November 4, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss how frequently 10% market pullback occurs. Third quarter earnings are indicating a divided economy. Federal Reserve signals December rate cut are not a foregone conclusion. Slump in cardboard sales is stoking fears of lackluster holiday shopping. Yum Brands will review strategic options for Pizza Hut, opening the door for a sale. First Brands' new management accuses founder Patrick James of fraud.
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Episode Transcript
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Speaker 1 (00:00):
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(01:07):
and Mark Vandetti.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. We've got
a bit of a sell off taking place here in
equity markets. We've got the Dow off one hundred and
sixty three points a third of a percent, the SMP
off fifty points three quarters of one percent, in the
NASDAK off two hundred and ninety one points one and
a quarter percent. Here in early training, it's Mike, Mark
and Tucker with you on a Tuesday. In terms of
(01:34):
what may or may not be leading this will Palanteer
reported earnings overnight, their stock as of this morning getting
hit by about to the of about six and a
half percent. You've had a couple large bank CEOs mentioning
that they're anticipating a market pullback within the next twelve
to twenty four months, which again I consider to be
(01:55):
useful and useless information, but nonetheless they put it out there.
We also have the news that Michael Burry of Big
Short Fame shortening the stocks of Nvidia and Palaneer according
to reports. So any and all of those could be
changing some of the sentiment out there when it comes
to AI and the growth story there. But I will
(02:16):
caution folks that it is just a single day move
in the stock prices, and none of it seems to
be sparked by any giant news in particular that I
can put my finger on. How about you mark on.
Speaker 3 (02:26):
The precipice of a big pullback. It doesn't have to
be cataly it doesn't have to be sparked, as you say,
by something big and dramatic. If things are as fragile
as people who point out that stocks are very expensive
relative to any reasonable estimate of future earnings said differently, evaluations,
price to arnies, ratios, things like that are quite high,
(02:48):
as high as they've been at any time outside of
the telecom media telecommunication bubble bursting. Then the littlest random
thing could prick them. If it is a bubble, I'm
not saying it is true now, only in retrospect. I
know that's not helpful. Any little thing could prick them.
Maybe this is the beginning of something tumultuous, and maybe
(03:10):
it's nothing. Maybe this goes on front other two years.
Speaker 2 (03:12):
In the uselessness of CEO comments about market pullbacks, I
was able to find some data the Capital Group had
put together. If you don't know Capitol Group, they're the
parent company or owner of American Funds and pretty well
known investment company out there. So I was curious in
the data that they had, how frequently do ten percent
market correction that's happening that? Oh, did you know it? Though, yes,
(03:34):
you didn't do your homework and I knew based on
the look on your face. They looked at data from
nineteen fifty four through December of twenty twenty three to
let me know how frequently does this sort of thing happen. So, again,
this does not include any data from twenty twenty four
or twenty twenty five. We did have a ten plus
percent market correction back in April of this year, so
that's not included in this data. But what they found
(03:56):
for that time period was that a five percent or
more correction happens about once a year, a ten percent
or more correction about once every thirty months, fifteen percent
or more about once every five years, and twenty percent
or more about once every six years. Now, again, all
they're doing here is measuring how many of these did
you have over this time period. There are obviously long
(04:18):
windows of time where they had no corrections. Very there's
also probably a number of periods of time where they
had multiple of these in short time periods. So I
don't think it tells you anything about the likelihood of them.
But just to point out that a CEO telling you
that they're worried about stocks prices falling by ten percent
or more in the next twenty four months is not
anything useful or unique. It happens, Well, you don't.
Speaker 3 (04:40):
Know their motivations. Hey there, maybe they want to buy
back equity or something. Look, no CEO wants their stock
price to just call. So that's being a little bit
silly there. But with respect to these short sellers, and
as we talked about in the last hour, that's a
way that certain unconstrained managers, which we'll just called generically
hedge funds, can bet against a company or against a market.
You don't have to You could short a market, You
(05:02):
could short the S and P five hundred. You could
short any security if you find somebody willing to loan
you the security so as to affect the transaction. Everyone
we hear from is motivated. They're all talking of their
own book, as they like to say in finance. So
you have to consider the source and be wary of
people making exuberant predictions like the CEO of Nvidia or
(05:25):
something saying this guy's the limit. Will you would say
that these guys are all basically paid or acting in
the prospect of getting.
Speaker 2 (05:32):
Paid to rejuice their stock prices.
Speaker 3 (05:34):
Yeah, or to induce some and as it looks markets
are going down today, maybe the most reasonable catalyst is
a renowned short investor going public with these current short positions.
Speaker 2 (05:46):
And I know, you know it's not always explicit as
explicit as in some cases, but in the case of Tesla,
for example, they are literally voting on a compensation package
where Elon Musk could be paid what was it? Is
it a trillion dollar back if the company hits eight
and a half trillion dollars in market capitalization. So the
(06:06):
compensation is very directly tied to the stock price performance,
and so no surprise that the CEOs would talk it
up in one way or another. Cnbcut with a piece
and I'm in spite of a funny dig that I'll
put on CNBC With this piece, they are latching onto
a thing a theme that I'm seeing from people talking
about earnings right now, which is that ke shaped recovery story.
(06:28):
We've heard it from Chipotle last week. We're going to
hear from young brands McDonald's, Elf, Beauty, Tapestry, under Armoured
this week. And specifically, what you're hearing from some businesses,
not the AI companies, but the likes of Marriot Delta
that companies I just mentioned are that they are seeing
a wide divergence in terms of what products their customers
are buying. If they do sell products to both high
(06:50):
income and low income customers, they're seeing a divergence there.
And in the case where they largely rely on a
certain demo, some are doing really well, some are really struggling. Chipotlee,
for example, specifically called out that, hey, we saw a
ton of growth from young Americans over the last several years,
and that demographic is not really coming in the same
(07:11):
coming to our stores in the same frequency. They're seemingly
struggling financially and not doing quite as well. CNBC points
out the top ten percent of households saw their income
increase four point two percent between twenty twenty three and
twenty twenty four, while there was no meaningful change for
the bottom ten percent of households. They also thought it
was necessary to let you know that there were thirty
three million households in the top ten percent and another
(07:34):
thirty three million in the bottom ten percent of income earners,
because that's how percentages work.
Speaker 3 (07:39):
Actually, that's not as stupid as it sounds. No, they're
sorting by income, not people. If you said there's thirty
three percent of people in the top third of the population,
you'd say, well, that's the definition of this. They're sorting
by income coke, So it could work.
Speaker 2 (07:50):
I thought they were shorting by earners.
Speaker 3 (07:53):
Yeah, is defined by how much they earn.
Speaker 2 (07:55):
Right, So I thought they were specifically saying, Okay, if
you're in the top ten percent, but you may much.
I don't think they're saying of all the income in
the world in the United States. This is what I think.
What they're literally saying is the top thirty three million people,
you have to earn this much to get into the
next That's what they're saying the next third. Yeah, sorting.
(08:17):
Pretty sure they're doing sorting by people. They're doing a
deathcile analysis here and sorted by people and letting you
know that.
Speaker 3 (08:22):
If that's I thought they were sorting by income, not
the number of people.
Speaker 2 (08:25):
They could be hope the editor catch. I thought that
that was a pretty dumb one, that that was your dig. Yeah,
here is the general thesis that I'm looking to see
if it's confirmed this week, because I would think that
McDonald's and Uber and Airbnb would be able to give
(08:47):
us some insight into all this, and we're hearing from
all of them this week. It's are you seeing the
same trends play out where all of your sales are
being supported by the top ten percent. We've heard that
from a number of different companies. McDonald's, I'd be surprised
to hear that, right. You know, certainly they have done
a good job of fashioning themselves as the discount restaurant
(09:09):
out there, but are they actually attracting new customers or
are they just seeing that their existing customers are struggling.
And why this all matters is because that top ten percent,
the the degree to which their assets have grown, seems
to be a big part of why they are spending
right now. And should that reverse, you have a potential issue.
Speaker 3 (09:31):
Ye, in a sense, we're inn unchartered territory here. You
talked to Andrew Ross Sorkin last week. I don't know
if this comes up in his book, but during in
nineteen twenty nine, very small percentage of the population owned stocks,
like two percent. I know this because I you know,
there's some classic papers and economics written on the relationship
between the Great Depression and the stock crash. So very
(09:52):
very small percentage. But everybody freaked out with stocks crash, nevertheless,
because it was a symptom of something that went wrong.
Not a big wealth effect though. Probably the question to
wealth effect is how much you spend out of your
unrealized gains. What I'm leading up to here is now
over fifty percent of the population's own owns equities, either
directly or indirectly through Therefore, when K plan you have
(10:14):
an index fund that is yes and S and B
five hundred companies for example. The wealth effect is largely
thought to have increased in percentage terms, So for every
dollar in gains, you spend five or six cents every
dollar in gain. So it's quite powerful. Probably what happens
if that on wines Nobody knows bigger percentage than ever
(10:35):
owns equities, and the equity market is bigger than ever,
and information about it is more readily available, more conspicuous,
instantaneously available than ever.
Speaker 2 (10:46):
Yeah, I don't know. It's not good.
Speaker 3 (10:48):
It's just a question of how bad.
Speaker 2 (10:49):
Right, Let's say a quick break when we come back,
a little bit trivia here coming up next on The
Financial Exchange.
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dot Boston. Time for trivia here on the Financial Exchange
and on this day. In nineteen eighty, Ronald Reagan was
elected president, beating Jimmy Carter by a landslide. So trivia
(12:25):
question today, how many states did Jimmy Carter win in
the nineteen eighty election?
Speaker 2 (12:30):
Once again, how.
Speaker 4 (12:31):
Many states did Jimmy Carter win in the nineteen eighty election?
Be the sixth person today to textas at six one
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(12:53):
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Speaker 2 (12:57):
Uh mark. Last week, last Wednesday, we had the Reserve
press conference on their interest rate decision, which was for
another quarter percent cut to the target rate. No surprise there.
What did come as somewhat of a surprise to many,
I think though, was the I guess what do you
call it? When? To when voting members disagree descents in
(13:20):
either direction. You had one descent from Steven Myron.
Speaker 3 (13:24):
I know, because I'm a difficult person.
Speaker 2 (13:26):
He wanted a fifty basis point cut. You had another
from the Kansas City Fed chiefs whose name I can't
recall right now, who wanted to keep rates steady. So
one of the first things that Jay Powell said when
he came out with the press conference was that the
December rate decision is far from a foregone conclusion. That
did shift things in markets in terms of where investors
(13:49):
anticipate rates going. A week ago, you had a ninety
percent likelihood of rates being cut. Another time in December,
now it's about seventy percent. I happened to agree much
more with the viewpoint that hey, it's not a foregone
conclusion and that we should pace ourselves here and wait
(14:11):
and see what the data tells us. But what was
unique about by the way that descent in either direction
was the first time that had happened in six years,
which is why it got some press because generally speaking,
the Fed usually votes unanimously on these things.
Speaker 3 (14:25):
Yeah, since the Greenspan era, of course, we didn't know
how votes came down prior to that. So yeah, Greenspan
was famous for bringing everybody on board by hook or
by crook, sometimes apparently could be a little heavy handed. Anyway,
It's important that markets view the FED as speaking with
one voice because that lends credibility. The keyword when you
(14:46):
think of monetary policy is credibility. They've got to be believable.
When the FED says it wants to crush inflation, people
have to believe it. That makes inflation less costly to
vanquish because people start updating their expectations of future prices quickly.
That that affords the economy more. That imparts more price flexibility
to the economy, and that gets things moving in the
(15:07):
direction the FED wants. If that sounds a little technical,
it actually is. I certainly didn't get at the first
time it was explained. But the reason monetary policy works
is that prices are not flexible. The FED can flood
the economy with money before price is adjust demand picks up.
That stimulates real activity. Only later does inflation pick up.
This is a key tenant of monetary might get.
Speaker 2 (15:26):
I'm just thinking of a stupid joke.
Speaker 3 (15:27):
Don't worry about it, oh looke, Come on, catches it
there and smirk.
Speaker 2 (15:30):
Could you say that all again, but faster?
Speaker 3 (15:33):
So I'm just wait, there was actually a point there.
Now I've oh so credibility. If you take nothing else
away from that two minutes of incoherence on my part,
take away that it is critical that the FED be credible.
It is critical that it might not be viewed as
a political tool. It is critical that it not be
viewed as divided and confused, because then we don't know, you, me,
(15:53):
even Tucker, how to form our inflation expectations, and that
makes their job harder.
Speaker 2 (15:59):
Does the FED seem divided and confused to you right now?
Speaker 3 (16:02):
More than ever in my lifetime, this is the most precarious.
I think we won't know until all this gets worked out.
Inflation is elevated, they're cutting rates. Financial conditions are loose, We've.
Speaker 2 (16:14):
Got financial conditions are well. Excuse me.
Speaker 3 (16:18):
One quick way to look at it. One quick way
to diagnose financial conditions is to use an index that
asks that it is a compilation of asset prices and
what lending officers are telling Federal Reserve banks and stuff
like that the Kansas City FED puts together in Chicago Fed,
excuse me, puts together a national financial conditions index. You
(16:38):
can google that and you will see when you do that,
financial conditions are is conducive to borrowing and raising money
in capital markets, as they've been at any time in
this cycle. You could also just look at stock prices.
By the way, all of what I just said could
be summarized in stocks being at all hitting a new
time highs, all time highs every single day. Financial conditions
are obviously not tight. It's not hard to get your
(16:59):
hand on capital. Look at the investments AI, the investments
that companies are making in data centers related to the
need to adopt AI. So financial conditions are loose inflation's elevator.
Yet the Fed is loosening easying monetary policy. Why will
because they think the labor market is in trouble.
Speaker 2 (17:22):
I'm looking at this financial conditions index from the Chicago Fed.
I believe I'm reading it as the more negative the number,
looser the condition.
Speaker 3 (17:32):
That's the way they inconstructed it by that measurement.
Speaker 2 (17:34):
To your point, as of the latest reading October twenty fourth,
twenty twenty five, we are in the lowest territory we
have been since early twenty twenty two. So when conditions
were undoubtedly pretty loose there, the.
Speaker 3 (17:46):
Fed's credibility is in doubt. Right now, Mike, we've got
a guy on the FED board who is basically the
puppet of the president.
Speaker 2 (17:52):
Still no no offense, but he is.
Speaker 3 (17:53):
The President put him there, told them to lower rates,
and ever since then, every day Moran's been saying rates
need to be lower. Forgive me, he doesn't have credibility.
He may be he's got a more impressive degree than
I have, he's a Harvard PhD. But he doesn't have credibility.
He's the president's tool. You could say that's great, I
think the president should be running monetary policy, or you
could say I think an independent FED is one of
the reasons why the economy has been relatively successful over
(18:15):
the past call it fifty years since the Vulkar era.
That's now in question, Mike. Now you get these divisions
with it. But for the first time in my lifetime,
a member dissenting members dissenting in either direction. The FED
chair is under daily attack by the president. Credibility of
monetary policy is in question. How this will be resolved
A lot turns on that.
Speaker 2 (18:36):
What I struggle with here is I do push and
agree with you on the importance of the FED credibility
and independence, while at the same time look at the
decision making process of the current chairman and see a
lot of imperfection.
Speaker 3 (18:52):
But he's a model too. Yeah, he botched COVID. I
think he's batching this by advocating easing personally. We won't
know until obviously this all plays out. But yeah, he's
no exemplar of coherent monetary policy. I wish he'd just
shut up. I wish that all just shut up for
just six months, just give us a break and let
(19:12):
monetary policy work. So no, I'm with you, I'm not going.
Speaker 2 (19:14):
To Unfortunately for you, government shutdown does not apply to
the Reserve Board.
Speaker 3 (19:18):
Yeah, why can't shut their mouths?
Speaker 2 (19:20):
Yeah, let's take a quick break when we come back.
Wall Street Watch coming up next.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange 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 4 (19:57):
Market selling off this morning, driven by law. This is
in the tech sector. Is worries increase about high valuations
of AI stocks right now, the dows down a third
of a percent, or one hundred and fifty nine points,
SMP five hundred down three quarters of a percenter fifty
one points, NASDAC down one in a quarter percent or
two hundred and ninety eight points lower, Russell two thousands
(20:20):
down one percent, Tenure Treasure Reel down two basis points
at four point zero eight five percent to In crude
oil down about a half a percent, trading right below
sixty one dollars a barrel. Palenteer among the biggest AI
losers on the day due to concerns over the stocks
high valuation. Despite the data analytics company posting another quarter
(20:41):
of record revenue. Palenteer also raised its current quarter and
full year revenue guidance. Furthermore, renowned big short investor Michael
Berry revealed a short position of both Palenteer and Nvidia.
Pallenteer shares it down by seven percent. Meanwhile, Uber logged
a higher quarterly profit in revenue, saying you users took
(21:01):
twenty two percent more trips than a year ago. However,
the stock is retreating over six percent after the ride
sharing and delivery company offered an even arrange that's slightly disappointed. Elsewhere,
Young Brands posted stronger than expected third quarter earning zan
revenue growth, driven by strong demand for Taco Bell and
improved US sales for KFC. However, the bigger news is
(21:22):
the restaurant company's announcement that it plans to review strategic
options for struggling Pizza Hut, including a possible sale of
all or parts of the brandym stock is climbing over
six percent. The bidding war for obesity startup met Sarah
is escalating between Pfizer and Novo Nordisk. According to Metsarah,
(21:43):
Novo increased its offer for the company to approximately ten
billion dollars or about eighty six dollars a share. Pfizer
raised its bid to about eight point one billion dollars
or seventy dollars a share, after an initial agreement of
up to seven point three billion dollars. Sarah stock is
surging nineteen percent, and after today's close, we'll see earnings
(22:05):
from AMD. I'm Tucker Silva and that is Wall Street Watch.
And in the previous segment, we asked her the trivia
question how many states did Jimmy Carter win in the
nineteen to eighty election that would be six Anderson from Wareham,
Mass is our winner today taking on the Financial Exchange
Show t shirt. We play trivia every day here in
the Financial Exchange. See complete contest rules at Financial Exchange
(22:27):
Show dot com.
Speaker 2 (22:28):
So Halloween has come and gone, meaning we're going to
take a page out of American retails book here and
only be talking about the Christmas holiday shopping season between
now and December twenty fifth, and Bloomberg has a piece
out today on the subject. So a slump in cardboard
box sale stoking fears of lackluster holiday shopping. What we
(22:49):
are actually seeing here is not a massive slump in
in box sales, but according to a few different sources,
you've got sales of box shipments down generally between one
to one and a half percent this year compared to
twenty twenty four. Now individuals in the industry are saying
(23:11):
different numbers. Paper and packaging Giant Smurf at west Rock PLC.
Never heard of them before today. Last week report an
eight point seven percent drop in North American same day
box volumes in the third quarter. Why does anybody care
about this? Hopefully it's obvious. I mean, if you're building
any store displays you're using cardboard for them. If you
are shipping boxes from Amazon, you're putting them in cardboard boxes,
(23:34):
although I guess I'm getting more of those envelopes these days.
And if you're shipping stuff from China to the US,
you might be putting in a shipping container, but it
is also probably in one giant box of some sort
or another. And so many over the years have looked
at this single industry as an indication of, Hey, what
does retail demand look like for the coming year, And
(23:56):
the answer I think kind of fits in with what
I would expect, which is usumers are showing some signs
of concern. Retailers are feeling the effects of tariffs, and
so they're probably not ordering quite as much stock as
they normally would because they don't want to be sitting
on a whole bunch of extra inventory this holiday shopping
(24:17):
season if their worst fears do come true. Mm hmm.
Line up with what you're thinking.
Speaker 3 (24:22):
Is I have no idea what to make of it.
They don't cite any research on the subject. I mean,
can we has this in the past been a good forecaster?
Is the only question really that comes to mind, And
I can't say I scrutinized the article too closely, but
I didn't find that question answered.
Speaker 2 (24:37):
Did you know that nobody's done any So.
Speaker 3 (24:39):
It sounds like common sense. And I'm putting that in
quotes because there might be factors that cloud the relationship.
Speaker 2 (24:46):
Yeah, we've talked about that a little bit. There has
been a change in somehow some packaging giants ship things
and things along those lines, so I could buy some
of that too. I generally think that a decline in
you know, this type of cardboard probably does not indicate
positive things ahead of the holiday shopping season. But I'm
not exactly losing sleep over it either. Folks. We talk
(25:08):
a lot about planning for the future on this show,
and specifically we talk a lot about the risks to
the economy and the market at this point in time.
We've talked at length today about private credit and frothiness
of equity markets, and artificial intelligence and the eventual effects
on all of these things. If you are in the
(25:31):
position of having asked yourself recently, hey, am I taking
the right amount of risk for this stage of my life?
If you've asked yourself, what's the number I need to
hit before I can feel comfortable retiring, or how much
should I anticipate in withdrawing out of my portfolio? And
(25:52):
is that really sustainable for where I am in life
and what my goals are. If you've found yourself asking
any questions like that, the right time to get the
answers is frankly, when markets are near their all time
highs like we're seeing right now. It's not to say
that people shouldn't worry about this stuff when markets are
down to they absolutely should. But I'm what I'm saying
(26:16):
here is that I see a straight line, a correlation
line between how poorly markets are doing and how desperately
people want to talk to somebody about financial advice and
investment advice. And that's natural when things get panicky, you
ask for a second opinion. But I'm also here to
say that that's the absolute worst time to potentially be
making changes to your overall situation. It would make me
(26:40):
sleep a lot better if by the time that thing hits,
which everyone knows is perfectly unpredictable, I had already done
the homework of knowing what sort of financial shape I'm
in and what I still need to accomplish to achieve
my goals. Because one thing that I'm quite certain of
is that we will have future market corrections and crashes
and recessions. They will be very difficult to predict ahead
(27:01):
of time, and most people will not be properly timing
things to take advantage of those future downturns. If you
are falling into any of those categories and you want
a second opinion, we can give you a free one
here at Armstrong Advisor Group. Give us a call to
chat about your personal situation at eight hundred three nine
three for zero zero one. We have offices located throughout
(27:24):
New England. We're happy to sit down with you in person,
over the phone, via zoom, whatever's easiest for you, but
get the process started. You can go to Armstrong Advisory
dot com if you'd like to book a time for
us to call you back or again, just give us
a ring eight hundred three to nine three for zero
zero one.
Speaker 1 (27:39):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax and estate planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advisory services.
Speaker 2 (27:55):
I want to talk food. Do you have to talk
coffee or pizza? Your pick?
Speaker 3 (28:00):
Mark, I can't take the pressure.
Speaker 4 (28:04):
Really pizza pizza.
Speaker 3 (28:08):
Yeah, but it's almost one time and we're hungry. Why
would we want a mouthwatering pizza pizza?
Speaker 2 (28:13):
Well, according to Young Brands, it might not be so
mouthwatering because they are looking for strategic options for Pizza Hut.
If you didn't know Young Brands who also owns KFC
and Taco Bell. They're an old spinoff from Pepsi long not.
They own these three brands, and I think they're finding
that one nobody goes to Pizza Hut. Two, that the
(28:34):
Pizza Hut brand does not really fit in with the
KFC and Taco Bell brand. You wouldn't think that necessarily
fried chicken and tacos fit together either, but they have.
Speaker 3 (28:44):
Why would you buy things that fit together? You want
diversifiers in your portfolio.
Speaker 2 (28:48):
I think what they found is that they were able
to successfully put up one building and house both of
these restaurants in the same place.
Speaker 3 (28:56):
And I get that. Guys, I've been out on the
d Yeah.
Speaker 2 (29:01):
I thought you just lived in you know, you drove
to here and had never seen a fast food restaurant before.
But in either case, young brands saying that there's exploring
strategic options for pizza Hut, I've got to say, I
mean their buildings are very distinct. You can still tell
when like, there are several buildings I've driven by their
no longer pizza huts.
Speaker 4 (29:20):
That build Yeah, Okay, continue, Sorry, I.
Speaker 3 (29:23):
Was just gonna say, I don't see we've I don't see.
Speaker 4 (29:26):
Any pizza huts unless they're inside of a target or something. Right,
there are former pizza huts, Mike that you're saying, like,
I know of an urgent care that is Yeah, it was.
Speaker 2 (29:38):
Very clearly still distinctly a pizza hut because they had
that brand. But yeah, I don't know the last time
that I've been to one.
Speaker 4 (29:47):
I don't either.
Speaker 2 (29:49):
Are they the ones that were famous for the like
the red cups or is that Papa Gino's Pizza Pizza
Hut the red plastic cups that I'm sure just got broken.
They they were, But yeah, I don't know who the buy.
I'm sure there's some private equity for the firm that,
for the right price, will take this and strip it
of everything it's worth and repackaged it at some point,
(30:10):
but yeah, it sure doesn't seem like they have a
real good future there.
Speaker 4 (30:14):
Dominos won. Dominos won the Pizza Wars in terms of
like fast casual destinations.
Speaker 2 (30:20):
Yeah, I mean they are slightly different models because Pizza
Hut was I go and sit down there, but I
had a salad bar? Yeah did they? Yeah?
Speaker 4 (30:29):
I don't remember going to a Pizza Hut.
Speaker 2 (30:31):
I just think we remember being there with like thirteen
other eight year old hockey players and it was the
perfect place for that sort of thing, and not a
whole lot else.
Speaker 3 (30:41):
A salad bar, by the way, it was just ornamental.
Nobody went that was that was your cover?
Speaker 2 (30:45):
Yeah it was.
Speaker 3 (30:46):
It was all artificial, you know.
Speaker 2 (30:50):
Starbucks, on the other hand, planning to sell sixty percent
of their China business to a Chinese based private equity firm.
This has been a thorn in their side for quite
a few years here, and I mean, tell me if
you've heard this story before. US company, enticed by the
(31:10):
size of the Chinese market, enters the market can't really
compete because the second they start to have a brand there,
a Chinese startup starts to compete with them and has
every advantage out there, and so your only option remaining
is to sell yourself to a Chinese owned entity. I'm
not worried about any intellectual property loss here, but I
(31:30):
just look at the incentives of American companies in the
history of this and it's just the same exact story
over and over. Oh man, there's a few billion people there.
What a market that would be. Go there, grow a
little bit homegrown. Competition comes from China, puts you on
the not out of business, but on the ropes, and
then you're forced to sell out of some degree of necessity.
(31:54):
So Starbucks looking like they may go that way in
a deal valued at four billion dollars for their Chinese business.
Take a quick break when we come back here on
the Financial Exchange stack Roulette.
Speaker 1 (32:05):
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Speaker 2 (33:10):
We were talking about during the break and I can't
believe I forgot to, you know, just make the connection here.
But hopefully Pizza Hut is still around by the time
Space Balls two comes out and Pizza the Hut still
makes a recurring theme there.
Speaker 3 (33:24):
Yeah, no one would get the bit.
Speaker 2 (33:26):
People probably wouldn't.
Speaker 3 (33:27):
People rarely got it in whenever it was eighty seven.
Speaker 2 (33:29):
Yeah, well we'll have to Yeah, they might have to
find a more modern uh comparison there. We'll try and
come up with. If you have any modern options for
Pizza the Hut, you can text the show at six
one seven three, six two thirteen eighty five. I am
I am interested in your ideas. Mark, what do we
have for stack Roulette? Today?
Speaker 3 (33:50):
I talked about first brands, the auto parts maker that
is allegedly Yeah, well they're in bankruptcy that might be
allegedly committed fraud.
Speaker 2 (34:00):
And you asked some light fraud.
Speaker 3 (34:03):
Yeah, you asked if the if the founder had been
implicated any of this or something to that effect. This
story came out. I think after we arrived at the
today's so called stack of things we're going to talk about. Well,
First Brands group Patrick James is being sued by the
rump corporate, by the board management of First Brands. He's
(34:24):
no longer I guess part of that, so being sued
by the company for borrowing funds on fraudulent terms, diverting
cash for to himself and it's not it's not funny,
but it's it's predictable is not the right word, but
it's it's not surprising, diverting cash to himself and his family,
(34:45):
so funneling funds to to fund his quote and his
families lavish lifestyle, lining the pockets of his family at
the expensive First Brands and its creditors so they I
don't think I've serious motivation here too.
Speaker 2 (35:02):
I don't think I've ever read a story about fraud
that has been perpetrated that did not have the phrase
in the article about lining the pockets of their lavish
lifestyle on X, Y or Z, right.
Speaker 3 (35:17):
Else would you do it? You don't do it for charity?
Speaker 2 (35:19):
Usually not, Yeah, that's not usually what's coming up with
these With the frauds that are occurring. Pollunteer thinks college
might be a waste, so it's hiring high school grads.
We actually had this story in the stack yesterday prior
to them reporting earnings. But the tech companies offering twenty
two teenagers a chance to skip college for their fellowship,
which includes a four week seminar on Western civilization, because
(35:41):
they will not be getting a university education. The Wall
Street Journal interviews at least one candidate for the fellowship
who is turning down a entrance into Brown University for
the opportunity. And I guess here's what I will say
about this. No, not everyone needs a college degree. I'll
(36:01):
acknowledge that if you are turning down a Brown acceptance
to go take the Palenteer opportunity, then you are probably
in the upper echelons in terms of your test taking
and every other credential anyway. And so I don't think
that necessarily, I don't necessarily think that this story about
(36:22):
Palenteer offering this opportunity should be a lesson to any
eighteen year olds that, hey, I don't need a college degree.
If you are getting accepted into this program at Palenteer,
you are likely the very top of the crop and
could get your pick of universities to choose from. Anyway.
I'll also say that, imagine for a minute that you
get seven years down your career path with Palenteer and
(36:46):
then it all blows up in your face and you
don't have a college degree or education to fall back on.
I don't know that many other private companies out there
are going to take a look at your internship that
you did with Palenteer and say, you know what, I
like that kid. He might not have a college degree,
but he has this experience with the Palenttier internship program,
(37:07):
so I'm going to go hire him or her. I
feel like that's the way that this is all being discussed,
and let's call the fact the facts. If this tech
company is offering this opportunity for twenty two teenagers, they
are going to be some of the best test takers
and best coders of their classes across the country. And
(37:28):
I don't think it's a sign that the need for
a college education is dying in any meaningful way.
Speaker 3 (37:33):
Yeah, your earnings potential is almost certainly higher with a
degree from Brown or just about anywhere, frankly, then a
couple of years of job experience, which you're gonna get anyway. Yep,
unless you have unless for some reason you're in a
huge rush to earn money. I don't want to overject.
Speaker 2 (37:48):
I don't necessarily fault this kid for making this decision. He's,
you know, you're eighteen years old, Like, yeah, you can
always do college later. I would merely point out that
he's probably not you because he got accepted to in
the first place and had this other opportunity. Let's take
quick break. When we come back, it's going to be
tomorrow because it's the end of our show. Today. Markets
(38:08):
are strongly in negative territory, SMP off three quarters of percent,
NASDAK off more. We'll have a full recap and more
for you tomorrow
The Financial Exchange is produced by Money Matters Radio and
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(01:07):
and Mark Vandetti.
Speaker 2 (01:12):
Good morning, Welcome back to the Financial Exchange. We've got
a bit of a sell off taking place here in
equity markets. We've got the Dow off one hundred and
sixty three points a third of a percent, the SMP
off fifty points three quarters of one percent, in the
NASDAK off two hundred and ninety one points one and
a quarter percent. Here in early training, it's Mike, Mark
and Tucker with you on a Tuesday. In terms of
(01:34):
what may or may not be leading this will Palanteer
reported earnings overnight, their stock as of this morning getting
hit by about to the of about six and a
half percent. You've had a couple large bank CEOs mentioning
that they're anticipating a market pullback within the next twelve
to twenty four months, which again I consider to be
(01:55):
useful and useless information, but nonetheless they put it out there.
We also have the news that Michael Burry of Big
Short Fame shortening the stocks of Nvidia and Palaneer according
to reports. So any and all of those could be
changing some of the sentiment out there when it comes
to AI and the growth story there. But I will
(02:16):
caution folks that it is just a single day move
in the stock prices, and none of it seems to
be sparked by any giant news in particular that I
can put my finger on. How about you mark on.
Speaker 3 (02:26):
The precipice of a big pullback. It doesn't have to
be cataly it doesn't have to be sparked, as you say,
by something big and dramatic. If things are as fragile
as people who point out that stocks are very expensive
relative to any reasonable estimate of future earnings said differently, evaluations,
price to arnies, ratios, things like that are quite high,
(02:48):
as high as they've been at any time outside of
the telecom media telecommunication bubble bursting. Then the littlest random
thing could prick them. If it is a bubble, I'm
not saying it is true now, only in retrospect. I
know that's not helpful. Any little thing could prick them.
Maybe this is the beginning of something tumultuous, and maybe
(03:10):
it's nothing. Maybe this goes on front other two years.
Speaker 2 (03:12):
In the uselessness of CEO comments about market pullbacks, I
was able to find some data the Capital Group had
put together. If you don't know Capitol Group, they're the
parent company or owner of American Funds and pretty well
known investment company out there. So I was curious in
the data that they had, how frequently do ten percent
market correction that's happening that? Oh, did you know it? Though, yes,
(03:34):
you didn't do your homework and I knew based on
the look on your face. They looked at data from
nineteen fifty four through December of twenty twenty three to
let me know how frequently does this sort of thing happen. So, again,
this does not include any data from twenty twenty four
or twenty twenty five. We did have a ten plus
percent market correction back in April of this year, so
that's not included in this data. But what they found
(03:56):
for that time period was that a five percent or
more correction happens about once a year, a ten percent
or more correction about once every thirty months, fifteen percent
or more about once every five years, and twenty percent
or more about once every six years. Now, again, all
they're doing here is measuring how many of these did
you have over this time period. There are obviously long
(04:18):
windows of time where they had no corrections. Very there's
also probably a number of periods of time where they
had multiple of these in short time periods. So I
don't think it tells you anything about the likelihood of them.
But just to point out that a CEO telling you
that they're worried about stocks prices falling by ten percent
or more in the next twenty four months is not
anything useful or unique. It happens, Well, you don't.
Speaker 3 (04:40):
Know their motivations. Hey there, maybe they want to buy
back equity or something. Look, no CEO wants their stock
price to just call. So that's being a little bit
silly there. But with respect to these short sellers, and
as we talked about in the last hour, that's a
way that certain unconstrained managers, which we'll just called generically
hedge funds, can bet against a company or against a market.
You don't have to You could short a market, You
(05:02):
could short the S and P five hundred. You could
short any security if you find somebody willing to loan
you the security so as to affect the transaction. Everyone
we hear from is motivated. They're all talking of their
own book, as they like to say in finance. So
you have to consider the source and be wary of
people making exuberant predictions like the CEO of Nvidia or
(05:25):
something saying this guy's the limit. Will you would say
that these guys are all basically paid or acting in
the prospect of getting.
Speaker 2 (05:32):
Paid to rejuice their stock prices.
Speaker 3 (05:34):
Yeah, or to induce some and as it looks markets
are going down today, maybe the most reasonable catalyst is
a renowned short investor going public with these current short positions.
Speaker 2 (05:46):
And I know, you know it's not always explicit as
explicit as in some cases, but in the case of Tesla,
for example, they are literally voting on a compensation package
where Elon Musk could be paid what was it? Is
it a trillion dollar back if the company hits eight
and a half trillion dollars in market capitalization. So the
(06:06):
compensation is very directly tied to the stock price performance,
and so no surprise that the CEOs would talk it
up in one way or another. Cnbcut with a piece
and I'm in spite of a funny dig that I'll
put on CNBC With this piece, they are latching onto
a thing a theme that I'm seeing from people talking
about earnings right now, which is that ke shaped recovery story.
(06:28):
We've heard it from Chipotle last week. We're going to
hear from young brands McDonald's, Elf, Beauty, Tapestry, under Armoured
this week. And specifically, what you're hearing from some businesses,
not the AI companies, but the likes of Marriot Delta
that companies I just mentioned are that they are seeing
a wide divergence in terms of what products their customers
are buying. If they do sell products to both high
(06:50):
income and low income customers, they're seeing a divergence there.
And in the case where they largely rely on a
certain demo, some are doing really well, some are really struggling. Chipotlee,
for example, specifically called out that, hey, we saw a
ton of growth from young Americans over the last several years,
and that demographic is not really coming in the same
(07:11):
coming to our stores in the same frequency. They're seemingly
struggling financially and not doing quite as well. CNBC points
out the top ten percent of households saw their income
increase four point two percent between twenty twenty three and
twenty twenty four, while there was no meaningful change for
the bottom ten percent of households. They also thought it
was necessary to let you know that there were thirty
three million households in the top ten percent and another
(07:34):
thirty three million in the bottom ten percent of income earners,
because that's how percentages work.
Speaker 3 (07:39):
Actually, that's not as stupid as it sounds. No, they're
sorting by income, not people. If you said there's thirty
three percent of people in the top third of the population,
you'd say, well, that's the definition of this. They're sorting
by income coke, So it could work.
Speaker 2 (07:50):
I thought they were shorting by earners.
Speaker 3 (07:53):
Yeah, is defined by how much they earn.
Speaker 2 (07:55):
Right, So I thought they were specifically saying, Okay, if
you're in the top ten percent, but you may much.
I don't think they're saying of all the income in
the world in the United States. This is what I think.
What they're literally saying is the top thirty three million people,
you have to earn this much to get into the
next That's what they're saying the next third. Yeah, sorting.
(08:17):
Pretty sure they're doing sorting by people. They're doing a
deathcile analysis here and sorted by people and letting you
know that.
Speaker 3 (08:22):
If that's I thought they were sorting by income, not
the number of people.
Speaker 2 (08:25):
They could be hope the editor catch. I thought that
that was a pretty dumb one, that that was your dig. Yeah,
here is the general thesis that I'm looking to see
if it's confirmed this week, because I would think that
McDonald's and Uber and Airbnb would be able to give
(08:47):
us some insight into all this, and we're hearing from
all of them this week. It's are you seeing the
same trends play out where all of your sales are
being supported by the top ten percent. We've heard that
from a number of different companies. McDonald's, I'd be surprised
to hear that, right. You know, certainly they have done
a good job of fashioning themselves as the discount restaurant
(09:09):
out there, but are they actually attracting new customers or
are they just seeing that their existing customers are struggling.
And why this all matters is because that top ten percent,
the the degree to which their assets have grown, seems
to be a big part of why they are spending
right now. And should that reverse, you have a potential issue.
Speaker 3 (09:31):
Ye, in a sense, we're inn unchartered territory here. You
talked to Andrew Ross Sorkin last week. I don't know
if this comes up in his book, but during in
nineteen twenty nine, very small percentage of the population owned stocks,
like two percent. I know this because I you know,
there's some classic papers and economics written on the relationship
between the Great Depression and the stock crash. So very
(09:52):
very small percentage. But everybody freaked out with stocks crash, nevertheless,
because it was a symptom of something that went wrong.
Not a big wealth effect though. Probably the question to
wealth effect is how much you spend out of your
unrealized gains. What I'm leading up to here is now
over fifty percent of the population's own owns equities, either
directly or indirectly through Therefore, when K plan you have
(10:14):
an index fund that is yes and S and B
five hundred companies for example. The wealth effect is largely
thought to have increased in percentage terms, So for every
dollar in gains, you spend five or six cents every
dollar in gain. So it's quite powerful. Probably what happens
if that on wines Nobody knows bigger percentage than ever
(10:35):
owns equities, and the equity market is bigger than ever,
and information about it is more readily available, more conspicuous,
instantaneously available than ever.
Speaker 2 (10:46):
Yeah, I don't know. It's not good.
Speaker 3 (10:48):
It's just a question of how bad.
Speaker 2 (10:49):
Right, Let's say a quick break when we come back,
a little bit trivia here coming up next on The
Financial Exchange.
Speaker 1 (10:55):
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dot Boston. Time for trivia here on the Financial Exchange
and on this day. In nineteen eighty, Ronald Reagan was
elected president, beating Jimmy Carter by a landslide. So trivia
(12:25):
question today, how many states did Jimmy Carter win in
the nineteen eighty election?
Speaker 2 (12:30):
Once again, how.
Speaker 4 (12:31):
Many states did Jimmy Carter win in the nineteen eighty election?
Be the sixth person today to textas at six one
seven three six two thirteen eighty five with the correct answer,
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(12:53):
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Show dot com.
Speaker 2 (12:57):
Uh mark. Last week, last Wednesday, we had the Reserve
press conference on their interest rate decision, which was for
another quarter percent cut to the target rate. No surprise there.
What did come as somewhat of a surprise to many,
I think though, was the I guess what do you
call it? When? To when voting members disagree descents in
(13:20):
either direction. You had one descent from Steven Myron.
Speaker 3 (13:24):
I know, because I'm a difficult person.
Speaker 2 (13:26):
He wanted a fifty basis point cut. You had another
from the Kansas City Fed chiefs whose name I can't
recall right now, who wanted to keep rates steady. So
one of the first things that Jay Powell said when
he came out with the press conference was that the
December rate decision is far from a foregone conclusion. That
did shift things in markets in terms of where investors
(13:49):
anticipate rates going. A week ago, you had a ninety
percent likelihood of rates being cut. Another time in December,
now it's about seventy percent. I happened to agree much
more with the viewpoint that hey, it's not a foregone
conclusion and that we should pace ourselves here and wait
(14:11):
and see what the data tells us. But what was
unique about by the way that descent in either direction
was the first time that had happened in six years,
which is why it got some press because generally speaking,
the Fed usually votes unanimously on these things.
Speaker 3 (14:25):
Yeah, since the Greenspan era, of course, we didn't know
how votes came down prior to that. So yeah, Greenspan
was famous for bringing everybody on board by hook or
by crook, sometimes apparently could be a little heavy handed. Anyway,
It's important that markets view the FED as speaking with
one voice because that lends credibility. The keyword when you
(14:46):
think of monetary policy is credibility. They've got to be believable.
When the FED says it wants to crush inflation, people
have to believe it. That makes inflation less costly to
vanquish because people start updating their expectations of future prices quickly.
That that affords the economy more. That imparts more price flexibility
to the economy, and that gets things moving in the
(15:07):
direction the FED wants. If that sounds a little technical,
it actually is. I certainly didn't get at the first
time it was explained. But the reason monetary policy works
is that prices are not flexible. The FED can flood
the economy with money before price is adjust demand picks up.
That stimulates real activity. Only later does inflation pick up.
This is a key tenant of monetary might get.
Speaker 2 (15:26):
I'm just thinking of a stupid joke.
Speaker 3 (15:27):
Don't worry about it, oh looke, Come on, catches it
there and smirk.
Speaker 2 (15:30):
Could you say that all again, but faster?
Speaker 3 (15:33):
So I'm just wait, there was actually a point there.
Now I've oh so credibility. If you take nothing else
away from that two minutes of incoherence on my part,
take away that it is critical that the FED be credible.
It is critical that it might not be viewed as
a political tool. It is critical that it not be
viewed as divided and confused, because then we don't know, you, me,
(15:53):
even Tucker, how to form our inflation expectations, and that
makes their job harder.
Speaker 2 (15:59):
Does the FED seem divided and confused to you right now?
Speaker 3 (16:02):
More than ever in my lifetime, this is the most precarious.
I think we won't know until all this gets worked out.
Inflation is elevated, they're cutting rates. Financial conditions are loose, We've.
Speaker 2 (16:14):
Got financial conditions are well. Excuse me.
Speaker 3 (16:18):
One quick way to look at it. One quick way
to diagnose financial conditions is to use an index that
asks that it is a compilation of asset prices and
what lending officers are telling Federal Reserve banks and stuff
like that the Kansas City FED puts together in Chicago Fed,
excuse me, puts together a national financial conditions index. You
(16:38):
can google that and you will see when you do that,
financial conditions are is conducive to borrowing and raising money
in capital markets, as they've been at any time in
this cycle. You could also just look at stock prices.
By the way, all of what I just said could
be summarized in stocks being at all hitting a new
time highs, all time highs every single day. Financial conditions
are obviously not tight. It's not hard to get your
(16:59):
hand on capital. Look at the investments AI, the investments
that companies are making in data centers related to the
need to adopt AI. So financial conditions are loose inflation's elevator.
Yet the Fed is loosening easying monetary policy. Why will
because they think the labor market is in trouble.
Speaker 2 (17:22):
I'm looking at this financial conditions index from the Chicago Fed.
I believe I'm reading it as the more negative the number,
looser the condition.
Speaker 3 (17:32):
That's the way they inconstructed it by that measurement.
Speaker 2 (17:34):
To your point, as of the latest reading October twenty fourth,
twenty twenty five, we are in the lowest territory we
have been since early twenty twenty two. So when conditions
were undoubtedly pretty loose there, the.
Speaker 3 (17:46):
Fed's credibility is in doubt. Right now, Mike, we've got
a guy on the FED board who is basically the
puppet of the president.
Speaker 2 (17:52):
Still no no offense, but he is.
Speaker 3 (17:53):
The President put him there, told them to lower rates,
and ever since then, every day Moran's been saying rates
need to be lower. Forgive me, he doesn't have credibility.
He may be he's got a more impressive degree than
I have, he's a Harvard PhD. But he doesn't have credibility.
He's the president's tool. You could say that's great, I
think the president should be running monetary policy, or you
could say I think an independent FED is one of
the reasons why the economy has been relatively successful over
(18:15):
the past call it fifty years since the Vulkar era.
That's now in question, Mike. Now you get these divisions
with it. But for the first time in my lifetime,
a member dissenting members dissenting in either direction. The FED
chair is under daily attack by the president. Credibility of
monetary policy is in question. How this will be resolved
A lot turns on that.
Speaker 2 (18:36):
What I struggle with here is I do push and
agree with you on the importance of the FED credibility
and independence, while at the same time look at the
decision making process of the current chairman and see a
lot of imperfection.
Speaker 3 (18:52):
But he's a model too. Yeah, he botched COVID. I
think he's batching this by advocating easing personally. We won't
know until obviously this all plays out. But yeah, he's
no exemplar of coherent monetary policy. I wish he'd just
shut up. I wish that all just shut up for
just six months, just give us a break and let
(19:12):
monetary policy work. So no, I'm with you, I'm not going.
Speaker 2 (19:14):
To Unfortunately for you, government shutdown does not apply to
the Reserve Board.
Speaker 3 (19:18):
Yeah, why can't shut their mouths?
Speaker 2 (19:20):
Yeah, let's take a quick break when we come back.
Wall Street Watch coming up next.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange 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 4 (19:57):
Market selling off this morning, driven by law. This is
in the tech sector. Is worries increase about high valuations
of AI stocks right now, the dows down a third
of a percent, or one hundred and fifty nine points,
SMP five hundred down three quarters of a percenter fifty
one points, NASDAC down one in a quarter percent or
two hundred and ninety eight points lower, Russell two thousands
(20:20):
down one percent, Tenure Treasure Reel down two basis points
at four point zero eight five percent to In crude
oil down about a half a percent, trading right below
sixty one dollars a barrel. Palenteer among the biggest AI
losers on the day due to concerns over the stocks
high valuation. Despite the data analytics company posting another quarter
(20:41):
of record revenue. Palenteer also raised its current quarter and
full year revenue guidance. Furthermore, renowned big short investor Michael
Berry revealed a short position of both Palenteer and Nvidia.
Pallenteer shares it down by seven percent. Meanwhile, Uber logged
a higher quarterly profit in revenue, saying you users took
(21:01):
twenty two percent more trips than a year ago. However,
the stock is retreating over six percent after the ride
sharing and delivery company offered an even arrange that's slightly disappointed. Elsewhere,
Young Brands posted stronger than expected third quarter earning zan
revenue growth, driven by strong demand for Taco Bell and
improved US sales for KFC. However, the bigger news is
(21:22):
the restaurant company's announcement that it plans to review strategic
options for struggling Pizza Hut, including a possible sale of
all or parts of the brandym stock is climbing over
six percent. The bidding war for obesity startup met Sarah
is escalating between Pfizer and Novo Nordisk. According to Metsarah,
(21:43):
Novo increased its offer for the company to approximately ten
billion dollars or about eighty six dollars a share. Pfizer
raised its bid to about eight point one billion dollars
or seventy dollars a share, after an initial agreement of
up to seven point three billion dollars. Sarah stock is
surging nineteen percent, and after today's close, we'll see earnings
(22:05):
from AMD. I'm Tucker Silva and that is Wall Street Watch.
And in the previous segment, we asked her the trivia
question how many states did Jimmy Carter win in the
nineteen to eighty election that would be six Anderson from Wareham,
Mass is our winner today taking on the Financial Exchange
Show t shirt. We play trivia every day here in
the Financial Exchange. See complete contest rules at Financial Exchange
(22:27):
Show dot com.
Speaker 2 (22:28):
So Halloween has come and gone, meaning we're going to
take a page out of American retails book here and
only be talking about the Christmas holiday shopping season between
now and December twenty fifth, and Bloomberg has a piece
out today on the subject. So a slump in cardboard
box sale stoking fears of lackluster holiday shopping. What we
(22:49):
are actually seeing here is not a massive slump in
in box sales, but according to a few different sources,
you've got sales of box shipments down generally between one
to one and a half percent this year compared to
twenty twenty four. Now individuals in the industry are saying
(23:11):
different numbers. Paper and packaging Giant Smurf at west Rock PLC.
Never heard of them before today. Last week report an
eight point seven percent drop in North American same day
box volumes in the third quarter. Why does anybody care
about this? Hopefully it's obvious. I mean, if you're building
any store displays you're using cardboard for them. If you
are shipping boxes from Amazon, you're putting them in cardboard boxes,
(23:34):
although I guess I'm getting more of those envelopes these days.
And if you're shipping stuff from China to the US,
you might be putting in a shipping container, but it
is also probably in one giant box of some sort
or another. And so many over the years have looked
at this single industry as an indication of, Hey, what
does retail demand look like for the coming year, And
(23:56):
the answer I think kind of fits in with what
I would expect, which is usumers are showing some signs
of concern. Retailers are feeling the effects of tariffs, and
so they're probably not ordering quite as much stock as
they normally would because they don't want to be sitting
on a whole bunch of extra inventory this holiday shopping
(24:17):
season if their worst fears do come true. Mm hmm.
Line up with what you're thinking.
Speaker 3 (24:22):
Is I have no idea what to make of it.
They don't cite any research on the subject. I mean,
can we has this in the past been a good forecaster?
Is the only question really that comes to mind, And
I can't say I scrutinized the article too closely, but
I didn't find that question answered.
Speaker 2 (24:37):
Did you know that nobody's done any So.
Speaker 3 (24:39):
It sounds like common sense. And I'm putting that in
quotes because there might be factors that cloud the relationship.
Speaker 2 (24:46):
Yeah, we've talked about that a little bit. There has
been a change in somehow some packaging giants ship things
and things along those lines, so I could buy some
of that too. I generally think that a decline in
you know, this type of cardboard probably does not indicate
positive things ahead of the holiday shopping season. But I'm
not exactly losing sleep over it either. Folks. We talk
(25:08):
a lot about planning for the future on this show,
and specifically we talk a lot about the risks to
the economy and the market at this point in time.
We've talked at length today about private credit and frothiness
of equity markets, and artificial intelligence and the eventual effects
on all of these things. If you are in the
(25:31):
position of having asked yourself recently, hey, am I taking
the right amount of risk for this stage of my life?
If you've asked yourself, what's the number I need to
hit before I can feel comfortable retiring, or how much
should I anticipate in withdrawing out of my portfolio? And
(25:52):
is that really sustainable for where I am in life
and what my goals are. If you've found yourself asking
any questions like that, the right time to get the
answers is frankly, when markets are near their all time
highs like we're seeing right now. It's not to say
that people shouldn't worry about this stuff when markets are
down to they absolutely should. But I'm what I'm saying
(26:16):
here is that I see a straight line, a correlation
line between how poorly markets are doing and how desperately
people want to talk to somebody about financial advice and
investment advice. And that's natural when things get panicky, you
ask for a second opinion. But I'm also here to
say that that's the absolute worst time to potentially be
making changes to your overall situation. It would make me
(26:40):
sleep a lot better if by the time that thing hits,
which everyone knows is perfectly unpredictable, I had already done
the homework of knowing what sort of financial shape I'm
in and what I still need to accomplish to achieve
my goals. Because one thing that I'm quite certain of
is that we will have future market corrections and crashes
and recessions. They will be very difficult to predict ahead
(27:01):
of time, and most people will not be properly timing
things to take advantage of those future downturns. If you
are falling into any of those categories and you want
a second opinion, we can give you a free one
here at Armstrong Advisor Group. Give us a call to
chat about your personal situation at eight hundred three nine
three for zero zero one. We have offices located throughout
(27:24):
New England. We're happy to sit down with you in person,
over the phone, via zoom, whatever's easiest for you, but
get the process started. You can go to Armstrong Advisory
dot com if you'd like to book a time for
us to call you back or again, just give us
a ring eight hundred three to nine three for zero
zero one.
Speaker 1 (27:39):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax and estate planning advisors before making
any investment decisions. Armstrong make contact you to offer investment
advisory services.
Speaker 2 (27:55):
I want to talk food. Do you have to talk
coffee or pizza? Your pick?
Speaker 3 (28:00):
Mark, I can't take the pressure.
Speaker 4 (28:04):
Really pizza pizza.
Speaker 3 (28:08):
Yeah, but it's almost one time and we're hungry. Why
would we want a mouthwatering pizza pizza?
Speaker 2 (28:13):
Well, according to Young Brands, it might not be so
mouthwatering because they are looking for strategic options for Pizza Hut.
If you didn't know Young Brands who also owns KFC
and Taco Bell. They're an old spinoff from Pepsi long not.
They own these three brands, and I think they're finding
that one nobody goes to Pizza Hut. Two, that the
(28:34):
Pizza Hut brand does not really fit in with the
KFC and Taco Bell brand. You wouldn't think that necessarily
fried chicken and tacos fit together either, but they have.
Speaker 3 (28:44):
Why would you buy things that fit together? You want
diversifiers in your portfolio.
Speaker 2 (28:48):
I think what they found is that they were able
to successfully put up one building and house both of
these restaurants in the same place.
Speaker 3 (28:56):
And I get that. Guys, I've been out on the
d Yeah.
Speaker 2 (29:01):
I thought you just lived in you know, you drove
to here and had never seen a fast food restaurant before.
But in either case, young brands saying that there's exploring
strategic options for pizza Hut, I've got to say, I
mean their buildings are very distinct. You can still tell
when like, there are several buildings I've driven by their
no longer pizza huts.
Speaker 4 (29:20):
That build Yeah, Okay, continue, Sorry, I.
Speaker 3 (29:23):
Was just gonna say, I don't see we've I don't see.
Speaker 4 (29:26):
Any pizza huts unless they're inside of a target or something. Right,
there are former pizza huts, Mike that you're saying, like,
I know of an urgent care that is Yeah, it was.
Speaker 2 (29:38):
Very clearly still distinctly a pizza hut because they had
that brand. But yeah, I don't know the last time
that I've been to one.
Speaker 4 (29:47):
I don't either.
Speaker 2 (29:49):
Are they the ones that were famous for the like
the red cups or is that Papa Gino's Pizza Pizza
Hut the red plastic cups that I'm sure just got broken.
They they were, But yeah, I don't know who the buy.
I'm sure there's some private equity for the firm that,
for the right price, will take this and strip it
of everything it's worth and repackaged it at some point,
(30:10):
but yeah, it sure doesn't seem like they have a
real good future there.
Speaker 4 (30:14):
Dominos won. Dominos won the Pizza Wars in terms of
like fast casual destinations.
Speaker 2 (30:20):
Yeah, I mean they are slightly different models because Pizza
Hut was I go and sit down there, but I
had a salad bar? Yeah did they? Yeah?
Speaker 4 (30:29):
I don't remember going to a Pizza Hut.
Speaker 2 (30:31):
I just think we remember being there with like thirteen
other eight year old hockey players and it was the
perfect place for that sort of thing, and not a
whole lot else.
Speaker 3 (30:41):
A salad bar, by the way, it was just ornamental.
Nobody went that was that was your cover?
Speaker 2 (30:45):
Yeah it was.
Speaker 3 (30:46):
It was all artificial, you know.
Speaker 2 (30:50):
Starbucks, on the other hand, planning to sell sixty percent
of their China business to a Chinese based private equity firm.
This has been a thorn in their side for quite
a few years here, and I mean, tell me if
you've heard this story before. US company, enticed by the
(31:10):
size of the Chinese market, enters the market can't really
compete because the second they start to have a brand there,
a Chinese startup starts to compete with them and has
every advantage out there, and so your only option remaining
is to sell yourself to a Chinese owned entity. I'm
not worried about any intellectual property loss here, but I
(31:30):
just look at the incentives of American companies in the
history of this and it's just the same exact story
over and over. Oh man, there's a few billion people there.
What a market that would be. Go there, grow a
little bit homegrown. Competition comes from China, puts you on
the not out of business, but on the ropes, and
then you're forced to sell out of some degree of necessity.
(31:54):
So Starbucks looking like they may go that way in
a deal valued at four billion dollars for their Chinese business.
Take a quick break when we come back here on
the Financial Exchange stack Roulette.
Speaker 1 (32:05):
Find daily interviews and full shows of the Financial Exchange
on our YouTube page. Subscribe to our page and get
caught up on anything and everything you might have missed.
This is the Financial Exchange Radio Network. The Financial Exchange
is now available every day from eleven to noon on
Serious XM's Business Radio Channel one thirty two. Stay informed
(32:25):
about the latest from Wall Street, fiscal policy, and breaking
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the Financial Exchange Radio Network.
Speaker 4 (32:46):
Remember, you can watch the show live every day on
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Speaker 2 (33:10):
We were talking about during the break and I can't
believe I forgot to, you know, just make the connection here.
But hopefully Pizza Hut is still around by the time
Space Balls two comes out and Pizza the Hut still
makes a recurring theme there.
Speaker 3 (33:24):
Yeah, no one would get the bit.
Speaker 2 (33:26):
People probably wouldn't.
Speaker 3 (33:27):
People rarely got it in whenever it was eighty seven.
Speaker 2 (33:29):
Yeah, well we'll have to Yeah, they might have to
find a more modern uh comparison there. We'll try and
come up with. If you have any modern options for
Pizza the Hut, you can text the show at six
one seven three, six two thirteen eighty five. I am
I am interested in your ideas. Mark, what do we
have for stack Roulette? Today?
Speaker 3 (33:50):
I talked about first brands, the auto parts maker that
is allegedly Yeah, well they're in bankruptcy that might be
allegedly committed fraud.
Speaker 2 (34:00):
And you asked some light fraud.
Speaker 3 (34:03):
Yeah, you asked if the if the founder had been
implicated any of this or something to that effect. This
story came out. I think after we arrived at the
today's so called stack of things we're going to talk about. Well,
First Brands group Patrick James is being sued by the
rump corporate, by the board management of First Brands. He's
(34:24):
no longer I guess part of that, so being sued
by the company for borrowing funds on fraudulent terms, diverting
cash for to himself and it's not it's not funny,
but it's it's predictable is not the right word, but
it's it's not surprising, diverting cash to himself and his family,
(34:45):
so funneling funds to to fund his quote and his
families lavish lifestyle, lining the pockets of his family at
the expensive First Brands and its creditors so they I
don't think I've serious motivation here too.
Speaker 2 (35:02):
I don't think I've ever read a story about fraud
that has been perpetrated that did not have the phrase
in the article about lining the pockets of their lavish
lifestyle on X, Y or Z, right.
Speaker 3 (35:17):
Else would you do it? You don't do it for charity?
Speaker 2 (35:19):
Usually not, Yeah, that's not usually what's coming up with
these With the frauds that are occurring. Pollunteer thinks college
might be a waste, so it's hiring high school grads.
We actually had this story in the stack yesterday prior
to them reporting earnings. But the tech companies offering twenty
two teenagers a chance to skip college for their fellowship,
which includes a four week seminar on Western civilization, because
(35:41):
they will not be getting a university education. The Wall
Street Journal interviews at least one candidate for the fellowship
who is turning down a entrance into Brown University for
the opportunity. And I guess here's what I will say
about this. No, not everyone needs a college degree. I'll
(36:01):
acknowledge that if you are turning down a Brown acceptance
to go take the Palenteer opportunity, then you are probably
in the upper echelons in terms of your test taking
and every other credential anyway. And so I don't think
that necessarily, I don't necessarily think that this story about
(36:22):
Palenteer offering this opportunity should be a lesson to any
eighteen year olds that, hey, I don't need a college degree.
If you are getting accepted into this program at Palenteer,
you are likely the very top of the crop and
could get your pick of universities to choose from. Anyway.
I'll also say that, imagine for a minute that you
get seven years down your career path with Palenteer and
(36:46):
then it all blows up in your face and you
don't have a college degree or education to fall back on.
I don't know that many other private companies out there
are going to take a look at your internship that
you did with Palenteer and say, you know what, I
like that kid. He might not have a college degree,
but he has this experience with the Palenttier internship program,
(37:07):
so I'm going to go hire him or her. I
feel like that's the way that this is all being discussed,
and let's call the fact the facts. If this tech
company is offering this opportunity for twenty two teenagers, they
are going to be some of the best test takers
and best coders of their classes across the country. And
(37:28):
I don't think it's a sign that the need for
a college education is dying in any meaningful way.
Speaker 3 (37:33):
Yeah, your earnings potential is almost certainly higher with a
degree from Brown or just about anywhere, frankly, then a
couple of years of job experience, which you're gonna get anyway. Yep,
unless you have unless for some reason you're in a
huge rush to earn money. I don't want to overject.
Speaker 2 (37:48):
I don't necessarily fault this kid for making this decision. He's,
you know, you're eighteen years old, Like, yeah, you can
always do college later. I would merely point out that
he's probably not you because he got accepted to in
the first place and had this other opportunity. Let's take
quick break. When we come back, it's going to be
tomorrow because it's the end of our show. Today. Markets
(38:08):
are strongly in negative territory, SMP off three quarters of percent,
NASDAK off more. We'll have a full recap and more
for you tomorrow
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