Latest / The Financial Exchange Show / Intel shares slide as costs pile up

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Intel shares slide as costs pile up · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:05
Speaker 1: Zada and Mike Armstrong, Chuck.
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Speaker 2: Mike and Tucker with you today as we wrap up
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Speaker 2: a week. Maybe it was busy, maybe it wasn't it.
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Speaker 2: It was kind of interesting. You know, there's some uh,
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Speaker 2: some fireworks in markets, but ultimately, here, here's the place
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Speaker 2: that I continue to come back to when when looking
1:29
Speaker 2: at this market so far this year, it has now
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Speaker 2: been nearly three full weeks since the start of the year,
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Speaker 2: and as we look at it, the S and P
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Speaker 2: five hundred opened the year at sixty eight seventy eight.
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Speaker 2: It's sitting here right now, it's sixty nine fourteen, which
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Speaker 2: means it's moved less than one percent over the course
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Speaker 2: of this year. It just has been, you know, kind
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Speaker 2: of chopping around. Hey, do I want to go a
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Speaker 2: little bit. Okay, here's new all time high. Okay, I'm
2:02
Speaker 2: gonna go down a couple percent because I'm nervous about Greenland. Okay,
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Speaker 2: I'm gonna go back up. I'm not nervous about it anymore.
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Speaker 2: But ultimately, this is a market that has not found
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Speaker 2: any convincing direction. And by the way, it's not just
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Speaker 2: this year that we're talking about now. The S and
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Speaker 2: P five hundred is at the same place that it
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Speaker 2: was at at the end of October. So we're at
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Speaker 2: three months now that the S and P has basically
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Speaker 2: been flat with a little bit of chop in each direction.
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Speaker 2: It's been able to get about one percent above where
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Speaker 2: it is today. It's been able to go down about
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Speaker 2: four to five percent with the November dip that we saw,
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Speaker 2: But ultimately this has been a rangebound market that hasn't
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Speaker 2: seen any meaningful move as a whole over the last
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Speaker 2: three months, despite the fact that Mike, when you look
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Speaker 2: at how much the individual constituents are moving under the surface,
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Speaker 2: there are big swings happening in either direction. In general,
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Speaker 2: what we've seen is when you look at your your
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Speaker 2: mag seven names number that have really struggled in the
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Speaker 2: last three months. Microsoft's down twelve percent, Metas down ten,
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Speaker 2: Apples down five, broad Colms down seven. You know, they've
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Speaker 2: kind of struggled there. Google being up thirty one percent
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Speaker 2: is offset that. But you've got other names that have
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Speaker 2: been just you know, rocketing up. You know, you talk
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Speaker 2: about what's going on the memory space. Micron Technology up
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Speaker 2: one hundred percent in the last three months. Caterpillar is
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Speaker 2: up twenty three percent, Lily's up thirty two. You've got
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Speaker 2: Exon Mobile up seventeen, city groups up nineteen. So there's
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Speaker 2: there's this rotation that's been happening in markets, and it's
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Speaker 2: led to things looking pretty calm on the surface, but
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Speaker 2: under the hood, things have been all over the place
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Speaker 2: in terms of what we've been seeing, Mike.
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Speaker 3: So, looking back then at the last three three months,
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Speaker 3: without getting into individual companies too much, let's talk about
3:52
Speaker 3: the broad based themes I guess that have been dominating.
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Speaker 3: Obviously recently we had this you know, greenland attention and
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Speaker 3: the threat of tariffs. Again, that one swept away pretty
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Speaker 3: quickly and was never likely to be a big issue
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Speaker 3: from the start. We've had big discussions over affordability.
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Speaker 4: And potential legal changes there.
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Speaker 3: Those ones, too, I assume, are not really contributing to
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Speaker 3: market returns in one direction or another. I think over
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Speaker 3: the last three months you've had a renewed questioning over
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Speaker 3: both the state of the economy and the potential return
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Speaker 3: on artificial intelligence. This has been you know, an echoing
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Speaker 3: question for a while. But in the labor market side
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Speaker 3: of things, we had some worsening that was going on.
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Speaker 3: Might have led to some concern about the broader state
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Speaker 3: of the economy. Recently, though, that's improved, and so we'll
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Speaker 3: see where that goes. You also had the FED kind
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Speaker 3: of pausing their interest rate setting policy during that period of.
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Speaker 4: Time, so we'll see where that renewal goes.
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Speaker 3: On the side of artificial intelligence, I can't point to
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Speaker 3: anything specifically where I say, oh, yeah, investors are now
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Speaker 3: more concerned about the return on investment, but you're seeing
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Speaker 3: it reflected in some of the the shares of companies
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Speaker 3: that dominate that space, a little bit of skepticism about
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Speaker 3: their earnings and future growth. I don't know if there's
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Speaker 3: much else I guess that I would point to to
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Speaker 3: dominate market. I guess the wild card that's also in
5:14
Speaker 3: the background there that I think people are aware of
5:17
Speaker 3: but not sure what to do with, is potential issues
5:20
Speaker 3: with the private credit market that bubbled up during the summer,
5:23
Speaker 3: and we didn't really see any repeat of that over
5:25
Speaker 3: the last three months, so I think kind of a
5:27
Speaker 3: wait and see approach has been taken with that whole
5:31
Speaker 3: sector of the market. Is there anything else in your
5:33
Speaker 3: mind that's kind of dominated the narrative for markets over
5:36
Speaker 3: the last three months.
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Speaker 2: No, I think that's the big stuff. And ultimately, I
5:42
Speaker 2: think if you look at this market, it is coherent
5:44
Speaker 2: with the idea of Hey, twenty twenty five saw you know,
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Speaker 2: tech and AI related names that you know were the
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Speaker 2: driving force. There's this talk of, hey, this market's trying
5:54
Speaker 2: to broaden out because this acceleration in the US economy
5:59
Speaker 2: and in the global economy is anticipated, and that's you know,
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Speaker 2: kind of what you're seeing is people trading trying to
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Speaker 2: participate in that. So ultimately it's going to be hey,
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Speaker 2: is that what actually pans out in the economy? Is
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Speaker 2: that what we see? And I think the question that
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Speaker 2: is is kind of being forgotten in all of this is, Okay,
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Speaker 2: if that reacceleration does happen, what happens to the bond market,
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Speaker 2: which you know tenure Treasury is at four and a
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Speaker 2: quarter and you know, somewhere in that ballpark. Hey, if
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Speaker 2: you see a reacceleration in the economy, typically that comes
6:33
Speaker 2: with higher yields, how does that balance things out in
6:36
Speaker 2: terms of the attractiveness of stocks versus fixed income? If
6:41
Speaker 2: the tenure makes another run towards five percent, you know,
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Speaker 2: in the next six months or so, Yeah, So that's
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Speaker 2: kind of weird.
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Speaker 3: I mean, a lot of things can go right, and
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Speaker 3: if you don't see continued improvement on the artificial intelligence
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Speaker 3: side of things, then none of it might matter. Well, right, Like,
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Speaker 3: we could see increasing home affordability, more homes, you know,
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Speaker 3: transactions taking place, you could see inflation died down. But
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Speaker 3: if we don't see the spending from AI beginning to
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Speaker 3: pay off this year, then all of that might not
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Speaker 3: be terribly important to markets.
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Speaker 2: Maybe, But like, here's the thing, there are some signs
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Speaker 2: that we may be, you know, seeing a little bit
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Speaker 2: of a very early innings improvement in the labor market.
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Speaker 2: The last couple of weeks of continuing claims have been
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Speaker 2: much better than anticipated. And so I think that if
7:29
Speaker 2: you look at this, the case that I don't think
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Speaker 2: anyone's expecting is this is the US economy strengthens this
7:39
Speaker 2: year on a rebounding labor market, and with that interest
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Speaker 2: rates move up, making bonds a little bit more attractive
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Speaker 2: relative to stocks. Then, you know, in terms of look
7:49
Speaker 2: you have, you know, bonds have to sell off to
7:51
Speaker 2: get there. But then once you know the ten years
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Speaker 2: at five percent, does that attract a little bit more
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Speaker 2: money in that direction? Stabilize things, but in doing so,
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Speaker 2: you have this rotation that happens away from tech into
8:03
Speaker 2: other stuff. And so couldn't the thing that you see
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Speaker 2: this year, Like, wouldn't The possibility that I just want
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Speaker 2: to put out there is what if bonds fall, you know,
8:14
Speaker 2: the Bloomberg Aggregate bond Index, what if it falls five
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Speaker 2: percent for the year, the S and P five hundred
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Speaker 2: is flat, but you know big tech and AI is
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Speaker 2: down twenty percent and everything else is up fifteen percent
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Speaker 2: within it like that, that could be what you see
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Speaker 2: this year if this pans out in that fashion. So
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Speaker 2: I just want to put that out there and say, look,
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Speaker 2: this is a possibility investors need to consider beyond just
8:41
Speaker 2: you know, hey, like Tech's gonna go up, and that's
8:44
Speaker 2: gonna be the thing. Maybe I know that's been the
8:46
Speaker 2: case the last couple of years, but there's never any
8:50
Speaker 2: sector that just wins every year year after year. I
8:54
Speaker 2: know that tech's been so dominant in the last few
8:56
Speaker 2: that it feels like that's always been the case. But
9:00
Speaker 2: if you look at the charts of the best performing sectors,
9:02
Speaker 2: you know, year by year, you generally don't have runs
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Speaker 2: that last more than three to four years before you
9:08
Speaker 2: know that either bubble pops or before something shiny and
9:12
Speaker 2: new comes along. You just you don't have, you know,
9:15
Speaker 2: one sector that outperforms for you know, two decades or
9:18
Speaker 2: something like that.
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Speaker 4: What is that, Chuck?
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Speaker 3: What is that type of chart that we'd like to
9:22
Speaker 3: look at every once in a while. Internally, It gives
9:24
Speaker 3: you the best performing sector of the market by year,
9:29
Speaker 3: and then just color shades them so you can tell
9:31
Speaker 3: that nothing really dominates year after year.
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Speaker 2: I don't know what they're they're called specifically, but if
9:38
Speaker 2: you look at like, just as an example, if you
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Speaker 2: were to look at you know, from twenty seven to
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Speaker 2: twenty nineteen, is the one that I just pulled up here.
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Speaker 2: If you look at the best performing sectors in the
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Speaker 2: S and P five hundred during that time, two thousand
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Speaker 2: and seven was energy, two thousand and eight was consumer staples,
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Speaker 2: nine was technology, twenty ten was real estate, twenty eleven
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Speaker 2: was utilities, twenty twelve was financials, twenty thirteen, consumer discretionary,
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Speaker 2: twenty fourteen, real estate twenty fifteen, Consumer discretionary, twenty sixteen, Energy,
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Speaker 2: twenty seventeen, Tech twenty eighteen, healthcare twenty nineteen Tech.
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Speaker 4: Like it wasn't no consistency.
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Speaker 2: There's no consistency. And it's not even like oh, these
10:22
Speaker 2: were you know all in like the top three or something.
10:24
Speaker 2: You know, it was you had constant variation from one
10:28
Speaker 2: to the next. The only constant that you had was
10:30
Speaker 2: that for most of you know, the twenty tens. Aside
10:33
Speaker 2: from that twenty sixteen period, energy was generally the worst
10:36
Speaker 2: performing sector. And that's why energy companies are so hesitant to,
10:40
Speaker 2: you know, drill, even if oil prices move up. Is
10:43
Speaker 2: they all remember the twenty tens and they're like, nope,
10:46
Speaker 2: not going to do that again. Let's take a quick break.
10:48
Speaker 2: When we come back, Let's talk a little bit about
10:51
Speaker 2: Intel's earnings. They reported them and they were kind of
10:55
Speaker 2: not ideal, which is why the stocks down fourteen percent today,
10:58
Speaker 2: and so we'll discuss that when we come back.
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11:34
Speaker 2: Yesterday, after the bell, Intel reported earnings and well, here's
11:42
Speaker 2: the thing. The stock right now is down fifteen and
11:46
Speaker 2: a half percent. So is it fair to say, Mike
11:49
Speaker 2: that investors did not like the quarterly earnings report from Intel?
11:53
Speaker 4: Not a lot at all.
11:56
Speaker 3: And a reminder for all of us listening right now now,
12:00
Speaker 3: if you are a US taxpayer, then congratulations, because you
12:05
Speaker 3: own ten percent of this company. The US government took
12:07
Speaker 3: a stake in it last year, so this is your
12:11
Speaker 3: money at stake.
12:12
Speaker 4: Two here.
12:14
Speaker 3: Nonetheless, the company reported a net loss of three hundred
12:17
Speaker 3: and thirty three million dollars during the last three months
12:20
Speaker 3: of the year.
12:21
Speaker 4: Wellstre was already expecting a loss.
12:23
Speaker 3: But it was under three hundred million dollars that they
12:25
Speaker 3: were anticipating. Revenue was worse than expected, too, and they
12:30
Speaker 3: didn't really have a great message on how quickly the
12:34
Speaker 3: turnaround is going to take. Quote, we are on a
12:38
Speaker 3: multi year journey. It will take time and resolve. Furthermore,
12:43
Speaker 3: you know, they admitted to I don't know. I don't
12:46
Speaker 3: know how to describe this as anything other than a mistake.
12:49
Speaker 3: So the chief financial officer pointed out that Intel hadn't
12:53
Speaker 3: anticipated a surgeon demand for CPUs from data centers serving
12:57
Speaker 3: artificial intelligence models, and so the company was purchasing equipment
13:01
Speaker 3: to produce more wafers. And my question is, how did
13:04
Speaker 3: you not see that coming. It doesn't really seem like
13:09
Speaker 3: a company that's been.
13:10
Speaker 2: Well it's been three years now, you know, it's like
13:13
Speaker 2: it's here the things that are simultaneously true. As you mentioned,
13:18
Speaker 2: Intel right now has about his cozy relationship with the
13:22
Speaker 2: US government as any company out there, which makes it
13:25
Speaker 2: one where look at a certain level, you kind of
13:28
Speaker 2: look at it and you're like, okay, if you know
13:30
Speaker 2: US taxpayers own part of it, then this is something
13:33
Speaker 2: that we said at the time. If they're struggling, the
13:36
Speaker 2: US government is likely to funnel more money to Intel
13:39
Speaker 2: in order to try to recoup that investment. Simultaneously, though,
13:45
Speaker 2: it seems like they're having a hard time actually making
13:50
Speaker 2: the stuff that they're trying to make, and the stuff
13:54
Speaker 2: that they are making again, sales are declining year over
13:57
Speaker 2: year and so it's not selling particularly well, and so
14:02
Speaker 2: you kind of just look at this and you're like,
14:03
Speaker 2: what's the plan, guys, you know, like, what are you
14:06
Speaker 2: gonna do? It's it's kind of messy, and look, turnarounds
14:11
Speaker 2: and chip making are few and far between, and they
14:14
Speaker 2: take a decade. So it's early innings on this one,
14:18
Speaker 2: But I feel like Intel's been trying to do a
14:20
Speaker 2: turnaround for the last like decade anyways, and they just
14:23
Speaker 2: haven't gotten anywhere.
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Speaker 3: I guess the nicest thing I can say is that
14:27
Speaker 3: at least the US government stake was bought at twenty
14:30
Speaker 3: dollars a share, and even with today's losses, we're nowhere
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Speaker 3: near that.
14:36
Speaker 4: It's not terribly encouraging, though.
14:38
Speaker 2: Yeah, it's uh. Again, I'm just not sure what the
14:44
Speaker 2: company is is going to be able to do. It's
14:49
Speaker 2: just unclear, and it's really sad for a company that
14:52
Speaker 2: again was the cutting edge for semiconductors for thirty years,
14:59
Speaker 2: you know, like basically from its founding until you know,
15:02
Speaker 2: the late twenty tens, and now it's kind of fallen
15:05
Speaker 2: on hard times and has lost its way here. So
15:07
Speaker 2: I don't really know what to do with this other
15:11
Speaker 2: than it's it's not great. And look, you can be
15:15
Speaker 2: as tied in politically as you want to, you know,
15:18
Speaker 2: a government, but ultimately you still got to figure out
15:20
Speaker 2: how to execute, and it's unclear from this earnings report
15:23
Speaker 2: that they know how to execute particularly well.
15:26
Speaker 3: Yeah, I remain very confused as to why our government
15:29
Speaker 3: has a stake in this company's.
15:31
Speaker 2: Talk about another semiconductor company that's had a little bit
15:34
Speaker 2: of a you know, brighter run over the last couple
15:37
Speaker 2: of years, small little firm called Nvidia China apparently telling
15:42
Speaker 2: Ali Baba and other tech companies that they can start
15:45
Speaker 2: preparing orders for in Vidia's H two hundred chip that
15:49
Speaker 2: the Trump administration authorized in Vidia to be able to
15:53
Speaker 2: sell to them back in I think it was early August.
15:57
Speaker 2: The last three to four months, China has been basically
16:00
Speaker 2: been saying, hey, thanks for you know, letting us buy them,
16:03
Speaker 2: but we're not interested anymore. And now China apparently starting
16:07
Speaker 2: to prepare some orders here. So maybe you're starting to
16:11
Speaker 2: get something happening. But we'll have to see because we've
16:16
Speaker 2: kind of seen this before from China in a number
16:18
Speaker 2: of different respects.
16:19
Speaker 3: Yeah, the Financial Times had recently reported that art suppliers
16:22
Speaker 3: for these specific chips had paused all productions, so the
16:26
Speaker 3: seemingly did come pretty quickly. It's also timed with the
16:31
Speaker 3: TikTok deal announcement. I'm wondering if those two are seemingly
16:36
Speaker 3: tied together or an indication of improving relations between the
16:41
Speaker 3: US and China. We haven't heard about rare earth materials,
16:44
Speaker 3: you know, getting siphoned off or shut down between the
16:49
Speaker 3: US and China recently, So I guess that's how I'll
16:52
Speaker 3: take it. But yeah, until these actually sell over to China,
16:56
Speaker 3: I'm not exactly sure Nvidio should be banking on the
16:59
Speaker 3: revenue because as it seems to change on a month
17:02
Speaker 3: to month basis.
17:03
Speaker 2: And you just don't know if it's like, could this
17:05
Speaker 2: just be like a one time thing, like oh, like
17:07
Speaker 2: we bought some you know, like how I don't know.
17:11
Speaker 2: And and by the way, it's also really interesting to
17:15
Speaker 2: me in terms of, you know, when you talk about
17:17
Speaker 2: the development as it relates to AI, you're starting to see,
17:21
Speaker 2: you know again, different approaches to, you know, how this
17:24
Speaker 2: is going to be done, in terms of how much
17:27
Speaker 2: computing power do you actually need? You know, is it
17:29
Speaker 2: necessary to keep ramping up spending in capex in this way?
17:33
Speaker 2: What if the whole you know, industry goes through a
17:36
Speaker 2: shift over the next year or two and it's like, okay,
17:38
Speaker 2: maybe this was kind of the swan song for this
17:41
Speaker 2: theory as to how you needed to build these things out.
17:44
Speaker 2: So I think there are a lot of questions as
17:48
Speaker 2: to where this can evolve over the next year or two.
17:52
Speaker 2: And you know, the China piece, I think we just
17:54
Speaker 2: have to look at this point. I think you know,
17:58
Speaker 2: anything that's coming from the Chinese government, and I think
18:00
Speaker 2: you have to rightly view with kind of a skeptical
18:02
Speaker 2: eye in terms of is this going to come to
18:05
Speaker 2: fruition or not, or is it just talk from them?
18:09
Speaker 3: Completely agree Maybe we've seen this game over and over again,
18:13
Speaker 3: whether it be with semiconductors or soybeans. There are oftentimes
18:17
Speaker 3: pretty big promises and announcements made, and whether or not
18:20
Speaker 3: they're followed through on is a very much open question.
18:23
Speaker 4: Clearly.
18:23
Speaker 3: Clearly, I think one thing is obvious. The Chinese leadership
18:27
Speaker 3: does not want to have to rely on Nvidia chips.
18:30
Speaker 3: They would like to develop their own homegrown industry for
18:33
Speaker 3: advanced semiconductors.
18:35
Speaker 4: And this purchase.
18:38
Speaker 3: Of the H two hundreds maybe it's enough to, you know,
18:42
Speaker 3: relieve some of the heated tense relationship between the US
18:45
Speaker 3: and China. But there's no doubt in my mind that
18:47
Speaker 3: long term, China would far prefer to be able to
18:50
Speaker 3: manufacture somewhat usable high end AI chips domestically. And you
18:58
Speaker 3: have to view this purchase as a stepping stone in
19:01
Speaker 3: that ultimate objective.
19:02
Speaker 2: Yeah, I think that's fair. Let's take a quick break here.
19:06
Speaker 2: When we return, we'll do a little bit of Wall
19:10
Speaker 2: Street Watch, and then we'll talk about what different CEOs
19:14
Speaker 2: are seeing as far as US consumer habits. Are they
19:17
Speaker 2: expecting them to strengthen in the near future. Are they
19:20
Speaker 2: seeing some signs of weakness? We will discuss that when
19:25
Speaker 2: we return.
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Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
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Speaker 1: Street Watch. A complete look at what's moving markets so
19:56
Speaker 1: far today right here on the Financial Exchange Radio.
20:00
Speaker 5: Market's wrapping up the vault a week in mixed territory
20:03
Speaker 5: as investors react to a disappointing outlook from chip maker Intel.
20:07
Speaker 5: Right now, the Dow is down over half a percent,
20:09
Speaker 5: or two hundred and seventy one points lower, SMP five
20:13
Speaker 5: hundred edging four points higher, Nasdaq up four tenths of
20:16
Speaker 5: a percent or ninety six points higher, Russell two thousand
20:19
Speaker 5: is down one percent, Tenure Treasreal is flat at four
20:22
Speaker 5: point two four to three percent, and crude oil up
20:26
Speaker 5: nearly three percent higher. Trading right around sixty one dollars
20:31
Speaker 5: a barrel. Intel tumbling fifteen percent on the heels of
20:36
Speaker 5: its earnings report, where the chip maker posted a bigger
20:39
Speaker 5: than expected loss and forecasted more losses in the current quarter.
20:43
Speaker 5: The company said it doesn't have the supply it needs
20:46
Speaker 5: four seasonal demand, and also continues to spend heavily to
20:49
Speaker 5: ramp up production of its latest chips. Sticking with the
20:52
Speaker 5: chip sector, where Nvidia shares are up one and a
20:55
Speaker 5: half percent after CNBC reported that CEO Jensen Wong plans
20:59
Speaker 5: to visit China in the coming days as questions continued
21:02
Speaker 5: amount over in Nvidia's ability to sell in the Chinese market. Meanwhile,
21:07
Speaker 5: Capital One missed expectations for just at earnings in the
21:10
Speaker 5: previous quarter and raised its credit loss provisions. The credit
21:14
Speaker 5: card company also announced it agree to buy financial technology
21:18
Speaker 5: company Brecks for just over five billion dollars in cash
21:21
Speaker 5: and stock. Capital One stock is down nearly five percent. Elsewhere,
21:25
Speaker 5: CSX shares rising four percent after the railroad operator missed
21:30
Speaker 5: quarterly profit and revenue forecast but said its results are
21:33
Speaker 5: positioned to improve this year, and Clorox reaffirmed its fiscal
21:38
Speaker 5: year Outlook and said it would buy purell maker Gojo
21:41
Speaker 5: Industries for two point two five billion dollars. Clorox shares
21:45
Speaker 5: are climbing over two percent higher. I'm Tucker Silva and
21:49
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21:52
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21:55
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22:02
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22:10
Speaker 2: Piece today in Bloomberg, CEO is wary of jittery US
22:16
Speaker 2: consumer as global tensions intensify. And I gotta tell you,
22:23
Speaker 2: I'm kind of starting to have it with you know,
22:27
Speaker 2: just all this talk about you know, oh, like we're
22:30
Speaker 2: nervous about the US consumer. All of the data and
22:34
Speaker 2: this continues to be whether you're talking credit card companies, retail,
22:37
Speaker 2: whatever it might be, continues to point to very steady
22:40
Speaker 2: eddy four to six percent spending growth year over year
22:45
Speaker 2: in the aggregate across US households. Now, we'd certainly again
22:51
Speaker 2: like the thing that's always you know in the background,
22:54
Speaker 2: here is this idea of the K shaped economy where
22:57
Speaker 2: a lot of that spending growth is likely coming from
22:59
Speaker 2: higher income households. Lower income households are struggling. This has
23:03
Speaker 2: been the case for the last couple of years now.
23:05
Speaker 2: We also have seen the savings rate tumble in the
23:08
Speaker 2: last six months to try to support this spending. So
23:10
Speaker 2: you can look at this and say, yeah, maybe there
23:13
Speaker 2: are a few things that are worth watching here, but generally,
23:17
Speaker 2: the pattern, as we've described it is consumer spending does
23:20
Speaker 2: not break in the United States unless forced to, and
23:23
Speaker 2: to this point there has been nothing that has forced
23:25
Speaker 2: US consumer spending to break.
23:28
Speaker 3: I was going to say one of the statements in
23:31
Speaker 3: here is that geopolitical uncertainty is going to cause consumers
23:37
Speaker 3: to slow down. I would argue that the only time
23:41
Speaker 3: in my lifetime where you've seen consumer spending slow down
23:45
Speaker 3: due to geopolitical items was the nine to eleven attacks
23:49
Speaker 3: on the United States.
23:52
Speaker 4: It's like the only one.
23:53
Speaker 3: So there is not a geopolitical event that I think
23:56
Speaker 3: is going to change how consumers spend for any period
24:00
Speaker 3: of time.
24:01
Speaker 4: Here's what this is.
24:02
Speaker 3: If you are the CEO of Proctor Gamble or McCormick
24:05
Speaker 3: or three M what would you rather do when talking
24:09
Speaker 3: about twenty twenty six describe a consumer that you think
24:12
Speaker 3: is going to be very loose with their wallet and
24:16
Speaker 3: be willing to spend all over the place, and then
24:18
Speaker 3: have to tell your shareholders that didn't happen quite as
24:22
Speaker 3: rosy as you anticipated, or would you like to warrn
24:25
Speaker 3: everybody that, hey, we're seeing some things that might not
24:28
Speaker 3: look all that great from the consumer. We'll see how
24:30
Speaker 3: twenty twenty six goes, and then defy all expectations that
24:33
Speaker 3: you have now lowered for your own business and prove
24:38
Speaker 3: everybody wrong by showing how good your business is. Obviously,
24:42
Speaker 3: as a CEO, you're going to take the ladder. And
24:44
Speaker 3: so I think that's all this is. And while CEOs
24:49
Speaker 3: and their earnings can tell you something interesting about what
24:52
Speaker 3: the consumer did, I don't think they have anything interesting
24:56
Speaker 3: to say about what the consumer is going to do.
24:58
Speaker 2: No, I would tend to agree. And again I I
25:04
Speaker 2: also just feel like everyone in their grandmother right now
25:07
Speaker 2: is talking about you know, K shaped economy and stretched
25:10
Speaker 2: us consumer generally, once everyone is focused on a certain
25:15
Speaker 2: idea that it's kind of played out, and so again,
25:20
Speaker 2: there are a few different ways that like this K
25:21
Speaker 2: shape can resolve if you think about it really there's
25:25
Speaker 2: four of them. The first is both sides of the
25:28
Speaker 2: K inflect up. Okay, so you know, the the bottom
25:32
Speaker 2: half starts to see improvement and the top continues to
25:35
Speaker 2: both could inflect down where hey, the bottom falls out
25:38
Speaker 2: of the labor market and the bottom of the K
25:40
Speaker 2: shape is a mess, and that in turn then ends up,
25:42
Speaker 2: you know, impacting the top because the stock market feels
25:45
Speaker 2: that that's your you know, second possibility next one is, hey,
25:50
Speaker 2: the labor market could you know, start to improve, but
25:55
Speaker 2: with that comes you know, higher wages than pressure margins,
25:59
Speaker 2: and so the bottom half of the K shape maybe
26:02
Speaker 2: starts to feel better, but the top doesn't. The other
26:05
Speaker 2: one that you could see is again kind of a
26:08
Speaker 2: continued widening of the K. But that's what everyone's talking
26:11
Speaker 2: about right now, and I just I just wonder if
26:14
Speaker 2: we're like peak affordability concern and peak K shape because
26:18
Speaker 2: it's all anyone wants to talk about right now. And
26:22
Speaker 2: usually once everyone's talking about something, it means that you're
26:26
Speaker 2: kind of over the hill and starting to move towards
26:29
Speaker 2: you know, whatever the next battle might actually be. Yeah,
26:32
Speaker 2: So just a couple of thoughts on that piece in
26:35
Speaker 2: the Wall Street Journal how banks can appease Trump on
26:38
Speaker 2: credit card rates? What does it lay out here, Mike, So.
26:42
Speaker 3: We're talking about the ten percent interest rate cap for
26:45
Speaker 3: credit cards. Yes, whether or not that is actually a
26:48
Speaker 3: serious proposal, and you know what banks hypothetically could do.
26:53
Speaker 4: To avoid that, And they lay out a bunch of things.
26:57
Speaker 3: You know, they talk about learning pieces from the pharmacy
27:00
Speaker 3: utical industry and what they did to you know, strike
27:03
Speaker 3: deals with the Trump administration for direct consumer drug pricing.
27:08
Speaker 3: I'm genuinely unsure that banks should be treating this with
27:12
Speaker 3: any degree of seriousness.
27:14
Speaker 4: I recognize that.
27:15
Speaker 3: It would be a hit to their bottom line that
27:17
Speaker 3: would be fairly significant, but does anyone actually believe this
27:21
Speaker 3: is likely to go anywhere?
27:22
Speaker 2: Well, so, the one place that it could go is
27:26
Speaker 2: in theory. Like let's say that I'm a bank, yep,
27:29
Speaker 2: bank of Chuck. I could say, you know what I
27:31
Speaker 2: am going to roll out, you know, a special credit
27:34
Speaker 2: card that has a ten percent interest rate. To qualify
27:38
Speaker 2: for it, you need to have, you know, a credit
27:41
Speaker 2: score of either you know, eight twenty or above, or
27:45
Speaker 2: your credit limit is going to be one hundred dollars.
27:48
Speaker 3: Right, which means that the only people who will apply
27:52
Speaker 3: for the I don't know who is the only credit
27:53
Speaker 3: card if you have, but there would be people that
27:55
Speaker 3: would never carry a balance.
27:56
Speaker 2: Right and they wouldn't probably apply for it simply because
28:00
Speaker 2: us you probably can't offer much of the way of
28:02
Speaker 2: perks on it unless you know you're you're able to
28:04
Speaker 2: finagle like some way to make this all work, and
28:07
Speaker 2: those types of plans take, you know, a long time
28:09
Speaker 2: to come to fruition. So I think there's a narrow
28:12
Speaker 2: path where banks could do this simply because look, they
28:16
Speaker 2: want to stay on the right side of the administration.
28:19
Speaker 2: But the idea that there's going to be some kind
28:22
Speaker 2: of broad push where you're going to have, you know,
28:25
Speaker 2: widely available credit cards at ten percent interest doesn't make
28:29
Speaker 2: sense because you know, in a world in which look,
28:33
Speaker 2: you still have enough competition amongst banks to try to
28:35
Speaker 2: offer these things and and lenders to try to offer them.
28:39
Speaker 2: There's a reason why none of like the six or
28:41
Speaker 2: seven major lenders have a credit card that is at
28:44
Speaker 2: a ten percent interest rate, and it's because it doesn't
28:48
Speaker 2: make financial sense for them.
28:49
Speaker 3: I do like Jamie Diamond's proposal on the saw that
28:52
Speaker 3: is to implement it in Massachusetts and Vermont and.
28:55
Speaker 4: See how it goes. Yeah, it's uh, it goes that.
28:59
Speaker 3: You know, you have Ernie Sanders and Elizabeth Warren really
29:01
Speaker 3: pushing for this, so I kind of enjoyed his proposal there.
29:04
Speaker 3: Let's just roll it out into those two states and
29:06
Speaker 3: see which banks decide to participate.
29:08
Speaker 2: Let's take a quick break here. When we return, we're
29:11
Speaker 2: talking about private credit.
29:12
Speaker 1: After this, there's only one show that follows Wall Street's
29:16
Speaker 1: continued volatility. Keep it here all morning long on the
29:20
Speaker 1: Financial Exchange Radio Network. This is your home for the
29:24
Speaker 1: most comprehensive coverage of the economy and the trends on
29:27
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30:09
Speaker 2: PCCNBC. Social Security has quote no bankruptcy or collapse in
30:13
Speaker 2: the cards, economists says, but benefits may change. Yes, this
30:19
Speaker 2: was new research.
30:22
Speaker 3: I don't understand what makes it new research from the
30:24
Speaker 3: Roosevelt Institute.
30:26
Speaker 4: But an economists get put together this paper.
30:29
Speaker 3: I don't know what he had to research, because nobody
30:32
Speaker 3: has been saying that the Social Security payments will just stop.
30:38
Speaker 3: They've been saying that the trust fund will run out,
30:41
Speaker 3: and that would mean that beneficiaries, if Congress were to
30:44
Speaker 3: not act, would receive around seventy four percent of their
30:48
Speaker 3: current benefits on average.
30:50
Speaker 4: Yes, so.
30:54
Speaker 2: I don't know what research had to be done.
30:56
Speaker 3: Yeah, I'm I guess I'm just confused about the research
30:59
Speaker 3: I do. I think that maybe there is some misunderstanding
31:03
Speaker 3: of how Soci Security Trust fund running out of money
31:05
Speaker 3: would work and how people would be impacted. So maybe
31:09
Speaker 3: this will get the word out. But if you weren't
31:11
Speaker 3: previously aware, that's the path if Congress does nothing by
31:15
Speaker 3: twenty thirty.
31:16
Speaker 4: Where are we now twenty thirty two?
31:17
Speaker 2: Chuck thirty three? Is I think still where we are?
31:21
Speaker 2: So we are seven years away, seven years away.
31:26
Speaker 3: Our first senators were just elected, will will be elected
31:30
Speaker 3: this year, and they will be the first Senators that
31:33
Speaker 3: will still be in office when they actually need to
31:36
Speaker 3: deal with this problem, which is exciting. I'm sure they
31:38
Speaker 3: won't talk about it on the debate on the campaign
31:41
Speaker 3: trail really at all, because it's not an issue.
31:44
Speaker 4: That anybody wants to deal with.
31:45
Speaker 3: But nonetheless, that is the current status of social security,
31:49
Speaker 3: and I think it's got a lot of folks, especially
31:52
Speaker 3: those in their mid fifties, who are pretty nervous about
31:55
Speaker 3: this for good reason. I do understand why somebody at
31:59
Speaker 3: the age fifty eight would be looking at this right
32:01
Speaker 3: now and saying, what the heck am I supposed to
32:04
Speaker 3: do with this information? What if social Security is substantially
32:08
Speaker 3: lower for me? And will my plans work? We actually
32:12
Speaker 3: have a brand new guide out this month from the
32:15
Speaker 3: Armstrong Advisory Group. It's all about both social Security and
32:18
Speaker 3: Medicare and specifically goes into how to apply for these
32:22
Speaker 3: two benefits and what exactly you need to do. So
32:25
Speaker 3: I know It doesn't exactly address how we think Congress
32:28
Speaker 3: is going to fix the problem, quite honestly, because I
32:30
Speaker 3: have no idea how Congress is going to fix the problem,
32:33
Speaker 3: but there are several paths that they could take to
32:35
Speaker 3: fix it. This guy lays out what to expect when
32:38
Speaker 3: you're getting to that filing age. So if you are
32:41
Speaker 3: approaching sixty two on Social Security or sixty five on Medicare,
32:45
Speaker 3: what sort of documents do you need to have in order?
32:47
Speaker 3: What sort of information do you need to have before
32:49
Speaker 3: you go to apply? How do the rules work if
32:51
Speaker 3: I end up taking Social Security before my retire full
32:54
Speaker 3: retirement age? What if I'm working past sixty five? What
32:57
Speaker 3: do I need to do when it comes to Medicare?
32:59
Speaker 4: All all of these.
33:00
Speaker 3: Questions can be addressed through the Armstrong Advisor Group's new
33:04
Speaker 3: guide How to Apply for Social Security and Medicare. You
33:07
Speaker 3: can get your free copy by calling eight hundred three
33:10
Speaker 3: nine three for zero zero one. You can also request
33:13
Speaker 3: it online at Armstrong Advisory dot com, but that phone
33:17
Speaker 3: number once again is eight hundred three nine three for
33:19
Speaker 3: zero zero one.
33:21
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
33:23
Speaker 1: registered investment advisor. Nothing in the ad or in any
33:26
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
33:29
Speaker 1: your own financial, tax into state planning advisors before making
33:32
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
33:35
Speaker 1: advisory services.
33:37
Speaker 2: PCENCNBC Wall Street braced for a private credit meltdown. The
33:41
Speaker 2: risk of one is rising. I don't know how you
33:45
Speaker 2: can tell if the risk of one is rising because
33:47
Speaker 2: it's a privately held debt that you can't see if
33:50
Speaker 2: anything is wrong, which is kind of the whole problem
33:53
Speaker 2: is like you don't know if there's an issue. So
33:57
Speaker 2: I think it's a risk worth monitoring. To be able
34:00
Speaker 2: to say the risk is rising, you got to bring
34:03
Speaker 2: some receipts to the table, and I don't think this
34:06
Speaker 2: CNBC piece really does so.
34:09
Speaker 3: Warren Buffett has a phrase that I think I don't
34:11
Speaker 3: know if he coined it or made it popular, but
34:14
Speaker 3: when the tide goes out, you see who's swimming naked
34:17
Speaker 3: is something that he would say. And I think what
34:20
Speaker 3: is fair to say about private credit is.
34:22
Speaker 2: That it's actually not true. They could go out with
34:23
Speaker 2: the tide too.
34:25
Speaker 3: Yeah, that's fair, But nonetheless, I think in the private
34:28
Speaker 3: credit space, it's fair to say that maybe the tide
34:32
Speaker 3: hasn't completely gone out, but very clearly because of the
34:37
Speaker 3: big bankruptcies in fraud cases that you had last summer,
34:39
Speaker 3: which there were three or four of specifically in this
34:43
Speaker 3: private credit space, whether the tider has gone out or not,
34:48
Speaker 3: literally or sorry, figuratively, with this is people, there's clearly
34:54
Speaker 3: more scrutiny.
34:55
Speaker 4: On the loans that were made.
34:57
Speaker 3: And so with that additional scrutiny, I would think that
35:03
Speaker 3: eventually you discover, hey, was this an industry that fraud
35:07
Speaker 3: was really everywhere and quite rampant, or were these some
35:10
Speaker 3: one off cases where you know, some bad loans were
35:13
Speaker 3: made to some bad businesses and they were one offs,
35:17
Speaker 3: and we see a continuation of the shift into private credit.
35:20
Speaker 3: I really don't think it's an argument of yeah, the
35:24
Speaker 3: risk is increasing or decreasing. It's we don't know what
35:27
Speaker 3: the risk is, but we probably won't have to wait
35:30
Speaker 3: forever because a whole bunch of issuers, their stocks are
35:34
Speaker 3: getting absolutely crushed, and they're all taking a look at
35:37
Speaker 3: their book and ensuring that they don't have a repeat
35:40
Speaker 3: of what we saw last summer.
35:42
Speaker 2: As Donald Rumsfeld once said, it's an unknown unknown. I
35:47
Speaker 2: think that's the best.
35:48
Speaker 3: Known unknown, knowns, known unknowns.
35:51
Speaker 2: It's it's an unknown unknown is what we're dealing with.
35:55
Speaker 2: So it could be a problem, it might not. Ultimately,
35:58
Speaker 2: it's can depend on two things. What is the breadth
36:02
Speaker 2: of the problems and what is the depth of those problems.
36:06
Speaker 2: If you have you know, a handful of companies that
36:09
Speaker 2: you know run into these these problems with these loans
36:12
Speaker 2: as as we've seen so far, Okay, it's gonna be
36:15
Speaker 2: very bad for the particular investors in those you know,
36:18
Speaker 2: particular issues, but ultimately hasn't affected the market in any
36:22
Speaker 2: meaningful way. If you have a lot of companies with
36:25
Speaker 2: some minor problems but they can renegotiate, also won't really
36:29
Speaker 2: impact the market in any meaningful way. Ultimately, it's going
36:32
Speaker 2: to be, hey, do you have a lot of companies
36:34
Speaker 2: that saw the problems that those handful saw last year.
36:38
Speaker 2: That's where it becomes something that's worth you know, paying attention,
36:41
Speaker 2: not paying attention to that's that's a problem, but we
36:44
Speaker 2: don't know right now because it's an unknown unknown.
36:48
Speaker 4: Yeah.
36:48
Speaker 3: I think that piece is important though, chat because this
36:51
Speaker 3: is a lot of people are listening right now and
36:53
Speaker 3: have no exposure to private credit whatsoever. It's typically sold
36:57
Speaker 3: to high net worth investors, pension plans, endowments, you know,
37:02
Speaker 3: family offices, insurance companies. If there are serious problems here, though,
37:08
Speaker 3: you can have a credit issue that permeates through the
37:11
Speaker 3: economy and can dry up lending in other areas that
37:15
Speaker 3: need the cash. The big one that comes to mind
37:17
Speaker 3: for me is the buildout of AI infrastructure, and without
37:20
Speaker 3: the cash coming from those areas, then something else needs
37:23
Speaker 3: to fill that gap.
37:25
Speaker 4: I don't think there's a whole.
37:26
Speaker 3: Lot of evidence though that we are reaching anything near
37:29
Speaker 3: that level of slowdown.
37:31
Speaker 2: Last week, we had reported that Time Out Market near
37:34
Speaker 2: Fenway was going to be closing later this week. It
37:40
Speaker 2: turns out that local real estate developer Samuel's and Associates
37:44
Speaker 2: announced yesterday that they were going to take over management
37:47
Speaker 2: of the food hall, just a day before it was
37:49
Speaker 2: supposed to be closing. Instead, they're going to be entering
37:51
Speaker 2: into a partnership with Alexandria Real Estate Equities to end
37:56
Speaker 2: up allowing the mix of vendors to stay open in there.
38:00
Speaker 2: They're going to license the Timeout name, so that's still
38:02
Speaker 2: going to be uh, you know, kind of on board there,
38:05
Speaker 2: and we're going to see if they, you know, can
38:08
Speaker 2: you know, kind of turn this, uh this puppy around
38:11
Speaker 2: a little bit and keep it open there. So just
38:13
Speaker 2: kind of an interesting development. We're gonna take a quick break.
38:17
Speaker 2: Hour two coming up in a bit