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What you need to know as bank earnings begin this week · The Financial Exchange Show

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He's the Financial Exchange with Chuck Zada and Mark Vandetty.
1:12
Speaker 2: Kicking off hour two of the Financial Exchange Chuck, Mark
1:15
and Tucker with the O. The dows up one hundred
1:17
and ninety six points, the S and p's have twenty
1:20
two points. Just checking quickly to see if yep, it's
1:24
a new all time high on the S and P
1:26
five hundred, just pointing that out.
1:29
Speaker 3: I was waiting for sound effect.
1:32
Speaker 2: It's fine. You know why there's no sound effect because
1:35
the market didn't crash in September like everyone thought it
1:38
was going to. Oh, September's the wars month for stocks.
1:41
You know, the first three days went Yeah, it's October ninth.
1:44
I'm still going on about it for a month. Sorry,
1:47
let's just summed it up.
1:50
Speaker 3: There is this this strange, curious, interesting regularity whereby the
1:54
fall is typically tough for stocks, and it's not just
1:57
nineteen twenty nine and nineteen eighty seven. So it's it's
2:00
kind of funny. You know, in finance, there's not always
2:03
something new to do, so you look for these these regularities,
2:06
These little accidents may be of history in the September effect,
2:10
if you want to call it that, which obviously was
2:13
not born out recently. Nope, the September in fact, is
2:15
one of those kind of curious regularities that you run
2:18
into that there's no obvious explanation for.
2:21
Speaker 2: So in any case, the S and P five hundred
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hitting a new intra day all time high of fifty
2:25
seven to seventy three point six y nine. So just
2:29
chugging along again as we get, you know, kind of
2:31
into the middle part of October, the Nasdaq up sixty
2:34
nine points to eighteen two point fifty two. When we
2:37
take a look at Oil West Texas Intermediate down another
2:40
ninety cents a barrel today is seventy two sixty seven
2:43
on the back of again no further escalation in the
2:48
Middle East to this point, and also China stimulus continuing
2:53
to disappoint investors at the moment. When we look at
2:56
the impact on gas prices still moving up again, there's
3:00
a little bit of a lag here. So you've got
3:01
gas prices up two point four cents over nine to
3:05
three twenty and five tenths of a cent. If we
3:08
continue to see prices sliding back into the low seventies,
3:11
this should reverse and we'll probably fall back into right
3:15
around that three twenty range after a brief move, probably
3:18
up to three twenty five ish. And when we take
3:21
a look at gold, we've got gold off six dollars
3:24
and forty cents an ounce today to twenty six twenty
3:28
nine even, And so that is what is moving in markets. Markets.
3:33
Talk a little bit about earnings, because later this week
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we got JP Morgan and Wells Fargo kicking off earning
3:40
season four Q three.
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Speaker 4: How excited are you?
3:45
Speaker 3: I don't get overly excited, as you know about earnings.
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There's not much correlation between stock market performance quarter over
3:51
quarter and earnings. Longer term, there certainly is. That's one
3:54
of the reason your own stocks. But you pointed out
3:57
in the last hour, and can you recap. I don't
4:00
want to put words in your mouth, but you talked
4:03
about why, for example, watching financial services companies, specifically the
4:07
bank part of that sub index, which is not a
4:10
huge part of the overall sure market maybe what three
4:13
four percent banks in total, but they can be a
4:16
harbinger of good or bad economic outcomes.
4:20
Speaker 2: Yeah, you can just get a little bit of a
4:22
sense of what's going on as far as the lending
4:25
that they're doing simply because one of the ways that
4:27
the US economy grows, typically the major way that it grows,
4:30
is through borrowing in order to fund future expansion of
4:35
businesses or households, whatever it might be. And so banks
4:40
can give you a little bit of an idea as
4:41
to what's going on in the US economy. And I
4:43
think this is particularly important right now just because look,
4:49
we're gonna have messy economic data from these two hurricanes.
4:52
For quite honestly, probably most of the fourth quarter is
4:56
just going to be messy. October might look really slow,
5:00
November it might look really hot December, who the heck knows,
5:04
And so you might have like a two to three
5:05
month period where it's kind of hard to tell what's
5:07
going on with all the noise in the broader data.
5:11
And so I think that when you look at banks,
5:14
not looking at the earning specifically, because bank earnings quite honestly,
5:19
unless you really study banks, like, you don't really know
5:21
what you're looking at with bank earnings, but just hearing
5:25
how they describe what they're seeing as far as loan growth,
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their loan book charge off rates, things along those lines,
5:30
they can give you a little bit of an insight
5:32
as to what some of the trends might be from
5:34
households and businesses as far as borrowing in their ability
5:37
to pay back those loans. I think that's something that
5:41
might be data that we need given the unreliability of
5:47
data in the coming months because of the impacts of
5:49
these two hurricanes here.
5:50
Speaker 3: Yeah, so credit card delinquencies is one of the areas
5:53
that typically are commented on, I guess in these calls.
5:55
I'm not an analyst in this sector or any sector
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for that matter, to just generalist comment here on my part,
6:02
but credit card delinquencies and what they may apply for
6:05
the health of the consumer is always of interest. But
6:09
they've been inc they breached a trillion dollars. You may
6:12
recall credit card balances a year ago to great fanfare
6:17
or despair, depending on your point of view. The economy
6:21
didn't break far from it. It's been growing at a
6:23
very respectable clip. Nevertheless, some color on that from them
6:28
might be from those reporting earnings overall might be interesting.
6:33
Just hard to know what to make of it, how
6:35
to put it all in context, and hard to know
6:37
whether to generalize from as you pointed out, from what
6:40
one company's saying are they trying to are they making
6:42
excuses for bad operational execution? Are they trying to blame
6:48
the macro environment?
6:49
Speaker 2: Now the good news, we're going to be getting a
6:51
whole bunch more earnings coming out over the next couple weeks.
6:53
This is kind of the unofficial kickoff of earning season.
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And as we get into next week, next Wednesday, we've
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got Tests reporting. Thursday we got Netflix, and Friday you
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got P and G American Express, so you know, again
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a few major companies next week. But then the week after,
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so two weeks from now is where you really get
7:11
into the bulk of it. October twenty second, you got Microsoft,
7:15
Alphabet and Visa all reporting, so you got just you know,
7:19
some monsters there. The day after that you get Meta,
7:22
Coca Cola reporting McDonald's as well. Day after that you
7:26
are going to be getting Apple, Amazon. So it's it's
7:30
just all lined up that third week, third full week
7:34
of October here, and so we're gonna be hearing from
7:37
companies in lots of different areas about what they are seeing.
7:42
Are those AI trends continuing in tech? Are we you know,
7:45
still seeing retailers concerned about inventories retailers don't report until
7:50
a little later in the cycle. Those will typically be
7:52
I think at this point it will be like early
7:54
November when we start to get the walmarts and home
7:57
depots and targets of the world reporting. But this is
8:01
going to be important in terms of us trying to
8:02
figure out, hey, where is the economy going? Because the
8:05
broader economic data is just going to be an absolute mess.
8:10
I mean, if if you end up with Hurricane Milton,
8:13
you know, again, right now it looks like it's making
8:15
a straight b line for a kind of right between
8:17
Bradenton and Sarasota. Look, think about all the consumer spending
8:22
that happens in that area as you head into the winter.
8:26
The thousands of people that traveled down to the west
8:30
coast of Florida either to vacation for a week or hey,
8:35
the snowbirds that head down to their place for the winter.
8:39
That like normally this is the time of year when
8:41
that stuff starts happening. And you think about the amount
8:45
of spending that might not happen as a result of that.
8:49
Rental car cancelations, hotel cancelations, Disney trips that don't have like,
8:55
all this stuff that might not be happening. We're not
8:58
really gonna have a ton of insight into at you know,
9:01
with the broad government data, but we're gonna hear from
9:03
companies in the next few weeks. Hey, here's what we're
9:06
seeing as a result of you know, these hurricanes and
9:09
how they're impacting our businesses, and that I think is
9:12
going to give us some important data about the health
9:14
of the US economy because we're going to be kind
9:17
of blind as far as the broader data.
9:19
Speaker 3: I think, yeah, it's interesting. There has been a lot
9:21
of work done on the economic impact of natural disasters,
9:24
and if I had to sum it up, just having
9:26
looked at it quickly this morning, some of the literature,
9:29
and it's a it's a it's a it's a specialization.
9:31
I don't mean to give it your shrift or to
9:32
be cavalier about it, but as you would expect, the
9:35
local impact is severe and takes years to resolve, and
9:39
it may never resolve if people determine that an area
9:42
is just unsafe where they can't live there because home
9:45
insurance becomes prohibitively expensive, which is the whole point of insurance,
9:48
after all, it's to change behavior to an extent. So
9:51
we just don't know overall activity. It'll be a blip.
9:54
I'm confident of that. It's it may affect the course
9:57
of the economy over one or two quarters, or seem to,
10:00
but in the long run, it will, like so much
10:03
turmoil historically, God willing anyway, be nothing but a blip.
10:08
Speaker 2: Take a quick break here. When we come back, we'll talk,
10:12
we'll do a little bit of trivia, and then we're
10:14
talking deficits After this.
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contest rules. At Financial Exshange showed that was.
12:00
Speaker 3: Such a sober delivery of a wacky slogan. I've never
12:03
heard it. I've never you really took the fun out
12:06
of Sometimes you feel like a nut. It's mostly you're
12:08
supposed to sing it, and it's supposed to be a beat.
12:10
Speaker 4: It was.
12:11
Speaker 3: You delivered that like Walter Cronkite, which he was.
12:15
Speaker 2: It was a little jingle, Oh, an American. Sometimes you
12:18
feel like a nut, and sometimes you don't.
12:20
Speaker 3: Good evening, right. You delivered it like a nineteen fifties
12:25
newscast or something.
12:26
Speaker 1: It was.
12:27
Speaker 2: It was perfect, by the way, but we could do
12:29
the whole segment. Sorry, sorry, no, no, no, we could do
12:31
the whole segment that way. The federal deficit hit one
12:34
point eight trillion dollars for twenty twenty four, according to
12:37
a CBO study.
12:39
Speaker 5: Now do Tom Brokaw, sometimes you'll feel it. I can't
12:44
even do it. That was more Sean Connery.
12:48
Speaker 2: Sean Connery reads economics headlines. Sometimes you feel like a nut.
12:53
Sometimes you don't duffer shut Now I'm doing like celebrity Jeopardy,
13:00
Sean Connery. So, anyways, federal deficit hit one point eight
13:04
trillion dollars for I can't even get.
13:06
Speaker 4: Through one one article doing it.
13:08
Speaker 2: That way one point eight trillion dollars in twenty twenty
13:10
four on a percentage basis, which is what really matters,
13:14
Like the number of dollars. It's always I find that
13:18
it's just out there to shock people, because the first
13:21
time that the deficit went over, you know, a billion
13:23
dollars one hundred years ago, people were probably like, oh,
13:25
the deficit's too big, But the number is not what matters.
13:29
Like if you have a one point eight trillion dollar
13:30
annual deficit but your economy is two hundred trillion dollars,
13:35
you're probably fine. It's probably not a big deal as
13:37
long as your economy is growing faster than that one percent.
13:41
The unfortunate thing is that the US economy is about
13:44
twenty nine trillion dollars in terms of GDP, and so
13:48
if you will get the annual you know, deficit and say, okay,
13:51
it's like six percent change of GDP, that's kind of
13:55
a problem simply because the US economy is growing at
13:59
a nominal rate somewhere in the five to five and
14:01
a half percent range, and so the deficit is continuing
14:05
now to expand as a percentage of GDP, not contracting
14:08
as it did for the last couple of years.
14:10
Speaker 3: Yeah, so the big question is at what point will
14:14
debt markets bulk at such high deficits and debt and
14:19
demand to be compensated more for holding it said differently,
14:22
winter interest rate's going to start going.
14:24
Speaker 2: Up and there is an expirical answer to this.
14:26
Speaker 3: Well, in twenty ten, the seminal study was done on this.
14:31
They wrote a book based on a paper these two
14:33
economists did. Their names are Ryan Hart and Rogue offf
14:37
More detail is not really important right now, and this
14:39
was controversial at the time. It remains controversial. They've found
14:42
that after debt to GDP gets above ninety percent in
14:47
developed countries. I'm not gonna I won't bore you with
14:49
too much of the detail, but at that point you
14:51
get a phenomenon that they coined as debt intolerance.
14:57
Speaker 4: But with debt but without the gas can't digest it.
14:59
Speaker 2: Yeah, it's a little gassy, it's a little it's uncomfortable
15:04
for everyone.
15:06
Speaker 3: So I guess they found and this again, there is
15:09
no tipping point, per se. It's different for every economy
15:13
at different points in time. But there will come a
15:15
point when investors just think to yourself, do you want
15:18
to lend to a government that might have to say,
15:20
print money to pay off its debts because of these
15:23
chronic deficits. And we use these two terms interchangeably, but
15:27
deficits are the flow, they're the change. The debt is
15:29
the stock. The debt is the thirty four trillion you
15:32
were talking about, some of which is held by the FED.
15:35
The deficit is what we're adding every year. It's roughly
15:37
two trillion, is Chuck just pointed out. So at some
15:41
point investors will demand higher interest rates to compensate for
15:45
the risk that some of this will get inflated away.
15:48
It's a very real risk. It's just a question of
15:50
where the tipping point is. And there is no easy, empirical,
15:53
Chuck as you put it, answer, but it will come.
15:56
It's just a question to win.
15:57
Speaker 2: And the other tough thing that you have to remember
15:59
is that not all developed countries are created equal when
16:02
it comes to the amount of debt that they can't
16:04
sustain it. Quite honestly, in the last one hundred years,
16:07
there has been no country that exists in a situation
16:11
that resembles the United States in any way, shape or
16:13
form today. And that look, the US is still about
16:16
twenty percent of the world economy. So it's just a huge,
16:20
you know engine in a way that no other economy
16:23
that we have accurate data for has been. The US
16:27
dollar is still the single biggest UH currency that is
16:31
used for world trade by a large margin, despite you know,
16:36
all the claims to the contrary about how the dollar
16:38
is you know, being replaced and blah blah blah, like
16:41
it's it's just not I'm sorry, the data is pretty
16:44
conclusive on this. For all the people that want to
16:47
say that, you know, countries are choosing to use the
16:50
yuan and this no, I mean outside of Russia, basically,
16:54
no one's using it in any meaningful fashion at this point.
16:57
And even Russian and China, by the way, they they
17:00
don't settle any of their trades in each other's currencies
17:03
because they specifically don't trust each other's currencies. So yes,
17:06
they may have trades that you know, take place initially there,
17:09
but they're settling in a third No, that's right.
17:11
Speaker 3: Current Trump sends Putent birthday gifts. He sends him hundred
17:14
dollars bills.
17:15
Speaker 2: Well, it's as good as gold, right, you know. So
17:18
in any case, when you look at where the US
17:22
is with regards to the deficit, like it's going to
17:25
be a problem at some point if it continues on
17:29
this track. The problem is you don't know where that
17:33
point is from a time perspective. You don't know if
17:35
it's a week from now, a month from now, a
17:37
year from now, a decade from now, or one hundred
17:39
years from now.
17:39
Speaker 3: I would keep the rogue off Ryan hart tipping point estimate,
17:42
which is just an average of all the countries they
17:45
looked at. And it's always hard to say why rates
17:47
are going up. And this work remains controversial, but we're
17:50
probably in the danger zone now at ninety five percent
17:53
of the debt held by or public. That's the ratio
17:55
of debt held by the public did GDP. Everybody agrees
17:59
that it's too high. Nobody agrees on how to get
18:02
it down. It's going to require, as you guys talk about,
18:04
a lot on the financial has change, some combination of
18:06
tax increases, in spending cuts, particularly entitlement spending cuts. And
18:09
there's another article in the stack, I don't know if
18:11
we'll get to it that addresses that these problems are
18:13
virtually intractable, and it seems like it's going to take
18:16
a crisis for us to deal with them.
18:18
Speaker 2: Yeah, I mean we've been putting off this stuff for
18:20
my whole life quite a while, honestly since the nineteen eighty.
18:23
But this is also the other problem in like, if
18:25
you're if you're trying to build an investible thesis, you
18:30
can't because you don't know when this is going to
18:32
actually become a problem. If if you spent the last
18:35
forty years saying, well, I need to change how I
18:37
invest because the US deficit is a problem, it's been
18:40
a horrible strategy for you, Like it's.
18:42
Speaker 3: Not actionable now, and that's this Unfortunately, that's the.
18:45
Speaker 2: Thing is you hear people say well, the US deficit's
18:48
a problem, like now's the time to buy you know,
18:50
gold or real estate or this or pigs or whatever
18:53
the heck it is. And it's like, well why now,
18:58
Like what what do you know? Well, I read this piece? No, no, no, no, no.
19:02
Speaker 3: That's a good point.
19:03
Speaker 2: Yeah, you have to remember that just because we're saying, hey,
19:07
there are potential problems because of this, that does not
19:10
make something an investible thesis. You have to be able
19:13
to go further and say here's the edge that I
19:15
have that explains why this is going to happen at
19:17
this time, and why what I'm proposing is the right
19:21
thing to do. Quick break here. When we come back,
19:23
we've got the trivia answer, and then let's talk a
19:26
little bit of Boeing when we return.
19:38
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Speaker 5: Two candy bars were featuring a famous ad with the
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slogan sometimes you feel like a nut and sometimes you don't.
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That was a trivia question today asking which two candy
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Mounds Candy has no nuts and a dark chocolate candy coating.
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Speaker 2: Boeing is in the midst of a negotiation with their union,
21:02
the International Association of Machinists. It's not their union, it's
21:06
the union that employs people that work at their factories
21:08
out on the West Coast, and they decided yesterday that
21:15
Boeing decided to step back from negotiations. Boeing said the
21:19
union was making quote non negotiable demands, while the IM
21:23
said the company was quote hell bent on standing on
21:25
the non negotiated offer. So you've got this strike that's
21:30
been going on since I believe it's September thirteenth, So
21:33
we're closing it on a month now, and Boeing is
21:37
losing a bunch of money each day because well, they
21:40
make airplanes with these workers, or rather these workers make airplanes.
21:44
I guess that's the better way to phrase it. And
21:47
so if you're an airplane manufacturer that can't make some
21:50
of the airplanes that you sell, it results in the
21:53
loss of revenue, which typically impacts profit as well, And
21:57
so Bowing continues to head towards a place where S
22:01
and P Global Ratings is now saying that it might
22:04
cut the plane maker's credit grade. To junk your thoughts, Mark.
22:10
Speaker 3: I'd forgotten there was a strike, to be honest, at
22:12
the risk of sounding of twos, But one does wonder
22:15
how long. First of all, I didn't realize one party
22:16
could just walk away. They haven't taken that rather severe
22:20
step yet, but at some point, I guess the FEDS
22:23
can come in and force them to talk, if not
22:25
force a settlement on them.
22:28
Speaker 2: Boeing is also apparently considering selling ten billion dollars of
22:32
new stock once they know the extent of the damage.
22:36
And so it's just just kind of a continuation of again,
22:42
different struggles in this case than you know, building planes poorly,
22:46
but continuation of struggles for a company that has been
22:49
struggling really for the last six to eight years. Now,
22:52
I mean this goes back you're talking. I mean the
22:55
decision making on their struggles goes back over a decade,
22:58
but you're really talking like twenty seventeen twenty eighteen where
23:02
this company started to run into two problems in the manufacturing.
23:07
Decisions that they made started resulting in the deaths of
23:11
people flying on Boeing airplanes. So we'll continue to keep
23:15
you updated on what is going on on that front.
23:19
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24:27
Speaker 2: The Wall Street Journal. It's titled the battleover Robots at
24:30
US Ports is on, and basically what it's talking about is, Look,
24:35
you've got this tentative agreement on wages between the dock
24:39
workers now and the shippers and.
24:45
Speaker 4: Ports.
24:46
Speaker 2: But one of the things that still needs to be
24:49
negotiated before the short term expiration the short term extension
24:54
expires on January fifteenth, is what are these ports going
24:59
to do with regard yards to automation. And obviously, look,
25:03
the ports and the shippers are pushing for much higher
25:05
levels of automation because they think it'll build efficiency and
25:08
lower cost. The workers are saying, no, we don't want
25:11
to be automated out of jobs. Both of these are
25:15
positions that I can understand, but Ultimately, when we look
25:22
at the idea of economic growth and the creation and
25:28
building of wealth, the way that it happens is through
25:33
productivity gains and efficiency gains that allow us to produce
25:38
more stuff with fewer inputs. It's basically the entire principle,
25:43
which is, Look, if we were still restricted to, you know,
25:47
having to manually plant every farm and catch every fish
25:50
by hand, and it would be, you know, an awful
25:54
lot of work. You know, imagine a world in which
25:58
you say, hey, hey, you know what, I'm gonna go
26:01
out and get some shrimp for tonight, and you have
26:04
to go out there with like a harpoon and get
26:07
all of the shrimp one by one. That would be
26:10
really bad.
26:11
Speaker 5: It seems aggressive.
26:12
Speaker 2: Rump shrimp. It does seem like a tiny harpoon, little
26:15
tiny harpoon, maybe harpoon, just toothpick, just a little, little
26:18
tiny one. It gets right into the cocktail size.
26:21
Speaker 1: You know.
26:21
Speaker 2: It's it's that toothpick that.
26:23
Speaker 5: Use the spear that goes into a sandwich. That that
26:26
that's what I mean by harpoont.
26:28
Speaker 3: Why poor Chucks ever enjoyed a shrimp. He's been obliterating
26:31
them with harpoons. It's like, how do you guys do it?
26:34
There's nothing left By the time.
26:35
Speaker 2: Guys, I got a big one. It's a jumbo eventually, though, Look,
26:40
I know that's not how they caught them originally. But look,
26:42
someone comes along with, hey, a net that's you know,
26:45
a fine mesh and actually catches hundreds of them. The
26:47
person using the harpoon doesn't say, hey, you can't use that,
26:50
it's gonna put me out of business. We adapt because
26:53
new technology makes things easier, and the companies and workers
26:56
that adapt us to new technologies are able to be
26:59
on the cutting edge. So this is a place where
27:04
again I say, this is someone who realizes that for
27:06
the last I don't know, fifty years, the bulk of
27:10
that time, we've seen wage gains not keeping up with productivity,
27:14
meaning we've been generating more wealth, but it hasn't been
27:18
distributed out to workers as well. Like that's been one
27:21
of the major problems. The answer to that is not
27:25
to say, let's restrict productivity. In my opinion, like that's
27:30
that's a bad way to go about it. Hey, we've
27:33
got this new technology that can make things easier, cheaper,
27:36
and faster for us. Let's not use it because we're
27:40
worried about losing jobs. That's like, imagine if that's the
27:44
point is imagine if we said that about the combine,
27:47
or the word processor or the airplane.
27:51
Speaker 3: These jobs aren't really lost. These workers will be retrained
27:55
gradually moving into new industries, or perhaps if it's done
27:58
in a more humane, slow but more humane way, by attrition,
28:01
the adjustment could be made far less painful. But the
28:05
we'll just call it progress, which there was not for
28:08
a long time. The economics profession has spent and continue
28:12
to spend a lot of time answering the question what
28:14
causes growth? It might surprise you to know economist don't
28:16
agree on that question. Productivity is a residual. It's like
28:21
what is driving it? But we don't really know how.
28:23
They're a model.
28:24
Speaker 4: We don't know what causes productive Yeah.
28:26
Speaker 3: There are theorist right, there are. There are different schools
28:28
of thought on this is my point. So if it's
28:29
not obvious to you, you're in really good company as
28:32
to what causes economic growth. Nobody really understands it. We
28:35
can describe it, but what causes it harder to say.
28:38
Good institutions are important. I'll just leave it at that.
28:40
Stable government, independent federal reserve, the stuff basically that we have.
28:43
But you're right, Chuck, you can't fight. I'll just call
28:45
it progress. The right solution is for politicians to get
28:48
in front of this and establish funds for retraining people
28:53
hurt by free trade, which is another example of your
28:56
temporary job disruptions losses. To be more blunt is free trade.
29:00
You can either throw up barriers like JD Vance wants
29:02
to do when he says five million cheap toasters is
29:05
not worth one job. Really, JD. If you're saving ten
29:08
bucks on each toaster, that's fifty million dollars. Got plenty
29:11
of money. You could tax half of that, use it
29:13
to retrain workers, put them in a new industry. So
29:15
one solution, which both the left and right have embraced,
29:18
is to throw up barriers and hide from the world.
29:21
This view seems prevalent right now. Sadly, it make us
29:23
less wealthy, a lot less wealthy in the long term.
29:26
Another view is to get ahead of it through education
29:29
through universal basic income, something I'm not a huge fan of,
29:32
but it's another way to support people who are displaced
29:34
or look.
29:35
Speaker 2: This is at the risk of getting you know, really
29:39
really basic on this. This is a collective bargaining agreement.
29:44
The union and the companies can collectively bargain the retraining
29:48
in this case like it's it's what they've done, you know,
29:51
these are things. It's not. You don't just have one
29:54
worker out there saying, oh, gee, what am I going
29:55
to do? Like you can literally bargain in hey, for
30:01
every worker displace, the companies will commit X dollars to retraining,
30:06
you know in the fields that specialize in X, Y
30:09
or z and blah blah blah. You can literally collectively
30:13
bargain it. So I have sympathy for, you know, workers
30:17
who say, hey, we're going to be automated out of existence.
30:19
Like again, no one says thinking this might be coming
30:22
for all of us with AI and where it could
30:24
be going chuck.
30:25
Speaker 3: Nobody's saying good luck, sorry, a robot takes seven jobs.
30:29
As the research from Darren as mcglu works at MIT,
30:32
which is cited in this article, rightly points out, that's
30:35
over a thirty year, multi decade period, though, plenty of
30:38
time again to get ahead of this. Nobody's saying kick
30:41
these people out of work and wish them good luck.
30:43
I'll use the same argument with respect to free trade.
30:46
You don't hide from the world, so we could produce
30:48
again JD Vance's fantasy. Sorry for picking on the Republican ticket,
30:51
but he's the one out there saying he wants all
30:53
cars to be made here and toasters to be made here.
30:56
We remember what all American cars was like those of
30:58
us who drove a car made in the night, teen
31:00
eighties or seventies, we didn't always get the best quality.
31:03
Competition is good.
31:05
Speaker 2: Let's take a quick break here. When we return, let's
31:09
do a little bit of stack roulette.
31:11
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31:42
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32:18
Speaker 2: Do you have for me for stack Roulette?
32:21
Speaker 3: Home depot ordering corporate staff so desk jockeys basically to
32:26
take an eight hour shift at a retail location at
32:30
least once I read this yesterday, I hope I'm remembering
32:33
this correctly at least once a year, and it sounds
32:36
I'm not sure whether I feel like this is a
32:38
gimmick or whether it's likely to help people better appreciate
32:41
the challenges faced by the people on the front lines.
32:44
And this would apply to any corporate structure. Farm depot
32:47
has its unique challenges. Big box home improvement stores exploded.
32:51
Their sales exploded after COVID as people were stimulus flush
32:55
and very few places to have, very few places to
32:57
spend it. They've since sagged, so this is partly perceived
33:01
as a way to shore up confidence in there what
33:04
I'll call turnaround plan, even though that's probably a little
33:06
bit too dramatic a way to put it. But how
33:07
in the world could you come to appreciate the challenges
33:11
faced by your frontline people with only an eight hour
33:14
shift spent god knows how doing who knows what once
33:18
a year. It seems like a gimmick.
33:20
Speaker 2: It is, And here's why it's it's a gimmick that
33:23
sounds good. People to be like, Oh, that's that's what
33:24
you need. You got to get the experience of being
33:26
an average joe. Well, here's the thing. First, that one
33:31
day that you're working there, you can have no idea
33:33
what to do. So you're gonna be spending the entire
33:34
day just asking people what to do.
33:36
Speaker 3: Yeah, which, unless there's a plan were there?
33:38
Speaker 5: Sorry, no, no, I was just gonna say, that's literally
33:40
what you said, Chuck is going to piss off the
33:42
retail workers who are there on a deal basis.
33:44
Speaker 3: In the way, unless there's a well thought out, correct
33:47
maybe there is a plan I shouldn't prejudge.
33:49
Speaker 2: But the other thing is that one day does not
33:53
give you a representative experience. Even assuming let's say let's
33:58
say you knew everything going and you like a month
34:00
training for this, and you're like, Okay, I know what
34:02
I'm gonna do. It's not just one day. It's hey,
34:07
you got to experience what it's like to be in
34:09
that role long term, because the lived experience is just
34:11
fundamentally different. You tell someone, hey, you know you're gonna
34:16
make X dollars an hour, and you say, okay, I'll
34:19
cut my wage to that for a day. That's not
34:21
the lived experience of living at those wages or with
34:24
the pressures that they have, because you know that you
34:26
can walk away from them. It's just it's fundamentally different.
34:30
Having to actually have that like hanging over your head
34:32
the whole day as something that you deal with day
34:35
in day out for months or years at a time,
34:39
is just a fundamentally different experience because you actually have
34:43
to live it. You can't just be like, well, I'm
34:45
going back to corporate tomorrow.
34:46
Speaker 3: I think everybody knows shadowing is, which is corporate speak
34:49
for watching somebody all day can have indifferent or even
34:54
negative results. The person being shadowed tends to resent it.
34:57
When it's somebody from another department. I mean, in a
34:59
big corporate structure kind of like this one, the person
35:02
shadowing wonders, what am I supposed to get out of this?
35:05
How will the success of it be evaluated? Is today
35:07
a good sample of a day in the life of
35:10
the person that i'm or the department that I'm shadowing.
35:13
It feels like a gimmick. And I think if if
35:16
I were on the board and the CEO brought this
35:18
to me, is this great innovative thing, I'd start to
35:21
wonder if I'm not I should be generalizing here. There's
35:25
probably a lot more going on. But if this were
35:27
the big idea, and there's no indication that it is,
35:29
not that it is the only big idea circulating at home, depot,
35:33
C suite, but I would start to wonder about leadership.
35:36
Speaker 2: I mean, look, if you really want to know what's
35:39
going on at your different locations, talk to your people
35:44
and listen to them like they're the ones who will
35:48
give you this without you having to spend a day
35:50
pretending that you're a cashier.
35:51
Speaker 3: And maybe they've tried that in fairness, we don't really know.
35:54
Speaker 2: Well they're not listening well enough, then I guess not
35:56
like you're either not listening well enough or you're just
35:58
not listening well enough.
36:00
Speaker 3: I'm sorry. Do you repeated that?
36:01
Speaker 2: Yes, I want to talk a little bit about McDonald's nanks, Tucker.
36:06
I thought you would like that McDonald's is suing a
36:09
number of meat packing companies claiming that they are colluding
36:12
to inflate beef prices. And this is wild to me because,
36:17
like you, you don't really see this that often where hey,
36:23
company who is dependent on you know, wholesale, x Y
36:27
and Z for its you know, livelihood suing the only
36:32
companies that can make the stuff that they need. Kind
36:36
of wild. Actually, I mean like you've got you've got
36:39
big fast food suing big beef. This this stuff doesn't
36:43
really happen. Imagine as an example, let's say that Toyota
36:48
sued a bunch of steel producers.
36:50
Speaker 3: Somebody did this when the last year they sued a supplier,
36:52
who was it? You would know you followed this. This
36:55
is this is ringing a bell, getting somebody suit a
36:58
supplier in the last year, big company, big so both
37:00
household names. I forget.
37:02
Speaker 2: There have been all kinds of things with food suppliers,
37:04
like food holds.
37:05
Speaker 3: I'm remembering one of those.
37:07
Speaker 2: I think Tyson Foods has gone through like three different
37:09
like chicken fixing things that I forget if it's the
37:12
ftc or the DOJ is looking into tuna collusion. Do
37:15
you remember that story we covered Tucker Tucker Big.
37:20
Speaker 4: Taca.
37:22
Speaker 2: Yeah, Big Tuna's getting out of control. But this is
37:26
fascinating me because McDonald's filed a federal complaint against Tyson Foods, JBS, Cargill,
37:31
and National Beef Packing Company alleging that they are engaging
37:34
in a price fixing scheme for beef. Now, again, there
37:39
have been a lot of these things that have been filed,
37:41
but they've typically been by the government. What makes this
37:43
difference is McDonald's saying, hey, you guys are colluding because
37:48
McDonald's needs the beef. And you know, the obvious threat
37:52
here is that Tyson, JBS or Cargo is like, okay, fine,
37:56
we're gonna send our stuff somewhere else and now you're
37:58
not gonna have any beef.
37:58
Speaker 4: How do you like it? Now?
38:00
Speaker 2: So I think this is fascinating also to me, I
38:05
wonder the cynic in me. McDonald's been catching some flak
38:09
for raising prices quickly. Is this something public they can
38:13
point to to push back? And then they're like, no,
38:16
we'll just let this go. A couple months later, quick
38:19
break for the rest of the day. We'll see you
38:20
Speaker 4: Tomorrow on the Financial Exchange