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AI Earnings Could Make or Break the Market Rally · The Financial Exchange Show

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Speaker 1: is the Financial Exchange with Chuck Zotta and Mike Armstrong.
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Speaker 2: Chuck, Mike, and Tucker with you. And if you didn't
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Speaker 2: like yesterday, there are going to be parts of today
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Speaker 2: that you like. Parts, but not. Because I got to
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Speaker 2: tell you, this market's just messy right now. It doesn't
1:30
Speaker 2: know what to do with itself. I think the good
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Speaker 2: news is that we've got a really heavy earnings week
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Speaker 2: next week. You've got Monday. Let's be honest. We're going
1:47
Speaker 2: to skip Monday. Tuesday, you've got Visa. They're going to
1:50
Speaker 2: tell us a lot about what's going on consumer spending-wise. Yep.
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Speaker 2: The rest of Tuesday, again, like some historically big companies,
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Speaker 2: but not the ones that matter right now. Coca-Cola's not
2:00
Speaker 2: going to tell you anything that you don't already know.
2:02
Speaker 2: Boeing's not going to tell you anything you don't already know.
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Speaker 2: Forget about it. What you do have is Wednesday. Alphabet
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Speaker 2: and Microsoft. This one here, this is the big one.
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Speaker 2: Because the concerns that have come up in the last
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Speaker 2: couple weeks in the market that have driven it... Again,
2:23
Speaker 2: the S & P is only like 2.7% off its
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Speaker 2: all-time high. So, like, context is needed. But the Philly
2:30
Speaker 2: Semiconductor Index, as of yesterday at one point, was down 19.5%
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Speaker 2: in like eight days.
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Speaker 3: So Microsoft and Alphabet, both in the five hyperscalers group
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Speaker 3: that we talk about frequently, hyperscalers are those that are
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Speaker 3: spending tens if not hundreds of billions of dollars building
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Speaker 3: out AI data centers. They include Microsoft and Alphabet, as
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Speaker 3: we mentioned, Meta, Amazon, as well as Oracle.
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Speaker 2: Who are lumped into that group, and two of them
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Speaker 2: will be reporting earnings. So this is a big one,
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Speaker 2: and I think what you're going to get out of
3:00
Speaker 2: Microsoft and Alphabet is either going to be... I hesitate
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Speaker 2: to say either, but the two options, in my opinion, are, hey,
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Speaker 2: they confirmed that there's a lot more capital raising that's
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Speaker 2: going to need to happen, and that's not going to
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Speaker 2: be received well by markets, I think. Or they say, no,
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Speaker 2: we can fund more of this out of operations because
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Speaker 2: we're starting to show signs of additional profitability in our
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Speaker 2: data center operations. And that's going to juice markets to
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Speaker 2: new all-time highs.
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Speaker 3: How do you square either of those stories with Microsoft's
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Speaker 3: decision to pull funding at the UK data center?
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Speaker 2: So this is the piece that is interesting to me.
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Speaker 3: It doesn't really tuck into either of those two narratives
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Speaker 3: terribly well.
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Speaker 2: No, and we covered this. I think we covered this.
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Speaker 2: If we didn't, we should have. Microsoft, on Monday, pulled
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Speaker 2: out of a deal to anchor a data center that
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Speaker 2: a company by the name of Nscale, they're one of
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Speaker 2: these neoclouds, they're backed by NVIDIA. But Microsoft backed out
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Speaker 2: of a deal for a UK data center. The big
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Speaker 2: thing that Microsoft said was, that it was because the
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Speaker 2: expected power supply would not be online until somewhere.
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Speaker 1: In the 2030s.
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Speaker 2: So Microsoft could square that circle by saying, yeah, this
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Speaker 2: was a timing issue, like we pulled out because we
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Speaker 2: want this developed sooner, not because we don't believe in
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Speaker 2: further data center construction. This also might have just been
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Speaker 2: a convenient excuse. I mean, look, trust me, trying to,
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Speaker 2: not trust me, I've never done it, but I would imagine,
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Speaker 2: based on what I know about the regulatory environment in
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Speaker 2: the UK, it's hard to build data centers there.
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Speaker 1: Probably.
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Speaker 2: So I get that. But this could also just be
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Speaker 2: Microsoft having a convenient excuse like, oh, there's a one-year delay. Okay, great.
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Speaker 2: If they really thought the demand was going to be there,
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Speaker 2: wouldn't they say, okay, we can add this to our
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Speaker 2: pipeline for later development and just do something else sooner?
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Speaker 4: Right.
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Speaker 2: So there are different ways that you can spin this.
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Speaker 3: So there are those pieces. We are also rapidly closing
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Speaker 3: in on the end of October here. And the other
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Speaker 3: looming item that is just in the back of my mind,
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Speaker 3: on top of earnings, because we're going to have earnings
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Speaker 3: going through mid-November. Remember that NVIDIA doesn't even report earnings
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Speaker 3: until November 17th. So it does stretch on a bit
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Speaker 3: these days in a way that it didn't previously because
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Speaker 3: NVIDIA is so massive now. But we're also kind of
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Speaker 3: awaiting this massive unknown piece of information of, whether or
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Speaker 3: not Anthropic's going to go forward with their IPO.
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Speaker 2: Which the chatter at the beginning of this week was
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Speaker 2: they were going to try to file today. Not, like,
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Speaker 2: actually go public today, but they were going to file today.
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Speaker 2: Haven't seen anything on the Bloomyberg yet. Haven't. So we'll see.
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Speaker 2: Here's the thing. There's not much time left to get
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Speaker 2: this thing out the door.
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Speaker 3: No, it's by Thanksgiving, and preferably, like, at least a
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Speaker 3: week or two before Thanksgiving if you're going to get
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Speaker 3: the attention it needs.
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Speaker 2: Look, including today, we've got 48 trading days left in
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Speaker 2: the year. The last 23 of those, post-Thanksgiving, are cooked.
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Speaker 2: You're not IPO-ing anything on December 9th. You're just not.
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Speaker 2: That would be a crazy idea to do so. It
6:13
Speaker 2: would be nuts. So basically, you've got somewhere in the
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Speaker 2: ballpark of like 22 to 25 trading days to get
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Speaker 2: this thing done. Ideally, probably closer to like 15.
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Speaker 4: Tick, tick, tick.
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Speaker 2: That's all I'll say.
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Speaker 1: Yeah.
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Speaker 3: These markets are torn on, yeah, I guess the spending
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Speaker 3: and whether or not it's going to come to fruition.
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Speaker 2: I don't think this market can support the IPO right now.
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Speaker 2: I know they're trying. Yeah. Just as an example, just
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Speaker 2: looking today, Mike, so the S & P 500 is
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Speaker 2: down a quarter percent. Nothing big. It's down 14 points. Whoop-de-doo.
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Speaker 2: You can make that up in literally half a second
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Speaker 2: if you get the right headline. So the S &
7:02
Speaker 2: P is down a quarter percent. On a sector-by-sector basis,
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Speaker 2: one of three sectors that's up today is tech. And
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Speaker 2: yet CoreWeave is down 2%. That doesn't feel great for
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Speaker 2: getting the Anthropic IPO off the ground. Because if you
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Speaker 2: look in tech, here's what's up today. Micron's up 3%.
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Speaker 2: AMD's up 2.25%. Intel's up 1%. Microsoft's up 3.25%. NVIDIA's
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Speaker 2: up 0.25%. So that's the stuff that's up in tech.
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Speaker 2: You take a look at what's down there, and again,
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Speaker 2: it's like, All the neocloud stuff, like no one knows
7:47
Speaker 2: if it's going to make sense. Because here's the thing,
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Speaker 2: like for better or for worse, Microsoft, the reason why
7:53
Speaker 2: Microsoft is able to catch as much of a pass
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Speaker 2: as they can on this, again, remember, semiconductor stocks are
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Speaker 2: off like 20% in the aggregate in the last 11 days. Microsoft,
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Speaker 2: if you go back to the exact same time, October 6th,
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Speaker 2: which I'm pulling up right now, Microsoft closed at 529.
8:10
Speaker 2: It's at 524 now. Microsoft's down 1% in the same time.
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Speaker 2: Here's why. Number one, Satya Nadella, Microsoft CEO, really freaking
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Speaker 2: good at what he does. You could argue that he
8:26
Speaker 2: has been... Might be the best CEO in tech. Yeah,
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Speaker 2: Tim Cook.
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Speaker 3: It's tough for me to put Nadella above Cook in
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Speaker 3: the way he's navigated the last 20 years at Apple
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Speaker 3: or whatever it's been, but Nadella has quietly built Microsoft
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Speaker 3: into what it is now.
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Speaker 2: I put Nadella above Cook for kind of what you
8:47
Speaker 2: mentioned because Nadella followed Steve Ballmer. The Steve Ballmer era
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Speaker 2: at Microsoft was bad. The stock didn't do anything interesting
9:02
Speaker 2: for most of it. I mean, it did interesting things.
9:04
Speaker 2: They were just down. The stock was basically flat over
9:07
Speaker 2: the duration of it. Nadella took a company that, again,
9:11
Speaker 2: was like a powerhouse. Like, make no mistake, but just, like,
9:13
Speaker 2: the stock wasn't doing anything. It was like, oh, like,
9:15
Speaker 2: I'll push these buttons and Yahoo, like, look at it go. Cook,
9:20
Speaker 2: on the other hand, like, yes, he had a tough
9:22
Speaker 2: act to follow in Steve Jobs, but he had a
9:25
Speaker 2: company that, like, had it already. Like, he didn't have
9:29
Speaker 2: to give it anything special.
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Speaker 3: Hmm. I... I'm still not convinced of the argument. The
9:38
Speaker 3: stuff that Cook did on the supply chain and... He
9:41
Speaker 3: did that before, though, he was CEO. And navigating through
9:44
Speaker 3: the politics of where this nation is right now was
9:48
Speaker 3: pretty phenomenal to see.
9:52
Speaker 2: Cook, the biggest thing Cook had to do was not
9:54
Speaker 2: screw it up. Which he did. Like, again, I'm not
9:57
Speaker 2: saying Cook did a bad job.
9:59
Speaker 1: Yeah.
10:00
Speaker 2: But Nadella did a better job.
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Speaker 5: Okay.
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Speaker 2: The point that I was trying to make, I'm going
10:06
Speaker 2: to remember it at some point. Here it is. It
10:08
Speaker 2: had to do with Microsoft and their AI. He might be, like,
10:11
Speaker 2: the best CEO in America. Again, like, I know we
10:13
Speaker 2: all would like to rip on these guys and be like, oh, like,
10:15
Speaker 2: they're dumb. How could they do? They're all smarter than us. Like,
10:19
Speaker 2: Anytime you put yourself in a position where your company
10:21
Speaker 2: can lose $ 100 billion in market cap, you've got to
10:26
Speaker 2: be pretty smart. That's not a responsibility that the board
10:30
Speaker 2: of directors just hands to anyone, right? So with Microsoft,
10:35
Speaker 2: the big thing is, I think the view that I
10:38
Speaker 2: have is, if the AI trade starts to slow, they're
10:43
Speaker 2: going to be the first to pull the plug. Because
10:45
Speaker 2: they already have a perfectly cromulent other business that was
10:48
Speaker 2: growing fine before this. Is it going to grow the
10:52
Speaker 2: same way that it could have?
10:53
Speaker 6: No.
10:54
Speaker 2: But on the other hand, if this scale of expansion
11:00
Speaker 2: ends up being successful, they also have the best credit
11:05
Speaker 2: in the business. and so they'll have the lowest borrowing cost,
11:08
Speaker 2: the least need to tap into equity, and so it
11:11
Speaker 2: sets them up with the best platform to go and
11:14
Speaker 2: expand there. And that's why Microsoft is being treated just
11:17
Speaker 2: fine here. Now, again, it's not to say that the
11:20
Speaker 2: stock can never go down. Again, there's a time earlier
11:24
Speaker 2: this year where the stock went from $ 5. 50 down to $ 3. 50.
11:27
Speaker 2: It's a 40% loss in the span of six months. Okay, yeah,
11:32
Speaker 2: we have to realize this stuff is possible, but... There's
11:36
Speaker 2: a reason why they're being treated differently from CoreWeave. And
11:39
Speaker 2: when you think about Anthropic trying to IPO now, is
11:44
Speaker 2: Anthropic closer to Microsoft or CoreWeave? They're neither, but they're
11:49
Speaker 2: closer to CoreWeave because their entire business is resting on
11:53
Speaker 2: a model that is untested at the scale they're trying
11:56
Speaker 2: to scale to. Let's take a quick break. When we return, let's... Yeah,
12:04
Speaker 2: let's talk a little bit about fraud and specifically like
12:09
Speaker 2: personal fraud, financial fraud against seniors, which is continuing to
12:13
Speaker 2: be a bigger and bigger problem. We'll discuss next.
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12:56
Speaker 4: Well, on this day in 1981, the U.S. national debt
13:00
Speaker 4: hit $ 1 trillion for.
13:02
Speaker 2: The first time.
13:03
Speaker 4: 2008, U.S. national debt passed $ 10 trillion, passed $ 20 trillion
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Speaker 4: in 2017, and $ 30 trillion in 2022. So today's question is,
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Speaker 4: as of today, what is the U.S. national debt? You
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Speaker 4: As of today, what is the U.S. national debt? Now,
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13:49
Speaker 2: Mike, we got a piece from CNBC. It's titled, Reported
13:52
Speaker 2: Fraud Losses Among Older Americans Hit $ 3 Billion in 2025
13:57
Speaker 2: as Big Losses Surge. This is according to a report
13:59
Speaker 2: from the FTC. That sucks. It's just brutal. 6% of
14:07
Speaker 2: fraud victims reported, of older fraud victims, reported losing $ 100, 000
14:12
Speaker 2: or more last year.
14:16
Speaker 3: Fraud losses reported by consumers age 60 and older were
14:19
Speaker 3: up 25% in 2025.
14:22
Speaker 2: And the magnitude of the losses, those big ones, north
14:26
Speaker 2: of 100,000, those rose from about 1,100 of those cases
14:30
Speaker 2: in 2020 to more than 6,700 last year.
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Speaker 3: You know, I don't have the statistic on me. I
14:40
Speaker 3: think Wall Street Journal reported that wires that are, you know,
14:47
Speaker 3: fraudulently sent and reported to the FBI within the first
14:50
Speaker 3: 24 hours have a really high recovery rate, which, like,
14:56
Speaker 3: shocked me. I was of the impression that once you
14:59
Speaker 3: sent that wire, that money was gone and there was
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Speaker 3: no getting it back. And this is one of the
15:05
Speaker 3: problems here is, you know, this growth, this is one
15:09
Speaker 3: of the most underreported crimes out there.
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Speaker 2: So it's much higher. The FTC estimates... that the actual
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Speaker 2: losses in 2025 from fraud perpetrated on older Americans might
15:22
Speaker 2: actually be anywhere from $ 13 billion to $ 119 billion. And
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Speaker 2: $ 3 billion has been reported.
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Speaker 3: I've seen this happen before. Especially, there's legislation out there
15:35
Speaker 3: to change this, but if you've ever seen somebody have
15:39
Speaker 3: fraud perpetrated and use their IRAs to fund that fraud...
15:43
Speaker 3: That's where it gets even worse, right? Because right now,
15:46
Speaker 3: what can happen? You fall for a scam. You wire
15:50
Speaker 3: somebody $ 100, 000 from your retirement account on the promise that
15:54
Speaker 3: it's being invested somewhere for you because you got convinced
15:58
Speaker 3: that somebody online is actually an investment advisor when they're not.
16:01
Speaker 3: The money disappears. And then, oh, by the way, you
16:05
Speaker 3: were only 58 when you did it. So you have
16:08
Speaker 3: to pay the IRS a 10% penalty on that $ 100, 000
16:09
Speaker 3: that you lost to a scam. Plus all of the
16:13
Speaker 3: income taxes due on $ 100, 000 of income.
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Speaker 2: It's not good. I've seen similar things, not on fraud,
16:22
Speaker 2: but on, like, I have buddies who had, again, like,
16:26
Speaker 2: some of the dumbest stuff. Back when, like, crypto was doing, like,
16:31
Speaker 2: nutty things. They made a bunch of money on crypto,
16:34
Speaker 2: and then were like, oh, I'll diversify into other crypto,
16:37
Speaker 2: which then promptly just the bottom fell out of it.
16:39
Speaker 6: Yeah.
16:40
Speaker 2: And so they ended up with a giant tax bill
16:42
Speaker 2: that they couldn't pay because they had no money left.
16:45
Speaker 2: It's similar with some of this fraud stuff.
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Speaker 3: So there's some legislation out there to try and help
16:50
Speaker 3: a little bit.
16:52
Speaker 2: One is, I don't know, polishing a turd a bit. Yeah.
16:57
Speaker 3: The Tax Relief for Fraud Victims Act would eliminate the
17:00
Speaker 3: deductibility restrictions and waive the 10% penalty if it applies
17:04
Speaker 3: to fraud, which like, okay. Let's prevent the fraud, not
17:10
Speaker 3: make it tax deductible because that's not going to help.
17:14
Speaker 2: There's another act.
17:15
Speaker 3: Though, the Financial Exploitation Prevention Act, which I think I
17:19
Speaker 3: think really needs to be in place sooner than later.
17:22
Speaker 3: It would allow certain financial institutions such as mutual fund companies,
17:27
Speaker 3: and I would assume investment advisors, but I'm not certain
17:31
Speaker 3: about that group, to temporarily delay restrictions. Sorry, temporarily delay
17:36
Speaker 3: transactions when they reasonably believe somebody is being financially exploited.
17:41
Speaker 2: So, you know, today....
17:45
Speaker 3: If you are working with an investment advisor and... Or
17:49
Speaker 3: your mother is working with an investment advisor and they
17:52
Speaker 3: look at the transaction and have a reasonable concern that
17:56
Speaker 3: it is fraud, but they have no way of proving
18:01
Speaker 3: it and the customer insists, there's really nothing that a
18:05
Speaker 3: licensed investment advisor can do to say no to that person. No.
18:10
Speaker 2: Like, you know, if they.
18:12
Speaker 3: also are suffering from horrible dementia and, you know, they're
18:16
Speaker 3: no longer competent to manage their account.
18:18
Speaker 2: That's one thing. But, you know, that's not the majority
18:20
Speaker 2: of fraud cases.
18:22
Speaker 3: The majority of fraud cases are people who are mentally
18:25
Speaker 3: competent and fall victim to some sort of believable scam.
18:31
Speaker 3: And there is currently very little that financial institutions can
18:35
Speaker 3: do to prevent that other than warn you.
18:39
Speaker 2: And it's tough because... Like, you don't want to have
18:45
Speaker 2: limits on your ability to use your money. Right.
18:49
Speaker 3: That's what this is proposing is like, hey, your investment
18:52
Speaker 3: advisor can basically delay your withdrawal.
18:56
Speaker 2: Well, that's potential for abuse there, too. Well, and by
18:59
Speaker 2: the way, like, here's what will happen if you like
19:01
Speaker 2: if you're convinced that your advisor is wrong. You'll take
19:05
Speaker 2: the money, move it somewhere else and send it to
19:07
Speaker 2: the fraudster anyways. Yeah.
19:09
Speaker 4: Yeah.
19:10
Speaker 6: Yeah.
19:11
Speaker 2: Again, I'm not saying that we should do nothing, but
19:14
Speaker 2: it's a really difficult situation to get a good piece
19:19
Speaker 2: of legislation on. Let's take a quick break. When we return,
19:23
Speaker 2: we've got the trivia answer next.
19:39
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Speaker 1: Time now for Wall Street Watch. Tracking the stocks, the data,
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20:00
Speaker 4: Well, markets are starting to reverse their earlier retreat. Dow
20:03
Speaker 4: Jones still down, but down 475 points or nine-tenths of
20:07
Speaker 4: a percent. The S & P 500 is is off
20:10
Speaker 4: just over 5 points, or 0.08%. Meanwhile, the Nasdaq has
20:15
Speaker 4: flipped and is up 77.8 points, or 0.3%. Moderna shares
20:22
Speaker 4: are now up 0.3% this morning after falling 25% yesterday
20:27
Speaker 4: following a leak of partial data on its closely watched
20:29
Speaker 4: cancer vaccine developed with Merck. Both stocks faltered even though
20:33
Speaker 4: the full data, which was released Thursday, appeared meaningful for
20:36
Speaker 4: patients and positive relative to Wall Street expectations. Shares of
20:41
Speaker 4: AT & T have dropped 5.4%, T-Mobile has fallen 5.3%,
20:45
Speaker 4: while Verizon has decreased 1.4% on a Bloomberg News report
20:50
Speaker 4: that SpaceX is in private talks to lease 80,000 cell towers.
20:55
Speaker 4: SpaceX is attempting to build the fourth nationwide wireless carrier.
20:59
Speaker 4: by combining its Starlink-directed device network with ground infrastructure. And
21:04
Speaker 4: speaking of SpaceX, shares are up 1.8% after getting a
21:08
Speaker 4: boost from an upgrade on Wall Street. Philip Capital double-upgraded
21:12
Speaker 4: the shares to buy from sell, raising its price target
21:15
Speaker 4: all the way to $ 250 from $ 75, citing surprising gains
21:19
Speaker 4: for its AI business. And finally, Bloom Energy shares are
21:23
Speaker 4: down 11.5% after the Energy Technology Solutions provider for data centers...
21:28
Speaker 4: reported third quarter earnings late yesterday. Despite beating on the
21:32
Speaker 4: top and bottom line and raising its full-year 2026 earnings
21:35
Speaker 4: per share guidance, what stirred fear among investors was the
21:38
Speaker 4: reported negative free cash flow for the quarter. I am
21:42
Speaker 4: Ben Kitchen, and that was Wall Street Watch. Time now
21:45
Speaker 4: to pay off our trivia, which is brought to you
21:46
Speaker 4: by Circle K, a proud partner of the Disabled American
21:49
Speaker 4: Veterans Department of Massachusetts, and the official convenience store of
21:53
Speaker 4: the DAV5K. Today's question was... What is the national debt
22:00
Speaker 4: right now? And that would be $ 40 trillion. I'm disappointed
22:04
Speaker 4: in a lot of you people. I tried to lead
22:06
Speaker 4: you to the right answer in the question, and only
22:08
Speaker 4: one of you got it right. That would be Dottie Insaga.
22:10
Speaker 4: She's taking home a Financial Exchange Show t-shirt. You can
22:14
Speaker 4: see complete contest rules at financialexchangeshow.com.
22:17
Speaker 2: That Dottie always knows about the debt. Good job, Dottie.
22:21
Speaker 2: There you go. Mike, do you ever hear of the
22:24
Speaker 2: Super Bowl? The what? Precisely. So, real question for you.
22:32
Speaker 2: Do you know when the Super Bowl is next year?
22:35
Speaker 2: Is it different?
22:37
Speaker 6: Yes.
22:37
Speaker 2: Oh, no. Pick a date. February 12th.
22:46
Speaker 3: Ben.
22:47
Speaker 4: You're so close.
22:49
Speaker 2: It's February 14th. That's pretty close. I don't know. What
22:51
Speaker 2: day is February 14th? I don't know. A Sunday, hopefully?
22:54
Speaker 2: A Saturday, hopefully? It's a Sunday. What special day is
22:58
Speaker 2: February 14th? Valentine's Day?
22:59
Speaker 6: Yes. Oh.
23:00
Speaker 2: It's the first time ever the Super Bowl has been
23:02
Speaker 2: held on Valentine's Day. That's exciting. I can't wait to
23:06
Speaker 2: see the fights that couples get into over this. Yeah,
23:09
Speaker 2: it's going to be pretty entertaining. Are we going to
23:12
Speaker 2: have the lowest viewership ever in the United States? Yeah, maybe.
23:18
Speaker 2: Honest question, and I'm not saying like, look, listen, in
23:22
Speaker 2: my household, here's the deal. My wife gets me underwear
23:25
Speaker 2: because I don't get my own, and I buy her
23:27
Speaker 2: a board game.
23:28
Speaker 4: Does she get you that silk underwear with the hearts
23:31
Speaker 4: on it?
23:31
Speaker 2: Once, and I was like, okay, once is good. But
23:36
Speaker 2: in any case, my household is not like a big
23:38
Speaker 2: Valentine's Day household. It's not something that we're really big into.
23:44
Speaker 2: But the point remains, there are... I'm trying to think
23:46
Speaker 2: about the restaurant promotions here. Well, this is the thing. Like,
23:49
Speaker 2: how many times is it just like, oh, like, here's
23:53
Speaker 2: our Valentine's Day menu and, like, book your table. Yeah. Okay.
23:58
Speaker 2: What percentage of men are going to be like, yeah,
24:02
Speaker 2: I'll take the 630 reservation. Yeah, that's going to be
24:04
Speaker 2: a real problem. I mean, I guess brunch could be
24:07
Speaker 2: very big.
24:07
Speaker 3: Okay, here's the other entertaining thing. Disney, who owns... the
24:12
Speaker 3: broadcast rights to the Super Bowl this year via ABC
24:15
Speaker 3: and all of their other affiliates, is deciding to air
24:18
Speaker 3: it on ABC, ESPN, Disney +, ESPN2, NFL Network, and ESPNU.
24:26
Speaker 3: So nobody's happy about this. I don't know mechanically how
24:32
Speaker 3: this works. Will the national advertisements that air on ABC
24:37
Speaker 3: be the same national advertisements that air on ESPNU?
24:42
Speaker 2: Potentially. But not necessarily. My guess is there might be
24:46
Speaker 2: a split in... Actually, yes. For the Super Bowl, they will.
24:50
Speaker 1: Yes.
24:50
Speaker 2: I don't believe... There might be a handful of slots
24:53
Speaker 2: that are local, but there's not many. Yeah, there's some
24:56
Speaker 2: regional slots that you get, especially before.
24:58
Speaker 3: And after the game, and that's probably what the ABC
25:00
Speaker 3: affiliates are most upset about.
25:01
Speaker 2: Well, but here's the thing. I'm guessing that the revenue
25:04
Speaker 2: just gets split up by the affiliates by proportion watching
25:08
Speaker 2: in each place. And so... The estimates are that this
25:13
Speaker 2: will reduce broadcast viewership by 35% because people scattered to
25:16
Speaker 2: these other platforms.
25:18
Speaker 3: There was a Super Bowl party that I went to
25:20
Speaker 3: back in like the late 2010s, I recall, where the
25:24
Speaker 3: guy hosting did not have basic cable. And so he
25:28
Speaker 3: was streaming the Super Bowl on one of the streaming
25:31
Speaker 3: platforms that was at the time relatively new.
25:34
Speaker 2: Well, but you've never needed... It's always been on a
25:37
Speaker 2: broadcast network. I know, but he didn't have an antenna. Oh,
25:40
Speaker 2: what did he have? He had just a TV with...
25:43
Speaker 2: Just streaming. Okay, got it. Just streaming. And so it.
25:45
Speaker 3: Was at the stage where these streaming companies did not
25:49
Speaker 3: have full access to the commercials. And so it was
25:53
Speaker 3: a Super Bowl where in between breaks, whatever the platform
25:57
Speaker 3: was would show a picture of a forest and be like.
26:00
Speaker 2: We'll be right back. So because of those people who
26:04
Speaker 2: only have streaming, I can understand the decision to be like, hey,
26:07
Speaker 2: we'll put this on Disney Plus, too.
26:09
Speaker 6: Right.
26:09
Speaker 3: But choosing to go ESPN to NFL Network, ESPN, you
26:13
Speaker 3: and ESPN and ABC seems like a misstep.
26:17
Speaker 2: Ben, do you understand that at all?
26:19
Speaker 6: No.
26:20
Speaker 2: OK, so that's all three of us. If someone who
26:23
Speaker 2: works in the TV business can better explain it to us.
26:26
Speaker 2: Texas at 617-362-1385.
26:29
Speaker 3: What's the demo that has access to ESPNU but not ABC?
26:34
Speaker 2: I don't think that's possible. Or Disney +. I don't
26:37
Speaker 2: think that's possible. Right. It just doesn't make sense.
26:40
Speaker 4: Well, you could have Disney Plus without ABC. You just
26:43
Speaker 4: don't have YouTube TV, Hulu, any of that stuff. No, right.
26:46
Speaker 2: You could have Disney.
26:47
Speaker 4: Only doing streaming.
26:48
Speaker 2: But who's the person who has ESPNU but not Disney
26:51
Speaker 2: Plus or ABC?
26:52
Speaker 4: No, the real question, who has ESPNU, period?
26:54
Speaker 2: Yeah, yeah, full stop. ESPN me?
26:57
Speaker 3: So why put the Super Bowl on it? It just
27:01
Speaker 3: doesn't make a whole ton of sense. I also didn't
27:03
Speaker 3: know that Disney owned NFL Network.
27:06
Speaker 4: Yeah, they just bought it last year.
27:08
Speaker 2: Because who ended up with MLB? ESPN, because they got
27:13
Speaker 2: MLB Plus also as part of something. Oh, I didn't
27:15
Speaker 2: realize that. Not that deal, obviously, but they have MLB Plus,
27:19
Speaker 2: I believe, because that's under the ESPN umbrella now, I think.
27:23
Speaker 2: They've kind of consolidated a lot of that stuff.
27:28
Speaker 3: Can somebody volunteer to watch the Super Bowl on ESPNU
27:31
Speaker 3: and just tell us how weird it is?
27:33
Speaker 2: Because I'm expecting it to be different than ABC broadcast.
27:35
Speaker 2: Maybe they'll do like the Manning cast on there or something.
27:39
Speaker 2: It's going to be pretty strange.
27:40
Speaker 4: I believe this is also the first Super Bowl. That's
27:43
Speaker 4: President's Day weekend.
27:45
Speaker 2: Which is nice because everyone's got the day off the
27:47
Speaker 2: next day.
27:47
Speaker 1: Yeah.
27:48
Speaker 2: We should do something like that more often. Or here's
27:51
Speaker 2: an idea. Why not just have it on a Saturday? Yeah,
27:54
Speaker 2: that's a better idea. The college football season is already over.
27:57
Speaker 2: We have this debate every single year. Yes, just put
27:59
Speaker 2: it on a Saturday. And then it doesn't matter if
28:02
Speaker 2: it's President's Day weekend or not. Right. Let's take a
28:05
Speaker 2: quick break. When we return, we're going to ask Paul
28:08
Speaker 2: LaMonica what he does for Valentine's Day next.
28:28
Speaker 1: Watch the Financial Exchange live every day on YouTube with
28:32
Speaker 1: market moves, breaking business news and analysis throughout the show.
28:36
Speaker 1: Join the live chat and be part of the conversation.
28:39
Speaker 1: This is the Financial Exchange Media Network. Ladies and gentlemen,
28:45
Speaker 1: the weekend.
28:54
Speaker 2: As promised, we're now joined by the one, the only,
28:57
Speaker 2: Paul LaMonica from Barron's, and we're talking a little bit
29:00
Speaker 2: about Starbucks. Paul, how are you doing today?
29:02
Speaker 6: I'm good, thanks. How are you guys doing?
29:05
Speaker 2: We're doing well. Starbucks this year, I know it's not
29:08
Speaker 2: an AI stock, but it's actually up 23% year-to-date, which
29:11
Speaker 2: means it's beating the S & P 500. by about
29:14
Speaker 2: a two to one ratio. What's been going on there?
29:18
Speaker 2: Is it all the CEO trying to turn things around
29:22
Speaker 2: or what's happening?
29:24
Speaker 5: Yeah, I think it has a lot to do with that.
29:27
Speaker 5: Brian Nickel, who joined Starbucks from Chipotle, trying to turn
29:33
Speaker 5: Starbucks around and rejuvenate the company's growth prospects. They reported
29:41
Speaker 5: pretty strong earnings back in the summer that helped boost
29:44
Speaker 5: the stock, the second quarter results in July. They've got
29:48
Speaker 5: their third quarter numbers coming out next week, and earnings
29:51
Speaker 5: growth is forecast to be pretty robust, as maybe as
29:56
Speaker 5: robust as a venti black coffee with no sugar.
30:01
Speaker 6: Or ice in it.
30:03
Speaker 5: But sales are expected to be down a little bit.
30:05
Speaker 5: So that's something I think that's still a challenge Nickel
30:08
Speaker 5: is trying to work out. What's probably not part of
30:12
Speaker 5: the Starbucks growth strategy is an acquisition of his former company, Chipotle.
30:18
Speaker 5: There were some rumors that Starbucks was looking at Chipotle.
30:21
Speaker 5: But Starbucks has shot those down.
30:24
Speaker 2: When when we look at Starbucks, I know it's typically
30:28
Speaker 2: been thought of as, you know, it's high end, high
30:31
Speaker 2: price point, you know, affluent neighborhoods. I've seen some studies
30:35
Speaker 2: recently that are, you know, kind of pointing towards, hey,
30:37
Speaker 2: it's not, you know, quite the same signal that it
30:39
Speaker 2: used to be. What's your sense of how they're trying
30:42
Speaker 2: to market under Nikola? Are they still going for that
30:44
Speaker 2: premium customer? Has there been any change in their approach?
30:49
Speaker 5: Yeah, I think that the company realizes that having a
30:54
Speaker 5: little bit more of a mass market appeal would potentially
30:58
Speaker 5: help from a sales standpoint.
31:01
Speaker 6: I think they are trying to simplify.
31:04
Speaker 5: The menu a little bit to make it maybe slightly
31:08
Speaker 5: less intimidating. But this is always going to be a
31:13
Speaker 5: company that you know is going to confuse with a bargain.
31:19
Speaker 6: Priced, you know, fast food, fast casual chain.
31:23
Speaker 5: I mean, I think there's always going to be a
31:25
Speaker 5: certain element of higher prices that you may turn off
31:31
Speaker 5: or intimidate some people.
31:34
Speaker 2: The other piece that I think has always been like
31:36
Speaker 2: the core of the Starbucks I don't know, the vibe,
31:42
Speaker 2: the zeitgeist is, hey, it used to be like come
31:45
Speaker 2: into our cafes and just sit there and read a
31:48
Speaker 2: book or do something on your computer. A lot of
31:51
Speaker 2: their locations that have been built recently are smaller and
31:54
Speaker 2: more drive-through focused. Any sense as to how Nickel might
31:58
Speaker 2: be adjusting that approach that it developed in the last
32:01
Speaker 2: 10 to 15 years as well?
32:03
Speaker 6: Yeah, I think that's a great question.
32:06
Speaker 5: Clearly, there are a lot more people using those Starbucks
32:11
Speaker 5: drive-thrus and not necessarily sitting in the cafes and taking
32:16
Speaker 5: advantage of.
32:17
Speaker 6: The Wi-Fi, if you will.
32:20
Speaker 5: There is that element that Starbucks always wants to be
32:25
Speaker 5: similar to a kind of classic old school neighborhood coffee shop.
32:31
Speaker 5: But that being said, having people just sit in a
32:36
Speaker 5: Starbucks and work and maybe only have one coffee and
32:42
Speaker 5: one egg sandwich or one muffin. sit there for hours,
32:46
Speaker 5: that's not necessarily great for revenue and profit margins. So
32:51
Speaker 5: I think Nickel is going to try and stress even
32:56
Speaker 5: more that Starbucks probably needs to boost its sales growth
33:02
Speaker 5: to keep the momentum with the stock going. And again,
33:07
Speaker 5: I think mobile is an incredibly important part of that,
33:11
Speaker 5: with more people maybe taking Starbucks to go as opposed
33:14
Speaker 5: to sitting in the cafes. I don't think that's the
33:16
Speaker 5: end of the world if the Starbucks are empty because
33:20
Speaker 5: a lot of people are taking their orders to go.
33:23
Speaker 2: Paul, any other changes that are taking place at Starbucks
33:26
Speaker 2: that Nichols instituting that you think are interesting? Are there
33:29
Speaker 2: any things that he's continuing that you thought maybe he
33:31
Speaker 2: would have changed? Like what else is going on there
33:33
Speaker 2: that we need to be aware of?
33:36
Speaker 5: Yeah, I mean, I think by and large, like I mentioned,
33:40
Speaker 5: just focusing more on some of the core food products,
33:45
Speaker 5: not getting too complicated. I think in the past, there
33:49
Speaker 5: had been some concerns that Starbucks was maybe overextending itself
33:55
Speaker 5: with regards to It's a product offering, so I think
33:59
Speaker 5: maybe a little bit more of a simplified menu will help.
34:04
Speaker 5: And again, investors can't really be complaining. As you pointed out,
34:08
Speaker 5: the stock's up more than 20% this year. Earnings growth
34:12
Speaker 5: is expected to be pretty strong. If they can just
34:14
Speaker 5: get sales growth back on track, then that's really probably
34:18
Speaker 5: the recipe for success.
34:21
Speaker 2: Very good. Paul, appreciate you joining us today. I hope
34:23
Speaker 2: you have a great weekend, and we will catch up
34:26
Speaker 2: with you soon.
34:28
Speaker 6: Thank you very much. Have a good one, guys.
34:30
Speaker 2: That is Paul and Monica from Barron's talking about Starbucks. Mike,
34:34
Speaker 2: what do you got for me that we haven't covered yet?
34:38
Speaker 2: Liberty Mutual. Have you seen the new Liberty Bibberty? What
34:43
Speaker 2: about the new Liberty Bibberty? The mascot?
34:46
Speaker 3: No.
34:47
Speaker 2: Is it actually a Biberty?
34:49
Speaker 3: Yeah, so they created a mascot for Liberty Biberty and
34:54
Speaker 3: named him Liberty Biberty. They developed it in concert with
34:59
Speaker 3: Jim Henson's, like, Muppet Studio is who developed this mascot.
35:04
Speaker 3: And it's this fuzzy yellow annoyance.
35:09
Speaker 2: I saw it in a commercial. They didn't have enough
35:12
Speaker 2: traction with, like, the emu or whatever?
35:13
Speaker 3: I think the emu, I don't think they, you know,
35:16
Speaker 3: brought out the emu out back and killed it or
35:18
Speaker 3: anything like this is just a different trend line that
35:20
Speaker 3: they're going with for one of their characters.
35:22
Speaker 2: Okay. And, uh, it's drawn some backlash. John Oliver on.
35:26
Speaker 3: His show, uh, you know, uh, described it as, uh,
35:31
Speaker 3: let's see, hold on, whatever. He did an entire segment
35:35
Speaker 3: dedicated to his disgust with this liberty, liberty creature. And
35:39
Speaker 3: one enterprising young individual, I think kind of as a
35:42
Speaker 3: joke decided that he was going to throw a protest, uh,
35:45
Speaker 3: at the Liberty Mutual headquarters in Boston to protest Liberty Bibberty.
35:51
Speaker 4: Why?
35:51
Speaker 2: I think... Like, you really have nothing better to do
35:54
Speaker 2: than to protest an insurance mascot? Yeah, apparently not.
36:00
Speaker 3: And his video to promote his protest of the Liberty
36:06
Speaker 3: Bibberty Boston protest has.
36:08
Speaker 2: Now amassed more than 600,000 views. Okay, there's a lot to.
36:15
Speaker 3: I just love that at the same time that the
36:18
Speaker 3: French are revolting against changes to their pension system, and
36:25
Speaker 3: we have a lot of seemingly pretty big issues here domestically,
36:30
Speaker 3: one group will be protesting Liberty Mutual's choice of mascot
36:34
Speaker 3: at their headquarters this weekend.
36:35
Speaker 2: Yes, you call yourself a revolutionary? I call you a baguette.
36:43
Speaker 3: One thing I will say is all of this, to me,
36:46
Speaker 3: leads to believe that this is a success for Liberty Mutual.
36:49
Speaker 3: If we're talking about it, John Oliver's talking about it,
36:51
Speaker 3: and some video protesting it is talking about it, that
36:54
Speaker 3: means that it is, yeah, quite popular, in fact.
37:01
Speaker 2: Are you not a baguette? I'm not a baguette.
37:04
Speaker 4: No?
37:06
Speaker 2: Do you like escargot?
37:07
Speaker 1: No.
37:09
Speaker 2: You do not know how to protest. Yeah, this is impressive. Okay,
37:14
Speaker 2: so on one hand, I'm like, okay, so again, as
37:17
Speaker 2: I said, you really have nothing better to do than
37:19
Speaker 2: to go protest an insurance mascot. But then you get
37:22
Speaker 2: one step further than that, where 600,000 people had nothing
37:26
Speaker 2: better to do than to watch a video of a
37:28
Speaker 2: guy protesting an insurance mascot. And now we're talking... About
37:34
Speaker 2: the people protesting the insurance mascot. John Oliver claimed. And
37:37
Speaker 2: you all are listening to us. Yeah. So what does
37:40
Speaker 2: this say about where we are today?
37:42
Speaker 3: The claim is that it sounds like what the devil
37:44
Speaker 3: would shout in tongues to herald his arrival on Earth.
37:47
Speaker 2: Liberty, biberty. It's good. I like it. Stocks remain mixed
37:53
Speaker 2: as we head towards the top of the hour. The
37:55
Speaker 2: S & P is down 12. The Dow is off 500.
37:58
Speaker 2: The Nasdaq composite up 54. We're going to take a
38:02
Speaker 2: break for the whole rest of the weekend because we
38:07
Speaker 2: want to. And markets are closed also. It's both of
38:11
Speaker 2: those things. If we move to 24-7 trading, we'll see
38:14
Speaker 2: if we do a 24-7 show and how that goes.
38:18
Speaker 2: Let's take a quick break for that weekend, and we'll
38:21
Speaker 2: see you on Monday. Big earnings week next week.