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Are Big Tech Earnings Better Than They Look · The Financial Exchange Show

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  Speaker 1: This is the Financial Exchange with Chuck Zada and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Tucker with you here on Monday, and
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  Speaker 2: pretty quiet trading over all today so far. The SP's
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  Speaker 2: down about ten points, continuing very modest losses from Friday.
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  Speaker 2: The Dow is off two thirty two now's that can
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  Speaker 2: posit though, up forty four points, so again, kind of
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  Speaker 2: just mixed markets, not much direction. Everyone just kind of
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  Speaker 2: chilling right now. Ten year Treasury up one point two
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  Speaker 2: basis points to four point seven eight percent. Despite that,
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  Speaker 2: you've got the dollar index off point one five percent
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  Speaker 2: ninety nine four oh five there, and gold is up
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  Speaker 2: thirty five ten announced to forty four to seventy two.
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  Speaker 2: Crude oil West Texts Intermediate is at eighty two twenty six.
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  Speaker 2: That's down fourteen cents a barrel from last Friday. Triple
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  Speaker 2: a national average, not really budget a whole lot as
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  Speaker 2: you would expect. It's down two tenths of a cent
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  Speaker 2: to four oh six and three tenths right now, so
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  Speaker 2: no major movement there.
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  Speaker 3: And the one that I do want.
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  Speaker 2: To keep pointing out though, as long as we're talking
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  Speaker 2: fuel prices, diesel keeps on creeping up.
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  Speaker 3: We're now at five point forty four gallon there.
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  Speaker 2: Gas prices have gone up six cents over the last week,
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  Speaker 2: diesel prices up fifteen cents over the last week, and
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  Speaker 2: this all gets at hey. Ultimately, different fuels are made
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  Speaker 2: from different kinds of crude, and diesel tends to require heavier,
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  Speaker 2: more higher sulfur content crude in order to produce diesel,
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  Speaker 2: and that's the very stuff that tends to come out
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  Speaker 2: of the Middle East, and when we don't have as
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  Speaker 2: much of that, we really can't produce so much of
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  Speaker 2: it domestically. There are other places that you can get it,
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  Speaker 2: but not like you're just gonna spool them up instantly.
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  Speaker 2: And so watch what goes on with diesel because those
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  Speaker 2: prices have a chance to continue ticking up in the
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  Speaker 2: coming weeks and potentially could threaten the all time high
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  Speaker 2: of five eighty one per gallon on diesel. PC and
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  Speaker 2: CNBC from Mike Santoli, who we occasionally have on the show,
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  Speaker 2: Earnings Bonanza that lifted market to record may not be
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  Speaker 2: all that it appears to be. Oh is it an
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  Speaker 2: earnings mirage?
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  Speaker 4: That's more and more what people seem to be interested
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  Speaker 4: in and fascinated by. Obviously, we are no longer at
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  Speaker 4: the all time. You know, the cycle high on valuations
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  Speaker 4: that was reached back in October of last year when
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  Speaker 4: we got to twenty three times forward earnings since declined
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  Speaker 4: because the earnings have come in and are so good.
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  Speaker 3: So we made this point last.
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  Speaker 4: Week as well, and there's a few points I guess
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  Speaker 4: to be made on it. One, A lot of the
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  Speaker 4: earnings that you have seen for the last few quarters
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  Speaker 4: have been based on big companies who have big investment
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  Speaker 4: stakes in privately held companies who we think are now
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  Speaker 4: worth more than they previously were. So think about Alphabet's
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  Speaker 4: holdings in Anthropic. They are not insignificant and they made
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  Speaker 4: the investment.
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  Speaker 3: A while ago.
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  Speaker 4: If you are a publicly traded company, you need to
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  Speaker 4: show that increase in valuation on your P and L
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  Speaker 4: a A just as something that actually happened. When you
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  Speaker 4: know reality, it's not like you sold more stuff or
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  Speaker 4: spent more money to sell that stuff. You just owned
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  Speaker 4: a company that became more valuable. Likewise, the other part
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  Speaker 4: of the earnings mirage that we have discussed is all
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  Speaker 4: the companies that are making on and off balance sheet
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  Speaker 4: investments into data centers. So an example here would be
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  Speaker 4: Meta is assisting in the buildout of a massive data
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  Speaker 4: center in Louisiana, I believe it is. It's not actually
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  Speaker 4: being funded today by Meta. What they have done is
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  Speaker 4: they have agreed to a lease of the facility. They
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  Speaker 4: are backing up the builders of that facility and saying, hey,
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  Speaker 4: if they default, we will actually back the bond issuance
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  Speaker 4: that they are making. And if we leave as a
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  Speaker 4: tenant within the next twenty years, then we will also
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  Speaker 4: back the bond issuance there. But because they are not
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  Speaker 4: actually raising the money, nor are they spending the money
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  Speaker 4: on the lease right now, it's not really being booked
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  Speaker 4: as an expense. And so sure, there's a few of
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  Speaker 4: these different types of arrangements that are today making earnings
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  Speaker 4: look perhaps better than.
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  Speaker 3: They will in the future. But that's it.
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  Speaker 4: Perhaps the question remains, Chuck is clearly these companies see
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  Speaker 4: a investment that.
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  Speaker 3: They believe is worth making.
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  Speaker 4: So the relevant question is how much are they going
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  Speaker 4: to grow their revenue to account for this massive surgeon expense? Right?
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  Speaker 2: I mean, it's the whole ballgame. I mean it's again here,
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  Speaker 2: here's the thing. Next year, You've got north of a
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  Speaker 2: trillion dollars in Kapex commitments, that in future years is
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  Speaker 2: going to come back in the form of about one
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  Speaker 2: hundred depending on the depreciation schedule, one hundred and forty
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  Speaker 2: to one hundred and eighty billion.
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  Speaker 3: Dollars a year depreciation.
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  Speaker 4: Because again, this capital expenditure means they're buying stuff, stuff
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  Speaker 4: that has a useful life.
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  Speaker 2: Now, if one were to assume forty percent margins, okay,
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  Speaker 2: then you're talking in order to cover that, you need
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  Speaker 2: five hundred billion dollars in revenue generated by that capex
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  Speaker 2: in order to cover it. Going forward, you're gonna get
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  Speaker 2: five hundred billion dollars in new revenue from this stuff maybe.
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  Speaker 2: And remember that's just for one year of building. Then
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  Speaker 2: you got another one of those and anothers now you
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  Speaker 2: got like within a few years and another one point
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  Speaker 2: five trillion dollars in revenue for all these hyperscalers, How
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  Speaker 2: are you gonna get there?
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  Speaker 1: Like?
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  Speaker 2: Where where's it gonna cot? What companies in the world
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  Speaker 2: just have all this money floating around? They don't, And
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  Speaker 2: so this is how you get to Okay, they're gonna
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  Speaker 2: have to cut headcount in order to do that.
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  Speaker 3: Well, what does that do to the economy?
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  Speaker 2: I don't know, But it's like the the math gets
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  Speaker 2: it's awfully hard when you when.
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  Speaker 3: You look at it.
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  Speaker 2: And that's that's the part I struggle with the other stuff.
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  Speaker 2: You know, Hey, earnings. Look, the reason why the US
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  Speaker 2: stock market has been so fantastic for the last you know,
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  Speaker 2: eighty years post World War two period in particular, is
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  Speaker 2: because companies have been able to figure out, hey, how
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  Speaker 2: are we going to grow earnings.
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  Speaker 3: Year after year? They don't do it every year.
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  Speaker 2: There's always hiccups that come in and disrupt things like that.
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  Speaker 2: That happens, But in the long run, the reason why
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  Speaker 2: you have the S and P five hundred producing the
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  Speaker 2: returns that it has is because the long run rate
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  Speaker 2: of earnings growth for S and P five hundred companies
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  Speaker 2: is around seven percent. And so the question here is,
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  Speaker 2: look the last four years now, you've had double digit
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  Speaker 2: returns in markets I'm including this one so far this year.
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  Speaker 2: Do we think that AI is going to be something
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  Speaker 2: that transforms the potential earnings growth from seven percent up
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  Speaker 2: to like twelve to fifteen percent year over year? Are
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  Speaker 2: you perpetually in that mode? If you are, then great,
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  Speaker 2: If not, then not so great. Like that, That's basically
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  Speaker 2: how it looks in the short term. The counter to this,
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  Speaker 2: like this piece and again, like we have Mike on.
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  Speaker 2: I'm not disagreeing with Mike Santoli here, I'm just saying, hey,
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  Speaker 2: here's the possible counter. Hey, if market's got to twenty
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  Speaker 2: three x forward earnings last year and we're only sitting
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  Speaker 2: here at twenty right now.
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  Speaker 3: Then if you believe that twenty three.
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  Speaker 2: Is the right multiple to slap on, you know, on
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  Speaker 2: earnings here, okay, instead of twenty, then what you're actually
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  Speaker 2: looking at is the market should be making a run
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  Speaker 2: towards almost nine thousand on the S and P five hundred,
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  Speaker 2: not seventy eight hundred.
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  Speaker 3: Is that reasonable?
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  Speaker 2: I don't know, but I just it's always good to
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  Speaker 2: consider alternative viewpoints and understand how you can get there.
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  Speaker 2: The bear case right now is that this is just
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  Speaker 2: another tech bubble. The bull case is that it's not,
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  Speaker 2: and stocks are priced more cheaply than a year ago,
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  Speaker 2: and maybe last year was the right pricing. We'll see
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  Speaker 2: which one ends up developing from here, but keep an
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  Speaker 2: open mind on these things.
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  Speaker 3: Quick break.
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  Speaker 2: When we return, let's talk a little bit about home improvement.
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  Speaker 2: The home improvement sector. We got a bunch of earnings
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  Speaker 2: coming there this week. We'll discuss next.
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• 10:29
  Speaker 3: Big week.
• 10:30
  Speaker 2: Here for home improvements earnings, we got home Depot and
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  Speaker 2: Low's that are reporting. Floor and Decor reported a couple
• 10:38
  Speaker 2: of weeks ago. You ever been to a FLOURG and Decor? Yes,
• 10:41
  Speaker 2: I gotta tell you, man, So I readed a laundry
• 10:45
  Speaker 2: room a couple of years ago, Okay, and in doing it,
• 10:49
  Speaker 2: there had previously been a sink in there, and we
• 10:51
  Speaker 2: pulled it out expecting just the sync to be like,
• 10:54
  Speaker 2: you know, on topic on top of the previous tile.
• 10:57
  Speaker 2: And it turned out that the tile had been put
• 11:00
  Speaker 2: round the sink because it went all the way down.
• 11:02
  Speaker 3: Sure, and so it was.
• 11:03
  Speaker 2: Okay, like we got I gotta tell you, after retiling
• 11:06
  Speaker 2: a laundry room, I wanted to put tile everywhere, man,
• 11:10
  Speaker 2: like I just I love.
• 11:11
  Speaker 3: This stuff, Like it's just did you yourself install it? Uh?
• 11:16
  Speaker 2: No, Okay, No I didn't because it's uh, here's the thing.
• 11:19
  Speaker 2: I feel like I would be comfortable tiling walls. I
• 11:25
  Speaker 2: don't think I'm comfortable tiling a floor, just because I
• 11:30
  Speaker 2: don't think I would be able to do it even
• 11:31
  Speaker 2: and I feel like if I did it on the floor,
• 11:33
  Speaker 2: it wouldn't be quite level enough.
• 11:34
  Speaker 3: Where's on the wall.
• 11:35
  Speaker 2: It's like, oh, he meant to do that, like it's
• 11:37
  Speaker 2: a texture or something.
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  Speaker 3: And it's like you could forgive me for not being
• 11:40
  Speaker 3: good at it. Yeah.
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  Speaker 2: But in any case, you got home improvement earnings that
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  Speaker 2: are coming this week, and there's this headline the Wall
• 11:49
  Speaker 2: Street Journal home improvements hangover could last as if like
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  Speaker 2: the last three years haven't happened, where the housing sector's
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  Speaker 2: just been stuck in neutral at a very low level
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  Speaker 2: of activity since twenty twenty two. Like you look, get
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  Speaker 2: twenty three, four, five, and now six. It's been four
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  Speaker 2: years of crap for the housing sector.
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  Speaker 3: Yeah.
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  Speaker 4: Yeah, to be frank, it would be more surprising if
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  Speaker 4: the home improvement sector had a big rebound this quarter
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  Speaker 4: than if the hangover didn't continue to contribute. Right, Yeah,
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  Speaker 4: nobody's buying or selling homes, and we just talked about
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  Speaker 4: cash strapped consumers who are seeing inflation outpace their wages.
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  Speaker 4: So I don't really see a great case for home
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  Speaker 4: improvement companies to surge in the coming quarters because again,
• 12:33
  Speaker 4: you know, you can only buy so many inflatable Halloween decorations,
• 12:36
  Speaker 4: which by the way, are out if you haven't been
• 12:38
  Speaker 4: to Home Depot and Lo's yet. My dog was terrified.
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  Speaker 3: I didn't see the BJ's last weekend.
• 12:43
  Speaker 4: Now, no, maybe it's just the home improvement guys, but yeah,
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  Speaker 4: I mean this will be a heavy earnings week for
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  Speaker 4: those not just home improvement retailers, but retailers generally. So
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  Speaker 4: tomorrow morning we do have Home Depot reporting, as you mentioned.
• 12:57
  Speaker 4: Wednesday we're gonna have TJX Lows target all reporting before
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  Speaker 4: the bell, and then Thursday we're going to get earnings
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  Speaker 4: from Walmart. Yeah, Deers in there as well, big company,
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  Speaker 4: but not home improvement related. So you know, a few
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  Speaker 4: things to potentially get answers to. Right, We've been hearing
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  Speaker 4: over and over again about inflation versus earnings, and yet
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  Speaker 4: you've got that lower fifth or that lower quarter of
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  Speaker 4: the household income demographic that seems to be having wages increase.
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  Speaker 4: So do we get any flavor of that in these
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  Speaker 4: earnings I think will be interesting to me. The other
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  Speaker 4: one that I've just I found more entertaining than interesting
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  Speaker 4: is Walmart and Target, who used to be pretty comparable stores. Yeah,
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  Speaker 4: for the last five years, have just seen Walmart just
• 13:49
  Speaker 4: clean up compared to what Target's able to do. And
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  Speaker 4: I'm curious if there's any return to execution on that front.
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  Speaker 4: But yeah, that's more been an entertaining story than it
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  Speaker 4: has been a market moving story in any meaningful way.
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  Speaker 3: Yeah.
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  Speaker 2: The piece that's I mean, here's the thing they've I
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  Speaker 2: think we've always wanted to think that they're comparable, but
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  Speaker 2: they're not. Well, yeah, I was looking at the data
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  Speaker 2: before this. Actually, today Walmart has seven hundred and twenty
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  Speaker 2: five billion dollars in revenue and Target has about one
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  Speaker 2: hundred and six. So call it it's like a seven
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  Speaker 2: to one ratio. You go back to two thousand, twenty
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  Speaker 2: five years ago, Walmart had one hundred and sixty five
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  Speaker 2: billion in revenue. Target was thirty three, was a five
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  Speaker 2: to one.
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  Speaker 3: You know, I don't know why.
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  Speaker 2: It always seemed like they were closer in size, but
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  Speaker 2: like they never have been.
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  Speaker 4: You know. Can we just talk from I don't know
• 14:49
  Speaker 4: about everyone else who's listening experience right now, and I
• 14:51
  Speaker 4: recognize that Home Depot lows, Walmart, and Target do pretty
• 14:55
  Speaker 4: different things, but you can get some of the same
• 14:58
  Speaker 4: items at all four of those stores. And yeah, I
• 15:01
  Speaker 4: gotta tell you, in my experience, Walmart is just so
• 15:04
  Speaker 4: much better than the others at it. Recent couple examples,
• 15:08
  Speaker 4: one just ordering things online and Home Depot's website was
• 15:15
  Speaker 4: it's brutal, just unusable. The car shopping cart wouldn't properly
• 15:20
  Speaker 4: adjust any of the filters. When I was I was
• 15:22
  Speaker 4: searching for a fridge, and like the.
• 15:24
  Speaker 3: Filters just had no meaning.
• 15:26
  Speaker 4: You know, you would put one filter in and suddenly
• 15:28
  Speaker 4: there'd be zero items that you could look at.
• 15:30
  Speaker 5: It's just jump on there and it's just like the
• 15:32
  Speaker 5: first it's the website is just banners.
• 15:36
  Speaker 4: The other thing that I will say, So Walmart, you
• 15:38
  Speaker 4: go and find the item that you want. And so
• 15:41
  Speaker 4: I was traveling recently and I wanted to meet thermometer
• 15:43
  Speaker 4: while we were on vacation, and my wife's uncle was Walmart,
• 15:47
  Speaker 4: and I said steaks.
• 15:48
  Speaker 3: And I was doing it for thirty people. So I
• 15:50
  Speaker 3: didn't want to screw it. I just want to touch them.
• 15:52
  Speaker 3: I can't do it. I feel I can, but Rare
• 15:54
  Speaker 3: did not. I know, I know the trick.
• 15:57
  Speaker 4: Again. I'm pointing, screwed this up for twenty five or
• 16:00
  Speaker 4: thirty people, I would be criticized for life. So I
• 16:02
  Speaker 4: want to make sure I got it. But go to
• 16:04
  Speaker 4: walmart dot com. I say, this is the meat thermometer
• 16:06
  Speaker 4: I want, and they put a nice little display like
• 16:08
  Speaker 4: this is the isle in it. It's going to be
• 16:10
  Speaker 4: at you know, this height, and here's the thing that
• 16:13
  Speaker 4: you're looking for. And I send that to him and
• 16:14
  Speaker 4: it's there and the inventory is correct. I do the
• 16:17
  Speaker 4: same thing at home depot. They tell me that there's like,
• 16:19
  Speaker 4: you know, two hundred in stock. You get there and
• 16:22
  Speaker 4: there's five open bags of gravel that have all fallen
• 16:25
  Speaker 4: apart inspite of them telling me that there's five hundred
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  Speaker 4: in stock. It's just again different types of products. I
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  Speaker 4: recognize that they are not these same companies, but they
• 16:36
  Speaker 4: all fall into the same category of big you know,
• 16:40
  Speaker 4: big you know local presence, in my opinion, generally understaffed
• 16:45
  Speaker 4: for you know what you're looking for, uh, you know,
• 16:48
  Speaker 4: pretty tough to find an employee in all these locations.
• 16:51
  Speaker 4: But one of them really outshines the others in terms
• 16:54
  Speaker 4: of their ability to control their inventory, monitor it and
• 16:58
  Speaker 4: quickly tell you what they have in stock, and then
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  Speaker 4: if you want to just buy it online, just a
• 17:03
  Speaker 4: way better experience.
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  Speaker 2: In my opinion, I'm in strong agreement. You know, Walmart
• 17:11
  Speaker 2: in the last decade has made huge progress in three
• 17:18
  Speaker 2: things in my opinion. Number one, as you mentioned, like
• 17:20
  Speaker 2: the online experience is just way better than it used
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  Speaker 2: to be. They've done a tremendous.
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  Speaker 3: Job building that out.
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  Speaker 2: Number two, the overall vibe in the stores is miles
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  Speaker 2: better than it used to be, Like it just feels
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  Speaker 2: higher quality than you remember Walmart from twenty five years ago.
• 17:37
  Speaker 2: And the other one that I'll say, and this I
• 17:40
  Speaker 2: think is happening across the board and look, people forget
• 17:43
  Speaker 2: that Walmart is the biggest grocery store in the country. Yep,
• 17:46
  Speaker 2: they have the most the greatest dollar volume of grocery
• 17:48
  Speaker 2: sales out of any company in the country. The quality
• 17:52
  Speaker 2: of what you can get at Walmart's grocery stores and
• 17:54
  Speaker 2: the selection is so much better than it.
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  Speaker 3: Used to be.
• 17:58
  Speaker 4: Hey, you might have been able to get schallice these
• 18:00
  Speaker 4: It's absolutely wild.
• 18:03
  Speaker 3: You guys, are any shalots. You're never gonna let them
• 18:05
  Speaker 3: live that down, are you who? That was a me thing,
• 18:08
  Speaker 3: not that that it was like five six years ago.
• 18:10
  Speaker 4: One should not go to the Noblesville, Indiana Walmart grocery
• 18:15
  Speaker 4: store and expect them to have shallots and then the
• 18:18
  Speaker 4: staff to know where they are. It's an unrealistic expectation,
• 18:21
  Speaker 4: of my view. That's fair, Yeah, that's fair.
• 18:25
  Speaker 2: So yeah, I think they've done a tremendous job building
• 18:29
  Speaker 2: all of like all of those kind of pillars of
• 18:32
  Speaker 2: what they are today now.
• 18:34
  Speaker 3: And yeah, it's the home improvement stores.
• 18:38
  Speaker 2: I feel like, again, I don't go into them a tunnel,
• 18:41
  Speaker 2: like quite honestly, there's like a small ace hardware near
• 18:44
  Speaker 2: me that I tend to use for most things just
• 18:45
  Speaker 2: because I prefer like it's just closer to me than
• 18:49
  Speaker 2: any of the big boys, and so like I just
• 18:50
  Speaker 2: end up there. But the big guys, I feel like
• 18:55
  Speaker 2: they're great if you know exactly what you need.
• 18:58
  Speaker 4: Yeah, look, they're good because a big chunk of their
• 19:01
  Speaker 4: sales goes to contractors who know what they're doing.
• 19:04
  Speaker 3: No, I don't not us, So I go to Walmart. Yes,
• 19:07
  Speaker 3: we're your Shallots. Mike cast of Low's.
• 19:12
  Speaker 4: Right says, right here, you have them in stock thirty. Yeah,
• 19:17
  Speaker 4: those are That's that's the store next door Michael's. Let's
• 19:20
  Speaker 4: take a quick break when we return.
• 19:22
  Speaker 2: Uh, we got Wall Street Watch and then we'll talk
• 19:25
  Speaker 2: about TikTok Financial Advice.
• 19:37
  Speaker 6: Bringing the latest financial news straight to your radio. Every day.
• 19:42
  Speaker 6: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:47
  Speaker 1: Tell you out full Wall Street Watch, treking, the stocks,
• 19:51
  Speaker 1: Theodato and the headlines driving markets so far today right
• 19:54
  Speaker 1: here on the Financial Exchange Radio Net.
• 19:57
  Speaker 5: Markets mixed by midday to begin the week as trader
• 20:00
  Speaker 5: ready for a batch of retailer earnings including Home DEEPO Tomorrow,
• 20:04
  Speaker 5: Low's and Target on Wednesday in Walmart on Thursday. Right now,
• 20:09
  Speaker 5: the Dow is down about a third of percent or
• 20:10
  Speaker 5: one hundred and ninety points lower, SMB five hundred down
• 20:13
  Speaker 5: over a tenth of percent or twelve points lower. NASDAK
• 20:17
  Speaker 5: now edging higher about a tenth of a percent or
• 20:19
  Speaker 5: twenty seven points higher, Russell two thousand, down four tenths
• 20:23
  Speaker 5: of one percent, and the Tenure Treasure Reel is up
• 20:27
  Speaker 5: one basis point at four point seven zero six percent.
• 20:30
  Speaker 5: Oil up about half a percent, rating at eighty two
• 20:33
  Speaker 5: dollars a barrel. Shares in several domestic memory chip makers
• 20:38
  Speaker 5: seeing gains after US Commerce Secretary Howard Lutnik told The
• 20:41
  Speaker 5: Wall Street Journal the Trump administration opposes Apple buying Chinese
• 20:46
  Speaker 5: memory chips. Sand disks jumping now ten percent. Western Digital
• 20:50
  Speaker 5: is up nearly seven percent. To Microun Technology shares are
• 20:53
  Speaker 5: up six percent. Meanwhile, according to according to Reuters, Ali
• 20:59
  Speaker 5: Baba is expected to to unloaded's gaming developer Unit two
• 21:02
  Speaker 5: private equity firm True Star Capital for more than two
• 21:05
  Speaker 5: billion dollars. Ali Baba stock is edging higher, and in
• 21:10
  Speaker 5: Video has agreed to provide more than one hundred billion
• 21:13
  Speaker 5: dollars for a massive new open AI data center in
• 21:17
  Speaker 5: Ohio that is being developed alongside soft Bet Bank lead
• 21:20
  Speaker 5: energy company in one of the biggest AI infrastructure deals yet,
• 21:25
  Speaker 5: and video stock is up by one percent. I'm Tucker
• 21:29
  Speaker 5: Silva and that is Wall Street Watch.
• 21:32
  Speaker 3: Mike, do you spend much time on TikTok?
• 21:34
  Speaker 4: I actually don't have a TikTok account.
• 21:36
  Speaker 3: I don't either.
• 21:37
  Speaker 2: PC Here in the Wall Street Journal a breakdown of
• 21:39
  Speaker 2: the financial advice that's flying all over TikTok. So the
• 21:43
  Speaker 2: Wall Street Journal reviewed nearly fifty hours of TikTok content
• 21:46
  Speaker 2: across two hundred and twelve accounts offering money advice. So
• 21:50
  Speaker 2: that might not sound like a lot of hours, but
• 21:52
  Speaker 2: you have to remember the average TikTok video is like
• 21:57
  Speaker 2: thirty seconds in less. True, so each hour, you might
• 22:00
  Speaker 2: have like one hundred videos that you're reviewing, So you
• 22:03
  Speaker 2: might have, you know, overall, looked like fifty thousand, you know,
• 22:07
  Speaker 2: five thousand you know, different videos, and you know, tried
• 22:10
  Speaker 2: to make heads details of what's actually going on in there.
• 22:13
  Speaker 2: And basically what the Wall Street Journal found out is,
• 22:16
  Speaker 2: you know, surprise, surprise, like most of the people that
• 22:18
  Speaker 2: are running those accounts don't have any kind of financial
• 22:21
  Speaker 2: license or certification. It doesn't inherently mean that the information
• 22:27
  Speaker 2: they're giving is bad. There are plenty of people out
• 22:30
  Speaker 2: there that aren't certified to give advice who still, you know,
• 22:34
  Speaker 2: have good idea, constructive thoughts about different financial topics.
• 22:39
  Speaker 3: What did they find when they went through this mic.
• 22:42
  Speaker 4: Well, they kind of bucketed them into a few different categories.
• 22:45
  Speaker 4: One was a group who were you know, really actually
• 22:49
  Speaker 4: seemingly genuinely focused on educating and.
• 22:52
  Speaker 3: Some of them are quite qualified to do so.
• 22:53
  Speaker 4: One of them was a former financial professional and is
• 22:57
  Speaker 4: now doing this full time. Fifty million different follower or
• 23:02
  Speaker 4: different likes across his videos, and they reviewed it and
• 23:05
  Speaker 4: it was pretty entertaining, but plain vanilla stuff. Sure, hey,
• 23:10
  Speaker 4: index funds, roth Ira, you got to save more than
• 23:12
  Speaker 4: you spend, you know, like you know, things like that.
• 23:14
  Speaker 3: So there is a lot of that.
• 23:16
  Speaker 4: Remember how TikTok works, though, you're not getting a random
• 23:19
  Speaker 4: sample right like they did a random sample, but that's
• 23:22
  Speaker 4: not what you're going to get. You're going to get
• 23:24
  Speaker 4: fed information based on your previous viewing habits, and so
• 23:26
  Speaker 4: that's really important context here. They put in another group
• 23:32
  Speaker 4: that they labeled the young guns. These are generally people
• 23:34
  Speaker 4: under the age of twenty five who seem to have
• 23:37
  Speaker 4: a lot of financial advice for you. Some they considered
• 23:40
  Speaker 4: to be hot.
• 23:41
  Speaker 2: Garbage, other was others standard things like hey, if you
• 23:44
  Speaker 2: have a credit card, you know, make sure you pay
• 23:46
  Speaker 2: it off every month.
• 23:47
  Speaker 3: Like again, nothing crazy necessarily.
• 23:50
  Speaker 4: The third category I found most interesting just based on
• 23:54
  Speaker 4: what we do, and they called them the stock hypers.
• 23:57
  Speaker 4: So of the two hundred and twelve accounts they reviewed,
• 23:59
  Speaker 4: nearly a third we're making recommendations about individual stocks or
• 24:03
  Speaker 4: talked about their portfolio holdings. And by the way, you know,
• 24:07
  Speaker 4: one of the common ways that they do such things
• 24:10
  Speaker 4: is they flash a view of their portfolio at the
• 24:13
  Speaker 4: beginning of the view at the of the video, so
• 24:16
  Speaker 4: that you can see just how much money they've made
• 24:18
  Speaker 4: or how wealthy they are, which is again, you know,
• 24:21
  Speaker 4: could be a full out lie. You have no way
• 24:22
  Speaker 4: of verifying any of those details. But they find that
• 24:24
  Speaker 4: it's a way of getting people to trust them.
• 24:26
  Speaker 3: Sure.
• 24:27
  Speaker 4: The thing that I found interesting here again, so if
• 24:29
  Speaker 4: you are making a TikTok video and you are putting
• 24:32
  Speaker 4: it out there and it's successful, if it's successful enough,
• 24:36
  Speaker 4: you're getting compensated by TikTok, right, Like if you monetize
• 24:41
  Speaker 4: your videos, then they are placing ads in there, and
• 24:43
  Speaker 4: therefore TikTok is then paying you the creator of that video. Yes,
• 24:48
  Speaker 4: I want to compare that to a sector in the
• 24:50
  Speaker 4: financial industry, which is those who recommend stock picks via
• 24:55
  Speaker 4: a newsletter. So it's not necessarily personalized investment advice. It is, Hey,
• 25:00
  Speaker 4: you're going to subscribe and pay for my newsletter and
• 25:03
  Speaker 4: in exchange, I'm going to give you stock picks. And
• 25:06
  Speaker 4: in order to do that, you're required to register with
• 25:09
  Speaker 4: Securities Exchange Commission as an investment advisor because you are
• 25:12
  Speaker 4: providing investment advice.
• 25:14
  Speaker 3: For a fee.
• 25:15
  Speaker 4: Sure, in this case, you have, you know, unlicensed individual
• 25:20
  Speaker 4: providing stock picks to the general public, and they are
• 25:24
  Speaker 4: being compensated for it because TikTok. You know, again, it's
• 25:28
  Speaker 4: not based on the success of their picks. It's based
• 25:32
  Speaker 4: on the popularity of their videos. But TikTok is compensating
• 25:35
  Speaker 4: in those individuals for this work. And frankly, just because
• 25:40
  Speaker 4: regulations haven't really cut up, there's no registration requirement here.
• 25:45
  Speaker 3: I just find that fascinating because it's.
• 25:46
  Speaker 4: Another area where you are seeing technology move much faster
• 25:51
  Speaker 4: than regulation and quite honestly, financial advice on TikTok is
• 25:56
  Speaker 4: wild West. You're going to get some probably pretty sound
• 25:59
  Speaker 4: stuff out there. You're also going to get some hot garbage,
• 26:03
  Speaker 4: hot garbage that could be a scam to and everything
• 26:06
  Speaker 4: in between. The most fascinating piece about all that too,
• 26:11
  Speaker 4: Finra did a study looking at those who use social
• 26:13
  Speaker 4: media for investment advice and rate there and those who
• 26:17
  Speaker 4: do it. Like, those who use social media for investment
• 26:19
  Speaker 4: advice rate their investment knowledge higher.
• 26:22
  Speaker 3: Than those who don't.
• 26:23
  Speaker 4: So when judging themselves, they say, you know, I have
• 26:26
  Speaker 4: this type of knowledge, but when they actually put that
• 26:28
  Speaker 4: knowledge to a test, they perform worse than the other group.
• 26:33
  Speaker 3: That's not great.
• 26:34
  Speaker 4: So again it's this effect where I mean, to me,
• 26:39
  Speaker 4: that's pretty solid evidence that the advice that people are
• 26:42
  Speaker 4: getting on TikTok makes them more confident and not more knowledgeable,
• 26:47
  Speaker 4: which is kind of a dangerous combination if you think
• 26:49
  Speaker 4: of it.
• 26:51
  Speaker 3: Nonetheless, like we said, I'm.
• 26:53
  Speaker 4: Open minded to how people learn about financial guidance and
• 26:58
  Speaker 4: get better at what that they what it is that
• 27:01
  Speaker 4: they do. However, I think you have to take any
• 27:06
  Speaker 4: advice that you're going to get with a grain of salt. Sure,
• 27:09
  Speaker 4: and you know, I think it's pretty important, especially if
• 27:12
  Speaker 4: you are considering putting your own money at risk, that
• 27:15
  Speaker 4: you understand the credentials of the person that you are
• 27:18
  Speaker 4: listening to. And again, one of the benefits of working
• 27:23
  Speaker 4: with somebody who you know, actually you know has credential
• 27:28
  Speaker 4: and registers with a regulator is a key thing there
• 27:32
  Speaker 4: is disclosing their own conflicts of interest, right like, hey,
• 27:36
  Speaker 4: sure you get to know if I have a big
• 27:39
  Speaker 4: conflict with recommending this, that or the other to you. Nonetheless,
• 27:43
  Speaker 4: like we said, there are a million different ways out
• 27:45
  Speaker 4: there to build your own future financial plan and get
• 27:50
  Speaker 4: quality investment advice. If you have been doing it on
• 27:54
  Speaker 4: your own and looking for.
• 27:56
  Speaker 3: That extra help somewhere, arm.
• 27:59
  Speaker 4: Storre Advisor Group like to chat with you and see
• 28:02
  Speaker 4: if there is work that we could help you do
• 28:05
  Speaker 4: around your investments, your personal finances, your retirement plan. If
• 28:09
  Speaker 4: you would like more information for a free consultation, the
• 28:12
  Speaker 4: numbers eight hundred three nine three for zero zero one.
• 28:16
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• 28:19
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  Speaker 4: ball rolling call us first eight hundred three nine three
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  Speaker 4: for zero zero one.
• 28:27
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 28:29
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 28:32
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• 28:35
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• 28:42
  Speaker 3: Just take a quick break here.
• 28:44
  Speaker 2: When we come back, we'll do a little bit of
• 28:47
  Speaker 2: stack roulette right after this.
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• 29:37
  Speaker 3: Mike, what do you got for me? For stack Roulette?
• 29:39
  Speaker 4: The New York Times reports that with ai riches at stake,
• 29:43
  Speaker 4: pressure is mounting to share the wealth. So uh, this
• 29:47
  Speaker 4: is growing phenomena that we're seeing across the political spectrum.
• 29:52
  Speaker 4: By the way, this is not a uniquely Bernie Sanders idea,
• 29:56
  Speaker 4: though he has.
• 29:57
  Speaker 3: Tossed it out there.
• 29:58
  Speaker 4: He's being agreed with on it by a number of
• 30:01
  Speaker 4: conservative lawmakers as well. That hey, with the amount of
• 30:06
  Speaker 4: wealth that we are seeing created or expect to be
• 30:09
  Speaker 4: created by AI and the potential for job loss, the
• 30:12
  Speaker 4: appropriate way to deal with that is to have the
• 30:17
  Speaker 4: government redistribute some of the wealth created by AI in
• 30:21
  Speaker 4: the form of presumably ownership stakes. And I just I
• 30:28
  Speaker 4: have to get out here and say it, because again
• 30:32
  Speaker 4: I keep hearing it repeated by people that seem to
• 30:35
  Speaker 4: have a conservative values, financial outlook, or economic outlook. This
• 30:42
  Speaker 4: is called socialism, yes, Like, you know, people are just
• 30:49
  Speaker 4: throwing around the word communism and socialism all over the
• 30:52
  Speaker 4: place recently, and they seem to be vastly afraid of it.
• 30:56
  Speaker 4: But then topics like this come up, like, oh, that
• 30:58
  Speaker 4: actually does sound pretty good, Like no, that's called socialism.
• 31:01
  Speaker 2: Like it's not just policymakers, and it's not just on this.
• 31:04
  Speaker 4: Yeah.
• 31:06
  Speaker 2: CBS News did a poll from August twelfth to fourteenth.
• 31:09
  Speaker 2: One of the questions asked was would you approve or
• 31:12
  Speaker 2: disapprove of government price controls? What do you think the
• 31:17
  Speaker 2: percentages of Democrats that said they approve of government price
• 31:20
  Speaker 2: controls seventy seventy five? What do you think it was
• 31:24
  Speaker 2: for Independence forty sixty two?
• 31:28
  Speaker 4: Jeez?
• 31:28
  Speaker 3: What do you think it was for Republicans sixty fifty four?
• 31:34
  Speaker 2: A majority across the two political parties and Independence are
• 31:38
  Speaker 2: in favor are in favor of government price controls, which, again,
• 31:44
  Speaker 2: the follow up question should be, Now I am clearing
• 31:48
  Speaker 2: my throat just so I want to make sure everyone
• 31:50
  Speaker 2: hears this. The follow up question is, if you believe
• 31:53
  Speaker 2: in government price controls, then what is the right price
• 31:59
  Speaker 2: for gas?
• 32:00
  Speaker 3: Lean everywhere? Today? We're gonna get a bunch.
• 32:04
  Speaker 2: Of texts Texas is six point seven three six thirteen
• 32:07
  Speaker 2: eighty five. Tell me the right price for any product
• 32:11
  Speaker 2: because it doesn't exist. And then when you get to
• 32:15
  Speaker 2: this piece about oh, like, yeah, we want the government
• 32:18
  Speaker 2: to own this this company, here's the problem that you
• 32:23
  Speaker 2: get into. Then, Uh, Mike, you're familiar with the company
• 32:26
  Speaker 2: by the name of uh, let's see, you're familiar with
• 32:30
  Speaker 2: digital digital equipment.
• 32:31
  Speaker 3: Yeah, digital equipment is still around today? No, why are
• 32:35
  Speaker 3: they not still around.
• 32:36
  Speaker 4: They got innovative out of business.
• 32:38
  Speaker 3: Correct.
• 32:39
  Speaker 2: Now, imagine that the federal government owns digital equipment. Yeap,
• 32:44
  Speaker 2: are you going to go up against them?
• 32:46
  Speaker 3: No, you're not.
• 32:46
  Speaker 2: You're not even gonna try to play that game, because
• 32:49
  Speaker 2: the federal government's gonna say, no, we own digital and
• 32:51
  Speaker 2: if you try to compete against us, we're gonna make
• 32:53
  Speaker 2: it increasingly difficult to do so. There are certain very
• 32:57
  Speaker 2: niche areas that are inherently important for national security but
• 33:03
  Speaker 2: uneconomical to operate domestically, where you can make a case
• 33:07
  Speaker 2: for sporadic government intervention, places like you know, rare earth
• 33:13
  Speaker 2: minerals and things like that, where.
• 33:15
  Speaker 4: A healthy US drone defense industry all on board. You know, like,
• 33:20
  Speaker 4: you can come up with like some of these different things.
• 33:23
  Speaker 4: But even in most of them, the answer isn't usually well,
• 33:25
  Speaker 4: I want the US government to own these companies. It's
• 33:29
  Speaker 4: usually okay, the US government should help find ways to
• 33:33
  Speaker 4: incentivize the domestic production of these through private enterprise, and
• 33:37
  Speaker 4: ideally not all through one national champion company that gets
• 33:41
  Speaker 4: all of the funding, but rather, hey, here's like thirty
• 33:44
  Speaker 4: different moonshots out there. You guys go fight amongst yourselves.
• 33:48
  Speaker 4: I just like, we get focused on this idea, you know, hey,
• 33:53
  Speaker 4: it's socialism because they want to raise my taxes and
• 33:58
  Speaker 4: people are talking about expanding security benefits or this, that
• 34:02
  Speaker 4: or the other, and I agree, like that is you know,
• 34:05
  Speaker 4: part of what you know in expanding government likes to
• 34:09
  Speaker 4: do universal basic income is one of these ideas of, hey,
• 34:12
  Speaker 4: this is how we're going to solve the crisis from AI,
• 34:15
  Speaker 4: and we label that socialism. And then when we talk
• 34:18
  Speaker 4: about the US government taking equity ownership stakes in privately
• 34:24
  Speaker 4: held companies to quote share the wealth of the AI
• 34:29
  Speaker 4: or we're setting prices, we're like, oh, yeah, that sounds
• 34:31
  Speaker 4: pretty good.
• 34:33
  Speaker 3: No, this doesn't.
• 34:35
  Speaker 4: Again, one of not the only, but one of the
• 34:38
  Speaker 4: reasons that I believe the US economy has become the
• 34:42
  Speaker 4: best in the.
• 34:43
  Speaker 3: World over the last couple hundred years is because.
• 34:45
  Speaker 4: We do allow businesses to succeed and fail, albeit with
• 34:50
  Speaker 4: you know, a changing regulatory environment over time and changing
• 34:53
  Speaker 4: tax codes and all these things. But the idea of
• 34:57
  Speaker 4: allowing things to fail and crash and burn and then
• 35:01
  Speaker 4: learn from that is a pretty you know, key component
• 35:06
  Speaker 4: of that. And if the government's going to suddenly own
• 35:09
  Speaker 4: all of the growth companies or have an ownership stake
• 35:11
  Speaker 4: in them. It really removes that possibility.
• 35:14
  Speaker 2: Well, and also it becomes increasingly hard to try to
• 35:19
  Speaker 2: figure out what is next if the government is setting
• 35:21
  Speaker 2: that policy for what is next.
• 35:24
  Speaker 4: So again, your lawmaker, raising your taxes is not socialism.
• 35:29
  Speaker 4: The government buying privately held companies in order to quote
• 35:34
  Speaker 4: participate in the AI boom, that's socialism.
• 35:41
  Speaker 3: Yeah. Yeah, it's kind of the bad kind. It's not great.
• 35:47
  Speaker 2: Where it's not great, we're having these conversations more often.
• 35:51
  Speaker 4: Yeah, and that again, I don't mean to not focus
• 35:55
  Speaker 4: on the poll that you just mentioned, that ABC poll
• 35:57
  Speaker 4: that more than half of the people polled in every
• 36:01
  Speaker 4: political affiliation believe that price controls are a good idea.
• 36:04
  Speaker 4: It's a pretty scary indicator of where people feel.
• 36:07
  Speaker 3: Right, do we have anyone texting in telling us the
• 36:10
  Speaker 3: right price for anything?
• 36:11
  Speaker 5: Somebody said three dollars and eighty one cents?
• 36:13
  Speaker 3: Good goal? What it is?
• 36:15
  Speaker 2: I'm more of a three eighty two guy myself, but
• 36:17
  Speaker 2: your mileage may vary.
• 36:19
  Speaker 3: Yeah, it's the only one we got.
• 36:21
  Speaker 5: Somebody else said, the socialists will.
• 36:23
  Speaker 3: Say the right price is zero free.
• 36:26
  Speaker 4: Yeah, it's just nothing.
• 36:28
  Speaker 2: Also adds I missed digital well, I mean, you still
• 36:32
  Speaker 2: got analog devices. At least they're still cooking around. Speaking
• 36:35
  Speaker 2: of cooking, Burger King, they're cooking. I'm gonna have to
• 36:39
  Speaker 2: get back to Burger King. I stopped today McDonald's on
• 36:42
  Speaker 2: my way home yesterday, got the kids a couple happy meals,
• 36:45
  Speaker 2: got a McNuggets myself, but because I was driving, I
• 36:49
  Speaker 2: really would like to try out. They've revamped the whopper apparently,
• 36:53
  Speaker 2: and it's one of the things that is driving this,
• 36:56
  Speaker 2: you know, huge resurgence in Burger King sales same store
• 36:58
  Speaker 2: sales growth up eight and a half percent year over year,
• 37:01
  Speaker 2: demolishing McDonald's and Wendy's, whereas McDonald's and Wendy's are basically
• 37:04
  Speaker 2: flat and look, I gotta be honest, it's been probably.
• 37:10
  Speaker 3: Twenty years since I've been to a Burger King. It's
• 37:12
  Speaker 3: been a while.
• 37:12
  Speaker 2: Yeah, I'm really a McDonald's Wendy's guys, if I'm going,
• 37:17
  Speaker 2: you know, pure fast food burgers.
• 37:19
  Speaker 3: But they're getting a lot of buns here.
• 37:21
  Speaker 2: They apparently have a new bun that they've you know,
• 37:25
  Speaker 2: gone a little bit more.
• 37:26
  Speaker 4: Upscale with the last time I even thought about Burger
• 37:29
  Speaker 4: King was in I want to say mid two thousands
• 37:31
  Speaker 4: when they had that the creepy Burger King commercials. I
• 37:34
  Speaker 4: don't remember the theme of them, but I just remember
• 37:36
  Speaker 4: a bunch of people with the King just like showing up, yeah,
• 37:38
  Speaker 4: addressing as him for Halloween. I remember seeing several Kings.
• 37:42
  Speaker 2: So I'm I'm interested to see what's going on here.
• 37:45
  Speaker 2: But they're doing something right them. And is it Chili's
• 37:48
  Speaker 2: that has like the thirty percent same store sales growth Chili's,
• 37:52
  Speaker 2: we know what they're doing. They're selling really cheap burgers
• 37:54
  Speaker 2: for the fast casual space.
• 37:55
  Speaker 3: Ye, Burger King. It's a combination of deals and revamped products.
• 37:59
  Speaker 3: I got it.
• 38:00
  Speaker 2: Check out the fries because that's always been the piece
• 38:01
  Speaker 2: that's been lacking to me at Burger King, is what's
• 38:04
  Speaker 2: going on with the fries. I'll do a little bit
• 38:07
  Speaker 2: of market research and report back.
• 38:09
  Speaker 4: And with that, it is lunchtime, folks.
• 38:11
  Speaker 3: Have a great rest of the day. We'll see you tomorrow.