Latest / The Financial Exchange Show / Micron's guidance jolts slumping tech market

Transcript

Micron's guidance jolts slumping tech market · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:05
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:08
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
Speaker 1: or anyone else. Investments can lose money. This program does
0:14
Speaker 1: not offer any specific financial or investment advice. Please consult
0:17
Speaker 1: your own financial, tax, and estate planning advisors before making
0:20
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:28
Speaker 1: for referrals and are not affiliated. This is the Financial
0:34
Speaker 1: Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:42
Speaker 1: your world. Stay informed and up to date about economic
0:46
Speaker 1: and market trends plus breaking business news every day. The
0:50
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:53
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:57
Speaker 1: heroes by visiting DAV five k DoD Boston and making
1:01
Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:05
Speaker 1: Zada and Mike Armstrong.
1:10
Speaker 2: All right, is Chuck, Mike and Tucker with you here
1:14
Speaker 2: on the Financial Exchange. We are, you know, getting economic
1:19
Speaker 2: data coming out from the US government again as we
1:23
Speaker 2: get into December. Earlier this week, we had a delayed
1:27
Speaker 2: release on the jobs report on Tuesday, so we had
1:32
Speaker 2: a job's Tuesday, which was kind of fun. Don't think
1:34
Speaker 2: I ever want to do it again, but it was was,
1:36
Speaker 2: you know, nice for a change, I guess. And today
1:39
Speaker 2: we get a CPI Thursday, which is not overly unusual.
1:43
Speaker 2: They're usually on Wednesdays or Thursdays, I believe, maybe even
1:46
Speaker 2: Tuesdays occasionally, so nothing too crazy there about a week delayed,
1:49
Speaker 2: but again nothing nothing bad. And I think when we
1:53
Speaker 2: look at it the Tuesday release of the jobs data,
1:57
Speaker 2: we said, guys, the data you're just really isn't particularly
2:01
Speaker 2: good obvious caveat. Hey, there are some sampling issues related
2:05
Speaker 2: to when the shutdown happened and when data was being collected,
2:09
Speaker 2: so don't read too much into it.
2:11
Speaker 3: Where'd you grade that thing?
2:12
Speaker 1: Like?
2:12
Speaker 4: I see the job report? Yeah, I don't think I
2:16
Speaker 4: gave it a grade, but I was see it best
2:19
Speaker 4: for me?
2:19
Speaker 2: I yeah, I mean C minus dplus. Anytime that the
2:22
Speaker 2: unemployment rate goes upero point two percent in a month,
2:25
Speaker 2: that's not.
2:25
Speaker 3: Great technically over two months, but yeah.
2:28
Speaker 2: Yeah, either way, it's it's it's not great, So it
2:31
Speaker 2: wasn't particularly good. This kind of the mirror image of
2:35
Speaker 2: that in that same cavets apply. Hey, data collection YadA, YadA,
2:39
Speaker 2: like all that, but coming in with a much better
2:42
Speaker 2: CPI report than anticipated. Now, we don't have month over
2:47
Speaker 2: month data because there is no October CPI, so we
2:51
Speaker 2: can't look at the month over month data, but when
2:55
Speaker 2: we look at the year over year data that's present
2:58
Speaker 2: in it, it does show up and say, yeah, the
3:00
Speaker 2: CPI for the last twelve months decreased from three percent
3:04
Speaker 2: down to two point seven and core went you know,
3:07
Speaker 2: kind of in the same direction down to two point
3:10
Speaker 2: six percent. So I think overall it points towards some
3:14
Speaker 2: improvements on that side of things and is an encouraging report.
3:19
Speaker 2: With the caveat data collection was disrupted and we don't know,
3:23
Speaker 2: you know, exactly what the next couple months are going
3:25
Speaker 2: to bring as those disruptions ease.
3:28
Speaker 3: Yeah, it's really missing quite a bit.
3:30
Speaker 1: You know.
3:30
Speaker 4: We can typically dive in here and we when these
3:34
Speaker 4: reports come out. You hear us talk about it frequently, like, yeah,
3:37
Speaker 4: I know the headline number is gonna be quoted as
3:39
Speaker 4: two point seven percent, but that's not the most relevant thing.
3:41
Speaker 4: The most relevant thing is how has it done lately?
3:44
Speaker 4: And I guess there you can cobble together something because
3:47
Speaker 4: what we do know from this report is that core CPI,
3:51
Speaker 4: so stripping out food, stripping out energy, it rose two
3:55
Speaker 4: tenths of a percent compared to the September reading. Again,
4:00
Speaker 4: we can get that much at least that hey, that
4:03
Speaker 4: the pace of increase over a two month time here
4:06
Speaker 4: horizon September to November was pretty muted, and were that
4:11
Speaker 4: to continue, that would be fantastic news. But yeah, you
4:15
Speaker 4: look at this as someone that looks at this report
4:17
Speaker 4: every month, you just kind of glare at it and
4:20
Speaker 4: you're like.
4:20
Speaker 3: What do I what do I do with this?
4:23
Speaker 5: Yeah?
4:23
Speaker 2: So good news, but again, like we can't really dig
4:27
Speaker 2: through and be like, hey, like here's what we're seeing
4:29
Speaker 2: on this. It's more just kind of all right, I
4:33
Speaker 2: guess this is, you know, kind of what it is here.
4:36
Speaker 2: So it's it's good news that we saw some improvement
4:40
Speaker 2: in the rate of inflation. It still is a little
4:42
Speaker 2: bit higher than you'd like to see. But quite honestly,
4:45
Speaker 2: if we cocked in a two seven on inflation next year,
4:48
Speaker 2: I would not have any issues with that, just because
4:51
Speaker 2: we've talked about, hey, if you're if you're ending up
4:54
Speaker 2: you know, anywhere in the twos that's generally historically where
4:57
Speaker 2: we've been the last forty years. I think if you
5:00
Speaker 2: you've got twelve more inflation reports that look just like this,
5:03
Speaker 2: you'd say, great, don't have to worry about that right now,
5:06
Speaker 2: it's not a problem.
5:07
Speaker 3: Yeah.
5:07
Speaker 4: What markets are reading right here is that with an
5:09
Speaker 4: inflation rate of two point seven percent, the Fed does
5:11
Speaker 4: not care about inflation. They're going to care about that
5:14
Speaker 4: ugly jobs report that we just discussed, and that that,
5:17
Speaker 4: to me is the whole implication of markets today is
5:20
Speaker 4: inflation at two point seven percent, even though it's ablah
5:23
Speaker 4: above the two percent target, will not be of concern
5:26
Speaker 4: to j.
5:27
Speaker 3: Powell and the gang.
5:29
Speaker 2: So I think this does set up the first half
5:32
Speaker 2: of the year nicely with these two reports in that
5:35
Speaker 2: to me, and this has been the way things have
5:37
Speaker 2: been evolving over the last few months. The question in
5:40
Speaker 2: the first half of twenty twenty six is not does
5:45
Speaker 2: inflation you know, continue to trend up? Rather, it's does
5:50
Speaker 2: unemployment continue to trend down? And do we hit those
5:54
Speaker 2: points that historically we've hit where it goes from a
5:57
Speaker 2: linear move down, you know, zero point one percent of
6:00
Speaker 2: month or point one percent every two months on unemployment
6:03
Speaker 2: moving up to hey, it starts to accelerate. And then
6:06
Speaker 2: you see a month where unemployment goes up by point
6:09
Speaker 2: three percent, then by point five, then by point five again,
6:12
Speaker 2: and finally next thing, you know, after you know, six
6:15
Speaker 2: to eight months, unemployment has risen three percent and starts
6:19
Speaker 2: to peak.
6:19
Speaker 5: Yeap.
6:20
Speaker 3: You know.
6:20
Speaker 4: A few caveats that I can think of here. One,
6:23
Speaker 4: we continue to get a lot of help from energy markets.
6:26
Speaker 4: I know that doesn't play into the core numbers here,
6:28
Speaker 4: but frankly, oil slips into every other price measure that
6:32
Speaker 4: we use, and so we've been dramatically helped by energy prices.
6:37
Speaker 4: Should they turn the year over year situation though no,
6:40
Speaker 4: you know every year it's flat, But that's still helpful. Right,
6:43
Speaker 4: If we're targeting two percent inflation and energy prices aren't
6:46
Speaker 4: moving upwards, that certainly helps along the way. The other
6:49
Speaker 4: piece that just comes to mind that I don't think
6:51
Speaker 4: will have a dramatic impact on inflation, but certainly might
6:55
Speaker 4: be stimulative. Is all the tax changes, and specifically seniors
7:01
Speaker 4: in my mind, are going to have a pretty big
7:03
Speaker 4: tax benefit from this. They are also accounting for a
7:05
Speaker 4: larger portion of spending than they have historically. And so
7:09
Speaker 4: do you have some you know, spill overcome March in
7:12
Speaker 4: April when those tax return tax refund checks come in,
7:15
Speaker 4: plus the lower withholdings kick in for some employees, but
7:18
Speaker 4: go maybe, yeah, I think I don't think that shows
7:22
Speaker 4: up till April May June timeframe.
7:23
Speaker 3: So I think you're right about the first half. And
7:25
Speaker 3: sorry for interrupting you.
7:26
Speaker 5: No, it's it's so.
7:28
Speaker 2: I think this is the the battle lines are drawn
7:32
Speaker 2: now in terms of the things to worry about in
7:35
Speaker 2: the first half of next year. Does unemployment worsen, do
7:39
Speaker 2: we start seeing more pushback on AI financing and maybe
7:46
Speaker 2: a slowdown in capex? You know that happens yesterday is
7:49
Speaker 2: just as an example, we had the report that Blue
7:52
Speaker 2: Owl was pulling out of a ten billion dollar financing
7:55
Speaker 2: deal for an Oracle data center in Michigan.
7:58
Speaker 5: So do we see things like that popping up?
8:01
Speaker 2: And what do we see from housing in terms of employment,
8:06
Speaker 2: and those questions can all be positively answered. Remember, the
8:10
Speaker 2: thing that we talk about with the stock market typically
8:12
Speaker 2: is it climbs a wall of worry. What that means
8:15
Speaker 2: is that there are always worries that you have to
8:18
Speaker 2: look at in markets. There's always something out there. It's
8:20
Speaker 2: never a perfect situation. When's the last time that you
8:23
Speaker 2: ever just sat back and said there's nothing to worry about.
8:27
Speaker 2: You were three years old and you just didn't know
8:30
Speaker 2: the broader world existed other than that. You know, it's like,
8:34
Speaker 2: you know, there's always something to worry about out there,
8:37
Speaker 2: especially you know economically, there's always something that can potentially
8:40
Speaker 2: go wrong.
8:41
Speaker 5: It doesn't mean that it will.
8:43
Speaker 2: But these worries and risks evolve, and you have to
8:46
Speaker 2: pay attention to them in order to make sure that
8:49
Speaker 2: you're not getting caught, you know, blindsided by them, and
8:53
Speaker 2: that you understand what's actually going on so that you
8:56
Speaker 2: can prepare for the potential evolution of those worries.
9:00
Speaker 4: Interestingly, to meet Chuck, no sizeable move in the likelihood
9:03
Speaker 4: of a rate cut at that January meeting after this report,
9:06
Speaker 4: again still early, but the likelihood now of a FED
9:09
Speaker 4: rate cut in January sitting at twenty six point six
9:12
Speaker 4: percent according to the CME Group FED Funds futures. Yesterday
9:17
Speaker 4: it was twenty four point four percent, So yeah, a
9:20
Speaker 4: little bit more likelihood, but no sizeable shift on this
9:23
Speaker 4: better pretty substantially better than anticipated inflation report.
9:27
Speaker 2: Anything else that we want to talk about here. I
9:29
Speaker 2: think again, if if you're grading the the jobs report,
9:33
Speaker 2: you know, C minus D plus again with these are
9:37
Speaker 2: all with the caveats of like the data is, you know,
9:39
Speaker 2: potentially skewed on both of these because of the shutdown.
9:42
Speaker 2: I think you probably look at this and granted like
9:45
Speaker 2: it doesn't have all of the underlying supplemental data that
9:47
Speaker 2: you like, you probably have to grade this B plus
9:50
Speaker 2: A minus. That's ray I was too. Yeah, you know,
9:52
Speaker 2: a really good report and good to see. We also
9:55
Speaker 2: got jobless claims this morning, nothing of note there, So
9:59
Speaker 2: despite concer arns about the labor market, the weekly jobless
10:02
Speaker 2: claims report remains really calm, no major surprises there, and
10:08
Speaker 2: I think you continue to be in good shape on
10:10
Speaker 2: that side, even though a lot of other labor market
10:13
Speaker 2: indicators kind of flashing yellow at this point.
10:16
Speaker 5: To take a quick break when.
10:18
Speaker 2: We return after hours, yesterday, Micron reported earnings. We'll talk
10:22
Speaker 2: to you about what they said and what it means
10:24
Speaker 2: for the tech industry and AI industry specifically.
10:28
Speaker 5: Right after this miss any of the show.
10:30
Speaker 1: The Financial Exchange Show podcast is available on Apple, Spotify,
10:34
Speaker 1: and iHeartRadio. Hit the subscribe button and leave us a
10:37
Speaker 1: five star review. This is the Financial Exchange Radio Network.
10:42
Speaker 6: We're proud to announce that circle K is now the
10:44
Speaker 6: official convenience store of the DAV Department of Massachusetts at
10:48
Speaker 6: circle K. Supporting those who bravely served our country isn't
10:51
Speaker 6: just a commitment, it's a heartfelt mission. Circle K is
10:54
Speaker 6: honored to stand with the dav Department of Massachusetts to
10:57
Speaker 6: ensure that veterans receive the care and rerect cognition they deserve.
11:01
Speaker 6: If you'd like to do your part, please visit DAVMA
11:04
Speaker 6: dot org. Thank you for standing with circle K and
11:06
Speaker 6: the dav Department of Massachusetts, and thank you veterans for
11:10
Speaker 6: all you've done.
11:13
Speaker 1: Text us at six one seven three, six two one
11:15
Speaker 1: three eighty five with your comments and questions about today's
11:18
Speaker 1: show and let us know what you think about the
11:20
Speaker 1: stories we are covering. This is the Financial Exchange Radio Network.
11:35
Speaker 7: This segment of the financial exchange is brought to you
11:38
Speaker 7: by the US Virgin Islands Department of Tourism. There's still
11:41
Speaker 7: time to book your holiday vacation to Saint Croix, Saint Thomas,
11:44
Speaker 7: or Saint John. Enjoy one or all three, and if
11:47
Speaker 7: the act fast, you could be on Saint Croix to
11:49
Speaker 7: experience their Crucing Christmas Festival taking place this December through
11:53
Speaker 7: early January. Discover the magic of this long standing tradition
11:57
Speaker 7: with incredible food, music and entertainment. Or just go soak
12:00
Speaker 7: up the sun, stroll long white sand beaches and feel
12:03
Speaker 7: the rhythm of the heartbeat of the islands. The USBI
12:05
Speaker 7: is America's Caribbean paradise. Plan your winter escape a visit
12:09
Speaker 7: USVII dot com. That's visit USVI dot com.
12:14
Speaker 2: All right, So, yesterday after hours, we received earnings from
12:19
Speaker 2: Micron Technology. Micron in case anyone wondering is you know,
12:24
Speaker 2: anyone listening is wondering, you know what do they do
12:27
Speaker 2: in the tech space. They are not a processor maker.
12:30
Speaker 2: They are a maker of memory chips predominantly and other
12:34
Speaker 2: storage devices solid state drives, hard drives like you name it.
12:38
Speaker 2: Micron makes stuff that stores stuff. I think is the
12:42
Speaker 2: best way to to indicate what they do. Now, just
12:47
Speaker 2: to give you an idea of how good Micron's earnings were, Mike,
12:53
Speaker 2: it's kind of mind blowing to me that they reported this,
12:56
Speaker 2: because it's just it's it, it's wild. So analyst estimates
13:03
Speaker 2: for not even their earnings, but let's do their their
13:06
Speaker 2: guidance for the next quarter, because this is really where
13:09
Speaker 2: the meat is. Analyst estimates for their next quarter revenue
13:14
Speaker 2: were twelve point zero six to seventeen point three eight
13:17
Speaker 2: billion dollars. The guidance that Micron gave was eighteen point
13:22
Speaker 2: three to nineteen point one billion dollars. Both the low
13:26
Speaker 2: and high end of their guidance was above analyst's high
13:29
Speaker 2: end guidance their high end expectations, which to me a
13:34
Speaker 2: couple things. The first is memory prices has been going
13:36
Speaker 2: nuts in the last six months, in particular as there's
13:40
Speaker 2: just an incredible demand for memory in AI data center buildouts, which.
13:46
Speaker 4: By the way, we also need for consumer products. This
13:49
Speaker 4: is not you do just just an AI product you do.
13:53
Speaker 2: So part of me looks at this and is like,
13:55
Speaker 2: did a bunch of analysts just like miss the boat
13:57
Speaker 2: on where memory pricing has been going, because it sure
14:02
Speaker 2: seems like they did. The other piece is, you know,
14:06
Speaker 2: in terms of what this tells us about data center demand,
14:10
Speaker 2: it's it's you know, you have to get the read
14:12
Speaker 2: through based on pricing, because again, if pricing goes up
14:15
Speaker 2: meaningfully in a short period of time, which it has,
14:19
Speaker 2: then it doesn't necessarily mean you're selling more product. It
14:22
Speaker 2: just means it's costing your buyers more to buy that product,
14:25
Speaker 2: which seems to be a combination of what's happening here. Yes,
14:28
Speaker 2: there is more demand which is driving this, but you
14:31
Speaker 2: can only build these data centers so quickly otherwise we
14:33
Speaker 2: would see this being reflected in the other pieces and
14:37
Speaker 2: of demand as well, in video chips and things like that.
14:40
Speaker 2: Like you didn't have Nvidia, you know, missed by fifty
14:43
Speaker 2: percent to the upside they beat by you know, a
14:46
Speaker 2: several percentage points because you haven't seen the same cost
14:49
Speaker 2: push on that side of things. So ultimately, I think
14:53
Speaker 2: what this does do AI related companies have kind of
14:57
Speaker 2: been struggling in the last week or two and at
15:02
Speaker 2: least right now, this is you know, helping them to
15:05
Speaker 2: find their footing a little bit. With the semiconductor index
15:09
Speaker 2: up about two and a half percent today, You'll get
15:12
Speaker 2: you know some you know big stocks that are up today,
15:15
Speaker 2: Core Weaves up four percent, AMD's up three percent, let's
15:19
Speaker 2: see Oracles up two percent, and videos up one seven.
15:23
Speaker 2: So you've got a little bit of a spill over here,
15:25
Speaker 2: kind of tempering what had been a sector that was
15:28
Speaker 2: on edge over the last week or so, week or
15:30
Speaker 2: two and so I think that's what you're seeing here
15:34
Speaker 2: is just a little bit of relief in terms of Okay,
15:37
Speaker 2: the earnings came out pretty well on this company, and
15:39
Speaker 2: even though good earnings from other companies didn't really help
15:42
Speaker 2: the sector in the last couple of weeks, this one
15:45
Speaker 2: providing a little reassurance after those companies have been sliding recently.
15:49
Speaker 4: Yeah, enough of a surprise to move marks. A few things.
15:52
Speaker 4: I'll just mention about this. I mean, you're of a
15:54
Speaker 4: year revenue growth of growth is something like sixty percent
15:57
Speaker 4: on this.
15:58
Speaker 5: This is truly.
16:01
Speaker 4: Mind blowing pace of growth like we have seen from
16:04
Speaker 4: other companies in this space.
16:07
Speaker 5: One.
16:07
Speaker 4: I mean, let's be honest, like many of these companies,
16:11
Speaker 4: Micron Technology not exactly a household name, but they are
16:14
Speaker 4: now eclipsing companies like Morgan Stanley Goldman, Sachs, IBM, Caterpillar,
16:19
Speaker 4: American Express, Philip Morris in terms of market capitalization.
16:23
Speaker 3: So this is a very.
16:24
Speaker 4: Big company now that has grown by nearly two hundred percent.
16:28
Speaker 3: Over the course of this year.
16:30
Speaker 4: The other point that I will make about this, which
16:32
Speaker 4: is the same one we've made about AMD, We've made
16:34
Speaker 4: it about Broadcom and Nvidia, these are not companies whose
16:40
Speaker 4: earnings will lead in terms of telling you what's going
16:44
Speaker 4: on with the AI story, right correct, you if you're
16:48
Speaker 4: looking to try and figure out, hey, is this actually
16:51
Speaker 4: going to be a monetizable product, and will companies slow
16:55
Speaker 4: down in terms of their data center builds, Well, that
16:58
Speaker 4: happens last and therefore, you know, Microns technology, Microns earnings
17:04
Speaker 4: and videos earnings, you know, these would be I think
17:07
Speaker 4: the last things to turn over when it comes to
17:10
Speaker 4: demand for AI products, data centers.
17:14
Speaker 3: It's at talent, et cetera. So it's not that it's unimportant.
17:17
Speaker 4: It's clearly lifting markets today pretty substantially, but it is
17:22
Speaker 4: also not any sort of leading indicator in my view
17:25
Speaker 4: about where this industry goes.
17:27
Speaker 2: Right, It's okay at a certain point, and the thing
17:30
Speaker 2: that we've been continuing to talk about if you are
17:33
Speaker 2: one of the companies investing these tens and now hundreds
17:36
Speaker 2: of billions of dollars into artificial intelligence data centers, at
17:41
Speaker 2: some point you're going to have to figure out how
17:42
Speaker 2: to actually make money off them, because.
17:46
Speaker 3: Matters that is their goal with business.
17:50
Speaker 5: Yes, you know, it's generally.
17:52
Speaker 2: My understanding is if in the long run you take
17:55
Speaker 2: in less money than you spend, at some point you
17:59
Speaker 2: either have to stop spending that money or you will
18:02
Speaker 2: no longer be in business.
18:03
Speaker 3: Yeah.
18:04
Speaker 4: The follow on piece of this from the Wall Street
18:06
Speaker 4: Journal talking about what we alluded to, which is the
18:10
Speaker 4: other thing this means is that prices for memory are
18:14
Speaker 4: going up, meaning your cell phone, your computer, even things
18:19
Speaker 4: like maybe your cloud storage for your business might all
18:22
Speaker 4: be increasing in price. And it's just a I think
18:25
Speaker 4: a good reminder that with this AI development, consumers need
18:29
Speaker 4: to understand that we are now heavily competing for electricity, chips,
18:34
Speaker 4: memory storage, even putable water with these giant tech companies
18:39
Speaker 4: and municipalities are really unsure as to how to handle
18:42
Speaker 4: it all. It is a complicated thing, and I'm not
18:47
Speaker 4: We're not dealing with situations where towns water is drying up,
18:51
Speaker 4: but realistically, like, all of these things are public resources
18:55
Speaker 4: that are now in demand in a way that they
18:57
Speaker 4: were not just two years ago.
19:00
Speaker 2: So that's again kind of the rundown here is Again
19:04
Speaker 2: I don't think anyone was expecting weakness here, but I
19:07
Speaker 2: think that the strength in pricing power is kind of
19:10
Speaker 2: mind blowing on this. But as Mike indicated, look, memory
19:15
Speaker 2: prices have gone up generally, call it sixty to eighty
19:19
Speaker 2: percent in the last six months or so, and that
19:25
Speaker 2: is going to filter into other areas as we go.
19:29
Speaker 2: It also affected by the way Micron's business they shut
19:32
Speaker 2: down are they're in the process right now shutting down
19:34
Speaker 2: their consumer facing business because they pretty much said it's
19:39
Speaker 2: not important, we can't really provide this and continue to
19:42
Speaker 2: be able to provide on the data center side the
19:45
Speaker 2: way that we want to, and so at like, if
19:49
Speaker 2: enough companies do that, then you get into a problem
19:51
Speaker 2: of availability, not pricing. Let's take a quick break. When
19:55
Speaker 2: we return, it's Wall Street Watch.
20:10
Speaker 1: Like us on Facebook and follow us on Twitter. Act
20:13
Speaker 1: TFE show breaking business news is always first right here
20:17
Speaker 1: on the Financial Exchange Radio Network. Time Now for Wall
20:22
Speaker 1: Street Watch a complete look at what's moving markets so far.
20:25
Speaker 1: Today right here on the Financial Exchange radio network.
20:34
Speaker 7: OH Marcus today are bouncing back as Wall Street reacts
20:39
Speaker 7: to the November Consumer Price Index released this morning, which
20:42
Speaker 7: rose at a two point seven percent annualized rate last month,
20:47
Speaker 7: cooler than forecasts of three point one percent. Right now,
20:53
Speaker 7: the Dow is up seven tents of one percent, or
20:55
Speaker 7: three hundred and twenty eight points. SMP five hundred is
20:58
Speaker 7: up one point two per center eighty points, Nasdaq surging
21:03
Speaker 7: one point seven percent higher at three hundred and ninety
21:06
Speaker 7: five points higher, Rusted two thousands up over nine tenths
21:08
Speaker 7: of one percent, ten Your Treasure reeled down three basis
21:11
Speaker 7: points at four point one one six percent, and crude
21:15
Speaker 7: oil up nearly nine tenths of a percent higher, trading
21:18
Speaker 7: a fifty six dollars and forty one cents a barrel.
21:21
Speaker 7: Micron impressed with its quarterly results, where the chip maker
21:24
Speaker 7: issued an impressive revenue forecast and raised its outlook for
21:27
Speaker 7: demand four key products. Micron shares are rallying nearly twelve percent. Meanwhile,
21:33
Speaker 7: Trump Media and Technology agreed to merge with fusion power
21:35
Speaker 7: company TAE Technologies in an all stock deal worth over
21:40
Speaker 7: six billion dollars shares. Intrump Media is jumping thirty four
21:45
Speaker 7: percent on that news. Elsewhere, the Wall Street Journal reported
21:48
Speaker 7: that activist investor Elliott Investment Management has built a stake
21:52
Speaker 7: of over one billion dollars in Lulu Lemon. Furthermore, Elliott
21:56
Speaker 7: is bringing a potential CEO candidate to the struggling tailor.
22:00
Speaker 7: Lulu shares are climbing nearly six percent higher. Carmac shares
22:04
Speaker 7: a flat after the used car dealer said it plans
22:06
Speaker 7: to lower margins in the fourth quarter and increase marketing
22:09
Speaker 7: spend year over year. All of Garden parent Darden restaurants
22:13
Speaker 7: posted stronger than expected quarterly results and raised its annual
22:16
Speaker 7: sales guidance. Darting stock is up over two percent. At Chipotle,
22:20
Speaker 7: adding a twist to their menu, the fast casual giant
22:23
Speaker 7: will roll out its first ever high protein menu later
22:27
Speaker 7: this month, featuring grabbing go protein cups with a four
22:31
Speaker 7: round portion of either a dobo chicken or steak. Chipotle
22:34
Speaker 7: stock is up over one percent. I'm Tucker Silvan. That
22:38
Speaker 7: is walste Watch and remember you can watch the show
22:41
Speaker 7: live every day on our YouTube page. We'll at breaking
22:43
Speaker 7: business news and all of our content is also archived
22:47
Speaker 7: So if you want to go see an interview or
22:49
Speaker 7: a discussion about a specific topic, it's all there with
22:51
Speaker 7: the click of a button. Just search the Financial Exchange
22:55
Speaker 7: on YouTube and hit that subscribe button.
22:59
Speaker 5: Mike, anything else do we want to talk about with Micron?
23:02
Speaker 3: No, let's move along.
23:03
Speaker 5: Do we want to talk more on Oracle Blue Owl?
23:06
Speaker 4: Well, I didn't get to do the program yesterday, so
23:08
Speaker 4: I don't know how to start to hear that went here.
23:10
Speaker 4: But I felt a little bit like, you know, it's
23:15
Speaker 4: the same meme we bring up every time, the Charlie
23:17
Speaker 4: Day conspiracy theory meme, where he's connecting all the lines
23:20
Speaker 4: together on the board, he's got papers everywhere, he's not
23:23
Speaker 4: making any sense. I felt a bit like that because
23:26
Speaker 4: I was, you know, this story connects the dots between
23:30
Speaker 4: concerns and private credit to AI data center build out,
23:33
Speaker 4: ultimately even to the paramount bid for.
23:40
Speaker 3: Warner Brothers.
23:41
Speaker 4: And I again kind of felt like a crazy person
23:44
Speaker 4: saying that this morning. But aren't these things a little
23:47
Speaker 4: bit coming into focus and interconnected at this moment? Given
23:50
Speaker 4: the news yesterday from Blueel.
23:53
Speaker 5: I would say, so, I mean it's it.
23:55
Speaker 2: Look, here's the risks heading into twenty twenty six. There
24:01
Speaker 2: are three private credit could blow up, Housing could continue
24:05
Speaker 2: to slow, data center expansion could slow. Those are the
24:09
Speaker 2: three ones that are out there. This story kind of
24:12
Speaker 2: encapsulates two of them, the private credit and the.
24:17
Speaker 5: Data center one.
24:19
Speaker 2: The fact that you know, Larry Elson's son also happens
24:23
Speaker 2: to be trying to buy Warner Brothers Discovery.
24:26
Speaker 4: Relying on funds from the Ellison family trust, which is
24:29
Speaker 4: probably heavily invested in Oracle st.
24:31
Speaker 2: Yeah, it's it's kind of ancillary, Like, I don't think
24:33
Speaker 2: that there's any risk that if that deal doesn't go through,
24:36
Speaker 2: or even if it does go through, that it affects
24:39
Speaker 2: the economy next year. So like that's just it's just
24:41
Speaker 2: kind of Yes, it's it's kind of like an ancillary
24:44
Speaker 2: thing where you're like, oh, and this could matter for
24:45
Speaker 2: this reason. But I do think that the piece that
24:49
Speaker 2: you're gonna to get to on this is, look, if
24:52
Speaker 2: these things are not profitable right now, which by all
24:55
Speaker 2: accounts they're not right like, yeah, or the goal we
25:00
Speaker 2: see is free cash flow negative at the moment, Open AI,
25:03
Speaker 2: from what we can gather from reporting because they're not
25:05
Speaker 2: publicly traded, is losing money and burning through cash right now.
25:10
Speaker 2: And one would then assume that your other companies that
25:12
Speaker 2: are publicly traded they can afford your Metas, your Googles,
25:17
Speaker 2: and your Microsofts of the world, they can afford these
25:20
Speaker 2: buildouts because they have other businesses that are cash cows
25:23
Speaker 2: that are covering those costs.
25:24
Speaker 3: At the moment, they can't.
25:25
Speaker 4: But the messaging that you're getting from the tech firms
25:28
Speaker 4: is we don't want to deploy our capital on something
25:30
Speaker 4: as boring as a data center. These are facilities that
25:34
Speaker 4: may be profitable, but to the tune of single maybe
25:37
Speaker 4: low double digits, and why would we want to deploy
25:39
Speaker 4: our capital there when we make fifty percent margins on
25:43
Speaker 4: this side of our business. So even even the data
25:45
Speaker 4: centers that Google, Meta, Amazon are part of the development
25:50
Speaker 4: on and leasing space from, they're basically saying like, now,
25:53
Speaker 4: we'd rather just, you know, deploy borrowed money here rather
25:56
Speaker 4: than deploying our own capital and missing out on what
25:59
Speaker 4: we think are the big to be the bigger returns.
26:01
Speaker 5: Later on all of this.
26:03
Speaker 3: And so.
26:05
Speaker 4: Can Meta and Google an Amazon afford to continue to
26:08
Speaker 4: build that data centers? Absolutely, But if the private credit
26:13
Speaker 4: market is not willing to lend the money to it,
26:16
Speaker 4: or they're only willing to lend to certain customers of it.
26:19
Speaker 4: All else equal, I think it just raises the cost
26:21
Speaker 4: of building these things.
26:23
Speaker 5: It's probably true.
26:24
Speaker 2: So again this is something where you put it on
26:27
Speaker 2: your BINGO card for next year. Hey, this is something
26:30
Speaker 2: that we need to monitor and pay attention to, because
26:35
Speaker 2: clearly there's some angst in the private credit space, at
26:39
Speaker 2: least from one lender as to.
26:43
Speaker 5: I think with Blue Awl.
26:44
Speaker 2: Quite honestly, it might just be, Guys, we've lent a
26:46
Speaker 2: lot of money to data center buildouts already. Maybe we're
26:50
Speaker 2: just up to our gills in it and just need
26:52
Speaker 2: to not do anymore because we've already lent a lot.
26:55
Speaker 3: We don't like the space. Well, is it that?
26:58
Speaker 4: Or is it also all of our buyers at private
27:01
Speaker 4: credit have put the pause button in.
27:03
Speaker 3: That could be the case too, right, like, and there's
27:06
Speaker 3: just not more money coming to lend.
27:08
Speaker 2: It also could be because again this is what we're seeing,
27:11
Speaker 2: like specifically with Blue Owl, guys, we trust Meta to
27:15
Speaker 2: pay us back better than Oracle sure, And I understand
27:19
Speaker 2: why you would, Like you just look at their balance sheets,
27:22
Speaker 2: their income statements, and you say, yeah, there's a there's
27:26
Speaker 2: a Meta is a far stronger company financially than Oracle is,
27:31
Speaker 2: and I get that. Like that that makes sense too,
27:33
Speaker 2: So agree.
27:33
Speaker 3: If it's an Oracle problem only, then it's not really
27:36
Speaker 3: a story, which it might be.
27:38
Speaker 5: It could be.
27:38
Speaker 4: Yeah, it could just be an Oracle story. If it's
27:41
Speaker 4: a larger private credit story, it's problematic.
27:46
Speaker 5: I agree. I agree. Uh.
27:48
Speaker 2: This then dovetails into another story from the Wall Street Journal. Again,
27:52
Speaker 2: it's just like the dots are just connecting. Wall Street
27:55
Speaker 2: gets a taste of blockbuster stock market debuts ahead, and
27:58
Speaker 2: this is something I touched on. I think yesterday I
28:01
Speaker 2: might not have. Maybe I just thought this and didn't
28:03
Speaker 2: say anything. It's increasingly hard for me to tell like
28:07
Speaker 2: what I've said on air and what like, I've just
28:10
Speaker 2: been thinking about in my head and haven't expressed as
28:12
Speaker 2: a thought.
28:12
Speaker 5: So if I'm repeating myself.
28:14
Speaker 2: Sorry, But there are a lot of liquidity needs next
28:18
Speaker 2: to year, Michael, talk to me. Okay, So you've got
28:22
Speaker 2: this whole private credit thing which is continuing to demand liquidity. Ye,
28:26
Speaker 2: you've got data centers that are demanding liquidity, IPOs demand liquidity. Indeed,
28:32
Speaker 2: there's a pretty good chance that next year's tax season
28:35
Speaker 2: is going to demand liquidity because there's probably a boatload
28:38
Speaker 2: of capital gains this year. There's just a lot of
28:43
Speaker 2: cash that is needed in the form of actual liquid
28:46
Speaker 2: cash at certain times, and part of me looks at
28:49
Speaker 2: it and goes, how does all of that cash get
28:52
Speaker 2: where it needs to go next year? I mean, if
28:54
Speaker 2: you're talking about an open AIIPO and a SpaceX ipo,
28:58
Speaker 2: and at the same time you've got to get you know,
29:01
Speaker 2: hundreds of billions of dollars into data center build outs
29:04
Speaker 2: and private credits still trying to build, you know, portfolios
29:07
Speaker 2: of subprime auto lenders because someone still wants those in
29:11
Speaker 2: their portfolio. Like, at some point you look at this
29:14
Speaker 2: and you go, where's the actual cash going to come from?
29:19
Speaker 5: Because flows are what matter.
29:22
Speaker 3: Yeah, I don't have a look.
29:24
Speaker 4: It's not to say there isn't plenty of cash in
29:26
Speaker 4: the system, right, like plain and simple. If you go
29:28
Speaker 4: look at money market balances and other ways of measuring
29:32
Speaker 4: you know, different levels of cash, there's still plenty out
29:35
Speaker 4: there slashing around.
29:37
Speaker 3: But you're right, there's going to be a lot of
29:38
Speaker 3: demands for it come twenty twenty six.
29:41
Speaker 2: And this this piece kind of gets at that too.
29:42
Speaker 2: I'm just gonna quote here from the Wall Street Journal.
29:45
Speaker 2: Some bankers and fund managers worry the stock market might
29:47
Speaker 2: struggle to handle the barrage of expected new issuance next year.
29:52
Speaker 2: If SpaceX were to go public, some bankers estimate it
29:54
Speaker 2: could sell well over the nearly thirty billions sold by
29:57
Speaker 2: the largest IPO on record, Saudi Aramco. Overall, this year,
30:01
Speaker 2: US listed companies have raised forty six billion dollars. When
30:04
Speaker 2: companies raise money, it's not like it just appears in
30:07
Speaker 2: their account. Investors have to say, I am going to
30:10
Speaker 2: take either cash on the sidelines, of which there's much
30:14
Speaker 2: less now than earlier this year, or I'm going to
30:17
Speaker 2: sell something else in order to buy this new thing.
30:21
Speaker 2: That money has to come from somewhere, and so that like,
30:26
Speaker 2: that's what this is getting at is. Look, if you're
30:29
Speaker 2: gonna have IPOs that are demanding, you know, one hundred
30:33
Speaker 2: billion dollars in cash next year, at the same time,
30:37
Speaker 2: the data center buildouts now need three hundred billion, and
30:40
Speaker 2: private credit continues to vacuum up a couple hundred billion
30:43
Speaker 2: a year. That's a lot of liquidity that you need.
30:46
Speaker 2: I do not have one billion dollars Michael let alone
30:48
Speaker 2: several hundred billion to be able to finance this. Yeah,
30:52
Speaker 2: So I think that's the interesting piece as I think
30:55
Speaker 2: through this, which is, hey, where does the money come from?
30:59
Speaker 2: And how does that influence markets and other things around it?
31:02
Speaker 2: Because flows are what matter. Let's take a quick break.
31:06
Speaker 2: When we come back, we're talking winter heating costs.
31:08
Speaker 1: Right after this, find daily interviews in full shows of
31:12
Speaker 1: the Financial Exchange on our YouTube page. Subscribe to our
31:15
Speaker 1: page and get caught up on anything and everything you
31:18
Speaker 1: might have missed. This is the Financial Exchange Radio Network.
31:23
Speaker 1: This is your home for the most comprehensive coverage of
31:26
Speaker 1: the economy and the trends on Wall Street. This is
31:29
Speaker 1: the Financial Exchange Radio Network.
31:34
Speaker 7: The Financial Exchange is incredibly proud to be a partner
31:37
Speaker 7: of the Disabled American Veterans Department of Massachusetts. If you
31:40
Speaker 7: didn't have a chance to participate in this year's RACEBOW
31:43
Speaker 7: would still like to support our great American heroes. Please
31:46
Speaker 7: visit dav five k dot Boston. Your gifts help fund
31:50
Speaker 7: free rides to medical appointments for veterans in the nation's
31:53
Speaker 7: first dav leadhousing initiative, providing homes for single veterans and
31:58
Speaker 7: veteran families. Go to d fivek dot Boston and make
32:02
Speaker 7: your donation today. That's DAV fivek dot Boston.
32:07
Speaker 2: Piece in New York Times, heating costs expected to rise
32:09
Speaker 2: nine point two percent this winter and combination of things.
32:16
Speaker 2: Number one, despite the fact that us here in New England,
32:20
Speaker 2: very few of us heat our homes with electricity, Mike,
32:25
Speaker 2: it's it's wild that you go to most of the
32:26
Speaker 2: rest of the country and that's how they do it.
32:29
Speaker 2: And so if electricity costs are up, heating costs will
32:32
Speaker 2: be up because if you're heating with those little electrons
32:35
Speaker 2: flowing through your house, they're more expensive to buy these days.
32:38
Speaker 4: Yeah, we are competing for electricity all over where. Net
32:42
Speaker 4: gas prices compared to this time last year, so this has.
32:45
Speaker 2: Been wild actually watching that gas over the last couple weeks,
32:48
Speaker 2: a couple months, So in early October, actually late September,
32:53
Speaker 2: net gas prices were running really really low, like you
32:58
Speaker 2: were at like two six sixty per million BTUs, which
33:03
Speaker 2: is basically where you were heading into last year. You
33:06
Speaker 2: then saw net gas prices more than double in the
33:10
Speaker 2: next three months, peaking at five fifty per million BTUs
33:13
Speaker 2: on December fifth, and then since then they've fallen about
33:18
Speaker 2: thirty percent. It's a lot, and are seeing like five
33:21
Speaker 2: percent swings each day right now, So there's a ton
33:24
Speaker 2: of volatility in that gas prices. But remember nott gas
33:27
Speaker 2: prices that are in place right now, they're not going
33:30
Speaker 2: to affect your rates for this winter because your utility
33:35
Speaker 2: already applied for their winter rates and had them approved,
33:38
Speaker 2: you know, a couple months ago.
33:39
Speaker 4: So the estimate is that household are going to spend
33:41
Speaker 4: about one thousand dollars this winter to heat their home.
33:44
Speaker 4: That's up nine percent from a year earlier. At the
33:46
Speaker 4: same time, federal programming to states that assist with low
33:51
Speaker 4: income residents and their heat and their heat bills that
33:55
Speaker 4: is being cut this year, and so we'll see how
33:58
Speaker 4: states adapt to that. But yeah, again, a lot of
34:01
Speaker 4: these stories that we are covering come back to that
34:04
Speaker 4: affordability discussion. And while I don't think it's directly affecting
34:10
Speaker 4: things in markets.
34:11
Speaker 3: Or the economy, it seems like it is going to be.
34:14
Speaker 4: The only word that matters come twenty twenty six midterm elections.
34:18
Speaker 2: It might, but I'm also getting to the point now
34:22
Speaker 2: where I think that we are at peak affordability concerns.
34:30
Speaker 2: And I mean this in two different ways, and that
34:33
Speaker 2: if you look at the path forward for the economy, Mike,
34:36
Speaker 2: when we talk about affordability, generally, in my mind, we're
34:39
Speaker 2: talking about like three or four things. Shelter, groceries, transportation.
34:47
Speaker 2: I think those are the big ones, and utilities I'll
34:49
Speaker 2: put in there as well. Yes, you're including gas prices
34:51
Speaker 2: and transportation. Yeah, yeah, Like those are the things. Gas prices,
34:56
Speaker 2: you know, bus tickets, car prices, like all that stuff.
35:01
Speaker 2: Where I'm going with this is it seems likely to
35:06
Speaker 2: me that one way or another you are going to
35:09
Speaker 2: see improved affordability in several of those areas in the
35:13
Speaker 2: next two to three years. Housing prices are falling that
35:18
Speaker 2: makes it more affordable, transportation gas prices have largely been flat,
35:25
Speaker 2: and the car price thing is a problem. This is
35:29
Speaker 2: one area where I don't have a great sense of
35:33
Speaker 2: how this resolves. I just I really don't know. On
35:37
Speaker 2: the grocery side of things, I think there are things
35:39
Speaker 2: that are present right now that are going to cycle
35:43
Speaker 2: out and you know, not be a problem down the
35:46
Speaker 2: road in several years. The beef thing that we've been
35:48
Speaker 2: talking about with you know, the smallest herds, beef herds, like, okay,
35:52
Speaker 2: when you know you have small beef herds and prices
35:54
Speaker 2: go up, ranchers say, okay, we're going to you know,
35:57
Speaker 2: allow four more cows in the next year, and so
36:01
Speaker 2: prices eventually come down. Like these are things that will
36:03
Speaker 2: cycle through the other place that I will go with this,
36:06
Speaker 2: and this is the potential bad outcome that still leads
36:08
Speaker 2: to affordability not being the best concern. Biggest concern is
36:13
Speaker 2: if we end up with the jobs market taking a
36:16
Speaker 2: turn for the worst next year, affordability.
36:18
Speaker 5: Will not be the problem. It will be do I
36:20
Speaker 5: have a job?
36:21
Speaker 3: Yeah, And so gets that affordability.
36:22
Speaker 4: If you don't have income, you can't afford the things
36:24
Speaker 4: that you need to live your life.
36:27
Speaker 2: It's not an affordability thing though, like it's if you
36:30
Speaker 2: don't have like it's it's a job problem becomes the
36:32
Speaker 2: bigger one. So that's another path out that's not as good.
36:35
Speaker 2: But I'm just at a point now where I think that,
36:41
Speaker 2: like any problem that's out there, once it's been identified
36:45
Speaker 2: as the main problem, then we start to figure out
36:48
Speaker 2: solutions to it. The problem with affordability, it's not one
36:53
Speaker 2: that you can typically solve from the top down.
36:55
Speaker 4: No, it is almost never. It does lead me into
36:59
Speaker 4: the conversation that we have with folks all the time, Chuck,
37:01
Speaker 4: which is I continue to feel that, in spite of
37:03
Speaker 4: all the concerns I have about the markets where this
37:06
Speaker 4: AI potential bubble could go and the concerns that people
37:11
Speaker 4: have there, the underappreciated risk to most retirees that I
37:15
Speaker 4: see continues to be inflation. I know we just got
37:18
Speaker 4: a better than anticipated inflation report this morning, but you
37:21
Speaker 4: need to be asking yourself when it comes to stories
37:23
Speaker 4: like this where home heating costs expected to rise nine
37:26
Speaker 4: percent next year? Can I afford that my financial plan
37:29
Speaker 4: call the Armstrong Advisory Group to ask those questions and
37:32
Speaker 4: test yours out eight hundred three nine three for zero
37:36
Speaker 4: zero one.
37:37
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
37:40
Speaker 1: registered investment advisor. Nothing in the ad or in any
37:42
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
37:45
Speaker 1: your own financial, tax and to state planning advisors before
37:48
Speaker 1: making any investment decisions. Armstrong may contact you to offer
37:51
Speaker 1: investment advisory services.
37:53
Speaker 2: Instacart shares dropping on report that the FTC is probing
37:56
Speaker 2: company over AI pricing tool. Last week we covered the
38:00
Speaker 2: story from Forget where it was was it in? Was
38:03
Speaker 2: the Washington Post that had it originally. I don't know
38:06
Speaker 2: who knows, but that instacart. It was a bunch of
38:09
Speaker 2: users in DC tried to buy the same products from
38:12
Speaker 2: the same stores using pickup only, so not delivery, and
38:15
Speaker 2: got a wide variety of prices, which really, like was
38:19
Speaker 2: was grinding my gears because it's like you're trying to
38:22
Speaker 2: make more profit, not through improving your product or service
38:27
Speaker 2: or you know, finding cheaper ways to do it. You're
38:29
Speaker 2: trying to make more money just through like ripping someone
38:33
Speaker 2: off who lives in a different.
38:34
Speaker 3: Zip code willing to pay.
38:36
Speaker 2: So the FTC is apparently looking into this, and so
38:38
Speaker 2: instacart is down. Was down about seven percent on this news.
38:44
Speaker 2: Just take a quick break when we return. Hour two
38:48
Speaker 2: is coming up
39:01
Speaker 5: Four