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Consumer sentiment doesn't seem to care about tariffs · The Financial Exchange Show

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  Speaker 1: a donation today. This is the Financial Exchange with Chuck
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  Speaker 1: Zada and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Tucker with you, and we got a
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  Speaker 2: whole bunch more in terms of economic data this morning.
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  Speaker 2: We got building permits and housing starts. We got some
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  Speaker 2: consumer sentiment data. We got some earnings to get through
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  Speaker 2: as well. But I wanted to kick things off talking
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  Speaker 2: about the housing data just because it came out at
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  Speaker 2: eight thirty, so we've actually had a little bit of
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  Speaker 2: time to look at it, unlike the consumer sentiment data,
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  Speaker 2: which came out five minutes ago, and we're sitting there going, Okay,
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  Speaker 2: is there anything there?
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  Speaker 3: Is there anything there?
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  Speaker 2: We're gonna, you know, do that silently in our heads
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  Speaker 2: while pretending to look at the other data.
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  Speaker 4: I like it.
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  Speaker 3: Yeah, so let's talk.
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  Speaker 2: Let's talk a little bit about permits and housing starts.
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  Speaker 2: Uh So, permits came in basically flat month over month.
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  Speaker 2: The prior month was one point thirty nine to four
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  Speaker 2: million on an annualized basis. This was month was one
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  Speaker 2: point three ninety seven on an annualized basis. No statistical difference,
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  Speaker 2: basically saying, yeah, permits are running right around one point
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  Speaker 2: four million units at this point.
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  Speaker 3: Is that good? Is that bad?
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  Speaker 2: Here's what I'll tell you in terms of if you
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  Speaker 2: look at the historic pace or the historical pace that
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  Speaker 2: we've you know, typically seen during the run up to
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  Speaker 2: the Great Financial Crisis, permits peaked at around two point
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  Speaker 2: two million, somewhere in that range. You don't want to
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  Speaker 2: necessarily be that high. Immediately after the crisis, they went
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  Speaker 2: down to a range of around five hundred thousand, don't
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  Speaker 2: want to be that low. If you look at where
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  Speaker 2: we were kind of in let's look at President Trump's
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  Speaker 2: first term, where I think, you know, we can all
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  Speaker 2: look at that and say, yeah, really good economy, low inflation,
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  Speaker 2: unemployment was low.
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  Speaker 3: What did we see there?
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  Speaker 2: Generally we were running somewhere around one point three to
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  Speaker 2: one point four million units, So we're kind of right
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  Speaker 2: in that range. What ultimately matters, though, for construction is
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  Speaker 2: not how many units you're building, but it's how many
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  Speaker 2: units you're building relative to last year. That determines how
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  Speaker 2: much you know, how much additional material you need, how
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  Speaker 2: many additional workers you need, and things along those lines.
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  Speaker 2: And this is where what we are seeing right now
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  Speaker 2: is housing not really in a great spot as far
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  Speaker 2: as the prospects for employment heading into next year and specifically,
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  Speaker 2: Now I want to turn to housing starts because Mike,
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  Speaker 2: do you does anyone do a war? Does anyone do
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  Speaker 2: any work on a housing permit?
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  Speaker 3: Yeah?
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  Speaker 4: You got the town.
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  Speaker 3: That town workers employed, no matter what you gotta.
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  Speaker 5: You know, No, there's not a whole lot of effort
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  Speaker 5: that goes into filing for a permit.
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  Speaker 2: No, the work gets done when you're actually building it.
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  Speaker 2: And so that for this we want to look at
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  Speaker 2: housing starts. And here's what we're seeing in terms of
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  Speaker 2: year over year data on housing starts. When you look
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  Speaker 2: at housing stars as a whole, basically for the entire
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  Speaker 2: year this year, we're floating right around zero percent growth,
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  Speaker 2: so no additional housing starts relative.
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  Speaker 3: To last year.
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  Speaker 2: Where it gets a little bit concerning is the divergence
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  Speaker 2: that we're seeing between single family starts in multi family
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  Speaker 2: and the reason why is that single family construction on
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  Speaker 2: a per unit basis employees more people than multifamily does
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  Speaker 2: for obvious reasons, economies of scale, things along those lines.
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  Speaker 3: And what we're seeing.
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  Speaker 2: Is for the last four months now, dating back through March,
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  Speaker 2: so March, April, May and June, we're basically seeing single
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  Speaker 2: family starts declining at a nine to ten percent year
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  Speaker 2: over year rate consistently. And this messures, by the way,
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  Speaker 2: with what the big publicly traded home builders are telling us.
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  Speaker 2: They're not building as many units because they can't sell
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  Speaker 2: as many units.
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  Speaker 4: Yeah, I think what we were saying.
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  Speaker 5: I saw the headline cross the desk yesterday, one of
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  Speaker 5: the major homebuilders slashing prices pretty dramatically out there.
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  Speaker 4: And it comes down to geography.
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  Speaker 3: Right.
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  Speaker 5: This seems like a foreign concept here, but in the
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  Speaker 5: states that actually build a lot of these homes, where
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  Speaker 5: Toad Brothers does a lot of business, supplies starting to
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  Speaker 5: exceed demand right now.
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  Speaker 2: Multifamily, on the other hand, you look at the last
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  Speaker 2: four months and basically what you're seeing is around a
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  Speaker 2: twenty to twenty five percent increase in units under construction
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  Speaker 2: relative to last year, which last year though was a
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  Speaker 2: really bad year for multifamily construction. It's one of the
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  Speaker 2: things that we talked about where there wasn't much going
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  Speaker 2: on on that front, and you know, that's something that
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  Speaker 2: eventually as you get into you know, later this year
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  Speaker 2: and early next year, in theory, has the potential to
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  Speaker 2: push rents up a little bit. Because there wasn't much
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  Speaker 2: new inventory that becoming to market second after this year
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  Speaker 2: and early next year, because there wasn't much construction that
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  Speaker 2: started last year.
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  Speaker 5: Well it was that I seem to remember during COVID
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  Speaker 5: a whole bunch of multi family construction going on getting delayed,
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  Speaker 5: and so I feel like a lot of that did
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  Speaker 5: get finished in twenty twenty three, and then twenty twenty
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  Speaker 5: four kind of dropped off for that reason. So of
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  Speaker 5: course we're just getting back to a more normalized area
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  Speaker 5: of multi family construction.
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  Speaker 4: Now.
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  Speaker 2: Yeah, I think I think that's probably a fair thing
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  Speaker 2: to say. So I think where we are on housing
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  Speaker 2: in terms of construction is in the aggregate. There's probably
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  Speaker 2: a very weak impulse towards like some additional drag on
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  Speaker 2: the US economy, just because if you're building the same
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  Speaker 2: number of units but fewer of them are single family,
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  Speaker 2: you don't necessarily need as much in the way of labor.
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  Speaker 2: It's very on the margins there on construction. Right now,
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  Speaker 2: we're not seeing a ton but that's again there's a
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  Speaker 2: little bit of drag that's maybe happening from housing construction.
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  Speaker 2: The bigger drag in the housing sector is just, hey,
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  Speaker 2: we've got a ton of inventory that's showing up throughout
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  Speaker 2: you know, bigger parts of the country, not in the Northeast,
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  Speaker 2: not in the Midwest, but if you look at the
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  Speaker 2: West coast, basically, if if you make a big l
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  Speaker 2: across the United States, that's the area where inventory has
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  Speaker 2: really picked up. And it's it's a frontward zell, not
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  Speaker 2: backwards l I just wanted to make that clear. So
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  Speaker 2: I think where we are right now is home prices
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  Speaker 2: are definitely coming under pressure in markets that probably have
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  Speaker 2: When you look at population wise, anywhere from like fifty
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  Speaker 2: to sixty percent of the US population right now, by
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  Speaker 2: the end of this year, you're probably seeing about seventy
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  Speaker 2: percent of the housing markets starting to feel pricing pressure,
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  Speaker 2: but still not really in the Northeast, and still not
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  Speaker 2: really in the Midwest. So I think overall, you look
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  Speaker 2: at this data here, it basically suggests, yeah, you could
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  Speaker 2: start to see some layoffs in construction as we get
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  Speaker 2: towards the second half of this year. You haven't yet, though,
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  Speaker 2: and the numbers are relatively stable, so any impact is
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  Speaker 2: likely to be modest at most. It's it's not something
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  Speaker 2: where at least with what we're seeing right now, it
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  Speaker 2: would be indicative of a major shift in employment in housing.
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  Speaker 5: I'll tell you what, Chuck, I'm not sure you see that.
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  Speaker 5: Given what we're seeing with deportations and immigration right now,
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  Speaker 5: and the portion of that construction population that falls into
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  Speaker 5: that either not on a work visa or having family
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  Speaker 5: that's not on a work visa, I suspect that that
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  Speaker 5: labor pool is in the process of tightening. And so
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  Speaker 5: whether or not we see the layoffs in that space,
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  Speaker 5: even should housing starts slow further, I think is a
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  Speaker 5: bit of an open question.
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  Speaker 2: Because you're suggest I'm just trying to supply the supply
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  Speaker 2: of that labor disappears faster than you would need to
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  Speaker 2: lay out.
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  Speaker 3: So maybe maybe I used the layoffs the wrong term.
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  Speaker 5: Employment in total decreasing in the space I think as
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  Speaker 5: a fair prediction.
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  Speaker 2: That's where I think you might see like a modest
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  Speaker 2: contraction in employment. Does it take the form of layoffs
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  Speaker 2: or just workers who aren't available anymore? I don't know,
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  Speaker 2: but yes, I think you could start to see some
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  Speaker 2: modest movement in that direction. Yeah, let's take a look
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  Speaker 2: now at the consumer sentiment data came in at a
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  Speaker 2: reading of sixty one point eight, up slightly from the
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  Speaker 2: reading of sixty point seven.
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  Speaker 3: This is still not.
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  Speaker 2: A particularly strong reading that you're seeing on this if
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  Speaker 2: you look at where, just as a point of comparison,
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  Speaker 2: during President Trump's first term, consumer sentiment was consistently reading
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  Speaker 2: around ninety eight. It's not on a scale of one
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  Speaker 2: to one hundred. So I don't I don't know like
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  Speaker 2: what the theoretical highest is that it could go. But
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  Speaker 2: I do know that readings in you know, the low sixties,
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  Speaker 2: those are what we were seeing in like October, November,
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  Speaker 2: December of twenty twenty two, which I think we all
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  Speaker 2: can agree was a bad time, bad economy, Like it
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  Speaker 2: was unobjectively or objectively a bad economy.
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  Speaker 5: I'm a little surprised that we haven't seen We did
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  Speaker 5: see an improvement off of June data, I'm a little
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  Speaker 5: bit surprised that we haven't seen more improvement.
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  Speaker 4: Markets continue to hit these.
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  Speaker 5: All time highs, tariff threats seeming to take a back
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  Speaker 5: back seat, and just commentary from you know, public companies.
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  Speaker 5: Right we had the United CEO talking about travel demains,
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  Speaker 5: and we've had other companies and executives talking about appetite
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  Speaker 5: for companies to merge and acquire others. I know that
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  Speaker 5: doesn't flow down to the consumer necessarily. But I guess
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  Speaker 5: I'm just a bit surprised, based on where we're seeing
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  Speaker 5: other data go that the consumer hasn't taken more of
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  Speaker 5: a shift here.
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  Speaker 2: Yeah, I don't really know what to make of this.
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  Speaker 2: It's not good.
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  Speaker 5: I mean, let's hear Colla Spada Spade like readings in
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  Speaker 5: the sixties for consumer sentiment is a bad indicator of
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  Speaker 5: how Americans are feeling. I'm just not sure that it
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  Speaker 5: indicates anything else about the economy.
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  Speaker 2: I continue to wonder just if Michigan consumer sentiment is
• 10:43
  Speaker 2: irreparably broken. And what I mean by this is a
• 10:46
  Speaker 2: few years ago they changed their methodology to online only,
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  Speaker 2: and basically since then we have not gotten any good
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  Speaker 2: consumer sentiment readings. Now you can make a case, okay, like, yeah,
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  Speaker 2: twenty twenty two, the economy was objectively bad, but even like,
• 11:02
  Speaker 2: look at like late twenty three, early twenty four, and
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  Speaker 2: I know that inflation had been you know, hot, and
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  Speaker 2: obviously prices don't come down, like the price level doesn't
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  Speaker 2: come down, it's just inflation slows down in terms of
• 11:13
  Speaker 2: the rate to change. But the highest that we got
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  Speaker 2: was a reading of seventy nine point four in March
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  Speaker 2: of twenty four and we haven't exceeded that since then,
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  Speaker 2: and so I just kind of wonder, especially we've talked about,
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  Speaker 2: like you know, some of the crazy readings that we've
• 11:32
  Speaker 2: seen when it comes to inflation expectations, and I just
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  Speaker 2: wonder if there's something broken in that survey.
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  Speaker 4: Quite honestly, yeah.
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  Speaker 2: I just answer, I just don't know if it holds
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  Speaker 2: any useful signal at this point. Maybe it does, but
• 11:52
  Speaker 2: like I don't know, I just I haven't gotten anything
• 11:56
  Speaker 2: useful out of it in a while.
• 11:59
  Speaker 3: Maybe that's just me.
• 12:01
  Speaker 4: Sure. Yeah, I don't have an answer to you. Is
• 12:05
  Speaker 4: it us? No? Is it.
• 12:11
  Speaker 3: Yes?
• 12:11
  Speaker 4: Let's move on.
• 12:12
  Speaker 2: The answer is yes, Let's take a quick break. When
• 12:14
  Speaker 2: we come back, let's talk a little bit about what
• 12:16
  Speaker 2: we are seeing from earnings so far this quarter.
• 12:20
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• 13:22
  Speaker 2: Mike, I got one more consumer sentiment thing before we
• 13:26
  Speaker 2: move on to earnings. I just said that it was
• 13:30
  Speaker 2: useless and not worth talking about anymore. Yeah, so we're
• 13:34
  Speaker 2: gonna do.
• 13:34
  Speaker 3: This one thing.
• 13:36
  Speaker 2: And part of the reason that I said that it
• 13:37
  Speaker 2: was useless. You remember a few months ago, I forget
• 13:40
  Speaker 2: the exact reading. It was either like March or April,
• 13:44
  Speaker 2: but we got the reading where they split this out
• 13:47
  Speaker 2: by political democrat versus. They said Democrats were like, a
• 13:51
  Speaker 2: in place is gonna be eight percent over the next year,
• 13:53
  Speaker 2: and Republicans said it was going to be like minus
• 13:55
  Speaker 2: point one, which obviously, like those two things cannot exist
• 13:59
  Speaker 2: at the same time.
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  Speaker 3: I'm for very obvious reasons.
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  Speaker 4: And nor are either of them terribly likely.
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  Speaker 2: No, What is interesting to me is that we do
• 14:07
  Speaker 2: have a convergence that's now starting to happen, not just
• 14:12
  Speaker 2: between like this data set, but also if you look
• 14:15
  Speaker 2: at like inflation swaps and CPI and things like that,
• 14:18
  Speaker 2: and it looks like we're converging towards like three and
• 14:22
  Speaker 2: a half to four and a half percent inflation, which
• 14:26
  Speaker 2: is probably like again, you heard it like all the
• 14:28
  Speaker 2: projections like immediately after tariffs were announced, and that's kind
• 14:32
  Speaker 2: of like where most projections have this this going. But
• 14:36
  Speaker 2: the most recent you Mission sentiment survey Democrats still saying
• 14:41
  Speaker 2: that inflation is going to be around nine percent, but
• 14:44
  Speaker 2: that's down from closer to ten, so like they're starting
• 14:47
  Speaker 2: to tail down and Republicans expecting inflation is going to
• 14:50
  Speaker 2: be around one point six one point seven, So you're
• 14:53
  Speaker 2: starting to kind of converge to where it probably is
• 14:56
  Speaker 2: going to be. So it maybe maybe the this is
• 15:01
  Speaker 2: just hey, the immediate like aftermath, these surveys just overreact
• 15:05
  Speaker 2: dramatically and then they eventually get to the right point
• 15:08
  Speaker 2: like six or seven months later. I don't know what signal,
• 15:12
  Speaker 2: what value there is in that, because it's like okay,
• 15:16
  Speaker 2: just wait six months and then they'll tell you what's
• 15:17
  Speaker 2: gonna happen.
• 15:19
  Speaker 5: Yeah, you can find out what already happened by just
• 15:22
  Speaker 5: looking right like.
• 15:23
  Speaker 3: Things things kind of already are going on.
• 15:25
  Speaker 2: So I don't know that, you know, Well, just look
• 15:27
  Speaker 2: at you miss sentiment in July and it'll tell you
• 15:30
  Speaker 2: what you know inflation was gonna be six months ago.
• 15:33
  Speaker 3: Well, no, we've already got the inflation data, so we're good.
• 15:35
  Speaker 4: Yeah.
• 15:36
  Speaker 2: Wall Street Journal upbeat earning sent s and P five
• 15:38
  Speaker 2: hundred Nasdaq to new highs. We've had good earning so far,
• 15:42
  Speaker 2: composed predominantly of banks and other financial institutions. To this point,
• 15:47
  Speaker 2: earnings have largely been pretty darn good. Even Netflix had
• 15:53
  Speaker 2: a good earnings report yesterday, though their stock is down today,
• 15:55
  Speaker 2: and that's interesting to me, and we'll touch on that.
• 15:57
  Speaker 3: In a little bit.
• 15:58
  Speaker 2: But overall, we've continued to see no major signs from
• 16:03
  Speaker 2: companies that anything in the second quarter represented a dramatic
• 16:07
  Speaker 2: shift from where things were previously. Outside of airlines and traveling.
• 16:12
  Speaker 2: Even there, the companies in that space have indicated, yeah,
• 16:15
  Speaker 2: we're seeing a little bit more stability. Things aren't necessarily
• 16:18
  Speaker 2: getting better, but they're not getting worse. Anymore, and so
• 16:20
  Speaker 2: we have a little more confidence in our full year forecast.
• 16:22
  Speaker 5: Yeah, and I think I might argue on the banking
• 16:25
  Speaker 5: side that while they're earnings as a whole, I think you.
• 16:28
  Speaker 4: Know, no change. I'm with you.
• 16:29
  Speaker 5: I think some of the indications they gave of business
• 16:33
  Speaker 5: confidence were perhaps an improvement even on where.
• 16:37
  Speaker 4: Things were previously right.
• 16:38
  Speaker 5: You know, CEOs and investment bank leaders were going into
• 16:42
  Speaker 5: this quarter saying, oh man, nobody's going to go public
• 16:45
  Speaker 5: or make a deal under these business conditions. They left
• 16:48
  Speaker 5: the quarter saying, oh, yeah, we're seeing some uptick here,
• 16:51
  Speaker 5: and we're seeing some business happening. So yeah, in certain areas,
• 16:54
  Speaker 5: I think you can point to improvement. We have not,
• 16:57
  Speaker 5: at least from what I have seen. I've seen any big,
• 17:01
  Speaker 5: hard hitting questions and tough answers yet on teriff expectations
• 17:07
  Speaker 5: and what that's doing to businesses. I'm kind of waiting
• 17:09
  Speaker 5: on that, like, hey, give me you know, I know
• 17:12
  Speaker 5: they come very late in the season, but give me
• 17:14
  Speaker 5: Target and Walmart's answers to questions about how are you
• 17:17
  Speaker 5: dealing with price increases because your input costs have to
• 17:20
  Speaker 5: be going up, what are you doing about it? On
• 17:22
  Speaker 5: the other end of that, these aren't the types of
• 17:24
  Speaker 5: companies that are really getting those questions, but we will
• 17:27
  Speaker 5: get to them pretty quickly over the coming weeks, and
• 17:29
  Speaker 5: I think those are going to be important, important benchmarks
• 17:34
  Speaker 5: for what comes next from those companies.
• 17:37
  Speaker 2: Yeah, looking ahead to kind of what's more immediate next week.
• 17:40
  Speaker 2: I don't really care what Verizon says on Monday, like great,
• 17:43
  Speaker 2: you're prepaid, you know your postpaid phone plans, We're up
• 17:46
  Speaker 2: you know, one percent for the quarter or whatever. It's
• 17:47
  Speaker 2: going to be okay, Like great, good luck with that.
• 17:50
  Speaker 3: The ones that I'm.
• 17:51
  Speaker 2: Interested in as we you know, kind of look at
• 17:54
  Speaker 2: what's out there Tuesday too that I want to see
• 17:57
  Speaker 2: Capital One just because they represent typically a little bit
• 18:00
  Speaker 2: more of the lower income households. I want to see
• 18:03
  Speaker 2: what they're saying as opposed to Amex, who came out
• 18:05
  Speaker 2: today and was like, yeah, things are gangbusters for you know,
• 18:07
  Speaker 2: high income households.
• 18:08
  Speaker 3: Like we kind of know that.
• 18:09
  Speaker 4: Everybody who's making half a million dollars is doing great.
• 18:12
  Speaker 2: Right, tell me about the people that are making thirty
• 18:15
  Speaker 2: five thousand dollars a year. That's what I want to
• 18:17
  Speaker 2: hear about. Sherwin Williams. Tell me what's going on with
• 18:19
  Speaker 2: your business and housing. I want to see a little
• 18:21
  Speaker 2: bit on that because we don't get home Depot and
• 18:23
  Speaker 2: Low's reporting until later. As you mentioned on Wednesday, obviously
• 18:28
  Speaker 2: you know Google and Tesla, sure like you're both you know,
• 18:31
  Speaker 2: trillion dollar companies.
• 18:32
  Speaker 3: I need to hear from you.
• 18:33
  Speaker 2: But beyond them, on Wednesday, we also get Chipotle, and
• 18:37
  Speaker 2: so I want to see what's going on at restaurants
• 18:39
  Speaker 2: at this point, just because that was an area of
• 18:41
  Speaker 2: concern in Q one, kind of across the board, so
• 18:45
  Speaker 2: I want to see what they're saying on that side
• 18:47
  Speaker 2: of things.
• 18:47
  Speaker 3: Uh. And then on.
• 18:49
  Speaker 2: Thursday, MasterCard and Blackstone, Okay, more financials.
• 18:52
  Speaker 3: That's that's all. Great.
• 18:55
  Speaker 2: Royal Caribbean Cruises LA Cruises have kind of been immune
• 18:57
  Speaker 2: to any problems over the last four years. It's they
• 19:00
  Speaker 2: just continue to, you know, kind of rack things up
• 19:02
  Speaker 2: on that side of things. So there's a few companies
• 19:05
  Speaker 2: next week that I'm interested in seeing, you know, kind
• 19:08
  Speaker 2: of what they're indicating. But overall that the tenor of
• 19:12
  Speaker 2: earnings have been good so far. But I do want
• 19:15
  Speaker 2: to touch a little bit on Netflix. So why don't
• 19:19
  Speaker 2: we take a quick break here and when we return.
• 19:24
  Speaker 2: We got Wall Street Watch, and then let's talk Netflix
• 19:27
  Speaker 2: earnings because I think there's something juicy there that I
• 19:31
  Speaker 2: want to discuss.
• 19:41
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:44
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:48
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:54
  Speaker 1: Street Watch. A complete look at what's moving market so
• 19:57
  Speaker 1: far today, right here on the Financial Exchange Radio Network.
• 20:01
  Speaker 6: Market's wrapping up the week with the SMP five hundred
• 20:04
  Speaker 6: hitting fresh record highs as traders sift through a new
• 20:07
  Speaker 6: batch of economic data points in addition to more second
• 20:11
  Speaker 6: quarter earnings. Right now, it's mostly quiet for markets. Dows
• 20:14
  Speaker 6: off by three tenths of one percent, or one hundred
• 20:17
  Speaker 6: and forty four points, SMP five.
• 20:19
  Speaker 3: Hundred completely flat. Could not be more flat.
• 20:23
  Speaker 6: As a matter of fact, Nasdaq is down by only
• 20:26
  Speaker 6: eighteen points, whilst two thousand is edging two points higher.
• 20:30
  Speaker 6: Ten year treasure real down three basis points at four
• 20:33
  Speaker 6: point four two seven percent, and crude oil is up
• 20:36
  Speaker 6: nearly one and a half percent higher today, trading at
• 20:38
  Speaker 6: sixty eight dollars in fifty one cents.
• 20:41
  Speaker 3: A barrel.
• 20:42
  Speaker 6: Significant news out of the energy sector this morning after
• 20:45
  Speaker 6: an arbitration panel cleared the way for Chevron to close
• 20:48
  Speaker 6: its fifty three billion dollar acquisition of Hesse after Exon
• 20:52
  Speaker 6: Mobile tried to pre empt the deal. Chevron is up
• 20:56
  Speaker 6: over half a percent. Meanwhile, Netflix hiked its annual revenue
• 20:59
  Speaker 6: in operating margin forecast after posting better than expected second
• 21:03
  Speaker 6: quarter results. The streaming giants said member editions, price increases
• 21:08
  Speaker 6: and its growing ad business drove revenue in the second quarter. However,
• 21:12
  Speaker 6: shares are down nearly five percent. Chuck and Michael of
• 21:15
  Speaker 6: Moore on Netflix coming up here on the Show. Elsewhere,
• 21:18
  Speaker 6: American Express reported stronger than expected second quarter revenue, driven
• 21:22
  Speaker 6: by a twenty percent jump in card fees. The company's
• 21:26
  Speaker 6: chief executive said it saw record spending from card members
• 21:30
  Speaker 6: during the quarter, with strong demand for its premium products.
• 21:34
  Speaker 6: AMEX shares are down about three percent. According to The
• 21:37
  Speaker 6: Wall Street Journal, railroad operator Union Pacific is in talks
• 21:41
  Speaker 6: to acquire Norfolk. Southern Norfolk is up over two percent,
• 21:46
  Speaker 6: while Union Pacific stock is falling about one percent lower,
• 21:50
  Speaker 6: and three M shares are down nearly three percent. After
• 21:53
  Speaker 6: the industrial conglomerate, who makes products like post it notes
• 21:56
  Speaker 6: in Scotch tape, raised its annual earnings outlook after posting
• 22:00
  Speaker 6: quarterly results that beat forecast. I'm Tucker Silva, and that
• 22:04
  Speaker 6: is Wall Street Watch, Mike.
• 22:06
  Speaker 2: So let's talk a little bit about Netflix, who they
• 22:09
  Speaker 2: reported their second quarter earnings. Their revenue was up sixteen
• 22:14
  Speaker 2: percent to eleven point oh wait billion dollars, and that
• 22:17
  Speaker 2: profit up forty six percent to three point one billion dollars,
• 22:22
  Speaker 2: both of these slightly beating expectations. And so you take
• 22:27
  Speaker 2: a look at Netflix stocked and you're like, okay, like
• 22:29
  Speaker 2: they're you know, good, Like they beat expectations, they must
• 22:32
  Speaker 2: be doing great, and stocks down almost five percent today,
• 22:36
  Speaker 2: and so one then asks what gives And obviously, we could,
• 22:40
  Speaker 2: you know, give you a whole bunch of platitudes about well,
• 22:42
  Speaker 2: expectations are what really matter, and you know, you got
• 22:45
  Speaker 2: to have bigger beats in the audiata. But there's also
• 22:47
  Speaker 2: an interesting phenomenon that I've noticed in the last three
• 22:52
  Speaker 2: four years that is kind of interesting to me, and specifically,
• 22:57
  Speaker 2: and again this it does have some statistical significance over
• 23:02
  Speaker 2: you know, the last few years. I don't know that
• 23:04
  Speaker 2: there's anything longer term about it, but there's an interesting
• 23:07
  Speaker 2: phenomenon where if it's basically, hey, if stocks are ripping
• 23:12
  Speaker 2: heading into earning season, Earning season tends to bring them
• 23:15
  Speaker 2: back down to earth a little bit. If stocks are
• 23:17
  Speaker 2: in the tank heading into earning season, earning season tends
• 23:19
  Speaker 2: to lift them. And what if stock's been doing for
• 23:21
  Speaker 2: the last three months now, Mike rallying ripping, Yeah, they've
• 23:25
  Speaker 2: been ripping. And so I think part of this is
• 23:27
  Speaker 2: just look, you know, we talk about something, you know,
• 23:29
  Speaker 2: is it priced in or not? When we look at
• 23:32
  Speaker 2: Netflix stock just as an example. And again, I know
• 23:36
  Speaker 2: this is obviously coming off of you know, the April
• 23:38
  Speaker 2: second tariffs and all this and that, but Netflix stock
• 23:41
  Speaker 2: since early April has rallied about fifty percent. Even at
• 23:45
  Speaker 2: this point, it was up close to sixty if you
• 23:47
  Speaker 2: looked at it a couple of weeks ago. And so
• 23:50
  Speaker 2: I think part of this is just look, when a
• 23:51
  Speaker 2: stock has risen fifty percent in a span of three months,
• 23:56
  Speaker 2: sometimes you just got a chill, and occasionally even a
• 23:58
  Speaker 2: good earnings report can be reason for that. Now, if
• 24:02
  Speaker 2: you're looking for reasons in this earnings report, why you
• 24:04
  Speaker 2: might say, Okay, maybe Netflix isn't as strong as it appears.
• 24:10
  Speaker 2: There's not many there are only a couple margins expanded
• 24:13
  Speaker 2: from twenty seven percent to thirty four percent. Free cash
• 24:17
  Speaker 2: flow expanded from one point two billion dollars a year
• 24:20
  Speaker 2: earlier to two point three Like, this is all really
• 24:23
  Speaker 2: good news if you want to look at one thing,
• 24:26
  Speaker 2: and specifically they indicated, hey, part of this earnings growth
• 24:30
  Speaker 2: was fueled by foreign exchange, you know, shifts that may
• 24:34
  Speaker 2: not be repeatable in future terms in future quarters. And
• 24:39
  Speaker 2: basically what that means is, look, when the dollar falls
• 24:43
  Speaker 2: as it has and just in Q two, the US
• 24:46
  Speaker 2: dollar index fell from about one hundred and four down
• 24:48
  Speaker 2: to ninety eight, so about a six percent depreciation against
• 24:51
  Speaker 2: the broad basket occurrencies, what it means is that actually
• 24:56
  Speaker 2: it was down to ninety six at the end of
• 24:57
  Speaker 2: the quarters, rebounded a little bit to start this quarter off.
• 25:00
  Speaker 2: But what it means is, look, let's say that you
• 25:02
  Speaker 2: are Netflix and you operate in you know, one hundred
• 25:04
  Speaker 2: plus countries. The income that you bring in from overseas
• 25:10
  Speaker 2: is worth more in dollar terms. And how does Netflix
• 25:13
  Speaker 2: report its earnings in dollar terms? They don't report, you know, hey,
• 25:17
  Speaker 2: we they won't split it out. And they're like, well,
• 25:20
  Speaker 2: we got you know, X number of rupees in India
• 25:22
  Speaker 2: and we got tue.
• 25:24
  Speaker 5: Why are we both on Indian rupees and I think,
• 25:26
  Speaker 5: I think I know what I want for lunch.
• 25:27
  Speaker 3: They're they're they're big in India. I guess that must
• 25:30
  Speaker 3: be it.
• 25:31
  Speaker 2: So in any case, when you have a weakening dollar,
• 25:35
  Speaker 2: it can help the the earnings of a company short term.
• 25:38
  Speaker 2: The counter to this, currencies rarely go in one direction permanently,
• 25:43
  Speaker 2: unless you're you know, the deutsch mark back in the
• 25:45
  Speaker 2: nineteen twenties, or the Argentinian peso for most of its history,
• 25:50
  Speaker 2: or the Turkish lira in recent years. Like, currencies rarely
• 25:54
  Speaker 2: move in one direction. They tend to kind of be
• 25:56
  Speaker 2: self correcting to a certain extent. So what can help
• 25:59
  Speaker 2: you one quarter can come back to bite you later on.
• 26:03
  Speaker 2: And so maybe that's some of you know, if you're
• 26:05
  Speaker 2: looking for a story as to why someone might be
• 26:07
  Speaker 2: selling Netflix today, it could simply be, Yeah, they were
• 26:10
  Speaker 2: helped by currency last quarter. They won't be in the future,
• 26:13
  Speaker 2: and so you know it's gonna be tougher for them
• 26:15
  Speaker 2: to continue to beat in the you know, expectations.
• 26:17
  Speaker 5: Yeah, this is the second quarter that they have no
• 26:20
  Speaker 5: longer been reporting subscribers. Again, that has nothing to do
• 26:25
  Speaker 5: with the stock price. Move today is the second quarter
• 26:27
  Speaker 5: they're doing it, but it's it's interesting the direction they
• 26:31
  Speaker 5: are moving in, which is, we don't you don't need
• 26:35
  Speaker 5: to know how many people are using our system. Take
• 26:37
  Speaker 5: a look at our profits now. And the reason you
• 26:41
  Speaker 5: would do that is because in the past you didn't
• 26:43
  Speaker 5: have much in the way of profits to speak of,
• 26:45
  Speaker 5: and so now that you do, let's take the focus
• 26:48
  Speaker 5: away from the user growth and really focus now on Hey,
• 26:51
  Speaker 5: how much are we able to grow that advertising beast
• 26:53
  Speaker 5: and raise prices on our customers without them ditchinus right.
• 26:57
  Speaker 2: It's it's actually indicative of a healthy bit of amature business.
• 27:02
  Speaker 2: And that what they're basically telling you, because again companies
• 27:05
  Speaker 2: they can disclose. You know, there's plenty of stuff that's optional,
• 27:08
  Speaker 2: like subscriber numbers. They're telling you, Look, our growth rate
• 27:12
  Speaker 2: is slowing. If it wasn't, they'd love to still tell
• 27:14
  Speaker 2: you that. Sure, our growth rate is slowing, but our
• 27:18
  Speaker 2: pricing power is improving. That's a pretty good story. So
• 27:22
  Speaker 2: it's not to say that Netflix is impervious to, you know,
• 27:26
  Speaker 2: changes in habits and things like that. Every media company
• 27:31
  Speaker 2: is always on the lookout for what comes next, and
• 27:34
  Speaker 2: are we going to get run over or you do
• 27:36
  Speaker 2: end up getting run over. But Netflix, to this point,
• 27:39
  Speaker 2: there really aren't many warning signs that are out there.
• 27:42
  Speaker 2: It's just a it's a mature business that is highly
• 27:45
  Speaker 2: profitable now and continues to move in the right direction
• 27:50
  Speaker 2: even if the stock is not doing what shareholders want
• 27:53
  Speaker 2: it to do.
• 27:54
  Speaker 3: Today.
• 27:54
  Speaker 5: I can think of very few bigger success stories of
• 27:58
  Speaker 5: that business model, which I would describe as grow as
• 28:01
  Speaker 5: quickly as possible by offering a great product at an
• 28:04
  Speaker 5: extremely low price even if it's unprofitable to you in
• 28:07
  Speaker 5: the short term, in order to grab that user base
• 28:11
  Speaker 5: and have pricing power in the future.
• 28:14
  Speaker 4: Uber's done it. Other companies have run that business.
• 28:17
  Speaker 5: Model for years, some to their absolute failure. Go see
• 28:23
  Speaker 5: what was the movie company that did this? The movie
• 28:26
  Speaker 5: subscription movie pass. Yeah, I mean some of them have
• 28:30
  Speaker 5: absolutely failed because they didn't have anything unique.
• 28:33
  Speaker 4: But Net took to be fair. That was your dad's fault. Yeah,
• 28:36
  Speaker 4: maybe my father bankrupted that.
• 28:38
  Speaker 2: You put them out of business. You're seeing thirty movies
• 28:40
  Speaker 2: a month for nine dollars. They can't survive that.
• 28:42
  Speaker 3: It was every day he wents on movie. Yeah, we
• 28:45
  Speaker 3: get like a report the next day. I'm like oh
• 28:46
  Speaker 3: I saw this, like, how was it pretty bad?
• 28:50
  Speaker 4: I'll be there again tomorrow.
• 28:51
  Speaker 3: Wasn't good but it was thirty cents.
• 28:54
  Speaker 5: But but yeah, I mean, you know, Uber's done it
• 28:57
  Speaker 5: fairly successfully. Others have too, but no one quite in
• 29:01
  Speaker 5: the same way that Netflix has, so hats off to them. Yeah,
• 29:05
  Speaker 5: It's doesn't always work that way.
• 29:06
  Speaker 2: It's a small list that has been able to, uh
• 29:09
  Speaker 2: to get to that point, and Netflix is just they're
• 29:14
  Speaker 2: firing on all cylinders again.
• 29:15
  Speaker 3: I know the stock's down today, but.
• 29:18
  Speaker 2: Listen, they say, don't judge a book by its cover,
• 29:21
  Speaker 2: don't judge a stock by its July eighteenth, twenty twenty
• 29:24
  Speaker 2: five performance.
• 29:25
  Speaker 3: That's what I always say.
• 29:26
  Speaker 4: Yeah, he said that for years.
• 29:28
  Speaker 3: Just take a quick break here and when we return.
• 29:32
  Speaker 5: I want to talk about four oh one. Case you do,
• 29:34
  Speaker 5: I do, I don't, but we will. Sounds good, missed
• 29:39
  Speaker 5: one of our shows.
• 29:40
  Speaker 1: Catch up anytime by asking your alexis Smart speaker to
• 29:43
  Speaker 1: play the Financial Exchange. This is the Financial Exchange Radio Network.
• 29:48
  Speaker 1: The Financial Exchange streams live on YouTube. Like our page
• 29:53
  Speaker 1: and stay up to date on breaking business news all
• 29:55
  Speaker 1: morning long. This is the Financial Exchange Radio Network.
• 30:07
  Speaker 2: All right, Mike, you wanted to talk for one case,
• 30:10
  Speaker 2: what do you want to talk about?
• 30:11
  Speaker 5: Well, it's been this is the last day of crypto
• 30:16
  Speaker 5: week out there, and as such, the President is talking
• 30:19
  Speaker 5: about an executive order that would seemingly direct the Department
• 30:25
  Speaker 5: of Labor to allow a broad pool of different alternative
• 30:29
  Speaker 5: assets to be included in four one K plans. Before
• 30:33
  Speaker 5: everyone you know jumps you know for joy here, I
• 30:37
  Speaker 5: think it would be useful for us to explain how
• 30:40
  Speaker 5: all of this works, because the President can direct the
• 30:44
  Speaker 5: Department of Labor presumably to consider these as viable options
• 30:48
  Speaker 5: within retirement plans, such as cryptocurrency pools, private equity investments,
• 30:53
  Speaker 5: private credit, all sorts of things that aren't really in
• 30:56
  Speaker 5: there today. That does not mean that tomorrow you're going
• 31:00
  Speaker 5: to be able to go put crypto into your four
• 31:02
  Speaker 5: to one K plan. So I think that's point number
• 31:04
  Speaker 5: one here, just because they allow for something. The way
• 31:09
  Speaker 5: that four one K plans work is your employer, if
• 31:11
  Speaker 5: they offer one, is required to act in your best
• 31:16
  Speaker 5: interest as their employee when evaluating these four to one k's,
• 31:19
  Speaker 5: or they outsource that duty to an investment manager, but
• 31:22
  Speaker 5: ultimately it does land with that employer. And so first
• 31:27
  Speaker 5: step is, Yeah, the Department of Labor under a risk
• 31:31
  Speaker 5: a law would have to say yes, this is allowable.
• 31:34
  Speaker 5: Second step would be on a case by case basis,
• 31:37
  Speaker 5: these employers are gonna have to decide, one by one,
• 31:40
  Speaker 5: do we actually think that this is in the best
• 31:44
  Speaker 5: interests of our participants.
• 31:47
  Speaker 4: In these retirement plans?
• 31:49
  Speaker 5: And that is a tough bar to get over, because
• 31:52
  Speaker 5: it's pretty easy to sue somebody if that all goes
• 31:56
  Speaker 5: south in terms of their fiduciary obligation within a four
• 31:59
  Speaker 5: one K plan.
• 32:01
  Speaker 3: Yeah, it's something where.
• 32:05
  Speaker 2: It's it's one thing to eventually allow for this to
• 32:10
  Speaker 2: be present in for one case, the question is going
• 32:14
  Speaker 2: to be the question is going to be how do
• 32:18
  Speaker 2: employers end up feeling about offering this?
• 32:21
  Speaker 4: Yeah, and there are.
• 32:23
  Speaker 5: A few asset classes more volatile than cryptocurrencies in particular,
• 32:31
  Speaker 5: I hesitate to think of a single one.
• 32:35
  Speaker 3: Yeah, I would struggle to And I think.
• 32:39
  Speaker 2: The the big thing about this, like, if you're talking
• 32:45
  Speaker 2: about this from a retirement savings perspective, sure, and I
• 32:50
  Speaker 2: know I'm gonna be you know, grumby old chuck just
• 32:53
  Speaker 2: you know, get off my four oh one K plan.
• 32:56
  Speaker 2: But let's say that you're a twenty year old today,
• 33:00
  Speaker 2: and you've got forty forty five years until retirement, and
• 33:05
  Speaker 2: I don't know exactly what equities are going to do
• 33:09
  Speaker 2: over the next forty years, but based on what we
• 33:12
  Speaker 2: see in terms of you know, demographic trends and earnings
• 33:14
  Speaker 2: trends and this and that, it's a fair bet that
• 33:17
  Speaker 2: if you look at where you know, the S and
• 33:20
  Speaker 2: P five hundred is in twenty sixty five, it's probably
• 33:23
  Speaker 2: earned somewhere between like five percent a year and twelve
• 33:27
  Speaker 2: percent a year based on what we know historically.
• 33:29
  Speaker 4: Yep, that's what histrue.
• 33:30
  Speaker 3: It tells somewhere in that range.
• 33:32
  Speaker 2: If it's outside that range, it's because things either went
• 33:34
  Speaker 2: you know, much better than expected or much worse. But like,
• 33:37
  Speaker 2: that's kind of what you'd expect to see. And so
• 33:40
  Speaker 2: you can look at this from a retirement saver's perspective
• 33:43
  Speaker 2: and say, look, I don't know what stocks are going
• 33:44
  Speaker 2: to do any given day, given year, but I know
• 33:47
  Speaker 2: how you know, this typically has played out. Here's my expectations,
• 33:51
  Speaker 2: and here's why as a fiduciary, I feel comfortable offering
• 33:54
  Speaker 2: this in a four to one K plan.
• 33:56
  Speaker 4: I mean, the reality is.
• 33:59
  Speaker 5: They have when they started offering for one K plans
• 34:02
  Speaker 5: and coming up with this fiduciary obligation, companies and investors
• 34:06
  Speaker 5: had a good hundred years of track record history to
• 34:09
  Speaker 5: say yeah, we feel comfortable with this.
• 34:11
  Speaker 2: With crypto, you've got about ten years of track record,
• 34:14
  Speaker 2: and to be fair, the gains have been absolutely explosive.
• 34:16
  Speaker 2: They've been monster yep. But it's not predicated on any
• 34:21
  Speaker 2: use for crypto, because, if we're being one hundred percent honest,
• 34:23
  Speaker 2: crypto isn't used for anything aside from spechiving money from
• 34:27
  Speaker 2: one place to another, and even that it doesn't do
• 34:30
  Speaker 2: particularly efficiently. And so the whole premise of hey, how
• 34:33
  Speaker 2: does crypto go up in value is well, more people
• 34:36
  Speaker 2: are gonna use it, and so that will make it
• 34:37
  Speaker 2: more valuable.
• 34:39
  Speaker 3: Yep. It's worked to this point. What does it look
• 34:42
  Speaker 3: like over the next forty years. I have no idea.
• 34:45
  Speaker 2: If you told me that over the next forty years,
• 34:48
  Speaker 2: crypto's gonna earn a return of you know, thirty percent
• 34:51
  Speaker 2: a year, okay, that's possible. If you told me it's
• 34:53
  Speaker 2: gonna lose twenty percent a year, Okay, that's possible too.
• 34:56
  Speaker 2: I have no idea, and that's the dangerous thing for
• 35:00
  Speaker 2: a fiduciary of a four to one K plan and
• 35:02
  Speaker 2: for a participant.
• 35:04
  Speaker 5: There are changes coming to four o one k's. It
• 35:06
  Speaker 5: seems almost inevitable. At this point. We've already seen some
• 35:10
  Speaker 5: of them take place that aren't really to do with
• 35:14
  Speaker 5: the investments they are in, but new offerings from roths
• 35:17
  Speaker 5: versus traditionals. There's going to be more of these changes
• 35:21
  Speaker 5: to come, and what I can tell you is four
• 35:23
  Speaker 5: to one k's are complicated.
• 35:25
  Speaker 4: They really are.
• 35:26
  Speaker 5: That's why there's these giant pages of disclosures when it
• 35:30
  Speaker 5: comes to your four oh one K. They are trying
• 35:32
  Speaker 5: to make them more and more simple, which I think
• 35:33
  Speaker 5: is a good thing. But I'm here to tell you
• 35:36
  Speaker 5: there's confusion. There's confusion around them, and there's going to
• 35:39
  Speaker 5: be more based on the new types of investments that
• 35:41
  Speaker 5: are likely to be allowed in there in the future.
• 35:44
  Speaker 5: If you have questions about your retirement savings plan and
• 35:47
  Speaker 5: how it's going to work for you, rather than those
• 35:51
  Speaker 5: who are pushing to get, for instance, private investments and
• 35:53
  Speaker 5: cryptocurrency into four one K plans, because let's be honest,
• 35:57
  Speaker 5: everybody's got their own agenda about all this, Please give
• 36:00
  Speaker 5: the folks at Armstrong Advisory Group a call, let us
• 36:02
  Speaker 5: work with you to make a plan for your retirement future.
• 36:05
  Speaker 5: The numbers eight hundred three nine three for zero zero one. Again,
• 36:10
  Speaker 5: that's the Armstrong Advisory Group at eight hundred three nine
• 36:13
  Speaker 5: three for zero zero one.
• 36:15
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 36:18
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 36:20
  Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
• 36:24
  Speaker 1: your own financial tax into state planning advisors before making
• 36:26
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 36:29
  Speaker 1: advisory services.
• 36:31
  Speaker 3: Mike, do you want to talk in Vidia or Chevron?
• 36:35
  Speaker 4: M Let's go to Nvidio.
• 36:37
  Speaker 3: Okay.
• 36:38
  Speaker 2: Piece in Bloomberg and Video CEO Hwang emerges as reluctant
• 36:42
  Speaker 2: emissary for US China, and I've seen a couple of
• 36:45
  Speaker 2: these pieces today. There is also one in the New
• 36:47
  Speaker 2: York Times basically talking about how Jensen Hwang has no
• 36:55
  Speaker 2: desire to really, you know, be some kind of bridge
• 36:58
  Speaker 2: between the US and China, but that ultimately he strongly
• 37:02
  Speaker 2: believes that being able to sell more American based products
• 37:06
  Speaker 2: to the rest of the world, including China, will help
• 37:09
  Speaker 2: to encourage American leadership.
• 37:10
  Speaker 4: Do you think so?
• 37:11
  Speaker 5: Or will it help increase his own company's profit margin
• 37:14
  Speaker 5: or is it a non meaningful difference.
• 37:15
  Speaker 3: I think he.
• 37:16
  Speaker 2: Probably believes both, to be completely honest. Sure, like there's
• 37:19
  Speaker 2: obviously some self interest here. Yeah, I guess the big
• 37:22
  Speaker 2: thing that I come back to is we had two
• 37:25
  Speaker 2: concurrent administrations, Trump one and Biden, who both said, look,
• 37:30
  Speaker 2: we want some real, you know, stringent export controls on
• 37:33
  Speaker 2: semiconductors because of fears of how they could be used
• 37:36
  Speaker 2: against us by the Chinese government and Chinese armies specifically,
• 37:41
  Speaker 2: And all of a sudden, in the span of a
• 37:43
  Speaker 2: couple months, it's just okay for these to be sent
• 37:45
  Speaker 2: to China. Does that feel good to anyone?
• 37:49
  Speaker 5: No? Look, you can convince me that that is the
• 37:52
  Speaker 5: price we have to pay in order to get rare
• 37:54
  Speaker 5: earth magnets and things along those lines like that very
• 37:57
  Speaker 5: well may be where these negotiations landed. And that's a
• 38:00
  Speaker 5: tough call to make if those are the trade offs
• 38:03
  Speaker 5: you have to have. But no, I don't feel great about,
• 38:06
  Speaker 5: you know, selling our best intellectual property in China.
• 38:10
  Speaker 2: It doesn't give you the fuzzy and warmings. No, it doesn't.
• 38:15
  Speaker 2: Let's take a quick break. We got our two coming
• 38:17
  Speaker 2: up in just a little bit.