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Where are consumer prices rising the most? · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:06
Speaker 1: Zada and Mike Armstraw.
1:10
Speaker 2: Chuck, Mike and Tucker with you here on a Thursday.
1:14
Speaker 2: Quite a bit of economic data that we received this morning.
1:17
Speaker 2: Also a little bit of follow up on some of
1:19
Speaker 2: the big moves from yesterday, most notably Oracles thirty five
1:22
Speaker 2: percent jump, and we'll be digging into that. We'll be
1:26
Speaker 2: talking about nice little swath of IPOs this week as
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Speaker 2: well and what that may mean for the market.
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Speaker 3: But we begin with the two pieces.
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Speaker 2: Of economic data that came out this morning. At eight
1:38
Speaker 2: thirty am. We received CPI Consumer Price Index data from
1:42
Speaker 2: the Bureau of Labor Statistics. We also received weekly jobless
1:45
Speaker 2: claims data from the Department of Labor. Michael, where would
1:48
Speaker 2: you like to begin?
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Speaker 4: I don't know, Chuck. Neither of them are terribly good.
1:52
Speaker 5: Let's, I guess start with the bigger one, the monthly
1:54
Speaker 5: release of inflation on the consumer price index front, which
2:00
Speaker 5: we owed a slight increase from where we were last month,
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Speaker 5: after where we were last month was kind of getting
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Speaker 5: a little bit uncomfortably high. So running through the details here,
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Speaker 5: we saw headline CPI jump up four tenths percent compared
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Speaker 5: to last month. That's the doubling of the rate that
2:17
Speaker 5: we saw in July in terms of where that came from,
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Speaker 5: though a lot of it was food and energy, and
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Speaker 5: so when you strip that out, we're about tied with
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Speaker 5: where we were last month.
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Speaker 3: No, we're not.
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Speaker 5: Point three percent month over versus point two July. Core
2:34
Speaker 5: I think was point three, Chuck, I'm.
2:37
Speaker 3: Looking at it right now. It's point two.
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Speaker 2: Really, okay, I'm looking at it right here. July and
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Speaker 2: June we're both point two. Unless the BLS report is
2:46
Speaker 2: lying to me.
2:47
Speaker 5: The BLS report is probably lying to me, or my
2:50
Speaker 5: numbers are wrong. Hold on a second, Yeah, you're right,
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Speaker 5: all items less, No, all items less food and energy.
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Speaker 5: We're up point three percent in the month of July
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Speaker 5: twenty twenty five point two the preme.
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Speaker 3: Let's see what line am I looking at?
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Speaker 5: Oh?
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Speaker 3: Sorry, I'm looking at just good?
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Speaker 5: Yes, so right to see that, guys market tape do
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Speaker 5: the rest of the show is their tape?
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Speaker 4: Can we marke it anymore?
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Speaker 3: So?
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Speaker 5: In either case, whether a point two or point three,
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Speaker 5: what we're seeing now is inflation for the last three
3:20
Speaker 5: months at least accelerating a little bit from where I
3:22
Speaker 5: think our comfort zone might be. And this has been
3:25
Speaker 5: nothing new Chuck right. We've been sitting around this three
3:28
Speaker 5: percent level for a few months now, but if you
3:31
Speaker 5: take the last three months, you're heading closer to that
3:34
Speaker 5: three to five level if you're going to just average
3:37
Speaker 5: the last three months. And so the question is how
3:39
Speaker 5: much longer does that continue? And it also speaks to
3:43
Speaker 5: probably a lot of unhappiness in households because where a
3:46
Speaker 5: lot of that inflation is coming from is food and
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Speaker 5: energy inflation. Right now, energy I think people probably have
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Speaker 5: less issue with given where gas prices are, but on
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Speaker 5: the food side of things, that that's a pretty quick
3:58
Speaker 5: pace if that continues.
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Speaker 3: Yeah.
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Speaker 2: The interesting thing on the food side, I've had a
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Speaker 2: number of people in the last month or so ask
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Speaker 2: me about what's been going on with grocery prices. I've
4:09
Speaker 2: been like, well, what do you mean And they're like, well,
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Speaker 2: I'm seeing you know, higher prices in a number of areas.
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Speaker 2: And I'm like, well, can you can you tell me
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Speaker 2: more about what it is that that you're seeing. I'm
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Speaker 2: you know, trying to get a sense of hey, is
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Speaker 2: this a is this one area? Is it you know,
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Speaker 2: spread out? And the thing that I've been hearing from
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Speaker 2: them is, hey, this is this is showing up, you know,
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Speaker 2: predominantly for them on the produce side. That that's where
4:34
Speaker 2: they've been telling me it's it's you know, beef prices
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Speaker 2: are up. We've covered that at length, but they're telling me, hey,
4:40
Speaker 2: this is happening on the produce side. And so I
4:42
Speaker 2: looked in the data here to see what we had,
4:45
Speaker 2: and the unadjusted percentage change for July through August was
4:50
Speaker 2: one point two percent for the month. On fruits and vegetables,
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Speaker 2: the seasonally adjusted was one point six. So this is
4:56
Speaker 2: one case where the anecdotes that I've been hearing mesh
4:59
Speaker 2: with what we see in the data, which is one
5:02
Speaker 2: of the fastest you know, rising areas of food prices
5:05
Speaker 2: is on the produce side. On the other side, like
5:08
Speaker 2: eggs or flat for the month, there's no change on
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Speaker 2: that side. Beef continuing to move up at a fast clip. Now,
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Speaker 2: beef prices are up thirteen point nine percent year over
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Speaker 2: year and two point seven percent for the month. Continuing
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Speaker 2: to just see that moving forward at this point. But
5:24
Speaker 2: what we're seeing on fruits and vegetables is a new thing.
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Speaker 2: For the full year, they're only up one point nine
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Speaker 2: percent year over year, But now You've got this one
5:33
Speaker 2: point six percent in a month. It's basically saying, hey,
5:35
Speaker 2: all of that, you know, growth in fruit and vegetable
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Speaker 2: prices happened in August. Is this going to be something
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Speaker 2: that continues or is it a one off? The FED
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Speaker 2: doesn't care about food and fuel price changes, not because
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Speaker 2: they don't care about human beings. It's simply because they're
5:56
Speaker 2: not often indicative of long term shifts that tend to
5:58
Speaker 2: stick around. For an example of this, look at egg prices.
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Speaker 2: They went up really sharply for about six months and
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Speaker 2: then came down really sharply for about four months. And
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Speaker 2: so it's not something that tends to have sticking power
6:12
Speaker 2: usually because it's because of transitory factors a bad harvest,
6:18
Speaker 2: a bird flu with this that whatever. Those things don't
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Speaker 2: tend to stick around generally with food, with fruit and
6:26
Speaker 2: vegetable prices, you know, we can look at some of
6:29
Speaker 2: the things and say, Okay, is there anything that's potentially
6:32
Speaker 2: longer term here? And the one thing that I do
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Speaker 2: come back to is something to potentially watch it's not
6:37
Speaker 2: a definite thing. Is when we talk about the illegal
6:40
Speaker 2: immigration crackdown, a lot of folks who are not in
6:43
Speaker 2: the country legally tend to work in the agriculture area,
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Speaker 2: and so you wonder if this is driving up labor
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Speaker 2: costs for farms and things like that and potentially reducing
6:53
Speaker 2: supply of fruits and vegetables. And so it's something that
6:56
Speaker 2: I put on my car just to monitor. I'm not
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Speaker 2: saying that this is going to happen or not, but
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Speaker 2: just hey, let's pay attention to this and see if
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Speaker 2: it becomes a trend.
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Speaker 3: Right now, it's one month in the data.
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Speaker 2: That's not really worth you know, getting too excited about.
7:11
Speaker 2: But let's see if this becomes something that has staying
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Speaker 2: power or if this is just you know, one off
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Speaker 2: and then we kind of go back to where we were.
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Speaker 5: Could it be terriff related to I just I'm thinking
7:20
Speaker 5: about my grocery basket and what goes in there, and
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Speaker 5: when it comes to fruit and vegetables, bananas, oranges, avocados,
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Speaker 5: these are not things that are grown generally speaking, in
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Speaker 5: the United States.
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Speaker 3: I do.
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Speaker 5: I don't even know off the top of my head though,
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Speaker 5: if like bananas and avocados are subject to tariff right now,
7:40
Speaker 5: I believe they are.
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Speaker 2: They are, so in terms of you know, what you
7:45
Speaker 2: see here. Some of this could be terraf related, Like
7:49
Speaker 2: banana's up six point six percent in the last year,
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Speaker 2: two point one percent in the month.
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Speaker 3: So maybe because quite literally, we don't.
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Speaker 2: Grow any bananas in the United States, right, It's just
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Speaker 2: that they don't grow here. Other things that we do
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Speaker 2: grow in the US, you know, let us as an example,
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Speaker 2: up three and a half percent for the month. Tomatoes
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Speaker 2: up three and four and a half percent for the month.
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Speaker 2: These are but some of these can be explained by
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Speaker 2: transitory factors. Yeah, tomatoes just as an example. You look
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Speaker 2: at it, and at least in the northeast, talk to
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Speaker 2: anyone who's put tomato plants in their gardeners here. It's
8:19
Speaker 2: been a brutal harvest because it's been so dry, just
8:22
Speaker 2: hasn't been much much that's been going on there.
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Speaker 3: And this is not just a New England thing.
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Speaker 2: You will get you know, other areas of the country
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Speaker 2: that grow them and they're facing you know, the same problems.
8:32
Speaker 2: So this is why I look at this and I
8:34
Speaker 2: say some of this could be transitory, some not. But
8:36
Speaker 2: you gotta kind of watch and see the stuff that is,
8:40
Speaker 2: you know, more troublesome is the stuff that's not going
8:44
Speaker 2: on here, which is, hey, the hit to use cars
8:47
Speaker 2: and trucks is starting to show up the last two months,
8:50
Speaker 2: up half a percent in July, up another one percent
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Speaker 2: in August. So you're starting to see that seeping in
8:57
Speaker 2: things like apparel that is now showing, you know, sign
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Speaker 2: where the last three months we've gone and basically averaged
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Speaker 2: point three to five percent for apparel, so that's running
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Speaker 2: it more than a four percent annualized clip.
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Speaker 3: Other things that we saw, this one.
9:11
Speaker 2: That I don't think will stick around, and this bodes
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Speaker 2: well for next month's inflation report. Shelter costs upe point
9:17
Speaker 2: four percent for the month after back to back ones
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Speaker 2: at point two. There's not really anything out there to
9:22
Speaker 2: me that points to that point four being sustainable right now.
9:26
Speaker 2: We'll have to kind of watch and see how it evolves.
9:29
Speaker 2: Transportation services up one percent. This is something where you're
9:33
Speaker 2: starting to see a little bit of a rebound in airfares.
9:35
Speaker 2: The reason being airlines have finally gotten to the point
9:38
Speaker 2: where they've cut the capacity that they think they need
9:40
Speaker 2: to and so now they're raising prices on the remaining
9:43
Speaker 2: capacity because they don't have to try to fill as
9:46
Speaker 2: many planes. So that could have some staying power potentially.
9:50
Speaker 2: But overall, I think you look at this report and
9:54
Speaker 2: you got a couple new things to monitor. Again, that
9:56
Speaker 2: the food situation is new, and so you say, okay,
9:58
Speaker 2: let's see if there's something there. But it's one month.
10:01
Speaker 2: But overall, I don't think it's dramatically out of line
10:04
Speaker 2: with what we've seen for the last several months, which
10:07
Speaker 2: is inflation, particularly core inflation, still running a little bit elevated.
10:12
Speaker 2: But given the situation in the labor market and how
10:16
Speaker 2: things may be worsening there, the FED I think could
10:19
Speaker 2: be Quite honestly, I go stronger that the FED is
10:22
Speaker 2: completely justified in beginning to move forward with rate cuts
10:26
Speaker 2: YEP next week. And so let's take a quick break,
10:29
Speaker 2: and when we come back, let's talk about what we
10:31
Speaker 2: saw from jobless claims, and that will dovetail nicely into
10:36
Speaker 2: a discussion of the labor market and the FED.
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11:52
Speaker 2: My final note just on the inflation data before we
11:57
Speaker 2: get to jobbles claims.
11:58
Speaker 3: Yeah please.
12:00
Speaker 2: Big thing that we are seeing here is that if
12:03
Speaker 2: you look at this in terms of two components, services
12:06
Speaker 2: and goods, and specifically core like this like toss the
12:09
Speaker 2: food stuff away just because it's not what the FED
12:11
Speaker 2: cares about because a lot of that tends to be transitory.
12:14
Speaker 3: YEA, core services.
12:17
Speaker 2: Inflation is basically running at three and a half percent
12:22
Speaker 2: right now and has been at three and a half
12:25
Speaker 2: percent for the last four months or so. Core goods inflation,
12:34
Speaker 2: which was around negative two in Q three of last year,
12:38
Speaker 2: started to inflect upward then, so even before any tariff stuff.
12:41
Speaker 2: This is this goes back you know, a full year
12:43
Speaker 2: now before tariffs or any of that. Core goods started
12:47
Speaker 2: to inflect up, but have accelerated up recently, and now
12:50
Speaker 2: we're closing in on three percent. And this is kind
12:52
Speaker 2: of the whole crux of this is, look, inflation kind
12:55
Speaker 2: of bottomed in the high twos on the on the
12:58
Speaker 2: core range because of core goods falling, while core you know,
13:02
Speaker 2: services were still elevated, you know, around four percent declining slowly.
13:07
Speaker 2: What we're seeing now is not much progress being made
13:10
Speaker 2: on core services, but core goods accelerating up. And so
13:15
Speaker 2: I think it gets to the point where you know,
13:16
Speaker 2: you sit here and you say, okay, all of the
13:20
Speaker 2: data out there is consistent with probably low threes core inflation,
13:24
Speaker 2: so low threes long term inflation, and for whatever reason,
13:29
Speaker 2: one reason or another. I'm not saying this is good, bad,
13:31
Speaker 2: or anything else. I'm just saying it is. The decision
13:33
Speaker 2: that's being made by the Fed and basically by markets
13:36
Speaker 2: right now is Hey, it's okay that inflation is gonna
13:39
Speaker 2: be a little bit hotter. We got to deal with
13:41
Speaker 2: the unemployment question first.
13:43
Speaker 5: Yeah, that is, that is the trade off it's being made.
13:46
Speaker 5: It really raises an interesting question of just how much
13:50
Speaker 5: can they actually cut in an environment like this. And
13:52
Speaker 5: I know that big bets are being made right now
13:54
Speaker 5: on a lot of them, but it becomes challenging on
13:59
Speaker 5: inflations like this.
14:01
Speaker 2: Yeah, And the other interesting piece just that I'll point
14:04
Speaker 2: out if you look at the twenty fourteen through twenty
14:07
Speaker 2: nineteen period, so before anyone was like really concerned about
14:10
Speaker 2: inflation and before it was a thing. If you look
14:13
Speaker 2: during that period, core services typically was running at about
14:16
Speaker 2: a three percent to three and a quarter percent annualized clip,
14:20
Speaker 2: like that's where it tended to land. Core goods was
14:24
Speaker 2: typically seeing about half a percent to one percent deflation
14:28
Speaker 2: on an annual basis.
14:29
Speaker 5: So you think about and that's how you got to too.
14:32
Speaker 5: You got tech coming down and getting cheaper, You've got
14:35
Speaker 5: used cars, things like that, sorts of that stuff just
14:38
Speaker 5: moderating or coming down generally speaking in the twenty tens.
14:42
Speaker 5: And that's how you got to like, yeah, somewhere around
14:44
Speaker 5: two percent inflation with services ran around three.
14:46
Speaker 3: Goods ran you know, slightly negative. And that's how you
14:49
Speaker 3: got there.
14:49
Speaker 2: It wasn't just that every like Defen doesn't try to
14:51
Speaker 2: make every price grow at two. They try to get
14:54
Speaker 2: you know, the whole thing, you know, with price stability,
14:56
Speaker 2: somewhere around two percent. And generally the mix that we
15:00
Speaker 2: we saw on the twenty tens, services ran about three
15:02
Speaker 2: to three and a half percent. Goods ran negative half
15:05
Speaker 2: percent to negative one percent.
15:07
Speaker 5: Each year, TV's got cheaper, vacations got more expensive.
15:10
Speaker 2: Yes, let's talk a little bit about the weekly jobbles
15:15
Speaker 2: claims number. So here's what we saw. Weekly initial claims
15:20
Speaker 2: jumped to two hundred and sixty three thousand. That was
15:22
Speaker 2: a jump of twenty seven thousand from the prior week.
15:27
Speaker 2: And this starts to get into you know, hey, I
15:29
Speaker 2: think I said last week, like, if you start to
15:31
Speaker 2: see like three four weeks in a row above two sixty,
15:33
Speaker 2: that's where I start to get concerned. You've got one now,
15:36
Speaker 2: So I'm still not quite concerned for a couple reasons.
15:40
Speaker 2: The first is, obviously, it's it's one week, so anything
15:44
Speaker 2: weird can happen in one week. Second piece, it looks
15:47
Speaker 2: like something weird might have happened this week. Texas, for
15:51
Speaker 2: whatever reason, saw its weekly jobbles claims jump from sixteen
15:54
Speaker 2: thousand to thirty two thousand. Now, this could be a
15:58
Speaker 2: case where you say, oh, OK, the oil industry has
16:02
Speaker 2: announced a bunch of layoffs recently. Maybe this is, you know,
16:04
Speaker 2: showing up there. Because Texas is oil country. We've talked
16:07
Speaker 2: a little bit about what's going on in agriculture. Maybe
16:10
Speaker 2: you're seeing some signs of things there. I don't think
16:12
Speaker 2: it would show up in new unemployment claims though, more
16:15
Speaker 2: you know, hey, we need to hire more in the
16:17
Speaker 2: agriculture sector. So I don't think that clips clicks. But
16:21
Speaker 2: I think ultimately there could be something weird that's just
16:24
Speaker 2: going on with the Texas datea this week, kind of
16:26
Speaker 2: like when all the New York City school bus drivers
16:28
Speaker 2: got laid off a week later than normal in the
16:30
Speaker 2: spring because of you know, when the school calendar fell,
16:33
Speaker 2: and so we saw a one week jump there. It
16:35
Speaker 2: could be that other things Remember this is right around
16:39
Speaker 2: labor Day. Labor Day moves around from year to year.
16:42
Speaker 2: Maybe there was something weird with the seasonal adjustments things
16:45
Speaker 2: like that. So I don't know that I necessarily make
16:49
Speaker 2: anything of this one week yet, other than to say, hey,
16:54
Speaker 2: if the next couple weeks come in at these levels,
16:57
Speaker 2: around these levels or higher, Okay, now we got something
17:01
Speaker 2: that we got to talk about.
17:03
Speaker 5: Taking this in context with the last week's jobs report,
17:05
Speaker 5: I mean, how do we contextualize the overall state of
17:09
Speaker 5: the labor market for the Federal Reserve members in terms
17:12
Speaker 5: of how they're looking at it?
17:14
Speaker 6: Right?
17:14
Speaker 5: I mean, you know, it's one thing for us to
17:15
Speaker 5: contextualize it, but what really matters in the short term
17:18
Speaker 5: is how the Fed is thinking about it. You did
17:21
Speaker 5: see an uptick in the unemployment rate, you saw a
17:25
Speaker 5: pretty weak job creation number, and then was it yesterday
17:28
Speaker 5: that you got the annual revisions in there with nine
17:31
Speaker 5: day Tuesday? Okay, so nine hundred thousand fewer jobs actually
17:34
Speaker 5: created over the course of the last month with those revisions.
17:37
Speaker 2: Oh no, No, that was over the last that was twenty
17:39
Speaker 2: twenty four, in early twenty five, not over the last month, last.
17:43
Speaker 5: Twelve months, Yes, yeah, sorry, did I say last month doesn't?
17:46
Speaker 3: Yeah?
17:47
Speaker 4: Okay, yes, I.
17:47
Speaker 3: Would have been that really bad.
17:49
Speaker 5: Then the Fed's got a cut by you know, two percent,
17:51
Speaker 5: So over the last year, fewer jobs created than was
17:53
Speaker 5: previously understood. How is the FED contextualizing again? I don't
17:57
Speaker 5: think that any of that has much to do with
18:00
Speaker 5: today's jobless claims number. That would have to be a
18:03
Speaker 5: story that continues for a few weeks. But with all
18:06
Speaker 5: of this context, I kind of do get to where
18:10
Speaker 5: they are seemingly pointing, which is, we do have to
18:14
Speaker 5: overlook this inflation data because there is significant weakening on
18:17
Speaker 5: the labor side.
18:18
Speaker 2: And this is where the breakdown that I just gave,
18:20
Speaker 2: I think kind of puts it all into you know
18:22
Speaker 2: how they'll think about it. They're gonna look at core
18:25
Speaker 2: goods and say, hey, that's because of tariffs. And once
18:28
Speaker 2: those tariff price increases come through, Core Goods is going
18:30
Speaker 2: to go back to doing what it used to do,
18:32
Speaker 2: which is half percent to one percent annual decline. Core
18:36
Speaker 2: services might be plateauing around three and a half percent,
18:38
Speaker 2: but it really only needs to get down to like
18:40
Speaker 2: three to be where it was before. Great we can do,
18:44
Speaker 2: you know, that'll probably happen over the next year or so.
18:47
Speaker 2: On the other hand, the labor market, once it gets
18:49
Speaker 2: moving in one direction, the only thing that tends to
18:51
Speaker 2: stop it is an intervention, and so we need to intervene,
18:54
Speaker 2: is what the Fed's thinking. And I don't think that
18:56
Speaker 2: that thinking is wrong, provide that this is what we
19:00
Speaker 2: continue to see on the inflation side. I'm not saying that,
19:03
Speaker 2: you know, three and a quarter three and a half
19:05
Speaker 2: percent inflation is good. What I'm saying is it's not worsening,
19:08
Speaker 2: but the labor market is. And in a situation where
19:12
Speaker 2: neither side is really where you want it to be,
19:15
Speaker 2: you've got to deal with the problem that is worstening
19:17
Speaker 2: first and then move on to the other one.
19:20
Speaker 3: And I think that's totally defensible.
19:22
Speaker 2: And if I were on the FED, which no one
19:24
Speaker 2: would ever want me there, I'd so, yeah, we got
19:27
Speaker 2: to go a quarter percent next next week, with plans
19:30
Speaker 2: to maybe go heavier in October if the labor market
19:33
Speaker 2: worsens further. Quick Break when we return It's Wall Street.
19:37
Speaker 1: Watch Like us on Facebook and follow us on Twitter
19:43
Speaker 1: at TFE show. Breaking business news is always first right
19:48
Speaker 1: here on the Financial Exchange Radio Network. Time Now for
19:53
Speaker 1: Wall Street Watch a complete look at what's moving market
19:56
Speaker 1: so far today right here on the Financial Exchange Radio Network.
20:00
Speaker 6: Market seeing a nice little bump today is Walster rereacts
20:04
Speaker 6: to a key inflation measure posted this morning, where the
20:07
Speaker 6: consumer price index increased two point nine percent on an
20:11
Speaker 6: annual basis, in line with expectations, yet hotter than July's
20:16
Speaker 6: gain of two point seven percent. Jobless claims data also
20:19
Speaker 6: came in slightly above estimates.
20:21
Speaker 3: Right now, the.
20:22
Speaker 6: Dow is up just over one percent higher, or five
20:25
Speaker 6: hundred and seven points, SMP five hundred is up six
20:28
Speaker 6: tens of one percent, or forty three points higher, NASDAC
20:32
Speaker 6: up just over half a percent, or one hundred and
20:34
Speaker 6: nineteen points. Russell two thousand is up nearly one percent,
20:38
Speaker 6: Tenure Treasure reeled down three basis points at four percent,
20:42
Speaker 6: and crude oil is down nearly two percent today, training
20:46
Speaker 6: its sixty two dollars and fifty cents a barrel after
20:50
Speaker 6: its best day since nineteen ninety two. On the heels
20:53
Speaker 6: of its optimistic AI revenue projections. Oracle shares are slightly
20:58
Speaker 6: retreating from yesterday's thirty six percent surge, down five percent today. Separately,
21:04
Speaker 6: the Wall Street Journal reported it struck a three hundred
21:06
Speaker 6: billion dollar cloud deal with open Ai. Meanwhile, recent meme
21:11
Speaker 6: stock open Door jumping fifty four percent after the online
21:15
Speaker 6: housing platform named a top Shopify executive as its next CEO.
21:20
Speaker 6: Elsewhere after its three percent pullback yesterday following an overall
21:25
Speaker 6: underwhelming product event, Apple shares are up about eight tenths
21:28
Speaker 6: of one percent today after a successful IPO yesterday, where
21:33
Speaker 6: shares jumped fourteen percent in its debut. Shares in the
21:37
Speaker 6: buy now, pay later platform Klarna are falling two percent today.
21:41
Speaker 6: Kroger climbing nearly one percent after the grocery store chain
21:44
Speaker 6: posted mixed quarterly results where it beat earnings expectations but
21:48
Speaker 6: fell just short of revenue estimates. And energy drink company
21:53
Speaker 6: Celsius is climbing about three percent after Goldman Sachs gave
21:56
Speaker 6: the stock a buy rating with the banks at Celsius
21:59
Speaker 6: has posted strong growth in is in a quickly growing category.
22:05
Speaker 6: I'm Tucker Silvan, that is Wallstreet Watch, Mike.
22:08
Speaker 2: Anything else that you want to cover as it relates
22:11
Speaker 2: to any of the economic data from this morning.
22:16
Speaker 5: No, I'm sure it'll seep through to other stories as
22:19
Speaker 5: the day goes on Chuck.
22:21
Speaker 2: All Right, so now that we've gotten that out of
22:24
Speaker 2: the way, let's talk about next week's FED meeting, because gosh,
22:29
Speaker 2: it's gonna be exciting fireworks. It actually really won't be
22:33
Speaker 2: that exciting. I think we kind of know what's happening.
22:36
Speaker 2: The piece that is interesting, Lisa Cook is going to
22:40
Speaker 2: be back and present for this FED meeting. The Supreme
22:43
Speaker 2: Court did agree to hear the Trump administration's appeal related
22:47
Speaker 2: to her firing being denied by a lower court. Was
22:52
Speaker 2: that late last week or early this week? I can't
22:54
Speaker 2: even remember this week. I believe this week. So, but
23:00
Speaker 2: an expedited appeal does not mean by next FED meeting.
23:02
Speaker 2: It probably means by Thanksgiving.
23:05
Speaker 5: Yeah, the next FED meetings in six days to be yes,
23:07
Speaker 5: five days, and the press conferences in six days.
23:10
Speaker 2: So I suspect that the Supreme Court will likely have
23:13
Speaker 2: a ruling out on this before your end, probably before Thanksgiving.
23:17
Speaker 2: But Cook will be at that FED meeting, and also
23:20
Speaker 2: potentially present is Stephen Moran, who was on the Council
23:24
Speaker 2: of Economic Advisors for the President but was put forward
23:27
Speaker 2: as the replacement for Kugler.
23:31
Speaker 3: What was that about a month ago?
23:32
Speaker 2: I think when Adrana Kugler decided to step down, and
23:37
Speaker 2: so he cleared the Senate Banking Committee yesterday and potentially
23:42
Speaker 2: could be confirmed by the full Senate in the next
23:45
Speaker 2: couple of days. And so it steads the stage for
23:48
Speaker 2: a widely expected quarter percent cut with the interesting possibility
23:54
Speaker 2: that you could see descents to both sides for the
23:58
Speaker 2: first time that I can remember on this.
24:00
Speaker 5: Yeah, so we talk about this. I think it's worth
24:02
Speaker 5: an explanation.
24:03
Speaker 3: Again.
24:04
Speaker 5: This is a twelve member voting committee. They almost what
24:10
Speaker 5: would you guess, like ninety percent of the time act unanimously.
24:15
Speaker 3: It might even be more than that.
24:17
Speaker 5: So most of the time, the vast majority of the
24:19
Speaker 5: time they vote unanimously on which direction to go. The
24:22
Speaker 5: last two meetings, you've had to sense pushing for lower
24:26
Speaker 5: interest rates at this meeting. To your point, Chuck, which
24:30
Speaker 5: would be incredibly abnormal, would be you clearly have some
24:35
Speaker 5: voting members that want rates to go lower, and perhaps
24:38
Speaker 5: even more than twenty five basis points. And then I
24:41
Speaker 5: think they're likely to your point, are some folks that
24:43
Speaker 5: are looking at this inflation data and saying I'm not
24:46
Speaker 5: so sure. I don't know, though, Chuck, I tend to
24:49
Speaker 5: think that you don't have anyone on that committee that
24:53
Speaker 5: is going to be so firmly stuck to keeping rates
24:55
Speaker 5: right where they are right now that they would descent
24:57
Speaker 5: to the upside.
25:00
Speaker 4: Well, we'll have to see.
25:02
Speaker 3: I don't know. I mean, it's Look, here's the thing.
25:04
Speaker 2: Even though last segment I said, I think the Fed
25:08
Speaker 2: it like can completely justify cutting a quarter percent right
25:11
Speaker 2: now because the labor market's worsening, while the inflation picture,
25:15
Speaker 2: you can make a case, is kind of just stagnating
25:17
Speaker 2: out there.
25:17
Speaker 3: Yep.
25:19
Speaker 2: I think that there's room for someone who says, yeah,
25:23
Speaker 2: these two risks are still both out there, and given
25:26
Speaker 2: the potential for labor supply disruptions, there's a chance that
25:30
Speaker 2: you might not see the unemployment rate move up much
25:33
Speaker 2: further from here, And so you could be justified in
25:37
Speaker 2: saying I don't want to do anything.
25:38
Speaker 4: Yeah, you could.
25:40
Speaker 2: The point that you make, and that I think you
25:43
Speaker 2: know you kind of get from Powell from his Jackson
25:46
Speaker 2: Whole speech, is when Powell gives the go ahead to
25:50
Speaker 2: move in a direction. Usually he's pretty good at corralling
25:53
Speaker 2: the rest of the committee, and so the signal from
25:57
Speaker 2: August and that Jackson Hole speech is it's time to go,
26:02
Speaker 2: and so I think given that, it would be surprising
26:06
Speaker 2: to see a descent saying yes, I don't want to
26:08
Speaker 2: cut rates now. It's not impossible, but it's a lower likelihood.
26:16
Speaker 5: The other counterpoint to my own perspective on this is
26:19
Speaker 5: he undoubtedly has less ability to corral today given his
26:24
Speaker 5: yes longevity compared to a couple of years ago. And
26:26
Speaker 5: so you're right, there's going to be more willingness to dissent,
26:30
Speaker 5: I think, and that could take place on either side here.
26:33
Speaker 5: Most recently the descents have been towards lower rates, but
26:36
Speaker 5: as Powell's influence wanes here in the last few months
26:41
Speaker 5: of his role as chair, we could see that happen.
26:45
Speaker 5: The interesting thing, too, Chuck. On the bond side, we
26:49
Speaker 5: now have that ten year down below four percent, the
26:51
Speaker 5: first time that's happened since since April fourth, right on
26:58
Speaker 5: the cusp of the tariff announce Men's win markets freaked out.
27:02
Speaker 5: I wonder if you have a take on the precipitous
27:04
Speaker 5: drop that we've seen in that ten year benchmark over
27:06
Speaker 5: the course of just the last week or so.
27:08
Speaker 2: It's it's all about jobs, and it's basically, Hey, if
27:11
Speaker 2: the Fed's saying that they're gonna go and if the
27:13
Speaker 2: labor market's weakening, we got to fix that first before
27:15
Speaker 2: we worry about inflation. Is what the bond market is saying.
27:19
Speaker 2: Whether that is right or wrong, we're gonna find out
27:25
Speaker 2: over the next year.
27:26
Speaker 3: You know.
27:27
Speaker 2: That's not one that I think you call a win
27:30
Speaker 2: by year end. I think it's one where, hey, you're
27:33
Speaker 2: gonna have to see how this evolves by next year,
27:35
Speaker 2: because if the economy does bottom in the next few
27:40
Speaker 2: months and starts to reaccelerate, and now you're saying, okay,
27:44
Speaker 2: like job's growth is picking back up again, inflation is
27:46
Speaker 2: still running you know, three to three and a half,
27:48
Speaker 2: and nominal growth is heading towards six that ten years
27:52
Speaker 2: dramatically overpriced, then, right, if you have a deeper recession
27:55
Speaker 2: that goes for a little bit longer, okay, Like, yeah,
27:58
Speaker 2: you could probably justify it, but there's there are a
28:01
Speaker 2: lot of eggs in the basket right now. For yeah,
28:05
Speaker 2: rates are gonna be lower for longer. And I'm not
28:10
Speaker 2: saying it's right or wrong. I don't know, but by
28:14
Speaker 2: the end of next year, we're gonna find out. I mean, look,
28:17
Speaker 2: if if the tenuere is still below.
28:20
Speaker 3: I'll give some wiggle rom on this.
28:22
Speaker 2: If the ten years below four and a half at
28:23
Speaker 2: the end of next year, then this bond signal is
28:26
Speaker 2: the right one.
28:27
Speaker 3: Right. If it's above four and a half, then oops.
28:30
Speaker 2: Like it's basically saying, hey, we we didn't need to
28:34
Speaker 2: cut that much because this was a short term wiggle
28:36
Speaker 2: in the economy and not a real slot, not a
28:38
Speaker 2: real recession. Just take a quick break here. When we
28:43
Speaker 2: come back, I do want to talk more about Oracle
28:46
Speaker 2: from me. Yesterday just a monster day, and so we'll
28:48
Speaker 2: talk about what they're doing today and what it means
28:51
Speaker 2: after this.
28:52
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28:56
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29:24
Speaker 3: Alriting.
29:25
Speaker 2: So let's talk a little bit about the company known
29:29
Speaker 2: as Oracle. So they reported earnings on Tuesday, and as
29:34
Speaker 2: part of that they talked about, you know, future commitments
29:41
Speaker 2: for purchases from their customers and specifically, like the term
29:49
Speaker 2: that gets used when when talking about this is RPOs. Now,
29:54
Speaker 2: this is not if you're a football fan, This is
29:55
Speaker 2: not the run pass option. So I don't want you
29:57
Speaker 2: to get, you know, all excited about that. This which
30:00
Speaker 2: talking about remaining performance obligations and rbos. Just so that
30:07
Speaker 2: you're aware of this, they are not guaranteed revenue. And
30:11
Speaker 2: this is the direct quote from Oracle. They represent the
30:15
Speaker 2: total value of contracted revenue that has not yet been recognized,
30:18
Speaker 2: often tied to future performance obligations. And so if you
30:22
Speaker 2: look at Oracles RPOs over the last couple of years,
30:26
Speaker 2: they had risen from around sixty six billion dollars in
30:31
Speaker 2: November of twenty three two one hundred and thirty eight
30:34
Speaker 2: billion dollars in May of this year, and then just
30:37
Speaker 2: jumped in one quarter at a four hundred and fifty
30:39
Speaker 2: five billion. This is all because of the Stargate deal
30:42
Speaker 2: between Oracle and open Ai, for you know, three hundred
30:46
Speaker 2: billion dollars in cloud contracts that that Oracle is going
30:49
Speaker 2: to deliver to open Ai over a three to four
30:52
Speaker 2: year time period, which is all well and good. I'm
30:55
Speaker 2: not saying that it's not. I'm just saying a couple
30:58
Speaker 2: of things on this. The first is that when we
31:03
Speaker 2: look at this, there are a couple different things that
31:06
Speaker 2: you have to remember. The first is open AI does
31:10
Speaker 2: not have any cash of its own just sitting around
31:14
Speaker 2: to pay this. They don't, true, yep, they rely right
31:19
Speaker 2: now on a bunch of funding in order to actually
31:23
Speaker 2: pay their bills. So they don't just have like three
31:26
Speaker 2: hundred and seventeen billion dollars. Their cash flow is not
31:28
Speaker 2: three hundred and seventeen billion dollars. Their revenue run rate
31:31
Speaker 2: is not like they don't have this money there.
31:33
Speaker 3: So the first question that you have in.
31:35
Speaker 2: Terms of hey, how ironclad is this is they can't
31:39
Speaker 2: open Ai actually, you know, pay this. The second one
31:43
Speaker 2: is will open AI actually pay this? Yes, they may
31:46
Speaker 2: have signed a contract to do so. But we see
31:48
Speaker 2: companies change their plans for construction all the time. Look
31:51
Speaker 2: at all of the car companies that we're going to
31:54
Speaker 2: be building EV plants and decided, O, G, like, we
31:56
Speaker 2: can't sell that many evs, we don't need to actually
31:58
Speaker 2: do this, and they changed their mind and delayed them,
32:02
Speaker 2: and so on and so forth. The other piece on
32:05
Speaker 2: this is no one asked or even seemed to care
32:10
Speaker 2: on the conference call, Hey, what's the what's the return
32:13
Speaker 2: on investment going to be here? You know, okay, you're
32:16
Speaker 2: gonna be you know, getting three hundred billion dollars in contracts.
32:19
Speaker 2: What's it gonna cost you in order to actually build
32:23
Speaker 2: that and deliver it? What's the ROI on it? And
32:27
Speaker 2: so these are the reasons why, in my opinion, that
32:31
Speaker 2: Oracle stock, since it's big jump yesterday up to a
32:34
Speaker 2: three hundred and forty five bucks a share, it's back
32:36
Speaker 2: down today to around three ten. So it's given back
32:40
Speaker 2: ten percent in you know, a twenty four hour period.
32:43
Speaker 2: It obviously still has a massive gain there. But you
32:47
Speaker 2: look at this and you say, okay, there are definitely
32:49
Speaker 2: some questions that need to be answered here. And also
32:52
Speaker 2: this is not actually new spending that is that no
32:57
Speaker 2: one knew about. It's just it finally reached the stage
32:59
Speaker 2: where it was formal enough that op that Oracle could
33:02
Speaker 2: put it on their earnings report.
33:07
Speaker 4: Yeah.
33:08
Speaker 5: Uh, it's not the only giant move that kind of
33:14
Speaker 5: has people scratched. I don't know if it has people
33:16
Speaker 5: scratching their heads, but it is just another comparison point
33:21
Speaker 5: that you can pretty easily make to the late nineties,
33:25
Speaker 5: and I know that those are getting drawn out and
33:28
Speaker 5: many of those comparisons being made. But I just see
33:30
Speaker 5: it over and over again.
33:32
Speaker 3: And let's look.
33:33
Speaker 2: If we're gonna make comparisons to the nineteen nineties, then
33:36
Speaker 2: let's make comparisons to the nineteen nineties. Oracle in the
33:40
Speaker 2: nineteen nineties had an accounting scandal directly related to revenue recognition.
33:47
Speaker 3: Well, let's let's let's.
33:48
Speaker 2: They had a problem related to this. Uh, they had,
33:52
Speaker 2: you know, settlements with regulators related to how are you
33:57
Speaker 2: recognizing revenue?
33:58
Speaker 3: And what's going on.
34:00
Speaker 4: Here, folks.
34:02
Speaker 5: The markets have been inexorably tied to what's been going
34:07
Speaker 5: on in the artificial intelligence space, and that has made
34:10
Speaker 5: a lot of sense for quite some time, and it
34:12
Speaker 5: is truly contributing to real development in the economy. When
34:17
Speaker 5: we talk about deals like this one with Oracle or
34:19
Speaker 5: other types of providers, we are talking about real dollars
34:22
Speaker 5: invested and real infrastructure put into the ground. All of
34:27
Speaker 5: that having been said, this excitement is drawing many comparisons
34:30
Speaker 5: to the nineteen nineties, the dot com boom and then
34:33
Speaker 5: that following bust cycle. And we are not the only
34:36
Speaker 5: ones making those comparisons. I want to talk to you
34:40
Speaker 5: all about a two part live broadcast of this show
34:45
Speaker 5: with a seminar from the Armstrong Advisor Group that we
34:47
Speaker 5: are doing this fall, two locations, two separate dates, and
34:52
Speaker 5: limited time to sign up for these seminars and live broadcasts.
34:56
Speaker 5: One of them is going to be down at the
34:58
Speaker 5: Margaritaville Resort on Cape that's on October ninth. The other
35:02
Speaker 5: will be a showcase super Lux in Chestnut Hill on
35:04
Speaker 5: October sixteenth. Again October ninth, October sixteenth. I'm gonna give
35:09
Speaker 5: you the number where you can get more details. But
35:12
Speaker 5: if you are staring down this market and economy and wondering, hey,
35:16
Speaker 5: how could this develop at the next stage and what
35:19
Speaker 5: might that mean for me and my financial strategy?
35:22
Speaker 4: This these are the dates for you. This is the
35:26
Speaker 4: event for you.
35:27
Speaker 5: Call us at eight hundred three nine three for zero
35:30
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35:34
Speaker 5: two separate seminars and live broadcasts again October ninth or
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Speaker 5: October sixteenth. To get more details, go to Armstrong Advisory
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Speaker 5: three for zero zero one now to reserve your seat.
35:49
Speaker 1: The proceeding was paid for by Armstrong Advisory Group. A
35:52
Speaker 1: registered investment advisor. Nothing in the ad or in any
35:55
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
35:58
Speaker 1: your own financial, tax, into state planning in visors before
36:00
Speaker 1: making any investment decisions. Armstrong may contact you to offer
36:03
Speaker 1: investment advisory services.
36:05
Speaker 2: Mike, do we want to talk about tech stocks are
36:07
Speaker 2: doing so well that investors are starting to worry or
36:10
Speaker 2: IPO mania?
36:14
Speaker 5: I feel there's a little bit more meat on the
36:16
Speaker 5: IPO bone.
36:18
Speaker 3: Talk to me.
36:20
Speaker 5: We have seen now, I mean it's been a relatively few,
36:25
Speaker 5: but how many do we have scheduled now in terms
36:27
Speaker 5: of AI and tech related names or frankly, even names
36:31
Speaker 5: that aren't terribly related to AI who are just trying
36:35
Speaker 5: to take advantage of the moment here pushing into the
36:38
Speaker 5: publicly traded market. And a few years ago this was
36:42
Speaker 5: not universally taken with open arms, but it seems to
36:45
Speaker 5: be a little bit more in terms of excitement about
36:48
Speaker 5: it over the course of the last few months. Would
36:50
Speaker 5: you agree on that trend line?
36:52
Speaker 3: Yeah, I think so.
36:54
Speaker 5: In and of itself, probably not a concern, but again,
36:58
Speaker 5: one more quiver in the or arrow in the quiver
37:03
Speaker 5: of those making the comparisons to that pre dot com moment.
37:10
Speaker 2: The question, as you always have to ask, then, is
37:12
Speaker 2: is this nineteen ninety seven or two thousand?
37:16
Speaker 4: You know, it's or neither, right, Like, you know, is
37:18
Speaker 4: it all over?
37:19
Speaker 2: Like if you think we're heading towards a bus, then
37:23
Speaker 2: remember like the dot com bubble went on for a
37:26
Speaker 2: long time. I mean, it wasn't just something where you
37:29
Speaker 2: were like, hey, we had two good years and it
37:31
Speaker 2: fell apart.
37:32
Speaker 3: It was half a decade.
37:35
Speaker 2: And this puppy, quite honestly, just got started two and
37:38
Speaker 2: a half years ago. And who's to say it can't
37:40
Speaker 2: go on longer morph into something else? And you know,
37:44
Speaker 2: it's I'm not saying that this is going to go
37:48
Speaker 2: up forever, because like stocks always have pullbacks at some
37:51
Speaker 2: point because something happens. But I do think it's important
37:56
Speaker 2: to recognize, hey, this has been a really resilient market
37:59
Speaker 2: all year, and there have been a number of challenges
38:02
Speaker 2: even in the last month or two that haven't really
38:05
Speaker 2: gone anywhere for it. It's like every time we say, oh, gee,
38:07
Speaker 2: like this looks a little dodgy, it's a couple of
38:10
Speaker 2: days and then that's kind of it. And that's that's
38:13
Speaker 2: where we are right now with markets. It won't stay
38:16
Speaker 2: that way forever, but it's where we are today. Quick
38:21
Speaker 2: Break Hour two coming up in a bit