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Why are stocks up? Does anybody know? · The Financial Exchange Show

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  Speaker 1: and Paul Lane.
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  Speaker 2: Good morning, Welcome back to the Financial Exchange, the day
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  Speaker 2: after markets hit all time record highs. We have a
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  Speaker 2: mixed market here, with the Dow up twenty points, the
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  Speaker 2: SMP and NASDAC down by a tenth of a percent
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  Speaker 2: and nearly a half of a percent, respectively. It's Mike,
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  Speaker 2: Paul and Tucker with you on a earnings Tuesday where
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  Speaker 2: we heard from several companies. I was wondering, Paul, why
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  Speaker 2: I didn't see General Motors on my list when I
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  Speaker 2: was looking for things, But then I recalled that they
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  Speaker 2: are so tiny these days in terms of market capitalization
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  Speaker 2: that I have to click to page two of the
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  Speaker 2: earnings calendar to go find them. They are only a
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  Speaker 2: fifty billion dollar company these days, but we heard from them,
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  Speaker 2: amongst many others. Coca Cola, Phillip Morris, RTX Corporation, danaher
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  Speaker 2: Lockheed Martin Shrwhen Williams All reporting ear this morning, we'll
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  Speaker 2: hear from Texas Instruments and SAP after the bell today.
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  Speaker 2: Tomorrow though, is when the heavy hitters come in, So
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  Speaker 2: after the bell tomorrow we'll hear from Alphabet, Google's parent company, Tesla,
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  Speaker 2: IBM T mobile service now before the bell tomorrow at
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  Speaker 2: and T next Era Energy ges spinoff ge for Vernova,
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  Speaker 2: Boston Scientific. I want to make sure I turned a
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  Speaker 2: page two. Yeah, big ones here still, Thermo, Fisher, CME Group,
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  Speaker 2: Moody's will be reporting general dynamics as well. So heavy
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  Speaker 2: hitters here, but the big ones being obviously the trillion
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  Speaker 2: dollar tech I'm gonna call them tech adjacent companies Tesla
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  Speaker 2: and Alphabet who will be reporting. We also heard from
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  Speaker 2: Treasury Secretary Scott Bessent this morning or was it yesterday afternoon?
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  Speaker 2: Yesterday afternoon calling for a review of the FEDS renovation
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  Speaker 2: plans of their Washington, DC headquarters, also calling for a
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  Speaker 2: review of their general powers. We will see where that goes.
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  Speaker 2: But generally speaking, Scott Besant has been one of the
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  Speaker 2: people in the administration who have called for that FED
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  Speaker 2: independence and have urged the President to not remove or
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  Speaker 2: attempt to remove J. Powell from his role. We will
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  Speaker 2: see if he remains successful in that. Anything else catching
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  Speaker 2: your eye this morning, Paul, in terms of data companies,
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  Speaker 2: et cetera, et cetera.
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  Speaker 3: No, I think you hit the major ones.
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  Speaker 2: We will get existing home sales tomorrow. In addition to
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  Speaker 2: all the company earnings. Will have some jobless claims to
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  Speaker 2: discuss with you on Thursday. New home sales come out
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  Speaker 2: Thursday at ten am, but the big news will be earnings,
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  Speaker 2: and specifically the earnings from Google and Tesla, so we
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  Speaker 2: will see how those go. I think a couple stories
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  Speaker 2: here about markets generally have just had people kind of
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  Speaker 2: scratching their head, and especially those who were nervous about
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  Speaker 2: terriffs this year, asking you know, why does stocks keep
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  Speaker 2: going up? And we've got we've got a piece from
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  Speaker 2: the Wall Street Journal that I think is a bit disingenuous.
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  Speaker 2: Why are stocks up? Nobody knows? And my answer would be,
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  Speaker 2: we absolutely know. The reason that stocks are up is
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  Speaker 2: because the economy is growing. In spite of US hitting
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  Speaker 2: the economy with every possible degree of uncertainty you can,
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  Speaker 2: finally you can possibly find. It's called resilience. The US
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  Speaker 2: economy has proven once again to be incredibly resilient to
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  Speaker 2: all sorts of disruptions about the status quo in terms
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  Speaker 2: of where things are going to go. I know some
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  Speaker 2: people are gonna be interpreting that as well. You know, Mike,
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  Speaker 2: tariffs are all bad, but no, not necessarily. And I
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  Speaker 2: recognize that there can be benefits to the US economy
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  Speaker 2: when it comes to tariffs, but short term they are
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  Speaker 2: one thing. They are attacks on a bunch of companies production,
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  Speaker 2: and yeah, those would normally be a hit to those companies.
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  Speaker 2: The added uncertainty of what those tarifs are going to
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  Speaker 2: be and what the other countries you are imposing them
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  Speaker 2: on are going to retaliate with adds a degree of
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  Speaker 2: uncertainty to this economy that we haven't seen in several years.
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  Speaker 2: But why are stocks up well Because in spite of
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  Speaker 2: all that uncertainty, in spite of all the rapidly changing environments,
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  Speaker 2: companies have continued to grow, held onto their employees, people
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  Speaker 2: have continued to spend and basically continued to live their
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  Speaker 2: lives as though everything is normal.
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  Speaker 3: Ultimately, what it's going to come down to and check,
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  Speaker 3: and I've talked about this before that initially the reason
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  Speaker 3: why the market performance was so weak in the first
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  Speaker 3: quarter four months of the year so was because of
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  Speaker 3: the potential feared impact from tariffs.
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  Speaker 1: They have been.
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  Speaker 3: Revised so much from what they initially seemed to look like,
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  Speaker 3: which would have been if they went in in their
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  Speaker 3: current form as they were renounced in April really economically detrimental,
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  Speaker 3: but that hasn't been the case. And it seems like
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  Speaker 3: the more economic data that we parsed through, while there
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  Speaker 3: is some impacts, that's been much more muted than Wall
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  Speaker 3: Street thought. So ultimately, what the next four months or
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  Speaker 3: so holds that is really what is going to be
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  Speaker 3: of the utmost focus, because we continue to talk about
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  Speaker 3: these stories on tariff impact, and there's always that lingering
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  Speaker 3: doubt that perhaps the impacts are being delayed by the
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  Speaker 3: time you know, October or November rolls around. There's you
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  Speaker 3: really can't make that case anymore, particularly with the expiration
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  Speaker 3: of some of these trade negotiation deals in August here
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  Speaker 3: or the negotiating table perhaps stepping away from at that point,
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  Speaker 3: you won't be able to make that case, AMR. But
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  Speaker 3: resilience is a word I use three or four weeks
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  Speaker 3: to go to sum up this economy, and I would
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  Speaker 3: still continue to lean on that one as to where
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  Speaker 3: what we're seeing from a stock market performance here.
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  Speaker 2: To date, if you want to risk, in my mind,
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  Speaker 2: it's that the economy and markets have continued to do
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  Speaker 2: extraordinarily well. You now are once again staring down one
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  Speaker 2: of the most expensive stock markets in history. And look,
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  Speaker 2: go study your history when markets get as expensive as
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  Speaker 2: they are right now. And by expensive, I mean not
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  Speaker 2: just you know the now sitting at forty four thousand,
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  Speaker 2: that's never happened before. What I'm talking about is the
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  Speaker 2: price that you're paying for stocks compared to what they
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  Speaker 2: are generating in revenue or sales, or earnings or ebit that,
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  Speaker 2: whatever metric you want to choose. We're towards the top
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  Speaker 2: of historic norms by any way you measure it, and
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  Speaker 2: go and study throughout history other times that the US
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  Speaker 2: stock market has gotten nearly this expensive. It has told
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  Speaker 2: you nothing about the short term. It's told you a
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  Speaker 2: lot about the intermediate term for stocks, largely that they
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  Speaker 2: don't do well over the intermediate term. How do we
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  Speaker 2: define I would define intermediate term as five to ten years.
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  Speaker 3: Yes, I think that's a fair.
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  Speaker 2: And so I'm not the first person to point this out.
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  Speaker 2: I will not be the last person to point it out,
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  Speaker 2: but I'll continue to point it out that if you
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  Speaker 2: are buying into stocks today, what you have to understand is, yes,
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  Speaker 2: the economy, the US economy remains the shining jewel of
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  Speaker 2: the world. Yes, there are risks out there, but one
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  Speaker 2: of the big ones is that you are buying into
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  Speaker 2: a stock market that is approaching the most expensive it's
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  Speaker 2: ever been, and that could come with all sorts of consequences.
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  Speaker 3: To be fair, two ways to correct that long term
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  Speaker 3: trend that you're mentioning on the price earnings piece. One
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  Speaker 3: stock market goes down and you get back to more
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  Speaker 3: normalized level of those ratios that you're mentioning, or companies
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  Speaker 3: earn more money and grown to those valuations. Yeah, so
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  Speaker 3: important to note both sides to it. It's hard to
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  Speaker 3: no one has a crystal ball for that. But ultimately,
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  Speaker 3: when you're investing in socks, it's for that longer term.
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  Speaker 3: And you study large samples of stock market data, overwhelmingly
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  Speaker 3: they are positive over longer periods of time. But that
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  Speaker 3: doesn't promise anything. By the way, basically, you.
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  Speaker 2: Know, I know, I'm insinuating that bad performance comes over
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  Speaker 2: a ten year time period. There are plenty that are
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  Speaker 2: taking the opposite side of that trade. Kathy Wood, the
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  Speaker 2: person who runs ARK invest has spoken extensively about how
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  Speaker 2: we are on the precipice of a massive increase in
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  Speaker 2: productivity due to artificial intelligence, a huge surge and profitability
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  Speaker 2: of companies because of all of that. And I don't
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  Speaker 2: know that.
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  Speaker 3: Very self serving commentary.
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  Speaker 1: I would know.
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  Speaker 3: Whose track record is not great like Warren Buffett or
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  Speaker 3: send these other legends out there.
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  Speaker 2: But I mean, I think it's important to play both
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  Speaker 2: sides of that, right. Is it possible that instead of
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  Speaker 2: a poor market performance we get a historic surge and
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  Speaker 2: profits that justifies the price people are paying for stocks
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  Speaker 2: right now? Sure, anything's possible. Let's take a quick break
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  Speaker 2: Well, Paul, immediately after I got done calling the American
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  Speaker 2: economy resilient, MarketWatch has a piece out telling me I'm wrong.
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  Speaker 2: They're calling us ol so one. They're largely calling out
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  Speaker 2: executives who have been describing the American consumer as resilient,
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  Speaker 2: which we didn't directly do, but I think we alluded
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  Speaker 2: to that.
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  Speaker 3: I've used it, so throw me in the camp.
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  Speaker 2: Yeah, the US economy is the consumer, and the consumer
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  Speaker 2: has kept spending, and I'm taking.
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  Speaker 3: My cues from those executives. They have a lot of
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  Speaker 3: data that I don't have access to.
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  Speaker 2: So quote consumers remained resilient with healthy spending and asset
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  Speaker 2: quality and commercial borrower utilization rates rose. That's from Bank
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  Speaker 2: from America CEO Brian moynihan. City Group CEO Jane Frazier said,
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  Speaker 2: quote proven to be more resilient than most of us anticipated.
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  Speaker 2: But we aren't dropping our guard as we begin the
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  Speaker 2: second half of this year, You've seen this echoed all
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  Speaker 2: over the place. When you go ask consumers. However, they're
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  Speaker 2: not feeling as resilient as they're being described by banking ceo.
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  Speaker 2: So what do you suppose the mix up is here?
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  Speaker 3: Oh, Ultimately, what it comes down to is that I
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  Speaker 3: don't feel that this piece does a good job of
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  Speaker 3: making the counter argument against their issues that they have
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  Speaker 3: with us using the term resiliency because they didn't come
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  Speaker 3: with any hard economic data to back up their point.
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  Speaker 3: All they lean on to your point, Mike, is survey
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  Speaker 3: results where you know, if you look at consumer sentiment,
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  Speaker 3: it reached a five month high by the University of
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  Speaker 3: Michigan's Ongoing Gage, but it was well below historical averages
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  Speaker 3: they're quoted as saying in this piece, and Mark watch.
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  Speaker 3: What it comes down to, in my view is that
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  Speaker 3: you have a portion of the country that is in
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  Speaker 3: that middle income range where they've been negatively impacted by
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  Speaker 3: inflation over the course of the last four or five years,
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  Speaker 3: and I think that's continued to lead to lingering negative
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  Speaker 3: sentiment about the economy because their wage growth has not
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  Speaker 3: kept up with inflation and I'm in agreement that it
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  Speaker 3: is that is an area of concern, but that still
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  Speaker 3: doesn't negate the fact that the overall US economy from
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  Speaker 3: a consumer standpoint, isn't showing economic signs of waking. This
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  Speaker 3: is more sentiment driven their argument than telling me that
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  Speaker 3: US retail sales or other areas of spending are declining.
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  Speaker 2: Yeah, here's the data they relied upon. A record share
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  Speaker 2: of Americans. In twenty twenty four, more than a quarter
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  Speaker 2: of Americans said that they're spending exceeded their income. That's
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  Speaker 2: obviously not a healthy sign for a resilient consumer. That's
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  Speaker 2: way worse than in other times over the last few years.
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  Speaker 2: And this was a poll of more than twenty thousand people.
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  Speaker 2: The number of people who said they had no problems
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  Speaker 2: with costs fell to forty four percent in twenty twenty four.
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  Speaker 2: That was at fifty four percent in twenty twenty one,
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  Speaker 2: and it's the first substantial drop recorded for that question
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  Speaker 2: since the survey began No. Nine. So that's the data
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  Speaker 2: they're relying upon, and I think they're right, and it
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  Speaker 2: comes back to this I think kind of distasteful truth,
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  Speaker 2: But it is true that half of the total spending
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  Speaker 2: in this country that is coming from the top ten
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  Speaker 2: percent of income earners, and so you can still have
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  Speaker 2: what I would describe as a resilient economy while nearly
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  Speaker 2: half of people are saying things aren't looking so good
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  Speaker 2: for me.
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  Speaker 3: That's statistic to me of any that I've heard this year,
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  Speaker 3: blew me away the most. That ten percent of the
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  Speaker 3: population could account for half the spending. I almost need
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  Speaker 3: to say it twice sometimes because it is just so
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  Speaker 3: incredibly just a narrow sect that can really make up
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  Speaker 3: a huge market share.
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  Speaker 2: Well, it all reminds me of a conversation we have
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  Speaker 2: with our clients almost every time we start, especially with
• 15:31
  Speaker 2: somebody new. It's a very simple phrase, you need a budget,
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  Speaker 2: And I do think that people kind of get confused
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  Speaker 2: about budgeting. Right when I was talking to somebody just
• 15:40
  Speaker 2: last week about budgeting, They're like, oh, yeah, we don't
• 15:43
  Speaker 2: have a budget, and we dug in a little bit,
• 15:46
  Speaker 2: and what they were thinking in their mind was like, Okay, yeah,
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  Speaker 2: this is how much we budget out for this spending
• 15:52
  Speaker 2: category every month, and we hold ourselves to that and
• 15:54
  Speaker 2: report on it every month. But then we dug it in,
• 15:56
  Speaker 2: it was like, well, how much do you spend on
• 15:58
  Speaker 2: these categories, and they were able to tell me very key,
• 16:00
  Speaker 2: quickly and easily, like, oh, yeah, we spend about this
• 16:02
  Speaker 2: much on groceries every month, we spend this much on
• 16:05
  Speaker 2: this that the other end. And my answer is, guys,
• 16:07
  Speaker 2: you did your budget right. Like, the step one in
• 16:11
  Speaker 2: this process seems really, I think scary and challenging for
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  Speaker 2: a lot of folks because it's the idea of living
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  Speaker 2: on a budget, which I would strongly encourage people to do.
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  Speaker 2: But honestly, the step one is just understanding what your
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  Speaker 2: budget is before you even get into the tracking of it.
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  Speaker 2: And you know, people have the old envelope approach right like, Okay,
• 16:31
  Speaker 2: I've got one hundred bucks for groceries this week, so
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  Speaker 2: how am I going to spread that out? Here's the envelope.
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  Speaker 2: But step one, when it comes to any financial plan
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  Speaker 2: and getting yourself on the right path is developing that
• 16:42
  Speaker 2: current spending budget. Best way to do it go look
• 16:45
  Speaker 2: at what you spent previously. Don't set yourself some aspirational
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  Speaker 2: goal because as Paul knows, he doesn't know what groceries cost,
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  Speaker 2: he's not going to be good at determining that budget
• 16:54
  Speaker 2: for what the garlic is going to cost him next month. Instead,
• 16:57
  Speaker 2: take a look at what you've already done. If you
• 16:59
  Speaker 2: are working on getting yourself on that right financial track,
• 17:02
  Speaker 2: maybe you're staring down a big expense coming up, and
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  Speaker 2: maybe it's a drop an income. Maybe you've got the
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  Speaker 2: kids going to college or retirement staring you down. You
• 17:09
  Speaker 2: need to start with that budget, and if you need
• 17:11
  Speaker 2: help with how to look at all that stuff, call
• 17:14
  Speaker 2: the folks at Armstrong Advisory Group. As you can tell,
• 17:16
  Speaker 2: it's a lot of what we do here during our
• 17:19
  Speaker 2: day job is working with those clients and developing those
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  Speaker 2: budgets and working within their means. The numbers eight hundred
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  Speaker 2: three nine three for zero zero one. That's for the
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  Speaker 2: Armstrong Advisory Group. Let us help you along your financial journey.
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  Speaker 2: Eight hundred three nine three four zero zero one.
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• 17:52
  Speaker 2: Paul Banks are finally getting some data on those buy
• 17:56
  Speaker 2: now pay later purchases. I was buying a pair of
• 17:58
  Speaker 2: uh a pair of shoes yesterday and a firm was
• 18:02
  Speaker 2: the second option for paying for my new dress shoes
• 18:07
  Speaker 2: that I had to purchase. I did not use a firm.
• 18:09
  Speaker 2: I ended up just paying on my credit card. But
• 18:12
  Speaker 2: it has made its way into everywhere, and for a
• 18:15
  Speaker 2: long time, there was no real credit monitoring of those
• 18:18
  Speaker 2: micro loans that were being made.
• 18:19
  Speaker 3: Yeah, well, we're gonna see Mike later this year. I
• 18:21
  Speaker 3: FIKO is going to roll out a new scoring model
• 18:24
  Speaker 3: that incorporates these buy now, play later technologies that previously
• 18:28
  Speaker 3: would not be tracked on your credit score from any
• 18:32
  Speaker 3: of the three major bureaus that you might have access
• 18:35
  Speaker 3: to the information on It seems like the lenders, the
• 18:39
  Speaker 3: JP Morgan Chases and others out there, they're going to
• 18:42
  Speaker 3: use this score as a bit of a consideration in
• 18:46
  Speaker 3: underwriting when they're giving out when they're lending out money.
• 18:49
  Speaker 3: But it's not something that is going to take over
• 18:52
  Speaker 3: the old system. It's kind of an additional auxiliary product
• 18:57
  Speaker 3: that they're offering to make sure that they're capturing that
• 18:59
  Speaker 3: net of debt.
• 19:00
  Speaker 2: The reality is, I don't think they have any idea
• 19:02
  Speaker 2: how to use the data. No, right, Like, if somebody
• 19:05
  Speaker 2: has ten micro buy now pay later loans out but
• 19:10
  Speaker 2: they've never defaulted on a single one, what does that
• 19:12
  Speaker 2: indicate about the consumer? I don't really know the answer
• 19:15
  Speaker 2: to that question.
• 19:16
  Speaker 3: Well, will they be able to gauge the size? I
• 19:18
  Speaker 3: would imagine so?
• 19:19
  Speaker 2: Right?
• 19:19
  Speaker 3: Yeah, So, I mean if it's it's a huge balance
• 19:23
  Speaker 3: that would add to your credit access where you're over
• 19:26
  Speaker 3: thirty five or forty percent, then that's concerning quick break.
• 19:28
  Speaker 2: Wall Street watches.
• 19:29
  Speaker 5: Next, bringing the latest financial news straight to your radio.
• 19:44
  Speaker 6: Every day. It's the Financial Exchange on the Financial Exchange
• 19:48
  Speaker 6: Radio Network. Time now for Wall Street Watch a complete
• 19:53
  Speaker 6: look at what's moving markets so far today, right here
• 19:56
  Speaker 6: on the Financial Exchange Radio Network.
• 19:59
  Speaker 4: One day after the S and P five hundred and
• 20:01
  Speaker 4: Nasdaq closed with new record highs markets today in mixed
• 20:05
  Speaker 4: territory is trader sift through a new batch of second
• 20:07
  Speaker 4: quarter earnings, including from General Motors, Coca Cola, in Lockheed Martin.
• 20:13
  Speaker 4: Right now, the Dow is pretty flat, up forty one points,
• 20:17
  Speaker 4: SMP five hundred is down by merely six points. NASDAK
• 20:21
  Speaker 4: is off by four tenths of one percent, or eighty
• 20:23
  Speaker 4: three points. RUSS two thousand is off by nearly four
• 20:26
  Speaker 4: tenths of one percent. Eight point excuse me, up four
• 20:30
  Speaker 4: tenths of one percent. Ten year treasure reeled is down
• 20:33
  Speaker 4: three basis points at four point three four percent. In
• 20:36
  Speaker 4: crude oil down one and a half percent lower today,
• 20:38
  Speaker 4: trading just above sixty six dollars a barrel. General Motors
• 20:42
  Speaker 4: down by about seven percent after the automaker saw its
• 20:45
  Speaker 4: net income shrink thirty five percent in the second quarter
• 20:48
  Speaker 4: despite strong sales, as auto tariffs weighed on its results.
• 20:53
  Speaker 4: Tariffs hit GMS operating income by one point one billion
• 20:57
  Speaker 4: dollars in the second quarter. Meanwhile, Coca Cola reported quarterly
• 21:01
  Speaker 4: earning xan revenue that beat analysts expectations as strong demand
• 21:05
  Speaker 4: in Europe offset weaker volume in other markets. The beverage
• 21:09
  Speaker 4: giant also said it plans to launch a new coke
• 21:11
  Speaker 4: product for American consumers made with US cane sugar this fall.
• 21:15
  Speaker 4: Coke stock is down by one percent. Elsewhere, Lockheed Martin
• 21:20
  Speaker 4: Scher is sinking seven percent after the defense manufacturers quarterly
• 21:24
  Speaker 4: revenue fell short of forecasts. Last hour, I mentioned open
• 21:28
  Speaker 4: Door Technologies as the latest meme stock, but we have
• 21:31
  Speaker 4: a new one to report this morning, Coal Sharer is
• 21:34
  Speaker 4: more than doubled amid a new influx of mentions by
• 21:38
  Speaker 4: retail traders on social media. Shares of the retailer jumped
• 21:42
  Speaker 4: as much as one hundred and five percent in early trading,
• 21:45
  Speaker 4: the largest one day jump on record, bringing the stock
• 21:48
  Speaker 4: two levels last seen nearly a year ago. Right now,
• 21:52
  Speaker 4: Coal shares are up thirty five percent. Open Door is
• 21:55
  Speaker 4: now down by two percent, so very vulatble trading on
• 21:59
  Speaker 4: both fronts there, and after today's closing bell, we'll see
• 22:03
  Speaker 4: more earnings from SAP, Texas Instruments and Intuitive Surgical. I'm
• 22:08
  Speaker 4: Tucker Silva and that is Wall Street Watch. And the
• 22:10
  Speaker 4: previous segment we asked the trivia question what year did
• 22:14
  Speaker 4: David Spade join Saturday Night Live? That will be nineteen ninety.
• 22:18
  Speaker 4: Bruce from Coventry to Rhode Island is our winner today
• 22:21
  Speaker 4: taking on the Financial Exchange Show. Teacher, congrats to Bruce,
• 22:25
  Speaker 4: and we play trivia every day here in the Financial Exchange.
• 22:28
  Speaker 4: See complete contest rules at Financial Exchange Show dot com.
• 22:32
  Speaker 2: I was guessing ninety three, all right, I was close.
• 22:36
  Speaker 2: I recognize that memestock traders probably have a different investment
• 22:39
  Speaker 2: strategy than I do personally. But you have to think
• 22:43
  Speaker 2: about it these days like open Door. Okay, I have
• 22:45
  Speaker 2: to go look up what they do too. But Coles,
• 22:48
  Speaker 2: there are probably people who are betting on Colestock right
• 22:51
  Speaker 2: now because the memestock craze who have never stepped foot
• 22:55
  Speaker 2: inside of Cole's. Well, if you talk to Tucker, there's
• 22:58
  Speaker 2: a lot of people that probably the.
• 23:02
  Speaker 3: Favorite department store everything but.
• 23:06
  Speaker 2: Tucker's entire outfit is Coals. Right falls the.
• 23:10
  Speaker 3: Game stock thing, I guess probably more of those investors
• 23:13
  Speaker 3: had stepped into game Stop because it was the nostalogia
• 23:16
  Speaker 3: sell that you had so many people investing.
• 23:19
  Speaker 2: Yeah in those just wild to think about, right, it
• 23:22
  Speaker 2: is bidding up a company stock that you Although it
• 23:25
  Speaker 2: shouldn't surprise me because how many emails. I have gotten
• 23:28
  Speaker 2: so many calls and emails from people who are like, oh,
• 23:30
  Speaker 2: they were just talking about this company on whatever beat,
• 23:34
  Speaker 2: Fox Business, the NBC, Bloomberg. Here's the ticker symbol. Can
• 23:37
  Speaker 2: you tell me? Can you tell me about it? And
• 23:39
  Speaker 2: I'll pause right there, and I said, Okay, so they're
• 23:41
  Speaker 2: saying that it's going to go through the roof, Can
• 23:43
  Speaker 2: you tell me what they do. No, can you tell
• 23:48
  Speaker 2: me what the ticker symbol stands for the company's name? No,
• 23:54
  Speaker 2: probably not something you should consider investing in. But I
• 23:58
  Speaker 2: got to each their own, I said, But but I
• 24:00
  Speaker 2: literally genuinely have had those types of conversations. I'm sure
• 24:02
  Speaker 2: you have too, because people plug into c NBC all
• 24:05
  Speaker 2: day or whatever, you know, whatever the difference tool is,
• 24:08
  Speaker 2: and they just talk about the symbol and the you know,
• 24:11
  Speaker 2: somebody will go in and look at the chart and
• 24:13
  Speaker 2: the candlesticks and be like, Wow, this is about to
• 24:14
  Speaker 2: break through. You know, you get ready, folks, and genuinely
• 24:19
  Speaker 2: people will buy it without having any idea what the
• 24:23
  Speaker 2: company is, what sector it operates in, what even the
• 24:26
  Speaker 2: name of the company is. So yeah, I guess, I
• 24:29
  Speaker 2: guess different investment strategies work for different people. Alphabet is
• 24:33
  Speaker 2: going to be reporting earnings tomorrow after the bell and
• 24:37
  Speaker 2: been making a lot of news over the course of
• 24:41
  Speaker 2: this year due to anti trust concerns. I guess that
• 24:43
  Speaker 2: really started last year with these lawsuits and the guilty verdicts.
• 24:47
  Speaker 2: But it is an uncertain future in terms of what
• 24:50
  Speaker 2: Alphabet parent Google parent company Alphabet ultimately looks like, what
• 24:54
  Speaker 2: sort of punishments they face. But I think investors are
• 24:58
  Speaker 2: once again realizing that, in spite of all this, this remains,
• 25:04
  Speaker 2: if you exclude Saudi A Ramco for a moment here
• 25:06
  Speaker 2: the most profitable company in the world. Important to just
• 25:10
  Speaker 2: focus on that for a moment. With if the US
• 25:13
  Speaker 2: stock market or if if business is a game, Google one.
• 25:18
  Speaker 3: With by far and away the best business model, you know,
• 25:21
  Speaker 3: compared to Saudi A Ramco, much easier business radel to
• 25:26
  Speaker 3: run from an operating margin standpoint.
• 25:28
  Speaker 2: Look, I'm not complementing everything that Google does. They have.
• 25:32
  Speaker 2: You know, their whole phrase when they started was don't
• 25:34
  Speaker 2: be evil. And this is a company that knowingly took
• 25:37
  Speaker 2: that phrase and said, yeah, maybe we'll just get rid
• 25:39
  Speaker 2: of that from now on, and has done all sorts
• 25:42
  Speaker 2: of things that you know, could be considered or perceived
• 25:44
  Speaker 2: as evil. But if if this whole business environment is
• 25:49
  Speaker 2: a game of monopoly, Google won it. Let's just call
• 25:51
  Speaker 2: it what it is. The reason they're being broken up
• 25:53
  Speaker 2: is because they are damn good at business.
• 25:56
  Speaker 3: Yeah, n market share of the global search market and
• 26:00
  Speaker 3: a very profitable AD revenue business that accounts for fifty
• 26:05
  Speaker 3: percent of their total revenue, which is anticipated on a
• 26:08
  Speaker 3: quarterly basis to come in around eighty billion dollars. Extrapolate
• 26:12
  Speaker 3: that out annually. Not to say that they make the
• 26:15
  Speaker 3: same revenue every requorter, but you're talking about three hundred
• 26:17
  Speaker 3: and twenty billion dollars of annual.
• 26:19
  Speaker 2: Revenue, not not too shabby, big number, with.
• 26:22
  Speaker 3: Not a lot of expenses behind it. It's a tremendous business.
• 26:26
  Speaker 3: But ultimately what it comes down to is these antitrust
• 26:28
  Speaker 3: concerns have Google surprisingly priced relatively cheaply based on their
• 26:34
  Speaker 3: historical averages. It's trading at about eighteen times estimated earnings.
• 26:38
  Speaker 3: That's a discount to its ten year average. If you
• 26:41
  Speaker 3: look at some other companies out there, You've got Microsoft
• 26:44
  Speaker 3: that trades at thirty three times on looking at that
• 26:47
  Speaker 3: same metric. And they have a lot of areas where
• 26:50
  Speaker 3: a concern other than the anti trust stuff we talked
• 26:53
  Speaker 3: about is their dominance in search is based on Google
• 26:57
  Speaker 3: being the front door or to the Internet in terms
• 27:01
  Speaker 3: of when people are looking for information on certain things.
• 27:04
  Speaker 3: That market share is still incredibly dominant. However, some of
• 27:08
  Speaker 3: their search numbers have declined a little bit, like you mentioned,
• 27:10
  Speaker 3: with the emergence of AI and other chatbots out there,
• 27:14
  Speaker 3: like chat GPT for example.
• 27:16
  Speaker 2: Yeah, I mean, if you really believe in the dominance
• 27:20
  Speaker 2: of AI to be the trend of the next decade,
• 27:22
  Speaker 2: Google's doing their best and they're trying to figure it
• 27:25
  Speaker 2: out and doing pretty well. I mean, their system want
• 27:29
  Speaker 2: to gold medal in the International Math Olympiad recently, which
• 27:32
  Speaker 2: we were going to cover. But while that sounds silly,
• 27:35
  Speaker 2: one of the main things that AI has kind of
• 27:38
  Speaker 2: sucked at is doing math, and so this is actually
• 27:39
  Speaker 2: pretty impressive. But yeah, there are a few companies that
• 27:44
  Speaker 2: I can look at today and say, okay, currently very dominant,
• 27:49
  Speaker 2: but faces a significant threat. If AI is truly successful,
• 27:54
  Speaker 2: if AI is genuinely, really really successful, then why do
• 28:00
  Speaker 2: I need to scroll through pages of pages of Google
• 28:03
  Speaker 2: Search where they make a lot of their revenue. So
• 28:05
  Speaker 2: it's an open question, I'll admit, but it's tough to
• 28:08
  Speaker 2: bet against how they're going to shape.
• 28:10
  Speaker 3: It's hard because they've got you know, they have their
• 28:12
  Speaker 3: own AI capabilities. And then also they're benefiting, not like
• 28:16
  Speaker 3: this would make up for all the loss of AD revenue,
• 28:19
  Speaker 3: but they also are benefiting on the clouds service side
• 28:21
  Speaker 3: of things, as there's additional computing capacity needed for these
• 28:24
  Speaker 3: AI technologies. They're a player in that space too.
• 28:28
  Speaker 2: But it is a question. Look, I mean, if you
• 28:30
  Speaker 2: go take a look at the dominant tech companies of
• 28:32
  Speaker 2: nineteen ninety five, you're looking at Microsoft, Oracle, IBM, Intel,
• 28:39
  Speaker 2: a bunch of companies that are not relevant today. And
• 28:42
  Speaker 2: a lot has been written about how it's different this time,
• 28:45
  Speaker 2: how today's tech companies have dug such a huge moat,
• 28:49
  Speaker 2: have gobbled up every competitor out there, that they can't
• 28:52
  Speaker 2: be disrupted in the same way. Here's the test, right,
• 28:56
  Speaker 2: will today's giant tech behemoths Amazon, Apple, Alphabet now in
• 29:01
  Speaker 2: video be the giant tech Mahaemas thirty years from now,
• 29:04
  Speaker 2: or will it be new startups that nobody's even thinking
• 29:07
  Speaker 2: about yet. Those are big questions that I don't think
• 29:09
  Speaker 2: anybody's got a real good answer to. Let's take a
• 29:12
  Speaker 2: quick break when we come back, bit a stack roulette
• 29:14
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• 29:20
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• 29:23
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• 30:24
  Speaker 2: Time for a bit of stack roulette, Paul, What do
• 30:27
  Speaker 2: you have for us?
• 30:29
  Speaker 3: California back in I believe it was last April past
• 30:34
  Speaker 3: a increase to minimum wage in this their state, up
• 30:39
  Speaker 3: from sixteen dollars to twenty dollars for fast food locations
• 30:43
  Speaker 3: that had more than sixty locations.
• 30:46
  Speaker 2: And I love this story. Thank you so much for
• 30:49
  Speaker 2: choosing I'm just gonna interrupt you for a moment, because
• 30:51
  Speaker 2: when we were covering this story, I can't tell you
• 30:54
  Speaker 2: how excited I was, not for the people of California,
• 30:57
  Speaker 2: who I was quite certain would be harmed by this, Paul.
• 31:00
  Speaker 2: But because very rarely in the subject of economics do
• 31:05
  Speaker 2: you get the opportunity to try something out that is
• 31:08
  Speaker 2: so glaringly stupid, confine it to one geographic area, and
• 31:15
  Speaker 2: then look at the results like it just doesn't happen
• 31:17
  Speaker 2: that way. Most of economics is theoretical, like, Okay, what
• 31:20
  Speaker 2: would happen if we had universal basic income and everybody
• 31:23
  Speaker 2: got one thousand dollars a month hypothetically? Or how would
• 31:26
  Speaker 2: a four day work week work? You know, how does
• 31:29
  Speaker 2: this all play out? Well, we start are starting to
• 31:31
  Speaker 2: get results on the twenty dollars an hour minimum wage,
• 31:34
  Speaker 2: which again is not a state wide minimum wage. It
• 31:37
  Speaker 2: is a state wide minimum wage specifically if you work
• 31:40
  Speaker 2: in a fast food restaurant, not fast casual, not sit down,
• 31:44
  Speaker 2: not TGA Fridays fast food. So what do we find, Paul?
• 31:48
  Speaker 3: What we found was that we had eighteen thousand fewer
• 31:52
  Speaker 3: fast food jobs than if the law had ever been passed.
• 31:54
  Speaker 3: According to this recent study, they saw that the law
• 31:59
  Speaker 3: raised wages is about eight percent relative to the fast
• 32:02
  Speaker 3: food sector elsewhere in the country, and as a result
• 32:05
  Speaker 3: of that, employment in the fast food sector sector in
• 32:08
  Speaker 3: California fell substantially, with estimates raging ranging from two point
• 32:12
  Speaker 3: three percent to three point nine percent.
• 32:15
  Speaker 2: That's a big gap, anyway, I know, two point three
• 32:18
  Speaker 2: you know, we're talking about less than five percent employment change.
• 32:20
  Speaker 2: That's a big change on one, you know, relatively small
• 32:25
  Speaker 2: change in wages.
• 32:26
  Speaker 3: It's something that it bears mentioning because of the economic
• 32:31
  Speaker 3: impacts that you can study so readily. And when you
• 32:34
  Speaker 3: have development of technology. I know someone a friend of
• 32:37
  Speaker 3: mine who works at a company that is part of
• 32:40
  Speaker 3: developing AI that is specific to the fast food sector
• 32:43
  Speaker 3: and drive throughs and building out the software capabilities for
• 32:47
  Speaker 3: me to go and order, you know, a burger meal,
• 32:50
  Speaker 3: and then just for the software to be able to
• 32:53
  Speaker 3: make responses and try to upsell on certain items, basically
• 32:56
  Speaker 3: replacing sure a fast food worker. And if you're talking
• 32:59
  Speaker 3: about writing this nationally, this idea of increasing minimum wage,
• 33:03
  Speaker 3: the Democratic Socialist nominily for New York mayor has mentioned
• 33:07
  Speaker 3: increasing the city's minimum wage to thirty dollars. All you're
• 33:11
  Speaker 3: going all you're going to do is destroy unemployment in
• 33:14
  Speaker 3: those sectors because these companies out there, like Burger King
• 33:18
  Speaker 3: or McDonald's are going to scrutinize what was a twenty
• 33:21
  Speaker 3: five percent increase on wages and look for ways to
• 33:26
  Speaker 3: cut back down unemployment much faster than they would normally.
• 33:29
  Speaker 2: So I will be the first to admit that not
• 33:30
  Speaker 2: every faster job can be done by AI. Some of
• 33:33
  Speaker 2: them probably can, and certainly the drive through windows seems
• 33:36
  Speaker 2: like low hanging fruit. But let's say that I fundamentally
• 33:39
  Speaker 2: don't believe that AI is going to be successful in that,
• 33:41
  Speaker 2: and it's been a mixed bag. It hasn't been. It's
• 33:43
  Speaker 2: not like AI is doing every takeout order across the
• 33:46
  Speaker 2: country right now. A lot of companies have found not
• 33:49
  Speaker 2: worth the investment. Got another solution for you, Paul, Do
• 33:53
  Speaker 2: you have a means of talking over long distances today?
• 33:56
  Speaker 1: Yes?
• 33:57
  Speaker 2: Yeah, plenty of options. Right, we could do a zoom call,
• 34:00
  Speaker 2: be able to call you on the phone. You're on
• 34:02
  Speaker 2: the radio, right, We're on the radio right now. So
• 34:04
  Speaker 2: we clearly have a means of broadcasting voices over long
• 34:07
  Speaker 2: distances pretty easily. If I am a fast food restaurant
• 34:12
  Speaker 2: in Manhattan, and I'm facing a thirty dollars an hour
• 34:15
  Speaker 2: minimum wage for the person that is taking the fast
• 34:17
  Speaker 2: food order. You know what I'm doing. I'm hiring a
• 34:20
  Speaker 2: call center in Indiana. It's gonna be Americans with American
• 34:24
  Speaker 2: voices taking the order, and I'm gonna pay them whatever
• 34:29
  Speaker 2: that going rate is to work at a call center
• 34:31
  Speaker 2: to deal with the McDonald's order. Just by the way,
• 34:34
  Speaker 2: And by the way, if you think this is some
• 34:35
  Speaker 2: futuristic thing, my wife was renting a car a few
• 34:38
  Speaker 2: years ago. I don't recall where is for a business trip. Apologies,
• 34:41
  Speaker 2: shows up to the kiosk, puts in her information, a
• 34:45
  Speaker 2: zoom call inference calls comes in. A woman's face appears
• 34:48
  Speaker 2: right on the screen as she is doing that. She
• 34:49
  Speaker 2: helps her go through the rest of the application, asks
• 34:51
  Speaker 2: her a few questions about insurance and her needs, and
• 34:55
  Speaker 2: the keys just drop into a slot and the person
• 34:57
  Speaker 2: tells her go down to floor three. You'll pick up
• 34:59
  Speaker 2: your car there and see you later.
• 35:00
  Speaker 3: And wow, gosh, hurts should really do that. I had
• 35:03
  Speaker 3: an awful experience down in Jacksonville where we waited for
• 35:06
  Speaker 3: like an hour after we got off the plane to
• 35:08
  Speaker 3: get I.
• 35:08
  Speaker 2: Don't remember who the rental car company was, I don't
• 35:11
  Speaker 2: remember how it all worked. But like, this is technology
• 35:14
  Speaker 2: that is so basic today that, yeah, if you're running
• 35:19
  Speaker 2: a rental car company at Boston Logan Airport, you don't
• 35:21
  Speaker 2: need to hire that person there. If they're going to
• 35:23
  Speaker 2: make them, you pay them thirty dollars an hour, Just
• 35:25
  Speaker 2: have a zoom call with the person and you'll have
• 35:27
  Speaker 2: one person there that has to handle the stuff that
• 35:30
  Speaker 2: can't be done via this means and boom, you don't
• 35:32
  Speaker 2: need that extra employee. And so I'm not the person
• 35:37
  Speaker 2: that's like in favor of any of these things. I'm
• 35:40
  Speaker 2: just saying that when you make stupid policy such as
• 35:44
  Speaker 2: dramatically changing the wages, the minimum paid wages for different
• 35:49
  Speaker 2: jobs across different geographic locations for kind of arbitrary reasons,
• 35:56
  Speaker 2: you tend to get bad effects. And we're seeing that
• 35:59
  Speaker 2: in California right now.
• 36:00
  Speaker 4: Speaking of California and fast food. You see in an
• 36:02
  Speaker 4: out Burger their announcement yesterday.
• 36:04
  Speaker 2: Yeah, moving headquarters to Tennessee. See you la to California.
• 36:08
  Speaker 2: You can't do it anymore.
• 36:10
  Speaker 4: It's got to be taxes, right, I mean, that's the
• 36:12
  Speaker 4: first when I think of California or LA in fast food,
• 36:15
  Speaker 4: Like the first thing I think of is in an
• 36:17
  Speaker 4: out burger.
• 36:18
  Speaker 2: Yeah, sure, first thing I think of.
• 36:19
  Speaker 3: Definitely, Yeah, I would think.
• 36:22
  Speaker 2: Look, there's a whole bunch of reasons that companies look
• 36:24
  Speaker 2: at relocating out of California and out of New York.
• 36:27
  Speaker 2: But taxes come to mind. Just general requirements for corporate leaders,
• 36:32
  Speaker 2: like all sorts of anti what's the word I'm looking for.
• 36:39
  Speaker 2: You can't do all sorts of agreements with your employees.
• 36:42
  Speaker 2: There's just dramatically different laws when it comes to who
• 36:45
  Speaker 2: you hire, how you hire them, the disclosures you have
• 36:47
  Speaker 2: to give them when you operate in some states versus
• 36:49
  Speaker 2: the others. And yeah, whether it's Texas, Tennessee, there's been
• 36:52
  Speaker 2: a big push by companies. Fisher Investments is another big
• 36:55
  Speaker 2: one I can think of that relocated down to Texas
• 36:57
  Speaker 2: from I think either California or Seattle recently because of
• 37:02
  Speaker 2: a lot of those same reasons. So, yeah, the wage
• 37:05
  Speaker 2: one was not surprising, but nice to see, like the
• 37:10
  Speaker 2: core fundamentals of how economics were confirmed every once in
• 37:14
  Speaker 2: a while, rather than having a guess at the effects
• 37:17
  Speaker 2: hurricane risk and Florida is escalating, no kidding, but we
• 37:20
  Speaker 2: do have some data here and some fascinating pieces. Homeowner's
• 37:25
  Speaker 2: insurance across the state going up dramatically. Premiums have climbed
• 37:29
  Speaker 2: by nearly thirty percent statewide. This one is shocking for
• 37:32
  Speaker 2: people that live around here. Florida residents can now expect
• 37:35
  Speaker 2: to pay almost ten thousand dollars a year on average
• 37:38
  Speaker 2: in premiums, making it by far the most expensive place
• 37:42
  Speaker 2: in the US to buy homeowners insurance. If there's one
• 37:46
  Speaker 2: positive news here from what I read, this is the
• 37:50
  Speaker 2: latest correction in the Florida insurance market, and it is
• 37:52
  Speaker 2: actually adequately pricing the market so that it is improving
• 37:57
  Speaker 2: and more insurance are coming into the market at this stage.
• 38:00
  Speaker 2: But yeah, maybe maybe not. I think they might actually
• 38:04
  Speaker 2: finally be adequately pricing this market up from what I hear,
• 38:08
  Speaker 2: So we will see, but not the cheap place to
• 38:10
  Speaker 2: relocate it used to be. All the time we have
• 38:12
  Speaker 2: for today on the Financial Exchange, we'll be back at
• 38:15
  Speaker 2: it tomorrow and it's a huge earnings day. Tomorrow's tune in, folks,