November 4, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the upcoming Fed meeting and Tuesday's election and debate which is more important for the US economy. The two things we need from the Fed right now. Squeezed homebuilders are bad news for the housing market. Berkshire continues to retreat from stocks. There's too much wine, and not enough wine drinkers.
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Episode Transcript
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Speaker 1 (00:00):
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zada and Mike Armstrong.
Speaker 2 (01:13):
Kicking things off on a busy week here on the
Financial Exchange, we're through the vast majority of the you know,
economic data that we were waiting for last week. We're
through most of the important earnings at this point for
Q three. At this point, just to give you a
quick little earnings update, seventy percent of S and P
(01:34):
five hundred companies have now reported earnings. The only one
that really matters to the index that hasn't reported is
in Video, which typically reports about two to three weeks
after all your other major tech companies. I think it's
going to be like the third or fourth week in
November this year.
Speaker 3 (01:49):
They don't like any competition.
Speaker 2 (01:50):
What's that?
Speaker 3 (01:51):
They don't like any competition?
Speaker 2 (01:53):
Why would you? Why would you? And so thus far
through that seventy percent of companies reporting SP five hundred.
Annual growth rate for earnings is five point one percent.
That'll be the fifth straight quarter of year over year
earnings growth. When we look at the projections heading into
the quarter, on September thirtieth, the S and P five
(02:14):
hundred was expected to see four point three percent earnings growth.
And remember this is missing Nvidia, which is a heavy
weight and is showing rapid earnings growth. So this number
is going to end up higher than where it is
today unless like the other twenty nine percent of companies
end up reporting poorly. And so again, it's been a
good quarter for earning so far. Overall, it has not
(02:36):
been one where you've seen any major challenge to you know,
the idea that the US is in a growing but
slowing economy. I think that's, you know, kind of a
fair statement. And at this point stocks have largely been
humming along, aside from a brief interruption last Thursday where
we saw about a two percent pullback on the S
(02:57):
and P five hundred.
Speaker 4 (02:58):
Let's face the music here for a moment. This week,
none of this matters. The most important political and economic
event of the week is the election tomorrow. I would
say most important economic event of the week too, not
because it's going to determine whether the economy continues to
grow or contract, but obviously the priorities of the President
(03:19):
and the Senate and the House are going to override
really anything that I can think of that we might
hear from Jerome Powell from publicly traded corporations.
Speaker 3 (03:27):
Or anywhere else.
Speaker 4 (03:28):
It is going to be the most important, even economic
event of the week will be tomorrow's election, the outcome
of which hopefully we'll have some clarity about by Wednesday, and.
Speaker 3 (03:41):
All of the other stuff that's going to happen.
Speaker 4 (03:43):
I mean, you know, the Federal Reserve is so aware
of this that they kicked their meeting back by a
full day so that they didn't have to compete for
any eyeballs with the election coming out. So that's going
to be all that really matters, and I can understand
why people listening might have a tough time focusing on
anything other than that this week.
Speaker 2 (04:01):
I'll disagree with that, will you fed meeting is more important?
Completely disagree j Powell. At the stroke of a pen
or push of a button or however they actually whatever
they actually do in order to change interest rates, it's
unclear to me the exact mechanism, whether it's button, dove,
(04:21):
lever dove. I don't think they change rates by dove.
Hawk could be a hawk could carry sometimes that was
gonna be my case.
Speaker 3 (04:30):
They carry a pigeon.
Speaker 2 (04:32):
It's like you're waiting for them to name the new pope.
Whatever birds they release out of the uh, but they
don't burn the birds, that will be bad. Uh. J Powell,
with the push of a button, can have more impact
on the US and global economy than any other person
on the planet, true President, Senate House included. I'm not
(04:59):
saying that tomorrow 's vote isn't important to you know,
the the broader idea of like humanity in the world
and everything. But from an economic perspective, honestly, there is
nothing like Jay Powell, and not him specifically, but the
Fed Chair like that there is no one else who
(05:19):
is that powerful economically. They're like, there's no one else
that that has that level of control.
Speaker 4 (05:28):
Yeah, I will still say that, Uh, the importance of
tomorrow's election outweighs what we're going to hear from Jerome
Powell in terms of the economic implications, because we don't
just have the presidential election going on.
Speaker 3 (05:41):
We have the Senate, we have the House, and we
have a whole new makeup people law making. None of
them can do that again, but of course not.
Speaker 4 (05:48):
But Powell's not going to do something that is outrageously
out of uh, out of predictability.
Speaker 2 (05:57):
But nothing unpredictable can really pass. Like even predictable stuff
has trouble passing Congress. And like, this is the point
that I come back to the last two presidential elections
that we've had, twenty sixteen and twenty twenty. In both
of those cases, you ended up with a trifecta with House,
Senate and White House control Republicans in twenty seventeen Democrats
(06:19):
in twenty twenty one. Could either of them accomplish all
of their priorities even given two years.
Speaker 4 (06:25):
Of course not, But would you debate that those priorities
were completely different.
Speaker 2 (06:29):
I don't think they affected the economy nearly as much
as people think. I think they affected markets because hey,
here's where we're gonna give tax breaks, or here's where
we're going to lower or raise taxes. Yep, and so
certain sectors may benefit more than others. Sure, but from
an actual economic perspective, no, I don't think that there
(06:50):
was a meaningful change as a result. And I know
that everyone listening like that there's just like exploding, like Chuck,
you're an idiot, Like you're I get it. I get
that we want to think that this is what moves markets,
But for three hundred and sixty four days out of
(07:12):
the year, and for you know, almost fifteen hundred days
every four years we don't have elections, and most of
the time we don't pass anything in Congress.
Speaker 4 (07:23):
See you agree on ninety you and I agree on
ninety percent of this. I don't think it's going to
move markets. I don't think that either candidate leading here
will change anything in the way of deficits or the
fact that social Security is going to run out, or
broadly speaking, what you know, the big economy looks like
over the next decade. My mere point is that the
outcome of the election for the economy is more impactful
(07:45):
than anything Jerome and Powell will have to say on Thursday.
Speaker 2 (07:48):
But what's that impact of all? That's like what we
have no idea what it will be.
Speaker 4 (07:52):
No, but but whether we will still have assault deduction,
whether or not.
Speaker 2 (07:56):
Doesn't matter to the economy. Doesn't matter. It doesn't matter
absolutely does Okay? What walk me through again?
Speaker 5 (08:07):
No?
Speaker 2 (08:07):
No, no, no, this is this is really like there's
a lot of meat here. I think this is like
really great to dig in on this.
Speaker 4 (08:14):
So what you're describing is what does it matter to
the big gross economy of the whole United States, And
you know the salt deduction doesn't matter. But yes, would
you say that the salt deduction doesn't matter to your
personal economy? Would you say it doesn't matter to everyone
said no, I said it doesn't matter to the economy.
Speaker 2 (08:31):
Yes, and I believe it does not matter to the economy.
I believe it absolutely matters to the economy.
Speaker 1 (08:35):
No.
Speaker 2 (08:36):
Yeah, the economy will figure out how to live with
or without the salt deduction. But that's like, but it.
Speaker 4 (08:42):
Will prioritize different people, and different people win or lose
based on whether or not it happens.
Speaker 3 (08:45):
It is immensely and more important than whatever jerone Palace
say this week.
Speaker 2 (08:48):
No, here's the thing. J. Powell can quite literally. If
the FED makes a policy mistake, not intentionally but accidentally. Sure,
if the FED makes a policy mistake, the US has recession.
If Congress makes a tax code mistake, the US doesn't
have a recession. It's just okay, some people get more
(09:08):
money and some people don't.
Speaker 4 (09:13):
Are we like on completely different pages here? If the
US Congress makes a bunch of mistakes, then we have
another ten trillion dollars of deficits and potentially ruin the
United States long term future.
Speaker 3 (09:25):
We've just talked about how there is so much more important, but.
Speaker 2 (09:27):
We've talked about how there is no meaningful daylight on
deficits between these two parties agreed, So like, what are
we talking about?
Speaker 4 (09:34):
Then I would think that a split Congress would be
a net positive for all of this.
Speaker 2 (09:39):
Why split Congress or not? No one's dealing with it. Well,
the point that I'm making is there's no meaningful difference
in what you are going to get as far as
the things that we're concerned about from an economic perspective,
deficit control, you know how responsive Congress is in the
event of recessions. There's no meaningful daylight on these things.
(10:03):
It's just okay, if you end up with Democrats in office, Okay,
the money is going to clean energy instead of traditional energy. Like,
is that something that we're really looking at and being like, well,
you know this is gonna dramatically change the No, Like.
Speaker 4 (10:21):
It's again, I don't know that it dramatically dramatically changes
anything between the Republicans what would do and what the
Democrats would do. But in terms of the importance compared
to what's going to come out of Jerome Powell's mouth
on Thursday to me, and I think almost every American's economy,
real world economy is far more important.
Speaker 2 (10:39):
I don't know.
Speaker 4 (10:40):
I just I don't see it, but I don't. And
land on the other side, I I.
Speaker 2 (10:47):
Think everyone listening thinks I'm the idiot, which is cool,
Like it's it's fine, you can think I'm the idiot.
But ultimately, like, think about the last month just as
an example, and what we've seen from interest rates and
things like that, we're gonna say that, like stuff like
that doesn't matter more than hey, Like on the margins,
(11:11):
the tax code's gonna shift from you know, the top
bracket being thirty seven percent to thirty nine six or
thirty seven to thirty five. Like I can't get there,
Like I just can't. And the thing about the FED
is we we don't know if they're making a big
mistake until a year or two after the fact. Sure,
like we can't judge any of this even look even Congress,
(11:34):
if they make a mistake, you look at it and
you're like, okay, we won't know until I mean, if
we're talking the deficit, it could be like forty five
years sure, And it's probably not even this Congress then,
So it's like, I, I just don't know how from
an economic perspective we can look at it and say, yes,
(11:54):
like tomorrow matters so much more than Thursday. A FED
mistake is like, in my opinion, infinitely more important then
whatever happens tomorrow from an economic perspective, because I would
just say that a FED mistake literally causes a recession.
Speaker 4 (12:12):
Yeah, and A again A depending on the makeup of how
Congress looks like the country's economic priorities to me look
vastly different under one party versus another. Again, whether even
even if that is still these exact same amount of deficits,
which parts of the economy are prioritized, which people in
the economy are prioritized, looks incredibly different under these two
(12:35):
candidates running for president, and nothing that Jerne Powell is
gonna say on Thursday, specifically, what.
Speaker 2 (12:42):
Do they actually pass?
Speaker 3 (12:43):
Like what the hell if? I know but that?
Speaker 2 (12:45):
But that's like what what's meaningful that's gonna pass?
Speaker 3 (12:49):
Is it?
Speaker 2 (12:49):
Like, no one's gonna deal with Social Security while the
other doesn't. No one's gonna deal with Medicare while the
other doesn't. No one's gonna deal with the defense budget
while the other does. Like what, I don't know, what
are we talking about? Like, hey, there's a billion dollars
going to like Doe or something like that. All right,
Like who cares? I don't know. I can't get there
(13:11):
on tomorrow mattering much economically. I know that that's heathens
to like everyone in the entire country because it always
has to be the most important election of our lifetimes.
Speaker 3 (13:23):
No, I don't think it has to be the most
important election of our lifetime.
Speaker 2 (13:25):
No thing about everyone listening more.
Speaker 4 (13:28):
Important than one FED meeting, more important than one FED
meeting because it is a presidential end election that will
swing the Senate in all likelihood.
Speaker 2 (13:37):
Yeah, I can't get.
Speaker 3 (13:39):
Excited about it.
Speaker 2 (13:40):
Sorry, take a quick break here. When we come back,
we'll talk about what the FED might do on their
meeting on Thursday.
Speaker 5 (13:47):
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This is the Financial Exchange Radio Network, all right, So
(14:21):
we do have a.
Speaker 2 (14:22):
FED meeting on Thursday. It's more important than anything else
going on.
Speaker 4 (14:27):
How annoyed would you be if every story you brought
up today, I just said it doesn't matter.
Speaker 2 (14:31):
Nobody cares. I didn't say nobody cares. I said I
don't care. I know, I don't speak for anyone else.
Speaker 3 (14:40):
Big FED meeting coming up on Thursday usually occurs on Wednesdays.
Speaker 4 (14:43):
They've delayed a day, the only FED meeting certainly of
the year that's not occurring on a Wednesday, and widely
anticipated for another twenty five basis point rate cut after
the fifty basis point during the last meeting. And I
don't know about your but I can't really think of
anything at this stage that should dissuade them.
Speaker 3 (15:04):
From that path.
Speaker 4 (15:06):
I think Muhammed eler and makes some good points about
their mistake on whether or not it was mistake to
do a fifty base point previously. But you know, you
had a weak jobs report, you had soft inflation, and
they're already on this cut path. I don't think you
can divert from it at this stage.
Speaker 2 (15:20):
No, quite. Honestly, I don't think you would want to know,
because I also think that you have to realize it's
there's no immediate pass through in terms of, you know,
how quickly rates are transmitted in this and that. But
it is something where okay, people were expecting the FED
(15:41):
to cut, and did that shift behavior even in advance,
and people started saying, okay, like, if the Fed's going
to be cutting, we're going to be okay doing X,
Y and Z. And look no further than how markets
have reacted. Just as an example, since the FED started cutting,
you've had the S and P five hundred situation where
despite you know, the negative seasonality in September and stuff
(16:05):
like that, you know, the FED cut on the nineteenth
of September. The S and P five hundred closed at
you know, fifty seven thirteen, it still is about two
thirds of a percent higher than then, and at one point,
you know, we were like three percent higher when it
was closing in on fifty nine hundred, and so it's
something where hey, to markets, the signal is, hey, if
(16:26):
things get bad, we're gonna cut more like that was
very clear and so markets, at least in the short
term found some support because of that. And I think
if you want to look at you know, recent weakness,
I think it's probably ascribed to, Hey, the economy might
be hotter than we think, and maybe the FED doesn't
(16:46):
need to do as much, and so that's been why,
you know, rates have been moving up and maybe EVE
been seeing some signs of I don't want to say
slow down, because again it's it's mostly the labor market
that we're concerned about at this point. But I think
ultimately the FED can probably go through another two to
three cuts and kind of sit there and say, Okay,
(17:06):
when we get to four and a half, let's see
what the situation looks like at that point. And I
don't think they've necessarily done any harm in continuing on
that path. And in fact, if this little burst that
we've had turns out to be a dare I say,
transitory form of strength, then I think THEE can say, yeah,
(17:27):
the underlying stuff that we were seeing, which is stuff
that we've been talking about, Hey, we were justified in
looking through that strength. Just like remember in the spring
they were talking about, Hey, we think that this uptick
in inflation in January through March was kind of this
aberration that they look through. They might end up being
justified similarly here and saying yeah, this was, you know,
(17:50):
transitory strength, and we're not going to get fooled by
it because the underlying data is pointing still in a
negative direction.
Speaker 4 (17:57):
So pretty clear what the outcome of Thursday is going
to be. By by all accounts, probably no significant change
in what that means for long.
Speaker 3 (18:05):
Term rates or mortgage borrowers out there.
Speaker 4 (18:07):
What do you make of Muhammad al Arian's most recent
commentaries published this exact story multiple times over the last
year or so, But I'm starting to buy in more.
And here's a quote. Consider the following. A FED that
saw no need to cut interest rates at the end
of July proceeded to do so by an unusually large
fifty basis points at its next policy meeting in mid September,
(18:28):
slashing the target FED funds rate to a range of
four to seven five to five from a range of
five and a quarter to five and a half.
Speaker 3 (18:34):
The intention to go big rather than valid the.
Speaker 4 (18:35):
Twenty five basis points that the market expected that stage
was communicated via newspaper leaks. He goes on, I'm starting
to buy into this a little bit more. To say,
the Fed seems to lack any long term strategic vision
and instead seems to be bouncing back and forth to
different data points and inconsistently, by the way, right to
(18:56):
your point. Back in the spring, they saw higher inflation,
didn't really seem to rect to it. This time they
saw possibly lower inflation and quickly reacted with a fifty
base point cut.
Speaker 2 (19:05):
I think it's a FED that has been proven very
clearly in the last three years to be more afraid
of causing a recession than letting inflation linger. They've behaved
dubbishly every time they've had the opportunity to do so.
I don't know if I agree with Larian that they
lack strategic vision. I just think that that vision is
asymmetrically skewed to being afraid of recession more than being
(19:27):
afraid of inflation. Fair let's take a quick break here.
When we come back, we got Wall Street Watch and
we're talking housing.
Speaker 1 (19:41):
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Speaker 5 (19:46):
Always first right here on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (20:01):
The busy stretch on Wall Street continues this week with
a FED meeting this week in a tiny, little presidential
election you may have heard of tomorrow. Markets right now
are in mixed territory. The Dow is off by just
about a quarter percent, SMP five hundred is up by
only five points, and the Nasdaq is up by twenty
(20:23):
three points. Russell two thousand up by half a percent,
ten year treasure yealed down by nine basis points at
four point two seven percent, and crude oil is up
over two percent, trating just above seventy one dollars a barrel.
Over the weekend, Berkshire halfway posted their third quarter third
quarter results, narrowly missing earnings expectations. Worn Buffett's conglomerate also
(20:47):
revealed it further trimmed its holding of Apple stock, selling
about a quarter of its stake last quarter. Despite the cut,
Berkshire still remains Apple's largest shareholder. Berkshire also continued to
reduce its position in Bank of America. Apple shares are
off by half a percent, while Bank of America shares
are down by about a third of a percent. Meanwhile,
(21:09):
after initially jumping at the opening at the opening, bell
Viking Therapeutic stock now down by eight percent after the
biotech company reported promising results from an obesity pill trial.
If successful, the pill could compete with medications from Novo
Nordisk and Eli Lilly, which have to be injected elsewhere.
(21:29):
Boeing up by about a third of a percent ahead
of the big vote from its machinist union on a
new labor deal with the hopes of ending the seven
week strike, and ahead of Friday's opening. Bell and Video
will join the dowd Jones Industrial Average, replacing Intel. Paint
manufacturer Sherwin Williams will take Chemical Company Down Incorporated's place
(21:53):
in Video shares up by two percent while Sherwan Williams
stock is up by four percent. I'm Tucker Silvan. That's
Wall Street Watch.
Speaker 2 (22:01):
It's always exciting when you get some new Dow components.
It's also confusing because you're now comparing stocks today to
stocks that are no longer in there.
Speaker 3 (22:13):
Yeah, I mean, like.
Speaker 2 (22:14):
Mentally, I always struggle with this one when a new
component comes in, especially in a thirty company index.
Speaker 3 (22:20):
Right.
Speaker 4 (22:21):
Yeah, it's one thing with the S and P five
hundred when somebody gets the boot and yeah, you're technically
comparing very different companies today than you were thirty years ago.
Speaker 3 (22:31):
Even in the S and P five hundred.
Speaker 4 (22:32):
But yeah, when it's when it's only thirty companies and
they boot out a company like Intel, who's off by
fifty percent this year, and replace it within Video Who's.
Speaker 3 (22:41):
Up what one hundred and fifty percent this year? It
does distort things a bit.
Speaker 2 (22:46):
It does. And I also want to U just reference
one thing that I love to go back to. Do
you remember when Salesforce got added to the dow? Uh
twenty one or two twenty twenty? Okay, and do you
remember who they replaced? Ibm uh Exon Mobile?
Speaker 3 (23:04):
Really?
Speaker 2 (23:04):
Yeah, they basically do the same thing.
Speaker 4 (23:07):
Yeah, obviously, Yeah, obviously Salesforce and Exon Mobile have a
lot in common.
Speaker 2 (23:12):
Since August twenty fourth of twenty twenty, Salesforce is up
forty two percent, Exon Mobil is up two hundred and
twenty six percent.
Speaker 4 (23:22):
What was the prespice for? What was the cause to
give x on the boot? Is there another integrated oil company?
Speaker 3 (23:28):
And press? Is?
Speaker 5 (23:28):
What?
Speaker 2 (23:29):
Negative that?
Speaker 5 (23:29):
Sure?
Speaker 2 (23:30):
That's all I can think of.
Speaker 3 (23:31):
But like, is there a single other oil producer in
the Dow?
Speaker 2 (23:35):
Let me think of who's Lescu?
Speaker 4 (23:36):
That's a massive absoint if you're just gonna say, hey,
this is the representation of the US marketing von still
in there.
Speaker 3 (23:42):
Chevrons in there.
Speaker 2 (23:43):
Okay, Chevron's in there.
Speaker 3 (23:44):
And again, I.
Speaker 4 (23:45):
Don't know how you prioritize keeping Chevron over exon given
the comparable size the two.
Speaker 3 (23:50):
But nonetheless, here we are.
Speaker 2 (23:52):
I believe it's called Chevron deference. Yeah, it's such like
show like it's such a nerd I crap joke. There's
like this three of our talking about. Actually no, I
would say most of our listeners might know about that.
Speaker 4 (24:09):
They've heard of the Chevron difference. Yeah, but a very
small portion of them would find that joke funny, like
I did.
Speaker 2 (24:17):
I'm glad I made you smile, Mike. Let's talk a
little bit about the housing market, something that's not gonna
make anyone smile anytime soon. If you own a home,
I'm not if you want to move, and not if
you want to refinance. Basically, if if you like everything
exactly how it is right now with your housing situation,
you can smile. If you have any problems, you probably can't.
(24:38):
Piece from connor Son in Bloomberg Opinion Today, It's titled
Squeezed homebuilders are bad news for the housing market and
This is a story I've been following for the last
couple of weeks, which is homebuilders have been reporting earnings
just like other companies over the last couple of weeks,
and there are two things going on. First, the earnings
have been bad, just not good. The second is that
these companies are just significantly reducing backlogs in places where
(25:02):
they're actually building houses in large numbers. Remember, the housing
industry is just hugely fragmented. There is no there is
no apple for housing. Even the biggest home builders in
the country build like two percent of all the new
homes that are built each year, so like it's just
not a very concentrated market. But what we're seeing from
(25:24):
those large home builders is in places like Texas, Florida, Georgia,
all the places where the growth has been population wise
the last few years, the backlogs that they are reporting
in terms of you know, unit construction and orders and
things like that are dropping by like twenty to thirty
percent year over year. And what this means is these
(25:45):
companies are looking at pricing and looking at what people
can actually pay, and they're pretty much saying, hey, we
can't sell nearly as many homes as we used to,
so we're not gonna build them.
Speaker 3 (25:57):
And that's also problematic.
Speaker 4 (25:59):
Like you could look at that and say, well, you know,
if people are leaving Florida and Georgia and North Carolina
and returning back to the northeastern California, for example, which
does some extent might be happening somewhere out the margins,
maybe you know, the logical thing to be like, well,
just build the homes in New England.
Speaker 3 (26:14):
But that doesn't really happen.
Speaker 4 (26:16):
It is just so much more difficult to build a
home anywhere in New England compared to Florida and Georgia
and North Carolina that you won't see an easy replacement.
Like Chuck said, also, the same companies that build those
homes in Georgia aren't the same ones that do it
in New England.
Speaker 3 (26:30):
In the first place.
Speaker 4 (26:31):
But yeah, nonetheless, a slow down in housing construction is
a slow down for the US economy. And you know,
it was wildfire for the last few years in terms
of cost materials and everything else. And a somewhat logical
turnaround here, although you know could look could have looked
very different. Head rates started coming down a little bit
(26:53):
faster than they have recently.
Speaker 2 (26:56):
Yeah, and so this is ultimately going to be a
big continued problem because if you don't build enough new housing,
then you don't get enough used housing, and then you
end up with prices that don't really move the way
you want them to. We've seen this with the auto
(27:17):
market in terms of how it's cleared, but even in
the auto market, you still are not quite back to
where you would expect it to be, just because part
of that is just a shift in consumer preferences and
what we're seeing in autos. But even in the auto market, look,
once automakers squared away their supply chains, you've had like
two years now have used car prices going down. They've
(27:38):
kind of bottomed out a little bit, but it still
is something where, hey, once you finally produced enough new cars,
it cleared a lot of the issues on the used
car market that we were seeing that we're leading to them,
you know, going up in value by thirty forty percent
a year.
Speaker 4 (27:55):
This is only tangentially attached to housing. Have you seen
any uptick in ADU construction in your area? Only because
nationally there's been a big push for accessory dwelling units
and specifically a big push for states and municipalities to
(28:15):
pass laws saying hey, by default, you're able to build
one of these. I know in my town, for instance,
there's an exemption where you know, you don't have to
go through traditional zoning requests and things like that, so
long as it's under a certain square footage, sure, and
as long as you're not in an environmental zone. For example,
I was working with somebody else up in Maine who
you know, so long as it's not being used for
(28:35):
short term rentals, pretty much can construct one of these
things without much in the way of requirements. I haven't
seen locally any significant uptick, but to me that logically
makes a good bit of sense for folks that you
know might have family or you know, aging family that
needs to be close by.
Speaker 3 (28:57):
Seems like a logical next step.
Speaker 4 (28:58):
But I haven't can't say I've seen a ton of it,
and I wonder if from builders, if they're saying it anecdotally.
Speaker 2 (29:03):
I haven't seen much either. It's something where I also
don't know in some cases like how you would see it,
because the idea behind these ADUs is, hey, they might
be built as like like it almost looks like a
slightly larger shed behind someone's house, So true, you might
not see it. You might not have the signs of it.
(29:25):
You might see, you know, construction vehicles outside someone's house,
but it looks like they're just doing a kitchen renovation,
but really they're building an ADU behind it, and so
you just don't know it's which is again, that's kind
of the whole point of making them more allowable, is Hey,
if you can't see it from the street, who cares?
What are we really doing here?
Speaker 3 (29:46):
Now?
Speaker 2 (29:47):
Like there's limits to that. Obviously, this is an ADU,
not you know, a missile silo. I know there's a
lot of middle ground between that, but ultimately, you know,
nuclear power plant things like that, Like you wouldn't just
be like, yeah, pop a little miniature reactor in your
backyard and hook your Dolorean up to it and you're
good to go. But yeah, you would hope that you're
(30:08):
seeing more of this, but you might not actually see it.
If that makes sense either way, that the housing market
is stuck. It really doesn't really show any signs of
budget either. With rates where they are no and the
places that do now have higher inventory levels than pre pandemic.
You're seeing prices coming down and that is something that
(30:31):
feels like a feature, not a bug of this market. Unfortunately,
at this point, if you're if you're trying to sell
in one of those high inventory areas, it's it's it's
not great like it's it's unclear there's gonna be anything
that clears that in the near future. Take a quick
break here when we come back, talk a little bit
(30:52):
about Berkshire, Hathaway and Boeing. Right after this text, does.
Speaker 5 (30:58):
Six one seven drink six to two one three five
with your comments and questions about today's show.
Speaker 1 (31:03):
This is the Financial Exchange Radio Network.
Speaker 5 (31:07):
The Financial Exchange Show podcast drops every day on Apple, Spotify,
and iHeartRadio. Hit that subscribe button and leave us a
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Speaker 6 (31:21):
Just want to remind everybody that coming up right here
on the show at eleven am, we have the Ultimate
Boston Sports Auction to benefit the Disabled American American Veterans
Department of Massachusetts once again, that auction is going to
open up at eleven am. We'll have four incredible items
to bid on in one massive package, including a pair
(31:42):
of tickets to see each of the Boston sports teams.
Some nice memorabilia, including a Drake May autograph, team jersey
of Pedro Martinez autograph baseball and much more. It's a massive,
max massive Boston sports auction in that will be open
again coming up here at eleven am and will be
(32:03):
happening the entire week and again all the proceeds will
benefit the Disabled American Veterans Department of Massachusetts once again.
That will be open at eleven am and the phone
number to call at eleven am is eight eight eight
two zero five two to two sixty three. To bid
at eleven am once again, the number eighty eight two
(32:23):
zero five two two six three.
Speaker 2 (32:27):
Love the Drake, wonderful play at the end of yesterday.
Oh yeah, I love the Drake. He's a stud. There's
not much else going on there, but uh yeah, that's it.
There's not much else. Just to see Drake May.
Speaker 6 (32:40):
I mean that would be amazing, right.
Speaker 2 (32:42):
Like just fantastic, absolutely fantastolutely Mike, did you watch any
of the game yesterday?
Speaker 3 (32:47):
I did. I watched them listen overtime.
Speaker 2 (32:48):
Yeah, oh good good. It was one of the more
enjoyable overtime losses I've ever waitnessed.
Speaker 6 (32:54):
Our house, our household was standing watching that game all
that matters, which hasn't happened in a while. And right,
but this new quarterback, Drake May, who stud.
Speaker 2 (33:03):
Drake May so hot? Right now, let's talk a little
bit about Berkshire Hathaway. They announced that they are continuing
to trim some of their holdings, specifically their Apple holding.
They sold about one hundred million shares of Apple in
the quarter, but it's about twenty five percent of their
steak and they've now sold more than six hundred million
(33:25):
Apple shares this year, so they've reduced their steak by
almost seventy percent over the course of the year. Does
Warren know something, Mike, what's he doing?
Speaker 4 (33:37):
Probably he knows lots of things he does. I think
it's a good reminder that while Warren Buffett does have
a lot of great advice to dole out, and frequently
does on all sorts of different topics, from taxes to
how to invest, using Berkshire Hathaway's investment strategy as your own,
(33:58):
should you know should be looked at with some extreme caution.
To know the least, no one is able to invest
like Berkshire Hathaway. Berkshire Hathaway is an entity that is
designed to hopefully continue to exist for decades after this
has all sorts of reporting and regulatory requirements to its
shareholders that don't and should not invest and exist for
(34:21):
the average investor.
Speaker 2 (34:22):
Beyond that, I think there's a very simple thing that
I come back to, which is, there's a reason why
Warren Buffett is Warren Buffett in your you and I
include me in the your you right category like it's
all of us, yeah, and we're us.
Speaker 3 (34:35):
You know.
Speaker 2 (34:35):
It's he's really good at investing. I know that he's
playing the long game. He can afford to play the
long game. You know, when when he comes in in
two thousand and eight and makes the deal with Bank
of America to rescue them from blowing up, he wasn't
concerned about, Hey, how's this going to look for me
(34:57):
next year, next week? Or do I need the money
to buy a house? He's no, I'm getting a huge
deal on this, And even if it doesn't pay off
for eight to ten years, which is it took like
seven or eight years for it to kind of get
to be as good of a deal as it was. Hey,
that's fine, I can sit and wait on that. That's
no problem. On top of that. Remember, Warren Buffet's also
a great example of like do as I say, not
(35:18):
as I do. He always talks about the dangers of leverage.
Warn Buffet uses a ton of leverage his businesses. It's
because he knows what he's doing. And I'm not saying
that none of us know what we're doing either, But
Warren's pretty special. There's a reason why most people don't
accumulate the level of wealth and the types of returns
that he has. It's because he's really good at it.
And you can't just look at what he did in
(35:40):
the prior court and be like, I should do that,
because you don't know why he was doing it. You
don't know when he was selling it, what prices, you
don't know when it's all.
Speaker 3 (35:47):
He's done for the better part of a century.
Speaker 2 (35:50):
Right, Yeah, he's ninety four years old, He's seen some stuff,
knows a few things.
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Speaker 3 (36:57):
Chuck, how many leaders are an a HECTA leader?
Speaker 2 (36:59):
One hundred?
Speaker 3 (37:00):
Okay.
Speaker 4 (37:02):
In twenty twenty three, global wine consumption came in at
two hundred and twenty one million hecto leaders, which sounds
like a lot, but it was actually down almost ten
percent from two hundred and forty seven million Hecto leaders
back in twenty seventeen, which hopefully means that I'm going
to start finding some bigger discounts on wine.
Speaker 2 (37:21):
It's three point five billion fewer bottles of wine. To
put that in you know term that we're more than
a lot because most of us don't buy by the
Hecto leader. No, we don't even buy the leader. No,
he buy three quarters for flye. And so what you're
seeing here is that apparently there is too much wine
being produced and not enough people drinking wine. There's various
(37:43):
different reasons for this. There's one theory that baby boomers
have been the primary wine you know consumers, and younger
generations are more beer and whiskey.
Speaker 4 (37:53):
You know now that there is that younger consumers just
aren't drinking as much alcohol in general.
Speaker 2 (37:57):
Yep, you've got kind of like dry anuary and stuff
that goes on. Ultimately, as someone who does enjoy drinking wine,
I come back to the idea that hey, if no
one else wants to buy it, it's better for supply
and demand for me, and hopefully I can get some
better pricing on it. Sounds nice.
Speaker 3 (38:14):
Some winers will probably also go out of business.
Speaker 2 (38:15):
Not great if you're in the wine business, though, It's uh,
you know, something that's gonna be a real challenge. Let's
take a quick break here. Hour two coming up in
a bit
The Financial Exchange is produced by Money Matters Radio and
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zada and Mike Armstrong.
Speaker 2 (01:13):
Kicking things off on a busy week here on the
Financial Exchange, we're through the vast majority of the you know,
economic data that we were waiting for last week. We're
through most of the important earnings at this point for
Q three. At this point, just to give you a
quick little earnings update, seventy percent of S and P
(01:34):
five hundred companies have now reported earnings. The only one
that really matters to the index that hasn't reported is
in Video, which typically reports about two to three weeks
after all your other major tech companies. I think it's
going to be like the third or fourth week in
November this year.
Speaker 3 (01:49):
They don't like any competition.
Speaker 2 (01:50):
What's that?
Speaker 3 (01:51):
They don't like any competition?
Speaker 2 (01:53):
Why would you? Why would you? And so thus far
through that seventy percent of companies reporting SP five hundred.
Annual growth rate for earnings is five point one percent.
That'll be the fifth straight quarter of year over year
earnings growth. When we look at the projections heading into
the quarter, on September thirtieth, the S and P five
(02:14):
hundred was expected to see four point three percent earnings growth.
And remember this is missing Nvidia, which is a heavy
weight and is showing rapid earnings growth. So this number
is going to end up higher than where it is
today unless like the other twenty nine percent of companies
end up reporting poorly. And so again, it's been a
good quarter for earning so far. Overall, it has not
(02:36):
been one where you've seen any major challenge to you know,
the idea that the US is in a growing but
slowing economy. I think that's, you know, kind of a
fair statement. And at this point stocks have largely been
humming along, aside from a brief interruption last Thursday where
we saw about a two percent pullback on the S
(02:57):
and P five hundred.
Speaker 4 (02:58):
Let's face the music here for a moment. This week,
none of this matters. The most important political and economic
event of the week is the election tomorrow. I would
say most important economic event of the week too, not
because it's going to determine whether the economy continues to
grow or contract, but obviously the priorities of the President
(03:19):
and the Senate and the House are going to override
really anything that I can think of that we might
hear from Jerome Powell from publicly traded corporations.
Speaker 3 (03:27):
Or anywhere else.
Speaker 4 (03:28):
It is going to be the most important, even economic
event of the week will be tomorrow's election, the outcome
of which hopefully we'll have some clarity about by Wednesday, and.
Speaker 3 (03:41):
All of the other stuff that's going to happen.
Speaker 4 (03:43):
I mean, you know, the Federal Reserve is so aware
of this that they kicked their meeting back by a
full day so that they didn't have to compete for
any eyeballs with the election coming out. So that's going
to be all that really matters, and I can understand
why people listening might have a tough time focusing on
anything other than that this week.
Speaker 2 (04:01):
I'll disagree with that, will you fed meeting is more important?
Completely disagree j Powell. At the stroke of a pen
or push of a button or however they actually whatever
they actually do in order to change interest rates, it's
unclear to me the exact mechanism, whether it's button, dove,
(04:21):
lever dove. I don't think they change rates by dove.
Hawk could be a hawk could carry sometimes that was
gonna be my case.
Speaker 3 (04:30):
They carry a pigeon.
Speaker 2 (04:32):
It's like you're waiting for them to name the new pope.
Whatever birds they release out of the uh, but they
don't burn the birds, that will be bad. Uh. J Powell,
with the push of a button, can have more impact
on the US and global economy than any other person
on the planet, true President, Senate House included. I'm not
(04:59):
saying that tomorrow 's vote isn't important to you know,
the the broader idea of like humanity in the world
and everything. But from an economic perspective, honestly, there is
nothing like Jay Powell, and not him specifically, but the
Fed Chair like that there is no one else who
(05:19):
is that powerful economically. They're like, there's no one else
that that has that level of control.
Speaker 4 (05:28):
Yeah, I will still say that, Uh, the importance of
tomorrow's election outweighs what we're going to hear from Jerome
Powell in terms of the economic implications, because we don't
just have the presidential election going on.
Speaker 3 (05:41):
We have the Senate, we have the House, and we
have a whole new makeup people law making. None of
them can do that again, but of course not.
Speaker 4 (05:48):
But Powell's not going to do something that is outrageously
out of uh, out of predictability.
Speaker 2 (05:57):
But nothing unpredictable can really pass. Like even predictable stuff
has trouble passing Congress. And like, this is the point
that I come back to the last two presidential elections
that we've had, twenty sixteen and twenty twenty. In both
of those cases, you ended up with a trifecta with House,
Senate and White House control Republicans in twenty seventeen Democrats
(06:19):
in twenty twenty one. Could either of them accomplish all
of their priorities even given two years.
Speaker 4 (06:25):
Of course not, But would you debate that those priorities
were completely different.
Speaker 2 (06:29):
I don't think they affected the economy nearly as much
as people think. I think they affected markets because hey,
here's where we're gonna give tax breaks, or here's where
we're going to lower or raise taxes. Yep, and so
certain sectors may benefit more than others. Sure, but from
an actual economic perspective, no, I don't think that there
(06:50):
was a meaningful change as a result. And I know
that everyone listening like that there's just like exploding, like Chuck,
you're an idiot, Like you're I get it. I get
that we want to think that this is what moves markets,
But for three hundred and sixty four days out of
(07:12):
the year, and for you know, almost fifteen hundred days
every four years we don't have elections, and most of
the time we don't pass anything in Congress.
Speaker 4 (07:23):
See you agree on ninety you and I agree on
ninety percent of this. I don't think it's going to
move markets. I don't think that either candidate leading here
will change anything in the way of deficits or the
fact that social Security is going to run out, or
broadly speaking, what you know, the big economy looks like
over the next decade. My mere point is that the
outcome of the election for the economy is more impactful
(07:45):
than anything Jerome and Powell will have to say on Thursday.
Speaker 2 (07:48):
But what's that impact of all? That's like what we
have no idea what it will be.
Speaker 4 (07:52):
No, but but whether we will still have assault deduction,
whether or not.
Speaker 2 (07:56):
Doesn't matter to the economy. Doesn't matter. It doesn't matter
absolutely does Okay? What walk me through again?
Speaker 5 (08:07):
No?
Speaker 2 (08:07):
No, no, no, this is this is really like there's
a lot of meat here. I think this is like
really great to dig in on this.
Speaker 4 (08:14):
So what you're describing is what does it matter to
the big gross economy of the whole United States, And
you know the salt deduction doesn't matter. But yes, would
you say that the salt deduction doesn't matter to your
personal economy? Would you say it doesn't matter to everyone
said no, I said it doesn't matter to the economy.
Speaker 2 (08:31):
Yes, and I believe it does not matter to the economy.
I believe it absolutely matters to the economy.
Speaker 1 (08:35):
No.
Speaker 2 (08:36):
Yeah, the economy will figure out how to live with
or without the salt deduction. But that's like, but it.
Speaker 4 (08:42):
Will prioritize different people, and different people win or lose
based on whether or not it happens.
Speaker 3 (08:45):
It is immensely and more important than whatever jerone Palace
say this week.
Speaker 2 (08:48):
No, here's the thing. J. Powell can quite literally. If
the FED makes a policy mistake, not intentionally but accidentally. Sure,
if the FED makes a policy mistake, the US has recession.
If Congress makes a tax code mistake, the US doesn't
have a recession. It's just okay, some people get more
(09:08):
money and some people don't.
Speaker 4 (09:13):
Are we like on completely different pages here? If the
US Congress makes a bunch of mistakes, then we have
another ten trillion dollars of deficits and potentially ruin the
United States long term future.
Speaker 3 (09:25):
We've just talked about how there is so much more important, but.
Speaker 2 (09:27):
We've talked about how there is no meaningful daylight on
deficits between these two parties agreed, So like, what are
we talking about?
Speaker 4 (09:34):
Then I would think that a split Congress would be
a net positive for all of this.
Speaker 2 (09:39):
Why split Congress or not? No one's dealing with it. Well,
the point that I'm making is there's no meaningful difference
in what you are going to get as far as
the things that we're concerned about from an economic perspective,
deficit control, you know how responsive Congress is in the
event of recessions. There's no meaningful daylight on these things.
(10:03):
It's just okay, if you end up with Democrats in office, Okay,
the money is going to clean energy instead of traditional energy. Like,
is that something that we're really looking at and being like, well,
you know this is gonna dramatically change the No, Like.
Speaker 4 (10:21):
It's again, I don't know that it dramatically dramatically changes
anything between the Republicans what would do and what the
Democrats would do. But in terms of the importance compared
to what's going to come out of Jerome Powell's mouth
on Thursday to me, and I think almost every American's economy,
real world economy is far more important.
Speaker 2 (10:39):
I don't know.
Speaker 4 (10:40):
I just I don't see it, but I don't. And
land on the other side, I I.
Speaker 2 (10:47):
Think everyone listening thinks I'm the idiot, which is cool,
Like it's it's fine, you can think I'm the idiot.
But ultimately, like, think about the last month just as
an example, and what we've seen from interest rates and
things like that, we're gonna say that, like stuff like
that doesn't matter more than hey, Like on the margins,
(11:11):
the tax code's gonna shift from you know, the top
bracket being thirty seven percent to thirty nine six or
thirty seven to thirty five. Like I can't get there,
Like I just can't. And the thing about the FED
is we we don't know if they're making a big
mistake until a year or two after the fact. Sure,
like we can't judge any of this even look even Congress,
(11:34):
if they make a mistake, you look at it and
you're like, okay, we won't know until I mean, if
we're talking the deficit, it could be like forty five
years sure, And it's probably not even this Congress then,
So it's like, I, I just don't know how from
an economic perspective we can look at it and say, yes,
(11:54):
like tomorrow matters so much more than Thursday. A FED
mistake is like, in my opinion, infinitely more important then
whatever happens tomorrow from an economic perspective, because I would
just say that a FED mistake literally causes a recession.
Speaker 4 (12:12):
Yeah, and A again A depending on the makeup of how
Congress looks like the country's economic priorities to me look
vastly different under one party versus another. Again, whether even
even if that is still these exact same amount of deficits,
which parts of the economy are prioritized, which people in
the economy are prioritized, looks incredibly different under these two
(12:35):
candidates running for president, and nothing that Jerne Powell is
gonna say on Thursday, specifically, what.
Speaker 2 (12:42):
Do they actually pass?
Speaker 3 (12:43):
Like what the hell if? I know but that?
Speaker 2 (12:45):
But that's like what what's meaningful that's gonna pass?
Speaker 3 (12:49):
Is it?
Speaker 2 (12:49):
Like, no one's gonna deal with Social Security while the
other doesn't. No one's gonna deal with Medicare while the
other doesn't. No one's gonna deal with the defense budget
while the other does. Like what, I don't know, what
are we talking about? Like, hey, there's a billion dollars
going to like Doe or something like that. All right,
Like who cares? I don't know. I can't get there
(13:11):
on tomorrow mattering much economically. I know that that's heathens
to like everyone in the entire country because it always
has to be the most important election of our lifetimes.
Speaker 3 (13:23):
No, I don't think it has to be the most
important election of our lifetime.
Speaker 2 (13:25):
No thing about everyone listening more.
Speaker 4 (13:28):
Important than one FED meeting, more important than one FED
meeting because it is a presidential end election that will
swing the Senate in all likelihood.
Speaker 2 (13:37):
Yeah, I can't get.
Speaker 3 (13:39):
Excited about it.
Speaker 2 (13:40):
Sorry, take a quick break here. When we come back,
we'll talk about what the FED might do on their
meeting on Thursday.
Speaker 5 (13:47):
Woll Street watch a full update on the markets performance
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This is the Financial Exchange Radio Network, all right, So
(14:21):
we do have a.
Speaker 2 (14:22):
FED meeting on Thursday. It's more important than anything else
going on.
Speaker 4 (14:27):
How annoyed would you be if every story you brought
up today, I just said it doesn't matter.
Speaker 2 (14:31):
Nobody cares. I didn't say nobody cares. I said I
don't care. I know, I don't speak for anyone else.
Speaker 3 (14:40):
Big FED meeting coming up on Thursday usually occurs on Wednesdays.
Speaker 4 (14:43):
They've delayed a day, the only FED meeting certainly of
the year that's not occurring on a Wednesday, and widely
anticipated for another twenty five basis point rate cut after
the fifty basis point during the last meeting. And I
don't know about your but I can't really think of
anything at this stage that should dissuade them.
Speaker 3 (15:04):
From that path.
Speaker 4 (15:06):
I think Muhammed eler and makes some good points about
their mistake on whether or not it was mistake to
do a fifty base point previously. But you know, you
had a weak jobs report, you had soft inflation, and
they're already on this cut path. I don't think you
can divert from it at this stage.
Speaker 2 (15:20):
No, quite. Honestly, I don't think you would want to know,
because I also think that you have to realize it's
there's no immediate pass through in terms of, you know,
how quickly rates are transmitted in this and that. But
it is something where okay, people were expecting the FED
(15:41):
to cut, and did that shift behavior even in advance,
and people started saying, okay, like, if the Fed's going
to be cutting, we're going to be okay doing X,
Y and Z. And look no further than how markets
have reacted. Just as an example, since the FED started cutting,
you've had the S and P five hundred situation where
despite you know, the negative seasonality in September and stuff
(16:05):
like that, you know, the FED cut on the nineteenth
of September. The S and P five hundred closed at
you know, fifty seven thirteen, it still is about two
thirds of a percent higher than then, and at one point,
you know, we were like three percent higher when it
was closing in on fifty nine hundred, and so it's
something where hey, to markets, the signal is, hey, if
(16:26):
things get bad, we're gonna cut more like that was
very clear and so markets, at least in the short
term found some support because of that. And I think
if you want to look at you know, recent weakness,
I think it's probably ascribed to, Hey, the economy might
be hotter than we think, and maybe the FED doesn't
(16:46):
need to do as much, and so that's been why,
you know, rates have been moving up and maybe EVE
been seeing some signs of I don't want to say
slow down, because again it's it's mostly the labor market
that we're concerned about at this point. But I think
ultimately the FED can probably go through another two to
three cuts and kind of sit there and say, Okay,
(17:06):
when we get to four and a half, let's see
what the situation looks like at that point. And I
don't think they've necessarily done any harm in continuing on
that path. And in fact, if this little burst that
we've had turns out to be a dare I say,
transitory form of strength, then I think THEE can say, yeah,
(17:27):
the underlying stuff that we were seeing, which is stuff
that we've been talking about, Hey, we were justified in
looking through that strength. Just like remember in the spring
they were talking about, Hey, we think that this uptick
in inflation in January through March was kind of this
aberration that they look through. They might end up being
justified similarly here and saying yeah, this was, you know,
(17:50):
transitory strength, and we're not going to get fooled by
it because the underlying data is pointing still in a
negative direction.
Speaker 4 (17:57):
So pretty clear what the outcome of Thursday is going
to be. By by all accounts, probably no significant change
in what that means for long.
Speaker 3 (18:05):
Term rates or mortgage borrowers out there.
Speaker 4 (18:07):
What do you make of Muhammad al Arian's most recent
commentaries published this exact story multiple times over the last
year or so, But I'm starting to buy in more.
And here's a quote. Consider the following. A FED that
saw no need to cut interest rates at the end
of July proceeded to do so by an unusually large
fifty basis points at its next policy meeting in mid September,
(18:28):
slashing the target FED funds rate to a range of
four to seven five to five from a range of
five and a quarter to five and a half.
Speaker 3 (18:34):
The intention to go big rather than valid the.
Speaker 4 (18:35):
Twenty five basis points that the market expected that stage
was communicated via newspaper leaks. He goes on, I'm starting
to buy into this a little bit more. To say,
the Fed seems to lack any long term strategic vision
and instead seems to be bouncing back and forth to
different data points and inconsistently, by the way, right to
(18:56):
your point. Back in the spring, they saw higher inflation,
didn't really seem to rect to it. This time they
saw possibly lower inflation and quickly reacted with a fifty
base point cut.
Speaker 2 (19:05):
I think it's a FED that has been proven very
clearly in the last three years to be more afraid
of causing a recession than letting inflation linger. They've behaved
dubbishly every time they've had the opportunity to do so.
I don't know if I agree with Larian that they
lack strategic vision. I just think that that vision is
asymmetrically skewed to being afraid of recession more than being
(19:27):
afraid of inflation. Fair let's take a quick break here.
When we come back, we got Wall Street Watch and
we're talking housing.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
TFE show Breaking business news is.
Speaker 5 (19:46):
Always first right here on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (20:01):
The busy stretch on Wall Street continues this week with
a FED meeting this week in a tiny, little presidential
election you may have heard of tomorrow. Markets right now
are in mixed territory. The Dow is off by just
about a quarter percent, SMP five hundred is up by
only five points, and the Nasdaq is up by twenty
(20:23):
three points. Russell two thousand up by half a percent,
ten year treasure yealed down by nine basis points at
four point two seven percent, and crude oil is up
over two percent, trating just above seventy one dollars a barrel.
Over the weekend, Berkshire halfway posted their third quarter third
quarter results, narrowly missing earnings expectations. Worn Buffett's conglomerate also
(20:47):
revealed it further trimmed its holding of Apple stock, selling
about a quarter of its stake last quarter. Despite the cut,
Berkshire still remains Apple's largest shareholder. Berkshire also continued to
reduce its position in Bank of America. Apple shares are
off by half a percent, while Bank of America shares
are down by about a third of a percent. Meanwhile,
(21:09):
after initially jumping at the opening at the opening, bell
Viking Therapeutic stock now down by eight percent after the
biotech company reported promising results from an obesity pill trial.
If successful, the pill could compete with medications from Novo
Nordisk and Eli Lilly, which have to be injected elsewhere.
(21:29):
Boeing up by about a third of a percent ahead
of the big vote from its machinist union on a
new labor deal with the hopes of ending the seven
week strike, and ahead of Friday's opening. Bell and Video
will join the dowd Jones Industrial Average, replacing Intel. Paint
manufacturer Sherwin Williams will take Chemical Company Down Incorporated's place
(21:53):
in Video shares up by two percent while Sherwan Williams
stock is up by four percent. I'm Tucker Silvan. That's
Wall Street Watch.
Speaker 2 (22:01):
It's always exciting when you get some new Dow components.
It's also confusing because you're now comparing stocks today to
stocks that are no longer in there.
Speaker 3 (22:13):
Yeah, I mean, like.
Speaker 2 (22:14):
Mentally, I always struggle with this one when a new
component comes in, especially in a thirty company index.
Speaker 3 (22:20):
Right.
Speaker 4 (22:21):
Yeah, it's one thing with the S and P five
hundred when somebody gets the boot and yeah, you're technically
comparing very different companies today than you were thirty years ago.
Speaker 3 (22:31):
Even in the S and P five hundred.
Speaker 4 (22:32):
But yeah, when it's when it's only thirty companies and
they boot out a company like Intel, who's off by
fifty percent this year, and replace it within Video Who's.
Speaker 3 (22:41):
Up what one hundred and fifty percent this year? It
does distort things a bit.
Speaker 2 (22:46):
It does. And I also want to U just reference
one thing that I love to go back to. Do
you remember when Salesforce got added to the dow? Uh
twenty one or two twenty twenty? Okay, and do you
remember who they replaced? Ibm uh Exon Mobile?
Speaker 3 (23:04):
Really?
Speaker 2 (23:04):
Yeah, they basically do the same thing.
Speaker 4 (23:07):
Yeah, obviously, Yeah, obviously Salesforce and Exon Mobile have a
lot in common.
Speaker 2 (23:12):
Since August twenty fourth of twenty twenty, Salesforce is up
forty two percent, Exon Mobil is up two hundred and
twenty six percent.
Speaker 4 (23:22):
What was the prespice for? What was the cause to
give x on the boot? Is there another integrated oil company?
Speaker 3 (23:28):
And press? Is?
Speaker 5 (23:28):
What?
Speaker 2 (23:29):
Negative that?
Speaker 5 (23:29):
Sure?
Speaker 2 (23:30):
That's all I can think of.
Speaker 3 (23:31):
But like, is there a single other oil producer in
the Dow?
Speaker 2 (23:35):
Let me think of who's Lescu?
Speaker 4 (23:36):
That's a massive absoint if you're just gonna say, hey,
this is the representation of the US marketing von still
in there.
Speaker 3 (23:42):
Chevrons in there.
Speaker 2 (23:43):
Okay, Chevron's in there.
Speaker 3 (23:44):
And again, I.
Speaker 4 (23:45):
Don't know how you prioritize keeping Chevron over exon given
the comparable size the two.
Speaker 3 (23:50):
But nonetheless, here we are.
Speaker 2 (23:52):
I believe it's called Chevron deference. Yeah, it's such like
show like it's such a nerd I crap joke. There's
like this three of our talking about. Actually no, I
would say most of our listeners might know about that.
Speaker 4 (24:09):
They've heard of the Chevron difference. Yeah, but a very
small portion of them would find that joke funny, like
I did.
Speaker 2 (24:17):
I'm glad I made you smile, Mike. Let's talk a
little bit about the housing market, something that's not gonna
make anyone smile anytime soon. If you own a home,
I'm not if you want to move, and not if
you want to refinance. Basically, if if you like everything
exactly how it is right now with your housing situation,
you can smile. If you have any problems, you probably can't.
(24:38):
Piece from connor Son in Bloomberg Opinion Today, It's titled
Squeezed homebuilders are bad news for the housing market and
This is a story I've been following for the last
couple of weeks, which is homebuilders have been reporting earnings
just like other companies over the last couple of weeks,
and there are two things going on. First, the earnings
have been bad, just not good. The second is that
these companies are just significantly reducing backlogs in places where
(25:02):
they're actually building houses in large numbers. Remember, the housing
industry is just hugely fragmented. There is no there is
no apple for housing. Even the biggest home builders in
the country build like two percent of all the new
homes that are built each year, so like it's just
not a very concentrated market. But what we're seeing from
(25:24):
those large home builders is in places like Texas, Florida, Georgia,
all the places where the growth has been population wise
the last few years, the backlogs that they are reporting
in terms of you know, unit construction and orders and
things like that are dropping by like twenty to thirty
percent year over year. And what this means is these
(25:45):
companies are looking at pricing and looking at what people
can actually pay, and they're pretty much saying, hey, we
can't sell nearly as many homes as we used to,
so we're not gonna build them.
Speaker 3 (25:57):
And that's also problematic.
Speaker 4 (25:59):
Like you could look at that and say, well, you know,
if people are leaving Florida and Georgia and North Carolina
and returning back to the northeastern California, for example, which
does some extent might be happening somewhere out the margins,
maybe you know, the logical thing to be like, well,
just build the homes in New England.
Speaker 3 (26:14):
But that doesn't really happen.
Speaker 4 (26:16):
It is just so much more difficult to build a
home anywhere in New England compared to Florida and Georgia
and North Carolina that you won't see an easy replacement.
Like Chuck said, also, the same companies that build those
homes in Georgia aren't the same ones that do it
in New England.
Speaker 3 (26:30):
In the first place.
Speaker 4 (26:31):
But yeah, nonetheless, a slow down in housing construction is
a slow down for the US economy. And you know,
it was wildfire for the last few years in terms
of cost materials and everything else. And a somewhat logical
turnaround here, although you know could look could have looked
very different. Head rates started coming down a little bit
(26:53):
faster than they have recently.
Speaker 2 (26:56):
Yeah, and so this is ultimately going to be a
big continued problem because if you don't build enough new housing,
then you don't get enough used housing, and then you
end up with prices that don't really move the way
you want them to. We've seen this with the auto
(27:17):
market in terms of how it's cleared, but even in
the auto market, you still are not quite back to
where you would expect it to be, just because part
of that is just a shift in consumer preferences and
what we're seeing in autos. But even in the auto market, look,
once automakers squared away their supply chains, you've had like
two years now have used car prices going down. They've
(27:38):
kind of bottomed out a little bit, but it still
is something where, hey, once you finally produced enough new cars,
it cleared a lot of the issues on the used
car market that we were seeing that we're leading to them,
you know, going up in value by thirty forty percent
a year.
Speaker 4 (27:55):
This is only tangentially attached to housing. Have you seen
any uptick in ADU construction in your area? Only because
nationally there's been a big push for accessory dwelling units
and specifically a big push for states and municipalities to
(28:15):
pass laws saying hey, by default, you're able to build
one of these. I know in my town, for instance,
there's an exemption where you know, you don't have to
go through traditional zoning requests and things like that, so
long as it's under a certain square footage, sure, and
as long as you're not in an environmental zone. For example,
I was working with somebody else up in Maine who
you know, so long as it's not being used for
(28:35):
short term rentals, pretty much can construct one of these
things without much in the way of requirements. I haven't
seen locally any significant uptick, but to me that logically
makes a good bit of sense for folks that you
know might have family or you know, aging family that
needs to be close by.
Speaker 3 (28:57):
Seems like a logical next step.
Speaker 4 (28:58):
But I haven't can't say I've seen a ton of it,
and I wonder if from builders, if they're saying it anecdotally.
Speaker 2 (29:03):
I haven't seen much either. It's something where I also
don't know in some cases like how you would see it,
because the idea behind these ADUs is, hey, they might
be built as like like it almost looks like a
slightly larger shed behind someone's house, So true, you might
not see it. You might not have the signs of it.
(29:25):
You might see, you know, construction vehicles outside someone's house,
but it looks like they're just doing a kitchen renovation,
but really they're building an ADU behind it, and so
you just don't know it's which is again, that's kind
of the whole point of making them more allowable, is Hey,
if you can't see it from the street, who cares?
What are we really doing here?
Speaker 3 (29:46):
Now?
Speaker 2 (29:47):
Like there's limits to that. Obviously, this is an ADU,
not you know, a missile silo. I know there's a
lot of middle ground between that, but ultimately, you know,
nuclear power plant things like that, Like you wouldn't just
be like, yeah, pop a little miniature reactor in your
backyard and hook your Dolorean up to it and you're
good to go. But yeah, you would hope that you're
(30:08):
seeing more of this, but you might not actually see it.
If that makes sense either way, that the housing market
is stuck. It really doesn't really show any signs of
budget either. With rates where they are no and the
places that do now have higher inventory levels than pre pandemic.
You're seeing prices coming down and that is something that
(30:31):
feels like a feature, not a bug of this market. Unfortunately,
at this point, if you're if you're trying to sell
in one of those high inventory areas, it's it's it's
not great like it's it's unclear there's gonna be anything
that clears that in the near future. Take a quick
break here when we come back, talk a little bit
(30:52):
about Berkshire, Hathaway and Boeing. Right after this text, does.
Speaker 5 (30:58):
Six one seven drink six to two one three five
with your comments and questions about today's show.
Speaker 1 (31:03):
This is the Financial Exchange Radio Network.
Speaker 5 (31:07):
The Financial Exchange Show podcast drops every day on Apple, Spotify,
and iHeartRadio. Hit that subscribe button and leave us a
five star review. You're listening to the Financial Exchange Radio Network.
Speaker 6 (31:21):
Just want to remind everybody that coming up right here
on the show at eleven am, we have the Ultimate
Boston Sports Auction to benefit the Disabled American American Veterans
Department of Massachusetts once again, that auction is going to
open up at eleven am. We'll have four incredible items
to bid on in one massive package, including a pair
(31:42):
of tickets to see each of the Boston sports teams.
Some nice memorabilia, including a Drake May autograph, team jersey
of Pedro Martinez autograph baseball and much more. It's a massive,
max massive Boston sports auction in that will be open
again coming up here at eleven am and will be
(32:03):
happening the entire week and again all the proceeds will
benefit the Disabled American Veterans Department of Massachusetts once again.
That will be open at eleven am and the phone
number to call at eleven am is eight eight eight
two zero five two to two sixty three. To bid
at eleven am once again, the number eighty eight two
(32:23):
zero five two two six three.
Speaker 2 (32:27):
Love the Drake, wonderful play at the end of yesterday.
Oh yeah, I love the Drake. He's a stud. There's
not much else going on there, but uh yeah, that's it.
There's not much else. Just to see Drake May.
Speaker 6 (32:40):
I mean that would be amazing, right.
Speaker 2 (32:42):
Like just fantastic, absolutely fantastolutely Mike, did you watch any
of the game yesterday?
Speaker 3 (32:47):
I did. I watched them listen overtime.
Speaker 2 (32:48):
Yeah, oh good good. It was one of the more
enjoyable overtime losses I've ever waitnessed.
Speaker 6 (32:54):
Our house, our household was standing watching that game all
that matters, which hasn't happened in a while. And right,
but this new quarterback, Drake May, who stud.
Speaker 2 (33:03):
Drake May so hot? Right now, let's talk a little
bit about Berkshire Hathaway. They announced that they are continuing
to trim some of their holdings, specifically their Apple holding.
They sold about one hundred million shares of Apple in
the quarter, but it's about twenty five percent of their
steak and they've now sold more than six hundred million
(33:25):
Apple shares this year, so they've reduced their steak by
almost seventy percent over the course of the year. Does
Warren know something, Mike, what's he doing?
Speaker 4 (33:37):
Probably he knows lots of things he does. I think
it's a good reminder that while Warren Buffett does have
a lot of great advice to dole out, and frequently
does on all sorts of different topics, from taxes to
how to invest, using Berkshire Hathaway's investment strategy as your own,
(33:58):
should you know should be looked at with some extreme caution.
To know the least, no one is able to invest
like Berkshire Hathaway. Berkshire Hathaway is an entity that is
designed to hopefully continue to exist for decades after this
has all sorts of reporting and regulatory requirements to its
shareholders that don't and should not invest and exist for
(34:21):
the average investor.
Speaker 2 (34:22):
Beyond that, I think there's a very simple thing that
I come back to, which is, there's a reason why
Warren Buffett is Warren Buffett in your you and I
include me in the your you right category like it's
all of us, yeah, and we're us.
Speaker 3 (34:35):
You know.
Speaker 2 (34:35):
It's he's really good at investing. I know that he's
playing the long game. He can afford to play the
long game. You know, when when he comes in in
two thousand and eight and makes the deal with Bank
of America to rescue them from blowing up, he wasn't
concerned about, Hey, how's this going to look for me
(34:57):
next year, next week? Or do I need the money
to buy a house? He's no, I'm getting a huge
deal on this, And even if it doesn't pay off
for eight to ten years, which is it took like
seven or eight years for it to kind of get
to be as good of a deal as it was. Hey,
that's fine, I can sit and wait on that. That's
no problem. On top of that. Remember, Warren Buffet's also
a great example of like do as I say, not
(35:18):
as I do. He always talks about the dangers of leverage.
Warn Buffet uses a ton of leverage his businesses. It's
because he knows what he's doing. And I'm not saying
that none of us know what we're doing either, But
Warren's pretty special. There's a reason why most people don't
accumulate the level of wealth and the types of returns
that he has. It's because he's really good at it.
And you can't just look at what he did in
(35:40):
the prior court and be like, I should do that,
because you don't know why he was doing it. You
don't know when he was selling it, what prices, you
don't know when it's all.
Speaker 3 (35:47):
He's done for the better part of a century.
Speaker 2 (35:50):
Right, Yeah, he's ninety four years old, He's seen some stuff,
knows a few things.
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Speaker 3 (36:57):
Chuck, how many leaders are an a HECTA leader?
Speaker 2 (36:59):
One hundred?
Speaker 3 (37:00):
Okay.
Speaker 4 (37:02):
In twenty twenty three, global wine consumption came in at
two hundred and twenty one million hecto leaders, which sounds
like a lot, but it was actually down almost ten
percent from two hundred and forty seven million Hecto leaders
back in twenty seventeen, which hopefully means that I'm going
to start finding some bigger discounts on wine.
Speaker 2 (37:21):
It's three point five billion fewer bottles of wine. To
put that in you know term that we're more than
a lot because most of us don't buy by the
Hecto leader. No, we don't even buy the leader. No,
he buy three quarters for flye. And so what you're
seeing here is that apparently there is too much wine
being produced and not enough people drinking wine. There's various
(37:43):
different reasons for this. There's one theory that baby boomers
have been the primary wine you know consumers, and younger
generations are more beer and whiskey.
Speaker 4 (37:53):
You know now that there is that younger consumers just
aren't drinking as much alcohol in general.
Speaker 2 (37:57):
Yep, you've got kind of like dry anuary and stuff
that goes on. Ultimately, as someone who does enjoy drinking wine,
I come back to the idea that hey, if no
one else wants to buy it, it's better for supply
and demand for me, and hopefully I can get some
better pricing on it. Sounds nice.
Speaker 3 (38:14):
Some winers will probably also go out of business.
Speaker 2 (38:15):
Not great if you're in the wine business, though, It's uh,
you know, something that's gonna be a real challenge. Let's
take a quick break here. Hour two coming up in
a bit
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