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Inflation expectations need to come down · The Financial Exchange Show

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  Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
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  Speaker 1: and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Tucker with you here on a Friday.
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  Speaker 2: This morning, at eight thirty am Eastern time, we received
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  Speaker 2: the first government data of October what will be the
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  Speaker 2: most likely only government economic data from October. We received
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  Speaker 2: the September CPI that came in a little bit better
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  Speaker 2: than expected, still at point three percent month over month
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  Speaker 2: on the headline, but point two percent month over month
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  Speaker 2: on core, both running at three percent over the last
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  Speaker 2: twelve months. And this report largely compiled because Social Security
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  Speaker 2: needed to calculate the cost of living adjustment for twenty
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  Speaker 2: twenty six, which is now going to be two point
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  Speaker 2: eight percent based on the results of this report.
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  Speaker 3: So if you're.
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  Speaker 2: Listening and you happen to be someone who's collecting Social
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  Speaker 2: Security now or trying to figure out, hey, what benefits
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  Speaker 2: look like for next year? Is a two point eight
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  Speaker 2: percent cost of living adjustment for twenty twenty six. Indeed,
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  Speaker 2: so there's that. Taking a look around markets and what
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  Speaker 2: is moving today, We've got equity markets showing an awful
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  Speaker 2: lot of green on them right now. The S and
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  Speaker 2: P five hundred up fifty one points to a new
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  Speaker 2: all time high of sixty seven to ninety, the Dow
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  Speaker 2: Jones Industrial average up four hundred and three points, in
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  Speaker 2: the Nasdaq composite up two hundred and twenty two, So
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  Speaker 2: about a three quarters of an percent to one percent
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  Speaker 2: rally taking place in equity markets. Ten year treasury not
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  Speaker 2: really budging in any way, shape or form. It's a
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  Speaker 2: three point nine to nine to one percent. That is
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  Speaker 2: two tenths of a basis point above where it was yesterday.
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  Speaker 2: Not very exciting, but that's fine when you're talking bonds.
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  Speaker 2: Dollar index is up four cents. It's not really four cents.
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  Speaker 2: The dollar index is a point oh four percent, we'll
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  Speaker 2: call it to ninety eight point seven six. We've got
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  Speaker 2: goal down a quarter percent, are about ten dollars an
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  Speaker 2: ounce to forty one to thirty four. And crude oil
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  Speaker 2: West Texas Intermediate is sitting there right now, up forty
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  Speaker 2: five cents a barrel to sixty two to twenty four.
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  Speaker 2: The triple A national average for gas prices currently sits
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  Speaker 2: at three h six and eight tenths of a cent.
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  Speaker 2: That's down about ten cents from a month ago, but
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  Speaker 2: up about two cents from a week ago.
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  Speaker 3: The bond market piece, I think could use additional context here, Chuck,
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  Speaker 3: because we do have equity markets hitting new all time highs.
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  Speaker 3: I think on some release of concern that the inflation
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  Speaker 3: report that we got this morning could have hindered the
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  Speaker 3: Fed's ability to cut rates, or at least added some
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  Speaker 3: questionability into it. It didn't do that. So equity markets
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  Speaker 3: rallying on the news. What investors are seemingly not doing
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  Speaker 3: is betting that long term rates will need to come
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  Speaker 3: down in any meaningful way. And I think that's an
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  Speaker 3: important caveat here. They are fully buying that the Fed
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  Speaker 3: is going to cut rates. They are not buying that
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  Speaker 3: there's gonna be any sustained pressure on longer term interest rates,
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  Speaker 3: and therefore, the things that really matter to everyday consumers,
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  Speaker 3: we're not seeing any shake up on those rates right now,
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  Speaker 3: and we haven't since the Fed underwent their rate cutting
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  Speaker 3: cycle that we're in right now.
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  Speaker 2: Yeah, I mean, let's explore this just a little bit,
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  Speaker 2: just because I think it's kind of interesting. And if
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  Speaker 2: we look at the let's look at the ten year treasury, sure,
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  Speaker 2: and then let's look at CPI and actually, I'm gonna
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  Speaker 2: do one other thing. I just want to build a
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  Speaker 2: little spread here between the two. So we're gonna do
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  Speaker 2: the ten year treasury rate. I'm doing this in real time,
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  Speaker 2: so we'll see if this ends up working. And we're
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  Speaker 2: gonna compare that to CPI year over year, and let's
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  Speaker 2: see what we get for the spread. Okay, perfect, here
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  Speaker 2: we go. So if you look historically at the difference
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  Speaker 2: between the tenure Treasury, so take the tenure Treasury and
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  Speaker 2: subtract from it CPI year over years. So right now
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  Speaker 2: you'd get one or thereabouts one point one four seven
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  Speaker 2: is what you have right now. If you look at
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  Speaker 2: the historical average for which we have data, which the
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  Speaker 2: data I have goes back to nineteen sixty two, long
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  Speaker 2: ways sixty three years of data, so it's a decent chunk.
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  Speaker 2: The average spread between tenure Treasury and CPI is two percent.
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  Speaker 2: There's generally a two percent difference. The tenure Treasury generally
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  Speaker 2: runs two percent higher than CPI. There are times where
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  Speaker 2: that's not the case. It's generally during times where inflation spikes.
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  Speaker 2: Was an example, first big round of inflation in the
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  Speaker 2: early nineteen seventies. In September seventy four, inflation was running
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  Speaker 2: twelve percent. Tenure Treasury was at eight If you go
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  Speaker 2: to the second round of inflation late nineteen seventies, early eighties,
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  Speaker 2: Inflation in May of eighty was running fourteen percent. Tenure
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  Speaker 2: treasury was at ten the reason being you don't expect
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  Speaker 2: those things to last that long, and so you wouldn't
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  Speaker 2: expect the ten year to need to be that high.
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  Speaker 2: The biggest gap that we've seen the other way was
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  Speaker 2: in the early eighties. June of eighty four, ten year
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  Speaker 2: treasury was still at thirteen percent. It had kept rising,
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  Speaker 2: you know, after inflation was down to four. But in general,
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  Speaker 2: especially when you look at you know, kind of the
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  Speaker 2: modern economy, which I'll say like effectively starts like post
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  Speaker 2: nineteen ninety, you know, you start getting into the Internet
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  Speaker 2: and more globalization and things like that. You generally were around,
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  Speaker 2: you know, anywhere from one and a half percent to
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  Speaker 2: four and a half percent was the spread between those two.
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  Speaker 2: And the reason why is is, like, think about it
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  Speaker 2: just in the context of this. If I am a lender.
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  Speaker 2: Let's say that I am looking at Michael saying I
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  Speaker 2: would like to lend you money. One of the decisions
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  Speaker 2: as to how much it's going to cost, like how
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  Speaker 2: much I will charge Mic in order to lend money
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  Speaker 2: is going to be based on his trustworthiness. And I
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  Speaker 2: look at Mike and I say, you know what, I've
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  Speaker 2: known Mike and off a long time.
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  Speaker 3: Don't trust him as far as I can throw him.
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  Speaker 2: I really don't trust him. But I'm gonna lend to
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  Speaker 2: Tucker really cheaply, you know, mistake, I'm gonna do that.
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  Speaker 2: So I'm content to lend to Tucker at an interest
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  Speaker 2: rate of call it, you know, one percent for ten years,
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  Speaker 2: because I really trust Tucker. But that's a real one
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  Speaker 2: percent that I'm demanding. Because ultimately, the other piece that's
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  Speaker 2: gonna play into this is, hey, there's a cost in
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  Speaker 2: terms of inflation over that length that I need to
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  Speaker 2: account for as well. And so I can't just ask
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  Speaker 2: Tucker for one percent, you know, and say, yes, that's
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  Speaker 2: gonna I'm gonna make one percent. If inflation's running at two, well,
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  Speaker 2: I lose a little in terms of purchasing power by
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  Speaker 2: making that loan. If inflation's running at five, I lose
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  Speaker 2: a lot in purchasing power by making that loan. And
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  Speaker 2: so oftentimes I say, no, I'm gonna demand, you know,
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  Speaker 2: a spread above where inflation is the time. So yeah,
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  Speaker 2: I might make Tucker alone at one percent, but it's
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  Speaker 2: going to be one percent north of where CPI is,
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  Speaker 2: and that's three percent now, so I'm going to demand four.
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  Speaker 2: And that's basically why that the ten year is where
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  Speaker 2: it is in my opinion. And this can all also change,
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  Speaker 2: Like this is always a fluid situation, right, and so.
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  Speaker 3: You've got to get inflation expectations down if you're going
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  Speaker 3: to see those long term rates come down. And there's
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  Speaker 3: two ways you can. There's only one real way the
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  Speaker 3: story that I can think of it, and it's an
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  Speaker 3: end to this business cycle. Yeah.
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  Speaker 2: Historically, the only way that inflation has gotten down to
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  Speaker 2: the levels that people want is through recession. I'm not
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  Speaker 2: saying this is good or bad. I'm just saying it's
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  Speaker 2: the historical data that we have. Now. If you look
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  Speaker 2: at the period where the spread between the ten year
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  Speaker 2: was lowest compared to CPI, it was the twenty tens.
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  Speaker 2: Most of the twenty tens sucked economically, at least in
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  Speaker 2: the United States. You know, I like, go through it.
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  Speaker 2: Twenty ten really bad, twenty eleven really bad, twenty twelve
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  Speaker 2: pretty bad, twenty thirteen pretty bad, twenty fourteen getting okay
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  Speaker 2: ish twenty fifteen okay, ish, twenty sixteen pretty good, twenty
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  Speaker 2: seventeen good, twenty eighteen great, twenty nineteen great. But it
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  Speaker 2: like it was, it was like it was a lot
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  Speaker 2: of not great. There was a lot of bad in
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  Speaker 2: the twenty tens. And that's why investors were like, Okay,
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  Speaker 2: we're pretty convinced that inflation is not actually going to
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  Speaker 2: come back in a meaningful way. We don't afford, we
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  Speaker 2: don't need much of a spread relative to you know, CPI,
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  Speaker 2: and so that's why, like in April of seventeen, CPI
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  Speaker 2: is running two point two the tenyure treasurre room was
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  Speaker 2: two two nine. Like, Okay, we know it's not going
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  Speaker 2: to go anywhere. Yeah, let's talk about something that might
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  Speaker 2: go somewhere. We're gonna take a quick break, and then
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  Speaker 2: we're gonna talk Argentina. After this uh fascinating little election
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  Speaker 2: coming up this weekend. We'll talk about what it means
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  Speaker 2: the US's involvement economically and what can happen and what's
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  Speaker 2: actually happening on the ground. Right after this.
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  Speaker 4: All right, do a little bit trivia here On this day.
• 10:53
  Speaker 4: In nineteen thirty one, al Capone was sentenced to eleven
• 10:57
  Speaker 4: years in prison. The architect of the scene Valentine's Day
• 11:01
  Speaker 4: massacre spent half of his prison sentence at Alcatraz. So
• 11:06
  Speaker 4: our triviute question today, what was al Capone sent to prison?
• 11:11
  Speaker 2: Four? Once again?
• 11:12
  Speaker 4: What was al Capone sent to prison four? Be the
• 11:17
  Speaker 4: I don't know eighth person today to text us at
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  Speaker 4: six one seven three, six, two thirteen eighty five with
• 11:23
  Speaker 4: the with the correct answer, and you win a Financial
• 11:26
  Speaker 4: Exchange Show T shirt. Once again, the eighth correct response
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  Speaker 4: to text us to the number six one seven, three,
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  Speaker 4: six two thirteen eighty five will win that T shirt.
• 11:36
  Speaker 4: See complete contest rules at Financial Exchange Show dot com.
• 11:40
  Speaker 3: Tucker's done done with what the week. I'm glad to
• 11:44
  Speaker 3: be the I don't know whatever eightieth person, whatever that,
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  Speaker 3: whatever answer you want, and maybe we'll pick you as
• 11:51
  Speaker 3: the winner today.
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  Speaker 2: Huh fuss buzz off. With that, we turned to Argentina.
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  Speaker 2: So Argentina has an election that's happening this markeend, and
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  Speaker 2: the big question is whether the population decides they want
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  Speaker 2: more or less of Javier Malay. Malay was elected two
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  Speaker 2: years ago with the idea that he was going to
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  Speaker 2: come in and reform the economy significantly and that those
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  Speaker 2: reforms would produce lasting, you know, economic growth for Argentina.
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  Speaker 2: He did come in and put a bunch of reforms
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  Speaker 2: in and they were very successful in the short term
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  Speaker 2: in terms of Hey, inflation dropped from two hundred percent
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  Speaker 2: at the end of twenty twenty three down to thirty
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  Speaker 2: two percent in September. Now, I know all of us
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  Speaker 2: in the United States will get thirty two percent inflation
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  Speaker 2: to be like, my goodness, but remember everything's relative. When
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  Speaker 2: you're coming from two hundred percent inflation, thirty two is
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  Speaker 2: not bad.
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  Speaker 3: There are also some government employees and contractors who are
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  Speaker 3: not terribly happy. Even though inflation's down because he did
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  Speaker 3: cut quite a bit out of government spending in order
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  Speaker 3: to accomplish some of this.
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  Speaker 2: And part of the problem that Argentina is having now
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  Speaker 2: is one of the mechanisms that they've used in order
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  Speaker 2: to try to keep inflation down is trying to peg
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  Speaker 2: the currency to the dollar. The issue is that Argentina
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  Speaker 2: imports a ton of stuff in order for it to
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  Speaker 2: for day to day life to actually happen.
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  Speaker 3: It's a heavily agricultural economy and not much else, and
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  Speaker 3: so when you have a currency that is rapidly depreciating,
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  Speaker 3: it creates inflation just by virtue of needing to import
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  Speaker 3: stuff in a depreciating currency, which we have to explain
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  Speaker 3: because again we focused on we explained it, but it's
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  Speaker 3: such a foreign concept to Americans, right because because the
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  Speaker 3: all global trade occurs in dollars, and so this is
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  Speaker 3: not a phenomenon that Americans experience, right if oil prices
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  Speaker 3: go up, and we.
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  Speaker 2: Also don't import most of our stuff like that. Yes,
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  Speaker 2: I know, we import like thirty percent of the stuff
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  Speaker 2: that but like most of the stuff we actually do
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  Speaker 2: produce in America, it's just like this the stuff you know,
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  Speaker 2: thirty percent or so. We don't. But here's the deal. Like,
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  Speaker 2: let's say that you are using the Argentinian paeso and
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  Speaker 2: you're buying stuff from America. You're trying to buy a
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  Speaker 2: light bulb as an example, it costs two dollars. If
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  Speaker 2: the exchange rate goes from fourteen hundred pasos to the dollar,
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  Speaker 2: which is basically where it is right now, to twenty
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  Speaker 2: eight hundred paesos to the dollar, then you need to
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  Speaker 2: have twice as many paesos in order to buy said
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  Speaker 2: light bulb. Hence inflation, which.
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  Speaker 3: Is why there's a black market for dollars and all
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  Speaker 3: sorts of correct things in Argentina.
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  Speaker 2: So the Argentinian government has been trying to peg its
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  Speaker 2: currency to the dollar. There's two ways that you can
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  Speaker 2: do this. Number one, you can effectively sell again, Like
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  Speaker 2: you think about it in terms of, Okay, if the
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  Speaker 2: peso is weakening against the dollar, what do I need
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  Speaker 2: to do. I need to buy pasos up and take
• 14:46
  Speaker 2: them out of circulation. What do you do it with dollars?
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  Speaker 2: Typically in order to get both sides of it working.
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  Speaker 2: The problem that Argentina ran into starting about a month ago,
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  Speaker 2: they're kind of running out of dollars. They're not running
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  Speaker 2: out of pasos, but they're runningut of because dollars actually exist,
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  Speaker 2: they're a real thing.
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  Speaker 3: And part of the reason they're running out of dollars
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  Speaker 3: is because Milay lost his party lost a pretty big
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  Speaker 3: election in the Buenos Aires region, and when that happened.
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  Speaker 2: People started trying to sell the Argentinian currency.
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  Speaker 3: Yeah, they started betting against the currency, and so they're
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  Speaker 3: running out of dollars to try and keep the paeso afloat.
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  Speaker 2: Now there's a great chart that I found on social
• 15:25
  Speaker 2: media that illustrates exactly what is happening. So even though
• 15:29
  Speaker 2: so one of the things that's really interesting, you do
• 15:33
  Speaker 2: have some American companies that have their shares listed on
• 15:35
  Speaker 2: the Argentinian stock exchange. Okay, don't know why, but they
• 15:39
  Speaker 2: but they do. Apple just as an example, is listed
• 15:43
  Speaker 2: on the Argentinian stock exchange. Okay, don't know why, but
• 15:47
  Speaker 2: they are. So you know, people in Argentina, in local
• 15:49
  Speaker 2: markets and local currency can go and buy Apple shares.
• 15:53
  Speaker 2: And for most of this year, the price of Apple
• 15:57
  Speaker 2: in the Argentinian market traded basically in line with the
• 16:02
  Speaker 2: price in American markets, suggesting that there was confidence in
• 16:06
  Speaker 2: that dollar PEG because you couldn't arbitrage between them since
• 16:10
  Speaker 2: mid September. What is happening is that in order to
• 16:14
  Speaker 2: buy shares in Argentina you have to pay right now,
• 16:17
  Speaker 2: as of yesterday, an eight percent premium relative to the
• 16:21
  Speaker 2: American shares if you're buying in pasos. The implication is
• 16:26
  Speaker 2: that the official exchange rate that is out there right
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  Speaker 2: now between the paso and the dollar is not going
• 16:34
  Speaker 2: to be able to hold right now. You might say,
• 16:37
  Speaker 2: like an eight percent like premium, Like that's you know,
• 16:39
  Speaker 2: a huge difference. Just to give you some context, if
• 16:42
  Speaker 2: you look at this relationship historically, like over the last
• 16:46
  Speaker 2: you know, five six years, at one point in twenty twenty,
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  Speaker 2: that gap was fifty percent, suggesting, hey, they're like there's
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  Speaker 2: gonna be some real problems with the paso relative to
• 16:57
  Speaker 2: the dollar. But again this is largely men over the
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  Speaker 2: last year or two with with Malay with this PEG.
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  Speaker 2: But now investors, this is this is like the financial
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  Speaker 2: sign or one of them that investors are losing confidence
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  Speaker 2: that the PEG is going to be able to be
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  Speaker 2: maintained even with the US backing to the tune of
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  Speaker 2: twenty billion dollars in swamp lines and trying to arrange
• 17:17
  Speaker 2: another twenty billion in finance.
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  Speaker 3: So in plain English, the United States government has loaned
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  Speaker 3: Argentina's government's twenty billion US dollars to try and maintain
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  Speaker 3: this peg. And the question is the question is very simple,
• 17:31
  Speaker 3: how fast will they run through it?
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  Speaker 2: How fast do they run through it? And is there
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  Speaker 2: any chance of them paying this back? And markets right
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  Speaker 2: now are not really sure they're going to be able
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  Speaker 2: to pay it back, And a lot hinges on this
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  Speaker 2: weekend because if Malay's party is able to win the
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  Speaker 2: seats that they need to, then you say, okay, Malay
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  Speaker 2: retains you know, the political capital and the real capital
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  Speaker 2: needed in order to continue backing this. If not, gosh,
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  Speaker 2: there's going to be problems. So it's kind of binary.
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  Speaker 2: This money is very likely to either be paid back
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  Speaker 2: in full or not be paid back at all. It's
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  Speaker 2: not something where you sit there and you're like, well,
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  Speaker 2: the Argentinians will pay back like ten billion dollars of it.
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  Speaker 2: I don't think that's really an option. Yeah, this stuff
• 18:15
  Speaker 2: could be lit on fire rather quickly. We could be
• 18:18
  Speaker 2: sitting here at the end of next week and it's gone,
• 18:20
  Speaker 2: or okay, like this, this can actually work out. So
• 18:25
  Speaker 2: it's fascinating to me what we might end up seeing
• 18:27
  Speaker 2: out of this. I have no idea, Like I do
• 18:31
  Speaker 2: not know Argentinian politics. One of my best friends from
• 18:35
  Speaker 2: college's family is from Argentina. I've sat down with him
• 18:38
  Speaker 2: and tried to understand it, and I'm just like, I
• 18:41
  Speaker 2: can't get there. But it's something where by early next
• 18:46
  Speaker 2: week we're gonna have a really good sense as to
• 18:48
  Speaker 2: whether this loan is gonna be able to be paid
• 18:50
  Speaker 2: back or not. Because things get out of control very
• 18:53
  Speaker 2: quickly in Argentina. When we talk about economics and debt,
• 18:58
  Speaker 2: you know, it's again it's very much a binary situation.
• 19:04
  Speaker 2: It's not well, we can recover you know, fifty percent
• 19:06
  Speaker 2: of it. No, it's it's probably gonna be an all
• 19:08
  Speaker 2: or nothing type of deal. Let's take a quick break here.
• 19:12
  Speaker 2: When we return, we've got the trivia answer, We've got
• 19:17
  Speaker 2: Wall Street Watch, and then we're talking beef, my favorite.
• 19:22
  Speaker 1: When we return, bringing the latest financial news straight to
• 19:41
  Speaker 1: your radio. Every day, it's the Financial Exchange on the
• 19:45
  Speaker 1: Financial Exchange Radio Network. Time now for Wall Street Watch,
• 19:52
  Speaker 1: a complete look at what's moving markets so far today
• 19:55
  Speaker 1: right here on the Financial Exchange Radio network.
• 19:58
  Speaker 4: Well markets are at all time highs as investors react
• 20:01
  Speaker 4: favorably to the Consumer Price Index posted earlier this morning,
• 20:04
  Speaker 4: where consumer prices climb three percent year over year, lower
• 20:08
  Speaker 4: than expectations of three point one percent. Right now, the
• 20:12
  Speaker 4: Dow is up over one percent higher five hundred and
• 20:15
  Speaker 4: thirty six points. Some P five hundred is up one
• 20:18
  Speaker 4: percent or sixty six points higher. NASDAK up two hundred
• 20:22
  Speaker 4: and ninety three points, are one point two percent, Russell
• 20:25
  Speaker 4: two thousands up one point six percent. Tenure Treasure Reealed
• 20:29
  Speaker 4: is flat at three point nine to nine seven percent.
• 20:32
  Speaker 4: In crude oil up nearly one percent higher, trading just
• 20:35
  Speaker 4: above sixty two dollars a barrel. Procter and Gamble reported
• 20:39
  Speaker 4: earnings this morning, beating street expectations, driven by higher demand
• 20:43
  Speaker 4: for its beauty and grooming products. That stock is up
• 20:46
  Speaker 4: one percent. Meanwhile, Intel shares are now up only modestly
• 20:51
  Speaker 4: after retreating from an earlier rally after the chip maker
• 20:54
  Speaker 4: reported better than expected revenue as demand for its Core
• 20:58
  Speaker 4: x eighty six processor for PC's recovered elsewhere. Ford said
• 21:03
  Speaker 4: strong sales propelled the automaker's revenue and operating income handily
• 21:07
  Speaker 4: beating street estimates for the third quarter. Ford shares are
• 21:11
  Speaker 4: now up eleven percent. Decker's Outdoor posted a full year
• 21:15
  Speaker 4: sales forecast that missed analysts estimates, sending that stock down
• 21:19
  Speaker 4: by twelve percent, and Target stock is now flat after
• 21:24
  Speaker 4: the Wall Street Journal report of the retailer plans to
• 21:26
  Speaker 4: cut around eighteen hundred corporate roles as part of an
• 21:29
  Speaker 4: effort to remake its strategy. I'm Tucker Silva and that
• 21:33
  Speaker 4: is Wall Street Watch. And in the previous segment we
• 21:36
  Speaker 4: asked the trivia question, what was al Capone sent to
• 21:39
  Speaker 4: prison four? That would be tax evasion. Gene from Sanford,
• 21:44
  Speaker 4: Maine is our winner today, taking home a Financial Exchange
• 21:46
  Speaker 4: Show T shirt. Congrats to Gene. We played trivia every
• 21:49
  Speaker 4: day here in the Financial eks Change. See complete contest
• 21:52
  Speaker 4: rules at Financial Exchange Show dot com.
• 21:55
  Speaker 2: Mike, we got a piece here from the Financial Times
• 22:00
  Speaker 2: takehouse chopped portions and raise prices. As the cost of
• 22:04
  Speaker 2: beef surges, I'm disappointed.
• 22:09
  Speaker 3: Pretty expensive in the United States, at least the I
• 22:13
  Speaker 3: love that we track this at the at the Beer
• 22:15
  Speaker 3: of Labor Statistics, but the average price of a pound
• 22:20
  Speaker 3: of uncooked beef steaks reached twelve dollars and twenty two
• 22:24
  Speaker 3: cents in the month of August. That was before this
• 22:27
  Speaker 3: morning CPI report beef prices for all uncooked beef steaks
• 22:31
  Speaker 3: are up twelve point seven percent year over year, up
• 22:34
  Speaker 3: twenty seven percent year of a year in the UK.
• 22:38
  Speaker 2: Glad I don't live in the UK.
• 22:39
  Speaker 3: Yeah, so beef prices are getting more expensive. Ranchers are
• 22:44
  Speaker 3: pretty pumped because they're breaking even and profiting for the
• 22:46
  Speaker 3: first time in a while. But what is Argentina really
• 22:51
  Speaker 3: well known for chuck other than wine beeff So there's
• 22:57
  Speaker 3: already been a deal announced between the United States and
• 22:59
  Speaker 3: argent to quadruple the amount of Argentine beef that is
• 23:03
  Speaker 3: allowed to enter the country at lower tariff rates, and
• 23:07
  Speaker 3: so ranchers aren't happy. I'm pretty happy.
• 23:12
  Speaker 2: Yeah. I think when you look at this, the question
• 23:15
  Speaker 2: that you get to on it is typically at some point,
• 23:18
  Speaker 2: rising prices lead to what's called demand destruction, where people say, Okay,
• 23:22
  Speaker 2: we can't afford to buy this anymore, and that's when
• 23:25
  Speaker 2: you know, supply and demands start to come back into
• 23:26
  Speaker 2: balance and prices, you know, level off. We're not seeing
• 23:29
  Speaker 2: that to this point. No, you know, We're really not.
• 23:32
  Speaker 2: And it's disappointing to me that everyone else is not
• 23:37
  Speaker 2: abandoning beef so that I may continue to have as
• 23:40
  Speaker 2: much as i'd like. But it is what it is,
• 23:43
  Speaker 2: I guess.
• 23:44
  Speaker 4: Cushing and Dolan want to help you avoid costly mistakes
• 23:47
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• 24:51
  Speaker 1: The proceeding was paid for and the views expressed are
• 24:53
  Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
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• 25:02
  Speaker 2: Intel, which has been on a rocket ship up since
• 25:06
  Speaker 2: the announcement in mid September of a US government stake
• 25:11
  Speaker 2: in the company, reported their first earnings since that announcement,
• 25:18
  Speaker 2: and overall the numbers are pretty good. But the interesting
• 25:20
  Speaker 2: thing to me is not the numbers in the earnings,
• 25:22
  Speaker 2: but how the stock performs after. And the part that
• 25:25
  Speaker 2: I find notable is, Hey, the stock effectively opened up,
• 25:32
  Speaker 2: you know, about four percent today, rose to be up
• 25:35
  Speaker 2: almost six percent, and then promptly fell to the point
• 25:38
  Speaker 2: where it's now down slightly on the day. I don't
• 25:42
  Speaker 2: entirely know what to make of that. It's been trading
• 25:44
  Speaker 2: a pretty tight range for the last month or so.
• 25:47
  Speaker 3: But this thing's doubled since it's August lows it. I
• 25:51
  Speaker 3: think that was around the time frame that the questions
• 25:53
  Speaker 3: about the CEO were raised on yes on Twitter and
• 25:57
  Speaker 3: then the Trump administration got involved, initially pretty negatively before
• 26:01
  Speaker 3: announcing an investment into Intel's business. But this thing has
• 26:07
  Speaker 3: been on a tear and investors at least today, I mean,
• 26:12
  Speaker 3: I guess maybe all the good news is just baked in.
• 26:15
  Speaker 2: Look, the announcement about the federal government taking a stake
• 26:19
  Speaker 2: in the company was clearly enough to boost the stock
• 26:22
  Speaker 2: in the short term.
• 26:23
  Speaker 3: Well, it removes the failure risk.
• 26:26
  Speaker 2: I don't know, there's a lot of it. Does it
• 26:28
  Speaker 2: actually remove it?
• 26:30
  Speaker 3: It doesn't eliminate it, but it really reduces it.
• 26:35
  Speaker 5: See.
• 26:35
  Speaker 2: I go back and forth on this. I don't think.
• 26:37
  Speaker 2: I'm not sure that it reduces or even eliminates it.
• 26:41
  Speaker 2: I just think it makes it more expensive when that
• 26:45
  Speaker 2: if that fail, if that failure were to occur, it
• 26:48
  Speaker 2: just makes it more expensive because you're gonna throw bad
• 26:50
  Speaker 2: money after good. It's gonna cost the US taxpayer more
• 26:56
  Speaker 2: if it ever does end up failing, is what I'm
• 26:58
  Speaker 2: getting at.
• 26:58
  Speaker 3: Yeah, I guess my point would be if it starts
• 27:01
  Speaker 3: to fail, I think the government does not back away.
• 27:03
  Speaker 3: I think it doubles down, and so therefore.
• 27:06
  Speaker 2: That makes me feel good.
• 27:07
  Speaker 3: Oh yes, I don't think this is positive at all.
• 27:10
  Speaker 3: As I said in the earlier segment, I don't think
• 27:12
  Speaker 3: the US government has any business trying to pick winners
• 27:15
  Speaker 3: and losers in a free market, but ultimately that they have,
• 27:21
  Speaker 3: I think that's the likely outcome.
• 27:23
  Speaker 2: The big thing they're going to have to start delivering
• 27:25
  Speaker 2: on product, and that's been the big problem with Intel
• 27:28
  Speaker 2: for quite some time now is just they have not
• 27:31
  Speaker 2: been able to execute. And it's a shame because I
• 27:34
  Speaker 2: think people forget just how amazing Intel has been historically
• 27:41
  Speaker 2: in terms of I mean, they were the driver of
• 27:49
  Speaker 2: the PC revolution, yep. And then you know, they got
• 27:54
  Speaker 2: caught up in the tech bubble like everyone else in
• 27:55
  Speaker 2: terms of valuations, and then they spent the two thousands
• 27:59
  Speaker 2: and twenty ten's kind of reinventing themselves and looked like
• 28:02
  Speaker 2: they were poised for great things heading into the twenty twenties.
• 28:06
  Speaker 2: And it's just been one problem after another for them
• 28:09
  Speaker 2: for the last six seven years now.
• 28:11
  Speaker 3: Yep.
• 28:11
  Speaker 2: And it's a shame because like this is a company
• 28:14
  Speaker 2: that I it kind of mirrors Boeing in my opinion,
• 28:17
  Speaker 2: where it's like these two companies were like the crown
• 28:19
  Speaker 2: jewels representing everything that American ingenuity could be and then
• 28:26
  Speaker 2: they just like face planted entering the twenty twenties, both
• 28:29
  Speaker 2: of them, and so you know, you really want to see, like,
• 28:33
  Speaker 2: hey can you can you guys get yourself turned around?
• 28:36
  Speaker 2: And it's gonna take more than a quarter, Like when
• 28:38
  Speaker 2: you're talking about this stuff my years, you're talking about
• 28:40
  Speaker 2: years in like twenty thirties when we're finally gonna know Unfortunately,
• 28:44
  Speaker 2: you know how this plays out, You're gonna need five
• 28:46
  Speaker 2: six years. But this quarter again, fine, but it doesn't
• 28:51
  Speaker 2: put Humpty Dumpty back together again. You know, it's Humpty
• 28:56
  Speaker 2: Dumpty still kind of broken and you know, trying to
• 28:59
  Speaker 2: figure out where to go to take a quick break.
• 29:02
  Speaker 2: When we come back, we're gonna be joined by Paul
• 29:04
  Speaker 2: Lamonica from Barons right after this.
• 29:06
  Speaker 1: Here The Financial Exchange every day from eleven to noon
• 29:09
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• 29:13
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• 29:32
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• 29:35
  Speaker 1: Face is the Financial Exchange Radio network, Ladies and gentlemen
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  Speaker 1: the weekend.
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• 30:15
  Speaker 2: As promised. We're now joined by Paul Amonica from Barons
• 30:18
  Speaker 2: and Paul. This week is authored a piece titled Microsoft
• 30:21
  Speaker 2: stock has barely budged since July. Earnings are about to
• 30:25
  Speaker 2: change that. Paul, what do you know? Have you've seen
• 30:28
  Speaker 2: the future?
• 30:30
  Speaker 5: Yes, I have seen the future now obviously being a
• 30:35
  Speaker 5: little glib there, but you know Microsoft is going to
• 30:39
  Speaker 5: be reporting results that should show that their cloud as
• 30:45
  Speaker 5: your business is continuing to gain some big revenue gains
• 30:52
  Speaker 5: and that's going to help boost earnings overall. And Microsoft
• 30:57
  Speaker 5: hasn't done much since their last earnings report. There's been
• 31:00
  Speaker 5: a rotation to some other top tech stocks. Apple has
• 31:04
  Speaker 5: caught a bit lately. So I think that you know,
• 31:08
  Speaker 5: Microsoft could very well wind up you getting a boost
• 31:13
  Speaker 5: if the results are as strong as analysts are expecting,
• 31:16
  Speaker 5: and you know, the stock is reasonably valued for a
• 31:20
  Speaker 5: big tech stock, you know, about twenty eight times earnings,
• 31:23
  Speaker 5: not super cheap, but not absurdly expensive either.
• 31:27
  Speaker 2: Paul, how would you characterize the relationship between Microsoft and
• 31:30
  Speaker 2: open ai at this point, given that the excitement about
• 31:34
  Speaker 2: artificial intelligence has been one of the major things that's
• 31:37
  Speaker 2: boosted the company.
• 31:39
  Speaker 5: Yeah, that is definitely something that I think helped Microsoft
• 31:43
  Speaker 5: stock earlier in the year before it's sort of flatlined
• 31:47
  Speaker 5: over the summer, and I don't think that investors can
• 31:51
  Speaker 5: forget about the fact that Microsoft is a big open
• 31:55
  Speaker 5: AI chat GPT partner and that could continue going forward.
• 32:00
  Speaker 5: I think a lot of people will be waiting to
• 32:03
  Speaker 5: see what Microsoft says in its earnings released and during
• 32:06
  Speaker 5: its conference call with analysts about future AI applications that
• 32:12
  Speaker 5: you know, the company you know, might be able to
• 32:16
  Speaker 5: roll out in the coming quarters, and I think Microsoft
• 32:19
  Speaker 5: is clearly viewed as being one of the potential AI leaders.
• 32:25
  Speaker 5: You know, obviously they are spending a lot of money
• 32:29
  Speaker 5: on artificial intelligence, like many other quote unquote hyperscalers, but
• 32:33
  Speaker 5: you know, Microsoft's balance sheet seems to be strong enough
• 32:37
  Speaker 5: to support this type of spending.
• 32:39
  Speaker 2: Let me ask you about that, because this is something
• 32:41
  Speaker 2: that I know kind of wonder about, like, at what
• 32:44
  Speaker 2: point do investors start to care if that spending isn't
• 32:48
  Speaker 2: translating into actual revenue or profit growth.
• 32:51
  Speaker 5: Yeah, I think that is clearly an important question, and
• 32:55
  Speaker 5: I think in twenty twenty six, you're going to see
• 32:58
  Speaker 5: investors be war discerning. You know, another story I wrote
• 33:02
  Speaker 5: this week, you know, quoted someone who mentioned that, you know,
• 33:06
  Speaker 5: we are going to be getting to the show me
• 33:10
  Speaker 5: phase of AI, beyond the hype. It's no longer going
• 33:15
  Speaker 5: to be sufficient to just say we're spending a lot
• 33:18
  Speaker 5: on artificial intelligence. You're going to have to prove to
• 33:20
  Speaker 5: Wall Street that these AI investments are leading to, if
• 33:26
  Speaker 5: not just reduced costs, hopefully some revenue gains as well.
• 33:30
  Speaker 5: And you know, that is definitely something that you're going
• 33:33
  Speaker 5: to need to hear from Microsoft, Amazon, Alphabet Meta, those
• 33:37
  Speaker 5: other so called hyperscalers. But I think it's going to
• 33:40
  Speaker 5: be important, you know, for the investors in the big
• 33:43
  Speaker 5: chip companies in Vidia, A m D, you know, even
• 33:46
  Speaker 5: Intel for that matter. If these AI investments aren't really
• 33:50
  Speaker 5: going to be leading to big revenue and margin gains,
• 33:55
  Speaker 5: then you know, those companies might see less spending in
• 33:58
  Speaker 5: the future on AI that could impact their earnings.
• 34:02
  Speaker 2: Paul, anything else that you might be looking for from
• 34:04
  Speaker 2: Microsoft on their earnings.
• 34:07
  Speaker 5: Yeah, I think, you know, obviously a lot of importance
• 34:12
  Speaker 5: still about just enterprise spending in general, our big businesses
• 34:17
  Speaker 5: spending on you know, cloud overall. You know, I think
• 34:21
  Speaker 5: that's going to be something. You know, there are a
• 34:23
  Speaker 5: lot of other parts of the business that are a
• 34:28
  Speaker 5: little smaller, so they may not move the needle as much,
• 34:31
  Speaker 5: things like gaming. You know, they bought Activision a couple
• 34:34
  Speaker 5: of years ago, linked In as well. But Microsoft clearly
• 34:38
  Speaker 5: a very diversified software company, so I think investors are
• 34:43
  Speaker 5: excited about the growth overall.
• 34:47
  Speaker 2: Very good, Paul, appreciate you joining us, and I hope
• 34:49
  Speaker 2: you have a great weekend.
• 34:52
  Speaker 5: Thank you very much. Appreciate it.
• 34:53
  Speaker 2: It's paul A Monica from Baron's talking about Microsoft. Chuck,
• 34:57
  Speaker 2: I've got a candidate for top advertisement of the year.
• 35:01
  Speaker 2: Oh so, we're all familiar with the Louver heist at
• 35:04
  Speaker 2: this point. The Louver, the.
• 35:05
  Speaker 3: Louver Ah Louver Real, the company that manufactures the lift
• 35:13
  Speaker 3: car truck that was used in the heist, Yes, has
• 35:17
  Speaker 3: put out an Instagram ad with a photo of the
• 35:20
  Speaker 3: staircase truck at the Crean scene of the crime. The
• 35:25
  Speaker 3: company's name is Baker. The phrase is my way to
• 35:28
  Speaker 3: the top, and it's an advertisement that, when translated to English, says,
• 35:32
  Speaker 3: when it has to be fast, the boker Aglio transports
• 35:35
  Speaker 3: your treasures weighing up to four hundred kilograms at forty
• 35:38
  Speaker 3: two minutes meters per minute whisper quiet, thanks to a
• 35:41
  Speaker 3: two hundred and thirty volt electric motor. I have double
• 35:45
  Speaker 3: checked a few sources to make sure that this is legitimate.
• 35:48
  Speaker 3: I am, I'm only around three quarters sure that it
• 35:52
  Speaker 3: is legitimate, but I am it was reported to me
• 35:57
  Speaker 3: by CNN. I'm looking at a few other sources to
• 35:59
  Speaker 3: see if it is in fact legitimate, but it appears
• 36:01
  Speaker 3: to be from a real Instagram page for the company Bocker,
• 36:06
  Speaker 3: So if so, credit to them for I think probably
• 36:09
  Speaker 3: the best.
• 36:10
  Speaker 2: I gotta say it's a bad look. I here you
• 36:15
  Speaker 2: it's I gotta say it's a bad look if it's
• 36:17
  Speaker 2: true and nobody's died. No. But here's the There's two
• 36:21
  Speaker 2: reasons why. The first is, in general, one should not
• 36:26
  Speaker 2: be advertising that your products can be used in crimes
• 36:30
  Speaker 2: with you, because it promotes the idea that this is
• 36:33
  Speaker 2: okay with you. The second piece on the specific crime. Look,
• 36:37
  Speaker 2: here's the thing. I am a history nerd uh huh.
• 36:43
  Speaker 2: The stuff that was stolen surpasses like any kind of
• 36:47
  Speaker 2: actual value, agreed, because they are quite literally like priceless
• 36:53
  Speaker 2: pieces of history that can never be recreated because of
• 36:57
  Speaker 2: who had them at what particular point in time and
• 36:59
  Speaker 2: what they signified. And the problem is that they're basically
• 37:02
  Speaker 2: just gonna be like melted down into whatever and we
• 37:08
  Speaker 2: can never get that back. And that I'm not fan
• 37:11
  Speaker 2: me as a human.
• 37:12
  Speaker 3: The seriousness of the crime. But I do think it's
• 37:16
  Speaker 3: a pretty funny ACP.
• 37:17
  Speaker 2: Like you know what I thought would have been a
• 37:19
  Speaker 2: great Do you remember the the Southwest flight attendant that
• 37:22
  Speaker 2: just was like I quit and pop the emergency slide
• 37:25
  Speaker 2: and left.
• 37:25
  Speaker 3: I'm not sure if it was Southwest, but yes, I do,
• 37:27
  Speaker 3: I think it was a Jet Blue.
• 37:29
  Speaker 2: Whoever it was, the company that makes the emergency slide
• 37:32
  Speaker 2: could have been like whatever helps you get safely, you know,
• 37:35
  Speaker 2: to your destination or something like okay, like we canna
• 37:38
  Speaker 2: because we can all see ourselves as like having that
• 37:40
  Speaker 2: bad day and just being like, I gotta get out
• 37:42
  Speaker 2: of work, you know, even though I guess technically that's
• 37:45
  Speaker 2: probably a federal crime, so maybe that's not a great advertisement,
• 37:49
  Speaker 2: you know, Like but when you're talking about having you know,
• 37:54
  Speaker 2: historical relics stolen, pushes.
• 37:57
  Speaker 3: The enveloped too much for that.
• 37:58
  Speaker 2: That's a little too for me.
• 38:00
  Speaker 3: A great to disagree, I guess.
• 38:02
  Speaker 2: Okay, let's take a quick break and uh, we're gonna
• 38:05
  Speaker 2: do that for the next forty eight hours or so.
• 38:07
  Speaker 2: But when we come back on Monday, it's a busy week.
• 38:11
  Speaker 2: We got a FED meeting next week, didn't that? Just
• 38:13
  Speaker 2: sneak up on US plus monster earnings from tech companies.
• 38:17
  Speaker 2: All that and more next week on the Financial Exchange.
• 38:19
  Speaker 2: Have a great weekend.