Latest / The Financial Exchange Show / Which Big Tech company is best positioned to win the AI arms race?

Transcript

Which Big Tech company is best positioned to win the AI arms race? · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:02
is hosted by employees of the Armstrong Advisory Group, a
0:05
registered investment advisor. All opinions expressed are solely those of
0:08
the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
or anyone else. Investments can lose money. This program does
0:14
not offer any specific financial or investment advice. Please consult
0:17
your own financial, tax, and estate planning advisors before making
0:20
any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
this program do not endorse each other or their services.
0:25
Armstrong and Money Matters Radio do not compensate each other
0:28
for referrals and are not affiliated. This is The Financial
0:34
Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:39
at business and financial news affecting your day, your city,
0:42
your world. Stay informed and up to date about economic
0:46
and market trends plus breaking business news every day. The
0:50
Financial Exchange is a pround partner of the Disabled American
0:53
Veterans Department of Massachusetts. Help us support our great American
0:57
heroes by visiting DAV five k dot com and making
1:00
a donation today. The DAV five K Boston is presented
1:04
by Veterans Development Corporation. This is the Financial Exchange with
1:08
Chuck Zada and Mike Armstrong.
1:13
Speaker 2: Chuck, Mike and Chucker with you today here kicking off
1:18
the first day of November.
1:20
Speaker 3: And wrapping up the busiest week of the year.
1:25
Speaker 2: Are we gonna go year? It's up there. We had
1:27
another one like this. I forget when it was. It
1:30
was maybe May or July, somewhere in that ballpark. I
1:33
can't remember when. But yeah, we've been cranking this week.
1:36
Speaker 3: Actually, no, I'm gonna declare it busiest week of the
1:38
year because aside from everything that we're talking about.
1:41
Speaker 2: You also have the election on Tuesday. So I'm giving it.
1:45
Speaker 3: I'm giving the week of October twenty whatever, this was
1:48
the busiest week of the year.
1:49
Speaker 2: Destination. What election? Oh you hadn't heard. Yeah, yeah, there's
1:54
this thing Tuesday. You really got to get out there.
1:56
And what do I do? Give voting advice on air?
2:01
How do I vote? What's a vote? How does this work?
2:04
In any case? Look, here's just I need to recap
2:09
September and October. September remember negative seasonality, like everyone was, ah,
2:13
September is gonna be bad man, watch out well September.
2:17
The S and P five hundred opened at six fifty
2:20
six twenty three. It closed at fifty seven sixty two.
2:22
That's more than two percent gain for the month of September.
2:26
Then everyone says, hey, after bad September comes October, and
2:31
you know markets are usually good in October. SP five
2:35
hundred open October at fifty seven fifty seven, closed at
2:37
fifty seven oh five, little less than a one percent loss. Okay.
2:41
This is why you don't rely on something like seasonality
2:44
to just be like, oh, I gotta buy or sell
2:46
because she's no, no, no, no, what rhyme do we
2:48
have for November? Uh don't care? Yeah, okay, yeah, whatever,
2:54
it is what it is. And so let's kick things
2:56
off here though, with a discussion about the report this morning,
3:01
because thirty am, Yeah, eight thirty am the final jobs
3:05
report to be released during daylight savings time after so
3:10
not ever, but for the year. Okay, it's a big one. No,
3:14
it's a big one.
3:15
Speaker 3: Also, you know the last jobs report three days five
3:18
days before the election.
3:19
Speaker 2: What election? Yeah, yeah, I'm Mike. I'm just pretending it's
3:23
not happening because I don't want to do anything with it. Anymore.
3:26
I just I can't do it anymore.
3:28
Speaker 3: No, you're pretending it's not happening because you don't want
3:30
this time to go away. You just want to live
3:32
in pre election world for the rest of your life.
3:34
Speaker 2: Mike. If it were up to me, we would announce
3:37
the candidates at eight am on a Monday, vote for
3:39
them all day Tuesday, and be done with it by Wednesday. Yeah.
3:43
Speaker 4: Instead, we have the best thing about this election being
3:46
we might get more genuine messages if it was only
3:48
twenty four hours. The best thing about this election being
3:51
over is then on Wednesday we get to learn who's
3:53
running in twenty twenty eight.
3:57
Speaker 2: That's how much it sucks. Now, how much it sucks.
4:01
It's like, oh good, this is over. Well, I'd like
4:03
to announce my candidacy for the twenty twenty Come on, man,
4:06
give me a break anyways. Job Support. This morning, eight
4:12
thirty am Eastern daylight time, we received the jobs numbers
4:16
for October. They came in bad, twelve thousand jobs added.
4:21
The unemployment rate, though didn't move, stayed steady at four
4:24
point one percent. And before we go further, there's a
4:27
whole one page caveat that the PLS puts in here,
4:30
which is, hey, we had hurricanes that hit on September
4:35
twenty sixth October ninth. Our data collection period was ten
4:40
days starting on October tenth, and so basically we're not
4:47
entirely sure how accurate the data was. We don't see
4:51
any unique response rates as it relates to the areas
4:55
struck by these hurricanes, but instead response rates in general
4:59
were just awful across the board, is what they wrote, like,
5:03
we just didn't get many responses inconclusion, And I've been
5:07
saying this like for the last month and a half,
5:09
not month and a half because these hurricanesent hit then,
5:11
but for the last like three to four weeks. Throw
5:13
it out. This entire report basically useless. It's not to
5:18
say that like you can't say this report wasn't bad
5:21
like it was, But we don't know if there's gonna
5:24
be a huge bounce back next month because of jobs
5:26
that weren't counted here. We don't know if this is
5:29
actual weakness. This is one report that I don't think
5:32
you can tell anything out of as a results here.
5:36
Speaker 3: So contextualizing how bad that was, the average number of
5:39
jobs created over the last twelve months before this was
5:42
one hundred and ninety three thousand, So twelve thousand in
5:46
that context is quite bad, quite quite bad. Expectations going
5:50
in were for one hundred thousand jobs created, you get created,
5:54
you got twelve. So I agree throw it out, but
5:58
also acknowledge it was bad if you do want the
6:00
part of this.
6:00
Speaker 2: And there are things that I think you can glean
6:02
from this that that are bad. Non farm payrolls for
6:06
the last two months revised downward. August revised down by
6:10
eighty one thousand, September revised down by thirty one thousand.
6:13
This is as they get more data in yep, more
6:16
respond hey, look correct. So the data again was not
6:20
good in those revisions, and those were not impacted by hurricanes.
6:25
So this is something that you can point to and
6:27
be like, oh, like, that's kind of problematic that the
6:30
job growth that we thought we had is a little
6:32
bit weaker.
6:33
Speaker 3: Here unsurprising pieces manufacturing employment decreased by forty six thousand
6:37
in October Boeing strike.
6:38
Speaker 2: If you did, if you didn't have that going on,
6:41
that's basically flat. So again you can also you know,
6:44
wrap that up into this. Things that I don't think
6:47
are necessarily related to the hurricanes or Boeing strike. Temporary
6:53
help service is continuing on its you know, decline, dropping
6:56
by forty eight thousand people for the month. Temporary helps
7:00
services are generally one of the leading indicators of where
7:02
an economy is going, the reason being right out of
7:05
the gate after a recession, first people, you hire temp
7:08
help because you're not sure if you need the full
7:10
time help yet. Who do you get rid of? Is
7:12
your heading into one? Yeah, get rid of the temp
7:14
workers because you want to keep your full time people
7:16
in case it doesn't turn out to be a recession.
7:17
Speaker 3: We don't know that many four oh one k or
7:19
unemployment anyway, that's for the staffing agency to take care of.
7:21
Speaker 2: They'll handle that, we can get rid of them.
7:24
Speaker 3: The counterpoint there, obviously, is that we've lost five hundred
7:27
and seventy seven thousand temporary help jobs since March of
7:31
twenty twenty two and no recession. No recession, So I
7:36
don't know, maybe it's just a late.
7:38
Speaker 2: Now I'll go through the rest of this day to
7:40
just saying, hey, what in the absence of not of
7:43
knowing like which way this is actually going to go.
7:45
As far as how the revisions look in the future
7:47
and what we get next month. Let's talk about this
7:50
job's report for what it actually is, because I do
7:53
think there's a chance. Look as much as we say, hey,
7:56
this could be skewed, there's a chance it isn't like,
7:58
there's a chance that this is is the deal and
8:02
this is what you get even after more data, future
8:04
revisions and so on and so forth. Unemployment rate steady
8:08
at four point one percent, somewhat reassuring that it's not
8:11
ticking back up. So that's that's kind of one of
8:14
your few good pieces I think that you have here
8:17
other things that are not great. As you know, kind
8:22
of go through this. The duration of unemployment seems to
8:25
be lengthening. Those unemployed for fifteen to twenty six weeks
8:29
increased by one hundred and fifteen thousand, Those unemployed five
8:32
to fourteen weeks increased by ninety eight thousand, Those unemployed
8:36
for less than five weeks decrease by thirty four thousand.
8:39
So there's a lengthening of unemployment that's happening. That's not
8:42
typically something that's good that you like to see that
8:47
headline number of twelve thousand jobs created. Hey, if you
8:50
get that on a repeated basis unemployment rate is going up.
8:53
I know it didn't this month. Yeah, that's not enough
8:56
job creation to keep pace with the growth of our workforce.
8:59
I know it didn't this month. But quite honestly, it's
9:01
because of rounding that we saw this month. So last month,
9:03
just as an example, it came in at four point
9:05
one percent because the unrounded number was like four point
9:09
zh five three or something like that. This year, the
9:12
unrounded number, or this month, the unrounded number is four
9:15
point one four something. I think. So ultimately, rounding is
9:20
something that hey, when you strip it away, the unemployment
9:24
rate actually looks like it's ticking up a little bit.
9:26
Here again the caveat being you know, what does this
9:29
this ultimately mean this report? I don't know. I don't
9:33
think that you can make any conclusive thoughts about this
9:38
in terms of what it means for the US economy
9:40
at this point other than, hey, if this turns out
9:43
to be accurate, it's a bad report. Like there's no
9:46
other way to put it other than that. Yeah, but
9:50
we just don't know how accurate it actually is. Other things,
9:55
the U six the underemployment rate holding steady at seven
9:58
point seven percent, So I guess that. It's a good
10:01
point that you have here. But overall, this is a
10:04
report that if you were to duplicate it twelve times over, well,
10:10
unemployment's not holding it four to one. Like you are
10:13
seeing unemployment rise probably in the ballpark of one percent
10:17
over the course of a year. If you get this
10:19
kind of job creation for a full year.
10:21
Speaker 3: Yeah, again, I think there are parts of this where
10:24
you just you say you don't know.
10:26
Speaker 2: There are other parts where you do know.
10:28
Speaker 3: The forty four thousand job loss in manufacturing does not
10:31
occur if the Boeing workers are back to work, correct
10:34
like that, that's pretty definitive. The other stuff about why
10:37
only twelve thousand jobs were created, you just have no
10:40
idea how much of that was hurricane related and how
10:42
much of it was just related to The other piece
10:44
I think about is Okay, they talked about how response
10:47
rates state by state didn't seem that far off, and
10:50
so where is there just a lack of response due
10:52
to something like an election and then the responses are
10:55
going to come pouring in later.
10:57
Speaker 2: Maybe you don't know.
10:59
Speaker 3: So again, obviously, i'd be shocked if Donald Trump hasn't
11:05
already posted about this job's report and how it indicates
11:08
that we're in a recession. Take everything with a grain
11:10
of salt, because we simply do not know what this
11:13
looks like.
11:14
Speaker 2: No, look, I've been saying all month, Hey, whatever you
11:17
get here, you kind of just toss it in the
11:20
pile and say, Okay, we're gonna need more information. But
11:23
this report if duplicated in subsequent months, yeah, you've got
11:28
a real problem in the labor market. Then let's take
11:31
a quick break here and when we come back, talk
11:35
a little bit about the FED. That's right, We've got
11:37
a FED meeting next Wednesday. Also, so look, if you
11:42
want to say definitively, hey, this is the busiest two
11:45
week stretch of the year, then you got it one.
11:49
Like man, we're cooking with with some gas here, let's
11:54
take a quick break. We're talking FED. Right after this,
11:57
whoa stream.
11:58
Speaker 1: Watch a full update on the market performance today weekdays
12:01
at ten thirty only here on the Financial Exchange Radio Network.
12:05
Find daily interviews and full shows of the Financial Exchange
12:08
on how are YouTube page Get cut up on anything
12:11
and everything you might have missed. This is the Financial
12:14
Exchange Radio Network.
12:19
Speaker 5: This segment of the Financial Exchange is brought to you
12:22
in part by the US Virgin Islands Department of Tourism.
12:25
The US Virgin Islands or Saint Croix, Saint Thomas, and
12:28
Saint John fall in full swing. Now's the time to
12:31
start looking at a fabulous holiday vacation, and there's no
12:34
better place than the US Virgin Islands. Enjoy perfect weather,
12:37
world class dining, incredible beaches, and a vibrant nightlife. No
12:40
passport is needed, and there's no money to exchange. Take
12:44
your next vacation in America's Caribbean paradise the United States
12:47
Virgin Islands. Go to visit USVII dot com to book
12:51
your trip. That's visit USVII dot com, Mike.
12:54
Speaker 2: So next week we have a FED meeting. It's actually
12:57
the only FED meeting of the year this year that
13:00
taking place on a Thursday rather than the standard Wednesday.
13:03
I presume that's because of the election. It's a two
13:05
day meeting, so they probably maybe if things off Wednesday,
13:09
maybe they take the day off on Tuesday to vote.
13:11
You know. Jay Powell's like, yeah, I'm gonna I'm gonna
13:14
take the day off and go vote. So we got
13:18
a FED meeting next week, and where we stand right now.
13:20
According to the CMA, the projections right now are for
13:25
a ninety nine point eight percent chance of a quarter
13:28
percent cut next Thursday.
13:31
Speaker 3: So let's do you want to roll down the evidence
13:33
and see if there's anything in your mind that would
13:38
run contradictory to that.
13:41
Speaker 2: Uh, there's nothing in my mind that would run contract
13:44
yeah to it. I don't see anything that sways you
13:46
from that.
13:47
Speaker 3: The jobs report came in weak, The Jolt report came
13:50
in fine, but weaker than the previous month.
13:54
Speaker 2: The big thing, the Fed's not going to go from
13:56
fifty BIPs to just a zero. Hey, we need to
13:59
hold if you want something that would undermine FED credibility. Hey,
14:04
we cut half a percent because we're nervous and we
14:06
want to get in front of you know, any weakness.
14:08
A month later ever, cutting again, Well you know what,
14:11
we actually don't need to cut now. Yeah, well then
14:13
you didn't need to go fifty BIPs. Yeah. The real
14:15
question here is what happens in uh December, as far
14:20
as the December eighteenth meeting. In my opinion, and this
14:24
is gonna be one in which you have, you know,
14:26
another month of data from really two months of data
14:28
because you're gonna get all the rest of the October
14:30
data coming in. You're gonna have November jobs. You're gonna
14:33
have November CPI like, you're gonna have, you know, some
14:36
some good stuff over the next couple months that you
14:38
can look at. And so right now, if you kind
14:42
of back into it, it's about an eighty percent chance
14:45
that the FED cuts rates by another quarter percent in
14:48
December at the moment. That's kind of what we're looking
14:51
at here. But you know, the Fed. The main thing
14:55
that the Fed's been looking at in order to you know,
14:57
make the case for hey, we need to move a
15:01
little bit more quickly here, there's been the labor market
15:04
and outside of this report that we just got, the
15:06
prior to jobs reports have been quite good and in
15:09
fact showed the unemployment rate turning back down. So I
15:13
do think that there's you know, potentially an inflection point
15:16
here about what happens in December and January, and that's
15:19
really where the action is going to be, which is, hey,
15:21
what do you think the economic data is going to
15:23
show over the next two to three months, and that's
15:26
going to impact where the FED goes from here.
15:28
Speaker 3: But to your point, with two meetings before December. I
15:31
tough to see any significant moves on inflation given where
15:34
we know where oil prices are right now and the
15:36
trajectory there.
15:37
Speaker 2: And the FED won't make moves based on oil prices.
15:39
Wouldn't anyway.
15:41
Speaker 3: And again, in spite of what was objectively a bad
15:46
jobs report this morning, you didn't see the unemployment rate
15:49
tick up. No, you saw bad hiring numbers, but you
15:52
didn't see more a larger portion of Americans saying they
15:55
can't find work.
15:57
Speaker 2: Just that.
15:57
Speaker 3: Again, I don't want to minimize this, just that the
16:00
existing ones are on unemployment for longer, but no uptick there.
16:04
And so those are what you have to see for
16:07
the FED to start changing their mind in one direction
16:09
or another.
16:10
Speaker 2: And we're just not getting it right now. Should we
16:13
talk a little bit about Amazon or do we have
16:15
more on the Fed? I think found pictures kind of straightforward.
16:18
Speaker 3: Actually it it's complicated where the economy is going, but
16:23
it's not complicated where the FED needs to be right now.
16:25
Speaker 2: Yeah, I think that's a great summary. Amazon. Their shares
16:29
are up at one point I know pre market, I
16:31
haven't looked just now, but their shares right now are
16:34
up about six and a half percent and they just
16:38
can't break through that two hundred dollars mark right now
16:40
for some reason. And what we've got going on with
16:44
Amazon is, hey, they're making a boatload of money. Their
16:49
cloud services division continues to chug right along. They are
16:53
planning on spending a an absolutely insane amount of money
16:58
in capex for bill holding out AI capability.
17:01
Speaker 3: Can we talk about so and again, qualifying this money
17:05
is just tough to do because everyone's spending billions of dollars.
17:08
But analysts had been anticipating that Amazon would spend seventeen
17:13
point six billion dollars in the third quarter on this
17:15
capex that'd be a rise of forty two percent. Instead,
17:20
they increase spending by eighty one percent to twenty two
17:23
point six billion dollars, spend an extra five billion dollars
17:26
in the quarter without blinking, and shareholders like, yeah, yeah,
17:30
that sounds good. Cool, do more, do more? To be fair, Uh,
17:34
they did beat on revenue. They had a pretty solid
17:37
quarter in terms of you know, actually what everybody thinks
17:40
of Amazon for in terms of selling stuff at their
17:42
online store and getting it delivered.
17:44
Speaker 2: To your house.
17:46
Speaker 3: Their actual payoff from this investment in artificial intelligence the
17:51
only place that I can see it is people leasing
17:54
cloud space from them, which is not a bad place
17:56
to be. That's a huge growth enter for them. But
17:59
unlike Microsoft, unlike Google, I'm like Meta, I don't see
18:02
any real discussion of product development on Amazon side. And
18:07
maybe that's fine.
18:08
Speaker 2: I thought they had.
18:09
Speaker 3: A couple things that they We're talking about Alexa, they're
18:12
discussing it, but you know, Meta is actually pointing to saying, hey, this,
18:17
many customers of ours started using our tools to develop
18:20
new ads and put it out there. Eyeballs on Facebook's
18:24
platform were there for an extra twenty minutes, and we're
18:27
attributing that to AI. I'm not seeing that from Amazon
18:30
right now. It's not to say you won't in the future,
18:32
but I'm just this quarter not seeing much from Amazon
18:36
in terms of, hey, what's the payoff outside of people
18:39
outside of businesses taking up more cloud space on your networks.
18:43
Speaker 2: Yeah, I think that's fair that they are building a
18:46
bunch of stuff for businesses, like different selling tools and
18:48
stuff like that. So you know, we'll see where it
18:50
ends up going.
18:52
Speaker 3: But it's that would actually be low hanging fruit, right
18:56
if you're a vendor on that platform and you can
18:58
use AI to develop a video on how your product works,
19:01
which should be really easy.
19:03
Speaker 2: So the stuff that I'm seeing on their side is
19:06
like they're more trying to sell like virtual assistance, conversational analytics,
19:11
employee productivity tools. Yeah, some creativity stuff because they've got,
19:17
you know, their their AI stuff that they run as well.
19:20
I just find it wild that this part of their
19:23
business literally is an accident and now it's the most
19:27
important part of their business.
19:28
Speaker 3: Spending eighty billion what was it, twenty two billion dollars
19:31
on it a corn.
19:31
Speaker 2: Yeah, quick break here. When we come back, We've got
19:33
Wall Street watching a little more on Amazon.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter. Act
19:43
TFE show breaking business news is always first right here
19:48
on the Financial Exchange Radio Network. Time now for Wall Street.
19:53
Watch a complete look at what's moving markets so far
19:56
today right here on the Financial Exchange Radio Network.
20:01
Speaker 5: The markets are rallying in reaction to, well not really
20:04
in reaction to the October job support.
20:06
Speaker 2: It's more of a bounce back from yesterday. But the
20:08
job support.
20:08
Speaker 5: We saw twelve thousand jobs added last month, well short
20:12
of expectations of one hundred thousand. As the economy as
20:15
the labor force saw the effects of two significant hurricanes
20:19
and the ongoing Boeing strike. Unemployment rate held steady at
20:23
four point one percent, And on top of all that,
20:26
we're digesting big third quarter earnings from Amazon, Apple and others.
20:31
Right now, the Dow is up by nearly five hundred
20:34
points to one in a quarter percent, SMP five hundreds
20:37
up by sixty two points just over one percent, and
20:41
the NASDAC up nearly one and a half percent or
20:43
two hundred and fifty five points. Rusted two thousands up
20:46
by one and a third percent as well. Ten year
20:48
treasure realed up by two basis points at four point
20:51
three or three zero percent, and crude oil up nearly
20:54
two percent higher, trading at seventy dollars in fifty five
20:58
cents a barrel. He was on jumping seven percent after
21:02
the e commerce giant posted stronger than expected third quarter
21:05
earnings and impressive cloud and ad growth. Revenues for its
21:09
Amazon Web services also climb nineteen percent year over year.
21:14
Paulamonica of Barons will give his thoughts on Amazon coming
21:17
up on the show at eleven forty five. Meanwhile, Apple
21:21
also beat third quarter estmates on the top and bottom lines,
21:24
showing a revenue growth of six percent, driven by a
21:27
rebound in iPhone sales. However, the tech giants outlook for
21:31
sales growth missed Street forecasts. That stock is off by
21:35
nearly one percent. Elsewhere, Exxon Mobile and Chevron posted lower
21:39
quarterly profits as energy prices sank and fuel making margins narrowed. However,
21:44
those stocks are up half a percent and four percent, respectively.
21:49
Struggling chip maker Intel posted a record sixteen point six
21:52
billion dollar loss in the previous quarter, but said its
21:55
outlook for sales was improving. That stock up by seven
21:59
percent and Boeing up by three percent. After the playmaker
22:03
agreed to a new offer which with its machinist union
22:06
with the hopes of bringing the seven week strike to
22:09
an end. The deal would include thirty eight percent raises
22:13
over the next four years, with a vote on the proposal.
22:16
Speaker 2: Coming for Monday. I'm Tucker Silva and that's Wallstree. Watch Chuck.
22:21
Speaker 3: We had five major tech companies. I know they're not
22:25
necessarily all considered tech companies by s and PAK a
22:27
little bit, but tech companies report earnings this week. Apple, Amazon, Microsoft,
22:33
Google parent Alphabets, Facebook parent Meta I'm no tech analyst.
22:38
I know looking through these earnings, we can see how
22:41
the stock market reacted to each of them. YadA, YadA, YadA.
22:44
I'm more interested in one thing. Let's assume that we
22:46
all buy that artificial intelligence is going to be this
22:51
seismic productivity changer. Based on what we saw this week
22:56
from earnings, Where would you put these five tech companies
22:59
if you're rank them in terms of their influence in
23:03
that space or their opportunity for the future. I'm trying
23:07
to think through it in terms of what we're seeing
23:09
right now. And you know, I've maintained for a while
23:12
that Microsoft seems to be the low hanging fruit here
23:16
and has the biggest opportunity when it comes to artificial
23:18
intelligence because they're approaching it from two different sides. But
23:21
I'm interested in your take. Where would you rank these
23:24
if you're looking at, Hey, these companies are doing the
23:27
best thing. The best is a tough word, the most
23:31
productive and most profitable things with AI today and in
23:34
the future.
23:37
Speaker 2: So if we're talking about the potential for like greatest
23:41
profit expansion, probably Microsoft or Amazon Cloud story, Microsoft is
23:49
there is right there in every single office sect in America, yeah, Hey,
23:54
here's our tools that'll help you, you know, be twenty
23:56
percent more productive and only cost you five percent of
23:58
an employee's salary. Great. I can increase headcount without increasing headcount.
24:03
Yeah like that, that's the promise for Microsoft. If you're
24:06
looking at Amazon, it's all those resellers, Hey, find better
24:10
ways to sell your stuff, you know, manage your inventor
24:13
ya da yah like all that stuff. Okay, fine, And
24:16
they also happen to be in a lot of businesses backyards,
24:18
right Like.
24:19
Speaker 3: Sure, Amazon's cloud storage and computing business is massive.
24:23
Speaker 2: Meta and Google are in one business and one business only,
24:26
and that's selling ads. Yeah I know that, Like they
24:27
do like other stuff for fake, but they do one
24:31
thing for real, and that is they sell Like Meta's
24:34
revenue was ninety six or ninety eight percent ads, Google's
24:37
like seventy five percent ads, and the rest, by the way,
24:40
is just a bunch of YouTube TV subscriptions that, oh
24:42
what do they do? They sell ads?
24:44
Speaker 3: So ultimately I struggle with that one because I constantly
24:49
kind of poop poo and look down at their ability
24:51
to grow that revenue. But am I am I, you know,
24:56
am I missing the ball once again? On Meta and
24:59
Google and out on an alphabet's ability to sell more
25:02
ads based on the the leverage of age.
25:04
Speaker 2: There's only so much ad budget. That's like, here's the thing.
25:08
Here's why Microsoft and Amazon are more interesting to me.
25:11
If you are a company, what's the number one biggest
25:16
expense that you typically have? Headcount? That's where the money
25:21
can be spent. Usually like number like four or five
25:25
is advertising and marketing and stuff like. It's it's like it,
25:28
you know, like you go through the list. It's like, Okay,
25:30
I got headcount, then I got my you know, overhead
25:33
with you know, my office space and this and that,
25:35
Like you go down the list. You know. I think
25:39
that the bulk of the spending growth can potentially be
25:41
in convincing companies, hey, don't hire more people, buy our
25:46
services and get more out of your current people. With
25:49
Google and Meta, it's hey, how can we sell more ads? Well,
25:52
who's increasing their ad budget exponentially? There's only so much
25:56
product actually sell. Like if if you go to a
26:02
company and say, hey, if you increase your AD budget
26:05
by fifty percent, you know, here's what you can do. Well,
26:08
most companies can't increase their AD budget by that much.
26:11
They just they don't have that money available. On the
26:14
other hand, headcount, you know, consistently year and year out
26:17
might go up ten, fifteen to twenty percent. Spend that
26:20
on services, not on new heads. Convincing case Apple, it's
26:26
all selling devices. It's a bit of a wild card.
26:29
It's it's all selling devices, and I don't think there's
26:31
any there there.
26:34
Speaker 3: Yeah, I don't buy the Alexa devices. I don't buy
26:37
the Apple devices. I'm not saying it won't exist. I
26:39
just don't know what you do with it. Here.
26:40
Speaker 2: Well, no, here's the fascinating thing. In my opinion, I
26:43
think Apple may end up having the most useful day
26:47
to day approach to AI out of any of these,
26:50
but they won't be able to make money off it.
26:53
You go, Microsoft, Hey, you've got an employee that you're paying,
26:57
you know, eighty thousand dollars a year. You could hire
27:00
another one, or you could pay us an extra ten
27:02
thousand dollars for services that replicate another employee. Right, Like,
27:06
that's a sales point with Apple. It's hey, Apple, build
27:10
me an automation that you know, when I get home
27:14
every day, turns on my smart lights and turns on
27:16
this and that they can't monetize that.
27:19
Speaker 3: No, no, you can't monetize the household usefulness.
27:22
Speaker 2: Of the right. You can't monetize convenience. You can't.
27:27
Speaker 3: It's just a lot less worthwhile than business headcount reduction.
27:32
Speaker 2: Well, it's a one time sale on the device. And
27:37
here the way that Apple and theory could is, Okay,
27:40
we've got this installed user base of I don't know
27:43
a billion people worldwide. However, many people have Apple devices. Okay,
27:47
you're gonna start paying us twenty dollars a month to
27:50
access Apple Intelligence, like we'll have, you know, the free thing.
27:53
The free version does this. If you want to do
27:55
the real stuff, pay us this. Most people need that.
28:01
I don't know. I most know. I don't think so
28:05
either right now. It could be completely wrong there, but
28:10
this is what I get at when I'm like, hey,
28:11
Apple might have the most useful stuff to the most people,
28:15
but I don't know how they get there from a
28:17
dollar's perspective. And that's kind kind of interesting to me.
28:21
The counterpoint to that, man, Apple always figures out how
28:24
to make money. They do. They're not bad at it,
28:28
pretty good actually, So that's kind of interesting to me.
28:32
As far as again, where all of these companies are going.
28:36
Apple had their earnings this week as well. They were fine,
28:40
but find's not good enough to keep your stock you
28:42
know where it was. They're down one percent today, even
28:44
after falling a little bit yesterday.
28:46
Speaker 3: Yep, they've been projecting a seven percent increase in sales.
28:48
Apple didn't completely contradict that, but they said low single
28:52
digits to mid single digits, and that's not good enough
28:56
in this context.
28:56
Speaker 2: Let's take a quick break here. When we come back,
28:59
we're talking bow and burritos. One story or two? Will
29:02
you have to tune in to find out Right after
29:04
this text.
29:06
Speaker 1: Us six one seven three six two one three eight
29:08
five with your comments and questions about today's show. This
29:12
is the Financial Exchange Radio Network. The Financial Exchange Show
29:16
podcast drops every day on Apple, Spotify, and iHeartRadio. Hit
29:20
that subscribe button and leave us a five star review.
29:24
You're listening to the Financial Exchange Radio Network.
29:31
Speaker 5: The Ultimate Boston Sports Auction to benefit the Disabled American
29:35
Veterans Department of Massachusetts is coming this Monday. Your chance
29:39
to see the world champion Celtics, the Bruins, the Red Sox,
29:43
and the Patriots, plus autograph merch from Pedro Martinez, Chris Staff, Porzingis,
29:48
Brandon Carlow, and much more, one massive auction for incredible experiences,
29:54
all to benefits the Disabled American Veterans Department of Massachusetts.
29:58
The auction begins this at eleven am. That's this coming
30:03
Monday at eleven am. Keep it here on the Financial
30:07
Exchange and help support our great American heroes.
30:11
Speaker 2: Micha. Let's talk a little bit about Boeing's latest offer
30:13
to their machinists. They have now offered a thirty eight
30:18
percent wage increase over four years. That's up from the
30:21
original offer of twenty five and the newly rejected offer
30:26
of thirty five percent. So basically, hey, here's an extra
30:30
you know, three quarters of percent a year, and the
30:33
union is going to be voting on this deal on Monday.
30:37
This offer still does not restore pensions, which is something
30:41
that we covered as a key demand of union leaders,
30:45
but Boeing would further increase four to oh one K contributions.
30:50
They are also offering a twelve thousand dollars ratification bonus,
30:54
up from seven thousand, but that previous offer also had
30:58
a five thousand dollars four to one K bonus so
31:00
they're not really adding more for the ratification bonus. It's
31:03
just you you can get your money now instead of
31:05
having that retirement. So where free burritos for life? Two?
31:10
Uh no, the different story? Got it?
31:13
Speaker 3: Different story? Yes, I don't know. I mean they rejected
31:16
the first one by ninety percent. They rejected the second
31:19
one by sixty odd percent. The trend would seemingly be
31:22
the longer this is going on, the more machinists are
31:24
willing to vote on something like this.
31:26
Speaker 2: But this barely moves the needle.
31:28
Speaker 3: So if you rejected the last one, I'm not sure
31:31
why this moves the needle for you other than yeah,
31:34
it's been like seven weeks and I'm starting to struggle.
31:36
Speaker 2: I got two possibilities here. Either this gets rejected like
31:40
fifty two to fifty three. I don't think this is
31:43
enough to get it over the hump. No, I don't.
31:47
Or I could see this being something where it's like, hey,
31:51
all you're doing is moving that signing bonus money around.
31:54
This is a slap in the face eighty percent rejection.
31:57
Speaker 3: Think so, I don't think the union would bring it
32:00
to their members if they thought it would get rejected
32:02
by eighty percent.
32:04
Speaker 2: Probably true, but they brought the first one that got
32:06
rejected pretty badly they did. I think that was probably
32:08
just you had to do that in the process. Yeah,
32:10
you have to show like, hey, this is house. I
32:11
don't know if this gets it over the hump I
32:14
just don't know if it gets it over the hump here.
32:17
But maybe it's it's a baby. This is one vote
32:24
that we will know the answer of on Tuesday. They
32:27
usually tabulate these pretty quickly, so that'll be is this
32:31
actually Tuesday? Is this Monday? Well, the votes on Monday,
32:33
but we'll have it tuesday. Yeah, so it's uh that
32:35
that'll be great. We'll have some election results to cover
32:38
on Tuesday. Yeah, it's wonderful. Let's talk a little bit
32:42
about burritos. Now, indeed, what is your burrito reference price?
32:47
Seven ninety nine? I'm sorry to hear that, Tucker, what's your.
32:50
Speaker 5: I'm gonna say nine bucks, So I.
32:53
Speaker 2: Don't have a burrito reference price, by the way, nine
32:55
ten buckshere in that range. Reference price it's a fancy
32:58
word that economists use when they're trying to sound, you know,
33:01
very smart, smarter than the average person, and it basically is, hey,
33:06
what's the price that you're used to and that you
33:08
see as a fair cost for services. So if someone
33:11
came to you and said, Mike, I'm gonna charge you
33:13
eight dollars to replace your roof, you'd be like, Okay,
33:16
what's the scam? Yeah, because that's well below the reference
33:18
price for a roof. On the other hand, if you
33:20
walked into a McDonald's and they said, okay, you're getting
33:24
a big mac. That'll be two hundred dollars, you would
33:26
also say, again, you say, what's the scam? What's going
33:28
on here?
33:29
Speaker 3: So other big reference prices that everybody has a five
33:32
dollars foot long from subway, they really drove that one home.
33:35
And you do wonder about those strategies in hindsight, right
33:39
like the dollar menu the dollar menu, was that a
33:41
good idea having a company whose name is five below
33:46
or or dollar dollar general, Like you know, these are
33:51
companies that are by name tied to or by jingle
33:56
tied to a certain reference point. And I think in
33:58
subways case, for instance, it really struggled to get away
34:01
from that for a while.
34:02
Speaker 2: If do you know what I would call my like
34:05
discount retail chain, now we're naming. If I were naming
34:08
one and this is anyone can use this. I'm not
34:11
copyriting it or anything like if anyone wants to start
34:14
a dollar store with chuck, no, I don't want to
34:17
be involved retail. No, thank you feel like a million
34:24
it's too long? Like a million, that's better? How would
34:28
just million milk get get rid of get rid of
34:32
the like? Okay? In any case, we all have these
34:37
reference prices, and the big thing is, look, when inflation
34:41
isn't moving very far, you know, when you we're seeing
34:44
prices go up one to.
34:45
Speaker 3: Two percent a year, someone, we can maintain it. They
34:48
made I mean, that's the five dollars foot long? Was
34:50
that five dollars for like a decade and a half.
34:52
Speaker 2: It was like fifteen years. Yeah, So A, they can
34:56
maintain that, But B, you're even if prices do move
34:59
a little bit on things other than the five dollars
35:01
foot long. How many people paid attention to the price
35:03
of a big Mac from two thousand to twenty twenty. Nobody. Yeah,
35:07
it just wasn't a topic of conversation because the price
35:09
moves are slow, and so you like, it's kind of
35:12
like when you boil the frog in water slowly. It
35:16
doesn't hop out. You turn the water heat up slowly
35:19
so the frog doesn't realize it's being boiled alive. I've
35:22
done this, actually, Oh no, I haven't. No, why would
35:26
I often references them like why would anyone boil a frog?
35:30
Like what kind of To be fair, the French frog legs?
35:34
Never had them? Actually, but you fry them? Do you?
35:37
The only time I've ever heard you don't boil them?
35:39
I've never had them, to be honest, I have. But
35:43
the point that I'm making is, Hey, when things go
35:45
up slowly, you don't even really notice. That's kind of
35:48
the general premise of one to two percent inflation, even
35:51
two to three. Hey, you don't really notice. When prices
35:54
move twenty percent in a three year period, You're like, hey,
35:58
what gives? Right? What's going on? Like this is not
36:01
what I'm used to. And so those reference prices we
36:06
come back and we say, no, that burrito at Chipotle
36:09
is supposed to be twelve dollars even with guac, not
36:12
eighteen without. And that's what kind of gets us upset,
36:16
is that it's that difference between the reference price that
36:19
we have and what something actually costs today. And you know,
36:23
you see a few of these.
36:24
Speaker 3: So one person talked about their crispy rice bowl from
36:27
Sweet Green, a fast casual places out there. It went
36:31
from fifteen to eighteen dollars, and I get how that
36:33
disrupts your reference price, and extra three bucks for lunch
36:37
is not fun. It's also below the total inflation rate
36:42
that we've seen for dining out over the last few years.
36:45
Speaker 2: I think there's one other thing that needs to be
36:47
taken into account here, and that's mental rounding. You get
36:51
something for fifteen, you're like, that's fifteen bucks. It shows
36:55
up at eighteen instead of seventeen. Hey I'm paying twenty
36:58
bucks for lunch now, yeah, like you do that mental rounding,
37:02
And so I think that that's the same reason, Hey,
37:04
why do you sell everything at two ninety nine because
37:06
it doesn't have a three in the first digit, and
37:09
so that that rounding does happen as well. Where Okay,
37:14
if it goes from fifteen to sixteen, that's still pretty close.
37:16
Sixteen to seventeen, it's fine. Eighteen, man, this is almost
37:20
twenty dollars now, like you feel it on that side. Also,
37:25
I think the most interesting one to me is the
37:27
gasoline reference.
37:28
Speaker 3: Point, which is it's so so different, both region by
37:34
region and generationally.
37:37
Speaker 2: Not even generationally even just month, Like, we reset that
37:40
reference point quickly because you're always filling up.
37:44
Speaker 3: Yeah, you're always frequently, but yeah, you know, you talk
37:50
to a baby boomer who might genuinely have a reference
37:54
point on gasoline of like ninety nine cents, And that's
37:57
that's where I am. On this and everything above that.
38:00
It's expensive for me. Anything below four bucks a gallon
38:02
seems pretty reasonable.
38:03
Speaker 2: Let's take a quick break here, and when we come back.
38:06
We got our two coming up in just a little bit.
38:09
We're talking holidays, shopping, we're talking oil, and we're talking
38:12
Intel and a whole lot more when we return