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Is the job market hiding a major red flag? · The Financial Exchange Show

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Speaker 1: Chuck Zada and Paul.
1:06
Speaker 2: Lane, Chuck, Paul and Tucker with you, and we got
1:12
Speaker 2: equity markets mixed today. The Dow Jones Industrial Average, he's
1:18
Speaker 2: up one hundred and eleven points right now.
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Speaker 3: The SMP, though, is down twenty one, about.
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Speaker 2: A third of a percent, and it's being dragged by tech,
1:26
Speaker 2: with the Nasdaq currently off one point zho nine percent,
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Speaker 2: or about two hundred and thirty eight points. What's really
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Speaker 2: lagging on the day, It's a lot of the stuff
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Speaker 2: that has been fun for the last six months or so.
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Speaker 2: Core Weave down another seven percent today, Palanteer down six
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Speaker 2: percent today, AMD down three, Netflix down three, and Vidia
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Speaker 2: down too, Meta down two, Microsoft and Google and Amazon
1:50
Speaker 2: all down one and a half. So again, kind of
1:53
Speaker 2: your big tech stocks down today. And the interesting thing is,
1:57
Speaker 2: despite you know, the SMP being down a third of
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Speaker 2: a percent, you actually have two hundred and eighty four
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Speaker 2: more stocks up than down in the index today, and
2:05
Speaker 2: so the S and P five hundred on an equal
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Speaker 2: weighted basis instead of market cap weighted, is actually up
2:10
Speaker 2: almost two thirds of a percent. So again, kind of
2:13
Speaker 2: one of these things where, hey, you know, you can
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Speaker 2: complain about the big boys being down, but they're being
2:19
Speaker 2: up and missing out on them. But if the big
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Speaker 2: boys turned down, even if everything else is moving up,
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Speaker 2: it's kind of hard for the index to hold up there.
2:26
Speaker 2: So that's a bit of what we're seeing in equities today.
2:29
Speaker 2: On the bond side of things. Tenure Treasury down three
2:31
Speaker 2: basis points to four point three one percent. With oil
2:35
Speaker 2: right now, West Texas Intermediate is down seventy one cents
2:39
Speaker 2: a barrel to sixty two to seventy one. Gold is
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Speaker 2: down nine to seventy and ounced to thirty three, sixty
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Speaker 2: eight and thirty cents. And that is what we have
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Speaker 2: moving markets today from Business Insider this morning, Paul. The
2:55
Speaker 2: under the radar number that's a huge red flag for
2:59
Speaker 2: America job market. Is it Daniel Jones passer rating with
3:04
Speaker 2: the Indianapolis cults?
3:06
Speaker 4: That is concerning for Danny Dimes, But no, check. What
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Speaker 4: it is is all about labor supply. So the concern
3:13
Speaker 4: that's outlined in this piece is that just like in
3:16
Speaker 4: your regular economics course or you know concept that you
3:20
Speaker 4: hear thrown off and is supply and demand. You know,
3:23
Speaker 4: you need to have enough supply to meet the demand
3:25
Speaker 4: in place. What this article goes to describe is the
3:28
Speaker 4: importance of having enough people participating in the labor market
3:33
Speaker 4: to satisfy the demand for businesses out there. And what
3:37
Speaker 4: it goes to say is that typically there was the
3:40
Speaker 4: number of people entering the labor market exceeded those people
3:44
Speaker 4: who were leaving it since two thousand and seven, but
3:47
Speaker 4: more recently, what they've seen on a trend basis is
3:50
Speaker 4: that more people have been leaving rather than entering, and
3:55
Speaker 4: it's something that certainly the population decline is an an
3:59
Speaker 4: idea that we've talked about. From our longer term trend perspective,
4:03
Speaker 4: I'm not so sure I share the same concern that's
4:06
Speaker 4: outlined in this article on labor supply that I think
4:12
Speaker 4: it's worth worrying about necessarily, just because I do feel
4:16
Speaker 4: like from a technological perspective, there could be a lot
4:20
Speaker 4: of advancements that we could see that could help minimize
4:25
Speaker 4: perhaps some of that labor supply deficit. And or you
4:29
Speaker 4: can always have the ebb and flow and change of
4:32
Speaker 4: immigration policies what cite in this article here is perhaps
4:35
Speaker 4: a further crackdown and immigration. It would be relatively easy
4:38
Speaker 4: to change policy to get more workers into the system
4:42
Speaker 4: too that's another factor.
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Speaker 2: So this is a really interesting topic to dig in
4:47
Speaker 2: on in my opinion, and I have a few different
4:51
Speaker 2: thoughts on this, so let's start. I saw an interesting
4:55
Speaker 2: theory put out this morning, which is it's on this
4:59
Speaker 2: exact topic. So this is just like great that this is,
5:01
Speaker 2: you know, kind of the big one that we're talking
5:03
Speaker 2: about here back in twenty twenty two. Uh, let's tucker,
5:07
Speaker 2: can you fire up the time machine for a minute
5:08
Speaker 2: for me by stand by? All right, we're getting it
5:12
Speaker 2: all queued up. So it's the summer of twenty twenty two.
5:17
Speaker 4: Things are really expensive.
5:19
Speaker 2: It's really hot. Prices are going up nine percent a year.
5:23
Speaker 2: The dog that cost you, well, no was there was
5:27
Speaker 2: there dog inflation.
5:28
Speaker 4: There was a lot of demand for pets, uh post COVID.
5:31
Speaker 3: So we'll roll with it.
5:33
Speaker 2: It's hot, it's the middle of the summer in twenty
5:35
Speaker 2: twenty two. Even the hot dogs you don't even need
5:38
Speaker 2: a griddle to cook him on. You're just cooking them
5:40
Speaker 2: on the street. And the price of the hot dogs
5:43
Speaker 2: is is you know, tripled, because that's what it feels
5:45
Speaker 2: like to us. And then inflation starts, you know, kind
5:49
Speaker 2: of going down on an annual basis. It's not that
5:51
Speaker 2: it goes away, but we don't see nine percent inflation,
5:53
Speaker 2: you know, continuing. And one of the theories that I've
5:56
Speaker 2: seen positive on this is, look, you had this huge
6:00
Speaker 2: surge in immigration, which I'm not asking you know, anyone
6:03
Speaker 2: to you know, think of immigration as good, bad, or whatever.
6:05
Speaker 2: I'm just saying, we had this big surge in immigration,
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Speaker 2: some of it legal, some of it illegal, and what
6:11
Speaker 2: it resulted in, one of the things was a bunch
6:14
Speaker 2: of people coming into the country into the labor force.
6:18
Speaker 2: And so the theory that I saw basically says, Look,
6:21
Speaker 2: one of the reasons why we avoided what's called this
6:23
Speaker 2: wage price spiral, which is, hey, as prices go up,
6:26
Speaker 2: labor demands more in order to you know, pay for
6:29
Speaker 2: those things, and that drives prices up more because companies
6:32
Speaker 2: maintain margins and YadA, YadA. One of the reasons we
6:35
Speaker 2: avoided this wage price spiral is because of that huge
6:38
Speaker 2: surge in immigration, which subsequently, particularly this year, has abated
6:43
Speaker 2: and in some cases, you know, there's questions whether it's
6:46
Speaker 2: even reversed. And so the question that is out there
6:49
Speaker 2: now that I think is looming is, Look, Paul mentioned look,
6:53
Speaker 2: there's a bunch of new technology that might end up,
6:55
Speaker 2: you know, being able to help us be more productive
6:58
Speaker 2: in the future. Is it fair to say, Paul, that
7:01
Speaker 2: we think that a lot of that's not quite ready
7:03
Speaker 2: for primetime right now?
7:05
Speaker 4: That's fair over the next six to twelve months.
7:07
Speaker 2: No, Yeah, And so the question that I see out
7:10
Speaker 2: there now is, Okay, there's still is work that needs
7:12
Speaker 2: to be done now, but there are fewer people. We
7:15
Speaker 2: have this inflationary impulse that in theory can be a
7:20
Speaker 2: one time change in the price level because of tariffs.
7:23
Speaker 2: But if the labor supply is diminished relative to where
7:27
Speaker 2: it was previously, does this end up kind of spooling
7:32
Speaker 2: that that inflation up and making it not such a
7:34
Speaker 2: one time thing. And maybe the evidence that we're seeing
7:38
Speaker 2: of this is that services inflation is starting to pick
7:41
Speaker 2: up in multiple data sets now, and so the lack
7:46
Speaker 2: of available labor could actually act as a force to
7:50
Speaker 2: maintain inflation going forward.
7:52
Speaker 3: Here your thoughts, Paul.
7:54
Speaker 4: The services piece is something that that could make sense,
7:58
Speaker 4: that could play out that way we see currently saw
8:00
Speaker 4: it back in twenty twenty two when we hopped in
8:03
Speaker 4: the time machine, there was a tremendous amount of demand
8:07
Speaker 4: for labor in the services and leisure sector of things,
8:10
Speaker 4: because so much job loss was incurred over twenty twenty
8:14
Speaker 4: and twenty twenty one during the COVID era, and you
8:16
Speaker 4: did see just a tremendous demand for workers and all
8:19
Speaker 4: sorts of issues that restaurants and other hospitality businesses ran into. Here.
8:24
Speaker 4: I just find that it's it's a bit of a
8:26
Speaker 4: far jump to just sort of have all these things
8:29
Speaker 4: perhaps work in sick I'm not going to spell the
8:32
Speaker 4: probability of it not occurring at all, but I just
8:34
Speaker 4: wonder if you could have all of those things align
8:37
Speaker 4: at once. To me, it just seems a little bit
8:41
Speaker 4: far fetched that that would be the case to occur.
8:45
Speaker 2: I think the big thing that we are seeing is
8:47
Speaker 2: a labor market that is different from one that at
8:51
Speaker 2: least I've seen at any point in my lifetime, you know,
8:54
Speaker 2: at least since I knew what labor markets were.
8:56
Speaker 3: I mean, maybe when I was three something like this
8:58
Speaker 3: was going on, but I don't know.
9:00
Speaker 2: So I think you have this this really interesting situation now,
9:04
Speaker 2: and again it gets at the question of like what
9:06
Speaker 2: should the FED do, because let's say that job growth
9:09
Speaker 2: is slowing. But let's say it's also slowing because the
9:13
Speaker 2: labor market is not growing at the rate that it
9:15
Speaker 2: was previously. The FED doesn't have a jobs per month target.
9:20
Speaker 2: The FED has an unemployment rate target. And the reason why, like,
9:23
Speaker 2: if you think through this, Let's say that you live
9:26
Speaker 2: in a country with the population of one hundred people
9:29
Speaker 2: and four of them are unemployed. If one person leaves
9:33
Speaker 2: the country, and let's say that you fill one more job,
9:39
Speaker 2: let's say that you let's say that one person leaves
9:42
Speaker 2: the countries. Now you've got ninety nine people in the country.
9:44
Speaker 2: One of the unemployed people left, and let's say that
9:48
Speaker 2: you lose one job on a net basis, and now
9:50
Speaker 2: there's ninety five people out of ninety nine that are employed.
9:53
Speaker 2: You lost one job on a net basis. Should the
9:57
Speaker 2: central bank of that country be cutting Yeah? I mean again,
10:01
Speaker 2: like this is a fictional country with one hundred people.
10:03
Speaker 2: It probably doesn't have a central bank.
10:04
Speaker 3: But like they're looking on it. You get the general
10:07
Speaker 3: premise of this.
10:09
Speaker 2: So like when you have a population that isn't moving,
10:13
Speaker 2: you're not concerned in the same way about hey, what's
10:16
Speaker 2: the total number of jobs being added? Because you could
10:19
Speaker 2: have very few jobs added, but unemployment is stable and
10:23
Speaker 2: low still, as opposed to, Hey, if you got one
10:26
Speaker 2: hundred people, but now you've got one hundred and ten
10:29
Speaker 2: and the unemployment rate no new jobs are at now,
10:32
Speaker 2: the unemployment rates fifteen percent. The FED might say, Okay,
10:35
Speaker 2: we got to, you know, cut rates because we got
10:37
Speaker 2: all these unemployed people running around and that's generally not
10:40
Speaker 2: good for anyone. So the rate of population growth does matter,
10:45
Speaker 2: and it can.
10:46
Speaker 3: Distort all of these things.
10:48
Speaker 2: And part of me is wondering, Look, is this just
10:51
Speaker 2: a different environment between the shift and immigration that we've
10:54
Speaker 2: seen this year. You still have, you know, a bunch
10:56
Speaker 2: of baby boomers that are retiring and there aren't enough
10:58
Speaker 2: gen zers to replace all them.
11:00
Speaker 3: Is there a case in the short.
11:02
Speaker 2: Term for more labor demand than supply, even though that
11:05
Speaker 2: labor demand is relatively tepid? Maybe is kind of the
11:09
Speaker 2: answer is it's just kind of a wild thing to
11:12
Speaker 2: think about because we've never seen an economy and a labor.
11:15
Speaker 3: Market quite like this. Let's take a quick break here.
11:18
Speaker 2: When we return, Sarah Foster from Bank Grade is going
11:22
Speaker 2: to kind of continue this conversation sort of in a
11:25
Speaker 2: little bit, but it's different. It's tangential, but I think
11:27
Speaker 2: some really interesting stuff talking about wage growth versus inflation.
11:31
Speaker 2: Bank rad did a bunch of studies on this, and
11:34
Speaker 2: she's going to share what they learned with us right
11:37
Speaker 2: after this.
11:39
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Speaker 2: As promised, We're now joined by Sarah Foster from Bank
12:50
Speaker 2: Right Here to talk about their twenty twenty five wage
12:53
Speaker 2: two inflation index survey. Sarah, thanks for joining us today.
12:57
Speaker 3: How are you?
12:58
Speaker 6: Thanks for having me. It's great to be here.
13:00
Speaker 3: Always enjoy it, fantastic.
13:02
Speaker 2: Tell us a little bit about what this survey studied
13:05
Speaker 2: and what you found from it.
13:07
Speaker 7: Yeah, so it's a really complicated question that I think
13:09
Speaker 7: a lot of people have been wondering, have your wages
13:13
Speaker 7: kept pace with post pandemic inflation. We wanted to look
13:17
Speaker 7: into that, and the best way to do it was
13:19
Speaker 7: indexing inflation and wage growth to the beginning of twenty
13:22
Speaker 7: twenty one, because that's when the economy reopened and that's
13:26
Speaker 7: when inflation first took off. And what we found is
13:29
Speaker 7: that actually Americans' wages are still in the hole. That
13:32
Speaker 7: gap is closing, but it signifies that Americans have less
13:37
Speaker 7: purchasing power today than they did a few years ago.
13:40
Speaker 2: In terms of how this is being felt, Are there
13:43
Speaker 2: any demographic breakdowns or industry breakdowns that show this is
13:48
Speaker 2: happening the same.
13:48
Speaker 3: Way to everyone or different groups feeling it differently.
13:52
Speaker 7: Yeah, so there are actually some industries where workers' wages
13:55
Speaker 7: did keep pace and actually beat inflation. Those were retail,
14:00
Speaker 7: food services, leisure and hospitality, and then healthcare. You know,
14:04
Speaker 7: I think it's it's wage growth is always kind of
14:07
Speaker 7: this reflection of how much bargaining power workers have, and
14:11
Speaker 7: if companies are looking for workers and workers have lots
14:14
Speaker 7: of options, that's when they're able to negotiate and get
14:17
Speaker 7: bigger pay raises, and when companies are more likely to
14:20
Speaker 7: lift pay to lure talent. That's exactly what happened for
14:24
Speaker 7: those service sectors coming out of the pandemic, when jobs
14:26
Speaker 7: came back much faster than the workers did. In healthcare especially,
14:30
Speaker 7: that's been driving most of the job growth over the
14:32
Speaker 7: past twelve months. So that's probably why you've seen that
14:35
Speaker 7: be such a you know, a better kind of wage
14:37
Speaker 7: growth story for these workers.
14:40
Speaker 2: What's the situation look like now, I've heard today's labor
14:44
Speaker 2: market you know, referred to as you know, being more
14:46
Speaker 2: sluggish kind of this you know, slow, higher no fire,
14:49
Speaker 2: you know, situation that's going on. What is that doing
14:52
Speaker 2: to wage growth relative to inflation or do we just
14:55
Speaker 2: not have enough data on it for this year yet.
14:58
Speaker 6: Yeah, you're right.
14:59
Speaker 7: This job market, the economists and workers themselves were stuck
15:02
Speaker 7: in it. Describe it as just frozen in place. It's
15:05
Speaker 7: really hard for entry level people to find better jobs,
15:08
Speaker 7: it's really hard for people who are still employed to
15:10
Speaker 7: move up the ladder. It results in everybody just getting
15:14
Speaker 7: kind of stuck in place. And so that's why you've
15:16
Speaker 7: seen actually wage growth slow and slow even more than.
15:20
Speaker 6: Prices have over the past couple of months.
15:23
Speaker 7: Something that we really like to do is kind of
15:25
Speaker 7: project out when the gap between inflation and wages will close,
15:30
Speaker 7: and that has been taking longer year after year as
15:34
Speaker 7: inflation stays stubborn, and now as the labor market slows.
15:38
Speaker 7: It's also impacting how quickly Americans were covered from inflation.
15:43
Speaker 2: What kinds of things are people doing in order to
15:45
Speaker 2: try to still find ways to grow their wages during
15:50
Speaker 2: a more challenging labor market like this one.
15:54
Speaker 7: Yeah, well, we do know from surveys that many workers,
15:57
Speaker 7: about half of them, plan to look for a new
15:59
Speaker 7: job and the next twelve months and we also find
16:02
Speaker 7: that mini workers are also interested in negotiating for a raise,
16:05
Speaker 7: asking their employer for more money. I think you know,
16:09
Speaker 7: from an economists perspective, when I'm asked how do I
16:12
Speaker 7: get a raise in twenty twenty five, I often say
16:15
Speaker 7: that because it's so much harder to find a new
16:18
Speaker 7: job elsewhere, it probably is easier for you to at
16:21
Speaker 7: least get a pay increase if you're still employed with
16:24
Speaker 7: your current employer. Something I always like to say is
16:27
Speaker 7: that top performers are always rewarded, and the ones who
16:30
Speaker 7: remained agile, the ones who are always trying to get
16:33
Speaker 7: better at their jobs, improve their value, They're the ones
16:36
Speaker 7: who will be rewarded even in tougher job markets.
16:40
Speaker 2: Fantastic, Sarah, Thank you so much for the time today.
16:42
Speaker 2: We really appreciate it, and thanks for all the information
16:45
Speaker 2: that you were able to share with us.
16:47
Speaker 6: Thanks for having me. It's always great to be on here.
16:50
Speaker 2: That is Sarah Foster from bank Rate talking about wages
16:54
Speaker 2: and inflation.
16:55
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17:36
Speaker 2: Paul, I want to talk a little bit about restaurants.
17:40
Speaker 2: We get a couple pieces here, one from Bloomberg about
17:43
Speaker 2: Chipotle and shake Shack, another one from the Wall Street
17:46
Speaker 2: Journal about you know, casual dining restaurants, think Cheesecake Factory, Chili's,
17:53
Speaker 2: Olive gard, you know, more sit down style. And I
17:57
Speaker 2: think that when we look at what we're seeing here,
18:01
Speaker 2: there are definitely some things that you can tell from
18:03
Speaker 2: how American's restaurant tastes are changing. What does this piece
18:08
Speaker 2: or these pieces, what do they tell us here?
18:11
Speaker 4: There seems to be a lot of focus check on value.
18:14
Speaker 4: You know, the reason why Chili's has been successful in
18:18
Speaker 4: this environment is their development of the three for me
18:21
Speaker 4: value deals starting at ten ninety nine. It's not necessarily
18:24
Speaker 4: the cheapest out there, but the value that they're providing
18:28
Speaker 4: with that, the CEO has stated, has really worked well
18:33
Speaker 4: with consumers and it's really supercharged kind of their marketing efforts.
18:37
Speaker 4: And I think you compare that to an area like Chipotle,
18:42
Speaker 4: which is pretty pricey when you, you know, check out
18:46
Speaker 4: for their ultimate breedable whatever you're looking at, closing in
18:50
Speaker 4: probably closer at fifteen dollars or so, and you're just
18:54
Speaker 4: not getting the same value. And it seems like that
18:56
Speaker 4: is really the split that we're seeing there for consumers
18:59
Speaker 4: look looking for value and sort of beat some of
19:03
Speaker 4: the pricing pressure that they've seen post inflation, versus you know,
19:07
Speaker 4: those higher end ones struggling a little bit to keep up.
19:09
Speaker 2: Yeah, it's kind of you want me to pay that
19:11
Speaker 2: for this, No, I'm gonna go and yeah, I might
19:13
Speaker 2: have to pay a dollar or two more, but I'm
19:15
Speaker 2: sitting down.
19:15
Speaker 3: Someone's gonna refill my water.
19:17
Speaker 2: You know, like that seems to be something that makes
19:20
Speaker 2: sense just intuitively, I guess when you look at how
19:24
Speaker 2: all of this pricing is is compared just take a
19:28
Speaker 2: quick break here. When we come back, we'll got the
19:31
Speaker 2: trivia answer, and we got Wall Street.
19:33
Speaker 1: Watch, bringing the latest financial news straight to your radio.
19:44
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19:48
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19:54
Speaker 1: look at what's moving market so far today right here
19:57
Speaker 1: on the Financial Exchange Radio Network.
20:00
Speaker 5: Nasdaq selling off at the moment. The Dow and SMP
20:03
Speaker 5: five hundred mixed as investors digest a first wave of
20:07
Speaker 5: a major retailer earnings from the home depot posted earlier
20:10
Speaker 5: this morning with mixed results. Right now, the Dow is
20:13
Speaker 5: off by two tenths of one percent or ninety nine
20:16
Speaker 5: points higher. S and P five hundred is down a
20:19
Speaker 5: quarter for percent or fifteen points lower. NASDAK down nearly
20:23
Speaker 5: one percent or two hundred and seven points lower. Russell
20:27
Speaker 5: two thousand is off by nearly three tenths of one percent.
20:30
Speaker 5: Ten year Treasure reeled down two basis points at four
20:32
Speaker 5: point three one percent, and crude oil off one percent
20:36
Speaker 5: today training at sixty two dollars and seventy nine cents.
20:39
Speaker 5: A barrel home depot reported disappointing second quarter results with
20:43
Speaker 5: a home improvement retailer said that consumers were still delaying
20:47
Speaker 5: big ticket projects in that it would make modest price increases. However,
20:52
Speaker 5: Home Depot backed its annual outlooks, setting shares up by
20:56
Speaker 5: three percent. Meanwhile, Intel shares up over seven percent after
21:00
Speaker 5: Japan's Soft Bank agreed to invest two billion dollars in
21:03
Speaker 5: the struggling chip maker. This comes after news that the
21:07
Speaker 5: US government has been considering taking a stake in Intel.
21:11
Speaker 5: Sticking with Chips wherein Video shares are off over two
21:14
Speaker 5: percent after the AI and chip giants said that it
21:17
Speaker 5: is evaluating several products following a report that the company
21:21
Speaker 5: is working on a new AI chip for China that
21:24
Speaker 5: is more powerful than the currently available Age twenty chip. Elsewhere,
21:28
Speaker 5: Palo Alto Networks reported courtly results that Beach Street forecasts
21:32
Speaker 5: and offered full year guidance that was stronger than expected.
21:36
Speaker 5: That stock is up by four percent. Shares of Viking
21:39
Speaker 5: Therapeutics down forty percent after the company released mid stage
21:43
Speaker 5: trial data on its obesity pill that disappointed investors. And
21:48
Speaker 5: Robinhood announced this morning that the online broker is launching
21:51
Speaker 5: prediction markets for professional in college football. It will be
21:56
Speaker 5: available to customers in the coming days. Robin Hood shares
21:59
Speaker 5: are trading three percent lower at the moment. I'm Tucker
22:03
Speaker 5: Silva and that is Wall Street Watch. And in the
22:05
Speaker 5: previous segment we asked you the trivia question who is
22:07
Speaker 5: the Prime Minister of Great Britain during World War Two?
22:11
Speaker 5: That's of course Winston church Hill. Glenn from wood Woodsholl
22:15
Speaker 5: is our winner today taking home the Financial Exchange Show
22:18
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22:24
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22:26
Speaker 4: Can having a prediction market? Chuck? Does that just shorten
22:30
Speaker 4: out not being a gambling company? If you create a
22:32
Speaker 4: prediction market? Is that like a way to work around it?
22:35
Speaker 2: So here's this is actually a really interesting topic. So
22:43
Speaker 2: we're basically heading to something, Paul. It feels like where
22:47
Speaker 2: whether you want to call it gambling or not, I
22:51
Speaker 2: think there are just so many and this is just
22:55
Speaker 2: from talking with people like in their twenties.
22:56
Speaker 3: There are so many people.
22:57
Speaker 2: In their twenties, and you can even say, like early
23:01
Speaker 2: thirties that have two hundred and fifty dollars that are
23:05
Speaker 2: just willing to take a flyer on anything for hope
23:08
Speaker 2: that it gets them somewhere economically right now that you
23:11
Speaker 2: can basically just run that whole dopamine program for oh, like,
23:17
Speaker 2: this is exciting even if it goes badly.
23:19
Speaker 3: Yep, And people were fine with it.
23:21
Speaker 2: I saw someone yesterday and look, it's it's not my bag,
23:25
Speaker 2: Like I don't get involved in any of this stuff.
23:27
Speaker 3: I don't understand it.
23:29
Speaker 2: But someone yesterday was talking about, you know, the fact
23:34
Speaker 2: that look, in crypto, there's like all this scamming that
23:36
Speaker 2: goes on, right, And someone made the point like, look,
23:40
Speaker 2: if you're you know, upset about people in their twenties
23:43
Speaker 2: and thirties, you know, investing in crypto and getting scammed,
23:46
Speaker 2: you're missing kind of the point for them, which is
23:49
Speaker 2: ultimately they're trying to take a little amount of money
23:51
Speaker 2: and turn it into a large amount. Sure, and if
23:53
Speaker 2: they get scammed doing it, it's not really any different
23:56
Speaker 2: to them from you and I going to the casino
23:59
Speaker 2: and playing blackjack and getting a.
24:01
Speaker 3: Bad beat right on a hand, right, And And.
24:04
Speaker 2: When I thought about it that way, it's like, okay, Like, yeah,
24:06
Speaker 2: I kind of get that.
24:07
Speaker 3: They're not talking about you know, we're.
24:10
Speaker 2: Not talking about sophisticated investors who are like taking a
24:13
Speaker 2: million dollars and thinking something's gonna, you know, come out
24:15
Speaker 2: of it. It's hey, here's a hundred bucks, and hopefully
24:19
Speaker 2: it goes well. But otherwise I put it into fart coin,
24:21
Speaker 2: and jokes on me for investing in fart coin.
24:24
Speaker 4: I think that's a good way to phrase it. When
24:26
Speaker 4: I came out of college, I had a couple stocks
24:29
Speaker 4: that I bought that, you know, pharmaceutical hopes of FDA approval,
24:32
Speaker 4: you know, these long shot pipe dream models, and and
24:35
Speaker 4: you lose and you take a bath on them, and
24:37
Speaker 4: you're not putting a big amount of money in it.
24:39
Speaker 4: But then you learn, gee, maybe I should look for
24:42
Speaker 4: a more durable and sustainable business and invest in that
24:45
Speaker 4: rather than taking the fire. So it's interesting when you
24:49
Speaker 4: put it that way. We've all had those learning lessons
24:52
Speaker 4: and maybe it just comes through a different form that
24:54
Speaker 4: I'm not accustomed to now. But I don't know regulatory wise,
24:58
Speaker 4: how you get prediction first is gambling, but it doesn't
25:02
Speaker 4: Robin Hood's doing it. So here it goes.
25:04
Speaker 3: It doesn't feel good.
25:05
Speaker 2: I completely agree, and I don't know where that line
25:08
Speaker 2: is because again, like, what what makes a prediction different?
25:13
Speaker 2: For like, if I'm betting on Aaron Judge to hit
25:16
Speaker 2: sixty home runs. That's gambling. But if I'm betting on
25:21
Speaker 2: who the next Prime Minister of Norway is going to be,
25:24
Speaker 2: that's a prediction. What's the difference here, right?
25:29
Speaker 3: You know?
25:30
Speaker 7: So?
25:30
Speaker 3: Yeah, I kind of struggle with that too.
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Speaker 3: Peas in Bloomberg.
26:51
Speaker 2: This Big Business came prepared for this White House. It
26:55
Speaker 2: talks about how earnings have grown meaningfully to despite any
27:01
Speaker 2: questions about where the economy may be as a result
27:04
Speaker 2: of tariffs or anything else. Paul, what do you make
27:06
Speaker 2: of this piece and what we're seeing from companies trying
27:09
Speaker 2: to navigate this world right now?
27:12
Speaker 4: It's important for us to point out that this earning
27:14
Speaker 4: season has been quite strong relative to what Wall Street forecasted.
27:18
Speaker 4: As much as we will highlight potential economic concerns out
27:22
Speaker 4: there when we do the program, you also have to
27:25
Speaker 4: acknowledge that these earnings reports have been really great. For
27:28
Speaker 4: the most part, we've seen a surge of about ten
27:30
Speaker 4: and a half percent on earnings from a year earlier
27:33
Speaker 4: that was well above Wall Street's forecast of about a
27:36
Speaker 4: two point eight percent gain according to Bloomberg Intelligence. You've
27:41
Speaker 4: had a lot of contribution from the major players that
27:43
Speaker 4: we talk about a lot, the Metal metas, the Googles,
27:47
Speaker 4: the Microsofts, etc. But also there's been some earnings growth
27:52
Speaker 4: across some of the other major S and P five
27:54
Speaker 4: hundred sectors. And the other piece that I want to
27:57
Speaker 4: hit on here, other than acknowledging that hey, earnings have
27:59
Speaker 4: been better than anticipated, there was a lot of pessimism
28:02
Speaker 4: when tariffs were initially announced. They've been pared down significantly
28:05
Speaker 4: from where they came out the initial rates, so that's
28:08
Speaker 4: part of it, and estimates were pulled back and maybe
28:12
Speaker 4: that just makes an easier bar to clear. But the
28:13
Speaker 4: other piece I want to talk about is perhaps this
28:15
Speaker 4: divergence between big businesses of the S and P five
28:19
Speaker 4: hundred that you and I talk about so frequently on
28:21
Speaker 4: this program versus kind of that middle market business. And
28:24
Speaker 4: I was listening to a podcast recently which just had
28:27
Speaker 4: mentioned that, you know, just if you think about large
28:29
Speaker 4: retailers like Walmart and Target and others, they have a
28:32
Speaker 4: lot of strategic positioning and supply chain flexibility that smaller
28:37
Speaker 4: businesses don't have, And I just wonder if we are
28:41
Speaker 4: seeing that further split that the big businesses that we
28:44
Speaker 4: follow so closely on the S and P five hundred
28:46
Speaker 4: side of things are faring are right here, but you
28:49
Speaker 4: have other smaller to mid side businesses that may be
28:51
Speaker 4: struggling more that we don't necessarily cover as much in
28:55
Speaker 4: the show. And if you look at the Russell two thousand,
28:58
Speaker 4: which is that smaller side of things, it has not
29:01
Speaker 4: had anywhere near the robust earnings growth that we talked about,
29:05
Speaker 4: with the S and P five hundred only posing about
29:08
Speaker 4: a three percent earnings growth year over years. So it's
29:11
Speaker 4: just something that I've been looking for more and more
29:13
Speaker 4: evidence of it, and I haven't found the perfect statistic,
29:17
Speaker 4: but it's just the thought that has crossed my mind
29:19
Speaker 4: that maybe these midside businesses are struggling when these large
29:22
Speaker 4: ones are being a little bit more successful than anticipated.
29:25
Speaker 2: Let's take a quick break here. When we come back,
29:27
Speaker 2: we'll do a little bit of stack through.
29:29
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30:07
Speaker 3: All right, Paul, what do you got for me for
30:08
Speaker 3: stacker lot.
30:09
Speaker 4: I'm gonna go totally off script, Chuck, but I know
30:11
Speaker 4: you can handle it. This is in regards to an
30:14
Speaker 4: old New York Times piece. Old is a couple of
30:16
Speaker 4: months ago, but the concept is still the same. Gen
30:19
Speaker 4: Z doesn't want to start a bar tab, to the
30:22
Speaker 4: chagrin of many bartenders. These twenty something year olds are
30:26
Speaker 4: not willing to start a bar tab.
30:28
Speaker 3: Now.
30:28
Speaker 4: The gen Z has been accused of, or statistically found
30:31
Speaker 4: to not drink as much as their older counterparts, but
30:34
Speaker 4: they also feel there's some sort of entrapment by starting
30:39
Speaker 4: a bar tab. And the reason I brought up this
30:41
Speaker 4: piece is because, unfortunately, though I'm not in gen Z,
30:44
Speaker 4: I fall guilty of this too. I have the worst
30:46
Speaker 4: time committing to start a bar tab, and I just
30:51
Speaker 4: I can't explain it, but I just share these fears
30:54
Speaker 4: with them where I'm unwilling to do it, and I
30:56
Speaker 4: always go one by one and it probably ticks off
30:58
Speaker 4: bartenders quite a bit. Tucker and I are here to help, Okay,
31:04
Speaker 4: So where do you guys stand on this?
31:05
Speaker 3: I'm very pro tab Okay.
31:07
Speaker 2: I believe even if you know you're only getting one drink, yep,
31:12
Speaker 2: open a tab because you never know you might.
31:14
Speaker 3: Want another, right, you know?
31:16
Speaker 2: And again I don't like going through the hole. Oh
31:19
Speaker 2: I gotta get my card out again? And you know
31:21
Speaker 2: this and that what's why why did gen Zers say
31:24
Speaker 2: they don't want to start a tab?
31:26
Speaker 3: They think it's entrapmant Well, do they know what that
31:29
Speaker 3: word means?
31:31
Speaker 1: You know?
31:31
Speaker 4: I just like to keep it fancy on the show here.
31:34
Speaker 4: But if you want to leave and the bar is
31:36
Speaker 4: packed and you got to find someone, you're trying to
31:39
Speaker 4: wave them down to close out your tab, versus if
31:42
Speaker 4: you go one by one. And this is the reason
31:44
Speaker 4: why I've had an issue with it. I'm just out
31:46
Speaker 4: the door. You know, I'm paid up and I can
31:48
Speaker 4: go versus trying to wave and flag someone down to
31:52
Speaker 4: close out.
31:52
Speaker 5: I mean, that's what it comes down with me, is like,
31:56
Speaker 5: how busy is the bar? Because if it's packed and
31:58
Speaker 5: I'm not convinced I'm staying for more than one drink,
32:01
Speaker 5: I'm closing it out because I don't want to like
32:03
Speaker 5: sit there for ten minutes waiting for the busy bar
32:06
Speaker 5: to die down so I can get the bartender's attention, because.
32:09
Speaker 4: Okay, go ahead, no sorry, two things would need to
32:11
Speaker 4: happen there. You need to flag someone down, and you
32:13
Speaker 4: need to say I got to close out my tap,
32:15
Speaker 4: so they have to come over to you. And then
32:16
Speaker 4: also they have to go back and close out your taps.
32:19
Speaker 5: So mention it's hard to find some writing room right
32:23
Speaker 5: on the bar if they don't give you a little
32:25
Speaker 5: the yeah pamphlet.
32:28
Speaker 2: Cher Tucker, I spent my entire my entire childhood thinking
32:32
Speaker 2: I was going to be a professional athlete.
32:34
Speaker 3: You know what that meant? Meant? I practiced signing baseball's
32:37
Speaker 3: left and right.
32:38
Speaker 4: Sure, and we've all done it.
32:40
Speaker 2: Nevertheless, my signature looks great on a baseball, but I've
32:43
Speaker 2: never been asked to sign one. It's very convenient when
32:45
Speaker 2: you're in a crowded bar and you have very little
32:47
Speaker 2: room to sign, you can make it work. I guess
32:50
Speaker 2: where I end up on this is. Look, when I
32:52
Speaker 2: was twenty two, never did I go out just for
32:55
Speaker 2: one drink, right, So it wasn't a thing. Now that I'm,
33:00
Speaker 2: you know, twenty years older, I don't go out at
33:03
Speaker 2: the times where.
33:03
Speaker 3: It gets crowded too.
33:05
Speaker 2: That's you know, like, oh, it's it's two o'clock on
33:08
Speaker 2: a Saturday. Great, if it's if Like if it's if
33:11
Speaker 2: it's two pm, yeah, I'm there having.
33:13
Speaker 3: My drinks because there's no one else there.
33:16
Speaker 2: If it's two am on a Saturday, I've been in
33:18
Speaker 2: bed for six hours.
33:19
Speaker 4: Now, that's true, you know.
33:21
Speaker 3: So I don't deal with crowded bars.
33:24
Speaker 2: The I look at a place where there's a line
33:27
Speaker 2: out the door, I'm like, oh, those poor people, like
33:29
Speaker 2: wouldn't want to be you. But I guess people like
33:31
Speaker 2: going where other people are.
33:32
Speaker 3: I don't.
33:33
Speaker 2: At this point, I'm like, no, find me the quiet
33:35
Speaker 2: bar that might go out of business tomorrow.
33:37
Speaker 3: And and that's my jam. At this point, I'm I'm
33:40
Speaker 3: looking for.
33:40
Speaker 4: That that makes sense, that makes sense.
33:43
Speaker 3: I've got a good one here.
33:44
Speaker 2: Uh So Shamath is back with a new spack because
33:49
Speaker 2: we're in spac world at this point, and the disclosure
33:53
Speaker 2: that is available on this is fantastic, if I may
33:57
Speaker 2: say so myself. So this is from the actual filing
34:02
Speaker 2: for the SPACK. We will be attempting to find a
34:06
Speaker 2: great company at a great valuation. If you're not familiar
34:08
Speaker 2: with the SPACK, Basically, you put a bunch of money
34:11
Speaker 2: into this shell that then goes out of the shell's
34:14
Speaker 2: publicly traded, then goes out and finds a company to buy.
34:16
Speaker 2: That's the premise from it. It has fewer regulatory requirements
34:21
Speaker 2: and this and that, but you still have to file
34:22
Speaker 2: for the SPACK. So they're trying to raise two hundred
34:25
Speaker 2: and fifty million dollars to go and buy something. Quote,
34:29
Speaker 2: we'll be attempting to find a great company at a
34:30
Speaker 2: great valuation to take public. But without doubt, the investment
34:33
Speaker 2: will entail substantial risk, including the possibility of total loss. Okay,
34:38
Speaker 2: Basically every equity says that fine. Unlike my private portfolios
34:42
Speaker 2: which hold many companies thereby provide diversification, the American Exceptionalism
34:46
Speaker 2: Acquisition Corporation will be an investment vehicle into a single
34:50
Speaker 2: operating company.
34:52
Speaker 3: Okay.
34:52
Speaker 2: Finally, again pre standard stuff here. Consequently, we believe that
34:56
Speaker 2: this investment is most suitable for institutional investors, and retail
35:00
Speaker 2: should approach.
35:01
Speaker 3: This with caution if at all.
35:03
Speaker 2: Well, if that's true, you probably wouldn't be buying setting
35:05
Speaker 2: up a spack, you know, first of all.
35:07
Speaker 3: But this is where we get we get fun.
35:10
Speaker 2: We believe that retail investors should only participate if A
35:15
Speaker 2: this investment is part of a small, otherwise diversified portfolio.
35:20
Speaker 2: B this investment is a quantum of capital they can
35:23
Speaker 2: afford to completely.
35:24
Speaker 3: Lose quantum of capital? What defines a quantum of capital? Paul?
35:29
Speaker 3: Is that three? Is it for? Like? What is it? Four?
35:34
Speaker 2: Penny loafers? Like, what's a quantum of capital? And see
35:38
Speaker 2: if they do lose their entire capital? They will embody
35:42
Speaker 2: the adage from President Trump that there can be quote
35:44
Speaker 2: no crying in the casino. I mean, this isn't like
35:48
Speaker 2: an actual regulatory document.
35:52
Speaker 4: How many pages was this buried in or is this
35:54
Speaker 4: right front and center? This isn't even the disclosure this
35:56
Speaker 4: discussion from before this was front and center.
35:59
Speaker 3: Uh don't know.
35:59
Speaker 2: I don't have a page number on this, but I
36:02
Speaker 2: did confirm it is legit and in here. I just
36:04
Speaker 2: I don't have the page number. Oh my goodness on this,
36:07
Speaker 2: but this is what we're getting in disclosures at this point.
36:11
Speaker 2: And look, Shamath the big thing is back in when
36:16
Speaker 2: was it that he went through his hole? I'm the
36:18
Speaker 2: man in arena, in the arena trying things phase. It
36:22
Speaker 2: was twenty one or twenty one probably, and a lot
36:24
Speaker 2: of the things he tried just didn't work, which again,
36:26
Speaker 2: like he's the man in the arena. Great, but ultimately
36:29
Speaker 2: he's putting up your money, not his, So like how
36:31
Speaker 2: much is he really the man in the arena is
36:33
Speaker 2: the question?
36:34
Speaker 4: I think, right, Yeah, we need to know his capital
36:36
Speaker 4: commitment to this correctential quantum loss In.
36:39
Speaker 2: Any case, I found that to be funny. Yes, the
36:42
Speaker 2: loss of quantums is it could be devastating.
36:46
Speaker 4: Peace in here. When it comes to tipping, are we
36:49
Speaker 4: heading back down to fifteen percent? What they've noticed for
36:53
Speaker 4: from some data from Toast, which is a provider for
36:56
Speaker 4: a lot of restaurant payment systems out there, that they
36:59
Speaker 4: saw a decline in tipping at full service restaurants to
37:02
Speaker 4: nineteen percent on average. That was the lowest level that
37:06
Speaker 4: they've seen since they began tracking it seven years ago.
37:09
Speaker 4: It peaked at highest at twenty percent in twenty twenty
37:12
Speaker 4: one for obvious reasons. Of course, restaurants and staffing during
37:16
Speaker 4: the post COVID era it was a very challenging time,
37:19
Speaker 4: so that some of the theories kicked around our people
37:21
Speaker 4: are tipping tired. And I will say that there is
37:25
Speaker 4: not that I'm in agreement full service restaurants. I'm a
37:29
Speaker 4: standard twenty percent guy for the most part, unless you
37:31
Speaker 4: really are screwing things up. But there is something when
37:35
Speaker 4: you do go to those kiosks. And this is focusing
37:37
Speaker 4: on full serve restaurants. So it's not when we bump
37:40
Speaker 4: into this at a coffee stop or something like that,
37:42
Speaker 4: But that does We've talked about that before. That does
37:45
Speaker 4: bother me. When I'm at Fenway Park and you spend
37:48
Speaker 4: twenty dollars for a beer and then they asked for
37:49
Speaker 4: a tip. You know, no offense to those people working there,
37:52
Speaker 4: but it's like, come on, I just shelled out twenty
37:54
Speaker 4: bucks for a beer. I really don't feel like tipping.
37:56
Speaker 2: On top of this, I want to talk about I
37:59
Speaker 2: know we only have a couple of seconds left, but
38:01
Speaker 2: quiet cracking. Apparently this is when people feel overwhelmed at
38:06
Speaker 2: work and having lots of pressure to do more with less.
38:09
Speaker 2: I'm not sure that this is worthy of a new phrase,
38:11
Speaker 2: because I think this is burnout. Yes, we don't need
38:15
Speaker 2: to reinvent the burnout is kind of where I'm going.
38:18
Speaker 2: We're done for the day, back at it tomorrow.
38:20
Speaker 3: We'll see you then