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Will Trump's latest proposal win over blue collar workers? · The Financial Exchange Show

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Base is the Financial Exchange with Mike Armstrong and Mark Fandetti.
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Speaker 2: Good morning, Welcome back to the financial exchanges. We open
1:16
up the eleven o'clock hour. Markets strongly in positive territory here,
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Dow up two hundred ninety six points about three quarters
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of a percent, the S and P up thirty a
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half percent, and the NASDAC up one hundred twelve about
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two thirds of one percent. The wrestled two thousand year
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smaller size companies up over two percent in early trading,
1:34
and the price of barrel of oil up one and
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a half percent, back at that seventy dollars per barrel
1:39
range ahead of next week's FED FED meeting. Interest rates
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slightly on the move at the ten year treasury down
1:46
to three point sixty six percent, and that does bring
1:50
the thirty year fixed rate mortgage down to a couple
1:53
year low at this stage of six point five percent
1:57
on that thirty year mortgage rate. Last time I'm seeing
2:00
that we got down to that level was back in
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January of twenty twenty three, was when we were down
2:08
in the low sixes. So not quite a two year low,
2:10
but it's been a while since we've been down there.
2:14
And then the first story of the day that we've
2:17
been covering is the new strike at a blow at
2:21
Boeing over in the Seattle, Washington area, with their machinist
2:26
union rejecting the twenty four percent pay rays over four years.
2:31
Would have been the first new union contract with Boeing
2:35
since two thousand and eight, when the machinist union last
2:38
struck for a total of I believe fifty six days
2:42
at that period of time.
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Speaker 3: So continued troubles, I guess, is what we'll describe it at.
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Speaker 2: Boeing, albeit taking different forms of what we've seen over
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the last few years. I want to turn over to
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a new tax pledge from the Trump campaign that we
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hadn't I don't know, do you do, guys know when
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this came out because I don't remember seeing it this week,
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albeit I did miss the show Wednesday, so maybe it
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came out then.
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Speaker 3: But this is relatively new.
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Speaker 2: We've covered at length the proposal for waiving taxes on tips,
3:14
which apparently both candidates now support, and why I think
3:18
that that's a stupid idea. But maybe I'll repeat my
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criticisms of that. Trump campaign has also pledged a cut
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on or a elimination of taxes on social security benefits,
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which we'll talk about that one too, and then cut
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to the corporate tax as well as overall individual tax rates,
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keeping them where his Trump tax cuts brought them in
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twenty seventeen. So let's dive in though on this new one,
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which is a pledge to not tax overtime pay. And
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you know what's a pretty clear push for you know,
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the blue collar workers who might support his campaign. I
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don't think we need to paint it anything differently, but.
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Speaker 3: Let's talk about it.
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Speaker 2: Let's I know, we need to get to the deficit,
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and we need to get to the impact on social
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Security and Medicare, and that should be the overall focus.
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But when we talk about different tax proposals, I do
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like to think about, Okay, what's the effect on you know, labor,
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and what's the effect What are the likely outcomes of
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something like this?
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Speaker 4: So this would be a supply side directed or related change.
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It would in theory, increase the labor supply. Labor economists think,
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believe it or not, Labor economists, when they think about
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the way workers make decisions, they assume workers are purchasing
4:36
leisure or purchasing labor.
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Speaker 3: There's this this this trade off.
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Speaker 4: So if you make labor relatively more attractive by increasing.
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Speaker 3: The net pay, if you will increasing the wage.
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Speaker 4: Yeah, you can also think about that as increasing the
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price of leisure because there's only twenty four hours in
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a day. But this may sound really abstract and silly,
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but believe or not, this is the way labor economists
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think about labor supply. So will this increase the labor supply?
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Is the question, and the you might I don't know,
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what do you guys, off the top of your heads?
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Will this you could just give very simple answer, This
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is not a trick question. Answer this if you're listening
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to and then I'll tell you why your answer might
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be wrong and why economics is sometimes fun Yeah.
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Speaker 2: I mean, on the surface, in the media, thought would
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be yeah, you would think that it would contribute to
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some increase in the labor supply because workers would be
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looking for those overtime hours when previously they may have
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rejected them in spite of the increased PA.
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Speaker 4: I think that's the answer most people would give. Yeah,
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we're first introduced to the concept. And it's funny because
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Trump says in the article I approached a bunch of
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economists about this. They just thought it was unbelievable. It
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was the best thing they'd ever heard. He's funny when
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he comes up with an idea, he says, he approaches
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the world's formal this during COVID too. All these virologists,
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they can't believe how much I understand about this. Yeah,
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that was my impression too, mister President, you really got
5:46
your mind around this one anyway in this and forgive
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me for the sarcasm, but in this case, no economist
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would respond the way that he says. All these great
5:54
economists responded. Because there are two effects at work when
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you make something, when you make work more appeal, there
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is the direct effect of substituting more labor for leisure
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because the price of leisure went up. Or alternatively and equivalently,
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the benefits from labor from working increased increased. But at
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the same time, you have to work fewer overtime hours
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because you're making overtime more profitable to get to where
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you wanted to get. So there are some and if
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you've ever taken a microclass, forgive me for the mini
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lecture here, but it's fun. There are two effects substitution
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and income. We've all heard this. Anybody who took micro
6:33
will remember this. There's even a word. I won't bring
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up the technical term because it's just do boring. But economists,
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I've actually mister President thought about this and they Recognow
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labor supply is that labor supply curve, as they like
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to say, is probably positively sloped. But it's not obvious
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what the net effect would be. And I'll say again,
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because you have to work fewer hours to get to
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your income goal, whatever that is, that's actually had the
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perverse effect of causing people to work hours because you
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only have to work I suppose you eliminated TEX is
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just us an extreme example following his proposal, you only
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have to work half as much to reach your to
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get the same amount of it.
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Speaker 3: Right, So I hadn't considered that, But you're right, assuming
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a fifty percent tax percent TEX.
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Speaker 2: If I make one hundred thousand, If I make eighty
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thousand dollars a year by working ten hours of overtime.
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Speaker 3: You're good with eighty.
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Speaker 4: By the way you meet your that covers the building.
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Your utility is as high as you need it to be.
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Speaker 2: I might be able to make the same amount under
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this proposal by only working a few hours two hours.
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Speaker 4: As particularly millennials for whom a work life balances. This
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is one of those areas where I think economics micro
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in particular, which doesn't focus on Oh, what's the Fed's
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gonna do, what's it's it's it's interesting, uh, individual behavior
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type questions where it yields answers that are counterintuitive. And
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if Trump had actually gone to an economist, as he
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says he did, they would not have said, mister President,
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why didn't I ever think of that in my eight
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years at Harvard, in my fifty years of practicing this,
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I would have said, well, mister President, Actually, economists are
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divided on the effects of reducing taxes because there are
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substitution effects, which always result in an increase in the
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thing that gets less expensive or more profitable. Substitution effect
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is clear. It's the income effect that is unclear. I think,
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on net, it would probably increase labor supply. Given the
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research I quickly looked at before coming in here, most
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economists would probably answer that, but it's not going to
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have this unbelievable effect of increasing labor force participation, etc.
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Speaker 2: I'm also going to be critical of it here and
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think about it from other perspectives. So, most low income
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workers are working a couple jobs largely because they're not
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getting paid overtime in the first place. Right, So if
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you talk to somebody who's working an hourly rate at
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McDonald's or a number of different companies, oftentimes they want
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to keep you under thirty hours. So not only do
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they not need to pay overtime, but they also need
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to pay you healthcare benefits. And so I wonder what
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a reduction in taxes on overtime pay incentivized McDonald's to
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hire more people at fifty hours a week.
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Speaker 3: I don't probably not, I don't think. So where does it.
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Speaker 4: The incentives operate at the at the employee employee level,
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that's where the effects I was talking about a cur.
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Speaker 2: Yeah, there's no incentive here on the employer level. And
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so if you're in one of those positions where now
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I've got to work two jobs in order to make
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ends meet because neither of them are willing to pay
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me overtime, then that's not going to change.
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Speaker 4: Basically, he's making a labor supply argument here. He does
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say that much so one of these people advising him
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at least advised him that the effect will be to
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increase the labor supply. But that represents an oversight. If
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you if you answered that way, as you know freshman
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in your first micro class, you wouldn't get full credit
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for the question. You might get only half credit because
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it overlooks a key insight of economics. The only thing
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I take away from this, which you'll tell you what
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my focus, is that he didn't actually talk to any
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economists about this, because they would have given him, on
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the one hand, on the other hand type answer. But
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that's part for the course when you're making up fiscal
10:03
policy on the fly, as he appears to be doing
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at this stage in the campaign.
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Speaker 3: So if I'm to rank Harris too, by the way,
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I don't want to let shut the hook.
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Speaker 2: If I'm to rank these, I mean, look, this has
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the same impact of making Social Security and medicare run
10:16
out of money faster.
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Speaker 3: It raises the deficit. There's no debate about these little.
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Speaker 4: Tiki tak proposals they're coming up with. They're just they're reckless, honestly.
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Speaker 2: But you know, if I'm to rank these in terms
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of the incentives that it creates against no tax on
10:29
social security and no tax on tips. I think I
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put this one above both of those, at least right
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at least you have the possibility of.
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Speaker 3: Incentivizing increased labor supply.
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Speaker 2: You don't do that by reducing taxes on social security,
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and in the tips case, you might impact the supply,
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But I think the negative consequences there of just making
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everyone want tips far out weigh as the other one.
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Speaker 4: The economic debate has become so debased. What happened to
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a Republican party that talked about fostering conditions that were
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conducive to growth, generally lowering taxes generally to incent Now
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I don't think at their current rate marginal rates are
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a big disincentive to work or do productive things. But
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they certainly were in the seventies and arguably up until
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even recently. But whatever happened to talking about growth conditions
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in general? Both candidates are out there crass league pandering.
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I'm gonna lower yell Texas and I'm gonna lowers and
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I'm gonna loa. That's just a bad impression of love
11:32
of a politician from New York. But whatever happened to
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bigger vision to higher two high minded principles. They're just
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totally absent from this campaign.
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Speaker 2: It is out the window. And there is genuinely no
11:46
party that represents the idea of fiscal discipline.
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Speaker 3: No, no, it's outfit. They're not even talking about it.
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Speaker 2: It is completely out the window. And you could even
11:54
make a compelling argument that Democrats, albeit you know, with
11:59
zero z RO track record on it, are taking it
12:02
more seriously than Republicans are right now, which is.
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Speaker 4: Just well, they have just acknowledge that some taxes have
12:07
to go up if we want to keep spending at
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levels that people apparently want.
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Speaker 2: So absolutely shocking the turn and the discourse about economics
12:16
just takes very strange turns this year.
12:19
Speaker 3: But any case, tune.
12:20
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12:49
Speaker 2: The tax on overtime is apparently a pretty popular subject.
12:53
We've got a few texts here. So one the post Office,
12:56
we're capped at twenty hours of OT a week and
12:58
we're forced to work with our labor short so we
13:00
just get a tax saving. Another one getting rid of
13:04
tax Getting rid of taxing overtime will lower the misery
13:07
index could be And no, actually misery index is just
13:14
inflation plus unemployment. Yeah, it's a simple it's a simple calculation.
13:18
So you might be less miserable is.
13:20
Speaker 3: Going to go down.
13:21
Speaker 4: So he's saying unemployment is going to go down because
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you don't Yeah, just I mean, I don't toughly see
13:25
the causal connection there.
13:26
Speaker 2: But no taxes on overtime would be great for my
13:29
cousin who's a Boston cop. He makes well over three
13:32
hundred thousand dollars and a lot of that is overtime.
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So here's the interesting thing about the three texs we
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got on this. All three of them are I don't know,
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seemingly maybe in favor of the reduction in tax on overtime.
13:45
But none of them do I see a case where
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they're saying, oh, and that would incentivize me to work
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more in the post office case he's not allowed to
13:53
in the Boston police officer like, hey makes over three
13:55
hundred grand a year, A bunch of that would be
13:57
tax free. And then the one on the misery index say,
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I'm not sure where that's going. We also got another text,
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you guys are so biased.
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Speaker 3: Maybe against against dumbina. I mean, look, here's here's where
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something's fair.
14:11
Speaker 2: I am the We have spent a lot of time
14:14
uh criticizing Trump tax proposals, but only because Kamala Harris
14:18
has said nothing about what she wants to do. Yeah,
14:20
and that's you know, I'll lay out that out there.
14:22
Is you know, we spent a lot of time Trump
14:24
uh criticizing some Trump proposals because he's actually put something
14:27
together with some coldhering like.
14:30
Speaker 4: He's making this stuff up.
14:31
Speaker 3: He is, but he's at least say yes.
14:33
Speaker 2: But he's at least pandering. Kamala Harris is just going
14:36
out and saying nothing. And that's a fair criticism too.
14:39
Is I don't feel that I have any idea whatsoever
14:43
what Kamala Harris playing.
14:44
Speaker 4: We can talk about spending under the Biden administration, which
14:47
has been reckless and which is imperiling our future. Unfortunately,
14:50
I don't get any sense from Trump vance that they're
14:52
going to spend any more responsibly for as much flack
14:56
as they've gotten over the Heritage Foundation's project twenty twenty.
14:58
Speaker 3: Five that advocate it's real spending custry. I love that.
15:02
I don't know.
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Speaker 4: I don't know why they're running away from it now.
15:04
So I'm farther, far farther to that. I'm attacking Trump.
15:07
I think his tax plans anyway, because they're flaky, they're
15:09
ill conceived, and they're pandering them. But I'm attacking them
15:12
from the far right, not from the left.
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Speaker 2: Yeah, fair enough, fair enough. A couple of China stories
15:17
here that we alluded to earlier. One just all signals
15:21
about that economy continue to worsen and they continue to
15:26
take the same approach, which you know, you can agree
15:28
or disagree with, but it's basically approach of we're going
15:30
to invest heavily in infrastructure in order to be able
15:34
to produce more stuff, rather than ever setting up things
15:37
like a social security system or anything along those lines.
15:40
And my main question is pretty simple, does Hijingping have
15:45
enough of a chokehold on the general population there to
15:48
make all this stuff happen, because he's basically telling the people,
15:51
too bad. I'm not bailing out their real estate sector.
15:54
I Am not setting up a social security program or
15:56
a Medicare program. And by the way, I'm raising the
16:00
retirement age is the newest announcement there as well, the
16:03
retirement age in China going up by as much as
16:07
five years. Men will retire at sixty three instead of
16:10
sixty women will retire at fifty five instead of fifty
16:13
for quote ordinary workers, and fifty eight instead of fifty
16:16
five for those in management positions. And yeah, just an
16:21
interesting take here on the China situation. And like I said,
16:25
pretty much every single signal that you can get out
16:30
of China, which are few and far between, seem to
16:33
be showing the same thing, which is the real estate
16:36
crisis that occurred there has had a lasting impact on
16:41
consumers willingness to spend.
16:42
Speaker 4: Yeah, this was a problem before that, and it's obviously related.
16:46
It's interesting they can't just compel people to spend more,
16:49
even it's a talitarian which they are effectively, I guess
16:52
call it whatever you want. Well, one party authoritarian type system.
16:57
You can't compel people to spend money.
16:58
Speaker 3: No you no, you cannot speaking along those lines.
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Speaker 2: The question to me is does this economy eventually follow
17:08
the track of Japan in what was it the eighties?
17:12
Speaker 1: Then?
17:12
Speaker 2: No, it wasn't the eighties more than the nineties and
17:14
two thousands, the lost decades of Japanese growth on the
17:18
From the beginning, I've been really hesitant to describe it
17:21
or to compare it to such, because everyone in the
17:23
world is making that comparison, and so you would think
17:27
that Chinese economists.
17:28
Speaker 3: Know about it and side step only.
17:29
Speaker 4: Yeah, Japan got quite rich and their per capital wealth
17:32
is very high, nearly on par with ours.
17:35
Speaker 3: They grew very fast after.
17:37
Speaker 4: Their economy was devastated as an understatement after World War Two.
17:41
They had nothing, no industrial base, nothing, so they had
17:43
to grow very very fast to sort of catch up,
17:45
and once they did, they kind of leveled out. China
17:47
never got rich enough.
17:53
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Speaker 2: Piece from CNBC, which is, you know, nothing really more
18:12
than trivia in my view, but there are now that
18:14
we've seen inflation cool off, a number of categories that
18:18
we spend money on that are actually cheaper than a
18:20
year ago today, and I thought it just kind of
18:21
interesting to highlight a few of them. Very few of
18:24
them tell you anything about the overall inflation story. I
18:28
think the only one that you can focus on there
18:30
to say, hey, this could actually have a meaningful drag
18:33
on inflation in the future would be energy prices, which
18:37
we I think anybody familiar with home heating, oil or
18:40
gasoline knows that, hey, energy prices are cheaper today than
18:43
they were twelve months ago. Gasoline down over to ten
18:47
and a half percent, fuel oil down twelve percent. But
18:50
you know, across the food categories, you've got potatoes, ham
18:53
roasted coffee, rice all down three to six percent. And
18:57
then the big one that you know, I've been looking
19:01
at and found interesting is the the spike and used
19:04
car prices that we saw from a few years ago
19:07
has really come down quite a bit here to the
19:10
point where used cars and trucks are off of good
19:13
ten and a half percent from this time last year.
19:15
I don't know, Like, like I said, I don't think
19:17
this really tells you anything about you know, directional prices
19:22
or what it means for things coming next. But just
19:24
kind of some interesting trivia here, you know, clothing whear too.
19:29
Speaker 4: To me, it reinforces the very basic point that inflation
19:32
is just an average. There are some people who, by
19:35
virtue of their unique purchases of experienced personal disinflation over
19:39
the past.
19:39
Speaker 2: Yeah, if you buy TVs every week because you're a
19:43
Bills fan and constantly destroyed.
19:45
Speaker 3: Now they actually won last night, didn't they, Bills?
19:48
Speaker 1: Yeah?
19:48
Speaker 2: Yeah, okay, so what's what's a football team that just
19:50
notoriously loses The Carolina Panthers currently, If you're a Panthers
19:54
fan and you buy a new TV every week because
19:57
your team keeps losing, then yeah, you've you've been doing
20:00
a lot better this year.
20:01
Speaker 3: Yeah so.
20:02
Speaker 4: And it's also a nice reminder that inflation is not
20:05
caused by individual categories going up because they don't go
20:09
up persistently. And definitely even energy, it can have long
20:12
stretches like it did in the early to mid two thousands,
20:15
but eventually it comes back down. Inflation is the result
20:18
of the FED not doing its job properly, maybe because
20:21
they don't have perfect information hindsight is twenty twenty. But
20:24
inflation is the result in the long term of too
20:27
much money being printed. In the short term, that's not
20:30
necessarily live shocks.
20:32
Speaker 3: Other other actions can be that y.
20:34
Speaker 4: Yeah, there are other components of the inflation process, if
20:37
you will. But in the long term blame lies squarely
20:40
with the Fed, but.
20:41
Speaker 3: It isn't don't think Congress has any role there, right
20:43
if Congress.
20:43
Speaker 4: Well fiscal think about how fiscal policy works. It works
20:46
on demand, so it can You can have a good
20:49
example is twenty twenty one, and I'm going to start
20:51
in twenty twenty because we had a few rounds under
20:53
the Trump administration, then a couple under Biden all in
20:57
retrospect too big. Probably maybe not the first couple, but
21:00
certainly the last couple. Those worked on the demand part
21:05
of the inflation process, but their effect was fleeting. So
21:08
I'm talking long term, persistent inflation as the result of
21:12
too much money, and responsibility for that lies with the
21:15
Fed in the short term by the way they could
21:16
contract the money supply enough to cause to push against
21:20
to not accommodate fiscal stimulus in this example. But in
21:23
the long term it's with the monetary authority. Here and
21:26
around the world now and from time immemorial.
21:30
Speaker 3: Full stop, folks.
21:32
Speaker 2: Want to talk to you about two big events coming
21:34
up during the month of October for the Financial Exchange.
21:37
We're doing two live broadcasts of this show. One on
21:41
October eighth that's going to be out in Springfield, the
21:44
second one on October twenty fourth in a Highendas. We're
21:46
going to be doing a live broadcast of the Financial Exchange.
21:49
You can come on down and check it out. I
21:51
would be doing that full live two hours, followed by
21:53
an educational lunch with the Armstrong Advisor Group. Obviously, it's
21:56
an election year this year, a lot of questions we're
21:58
getting about that upcoming elects, the potential impact on policy,
22:02
where tax rates go. Obviously just having a heated debate
22:05
about tax on overtime and tips and how that could
22:08
shape out, and what the overall effect on the economy
22:11
and markets might look like in years to come. The
22:14
first date, as I mentioned, we're gonna be out in
22:16
Springfield at the MGM on October eighth. The second one
22:20
October twenty fourth, down in Hyannas at the Margaritaville Hotel
22:24
and Resort. Sign up for the events is mandatory and
22:28
will go relatively fast if history is to be a
22:31
guide here, you can sign up by going to Armstrong
22:34
Advisory dot com slash events. You're also welcome to give
22:37
us a ring and we can take your registration over
22:39
the phone that numbers eight hundred three nine three four
22:43
zero zero one. But easiest way to sign up for
22:46
either of the two events on October eighth or twenty
22:48
fourth are by going to Armstrong Advisory dot com slash events.
22:53
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
22:56
registered investment advisor. Nothing in the ad or in any
22:58
Armstrong guide a specific finance, legal, or tax advice. Consult
23:01
your own financial, tax into state planning advisors before making
23:04
any investment decisions. Armstrong may contact you to offer investment
23:07
advisory services.
23:09
Speaker 3: You know how we've all all been yeah, can I
23:12
start over here?
23:13
Speaker 5: Sure?
23:13
Speaker 6: Yeah?
23:14
Speaker 2: Yeah, you know how we've all been complaining about traffic recently.
23:17
But I hadn't really gotten much data as to total
23:21
driver volume because my sense had been look, a lot
23:23
of people were still working from home for an extended
23:26
period of time.
23:27
Speaker 3: That story is dead.
23:29
Speaker 2: The total miles traveled by all vehicles jumped by twelve
23:33
percent between May of twenty nineteen and May of twenty
23:37
twenty four. That's according to analytics firm street Light Data,
23:42
who unfortunately I have never really focused too much on before,
23:46
but some data out here in fact showing that, yeah,
23:49
congestion levels due to miles traveled likely up considerably given
23:55
this twelve percent drump. There are you know, they do
23:58
break this down by city by city, and there are
24:00
some areas where that's not quite the case.
24:02
Speaker 3: Mainly in California. Only ten out of the one hundred
24:06
most populous metropolitan areas have kept driving levels below twenty
24:11
nineteen level. LA would be first, with a seventeen percent
24:15
decline and average daily travel over the last five years.
24:20
I don't know what to make of that, other than
24:22
I would suggest more tech jobs and more people leaving
24:26
the state of California compared to other areas of the
24:29
country over the last few years.
24:31
Speaker 4: It's down from twenty twenty. I got a little the
24:33
FED publishes, as you well know, my database where you
24:36
can get a lot of different interesting series, and from
24:38
twenty twenty through the most recent reading, which was earlier
24:41
this month, it's actually down four percent.
24:44
Speaker 3: Of you what is there total it is the same statistic.
24:47
Speaker 4: So if you're cherry picking, and I'm not suggesting that
24:51
the people who wrote this had an agenda, but I don't.
24:53
Speaker 3: Know down from twenty twenty what time in twenty twenty.
24:55
Speaker 4: I just I went twenty twenty oh one to oh one,
24:57
so beginning of twenty twenty, right before COVID, if we
25:01
you know, change that just for fun, here on Friday
25:04
twenty twenty one, up eight percent from the depths of
25:08
COVID January twenty twenty one, a dark time, nobody was
25:11
doing anything that.
25:11
Speaker 2: Do you think maybe there's some seasonality here? Should we
25:13
be looking at like here they did May of nineteen
25:16
compared to May of twenty four. I just I just
25:19
do wonder because it's certainly it certainly feels as though
25:23
traffic is worse than it was in twenty nineteen in
25:25
the beginning of twenty twenty. But you know, I could
25:27
be wrong about this.
25:28
Speaker 4: Is this is an average, if this is a total,
25:32
but obviously.
25:32
Speaker 3: Yeah, obviously are yeah various city.
25:36
Speaker 4: We're actually flat from twenty nineteen. This is nationally now,
25:38
I wouldn't be surprised if it was busier here for
25:41
reasons that you mentioned. Or alluded to its flat based
25:46
on January twenty nineteen is a starting point.
25:49
Speaker 2: So flat the hell is Bloomberg talking about it is?
25:52
My guess is maybe it looked at a different series.
25:54
It must have been a different series. Maybe they were
25:56
looking at metropolitan areas only in the arguments that they
25:59
lay out makes sense to me too, in terms of
26:02
people having moved further away from their place of work
26:06
during COVID and now needed to commute more. But nonetheless, yeah,
26:10
a little bit of varying data points here on congestion rates.
26:12
Speaker 3: We gotta take it quick. Sorry, sorry, good, We gotta
26:14
take a quick break. Is Paul's here. We're gonna talk
26:17
about pet Co with PAULA Monica. Next on the Financial Exchange.
26:20
Speaker 1: The Financial Exchange Show podcast drops every day on Apple, Spotify,
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and iHeartRadio. Hit that subscribe button then leave us a
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Miss any of the show, Catch up at your convenience
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by visiting Financial Exchange Show dot com and clicking the
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and full shows. This is your home for the latest
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business and financial news in New England and around the country.
26:48
This is the Financial Exchange Radio Network Ladies and gentlemen
26:54
the weekend.
26:57
Speaker 6: This segment of the Financial Exchange is brought to you
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in part by the US Virgin Islands Department of Tourism.
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27:31
Speaker 2: Joining us now is Paul Lamonica from Barons and writing
27:34
this week about you know, one of the best symbols
27:37
out there for a company of its business ticker symbols
27:41
woof and we're talking about PETC.
27:43
Speaker 3: Good morning, Paul, Thanks for joining us.
27:45
Speaker 5: Yes, yes, as a cat owner, I would prefer me
27:47
out there.
27:48
Speaker 2: Yeah sure, sure, What can you do? Well, the stock
27:50
is up a good sixty plus percent this week. I'm
27:53
assuming it must be because they reported some blockbuster earnings
27:57
that you know that that investors weren't to anticipate, or
28:00
was it something else.
28:02
Speaker 5: It's a strange saga.
28:05
Speaker 7: Indeed, meme mania appears to be back, even if it's
28:08
misplaced in this case. Yes, the company did report results.
28:13
Sales growth is somewhat sluggish. They're still losing money. They
28:17
do have a new CEO to their credit, who's a
28:19
retail veteran that the hope is that he can turn
28:23
things around. He comes from five below. Before that, he
28:26
was at Walmart dot com. But it appears that the
28:29
reason why this stock got such a massive bomp earlier
28:34
this week is because someone posted on a Reddit page,
28:40
a Reddit account associated with fans of Roaring Kitty. Remember,
28:45
you know Keith Gill, the meme stock guru, who is
28:49
a big investor in game Stop and also Chewy, And
28:52
they said, woof is going bananas?
28:55
Speaker 5: Who is here with me? And that seemed to be
28:58
enough to spike the stock.
29:01
Speaker 7: And it really is curious because there's there is no
29:05
evidence to suggest that Gil has invested in Petco. He
29:12
you know does have a steak in Chewy, although there's
29:16
been speculation because of a you know, a post that
29:19
he put on X last week that maybe he's looking
29:21
to get out of that position. It's just a strange
29:25
world we live in where you know, pictures of cartoon
29:29
dogs and toy story two memes are enough to move stocks.
29:34
Speaker 1: You know.
29:35
Speaker 5: Warren Buffett must you know, be laughing his head off
29:38
at things like this.
29:39
Speaker 2: Yeah, and by the way, Paul, your your piece in
29:41
Baron's it did make me laugh, like it was really
29:44
well done. Just the the sharp criticism here and the
29:47
fact that we all have to still talk about this
29:49
four years on is just absolutely shocking.
29:52
Speaker 3: I couldn't agree more. It remind me too, though.
29:54
Speaker 2: I mean, for people out there, Keith gil you know,
29:57
it had been pumping, or maybe I shouldn't use the
30:01
word pumping, but that's what it seemed like to me,
30:03
a direct competitor who had kind of eaten, eaten Petco's
30:07
dog food over the last few years here Chewy in
30:11
terms of you know, bumping up that stock alongside game
30:14
Stop over the last few years. And it is your
30:18
conclusion that it's not terribly clear that this is actually
30:20
Keith Gill doing this.
30:22
Speaker 5: I don't know about that.
30:23
Speaker 7: I wouldn't go so far to say that it may
30:25
not be Keith Gill. I think we have to take
30:27
it faced value that it's him, especially since you know
30:31
Gil has filed with the SEC in early July that
30:35
he has about a nine million share stake of Chewy,
30:38
you know, more than six percent, you know of the
30:41
the company.
30:42
Speaker 1: You know.
30:43
Speaker 7: Whether or not he's gotten out of it, I guess
30:45
remains to be seen. But I think the bigger concern is,
30:47
you know, investors can't forget fundamentals, and you know a
30:51
company like Chewy, company like pet Code there there are both,
30:56
you know, real.
30:58
Speaker 5: Businesses that you know you can make a case for
31:01
why there is.
31:02
Speaker 7: Value in owning them because you know, we all love
31:04
our pets, and we spend pretty heavily those of us
31:07
that don't, cats, dogs, what have you. The problem though,
31:10
is that you know, the pure play pet retailers are
31:14
by far from being the only game in town. So
31:19
you could argue that you know, these companies Chewy and
31:22
Petco or are getting hurt by larger retailers, be it Amazon, Walmart, Target,
31:29
you know.
31:30
Speaker 5: Again.
31:30
Speaker 7: I mean, it's not as if you have to use
31:33
a specialty pet you know, retailer to buy dog food
31:38
and cat food and toys for your pets. They are
31:41
you know, available at plenty at mass marching mass merchandise retailers,
31:46
often for cheaper prices.
31:48
Speaker 2: My impression after the last YouTube stream that what I
31:52
don't even remember if it was about game Stop or
31:54
another company at this point game Stop a few months ago.
31:58
My takeaway from that was that at Chersey, like Keith Gill,
32:01
I don't know, I had lost some enthusiasm or maybe
32:04
lawyered up. There were a bunch of disclosures at the
32:06
beginning of his stream. Does this more recent activity run
32:12
contrary to that, right? Is this a change in behavior
32:15
from what you're seeing or is this just more of
32:16
the same from the guy?
32:19
Speaker 7: Again, I wouldn't say necessarily that it's you know, a
32:22
change from him, because, to be fair to Gil, it's
32:26
not as if he's out there posting on his own
32:30
Reddit page or his YouTube channel or his x account
32:33
that hey, I love wolf you know I own it
32:37
along with Chewi.
32:38
Speaker 5: This is all just rampant speculation. And we've seen before
32:45
that you.
32:45
Speaker 7: Know, Reddit investors can move stocks both up and down
32:49
and if you want to trade these based on social
32:54
media chatter, I guess be my guest, but you know
32:58
these are not stocks to own for the long term
33:03
because of what someone says on Reddit and then post
33:08
a meme of a cartoon.
33:10
Speaker 5: It's just it's patently absurd.
33:13
Speaker 2: Yeah, seems a bit like a slightly unreasonable justification for
33:17
doing so. Paul Lamonica from Baron's joining us today to
33:20
talk a bit about Keith Gill and a new memestock
33:24
I suppose in Petco, whose share is traded up over
33:27
sixty percent so far this week and are up again,
33:31
albeit slightly today.
33:32
Speaker 3: Paul, thanks so much for joining us. Appreciate it. Talk
33:34
to you again next week.
33:36
Speaker 5: Thanks. Have a good weekend, guys.
33:37
Speaker 2: As we close in on the twelve o'clock hour here,
33:40
we have market strongly in positive territory, Dow leading the
33:44
way up four hundred and twenty six points a full
33:46
percentage point, a little bit more, S and P up
33:48
thirty seven points, two thirds of one percent, mimicking the
33:51
NASDAQS up of one hundred and nineteen points, again two
33:54
thirds of a percent, and the Rustle two thousand still
33:56
hanging on there, up a full two percentage points in
33:59
that early trading. That is all the time that we
34:03
have for this week's financial exchange. But we'll be back
34:06
at it tomorrow with a big week with Jerome Powell
34:08
taking Saturday. Did I say tomorrow, Yes, you did well.
34:12
Speaker 3: Tomorrow. We'll be here. We just won't be broadcasting. I'm
34:16
not gonna be here. You're gonna be here, all right.
34:18
Speaker 2: We'll be back next week with a packed financial exchange
34:22
with Drome Powell taking the stage on interest rate moves.
34:25
Tune in, have a great weekend, everybody,