Let's Talk Money

August 2nd, 2026.

Episode Transcript

Speaker 1 (00:01):
Well, good morning and welcome to Let's Talk Money on
a TENWGY. I hope you enjoy this Sunday morning and
are making the most of this first weekend of August.
I can't believe it, July is in the books and
we're now in August. So hopefully maybe you're headed to
the Saratoga Racetrack, maybe to spac or spending time on

(00:21):
Lake George, or just by your pool, or just tackling
some projects around the house. We appreciate you tuning into
us this morning. I'm your host, John Malay, and I'm
glad you're chose to spend part of your weekend morning
with us. I'm a certified public accountant and serve as
a chief operating officer, chief financial officer, and a wealth

(00:41):
advisor at Bouchet Financial Group. As always, again, we really
appreciate you tuning in. The listeners really make this show
really what it is, so we appreciate that. This morning,
I'm joined by my co host, Edward Wilhelm. Ed is
a senior portfolio trader at investment that Bouchet Financial Group

(01:02):
and a key member of our investment team. That's the
group that's responsible for actually building and managing the investment
portfolios our clients. You So, Ed, appreciate you getting up
right in early and being with me this morning.

Speaker 2 (01:14):
Yeah, as always, nowhere I'd rather.

Speaker 1 (01:16):
Be excellent, excellent. Hey, we got a great show lined up,
you know, Ed, and I'll break down what happened this
past week how it impacted the markets. You know. Interesting
if you just looked at the pick up the paper
today and just looked at the net changes in major indexes,
you'd say, oh, it's a boring week, nothing really happened.
But really, you know, FED had FED Reserve had their meeting.

(01:38):
We heard a lot from FED Chairman Kevin worsh We
also had some real big technology earnings that had the
markets popping this week. So Ed and I will get
all into that. So again, we appreciate you tuning in.
We want to hear from you. If you have questions,
reach out to us at eight hundred talk WGY. That's
eight hundred eight two five five nine four nine. So

(02:00):
we'll jumper you know, radio to the market. As I mentioned,
you know, just you know, if you looked at the indexes,
you know s and p up percent for the week,
nasdak up a little over you know, almost one point
six percent for the week, the Dow up one percent
for the week, Russell two thousand small cap index. Really

(02:20):
we'll talk about the year to date numbers really been
leading the charge this year. Quite a change there, but flat, right,
So you look at that as yeah, up one percent,
no big deal, But underlying there was a lot of
movement going on, and you know, we certainly saw pop
up in the more in the bond market with treasury yields.
We saw the ten year treasury close at four point
seven four on Friday, the highest rate since January twenty

(02:45):
twenty five, and then the thirty year popping up to
remarkable five in point two eight percent. So big movement
in the in the bond markets, and in some ways,
you know, the FED meeting this week, you know, they
made a decision to keep rates flat, and we'll talk
about that. But as Kevin Warshon and the new FED chairman saying,
you know, he's letting markets take care of the long

(03:07):
end of the curve, and they are. We saw this,
We saw how markets react and we saw rates go up.
We're going back to the indexes, you know again, you know,
one percent really across the board. Other than Nasdaq a
little above one and a half year to date. And
that's really what matters when we look at our portfolios, right,
you know, similarity s and p up just about nine

(03:28):
point four percent for the year, Nasdaq a little over
nine percent, Dow nine point two percent, and the Russell
two thousand, the small cap index has not been this story.
You know, we've talked about AI, we've talked about the
the you know, the the hyperscalers, and the Russell two

(03:48):
thousand year today up eighteen percent, so double any of
the other indexes. So think about that big movement small
caps this year, and I will say, you know, guess
that adage where you know, sometimes when you talk to people,
they're like, you know, I want to get I want
to get more into the market, but I'm not quite sure.
You know, where do I invest in? And it's like,
all right, if you sat on the sidelines this year, right,

(04:12):
it didn't matter whether you decided to invest in technology,
small cap, large cap. Now this is a broad generalization,
but it is like, get in the market more than anything.
You know, Steve, if you listen to this show, you know,
Steve says, hey, you have to be in the equity market,
there is more volatility, and you will have ups and
downs and you will have you know, draw downs. You know,

(04:35):
in an average year fourteen percent. So that's a part
of being in the equity markets. But sometimes it's more
important just get in the market. I can't tell you that.
You know how many conversations I have, not with clients,
but just people on the outside and say, oh, I've
got some money I want to get in, And I'm like, okay,
just you know, if you're not, you know, really following
the markets and don't work with advisor, you know, just

(04:56):
pick some index funds, spread that money around, and then
six months later you're still run into that person and
they're like, well, I still haven't put that money to
work yet, I'm not quite sure, you know, I keep
hearing this. It's like, just get the game, get in
the market. And this year, with everything we've talked about,
right the AI are we in a bubble? How things
are going? You know, where should I be? Listen, if

(05:17):
you put some index s and P related, Nasdaq related,
dial related, you're gonna be up about the same. And
I know that's not the true for for every year,
but again it's it's more of just get in the game.
And we talked about that. It's investors get invested and
stay invested. So and I know, you know, I gloss through.

(05:39):
You know, we'll talk more about the fo MC meeting
earnings that came out. You know, it had some you know,
even though it was just a you know, one percent
one on a you know, one point six for the Nasdaq,
there were some some big earnings releases this week that
made some this past week that made some big noise
and you know, certain the Microsoft, Amazon, Apple, you know,

(06:03):
topping the charts on that and markets reacted even even
though the end, you know, Nasdaq might have only been
up one point six. We certainly saw some wild movies
and certainly within some individual stocks saw some big movement
this week.

Speaker 2 (06:17):
Yeah, no, I think by far for me, Microsoft was
the most exciting. Amazon right behind it. What we're seeing
on of Microsoft is you know, there Azure the cloud
platform growing you know, forty three percent. This is far
ahead of expectations. They also had so their AI you
know implementation Microsoft has is copilot. They had thirty million

(06:41):
paid seats on that platform, and that blue expectations out
of the water. So again, you know what we're seeing,
you know, similar with Amazon record cloud revenue above expectations.
You know, headline both top and bottom coming in great
on profits and revenue. Markets are rewarding companies are who

(07:03):
are spending money but seeing real you know return on
those AI capex investments. You know that that continues to
be the most important thing.

Speaker 1 (07:12):
Yeah, we've we've talked, you know, we spent a lot
of time talking about the enormous spend, right, and it
is the numbers are staggering how much these hyperscalers are spending.
But this week is about earnings, right, I mean, certainly,
you know, and we'll talk more about the FED meeting
and that was certainly a backdrop, but this week markets
were driven by earnings and earnings you know, again, we'll

(07:34):
do we're in the midst of Q two earning season.
So just remember, as public companies and you know, all
the S and P five hundred companies, every quarter, they
have to report their earnings, right, and so they do
an earnings release, they do an earnings conference call, and
analysts who follow those stocks, right, they set expectations of
what's going to happen and what we're seeing, and we

(07:56):
saw it this week it's not so much about how
great of a quarter you have. I mean, that's important, right,
the earnings have to be there, but it's also about
forward guidance. You know, what are you expecting ahead? And
so what we saw, as Ed said, you know, with
both Amazon and Microsoft, and Amazon up seventeen percent for
the week, Microsoft up over twenty one percent, is they

(08:18):
delivered earnings. So it's not just a spending story anymore.
We're seeing AI. We're seeing the aiplay hit the bottom
line now. And so the bottom line growth that both
Amazon and Microsoft reported were significant, and you know, markets
rewarded that. But also we talked about the forward guidance.
Both companies really talked about their backlog, right, so revenue

(08:40):
that they expect to see in future quarters, and both
Amazon and Microsoft gave great guidance on what they're expecting.
Continued expansion of not only top line but right down
to the bottom line. So we've see an expansion of
operating margins and revenue, so exactly what markets want to see.

Speaker 2 (09:01):
We needed it, Yeah, we definitely need it. I mean
looking at Microsoft, you know, down almost thirty percent year
to date, and you know, this single earnings release kind
of changed the picture again, you know, if we're just
thinking about what markets have looked like, you know, year
to date, from a badder perspective, it's really been hardware
and memory driven those bottom layers. You know, that's been
our thesis here at Bouchet coming into the year again,

(09:26):
you know, still convicted in it. But it was great
to see Microsoft get a nice balance off those lows,
you know, again on the more software side, and just
markets are going to continue to focus on that return
on investment and.

Speaker 1 (09:39):
I think you know ed from an investment point of view,
you know, Microsoft is a great example or sometimes sometimes
markets overreact, right, and sometimes the overreact to the negative,
and sometimes the overreact to the positive. And you know,
Microsoft stock was beat up this year, no question, and
certainly you know, created an opportunity. And as we saw there,

(09:59):
you know there their revenue and earnings for the second
quarter phenomenal and what they're projecting going forward and and
a lot of this is in you know, their cloud
based services, right, so cloud based not only and this
is important because it's not only expanding the the revenue,

(10:19):
but their their profit margins are getting better. They're doing
things more efficiently, so that's a big part of the
AI play. The reason they are investing so heavily in
AI is to generate higher bottom line results from those divisions.
So we certainly, you know, saw it this week and
I'll say, you know, that's that's where investing right sometimes

(10:41):
it's uh, you know, you're looking for opportunities, and I
think looking at technology compans you may look at some
of you know, the chip makers right now and some
of those plays they're getting beat up right now. Uh,
certainly can also represent some opportunities. So great to see
that with both Amazon and Microsoft. And then we had
Apple on the opposite side. So Apple, see you think

(11:06):
about this this last week from a quarterly earnings, boy,
a lot of excitement you know, Amazon, Microsoft and Apple
think about big technology companies reporting. So even though you
all had indexes move a little bit, underlying you had
some some major movements within that and certainly saw tech
come back strong. Now Apple, and this is where markets

(11:30):
are finicky, right, you know, the market for all intensive
purposes for the quarter had a great quarter. You know,
they had significant revenue growth, great profitability margins. So from
the quarter perspective looked great. Everything looked great. They had
expansion on every front really and then where things took

(11:54):
a turn is part of the earnings release. They talk
about forward guidance, right and you know, Apple signaled that, hey,
they're going to expect some slower growth in the next quarter.
They're starting to see some supply chain issues. And you
know this is important because what they're signaling, and they're
the really first one to be signal, is that they're

(12:14):
seeing not only an increase in pricing in chips that
they use for everything from their from their iPhones to
iPads to all their devices. They're seeing a huge increase
in pricing and they're at a point where but it's

(12:36):
also about scarcity. They're having problem getting the volumes that
they need, and so they signal that their guidance. So
they're expecting lower growth and they're also going to see
some cost expansion, so they've got some decisions to make.
They have started to pass price increases along in some
of their products, but their iPhone they've not. And if

(12:57):
you ever have an iPhone, I mean it's already pretty
expensive to sort of think that they're going to have
to pass price increases. But Apple stock got beat up,
you know, so Apple down, you know, over seven percent
for the week, and that was an area where hey,
if you if you picked a part their quarterly earnings,
they look phenomenal, great quarterly earnings, but it's all about hey,

(13:19):
it's all about pricing forward. And they signaled some concerns
and you know, we're seeing that ed. You know, the
whole semiconductor memory space is certainly seeing a little bit
of volatility right now.

Speaker 2 (13:30):
Yeah, you know, I think just even the Apple story,
I mean all ties together, but Apple rallied pretty hard,
you know, across the earlier parts of the July, and
that was really because it was the one large cap
tech company not massively spending on AI. So again, as
we saw some volatility, like John just mentioned in the
hardware space, Apple, Apple was on the other end of that,

(13:54):
and it was rewarded. Earlier in the month. On that
same front, we had s K high Next earnings come
in and they were record record profit, up five hundred
and fifty seven percent year over year. I mean, that's
just mind boggling. But again there was there was fears
of some over builds. You know, earlier in the quarter,

(14:14):
there's some news that came out on Meta and they
were repurposing a couple of facilities and you know, led
to some concerns on an overbuild. Now again, when you
have such a strong year and you have such a
volatile space like hardware and memory, it's been driving you know,
the better part of market returns. It's going to continue

(14:34):
to be a volatile space. And you know, everyone loves it.
I love it on the upside. You don't love it
as much on the downside. So certainly saw some volatility
in that space. Now again, even with great earnings coming
out of sk Heinex. We'll hav Nvidia go later in August,
I believe on the twenty sixth. But that's that's really
an area to watch. You know, we still have a

(14:55):
lot of conviction in the space here at Bouchet. But again,
earnings will, earnings will continue tell the story.

Speaker 1 (15:01):
Absolutely, which is good, right because again we always get
the question are we in some kind of bubble? And
no question. You know, valuations we're getting frothy. They've come
down a bit right with some of the drawback. But
this is one where earnings, this is not hype. I mean,
it's not just a spend story anywhere. We're seeing it
come through earnings, which is that's great and that's what

(15:24):
we want to see as investors, and just wrapping up
kind of the market segment for you know what happened
last week. Obviously, we're still continuing to see volatility and
energy as the Iranian conflict continues to take a different
direction every day almost it feels, and so I think
we felt that, you know, we saw oil again take

(15:44):
a spike, It's come down a little bit at the
end of the week, and until just the reality you know,
we're gonna have to live with, and that does impact inflation,
There's no question that trickles through until the situation is
totally settled. You know, we're just gonna have to some
volatility in energy and energy is a really important, you know,
component of the AI play and it's been a big benefactor.

(16:08):
But we're seeing some volatility and and just the reality
until things settled, owt We're going to continue to see that.
So again, Ed and I are here for you. So
if you have any questions, we encourage you to pick
up the phone reach out to us. No question is
too easy, too hard. You can reach us at eight
hundred talk WGY. That's eight hundred eight two five five

(16:30):
ninety four nine. We're going to take a quick commercial break,
so please stay tuned with us and we'll be right
back with Let's Talk Money on eight ten. WGY, Well,
thank you for staying with us through that quick commercial break.
I'm John Malay, your host for this morning show, and
I'm joined by my colleague Edward Wilhelm. And have you
been to the track yet this year?

Speaker 2 (16:52):
I have, you know, I had Belmont pretty hard and
been a few other times. Nothing, nothing too crazy, you know. Fortunate.
You know, Steve obviously is a big proponent of the horse,
so he's had a couple running this year. Fortunate enough
to join him for some of those races. So but
I like to get over there as much as I can,
how much yourself?

Speaker 1 (17:10):
Yeah, just actually, uh, this week was the first time
I made it there this season, so it was a
great week there. We were supposed to have a firm
track day on Wednesday, uh, something we started a couple
of years ago, but we so it's a day we
all look forward to. But we had monsoon rainstorms on Wednesday,

(17:30):
so actually they shut the meat down, so there's no
no meat on no racing on Wednesday, so we had
to uh, we had to pivot. So uh, but I
will say, uh, you know, as as Ed said, Steve
is very into the Saratoga racing scene. And I will
say as a company, you know, one thing Steve likes

(17:52):
to do is bring that to our the employees and
and and to our associates and you know, so so
she has get the ability to use some special tickets
at the track and also at Saratoga Performing Arts, and
those are just way Steve's generous to the whole team,
and we appreciate it because, to be honest, it allows

(18:15):
some of our colleagues to appreciate those two venues in
a way that you know normally they may they may
not be able to. So just to get another form
of Steve generosity within our team and how just maha
much our associates and colleagues appreciate that because I will say,
you grow up in the Capital Region and you know,
Sarahtoga we have a large presence, also have our headquarters

(18:37):
in lovely historic downtown Troy, but Capital Region, you know
some of the some of the key venues you want
to hit right right to enjoy summer, you know, Spack
for some music concerts and also the racetrack, so we've
got some chances to enjoy those venues this year. So

(18:58):
so getting you know, back onto the other story of
the week end. So the the FED met this week
on the twenty seven, twenty eighth, and you know, largely
as expected, kept rates the same, So no movement our rates. Interesting.
You know, Kevin Warsh who's now FED chair, definitely putting
his style right, imprinting his style which I like, and

(19:23):
you know, some of his quotes he talked about, you know,
really promoting a good old family fight with the during
the FED meetings and which I appreciate, right. I mean,
there was a time where you could have, you know,
quote a friendly family fight right where you're disagreeing. And
I came from a large family and you know, you'd
have disagreements and you whether it was political or other things.

(19:45):
But at the end of the day, when that was
discussion and maybe quote argument was done, you all sat
ate dinner and talked calmly. And you know, I will
say we've lost some of that quite frankly, and sometimes
they're not friendly fights. And I've seen f families that
have been unfortunately separated over political disagreements, and so I

(20:07):
like his idea of really, you know, it's okay to dissent,
it's okay to have difference of opinions on that community.
They got brilliant people, they really are. And so I
like that, and he's fostering that, and we're seeing that.
You know, out of that meeting there were three dissenters
who didn't want to keep rates flat. They also didn't

(20:29):
want to decrease them. They wanted to increase them. Right,
So I like some good, healthy conversation. I think he's
not afraid of that. And quite frankly, I think any
good organization should have that. I think even like a
bouchet financial ab. I'll tell you Steve's our CEO. But
we have differences of opinions. You know, we've got a
wide variety of backgrounds in our colleagues and our leadership team,

(20:49):
and any good organization should be able to have healthy conversation,
healthy disagreement and then get consensus, support each other and
move forward with that. And so certainly I appreciate kind
of the breath of fresh air that Kevin Watsh is
bringing to, you know, bringing to the committee. And you know, well,

(21:10):
we're gonna be taking a break shortly, you know, halfway
through the show, but I will when we come back.
We'll talk more about the meeting, what really came out
of it, what it means, and kind of what we're
thinking about as we look at the rest of the year.
Really what's going to happen, you know with raid. So again,
we are halfway through today's show. We're going to be
taking a quick news break. I want to thank you

(21:31):
so much for tuning in for so so far. We
hope you're enjoying the conversation. Please don't go anywhere. We've
got plenty more to talk about. And if you have
a question or anything you just want to talk about,
we want to hear from you. You can call us at
eight hundred Talk WGI eight hundred eight two five five
nine four nine. You were listening to Let's Talk Money,
brought to you by Bouche Financial Group, where we help

(21:51):
our clients prioritize their health while we manage their wealth
for life. Thank you for tuning in and please rejoin
us after the break. Well, good morning, and thank you
thank you for staying with us through that commercial break.
I'm John Malay, your host for this morning show, and
I'm joined by my colleague Edward Wilhelm. Edward halfway through
the show, we got halfway to go.

Speaker 2 (22:12):
We still got a lot left, a.

Speaker 1 (22:13):
Lot left, a lot left. Absolutely, I think ed could
talk all day on this topic. So so we we
you know, first half we covered markets, what's what kind
of happened and you know, as as we covered big
technology earnings week and markets reaction to that. Also FED
had a meeting and we were, you know, really talking

(22:35):
about the outcome of that. Uh So we'll continue on
that a bit. So outcome is, you know, they kept
rates flat. But you know Kevin worsh the new FED chair,
and uh love the local connections, right, but also love
his style. I think he's bringing a new style. Uh
and he's he's made it clear like he with his
press conference is not gonna project out in what they're

(22:59):
going to do. He's saying, we're gonna watch the data
with us and we'll figure this out together, which I
kind of like he's saying, you know, markets, you're gonna
have to figure things out. And you know, markets are figuring,
that's what they do. That's why we have efficient markets.
And so the result of the meeting was a cap
rates flat at three and a half to three point
seventy five is the FED funds rate. As I mentioned,

(23:21):
there was dissension right three three Fed officials wanted to
increase rate, So I think that's signaling nobody was dissenting
on the declining, you know, lowering rates. So you know,
one of the things of warsh he has come out
very strongly and inflation. The two percent inflation rate is

(23:42):
not just a suggestion. It's not a soft suggestion that, oh,
you know, we're gonna increase now just because things are changing.
He's made it clear that is their target and they're
not softening on that, and they're gonna get inflation down
to that target, not necessarily in you know, before the

(24:02):
next meeting, right, but just that's their long term and
again made that very clear. And you know we had
you know, inflation reading actually come out right after the
meeting PCE, which is you know, the FEDS preferred inflation rating.
We talk a lot about CPI pcees they're preferred for
a lot of reasons, but it's a little bit different basket,

(24:24):
but also also factors in that consumers change spending habits
right as prices increase, right, and so CPI really doesn't
factor that is, so that's one of the reasons that
they prefer the PC. They think it's kind of a
more realistic measure of how consumers really act. And so
we did see a you know, a slight reduction and
better than estimate, which is good. But I think it

(24:46):
certainly benefited from some of the volatile energy, which we
we had to decline a little bit in that measure.
So certainly nobody's celebrating, but it's certainly going in the
right direction. But I think the main takeaway is long term,
the FED is not going to relax on that. They're
they're gonna they're gonna do what they have to do
to get you know, rates down in their inflation rates

(25:10):
down in that two percent target range. And it's interesting,
you know. He also, you know, Kevin Worris was, you know,
commented about, hey, the Fed is going to change, right.
They have the ability to change short term rates, right,
and and they have not done any changes right for
a few meetings. They've just held steady. But what the

(25:31):
markets are doing is markets are handling the long end
of the curve and they have you know, we've seen
a steepening of the curve we've seen the long end,
you know, the ten year treasury and even the thirty
year you know, increased significantly. So as we see, the
Fed has certain strings that they can pull, right, but
then the market itself and we're seeing you know, certainly

(25:54):
bond yields spike up and uh, you know, certainly it's
going to create some you know, making fixed income a
little bit more of the story for the rest of
this year.

Speaker 2 (26:04):
Yeah, you know, again, that's why we love individual bond,
individual treasuries here at Bouchet. You know, obviously there's an
inverse relationship between yields and the price of your bond fund.
So if you're gonna own a GG, it's the US
bond aggregate index. When we see rates come up, and

(26:25):
you know, especially on the longer end, that is going
to hurt the price of your bond DTF. Now you
are going to be picking up a better yield moving forward.
But when you have those individual you know, bonds or
CDs or treasuries, you're not subject to that, you know,
same price fluctuation as long as you hold until maturity.
But fixed income is certainly an interesting space and it's

(26:46):
an area that we're watching really closely. I think this
is one of the largest gaps in history on what
you get paid for owning something on the short end
of the curve, like an actual CD or a treasury
versus just whole in cash in your account. So again,
you know, my roots here at Bouchet are are trade operations,
you know, really you know, putting you know, cash to

(27:08):
work in the actual execution of trades. And I think
one of the biggest value ads we have for clients
is just on that cash management. You know, it's it's
something that maybe isn't super glorious and it definitely doesn't
feel glorious when you're doing it, but really trying to
squeeze some excess cash from you know, maybe it's just
sitting in your investing account you had some dividends hit

(27:29):
not being reinvested, or you know, it's just piling up
in your checking your savings account. Is squeezing that into
a money market fund like s w v x X
or you know, a three six month treasury. The difference
in yield, you know, is really around three three and
a half percent, And you think about that over over

(27:51):
the long term, especially on you know, sizeable dollars, that
makes a huge difference. So that's one thing definitely encourage listeners.
If you've got some cash on the sidelines, if the
worst place you can have it is under the mattress,
so just get it somewhere at least pick up some yield.
And there are just better avenues than just like a
high yield savings account. You know, just for a little
extra work, you can you can really get paid on that.

Speaker 1 (28:14):
And fixed income is really a story of what side
of the equation you're on, right, are you a borrower
or a quote lender? Right, you've got you've got money
to put in a bank or invest. Right, these higher
for longer rate environment is great if you've if you're
not borrowing, right, so you've got cash that or maybe

(28:34):
you want liquidity and or other reasons just about balancing
your risk. You're you are getting a higher return for
less risks, right, but by putting them into you know,
money market vehicles or you know we use schwabss w
v x X as a vehicle. But also we're going
to see some attractive treasury yields. So you know, every
every environment creates opportunities. Now, if you're heavily leveraged right now,

(28:58):
in borrowing, and particularly if you're tied to short term rates.
But I will even say if you're tied to ten year, right,
we're seeing ten year go up pretty aggressively. Or mortgage right,
thirty year mortgage. If you're in a you know, an
adjustable rate mortgage and you're heading towards an adjustment period.
You know, if you're on that side of the equation,
you don't like this environment. You don't like the rates

(29:18):
being higher for longer. Now, if you're retired and you
have no debt and you have just investments in a
healthy amount of cash that you need for liquidity distribution planning,
you're gonna this higher for longer is gonna reward you
with some higher interest income quite frankly.

Speaker 2 (29:35):
Yeah, I'm just looking at the ten year you know,
four point seven percent just shy a five. If you
have a sizable you know, fixed income allocation, you know
you're in a sixty forty or maybe you're farther into
retirement and you're looking for capital preservation. Owning a ten
year treasure rate at this level is just it pays.
You can't be unhappy with that. You know, you have

(29:57):
essentially a risk free investment that's going to pay you
a shy of five percent over the course of the
next ten years. I mean that is you know, that's
really wonderful. And sometimes it's it's okay to just set
it and forget it exactly.

Speaker 1 (30:10):
And that's an area where you know, I will say,
sometimes some political differences come out and we're like, oh,
is it really safe. Listen, We've never defaulted. We are
not We have the strongest economy in the world, there's
no question. And we're not perfect, no country is perfect,
but are economically we are the growth engine for the world.

(30:30):
We're going to continue and so US treasuries are are
safe and as Ed said, you know guaranteed four point
seven plus over a ten years with no risk. I mean,
that's it's hard not to be attracted to that. And
so I think this is where you know, as part
of certainly you wouldn't want to put all of your

(30:52):
eggs into that one basket, right, but well diversified portfolio,
participate in the equity markets and decide what percentage you
should have in fixed incomes. So so the rate environment
and you know that's gonna be an interesting story is
we we head through the rest of this year, particularly
with you know, whether the Fed hikes or not. And

(31:12):
you know, I would say ed expectations now have moved.
I almost think a rate decreases. Nobody's talking about reading.

Speaker 2 (31:19):
I think it's off off the table almost entirely. You know,
probably one or two percent probability floating out there. But
looking at the probabilities right now, we've got a sixty
percent chance for a hike come the next meeting in September.
And again that is just what's priced in right now.
That's subject to change on literally one job's print, one

(31:39):
inflation print, you know, a news headline that that's that's
a live, floating point. But what it tells us right
now is based on current yields. What are markets thinking
at this very moment. For our listeners, I think the
biggest thing to watch is going to continue to just
be oil. You know, that's the only really live reading
we have, and it continue needs to be a focus,

(32:02):
you know, and it is forward looking in a sense.
If that continues to stay elevated, that's going to bleed
into pce CPI And again that's where Warsh is committed
to this two percent. And if we see that stay
elevated he's gonna have no choice to hike now. He's
been very hawkish in tone, which I like, you know,
I think a FED chair should be hawkish in tone.

(32:23):
It prevents markets from running too far ahead. Again, for
our listeners, hawkish just means that his general tone is
pro rate hikes and then dubvishes for cuts. But he's
he is, he is very committed, and it's good to
see now again, no FED chair wants to hike rates.
Every FED chair is going to want to be in

(32:44):
a decreasing rate environment and cutting, you know, it's better
for the consumer. It's just an overall tailwind provides markets
some liquidity. But he also knows that he does not
want to make a similar mistake to maybe Jerome in
his last So I think that's a big reason on
why he's so committed to that inflation target and continues

(33:06):
to reiterate it over and over.

Speaker 1 (33:08):
Right, he's made that clear. And you know the other
side of the equation labor. Labor continues to be strong.
Unemployment rate, you know, uh, solidly just above four percent,
which is right where they want to be. So labor
is strong. So it's it's really you know, what's going
to happen on the inflation front, and I think, uh,
you got to take Worsh's comments and as he put

(33:31):
him out there, like, you know, inflation is key and there,
and they're going to keep it within the target.

Speaker 2 (33:36):
So some mom we did it. We do webinars, and
some interesting data came out of Financial Times just on
the labor front, and you know, we thought this was
really interesting because there's a huge narrative that AI is
you know, taking jobs, especially at the entry level, and
some preliminary data as you know l l m's you know,
like chat Shept and Claude were really first coming into

(33:58):
you know, public use. We we're seeing you know, an
initial slowdown in hiring, especially you know for people earlier
in their career. Now it's actually shifting. What we're seeing
is companies that are adopting AI use at a higher
rate are actually hiring it at a faster pace. They're
acknowledging the you know, potential growth and what that can

(34:20):
mean for profit margins, but they also need people to
take advantage of the technology, so they they're they're leaning
into it. So I just thought that was really interesting
and just continues to kind of push that on the
labor side, like it's softening, you know, it's rolling over,
but not a major concern I think on any front.

(34:41):
And you know Warsh continues to reiterate.

Speaker 1 (34:43):
That absolutely absolutely. So we're going to take a quick
commercial break and we'll come back. We're going to talk
about you know, Q one earning season. Hopefully, if any
callers have any questions, they can reach out to us
at eight hundred talk w g Y. That's eight hundred
eighty two five, So please stay tuned and we'll be
right back with Let's Talk Money on eight ten WGY.

Speaker 2 (35:06):
Thank you for holding with us through our commercial break.
You've got John Malay and Ed Wilhelm on this morning,
and we still got a lot to cover, so I'm
gonna jump right into it. Looking at earnings. So so
far we've had about sixty percent of the S and
P five hundred report and eighty six percent of those
have beaten estimates. And that's against a five year average

(35:28):
of around joshy of eighty percent. So again, another quarter.
I think this is the seventh straight quarter of double
digit growth. I mean, such an awesome run. And when
we think about markets just over the last really three years,
the story has been not just broad macro strength, but
really on the corporate side, especially large cap tech earnings

(35:52):
continue to be phenomenal just across the board, whether it
is just tech or any areas outside. So far, healthcare
is the only sector where we're seeing some earning shrink
across the board. Now again, obviously energy this year is
the strongest sector by a wide margin, coming into like

(36:13):
almost one hundred and forty percent growth, but a lot
of that is going to be due to, you know,
those price increases in conflicts in the Middle East. We
started off the week with s k Heinez that is
a memory chip maker out of South Korea. They came
in I mentioned earlier in the show with a record profit,

(36:33):
you know, up almost six hundred percent, great margins, but
somehow just barely missed expectations. So when you're talking about
growth of you know, profit of six hundred percent and
still missing expectations, it kind of shows you just how
much is priced into some of these areas of the market.
You know, people have really really high expectations. These analysts,

(36:57):
you know, they forecast out revenues for all the different
memory chip A lot of work goes into it. So
any sort of miss you know, it gets it gets punished,
and especially in a small market like Korea. I think
the entire entire market for Korea was almost down ten
percent that day and they had they had to hold
some trading. So we started off the week a little

(37:17):
bit in a tough spot. And again, you know, memory
and hardware were already under a little bit of fire,
concerns about overbuild, how much is priced in volatile sector.
You know, all the major names were taking it on
the chin and s ke high Nick's earnings didn't necessarily help.
Now we got some earnings from the rest of you know,

(37:37):
maybe historic large cap tech, and we'll take a break.
We got Joe from Clifton Park calling, Joe, how are
you doing?

Speaker 3 (37:45):
Hi, good morning. Just to spin off of you were
talking about treasury on ten year treasuries, how about those
municipal bond funds, like the tax free ones? Would now
be a good time you think along the same lines
as the treasury one.

Speaker 2 (38:03):
Yeah, I think munis can certainly make sense. I think
the biggest thing for Unie's is it's going to depend
on your tax bracket. What you got to do is
you need to calculate a tax equivalent yield based on
your applicable tax rates, and then that will kind of
tell you if it makes more or less sense than
maybe just a treasury per se. Now, muni's are very different.

(38:29):
It's it's a large, large space, and there's very different
types of munis. But I think if you're in a
high tax bracket, then certainly munis make sense and it's
a good time to be in those positions.

Speaker 3 (38:42):
Okay, so good, thank you.

Speaker 2 (38:46):
Yeah, of course, you know, I appreciate you calling in.

Speaker 1 (38:50):
Yeah, it's just as I said that, you know, the
the overall long term borrowing rates will bleed into the
muni market as well. So think about your you know,
you will see you know, some price improvement there where
you're getting higher yield and then obviously it said getting
the tax benefit on top of that.

Speaker 2 (39:09):
So I think jumping just right back into earnings again.
You know, some more classic blue chip stocks came out,
and really with the tailwind at least for hardware and
memory was is we're still seeing strong spending spending for
these you know, like Microsoft, Meta, Amazon, above estimates. And
that's great because you know, our thesis has really been

(39:30):
we want to be invested in the bottom of the
AI stack. Those are the companies receiving the benefits of
all of this, the rest of blue chip spending. So
when we see those estimates come in, that was a
much needed bounce for Memory and Semis. I can't tell
you how happy I was to see that. And you know,
we covered Microsoft and Amazon a little bit earlier in

(39:51):
the show. But there is a flip side of that.
You know, we talked about how markets are rewarding companies
who are seeing returns on their revenue. On the other side,
we had Meta come out on the twenty ninth and
that that fell about ten percent after earnings. Now, they
grew revenue by you know, almost thirty percent and beat

(40:11):
but their profit missed by jashi of fifteen percent, and
free cash flow was honestly abysmal. I think it fell
to under one billion when it was more than eight
billion a year ago. So Meta, on the flip side,
their capital spending is now consuming nearly everything the advertising
business produces, and that's a real story and that's scaring investors.

(40:35):
But again, you know, for the broader picture, they are
still spending and that is that is a tailwind. But
that's why earnings continue to be so important, and we're
going to see dispersion across names of print to print,
and this does provide opportunities, you know, looking at Meta,
if you don't think that they have the opportunity to
reverse that, you know, over maybe the next three quarters

(40:56):
might get worse before it gets better. But certainly, certainly
these earnings always provide opportunities across the board.

Speaker 1 (41:02):
And what we're seeing, you know, in the memory space
is not a slowdown in demand, quite the opposite. We're
seeing an increase in demand. So now, if you're a
memory chip maker, part of your forward guidance is can
be hindered by what just what your capacity is, right,
and because the demand is not slowing down, you know

(41:23):
is I talked about Apple's earnings in their conference call
and this was you know, one thing I forgot to mention.
This was Tim Cook's last so CEO of Apple, his
last earnings call. He's a new CEO coming in on
September first. But you know, as Apple indicated in their call,

(41:43):
like their ability to grow is or grow profitably without
passing price increases is being constrained by memory, the capacity memory.
So if you're making those chips right, the demands there
it's can you scale up enough to produce them as
fast as the demand is there? So so certainly a

(42:07):
story there. But as as much as Ed said, you
grown a x hundred percent and the markets don't like it,
it's not enough. And but as you said, that's that's
where hey, with tech companies, right, the value today of
that stock is largely being priced by future earnings, and
if there's any hiccups to the expectations of those future earnings,

(42:28):
that can have an impact on rates or on the
value of that stock for sure.

Speaker 2 (42:33):
Speaking about future earnings, a couple of exciting ones coming
up next week. One I'm really looking forward to is Caterpillar.
You know, maybe at face value not the most exciting,
but when you think about all the construction of AI
data centers, you know that that is a good indicator.
You know, their earnings are you know, very much tied
into the AI trade. And actually I think it's one

(42:54):
of the best performing stocks over the last few years.
With an S and P five hundred. We've also got
and then this is a big up over yeah, I mean, yeah,
you got to look about it.

Speaker 1 (43:05):
You think of Caterpillar as old school, right, and uh,
it's not right. It's certainly one of those companies that
are benefiting hugely from the data center build up.

Speaker 2 (43:16):
And we've also got SpaceX. Uh, and this this will
be an interesting one. It's going to be its first
you know, public earnings report, so again there's gonna be
a lot to sift through on the retail side. You know,
I'm sure corporate analysts are also going to be busy
looking through those financial statements. And if you listen to
our show pre IPO, I gotta say the Bouchet team

(43:40):
nailed it on this one. You know, we were pretty
outspoken about waiting to get into SpaceX and now it's
it's down below. I think it closed Friday about one
hundred and eight dollars a share at iPod at one
hundred and thirty five. And again, you know, for listeners,
I hope you didn't get it right at the top
on that IPO day. It ran up over the next

(44:03):
couple days. But we'll see next week.

Speaker 1 (44:07):
Yeah, SpaceX, well it'll be it'll be a big one.
And you know zed mentioned there was a flurry. Everybody
wanted to be in that and how many times do
we say this is it's not a new story, right,
IPO comes out comes out high and the first year
you see a lot of volatility and a lot of
times you see it going below IPO pricing. So ed,
I can't believe we're coming to the end of the show. Hey,

(44:28):
really appreciate you being a part of the show, and
obviously we appreciate the listening audience being a part. Really,
that's why we're here. So we want to thank you
for tuning in with us today. I hope you enjoyed
this show as much as we did. Hope you enjoy
the rest of your Sunday and have an awesome week ahead.
Be sure to join us next week for another edition
of Let's Talk Money. In the meantime, go to our

(44:50):
website Bouche dot com for great content. You have been
listening to Let's Talk Money, brought to you by Bouchet
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the year. Sunday