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Can Stocks Handle More Fed Rate Hikes? · 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, Tucker with you here on a Friday. We've
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  Speaker 2: got markets, equity markets, not really doing much of anything.
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  Speaker 2: The S & P 500 is.
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  Speaker 2: Down eight points. Dow's off 200. NASDAQ composites up nine.
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  Speaker 2: So mixed, not much of anything. If you do want
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  Speaker 2: to know the parts of the equity markets that are
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  Speaker 2: doing well, it is semiconductors. You got Broadcom up a
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  Speaker 2: few percent, Applied Materials up a few percent, SanDisk up 6%,
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  Speaker 2: Micron up one and a half. That's the up part.
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  Speaker 2: The down part is some other stuff that is not semiconductors.
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  Speaker 2: So That's kind of what you got going on there.
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  Speaker 3: Bonds.
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  Speaker 2: Yesterday, bonds caught a bit, and everyone was like, ooh, look,
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  Speaker 2: the Fed did it. And it's like, well, it's been
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  Speaker 2: one day, so let's not, you know, we said this, like, hey,
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  Speaker 2: it's been one day, like, don't count your chickens. Well, today,
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  Speaker 2: bond yields, they're back up. 10-year back above 5% to 5.004
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  Speaker 2: of 5.7 basis points. As a result, the dollar index
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  Speaker 2: is up 0.16% to 100.145. I find it interesting. That gold,
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  Speaker 2: despite this, is up $ 100 since yesterday morning and is
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  Speaker 2: flat on the day today. So that catches my eye
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  Speaker 2: when you've got bond yields moving up, dollar rallying, and
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  Speaker 2: yet gold holds steady. Again, you just look for these
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  Speaker 2: little dislocations and you're like, okay, file that away. Maybe
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  Speaker 2: it means something, maybe it doesn't. I don't know. Crude oil,
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  Speaker 2: West Texas Intermediate up 27 cents a barrel to $ 102.
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  Speaker 4: 18.
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  Speaker 2: AAA National average for gas prices up another 3 cents
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  Speaker 2: a gallon overnight to $ 4.
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  Speaker 5: 68.
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  Speaker 2: Diesel up another 5 to $ 6. 44. Based on what's in
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  Speaker 2: the pipeline, we're probably going to get up to somewhere
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  Speaker 2: in that $ 6. 50 range on diesel and then take a
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  Speaker 2: little bit of a breather here. That would be good
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  Speaker 2: given the diesel prices have risen 40 cents in the
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  Speaker 2: last week and a dollar in the last month. You'd
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  Speaker 2: like to take a little bit of a break on
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  Speaker 2: diesel prices going up. Anecdotally, small businesses seem to be,
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  Speaker 2: I think the technical term is in deep doo-doo when
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  Speaker 2: it comes to these diesel price increases. They don't have
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  Speaker 2: the wherewithal and the large-scale contracts to be able to
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  Speaker 2: manage these things as well as bigger ones. And so
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  Speaker 2: watch what happens over the coming weeks and months here.
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  Speaker 2: I know that, again, we get this August data that,
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  Speaker 2: by and large, let's be honest, the August data has
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  Speaker 2: been ripping. It's been good. Retail sales, crazy hot. Jobs report,
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  Speaker 2: crazy hot. Inflation, hot, but in line with expectations. The
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  Speaker 2: August data has been fine. There's nothing in the August
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  Speaker 2: data that's been a problem. The piece that I do
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  Speaker 2: come back to is, okay, the price of diesel has
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  Speaker 2: gone up 20% since the start of August, like 25%.
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  Speaker 2: That's not going to be reflected in the August data.
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  Speaker 2: Not even sure it's going to be reflected in the
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  Speaker 2: September data. Some of it will be. Not all of it.
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  Speaker 2: It just takes a while for it to bleed through.
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  Speaker 2: Q4 is where it's really going to get picked up.
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  Speaker 2: So this is what we have going on in the
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  Speaker 2: markets today. And it brings us to this Axios piece titled,
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  Speaker 2: Wall Street thinks the stock market can handle a few hikes.
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  Speaker 2: So let's talk a little bit about things we know
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  Speaker 2: and things we don't know. Number one, I have no
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  Speaker 2: idea how the market is going to perform in this
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  Speaker 2: particular rate hiking cycle. Part of the reason for that
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  Speaker 2: is I have no idea how big this rate hiking
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  Speaker 2: cycle is going to be. And by the way, the
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  Speaker 2: market doesn't either. The market is pricing in potentially another
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  Speaker 2: 1% of interest rate hikes if you look at short
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  Speaker 2: term interest rate trades. Whereas the Fed is saying, okay,
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  Speaker 2: we might do another one or two hikes and then
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  Speaker 2: basically be done. So that delta has to be absorbed somewhere,
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  Speaker 2: or potentially it could go somewhere that's not even on
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  Speaker 2: the board right now, as we've seen plenty of times
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  Speaker 2: in the last five years. Yeah, I guess first with
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  Speaker 2: the premise, like who is Wall Street and what leads
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  Speaker 2: you to believe that they think that markets can't handle
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  Speaker 2: those hikes? I mean, I suppose they have hikes priced
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  Speaker 2: in and markets aren't down 5% since the press conference.
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  Speaker 4: So, I guess so. I believe that the markets can
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  Speaker 4: handle more rate hikes. I don't think it would demolish
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  Speaker 4: them at this moment in time. But I'm not Wall Street.
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  Speaker 3: Hold my hand up. I'm not Wall Street.
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  Speaker 2: No, you're Michael.
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  Speaker 3: I live and work in greater Boston.
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  Speaker 2: So, look, here's the thing that I will say. The
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  Speaker 2: driving engine of the U.S. economy since 2023 has been
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  Speaker 2: the AI build-up. Whether you like it don't care about
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  Speaker 2: it or hate it, that has been the driving force.
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  Speaker 2: It's not housing. Housing, we've been seeing like 4 million
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  Speaker 2: transactions a year for the last four years. It hasn't
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  Speaker 2: gotten better. It hasn't gotten worse. It's not consumer spending.
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  Speaker 2: Consumer spending is basically keeping up with inflation plus like
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  Speaker 2: one percentage point over the last four years. It's fine.
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  Speaker 2: It's not a problem. But it's not driving the economy forward.
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  Speaker 2: Healthcare is contributing, but it's a fraction of the market.
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  Speaker 2: And AI, you know, Best estimates around 40 percent of
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  Speaker 2: the S & P 500.
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  Speaker 4: Market cap has some direct linkage to the AI spend.
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  Speaker 2: So here's like the interesting thing to consider. And I
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  Speaker 2: say consider because, again, like. I don't know how many
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  Speaker 2: times the Fed's going to hike. You know, like I
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  Speaker 2: saw comparisons yesterday, someone online made the comparison like, oh, like,
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  Speaker 2: you know, Kevin Warsh is Paul Volcker now. It's like
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  Speaker 2: my dude. He's had one hike. Kevin Warsh is Paul
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  Speaker 2: Volcker now. Are you kidding me? Let's take a little
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  Speaker 2: bit of a breather here. Like, hold your excitement to,
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  Speaker 2: you know, quote Bill Belichick, let's not put him in
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  Speaker 2: the Hall of Fame yet. Okay? So, I think that
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  Speaker 2: when we look at this, the magnitude of hikes, we
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  Speaker 2: don't know. But let's say that, hey, inflation proves persistent
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  Speaker 2: and the Fed's got to hike a bunch. The industry
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  Speaker 2: that's been driving the train for the United States has
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  Speaker 2: been artificial intelligence.
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  Speaker 6: Mm-hmm.
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  Speaker 2: Does artificial intelligence care whether Fed funds is three and
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  Speaker 2: a half or four and a half?
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  Speaker 1: No.
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  Speaker 2: Does it care if it's three and a half or
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  Speaker 2: five and a half? More. You might need three to
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  Speaker 2: four percentage points in hikes for artificial intelligence to care.
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  Speaker 4: Yeah, I think. Incrementally, there are companies that care about
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  Speaker 4: five and a half percent rates.
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  Speaker 2: No, but artificial intelligence, that ecosystem.
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  Speaker 1: Yeah.
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  Speaker 2: If you think that you are building a digital superhuman,
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  Speaker 2: you don't care about a few little interest rate hikes.
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  Speaker 2: The problem is that I do think there is a
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  Speaker 2: lot of this economy, not necessarily from what's been contributing
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  Speaker 2: to growth standpoint, but just from a human impact standpoint,
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  Speaker 2: there's a lot of this economy that does care about...
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  Speaker 2: a 1% hike in interest rates that does care a
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  Speaker 2: lot about a 2% hike in interest rates. And so
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  Speaker 2: could we end up with this thing where like the
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  Speaker 2: U S economy as a whole doesn't fall apart because
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  Speaker 2: this pull from a trillion to one and a half
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  Speaker 2: trillion to 1.8 trillion in CapEx each year is just
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  Speaker 2: enough to keep things moving there. But all these small
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  Speaker 2: businesses are just pulling their hair out because they're like,
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  Speaker 2: my diesel's up. My financing is up. My labor's up.
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  Speaker 2: Can't do it anymore.
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  Speaker 4: Yeah, a version of this question was asked of Warsh
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  Speaker 4: at the press conference, actually. It was asked in the
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  Speaker 4: form of, is there a different neutral rate for, for instance,
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  Speaker 4: housing and the rest of the economy? And it seems
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  Speaker 4: like it, because I don't know what the, when they
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  Speaker 4: talk about that neutral rate, right, it's the interest rate
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  Speaker 4: that's neither restrictive nor stimulative. And you might need a
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  Speaker 4: pretty high rate in order to be restrictive on the
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  Speaker 4: AI economy, to your point. I think you can successfully
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  Speaker 4: argue that interest rates are already restrictive on housing, but
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  Speaker 4: you don't exactly have the ability to say, hey, it's
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  Speaker 4: this much for borrowing for buying a house and this
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  Speaker 4: much to borrow for building a data center.
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  Speaker 3: We don't do that.
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  Speaker 2: We don't. But doesn't it seem like we almost want
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  Speaker 2: to right now?
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  Speaker 5: Yeah.
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  Speaker 1: Yeah.
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  Speaker 4: I mean, we might, in fact, see a version of
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  Speaker 4: that through laws that go through. We just saw California
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  Speaker 4: Governor Newsom issued an AI executive order that had nothing
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  Speaker 4: to do with taxes or financing or anything else. It
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  Speaker 4: was just setting up a committee to study what they
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  Speaker 4: can do to regulate it more. But yes, it does
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  Speaker 4: seem as though we want to, on the left, prohibit
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  Speaker 4: data center construction, slow down AI, on the right, participate
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  Speaker 4: in the gains that.
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  Speaker 3: It will be promised.
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  Speaker 2: I don't think the divide's that clear. Yeah, I guess
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  Speaker 2: it's not. I think it's pretty broad. I mean, you've
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  Speaker 2: got Texas putting in moratoriums and stuff. I mean, this
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  Speaker 2: is not a left-right issue at this point.
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  Speaker 3: This is.
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  Speaker 2: Guys, no one likes these companies. No one likes them
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  Speaker 2: because we don't trust them. Let's be honest. And That
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  Speaker 2: distrust is earned because of how badly the stewardship of
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  Speaker 2: technology has gone with big tech companies for the last
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  Speaker 2: couple decades, whether it's Facebook and privacy issues, whether it's
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  Speaker 2: Amazon and counterfeit issues and things along those lines, whether
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  Speaker 2: it is... Who else is in big tech? Google and antitrust. Oh, yeah,
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  Speaker 2: Google and antitrust. You can get to... Microsoft. Interestingly enough,
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  Speaker 2: I feel like Microsoft doesn't really... have much that the
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  Speaker 2: average person finds objectionable right now.
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  Speaker 4: Apple and Microsoft are the two that you can't look
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  Speaker 4: at and be like, I really hate those guys for
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  Speaker 4: all the bad stuff they do.
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  Speaker 2: Even Apple, you can say the App Store stuff that
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  Speaker 2: they do in terms of pricing. I don't know that
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  Speaker 2: that rises to the level of these other things. You know, Microsoft,
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  Speaker 2: you got rid of Clippy. I really liked him. Can
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  Speaker 2: you bring him back?
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  Speaker 3: Yeah, biggest complaint people have.
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  Speaker 2: But look, big tech has not been great stewards of...
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  Speaker 2: technology for the last 20 years. And I think that's
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  Speaker 2: fundamentally different from the previous 20, by the way, you know,
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  Speaker 2: like that 1985 through 2005 period. Did anyone look at
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  Speaker 2: tech companies and say like, Oh, like, you know, you're,
• 11:32
  Speaker 2: you're like invading our private, like it was different then
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  Speaker 2: it was like the frontier for growth. It was like,
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  Speaker 2: we can all participate in this.
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  Speaker 4: And like, what was the evil sector of the market
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  Speaker 4: in the eighties to two thousands then?
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  Speaker 2: There's always been.
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  Speaker 4: An evil somebody to blame things on.
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  Speaker 2: For what?
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  Speaker 4: I feel like there's always just been a scapegoat for
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  Speaker 4: the market. Who is the scapegoat? In terms of what?
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  Speaker 2: Just who we like?
• 11:58
  Speaker 4: Yeah, societally dislike. Was it the energy sector back then?
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  Speaker 4: Big tobacco, certainly.
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  Speaker 2: That was my first thought. Big tobacco. Military-industrial complex. Maybe.
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  Speaker 2: But again, they didn't have the size and scale. They
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  Speaker 2: didn't have the reach.
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  Speaker 6: Like.
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  Speaker 2: I mean, look, you've made your point.
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  Speaker 4: You don't need to go look any further than Hollywood
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  Speaker 4: to know how much we hate big tech right now.
• 12:21
  Speaker 4: Go look at the movies that are being created. Yes,
• 12:24
  Speaker 4: some of them honor them, but most of them are
• 12:27
  Speaker 4: taking a very critical look at people like Zuckerberg.
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  Speaker 1: Yeah.
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  Speaker 2: Let's take a quick break here. When we return, we've
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  Speaker 2: got some trivia. And then let's talk about this piece
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  Speaker 2: here from Barron's. Most Americans lack confidence they'll meet future
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  Speaker 2: financial needs. We'll discuss next.
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  Speaker 6: Time for some Friday trivia here on the Financial Exchange.
• 13:26
  Speaker 6: And Nike was founded in 1964 by track athlete Phil Knight.
• 13:31
  Speaker 6: And his university track coach, Bill Bowerman, Nike went public
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  Speaker 6: in 1980 and really hit its stride in the mid-' 80s
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  Speaker 6: when the company made a deal with Michael Jordan and
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  Speaker 6: Michael J. Fox, who wore an iconic pair of Nikes
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  Speaker 6: in the movie Back to the Future. So our trivia
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  Speaker 6: question today, on which university campus was Nike developed? Once again,
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  Speaker 6: trivia question, on which university... campus was Nike developed. Be
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  Speaker 6: the fourth person today to text us at 617-362-1385 with
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  Speaker 6: the correct answer and you win a Financial Exchange Show t-shirt.
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• 14:20
  Speaker 2: Mike, we got a piece here from Barron citing a
• 14:24
  Speaker 2: Gallup poll that was sponsored by Edward Jones. Most Americans
• 14:29
  Speaker 2: lack confidence they'll meet future financial needs. What did we
• 14:33
  Speaker 2: learn here?
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  Speaker 4: Only about 37% of baby boomers express, quote, certainty that
• 14:38
  Speaker 4: they can handle future financial needs. Every other generation is
• 14:41
  Speaker 4: lower in terms of that probability, by the way. So
• 14:44
  Speaker 4: the baby boomers who have the most wealth in our
• 14:47
  Speaker 4: overall economy are, pretty darn uncertain. And then every other
• 14:51
  Speaker 4: younger generation is even less certain than that.
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  Speaker 3: Where we, I guess where we land here.
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  Speaker 4: Is the same question that I land on with all
• 15:04
  Speaker 4: of the different polls that we get, which is when
• 15:07
  Speaker 4: you ask people how they feel about things like the
• 15:09
  Speaker 4: economy or anything expressing certainty, it's pretty bad. But when
• 15:15
  Speaker 4: they talk about their own financials, they usually say it's
• 15:18
  Speaker 4: pretty good. And here, I don't think they're really reflecting
• 15:22
  Speaker 4: on whether or not their own financial situation is good
• 15:24
  Speaker 4: or bad, but whether or not they know anything about it.
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  Speaker 2: No, because I got to be honest. I've sat down
• 15:31
  Speaker 2: and met with people where they have their nest egg.
• 15:37
  Speaker 2: And they come in and it's just like, I just
• 15:39
  Speaker 2: don't know if I have enough money for retirement. And
• 15:42
  Speaker 2: then you dig through the situation and you get to
• 15:45
  Speaker 2: the end of the meeting and you go back and
• 15:47
  Speaker 2: you run some numbers and you're like, my guys, you're
• 15:51
  Speaker 2: not going to run out of money in four lifetimes.
• 15:54
  Speaker 2: What are you even worried about here?
• 15:56
  Speaker 3: Yeah, that does happen pretty frequently.
• 15:59
  Speaker 2: And so, like, if there are people where the numbers
• 16:02
  Speaker 2: are that far skewed and they're going to be fine,
• 16:06
  Speaker 2: there are certainly plenty where, hey, maybe it does look
• 16:09
  Speaker 2: more like, you know, a 70-30 or 80-20 chance of,
• 16:12
  Speaker 2: you know, making it through retirement without changing course. And
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  Speaker 2: this is the other place that I get to is, remember,
• 16:19
  Speaker 2: when you talk about, you know, running projections for your retirement...
• 16:24
  Speaker 2: Sometimes you'll run through these scenarios and everything, and it'll
• 16:28
  Speaker 2: be like, well, you have an 80% chance of retirement success.
• 16:32
  Speaker 2: And I think that that's a crappy way of looking
• 16:34
  Speaker 2: at it, because basically, no one ever is just like, well,
• 16:38
  Speaker 2: I'm going to spend my money, and when it's gone,
• 16:40
  Speaker 2: then it's gone. No, it's an 80% chance that you
• 16:42
  Speaker 2: won't have to make changes anymore. to your retirement at
• 16:49
  Speaker 2: some point. So, you know, there was another piece here today.
• 16:53
  Speaker 2: I don't know where it was, but it was somewhere
• 16:55
  Speaker 2: in our stack. And it was talking about this woman
• 16:58
  Speaker 2: who was, you know, eating down her savings and, you know,
• 17:01
  Speaker 2: only had, I think it was like $ 13, 000 left in
• 17:04
  Speaker 2: her savings.
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  Speaker 3: Scary, right?
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  Speaker 2: And scary. And then you keep reading and she's like,
• 17:09
  Speaker 2: you know, really my nest egg is my house and
• 17:12
  Speaker 2: I don't want to have to tap that. And it's like, Well,
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  Speaker 2: I know that you might not want to have to,
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  Speaker 2: but this is what happens.
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  Speaker 3: But if all else is lost.
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  Speaker 2: Yes, it's not just like you lost retirement. It's, okay,
• 17:24
  Speaker 2: now you've got to figure out whether it's through a
• 17:26
  Speaker 2: home equity line or taking out a mortgage or reverse
• 17:28
  Speaker 2: mortgage or whatever the appropriate tool is for that person. Okay,
• 17:31
  Speaker 2: how do you adapt if you get to that point?
• 17:34
  Speaker 2: But for most people, it's, hey, if you're putting a
• 17:36
  Speaker 2: plan together in advance of retirement, okay, you can pull $ 2, 000
• 17:40
  Speaker 2: a month from your retirement savings. Hey, like things have changed.
• 17:44
  Speaker 2: Now you've got to reduce that by 300 a month.
• 17:47
  Speaker 2: How do we adapt and change the plan at that point?
• 17:49
  Speaker 2: Not just, well, the plan is to take 2000 out.
• 17:53
  Speaker 2: We're just going to keep doing that until you run
• 17:54
  Speaker 2: out of money. No, it's how do you adapt in
• 17:56
  Speaker 2: that 20% situation or 30% situation where you otherwise would
• 18:02
  Speaker 2: run out of money?
• 18:02
  Speaker 3: I can think of very.
• 18:04
  Speaker 4: few things that are less comfortable than approaching Medicare and
• 18:07
  Speaker 4: Social Security and retirement age without that degree of certainty.
• 18:10
  Speaker 4: If you would like to work with somebody to evaluate
• 18:12
  Speaker 4: that and get to the bottom, call Armstrong Advisory Group
• 18:16
  Speaker 4: at 800-393-4001.
• 18:16
  Speaker 3: You can book a time for us to call you
• 18:18
  Speaker 3: back at armstrongadvisory.com, but again, 800-393-4001.
• 18:27
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 18:29
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 18:32
  Speaker 1: Armstrong guide is specific financial, legal, or tax advice. Consult
• 18:35
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 18:38
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 18:41
  Speaker 1: advisory services.
• 18:43
  Speaker 2: Mike, we got a piece in the Wall Street Journal.
• 18:46
  Speaker 2: How to tell whether a plunging stop will keep plunging.
• 18:52
  Speaker 2: Catching a fallen knife?
• 18:54
  Speaker 4: Here's the one interesting thing I think they found based
• 18:57
  Speaker 4: on their own study, what they concluded.
• 18:59
  Speaker 3: I'm not sure it's the right conclusion.
• 19:01
  Speaker 4: When a single stock with an industry falls, they found
• 19:05
  Speaker 4: that it is probability-wise less likely to quickly recover, whereas
• 19:09
  Speaker 4: when an entire sector or industry gets hit, think the
• 19:13
  Speaker 4: SaaSpocalypse from last.
• 19:15
  Speaker 2: Year or.
• 19:19
  Speaker 4: Snack brands after the GLP-1 thing, when it's based on
• 19:22
  Speaker 4: an entire industry struggling... they found at least that most
• 19:26
  Speaker 4: of the time it was a little bit less convincing
• 19:28
  Speaker 4: to the future stock performance than a single stock experiencing issues.
• 19:32
  Speaker 3: Take that with what you will. I'm not sure it's
• 19:34
  Speaker 3: a good conclusion.
• 19:35
  Speaker 2: I won't take much from it. Quick break. Trivia answers next.
• 19:39
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:47
  Speaker 1: Time now. for Wall Street Watch. Tracking the stocks, the data,
• 19:53
  Speaker 1: and the headlines driving markets so far today. Right here
• 19:56
  Speaker 1: on the Financial Exchange Radio Network.
• 19:59
  Speaker 6: After yesterday's rally, markets today are mostly quiet heading into
• 20:02
  Speaker 6: the weekend. The Dow is down 4%. just over a
• 20:05
  Speaker 6: third of a percent or 196 points lower. S &
• 20:08
  Speaker 6: P 500 down just over a tenth of a percent lower.
• 20:11
  Speaker 6: NASDAQ also down about a tenth of a percent or
• 20:14
  Speaker 6: 28 points off. Russell 2000 is down nearly nine-tenths of
• 20:17
  Speaker 6: one percent. Ten-year Treasury yield is up five basis points
• 20:21
  Speaker 6: to trade at five percent. Crude oil is up about
• 20:24
  Speaker 6: half a percent, trading at $ 102 a barrel, while Brent
• 20:27
  Speaker 6: retreating slightly, trading at $ 104, mostly flat, though. News from
• 20:32
  Speaker 6: Berkshire Hathaway this morning. After famed investor Warren Buffett announced
• 20:37
  Speaker 6: he is stepping down as chairman, Buffett's son Howard Buffett
• 20:41
  Speaker 6: will replace the 96-year-old legend effective immediately. Meanwhile, steel producers
• 20:47
  Speaker 6: Steel Dynamics and Nucor are sliding about 5% after they
• 20:50
  Speaker 6: issued third-quarter earnings guidance that showed weaker-than-expected results. Elsewhere, Wells
• 20:56
  Speaker 6: Fargo downgraded streaming giant Netflix. where the bank said that
• 20:59
  Speaker 6: worrying engagement trends and weaker content expected to be released
• 21:04
  Speaker 6: in the second half of this year will lead to
• 21:06
  Speaker 6: lower margin expansion in 2027 and 2028. Netflix shares are
• 21:09
  Speaker 6: down over 4.5% and shares in Xenon Pharmaceuticals sinking nearly
• 21:11
  Speaker 6: 30% after it announced it was pausing enrollment for new
• 21:14
  Speaker 6: patients this in its clinical studies for treatment for major
• 21:27
  Speaker 6: and bipolar depression following reports of mental and nervous system-related
• 21:33
  Speaker 6: side effects. I'm Tucker Sullivan. That is Wall Street Watch.
• 21:36
  Speaker 6: In the previous segment, we asked you the Friday trivia
• 21:39
  Speaker 6: question on which university campus was Nike developed. That would,
• 21:43
  Speaker 6: of course, be the University of Oregon. And Kevin in Standish, Maine,
• 21:46
  Speaker 6: is our winner today, taking on the Financial Exchange Show t-shirt.
• 21:50
  Speaker 6: Congrats to Kevin. We play trivia every Friday here on
• 21:53
  Speaker 6: the Financial Exchange. See complete contest rules at financialexchangeshow.com.
• 21:59
  Speaker 2: Peace in the Wall Street Journal. The three dreaded words
• 22:02
  Speaker 2: no one wants to hear. What's for dinner?
• 22:06
  Speaker 4: I mean, I just struggle to hear it at 1130
• 22:08
  Speaker 4: in the morning because I would get so hungry by
• 22:10
  Speaker 4: the end of this show.
• 22:11
  Speaker 3: I don't dread it coming home, though.
• 22:14
  Speaker 2: But life is busy.
• 22:15
  Speaker 3: Food is expensive.
• 22:17
  Speaker 2: I get the sense that I'm in the minority... On
• 22:22
  Speaker 2: how my family handles meals.
• 22:24
  Speaker 3: Okay, I was going to talk about how my family
• 22:26
  Speaker 3: handles it, so hit me.
• 22:29
  Speaker 2: Sunday morning, during breakfast, it's me and the kids and
• 22:34
  Speaker 2: wife around the table, and we basically sort through every
• 22:38
  Speaker 2: single dinner for the entire week.
• 22:40
  Speaker 3: Yeah, that is way different.
• 22:42
  Speaker 2: We get a whiteboard.
• 22:43
  Speaker 6: Monday, Tuesday, Wednesday, listed.
• 22:46
  Speaker 4: See, we finish hockey practice about 6.30. screech into the driveway,
• 22:51
  Speaker 4: tear into the pantry and say, what the heck are
• 22:53
  Speaker 4: we going to do tonight?
• 22:54
  Speaker 2: God would be so stressed out. So stressful. Cause this
• 22:58
  Speaker 2: way Sunday morning, then go out. Okay. Stop at this
• 23:01
  Speaker 2: store for this. Stop at this one for that. And
• 23:04
  Speaker 2: you're all stocked up for the whole week by 1130
• 23:06
  Speaker 2: Sunday morning. Yeah.
• 23:07
  Speaker 4: I think the majority of American families are much like
• 23:10
  Speaker 4: me where I have a daughter who won't eat cheese.
• 23:13
  Speaker 4: My wife won't eat gluten. Um, And, yeah, it is
• 23:20
  Speaker 4: a challenge. We have different schedules, gymnastics, hockey, dance on
• 23:24
  Speaker 4: different evenings. My main methods are shop last minute because
• 23:30
  Speaker 4: I don't know when I'm going to be able to
• 23:31
  Speaker 4: cook the stuff.
• 23:32
  Speaker 2: Okay.
• 23:34
  Speaker 4: And grill whenever possible so that there is less cleanup.
• 23:39
  Speaker 4: Like I'll be out there in January if there's no snowstorm.
• 23:42
  Speaker 3: Yeah, yeah. because I don't want to have to wash
• 23:46
  Speaker 3: all of the pans.
• 23:46
  Speaker 4: I guess there's a third thing, too, which is if
• 23:49
  Speaker 4: I am going to cook, make as much of it
• 23:51
  Speaker 4: as possible because I know I'm going to need the leftovers.
• 23:55
  Speaker 2: Interesting. Yeah.
• 23:56
  Speaker 3: So that's the Armstrong family strategy. Seems to work for us.
• 23:59
  Speaker 3: There is a lot of takeout, though.
• 24:01
  Speaker 2: So we only do takeouts on Saturdays.
• 24:03
  Speaker 3: Not us.
• 24:04
  Speaker 2: Saturdays, takeout.
• 24:05
  Speaker 5: Yeah.
• 24:05
  Speaker 2: Friday, we make pizzas. We used to do takeout pizza.
• 24:08
  Speaker 2: Then it's like, okay, let's just make it because, you know.
• 24:12
  Speaker 2: You can make smaller pizzas that are more customized. This
• 24:15
  Speaker 2: is one area where it's like, okay, if you have
• 24:17
  Speaker 2: discussions about toppings, great. We can make smaller ones and
• 24:20
  Speaker 2: not have to worry about paying $ 14 each for four
• 24:26
  Speaker 2: small pizzas.
• 24:27
  Speaker 3: New trend in the Armstrong family household.
• 24:29
  Speaker 4: We've basically come to the conclusion that if we're doing pizza,
• 24:33
  Speaker 4: most of the time it's going to be Domino's. I'm
• 24:36
  Speaker 4: sorry to all the local pizza joints out there.
• 24:38
  Speaker 2: How dare you? So basically you don't eat pizza anymore.
• 24:41
  Speaker 4: So, I mean, based on the pizza that my kids
• 24:44
  Speaker 4: are going to eat anyway, and based on the fact
• 24:47
  Speaker 4: that they make it so incredibly easy, it's just, yeah.
• 24:54
  Speaker 4: And frankly, I can't point to a pizza joint around
• 24:59
  Speaker 4: me that I absolutely adore so much more that also, remember,
• 25:03
  Speaker 4: has a gluten-free option for my wife.
• 25:05
  Speaker 2: Sure, yeah.
• 25:06
  Speaker 3: Does Domino's have that?
• 25:08
  Speaker 2: They do. What does Domino's do? They get a cauliflower
• 25:12
  Speaker 2: crust or something like that?
• 25:13
  Speaker 4: I don't actually know off the top of my head
• 25:14
  Speaker 4: because I wouldn't touch it if you paid me. This
• 25:17
  Speaker 4: is very strictly something that my wife consumes. For me,
• 25:23
  Speaker 4: they are doing a good job. It's so easy to order,
• 25:26
  Speaker 4: relatively inexpensive. You know it's going to be delivered on time,
• 25:31
  Speaker 4: and they have gluten-free for my wife.
• 25:32
  Speaker 6: It just says gluten-free crust.
• 25:34
  Speaker 3: It's made of cardboard, I think.
• 25:36
  Speaker 2: No, I'll tell you what, the gluten-free stuff's gotten a
• 25:39
  Speaker 2: lot better in the last 10 years. I mean, like
• 25:42
  Speaker 2: 10 years ago, it was like a real challenge. Now
• 25:44
  Speaker 2: the availability is everywhere, number one.
• 25:46
  Speaker 4: But yes, to take this article's point, our family operates
• 25:50
  Speaker 4: exactly like this. And we are fortunate to be able
• 25:54
  Speaker 4: to have the income that when stuff hits the fan
• 25:57
  Speaker 4: that night because somebody forgot to pick somebody up at
• 26:00
  Speaker 4: the dance studio or practice and needs to rush home,
• 26:03
  Speaker 4: that we're in the position that we can do takeout
• 26:05
  Speaker 4: that night. Otherwise, I genuinely don't know how we would
• 26:09
  Speaker 4: handle it because two working parents, neither of whom usually
• 26:12
  Speaker 4: get home until 6 p.m., makes it challenging.
• 26:14
  Speaker 2: It does. It does. It's not easy.
• 26:18
  Speaker 6: I've got to say, I was giving you crap, Mike,
• 26:21
  Speaker 6: about getting Domino's and not supporting your local pizza.
• 26:23
  Speaker 2: But local pizza lately, a little expensive.
• 26:27
  Speaker 6: Just saying, guys. I know everything's expensive, but pepper, onion,
• 26:32
  Speaker 6: sausage pizza should not cost me $ 24.
• 26:34
  Speaker 1: Mm-hmm.
• 26:36
  Speaker 2: I was like floored when I did that over the summer.
• 26:39
  Speaker 3: When I'm feeling fancy, I just call it Domino's. Just,
• 26:43
  Speaker 3: you know, switch it up a little bit.
• 26:46
  Speaker 2: I like that. Domino's. My favorite part about Domino's, you
• 26:49
  Speaker 2: guys ever use the Domino's app?
• 26:51
  Speaker 3: No, never.
• 26:52
  Speaker 2: So the Domino's app has a, like a tracking thing.
• 26:55
  Speaker 6: Do they still do the emoji thing?
• 26:57
  Speaker 1: Or no.
• 26:57
  Speaker 3: Oh, yeah, you could text them an emoji and get
• 26:59
  Speaker 3: pizza delivered.
• 27:01
  Speaker 2: He's fat.
• 27:02
  Speaker 6: Let me send him a pizza.
• 27:03
  Speaker 2: I don't know about that. So the Domino's app, I
• 27:06
  Speaker 2: remember 15 years ago when I first got it, it
• 27:10
  Speaker 2: has a tracker built into it. Like, oh, we're making
• 27:13
  Speaker 2: your pizza, and now it's cooking, and now it's doing it.
• 27:17
  Speaker 2: It came out a few years ago that the Domino's
• 27:20
  Speaker 2: pizza tracker does not actually track your pizza. Hmm. Rather.
• 27:27
  Speaker 3: They just have the supply chain down so precisely.
• 27:29
  Speaker 2: It's just so tuned into, this is how long it
• 27:33
  Speaker 2: takes us to get the pizza from point A to
• 27:36
  Speaker 2: point B, that it was just like a standard script
• 27:40
  Speaker 2: that was just running, and it was like, boom, there
• 27:42
  Speaker 2: you go, and everything was dialed because of it. Based
• 27:44
  Speaker 2: on that time ordered, I assume, is mixed into that formula.
• 27:47
  Speaker 2: I'm guessing they had something there, but it was like... okay,
• 27:51
  Speaker 2: like this is it. Now they have since adapted it
• 27:53
  Speaker 2: now where like you can actually see the GPS tracking of,
• 27:56
  Speaker 2: you know, the car and stuff like that coming to you.
• 27:59
  Speaker 3: But initially it was just that good.
• 28:01
  Speaker 2: It's kind of wild.
• 28:04
  Speaker 4: I didn't get to participate in this, but neighbors of
• 28:06
  Speaker 4: mine apparently threw a pizza taste test party where they ordered,
• 28:11
  Speaker 4: I think like two pies, cheese and pepperoni from like
• 28:13
  Speaker 4: every pizza shop in town and did like a blind tasting.
• 28:17
  Speaker 3: And that's kind of where they landed. Like, you know what?
• 28:20
  Speaker 3: Domino's here, definitely not the bottom of the list.
• 28:23
  Speaker 2: Whenever we have the family together for big stuff, holidays,
• 28:28
  Speaker 2: 4th of July, whatever it might be, we do similar
• 28:31
  Speaker 2: things just because it's like, okay, here's your opportunity to
• 28:34
  Speaker 2: try all these different places and see which ones they
• 28:37
  Speaker 2: actually like. The thing that you realize very quickly is
• 28:41
  Speaker 2: the vast majority of places get the exact same ingredients
• 28:45
  Speaker 2: from third parties and their stuff tastes the same more
• 28:48
  Speaker 2: often than not. It's in a lot of pizza places.
• 28:52
  Speaker 2: Big food. So let's take a quick break here. When
• 28:56
  Speaker 2: we return, Paul LaMonica from Barron's joins us to tell
• 29:00
  Speaker 2: us what his favorite pizza is next.
• 29:03
  Speaker 1: Smart financial talk whenever you want. Find the Financial Exchange
• 29:07
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• 29:12
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• 29:18
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• 29:25
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• 29:27
  Speaker 2: Ladies and gentlemen, the weekend.
• 29:35
  Speaker 6: The 2026 DAV 5K.
• 29:37
  Speaker 2: Boston is officially sold out.
• 29:39
  Speaker 6: The race is Saturday, November 7th at Fort Independence on
• 29:42
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• 29:46
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• 29:49
  Speaker 6: Your gifts help fund free rides to medical appointments for
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• 30:01
  Speaker 6: make your donation today. That's DAV5K. Boston.
• 30:05
  Speaker 2: As promised, we're now joined by Paul LaMonica from Barron's,
• 30:09
  Speaker 2: and we're talking a little bit about Nike here. Paul,
• 30:12
  Speaker 2: how are you doing today?
• 30:13
  Speaker 5: I'm good, thanks.
• 30:15
  Speaker 2: How are you guys doing? Doing well. So I know
• 30:17
  Speaker 2: that you had this piece that was published yesterday, but
• 30:20
  Speaker 2: today we got news that Kylian Mbappe, the French soccer
• 30:24
  Speaker 2: star and probably one of the, I don't know, three
• 30:27
  Speaker 2: most recognizable soccer players on the planet, leaving Nike for
• 30:32
  Speaker 2: on today. Your piece was titled, Nike's Days in the
• 30:37
  Speaker 2: Dow May Be Numbered, and a guy like Mbappe leaving
• 30:41
  Speaker 2: Nike for upstart on certainly suggests it's not just their
• 30:44
  Speaker 2: days in the Dow that may be numbered, but they
• 30:46
  Speaker 2: don't hold the same cachet amongst athletes they used to.
• 30:50
  Speaker 5: Yeah, that's a great point. My colleague, Kit Norton, has
• 30:53
  Speaker 5: a story up on Barron's today about the Mbappe decision.
• 30:59
  Speaker 5: I think if you look at some of the more
• 31:02
  Speaker 5: prominent athletes out there, the days of Air Jordan and
• 31:08
  Speaker 5: everyone flocking to Nike, they seem to be far in
• 31:13
  Speaker 5: the past now. Ahn has momentum, but I think also
• 31:17
  Speaker 5: New Balance has a lot of big stars as well,
• 31:22
  Speaker 5: Shohei Itani in particular. So that's troublesome, I think, for Nike.
• 31:28
  Speaker 5: And my piece just looks at how Revenue continues to fall.
• 31:33
  Speaker 5: The company is struggling. And the stock price has plunged
• 31:37
  Speaker 5: to the point where the company is going to be
• 31:40
  Speaker 5: removed from the S & P 100, which is the
• 31:43
  Speaker 5: 100 largest companies in the 500 index, effective Monday. Could
• 31:48
  Speaker 5: the Dow be next? I mean, the Dow is a
• 31:50
  Speaker 5: price-weighted average, and Nike has by far the lowest price
• 31:56
  Speaker 5: in the Dow. And it's at about a level where
• 31:59
  Speaker 5: some other recent companies that were booted also were shown
• 32:05
  Speaker 5: the door. Companies like Verizon, for example, Dow Inc., another company, Walgreens,
• 32:11
  Speaker 5: which is now private, they got removed from the Dow.
• 32:16
  Speaker 5: Intel as well. So it wouldn't shock me if Nike
• 32:20
  Speaker 5: eventually gets replaced in the Dow. And that's you know,
• 32:24
  Speaker 5: is a somewhat symbolic sad sign.
• 32:28
  Speaker 2: Paul, how does Nike fix their business? Their free cash
• 32:31
  Speaker 2: flow has declined in the last couple of years. Their
• 32:34
  Speaker 2: margins have declined from where they've been, you know, previously
• 32:37
  Speaker 2: over the last 15 to 20 years. In that type
• 32:40
  Speaker 2: of business, I mean, I've often said, like, clothing business
• 32:44
  Speaker 2: is just tough. Like, anything related to it, it's like
• 32:47
  Speaker 2: my bottom three industries that I'd ever want to, like,
• 32:50
  Speaker 2: own a company and, like, personally and operate because it's
• 32:53
  Speaker 2: so hard.
• 32:54
  Speaker 5: So fickle.
• 32:55
  Speaker 2: How did they get back to, you know, doing what
• 33:00
  Speaker 2: made them so successful for, admittedly, like 25, 30 years,
• 33:03
  Speaker 2: which is an eternity in the apparel business.
• 33:06
  Speaker 5: Yeah. It's going to be a challenge because I think
• 33:11
  Speaker 5: consumers are increasingly looking to buy online, and that's hurting
• 33:20
  Speaker 5: big partners that Nike has, like Dick's Sporting Goods. Their
• 33:24
  Speaker 5: latest earnings were pretty poor. And Dick's now owns Foot Locker.
• 33:28
  Speaker 5: But I think the challenge for Nike is that this
• 33:30
  Speaker 5: is not necessarily a company-specific problem. You talked about On
• 33:36
  Speaker 5: Holding and how they got a big win with Kylian
• 33:40
  Speaker 5: Mbappe today. But that stock has also tumbled as of late.
• 33:46
  Speaker 5: So has Adidas, So has Decker's Outdoor, which owns Hoka.
• 33:51
  Speaker 5: New Balance is a privately held company, so we don't
• 33:55
  Speaker 5: have as much of a sense of what their financials are,
• 33:58
  Speaker 5: even though it does seem like they have momentum. I'm
• 34:01
  Speaker 5: not sure there's a quick fix for Nike right now.
• 34:05
  Speaker 5: It just seems like fashion trends, consumers, younger people in particular,
• 34:10
  Speaker 5: may not necessarily be wearing sneakers for leisure. So if
• 34:17
  Speaker 5: athletic shoes are really going to be now just for leisure,
• 34:21
  Speaker 5: People that are playing sports, that's a much smaller market, obviously,
• 34:25
  Speaker 5: than the casual person out there who wanted to wear
• 34:28
  Speaker 5: those Air Jordans because Michael Jordan was the most recognizable
• 34:32
  Speaker 5: athlete on the planet back in the 80s and 90s.
• 34:34
  Speaker 2: I was going to ask you, you look at a
• 34:36
  Speaker 2: lot of these companies and the market's basically pricing in
• 34:38
  Speaker 2: that no one's going to wear shoes again.
• 34:41
  Speaker 5: I mean, it's not that they're not going to wear
• 34:43
  Speaker 5: shoes again. I think they're not wearing athletic shoes. And
• 34:47
  Speaker 5: you're right. I mean, there probably is an overreaction with
• 34:52
  Speaker 5: regards to what these stocks are trading at. But it's
• 34:57
  Speaker 5: going to be, I think, a challenge. There needs to
• 35:00
  Speaker 5: be a refresh, I think, in the category. Maybe these
• 35:04
  Speaker 5: companies need to embrace fashionable footwear a little bit more
• 35:09
  Speaker 5: because people maybe aren't wearing sneakers as fashion in the
• 35:15
  Speaker 5: way that they used to. So these companies probably need
• 35:19
  Speaker 5: to adapt.
• 35:20
  Speaker 2: Very good. Paul, appreciate you joining us today and I
• 35:23
  Speaker 2: hope you have a great weekend.
• 35:25
  Speaker 5: Thanks a lot. Appreciate it.
• 35:26
  Speaker 6: You guys too.
• 35:27
  Speaker 2: That is Paul and Monica with Barron's talking about Nike.
• 35:31
  Speaker 4: Staying on the Nike story. So my wife is big
• 35:34
  Speaker 4: into the sport of running. She watches most major marathons.
• 35:40
  Speaker 4: She'll watch track and field events. We have a bunch
• 35:43
  Speaker 4: of streaming platforms that I'd never heard of because running
• 35:46
  Speaker 4: events Does.
• 35:46
  Speaker 2: She subscribe to track and field news?
• 35:48
  Speaker 3: I don't know.
• 35:48
  Speaker 2: If she doesn't, then she's not a true fan of running.
• 35:50
  Speaker 4: She listens to a lot of podcasts, yada, yada, yada,
• 35:53
  Speaker 4: and is big into the running space and will not
• 35:55
  Speaker 4: own Nike products.
• 35:57
  Speaker 6: Podcasts about running.
• 35:58
  Speaker 1: Interesting.
• 35:59
  Speaker 2: Yeah, there are.
• 35:59
  Speaker 3: Professional running podcasts.
• 36:00
  Speaker 2: Does she listen to them while running?
• 36:02
  Speaker 3: Don't think so. I think she listens to Hard Rock
• 36:05
  Speaker 3: when she's drunk.
• 36:05
  Speaker 2: I just don't know what you talk about, but okay.
• 36:07
  Speaker 2: I'm with you, but she does. There's a space for it.
• 36:10
  Speaker 2: There's a lot that you could do there.
• 36:11
  Speaker 3: Really?
• 36:12
  Speaker 2: Well, there's two different ways to approach it. One is
• 36:14
  Speaker 2: if it's like talking about like competitive running, then it's okay.
• 36:17
  Speaker 2: Here's what happened in these races this week. There's also, okay,
• 36:20
  Speaker 2: here are like some new workouts that, you know, people
• 36:23
  Speaker 2: are trying. And here's like the latest science on, you know,
• 36:25
  Speaker 2: managing electrolytes, this and that. There's a lot.
• 36:28
  Speaker 1: I'm sorry, Mike.
• 36:29
  Speaker 4: In any case, won't buy Nike. And I think that
• 36:31
  Speaker 4: is a bit of a trend in that whole space.
• 36:33
  Speaker 4: If you may recall back in 2019, there was this
• 36:36
  Speaker 4: op-ed by a famous runner, Mary Kayne, detailing, you know,
• 36:39
  Speaker 4: Alberto Salazar. If you remember, he was the abusive coach
• 36:42
  Speaker 4: in the Oregon product that was, you know, abusing women
• 36:46
  Speaker 4: under the Nike sponsored program. And they both ended up
• 36:49
  Speaker 4: settling for this with this runner. But I was actually
• 36:53
  Speaker 4: at a running store in my town earlier buying new
• 36:56
  Speaker 4: running shoes.
• 36:57
  Speaker 3: It was like a year ago, in fact.
• 36:59
  Speaker 4: And, you know, I mentioned to them, like, you know,
• 37:01
  Speaker 4: I'm not going to buy Nike products because my wife
• 37:03
  Speaker 4: doesn't buy them. And I'm just not going to do that.
• 37:05
  Speaker 4: He's like, well, that's not a problem. We don't sell
• 37:07
  Speaker 4: any Nike shoes here. It was a dedicated running store.
• 37:11
  Speaker 3: It was fascinating.
• 37:13
  Speaker 1: Yeah.
• 37:13
  Speaker 2: Quality, right?
• 37:15
  Speaker 3: I don't know. I think it is. It could be
• 37:16
  Speaker 3: any number of things.
• 37:17
  Speaker 4: It could be that they have a bunch of employees
• 37:19
  Speaker 4: and founders that were turned off by the brand by this,
• 37:22
  Speaker 4: but I was just fascinated to see a store that
• 37:25
  Speaker 4: only sells running shoes. It's not tennis shoes, not anything else,
• 37:29
  Speaker 4: not hiking boots, running shoes only. We do not sell
• 37:32
  Speaker 4: Nike products.
• 37:34
  Speaker 2: That is interesting because, I mean, you talk about Nike's
• 37:36
  Speaker 2: gross and like, the 80s, 90s, and 2000s, a big
• 37:40
  Speaker 2: part of that was the Nike Pegasus. That shoe was
• 37:43
  Speaker 2: central to their development alongside the Air Jordan. So, yeah,
• 37:48
  Speaker 2: that is interesting to me. Taking a look at markets
• 37:50
  Speaker 2: as we head towards the top of the hour. S
• 37:53
  Speaker 2: & P down 16, Dow off 236, NASDAQ down 40.
• 37:56
  Speaker 2: So all three major indices down modestly. Ten-year Treasury back
• 38:00
  Speaker 2: at 5%, so reversing yesterday's gains. And crude oil up
• 38:05
  Speaker 2: just a touch, 30 cents a barrel to 102.21 on
• 38:09
  Speaker 2: West Texas Intermediate. We're done for the day, done for
• 38:12
  Speaker 2: the week. Hope you all have a great weekend. We'll
• 38:15
  Speaker 2: see you on Monday.
• 38:28
  Speaker 6: Hi,