Latest / The Financial Exchange Show / Why Bad News Isn’t Stopping Stocks From Climbing

Transcript

Why Bad News Isn’t Stopping Stocks From Climbing · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
Speaker 1: is hosted by employees of the Armstrong Advisory Group, a
0:06
Speaker 1: registered investment advisor. All opinions expressed are solely those of
0:09
Speaker 1: the hosts. Do not reflect the opinions of Armstrong Advisory
0:12
Speaker 1: or anyone else. Investments can lose money. This program does
0:15
Speaker 1: not offer any specific financial or investment advice. Please consult
0:18
Speaker 1: your own financial, tax, and estate planning advisors before making
0:21
Speaker 1: any investment decisions. Armstrong Advisory and the advertisers heard on
0:24
Speaker 1: this program do not endorse each other or their services.
0:26
Speaker 1: Armstrong and Money Matters Radio do not compensate each other
0:29
Speaker 1: for referrals and are not affiliated. This is the Financial
0:35
Speaker 1: Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:39
Speaker 1: at business and financial news affecting your day, your city,
0:43
Speaker 1: your world. Stay informed and up to date about economic
0:47
Speaker 1: and market trends, plus breaking business news every day. The
0:51
Speaker 1: Financial Exchange is a proud partner of the Disabled American
0:54
Speaker 1: Veterans Department of Massachusetts. Help us support our great American
0:58
Speaker 1: heroes by visiting dav five K dot Boston and making
1:02
Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:06
Speaker 1: Zada and Mike Armstrong.
1:10
Speaker 2: It is Chuck and Mike and Tucker with you, and
1:17
Speaker 2: we got a piece of you from It's from the
1:19
Speaker 2: Boston Globe. It's a pretout globe. No, it's it's not
1:26
Speaker 2: Boston Globe. And the headline is bad news keeps coming.
1:32
Speaker 2: The stock market is still breaking records. So, uh, this
1:37
Speaker 2: is a very.
1:40
Speaker 3: Party pooper, extraordinary piece.
1:42
Speaker 2: And I think that what I have found to be
1:47
Speaker 2: useful over the last couple of months is being able
1:52
Speaker 2: to hold two distinct ideas in my head at the
1:56
Speaker 2: same time that may have some contradictory aspects to them.
2:01
Speaker 2: Number One, inflation is absolutely going up. The cost of
2:05
Speaker 2: living is going up. Paychecks are not going up fast enough,
2:08
Speaker 2: and so the average American is not feeling very good
2:12
Speaker 2: about their finances right now.
2:14
Speaker 4: Yeah, and beyond just surveys with that, ask people how
2:17
Speaker 4: they're feeling, we have some other evidence to support this fact,
2:21
Speaker 4: actual numbers on debt delinquencies and things like that, to
2:25
Speaker 4: back up the idea that, yeah, they're not they're telling
2:28
Speaker 4: us they're not feeling great about it, and there's some
2:29
Speaker 4: evidence of that.
2:30
Speaker 2: On top of that. If you want to toss some
2:32
Speaker 2: more bad news on the pile. Straight of Horror moves
2:36
Speaker 2: still closed. Indeed, Iran did let reportedly about thirty Chinese
2:42
Speaker 2: affiliated vessels out overnight, which is fascinating, and we'll get
2:45
Speaker 2: to that in just a little bit. But the Straight
2:48
Speaker 2: of Horror moves is still closed, which is not good
2:52
Speaker 2: for the intermediate term energy security of the human race. Sure,
2:59
Speaker 2: so there's some nega stuff out there, But and I
3:01
Speaker 2: did just say, butt ladies and gentlemen. What has been
3:06
Speaker 2: driving the stock market for the last three years is
3:09
Speaker 2: not you and me spending money going to Walmart or
3:14
Speaker 2: Target or cracker Barrel or five guys or any of
3:18
Speaker 2: that stuff.
3:19
Speaker 4: Nor is it the profits of oil giants and their
3:23
Speaker 4: refinery capacity.
3:24
Speaker 2: What has been driving this market since the start of
3:27
Speaker 2: twenty twenty three is artificial intelligence and the capex spending cycle.
3:33
Speaker 2: And so the two ideas that you need to hold
3:36
Speaker 2: in your head are things are pretty clearly getting worse
3:40
Speaker 2: for the average americans financial situation due to stress in
3:46
Speaker 2: the economy right now. But it also doesn't matter because
3:51
Speaker 2: that's not what was driving the stock market for the
3:55
Speaker 2: last three years anyways.
3:56
Speaker 3: And tough for me to say that bad news keeps
3:58
Speaker 3: coming when what about the good news that keeps coming.
4:02
Speaker 2: And look, I have been I've been a little divergent
4:06
Speaker 2: on this and that I'm probably one of the more
4:09
Speaker 2: negative people you will meet when it comes to the
4:12
Speaker 2: state of world energy markets.
4:15
Speaker 3: Right now.
4:16
Speaker 2: I think there is a real bleepstorm coming this summer
4:19
Speaker 2: that the world is not adequately prepared for. But some
4:25
Speaker 2: of you, you know, have been listening for a long time,
4:28
Speaker 2: you know, a month or so. Some of you might
4:30
Speaker 2: remember that in early to mid April, I said, look,
4:34
Speaker 2: if you want the positive view on this market, and
4:37
Speaker 2: this was when the S and P five hundred was
4:39
Speaker 2: sitting at about seven thousand, maybe seventy one hundred, I said,
4:43
Speaker 2: here's the positive view. Earnings expectations have continued to grow,
4:47
Speaker 2: and we've grown into some of the valuation things that
4:51
Speaker 2: have been problematic. If you thought that stocks were fairly
4:55
Speaker 2: valued last year, with the S and P five hundred
4:57
Speaker 2: trading at twenty two times forward earnings, then today, if
5:01
Speaker 2: you think that you can get to stocks being valued
5:03
Speaker 2: that same way, the S and P has a clear
5:06
Speaker 2: path to seventy five hundred and lo and behold, ladies
5:09
Speaker 2: and gentlemen, we're sitting here right now at seventy four
5:12
Speaker 2: to seventy one. So I can hold these two divergent
5:15
Speaker 2: views in my head, which are, hey, there's an energy
5:17
Speaker 2: problem that is screaming towards the human population over the
5:22
Speaker 2: next two to three months that may end up disrupting things,
5:25
Speaker 2: by the way, like I won't say that it won't.
5:27
Speaker 2: It may end up disrupting the earning story. But the
5:30
Speaker 2: other thing I can hold in my head at the
5:32
Speaker 2: same time is, despite that energy problem, the earning story
5:35
Speaker 2: largely remains intact because it's based on things that are
5:39
Speaker 2: not driven by the cost of gasoline and the price
5:44
Speaker 2: of fertilizer. Like again, these are things that don't matter
5:49
Speaker 2: for building a data center except at like the very
5:51
Speaker 2: peripheral margin when it comes to how much does it
5:54
Speaker 2: cost to drive the stuff to the data center and
5:56
Speaker 2: how much does it cost.
5:57
Speaker 3: To feed the people building it? Right, So.
6:01
Speaker 4: It comes back to something that we've repeated on the show,
6:04
Speaker 4: but it might have been a while. The economy is
6:07
Speaker 4: not the stock market, and the stock market is not
6:10
Speaker 4: the economy.
6:11
Speaker 3: No, and we tend to confuse these things.
6:15
Speaker 4: We like to use phrases like, well, you know, markets
6:18
Speaker 4: hate uncertainty, and you know there's a lot of that
6:21
Speaker 4: going on right now. There's a lot of global change
6:24
Speaker 4: going on right now. But I think contextualizing here for
6:27
Speaker 4: a minute, just how rare it is for the US
6:30
Speaker 4: and global economy to go through contraction is pretty important.
6:36
Speaker 4: And I think if there's one thing that's been proven
6:38
Speaker 4: over the last seventy years, so that the global economy
6:41
Speaker 4: is pretty resilient to shocks, and we're getting year after
6:47
Speaker 4: year now pretty big shocks to the system. And clearly
6:51
Speaker 4: the world economy has not sunk into recession, and the
6:54
Speaker 4: US economy certainly hasn't. And so again diverging these thoughts
6:58
Speaker 4: for a moment here, the economy is not the stock
7:03
Speaker 4: market and will not drive it forward.
7:05
Speaker 2: So again I'm not saying this because I'm very much
7:09
Speaker 2: not Hey, you should just feel better about how you're doing. No,
7:13
Speaker 2: I'm not saying that. I'm saying that the factors that
7:16
Speaker 2: are hurting you in your financial situation right now are
7:20
Speaker 2: not ones that are hurting the stock market, which is
7:25
Speaker 2: driven by earnings, growth and expectations. Those who have not
7:29
Speaker 2: been impacted to this point negatively, they just haven't. And
7:33
Speaker 2: it's not to say that like this isn't across the
7:36
Speaker 2: board phenomenon. When we look at data from facts at
7:40
Speaker 2: Earnings Insight, they're an aggregator of earnings data. And when
7:45
Speaker 2: we take a look at calendar year twenty twenty six
7:49
Speaker 2: as an example, you take a look at some of
7:53
Speaker 2: the areas in the economy and you say, okay, like
7:57
Speaker 2: what you know, what are what are we seeing here
8:00
Speaker 2: in terms of like, let's look at sales because I
8:02
Speaker 2: think this is a good place that you know, is
8:06
Speaker 2: informative on this side, if we will get some of
8:08
Speaker 2: the sectors of the economy that you would expect to
8:10
Speaker 2: be impacted. Real estate just as an example, their revenue
8:13
Speaker 2: growth real estate stocks expected to increase its six point
8:17
Speaker 2: six percent this year. Before the start of the year
8:19
Speaker 2: it was I'm sorry, before the start of the quarter
8:21
Speaker 2: it was seven point two, So okay, yeah, it makes
8:25
Speaker 2: sense that you know, revenue in you know, a place
8:27
Speaker 2: like real estate isn't really you know, moving consumer discretionary stocks,
8:32
Speaker 2: which again the problem with consumer discretionary it's kind of
8:35
Speaker 2: a broad category that includes anything from Amazon to Tesla
8:39
Speaker 2: to home deep ott to Booking dot Com. Consumer discretionary
8:43
Speaker 2: revenue projected to rise seven point seven percent this year
8:45
Speaker 2: compared to seven to two. So you say, okay, that's
8:47
Speaker 2: an increase, but a lot of that's being driven by
8:50
Speaker 2: like airfares going up and other stuff is you know,
8:52
Speaker 2: coming down to offset that. The real growth that's happening
8:56
Speaker 2: is in tech, It's in energy and and you know,
9:00
Speaker 2: to a certain extent, materials. That's where the growth in
9:04
Speaker 2: revenue and earnings projections is coming from right now. Communication
9:09
Speaker 2: services to a certain extent, but again kind of a
9:11
Speaker 2: messed up category that somehow includes both Meta and Verizon
9:15
Speaker 2: within it. So I find it to be a kind
9:17
Speaker 2: of useless broad category. But again, you can conceptualize this
9:23
Speaker 2: where you say, yeah, households are going to have less
9:26
Speaker 2: money to spend because of higher prices, but household spending
9:31
Speaker 2: is not the marginal driver of economic activity right now,
9:35
Speaker 2: and that's why these two things can coexist for now.
9:40
Speaker 2: You do get to a certain point where, yes, if
9:43
Speaker 2: you know, gas prices go so high and airfares due
9:46
Speaker 2: and food prices do, yeah, then you can start to
9:49
Speaker 2: see you enough drag on the consumer spending side that
9:53
Speaker 2: maybe it offsets some of the.
9:54
Speaker 3: Other growth that you're seeing.
9:58
Speaker 2: But you ain't there yet, right, It's just it's not
10:02
Speaker 2: where we are right now.
10:03
Speaker 3: So two thoughts that you got to hold together.
10:05
Speaker 2: One Yep, things have gotten harder for American households over
10:08
Speaker 2: the last couple months. Two American households. We're not driving
10:13
Speaker 2: this market for the last three years. Why would you
10:15
Speaker 2: expect them to? Now, Let's take a quick break. When
10:19
Speaker 2: we come back, let us talk China next.
10:23
Speaker 1: The Financial Exchange streams every day live on YouTube. Subscribe
10:27
Speaker 1: to our page and follow the markets all morning. Loans
10:30
Speaker 1: only here on the Financial Exchange Radio Network. Find daily
10:35
Speaker 1: interviews and full shows of the Financial Exchange on our
10:38
Speaker 1: YouTube page. Like us on YouTube and get caught up
10:41
Speaker 1: on anything and everything you might have missed. This is
10:44
Speaker 1: the Financial Exchange Radio Network.
10:51
Speaker 5: The Financial Exchange is incredibly proud to be a partner
10:55
Speaker 5: of the Disabled American Veterans Department of Massachusetts.
11:00
Speaker 3: It's nearly four hundred runners have already registered.
11:02
Speaker 5: For this year's DAV five k. The event sold out
11:05
Speaker 5: in record time last year, so head to DAV fivek
11:08
Speaker 5: dot Boston for all the information about how you can
11:10
Speaker 5: participate this November, or make a donation to support our
11:14
Speaker 5: great American heroes. Your gifts help fund free rides to
11:18
Speaker 5: medical appointments for veterans and the nation's first dav ladhousing
11:21
Speaker 5: initiative providing homes for single veterans and veteran families. Go
11:25
Speaker 5: to dav fivek dot Boston and make your donation today.
11:29
Speaker 5: That's dav five k dot Boston.
11:33
Speaker 2: President Trump has been in China for a little bit
11:35
Speaker 2: over twenty four hours now and earlier this morning concluded
11:41
Speaker 2: a one on one visit with President g that lasts
11:43
Speaker 2: for about two hours and fifteen minutes. Readouts from both
11:48
Speaker 2: sides indicated basically that, you know, the two countries want
11:53
Speaker 2: to try to, you know, move forward with you know,
11:55
Speaker 2: an attitude of stabilia.
11:57
Speaker 3: I'll quote here.
11:59
Speaker 2: Handled well, relationship between the two countries can maintain overall stability.
12:02
Speaker 2: If handled poorly, the two countries will collide or even clash,
12:05
Speaker 2: putting the entire US China relationship in an extremely dangerous situation.
12:09
Speaker 2: So again, I think my expectations for this summit, relative
12:13
Speaker 2: to some of the other ones the two have had,
12:15
Speaker 2: were relatively low. I didn't expect anything major to come
12:18
Speaker 2: out of it, and to this point it doesn't really
12:20
Speaker 2: seem like anything.
12:23
Speaker 1: Is.
12:24
Speaker 2: The two sides did agree that Iran should not control
12:29
Speaker 2: the Strait of horror moves, but there's probably differences in
12:32
Speaker 2: terms of what that means to each side. And with
12:35
Speaker 2: that in mind, I think it's very interesting to talk
12:38
Speaker 2: about what Iran announced this morning basically shortly after the
12:44
Speaker 2: g Trump meeting concluded, which is that they had let
12:48
Speaker 2: thirty Chinese vessels pass through the Strait of Horror Moves overnight.
12:54
Speaker 4: I've seen have you seen confirmed reporting that they actually
12:57
Speaker 4: I've seen four that actually successfully it's so we.
13:00
Speaker 3: Haven't seen any confirmed reporting it.
13:02
Speaker 2: So with with Iran reporting this, like you always, you know,
13:05
Speaker 2: have to take it with a grain of salt because
13:07
Speaker 2: you don't know what's actually true. And also remember that
13:11
Speaker 2: currently within the Persian Gulf, they're about a thousand ships
13:14
Speaker 2: that still remain trapped there right now. These are not
13:17
Speaker 2: all like you know, large crude carriers and things like that.
13:20
Speaker 2: It's anything from like small resupply vessels, you know, smaller
13:24
Speaker 2: cargo ships and things like that. So don't think there's
13:27
Speaker 2: just like a thousand you know, there's not like a
13:30
Speaker 2: billion barrels of crude sitting there. There is about you know,
13:32
Speaker 2: one hundred and sixty million from what you know I
13:34
Speaker 2: can gather.
13:35
Speaker 4: But the status quo here was that Iran has said
13:38
Speaker 4: that they have described a safe permit based shipping corridor
13:42
Speaker 4: through the Straight of Horn moves at the same time
13:43
Speaker 4: that the United States has said we're going to blockade
13:46
Speaker 4: any of those ships to try and navigate it, specifically ones.
13:48
Speaker 2: That are Iranian like target, you know, heading to Iran.
13:52
Speaker 2: So Iran says, hey, we're gonna let thirty ships out
13:56
Speaker 2: while President Trump and G your meeting. It then puts
14:00
Speaker 2: remember China does not have, you know, a military force
14:03
Speaker 2: in the region, you know, active on a naval mission.
14:06
Speaker 2: So the question that you then have to the US
14:08
Speaker 2: military is, okay, do we stop these ships, in which
14:13
Speaker 2: case word probably quickly gets to the Chinese delegation and
14:16
Speaker 2: g says, why do you stop the ships coming to China?
14:20
Speaker 3: Or you let them through and now you're blockade? Is
14:24
Speaker 3: it really a blockade?
14:26
Speaker 2: So this again, I don't know that you're going to
14:29
Speaker 2: see any sustained move in this direction. I think this
14:32
Speaker 2: was very clearly to send a message during this meeting.
14:36
Speaker 2: I would be kind of surprised if you saw it
14:39
Speaker 2: continue over the next couple of days.
14:42
Speaker 4: Here is it a message sent by the Chinese or
14:45
Speaker 4: the Iranians or does it not matter because to me,
14:48
Speaker 4: it's a message sent by the Chinese.
14:51
Speaker 2: I think, Look, here's the thing. The Iranian form mister
14:56
Speaker 2: Aragachi was in China a couple of days ago before this.
15:00
Speaker 2: I suspect there was some coordination here in terms of
15:04
Speaker 2: it's Look, it's a message from growth. The message from
15:06
Speaker 2: Iran is hey, you think you control the straight. No,
15:09
Speaker 2: we control the straight. The message from China is, hey,
15:13
Speaker 2: the leverage that you had over us was you know
15:16
Speaker 2: you could maybe, you know, let some of our ships
15:18
Speaker 2: go through. Well we just you know, we just did
15:21
Speaker 2: that and took that leverage away. So I don't think
15:24
Speaker 2: this solves anything in the horror Move situation. It still
15:26
Speaker 2: remains largely closed. It's certainly is great that you're getting
15:30
Speaker 2: some ships out, but again we still need an accurate
15:32
Speaker 2: count from a third party source, which we don't have.
15:36
Speaker 3: Well.
15:36
Speaker 4: But to be clear, I don't think anyone here domestically
15:39
Speaker 4: would consider a straight of Horror Moves that is only
15:43
Speaker 4: open to Chinese flagged vessels as anything resembling good news.
15:51
Speaker 2: I so there are a few different things that we
15:54
Speaker 2: need to unpack there. The first is, as long as
15:58
Speaker 2: you can get cargo goes out through the strait of
16:01
Speaker 2: horrorm moves. It doesn't really matter where they go because
16:06
Speaker 2: commodity markets are global like this, this will if you
16:11
Speaker 2: can get things out and there going to China. It's
16:13
Speaker 2: not ideal, but it'll balance at the margin.
16:15
Speaker 4: Yes, So from an economic standpoint, I agreed that if
16:19
Speaker 4: ships are just flowing to China, then you will have
16:21
Speaker 4: oil prices lower.
16:22
Speaker 3: That's not what I'm focused on. Though.
16:24
Speaker 2: The piece that quite honestly, no, like the rest of
16:29
Speaker 2: the region is not going to accept is Iran having
16:33
Speaker 2: veto power over what goes in and out, because then
16:35
Speaker 2: Iran is setting oil prices, not opek No, get like,
16:40
Speaker 2: that's very clearly what it becomes. And so the thing
16:46
Speaker 2: that needs to get sorted out is, hey, like, what
16:51
Speaker 2: is going to be allowed to and you know, to
16:53
Speaker 2: go in and out of hormones and who has the
16:55
Speaker 2: authority to determine that?
16:57
Speaker 4: And is IRN collecting revenue? Like Yeah, a lot of
17:01
Speaker 4: challenges to US military power in the region of this is.
17:04
Speaker 2: And and economic quite honestly, because in order for Ron
17:07
Speaker 2: to be able to collect any revenue through you know,
17:10
Speaker 2: reputable through means that actually allow like reputable shipping companies,
17:14
Speaker 2: not just the the sketchy ones that you know are
17:17
Speaker 2: happy to skirch sanctions and.
17:18
Speaker 3: Things like that. Gotta be Dallas.
17:20
Speaker 2: It has to be connected to the swift system basically,
17:23
Speaker 2: like it's yes, you're you know your Greek tanker companies
17:28
Speaker 2: that are you know already you know, on sanctioned lists
17:31
Speaker 2: and things like that. Fine, they're gonna pay in you know,
17:34
Speaker 2: bitcoin and whatever they can.
17:36
Speaker 3: They don't care.
17:37
Speaker 2: They're not going to pick up other legitimate cargo. The
17:39
Speaker 2: ones that do care, you know, the marisks of the
17:43
Speaker 2: world and things like that. Listen, they need to not
17:46
Speaker 2: show up on the Treasury sanctions list in order to
17:49
Speaker 2: be able to operate, and so they can't pay those
17:52
Speaker 2: tolls anyways. So I think that we go into the
17:58
Speaker 2: weekend most likely still with more questions as to what
18:03
Speaker 2: is actually going to happen with the Strait. And this
18:07
Speaker 2: is your daily reminder that every day that the Strait
18:10
Speaker 2: remains closed, another twelve million barrels of oil remains shut
18:13
Speaker 2: in on a daily basis.
18:16
Speaker 4: Yeah, the the timing of those ships moving though, is
18:19
Speaker 4: not a coincidence, not coincidental. It is very obviously a
18:25
Speaker 4: power move orchestrated by who is a fair question. But yeah,
18:29
Speaker 4: to see the things ships going to China while the
18:33
Speaker 4: President is in China on a state visit is very
18:36
Speaker 4: much a challenge to the president's power.
18:39
Speaker 2: The thing's been going on for seven seventy five days.
18:42
Speaker 2: Now you think that just randomly they're randomly They're like, hey,
18:46
Speaker 2: you know what, let's let some Chinese ships through today.
18:51
Speaker 2: It's a great day to go to Beijing. Not a
18:56
Speaker 2: coincidence is where I tend to land. Let's see, we
19:02
Speaker 2: got some inflation data over the last couple of days.
19:05
Speaker 2: It was warm to quite roasty, and so I want
19:10
Speaker 2: to take a quick break. But when we come back,
19:13
Speaker 2: the Boston Fed's head Susan Collins talking a little bit about, hey,
19:18
Speaker 2: what does this mean. Colin's not a voting member this year,
19:22
Speaker 2: so it doesn't have any influence on policy for you know,
19:25
Speaker 2: the next eight months. But what could it mean for
19:29
Speaker 2: how the Fed approaches things going forward? We'll discuss after this.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter at
19:45
Speaker 1: TFE show Breaking Business News is always first rank. Are
19:49
Speaker 1: on the Financial Exchange Radio Network till Now for Wall
19:55
Speaker 1: Street watch trecking the stocks, the data and the headlines
19:58
Speaker 1: driving markets so far into that right here on the
20:01
Speaker 1: Financial Exchange, Radio network.
20:03
Speaker 5: Markets in positive territory, being propelled by strong earnings from Cisco.
20:08
Speaker 3: Wall Street's also.
20:09
Speaker 5: Falling developments from the summit between President Trump and Chinese
20:12
Speaker 5: President Jijingping. Right now, the Dow is up about a
20:15
Speaker 5: half a percent, or two hundred and twenty six points.
20:18
Speaker 5: SMP five hundred also up about a half a percent
20:21
Speaker 5: or thirty five points, Nasdaq also up half a percent,
20:25
Speaker 5: russ A two thousand up about a third of a percent.
20:28
Speaker 5: Tenure Treasure Reel down two basis points at four point
20:31
Speaker 5: four five five percent. In Oil up about a third
20:35
Speaker 5: of a percent, rating right around one hundred and one.
20:37
Speaker 3: Dollars a barrel.
20:39
Speaker 5: Cisco rallying fourteen percent after the tech firm announcement will
20:42
Speaker 5: cut fewer than four thousand jobs this quarter, or about
20:45
Speaker 5: five percent of its workforce, so it can allocate more
20:49
Speaker 5: resources into high growth areas like AI infrastructure. Meanwhile, Vercent
20:54
Speaker 5: Media Group saw it's revenue win profit fall in the
20:57
Speaker 5: second quarter since being spun off from CONC, but they
21:01
Speaker 5: were better than analysts expected. The company also reported revenue
21:04
Speaker 5: growth across its content licensing and digital platforms that stock
21:08
Speaker 5: is jumping over eight percent. Elsewhere, Biogen shares down by
21:12
Speaker 5: four percent, despite the biopharmaceutical company announcing its experimental Alzheimer's
21:19
Speaker 5: drug will advance into a Phase three trial. Outdoor products
21:23
Speaker 5: company YETI impressed with its quarterly results, sending shares up
21:26
Speaker 5: by five percent. Ticket seller Stubub also beat expectations, sending
21:31
Speaker 5: shares surging by nineteen percent, and semiconductor equipment maker Applied
21:36
Speaker 5: Materials will report earnings after the closing bell. I'm Tucker Silva,
21:41
Speaker 5: and that is Wall Street Watch.
21:44
Speaker 3: Mike.
21:44
Speaker 2: We got a piece here in the Wall Street Journal.
21:46
Speaker 2: It's titled Boston Fed's Collins flags rate hike scenario as
21:50
Speaker 2: inflation risks tilt higher, and basically this is exactly what
21:55
Speaker 2: it sounds like. The Boston Fed President Susan Collins said that, hey,
21:59
Speaker 2: depending on how inflation moves, we might need to have
22:04
Speaker 2: higher rates if there is in fact higher and more
22:07
Speaker 2: persistent inflation. This is not really a surprise to the market,
22:11
Speaker 2: which after the last couple of days, is now pricing
22:15
Speaker 2: in the first move to be a.
22:18
Speaker 3: Rate hike rather than a rate cut.
22:20
Speaker 2: Now, when we take a look at the CME FED
22:23
Speaker 2: fund's futures, market that rate hike is being priced in
22:28
Speaker 2: in October of twenty twenty seven, so sixteen months from now,
22:32
Speaker 2: which means it's not worth the paper it's printed on, sure,
22:36
Speaker 2: because things can change a ton over that time span.
22:39
Speaker 4: I will say that when you look out at the
22:41
Speaker 4: December meeting, though, the most likely scenarios that rates aren't
22:45
Speaker 4: exactly where they are now. But yep, there is a
22:49
Speaker 4: thirty basically a one to three chance being priced in
22:52
Speaker 4: that rates could be higher than where they are right now,
22:54
Speaker 4: which basically no chance of a cut.
22:56
Speaker 3: Which is from a month ago. It's a basically complete it.
23:00
Speaker 2: A month ago there was about a thirty three percent
23:02
Speaker 2: chance of one or more cuts being priced in, and
23:06
Speaker 2: now you've got a thirty six percent chance of one
23:08
Speaker 2: or more hikes being priced in. So I do think
23:11
Speaker 2: that the market is waking up to the fact that, hey,
23:15
Speaker 2: it's kind of hard to cut interest rates When you
23:18
Speaker 2: know you're at three five on the Fed Funds rate
23:22
Speaker 2: and inflation's now heading for four it's probably not gonna,
23:27
Speaker 2: you know, pass the sniff test.
23:29
Speaker 3: May I just say that.
23:31
Speaker 4: For those that want to use this moment to compare
23:34
Speaker 4: to the dot com bubble in the late nineties and
23:36
Speaker 4: early two thousands. There sure are a lot of Don't
23:41
Speaker 4: get me wrong, There are a lot of differences in
23:43
Speaker 4: the types of companies that are going public, the revenue
23:46
Speaker 4: and profit that's being generated from the new technology. But boy,
23:50
Speaker 4: are there some you know, macro similarities. In June of
23:55
Speaker 4: nineteen ninety nine, the Federal Reserve had just come off
23:59
Speaker 4: you know, the last year on a cycle of three
24:01
Speaker 4: rate cuts.
24:02
Speaker 3: Yeah, the matrix had just come out.
24:04
Speaker 4: The matrix had just come out, and in June of
24:07
Speaker 4: nineteen ninety nine, they started saying, hey, things are getting
24:10
Speaker 4: a little bit frenzy, like green Span was describing the
24:14
Speaker 4: irrational exuberance.
24:16
Speaker 3: I think that might have come a little bit later.
24:18
Speaker 4: But the Fed then went on a rate hiking cycle
24:21
Speaker 4: in the summer and summer of nineteen ninety nine right
24:24
Speaker 4: through the spring of two thousand, bringing interest rates from
24:28
Speaker 4: five to six and a half percent yep, after just
24:31
Speaker 4: cutting rates the previous year and generally moving from a
24:36
Speaker 4: higher rate environment back in the early to mid nineties
24:40
Speaker 4: through the late nineties. Again, I know, there's a lot
24:43
Speaker 4: of differences out there, but you know, what are we
24:45
Speaker 4: really talking about in markets right now?
24:48
Speaker 3: Wow?
24:48
Speaker 4: Look at these big IPOs that we're going to see today,
24:50
Speaker 4: we'll talk about one that just went public yesterday.
24:52
Speaker 3: Did you what about the one from today? You mean today?
24:56
Speaker 3: Was it today that? Yes? So today? Did you see
24:59
Speaker 3: the number from this morning? No? I did, but they're wild. Yeah,
25:05
Speaker 3: it just again.
25:07
Speaker 4: I was talking to somebody about this yesterday and their
25:09
Speaker 4: perspective was, it's nothing like that, And I don't think
25:15
Speaker 4: that quite does it justice.
25:16
Speaker 3: It's different.
25:16
Speaker 4: It's always different this time, but there are a lot
25:19
Speaker 4: of echoes of similarities.
25:21
Speaker 3: Look, I've said this before.
25:22
Speaker 2: And it's not my own quote, so I wish I
25:24
Speaker 2: had been creative enough to come up with it. But
25:26
Speaker 2: you've got this reduction of economic risk right now. And
25:29
Speaker 2: remember economic risk does not mean that like the bad
25:32
Speaker 2: things end up materializing, but you do have you know
25:36
Speaker 2: a eventually, guys, like I'm sorry, eventually this semiconductor bubble
25:41
Speaker 2: is going to pop. It might not be for like
25:43
Speaker 2: one to three years. It might be a week or
25:45
Speaker 2: two from now. It might have already popped, like we
25:46
Speaker 2: don't know, but I can tell you that semiconductor stocks
25:49
Speaker 2: don't go up eighty percent a month for the rest
25:52
Speaker 2: of your life.
25:53
Speaker 3: Like that's that's not going to happen. Uh.
25:56
Speaker 2: So again, you've got this this tech bubble that is
26:00
Speaker 2: inflating that eventually is going to end badly. When it
26:05
Speaker 2: ends badly, I don't know, but eventually something will come
26:07
Speaker 2: of it. To this point, it's cranking, it's humming, and
26:11
Speaker 2: understand that that can go for a while. Still I'm
26:13
Speaker 2: saying it's over. I'm just saying there's a problem in tech.
26:17
Speaker 2: You got this private credit problem that is very reminiscent of,
26:21
Speaker 2: you know, the housing crisis, but we don't really know
26:23
Speaker 2: the scale. It's smaller than the housing crisis, but it
26:25
Speaker 2: still is kind of gnarly. You've got an energy shock
26:28
Speaker 2: that's reminiscent of the nineteen seventies that's going on right now.
26:32
Speaker 2: So like you've got nineteen ninety nine, nineteen seventy three,
26:37
Speaker 2: and two thousand and six all jumbled up here, and
26:41
Speaker 2: it's kind of like, well, maybe you can escape two
26:45
Speaker 2: out of the three of these, but one of them
26:46
Speaker 2: is gonna hit. Like something is going to end badly
26:50
Speaker 2: here at some point. And what Collins is raising is, look,
26:55
Speaker 2: the private credit stuff, for all the concern we've had
26:58
Speaker 2: about it, hasn't shown up in the economic data in
27:01
Speaker 2: any way shape or for it. At some point it might,
27:05
Speaker 2: but to this point it just hasn't. Like it's it's
27:07
Speaker 2: not a thing the tech bubble stuff. By and large,
27:11
Speaker 2: every time we've had questions about hey, can you know
27:13
Speaker 2: capex continue has they've been answered affirmatively right and san
27:18
Speaker 2: Kapex has continued.
27:19
Speaker 3: By the way.
27:19
Speaker 4: Using the counter argument, here, we have a incoming FED
27:23
Speaker 4: share that has been very public about wanting lower interest rates.
27:25
Speaker 4: I think that's wildly inappropriate right now. But you want
27:28
Speaker 4: an argument for the tech the tech rally continuing, what
27:32
Speaker 4: if rates come down later this year, like that'd be again,
27:36
Speaker 4: I think there's no argument for it to happen. I
27:38
Speaker 4: think it would be the wrong policy maneuver. But plenty
27:41
Speaker 4: of FED shares could have made stupid policy maneuvers.
27:44
Speaker 2: And so Collins raises the point of look the next
27:47
Speaker 2: move depending on how things resolve in the Middle East.
27:51
Speaker 2: If this is more persistent, then markets are pricing yeah,
27:55
Speaker 2: Like remember rate rate hiking cycles and rate cutting cycles
27:59
Speaker 2: that the word cycles in there for a reason.
28:02
Speaker 3: The FED never.
28:03
Speaker 2: Goes one and done. They just like it's not how
28:08
Speaker 2: they behave at least at this point. Like if you
28:10
Speaker 2: look at like you know, way in the past, like sure,
28:14
Speaker 2: it's typically okay, we're gonna do this for a meeting
28:16
Speaker 2: and another and another and will continue until we think
28:18
Speaker 2: it's appropriate. In the last few years, it's been like
28:21
Speaker 2: anywhere from like four to five meeting cycles, three to
28:24
Speaker 2: five meeting cycles, and you're good. The risk to markets
28:29
Speaker 2: is not that the FED funds rate goes from three
28:33
Speaker 2: and a half to three seven five. The risk is
28:37
Speaker 2: that the fun FED funds rate goes from three and
28:39
Speaker 2: a half to five. Right, it goes from three and
28:41
Speaker 2: a half to five and a.
28:42
Speaker 3: Half, like happened in nineteen ninety nine.
28:44
Speaker 2: Because like I've said this before, everyone gets all excited, like,
28:47
Speaker 2: ooho's the faking to cut a quarter percent?
28:49
Speaker 3: Who cares?
28:51
Speaker 2: It doesn't matter? A quarter percent rate cut in and
28:54
Speaker 2: of itself is like me like swatting a fly on
28:59
Speaker 2: my note in the summer. It doesn't matter to.
29:02
Speaker 3: The broader world.
29:04
Speaker 2: A quarter percent cut at six consecutive meetings or a
29:07
Speaker 2: quarter percent hike at six consecutive meetings, that is a
29:12
Speaker 2: meaningful shift worthy of attention. But everyone's like, oohs, the
29:17
Speaker 2: figure gonna cut.
29:17
Speaker 3: This meeting irrelevant? Who cares?
29:20
Speaker 2: Pay attention to the cycle, not to the meeting. Let's
29:23
Speaker 2: take a quick break here. When we return, let's talk
29:27
Speaker 2: about uh, you know, speaking of turning it back to
29:30
Speaker 2: nineteen ninety nine. I gotta tell you when the hottest
29:34
Speaker 2: two stocks for the last week are Intel and now Cisco. Listen,
29:39
Speaker 2: if you've been in a coma for the last twenty
29:41
Speaker 2: seven years and just woke.
29:42
Speaker 3: Up, nothing's changed.
29:44
Speaker 2: This will make you feel right at home. Quick break,
29:46
Speaker 2: We're talking Cisco when we come back.
29:49
Speaker 1: Remember, you can watch the show live every day on
29:52
Speaker 1: our YouTube page. We've got market updates and breaking business
29:56
Speaker 1: news all morning long, plus a full archive of all
29:59
Speaker 1: our shows. Con It's all there with that click of
30:01
Speaker 1: a button at YouTube dot com. Slash the Financial Exchange Show.
30:07
Speaker 1: Missed one of our shows, catch up anytime by asking
30:10
Speaker 1: your Alexis smart speaker to play the Financial Exchange. This
30:13
Speaker 1: is the Financial Exchange Radio Network.
30:30
Speaker 2: Cisco reported earnings after the bell yesterday, and the stock, well,
30:37
Speaker 2: it's it's up fourteen percent right now.
30:41
Speaker 3: It was up twenty two percent pre market, but it
30:43
Speaker 3: has pulled back.
30:44
Speaker 2: But Cisco stock is absolutely cranking at the moment and
30:50
Speaker 2: now has actually surpassed its year two thousand peak just
30:58
Speaker 2: twenty years later. It actually surpassed it last week. The
31:03
Speaker 2: big thing though, to remember on this is Cisco, like
31:08
Speaker 2: many companies, has been going through share buybacks for you know,
31:11
Speaker 2: much of the last twenty years, and so even though
31:14
Speaker 2: it reached surpassed a.
31:15
Speaker 3: Per share peak, Oh mind me just drop something you
31:21
Speaker 3: want to tell us talker big news or something like yeah,
31:25
Speaker 3: he always throws his micro.
31:28
Speaker 5: Usy fella, don't worry about me.
31:30
Speaker 3: Even though, even though.
31:34
Speaker 2: Even though Cisco has surpassed its per share peak, it
31:37
Speaker 2: still has not yet gotten to its market cap peak
31:41
Speaker 2: that it hit back in spring of two thousand.
31:44
Speaker 4: It's just a me, I mean, Cisco is being described
31:49
Speaker 4: once again as the picks and shovels of the AI
31:53
Speaker 4: industry or the plumbing of the AI industry, which is
31:56
Speaker 4: quite literally the exact terms that were being used in
31:59
Speaker 4: the nine to describe Cisco when it came.
32:01
Speaker 3: To the Internet.
32:02
Speaker 4: Now this is not saying it's wrong, but it's the
32:06
Speaker 4: same company going through the same exact description of their
32:09
Speaker 4: business model twenty six years later.
32:12
Speaker 2: This is a stock that spent the period of two
32:15
Speaker 2: thousand and one through two thy seventeen without any share
32:20
Speaker 2: price appreciation, and then spent mid twenty nineteen through mid twenty.
32:26
Speaker 3: Four with no share price appreciation.
32:29
Speaker 2: So I think again there's been some false starts here,
32:33
Speaker 2: and I think the real question is, look, is this
32:36
Speaker 2: actually a rising tide lifting all boats? Or is this
32:39
Speaker 2: Cisco being late to the game and just you know,
32:42
Speaker 2: kind of a flash in the pan.
32:43
Speaker 3: It's not going to mean much.
32:46
Speaker 4: Well, I bet they're gonna sell a whole bunch of stuff.
32:48
Speaker 4: The question is will they sell a whole bunch of
32:50
Speaker 4: stuff for a long period of time?
32:52
Speaker 3: That's what I mean.
32:52
Speaker 4: Yeah, I mean flashing the pan is the right analogy?
32:57
Speaker 4: I don't know, but I can tell you what happened
33:00
Speaker 4: in nineteen ninety nine.
33:01
Speaker 2: So again, we'll see how things go here, and we'll
33:07
Speaker 2: take it one day at a time.
33:08
Speaker 5: With them, long term care costs can reach thousands of
33:12
Speaker 5: dollars per month and can put a serious strain on
33:16
Speaker 5: your savings. The experts at Cushing and Dolan often see
33:20
Speaker 5: families caught off guard by that reality. Without the right
33:23
Speaker 5: plan in place, those costs can quickly eat through a
33:27
Speaker 5: lifetime of your hard work. But here's the shocker. Many
33:32
Speaker 5: estate plans don't protect your assets from those expenses. The
33:35
Speaker 5: right strategy may involve specific types of trust designed to
33:40
Speaker 5: help protect your assets, but timing matters. Cushing and Dolan
33:44
Speaker 5: has a brand new guide called Detour Ahead the State
33:48
Speaker 5: Planning Potholes to avoid. It breaks down some of the
33:51
Speaker 5: most common and costly mistakes people make and explains how
33:56
Speaker 5: to help protect your assets, your family, and your future.
34:00
Speaker 5: Call eight six six eight four eight five six nine
34:03
Speaker 5: to nine right now to get your free copy. Once again,
34:06
Speaker 5: the number is eight six six eight four eight five
34:10
Speaker 5: six nine nine, or you can request the guide from
34:12
Speaker 5: their website Legal exchange show dot com.
34:16
Speaker 1: The proceeding was paid for and the views expressed are
34:18
Speaker 1: solely those of Cushing and Dolan. Cushing and Dolan and
34:20
Speaker 1: or Armstrong Advisory may contact you offering legal or investment services.
34:24
Speaker 1: Cushing and Armstrong did not endorse each other and are
34:26
Speaker 1: not affiliated.
34:27
Speaker 3: P's in the Boston Globe.
34:28
Speaker 2: Mansfield becomes first town in Massachusetts to pass near total
34:32
Speaker 2: ban on data centers. Basically with the the article in
34:37
Speaker 2: the town Bylaws states Now is that only Tier one
34:42
Speaker 2: data centers facilities using up to two megawatts of electricity,
34:45
Speaker 2: which is not very much, would be allowed, and only
34:50
Speaker 2: in certain parts of the town. Tier two and three facilities,
34:54
Speaker 2: which are basically between two and ten megawatts, and more
34:56
Speaker 2: than ten megawatts, those would not be allowed anywhere in
34:59
Speaker 2: the town. So there's a couple of things that I
35:02
Speaker 2: believe to be true here. The first is, I don't
35:04
Speaker 2: think we're doing a great job of building out the
35:09
Speaker 2: support infrastructure for data centers in the form of electrical
35:14
Speaker 2: and water resources that are needed. The second piece is
35:18
Speaker 2: that the solution to this is not saying, well, we
35:22
Speaker 2: can't do that, so we're just not gonna build data
35:24
Speaker 2: centers like that. This is kind of like if back
35:28
Speaker 2: in like the nineteen twenties we had been like, hey,
35:31
Speaker 2: all these cars are taking up the roads for our horses,
35:35
Speaker 2: so we're not going to allow cars because we haven't
35:38
Speaker 2: done a good enough job, you know, widening the road
35:40
Speaker 2: so the horses can be on them too.
35:42
Speaker 3: Like it's just not.
35:47
Speaker 2: You know how Wayne Gretzky used to skate where the
35:49
Speaker 2: puck is going. Sure, this is skating analogy, This is
35:54
Speaker 2: skating towards the vending machine. It's doing what feels comfortable
35:59
Speaker 2: instead of it's going to push, you know, things forward.
36:02
Speaker 2: And look, I'm on record saying I don't want like
36:05
Speaker 2: a data center in my basement, but I would take
36:07
Speaker 2: a nuclear power plan there, but as I'll take the
36:10
Speaker 2: data center right, So but like we have a symbiotic
36:12
Speaker 2: relationship in that way. So ultimately, look, the world is
36:18
Speaker 2: going to need more data centers in the future. There
36:21
Speaker 2: is going to be more artificial intelligence usage in the future.
36:25
Speaker 2: These are incontrovertible facts. I don't think I can like
36:32
Speaker 2: have much uncertainty around these. You can either choose to
36:37
Speaker 2: build that out in a responsible and thoughtful manner, or
36:43
Speaker 2: you can do the opposite. And a ban of large
36:46
Speaker 2: data center construction is just as destructive to participating in
36:50
Speaker 2: that future as allowing too many data centers to be
36:53
Speaker 2: built willy nilly with no control over them at all.
36:57
Speaker 4: Did you see the planned Stratus project. It's been getting
37:00
Speaker 4: attention in Utah.
37:02
Speaker 3: No, what's that.
37:02
Speaker 4: It's a nine gigawatt, forty thousand acre AI data center
37:07
Speaker 4: planning one thousand acre. That's two times Manhattan. Just some
37:16
Speaker 4: comparison there, I thought would be nice. Two thousand Walmart
37:19
Speaker 4: stores combined, forty thousand acres.
37:22
Speaker 2: This is why when people talk about like orbital data centers,
37:25
Speaker 2: I'm like guys, we can launch like twenty thousand pounds into.
37:29
Speaker 3: Orbit at a time. Now, it doesn't seem like it's
37:31
Speaker 3: gonna work.
37:32
Speaker 2: Well, how are you gonna build Manhattan twenty thousand pounds
37:35
Speaker 2: at a time?
37:36
Speaker 3: Two times Manhattan? To be clear, let's start with one first.
37:40
Speaker 4: Yeah, it does seem like this is one of those
37:43
Speaker 4: moments where we need a little bit more coordination about
37:48
Speaker 4: how this is all going to work, because otherwise you're
37:50
Speaker 4: going to have a scattershot of different policies and plans
37:54
Speaker 4: location to location, and that's I don't know, it doesn't
37:58
Speaker 4: seem like a great red speak for success when it
38:01
Speaker 4: comes to AI building.
38:01
Speaker 3: Bey on this.
38:02
Speaker 2: Look, there's a lot of towns in Massachusetts that are
38:04
Speaker 2: desperate for tax revenue. What if Amazon or Microsoft said, hey,
38:09
Speaker 2: we'll give you four x the regular property tax rate
38:12
Speaker 2: if you let us build this here.
38:14
Speaker 3: So maybe that's the way it. Yeah, maybe we just
38:16
Speaker 3: ban them until they come together and say something like that.
38:18
Speaker 3: Maybe let's take a quick break out or two's coming
38:20
Speaker 3: up in a bit.