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Home builders are getting crushed by slow new home sales · The Financial Exchange Show

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Speaker 1: and Paul.
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Speaker 2: Lane, Chuck, Paul, and Tucker with you here and as
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Speaker 2: we kick things off, we got some housing related information
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Speaker 2: to share with you today. Starting with before before most
1:23
Speaker 2: people woke up this morning, Home Depot reported earnings.
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Speaker 3: They came in.
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Speaker 2: Interestingly, they did miss on both revenue and earnings, the
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Speaker 2: first time since twenty fourteen that they have had a
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Speaker 2: miss on both top and bottom line in the same quarter.
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Speaker 2: Despite that, you get headlines like this one from Bloomberg
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Speaker 2: Home Depot sales gain with shoppers opting for smaller projects.
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Speaker 2: And when we look at home Depot stock today, they
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Speaker 2: are responding positively at this point, up four and a
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Speaker 2: quarter percent. What's going on with the depot of the homes, Paul.
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Speaker 4: I'm a little surprised, Chuck to see the increase on
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Speaker 4: Home deep of stock today because you read through a
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Speaker 4: lot of this earnings feedback and none of it I
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Speaker 4: would really point to as being something that is really
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Speaker 4: accreative to the stock. And if you look at the
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Speaker 4: state of the housing market, which we'll get into, and
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Speaker 4: we've talked about it in prior shows, it's not in
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Speaker 4: a very good place. And Home Depot has been in
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Speaker 4: this cycle the last couple of years where many of
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Speaker 4: its consumers have sort of pushed back these larger projects
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Speaker 4: on their home The CFO was quoted as saying that
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Speaker 4: this home deferral has really lingered since twenty twenty three.
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Speaker 4: So I'm a bit puzzled as to why the stock's
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Speaker 4: going up. I mean, we can get into the nitty
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Speaker 4: gritty of the earnings report, but am I missing something
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Speaker 4: that you've peeled out here?
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Speaker 2: The only thing that I saw is during the quarter
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Speaker 2: on a per month basis, like they even broke this
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Speaker 2: down further and basically they we saw steady increases in
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Speaker 2: spending over the course of the quarter. And so I
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Speaker 2: guess the good news could be, hey, look, you've had
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Speaker 2: a couple months of upwardly trending same store sales now
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Speaker 2: within the quarter. If you expect that to continue, it
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Speaker 2: gives you a path towards further improvement in the second
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Speaker 2: half of the year, and I think that could be
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Speaker 2: the read through when you look at this. It is
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Speaker 2: tough to just look at housing as a whole and say, hey, there's.
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Speaker 3: Any meaning like that.
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Speaker 2: There's no meaningful growth impulse in housing right now, and
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Speaker 2: so the question and kind of what you're betting on
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Speaker 2: with with Home Depot is combination of hey, there's gonna
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Speaker 2: be you know, more renovations that happen, and there are
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Speaker 2: going to be not even renovations, it's more of like
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Speaker 2: the smaller projects. Hey, I've got you know, a pantry
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Speaker 2: that I want to put new shelving in. Great, you know,
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Speaker 2: all in between the shelving and maybe some new drywall
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Speaker 2: and paint that I got to do in order to
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Speaker 2: make it all you know how I want. Okay, I'm
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Speaker 2: gonna be you know, in for seven hundred bucks and
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Speaker 2: I've got to you know, and hey, more homeowners are
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Speaker 2: going to do that kind of stuff. So I don't
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Speaker 2: think this is like a bad you know report. Again,
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Speaker 2: comp sales up one percent in this environment is pretty
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Speaker 2: darn good. I mean here, here's the other thing that's
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Speaker 2: always true about Home Depot. Even in a tough environment
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Speaker 2: like they've been in for kind of the last two
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Speaker 2: years now, I mean since you know, early twenty three,
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Speaker 2: it's been kind of it's been pretty tough in housing,
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Speaker 2: they're great operators. I mean, this is this is a
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Speaker 2: company where you can look at a quarter that's kind
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Speaker 2: of me and still say, hey, they They rang everything
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Speaker 2: they could out of that quarter because the economic fundamentals
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Speaker 2: are just not particularly good for Home Depot, But they
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Speaker 2: still figured out how to make it work for them,
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Speaker 2: and I think that that at least reaffirms that management
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Speaker 2: still knows how to make you know, chicken salad out
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Speaker 2: of chicken bleep.
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Speaker 5: Yeah.
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Speaker 4: No, it's it's interesting the strategic shift that they've had.
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Speaker 4: They've really made a huge focus on targeting the pro
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Speaker 4: contractors out there. If you look at them compared to
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Speaker 4: Low's Low's Services, about seventy percent of its customers are
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Speaker 4: kind of DIY, the do it yourselfers, whereas Home Depot
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Speaker 4: now is saying their CFO that fifty five percent of
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Speaker 4: Home Depot sales are to professionals out there. And they've
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Speaker 4: done this furthered this by acquiring SRS Distributions for eighteen
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Speaker 4: billion last year, which is a supplier of roofing and
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Speaker 4: landscaping and pool professional equipment. And then they also grabbed
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Speaker 4: another company out there that has specialty building products. So
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Speaker 4: to your point, the resiliency that they have in a
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Speaker 4: really tough environment for home sales is impressive. This comparable
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Speaker 4: sales growth that we note here only in two of
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Speaker 4: the alas eleven quarters have they been able to report
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Speaker 4: sales growth. So it's been a tough environment, and it
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Speaker 4: does seem like the position that they've had on the
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Speaker 4: pro side of things leads them to at least be
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Speaker 4: positioned well Chuck. If for some reason we are to
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Speaker 4: get a turnaround in the housing market, whether that comes
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Speaker 4: from lower interest rates or just perhaps people finally just
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Speaker 4: stopping punting on these larger products, they are well positioned.
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Speaker 4: The stock's been relatively flat this year heading into today's action,
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Speaker 4: but interesting to see sort of how they've continue to
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Speaker 4: mold their business on the pro side.
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Speaker 2: Yeah, I mean, it's just something where they're just good
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Speaker 2: operators of the business. They're able to maintain margins pretty consistently.
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Speaker 2: Their margins if weakened a little in the last couple
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Speaker 2: of years, but again that's kind of expected. I mean,
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Speaker 2: housing has been when we talk about housing, like housing
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Speaker 2: construction has just been bad since early twenty three. It's
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Speaker 2: been on a steady decline. If you look at the
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Speaker 2: data out there in terms of number of units under construction,
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Speaker 2: which is what matters, right, Like it's permits and starts
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Speaker 2: ultimately feed into hey, how many units are under construction
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Speaker 2: and how much stuff do you need in order to
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Speaker 2: build all this? After Q two of twenty three, we
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Speaker 2: were seeing about one point seven million units under construction
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Speaker 2: on an annualized basis. In the US, it's at one
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Speaker 2: point three seven to two right now. So you do
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Speaker 2: the math, that's a twenty percent drop in construction activity
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Speaker 2: over the last two years. And Home Depot has been
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Speaker 2: able to respond by saying, Okay, like, yeah, we had
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Speaker 2: like some bad comps a couple of years ago, but
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Speaker 2: our margins are still you know, thirteen and a half
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Speaker 2: percent instead of fifteen, and we're figuring out, you know,
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Speaker 2: where to grow and like, they're just good operators, and
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Speaker 2: I give them a lot of credit for that because
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Speaker 2: it's not an easy time to be selling lumber and
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Speaker 2: selling sinks and selling lighting. I mean, it's it's just
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Speaker 2: kind of gross out there in terms of new construction activity.
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Speaker 2: And so given that, I think the one thing that
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Speaker 2: you can continue to say I said, again, I'm a
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Speaker 2: broken record on this, they're really good operator their business.
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Speaker 2: And if there's one thing we have seen, people are
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Speaker 2: willing to pay up now for good operators of otherwise
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Speaker 2: boring businesses. Look no further than Walmart as an example
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Speaker 2: of that.
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Speaker 5: Sure.
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Speaker 4: The other thing I would note here is in terms
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Speaker 4: of tariff impact, there really wasn't any in terms of
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Speaker 4: the data from this quarter. Just for folks out there
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Speaker 4: who may be asking, are they seeing price increases, and
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Speaker 4: the short answer is no. All of the items that
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Speaker 4: they sold over the course of this quarter that they
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Speaker 4: just reported were imported prior to tariff's being in place.
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Speaker 4: They source about fifty percent of their items in the
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Speaker 4: US Home Depot, and the CFO had mentioned that they
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Speaker 4: are going to do their best to hold line and
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Speaker 4: don't really anticipate major price increases. Again that can change,
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Speaker 4: but muted impact and really nothing to report on any
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Speaker 4: tear front there.
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Speaker 2: Along these lines, we get a piece from market Watch
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Speaker 2: talking about the NHB data that came out yesterday. Homebuilders
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Speaker 2: boost sales and incentives to five year high as they
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Speaker 2: struggle to sell newly built homes. This is a real thing.
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Speaker 2: When we look at inventories that are sitting out there
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Speaker 2: of newly finished homes, you're at the highest level since
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Speaker 2: two thousand and nine, which is not the kind of
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Speaker 2: comparison that you want to be making when it comes
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Speaker 2: to anything related to housing.
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Speaker 5: No question about it. We've talked about it before.
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Speaker 4: The percentage of builders offering incentives has now increased to
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Speaker 4: sixty six percent in the month of August. That was
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Speaker 4: sixty two percent the prior month. So, like you mentioned,
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Speaker 4: a five year high, that percentage figure that I just
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Speaker 4: quoted here, the confidence index has dropped too from where
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Speaker 4: it was last year. On the building front, and you
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Speaker 4: think of the pockets of the country, Chuck, that would
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Speaker 4: have the most building activity, and we've talked about on
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Speaker 4: the program before, Florida, areas of the Sunbelt, there just
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Speaker 4: isn't a tremendous amount of demand to build there. The
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Speaker 4: housing markets are in really difficult shape. So you just
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Speaker 4: don't have a tremendous amount of eagerness for those homebuilders
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Speaker 4: to get out there and build in what is a
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Speaker 4: very tepid real estate market from the demand side of things.
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Speaker 2: And in terms of those those inventories that are out
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Speaker 2: there so recently completed, you know, constructions. Right now, you've
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Speaker 2: got one hundred and nineteen thousand units available nationwide. This
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Speaker 2: is according to data from the Census Bureau. If you
10:22
Speaker 2: look back through the twenty tens, just as an example,
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Speaker 2: and you know, things were still normalizing as of you know,
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Speaker 2: twenty eleven to twelve from the housing bubble, but you
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Speaker 2: were down in twenty thirteen and fourteen. You're down at
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Speaker 2: like forty to fifty thousand units available. By the end
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Speaker 2: of the twenty tens, you moved up to around sixty
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Speaker 2: to seventy five eighty thousand units available nationwide. So you're
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Speaker 2: running right now at almost one hundred and twenty thousand,
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Speaker 2: anywhere from like a fifty percent to one hundred percent
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Speaker 2: increase from late twenty tens inventory. And the last time
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Speaker 2: that we saw housing inventory this high for completed homes
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Speaker 2: was August of two thousand and nine. It's just not
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Speaker 2: really a good comp again, like you, you do not
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Speaker 2: want to be.
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Speaker 3: There the peak that we saw.
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Speaker 2: Just so that you can understand the context of heyt
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Speaker 2: at peak housing bubble, what did things look like September
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Speaker 2: two thousand and seven, We had one hundred and ninety
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Speaker 2: four thousand units brand new ones finished but unsold, still
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Speaker 2: sitting out there, completed but unsold. And so the reason
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Speaker 2: why you are hearing about builders cutting back on their
11:29
Speaker 2: plans right now for construction, they don't want to get
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Speaker 2: back to one hundred and ninety four thousand units of
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Speaker 2: unsold inventory.
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Speaker 3: Again, right, it's kind.
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Speaker 2: Of bad for business. It's not good for them. And look,
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Speaker 2: it's not even just that, like you haven't sold these
11:43
Speaker 2: and made the money yet. You got to pay for
11:45
Speaker 2: landscapers to come in and mow the lawns so that
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Speaker 2: people will visit. You've got to pay in the Northeast
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Speaker 2: for you know, plowing the driveway so people can visit
11:53
Speaker 2: in the winter and stuff like that.
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Speaker 3: You got to have all.
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Speaker 2: The upkeep, but you don't get any money from it
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Speaker 2: until you actually sell it. That's a huge drag on
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Speaker 2: home builders as well. So we'll have to see where
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Speaker 2: this number goes. There some signs in the last few
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Speaker 2: months that maybe we're finding a little bit of a
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Speaker 2: plateau here in that one ten to one twenty thousand
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Speaker 2: unit range. Again, it more just speaks to the fact
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Speaker 2: that builders are pulling back as opposed to any surge
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Speaker 2: in buying activity. But we'll see where this goes, because
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Speaker 2: that's going to be the driver of how how home
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Speaker 2: builders move in the second half of this year and
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Speaker 2: into next year. Is Look, what's my own sold inventory
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Speaker 2: look like? Because I'm not sticking more shovels in the ground.
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Speaker 2: If I can't move these units, take a quick break here.
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Speaker 2: When we return, we're talking Intel.
12:42
Speaker 3: Right after this.
12:44
Speaker 1: Tara Fleebury's in high gear. We've got the latest on
12:47
Speaker 1: what might be next and how long it might last.
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Speaker 2: Paul piece from Bloomberg late yesterday giving us some additional
13:45
Speaker 2: information on the United States potentially becoming a shareholder in Intel.
13:50
Speaker 3: What do we learn?
13:51
Speaker 4: It seems that there is a potential. Again, this is
13:55
Speaker 4: all just rumored. There's been nothing official yet that they
13:57
Speaker 4: could utilize some of the chipsack money that was granted
14:02
Speaker 4: to Intel and convert them into an equity stake within
14:06
Speaker 4: the company. Intel had been allocated ten point nine billion
14:10
Speaker 4: in grants for commercial and military production of chips. The
14:13
Speaker 4: government is really focused on making sure that there is
14:16
Speaker 4: a domestic alternative for chip manufacturing. It's dominated largely by
14:22
Speaker 4: Taiwan Semiconductor and Samsung over in Asia, and they're looking
14:28
Speaker 4: for a United States solution. So these grants are supposed
14:31
Speaker 4: to be given out over different tranches based on different
14:35
Speaker 4: benchmarks being held and hit in terms of Intel building
14:39
Speaker 4: out its manufacturing capabilities, So this would be something that
14:44
Speaker 4: would progress over time. In terms of my feeling a
14:48
Speaker 4: little torn, Chuck just I don't really love government invention,
14:53
Speaker 4: intervention in business in general, more of a laissez fair
14:56
Speaker 4: approach personally, but obviously I recognize that need for domestic
15:01
Speaker 4: manufacturing of chips Intel as backing them as potentially the
15:06
Speaker 4: right bet.
15:08
Speaker 5: Historically they obviously we were.
15:10
Speaker 4: Dominant in the eighties and nineties and really were just
15:13
Speaker 4: the pinnacle of manufacturing. But they've really just screw the
15:18
Speaker 4: pooch big time. Over the course the last couple decades,
15:20
Speaker 4: they completely missed Mobile and they also have missed this
15:24
Speaker 4: AI wave as well. So mixed thoughts on this you
15:29
Speaker 4: know proposal here, and this also piggybacks off of soft
15:32
Speaker 4: Bank also announcing that they will be investing two billion
15:36
Speaker 4: dollars in Intel as well.
15:38
Speaker 2: So rule number one never follows soft Bank into anything.
15:42
Speaker 5: I wanted to get into them a little bit, like like.
15:44
Speaker 3: Full stop, like Maciosi.
15:46
Speaker 2: Son has a track record over the last decade or
15:50
Speaker 2: so of generally being kind of late to the party
15:53
Speaker 2: and backing the wrong horse. Granted, like it's not to
15:55
Speaker 2: say that he hasn't had you know, great investments. Historically,
15:59
Speaker 2: soft Bank has had you know a few major winners,
16:01
Speaker 2: largely from the early twenty tens. But recently we're talking
16:04
Speaker 2: about companies like you know, we work and things like
16:06
Speaker 2: that that you know we didn't work, and okay, like
16:09
Speaker 2: you move on, you take the l and you call
16:11
Speaker 2: it a day. When we talk about the federal government
16:16
Speaker 2: taking a stake in a major American publicly traded company,
16:24
Speaker 2: let's talk about the potential, you know, problems that that entails.
16:29
Speaker 2: Number one you've got a company that is now part
16:33
Speaker 2: owned by the federal government as such, are we going
16:37
Speaker 2: to then be more or less likely to try to
16:41
Speaker 2: funnel more money to that company because of you know,
16:45
Speaker 2: already existing, because that relationship already exists, regardless of whether
16:50
Speaker 2: or not the product coming out is actually good. Probably right,
16:55
Speaker 2: like it's it's not really great. Number two? Okay, you
16:59
Speaker 2: have to assume is it fair to say that if
17:03
Speaker 2: the US government wants to be a shareholder in Intel,
17:06
Speaker 2: they're probably not going to just be a passive shareholder
17:08
Speaker 2: that lets Intel do whatever it wants.
17:11
Speaker 4: Absolutely not. You know, They're they're gonna make sure this
17:13
Speaker 4: manufacturing gets They're gonna.
17:16
Speaker 2: Want board seats and stuff like that so they can
17:18
Speaker 2: exercise some level of control. Like do US politicians rather,
17:22
Speaker 2: do politicians have any political persuasion or any geographical and
17:29
Speaker 2: any polity? Do do politicians in general like to preside
17:34
Speaker 2: over job losses?
17:36
Speaker 5: No?
17:37
Speaker 2: What do companies often need to do in order to
17:40
Speaker 2: get more competitive in the landscape? They often need to
17:43
Speaker 2: lay people off. Are you gonna have you know, someone
17:46
Speaker 2: on the board saying no, don't lay people off because
17:49
Speaker 2: it's gonna look bad for US.
17:51
Speaker 3: M Okay, yep.
17:54
Speaker 2: Furthermore, regardless of what you think about this administration, good, bad,
17:58
Speaker 2: everything in between, if the next administration comes in and
18:02
Speaker 2: they are not someone who likes or believes in Intel,
18:06
Speaker 2: are you now putting the future of this company in
18:09
Speaker 2: the hands of someone who just because maybe there's a
18:12
Speaker 2: bad relationship there this and that decides, Hey, guess what,
18:15
Speaker 2: we're pulling the plug and you undo, maybe something good
18:18
Speaker 2: that actually comes from this. Sure, these are things where
18:22
Speaker 2: when you get into state owned enterprises, even on a
18:26
Speaker 2: minority level, it becomes kind of problematic. I am much
18:31
Speaker 2: more in favor of Hey, if you have something where
18:35
Speaker 2: you see, you know, a critical need for products X, Y,
18:39
Speaker 2: and Z, great, let's find a way, even if it
18:42
Speaker 2: doesn't make economic sense. Let's find a way to produce
18:45
Speaker 2: that stuff here through you know, ways that we can
18:49
Speaker 2: incentivize production. Look at the MP Materials deal just as
18:53
Speaker 2: an example. I'm gonna keep coming back to this one
18:55
Speaker 2: because I actually think it makes a good deal of
18:58
Speaker 2: sense if you look get the key tenants of that deal.
19:03
Speaker 2: You know, from earlier this summer, the big things were Okay,
19:08
Speaker 2: here's a bunch of money in order to produce.
19:12
Speaker 3: These rare earth materials.
19:15
Speaker 2: We are going to guarantee purchases at a certain level
19:20
Speaker 2: at a certain price, and we are going.
19:24
Speaker 3: To basically pay for that.
19:26
Speaker 2: We're also going to provide some financing, but it's going
19:29
Speaker 2: to be on the dead side, not the equity side.
19:32
Speaker 2: And we'll talk a little bit more about this when
19:34
Speaker 2: we come back. Along with Wall Street Watch, Like us.
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20:02
Speaker 6: Markets are in mixed territory as investors react to the
20:05
Speaker 6: first wave of major retailer earnings from Home Depot unveiled
20:09
Speaker 6: this morning with mixed results. Right now, the Dow is
20:13
Speaker 6: up by six tenths of one percent, or two hundred
20:16
Speaker 6: and seventy three points. SMP five hundred is now completely flat,
20:21
Speaker 6: Nasdaq is off by six tenths of one percent, or
20:24
Speaker 6: down one hundred and forty one points. Russell two thousand
20:27
Speaker 6: is up by one tenth of a percent. Ten year
20:29
Speaker 6: treasure yield is down two basis points at four point
20:33
Speaker 6: three one percent, and crude oil off nearly one percent,
20:37
Speaker 6: lower training and sixty two dollars in eighty four cents
20:40
Speaker 6: a barrel. Home Deepot reported disappointing second quarter results, where
20:44
Speaker 6: the home improvement retailers said that consumers were still delaying
20:48
Speaker 6: big ticket projects and that it would make modest price increases. However,
20:53
Speaker 6: home Depot backed its annual outlook, sending shares up by
20:58
Speaker 6: four percent at the moment. Meanwhile, Intel shares are rising
21:01
Speaker 6: over eight percent after Japan's SoftBank agreed to invest two
21:05
Speaker 6: billion dollars in the struggling chip maker. This comes after
21:09
Speaker 6: news that the US government has been considering taking a
21:12
Speaker 6: stake in Intel. Elsewhere, Palo Alto Networks reported quarterly results
21:18
Speaker 6: at Beach Street forecast and offered full year guidance that
21:21
Speaker 6: was stronger than expected. Shares in this cybersecurity company are
21:25
Speaker 6: up nearly five percent. Medtronic down by four percent, falling
21:29
Speaker 6: news that the medical device makers adding directors after Elliott
21:33
Speaker 6: Investment Management became a major shareholder. Medtronic also reported strong
21:39
Speaker 6: quarterly results and hiked its angle outlook, citing lower than
21:42
Speaker 6: expected tariff costs. Shares a Viking Therapeutics tumbling forty percent
21:47
Speaker 6: after the company released mid stage trial data on its
21:50
Speaker 6: obesity pill that disappointed, and TV station operator Nextstar Media
21:55
Speaker 6: agreed to buy its rival Tegna for six point two
21:58
Speaker 6: billion dollars. The Wall Your Journal previously reported that Sinclair
22:02
Speaker 6: was also seeking a merger with Tegna. Shares Integna in
22:05
Speaker 6: next Star up over four percent. Well, Sinclair stock is flat.
22:10
Speaker 6: I'm Tucker Silva, and that is Wall Street Watch.
22:14
Speaker 3: Paul.
22:14
Speaker 2: A couple other things that I want to touch on,
22:16
Speaker 2: just with Intel and the possibility of the US government
22:19
Speaker 2: taking a stake there with the NP Materials deal. One
22:24
Speaker 2: of the things is, look, we've seen in the last year,
22:29
Speaker 2: not even the last year, last six months, the importance
22:32
Speaker 2: of being able to produce rare earth materials domestically correct correct.
22:41
Speaker 2: With Intel, is there any information specifically that we need
22:47
Speaker 2: to have Intel chips produced here domestically.
22:52
Speaker 4: Just the looming thread of you know, potential Chinese invasion
22:56
Speaker 4: into of Taiwan, but not today.
22:57
Speaker 2: I agree, Maybe I didn't make the question clear. Is
23:03
Speaker 2: there any reason why we need Intel chips specific Intel? No,
23:08
Speaker 2: if you like, you look at it, just as an example,
23:10
Speaker 2: Taiwan Semiconductor I got a big old factory they're building
23:13
Speaker 2: down in Arizona. Samsung's doing one in Texas. They might
23:16
Speaker 2: be doing one in Arizona two, I can't remember. LG
23:19
Speaker 2: it's doing the same thing. Why why Intel, I guess,
23:23
Speaker 2: is my question? And and what I mean by this
23:26
Speaker 2: is I too believe that we need to have semiconductors
23:30
Speaker 2: produced here domestically. Why are we taking a steak in
23:36
Speaker 2: Intel when they're not really proven as a good operator
23:41
Speaker 2: in this space right now? Like if you wanted to
23:43
Speaker 2: produce semiconductors domestically, Hey, Taiwan Semi, come to us. We're
23:50
Speaker 2: gonna invest X dollars in this. I'm not even saying
23:53
Speaker 2: I like the deal structure, but just like bear with me,
23:56
Speaker 2: we're gonna I want you to set up, you know,
23:58
Speaker 2: a joint venture in the U. They might even already
24:01
Speaker 2: have one for just how they're structuring their US operations.
24:05
Speaker 2: Said up a joint venture in the US. We're going
24:07
Speaker 2: to own ten percent of it, and we want you to,
24:10
Speaker 2: you know, do the build out and do your stuff there.
24:13
Speaker 2: What's if Intel doesn't make the chips that are cost competitive,
24:21
Speaker 2: you know, competitive in terms of performance, and they're struggling
24:25
Speaker 2: to get their quality to where they need it to be.
24:28
Speaker 2: Why do we just want to throw more money at
24:30
Speaker 2: them at this point in this format too? Because remember,
24:34
Speaker 2: as an equity holder, if the company does badly, you
24:37
Speaker 2: do badly.
24:38
Speaker 1: Right, right?
24:39
Speaker 3: What's like? What?
24:40
Speaker 2: And I saw, you know, Commerce Secretary Lutnik today say well, look,
24:44
Speaker 2: you know this is a chance for the US to
24:45
Speaker 2: participate in the upside. Well, if the US wants to
24:48
Speaker 2: theoretically participate in the upside. Again, this is before I
24:51
Speaker 2: even get to you know, being cool with just you know,
24:54
Speaker 2: state owned semiconductor companies and things like that. Why are
24:57
Speaker 2: you picking Intel and not anyone else who's doing this
25:00
Speaker 2: right now?
25:01
Speaker 5: They're the only US option?
25:03
Speaker 4: Really, is probably the short answer to that, not to
25:05
Speaker 4: say I agree with that, and I mean they're not
25:08
Speaker 4: though who on the manufacturing side, who would be the
25:10
Speaker 4: next pick?
25:11
Speaker 3: Well, you're talking like for fabs and stuff.
25:13
Speaker 5: Yes, that's what they care about.
25:17
Speaker 2: Okay, I guess like, let's say, let's take this a
25:20
Speaker 2: step further then, if you really want to have a
25:24
Speaker 2: state owned chip maker, why not make a state owned
25:28
Speaker 2: chip maker.
25:29
Speaker 4: Well, that's gonna take even longer than into Intel is
25:32
Speaker 4: probably going to take a decade to figure it out.
25:34
Speaker 4: But it's gonna take even longer longer to see, which is.
25:36
Speaker 3: Why this is kind of a bad idea, right, No,
25:38
Speaker 3: I'm not.
25:39
Speaker 4: I'm not here to say the idea is a great idea,
25:42
Speaker 4: but that I'm just telling you the logic behind the decision.
25:45
Speaker 4: I would agree with you that we have to research
25:47
Speaker 4: probably Taiwan semi conducted they're that agreement. There's no way
25:50
Speaker 4: there isn't some deal in place or some partnership there
25:53
Speaker 4: for Taiwan Semiconductor to build that fab in Arizona. I
25:57
Speaker 4: feel like there has to be some sort of US
25:59
Speaker 4: government commits meant to that. But I'll take a look
26:01
Speaker 4: at that. But ultimately that's that's why the impetus for
26:04
Speaker 4: this decision, and based on their checkered history, I don't know,
26:08
Speaker 4: it's not necessarily the right horse of back. I don't
26:10
Speaker 4: agree with that at all, because they really have struggled,
26:13
Speaker 4: like I said, over the last fifteen years or so,
26:15
Speaker 4: whether it's mobile anything on the AI front, and the
26:19
Speaker 4: sophistication that's required to do this manufacturing. It's just it's
26:24
Speaker 4: a very high bar to clear and it's really capital
26:27
Speaker 4: intensive and to your point, as an equity stakeholder that
26:30
Speaker 4: would potentially require more capital commitment down the road, or
26:34
Speaker 4: or Intel is going to have to raise more debt
26:35
Speaker 4: to do this. It's it's a long road for sure.
26:39
Speaker 2: This also gets the problem of you mentioned, Hey, it
26:42
Speaker 2: tells like the only the only game in town, right
26:46
Speaker 2: you said something along those lines. Yeah, The benefab like
26:49
Speaker 2: that kind of.
26:50
Speaker 4: Because so many of the US companies are more design driven.
26:53
Speaker 4: On the chip side of things, they're probably the best,
26:56
Speaker 4: but on the manufacturing side.
26:58
Speaker 2: So I guess we're going with this is like I
27:02
Speaker 2: was also looking just at Intel's history of acquisitions over
27:06
Speaker 2: you know, the last twenty thirty years, and you know,
27:11
Speaker 2: a lot of the stuff is you know, kind of
27:12
Speaker 2: random things here and there. There's a few things, but
27:16
Speaker 2: they've also bought you know, some semiconductor manufacturers over the
27:19
Speaker 2: last fifteen twenty years as well. You know, it's not
27:23
Speaker 2: just you know, they've bought companies that you know, do
27:25
Speaker 2: you know machine learning and cloud computing and this and that,
27:28
Speaker 2: and that's what it is. But in terms of you know,
27:31
Speaker 2: actual you know, semiconductor capacity and things like that. Back
27:36
Speaker 2: in twenty fifteen, just as an example, All Terror was
27:39
Speaker 2: a semiconductor manufacturer. They were founded back in I want
27:42
Speaker 2: to say, like early mid eighties, like like most of
27:44
Speaker 2: them out in California, and Intel was allowed to buy
27:48
Speaker 2: them back in twenty fifteen for around fifteen sixteen point
27:51
Speaker 2: seven billion dollars. And you say, okay, Like, isn't part
27:55
Speaker 2: of the problem that we don't really have many companies
27:58
Speaker 2: that do this because there's been so much consolidation all
28:01
Speaker 2: out in this space that you have to back the
28:03
Speaker 2: bad horse instead of having other ones that are out
28:05
Speaker 2: there that you can potentially rely on.
28:08
Speaker 4: Yes, that's that's definitely part of it. And it's just
28:11
Speaker 4: it's such a capital intensive business too, that it's it's
28:14
Speaker 4: hard to build up. Not impossible, but it's challenging.
28:18
Speaker 2: So I don't know, I just I look at this
28:20
Speaker 2: and I just get a little bit nervous about it
28:24
Speaker 2: because I've seen this before where when you start getting
28:28
Speaker 2: into companies that you know historically are owned by, you know,
28:35
Speaker 2: the government with which they reside in, it can create
28:38
Speaker 2: some perverse incentives where things don't necessarily go great in
28:42
Speaker 2: the future.
28:42
Speaker 3: And so I just I have questions about it. I
28:46
Speaker 3: wonder about it.
28:47
Speaker 2: I guess sure, let's see let's take a quick break now,
28:53
Speaker 2: and when we return, Uh, let's take a look at
28:58
Speaker 2: what we're seeing in the economic data as a whole.
29:01
Speaker 2: There's a good piece of New York Times talking about this,
29:03
Speaker 2: and so let's touch on that when we return.
29:07
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29:25
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29:36
Speaker 2: Piece of New York Times that I, you know, a
29:39
Speaker 2: lot of times I'll call out, you know, a headline
29:41
Speaker 2: or a piece for being just you know, sensationalists are
29:45
Speaker 2: not really meaning anything or you can't do anything with this.
29:49
Speaker 2: In this case, I actually feel the opposite, and so
29:52
Speaker 2: I like to point out, you know, good things that
29:54
Speaker 2: I see that are out there as well. Piece here
29:56
Speaker 2: in the New York Times. Economic data has taken a
29:58
Speaker 2: dark turn. That doesn't necessarily mean a crash is near,
30:03
Speaker 2: and the subheader is inflation is up, in job creations down,
30:06
Speaker 2: but the US economy could still pull through without too
30:08
Speaker 2: much pain. And this is something we've been saying on
30:10
Speaker 2: our show for you know, quite a while now, which is, look,
30:13
Speaker 2: just because you have things slowing down here for a
30:16
Speaker 2: quarter or two doesn't mean that you inherently go into recession.
30:20
Speaker 2: We've seen this in the last two years, where heading
30:23
Speaker 2: into the fall, each time we had questions about job
30:26
Speaker 2: growth and inflation, and each time they were answered positively. Yes,
30:30
Speaker 2: we can get through this. The US economy is strong
30:32
Speaker 2: enough and it's going to be able to deal with this.
30:35
Speaker 2: And it's not saying that will or won't be the
30:38
Speaker 2: case this time, but much more. Hey, the US economy
30:41
Speaker 2: is a pretty robust and dynamic thing. And even though
30:45
Speaker 2: there are some questions that are out there on the
30:47
Speaker 2: US economy right now, it could still be answered successfully
30:50
Speaker 2: over the next couple months. And then as you get
30:52
Speaker 2: into next year, you've got a ton of potential business
30:55
Speaker 2: incentives from the big beautiful bill that could spur you know,
30:59
Speaker 2: additional investment, and now you're off to the races again
31:02
Speaker 2: in twenty twenty six. This is absolutely something that is
31:05
Speaker 2: possible that we have to you know, keep on our
31:07
Speaker 2: board as a real potential possibility for twenty twenty six.
31:13
Speaker 4: So many pundits out there are always in the business
31:16
Speaker 4: of trying to make a dramatic call one way or another,
31:19
Speaker 4: chuck that the economy is going to boom, or the
31:22
Speaker 4: economy is going to bust.
31:23
Speaker 3: Bear, we're so back, gets so over, We're so back
31:26
Speaker 3: gets so over.
31:26
Speaker 5: Bare bull case.
31:27
Speaker 4: You know, all these different terminologies that get thrown around.
31:31
Speaker 4: But sometimes and it's not appealing, it doesn't get clicks,
31:35
Speaker 4: and it also doesn't get views on the video front.
31:38
Speaker 4: Sometimes you might just go through a little bit of malaise.
31:40
Speaker 4: And that's possible here. And it's something that when you
31:43
Speaker 4: covered so much of this stuff earlier, when the tariffs
31:46
Speaker 4: were announced, it just was always one way or another.
31:49
Speaker 4: People viewed it in two different directions. Either this is
31:52
Speaker 4: going to fall apart and be disaster or this is
31:53
Speaker 4: going to be lucrative. And the answer could be somewhere
31:56
Speaker 4: in the middle, which isn't sexy to say, but we
31:59
Speaker 4: could get through this, muddle through it just fine. And
32:01
Speaker 4: like you said in twenty twenty six, turn the corner.
32:04
Speaker 2: So I just think it's important to keep, you know,
32:06
Speaker 2: the potential for upside on your dark board as something
32:10
Speaker 2: that we could see here. I mean, I'm not necessarily
32:13
Speaker 2: talking like upside in markets, Like you can also have
32:15
Speaker 2: something where, hey, the US economy catches up and markets
32:18
Speaker 2: stall for a little bit in order to get things
32:20
Speaker 2: more aligned there, Like, that's very possible too. So I
32:23
Speaker 2: think it's always just useful to remember. Now I think
32:27
Speaker 2: back at the last four or five years and just
32:32
Speaker 2: probably like how many things were like certain to throw
32:35
Speaker 2: us into recession during that time, and how many things
32:39
Speaker 2: then were, oh, well, the US Economy's gonna boom because
32:42
Speaker 2: of this, and oftentimes the truth is somewhere in the middle,
32:45
Speaker 2: And I think it's just important for people to remember.
32:47
Speaker 4: That, no question, inflation that we saw in twenty twenty two,
32:50
Speaker 4: it's still damaging, but we got through that remarkably without
32:54
Speaker 4: a substantial recession.
32:56
Speaker 2: Folks, if you are sitting there right now and you're saying, hey, hey,
33:00
Speaker 2: you know what, this is all well and good, but
33:02
Speaker 2: I'm getting up there in age and I want to
33:04
Speaker 2: make sure that I'm leaving things better for that next generation.
33:08
Speaker 3: The Armstrong Advisory.
33:09
Speaker 2: Group does have a guide on this exact topic this
33:11
Speaker 2: exact month. It's titled Leaving a Lasting Legacy. What types
33:17
Speaker 2: of items are can you discussed in here. Making sure
33:22
Speaker 2: that your estate plan is aligned with your financial plan.
33:25
Speaker 2: How do you make sure that you're minimizing taxes to
33:27
Speaker 2: maximize what you're passing through to that next generation.
33:30
Speaker 3: How do you make sure that.
33:31
Speaker 2: You're minimizing taxes on a multi generational basis, not just you,
33:36
Speaker 2: but minimizing taxes for the people that inherit your assets.
33:40
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33:43
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33:58
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Speaker 2: eight hundred three nine to three four zero zero one,
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34:09
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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Speaker 1: registered investment advisor. Nothing in the ad or in any
34:14
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
34:17
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34:24
Speaker 3: Peace from the Wall Street Journal.
34:26
Speaker 2: SMP Global Ratings has affirmed the credit ratings of the
34:30
Speaker 2: United States, this with them saying they expect quote robust
34:35
Speaker 2: revenues from the Trump administration's newly Institute of Terror regime
34:38
Speaker 2: to help offset the fiscal deterioration resulting from recent legislative changes.
34:43
Speaker 2: So basically saying, hey, the big beautiful build provides for
34:47
Speaker 2: a bunch more spending and so it's not really doing
34:49
Speaker 2: anything to reign in deficits. But you got this tear
34:52
Speaker 2: for revenue coming in, and so long as that continues,
34:56
Speaker 2: things aren't really worsening.
34:57
Speaker 3: You're just kind of treading water.
34:59
Speaker 4: Yeah, there wasn't huge meaningful takeaways that I had from
35:03
Speaker 4: from this ratings reffe reformation here. I don't know if
35:05
Speaker 4: they get paid by the word, but they really throw
35:08
Speaker 4: around a lot of different words in their their statement here, Chuck.
35:12
Speaker 4: They really are trying to get that word count up
35:15
Speaker 4: and use as sophisticated verbiage as possible.
35:18
Speaker 2: It seemed like, here, what businesses do you think would
35:20
Speaker 2: be worse to be paid by the word in uh
35:25
Speaker 2: for the employer or for the employee?
35:30
Speaker 4: Those investment perspectuses that yes often can get in the
35:35
Speaker 4: hundreds of pages. Anything in the legal realm has got
35:39
Speaker 4: to be in there too.
35:40
Speaker 3: Can we talk about investment perspectuses for a bit?
35:43
Speaker 5: Sure?
35:43
Speaker 3: Just while like you brought it up, and I think
35:45
Speaker 3: it's a great topic.
35:48
Speaker 2: It's one that I've actually seen written about, which is
35:50
Speaker 2: basically like disclosure fatigue.
35:53
Speaker 3: And it's not just on.
35:53
Speaker 2: Investment perspectuses, it's on you know, oh, you signed up
35:57
Speaker 2: for door dash. Here are terms and conditions. Click here
36:00
Speaker 2: to agree, right, and has anyone actually read them? Aside
36:04
Speaker 2: from the guy I forget what the company was, but
36:06
Speaker 2: someone some company buried something in theres where it was like,
36:09
Speaker 2: if you're the first person to read this and reach
36:12
Speaker 2: out to us, you collect like ten thousand dollars from
36:14
Speaker 2: us or something like. That's fantastic, And it took like
36:16
Speaker 2: five or six years for someone to actually do it,
36:19
Speaker 2: just because no one reads the terms and conditions, you know,
36:22
Speaker 2: like it's just you get disclosed so much by the
36:26
Speaker 2: lawyers that you're just like, I don't know what this means.
36:30
Speaker 2: I'm just gonna click it and next thing, you know,
36:32
Speaker 2: McDonald's owns your front lawn.
36:35
Speaker 4: I mean, think about when you do your p and
36:37
Speaker 4: s to buy buy a house. That's a good example
36:39
Speaker 4: of one that just pages go on forever and ever,
36:42
Speaker 4: and it's just sign sign sign. They really should have
36:45
Speaker 4: some reason and that's it's in our industry. There is
36:48
Speaker 4: a case of that where right, there's summaries that are
36:51
Speaker 4: provided that just hit on the key points. And I
36:54
Speaker 4: feel like this statement here by the S and P
36:57
Speaker 4: on the reinformation rating could have been much shorter or
37:02
Speaker 4: much more concise than it was.
37:04
Speaker 5: But hey, it is much the same thing.
37:07
Speaker 2: Yeah, let's see private equity firm stocks are struggling despite
37:12
Speaker 2: getting into four oh one k's misleading headline, Yes, and no,
37:21
Speaker 2: I wonder is the reason that they're trying to get
37:24
Speaker 2: into four oh one k's because they're struggling a bunch.
37:28
Speaker 4: There's they're always gonna be looking for new capital. That's
37:31
Speaker 4: definitely part of it. The reason I would say misleading
37:34
Speaker 4: headline is yes, President Trump put that into that notice
37:38
Speaker 4: or whatever exactly was termed as but it's gonna take years,
37:42
Speaker 4: several years for them to get on platforms and to
37:45
Speaker 4: get approval. There's a lot that goes into the regulatory
37:49
Speaker 4: background for four one k's and what they put on
37:51
Speaker 4: their platform. They have to act as produci aya. So
37:53
Speaker 4: this isn't an immediate revenue stream that kicks on tomorrow.
37:57
Speaker 2: No, it's a it's a great point, like this stuff
37:59
Speaker 2: is not happen overnight. Even if even if the platform
38:04
Speaker 2: may approve it, the fiduciary overseeing the plan may still say,
38:09
Speaker 2: I need a little bit more time to look at
38:10
Speaker 2: these before I allow these investments actually into my particular plan.
38:14
Speaker 3: Let's take a quick break here.
38:15
Speaker 2: When we come back, oh nother hour stuff on the
38:19
Speaker 2: financial exchange.
38:21
Speaker 3: Back in a bit.