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Which states are getting hit hardest by unemployment? · The Financial Exchange Show

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  Speaker 2: Good morning, Happy Friday, Welcome back to the Financial Exchange.
• 1:15
  Speaker 2: It's Mike, Mark and Tucker with you on a Friday here.
• 1:19
  Speaker 2: It's been a fairly busy week in terms of we
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  Speaker 2: had the FED meeting. There's been a few other data
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  Speaker 2: points coming out, the jobless claims numbers that once again
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  Speaker 2: seem to have had a data issue in them, this
• 1:32
  Speaker 2: time with North Carolina, last week with Texas. But the
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  Speaker 2: big move was the FED moving rates downward by a
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  Speaker 2: quarter of a percent next meeting scheduled slated for late October,
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  Speaker 2: where markets are betting they will continue to move down
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  Speaker 2: on rates. The FED members themselves when they project things
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  Speaker 2: out a little bit less clear. And my takeaway from
• 1:52
  Speaker 2: the press conference at least was j Powell always sounds
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  Speaker 2: a little bit confused, but the read on the state
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  Speaker 2: of the economy and where things go from here seemed
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  Speaker 2: especially questionable. From the Fed share on was that Wednesday
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  Speaker 2: Wednesday afternoon, And for good reason. I think I do
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  Speaker 2: think he's in a position where it is relatively unclear
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  Speaker 2: whether you need to be more worried about inflation than unemployment.
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  Speaker 2: Mark has a different opinion, which is you definitely need
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  Speaker 2: to be more worried about inflation than unemployment.
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  Speaker 3: Right now, about what do the facts say?
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  Speaker 4: Forget about where you think the labor market's going. What
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  Speaker 4: do we know? Unemployment is at four point three percent.
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  Speaker 4: It's come up from three point four over a year ago,
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  Speaker 4: but historically speaking, it's still low, maybe too low, Mike.
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  Speaker 4: We don't know what the so called natural rate is.
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  Speaker 4: We don't know what the rate of unemployment is that
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  Speaker 4: will cause pressure on wages and therefore prices. The economy
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  Speaker 4: is changing structurally, the White House is making changes to
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  Speaker 4: the labor force. The natural rate might be rising. That's
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  Speaker 4: one point I'd make. We also know that GDP is
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  Speaker 4: growing at trend or better so called potential GDP estimates
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  Speaker 4: of this. The Atlanta Fed calculates a GDP now figure
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  Speaker 4: sodas the New York Fed. Both are in the threes.
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  Speaker 4: I'm not so sure about New York, so I retract that,
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  Speaker 4: But the Atlanta Fed has us growing at above trend.
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  Speaker 4: That snapshot you made this point in the last hour.
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  Speaker 4: Markets record highs, financial conditions, record loose conditions. None of
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  Speaker 4: this screams cut rates, never mind by a lot. And oh,
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  Speaker 4: by the way, the icing on top of all this
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  Speaker 4: is inflation remains elevating.
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  Speaker 2: Were all debate of their market is what does scream
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  Speaker 2: cut rates? Is what's been the job pace? Create a
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  Speaker 2: pace of job creation for the twenty twenty five calendar year,
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  Speaker 2: because I think it's probably average under fifty thousand.
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  Speaker 4: Yeah, we're at about seventy this year. If you look
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  Speaker 4: at payrolls versus one hundred and sixty seven last year
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  Speaker 4: and versus two and yeah, forty or fifty Yeah. My
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  Speaker 4: question though, I will give you that, but what if
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  Speaker 4: that was too high, as evidenced by the high inflation
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  Speaker 4: at the time, But if the labor market was unnaturally
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  Speaker 4: tight because of all the COVID stimulus, the delayed monetary
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  Speaker 4: pol reaction, and it's now normalizing, we don't know that
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  Speaker 4: that's not the case. Look, Mike, honest, people can disagree
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  Speaker 4: on this, but you and you certainly come at this
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  Speaker 4: from a good faith point of view. But I would
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  Speaker 4: argue that based on what we know today, the risks
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  Speaker 4: seem to be more in balance than tilted toward slowing
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  Speaker 4: growth increasing unemployment. To me, the risks seem more balanced
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  Speaker 4: than that. If indeed you put some weight on inflation
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  Speaker 4: increasing as being an adverse outcome. It does depend on
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  Speaker 4: your ideology, if you will, it depends on how naturally
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  Speaker 4: hawkish you are. I'm an old fashioned conservative. When it
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  Speaker 4: comes to physical policy, I would prefer inflation be squashed.
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  Speaker 4: I like a target rate of zero or one, maybe
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  Speaker 4: two at best, because it can get out of hand
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  Speaker 4: quickly otherwise. So some of it depends on ideology as well.
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  Speaker 4: So like the political backdrop right now is what makes
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  Speaker 4: this especially dangerous. The White House is trying to take
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  Speaker 4: the FED over. They're very open about this, and they've
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  Speaker 4: installed a puppet at the FED who will do the
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  Speaker 4: bidding of the President. That's unprecedented in anybody's lifetime. No
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  Speaker 4: way of knowing how this pans out.
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  Speaker 2: To your point on the unemployment situation, we were sitting
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  Speaker 2: at four point two percent unemployment in August of last year.
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  Speaker 2: Right now we're sitting at four point three percent. You
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  Speaker 2: can say what you will about the hiring state of hiring.
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  Speaker 2: The unemployment rate and the national level has not significantly
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  Speaker 2: changed a year over year. There's probably a number of
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  Speaker 2: different reasons for that, but that's the state of things
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  Speaker 2: at the national level.
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  Speaker 3: When it comes to unemployment.
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  Speaker 2: I bring that up because just an hour ago we
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  Speaker 2: received data on the state by state changes in employment
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  Speaker 2: for the month of August. This always comes out a
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  Speaker 2: couple weeks after the national data, and we're seeing some
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  Speaker 2: interesting trends I think, especially here in the Northeast that
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  Speaker 2: I wanted to call out. So in Massachusetts, where we're
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  Speaker 2: doing this program, unemployment rate in August of last year
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  Speaker 2: was sitting at four point two percent, almost no exactly
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  Speaker 2: at the national average. We're now sitting at four point
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  Speaker 2: eight percent. It's a pretty big uptick. In Connecticut, they
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  Speaker 2: were sitting at three point two percent. They're now sitting
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  Speaker 2: at three point eight percent. Similar big uptick there.
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  Speaker 3: DC.
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  Speaker 2: We've talked about some of the slowdowns and issues there
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  Speaker 2: in the housing market, for example, five to three up
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  Speaker 2: to six percent now in d C. And there are
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  Speaker 2: several other states that are experiencing something similar. Right New Hampshire,
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  Speaker 2: unemployment's up four tenths of a percent instead of six
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  Speaker 2: tenths but still at an ultra low level. Unemployment in
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  Speaker 2: New Hampshire's three percent. It was two point six back
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  Speaker 2: in August of last year. New Jersey you've seen it
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  Speaker 2: rise four tenths of a percent. In Oregon, you've seen
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  Speaker 2: it go up eight tenths of a percent. In terms
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  Speaker 2: of states that are seeing declines in unemployment, New York
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  Speaker 2: unemployment down four tenths of a percent. In Illinois you're
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  Speaker 2: seeing it down six tenths of percent, Indiana down eight tenths,
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  Speaker 2: Kentucky down five tenths. So the story, as it always is,
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  Speaker 2: is the national economy differs.
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  Speaker 3: You know, it's a heck of a lot different when
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  Speaker 3: you drill in and look.
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  Speaker 2: At a state by state basis, and I don't think
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  Speaker 2: you can and tell anything. Sometimes, for instance, people will
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  Speaker 2: look at Nevada and say, oh, that's always a precursor
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  Speaker 2: to things. And to be fair, the unemployment rate in
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  Speaker 2: Nevada is down by four tenths of a percent. The
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  Speaker 2: argument there is, hey, when the economy is really falling apart,
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  Speaker 2: the first thing people cancel is their trip to go
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  Speaker 2: gamble in Las Vegas. But I do just wonder at
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  Speaker 2: the impact for those who are listening to this program
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  Speaker 2: in New England, what it means now to have the
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  Speaker 2: unemployment rate jumping six tenths of a percent in this
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  Speaker 2: state where I think you can easily explain it, I
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  Speaker 2: mean biotech companies which saw a ton of funding over
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  Speaker 2: the last beginning of COVID time are seeing that dry
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  Speaker 2: up and getting questioned a lot more universities in this
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  Speaker 2: area are losing funding. So I think I would explain
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  Speaker 2: it that way. But for you know, if this is
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  Speaker 2: indeed happening mainly in the Boston area, which I suspect,
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  Speaker 2: that could have some pretty big implications for the overall
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  Speaker 2: New England area. And what I am confident about, Mark
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  Speaker 2: is if we had seen the unemployment rate going from
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  Speaker 2: four to two to four eight at the national level,
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  Speaker 2: you and I would be having a very different conversation
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  Speaker 2: about the state of the economy, and the state of
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  Speaker 2: it depends on it should go.
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  Speaker 4: Why if it's due to a big surge in the
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  Speaker 4: labor force? Takes people time to find I'm splitting here
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  Speaker 4: just for fun, but it's but you're right, but you
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  Speaker 4: have an hour or so, what the hell.
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  Speaker 2: Let's be honest, right, If we had seen the unemployment
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  Speaker 2: rate by six times bump up by six tens of
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  Speaker 2: percent over twelve months, it would be concerned.
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  Speaker 4: It would be note worthy, to say the least, if
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  Speaker 4: it was combined with a deceleration and spending, a drop
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  Speaker 4: in industrial production, a drop in capacity utilization, a drop
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  Speaker 4: in all the factors tracked by the end by the
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  Speaker 4: folks who arbitrate the definition of recession at the NBER
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  Speaker 4: here in Massachusetts, that would be more concerning my I
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  Speaker 4: guess you have to weigh that against what you're seeing elsewhere,
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  Speaker 4: and you're not seeing signs of economics slow down elsewhere.
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  Speaker 4: I would point again to estimates of GDP today based
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  Speaker 4: on real time indicators, and of course capital markets, which
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  Speaker 4: have a mixed record, to say the least of predicting
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  Speaker 4: expansions and recession. But you cannot ignore the fact that
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  Speaker 4: stocks are at an all time high and financial conditions
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  Speaker 4: for all intents and purposes at an all cycle low.
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  Speaker 2: So my takeaway is there are some big regional differences
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  Speaker 2: in the state of the economy. Yeah, and for those
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  Speaker 2: I know there's a lot of folks who live and
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  Speaker 2: work in Massachusetts right now, if it feels different than
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  Speaker 2: the national scenario, it should. It is different than the
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  Speaker 2: national scenario. We are seeing a markedly higher unemployment rate
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  Speaker 2: here and other factors that Chuck brought up that I
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  Speaker 2: hadn't really considered when we talked about this last You know,
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  Speaker 2: many of the other states out there. So take a
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  Speaker 2: look at Texas, for example, a lot of employment in
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  Speaker 2: industries that have been affected by changes in migration and deportations.
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  Speaker 2: Construction farming, for example, we don't do a whole lot
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  Speaker 2: of either of them those in Massachusetts. And so if
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  Speaker 2: you're seeing the labor force for those particular industries dry
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  Speaker 2: up in some parts of the country, we wouldn't really
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  Speaker 2: notice that in Massachusetts, and so that is another compelling
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  Speaker 2: factor I think when it comes to all of this.
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  Speaker 2: But my overall point is if you're out there and
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  Speaker 2: you're looking for a job right now and the labor
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  Speaker 2: market feels like garbage in Massachusetts, I can kind of
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  Speaker 2: understand that given what we have seen in the pace
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  Speaker 2: of change over the course of the last twelve months
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  Speaker 2: here and.
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  Speaker 3: In other parts of the New England region.
• 10:31
  Speaker 2: Let's take a quick break when we come back. We're
• 10:32
  Speaker 2: gonna play it a little bit of trivia. Following that,
• 10:34
  Speaker 2: I want to talk about grocery prices. We've seen some
• 10:37
  Speaker 2: pretty big spikes, especially on some key areas eggs, meat.
• 10:41
  Speaker 2: I want to talk about what might be driving it
• 10:44
  Speaker 2: and what we're actually seeing in the data.
• 10:46
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  Speaker 2: Well Mark grocery prices are not pleasant. I will say
• 12:13
  Speaker 2: I get a little bit biased towards this because all
• 12:15
  Speaker 2: the grocery stores around me are the closest ones to me,
• 12:18
  Speaker 2: rather are Rosch Brothers, Whole Foods.
• 12:20
  Speaker 3: And Wegman's.
• 12:20
  Speaker 2: And I'm lazy, so I don't often go out of
• 12:23
  Speaker 2: my way to go to somewhere like Costco or market Basket.
• 12:27
  Speaker 2: But we did the other day, and honest to God,
• 12:30
  Speaker 2: like I think a full basket of groceries from market
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  Speaker 2: Basket was or sorry, full cart. Well, the groceries. I
• 12:38
  Speaker 2: have three kids, We buy a lot of groceries on
• 12:39
  Speaker 2: a weekly basis. I gotta say I think it was
• 12:42
  Speaker 2: seventy five dollars cheaper than what I can get at
• 12:43
  Speaker 2: Wegmans or Whole Foods.
• 12:45
  Speaker 3: Maybe one hundred dollars cheaper. It was.
• 12:48
  Speaker 2: It was shocking, just kind of gross actually when I
• 12:51
  Speaker 2: reflected on it, how much cheaper everything was at market Baskets.
• 12:54
  Speaker 2: So you know, I'm just here to congratulate the folks
• 13:00
  Speaker 2: that managing to keep grocery prices at a much more
• 13:02
  Speaker 2: reasonable place than some of their fancy.
• 13:04
  Speaker 4: Items you buy private label stuff or is it.
• 13:07
  Speaker 3: Not all as the same stuff.
• 13:09
  Speaker 2: It's just like fish meat, everything is so much cheaper
• 13:13
  Speaker 2: there that it really does start to add up. I'm
• 13:15
  Speaker 2: sure that differences on like Pete's coffee is probably not
• 13:18
  Speaker 2: all that different, But like when I take a look
• 13:20
  Speaker 2: at the per pound fish prices, for example, it is
• 13:23
  Speaker 2: it's flooring.
• 13:24
  Speaker 3: But that is beside the point. What we were talking
• 13:26
  Speaker 3: about is.
• 13:27
  Speaker 2: The fact that regardless of how cheap market basket is,
• 13:29
  Speaker 2: grocery prices.
• 13:30
  Speaker 3: Generally have been through the roof and it keeps rotating.
• 13:33
  Speaker 1: Right.
• 13:33
  Speaker 2: We had egg prices that were a big concern at
• 13:36
  Speaker 2: the end of last year beginning of this year. Now
• 13:38
  Speaker 2: it's beef prices that have gone through the roof. I think,
• 13:40
  Speaker 2: up some twelve percent year over year. And so whenever
• 13:44
  Speaker 2: something like this has happened, everybody's looking for a scapegoat.
• 13:48
  Speaker 2: In fact, egg prices made it into presidential debates last year,
• 13:52
  Speaker 2: which was kind of silly because I think everybody knew
• 13:54
  Speaker 2: that no president has the ability to just immediately stop
• 13:58
  Speaker 2: bird flu and prevent egg prices from going through the roof.
• 14:00
  Speaker 2: But in terms of laying out what's going on here.
• 14:06
  Speaker 2: I mean, One, we've seen just general inflation tremendously over
• 14:11
  Speaker 2: the last five years, and so I think there's just
• 14:12
  Speaker 2: a perception that everything's more expensive, and you notice groceries
• 14:16
  Speaker 2: a lot more because you tend to buy the same
• 14:18
  Speaker 2: things every week and so you notice it more. H Two,
• 14:22
  Speaker 2: the Russian invasion of Ukraine drove up food prices pretty quickly,
• 14:25
  Speaker 2: and while that's not still driving them higher now, that
• 14:29
  Speaker 2: was a factor.
• 14:30
  Speaker 3: Three.
• 14:30
  Speaker 2: Tariffs are in place here. We don't grow any bananas
• 14:34
  Speaker 2: or coffee in the United States so far as I know.
• 14:36
  Speaker 2: I'm sure somebody out there listening is like, no, I
• 14:38
  Speaker 2: saw a banana tree in southern California one time. Great,
• 14:41
  Speaker 2: good for you, but we don't buy Nobody buys the
• 14:43
  Speaker 2: bananas in the grocery store from an American farm, and
• 14:46
  Speaker 2: so these items are not exempt from tariffs. And so
• 14:50
  Speaker 2: a number of the items in your basket are subject
• 14:55
  Speaker 2: to tariffs and are seeing price increases in all likelihood
• 14:58
  Speaker 2: because of those increases.
• 15:00
  Speaker 3: Is the last piece.
• 15:02
  Speaker 2: That I don't think we're ever going I think it's
• 15:05
  Speaker 2: gonna be a long time before we get any sort
• 15:07
  Speaker 2: of reliable data on But I suspect that large portions
• 15:13
  Speaker 2: of the agricultural industry in the United States, as well
• 15:17
  Speaker 2: as the food processing industries in the United States, are
• 15:20
  Speaker 2: done by either people who are undocumented immigrants or who
• 15:27
  Speaker 2: have a immediate family member who is an undocumented immigrant.
• 15:31
  Speaker 2: And so with the big changes in deportations this year,
• 15:35
  Speaker 2: this is one of the main industries that I think
• 15:38
  Speaker 2: the President himself has acknowledged, because you know, farmers who
• 15:41
  Speaker 2: support him came out and said like, hey, I can't
• 15:43
  Speaker 2: find anybody to hire because of these immigration crackdowns. I
• 15:47
  Speaker 2: suspect that that is going to play a role in
• 15:50
  Speaker 2: food prices too, But it's really hard for anyone to
• 15:53
  Speaker 2: say right now if it's happening having an immediate impact
• 15:55
  Speaker 2: that oh yeah, farmers are having to hire other workers
• 15:58
  Speaker 2: at higher wages and their four food prices are going up.
• 16:01
  Speaker 2: I think that's a tougher dot to connect, but I
• 16:04
  Speaker 2: suspect it is one that will be connected eventually.
• 16:06
  Speaker 4: Everything you've just pointed out represents a reduction in supply, right, tariffs, immigration,
• 16:12
  Speaker 4: and those are directly attributable to policies we're imposing it.
• 16:16
  Speaker 4: You may think those policies are great, but you cannot
• 16:18
  Speaker 4: deny that they reduce supply. When you do that in
• 16:20
  Speaker 4: the face of constant or increasing demand, and when the
• 16:23
  Speaker 4: Fed cuts rates as it did this week, as it
• 16:25
  Speaker 4: did last fall, when the government accelerates tax rebates, as
• 16:28
  Speaker 4: it's going to do in the first part of next year,
• 16:30
  Speaker 4: you are fueling demand in the face of constricting supply.
• 16:36
  Speaker 4: This is a lot Does this sound familiar Early twenty
• 16:39
  Speaker 4: twenty one, anybody COVID was restricting supply. Government was with
• 16:44
  Speaker 4: a fire hose squirting money out at anybody who had
• 16:48
  Speaker 4: the hands to grab it. This is probably not going
• 16:52
  Speaker 4: to be as acute, but the factors are the same.
• 16:55
  Speaker 4: You've got supply contracting, demand staying the same or maybe
• 16:58
  Speaker 4: even going up. The result will be increased underlying inflation.
• 17:01
  Speaker 4: All LSEQL, and by all l SQL I mean assuming
• 17:03
  Speaker 4: there's not a big economic shock that causes a demand
• 17:07
  Speaker 4: contraction from some unforeseen corner of the world.
• 17:11
  Speaker 3: The other positive or if it's positive.
• 17:14
  Speaker 2: But the other piece of this that I will point
• 17:16
  Speaker 2: out is during the COVID supply shocks, it would there
• 17:20
  Speaker 2: were very little things you could have done in terms
• 17:22
  Speaker 2: of policy to reverse some of those supply shocks. Right,
• 17:25
  Speaker 2: you would have had a tough time convincing China to
• 17:27
  Speaker 2: just say, hey, reopen your economy and start making everything today.
• 17:31
  Speaker 2: If we see banana prices go through the roof, for example,
• 17:34
  Speaker 2: because there's some disease that affects foreign grown bananas and
• 17:41
  Speaker 2: prices start going through the roof, I can pretty easily
• 17:44
  Speaker 2: see the President saying, hey, it's kind of an emergency,
• 17:46
  Speaker 2: We're going to wave tariffs on bananas for.
• 17:48
  Speaker 4: Six or put price control. My guess is we'll see
• 17:52
  Speaker 4: price controls on various subcategories in the next year going
• 17:55
  Speaker 4: up to an election. They can't back off their core policy,
• 17:58
  Speaker 4: which is tariff's and labor supply restrictions. And by the way,
• 18:02
  Speaker 4: we say supply shocks, we mean anything that inhibits the
• 18:05
  Speaker 4: economy's ability to produce. If you take labor out of
• 18:07
  Speaker 4: the economy, you're reducing supply. If you throw up trade barriers,
• 18:11
  Speaker 4: you're reducing supply. There are other examples, but those are
• 18:14
  Speaker 4: the most conspicuous at present.
• 18:17
  Speaker 3: Yeah.
• 18:17
  Speaker 4: So yeah, my guess is you'll see some combination. Nixon
• 18:19
  Speaker 4: did this, it's not unheard of. Didn't work. It controlled
• 18:22
  Speaker 4: prices for a little bit, then they were removed and
• 18:24
  Speaker 4: inflation exploded again. But you'll see some attempt I imagine
• 18:28
  Speaker 4: at controlling specific prices in the next year.
• 18:31
  Speaker 3: Yeah, we will see.
• 18:32
  Speaker 2: I think, like I said, every time that things have
• 18:35
  Speaker 2: gotten to be really big pain points for companies or consumers,
• 18:40
  Speaker 2: the policy has just been Okay, we can kind of
• 18:43
  Speaker 2: reshape the trade policy.
• 18:44
  Speaker 3: Or Brazil is a good example.
• 18:46
  Speaker 2: I don't know if this is still the case, but
• 18:47
  Speaker 2: they implemented these big tariffs on Brazilian goods and then
• 18:50
  Speaker 2: they went through an exempted seven of the top ten
• 18:52
  Speaker 2: products that we actually import from Brazil because they realize like,
• 18:55
  Speaker 2: oh yeah, yeah, things will come to true reaching halt
• 18:57
  Speaker 2: when it came to China trade, like oh, we really
• 18:59
  Speaker 2: can't make anything without rare earth. So we're going to
• 19:02
  Speaker 2: kind of back off some of these policies and make
• 19:04
  Speaker 2: sure that it does not completely send the American economy
• 19:07
  Speaker 2: into tailspin. So that's what I keep taking away from
• 19:10
  Speaker 2: all of this is, yes, the tariffs are likely starting
• 19:13
  Speaker 2: to have an impact on prices. The reason that we're
• 19:16
  Speaker 2: not seeing prices through the roof is because of this
• 19:18
  Speaker 2: intentional policy of putting it out and then backing it off.
• 19:22
  Speaker 2: Quick Break Wall Street Watch is coming up.
• 19:24
  Speaker 1: Next, bringing the latest financial news straight to your radio.
• 19:42
  Speaker 1: Every day. It's the Financial Exchange on the Financial Exchange
• 19:46
  Speaker 1: Radio Network. Time now for Wall Street. Watch a complete
• 19:52
  Speaker 1: look at what's moving markets so far today right here
• 19:55
  Speaker 1: on the Financial Exchange Radio Network.
• 20:00
  Speaker 5: Markets are now little changed as the FED filled week concludes.
• 20:06
  Speaker 5: Wall Street continuing to monitor developments from the call this
• 20:09
  Speaker 5: morning between President Trump and Chinese President g this morning.
• 20:14
  Speaker 5: Right now, the Dow is down by only seven points.
• 20:17
  Speaker 5: SMP five hundred could not be more flat. Wow, that
• 20:21
  Speaker 5: is flat, and the Nasdaq is up about a tenth
• 20:24
  Speaker 5: of a percent or thirty two points higher. Russell two
• 20:27
  Speaker 5: thousand is down six tenths of one percent, Tenure treasreeled
• 20:31
  Speaker 5: is up three basis points at four point one three
• 20:35
  Speaker 5: five percent, and crude oil pulling back one percent today
• 20:39
  Speaker 5: trading just below sixty three dollars a barrel. FedEx rising
• 20:43
  Speaker 5: over two percent after the delivery. Giants said it expects
• 20:46
  Speaker 5: a one billion dollar ter related hit to its annual earnings.
• 20:50
  Speaker 5: As for the previous quarter, FedEx posted stronger than expected results. Meanwhile,
• 20:55
  Speaker 5: home builder Lennar saw its profit decline for a fourth
• 20:59
  Speaker 5: straight quarter as its sales for the previous quarter missed forecasts.
• 21:03
  Speaker 5: Earnings did, however, beat expectations. Leonar down over two percent
• 21:08
  Speaker 5: after its stock surged twenty two percent yesterday in reaction
• 21:12
  Speaker 5: to Nvidia investing five billion dollars in the company. Intel
• 21:16
  Speaker 5: shares of pulling back over one percent today. Furthermore, City
• 21:20
  Speaker 5: downgraded the stock to sell from neutral, saying Intel stock
• 21:24
  Speaker 5: is pricing in success and its leading edge foundry business
• 21:28
  Speaker 5: that it believes has minimal chance to succeed. And JP
• 21:32
  Speaker 5: Morgan upgraded its price target of Apple stock to two
• 21:35
  Speaker 5: hundred and eighty dollars per share from two hundred and
• 21:37
  Speaker 5: fifty do five dollars per share, with a firm said
• 21:40
  Speaker 5: demand for the tech giants new slate of iPhones is
• 21:43
  Speaker 5: strong based on early sales across Asia. Apple shares are
• 21:47
  Speaker 5: up nearly two percent. I'm Tucker Silva and that is
• 21:51
  Speaker 5: Wall Street Watch. And in the previous segment, we asked
• 21:54
  Speaker 5: you the trivia question, what year did Jimmy Fallon begin
• 21:57
  Speaker 5: hosting the tonight show? That would be twenty four. David
• 22:01
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• 22:04
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• 22:07
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• 22:10
  Speaker 5: contest rules at Financial Exchange Show dot com.
• 22:13
  Speaker 2: Exciting news if you're an ever source gas customer, because
• 22:15
  Speaker 2: you're gonna be facing a thirteen percent rate increase this winter.
• 22:19
  Speaker 2: Of that rate increase that has been approved, eleven percent
• 22:23
  Speaker 2: is attributed to maintenance and infrastructure investments, two percent to
• 22:27
  Speaker 2: the cost of supply, and less than one percent to
• 22:29
  Speaker 2: public public benefits.
• 22:31
  Speaker 3: So basically, we didn't maintain.
• 22:33
  Speaker 2: Our stuff well enough for years, or the legislature didn't
• 22:36
  Speaker 2: allow us to improve rates enough to improve our infrastructure
• 22:40
  Speaker 2: quite enough. If you're on national grid. Meanwhile, they're asking
• 22:43
  Speaker 2: for a three point eight percent hike this winter. But
• 22:47
  Speaker 2: I guess that makes me happy that I'm on oil.
• 22:50
  Speaker 2: Probably not oil is probably gonna be worse, would be
• 22:53
  Speaker 2: my guest. But in any case, yeah, you're seeing some
• 22:55
  Speaker 2: big upticks. We were talking a lot about inflation on
• 22:58
  Speaker 2: the food side, so I didn't want to leave heating
• 23:00
  Speaker 2: your home out of the equation.
• 23:01
  Speaker 3: Here.
• 23:04
  Speaker 2: The big story I think with all of this, or
• 23:07
  Speaker 2: what I would guess, you know, I hate to make
• 23:10
  Speaker 2: predictions about something as unpredictable as the cost of energy,
• 23:13
  Speaker 2: but it's hard for me to see an environment given
• 23:18
  Speaker 2: the environment we're in. It's hard for me to see
• 23:21
  Speaker 2: a scenario where electricity costs delivered to your home moderate
• 23:27
  Speaker 2: anytime in the next few years.
• 23:29
  Speaker 4: Michael, why are you getting me further worked up about inflation?
• 23:32
  Speaker 2: Yeah, like, taking a look at this scenario here, and
• 23:36
  Speaker 2: I know, like this is a big contributor to potential
• 23:38
  Speaker 2: inflation here. But let's think through logically what you would
• 23:42
  Speaker 2: need to see happen for electricity rates to come down.
• 23:46
  Speaker 2: I mean, I guess if we went into a big
• 23:49
  Speaker 2: recession and manufacturing dropped off a ledge that didn't want happen, though,
• 23:54
  Speaker 2: But every other scenario that I think of, like, Okay,
• 23:56
  Speaker 2: it's getting more costly to maintain our old, outdated infrastructure.
• 24:00
  Speaker 2: We keep having natural disasters like wildfires that cost a
• 24:04
  Speaker 2: bunch of money on the utility companies to rebuild that infrastructure.
• 24:07
  Speaker 2: And now we have these giant monsters of new demand
• 24:14
  Speaker 2: coming from the AI space. Again, granted they're not building
• 24:18
  Speaker 2: data centers here in Massachusetts. It's happening mainly in the midwest. Wisconsin.
• 24:22
  Speaker 3: Just get out to another.
• 24:23
  Speaker 2: Deal for one, but again, basic supply and demand. What
• 24:28
  Speaker 2: happens when you add a bunch of demand to the
• 24:30
  Speaker 2: grid generally speaking, prices will go up and then you
• 24:36
  Speaker 2: will see supply come online to feed that additional demand.
• 24:39
  Speaker 2: But that's last time I checked. It was not a
• 24:44
  Speaker 2: quick process to get a new electricity generation plant.
• 24:48
  Speaker 3: Approved, zoned, and built, And so I don't know.
• 24:52
  Speaker 2: I have a tough time seeing a scenario other than
• 24:55
  Speaker 2: a really bad economic recession where industrial demand comes down,
• 25:00
  Speaker 2: oil prices come down, gas prices come down, and therefore generation.
• 25:04
  Speaker 3: Prices come down.
• 25:05
  Speaker 2: That's the only scenario I see where these prices moderate
• 25:08
  Speaker 2: anytime in the near future.
• 25:10
  Speaker 4: And as you point out, it is nationwide. There are
• 25:12
  Speaker 4: variations by geography, but it is nationwide, and this is
• 25:16
  Speaker 4: another reason why inflation is more likely to surprise on
• 25:20
  Speaker 4: the upside. Honest, people can disagree about this, but the
• 25:23
  Speaker 4: evidence I think points to continued elevated inflation at the
• 25:28
  Speaker 4: very least with the possibility of a breakout, and in
• 25:32
  Speaker 4: retrospect the fed's talk and the fed's actions over Sorry,
• 25:36
  Speaker 4: I have to tie everything back to this because it
• 25:38
  Speaker 4: is the driver will have it will in retrospect not
• 25:41
  Speaker 4: be judged well by history.
• 25:43
  Speaker 1: Very ill advice.
• 25:44
  Speaker 2: The one positive of all this, by the way, I
• 25:46
  Speaker 2: do seem to see a big tie change in terms
• 25:52
  Speaker 2: of people's attitude towards nuclear power right now. And so
• 25:55
  Speaker 2: you know, I think ten years from now we might
• 25:57
  Speaker 2: have a really nice, reliable grid that uses something like
• 26:01
  Speaker 2: nuclear to power a big chunk of it.
• 26:03
  Speaker 4: And I think that'd be fam how the tragedy this is.
• 26:07
  Speaker 3: But I think it's gonna take a decade to get there.
• 26:08
  Speaker 4: In the nineteen eighties, people pointed out France gets eighty
• 26:11
  Speaker 4: percent of their nuclear power energy excuse me, electricity from
• 26:14
  Speaker 4: nuclear power. These were arguments that were very lively in
• 26:17
  Speaker 4: the eighties and nineties. We did nothing because in part
• 26:20
  Speaker 4: it was big oil that suppressed it. In part it
• 26:23
  Speaker 4: was just that oil was cheaper. In part that people
• 26:26
  Speaker 4: were afraid because of Three Mile Island and the scare
• 26:29
  Speaker 4: tactics that were employed as a result of the occasional
• 26:33
  Speaker 4: regrettable safety accidents that occurred at nuclear power plants. But
• 26:37
  Speaker 4: we had the ability to address this decades ago, and
• 26:40
  Speaker 4: by the way, for those of you concerned about it, it
• 26:42
  Speaker 4: would have solved the or would have made big strides
• 26:44
  Speaker 4: towards mitigating human cost climate change if you believe in that,
• 26:48
  Speaker 4: but even if you don't, if you believe in lower
• 26:50
  Speaker 4: energy prices which every red blood capitalist does. I mean
• 26:53
  Speaker 4: that we sort of we backed ourselves into this corner.
• 26:56
  Speaker 3: We cast time to start in the eighties. Best time
• 26:58
  Speaker 3: to start was yesterday. So hopefully, like a lot of things.
• 27:00
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• 28:02
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• 28:04
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• 28:13
  Speaker 3: Mark.
• 28:14
  Speaker 2: The debate over companies reporting earnings quarterly is firing back up. Yeah,
• 28:20
  Speaker 2: this came up during the first Trump administration. I believe
• 28:23
  Speaker 2: Barack Obama pushed it to right now, if you're publicly traded,
• 28:27
  Speaker 2: you report your earnings every single every ninety days, and
• 28:31
  Speaker 2: it's a requirement.
• 28:32
  Speaker 3: There's been this now renewed push to say why do
• 28:35
  Speaker 3: we need to do that?
• 28:37
  Speaker 2: The Wall Street journalists coming out and condemning it, saying
• 28:39
  Speaker 2: it's a terrible idea.
• 28:41
  Speaker 3: I'm having a tough time buying the arguments.
• 28:43
  Speaker 2: But to be fair, I've never worked at a publicly
• 28:45
  Speaker 2: traded company, and I've never been employed as a stock analyst.
• 28:49
  Speaker 2: So what would we lose by going to twice a
• 28:52
  Speaker 2: year earnings reports?
• 28:53
  Speaker 4: Exactly what you'd expect valuable information. Potentially, there's actually a
• 28:57
  Speaker 4: way to test this. You can ask does knowing earnings
• 29:02
  Speaker 4: quarterly as opposed to every six months help me to
• 29:04
  Speaker 4: better predict the long term trend in earnings, which is
• 29:08
  Speaker 4: presumably what's of interest to a long term investor or?
• 29:11
  Speaker 4: Am I indifferent between getting earnings every three or six
• 29:14
  Speaker 4: months in terms of my obile?
• 29:16
  Speaker 3: How would you test it? If no US companies do it.
• 29:19
  Speaker 4: You would take the last you would there is a
• 29:21
  Speaker 4: way to do it. It's a good question. You would
• 29:24
  Speaker 4: assume that earnings arrive every six as opposed to every
• 29:26
  Speaker 4: three months. You would then put in yourself half position. Yeah,
• 29:31
  Speaker 4: ignore the last three months, assume you only had the
• 29:34
  Speaker 4: six months prior to that, and then ask does getting
• 29:37
  Speaker 4: the additional three months allow me to better forecast the trend?
• 29:40
  Speaker 4: It's the test is statistical. It gets a little involved,
• 29:43
  Speaker 4: but I've done it, others have probably done it more
• 29:46
  Speaker 4: rigorously than I have, and it's not overwhelming. But the
• 29:51
  Speaker 4: quarterly frequency gives you better forecasts of the trend in
• 29:55
  Speaker 4: earnings than a semi annual frequency. So statistic that may improve.
• 30:01
  Speaker 4: We don't have that, unfortunately, as you know.
• 30:03
  Speaker 3: But no.
• 30:04
  Speaker 4: So you raise another question, at what costs though the
• 30:08
  Speaker 4: benefits outweigh the costs. The answer to that is very
• 30:10
  Speaker 4: hard to quantify. The benefits. Benefits include market efficiency, probably
• 30:14
  Speaker 4: stocks get priced more effectively efficiently if you will, they're better.
• 30:20
  Speaker 4: The value today is a better representation of the present
• 30:23
  Speaker 4: value of the earnings they're likely to generate, if you
• 30:25
  Speaker 4: want to use that as your definition of efficiency. So
• 30:28
  Speaker 4: you lose that market efficiency. And if you're a short
• 30:31
  Speaker 4: term trader, the more frequent the earnings, the more information
• 30:35
  Speaker 4: you have to trade on. It's unquestionably valuable. My guess is, Mike,
• 30:38
  Speaker 4: when you consider the effects and aggregate those that I
• 30:40
  Speaker 4: just mentioned market efficiency and the profits and the price
• 30:45
  Speaker 4: so called price discovery benefits of having more information, my
• 30:47
  Speaker 4: guess is those outweigh the accounting costs. And oh, by
• 30:51
  Speaker 4: the way, if you're worried about those, wouldn't a first
• 30:52
  Speaker 4: best solution be will streamline it. Go to regulators and
• 30:57
  Speaker 4: companies and ask them what would make How do we
• 30:59
  Speaker 4: cut your costs without reducing valuable information? As opposed to
• 31:02
  Speaker 4: an off the cuff, I think it should be every
• 31:04
  Speaker 4: six months. I'd love to see a serious effort at
• 31:07
  Speaker 4: quantifying benefits from reducing.
• 31:10
  Speaker 2: I say, less regulation. You're required to do it once
• 31:12
  Speaker 2: a year, and if you want to do more, go
• 31:13
  Speaker 2: for it.
• 31:14
  Speaker 4: But what if you lose What if traders and long
• 31:16
  Speaker 4: term investors lose valuable information, which, when quantified, exceeds those benefits.
• 31:21
  Speaker 2: If companies find it to be valuable for their stocks,
• 31:26
  Speaker 2: let the market decide.
• 31:27
  Speaker 4: Okay, sorry, I agree wholeheartedly.
• 31:29
  Speaker 3: Quick break. Paul A Monica from Baron's joins us.
• 31:31
  Speaker 1: Next, The Financial Exchange Show podcast drops every day on Apple, Spotify,
• 31:36
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• 31:39
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• 31:47
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• 31:51
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• 31:54
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• 31:57
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• 32:01
  Speaker 1: Financial Exchange Radio Network. Ladies and gentlemen the weekend.
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• 32:41
  Speaker 2: Paul Amonica from Barons joins US now and uh paul
• 32:46
  Speaker 2: Ipomania's back companies listing at a pretty hefty clip. I
• 32:50
  Speaker 2: don't think we're quite back in twenty twenty one status
• 32:53
  Speaker 2: by any stretch. But for those taking a look at
• 32:57
  Speaker 2: these recent IPOs, I guess, how do you judge the
• 33:00
  Speaker 2: market and what comes next? And then as you're right,
• 33:04
  Speaker 2: how do you avoid the froth?
• 33:06
  Speaker 6: Yeah, it's a great question. There have been, you know,
• 33:09
  Speaker 6: companies like the stable coin issuer Circle Figma design software
• 33:15
  Speaker 6: company that actually had a deal to sell itself to
• 33:18
  Speaker 6: Adobe a full a few years ago, and then there
• 33:21
  Speaker 6: were any trust concerns, so that deal wound up not happening,
• 33:26
  Speaker 6: and to Figma's benefit because Figma went public, you know,
• 33:30
  Speaker 6: not that long ago, at evaluation even higher than what
• 33:33
  Speaker 6: Adobe offered to pay for it. There's you know, just
• 33:36
  Speaker 6: a lot of froth out there, and you know, I
• 33:39
  Speaker 6: think investors have to be concerned because a lot of
• 33:43
  Speaker 6: times the expectations are very high. These companies then report
• 33:46
  Speaker 6: earnings once they're public, and they're even if they're slightly disappointing,
• 33:51
  Speaker 6: the stocks come tumbling down. So Circle and Pigma, for example,
• 33:55
  Speaker 6: still up sharply from their offering price, but down a
• 33:59
  Speaker 6: lot from the peak they hit in their first few
• 34:02
  Speaker 6: days of trading. And for a lot of individual investors,
• 34:05
  Speaker 6: that's where they're getting access to these socks. They're not
• 34:07
  Speaker 6: getting even if they put in for allocations on Robinhood
• 34:10
  Speaker 6: or Schwab, They're not necessarily getting shares at the IPO price.
• 34:15
  Speaker 6: They're buying in the aftermarket at the inflated prices.
• 34:18
  Speaker 2: Paul, back in twenty twenty twenty twenty one, it was
• 34:21
  Speaker 2: really defined by that spack boom that we saw, and
• 34:24
  Speaker 2: we are distinctly not seeing that right now. I'm sure
• 34:27
  Speaker 2: there have been a few companies using that vehicle. But
• 34:31
  Speaker 2: is this just a market where hey, people are going
• 34:35
  Speaker 2: back to those big bankers because they rely on them.
• 34:38
  Speaker 2: Is it bad taste from the busts that you saw
• 34:41
  Speaker 2: after the spack boom in twenty twenty twenty one, or
• 34:43
  Speaker 2: a they're actually regulatory changes that are pushing these companies
• 34:46
  Speaker 2: back over to the giants investment banks to make this happen.
• 34:50
  Speaker 6: Yeah, I think it's hard not to recognize that back
• 34:57
  Speaker 6: in twenty twenty one, there was that exuberance in the
• 35:02
  Speaker 6: I hesitate to call it post COVID, because obviously we
• 35:05
  Speaker 6: were still dealing with the pandemic in twenty twenty one,
• 35:08
  Speaker 6: but the market had reopened in a way that many
• 35:13
  Speaker 6: companies felt that rush to go public, and it was
• 35:17
  Speaker 6: easier and quicker to do it through those blank check
• 35:20
  Speaker 6: deals the spack vehicle. Now, I think there has been
• 35:25
  Speaker 6: that bounce back and companies recognized that they need the
• 35:28
  Speaker 6: validity of Wall Street investment banks going on these actual
• 35:33
  Speaker 6: roadshows to try and drum up interest from institutional investors
• 35:37
  Speaker 6: and not just retail as well. So I think that's
• 35:41
  Speaker 6: why you're seeing more companies go public the traditional way
• 35:44
  Speaker 6: than through this background.
• 35:46
  Speaker 2: I'm encouraged at least that we are not seeing every
• 35:49
  Speaker 2: company that goes public just absolutely taking off.
• 35:52
  Speaker 3: We had stub Hub premiere just this week.
• 35:55
  Speaker 2: What did we see in the day of the IPO
• 35:58
  Speaker 2: and now trading see when it comes to the giant
• 36:02
  Speaker 2: ticket player.
• 36:03
  Speaker 6: Yeah. I mean, let's be honest, you you don't want
• 36:06
  Speaker 6: to say that a company's IPO is a disappointment because
• 36:09
  Speaker 6: it stumbles on the first day. Take a look at
• 36:12
  Speaker 6: you know, what happened with core Weave earlier this year,
• 36:15
  Speaker 6: AI company that went public late March, terrible timing, right
• 36:19
  Speaker 6: before Liberation Day. It didn't have a great debut at first,
• 36:23
  Speaker 6: but has now gone bonkers, you know, as the AI
• 36:27
  Speaker 6: trade has come luring back to life. Not so sure
• 36:29
  Speaker 6: that's gonna happen with StubHub. StubHub fell on its debut day.
• 36:34
  Speaker 6: StubHub fell yesterday and it's down again so far today.
• 36:38
  Speaker 6: And you know, maybe it's the case where, you know,
• 36:41
  Speaker 6: investors recognize that the fundamentals aren't that great. You know,
• 36:46
  Speaker 6: the they they're losing money. They're obviously very susceptible to
• 36:52
  Speaker 6: trends in music. Not having Taylor Swift on tour this
• 36:55
  Speaker 6: year is a big problem for the company's revenue stream.
• 36:59
  Speaker 6: And then you you know, you look at what's happening
• 37:01
  Speaker 6: with Live Nation and ticket Master and the FTC, you know,
• 37:05
  Speaker 6: complaint about ticket resales that probably isn't helping sentiment either.
• 37:11
  Speaker 2: Paul only about thirty seconds here, But any other big
• 37:14
  Speaker 2: names that you're aware of or that have been hinting
• 37:16
  Speaker 2: of an IPO in the last what is it, three
• 37:19
  Speaker 2: and a half months of the year here as we
• 37:21
  Speaker 2: head into the fourth quarter.
• 37:23
  Speaker 6: Yeah, I mean, you know, companies you know are likely
• 37:26
  Speaker 6: to still go public take advantageist demand sources. I spoke
• 37:30
  Speaker 6: to my story mentioned you know, Discord as a potential company,
• 37:36
  Speaker 6: Revolute you know as one as well. You know, we're
• 37:40
  Speaker 6: just gonna have to wait and see data bricks. You know,
• 37:43
  Speaker 6: big Ai company also you know, worth about one hundred
• 37:47
  Speaker 6: billion already, could be one to keep an eye out for.
• 37:51
  Speaker 6: But I don't expect the really gigantic unicorns your SpaceX's
• 37:57
  Speaker 6: or open ais to go public just yet.
• 38:00
  Speaker 2: Paula Monica from Baron's joining us on this Friday talk
• 38:02
  Speaker 2: about the IPO market. Appreciate it as always, Paul, have
• 38:05
  Speaker 2: a great weekend and have a great weekend all listeners
• 38:07
  Speaker 2: to good weather weekend out there, so enjoy. We'll be
• 38:11
  Speaker 2: right back at it on Monday.