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Why are we saying goodbye to cheaper rent and airfares? · The Financial Exchange Show

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He's the Financial Exchange with Chuck Zada and Mark Vandetti.
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Speaker 2: Kicking off the second hour the Financial Exchange. Markets find
1:14
themselves in a similar situation to the last couple days.
1:17
Midway through the morning. The Dow is down two hundred
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and eighty four points, the S and P is off
1:21
twenty eight, the NASDAC off one twenty six. So we'll
1:24
see if the market can mountain, you know, similar rallies
1:27
to the last couple of days, where look, we've seen
1:30
these morning selloffs that have dissipated as we've headed into
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the afternoon. I have no idea if it will or won't,
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but that's been the pattern the last couple of days.
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Is yeah, modest morning sell offs that are gone by
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the time you get to the afternoon. And the SMP
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was down two points yesterday when it was all said
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and done. And we'll see if we get to a
1:49
similar place today. Tenure Treasury in a similar place, selling
1:53
off now to four point two four to eight percent,
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up four point two basis points. We've got oil down
1:59
ninety five cents barrel to seventy seventy nine on West
2:02
Texas intermediate gas price is nationally continuing to fall. We've
2:07
broken free of that three to twenty range, and now
2:09
the national average, according to Triple A, stands at three
2:11
point fifteen and five tenths of ascent, down another eight
2:15
tenths of ascent overnight. And we've got gold today reversing
2:19
its recent strength, down twenty five forty an ounce to
2:23
twenty seven to thirty four and forty cents. Markets talk
2:28
a little bit about Boeing. Boeing at one point was
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the crown jewel of the aviation industry, probably through the
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nineteen nineties, you would say, really even in the early
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two thousands after the McDonald Douglas merger. But it's you know,
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kind of a mess right now. To put it mildly,
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they ended up reporting a six point one seven billion
2:52
dollar quarterly loss, which not entirely unexpected. I mean, the
2:56
company literally can't build some of its airplanes right now
3:00
because its machinist union is on strike, and they're also
3:03
trying to revamp operations, streamline things to improve the financial footing,
3:07
and oh, by the way, just make the planes at
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a higher level of quality so they're not having so
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many issues once they actually get into service. But this
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is a company that needs some kind of turnaround here
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because on the commercial passenger side of things, there really
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are two options that exist in the world right now,
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Boeing an air bus and the lack of you know,
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any competition in that space. Were Boeing commercial airplanes, you know,
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if they were to cease to exist, would be a
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real problem in the commercial air space field.
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Speaker 3: And one of the issues with duoposo two suppliers. Thus
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do opoly is apposed like monopoly one. Just little economics
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background there, I guess one of the issues is that
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quality can suffer. They both become entrenched, they both become
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like sclerotic, you know, complacent, And to me, the car
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I'm not an expert obviously, I'm Boeing, far from it.
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You guys know way more about individual companies than I do.
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But to me, the question is how rotten does how
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deep is the rot what will be the catalyst? Are
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they really like worried in an existential sense or is
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Boeing too big to fail? Because you know, fifty percent
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of their revenues come from defense contracts and we rely
4:21
on them for vital systems and the planes that refuel
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our jet fighters and stuff like that. I mean, we
4:27
can't do what we do in this country securely without Boeing.
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Speaker 2: The defense side is certainly not too big to fail,
4:33
but too systematically important to come.
4:37
Speaker 3: So you've got to me. The lesson is is both
4:40
major political parties are contemplating protecting more American businesses and
4:43
building more stuff. Here, the high level lesson, not that
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you all don't know, this is competition's good. Duopolies monopolies
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entrenched positions protected by either lots of government contracts or
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outright regulations, and Boeing has been one of the biggest benefits.
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It's i think, our biggest exporter, also the biggest beneficiary
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of tariffs and what I'll just call indirect subsidies that
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come from government contracts. The result there has not been
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great for quality. So keep that in mind as you
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cheer on on shoring, as you cheer on buying everything
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American exclusively. Those of you who drove cars made in
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the eighties and the seventies know what I'm talking about.
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Not a good situation. So there's a cautionary tale I
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think here that goes beyond Boeing, and that tail is
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probably competition is good, even when it's foreign competition and
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it comes at the expense of American businesses in the
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short term.
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Speaker 2: You know, when we talk about that competition, one of
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the things that's so challenging is that there's basically no
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path to being a startup commercial plane maker today. But
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the amount of money that you have to spend before
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you even have a chance of making a diamond revenue
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is astronomical. You're talking tens, if not one hundred of
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billions of dollars because the way it sets up right now,
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it's basically a fifteen year process from start to finish
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to actually get a commercial airliner into service, like a
6:12
new one, a brand new model. So there's really no
6:15
clear path to any kind of legitimate competition for Boeing's
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commercial airplanes domestically really or basically anywhere else. The only
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place that's trying to actually like have you know, a
6:31
startup in the commercial airliner space is China, and they've
6:35
been trying to get the C nine to one nine
6:37
off the ground for the last two decades. I think
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they've made and sold literally sixteen of them at this point.
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Just because it's such a long process, they can't get
6:46
certified in the EU, they can't get certified in the US,
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so it's just a mess. But I have an interesting
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thought on Boeing, which is and again it's it's probably
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just a horrible thought. But sometimes these thoughts come up,
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and I just I have to say them in front
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of lots of people, because then I get told no,
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that's a bad idea, and I'm like, okay, fine, like
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maybe it is. But let's say that Boeing can't get
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themselves out of this this slump that they're in, and
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let's say they have these existential, you know, problems of hey,
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how do we stay in business? The US government is
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not going to let Boeing fail, as you noted, because
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of the Defense department business. Like it's just it's kind
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of important to be able to make f eighteens, you know,
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like to just make it simple, like that's you have
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to be able to make them. When we look at
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what I would do, I think that you could maybe
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kill a few birds with one stone in that. Okay,
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Boeing is, you know, considering declaring bankruptcy.
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Speaker 4: What do we do?
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Speaker 2: Split the company up? First and foremost, the defense business
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gets split off from the commercial business, because you don't
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want to be bailing out Boeing Defense for the sins
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of the commercial in perpetuity. So split that off that way,
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that can continue to exist on its own. Toss it
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a few billion dollars to make sure that you can
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still you know, operate and make all the stuff that
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you need. Fine, that goes its own way. The remaining
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commercial business, Well, if you can't get any startups to actually,
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you know, meaningfully enter the space, what if you split
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up Boeing's commercial business based on the products that it
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makes in its different factories. As an example, the Dreamliner
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they make exclusively in South Carolina. Fine, now you've got
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Dreamline or Aviation, and then all the stuff that's left
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in Washington State. Find that can keep the Boeing name
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or something along those lines, something where you try to
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generate additional you know, competition through whatever the end remedy is,
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because otherwise you might just be here in ten years,
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one national champion firm, and that's not good or sustainable.
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Speaker 3: Part of the issue to me is what is the problem.
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Is anybody to find it? What's the problem with bowing
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other than the obvious effects that we read about every day.
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Those are symptoms. What's the underlying problem is it culture?
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That's what the new CEO from. How does that from the.
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Speaker 2: People that have looked at this extensively, And by extensively,
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I mean more than just me reading a bunch and
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watching documentaries, like people who've actually talked to experts, actual experts.
9:34
After the McDonald Douglas merger, the MD people came in
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and basically took the reins and they are being counters,
9:40
not engineers, okay, And as such, the quality that Boeing
9:45
was known for before the merger has been on a
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multi decade slide to the point where it's gotten to
9:50
where it is today, and you need to put the
9:53
engineers in charge of the thing again and get the
9:55
being counters back to counting beings.
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Speaker 3: So whatever the solution is, whether it's splitting up the
9:59
company or changing the culture, as their new CEO continues
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to underscore, it's got to address the right problem. And
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the problem is culture is difficult to define, and I
10:14
just absent a specific problem. I don't know that anybody
10:18
can prescribe a solution. And these are smart people, they're
10:21
not stupid. They've had McKenzie in there, they've had other
10:23
consultants in there, they're not subject matter that makes me
10:26
feel good. Yeah, I know they're not. I mean, we
10:28
know these are smart guys. They get NBA's from good school.
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Speaker 2: Consulting firm though, was just to give you cover for
10:33
whatever you're going to do anything.
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Speaker 3: Some c sweet people do it for that reason. It's
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easier to, yeah, say this is backed by a goal
10:41
plated consulting firm as additional authority, I guess incredibility. But again,
10:47
unless you identify the problem and you're very specific about it,
10:51
these slap dash quote solutions are unlikely to be fruitful.
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Speaker 2: Let's take a quick break here. When we were talk about, hey,
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two areas where we've been seeing some improvements and costs recently,
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rent and airfares. Are those areas starting to reverse and
11:08
maybe prices start going back up. We'll talk about that
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when we return.
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Speaker 2: All right, let's talk a little bit about this piece
11:32
from Bloomberg Opinion is titled Sagabye to cheaper rent and airfares.
11:37
And the premise of this is pretty straightforward, which is, look,
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for the last few months, we've been hearing about airlines
11:45
having this glot of seats. Now it's put pressure on
11:48
airfares heading into the holiday season. And so what do
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airlines do in this case, They say, Okay, we're going
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to start reducing the number of available seats. So they're
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starting to do that. On the rent side of things,
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there was a huge boom in multi family construction during
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twenty twenty one and twenty twenty two. Low interest rates
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and high cost of perching a home led to a
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ton of demand for rentals, and so you saw just
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again rentals popping up left and right, especially in the
12:20
Southeast where we had these huge multi family developments going on.
12:24
As interest rates rose in twenty twenty three, you end
12:28
up in a situation where, really, actually late twenty two
12:31
and early twenty three, you end up in a situation where, hey,
12:35
it no longer is cost competitive for someone to go
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and build four hundred units of housing in the Southeast,
12:42
and so they say, great, We're not gonna build any
12:45
more multifamily, and so the pipeline for multi family construction
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is kind of dried up, and so you've got a
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lower number of new units coming on over the next
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couple of years. Once you get through kind of the
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next quarter or two, your thoughts mark.
12:58
Speaker 3: Yes, supply will catch you up with access to In
13:01
any market, supply catches up with excess demand. At first,
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there's a squeeze, and we saw that in both these
13:06
markets early in the early stages of the exit from
13:09
the COVID recession, and that pushes up prices. It contributed
13:13
to overall inflation as well. Supply eventually increases to fill
13:17
that gap, and the short term, though supply is fixed
13:21
as we all learn, but sometimes forget that pushes up prices,
13:25
then supply responds. That takes a little while, though demand
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inevitably can't keep up at a breakneck pace forever, and
13:32
therefore prices come down, which in turn spurs demand and
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the cycle repeats. I'm oversimplifying a little bit, but that's
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why you get many boom bust like behavior in some
13:44
industries and acute boom bust behavior in others. It all
13:48
depends on the relative responsiveness of supply and demand.
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Speaker 2: Do gus remember all the time that we spent covering
13:55
used vehicle prices back in twenty twenty one and twenty two.
13:59
The Manheim US Vehicles.
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Speaker 3: Media exactly clung to that. Yeah, I mean we look.
14:03
Speaker 2: It was a big thing. We've never seen anything like
14:05
that before. I mean, use cars, so their prices rise
14:08
forty percent year over year from twenty twenty to twenty
14:11
twenty one. You know, we joked about, hey, look, the
14:14
best performing you know, asset class in twenty twenty two
14:17
was used vehicles because they were up ten percent.
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Speaker 3: You know, I mean, is that an actual investable asset
14:22
clas where people.
14:23
Speaker 2: Trying to suritize I was making a joke.
14:25
Speaker 3: Oh okay, I wouldn't be surprised though if somebody did
14:26
try to securitize.
14:28
Speaker 2: Oh well, people try to securitize everything. I mean, my
14:30
whole belief about finance is there's only two tricks, and
14:32
it's just repackaging them. It's securitization and leverage, and.
14:35
Speaker 3: Just what can we there's only dead in equity.
14:38
Speaker 2: What can we securitize? And then how do we leverage
14:40
it once it's securitized. In two thousand and seven, it
14:43
was hey, we've securitized leverage, and that went very badly
14:48
for us and then leveraged it again. You know, it's
14:51
not quite ideal when uh when.
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Speaker 3: So back in Mannheim and I'm sorry I took off.
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Speaker 2: I was just talking about how look airfares and stuff
15:01
like that. Sure they might go through these you refer
15:03
to them as these mini boom bust cycles. We've seen
15:07
one in again in car prices a couple of years ago,
15:11
and those you know, have leveled off on the used
15:13
vehicle side at least now there's been basically no movement
15:17
for the last twelve months now, and used car prices
15:19
we've kind of found that the happy medium based on
15:22
where the economy is today. So I look at this
15:25
and yeah, you might have certain things that end up
15:28
becoming more expensive. But ultimately, when we talk about the
15:31
impact on inflation, remember inflation is not the change in
15:35
one price, it's the change in the aggregate price level.
15:38
And so if rent and airfares start going up in price,
15:42
there are a couple of things that can happen. Either
15:44
A people say, yeah, I'm willing to pay those prices,
15:47
but now it takes away from my spending elsewhere. So
15:49
something else has to see its price come down because
15:52
people can't afford to do that, or people might say,
15:54
you know what, airfares are too expensive, not gonna go
15:58
that route anymore. You will drive instead of flying, and
16:02
you end up with airfares having to you know, correct
16:05
and come back down because the demand still isn't there
16:07
at the prices that airlines want to charge. So there's
16:12
again it's a dynamic system. It's not something where you
16:14
just say, well, now you know they're gonna they're gonna
16:17
get us forever on airfares. Well, no, it prices and
16:22
preferences are always in flux and always changing. They're never
16:26
stuck forever. It's just hey, here's the latest adjustment that
16:30
companies are making based on what they're seeing in terms
16:33
of overall consumer demand, and consumers then may adjust their
16:37
preferences based on these new prices coming in from companies.
16:41
Speaker 3: Yeah, broad inflation statistics. Getting to the second article of
16:45
two in this theme, is that where you were going
16:47
or a my jumping ahead, they're not really meant to
16:50
capture my experience or yours. They were. Most of the
16:52
statistics that we use in statistic means loosely speaking, estimate.
16:56
We don't just use that fancy way of saying number.
16:58
When you hear statistic, you should think, oh errors, Oh
17:01
this is a sample. It's not it's probably not accurate,
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and it's certainly not representative of my experience. We use
17:07
these things, is the broad point I want to make here,
17:09
Whether it's GDP, this or unemployment, we use these things
17:12
in a way they weren't really developed to be used.
17:14
Speaker 2: And also, like it gets kind of nitpicky, like this
17:18
piece is talking about, Hey, you know, tipping isn't factored
17:21
into the CPI. Is that, well, tipping's never been in
17:23
the CPI. Let's not make this a problem that doesn't exist.
17:27
Speaker 3: Well, that's why when you look at something like that,
17:29
you gotta smooth it by taking a long term moving
17:31
average or use something like the median. What policy makers
17:34
are interested in is the trend, which is why we
17:37
talk about median and core and other ways of getting
17:40
at it, because again, the CPI is not supposed to
17:42
be representative of any one individual or even group of
17:44
individuals experience. That's not what it was built for.
17:48
Speaker 2: Other things they're like, hey, these other things didn't make
17:50
it into the CPI either, illegal activity like getting a
17:53
ticket for driving too fast, marijuana.
17:56
Speaker 3: Use, I mean those guys didn't notice.
18:00
Speaker 2: Sorry, it's fine quick break here. More coming up after this.
18:08
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18:30
Speaker 2: I don't issue apologies often, but I have to issue
18:35
one here. I've generally said that the if you have
18:41
an E coli outbreak, it's almost certainly caused by Romaine Lettuce,
18:47
because that just seems to be the culprit more often
18:49
than not. As such, I believe that Romaine Lettuce is
18:53
just why would I bother? It's kind of like, what's
18:56
the upside from Romaine Lettuce? Is kind of how I
18:59
approach it, you know. But McDonald's here has an E
19:04
coli outbreak that has been linked to quarter pounders, And
19:09
so I'm sorry Romain for blaming you for the E
19:13
coli all the time, because in this case it clearly
19:16
wasn't you. It's been reported in ten states at least
19:19
forty nine people sick. One person has died after this
19:23
E Coli outbreak. And so apparently though it's not the
19:29
it's not the meat, it's the onions that is the
19:32
problem here, and I'll quote here from the Wall Street Journal,
19:35
local restaurants have been instructed to remove the onions, and
19:37
distribution of slivered onions in the affected area has been paused,
19:40
McDonald said. And so it appears to have been because
19:44
of a single supplier that supplies three different McDonald's distribution
19:48
centers that has caused this year. And so they are
19:54
again basically pulling these from the menu, are in cases
19:57
where they can't just removing the onions off on them,
20:00
and just not great. You know, not great is basically
20:07
the best thing you can say about it.
20:08
Speaker 3: I think, Yeah, it's a reminder of how good the
20:10
food service indus not service, but the production. Well, I
20:13
guess service might overlap with that a little bit. Is
20:16
it ensuring most of our food is cleaning really is safe.
20:19
I've never had an issue my entire life.
20:21
Speaker 2: We've probably had some kind of you know.
20:23
Speaker 3: Maybe a mild GI reaction or something that I wasn't
20:26
even aware of.
20:27
Speaker 2: I don't know, like we've all had something that we've eaten.
20:29
We were like, oh gee, like I gotta.
20:30
Speaker 3: Stuff, you know, transient food or very feet. So that's
20:34
sort of what I mean. Nor do I know anybody,
20:36
and that's probably true of most of us. So to me,
20:39
it's a testament. As tragic as it is, there was
20:42
a death in this instance, and as nightmarish is, this
20:44
is for poor McDonald's. I say that because I love McDonald's.
20:48
Speaker 2: I think a lot of people it's one of my favorites.
20:50
Speaker 3: I would probably be a little I would probably think
20:53
twice for the next week or so.
20:55
Speaker 2: The safest time to do it.
20:57
Speaker 3: Oh yeah, maybe, but I can't. The behave behavior are
21:00
rational as it is. The behavioral impulses, oh, avoid it.
21:03
But you're absolutely right, they're gonna be on their game.
21:05
Speaker 2: I'm I'm gonna go for lunch tomorrow. That's just you know, well, actually,
21:09
take it back, I'm not gonna go for lunch tomorrow
21:12
because tomorrow I am actually going to be on the Cape.
21:16
We're gonna be doing a live broadcast from the DoubleTree
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Resort and Suites in Hyanas tomorrow Ed Lambert, host of
21:23
the WXTK Morning Show, is going to be joining us
21:27
and if you want. We do still have a couple
21:29
spots that are available for a live broadcast of the
21:32
Financial Exchange, followed by an educational lunch with the Armstrong
21:37
Advisory Group. What topics are we gonna be talking about? Well, look,
21:40
we got less than two weeks until the presidential election,
21:43
so we'll be talking about the impact of the election
21:45
on markets, different policies that are being proposed and how
21:48
they may affect the current economic landscape, and what volatility
21:52
we might see as a result of the election. How
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Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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22:25
Speaker 2: Starbucks reported earnings yesterday after the bell, and they missed
22:30
on top line bottom line, and they suspended their fiscal
22:36
guidance for their financial guidance for the next fiscal year.
22:39
Despite that, the stock is down just half a percent today.
22:45
Kind of one of those situations where you're like, Okay,
22:47
is this bad news just being priced in at this point,
22:51
and ultimately new CEO Brian Nicol saying, look, we've got
22:56
to you know, kind of get things moving again. Remember
22:59
Nichol is the person that went into Chipotle when they
23:02
were having their problems with food safety and and they're
23:05
branding and the company was just, you know, an absolute
23:09
juggernaut ever since he you know, took over there, so
23:12
investors are looking to see if he can do something
23:14
similar with Starbucks. At this point, I am not a
23:17
coffee drinker, so I don't really I don't really visit
23:23
any of these places. Quite honestly, I just it's it's
23:27
not something I really understand or know about, but the
23:31
sense that I have gotten from people that have frequented Starbucks,
23:36
it's not the same problem as you know two thousand
23:39
and seven, where it was, hey, we have way too
23:40
many stores, Like the classic joke, Hey, there's you know,
23:43
four corners on a you know, an intersection in New
23:46
York and there's a Starbucks on each corner. It's not that,
23:49
it's just the menu is bloated, the service times are abysmal,
23:54
and there are other options that are out there that
23:56
are now competitive from a quality standpoint. So I don't know.
24:00
We'll see how this goes. Either of you have any
24:02
thoughts on this, because you guys probably know this better
24:04
than I do.
24:05
Speaker 3: I only spend money there when somebody else is paying
24:07
the bills, So when it's at an airport, for example,
24:09
when I'm traveling for business, oh sure, yep, because it's
24:11
expensive and the menu is a little clectic and complicate.
24:16
Eclecticscise me, complicated and boring.
24:19
Speaker 2: Let's be honest, the menu all at any coffee place
24:22
is not good, like the regardless of which one you go,
24:26
you go to a Starbucks, everything you get there doesn't
24:28
matter what it is from a menu perspective.
24:30
Speaker 4: It's dry, it's flight like, it's just not good, inconsistent.
24:34
Speaker 3: And it's it's hard to They have their own language,
24:36
So what the heck is a grande macho uber? You know? Like,
24:40
what's roughly how many ounces?
24:41
Speaker 1: Is that?
24:41
Speaker 3: I have a hard time doing that.
24:43
Speaker 4: DA is sixteen?
24:44
Speaker 3: Okay, thank you, And it probably says that, but even then,
24:46
just you know, give me a large place. What is
24:48
a large black?
24:51
Speaker 2: You know?
24:52
Speaker 3: Yeah, see that I don't struggle with as much, but
24:54
I still can't conceptual, So I always struggle with, like,
24:57
what the heck, Hey, can I have a black coffee?
24:59
Or can I just have a tea? It's so too
25:01
many choices and a little too expensive for my But
25:03
I'm like a McDonald's dunking Donuts guy.
25:05
Speaker 2: So Tuck used to be a big Starbucks guy and
25:07
switched correct. Yeah, yeah, and that was the main thing
25:10
that drove you away. Price just.
25:13
Speaker 4: More so favoring the local coffee shop and making coffee
25:18
more frequently at home. But overall, yeah, it's just inconsistency
25:22
and pricing point.
25:24
Speaker 2: So there's one other thing there that I find interesting
25:26
is Starbucks rose to prominence in the late nineties early
25:31
two thousands, and Starbucks is kind of you if you
25:36
went to a consulting firm and said, hey, generate me
25:40
a business plan for a coffee shop that tries to
25:43
mimic your local coffee shop, that's what Starbucks is.
25:47
Speaker 4: And they've gone away from that.
25:49
Speaker 2: And it's just something where I wonder if that lack
25:53
of authenticity now where you can get those authentic experiences
25:57
more easily because like there's boutique everything.
25:59
Speaker 1: Now.
26:00
Speaker 2: We've talked like for the last decade about the rise
26:02
of Kraft beer, but craft coffee is a thing also,
26:06
and you don't have to go to a giant place
26:08
to to try to get that high end experience now,
26:11
I guess, is what I'm saying. So part of me
26:13
looks at it and wonders, hey, has the uh the
26:18
zeitgeist has it changed in the coffee space and is
26:21
there still a place for Starbucks like there used to be,
26:24
because it's it's an imitation, and I just wonder if
26:28
the imitation is good enough anymore to compete when there's
26:31
so many other options out there. I don't know, but
26:34
I'm not I'm not a coffee drinker. So this is
26:37
me from an outside perspective looking in.
26:39
Speaker 4: Well, it's yeah, Starbucks used to be the go to
26:41
meeting place for friends or business meetings if you wanted
26:46
to grab coffee or you know, a job interview or
26:48
something like. You're not going to do that experience at
26:51
a dunkin Donuts, your dunkin Donuts because because because dunkin
26:55
Donuts just like you're in and out boom, see you later,
26:57
And where is the Starbucks? Yes, you have that in
27:00
and out option, but it was also a place to
27:02
meet up, hang out with whoever. And they've gone away
27:06
from that. They put all their chips in the mobile
27:08
basket and it's just not resonating with its customers anymore,
27:13
especially with the app being a complete a pile of
27:17
garbage now that needs a complete overhaul.
27:20
Speaker 2: Oh, it's so infurious, But what are the problems with
27:22
the app?
27:22
Speaker 4: It's just like if I want to add friggin oat
27:24
milk to the thing or whatever, you get to go
27:27
to the creamer and then it's just like.
27:28
Speaker 3: A whole it's a whole process.
27:31
Speaker 4: It's a whole process. It's like it's pretty much extra
27:34
steps that it shouldn't have to take for a basic
27:38
coffee order, like it's coffee, and it's just like extra
27:41
steps that are not needed and it pisses everyone off
27:44
who just wants to frigging coffee.
27:46
Speaker 2: It would seem to me and look as someone who's
27:48
not a coffee drinker. I'm just speculating here. Does the
27:53
Starbucks app have a button for like my usual?
27:57
Speaker 3: It does?
27:58
Speaker 4: It does have that. I'll give them that but there's
28:01
so many customizations at Starbucks, and that's what's attractive to
28:05
customers that it makes it frustrating when you want to
28:08
change it up once in a while, especially if you're
28:10
in the car in traffic. Like, let's be honest, like
28:12
people are firing off mobile orders in traffic.
28:15
Speaker 2: You know, the answer on this probably is what AI?
28:18
Speaker 1: Sure?
28:20
Speaker 4: Whatever, whatever makes it quicker.
28:22
Speaker 3: I'm faster.
28:23
Speaker 2: I know that that. I think Brian Nichols smart enough
28:25
to not just be like, hey, we're going to try to,
28:27
you know, use AI to guess your order from now on.
28:30
But WoT wouldn't a lesser company wouldn't that be the
28:34
next place they go?
28:35
Speaker 4: Somebody just texted in I had a friend who spent
28:37
twelve bucks a day at Starbucks five years ago.
28:40
Speaker 2: How many coffees is that?
28:41
Speaker 1: Well?
28:42
Speaker 4: I assume that's food too, and they would just go
28:44
out go there every day twelve bucks. I don't know.
28:47
Speaker 2: Like, look, I'm someone I breakfast at home, I packed
28:51
my lunch and bring it to the office. I don't
28:54
like spending money on that stuff. Yeah, it just I
28:59
don't know quality of life.
29:01
Speaker 4: Lunch is expensive now, Lunch is really expensive, Like to
29:04
get a basic lunch locally like around here. Release it's
29:08
like fifteen bucks for basic lunch. It's expensive lunch.
29:12
Speaker 2: Packing lunch is the way to go. I'm telling you,
29:14
let's take a quick break and when we come back,
29:17
we'll do a little bit of stack roulette. That'll have
29:19
some launch.
29:21
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30:23
Speaker 2: Mark, what do you have me for? Stack? Rue Lette?
30:27
Speaker 3: Always risky, I guess, Chuck. When businesses weighed into politics,
30:31
we all know that former President Trump visited a closed
30:34
McDonald's last week and pretended to serve fries to pretend customers,
30:39
A good I guess, publicity stunt, but potentially bad for
30:43
business at Wall Street Journal Today reports that kind of amusingly,
30:48
that particular McDonald's is getting a so called review bombed
30:53
on yelps. So the fifty percent or so of the population,
30:57
maybe it's a little more or less than in that
30:59
particular air that doesn't like the former president is responding understandably,
31:05
I guess, and predictably I should say, not understandably, but
31:07
predictably by saying ugly things about this particular franchise on
31:12
social media. And it does raise the question of why
31:14
would you want to alien eight half your potential customers.
31:18
Speaker 2: Well, here's something, here's something I kind of want to
31:22
dig into on this. Are there any lasting effects actually
31:26
from this.
31:27
Speaker 3: On the business?
31:27
Speaker 2: I mean, yeah, Like you can look at the stuff
31:32
from the last decade that has been you know, hot
31:34
button politically and you know how it may have you know,
31:38
caused outcry at any particular point in time. Let's go back.
31:42
I don't remember exactly when it was, probably like twenty seventeen,
31:46
twenty eighteen, maybe maybe it was after. I really don't
31:49
know when it was. But the remember the NFL with
31:54
the kneeling during the national anthems. Has there been any
31:58
negative impact on the NFL's business over the last five
32:01
years or however long it's been. No, The franchises are
32:04
selling for more and more. You got prices for basically
32:07
everything through the roof. The TV contracts are massive because
32:10
it's the only product that you can draw fifteen million
32:13
people consistently week in and week out. And there's been
32:17
basically nothing there. You look at remember, uh, Target with
32:24
the the transgender bathroom stuff that they were was going
32:28
on again like eight nine years ago. Is there any
32:31
lasting impact to Target's bottom line? No, like there hasn't.
32:35
Speaker 3: And how you'd measure it, because you can it's hard
32:37
to control for that.
32:37
Speaker 2: Well again, I think you can just like look and
32:40
be like, hey, does this look like a business that's
32:42
permanently lost half its customers? And the answer is no,
32:44
Like it doesn't like you can kind of go down
32:47
the list of all these different things and be like, hey,
32:51
it hasn't really impacted the only one that I think
32:53
that you can point to where you know, there's been
32:55
any kind of meaningful shift, and even that has started
32:59
to reverse now after like a year or so. Was
33:02
bud light last year and he again even that a
33:05
year later is kind of, you know, trending back towards
33:08
where it was now. So I look at you know, hey,
33:12
do you want to get involved politically? And look, the
33:15
answer would probably be like no, Like what's what's the
33:17
point of you know, wading into those waters. But I'm
33:20
also uncertain that it actually causes any kind of long
33:24
term shift for the business, so long as you can
33:27
weather whatever the short term you know, social media firestorm is.
33:32
Speaker 3: Yeah, I guess I always go back to Michael Jordan's
33:34
maxim of the other political party buys sneakers too. Why
33:37
do I Why would I want to endorse one guy
33:39
and alien eight half of my potential customers. I always
33:42
thought those were very wise words. And again, this is
33:47
not this is not a cause, this is a person.
33:49
Whether not that makes a difference, I don't know.
33:51
Speaker 2: Yeah, So I just I don't know. I'm not sure
33:54
that there's anything meaningful in terms of any long term
33:57
impact from any of this stuff. Like I just I
34:01
don't think it really.
34:02
Speaker 3: I found it funny and predictable, that's all.
34:05
Speaker 2: Yeah, of course, I mean, yeah, exactly, like that's basically
34:09
you know what you would get out of it. Let's see,
34:11
do I want to do Netflix or Costco. Let's let's
34:14
talk Costco. They are partnering with Peloton in order to
34:19
sell Peloton bike pluses in stores over the next few months,
34:24
and they are going to be selling them at pretty
34:27
substantial discounts to what they typically are offered at on retail.
34:31
Online is twenty four ninety five, but through Costco in
34:35
store it'll be nineteen ninety nine and online at twenty
34:37
one to ninety nine. And you know, as you look
34:41
at Peloton, remember this is one of those pandemic darlings
34:44
where hey, the only way that any of us were
34:46
going to work out forever was in you know, a
34:49
connected fitness class on a really expensive bike. And now
34:54
free cash flow is still negative. They're not profitable. Margins
34:58
are you know, obviously bad and the company has let's
35:02
see about six hundred and ninety seven million dollars in
35:05
cash and short term investments on hand, and they're bleeding
35:08
cash at a rate of about ninety million dollars a year.
35:12
It's not really you know, great. So this is Peloton
35:16
trying to figure out, hey, how do we recapture growth?
35:19
But hey, how can we get to profitability just through
35:21
selling more of this stuff? And unfortunately for Peloton, it
35:25
looks like, hey, you're in the fitness space. Most of
35:30
the time, you're just a fad in that space. It's
35:32
really hard to have any staying power because people just
35:35
move on to the next cool thing that has some
35:37
influencers that they like on TikTok and we all have
35:40
both flex is sitting in our atticts and basements. Now
35:44
I don't, but.
35:46
Speaker 3: Potential market's a lot smaller than they hoped.
35:48
Speaker 2: Let's take a quick break here. For the rest of
35:50
the day, markets remain negative. We'll see it tomorrow. Tesla
35:53
earnings after the bell today will report on that as well.