Latest / The Financial Exchange Show / Can markets reverse the typical September drop?

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Can markets reverse the typical September drop? · The Financial Exchange Show

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Speaker 2: Hope everyone had a great weekend. It's Chuck, Mike and
1:17
Tucker with you here, kicking off another week on the
1:20
Financial Exchange. And what better way to kick this week
1:26
off than with this headline from the Wall Street Journal.
1:32
September is another is upsided. I blew it up so
1:36
that the headline sucks so much. September is once again
1:40
a tough month for stocks, which we can undoubtedly know
1:44
on September tenth, not even a third of the way
1:47
through the entire month.
1:48
Speaker 3: It's only September ninth. No, it's not what's today.
1:53
Speaker 4: The ninth is the ninth, Yeah, the tenth.
1:57
Speaker 3: I'm talking to you from the future. In any case,
2:01
this piece, and by the way, it does because we
2:04
only had data through the sixth.
2:08
Speaker 2: Whatever in this piece. Here's why it's so four days.
2:13
You can't say that the month is down when the
2:15
month hasn't ended yet. This is just like at the
2:19
start of this year. And yes, I do keep receipts
2:22
because the start of this year, do you remember what
2:24
happened in Market's Michael.
2:25
Speaker 3: They weren't terribly great.
2:27
Speaker 2: No, there's two days, right, it was the first three days.
2:30
The S and P five hundred was down the first
2:32
three days, and we got the stuff. Hey, when when
2:35
January is bad, here's what happens to markets. Well, guess what.
2:39
January ended up being just fine, and the first eight
2:43
months of the year ended.
2:44
Speaker 3: Up being just fine.
2:46
Speaker 2: And it's not to say that the market won't fall
2:48
apart now, because obviously it could. But we literally literally
2:56
had one bad week in September, and we're getting the piece. Well,
3:00
September is a bad month for stocks. It's a four
3:03
day week.
3:04
Speaker 3: It was a four day week, you know.
3:07
Speaker 2: And look, don't get me wrong, last week, worst week
3:10
in eighteen months, worst week in eighteen months, very bearish.
3:13
Just the way everything traded where it was, Hey, we
3:15
opened up to start the day and then puked every
3:18
single day. Reminded me a ton of September twenty twenty one,
3:21
which was an awful month for stocks. But you don't
3:25
get to write this. September is once again a tough
3:28
month for stocks. Piece on September ninth, not tenth, thank
3:33
you very much. I mean, what are we doing here, Michael.
3:39
Speaker 3: Yeah, Like, there's just way better ways to describe what's
3:43
happened so far. It was a tough last week for stocks.
3:47
They were down, like we said, four point two percent,
3:50
and unlike I don't know, unlike a few of the
3:52
other ones where you just rip the band aid off.
3:54
It was like you described this slow and steady slog,
3:57
not you know, there were big days right Friday, marks
4:00
were off by one point seven percent I think it
4:02
was after being.
4:02
Speaker 2: Up twenty point after being up, you know, almost half
4:04
a percent on the S and P five hundred to
4:06
start right.
4:07
Speaker 3: So it is this just volatile and annoying slot, but
4:09
it is just way too early to call it. But
4:11
what I do continue to find interesting, and we've talked
4:14
about this at length, is the fact that you know,
4:16
September is pretty notorious and almost no matter which way
4:20
you cut the data has been pretty bad for stocks
4:23
on average, and even taking out some of the worst
4:26
Septembers for stocks, it's still a pretty bad month on
4:28
average for stocks. And it's one of those that I
4:31
was talking with macaon this morning about this. It's pretty
4:35
tough to put your finger on why, right, the only
4:37
compelling thing that I can possibly come up with is
4:40
the old sell in May and go away. Psychology still
4:43
playing a role here where everyone's back to it, kids
4:46
going to school and things like that, And I don't
4:48
know how true that really drives for me. But it's
4:51
also not just an America focused thing. This occurs in
4:55
Japanese markets and European markets in many cases. And so
4:59
it has been it's been a bad first four days
5:04
for September, but that just tells you nothing. And facts
5:08
and evidence like check point to two is terrible first
5:11
three days in January and had you written off the
5:14
year because of it wasn't great. And also even let's
5:18
even say that September does finish the year or finish
5:21
the month poorly, does it tell you anything about the
5:24
direction of stocks for the next three months? No, or
5:27
twelve months, no or five years. No. Nothing.
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Speaker 2: Also a statistic in here the index ended lower fifty
5:36
six percent of the time over the stretch of September,
5:39
according to Dow Jones market data. This is talking about
5:41
the S and P five hundred. Like, okay, so the
5:43
S and P five hundreds down fifty six percent of
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months that it happened that September happens in so coin flip,
5:50
it's basically a coin flip. And do you know what
5:52
if you will get the broader distribution of S and
5:54
P five hundred returns over one month timeframes. This is
5:57
from data from uh Don't Quit your Day Job. The
6:00
S and P five hundred normally over all months, not
6:03
just September, it's up sixty percent of the time. So
6:08
four and ten normally are negative in septembers, it's like
6:15
five and a half out of ten.
6:17
Speaker 3: Still significantly different, and it is interesting, but it's not
6:21
like you normally. It's not like normally. Hey, markets are
6:23
only down ten percent of the time, and September.
6:25
Speaker 2: Is the only no like there's something here, But again,
6:29
let's let's actually get through September before we say that
6:32
this one is chalked up to the negative side of things,
6:36
because for all we know, we could go through the
6:40
next three weeks the exact same way that we went
6:44
through the last three weeks of August and end up
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right back within a quarter percent of an all time high.
6:51
We know this is possible because it's exactly what happened
6:54
in August. And I'm not saying it will or won't happen,
6:58
but stop writing the pieces about how bad September is
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before September is even a third of the way done.
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That's just lazy and not good. It's bad. It's bad
7:14
now it's on the floor.
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Speaker 1: Uh.
7:17
Speaker 3: Also, let's see, this is something.
7:19
Speaker 2: That I think is a much more interesting conversation, which is, hey,
7:22
you've had this this bull market going on for the
7:24
last two years now. Remember we went into bear market
7:26
territory in twenty twenty two, yep, and bottomed in October
7:31
of twenty twenty two. Another interesting but kind of useless stat.
7:36
More bull markets have started in October than any other
7:40
month for the S and P five hundred.
7:44
Speaker 3: I guess speaks to the bad September.
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Speaker 2: Maybe, but October again, like there have been let me
7:50
let me pull the exact stat just because it's it's
7:53
it's actually a really it's kind of a cool, if
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not you know, somewhat useless one because again it's like, okay,
7:59
what do I do I actually do with this? But
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when you look at the distribution of here we go,
8:06
h since World War Two, there have been sixty one
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rallies of ten percent or more in the S and
8:15
P five hundred and like like where they've continued on
8:19
before like a bear market is eventually hit or whatever
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sixty one of them. This is data from Bespoke via
8:28
Market Tear Market Tier. I don't know one of the
8:32
two sixty one of these of the sixty one that
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have happened since World War two nineteen have started during
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the month of October. The next closest is March, with
8:42
ten of them.
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Speaker 3: Okay, again, I don't know what to do with any
8:46
of that information. No, is it happening this way because
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markets are on average crappier during September and so hit
8:52
a bottom. Is it happening this way because there's something
8:55
unique about October, useless and really no way to take
8:59
advantage of it either. Correct.
9:01
Speaker 2: But you've got this piece here from CNBC. It's titled
9:04
bull Market limps into to Your Birthday with soft economic
9:06
landing in doubt and stock leaders failing, And this I
9:09
think is actually a good look at where things are
9:12
right now, which is, Hey, the economy is clearly slowing
9:16
right now. There are some real serious recession concerns that
9:21
are out there, even though you still have not really
9:23
gotten enough economic data to point in either direction. And
9:27
we're not sure how the next three to six months
9:30
are going to play out because there are three distinct
9:34
possibilities that you could have here. The first is recession,
9:38
which would be not great for the economy obviously, and
9:41
not great for stocks historically as well. But even in recessions,
9:45
the track record for stocks is mixed. It's not just
9:49
recession hits and everything goes down. That's modern recessions, but
9:54
not all of them in the last fifty years. Other possibility, Hey,
9:58
what if this was just a growth scare and now
10:00
we kind of continue to limp back along at you know,
10:04
one and a half percent GDP from here, and the
10:06
economy looks an awful lot like it did in twenty fifteen,
10:10
twenty sixteen. That's possible, like we could see that.
10:15
Speaker 3: Yep.
10:16
Speaker 2: Third possibility, Hey, we have a rebound just like we
10:19
did in Q four of last year, and you get
10:22
back up to like high twos in GDP growth and
10:25
the economy starts cranking again. Seems a little bit more
10:29
unlikely than last year, given what we're seeing with the
10:32
overall you know, tenor of the economic data, but it's
10:35
also possible because we literally saw it a year ago.
10:38
Speaker 3: And by the way, there's evidence to support any and
10:41
all of those arguments.
10:42
Speaker 2: I don't know that there's that much out there right
10:44
now that the last one is not as much.
10:46
Speaker 3: There's nothing I'm.
10:46
Speaker 2: Seeing right now that's like, hey, the economy is recelerating, right,
10:49
but there is some data out there that is like, hey,
10:53
the economy could just be entering a slow patch as
10:56
opposed to a recession.
10:59
Speaker 3: Again, you know, you have seen an uptick in unemployment,
11:02
but it leveled out last month. You haven't seen an
11:05
uptick in layoffs. You haven't seen a massive drop off
11:10
and setting like lots of different items here point to
11:13
one direction or another, and maybe a back leverage being
11:18
another one. So you know, you've got Janet yelling out there,
11:20
for instance, touting all the ones that look like a
11:23
soft landing. You've got many others tighting the ones that
11:25
look like a recession. And honestly, I don't think anybody
11:30
actually knows where we're going.
11:31
Speaker 2: No, No, take a quick break here. When we come back,
11:35
talk a little bit about what we're seeing from the
11:38
bond market as a result of this economic slowness.
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Speaker 2: Let's talk about this piece from Bloomberg and specifically, bonds
12:50
in general have had a nice little run recently. Ten
12:53
year treasury if you take a look at where it
12:55
has gone since really late April was it about four
12:59
point seven percent. Today it's at three point seven and change.
13:02
And so you've seen long term yields come down about
13:05
a full percentage point over the last four months here.
13:09
And the question that this Bloomberg piece is trying to
13:12
answer is, look, what's the path forward for bond specifically
13:16
kind of longer term bonds. And the answer that they
13:19
come up with is, well, it's gonna be determined by
13:21
how fast the.
13:22
Speaker 3: Fed cuts rates. Is that a viable argument. It's tough
13:28
to envision a scenario where bonds make a ton of
13:30
money otherwise. But yeah, if rates come down, typically bonds
13:37
go up and may continue to rally. I'll remind folks who,
13:42
you know, haven't been studying the bond market, like most
13:46
people don't. It's not exactly something that they talk about
13:48
on CNBC and Bloomberg every day. But we are still
13:51
in the United States, you know, in terms of the
13:54
overall price level of the whole bond market, the index
13:57
of the tracks it, I think we're still a good
13:58
fifteen percent off of the all time highs that were
14:01
reached back in twenty twenty. And that's because rates moved
14:03
up substantially. You've been paid your interest as time goes
14:06
on here, So maybe you've broken even or come close
14:09
to doing so at this stage. But that's I mean,
14:14
how else would we get to a point where bonds
14:16
are making a tremendous amount of money. No rates would
14:20
need to come down, which probably isn't something to wish for,
14:25
right If rates come down dramatically over the next year
14:29
or two, there's really only one reason that that happens recession.
14:33
By the way, you don't see rates, at least in
14:37
my perspective, coming down from where we are now five
14:40
and a half percent on the Fed funds rate down
14:42
to like one unless we have a pretty dire period
14:47
of unemployment.
14:48
Speaker 2: So interestingly, when you take a look at cutting cycles
14:52
and what happens to the long end of the curve,
14:56
there aren't really great facts and evidence supporting that cutting
15:00
cycles meaningfully sure move the long end once the Fed
15:05
starts cutting. And the reason why is, hey, once the
15:07
Fed starts cutting, we're kind of usually in a situation
15:10
like we are today, which is everyone has front run
15:13
it for the last few months, and so there might
15:17
be some wiggle room, but there's no clear directional trend.
15:21
Two yields once you end up seeing a recession actually
15:25
occur and a cutting cycle occur. Just as an example,
15:30
I'm just pulling it up right now, just so that
15:31
I can get the get all of the.
15:36
Speaker 3: The numbers on this.
15:37
Speaker 2: But I just want to have everything in front of
15:41
me right now, and unfortunately I don't well, I.
15:43
Speaker 3: Mean to speak to this more. Particularly, the FED has
15:46
not moved rates at all over the last twelve months.
15:49
Correct me if I'm wrong. Twelve months.
15:53
Speaker 2: Yeah, the last hike was the spring of last year. Okay,
15:55
so they haven't moved rates in twelve months. In October
15:58
of twenty twenty three, you had rates pressing up on
16:00
the ten year treasury. There we go up at five percent.
16:03
You're now sitting at under three seven five.
16:06
Speaker 3: The Fed has done nothing on rates that has been
16:09
in a move that has entirely been dictated by investors
16:12
piling into those bonds and driving rates lower on the
16:15
anticipation of trouble to come.
16:17
Speaker 2: So there have been seven real recessions since since the
16:21
nineteen sixties. I don't include twenty twenty because it was
16:24
sure it lasted for like a week and a half
16:26
uh sixty nine. The ten year treasury at the outside
16:30
of that was at seven point eight eight percent. When
16:32
it concluded, it was at seven point thirty three slight
16:35
moved down by about a half percent. UH the seventy
16:39
three seventy four recession tenures started at six seven to one.
16:42
When the recession ended, it was at seven four to six.
16:46
Moved up by one percent. Get high inflation environment UH
16:50
seventy nine, seventy nine SLAST eighty tenures started at ten
16:54
point three to three percent. By the time it concluded,
16:56
it was a ten point h nine no real movement.
16:59
UH eighty one ten years started at fourteen point six seven.
17:03
It finished at eleven point seven to three, so meaningful
17:08
downward move there, but that.
17:09
Speaker 3: Was also his inflation peaked.
17:11
Speaker 2: Nineteen ninety tenure started at eight three six, It finished
17:16
at eight oh two. Moved down a few tenths of
17:19
a percent. Two thousand, two thousand and one ten years
17:23
started at four nine three. It finished at four seven eight.
17:29
No and again in the middle. It might wiggle, but
17:32
I'm just saying start to finish on a recession. The
17:36
Great Financial Crisis tenures started at four to oh four.
17:40
It finished at three four seven, down half a percent.
17:44
So the tenure has already come down one percent in
17:46
the last four months.
17:48
Speaker 3: What's the likelihood that it crazy? Wait, where's the juice
17:50
from here?
17:51
Speaker 2: Is the question that you have to ask, And the
17:53
answer is, Look, the cutting is going to have to
17:56
be steeper than we than is currently projected, So you're
17:59
gonna have have deep cuts that then probably also need
18:02
to stay down for longer. You wouldn't expect to see
18:06
if you have a fast recovery, Well, the ten year
18:09
is going to recover with it in terms of yield,
18:11
not in terms of price where you see the selloff.
18:14
So yeah, there's a chance that you end up seeing
18:17
further downward movement in the tenure. I fully acknowledged possible.
18:21
But you also have to remember that just because the
18:23
Fed starts cutting interest rates, it doesn't mean that anything
18:26
actually happens to the long end of the curve, and
18:28
a lot of that is typically front run by people
18:31
who know that, hey, when cutting happens, all rates tend.
18:34
Speaker 3: To move a little bit. Yeah, I'd be interested too
18:35
in the intra recession moves. You remember eight It sticks
18:39
in your mind, right, and the period oh eight where
18:42
sticks in the back of my mind for me at least,
18:45
is everybody thought the financial world was coming to ruin
18:49
and piled into ten year treasuries at one point. Yes,
18:52
and they probably, you know, by the time we got
18:54
out of that recession, Yeah, they probably bounce back a
18:57
little bit on anticipation and reality checking that oh yeah,
19:00
the federal government is going to step in here and
19:02
support things.
19:03
Speaker 2: Yeah, the tenure gout is low, as to to two
19:05
before bouncing back to three five before the end of
19:07
that recession. But again, things like things had to look
19:12
really dire.
19:13
Speaker 3: For that to happen, Right, You have to ask yourself, like,
19:15
are we heading for a moment in time where people
19:17
start to question the viability of the entire US banking system? Again?
19:22
I hope not, because that would be a really tough day.
19:26
I wouldn't enjoy it. Let's take a quick break here.
19:29
Speaker 2: When we come back, we got Wall Street Watch, and
19:31
now let's talk China after this.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
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TFE show. Breaking business news is always first right here
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on the Financial Exchange Radio Network. Time now for Wall
19:54
Street Watch, a complete look at what's moving markets so
19:57
far today right here on the Financial Exchange Radio Network.
20:01
Speaker 4: Well after a tough week where a trader saw the
20:03
S and P five hundred cent four point three percent.
20:06
Markets today are beginning the week in positive territory, with
20:09
a key inflation reading on deck this coming Wednesday. Right now,
20:13
the Dow is up by about one percent, or three
20:15
hundred and eighty one points, SMP five hundred is up
20:19
three quarters of a percent or thirty nine points, and
20:21
the Nasdaq is up by two thirds of a percent.
20:24
Russell two thousand is up by about one percent as well.
20:27
Ten year treasure Reeled is flat at three points seven
20:30
to one percent, and crude oil up over half a percent,
20:33
trading just above sixty eight dollars a barrel. Boeing up
20:38
by four percent after the aircraft maker reached a deal
20:41
over the weekend with a union that represents its factory workers,
20:44
avoiding a potentially costly strike. The deal includes twenty five
20:48
percent wage increases over four years for the union that
20:51
represents more than thirty thousand workers in Boeing's factories. Meanwhile,
20:55
Planter Technologies and Dell Technologies will join the S and
20:59
P five hundred index this month, sending shares in both
21:02
companies up twelve percent and about five percent, respectively. Polanta
21:06
will replace American Airlines and Dell will replace Etsy in
21:11
the index. Elsewhere, Merk down by about one and a
21:14
half percent after competitors Summit Therapeutics announce phase three trial
21:18
results for a lung cancer drug. Some It said that
21:21
its product achieved quote a clinically meaningful benefit compared to
21:25
Merk's ki Truda. Summitch shares are I don't have them
21:30
in front of me right now. I will pull them
21:31
up momentarily. According to the Financial Times, Apple will use
21:35
Armholding's AI chip technology in the iPhone sixteen. Shares in
21:42
Armor up by four percent. And speaking of Apple, the
21:46
tech giant will hold their product event later this afternoon
21:50
at one o'clock where the company will unveil a new
21:53
generation of iPhones and will promote its new AI feature,
21:57
Apple Intelligence as a main selling point. By the way,
22:02
Apple stock is down by one percent, its Summit is
22:06
up by sixty five percent. On that news I mentioned earlier,
22:09
I'm Tucker Silva and that's Wall Street watch.
22:12
Speaker 2: China's troubles are hitting home for US companies. That is
22:17
the premise of a piece in Barrens over the weekend.
22:20
And what it's talking about is that for kind of
22:24
the last thirty years. Since the early nineteen nineties, there
22:27
have been two major ways that US companies have made
22:32
China part of their operations. In some cases, it is
22:35
using it as a factory for producing products that are
22:40
exported back to the United States think board games, socks,
22:44
things along those lines.
22:45
Speaker 3: iPhones.
22:46
Speaker 2: That was gonna be my Well, there's another case I
22:48
was going with there because the other reason is, hey,
22:52
you want access to China's billion plus people and being
22:55
able to sell into that market. And some companies like
22:58
Apple combine them and sure do both. Hey we're first
23:00
gonna make phones over there, We're gonna sell them here,
23:02
and then we're gonna tap that market afterwards. What we're
23:06
seeing right now is that the Chinese economy is stagnant.
23:13
Speaker 3: I think is the stagnant are shrinking shrinkingly stagnant? The
23:19
answer is, we don't know, but it's certainly not growing,
23:22
and it's certainly not growing as robustly as it did
23:24
for the last thirty years.
23:25
Speaker 2: The premise of investing in China before, when you wanted
23:28
to sell into that market was, hey, there are a
23:31
billion people here.
23:33
Speaker 3: Many of them are not.
23:36
Speaker 2: You know, living in cities or with access to modern
23:39
technology and watch what happens as the society modernizes and
23:43
people become spenders instead of savers. And that was the
23:46
whole premise of the last thirty years. And by the way,
23:49
American companies made a boatload of money on that premise.
23:52
It was a very successful one for them to operate it.
23:54
There's always a trade off. But yeah, you have to
23:57
deal with an authoritarian regime that controls what you say,
24:01
do act in so.
24:02
Speaker 3: On and so forth. And should you be successful, the
24:05
said authoritarian regime is going to do everything in its
24:07
power to try and build a homegrown company to compete
24:11
directly with you.
24:11
Speaker 2: Yes, what we're seeing now is that the growth story
24:17
in China doesn't exist anymore. It's not that it's damaged,
24:21
it's gone quite honestly. The population may or may not
24:26
be shrinking from year to year, the workforce is on
24:31
the verge of shrinking from year to year. And spending
24:36
from Chinese households has kind of gone in the toilet
24:41
since the pandemic broke out. And so if you are
24:46
an American company that is trying to sell into China
24:50
right now.
24:52
Speaker 3: You have the pros that you used to list.
24:54
Speaker 2: Hey, that the growth rate of you know, the overall
24:56
economies fast that we can sell into this, and there's
24:58
a lot of growth potential w all these people. Well
25:02
if you don't have that, but you have to deal
25:04
with an authoritarian regime that's going to favor homegrown companies
25:08
that may or may not copy your products. Eventually, you
25:12
kind of sit there and you're like, what am I
25:14
doing here?
25:15
Speaker 3: Well, I think there's a difference here. It is still,
25:19
by any stretch, a massively interesting market to try and
25:24
sell to, because, plain and simple, there's billions of people.
25:28
And you know, I've heard this spoken about on Shark Tank,
25:32
like being able to say that, oh, if I just
25:34
sold my product to one percent of Chinese consumers is
25:36
the worst possible sales point you could make, because yeah, horrible,
25:39
no means of doing so. But it is still a
25:43
market that I think many companies will be attracted to.
25:46
The problem is more for those who have been doing
25:49
business in China for decades and are now needing to
25:53
really revise their expectations for what the hell happens next
25:57
you speak to Marriott, Starbucks, General Mode, any of these
26:00
companies who have kind of jumped in hook line and
26:04
Sinker and I think there are some that are going
26:08
to be doing you know, better than others in this space.
26:10
But you know, auto industry would be you know, the
26:14
one that I would point towards where General Motors, I
26:16
don't know what future you have in selling cars in China.
26:21
They can make them significantly cheaper and quite honestly these
26:25
days they're making them better.
26:29
Speaker 2: That's reserve judgment there, fair companies have been around for
26:33
a year. Let's see how the cars hold up for
26:35
a couple of years before we say they're.
26:36
Speaker 3: Making them better. So like we will see where all
26:40
that lands. But you know, what is the case for
26:44
someone in China picking a General Motors vehicle over a
26:48
domestic manufactured one. It's tough to see other than maybe
26:51
like a Cadillac. There there are certain areas that, you know,
26:55
because there are billions of people and some of them
26:57
are quite wealthy, that there could be some traction to
27:00
driving some of these luxury brands. But and same goes
27:03
for Starbucks and same goes for Marriott. But that wasn't
27:06
the story of those companies. The story of those companies
27:08
was look how fast this sales growth is going to
27:11
happen here? And that story is dead.
27:14
Speaker 2: Speaking of Starbucks, they've got a new CEO, Brian Nickel
27:19
is taking he's doing a ceremonial first sip of coffee
27:23
this morning as he reports to work.
27:29
Speaker 3: Honest, I keep forgetting that he's commuting.
27:32
Speaker 2: He's commuting on a corporate jet to Starbucks Seattle offices.
27:37
I think he's gonna be there. It sounds like a
27:38
couple of weeks out of each month. So where is
27:41
the ceremonial cup then? Because I don't know about Brian,
27:44
but if I don't have my cup of coffee within
27:46
the first hour of waking, then I hope it's not
27:49
gonna be very pleasant to be around. I hope it's
27:51
not on the plane because a there can be some
27:52
turbulence and you could spill a little, but be your taste,
27:56
Bud's totally changed when you're at that surtitude. It doesn't
27:59
taste the same, which what they have to see an
28:00
airplane food differently, And if you ever try it at
28:04
ground level, it's even worse than it is thirty thousand
28:07
feet in the air.
28:09
Speaker 3: I digress.
28:10
Speaker 2: Indeed, Brian Nickel, I think this is going to be
28:13
a really interesting case here because it's kind of in
28:19
one sense, it's right up his alley because he went
28:21
to Chipotle when Chipotle was having all kinds of problems
28:24
with their brand and image and not getting people horribly
28:27
sick for meeting burritos, and he made us forget about
28:31
that and instead complain about the high cost of guac
28:34
while making the company really successful. Might I add, yep,
28:38
he now goes to a company in Starbucks that doesn't have,
28:41
you know, the same kind of issues because there aren't
28:44
like a ton of people throwing up from drinking Starbucks.
28:47
There just aren't a ton of people on the margins
28:51
that are going there. That the sales is kind of plateaued,
28:55
and internally the culture seems a little bit broken because
29:00
you've had there have been all these problems with their
29:02
mobile platform, from hey, we can't get enough mobile orders too,
29:06
Hey we got two hundred mobile orders that are due
29:08
at the same time and we can't possibly produce all
29:10
these and people are just waiting around getting angry in
29:12
our stores.
29:13
Speaker 3: And then what was the other what's the number of
29:16
combinations that you can possibly order on the Starbucks app.
29:19
It's it's some crazy number. And so they have a
29:24
little bit of a logistics problem. They clearly have a
29:26
growth and demand problem. They have a bit of a
29:28
labor problem and there and okay, another problem. You've had
29:34
four CEOs in five years, So yes, you have a
29:37
leadership problem too, and so.
29:39
Speaker 2: And also every time that Howard Schultz has left the company,
29:41
they've performed horribly, right, And so.
29:44
Speaker 4: I'll add a menu innovation as well.
29:47
Speaker 3: To that menu innovation.
29:49
Speaker 4: Yeah, like the olive oil coffee drink, Like what oliato?
29:54
Remember that one?
29:54
Speaker 3: I do? I tried it?
29:57
Speaker 4: Yeah, have you had it again?
29:58
Speaker 3: No? Okay?
30:00
Speaker 4: And the food is just really hasn't changed much at all.
30:04
Speaker 3: The food at all those places isn't good. What are
30:07
all those places?
30:08
Speaker 2: Any place that is coffee focused?
30:10
Speaker 3: Yeah, I mean dunks isn't good, like.
30:12
Speaker 4: The McDonald's dunks.
30:14
Speaker 2: But none of them is great. Like, yeah, you know,
30:17
you're kind of underwhelmed by it.
30:19
Speaker 3: Got a one hundred people and south the accents saying
30:23
you better hold your tongue chuck insulting dunkin donuts here, and.
30:27
Speaker 2: How many people are gonna be like yeah, I'll die
30:29
on the hill of the dunk and bagel Like, yeah,
30:31
I hear you.
30:32
Speaker 3: So they face a lot of challenges Interestingly, what I
30:36
keep hearing about are the logistics problems, the labor problems.
30:39
I hear nothing about what is a massive one, which
30:42
is China. Like, there's no I can see how they're
30:47
prepping to address some of the labor issues, some of
30:50
the logistics issues. Maybe they're going to slim down their
30:52
menu and say you can't do this, or if you
30:54
do it, it's gonna have a search charge like that.
30:56
They think they're coming up with ways in the background
30:59
to deal with some of the problems that we're hearing about.
31:02
But quite honestly, nobody's talking about the fact that they
31:04
have a massive presence in China that's being undercut by
31:10
Luck and Coffee, as well as being undercut by a
31:15
consumer that just doesn't have the money to spend on
31:17
their product.
31:18
Speaker 2: Completely forgot about Luck and Coffee.
31:21
Speaker 3: Have we figured out off a bunch of investors figured
31:23
out if they stopped frauding kept limping along. Well, that's
31:27
the important part to understand about any company doing business
31:30
in China is no, you have no idea.
31:32
Speaker 2: We don't know like we we didn't, we don't know now.
31:36
So it's hard to say. The other piece on Starbucks
31:40
and maybe This is just my perception. I'm not a
31:42
coffee drinker, so I don't know how it like how
31:46
it all plays out. It feels like when they were,
31:48
you know, coming up in the nineties and early two thousands,
31:52
they had this positioning as this this premium brand, and
31:55
they still have the pricing as the premium brand today.
31:58
But doesn't it feel like I don't know if it's
32:01
just me, but doesn't it feel like some of these
32:04
struggles and how like the service has kind of gone
32:07
downhill because of the mobile app. Doesn't it almost feel
32:11
like they're not delivering on the premium ness that they
32:15
need to or am I just making that up?
32:17
Speaker 3: And I'm not a coffee drink no start what I'm
32:19
talking about.
32:20
Speaker 4: I think absolutely fair.
32:21
Speaker 3: What is it that's deteriorated the brand? I mean, certainly
32:23
there's more competition out there from from many other more
32:26
local startups that are doing this. There's no national chain
32:30
that I think competes with them, and it's more that
32:33
out premium Starbucks. So I don't think that's an issue.
32:35
Speaker 2: But I mean, you carry the Starbucks cup as a
32:38
status symbol.
32:41
Speaker 3: Is it still that? Is it still that? I'm not
32:45
sure that it's so Apple. I think of it as
32:47
a status symbol in that way. I'm not sure that
32:49
I think about Starbucks in the same way I think
32:51
it was, though I think it contributed.
32:54
Speaker 4: It definitely was a few years ago, and now it's
32:57
just like Starbucks and Donks are the same thing pretty much.
33:00
I just go to Dunks because it's cheaper.
33:03
Speaker 3: See, I'm not sure I land there. I think there's
33:05
plenty I'm not one of them, but I think there's
33:07
plenty of people that will tell you, no, the coffee
33:09
at Dunks does not even come close to competing with Starbucks.
33:12
And I'll go to Starbucks all day. And then there's
33:14
others that say, like myself, that no, for what I'm ordering,
33:17
there's no difference and I don't care. So I think
33:21
they still have that, but I think it has been undercut.
33:23
And I'm not sure what has led to that undercutting,
33:25
other than just existing and expanding this much. Let's take
33:28
a quick break here.
33:29
Speaker 2: When we come back, we'll give a little bit more
33:31
detail on Boeing reaching a deal with their union workers.
33:35
Speaker 3: Right after this.
33:37
Speaker 1: Business and financial news affecting the markets and your wallet.
33:41
We've got it all straight from Wall Street right here
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33:52
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34:07
Speaker 3: All right.
34:08
Speaker 2: So, Boeing over the weekend yesterday actually reached a tentative
34:13
deal for a new contract with their unionized workers. Remember,
34:17
not all Boeing workers are unionized workers. It's part of
34:21
the reason why they have their South Carolina facility which
34:24
explicitly does not require unionization and does not have a
34:27
union to the best of my knowledge, even and.
34:30
Speaker 3: What the proposal looks like.
34:32
Speaker 2: It's a four year contract and it would have a
34:35
twenty five percent cumulative rais during that time, So it
34:40
works out to about a six percent bump in salaries
34:43
each year of the four year contract, and that is
34:46
lower than the forty percent bump that the union had
34:49
been looking for. But I think that was a negotiating tactic.
34:53
They didn't think they were actually going to get forty
34:55
percent over four years. And there are also a few
34:58
improvements to healthcare and retire benefits, and a promise that
35:02
the company will build their next commercial airplane in their
35:06
Seattle and Portland locations, not in South Carolina.
35:10
Speaker 3: Which is interesting but not actually binding because they're not
35:14
going to have a new airplane by the end of
35:16
twenty twenty eight.
35:16
Speaker 2: Correct, it won't be coming up during this contract.
35:18
Speaker 3: But it's symbolic of something and seems like a verbal
35:20
commitment to that. You know, if they backtrack on it
35:25
wouldn't be a great look. This might be the first
35:27
piece of good news that I can think about for
35:29
Boeing in quite some time.
35:30
Speaker 2: At least they're not going to have a labor issue. Yeah,
35:32
and they have costs you know, that are kind of
35:34
set in stone now.
35:35
Speaker 3: They do have to vote on this, by the way,
35:37
this is not voted in correct.
35:39
Speaker 2: The piece that is interesting to me this is a
35:42
big bump in pay at a time where wage growth
35:46
is slowing. So I can see this is a pretty
35:48
big win for the union given where we are in
35:50
the business cycle right now.
35:52
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36:58
Speaker 2: Amazon wants your palm and TA wants your face. That's
37:01
the headline from the Wall Street Journal. The question that
37:04
I raised then is who's getting my belly button? But
37:07
in any I don know, right, Yeah, real problem in
37:10
any case. This is talking about the proliferation of biometrics
37:14
into security procedures for a whole host of different things,
37:20
anything from going through you're checking at the airport to
37:24
paying for your groceries at Amazon. And how is that
37:27
information going to be safeguarded? How are we going to
37:30
make sure that no one you know, has the scan
37:33
of your iris or your palm or something like that
37:35
to be able to do whatever it is you're supposed
37:38
to do. And in a world where hey, ultimately it
37:41
might be a huge pain, but you could change your
37:43
Social Security number, you can't change your palm.
37:47
Speaker 3: Yeah, I won't see any reason to give Amazon my palm. Like,
37:51
so you can save me that extra six seconds it
37:54
takes me to take my phone out and tap it
37:56
on your device. I'm good TSA taking my face. They
38:00
already have it. That's kind of my point is, like,
38:03
you know, I'm on every camera in the airport. Have
38:05
you heard of a driver's license? Watch out, folks. I
38:08
mean I might be more willing to do that one
38:11
if they offer me some benefit to it. I suppose
38:14
maybe a donut. Actually, they require a picture of my
38:16
face when I get into your TSA. This is already
38:18
done quick break here.
38:20
Speaker 2: Hour two coming up in a bit