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What does a national housing emergency mean? · The Financial Exchange Show

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1:11
Speaker 2: Chuck, Mike and tuccer with you, and it is a
1:14
Speaker 2: job's Friday, and we've got markets selling off on a
1:17
Speaker 2: weaker than expected jobs report was twenty two thousand jobs
1:20
Speaker 2: created and the unemployment rate rising to four point three percent. Again,
1:27
Speaker 2: just you look for silver linings and there's just not
1:29
Speaker 2: many in this report. I guess you could say, look,
1:32
Speaker 2: net job growth was still positive, but ultimately a pretty
1:35
Speaker 2: weak report that continues a trend that's been going on
1:38
Speaker 2: for a little while now. And ultimately, I think the
1:43
Speaker 2: question that is out there in my mind is, look
1:46
Speaker 2: what changes this trend, because typically the best way to
1:50
Speaker 2: predict where the economy is going in the future is
1:52
Speaker 2: to see where it's been over the last few months.
1:54
Speaker 2: And there's definitely been a slow down on the labor market.
1:57
Speaker 2: It's something where maybe we're seeing some signs of that reversing.
2:01
Speaker 2: If you look at the indeed jobs posting data that's
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Speaker 2: out there now through and it's still through August twenty second,
2:09
Speaker 2: you're seeing a little bit of a bounce in August
2:12
Speaker 2: in in job openings, but that doesn't necessarily translate to
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Speaker 2: hiring right away. It could be something where there's you know,
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Speaker 2: a three to six month delay there, and so you
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Speaker 2: just kind of have to watch and see how things evolve.
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Speaker 2: The other piece that you are seeing is that when
2:28
Speaker 2: you looked at the data on wages from indeed kind
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Speaker 2: of matches up with you know, some of the other
2:35
Speaker 2: stuff that we're seeing in terms of you know, weakness
2:37
Speaker 2: and purchasing power in this report. But ultimately, this report,
2:42
Speaker 2: in my mind, solidifies you're almost guaranteed to have at
2:46
Speaker 2: least a twenty five basis point cut from the Fed
2:49
Speaker 2: in twelve days, and it puts on the table the
2:52
Speaker 2: possibility of a larger one. What would be needed for
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Speaker 2: that larger one, in my opinion, Number one, I think
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Speaker 2: you need to have, you know, continued acceleration in initial
3:01
Speaker 2: jobbles claims are continuing claims.
3:03
Speaker 3: Next week we saw a slight uptick of what nine
3:06
Speaker 3: thousand more than very modest, nothing huge, nothing to write
3:09
Speaker 3: home about.
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Speaker 2: Uh. And you would also need to see a CPI
3:13
Speaker 2: and PPI report next week that come in better than
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Speaker 2: expected as well. I think would be a tough putt
3:19
Speaker 2: for me to be saying, okay, let me, you know,
3:23
Speaker 2: do a half percent cut. If you know core CPI
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Speaker 2: comes into point four percent next week instead of point
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Speaker 2: three or below.
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Speaker 4: That's the toughest part.
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Speaker 3: Of analyzing what the Fed does, because it's very easy
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Speaker 3: to inject what you would do. Ultimately, what matters is
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Speaker 3: what the Fed governors would do, and I think they'd
3:42
Speaker 3: be more willing to cut than either of us would.
3:45
Speaker 3: And so, yeah, I'm not sure what you need out
3:47
Speaker 3: of the CPI report. I'm not sure what you mean
3:48
Speaker 3: to get a half percent. Yeah, yeah, I just think
3:51
Speaker 3: there's a bigger willingness to do that from this federal
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Speaker 3: reserve than.
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Speaker 2: Unless the CPI comes in hot.
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Speaker 4: Yeah, CPI comes in hot, it's off the table.
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Speaker 2: If if you get core CPI coming in at point
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Speaker 2: two percent next week, totally opens the door to a
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Speaker 2: half percent cut, and quite legitimately too, like it starts
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Speaker 2: to show, okay, like, yeah, there's been a couple of
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Speaker 2: wobbles in core CPI, but they've just been wabbles, they
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Speaker 2: haven't been a full change in direction. And if that's
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Speaker 2: the case, Yeah, the labor market's decelerating faster than inflation's accelerating,
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Speaker 2: you absolutely can move forward with a half percent cut.
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Speaker 5: Red.
4:26
Speaker 2: Let's talk a little bit about mortgages and mortgage rates.
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Speaker 2: Just you know, while we're talking about interest rates, here's
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Speaker 2: the thing. Mortgage rates have come down over the last
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Speaker 2: month or so. The thirty year fixed rate national average
4:41
Speaker 2: right now, according to Mortgage News Daily, is it's six
4:43
Speaker 2: four five. With the ten year treasury down another ten
4:47
Speaker 2: basis points today, you could be in the six to
4:49
Speaker 2: three range in short order.
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Speaker 3: Here, Chuck, I was speaking with two people who are
4:54
Speaker 3: getting mortgages right now, and they are in the sixty
4:57
Speaker 3: two to six three range. Again excellent credit rating, you know,
5:00
Speaker 3: So there are people getting mortgages now at this at
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Speaker 3: this level.
5:03
Speaker 2: And look, if you want to go the adjustable mortgage route,
5:05
Speaker 2: which again I'm not saying that you should or shouldn't,
5:08
Speaker 2: it's just it's an option that's out there if you're
5:09
Speaker 2: trying to manage the payment in the short term. You've
5:12
Speaker 2: got seven six arms that are out there now in
5:14
Speaker 2: the five to seven range. And like it starts to
5:17
Speaker 2: look you know, more reasonable. Now, the question is, okay,
5:22
Speaker 2: what is actually needed to get people off the sidelines.
5:24
Speaker 2: And the first problem is it needs to be the
5:28
Speaker 2: spring because home sales fall off a cliff heading into
5:32
Speaker 2: the end of the year. Yeap, Like if you actually
5:35
Speaker 2: look at the data as it relates to just the
5:40
Speaker 2: just the volume of transactions that we see, you know,
5:43
Speaker 2: during different points in the year. It's it's really really
5:48
Speaker 2: clear in terms of what happens there on a weekly basis.
5:52
Speaker 2: When we look at home sales, you generally peak somewhere
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Speaker 2: in the late May early June range. With around the
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Speaker 2: last couple of years, at least, it's been around seventy
6:05
Speaker 2: to eighty thousand sales per week. Sure, as you get
6:08
Speaker 2: into September that number drops to around sixty thousand, and
6:12
Speaker 2: by year end you're doing around forty five thousand sales.
6:14
Speaker 2: So there's just not no one wants to buy a
6:17
Speaker 2: home right before Christmas. Correct, You don't want to be
6:21
Speaker 2: moving during the holidays, Yes, plain and simple. And so
6:26
Speaker 2: the first thing is, Okay, it's great that rates are lower.
6:30
Speaker 2: Not a lot of people want to be buying a
6:31
Speaker 2: home right now. So like, yes, there's still are people
6:34
Speaker 2: that do, but it's just not the same kind of volume.
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Speaker 2: So it doesn't help to clear the inventory that's out there.
6:41
Speaker 2: So the first problem is timing. You need these lower
6:43
Speaker 2: rates to last another six months, you know, possible, but
6:48
Speaker 2: uncertain they may they look rates may be lower by
6:51
Speaker 2: the spring week. We don't know. It's very much possible.
6:55
Speaker 2: But when you talk about what we've seen here rates
6:58
Speaker 2: moving from the high sixes to i'll call six three
7:01
Speaker 2: the low sixes, like that's the borderline of low and
7:04
Speaker 2: mid sixes. Hey, a half a percent shift in mortgage
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Speaker 2: rates means that you can spend up to on a
7:12
Speaker 2: you know, conforming twenty percent down conventional mortgage for thirty
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Speaker 2: years generally about four to five percent more, and so
7:19
Speaker 2: the affordability gets a little bit better in terms of
7:21
Speaker 2: your monthly payment. Is that enough to offset continued increases
7:27
Speaker 2: in insurance premiums, property taxes and electricity rates on the margins?
7:33
Speaker 2: Does it get things moving enough?
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Speaker 1: Maybe?
7:36
Speaker 2: I'm just not sure right now. It's it's something where
7:40
Speaker 2: you know, if you got the thirty or fixed rate
7:42
Speaker 2: down into the high fives, I'd say, okay, there's probably
7:45
Speaker 2: enough juice there this with all the other costs that
7:48
Speaker 2: have gone up. I'm not sure it's quite enough, but
7:51
Speaker 2: it'll definitely help check. Yesterday, Scott Bessant discussed something that actually,
7:59
Speaker 2: sorry it was no labor day interview quote, we may
8:02
Speaker 2: declare a national housing emergency in the fall.
8:06
Speaker 4: We're in the fall.
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Speaker 3: H Do you have any clarity about what a national
8:10
Speaker 3: housing emergency would mean?
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Speaker 2: I don't. So if you look at like the things
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Speaker 2: that were done the last time that we've seen something
8:18
Speaker 2: along these lines, which was back in you know, late
8:21
Speaker 2: two thousand and eight, when gosh, like you want to
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Speaker 2: talk about emergencies, I mean, we're talking about as bad
8:28
Speaker 2: as it gets. So if you look at the things
8:30
Speaker 2: that were done back then, it was predominantly to try
8:36
Speaker 2: to backstop lending markets and things along those lines like that.
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Speaker 2: That was the bulk of what we saw during previous
8:43
Speaker 2: you know, national housing emergencies. The stuff that's being talked
8:47
Speaker 2: about in a couple of these pieces, I'm just not
8:49
Speaker 2: sure is actually feasible. So like when when you talk
8:53
Speaker 2: about a few of these things, or like some of
8:54
Speaker 2: it just doesn't matter. There's a piece from market Watch
8:58
Speaker 2: Five ways the Trump administration could addressed the housing crisis.
9:01
Speaker 2: Free up federal land to build housing, guys, doesn't make
9:05
Speaker 2: a difference. It doesn't matter if you're freeing up a
9:08
Speaker 2: bunch of land in Nevada. Yeah, It's the problem is
9:12
Speaker 2: in the places that people are trying to actively move
9:14
Speaker 2: right now, not in federal land that's you know, more
9:18
Speaker 2: remote and stuff like that. Not that it doesn't matter
9:20
Speaker 2: at all, but yeah, the high demand for housing and
9:23
Speaker 2: the week supply is not in the West, where all
9:26
Speaker 2: the federal land is concentrated.
9:28
Speaker 3: It's in the southeast. It's in the Midwest and northeast.
9:31
Speaker 3: Oh you're saying the demand for housing right now. Demand
9:35
Speaker 3: for housing right now is that's where and the lack
9:37
Speaker 3: of demands in the southeast.
9:38
Speaker 2: And this doesn't fix that either, which again, like sometimes
9:41
Speaker 2: the market just has to do what the market does.
9:43
Speaker 2: Increase flexibility on what and where you know, builders can build,
9:46
Speaker 2: so helping to change local zoning laws.
9:48
Speaker 4: I would love to see it. I don't know how
9:50
Speaker 4: they do it.
9:50
Speaker 2: Good luck listen. Our show is based in the northeast
9:53
Speaker 2: in Massachusetts. Massachusetts passed something a few years ago called
9:57
Speaker 2: a few years ago called the MBTA Communities Act, which
9:59
Speaker 2: basically tried to push towns near mass Transit to develop
10:03
Speaker 2: more housing. Even with like the state government trying to
10:08
Speaker 2: do this instead of the federal one. A ton of
10:11
Speaker 2: towns have pushback and it's basically been a flop. It
10:14
Speaker 2: hasn't really moved the way people thought it would. So
10:17
Speaker 2: no one wants to change their zoning laws when DC
10:19
Speaker 2: tells them to lowering mortgage rates. The you don't really
10:24
Speaker 2: have the executive branch able to do that directly. It'll
10:27
Speaker 2: happen if the economy slows as it is, and this
10:29
Speaker 2: could provide a nice counterbalance where hey, if the economy
10:32
Speaker 2: is slowing, great, lower mortgage rates can unlock housing and
10:35
Speaker 2: maybe you get things moving there. Let's take a quick break.
10:38
Speaker 2: When we come back, we're gonna be joined by Luke
10:40
Speaker 2: Kauwa from Sherwood News. Right after this, we're talking broadcom
10:44
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Speaker 2: As promised. We're now joined by Luke Kawa from Sherwood News.
11:47
Speaker 2: We're talking a little bit of semiconductors with Luke today. Luke,
11:51
Speaker 2: how you doing doing great?
11:53
Speaker 7: Thanks for having me, Luke.
11:54
Speaker 2: We've got Broadcom stock up about nine percent today, We've
11:58
Speaker 2: got AMD down six in video down three and a half.
12:01
Speaker 2: Why the the why is everyone trade in places inside
12:05
Speaker 2: the semiconductor space today?
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Speaker 5: See?
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Speaker 7: I find this very interesting. If you would go back,
12:10
Speaker 7: you know, three months ago, six months ago, one would
12:12
Speaker 7: think a Broadcom report where they say, hey, you know,
12:16
Speaker 7: we're doing good, sales beat expectations and by the way,
12:18
Speaker 7: we also think revenues are going to improve significantly from here.
12:22
Speaker 7: That that would be a kind of rising tide lifts
12:24
Speaker 7: all boats phenomenon that is decidedly not happening here. So
12:29
Speaker 7: I think, first, you know, you have to think about
12:31
Speaker 7: how much expectations have changed here ahead of Broadcom's report.
12:36
Speaker 7: So what I would suggest is that you know, the
12:39
Speaker 7: reason why there is some softness and the likes of
12:41
Speaker 7: Nvidia and AMD is because you're starting to see traders
12:46
Speaker 7: treat to the AI game as a little more zero sum.
12:49
Speaker 7: If you look even right now at the you know,
12:52
Speaker 7: change in market cap, how much broad cooms added versus
12:55
Speaker 7: how much Nvidia and am D of lost, it's pretty
12:58
Speaker 7: much the same at this point. So I think one
13:01
Speaker 7: interesting thing that could be added on to the AMD
13:04
Speaker 7: story is a few months ago they launched a new
13:08
Speaker 7: line of chips, introduced them. Wall Street was incredibly bullish
13:12
Speaker 7: on the prospects for those chips to be materially adding
13:16
Speaker 7: to AMD's forward sales. You saw sales estimates for AMD
13:20
Speaker 7: rise much faster than the likes of Nvidia, for instance,
13:23
Speaker 7: and Seaport Securities yesterday cut the stock to neutral and said, basically,
13:28
Speaker 7: we've done some channel techs, we've talked around and it
13:31
Speaker 7: doesn't seem like their new chips are gaining much traction
13:35
Speaker 7: that that business is doing too well. So it does
13:37
Speaker 7: seem for that stock in particular, there's a little bit
13:40
Speaker 7: of a level setting that's going on here.
13:43
Speaker 2: When we look at Broadcom, one of the big things
13:46
Speaker 2: that they announced they have new ten billion dollar mystery
13:49
Speaker 2: customer who everyone speculates is going to be open ai
13:52
Speaker 2: What does this mean in terms of I guess just
13:57
Speaker 2: the whole ecosystem that is out there. Open Aiye to
14:01
Speaker 2: this point has been Hey, we're running the models that
14:06
Speaker 2: everyone wants to use. Are they trying to more vertically
14:09
Speaker 2: integrate as well? I mean, what's kind of your read
14:12
Speaker 2: on this?
14:13
Speaker 7: I think it's interesting. I think there's myriad takes one
14:17
Speaker 7: could have on this. Kind of where I fall in
14:20
Speaker 7: is Hey, despite Nvidia's protestations to the contrary recently, if
14:24
Speaker 7: you saw some of their social media posts, the AI
14:27
Speaker 7: boom right now is more supply constrained than demand constrained.
14:31
Speaker 7: It's difficult to effectively keep equipping yourself with the top
14:35
Speaker 7: of the line supplies if you're a hyperscaler, just because
14:38
Speaker 7: they're hard to get your hands on. So do you
14:41
Speaker 7: want all of Nvidia's top of the state of the
14:43
Speaker 7: art materials, even though you might have to wait longer
14:46
Speaker 7: and longer, and by that time they're already working on
14:49
Speaker 7: the next generation and that's six months away, or are
14:51
Speaker 7: we going okay if we need to speed up this process.
14:54
Speaker 7: If we want to speed up this process, is actually
14:56
Speaker 7: more expedient for us to be diversifying our suppliers a
15:00
Speaker 7: little more, taking you know, some from Broadcom, having our
15:04
Speaker 7: own line of custom chips there, also using in videos
15:07
Speaker 7: GPUs and kind of full system architecture there. So I
15:11
Speaker 7: think this is more a means of hey, I think
15:13
Speaker 7: for the underlying AI trade, this is more a matter
15:16
Speaker 7: of hey, how do we fast track this? How do
15:19
Speaker 7: we keep this train moving as fast as possible? Because
15:22
Speaker 7: companies hyperscalers at least it does seem to be adding
15:26
Speaker 7: to their sales a heck of a lot and a
15:29
Speaker 7: reasonable reason for them to want to keep that process
15:32
Speaker 7: at accelerated a pace as possible.
15:35
Speaker 2: I have to ask you this question anytime that we're
15:37
Speaker 2: talking about AI. I know that no one knows the
15:39
Speaker 2: answer to it, but interested just to get your thought
15:42
Speaker 2: on it. Luke, when do people start to care about
15:46
Speaker 2: actual revenue and profitability from AI? Because they haven't to
15:50
Speaker 2: this point, which is fine, Like there's plenty of businesses
15:52
Speaker 2: where that's the case for a while, but you got
15:56
Speaker 2: like four to five hundred billion dollars in data center
15:59
Speaker 2: spend that's going to be coming next year, and at
16:02
Speaker 2: some point you say, look, this is going to need
16:05
Speaker 2: to start, you know, paying for itself. When do people
16:07
Speaker 2: start caring? Is the sign that you know, we might
16:10
Speaker 2: be seeing this as more of a zero sum game.
16:12
Speaker 2: Does it show that we're approaching that or are we
16:14
Speaker 2: not there yet?
16:16
Speaker 7: I mean I would I would somewhat question the premise
16:20
Speaker 7: a little bit. I do think that if you just
16:22
Speaker 7: look at how much are sales up versus how much
16:25
Speaker 7: is capax up. Of course you can attribute all of
16:27
Speaker 7: the sales increase to AI. Companies might try to, but
16:31
Speaker 7: right now you're you're effectively seeing even in a one
16:33
Speaker 7: year timeframe, trailing one year sales versus trailing one year
16:37
Speaker 7: capacks increases at the hyperscalers. It's you know, the sales
16:41
Speaker 7: are going up by more than the capacks. So even
16:44
Speaker 7: on a cash flow basis, it doesn't seem to be
16:46
Speaker 7: that negative at this point, and of course you would
16:49
Speaker 7: hope to get more than one year's use out of
16:51
Speaker 7: out of that. I think kind of in terms of
16:55
Speaker 7: the question marks people have about the longevity or the
16:59
Speaker 7: breadth of the AI trade, and this is something that
17:01
Speaker 7: ties into the price action.
17:02
Speaker 1: Today.
17:03
Speaker 7: We know that in Video right now has a very
17:05
Speaker 7: concentrated customer base over half of its revenues for direct
17:10
Speaker 7: AI hardware sales our three customers. One of those customers
17:14
Speaker 7: is now reported to be effectively also trying to diversify
17:18
Speaker 7: its supply there. So it's more a matter of we're
17:21
Speaker 7: seeing the depth. Are we seeing the breadth in the
17:25
Speaker 7: AI trade? Effectively? As more and more enterprise companies adopt
17:31
Speaker 7: this for enterprise purposes or see other ways to use
17:34
Speaker 7: AI to improve their businesses, do you start to see
17:37
Speaker 7: more breadth and less depth. I think that to me
17:41
Speaker 7: would be a kind of key marker of justifying or
17:45
Speaker 7: validating how much spend has gone into this and how
17:48
Speaker 7: much may be needed to continue going into this to
17:51
Speaker 7: have kind of durable, ongoing payoff periods.
17:54
Speaker 4: That makes sense.
17:55
Speaker 2: One more question on is we only have about a
17:57
Speaker 2: minute left, but I'm curious to get the sense of Look,
18:01
Speaker 2: the last time that we saw a build up of
18:03
Speaker 2: this scale for you know, anything tech related was you know,
18:07
Speaker 2: the tech bubble with all of the infrastructure related to
18:09
Speaker 2: the Internet and ultimately the companies that ended up winning
18:13
Speaker 2: in the long run, weren't the companies that built the infrastructure,
18:16
Speaker 2: they were the companies that operated on it. How do
18:18
Speaker 2: we reconcile that in this case? Sorry, only about thirty
18:21
Speaker 2: seconds for you to give that answer.
18:23
Speaker 7: All good, Hey, very a very interesting dynamic. Matt Phillips
18:26
Speaker 7: at Sherwood has reported on this recently that you've seen
18:29
Speaker 7: a bit in recent weeks a bit of a shuffling
18:32
Speaker 7: of the AI trade away from kind of the picks
18:34
Speaker 7: and shovel space to more of the software providers, some
18:38
Speaker 7: of whom were supposed to have their lunch eaten by
18:41
Speaker 7: AI effectively or be rendered somewhat obsolete. So I do
18:44
Speaker 7: think the market is kind of in this period of
18:46
Speaker 7: rotating between Hey, we have all these revenues from the
18:49
Speaker 7: chip makers now, but you know those could go away
18:51
Speaker 7: in a and a bust ai Ala dot com. But also,
18:56
Speaker 7: you know, we do have these end users that are
19:00
Speaker 7: seeing their stocks perform, you know, fairly well in recent
19:02
Speaker 7: weeks in contrast to some of the picks in trouble.
19:04
Speaker 7: So I think that's a digestion process that the market
19:08
Speaker 7: is rotating to and fro as the days, weeks, months
19:12
Speaker 7: go on.
19:12
Speaker 2: Very good, Luke, appreciate you joining us today. Thank you
19:15
Speaker 2: so much for the time, pleasure, pleasure that is Luke
19:18
Speaker 2: Cowa with Sherwood News. We're going to take a quick
19:21
Speaker 2: break here. When we come back, we've got trivia, we've
19:24
Speaker 2: got Wall Street Watch, and we've got Beef.
19:39
Speaker 1: Bringing the latest financial news straight to your radio every day.
19:44
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:50
Speaker 1: Time now for Wall Street Watch. A complete look at
19:53
Speaker 1: what's moving market so far today right here on the
19:56
Speaker 1: Financial Exchange Radio Network.
19:58
Speaker 6: Markets in negative territory on the heels of a weaker
20:01
Speaker 6: than expected August jobs report, where only twenty two thousand
20:04
Speaker 6: jobs were added last month, well below forecasts of seventy
20:08
Speaker 6: five thousand. The government also revised its numbers from earlier
20:12
Speaker 6: in the summer and said the economy lost a net
20:14
Speaker 6: thirteen thousand jobs in June, marking its first decline since
20:18
Speaker 6: December of twenty twenty. Right now, the Dow is down
20:21
Speaker 6: by over half a percent, two hundred and forty five
20:24
Speaker 6: points lower, SMP five hundred also down by a half
20:27
Speaker 6: a percent, Nasdaq down by three tenths of one percent.
20:31
Speaker 6: Russell two thousand is dipping into negative territory. Ten year
20:35
Speaker 6: treasureel down ten basis points at four point zero seven percent,
20:39
Speaker 6: and crude oil is down nearly three percent now trading
20:43
Speaker 6: its sixty one dollars in sixty one cents a barrel.
20:46
Speaker 6: Broadcom jumping ten percent after the chip and software maker
20:50
Speaker 6: swung to a profit, beating expectations for its quarterly sales.
20:54
Speaker 6: The company also noted its AI related revenue sword sixty
20:59
Speaker 6: three percent. Hi Meanwhile, Lulu Lemon shares are tanking eighteen
21:03
Speaker 6: percent after the eth leisure ware company's full year guidance
21:08
Speaker 6: missed estimates. Lulu also cut its outlook, citing tariffs, and
21:12
Speaker 6: a new financial filing revealed that Tesla's board is asking
21:16
Speaker 6: investors to approve a new pay package for CEO Elon
21:20
Speaker 6: Musk that could be worth as much as one trillion
21:23
Speaker 6: dollars over the next decade. Tesla shares a rising three
21:27
Speaker 6: percent on that news. I'm Tucker Silva, and that is
21:31
Speaker 6: Wall Street Watch, and we haven't done trivia yet, so
21:33
Speaker 6: let's do it here today is our final look at
21:36
Speaker 6: Famous Ben's this entire week. In August of nineteen seventy two,
21:41
Speaker 6: Michael Jackson released his second solo studio album, Ben the
21:46
Speaker 6: title track for the album was the first number one
21:49
Speaker 6: hit for Michael Jackson as a solo artist. So trivia
21:53
Speaker 6: question today, what was Michael Jackson's song ben About? Once again?
21:58
Speaker 6: What was Michael Jackson and Son ben About? Be the
22:03
Speaker 6: first person today to text us at six one seven
22:06
Speaker 6: three six two thirteen eighty five with the correct answer,
22:09
Speaker 6: you know, win a Financial Exchange Show T shirt once again.
22:12
Speaker 6: The first correct response to text us to the number
22:15
Speaker 6: six one seven three six two thirteen eighty five will
22:18
Speaker 6: win that T shirt. See complete contest rules at Financial
22:21
Speaker 6: Exchange Show dot com.
22:23
Speaker 2: World meat prices reach new highest consumers clamor for beef chuck.
22:29
Speaker 3: According to the Bureau of Labor Statistics, year over year,
22:32
Speaker 3: beef prices up eleven point three percent and my personal favorite,
22:37
Speaker 3: uncooked beef steaks twelve.
22:39
Speaker 4: Point four percent year over year increases July to July.
22:44
Speaker 2: It's been a tough year.
22:45
Speaker 3: Yeah, yeah, you wonder why people are so pessimistic about
22:49
Speaker 3: our future.
22:50
Speaker 2: So look, basically, you've got, you know, a bunch of
22:54
Speaker 2: problems that are causing thinning, herd's, combination of disease, drought,
22:59
Speaker 2: you know, a whole bunch of different things, and so
23:01
Speaker 2: as a result, you don't have as many cows, and
23:03
Speaker 2: as a result of that, you obviously don't have as
23:05
Speaker 2: many steaks. Steaks come from the cow, as I taught
23:08
Speaker 2: my five year old a couple weeks ago. It's kind
23:10
Speaker 2: of an eye opening conversation, but no, I think it
23:14
Speaker 2: went pretty well. Actually it helped that I was showing
23:18
Speaker 2: her the diagram of like this is you know, the
23:21
Speaker 2: the the flank steak here, and this is where the
23:24
Speaker 2: rib roast comes from, you know, so like we went
23:26
Speaker 2: through the whole cow. Yeah, and it was it was,
23:28
Speaker 2: It was good.
23:29
Speaker 3: But that sounds like it went significantly better than my
23:31
Speaker 3: wife's puberty conversation last night.
23:33
Speaker 4: So good job.
23:36
Speaker 2: I'm not Yeah, don't engage. Let's let's continue, shall we. H.
23:43
Speaker 2: You've got you've got beef prices moving up and there's
23:48
Speaker 2: nothing that we can really do to get them down.
23:50
Speaker 2: It's just one of those things where it's going to
23:52
Speaker 2: be cyclical, kind of like eggs were, you know, last
23:55
Speaker 2: year with bird flu and things like that. And unfortunately,
23:58
Speaker 2: for you know, people who enjoy, you know, a good
24:01
Speaker 2: stake or two every now and then, it's not really
24:04
Speaker 2: changing in the near future. We continue to see be futures,
24:06
Speaker 2: cattle future prices moving up over the last couple weeks,
24:10
Speaker 2: and so things are gonna get worse before we get better.
24:12
Speaker 3: There, folks want to talk to you about two upcoming
24:16
Speaker 3: events here from the Financial Exchange. As we've been discussing
24:20
Speaker 3: the labor market in particular, but the economy as a
24:24
Speaker 3: whole seems to be at potentially some.
24:28
Speaker 4: Pivot point right now.
24:30
Speaker 3: You've got the FED potentially cutting rates, You've got markets
24:33
Speaker 3: trading near all time highs on the artificial intelligence boom,
24:37
Speaker 3: and a lot of folks wondering what comes next. If
24:41
Speaker 3: you are too, please join us on one of two dates.
24:44
Speaker 3: The first one is going to be down at the
24:46
Speaker 3: Margaritaville Resort on Cape cod on October ninth. Second will
24:50
Speaker 3: be at the Showcase super Lux in Chestnut Hill on
24:53
Speaker 3: October sixteenth. We'll be doing a live broadcast of this
24:56
Speaker 3: show the Financial Exchange. You can join us for free
25:00
Speaker 3: and catch a live broadcast followed by a lunch where
25:03
Speaker 3: we discuss the markets, to discuss the economic trends and get
25:07
Speaker 3: into the details of what we are seeing when it
25:10
Speaker 3: comes to this country's outlook. If you would like to
25:12
Speaker 3: reserve your spot, do so now as these do fill
25:15
Speaker 3: up again, it's down on Cape Cod at the Margaritaville
25:19
Speaker 3: Resort on October ninth, or at the Showcase super Lux
25:22
Speaker 3: and Chestnut Hill on October sixteenth, and you can reserve
25:25
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25:28
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25:37
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
25:40
Speaker 1: registered investment advisor. Nothing in the ad or in any
25:42
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
25:45
Speaker 1: your own financial, tax, and estate planning advisors before making
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Speaker 1: any investment decisions. Armstrong may contact you to offer investment
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Speaker 1: advisory services.
25:53
Speaker 2: Michael's talk a little bit about Lulu Lemon in depth.
25:56
Speaker 2: So they reported earnings yesterday and basically their guidance was
26:00
Speaker 2: it bad to quite bad, and they're saying it's because
26:03
Speaker 2: of tariffs. Ultimately, like you actually look at the numbers
26:09
Speaker 2: and what they're telling you, and yes, that the profit
26:12
Speaker 2: side is certainly going to be impacted by tariffs, there's
26:16
Speaker 2: no doubt on that side of things. But I think
26:20
Speaker 2: that when you know, you talk about okay, is it
26:24
Speaker 2: tariffs or is it something else. The revenue guide being
26:27
Speaker 2: you know, three to five percent below where they had
26:29
Speaker 2: been previously guiding. That tells me you have a demand problem, because.
26:34
Speaker 3: That's what matters check because this is a company that
26:36
Speaker 3: has been defined by pricing power like no other company
26:40
Speaker 3: out there for the last several years.
26:41
Speaker 4: And if they're losing it, I.
26:42
Speaker 2: Mean, I'm there right now. I went to the lu
26:44
Speaker 2: Lemon website, which the only time I ever do it
26:46
Speaker 2: is when we cover them on the show to talk
26:47
Speaker 2: about how expensive their stuff is, and I see, this
26:51
Speaker 2: is a spanks guy. I am. It helps with you know,
26:54
Speaker 2: the midsection on me a little bit. So for best sellers,
26:57
Speaker 2: the first thing that comes up for men is the
27:00
Speaker 2: metal vent Tech short sleeve shirt. It's seventy eight dollars. Yeah,
27:07
Speaker 2: like human dollars, not you know, like anything. It's seventy
27:11
Speaker 2: eight dollars. They have an Evolution short sleeve polo shirt
27:15
Speaker 2: for eighty eight. And so the question that I ask
27:19
Speaker 2: is why, I mean, but that hasn't been enough. That
27:24
Speaker 2: hasn't been a problem for them to this point. But
27:27
Speaker 2: if you have an environment where people are, you know,
27:30
Speaker 2: paying more attention to pricing, right now and this and that,
27:34
Speaker 2: this is the first stuff that goes because quite honestly,
27:37
Speaker 2: and look, this is what I do. You can go
27:39
Speaker 2: to freaking old Navy and get eight workout shirts that
27:43
Speaker 2: cost the same amount as this one workout shirt from
27:46
Speaker 2: Lululemon and there's not that much of a difference. Probably
27:49
Speaker 2: I wouldn't know. I've never worn a single Lulu Elemon thing.
27:52
Speaker 2: Is there?
27:53
Speaker 4: I mean, is this the same thing that we see
27:55
Speaker 4: with like exercise fads?
27:58
Speaker 1: Right?
27:58
Speaker 3: I know it's different. It's fast, and there are plenty
28:01
Speaker 3: of fashion companies that have remained relevant for a lot
28:03
Speaker 3: longer than the Bowflex or Peloton, but this company became
28:09
Speaker 3: incredibly popular, incredibly quickly. And every time I log onto Facebook,
28:13
Speaker 3: I see five companies trying to pick off little pieces
28:17
Speaker 3: of their business.
28:17
Speaker 4: Here and there.
28:18
Speaker 2: Yeah, it's looks tough. It's a tough business. And the
28:23
Speaker 2: other piece that I wonder, if you're just seeing in general,
28:25
Speaker 2: that whole ath leisure space kind of feels like it
28:30
Speaker 2: peaked five or six years ago.
28:31
Speaker 4: I mean, it probably peaked during COVID.
28:33
Speaker 2: I mean just look at what you're seeing from like
28:35
Speaker 2: Nike and under Armour, and like this is not just
28:38
Speaker 2: a Lulu Lemon store. I mean, you're seeing this across
28:40
Speaker 2: the board with anything athletic, leisurely, you know, yeah, oriented,
28:46
Speaker 2: and so I think there's something to that as well.
28:50
Speaker 2: The other thing just from quite honestly again, like I'm
28:54
Speaker 2: not the target person for this. I know they have
28:56
Speaker 2: a men's section, but their bread and butter is selling,
28:59
Speaker 2: you know, workout close to women. Asking my wife about
29:02
Speaker 2: She's like, there's stuff's overpriced and no one wants to
29:04
Speaker 2: buy it anymore. Like that's it's kind of the vibe
29:09
Speaker 2: that that I get on this.
29:10
Speaker 4: No STIMMI checks, no Lululemon.
29:12
Speaker 2: Let's take a quick break when we return. Paul Monica
29:16
Speaker 2: from Baron's joined us after this.
29:18
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29:58
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30:32
Speaker 2: Joining us now is Paul Amonica from Barons and we're
30:36
Speaker 2: gonna be talking a little bit about sports gambling stocks here, Paul,
30:41
Speaker 2: How you doing good?
30:43
Speaker 5: Thanks? How are you guys doing good?
30:44
Speaker 2: I know you put together a piece on a couple
30:47
Speaker 2: of these companies. Can you talk a little bit about
30:49
Speaker 2: what was in there?
30:50
Speaker 5: Yeah, Draft Kings and Flutter Entertainment, which is the owner
30:56
Speaker 5: of FanDuel. They dominate the legal sports betting market. I mean,
31:01
Speaker 5: they have by far the biggest market share, over half
31:04
Speaker 5: of the overall market in the US, even though there's
31:08
Speaker 5: a lot of competition from the likes of MGM and Caesars,
31:12
Speaker 5: you know, fanatics and obviously even ESPN with their branded
31:18
Speaker 5: sports you know gambling service that's run by the casino
31:21
Speaker 5: company Pen Entertainment. But Banduel and DraftKings remain the leaders
31:28
Speaker 5: and that's reflected I think in their stocks as well.
31:30
Speaker 5: DraftKings shares up more than twenty percent this year, fan
31:34
Speaker 5: Duel up more than fifteen percent, I believe at last check.
31:38
Speaker 5: So they've had strong years, and I think investors are
31:41
Speaker 5: hopeful that more, you know people are going to be
31:45
Speaker 5: betting even more money on you know, legal NFL games.
31:50
Speaker 5: This year, the American Gaming Association I think had an
31:52
Speaker 5: estimate of you know, a nearly you know, ten percent
31:55
Speaker 5: increase in betting on sports to about thirty billion this year.
31:59
Speaker 2: So we haven't seen any signs that you know, sports
32:01
Speaker 2: betting is peaking. It still is growing in terms of
32:04
Speaker 2: the overall activity level.
32:07
Speaker 5: Yeah, it still is growing, and like I said, the
32:10
Speaker 5: largest two companies are increasingly grabbing market share. So that's
32:17
Speaker 5: I think one of the reasons why those two stocks
32:19
Speaker 5: have done well. But as is always the case, and
32:22
Speaker 5: you know gamblers know this firsthand as well as investors,
32:25
Speaker 5: sometimes you have to take money off the table, you know.
32:28
Speaker 5: I think DraftKings and Flutter FanDuel are both solid companies
32:32
Speaker 5: that deserve, you know, their market leading positions. But the
32:38
Speaker 5: valuations are starting to look a little stretched as well,
32:41
Speaker 5: more so for DraftKings than for Flutter. But you know,
32:44
Speaker 5: they're training at premium prices and given their run up
32:48
Speaker 5: this year, maybe they pull back a little bit. But
32:51
Speaker 5: you know, that being said, obviously we're heading into seasonally
32:55
Speaker 5: a very strong time for these companies. In addition to
32:58
Speaker 5: pro football, you have college football, you have the start
33:01
Speaker 5: of the NBA season, the Major League Baseball playoffs, So
33:05
Speaker 5: there's a lot of sports activity out there for gamblers
33:10
Speaker 5: to wager on.
33:11
Speaker 2: A couple of sports. Leagues have seen some gambling scandals
33:15
Speaker 2: in the last year. I know the NBA has, I
33:18
Speaker 2: know Major League Baseball has any signs that there might
33:22
Speaker 2: be pushback coming, either you know, legislatively or from leagues
33:26
Speaker 2: about this, or is the goose just too golden for
33:29
Speaker 2: them to do anything about it.
33:31
Speaker 5: Yeah, I think the leagues have to look at it
33:34
Speaker 5: very seriously. Anything that compromises the integrity of the game
33:39
Speaker 5: is a huge concern, and I think you do have
33:42
Speaker 5: to wonder if there are going to be legislatively some
33:47
Speaker 5: changes that could impact the industry. I mean, one thing
33:51
Speaker 5: that is interesting is that it got snuck into the
33:55
Speaker 5: one big beautiful bill, you know, Trumps stimulus plan that
33:59
Speaker 5: was by Congress that you know, there's a provision now
34:03
Speaker 5: that makes it more difficult for gamblers to deduct losses
34:08
Speaker 5: or tax purposes, and that is something that could be problematic.
34:14
Speaker 5: You know, now whether or not that causes people to
34:18
Speaker 5: say that, okay, instead of legally betting, I'm going to
34:21
Speaker 5: bet with you know, bookies underground so I don't have
34:25
Speaker 5: to report income. And you know, obviously that is one
34:29
Speaker 5: of the things that when you are betting through a
34:33
Speaker 5: legal sports app there is a record of it. You
34:36
Speaker 5: can't hide your wins and losses from the government. Usually
34:39
Speaker 5: not a problem when you're losing money, but that might
34:42
Speaker 5: be a concern now if it's no longer you know,
34:44
Speaker 5: something that gamblers can count on to be able to
34:49
Speaker 5: get some tax ad advantageous you know issues, you know,
34:53
Speaker 5: if they are actually losing money.
34:55
Speaker 2: Well, you mentioned that these two companies are gaining markets share.
34:57
Speaker 2: How came the established companies you can't compete in this
35:01
Speaker 2: space as well. I mean I see MGM bet commercials
35:03
Speaker 2: all over the place. You know, they've got casinos. Why
35:06
Speaker 2: are the traditional casino operators not on the cutting edge here?
35:10
Speaker 2: What they miss out on?
35:12
Speaker 5: Yeah, it's a great question. I mean I'm not so sure.
35:15
Speaker 5: I mean, I think, as is often the case in
35:18
Speaker 5: emerging businesses, you wind up having tech savvy companies that
35:24
Speaker 5: are able to take advantage of, you know, being a
35:29
Speaker 5: first mover. I think that maybe some of the casino
35:31
Speaker 5: companies were a little late to the game, you know,
35:35
Speaker 5: concerned about what legal online sports betting might do to
35:41
Speaker 5: their actual very profitable sports books at physical casinos. And
35:47
Speaker 5: you know, I think MGM and Caesars some of the
35:49
Speaker 5: other companies they're doing a good job. And as you mentioned,
35:52
Speaker 5: I mean, not a day goes by where you're not
35:54
Speaker 5: seeing a commercial. I guess you what, John ham now
35:57
Speaker 5: of mad Men fame for MGM is the latest. But
36:02
Speaker 5: I think that DraftKings and fan Duel, they've proven that
36:06
Speaker 5: they've been able to use that first mover advantage and
36:10
Speaker 5: run with it.
36:11
Speaker 2: Very good, Paul, appreciate you joining us. Have a great weekend.
36:16
Speaker 5: Thanks will do go Giants Go Hoop. You know that
36:22
Speaker 5: team that beat the New Year.
36:25
Speaker 2: Yeah, it's a little staticky, asked.
36:31
Speaker 5: On the Financial Exchange.
36:33
Speaker 2: Well, we'll see what the results are on Monday. In
36:36
Speaker 2: any case, thanks again, Paul, have a great weekend. That
36:39
Speaker 2: is Paul Monica from Baron's Trivia.
36:42
Speaker 6: Question we asked on the prior segment was what was
36:45
Speaker 6: Michael Jackson's song ben about it will be a rat
36:48
Speaker 6: or Killer Rat? Mike from Barnstable Masses our winner today
36:52
Speaker 6: taking home a Financial Exchange Show t shirt. Congrats to Mike,
36:56
Speaker 6: and we played trivia every day here in the Financial Exchange.
36:59
Speaker 6: See complete con test rules at Financial look Change show
37:02
Speaker 6: dot com.
37:03
Speaker 2: Michael, what else do we have to get through?
37:05
Speaker 4: Tesla is social Security? Tesla trillion dollars.
37:09
Speaker 2: So here's the thing. It's like a hugely excessive pay package.
37:14
Speaker 2: It's also really unlikely that he actually gets paid that
37:16
Speaker 2: whole thing. I went through and looked at some of
37:18
Speaker 2: the benchmarks that need to be hit, and you have
37:21
Speaker 2: things like, hey, Tesla for the last like three tranches
37:24
Speaker 2: needs to hit four hundred billion dollars in EBITDA in
37:27
Speaker 2: a twelve month period. Right now they're at like ten
37:31
Speaker 2: billion dollars. So like quite honestly have to do if
37:35
Speaker 2: they grow their revenue by forty x while he's still
37:38
Speaker 2: alive from here, fine, like pay him more. Like okay,
37:43
Speaker 2: Like it's probably worth I know it sounds crazy to
37:45
Speaker 2: say like a trillion dollars is worth it, But I
37:47
Speaker 2: don't know, like if you can actually do something that
37:50
Speaker 2: crazy pressive, Fine, have at it, Like do I think
37:54
Speaker 2: it's gonna get there? No, just because it's just a
37:57
Speaker 2: huge number. But I don't know in this case, if
38:01
Speaker 2: you really, if the board wants to do this, in
38:03
Speaker 2: the shareholders vote on it. Okay, I at it at
38:07
Speaker 2: this point, Like we've been down this road before.
38:09
Speaker 3: I'm not gonna like make a big hullabaloo about executive
38:12
Speaker 3: com It's.
38:13
Speaker 2: Just a trillion dollars. It's not like anything crazy. We're
38:17
Speaker 2: done for the day, done for the week. We'll see
38:18
Speaker 2: you next week. Bunch of inflation data coming up. Make
38:21
Speaker 2: sure you tune in