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How common are 10% market pullbacks? · The Financial Exchange Show

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Speaker 2: Good morning, Welcome back to the Financial Exchange. We've got
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Speaker 2: a bit of a sell off taking place here in
1:16
Speaker 2: equity markets. We've got the Dow off one hundred and
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Speaker 2: sixty three points a third of a percent, the SMP
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Speaker 2: off fifty points three quarters of one percent, in the
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Speaker 2: NASDAK off two hundred and ninety one points one and
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Speaker 2: a quarter percent. Here in early training, it's Mike, Mark
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Speaker 2: and Tucker with you on a Tuesday. In terms of
1:34
Speaker 2: what may or may not be leading this will Palanteer
1:38
Speaker 2: reported earnings overnight, their stock as of this morning getting
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Speaker 2: hit by about to the of about six and a
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Speaker 2: half percent. You've had a couple large bank CEOs mentioning
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Speaker 2: that they're anticipating a market pullback within the next twelve
1:52
Speaker 2: to twenty four months, which again I consider to be
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Speaker 2: useful and useless information, but nonetheless they put it out there.
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Speaker 2: We also have the news that Michael Burry of Big
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Speaker 2: Short Fame shortening the stocks of Nvidia and Palaneer according
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Speaker 2: to reports. So any and all of those could be
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Speaker 2: changing some of the sentiment out there when it comes
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Speaker 2: to AI and the growth story there. But I will
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Speaker 2: caution folks that it is just a single day move
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Speaker 2: in the stock prices, and none of it seems to
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Speaker 2: be sparked by any giant news in particular that I
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Speaker 2: can put my finger on. How about you mark on.
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Speaker 3: The precipice of a big pullback. It doesn't have to
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Speaker 3: be cataly it doesn't have to be sparked, as you say,
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Speaker 3: by something big and dramatic. If things are as fragile
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Speaker 3: as people who point out that stocks are very expensive
2:39
Speaker 3: relative to any reasonable estimate of future earnings said differently, evaluations,
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Speaker 3: price to arnies, ratios, things like that are quite high,
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Speaker 3: as high as they've been at any time outside of
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Speaker 3: the telecom media telecommunication bubble bursting. Then the littlest random
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Speaker 3: thing could prick them. If it is a bubble, I'm
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Speaker 3: not saying it is true now, only in retrospect. I
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Speaker 3: know that's not helpful. Any little thing could prick them.
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Speaker 3: Maybe this is the beginning of something tumultuous, and maybe
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Speaker 3: it's nothing. Maybe this goes on front other two years.
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Speaker 2: In the uselessness of CEO comments about market pullbacks, I
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Speaker 2: was able to find some data the Capital Group had
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Speaker 2: put together. If you don't know Capitol Group, they're the
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Speaker 2: parent company or owner of American Funds and pretty well
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Speaker 2: known investment company out there. So I was curious in
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Speaker 2: the data that they had, how frequently do ten percent
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Speaker 2: market correction that's happening that? Oh, did you know it? Though, yes,
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Speaker 2: you didn't do your homework and I knew based on
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Speaker 2: the look on your face. They looked at data from
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Speaker 2: nineteen fifty four through December of twenty twenty three to
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Speaker 2: let me know how frequently does this sort of thing happen. So, again,
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Speaker 2: this does not include any data from twenty twenty four
3:48
Speaker 2: or twenty twenty five. We did have a ten plus
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Speaker 2: percent market correction back in April of this year, so
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Speaker 2: that's not included in this data. But what they found
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Speaker 2: for that time period was that a five percent or
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Speaker 2: more correction happens about once a year, a ten percent
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Speaker 2: or more correction about once every thirty months, fifteen percent
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Speaker 2: or more about once every five years, and twenty percent
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Speaker 2: or more about once every six years. Now, again, all
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Speaker 2: they're doing here is measuring how many of these did
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Speaker 2: you have over this time period. There are obviously long
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Speaker 2: windows of time where they had no corrections. Very there's
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Speaker 2: also probably a number of periods of time where they
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Speaker 2: had multiple of these in short time periods. So I
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Speaker 2: don't think it tells you anything about the likelihood of them.
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Speaker 2: But just to point out that a CEO telling you
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Speaker 2: that they're worried about stocks prices falling by ten percent
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Speaker 2: or more in the next twenty four months is not
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Speaker 2: anything useful or unique. It happens, Well, you don't.
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Speaker 3: Know their motivations. Hey there, maybe they want to buy
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Speaker 3: back equity or something. Look, no CEO wants their stock
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Speaker 3: price to just call. So that's being a little bit
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Speaker 3: silly there. But with respect to these short sellers, and
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Speaker 3: as we talked about in the last hour, that's a
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Speaker 3: way that certain unconstrained managers, which we'll just called generically
4:56
Speaker 3: hedge funds, can bet against a company or against a market.
5:00
Speaker 3: You don't have to You could short a market, You
5:02
Speaker 3: could short the S and P five hundred. You could
5:03
Speaker 3: short any security if you find somebody willing to loan
5:07
Speaker 3: you the security so as to affect the transaction. Everyone
5:12
Speaker 3: we hear from is motivated. They're all talking of their
5:14
Speaker 3: own book, as they like to say in finance. So
5:17
Speaker 3: you have to consider the source and be wary of
5:20
Speaker 3: people making exuberant predictions like the CEO of Nvidia or
5:25
Speaker 3: something saying this guy's the limit. Will you would say
5:27
Speaker 3: that these guys are all basically paid or acting in
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Speaker 3: the prospect of getting.
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Speaker 2: Paid to rejuice their stock prices.
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Speaker 3: Yeah, or to induce some and as it looks markets
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Speaker 3: are going down today, maybe the most reasonable catalyst is
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Speaker 3: a renowned short investor going public with these current short positions.
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Speaker 2: And I know, you know it's not always explicit as
5:49
Speaker 2: explicit as in some cases, but in the case of Tesla,
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Speaker 2: for example, they are literally voting on a compensation package
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Speaker 2: where Elon Musk could be paid what was it? Is
5:59
Speaker 2: it a trillion dollar back if the company hits eight
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Speaker 2: and a half trillion dollars in market capitalization. So the
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Speaker 2: compensation is very directly tied to the stock price performance,
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Speaker 2: and so no surprise that the CEOs would talk it
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Speaker 2: up in one way or another. Cnbcut with a piece
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Speaker 2: and I'm in spite of a funny dig that I'll
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Speaker 2: put on CNBC With this piece, they are latching onto
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Speaker 2: a thing a theme that I'm seeing from people talking
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Speaker 2: about earnings right now, which is that ke shaped recovery story.
6:28
Speaker 2: We've heard it from Chipotle last week. We're going to
6:30
Speaker 2: hear from young brands McDonald's, Elf, Beauty, Tapestry, under Armoured
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Speaker 2: this week. And specifically, what you're hearing from some businesses,
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Speaker 2: not the AI companies, but the likes of Marriot Delta
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Speaker 2: that companies I just mentioned are that they are seeing
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Speaker 2: a wide divergence in terms of what products their customers
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Speaker 2: are buying. If they do sell products to both high
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Speaker 2: income and low income customers, they're seeing a divergence there.
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Speaker 2: And in the case where they largely rely on a
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Speaker 2: certain demo, some are doing really well, some are really struggling. Chipotlee,
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Speaker 2: for example, specifically called out that, hey, we saw a
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Speaker 2: ton of growth from young Americans over the last several years,
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Speaker 2: and that demographic is not really coming in the same
7:11
Speaker 2: coming to our stores in the same frequency. They're seemingly
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Speaker 2: struggling financially and not doing quite as well. CNBC points
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Speaker 2: out the top ten percent of households saw their income
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Speaker 2: increase four point two percent between twenty twenty three and
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Speaker 2: twenty twenty four, while there was no meaningful change for
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Speaker 2: the bottom ten percent of households. They also thought it
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Speaker 2: was necessary to let you know that there were thirty
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Speaker 2: three million households in the top ten percent and another
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Speaker 2: thirty three million in the bottom ten percent of income earners,
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Speaker 2: because that's how percentages work.
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Speaker 3: Actually, that's not as stupid as it sounds. No, they're
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Speaker 3: sorting by income, not people. If you said there's thirty
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Speaker 3: three percent of people in the top third of the population,
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Speaker 3: you'd say, well, that's the definition of this. They're sorting
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Speaker 3: by income coke, So it could work.
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Speaker 2: I thought they were shorting by earners.
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Speaker 3: Yeah, is defined by how much they earn.
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Speaker 2: Right, So I thought they were specifically saying, Okay, if
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Speaker 2: you're in the top ten percent, but you may much.
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Speaker 2: I don't think they're saying of all the income in
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Speaker 2: the world in the United States. This is what I think.
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Speaker 2: What they're literally saying is the top thirty three million people,
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Speaker 2: you have to earn this much to get into the
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Speaker 2: next That's what they're saying the next third. Yeah, sorting.
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Speaker 2: Pretty sure they're doing sorting by people. They're doing a
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Speaker 2: deathcile analysis here and sorted by people and letting you
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Speaker 2: know that.
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Speaker 3: If that's I thought they were sorting by income, not
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Speaker 3: the number of people.
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Speaker 2: They could be hope the editor catch. I thought that
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Speaker 2: that was a pretty dumb one, that that was your dig. Yeah,
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Speaker 2: here is the general thesis that I'm looking to see
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Speaker 2: if it's confirmed this week, because I would think that
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Speaker 2: McDonald's and Uber and Airbnb would be able to give
8:47
Speaker 2: us some insight into all this, and we're hearing from
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Speaker 2: all of them this week. It's are you seeing the
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Speaker 2: same trends play out where all of your sales are
8:56
Speaker 2: being supported by the top ten percent. We've heard that
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Speaker 2: from a number of different companies. McDonald's, I'd be surprised
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Speaker 2: to hear that, right. You know, certainly they have done
9:05
Speaker 2: a good job of fashioning themselves as the discount restaurant
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Speaker 2: out there, but are they actually attracting new customers or
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Speaker 2: are they just seeing that their existing customers are struggling.
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Speaker 2: And why this all matters is because that top ten percent,
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Speaker 2: the the degree to which their assets have grown, seems
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Speaker 2: to be a big part of why they are spending
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Speaker 2: right now. And should that reverse, you have a potential issue.
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Speaker 3: Ye, in a sense, we're inn unchartered territory here. You
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Speaker 3: talked to Andrew Ross Sorkin last week. I don't know
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Speaker 3: if this comes up in his book, but during in
9:40
Speaker 3: nineteen twenty nine, very small percentage of the population owned stocks,
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Speaker 3: like two percent. I know this because I you know,
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Speaker 3: there's some classic papers and economics written on the relationship
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Speaker 3: between the Great Depression and the stock crash. So very
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Speaker 3: very small percentage. But everybody freaked out with stocks crash, nevertheless,
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Speaker 3: because it was a symptom of something that went wrong.
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Speaker 3: Not a big wealth effect though. Probably the question to
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Speaker 3: wealth effect is how much you spend out of your
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Speaker 3: unrealized gains. What I'm leading up to here is now
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Speaker 3: over fifty percent of the population's own owns equities, either
10:12
Speaker 3: directly or indirectly through Therefore, when K plan you have
10:14
Speaker 3: an index fund that is yes and S and B
10:16
Speaker 3: five hundred companies for example. The wealth effect is largely
10:20
Speaker 3: thought to have increased in percentage terms, So for every
10:24
Speaker 3: dollar in gains, you spend five or six cents every
10:28
Speaker 3: dollar in gain. So it's quite powerful. Probably what happens
10:32
Speaker 3: if that on wines Nobody knows bigger percentage than ever
10:35
Speaker 3: owns equities, and the equity market is bigger than ever,
10:39
Speaker 3: and information about it is more readily available, more conspicuous,
10:43
Speaker 3: instantaneously available than ever.
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Speaker 2: Yeah, I don't know. It's not good.
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Speaker 3: It's just a question of how bad.
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Speaker 2: Right, Let's say a quick break when we come back,
10:51
Speaker 2: a little bit trivia here coming up next on The
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12:57
Speaker 2: Uh mark. Last week, last Wednesday, we had the Reserve
13:00
Speaker 2: press conference on their interest rate decision, which was for
13:03
Speaker 2: another quarter percent cut to the target rate. No surprise there.
13:08
Speaker 2: What did come as somewhat of a surprise to many,
13:11
Speaker 2: I think though, was the I guess what do you
13:16
Speaker 2: call it? When? To when voting members disagree descents in
13:20
Speaker 2: either direction. You had one descent from Steven Myron.
13:24
Speaker 3: I know, because I'm a difficult person.
13:26
Speaker 2: He wanted a fifty basis point cut. You had another
13:30
Speaker 2: from the Kansas City Fed chiefs whose name I can't
13:32
Speaker 2: recall right now, who wanted to keep rates steady. So
13:36
Speaker 2: one of the first things that Jay Powell said when
13:38
Speaker 2: he came out with the press conference was that the
13:42
Speaker 2: December rate decision is far from a foregone conclusion. That
13:46
Speaker 2: did shift things in markets in terms of where investors
13:49
Speaker 2: anticipate rates going. A week ago, you had a ninety
13:54
Speaker 2: percent likelihood of rates being cut. Another time in December,
13:57
Speaker 2: now it's about seventy percent. I happened to agree much
14:04
Speaker 2: more with the viewpoint that hey, it's not a foregone
14:08
Speaker 2: conclusion and that we should pace ourselves here and wait
14:11
Speaker 2: and see what the data tells us. But what was
14:13
Speaker 2: unique about by the way that descent in either direction
14:16
Speaker 2: was the first time that had happened in six years,
14:18
Speaker 2: which is why it got some press because generally speaking,
14:22
Speaker 2: the Fed usually votes unanimously on these things.
14:25
Speaker 3: Yeah, since the Greenspan era, of course, we didn't know
14:27
Speaker 3: how votes came down prior to that. So yeah, Greenspan
14:32
Speaker 3: was famous for bringing everybody on board by hook or
14:36
Speaker 3: by crook, sometimes apparently could be a little heavy handed. Anyway,
14:39
Speaker 3: It's important that markets view the FED as speaking with
14:43
Speaker 3: one voice because that lends credibility. The keyword when you
14:46
Speaker 3: think of monetary policy is credibility. They've got to be believable.
14:50
Speaker 3: When the FED says it wants to crush inflation, people
14:52
Speaker 3: have to believe it. That makes inflation less costly to
14:55
Speaker 3: vanquish because people start updating their expectations of future prices quickly.
15:00
Speaker 3: That that affords the economy more. That imparts more price flexibility
15:04
Speaker 3: to the economy, and that gets things moving in the
15:07
Speaker 3: direction the FED wants. If that sounds a little technical,
15:08
Speaker 3: it actually is. I certainly didn't get at the first
15:10
Speaker 3: time it was explained. But the reason monetary policy works
15:13
Speaker 3: is that prices are not flexible. The FED can flood
15:16
Speaker 3: the economy with money before price is adjust demand picks up.
15:19
Speaker 3: That stimulates real activity. Only later does inflation pick up.
15:22
Speaker 3: This is a key tenant of monetary might get.
15:26
Speaker 2: I'm just thinking of a stupid joke.
15:27
Speaker 3: Don't worry about it, oh looke, Come on, catches it
15:29
Speaker 3: there and smirk.
15:30
Speaker 2: Could you say that all again, but faster?
15:33
Speaker 3: So I'm just wait, there was actually a point there.
15:35
Speaker 3: Now I've oh so credibility. If you take nothing else
15:38
Speaker 3: away from that two minutes of incoherence on my part,
15:42
Speaker 3: take away that it is critical that the FED be credible.
15:44
Speaker 3: It is critical that it might not be viewed as
15:46
Speaker 3: a political tool. It is critical that it not be
15:49
Speaker 3: viewed as divided and confused, because then we don't know, you, me,
15:53
Speaker 3: even Tucker, how to form our inflation expectations, and that
15:57
Speaker 3: makes their job harder.
15:59
Speaker 2: Does the FED seem divided and confused to you right now?
16:02
Speaker 3: More than ever in my lifetime, this is the most precarious.
16:05
Speaker 3: I think we won't know until all this gets worked out.
16:10
Speaker 3: Inflation is elevated, they're cutting rates. Financial conditions are loose, We've.
16:14
Speaker 2: Got financial conditions are well. Excuse me.
16:18
Speaker 3: One quick way to look at it. One quick way
16:20
Speaker 3: to diagnose financial conditions is to use an index that
16:24
Speaker 3: asks that it is a compilation of asset prices and
16:28
Speaker 3: what lending officers are telling Federal Reserve banks and stuff
16:32
Speaker 3: like that the Kansas City FED puts together in Chicago Fed,
16:35
Speaker 3: excuse me, puts together a national financial conditions index. You
16:38
Speaker 3: can google that and you will see when you do that,
16:41
Speaker 3: financial conditions are is conducive to borrowing and raising money
16:45
Speaker 3: in capital markets, as they've been at any time in
16:47
Speaker 3: this cycle. You could also just look at stock prices.
16:49
Speaker 3: By the way, all of what I just said could
16:51
Speaker 3: be summarized in stocks being at all hitting a new
16:53
Speaker 3: time highs, all time highs every single day. Financial conditions
16:57
Speaker 3: are obviously not tight. It's not hard to get your
16:59
Speaker 3: hand on capital. Look at the investments AI, the investments
17:03
Speaker 3: that companies are making in data centers related to the
17:08
Speaker 3: need to adopt AI. So financial conditions are loose inflation's elevator.
17:14
Speaker 3: Yet the Fed is loosening easying monetary policy. Why will
17:19
Speaker 3: because they think the labor market is in trouble.
17:22
Speaker 2: I'm looking at this financial conditions index from the Chicago Fed.
17:27
Speaker 2: I believe I'm reading it as the more negative the number,
17:31
Speaker 2: looser the condition.
17:32
Speaker 3: That's the way they inconstructed it by that measurement.
17:34
Speaker 2: To your point, as of the latest reading October twenty fourth,
17:37
Speaker 2: twenty twenty five, we are in the lowest territory we
17:41
Speaker 2: have been since early twenty twenty two. So when conditions
17:44
Speaker 2: were undoubtedly pretty loose there, the.
17:46
Speaker 3: Fed's credibility is in doubt. Right now, Mike, we've got
17:49
Speaker 3: a guy on the FED board who is basically the
17:51
Speaker 3: puppet of the president.
17:52
Speaker 2: Still no no offense, but he is.
17:53
Speaker 3: The President put him there, told them to lower rates,
17:55
Speaker 3: and ever since then, every day Moran's been saying rates
17:57
Speaker 3: need to be lower. Forgive me, he doesn't have credibility.
17:59
Speaker 3: He may be he's got a more impressive degree than
18:02
Speaker 3: I have, he's a Harvard PhD. But he doesn't have credibility.
18:04
Speaker 3: He's the president's tool. You could say that's great, I
18:06
Speaker 3: think the president should be running monetary policy, or you
18:08
Speaker 3: could say I think an independent FED is one of
18:11
Speaker 3: the reasons why the economy has been relatively successful over
18:15
Speaker 3: the past call it fifty years since the Vulkar era.
18:19
Speaker 3: That's now in question, Mike. Now you get these divisions
18:22
Speaker 3: with it. But for the first time in my lifetime,
18:24
Speaker 3: a member dissenting members dissenting in either direction. The FED
18:28
Speaker 3: chair is under daily attack by the president. Credibility of
18:31
Speaker 3: monetary policy is in question. How this will be resolved
18:35
Speaker 3: A lot turns on that.
18:36
Speaker 2: What I struggle with here is I do push and
18:41
Speaker 2: agree with you on the importance of the FED credibility
18:44
Speaker 2: and independence, while at the same time look at the
18:46
Speaker 2: decision making process of the current chairman and see a
18:51
Speaker 2: lot of imperfection.
18:52
Speaker 3: But he's a model too. Yeah, he botched COVID. I
18:55
Speaker 3: think he's batching this by advocating easing personally. We won't
18:58
Speaker 3: know until obviously this all plays out. But yeah, he's
19:03
Speaker 3: no exemplar of coherent monetary policy. I wish he'd just
19:07
Speaker 3: shut up. I wish that all just shut up for
19:10
Speaker 3: just six months, just give us a break and let
19:12
Speaker 3: monetary policy work. So no, I'm with you, I'm not going.
19:14
Speaker 2: To Unfortunately for you, government shutdown does not apply to
19:17
Speaker 2: the Reserve Board.
19:18
Speaker 3: Yeah, why can't shut their mouths?
19:20
Speaker 2: Yeah, let's take a quick break when we come back.
19:22
Speaker 2: Wall Street Watch coming up next.
19:39
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:43
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:49
Speaker 1: Time now for Wall Street Watch. A complete look at
19:52
Speaker 1: what's moving market so far today right here on the
19:55
Speaker 1: Financial Exchange Radio Network.
19:57
Speaker 4: Market selling off this morning, driven by law. This is
20:00
Speaker 4: in the tech sector. Is worries increase about high valuations
20:03
Speaker 4: of AI stocks right now, the dows down a third
20:07
Speaker 4: of a percent, or one hundred and fifty nine points,
20:10
Speaker 4: SMP five hundred down three quarters of a percenter fifty
20:13
Speaker 4: one points, NASDAC down one in a quarter percent or
20:17
Speaker 4: two hundred and ninety eight points lower, Russell two thousands
20:20
Speaker 4: down one percent, Tenure Treasure Reel down two basis points
20:24
Speaker 4: at four point zero eight five percent to In crude
20:26
Speaker 4: oil down about a half a percent, trading right below
20:30
Speaker 4: sixty one dollars a barrel. Palenteer among the biggest AI
20:34
Speaker 4: losers on the day due to concerns over the stocks
20:36
Speaker 4: high valuation. Despite the data analytics company posting another quarter
20:41
Speaker 4: of record revenue. Palenteer also raised its current quarter and
20:44
Speaker 4: full year revenue guidance. Furthermore, renowned big short investor Michael
20:48
Speaker 4: Berry revealed a short position of both Palenteer and Nvidia.
20:53
Speaker 4: Pallenteer shares it down by seven percent. Meanwhile, Uber logged
20:57
Speaker 4: a higher quarterly profit in revenue, saying you users took
21:01
Speaker 4: twenty two percent more trips than a year ago. However,
21:04
Speaker 4: the stock is retreating over six percent after the ride
21:07
Speaker 4: sharing and delivery company offered an even arrange that's slightly disappointed. Elsewhere,
21:12
Speaker 4: Young Brands posted stronger than expected third quarter earning zan
21:15
Speaker 4: revenue growth, driven by strong demand for Taco Bell and
21:18
Speaker 4: improved US sales for KFC. However, the bigger news is
21:22
Speaker 4: the restaurant company's announcement that it plans to review strategic
21:26
Speaker 4: options for struggling Pizza Hut, including a possible sale of
21:30
Speaker 4: all or parts of the brandym stock is climbing over
21:34
Speaker 4: six percent. The bidding war for obesity startup met Sarah
21:38
Speaker 4: is escalating between Pfizer and Novo Nordisk. According to Metsarah,
21:43
Speaker 4: Novo increased its offer for the company to approximately ten
21:47
Speaker 4: billion dollars or about eighty six dollars a share. Pfizer
21:51
Speaker 4: raised its bid to about eight point one billion dollars
21:54
Speaker 4: or seventy dollars a share, after an initial agreement of
21:57
Speaker 4: up to seven point three billion dollars. Sarah stock is
22:00
Speaker 4: surging nineteen percent, and after today's close, we'll see earnings
22:05
Speaker 4: from AMD. I'm Tucker Silva and that is Wall Street Watch.
22:08
Speaker 4: And in the previous segment, we asked her the trivia
22:10
Speaker 4: question how many states did Jimmy Carter win in the
22:14
Speaker 4: nineteen to eighty election that would be six Anderson from Wareham,
22:18
Speaker 4: Mass is our winner today taking on the Financial Exchange
22:20
Speaker 4: Show t shirt. We play trivia every day here in
22:23
Speaker 4: the Financial Exchange. See complete contest rules at Financial Exchange
22:27
Speaker 4: Show dot com.
22:28
Speaker 2: So Halloween has come and gone, meaning we're going to
22:31
Speaker 2: take a page out of American retails book here and
22:33
Speaker 2: only be talking about the Christmas holiday shopping season between
22:36
Speaker 2: now and December twenty fifth, and Bloomberg has a piece
22:41
Speaker 2: out today on the subject. So a slump in cardboard
22:45
Speaker 2: box sale stoking fears of lackluster holiday shopping. What we
22:49
Speaker 2: are actually seeing here is not a massive slump in
22:53
Speaker 2: in box sales, but according to a few different sources,
22:58
Speaker 2: you've got sales of box shipments down generally between one
23:05
Speaker 2: to one and a half percent this year compared to
23:08
Speaker 2: twenty twenty four. Now individuals in the industry are saying
23:11
Speaker 2: different numbers. Paper and packaging Giant Smurf at west Rock PLC.
23:16
Speaker 2: Never heard of them before today. Last week report an
23:18
Speaker 2: eight point seven percent drop in North American same day
23:22
Speaker 2: box volumes in the third quarter. Why does anybody care
23:24
Speaker 2: about this? Hopefully it's obvious. I mean, if you're building
23:27
Speaker 2: any store displays you're using cardboard for them. If you
23:30
Speaker 2: are shipping boxes from Amazon, you're putting them in cardboard boxes,
23:34
Speaker 2: although I guess I'm getting more of those envelopes these days.
23:37
Speaker 2: And if you're shipping stuff from China to the US,
23:39
Speaker 2: you might be putting in a shipping container, but it
23:41
Speaker 2: is also probably in one giant box of some sort
23:44
Speaker 2: or another. And so many over the years have looked
23:47
Speaker 2: at this single industry as an indication of, Hey, what
23:52
Speaker 2: does retail demand look like for the coming year, And
23:56
Speaker 2: the answer I think kind of fits in with what
23:58
Speaker 2: I would expect, which is usumers are showing some signs
24:03
Speaker 2: of concern. Retailers are feeling the effects of tariffs, and
24:07
Speaker 2: so they're probably not ordering quite as much stock as
24:11
Speaker 2: they normally would because they don't want to be sitting
24:13
Speaker 2: on a whole bunch of extra inventory this holiday shopping
24:17
Speaker 2: season if their worst fears do come true. Mm hmm.
24:20
Speaker 2: Line up with what you're thinking.
24:22
Speaker 3: Is I have no idea what to make of it.
24:23
Speaker 3: They don't cite any research on the subject. I mean,
24:26
Speaker 3: can we has this in the past been a good forecaster?
24:29
Speaker 3: Is the only question really that comes to mind, And
24:32
Speaker 3: I can't say I scrutinized the article too closely, but
24:35
Speaker 3: I didn't find that question answered.
24:37
Speaker 2: Did you know that nobody's done any So.
24:39
Speaker 3: It sounds like common sense. And I'm putting that in
24:41
Speaker 3: quotes because there might be factors that cloud the relationship.
24:46
Speaker 2: Yeah, we've talked about that a little bit. There has
24:48
Speaker 2: been a change in somehow some packaging giants ship things
24:51
Speaker 2: and things along those lines, so I could buy some
24:53
Speaker 2: of that too. I generally think that a decline in
24:56
Speaker 2: you know, this type of cardboard probably does not indicate
25:00
Speaker 2: positive things ahead of the holiday shopping season. But I'm
25:03
Speaker 2: not exactly losing sleep over it either. Folks. We talk
25:08
Speaker 2: a lot about planning for the future on this show,
25:12
Speaker 2: and specifically we talk a lot about the risks to
25:18
Speaker 2: the economy and the market at this point in time.
25:20
Speaker 2: We've talked at length today about private credit and frothiness
25:24
Speaker 2: of equity markets, and artificial intelligence and the eventual effects
25:28
Speaker 2: on all of these things. If you are in the
25:31
Speaker 2: position of having asked yourself recently, hey, am I taking
25:36
Speaker 2: the right amount of risk for this stage of my life?
25:40
Speaker 2: If you've asked yourself, what's the number I need to
25:43
Speaker 2: hit before I can feel comfortable retiring, or how much
25:48
Speaker 2: should I anticipate in withdrawing out of my portfolio? And
25:52
Speaker 2: is that really sustainable for where I am in life
25:56
Speaker 2: and what my goals are. If you've found yourself asking
25:59
Speaker 2: any questions like that, the right time to get the
26:03
Speaker 2: answers is frankly, when markets are near their all time
26:07
Speaker 2: highs like we're seeing right now. It's not to say
26:10
Speaker 2: that people shouldn't worry about this stuff when markets are
26:12
Speaker 2: down to they absolutely should. But I'm what I'm saying
26:16
Speaker 2: here is that I see a straight line, a correlation
26:20
Speaker 2: line between how poorly markets are doing and how desperately
26:24
Speaker 2: people want to talk to somebody about financial advice and
26:27
Speaker 2: investment advice. And that's natural when things get panicky, you
26:31
Speaker 2: ask for a second opinion. But I'm also here to
26:33
Speaker 2: say that that's the absolute worst time to potentially be
26:36
Speaker 2: making changes to your overall situation. It would make me
26:40
Speaker 2: sleep a lot better if by the time that thing hits,
26:43
Speaker 2: which everyone knows is perfectly unpredictable, I had already done
26:46
Speaker 2: the homework of knowing what sort of financial shape I'm
26:49
Speaker 2: in and what I still need to accomplish to achieve
26:51
Speaker 2: my goals. Because one thing that I'm quite certain of
26:53
Speaker 2: is that we will have future market corrections and crashes
26:58
Speaker 2: and recessions. They will be very difficult to predict ahead
27:01
Speaker 2: of time, and most people will not be properly timing
27:05
Speaker 2: things to take advantage of those future downturns. If you
27:08
Speaker 2: are falling into any of those categories and you want
27:11
Speaker 2: a second opinion, we can give you a free one
27:14
Speaker 2: here at Armstrong Advisor Group. Give us a call to
27:17
Speaker 2: chat about your personal situation at eight hundred three nine
27:20
Speaker 2: three for zero zero one. We have offices located throughout
27:24
Speaker 2: New England. We're happy to sit down with you in person,
27:25
Speaker 2: over the phone, via zoom, whatever's easiest for you, but
27:28
Speaker 2: get the process started. You can go to Armstrong Advisory
27:31
Speaker 2: dot com if you'd like to book a time for
27:33
Speaker 2: us to call you back or again, just give us
27:35
Speaker 2: a ring eight hundred three to nine three for zero
27:38
Speaker 2: zero one.
27:39
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:42
Speaker 1: registered investment advisor. Nothing in the ad or in any
27:44
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
27:48
Speaker 1: your own financial, tax and estate planning advisors before making
27:50
Speaker 1: any investment decisions. Armstrong make contact you to offer investment
27:53
Speaker 1: advisory services.
27:55
Speaker 2: I want to talk food. Do you have to talk
27:57
Speaker 2: coffee or pizza? Your pick?
28:00
Speaker 3: Mark, I can't take the pressure.
28:04
Speaker 4: Really pizza pizza.
28:08
Speaker 3: Yeah, but it's almost one time and we're hungry. Why
28:10
Speaker 3: would we want a mouthwatering pizza pizza?
28:13
Speaker 2: Well, according to Young Brands, it might not be so
28:15
Speaker 2: mouthwatering because they are looking for strategic options for Pizza Hut.
28:20
Speaker 2: If you didn't know Young Brands who also owns KFC
28:23
Speaker 2: and Taco Bell. They're an old spinoff from Pepsi long not.
28:28
Speaker 2: They own these three brands, and I think they're finding
28:31
Speaker 2: that one nobody goes to Pizza Hut. Two, that the
28:34
Speaker 2: Pizza Hut brand does not really fit in with the
28:37
Speaker 2: KFC and Taco Bell brand. You wouldn't think that necessarily
28:40
Speaker 2: fried chicken and tacos fit together either, but they have.
28:44
Speaker 3: Why would you buy things that fit together? You want
28:46
Speaker 3: diversifiers in your portfolio.
28:48
Speaker 2: I think what they found is that they were able
28:50
Speaker 2: to successfully put up one building and house both of
28:54
Speaker 2: these restaurants in the same place.
28:56
Speaker 3: And I get that. Guys, I've been out on the
29:00
Speaker 3: d Yeah.
29:01
Speaker 2: I thought you just lived in you know, you drove
29:03
Speaker 2: to here and had never seen a fast food restaurant before.
29:08
Speaker 2: But in either case, young brands saying that there's exploring
29:11
Speaker 2: strategic options for pizza Hut, I've got to say, I
29:14
Speaker 2: mean their buildings are very distinct. You can still tell
29:17
Speaker 2: when like, there are several buildings I've driven by their
29:19
Speaker 2: no longer pizza huts.
29:20
Speaker 4: That build Yeah, Okay, continue, Sorry, I.
29:23
Speaker 3: Was just gonna say, I don't see we've I don't see.
29:26
Speaker 4: Any pizza huts unless they're inside of a target or something. Right,
29:30
Speaker 4: there are former pizza huts, Mike that you're saying, like,
29:34
Speaker 4: I know of an urgent care that is Yeah, it was.
29:38
Speaker 2: Very clearly still distinctly a pizza hut because they had
29:41
Speaker 2: that brand. But yeah, I don't know the last time
29:43
Speaker 2: that I've been to one.
29:47
Speaker 4: I don't either.
29:49
Speaker 2: Are they the ones that were famous for the like
29:51
Speaker 2: the red cups or is that Papa Gino's Pizza Pizza
29:54
Speaker 2: Hut the red plastic cups that I'm sure just got broken.
29:58
Speaker 2: They they were, But yeah, I don't know who the buy.
30:03
Speaker 2: I'm sure there's some private equity for the firm that,
30:05
Speaker 2: for the right price, will take this and strip it
30:07
Speaker 2: of everything it's worth and repackaged it at some point,
30:10
Speaker 2: but yeah, it sure doesn't seem like they have a
30:13
Speaker 2: real good future there.
30:14
Speaker 4: Dominos won. Dominos won the Pizza Wars in terms of
30:17
Speaker 4: like fast casual destinations.
30:20
Speaker 2: Yeah, I mean they are slightly different models because Pizza
30:23
Speaker 2: Hut was I go and sit down there, but I
30:26
Speaker 2: had a salad bar? Yeah did they? Yeah?
30:29
Speaker 4: I don't remember going to a Pizza Hut.
30:31
Speaker 2: I just think we remember being there with like thirteen
30:34
Speaker 2: other eight year old hockey players and it was the
30:37
Speaker 2: perfect place for that sort of thing, and not a
30:40
Speaker 2: whole lot else.
30:41
Speaker 3: A salad bar, by the way, it was just ornamental.
30:43
Speaker 3: Nobody went that was that was your cover?
30:45
Speaker 2: Yeah it was.
30:46
Speaker 3: It was all artificial, you know.
30:50
Speaker 2: Starbucks, on the other hand, planning to sell sixty percent
30:55
Speaker 2: of their China business to a Chinese based private equity firm.
31:00
Speaker 2: This has been a thorn in their side for quite
31:03
Speaker 2: a few years here, and I mean, tell me if
31:06
Speaker 2: you've heard this story before. US company, enticed by the
31:10
Speaker 2: size of the Chinese market, enters the market can't really
31:14
Speaker 2: compete because the second they start to have a brand there,
31:17
Speaker 2: a Chinese startup starts to compete with them and has
31:20
Speaker 2: every advantage out there, and so your only option remaining
31:24
Speaker 2: is to sell yourself to a Chinese owned entity. I'm
31:27
Speaker 2: not worried about any intellectual property loss here, but I
31:30
Speaker 2: just look at the incentives of American companies in the
31:33
Speaker 2: history of this and it's just the same exact story
31:36
Speaker 2: over and over. Oh man, there's a few billion people there.
31:40
Speaker 2: What a market that would be. Go there, grow a
31:43
Speaker 2: little bit homegrown. Competition comes from China, puts you on
31:48
Speaker 2: the not out of business, but on the ropes, and
31:50
Speaker 2: then you're forced to sell out of some degree of necessity.
31:54
Speaker 2: So Starbucks looking like they may go that way in
31:56
Speaker 2: a deal valued at four billion dollars for their Chinese business.
32:00
Speaker 2: Take a quick break when we come back here on
32:02
Speaker 2: the Financial Exchange stack Roulette.
32:05
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32:08
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32:11
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32:14
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32:19
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32:46
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33:10
Speaker 2: We were talking about during the break and I can't
33:13
Speaker 2: believe I forgot to, you know, just make the connection here.
33:16
Speaker 2: But hopefully Pizza Hut is still around by the time
33:19
Speaker 2: Space Balls two comes out and Pizza the Hut still
33:22
Speaker 2: makes a recurring theme there.
33:24
Speaker 3: Yeah, no one would get the bit.
33:26
Speaker 2: People probably wouldn't.
33:27
Speaker 3: People rarely got it in whenever it was eighty seven.
33:29
Speaker 2: Yeah, well we'll have to Yeah, they might have to
33:31
Speaker 2: find a more modern uh comparison there. We'll try and
33:37
Speaker 2: come up with. If you have any modern options for
33:41
Speaker 2: Pizza the Hut, you can text the show at six
33:43
Speaker 2: one seven three, six two thirteen eighty five. I am
33:46
Speaker 2: I am interested in your ideas. Mark, what do we
33:48
Speaker 2: have for stack Roulette? Today?
33:50
Speaker 3: I talked about first brands, the auto parts maker that
33:55
Speaker 3: is allegedly Yeah, well they're in bankruptcy that might be
33:59
Speaker 3: allegedly committed fraud.
34:00
Speaker 2: And you asked some light fraud.
34:03
Speaker 3: Yeah, you asked if the if the founder had been
34:05
Speaker 3: implicated any of this or something to that effect. This
34:08
Speaker 3: story came out. I think after we arrived at the
34:12
Speaker 3: today's so called stack of things we're going to talk about. Well,
34:15
Speaker 3: First Brands group Patrick James is being sued by the
34:19
Speaker 3: rump corporate, by the board management of First Brands. He's
34:24
Speaker 3: no longer I guess part of that, so being sued
34:26
Speaker 3: by the company for borrowing funds on fraudulent terms, diverting
34:31
Speaker 3: cash for to himself and it's not it's not funny,
34:34
Speaker 3: but it's it's predictable is not the right word, but
34:39
Speaker 3: it's it's not surprising, diverting cash to himself and his family,
34:45
Speaker 3: so funneling funds to to fund his quote and his
34:51
Speaker 3: families lavish lifestyle, lining the pockets of his family at
34:56
Speaker 3: the expensive First Brands and its creditors so they I
35:00
Speaker 3: don't think I've serious motivation here too.
35:02
Speaker 2: I don't think I've ever read a story about fraud
35:07
Speaker 2: that has been perpetrated that did not have the phrase
35:10
Speaker 2: in the article about lining the pockets of their lavish
35:14
Speaker 2: lifestyle on X, Y or Z, right.
35:17
Speaker 3: Else would you do it? You don't do it for charity?
35:19
Speaker 2: Usually not, Yeah, that's not usually what's coming up with
35:22
Speaker 2: these With the frauds that are occurring. Pollunteer thinks college
35:27
Speaker 2: might be a waste, so it's hiring high school grads.
35:29
Speaker 2: We actually had this story in the stack yesterday prior
35:31
Speaker 2: to them reporting earnings. But the tech companies offering twenty
35:34
Speaker 2: two teenagers a chance to skip college for their fellowship,
35:37
Speaker 2: which includes a four week seminar on Western civilization, because
35:41
Speaker 2: they will not be getting a university education. The Wall
35:45
Speaker 2: Street Journal interviews at least one candidate for the fellowship
35:49
Speaker 2: who is turning down a entrance into Brown University for
35:53
Speaker 2: the opportunity. And I guess here's what I will say
35:57
Speaker 2: about this. No, not everyone needs a college degree. I'll
36:01
Speaker 2: acknowledge that if you are turning down a Brown acceptance
36:07
Speaker 2: to go take the Palenteer opportunity, then you are probably
36:12
Speaker 2: in the upper echelons in terms of your test taking
36:15
Speaker 2: and every other credential anyway. And so I don't think
36:19
Speaker 2: that necessarily, I don't necessarily think that this story about
36:22
Speaker 2: Palenteer offering this opportunity should be a lesson to any
36:26
Speaker 2: eighteen year olds that, hey, I don't need a college degree.
36:29
Speaker 2: If you are getting accepted into this program at Palenteer,
36:32
Speaker 2: you are likely the very top of the crop and
36:35
Speaker 2: could get your pick of universities to choose from. Anyway.
36:39
Speaker 2: I'll also say that, imagine for a minute that you
36:42
Speaker 2: get seven years down your career path with Palenteer and
36:46
Speaker 2: then it all blows up in your face and you
36:48
Speaker 2: don't have a college degree or education to fall back on.
36:52
Speaker 2: I don't know that many other private companies out there
36:54
Speaker 2: are going to take a look at your internship that
36:58
Speaker 2: you did with Palenteer and say, you know what, I
37:00
Speaker 2: like that kid. He might not have a college degree,
37:03
Speaker 2: but he has this experience with the Palenttier internship program,
37:07
Speaker 2: so I'm going to go hire him or her. I
37:10
Speaker 2: feel like that's the way that this is all being discussed,
37:14
Speaker 2: and let's call the fact the facts. If this tech
37:16
Speaker 2: company is offering this opportunity for twenty two teenagers, they
37:20
Speaker 2: are going to be some of the best test takers
37:23
Speaker 2: and best coders of their classes across the country. And
37:28
Speaker 2: I don't think it's a sign that the need for
37:30
Speaker 2: a college education is dying in any meaningful way.
37:33
Speaker 3: Yeah, your earnings potential is almost certainly higher with a
37:35
Speaker 3: degree from Brown or just about anywhere, frankly, then a
37:39
Speaker 3: couple of years of job experience, which you're gonna get anyway. Yep,
37:43
Speaker 3: unless you have unless for some reason you're in a
37:45
Speaker 3: huge rush to earn money. I don't want to overject.
37:48
Speaker 2: I don't necessarily fault this kid for making this decision. He's,
37:50
Speaker 2: you know, you're eighteen years old, Like, yeah, you can
37:53
Speaker 2: always do college later. I would merely point out that
37:56
Speaker 2: he's probably not you because he got accepted to in
38:00
Speaker 2: the first place and had this other opportunity. Let's take
38:03
Speaker 2: quick break. When we come back, it's going to be
38:06
Speaker 2: tomorrow because it's the end of our show. Today. Markets
38:08
Speaker 2: are strongly in negative territory, SMP off three quarters of percent,
38:11
Speaker 2: NASDAK off more. We'll have a full recap and more
38:13
Speaker 2: for you tomorrow