it's ever printed,
right at the same time that you have consumer spending
(16:43):
continuing to run four to seven percent.
Speaker 4 (16:45):
Year over year growth unimpeded. Yeah, you can't square those
two other than.
Speaker 2 (16:53):
Even if you want to say, hey, consumer spending is
being driven by the wealthy, so people can feel bad
but they're fine. That still makes this a useless sur right, Like,
either way, it's not giving me anything useful at this point.
Speaker 5 (17:05):
Yeah, I don't know what the cause. I don't know
if it's because of a bunch of people online not
being unhappy.
Speaker 4 (17:09):
I don't know if it's.
Speaker 5 (17:10):
Because people are increasingly responding to these surveys in a
political fashion, which they clearly are, because we can measure
the democrat versus Republican response to these surveys and tell
you how dramatically they flip every time there's a new president.
But some combination of things makes it so that these
surveys do not indicate anything. So if you see it
(17:33):
flashing against your screen that new Michigan Consumer Sentiment did X,
Y or Z, I would really encourage you to throw
it out, because it's just maybe it'll tell us again
something again in the future. But right now, again, there's
no useful context for me to be telling you that
the consumer Sentiment survey right now is giving you a
reading that's worse than it was in May of two
(17:54):
thousand and nine.
Speaker 2 (17:56):
Which is, Look, you can think whatever you want about
the economy.
Speaker 5 (18:02):
It's better than it was in May of two thousand.
It's better than it was in May of two thousand
and nine.
Speaker 4 (18:05):
Yep, just full stop.
Speaker 3 (18:08):
You can have your own feelings, but you don't have
to share them.
Speaker 2 (18:10):
Yeah.
Speaker 4 (18:11):
Yeah, it's definitively better than it was in May of
two thousand and nine.
Speaker 1 (18:17):
You can be a.
Speaker 2 (18:17):
Title to your own opinion, but you're not entitled to
that opinion being right. And the economy is better than
it was in May of two thousand and nine.
Speaker 4 (18:24):
Yeah, yeah, we can agree on that.
Speaker 2 (18:26):
You know. It's like that's that's just where it is,
speaking of you know, economic statistics that don't make sense
peace in the Wall Street Journal. AI is distorting practically
everything about the economy, is it.
Speaker 5 (18:41):
It depends on your definition of distorting. I think it's
fair to say that GDP and other things are being
influenced by capital expenditis from giant companies more than they
in other times. You might be able to blame a
you know, investment drop in places like housing and office
(19:02):
buildings and factories partly on the crowding out effect of
the AI spend. I think that's an interesting story. I
don't know if any of that's distortion though, right Like
you know that's saying like, oh, like when the automobile
was invented, it totally distorted the horse based economy.
Speaker 4 (19:22):
It's changing things.
Speaker 5 (19:23):
Yes, we gotta talk a little bit more about this.
Let's say quick break. Wall Street Watch is coming up next.
Speaker 1 (19:40):
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 t no full Wall
Street Watch trekking the stocks, the data, and the headlines
driving markets so far today right here on the Financial
Exchange Radio nedwork well.
Speaker 6 (20:02):
Markets are reacting positively to this morning's job support that
came in better than expected. The Dow Jones is curry
currently up seventy five points or zero point one five percent.
The S and P five hundreds up fifty points or
just under seven tenths of a percent. The Nasdaq is
up just under three hundred points or one point one
five percent. Gold continuing its rally, up twenty three points
(20:22):
or half a percent, Silver up a percent and a half.
Cloud infrastructure company Core Weave is seeing a share price
drop ten percent as its second quarter revenue guidance disappointed
Wall Street. Core We've sees revenue ranging from two point
four five billion dollars to two point six billion dollars.
The midpoint of a two point five to three billion
(20:43):
fell short of the two point sixty nine billion consensus call.
Upwork shares tumbling nineteen percent after the company announced a
restructuring plan that includes reducing its workforce by twenty four percent.
Upwork said that it is doing this to make sure
the company remains profitable as work evolved. It also reported
first quarter earnings and revenue that came in slightly lower
than expected. Expedia shares are down eight and a half
(21:06):
percent after the online travel agency called for second quarter
revenue of four point one to one billion of four
point one to nine billion, compared to the four point
one two anticipated by analysts. Booked room nights in the
first quarter missed expectations, landing at one hundred and thirteen
point nine billion dollars versus the consensus of one hundred
and seventeen. Wendy's Company stock is up five point seven
(21:29):
percent after reporting better than expected revenue of five hundred
and forty point six million dollars in its first quarter
financial report. Analysts polled estimated revenue would be five hundred
and eighteen million dollars. Earnings also came in above estimates,
and the company also announced the plan to build up
to one thousand restaurants in China over the next decade.
Speaker 3 (21:49):
I am Ben Kitchen and that was Wall Street Watch Mike.
Speaker 2 (21:52):
During the last segment, we were covering a piece from
the Wall Street Journal titled AI's distorting practically everything about
the economy.
Speaker 4 (22:00):
So we agreed that distortions not really the right term.
Speaker 2 (22:04):
It's impacting the economy in ways that you know, we're
not the economy would look different. But I mean that's
like saying, well, if you know, Applebee's didn't have, you know,
the burger on their menu, then you wouldn't be able
to order it. Like, it's not really a useful counterfactual.
Speaker 4 (22:22):
Yeah, it's not.
Speaker 5 (22:24):
I think what we can say is, you know, most
of the time through the last when would you argue
that we turned more from a manufacturing to a consumer
based economy eighties. Yeah, in the last forty years or so,
it's been getting driven by the consumer and housing as
a major investment area, and neither of those two are
(22:48):
currently the growth engine of the economy. The growth engine
of the economy. To be really clear about this, I
know plenty of people don't use it day to day,
but the growth engine of the economy is seven hundred
billion dollars that the four major tech companies that are
spending on AI are spending this year and the one
point one trillion dollars that's estimated to be spent next year.
Speaker 4 (23:09):
And it is not to say that.
Speaker 5 (23:12):
It's either good or bad, but it is crowding out
other areas of investment. It is leading to employment in
new areas of the economy, and it is leaned to
higher prices and other things that we are all starting
just starting now to feel right like, you know, the
higher spending and AI is inarguably driving up the cost
(23:35):
of computers, iPhones and other technology that we hold on to,
and we will feel that for a few years now.
Is that a good thing or a bad thing?
Speaker 4 (23:43):
Is it distortion? You know, what would the economy look
like without it?
Speaker 5 (23:46):
I don't find those to be useful exercises, but you know,
I could certainly make an argument that housing would be
stronger if AI investments didn't exist the way that it
does today.
Speaker 3 (24:00):
Yeah.
Speaker 2 (24:01):
Yeah, Look, I don't know why we look at like
AI spending an AI investment like it's this foreign thing
that it's like, oh, like this is making the economy
look different from how it would be otherwise.
Speaker 5 (24:16):
Well, we do it with everything, but we don't though. Well,
I compare it to when we build lots of houses.
Speaker 2 (24:22):
We don't go, oh, these houses are making the economy
look different. No, we're like, hey, there's like a housing
boom going like we just call it like a boom
and we accept that there's more economic activity there.
Speaker 5 (24:34):
So I compare it to, for instance, all the talk
of the healthcare workers over the course of the last
decade and all these people who are saying, well, the
labor market would look like crap if we didn't hire
all these nurses over the last ten years. My point is, yeah,
but we did and we're going to continue to do so,
so it's not distorting things. You can't just remove it
(24:54):
from the employment. We do it inflation too. Oh, you know,
inflation would be so much better if it just wasn't
Shelter costs increasing by six percent year over years, then
spent the money somewhere else, Like, you can't just remove
the impact of an economic phenomenon and say, look at
what the economy would look like otherwise, this is the.
Speaker 4 (25:15):
Reality that we're in.
Speaker 5 (25:17):
And if you want to point out that, hey, an
increasing percentage of GDP and stock market growth is being
attributed to a boom in a new technology, and the
risk is that it turns out to be a bust
in some way and that spending disappears. Sure, that's true,
but you've got you've got to prove it out to
(25:39):
me that that's actually what's going to be happening, and
that that's an actual reason for concern.
Speaker 4 (25:45):
And also, I'm just done.
Speaker 5 (25:47):
With all of these stories like the one that we've
got from MarketWatch here about AI coming for your job.
After all the announcements that have been made, there.
Speaker 2 (25:57):
Are companies that over hired during the pandemic and are
now correcting that using AIS cover because they may also
be getting some productivity increases from AI.
Speaker 5 (26:07):
But AI is coming for your job if you work
in like three to six industries, and not even industries,
like specific roles within those industries.
Speaker 4 (26:17):
Let's let's not go too far in that direction. It's
coming for every job on what time frame is the
relevant question?
Speaker 3 (26:23):
Not right now.
Speaker 5 (26:25):
And if you're a web designer, and if you are
a paralegal, I think that they're coming for your job
very quickly.
Speaker 4 (26:32):
Yes, in just about every other area. I just don't
see it.
Speaker 1 (26:35):
Right.
Speaker 2 (26:36):
If you're a shrimp o captain, you're good for a while.
If you are the one of.
Speaker 4 (26:43):
The guys who's shrimp.
Speaker 2 (26:45):
If you sit on the back of the truck putting
the cones down on the highway, you're probably.
Speaker 3 (26:51):
Good for a while.
Speaker 4 (26:52):
Yeah.
Speaker 2 (26:52):
But if you are someone who makes your living, you know,
if you're a technical writer okay for those of you
who don't know what a technical writer is, they're the
ones that take what the engineers at Microsoft give you
and translate it into the manual that all of us
can understand. Yeah, you probably are gonna have a tough
time because AI is literally built to be like, hey,
(27:14):
take this information and turn it into this right. But
for everyone else right now, it's not really a threat.
What is a threat, okay, is for companies that have
over hired in the last five years, they're absolutely gonna
use it as an excuse to cut headcount. Doesn't mean
that every job is gonna go away.
Speaker 3 (27:35):
Sure, you know.
Speaker 2 (27:37):
Mark Andresen wrote yesterday that companies have overstaffed by two
to four x for the last twenty years, which fundamentally
doesn't make sense because ultimately you need it. It's like, Okay, yeah,
if we had AI twenty years ago, I guess we
might have been overstaffed if we could make it do
all this stuff. But talk to anyone who's worked in
a business in the last twenty years, and they're not
(27:59):
gonna be like, yeah, we could have done this with
eighty percent fewer people. That statement is just fundamentally dishonest. Yeah,
I guess, so it just doesn't make sense what I
will say. Do you remember back about a month ago
when Anthropic rolled out It's Mythos platform, Yes, and people
(28:22):
were like Even on our show, we were like, hey,
because they rolled what happened.
Speaker 5 (28:27):
They rolled it out, and then they had a meeting
with Scott Bessent and J Powell came to a meeting
with a bunch of bank executives and we were like, huh,
that doesn't happen very often. They warned a bunch of
tech executives that they needed to do something and we
were less scratching our heads, like this is a pretty
good pr move, but it does look like there's something
fundamentally serious about this too, So it was.
Speaker 2 (28:50):
Kind of like, hey, are they just you know, hiding
this from us to say how powerful it is? Or
is this like a real thing, And here's the first
example that we've seen that it's real. Mozilla who still exists.
Speaker 4 (29:07):
They may have to look that up.
Speaker 5 (29:09):
I chucked on me that this morning, and I was
not aware that Mozilla, who operates Firefox is still around.
Speaker 2 (29:13):
They make the Firefox web browser, which back in the
twenty and twenty tens was huge. I don't think it's
very big anymore, but it still is around on the
edges last year on average, because every month they roll
out a list of Hey, here are the bugs that
we fixed in order to improve our product security bugs specifically,
last year in twenty twenty five, they averaged twenty one
(29:35):
point five fixes per month for security issues, which for
the full year makes two hundred and fifty eight. In
April they fixed four hundred and twenty three security bugs,
which is one and a half times what they did
all of last year, and this was after they had
access to meat miffs. Now, the other thing that they
(29:58):
said is they provided list of like twenty of the
things that they fixed, and a bunch of them were like, oh,
this was, you know, from production that we put into
effect back in you know, two thousand and six, and
like this was just identified as a problem. So they're
literally fixing things that have been present in their code
for fifteen to twenty years that no one knew was
(30:20):
a problem before this.
Speaker 5 (30:23):
This makes me immensely concerned about antiquated industries like the
banking industry and like the healthcare industry. These are industries
that are famous for having antiquated systems that are full
of bugs. They are constantly the targets of cyber attacks.
Education systems would be a third one here.
Speaker 2 (30:44):
Did you see that Canvas got hacked yesterday? So again
I don't know, you know, I don't have kids that
use it, but Canvas is a learning management system. Yeah,
and basically it got hacked yesterday, and so throughout like
a bunch.
Speaker 3 (31:03):
Of colleges and school systems and everything.
Speaker 2 (31:06):
It's basically like not usable in a lot of cases
right now for teachers and students to manage their workloads,
because this is how it's managed today.
Speaker 5 (31:13):
All indications are that this is going to get way
worse before it gets better in terms of the breaches
and cyber attacks that are going to be out there
using these new tools.
Speaker 2 (31:22):
Yeah, let's take a quick break here. When we return,
let's talk SpaceX right after this.
Speaker 1 (31:31):
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Speaker 2 (32:04):
So SpaceX has an IPO that's coming up sometime in
the next probably four to six weeks. We don't have
exact dates yet. But here's the deal. SpaceX had bought
or merged with or whatever XAI, which is Elon Musk's
artificial intelligence company, which is now renting out data center
(32:26):
space to Anthropic because basically they didn't have enough demand
to do anything with.
Speaker 5 (32:31):
Do you know if XAI actually owned Grock because I
know it lived on Twitter, which is X Mike.
Speaker 2 (32:36):
I can't make sense. I have no idea. I didn't either,
I just did. Yeah, but here's the deal, so pretty
much shut it down. XAI in and of itself is
a standalone entity, is now fully shut down. So even
within SpaceX's it's not an official unit anymore. And basically
the company now is going to be space XAI and.
Speaker 3 (33:01):
That's what it's gonna be.
Speaker 4 (33:04):
You gotta stop.
Speaker 5 (33:05):
Changing these names if you're gonna be a publicly traded company.
It's listen, it can't be once every six months. This
is what everyone does now. Man, it used to be Facebook,
now it's Meta. Used to be Google, now it's alphabets.
I am still waiting for Mark Zuckerberg to change Meta's
name again now that the metaverse is not central to their.
Speaker 4 (33:24):
Kind of think, they'd have to write, but we'll see.
Speaker 3 (33:27):
I mean, isn't it kind of a joke?
Speaker 2 (33:29):
I mean, that would be like if we were still
sitting here, you know, in twenty twenty six, being like, man,
it's amazing how many cars Edsel sold. You know, like
you don't keep the name of your flopped product as
your company name.
Speaker 5 (33:43):
Yeah, yeah, that would be surprising. The IPO itself. You know,
when we talk about this thing, we are talking about
one that we have never seen before. The company's targeting
evaluation of two trillion dollars. That puts them with only
like six companies that are publicly traded today that are
larger than SpaceX. If it actually goes off of that
(34:03):
value be a seventy five billion dollar raise.
Speaker 4 (34:07):
A lot of complexities here.
Speaker 5 (34:09):
There's been talks of favoring some early Tesla customers and
other brand loyalists to Elon Musk's other brands. So really
confusing to me as to how this IPO is all
going to go off. But if it does and does successfully,
I mean, I'm just trying to brains from off the
top of my head here, Chuck Apple, Amazon, No, Amazon's
not two trillion, are they? Amazon might be like one
(34:31):
nine there, they're in the Microsoft, Nvidia, Apple, Amazon, Apple, Goo, Meta, Google. No,
Meta's not there, So yeah, it's Google. There's the only
companies that would be exceeding the size of this.
Speaker 4 (34:46):
Giant space company.
Speaker 5 (34:47):
So it will be fascinating to see if it does
go off this year.
Speaker 3 (34:52):
Yeah, there are some things that are.
Speaker 2 (34:57):
A little dodgy about how this is all going going
down in terms of what some of the indices and
exchanges are doing to try to encourage listings. Yes, none
of it really gives me the warm and fuzzies.
Speaker 5 (35:13):
And well, I can tell you firsthand the number of
advertisements that I see both in my email box and
on social media about hey, invest in this fund to
get pre IPO access to these x y Z companies.
And I'm sitting here saying, boy, something seems just off
about all of this.
Speaker 2 (35:34):
I'm gonna there's a piece from a guy by the
name of Dave Natig. He he's a big ETF guy,
like he basically knows more about ETFs and trading in
general than anyone like out there, in my opinion, just
like the the mechanics of how they work. It's not
like he's not like a great trader or anything. He
understands like, Hey, this is what this all means. I'm
(35:55):
just gonna quote from him.
Speaker 4 (35:56):
First.
Speaker 2 (35:56):
Under the new rules, simply because an IPO is big
enough to crack the top four, the company can skip
the three month aging window and be included in the
Nasdaq one hundred and just fifteen days. Used to be,
you had to you know, have a certain time period
before you could be included in there.
Speaker 3 (36:10):
Uh.
Speaker 2 (36:11):
Second, because SpaceX is floating such a minuscule amount of
the firm they abandon the old floor of how small
the float could be and just added any megacap at
three x there implied float, so basically SpaceX. When they
first list, not all the shares are available to be sold.
Most of them aren't because company insiders are not allowed
to sell during a certain lock up period at first,
(36:32):
and they're doing just a tiny, tiny little float in
order to seventy five billion. I was talking right, it's
seventy five billion, so ninety five percent is not going
to be tradable, and typically, like the Nasdaq's like no, like,
we don't allow low float shares to be like included
in the Nasdaq one hundred because they don't represent adequate
price discovery. Native here is basically like, yeah, you're not
(36:55):
going to get adequate price discovery because if all these
index funds have to go and buy from that pool
of seventy five billion that's outstanding, the price is gonna
get jacked up until everyone else has the ability to sell.
So pretty much he's looking at this, and that's just
the Nasdaq. The S and P five hundred typically has
to have companies wait a year to be considered for inclusion.
(37:18):
They have to have a ten percent free float and
need to have, you know, financial viability. The SMP is
thinking about abandoning that in order to get SpaceX listed
into the S and P, and so again it's kind
of like, what are we actually doing here and how
is this going to work out? We'll see, I don't know,
(37:39):
but he just points out that these are things that mechanically,
mechanically are not going to give you a good sense
of how SpaceX is worth at the beginning because of
forced bids that ultimately will end up disappearing and then
the real price discovery can take place.
Speaker 3 (37:55):
So there's that. Let's take a quick break here.
Speaker 2 (37:58):
When we return, we got our two coming up, and
we'll talk a little bit about the Middle East, talk
about China, President Trump heading to China next week, what
kind of expectations do we have, and a whole lot
more in our two
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