August 1, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the Fed clearing a path to a September rate cut what impact that will have on the Presidential election. A couple of early morning economic data releases paint a bleak picture that could end with recession. Meta posts strong earnings off the back of ad sales and shows how expensive AI is getting for companies. Nvidia sets a new single day record. The stock market doesn't look like the dot-com bubble. Does it look worse?
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Episode Transcript
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Speaker 1 (00:01):
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Speaker 2 (01:14):
Chuck, Mike and Tucker with you the day after the
July FED meeting, and big news from J. Powell is
not that they did anything yesterday, but explicitly and directly saying, yep,
we've got cuts on the table at our upcoming September meeting. Mike,
your thoughts on what we saw from J.
Speaker 3 (01:34):
Powell and how markets reacted to it yesterday entirely predictable.
Tough to in my opinion, at least to kind of
weed out the market reaction given the just massive amount
of earnings that.
Speaker 4 (01:47):
We also had leading into markets yesterday.
Speaker 3 (01:50):
So clearly there was some boost there, but you also had,
you know, good earnings from AMD which clearly drove up
in videostoc, which we'll talk about. So unclear in my
opinion about exactly what the market reaction was too, But look,
he did exactly what.
Speaker 4 (02:05):
Everyone thought he would.
Speaker 3 (02:07):
He described inflation now as somewhat elevated, that's down from elevated.
During his less last press conference, he defined job gains
of as having moderated instead of remaining strong. Was how
he described job gains last time. So clearly setting the
stage for this September rate cut, and like you said,
(02:27):
explicitly explained that there was at least one FED member
who was arguing for a rate cut now and they
decided against it. So very clearly heading for a September
rate cut, and as expected, getting a lot of questions
about the politics of all that.
Speaker 2 (02:43):
Let's talk a little bit about that. We discussed it
briefly yesterday. But obviously you've got a September FED meeting,
it's the next one on the calendar. They do have
the Jackson Hole Symposium in August, which is again I've
never been to Jackson Hole in August. It sounds lovely,
it does, but they don't make any rate decisions there.
(03:05):
So they've got this September meeting that's about six weeks
before the election. There's no way to untangle it. And
I made the point you have today. Look, regardless of
what Jay Powell does, he's going to be accused of
politics if he cuts interest rates. He's going to be
accused by basically whoever the challenger is to the current administration.
(03:25):
In this case, Donald Trump will say, hey, he's cutting
rates to you know, bolster the current administration regardless of
whether or not it's true, like that's going to be said, yep.
If he does not cut interest rates and there's some
kind of recession after, he's going to be accused. Even
if there's not a recession, he's going to be accused
by incumbents and Democrats saying, hey, you're you know, the
(03:49):
economic data is slowan, you're not doing anything. You're playing
politics here. So no matter what he's going to hear
from someone, hey, you're not doing something to help me, Yes,
no doubt. The answer in terms of what Powell should
do is, hey, whatever the data is showing, you, go
and follow it, because no matter what, someone's upset at you,
(04:11):
and ultimately, what people are going to remember more than
anything else is whether or not you were wrong or right,
not whether you know the timing of it was six
weeks before in election, because let's be completely honest, a
rate cut or hike six weeks before an election, it's
not actually going to change the economy before the election.
Speaker 3 (04:33):
It won't, and even if it did, we wouldn't have
readings on those changes until probably post election. So when
asked about this specifically, here is Jerome Powace quote, we
never use our tools to support or oppose a political party,
a politician, or any political outcome. Anything that we do before, during,
or after the election will be based on the data,
(04:54):
the outlook, and the balance of the risks, and not
on anything else. A former feteficial Rosngred from Boston said, quote,
the non political thing to do is if you think
policy will be too tight going into the end of
the year, you should ease. It's a political action to
avoid taking what you think is the appropriate correct and
(05:14):
so I think they're right on both accounts. I will
say that, you know, if they let's assume that they
lower rates in September and then Donald Trump goes on
to win the presidency, it might give him the cover
he is looking for to hire a new Federal Reserve
official like that or not, that will be the argument
that he will make. As you know, this guy was
(05:35):
making political maneuvers prior to the election. And while I
don't buy that, it might be the cover he uses
to put someone else in charge of the Federal Reserve,
and I think we should prepare for that.
Speaker 2 (05:47):
So this is where things stand right now. Again, I
didn't find this to be It wasn't a meeting where
you were expecting many fireworks, and I think it was
much more setting the stage for what the remain of
the year looked like. And in terms of quotes that
caught my eye, I always listen to the press conference
and just take notes that I'm going through it, just
(06:10):
because you know, I want to have something to look
back to afterwards and say, Okay, are there any key
themes that you know that that I noted as part
of Powell's speech. A few things just that I I
jotted down here that I think are interesting to me,
and and and things that he hasn't talked about previously. Uh.
(06:34):
Number one, he said, again, it's not an exact quote,
just because it's it's my shorthand and everything. Uh. The
path I'm sorry, the reason we're thinking about cutting rates
is because of high real rates. And what this means
is right now, if you will get the most recent
inflation data, and you can take your pick whether you
want CPI or PCE. Uh, for the purposes of you know,
(06:59):
kind of where we how I'm going to present it.
I'm gonna use core CPI just as an example. I'll
use CPI as well. Right now, if you look at
the data the Fed funds rate is running about two
point h five percent above core CPI right now. And
(07:19):
if you look at the historical average dating back to
when we have data, which goes back to like nineteen
fifty eight, the average is that the FED funds rate
has typically been about one point one percent above core CPI.
So what Powell's referencing here is, look, when we're too
far skewed in one direction, we have a situation where
we might be putting too much downward pressure on the
(07:40):
economy that we don't necessarily want to more need to
be doing right now. And so I thought it was
interesting that Powell acknowledged that, because he hasn't really talked
about that before as anything meaningful other things that he said,
this is a direct quote, because I went back in
played it again just to make sure I heard it right,
(08:01):
because I've never heard him say this. I would not
like to see a further material cooling in the labor market.
That is as direct as you can get from a
FED official, basically saying, guys, if the labor market loosens more,
we've got a potential problem here. So that's something that's notable,
And I also want to reference a quote then from
(08:23):
Ernie Tadesky, who I talk about a decent amount. He's
an economist, knows a whole bunch of stuff, mostly about
economics you would imagine being an economist. Was formerly on
the White House Council of Economic Advisors, and specifically talking
about the idea of full employment, because we talk about
this a lot, and hey, the Fed's mandate is to
(08:45):
have the economy at full employment. And one of the
points that he's been hammering home the last couple of
weeks on his Twitter feed is really simple, which is, look,
when you're at full employment, all you have is downside risk.
You're not gonna suddenly end up with this you know,
massive supply of workers that suddenly are unearthed and you say, ooh,
look like all these people can go to work. No,
(09:07):
you've got downside risk there. And so as such, you
have to really pay attention when you're at full employment
because the downside risk is the one that's present there.
There is no real upside risk to you know, more
people coming into the labor force. You just you just
don't have the numbers when you look at them, pretty
much any way that you slice it. And I think
(09:29):
Powell kind of acknowledged this yesterday, whereas like, yeah, we're
seeing you know, a little bit of slippage here, and
if that were to accelerate, there's a problem that starts
to show up, because very rarely do you see a
drop from full employment without you know, an accompanying acceleration
that takes it further than you'd like to see. I
(09:51):
think that's where Powell's going with this.
Speaker 4 (09:53):
Yeah, can we can we talk?
Speaker 3 (09:55):
I want to go back for a minute and talk
a little bit more about the politics of the situation,
because unless you are in ardent FED follower, I didn't
know the history and the context of previous rate cuts
around elections. I figured that they had happened, but in
terms of laying some of them out of the last
few decades. In July of twenty twenty two, the Fed
(10:15):
cut rates by half a percentage point as George H. W.
Bush was seeking reelection. They then cut rates again in September,
just as Bush at that time was really pushing for
lower interest rates and you know, speaking publicly about the FED.
In May of two thousand, the Fed raised rates to
a nine year high and then held them there until
(10:36):
January twenty twenty one. In two thousand and four, when
George W. Bush was seeking reelection, the FED started lifting
rates and did so in June and then every subsequent
policy meeting. While Bush was facing reelection, the FED slashed
rates throughout two thousand and eight. During an election. In
September of twenty twelve, officials launched a you know, somewhat
(10:59):
controversial bond buying stimulus program while Obama was seeking reelection.
And then even in September twenty twenty, while the Fed
didn't move rates anywhere, they made this pretty substantial promise to.
Speaker 4 (11:12):
Hold rates at a low level right after.
Speaker 3 (11:15):
You know, this was obviously in the wake, very early
wake of the COVID shutdowns. So to sit here and
look at this, I'm not saying that the moves in September.
Speaker 4 (11:26):
Are or not are not political.
Speaker 3 (11:29):
I don't think they are, but you know, everyone's going
to walk away with a different opinion on it. But
recognize too that there are no firsts here. This is
a pretty long history of the FED putting their head down,
ignoring the political cycle and saying we're going to try
and do what's right for the economy. And also a
few circumstances if you go back far enough of the
FED seemingly caving to political pressure and moving rates on
(11:52):
that side, and I think generally that's been looked at
as a mistake in the past.
Speaker 2 (11:56):
Let's take a quick break here when we come back,
a little bit of economic data out this morning that
I want to touch on, because some of it is
very quite bad. So let's discuss that when we return.
Speaker 1 (12:07):
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Speaker 2 (13:05):
Mike, Let's talk a little bit about some of the
economic data that we received this morning. Let's start first
with weekly jobless claims, which, as the name implies, we
get every single week, so it's a nice real time
snapshot of what's going on in the labor market. This week,
they rose to two hundred and forty nine thousand from
the prior weeks two hundred and thirty five thousand. That's
above forecasts and it's a decent sized jump. And continuing
(13:29):
claims also rose from the previous week's one point eight
four to four million to one point eight seven seven,
also above expectations. Now, it's one week, but you do
have a trend that's in place over the last couple
months that needs to break at some point in the
next basically in August, if it's going to follow the
normal seasonal patterns that we've seen in other non pandemic years,
(13:54):
you know, over the last five or six years. So
there's something that's happening there that isn't a you know,
screaming red flag right now, but it's a blinking yellow
light that says, hey, if this doesn't turn around, you're
gonna have that red light coming probably, you know, within
the next month or two. Is where things are pointing
right now.
Speaker 3 (14:13):
Yeah, I mean check to drive that point home. Let's
focus on those continuing claims that people still getting benefits.
It's the highest reading we've seen since November of twenty
twenty one. That's significant. Like you said, this time of
year is prone to some pretty big swings, a little
bit more volatility in the data than other times a year,
so it may well correct itself. But again, as we've mentioned,
(14:34):
this is kind of one of the early warning signs,
canary in the coal mine.
Speaker 4 (14:39):
If you're going to see increased.
Speaker 3 (14:41):
Layoffs oftentimes shows up here first. So uptick not to
the point where hey, we're definitively in a recession or
anything along those lines, but should the data continue in
this direction, something to keep an eye on.
Speaker 2 (14:55):
Another piece that we have here in terms of economic data,
the Institute of Supply Management, which is I'm sure it's
just really an exciting place to be. They publish a
monthly series of data both on the manufacturing sector and
on the services sector, and it's a survey where they
go out and they survey a bunch of purchasing managers
(15:15):
and they ask them how are things going in these
ten to twelve areas, And those areas are again pretty
broad as far as the general categories, but there's a
whole lot that you can get out of it in
terms of they ask you about, Hey, are you hiring,
are you seeing more new orders? How much are you producing?
(15:36):
How are your delivery times? What do inventories look like?
What about your customer's inventories, what are price is doing?
Your backlog? All these different pieces, And historically, outside of
the last four or five years, the ISM Manufacturing Index
has been a nice little indicator of overall economic growth
in the United States. I say other than the last
(15:58):
four to five years, because basically, since twenty twenty, everything's broken.
It's been completely broken. It has not indicated anything meaningful
at all. And that's not an understatement. It has not
indicated anything. But again, these these correlations and causations they
can they can break down and evolve because the economy
is very different today than it was two years ago.
(16:20):
And so what you might have been hearing then is,
you know, obviously has a different input into you know,
what your what your models look like today, just because
you know, the overall economy is in a very different
place right now than the summer of twenty two. So
the reason that I preface it with all this is
we just received a historically bad is Ism Manufacturing number.
(16:44):
The headline printed forty six point eight. Generally anything under
fifty is considered contraction, and any number under forty eight
starts to get you concerned about the possibility of recession.
Forty six point eight other than COVID in twenty twenty,
the last time that you had a print this low
(17:07):
was in two thousand and nine on ism manufacturing, Okay,
and that was coming out of you know, said recession.
Really it's you got to go back to two thousand
and eight then for the last time that you were
not in recession that you had a print like this.
So we're talking sixteen years, a long time since since
(17:28):
we've seen this, And again, historically this has been a
pretty good indicator of the overall health of the US economy.
It's been terrible for the last five years in its accuracy,
it has not meant anything there. But this kind of
print is is really bad. And this is why the
tenure Treasury today moved below four percent. That's right. I'm
(17:51):
not making this up. It's currently sitting right now at
three point nine seven nine percent, down twelve and a
half basis points from its close yesterday. So you got
a big move happening in yields. And some of this
was you know, in the in the cards even before this.
I think I saw it down five basis points when
I came in this morning. But you've had you know,
(18:12):
a real extension of that downward move, and it largely
has happened since this ism manufacturing number came out. So
I can't stress enough two things. The first is if
we're back to kind of a historically normal economy, which
a lot of economic data is kind of pointing to,
(18:32):
then there's the possibility that this data set is you know,
more accurate than it's been in the past four to
five years. And if it is more accurate then it's
been in the past four to five years, this is
a screaming red flag in terms of potential recession.
Speaker 3 (18:48):
Yeah, just understand again, this reading has shown contraction for
twenty of the last twenty one months.
Speaker 2 (18:55):
Which is what I mean when I say it hasn't
been a predictive of anything.
Speaker 3 (18:58):
Yeah, so it's a good point, Chocolate that at some
point I expect it to revert back to norms pre COVID.
Maybe that time is now. Maybe once again it's predictive
of nothing. But yeah, a pretty historically bad reading. Last
piece before we go to Wall Street Watch. We did
also receive productivity numbers for Q two which were quite solid,
(19:19):
but primarily on lower labor costs. As those increases we're modoring,
and this is a very backward looking economic measure as
US US productivity.
Speaker 2 (19:30):
Quick break here. Wall Street Watch is next.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
Markets are in negative territory. As Wall Street digest the
conclusion of the FEDS meeting yesterday and remarks from FED
Chairman Drome Powell. In addition to a flurry of second
quarter earnings, investor is also readying for tomorrow's big, big
jobs report. Right now, the Dow is down by three
quarters of a percent, or two hundred and eighty five points,
(20:23):
SMP five hundred is off by about a quarter percent,
or eleven points, and the Nasdaq is down by thirty
one points. Russell two thousand is off by about half
a percent. Ten year Treasure Real big pullback today, falling
below four percent for the first time since February, now
at three point nine seven percent, and crude oil off
about half a percent, trading at seventy seven dollars and
(20:46):
sixty cents a barrel. Meta scher is jumping by eight
percent after the social media giant posted higher profits for
the second quarter and also provided a better than expected
revenue forecast. Chuck and Mike have more on Meta coming
up here.
Speaker 2 (21:02):
In the show.
Speaker 5 (21:02):
Meanwhile, shares in Armholdings down by thirteen percent after the
British chip maker reported higher than expected revenue in the
second quarter. However, the company offered disappointing forward guidance elsewhere.
Online used car retailer Carvana reported a surprise quarterly profit
with a thirty three percent increase in vehicle sales that
(21:23):
stock up by thirteen percent. Hershey shares down by about
half a percent after the chocolate producer missed second quarter earnings.
In revenue forecast, where it's CEO cited an operating environment
where consumers are pulling back on discretionary spending. My Dirner
shares down by fifteen percent after the pharmaceutical company slashed
(21:44):
its full year sales guidance this morning, and after today's
closing bell, we'll see earnings from Apple, Amazon, Intel, and
Coinbase on Tucker Silva and that's Wallstreet Watch.
Speaker 4 (21:57):
Mike.
Speaker 2 (21:57):
Let's talking a little bit about those Meta earnings because
they were quite good. It was a really good quarter
for the company in terms of overall revenue growth, profit growth.
They still are I'm trying to figure out what they're
doing on the cap X side of things, and specifically, again,
(22:18):
we can kind of just laugh about it because look,
the stock's been doing great obviously, sure, but I don't
understand how they're still losing four and a half billion
dollars a quarter on their metaverse business, because I mean,
just to put this in perspective, a quarter is ninety days,
(22:40):
and so if you do the math out and say, hey,
look they lost four point five billion, obviously it means
they spent you know, a little more because the revenue
is pretty low, But it means that they're spending fifty
million dollars a day on the metaverse, and I just
don't understand how they could be doing that when no
(23:03):
one's in the metaverse? Like what what? What is the
actual money being spent on? I just want to know,
as opposed to like, yes, we lost four point five
billion dollars this this quarter on the metaverse. Okay, just.
Speaker 4 (23:17):
What do you do? Like where does it go?
Speaker 2 (23:18):
You don't have to keep the metaversus lights on, you know,
like it's what what's the deal?
Speaker 4 (23:24):
Man?
Speaker 2 (23:24):
Is kind of what I want to know.
Speaker 4 (23:26):
I don't know, and I won't say that it's irrelevant.
But for shareholders this quarter it hasn't mattered. The company's
sales are up twenty two percent year over year. That
is a slowdown from the last quarter when they were
up twenty seven percent, but I mean that is just
a massive increase. Also at a time when you know,
many companies that are out.
Speaker 3 (23:47):
There are talking about how they are facing pricing pressure,
and meta is just obviously a different business than say
Chipotle or McDonald's, but they're just not facing those same pressures.
Here's where I'm interested in your in Chucker's and everybody
else's take is sorry, not Elon Musk. Mark Zuckerberg really
(24:10):
trying to push people into the belief that, hey, we
are seeing improved results because of artificial intelligence today.
Speaker 4 (24:17):
Here's his quote.
Speaker 3 (24:18):
AI is improving recommendations and helping people find better content,
as well as making the advertising experience more effective. Now, Chuck,
I recognize you don't use Facebook or Instagram very often,
but I know what it is I go in there.
I don't notice any change in the operation of Facebook
(24:39):
on the front end over the last couple of years.
I did say the other day, though, I will admit that,
speaking for myself and a few other people that I've
spoken to, the general feeling that Facebook's targeted advertising has
improved over the last few years, I.
Speaker 4 (24:57):
Will admit to that. Very rarely.
Speaker 3 (24:59):
Am I now seeing a bunch of ads for things
that I've already purchased, And I have gone ahead and
clicked through a few ads and purchased things over the
last couple of years through Facebook, whereas I had rarely.
Speaker 4 (25:11):
Done that before.
Speaker 3 (25:12):
I'm just not fully buying that that is artificial intelligence driven,
but I mean, maybe it is. I don't think he's
trying to lie to the general public.
Speaker 2 (25:20):
Well, I think it's important to discuss what we mean
by AI. What Zuckerberg is likely orfering to. It's not
generative AI, which is what everyone's all excited for, although
he did speak about that too. I think what he's
more likely talking about here is, Hey, we've improved the
(25:40):
algorithm to understand what you like more, and so we're
getting more clicks on our ads because that's ultimately how
we get paid is if you view and click on
our ads. And so, look, does that mean that all
of the money they're spending on AI and the metaverses
is fine? I mean, look, if you keep printing twenty
percent year over your revenue growth, you could basically do
(26:03):
whatever you want and no one's gonna care.
Speaker 4 (26:05):
Yeah, whether it's AYE driven or just anything else.
Speaker 2 (26:08):
Right. Really, like you could say, hey, we're gonna try
to train dolphins to you know, perform CPR, and we're
gonna spend a billion dollars doing it. And ultimately, if
you print twenty percent year over your revenue growth, you
could train as many dolphins as you want to do CPR.
The answer is probably gonna be you can't train any
because they don't have you know, the dexterity and their
fins to really get the chess compressions right.
Speaker 3 (26:31):
But does anybody else wonder what in the name of
God is going on in Chuck's head that he comes
up with these examples from time to time, Like, I
know there's some listeners out there who are just scratching
their head, like this is not the first time Chuck
has thought of something akin to dolphins doing CPR as
his example.
Speaker 2 (26:49):
Look, Zuck is it's the summer of Zuck. Okay, let's
let's be honest. I'm not someone who is, you know,
a big Zuck fan, like anyone who's listening to the
program for a while, and there's a I generally have
not been the kindest towards the man, But it's the
summer of Zuck right now. Is revenue's up, he's growing
his hair out, Investors are saying, yeah, we're cool with
(27:11):
what you're doing.
Speaker 4 (27:11):
Like somebody else is clearly dressing him.
Speaker 2 (27:14):
Yeah, the dudes having himself a summer. And I gotta
say there was a refreshing moment of honesty from him
a couple of weeks ago he posted something somewhere and
like someone basically asked, like, Hey, why were you so weird?
When you were younger, and he actually responded, is like, honestly,
I was just really shy. I had all this money.
I didn't know what to do with it. I was
doing all these interviews and like they weren't going well.
(27:36):
So it just got worse and worse. And I've spent
a lot of time trying to figure out how to
just be better. And when's last. Like I'm not saying
that like Zuck should be like lionized or anything, but
the new version they've rolled out is more human than
the last one.
Speaker 4 (27:53):
Yeah, the AI training is working that you both know
is much better.
Speaker 2 (27:57):
The AI training is working, is what I'm trying to
say on this.
Speaker 4 (28:01):
So what a what a backhanded compliments? Shock?
Speaker 2 (28:03):
No, Like, honestly, like the guy's having himself a summer.
Let's be honest, Like things are going well for Zuck
right now, and I'm not again, I have all kinds
of problems with facebooks, you know, handling of privacy and
data and this and that.
Speaker 3 (28:18):
And you know, I just paid a one point three
or they just agreed to a one point three billion
dollar fine to the state of Texas. By the way,
I'm not sure you guys covered that yesterday all about
stealing people's data and utilizing it illegally. So like, still
plenty of problems out there.
Speaker 1 (28:34):
You know.
Speaker 3 (28:34):
One thing that they mentioned on the earnings that I
hadn't thought of in several months was apparently their Threads app,
the Twitter X competitor. Yes soon it hit two hundred
million active users. I don't know that there's anything actually
going on there, and the backlash against x has fallen
quite a bit, but still talking about their Threads platform
and not doing away with it yet.
Speaker 2 (28:53):
So this is what is going on with Meta, which
is up you know, about nine percent today yesterday in
video up over twelve percent. And they had the single
biggest day, the single biggest market cap edition for any
company in the history of the world yesterday. What I
mean by that the value of the company, the market
(29:14):
cap of it went up by three hundred and twenty
nine billion dollars yesterday.
Speaker 4 (29:18):
That's a Bank of America. It went up by one
Bank of America.
Speaker 2 (29:22):
It is the single largest addition to market cap for
any company in the history of the world in one day.
The next closest was like two hundred and forty billion.
And again this was thirty percent larger than that, and
a couple different views on this. Number one good for
d video. Number two not usually a sign of stability
(29:46):
in a down the day before. Not usually a great
sign of stability when you're seeing ten percent swings on
a three trillion dollar company, and so it doesn't really
feel like something that is the most sustainable in terms of, hey,
we're just you know, the pendulums just swinging back and
(30:06):
forth from day to day. And this has kind of
been what's happening for the last month or so, and
in Vidia during that time is off twenty percent ish,
you know, depending on the hour, because it's moving so much.
So obviously like a historic day for in Nvidia, but
(30:27):
not really quite honestly, a ten percent update on a
three trillion dollar company is not exactly what you want
to see unless you, like, plan to exit immediately when
that happens. And again, like who knows where the stock goes.
It could continue up, but volatility begets more volatility, and
that's something that makes investors nervous.
Speaker 4 (30:49):
When do we get earnings there a few weeks from now,
two three weeks.
Speaker 2 (30:52):
Two or three weeks, yeah, they there's sometime in mid August,
I don't know exactly when. Let's let's take a quick
look and then when we were turn how's this for
a scary headline from barons the stock market? It doesn't
look like the dot com bubble. It's something worse.
Speaker 5 (31:12):
Oh please don't do that again, Mike, You're just sorry.
Plea out absolutely made everybody death listening to the show.
Don't like yours and now bleeding thank.
Speaker 4 (31:21):
You don't like that.
Speaker 2 (31:22):
Don't like that one bit.
Speaker 4 (31:23):
I'll be quiet.
Speaker 5 (31:24):
You can't scream into Okay, let's go to break.
Speaker 2 (31:28):
We'll be back.
Speaker 1 (31:29):
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Speaker 2 (32:24):
Like there's a piece in Barons Day it says that
the stock market doesn't look like the dot com bubble,
it's something worse. What is is the worse?
Speaker 3 (32:31):
Uh, they're claiming that what's worse is that it looks
a lot like the six o seven period in the
stock market. Specifically, somebody did some sort of statistical regression
analysis to take a look at the correlation of the
S and P five hundred from the last twelve months
compared to Juli oh six through Juli oh seven and saying, well,
(32:53):
they're eighty five percent correlated today. I don't I can't
think of a more bogus waight compare two markets, Like,
I don't understand how anyone can take a look at
that and say, oh, and because the stocks traded similarly
on a percentage basis to this other period of time,
the next year is going to look similar to the
(33:16):
way it did in the year after. Oh seven, tell
me if I'm missing something here, chuck, but this just
feels like a garbage piece to me.
Speaker 2 (33:25):
Uh yes, it's it's not something that has any predictive
power about what's going to happen. Just because a market
looks like another one did for a certain period of
time doesn't mean that that's going to continue in any way,
shape or form. I mean, I've remembered for the last
like forever actually that you know, people will go on
(33:45):
Twitter whatever social media use, and they post like they're
called analogs, it's okay this this market looks a lot
like this one, and everyone always likes to show, Hey,
this year's market looks a lot like you know, nineteen
twenty eight and twenty nine or nineteen eighty seven, and
this is what's called And guess what, we haven't had
another nineteen twenty nine or nineteen eighty seven. It's not
(34:06):
to say that you never will, but just because markets
move similarly or look similar, or the underlying correlations are
similar to this and that markets don't repeat themselves exactly. Furthermore,
depending on what you were invested in the tech bubble
was actually way worse than the financial crisis. Just from
a market perspective, it took a lot longer for the
(34:28):
market to recover. Most certainly way longer for the market
to recover, and if you were invested in the Nasdaq
or anything tech, depending on what you were invest in,
you might not have ever recovered.
Speaker 3 (34:40):
They also make one other claim that I just want
to point out is just pretty provably false. They talk
about how the largest AI gainers right now are some
of the most profitable companies on the planet.
Speaker 4 (34:51):
True.
Speaker 3 (34:52):
They also make the claim that in like the late nineties,
internet companies were losing money, and don't you know, don't
get me wrong, there were plenty of Internet companies that
had no earnings whatsoever and we're getting bid up. But
there were also some very large, well established companies.
Speaker 2 (35:07):
You may have heard of the Microsoft Soft.
Speaker 3 (35:09):
They were making in tel a lot of money at
that point in time. Yes, there were others that were
making no money. But again, just making some blanket statement
about how Internet companies were losing money back in the
dot com bubble is not uniformly true.
Speaker 2 (35:24):
No, it's not anything else that you want to say
about this.
Speaker 3 (35:28):
No, I just look, these articles get written sometimes they
do at the end, you know, put a little caveat
in here and say, you know, First, the quote here is, first,
be aware of what you're of what's going on, but
don't rush to get out. Writing things out isn't a
bad thing if you've been in the market for a while. Second,
aggressively buying more stock isn't a great idea right now.
(35:51):
I don't know what anyone is supposed to do with
that advice. They also say go to the beach. I
think the idea of the last sentence here, saying just
go to the beach, is the only useful piece of
advice in this entire article that I've read.
Speaker 2 (36:05):
Yeah, and look, we've said this over and over again.
So if we sound like a broken record, sorry. If
you're making investment decisions based on reading an article anywhere,
two things are true. The first is anyone who actually,
you know, spends their time looking at markets consistently already
(36:25):
knew what you were looking at three weeks ago. Second,
if you're gonna make an investment decision to buy or
sell based on one article, how are you gonna make
the corresponding decision on the other side to do the opposite,
because what if an article doesn't get published, You know,
what if the same author isn't writing something? What if
or what if tomorrow, what if someone comes out with
a different view, Are you gonna say, well, I was
(36:47):
wrong yesterday, now I'm gonna then you're just racking up
transaction costs potentially taxes depending on the type of account
that you're trading in. Trading based on reading articles is.
Speaker 3 (36:58):
Not a sound investment strategy. No, No, there are probably
some worse ones out there, but not many, not many.
Speaker 2 (37:05):
There are a few, but in general, again, we've talked
about this in a few different contexts. If you're doing
anything investing related because you're emotional, you gotta take a
step back because emotional investing is not good investing. It's
just it makes you trade stuff that you probably don't
want to trade in a lot of cases, and it's
(37:29):
just it's something that gets dangerous. And that's why these
pieces bother me so much, because someone out there is
gonna read this and be like, oh my goodness, it's
gonna be worse than the financial crisis, and look, I
don't know, maybe it will be, but it's not gonna
be because of this piece.
Speaker 4 (37:45):
No like or any of the evidence raised in this piece.
Speaker 2 (37:48):
No, it's it's just not so, you know, think critically.
If you're feeling emotional about you're investing, you probably need to,
you know, think about how you're invested to begin with.
Do that, and then go to the beach. So you
don't have to think about it at the beach, because
when you're at the beach, you should be chilling, man,
you know, having a beer, pina colada if that's not
(38:09):
your thing, a nice cold water under an umbrella, whatever works,
but be chilling at the beach. Don't be thinking about
your investments there. Let's take a quick break here, Our
two of the financial exchange coming up.
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Speaker 2 (01:14):
Chuck, Mike and Tucker with you the day after the
July FED meeting, and big news from J. Powell is
not that they did anything yesterday, but explicitly and directly saying, yep,
we've got cuts on the table at our upcoming September meeting. Mike,
your thoughts on what we saw from J.
Speaker 3 (01:34):
Powell and how markets reacted to it yesterday entirely predictable.
Tough to in my opinion, at least to kind of
weed out the market reaction given the just massive amount
of earnings that.
Speaker 4 (01:47):
We also had leading into markets yesterday.
Speaker 3 (01:50):
So clearly there was some boost there, but you also had,
you know, good earnings from AMD which clearly drove up
in videostoc, which we'll talk about. So unclear in my
opinion about exactly what the market reaction was too, But look,
he did exactly what.
Speaker 4 (02:05):
Everyone thought he would.
Speaker 3 (02:07):
He described inflation now as somewhat elevated, that's down from elevated.
During his less last press conference, he defined job gains
of as having moderated instead of remaining strong. Was how
he described job gains last time. So clearly setting the
stage for this September rate cut, and like you said,
(02:27):
explicitly explained that there was at least one FED member
who was arguing for a rate cut now and they
decided against it. So very clearly heading for a September
rate cut, and as expected, getting a lot of questions
about the politics of all that.
Speaker 2 (02:43):
Let's talk a little bit about that. We discussed it
briefly yesterday. But obviously you've got a September FED meeting,
it's the next one on the calendar. They do have
the Jackson Hole Symposium in August, which is again I've
never been to Jackson Hole in August. It sounds lovely,
it does, but they don't make any rate decisions there.
(03:05):
So they've got this September meeting that's about six weeks
before the election. There's no way to untangle it. And
I made the point you have today. Look, regardless of
what Jay Powell does, he's going to be accused of
politics if he cuts interest rates. He's going to be
accused by basically whoever the challenger is to the current administration.
(03:25):
In this case, Donald Trump will say, hey, he's cutting
rates to you know, bolster the current administration regardless of
whether or not it's true, like that's going to be said, yep.
If he does not cut interest rates and there's some
kind of recession after, he's going to be accused. Even
if there's not a recession, he's going to be accused
by incumbents and Democrats saying, hey, you're you know, the
(03:49):
economic data is slowan, you're not doing anything. You're playing
politics here. So no matter what he's going to hear
from someone, hey, you're not doing something to help me, Yes,
no doubt. The answer in terms of what Powell should
do is, hey, whatever the data is showing, you, go
and follow it, because no matter what, someone's upset at you,
(04:11):
and ultimately, what people are going to remember more than
anything else is whether or not you were wrong or right,
not whether you know the timing of it was six
weeks before in election, because let's be completely honest, a
rate cut or hike six weeks before an election, it's
not actually going to change the economy before the election.
Speaker 3 (04:33):
It won't, and even if it did, we wouldn't have
readings on those changes until probably post election. So when
asked about this specifically, here is Jerome Powace quote, we
never use our tools to support or oppose a political party,
a politician, or any political outcome. Anything that we do before, during,
or after the election will be based on the data,
(04:54):
the outlook, and the balance of the risks, and not
on anything else. A former feteficial Rosngred from Boston said, quote,
the non political thing to do is if you think
policy will be too tight going into the end of
the year, you should ease. It's a political action to
avoid taking what you think is the appropriate correct and
(05:14):
so I think they're right on both accounts. I will
say that, you know, if they let's assume that they
lower rates in September and then Donald Trump goes on
to win the presidency, it might give him the cover
he is looking for to hire a new Federal Reserve
official like that or not, that will be the argument
that he will make. As you know, this guy was
(05:35):
making political maneuvers prior to the election. And while I
don't buy that, it might be the cover he uses
to put someone else in charge of the Federal Reserve,
and I think we should prepare for that.
Speaker 2 (05:47):
So this is where things stand right now. Again, I
didn't find this to be It wasn't a meeting where
you were expecting many fireworks, and I think it was
much more setting the stage for what the remain of
the year looked like. And in terms of quotes that
caught my eye, I always listen to the press conference
and just take notes that I'm going through it, just
(06:10):
because you know, I want to have something to look
back to afterwards and say, Okay, are there any key
themes that you know that that I noted as part
of Powell's speech. A few things just that I I
jotted down here that I think are interesting to me,
and and and things that he hasn't talked about previously. Uh.
(06:34):
Number one, he said, again, it's not an exact quote,
just because it's it's my shorthand and everything. Uh. The
path I'm sorry, the reason we're thinking about cutting rates
is because of high real rates. And what this means
is right now, if you will get the most recent
inflation data, and you can take your pick whether you
want CPI or PCE. Uh, for the purposes of you know,
(06:59):
kind of where we how I'm going to present it.
I'm gonna use core CPI just as an example. I'll
use CPI as well. Right now, if you look at
the data the Fed funds rate is running about two
point h five percent above core CPI right now. And
(07:19):
if you look at the historical average dating back to
when we have data, which goes back to like nineteen
fifty eight, the average is that the FED funds rate
has typically been about one point one percent above core CPI.
So what Powell's referencing here is, look, when we're too
far skewed in one direction, we have a situation where
we might be putting too much downward pressure on the
(07:40):
economy that we don't necessarily want to more need to
be doing right now. And so I thought it was
interesting that Powell acknowledged that, because he hasn't really talked
about that before as anything meaningful other things that he said,
this is a direct quote, because I went back in
played it again just to make sure I heard it right,
(08:01):
because I've never heard him say this. I would not
like to see a further material cooling in the labor market.
That is as direct as you can get from a
FED official, basically saying, guys, if the labor market loosens more,
we've got a potential problem here. So that's something that's notable,
And I also want to reference a quote then from
(08:23):
Ernie Tadesky, who I talk about a decent amount. He's
an economist, knows a whole bunch of stuff, mostly about
economics you would imagine being an economist. Was formerly on
the White House Council of Economic Advisors, and specifically talking
about the idea of full employment, because we talk about
this a lot, and hey, the Fed's mandate is to
(08:45):
have the economy at full employment. And one of the
points that he's been hammering home the last couple of
weeks on his Twitter feed is really simple, which is, look,
when you're at full employment, all you have is downside risk.
You're not gonna suddenly end up with this you know,
massive supply of workers that suddenly are unearthed and you say, ooh,
look like all these people can go to work. No,
(09:07):
you've got downside risk there. And so as such, you
have to really pay attention when you're at full employment
because the downside risk is the one that's present there.
There is no real upside risk to you know, more
people coming into the labor force. You just you just
don't have the numbers when you look at them, pretty
much any way that you slice it. And I think
(09:29):
Powell kind of acknowledged this yesterday, whereas like, yeah, we're
seeing you know, a little bit of slippage here, and
if that were to accelerate, there's a problem that starts
to show up, because very rarely do you see a
drop from full employment without you know, an accompanying acceleration
that takes it further than you'd like to see. I
(09:51):
think that's where Powell's going with this.
Speaker 4 (09:53):
Yeah, can we can we talk?
Speaker 3 (09:55):
I want to go back for a minute and talk
a little bit more about the politics of the situation,
because unless you are in ardent FED follower, I didn't
know the history and the context of previous rate cuts
around elections. I figured that they had happened, but in
terms of laying some of them out of the last
few decades. In July of twenty twenty two, the Fed
(10:15):
cut rates by half a percentage point as George H. W.
Bush was seeking reelection. They then cut rates again in September,
just as Bush at that time was really pushing for
lower interest rates and you know, speaking publicly about the FED.
In May of two thousand, the Fed raised rates to
a nine year high and then held them there until
(10:36):
January twenty twenty one. In two thousand and four, when
George W. Bush was seeking reelection, the FED started lifting
rates and did so in June and then every subsequent
policy meeting. While Bush was facing reelection, the FED slashed
rates throughout two thousand and eight. During an election. In
September of twenty twelve, officials launched a you know, somewhat
(10:59):
controversial bond buying stimulus program while Obama was seeking reelection.
And then even in September twenty twenty, while the Fed
didn't move rates anywhere, they made this pretty substantial promise to.
Speaker 4 (11:12):
Hold rates at a low level right after.
Speaker 3 (11:15):
You know, this was obviously in the wake, very early
wake of the COVID shutdowns. So to sit here and
look at this, I'm not saying that the moves in September.
Speaker 4 (11:26):
Are or not are not political.
Speaker 3 (11:29):
I don't think they are, but you know, everyone's going
to walk away with a different opinion on it. But
recognize too that there are no firsts here. This is
a pretty long history of the FED putting their head down,
ignoring the political cycle and saying we're going to try
and do what's right for the economy. And also a
few circumstances if you go back far enough of the
FED seemingly caving to political pressure and moving rates on
(11:52):
that side, and I think generally that's been looked at
as a mistake in the past.
Speaker 2 (11:56):
Let's take a quick break here when we come back,
a little bit of economic data out this morning that
I want to touch on, because some of it is
very quite bad. So let's discuss that when we return.
Speaker 1 (12:07):
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Speaker 2 (13:05):
Mike, Let's talk a little bit about some of the
economic data that we received this morning. Let's start first
with weekly jobless claims, which, as the name implies, we
get every single week, so it's a nice real time
snapshot of what's going on in the labor market. This week,
they rose to two hundred and forty nine thousand from
the prior weeks two hundred and thirty five thousand. That's
above forecasts and it's a decent sized jump. And continuing
(13:29):
claims also rose from the previous week's one point eight
four to four million to one point eight seven seven,
also above expectations. Now, it's one week, but you do
have a trend that's in place over the last couple
months that needs to break at some point in the
next basically in August, if it's going to follow the
normal seasonal patterns that we've seen in other non pandemic years,
(13:54):
you know, over the last five or six years. So
there's something that's happening there that isn't a you know,
screaming red flag right now, but it's a blinking yellow
light that says, hey, if this doesn't turn around, you're
gonna have that red light coming probably, you know, within
the next month or two. Is where things are pointing
right now.
Speaker 3 (14:13):
Yeah, I mean check to drive that point home. Let's
focus on those continuing claims that people still getting benefits.
It's the highest reading we've seen since November of twenty
twenty one. That's significant. Like you said, this time of
year is prone to some pretty big swings, a little
bit more volatility in the data than other times a year,
so it may well correct itself. But again, as we've mentioned,
(14:34):
this is kind of one of the early warning signs,
canary in the coal mine.
Speaker 4 (14:39):
If you're going to see increased.
Speaker 3 (14:41):
Layoffs oftentimes shows up here first. So uptick not to
the point where hey, we're definitively in a recession or
anything along those lines, but should the data continue in
this direction, something to keep an eye on.
Speaker 2 (14:55):
Another piece that we have here in terms of economic data,
the Institute of Supply Management, which is I'm sure it's
just really an exciting place to be. They publish a
monthly series of data both on the manufacturing sector and
on the services sector, and it's a survey where they
go out and they survey a bunch of purchasing managers
(15:15):
and they ask them how are things going in these
ten to twelve areas, And those areas are again pretty
broad as far as the general categories, but there's a
whole lot that you can get out of it in
terms of they ask you about, Hey, are you hiring,
are you seeing more new orders? How much are you producing?
(15:36):
How are your delivery times? What do inventories look like?
What about your customer's inventories, what are price is doing?
Your backlog? All these different pieces, And historically, outside of
the last four or five years, the ISM Manufacturing Index
has been a nice little indicator of overall economic growth
in the United States. I say other than the last
(15:58):
four to five years, because basically, since twenty twenty, everything's broken.
It's been completely broken. It has not indicated anything meaningful
at all. And that's not an understatement. It has not
indicated anything. But again, these these correlations and causations they
can they can break down and evolve because the economy
is very different today than it was two years ago.
(16:20):
And so what you might have been hearing then is,
you know, obviously has a different input into you know,
what your what your models look like today, just because
you know, the overall economy is in a very different
place right now than the summer of twenty two. So
the reason that I preface it with all this is
we just received a historically bad is Ism Manufacturing number.
(16:44):
The headline printed forty six point eight. Generally anything under
fifty is considered contraction, and any number under forty eight
starts to get you concerned about the possibility of recession.
Forty six point eight other than COVID in twenty twenty,
the last time that you had a print this low
(17:07):
was in two thousand and nine on ism manufacturing, Okay,
and that was coming out of you know, said recession.
Really it's you got to go back to two thousand
and eight then for the last time that you were
not in recession that you had a print like this.
So we're talking sixteen years, a long time since since
(17:28):
we've seen this, And again, historically this has been a
pretty good indicator of the overall health of the US economy.
It's been terrible for the last five years in its accuracy,
it has not meant anything there. But this kind of
print is is really bad. And this is why the
tenure Treasury today moved below four percent. That's right. I'm
(17:51):
not making this up. It's currently sitting right now at
three point nine seven nine percent, down twelve and a
half basis points from its close yesterday. So you got
a big move happening in yields. And some of this
was you know, in the in the cards even before this.
I think I saw it down five basis points when
I came in this morning. But you've had you know,
(18:12):
a real extension of that downward move, and it largely
has happened since this ism manufacturing number came out. So
I can't stress enough two things. The first is if
we're back to kind of a historically normal economy, which
a lot of economic data is kind of pointing to,
(18:32):
then there's the possibility that this data set is you know,
more accurate than it's been in the past four to
five years. And if it is more accurate then it's
been in the past four to five years, this is
a screaming red flag in terms of potential recession.
Speaker 3 (18:48):
Yeah, just understand again, this reading has shown contraction for
twenty of the last twenty one months.
Speaker 2 (18:55):
Which is what I mean when I say it hasn't
been a predictive of anything.
Speaker 3 (18:58):
Yeah, so it's a good point, Chocolate that at some
point I expect it to revert back to norms pre COVID.
Maybe that time is now. Maybe once again it's predictive
of nothing. But yeah, a pretty historically bad reading. Last
piece before we go to Wall Street Watch. We did
also receive productivity numbers for Q two which were quite solid,
(19:19):
but primarily on lower labor costs. As those increases we're modoring,
and this is a very backward looking economic measure as
US US productivity.
Speaker 2 (19:30):
Quick break here. Wall Street Watch is next.
Speaker 1 (19:42):
Like us on Facebook and follow us on Twitter at
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Street Watch. A complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:02):
Markets are in negative territory. As Wall Street digest the
conclusion of the FEDS meeting yesterday and remarks from FED
Chairman Drome Powell. In addition to a flurry of second
quarter earnings, investor is also readying for tomorrow's big, big
jobs report. Right now, the Dow is down by three
quarters of a percent, or two hundred and eighty five points,
(20:23):
SMP five hundred is off by about a quarter percent,
or eleven points, and the Nasdaq is down by thirty
one points. Russell two thousand is off by about half
a percent. Ten year Treasure Real big pullback today, falling
below four percent for the first time since February, now
at three point nine seven percent, and crude oil off
about half a percent, trading at seventy seven dollars and
(20:46):
sixty cents a barrel. Meta scher is jumping by eight
percent after the social media giant posted higher profits for
the second quarter and also provided a better than expected
revenue forecast. Chuck and Mike have more on Meta coming
up here.
Speaker 2 (21:02):
In the show.
Speaker 5 (21:02):
Meanwhile, shares in Armholdings down by thirteen percent after the
British chip maker reported higher than expected revenue in the
second quarter. However, the company offered disappointing forward guidance elsewhere.
Online used car retailer Carvana reported a surprise quarterly profit
with a thirty three percent increase in vehicle sales that
(21:23):
stock up by thirteen percent. Hershey shares down by about
half a percent after the chocolate producer missed second quarter earnings.
In revenue forecast, where it's CEO cited an operating environment
where consumers are pulling back on discretionary spending. My Dirner
shares down by fifteen percent after the pharmaceutical company slashed
(21:44):
its full year sales guidance this morning, and after today's
closing bell, we'll see earnings from Apple, Amazon, Intel, and
Coinbase on Tucker Silva and that's Wallstreet Watch.
Speaker 4 (21:57):
Mike.
Speaker 2 (21:57):
Let's talking a little bit about those Meta earnings because
they were quite good. It was a really good quarter
for the company in terms of overall revenue growth, profit growth.
They still are I'm trying to figure out what they're
doing on the cap X side of things, and specifically, again,
(22:18):
we can kind of just laugh about it because look,
the stock's been doing great obviously, sure, but I don't
understand how they're still losing four and a half billion
dollars a quarter on their metaverse business, because I mean,
just to put this in perspective, a quarter is ninety days,
(22:40):
and so if you do the math out and say, hey,
look they lost four point five billion, obviously it means
they spent you know, a little more because the revenue
is pretty low, But it means that they're spending fifty
million dollars a day on the metaverse, and I just
don't understand how they could be doing that when no
(23:03):
one's in the metaverse? Like what what? What is the
actual money being spent on? I just want to know,
as opposed to like, yes, we lost four point five
billion dollars this this quarter on the metaverse. Okay, just.
Speaker 4 (23:17):
What do you do? Like where does it go?
Speaker 2 (23:18):
You don't have to keep the metaversus lights on, you know,
like it's what what's the deal?
Speaker 4 (23:24):
Man?
Speaker 2 (23:24):
Is kind of what I want to know.
Speaker 4 (23:26):
I don't know, and I won't say that it's irrelevant.
But for shareholders this quarter it hasn't mattered. The company's
sales are up twenty two percent year over year. That
is a slowdown from the last quarter when they were
up twenty seven percent, but I mean that is just
a massive increase. Also at a time when you know,
many companies that are out.
Speaker 3 (23:47):
There are talking about how they are facing pricing pressure,
and meta is just obviously a different business than say
Chipotle or McDonald's, but they're just not facing those same pressures.
Here's where I'm interested in your in Chucker's and everybody
else's take is sorry, not Elon Musk. Mark Zuckerberg really
(24:10):
trying to push people into the belief that, hey, we
are seeing improved results because of artificial intelligence today.
Speaker 4 (24:17):
Here's his quote.
Speaker 3 (24:18):
AI is improving recommendations and helping people find better content,
as well as making the advertising experience more effective. Now, Chuck,
I recognize you don't use Facebook or Instagram very often,
but I know what it is I go in there.
I don't notice any change in the operation of Facebook
(24:39):
on the front end over the last couple of years.
I did say the other day, though, I will admit that,
speaking for myself and a few other people that I've
spoken to, the general feeling that Facebook's targeted advertising has
improved over the last few years, I.
Speaker 4 (24:57):
Will admit to that. Very rarely.
Speaker 3 (24:59):
Am I now seeing a bunch of ads for things
that I've already purchased, And I have gone ahead and
clicked through a few ads and purchased things over the
last couple of years through Facebook, whereas I had rarely.
Speaker 4 (25:11):
Done that before.
Speaker 3 (25:12):
I'm just not fully buying that that is artificial intelligence driven,
but I mean, maybe it is. I don't think he's
trying to lie to the general public.
Speaker 2 (25:20):
Well, I think it's important to discuss what we mean
by AI. What Zuckerberg is likely orfering to. It's not
generative AI, which is what everyone's all excited for, although
he did speak about that too. I think what he's
more likely talking about here is, Hey, we've improved the
(25:40):
algorithm to understand what you like more, and so we're
getting more clicks on our ads because that's ultimately how
we get paid is if you view and click on
our ads. And so, look, does that mean that all
of the money they're spending on AI and the metaverses
is fine? I mean, look, if you keep printing twenty
percent year over your revenue growth, you could basically do
(26:03):
whatever you want and no one's gonna care.
Speaker 4 (26:05):
Yeah, whether it's AYE driven or just anything else.
Speaker 2 (26:08):
Right. Really, like you could say, hey, we're gonna try
to train dolphins to you know, perform CPR, and we're
gonna spend a billion dollars doing it. And ultimately, if
you print twenty percent year over your revenue growth, you
could train as many dolphins as you want to do CPR.
The answer is probably gonna be you can't train any
because they don't have you know, the dexterity and their
fins to really get the chess compressions right.
Speaker 3 (26:31):
But does anybody else wonder what in the name of
God is going on in Chuck's head that he comes
up with these examples from time to time, Like, I
know there's some listeners out there who are just scratching
their head, like this is not the first time Chuck
has thought of something akin to dolphins doing CPR as
his example.
Speaker 2 (26:49):
Look, Zuck is it's the summer of Zuck. Okay, let's
let's be honest. I'm not someone who is, you know,
a big Zuck fan, like anyone who's listening to the
program for a while, and there's a I generally have
not been the kindest towards the man, But it's the
summer of Zuck right now. Is revenue's up, he's growing
his hair out, Investors are saying, yeah, we're cool with
(27:11):
what you're doing.
Speaker 4 (27:11):
Like somebody else is clearly dressing him.
Speaker 2 (27:14):
Yeah, the dudes having himself a summer. And I gotta
say there was a refreshing moment of honesty from him
a couple of weeks ago he posted something somewhere and
like someone basically asked, like, Hey, why were you so weird?
When you were younger, and he actually responded, is like, honestly,
I was just really shy. I had all this money.
I didn't know what to do with it. I was
doing all these interviews and like they weren't going well.
(27:36):
So it just got worse and worse. And I've spent
a lot of time trying to figure out how to
just be better. And when's last. Like I'm not saying
that like Zuck should be like lionized or anything, but
the new version they've rolled out is more human than
the last one.
Speaker 4 (27:53):
Yeah, the AI training is working that you both know
is much better.
Speaker 2 (27:57):
The AI training is working, is what I'm trying to
say on this.
Speaker 4 (28:01):
So what a what a backhanded compliments? Shock?
Speaker 2 (28:03):
No, Like, honestly, like the guy's having himself a summer.
Let's be honest, Like things are going well for Zuck
right now, and I'm not again, I have all kinds
of problems with facebooks, you know, handling of privacy and
data and this and that.
Speaker 3 (28:18):
And you know, I just paid a one point three
or they just agreed to a one point three billion
dollar fine to the state of Texas. By the way,
I'm not sure you guys covered that yesterday all about
stealing people's data and utilizing it illegally. So like, still
plenty of problems out there.
Speaker 1 (28:34):
You know.
Speaker 3 (28:34):
One thing that they mentioned on the earnings that I
hadn't thought of in several months was apparently their Threads app,
the Twitter X competitor. Yes soon it hit two hundred
million active users. I don't know that there's anything actually
going on there, and the backlash against x has fallen
quite a bit, but still talking about their Threads platform
and not doing away with it yet.
Speaker 2 (28:53):
So this is what is going on with Meta, which
is up you know, about nine percent today yesterday in
video up over twelve percent. And they had the single
biggest day, the single biggest market cap edition for any
company in the history of the world yesterday. What I
mean by that the value of the company, the market
(29:14):
cap of it went up by three hundred and twenty
nine billion dollars yesterday.
Speaker 4 (29:18):
That's a Bank of America. It went up by one
Bank of America.
Speaker 2 (29:22):
It is the single largest addition to market cap for
any company in the history of the world in one day.
The next closest was like two hundred and forty billion.
And again this was thirty percent larger than that, and
a couple different views on this. Number one good for
d video. Number two not usually a sign of stability
(29:46):
in a down the day before. Not usually a great
sign of stability when you're seeing ten percent swings on
a three trillion dollar company, and so it doesn't really
feel like something that is the most sustainable in terms of, hey,
we're just you know, the pendulums just swinging back and
(30:06):
forth from day to day. And this has kind of
been what's happening for the last month or so, and
in Vidia during that time is off twenty percent ish,
you know, depending on the hour, because it's moving so much.
So obviously like a historic day for in Nvidia, but
(30:27):
not really quite honestly, a ten percent update on a
three trillion dollar company is not exactly what you want
to see unless you, like, plan to exit immediately when
that happens. And again, like who knows where the stock goes.
It could continue up, but volatility begets more volatility, and
that's something that makes investors nervous.
Speaker 4 (30:49):
When do we get earnings there a few weeks from now,
two three weeks.
Speaker 2 (30:52):
Two or three weeks, yeah, they there's sometime in mid August,
I don't know exactly when. Let's let's take a quick
look and then when we were turn how's this for
a scary headline from barons the stock market? It doesn't
look like the dot com bubble. It's something worse.
Speaker 5 (31:12):
Oh please don't do that again, Mike, You're just sorry.
Plea out absolutely made everybody death listening to the show.
Don't like yours and now bleeding thank.
Speaker 4 (31:21):
You don't like that.
Speaker 2 (31:22):
Don't like that one bit.
Speaker 4 (31:23):
I'll be quiet.
Speaker 5 (31:24):
You can't scream into Okay, let's go to break.
Speaker 2 (31:28):
We'll be back.
Speaker 1 (31:29):
This is your home for the most comprehensive coverage of
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Speaker 5 (31:53):
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(32:14):
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Speaker 2 (32:24):
Like there's a piece in Barons Day it says that
the stock market doesn't look like the dot com bubble,
it's something worse. What is is the worse?
Speaker 3 (32:31):
Uh, they're claiming that what's worse is that it looks
a lot like the six o seven period in the
stock market. Specifically, somebody did some sort of statistical regression
analysis to take a look at the correlation of the
S and P five hundred from the last twelve months
compared to Juli oh six through Juli oh seven and saying, well,
(32:53):
they're eighty five percent correlated today. I don't I can't
think of a more bogus waight compare two markets, Like,
I don't understand how anyone can take a look at
that and say, oh, and because the stocks traded similarly
on a percentage basis to this other period of time,
the next year is going to look similar to the
(33:16):
way it did in the year after. Oh seven, tell
me if I'm missing something here, chuck, but this just
feels like a garbage piece to me.
Speaker 2 (33:25):
Uh yes, it's it's not something that has any predictive
power about what's going to happen. Just because a market
looks like another one did for a certain period of
time doesn't mean that that's going to continue in any way,
shape or form. I mean, I've remembered for the last
like forever actually that you know, people will go on
(33:45):
Twitter whatever social media use, and they post like they're
called analogs, it's okay this this market looks a lot
like this one, and everyone always likes to show, Hey,
this year's market looks a lot like you know, nineteen
twenty eight and twenty nine or nineteen eighty seven, and
this is what's called And guess what, we haven't had
another nineteen twenty nine or nineteen eighty seven. It's not
(34:06):
to say that you never will, but just because markets
move similarly or look similar, or the underlying correlations are
similar to this and that markets don't repeat themselves exactly. Furthermore,
depending on what you were invested in the tech bubble
was actually way worse than the financial crisis. Just from
a market perspective, it took a lot longer for the
(34:28):
market to recover. Most certainly way longer for the market
to recover, and if you were invested in the Nasdaq
or anything tech, depending on what you were invest in,
you might not have ever recovered.
Speaker 3 (34:40):
They also make one other claim that I just want
to point out is just pretty provably false. They talk
about how the largest AI gainers right now are some
of the most profitable companies on the planet.
Speaker 4 (34:51):
True.
Speaker 3 (34:52):
They also make the claim that in like the late nineties,
internet companies were losing money, and don't you know, don't
get me wrong, there were plenty of Internet companies that
had no earnings whatsoever and we're getting bid up. But
there were also some very large, well established companies.
Speaker 2 (35:07):
You may have heard of the Microsoft Soft.
Speaker 3 (35:09):
They were making in tel a lot of money at
that point in time. Yes, there were others that were
making no money. But again, just making some blanket statement
about how Internet companies were losing money back in the
dot com bubble is not uniformly true.
Speaker 2 (35:24):
No, it's not anything else that you want to say
about this.
Speaker 3 (35:28):
No, I just look, these articles get written sometimes they
do at the end, you know, put a little caveat
in here and say, you know, First, the quote here is, first,
be aware of what you're of what's going on, but
don't rush to get out. Writing things out isn't a
bad thing if you've been in the market for a while. Second,
aggressively buying more stock isn't a great idea right now.
(35:51):
I don't know what anyone is supposed to do with
that advice. They also say go to the beach. I
think the idea of the last sentence here, saying just
go to the beach, is the only useful piece of
advice in this entire article that I've read.
Speaker 2 (36:05):
Yeah, and look, we've said this over and over again.
So if we sound like a broken record, sorry. If
you're making investment decisions based on reading an article anywhere,
two things are true. The first is anyone who actually,
you know, spends their time looking at markets consistently already
(36:25):
knew what you were looking at three weeks ago. Second,
if you're gonna make an investment decision to buy or
sell based on one article, how are you gonna make
the corresponding decision on the other side to do the opposite,
because what if an article doesn't get published, You know,
what if the same author isn't writing something? What if
or what if tomorrow, what if someone comes out with
a different view, Are you gonna say, well, I was
(36:47):
wrong yesterday, now I'm gonna then you're just racking up
transaction costs potentially taxes depending on the type of account
that you're trading in. Trading based on reading articles is.
Speaker 3 (36:58):
Not a sound investment strategy. No, No, there are probably
some worse ones out there, but not many, not many.
Speaker 2 (37:05):
There are a few, but in general, again, we've talked
about this in a few different contexts. If you're doing
anything investing related because you're emotional, you gotta take a
step back because emotional investing is not good investing. It's
just it makes you trade stuff that you probably don't
want to trade in a lot of cases, and it's
(37:29):
just it's something that gets dangerous. And that's why these
pieces bother me so much, because someone out there is
gonna read this and be like, oh my goodness, it's
gonna be worse than the financial crisis, and look, I
don't know, maybe it will be, but it's not gonna
be because of this piece.
Speaker 4 (37:45):
No like or any of the evidence raised in this piece.
Speaker 2 (37:48):
No, it's it's just not so, you know, think critically.
If you're feeling emotional about you're investing, you probably need to,
you know, think about how you're invested to begin with.
Do that, and then go to the beach. So you
don't have to think about it at the beach, because
when you're at the beach, you should be chilling, man,
you know, having a beer, pina colada if that's not
(38:09):
your thing, a nice cold water under an umbrella, whatever works,
but be chilling at the beach. Don't be thinking about
your investments there. Let's take a quick break here, Our
two of the financial exchange coming up.
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