October 31, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss Amazon shares jump on news of strong cloud sales. How long can the economy rely on AI-led investments to keep driving the economy? Apple expects a big December. Should we be more skeptical about AI’s power needs? Why are more home sales falling through?
Mark as Played
Transcript
Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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(00:43):
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(01:06):
Zada and Mike Armstrong.
Speaker 2 (01:11):
Chuck, Mike, and Tucker with you here, and we continue
through a busy, busy, busy, busy, busy, busy week of earnings.
Yesterday we got a couple more big earnings in the
form of HF, Sinclair and Cube Smart, And so we're
gonna spend about an hour or so talking about each
(01:31):
of those companies, with nothing else along the way, we
might dabble in Apple and Amazon. Sure, let's actually kick
things off with Amazon, just because it's again getting kind
of all the love today with how it is moving.
Amazon stock currently up about eleven percent. What did we
see from their earnings report that has investors so.
Speaker 3 (01:52):
Excited a massive surge in their Amazon Web Services business,
which is the leader in the clubhouse and in demand
for all things AI related. So, while Amazon may not
be the company that produces the tool that every single
one of us use in our daily lives when it
comes to artificial intelligence, they are certainly seemingly going to
(02:13):
be the ones I shouldn't say certainly, they are seemingly
going to be the ones providing a lot of the computing, power, storage,
and other needs when it comes to running these giant
systematic AI models.
Speaker 2 (02:24):
So the big thing is that the year of year
growth for Amazon Web Services moved from the high teens
up into the low twenty percent range. And so that
is literally what is you know, kind of driving things
when you look at this move, it's the fact that
you have a quicker pace of growth happening there, and
(02:47):
ultimately that is something that investors are focusing on as
they look at the s earnings report. The big thing
that Amazon Web Services does for Amazon when you look
at it just in terms of again the company and
the quality of the earnings. It's a high margin business
compared to their typical retail business, which is very low margin,
(03:09):
and so as you sell more stuff from Amazon Web Services,
it results in a better earnings profile overall.
Speaker 3 (03:19):
Do we want to move on to Apple or do
we want to talk about kind of the culmination of
all the AI related tech earnings this week?
Speaker 2 (03:25):
Well, I think when we talk about Amazon here, and
I want to dig in on just a couple other
things with regards to Amazon, just because again, even though
the Amazon Web Services piece is, you know, the core
driver here, there are some other things that are going
on as well that I think are worth noting. Specifically,
(03:48):
they are brick and mortar retail business, which no one
really thinks about anymore, but they still own whole foods.
Speaker 1 (03:53):
Ye.
Speaker 2 (03:54):
At this point, brick and mortar retail business is showing
some pretty strong growth as well well and solid margins.
And so it's not just Amazon Web Services that is
hitting right now. You've got some really positive momentum that's
going on in Whole Foods for whatever reason.
Speaker 3 (04:15):
Plays right into all the other stuff we've been talking
about it when it comes to consumers this year.
Speaker 4 (04:19):
It does. It does.
Speaker 2 (04:20):
It is the upper end consumer that is buying this stuff.
And so ultimately, when you look at you know, whole foods,
they're right in that demo where you say, yeah, you're
picking up on that. You're not the down market grocer
who might be you know, struggling to you know, figure
out how to maintain margins and have competitive pricing. You've
(04:42):
got whole food stores that are now seeing six to
eight percent growth for the last four straight quarters, and
that's pretty solid when you look at the landscape out
there for groceries. So I think there's something that's going
on there as well, and I think ultimately it's continue
to help the profile of the company when you look
(05:03):
at you know, just the earnings quality that is out there.
I mean, just to give you a sense, in the
last five years, if you look at the change from
Q three of twenty one to Q three of twenty five,
and this is not data that ipull this is from
an analyst by name of Raoul Sharma. If you look
at Amazon's margins during that four year period, They've gone
(05:27):
from two and a half percent to twelve percent.
Speaker 4 (05:31):
That's the story.
Speaker 2 (05:32):
They are executing at an incredibly high level. Now what's
driving that. The interesting thing is that when you look
at the incremental revenue that's being added, it is predominantly
Amazon Web services, third party sales, and advertising.
Speaker 4 (05:49):
That's where the growth is.
Speaker 2 (05:51):
The core, Hey, we you know, act as a buyer
of product and then a distributor and seller of that product.
That's not really moving like they're basically doing the same
on that side. It's all the other stuff is where
the growth is. And that's because the business of operating
a warehouse, buying you know, something from China for three
(06:13):
dollars selling it to you for six it's a low
margin business. And so Amazon, I know that we like
to think of them as a retailer. Their core first
party retail business is maybe thirty five forty percent of
their overall mix right now, compared to north of fifty
(06:34):
percent four years ago. Most of their revenue now comes
from aws, third party sellers on their platform and advertising.
Speaker 3 (06:43):
Just speaking about that margin expansion, we have to I
had to look it up. Do you know when Bezos
stepped down?
Speaker 2 (06:51):
I'm going to say twenty two July fifth, twenty twenty one,
twenty one interesting, huh.
Speaker 3 (07:04):
Now, I think you would have seen the margin expansion regardless, right,
because he's like Jassie, kind of gets thrown under the
bus sometimes on stuff, and he's overseen probably one of
the largest dollar margin expansions that we've seen a company undertake.
Speaker 2 (07:18):
Counterpoint, most of the decisions that were made that impacted
twenty two and twenty three were by We're made was
Besis while he was still there.
Speaker 3 (07:26):
Agreed, But you know, we tend to when things go wrong,
we tend to blame the current CEO, and you know,
when things are going.
Speaker 4 (07:33):
Pretty well, I think you have to acknowledge it for
a minute.
Speaker 2 (07:35):
Yeah, I think that, And part of it is also, look,
Jasse came on board and the stock promptly fell like
fifty sixty percent, by no fault of his own. It
was just, hey, it's not twenty one anymore, and everyone
isn't just buying stuff on Amazon. The recovery since then,
I think has been really impressive. I mean, the stock
is almost tripled from the twenty twenty three lows. So yeah,
(07:57):
I think you take a look at how Amazon is
excuting right now, and it's it's nothing short of excellent,
quite honestly. So I think it's pretty impressive what you're
seeing from them. You wanted to kind of touch on,
you know, trying to wrap up the whole AI related
earnings because Apple is a separate beast.
Speaker 4 (08:17):
Apple is not AI focused.
Speaker 3 (08:20):
So here's where I'm We've talked about this, but now
that we have Amazon in, we are seeing the twenty
twenty five capex between Alphabet, Microsoft, Amazon, and Meta. And
granted we're kind of cobbling some of these numbers together
because Microsoft hasn't been perfectly clear with us, but I
think we are seeing somewhere in the range of three
hundred and ninety billion dollars in CAPEX for twenty twenty five.
(08:45):
That's my best guess, and I was trying to think
of how to quantify that. First of all, that that
spending alone is larger than the market cap of Procter Gamble,
So thought that's worth mentioning.
Speaker 1 (08:58):
Yep.
Speaker 3 (08:58):
It's also two an half times the capex of those
same four companies back in twenty twenty three. Now, again,
revenues have increased, cash flows increased, profit has increased across
all of those as well. But the capital expenditures that
these companies are pouring into their AI infrastructure primarily is
(09:20):
almost unfathomable. We're approaching four hundred billion dollars in annual
spending on this AI build out, and all of them
have promised that that's going to increase in twenty twenty
six as well. And frankly, this is the whole ballgame.
That four hundred billion dollars it's approaching is the thing
that is driving employment and spending in this economy. It
(09:43):
is driving the electricity expansion, the data warehouse expansion, it
is making up for the lost investment in housing. It's
contributing towards a large degree of employment in different areas.
It is also the piece that every stock market investor
out there is going to be asking will it be
(10:03):
worth it?
Speaker 2 (10:05):
It's kind of the whole ballgame, right, And I think
the next two years are gonna be when that's gonna
be proven out. Because here's the thing, Like the next
two years, you're either gonna have the sales and revenue
to prove it or you're not. I know, I like
all these companies are trying to project out their twenty twenty,
their twenty thirty sales, and quite honestly, that's kind of
(10:27):
a red.
Speaker 4 (10:27):
Flag for me.
Speaker 2 (10:27):
It's like, okay, like you're you're telling us that your
revenue is gonna be what in twenty thirty? Like when's
the last time you heard about companies trying to project
revenue five years out? Yeah, they analysts try to because
they say, okay, if we extrapolate, here's you know, our
price target. But when I hear you know, Oracle being like, well,
our twenty thirty cloud revenue is gonna be blank, Like okay,
(10:53):
Like I know that gets everyone all excited. But by
the way, sneaky quiet, have you guys noticed what's happened
to Oracle since that big the big earnings announcement that
they've given back all the gains they they've given back
all the gains, and so like, you look at this
and the next two years are where it's going to be,
(11:13):
because ultimately you're now at a pace where in this
quarter you're big four. You know, tech spenders in the
US spent almost one hundred and twenty five billion dollars
on CAPEX. They're going to spend north of five hundred
billion dollars next year. Yea, at some point you need
to start seeing a return on that investment. Actually, Like, no,
(11:34):
Andy Jase doesn't just sit out there and say, Gay,
you know what I'm gonna do.
Speaker 4 (11:36):
I'm gonna spend a.
Speaker 2 (11:37):
Hundred billion dollars in CAPEX next year just because I
want to.
Speaker 4 (11:41):
Even Mark Zuckerberg, who's.
Speaker 2 (11:42):
You know, as as you know, hey, like, well just
capexit man, Like he's as far down that road as
you can be. And and even you know, at a
certain point it's like, okay, Mark, where's the revenue gonna
come from?
Speaker 4 (11:57):
Yep.
Speaker 2 (11:57):
So I'm not saying that we will or won't get there.
I'm saying the next two years is when it's going
to be. Okay, you've spent the money, prove that it's
going to actually benefit your Business quick Break. When we
come back, let's talk Apple after this.
Speaker 1 (12:14):
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Speaker 5 (12:37):
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Speaker 2 (13:06):
In addition to Amazon earnings, we also received earnings from
app Lay or Apple as they're more commonly known. And again,
like the scale is just like insane at this point,
quite honestly, they did. And again this is this is
the third quarter. This is not even the holiday quarter.
They did one hundred and two point five billion dollars
in revenue for the quarter, which is more than a
(13:27):
billion dollars a day in revenue, which is insane. The
margins continue to be absolutely robust, you know, trending near
forty percent, so you know, they're making tens of billions
of dollars each quarter here. And the stock, by the way,
is valued as such. I mean, there are four trillion
(13:49):
dollar company big things, despite you know Tim Cook saying yeah,
we expect to have, you know, a really good fourth
quarter because of people moving into you know, new iPhones
and this and that. The stock's about half percent today,
and I think when I look at the culprits, the
fact is, okay, so your iPhone sales still missed analyst
(14:09):
estimates by a couple billion dollars, so you're not as
robust as they thought they were going to be. You
are seeing you know, continued growth in that services business revenue,
which surpassed one hundred billion dollars in revenue for the
first fiscal year ever. And that's high margin business. I
mean that that's truly that's the stuff where I think
the margins on the services business are like closer to
sixty percent than forty. So overall, there's nothing in this
(14:33):
report that gives me concern about Apple. It's just also
one where you sit there and you say, Okay, the
stock has rallied thirty percent, you know since September. What's
this going to give me is fuel for the idea
that it's going to do better. You know that it
can rally more. It's a perfectly good quarter, but this
(14:55):
market is not rewarding good quarters enough right now. We
saw this with Microsoft the day before, where they had
a perfectly good quarter and we're still down three percent.
Speaker 3 (15:03):
Yeah, it was a perfectly good quarter. And it's also
a company that does not have anything of note to
say on artificial intelligence.
Speaker 4 (15:10):
Or any new products. Right.
Speaker 2 (15:11):
When's the last time you heard anyone mention whatever? The
Goofy headset was? The vision pro is that what it
was called? Yeah, you remember when that came out and
there were like five videos of people like driving wearing it.
When's the last time you saw anyone? When's the last
time you saw one of those on social media? I've
never seen I've seen a wild Yeah, I've never seen
them in person. I'm not convinced they actually exist, like
(15:34):
it might just be maybe we all just made it up.
Speaker 4 (15:37):
Like they don't talk about it anymore.
Speaker 1 (15:39):
Yeah.
Speaker 3 (15:39):
Look, Apple continues to have a very impressive business that
is not exciting enough to drive their stock price substantially
higher at.
Speaker 4 (15:47):
The moment, even though it already has this year. I
mean it's like ten percent for the year. Uh no, I.
Speaker 2 (15:52):
Think it's more than after this is yeah, eight, It's
just it it fell so much, I guess at the beginning.
So yeah, it's had a monster rally in the life
couple months, but it's you know, yeah, I didn't realize
that it had fallen so much to the first half
of the year.
Speaker 4 (16:06):
I kind of splack that out. I mean, I think
you still I don't know.
Speaker 3 (16:11):
I still give Tim Cook benefit of the doubt here
because their lack of investment on artificial intelligence is right
in the wheelhouse of all the major successes they have had,
which is they are never the first to the game. No,
they're never going to be the first the first company
to roll out a folding smartphone. They're not going to
(16:32):
be the first ones to have wireless earbuds or noise
canceling headphones or smartphones in general, they have a reputation
of taking that emerging technology and making it better, more popular,
and easier to use. I don't know how you do
that with a software as opposed to a hardware, and
(16:55):
whether or not they can be successful on that front,
but arguably they have done a pretty job of that
same thing on streaming television and other things like that,
and so I hesitate to bash them on their lack
of lack of swings at the ball when it comes
to artificial intelligence.
Speaker 2 (17:11):
We have no idea how well they're doing on stream,
Like we don't know anything about Apple TV. Plus we
have they don't really.
Speaker 3 (17:17):
Break it out, But I mean, I don't think you
can look at it and say it's been a I
guess my point would be the content they have produced
has all been pretty high level and pretty darn good.
Speaker 4 (17:30):
Yeah, they've had a number of hits on Apple TV, right.
Speaker 2 (17:33):
I wouldn't say, like there's plenty of stuff that's probably forgettable,
just doesn't make it, but they have had a number
of hits. I mean, when you're talking Ted Lasso Severance, Yeah, I'm.
Speaker 4 (17:43):
Trying to go through and think that one. They have
a couple.
Speaker 2 (17:46):
Other ones that have been pretty good as well. But
the thing for Apple is, look, because the rest of
their business is so big and they're so profitable, they
can afford to outspend anyone else for whatever they actually
want to put on streaming.
Speaker 4 (18:00):
Right.
Speaker 2 (18:00):
I think they actually did this because they have the
F one rights starting next year? Is it next year
of the year after.
Speaker 4 (18:05):
Believe it's next year.
Speaker 2 (18:07):
I mean, like they can just outbid anyone for this
stuff because it's like, oh, like you want, you know,
two billion a year, Okay, we just made that in
revenue in two days.
Speaker 4 (18:16):
We'll bid three billions.
Speaker 2 (18:17):
Sure, And so they can just pay more for that
higher quality, higher caliber content that also, by the way,
targets the more affluent person that's typically buying Apple stuff.
You know, like F one fits into this perfectly.
Speaker 4 (18:32):
I mean, think about.
Speaker 2 (18:33):
Where the races are in F one, Just as an example,
You're in freaking Monaco, You're in Vegas, you're in Miami,
You're in all these Like.
Speaker 5 (18:39):
My buddy just went to Mexico City to catch one.
Speaker 2 (18:42):
Like it's all these places, and like the whole vibe
of it is, look how much money is there. It's
and it fits right into Apple's Wheelhouse.
Speaker 3 (18:51):
So and a nice little ability to do a product
to drop into any of these hit shows too. The
morning showed Lasso shrinking. Yeah, they're all on iPhone, all
on iPhones, they're all on MacBooks, they're all on Apple products, earbuds.
Speaker 4 (19:06):
And everything else.
Speaker 3 (19:07):
Not in severance, true different, different, different setting. I would
imagine Silo and Foundation two. Those are a couple sci
fi type ones that they're probably not using. Apple products.
Speaker 2 (19:18):
Foundation is an interesting one. The first season was it
wasn't hot garbage, but it was moderately cool garbage. The
second season I thought was outstanding in for some reason,
I just haven't watched the third quick break here when
we come back, we got Wall Street Watch.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving markets so
far today, right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Markets in positive territory on the hills of more impressive
big tech earnings from the likes of Amazon and Apple.
Right now, the Dow is up modestly, only thirty points higher,
SMP five hundred, up over half a percent or thirty
five points higher. NASDAC up just over one percent or
two hundred and forty two points higher, Russell two thousand
(20:21):
is up about a half a percent ten, Your treasure
wield is down one basis point at four point zero
eight one percent, and crude oil is edging higher, trading
at sixty dollars and sixty four cents a barrel. Amazon
is among the big winners on the day after the
e commerce in web services giant b third quarter earnings
in revenue expectations, where revenue from AWS jumped twenty percent
(20:45):
during the period, marking the fastest rate of growth since
twenty twenty two. Amazon also reported aggressive plans to grow
data center capacity, shares our rallying ten percent. Meanwhile, Apple
also beat quarterly expectation, with the iPhone maker logged record sales.
The tech giant forecasts at a strong holiday quarter due
(21:06):
to strong demand from customers seeking to upgrade to the
iPhone seventeen. However, applestock is now down about a third
of a percent. Outside of tech energy giants, Exon Mobile
and Chevron reported earnings this morning, where both companies posted
lower quarterly results or excuse me, earnings, but said they
would continue to ratchet up production. Exon down over one percent,
(21:27):
while Chevron shares are up two percent. Meanwhile, social media
company Reddit saw is solid quarterly profit is revenue increase
due to higher advertising demand across industries. Reddit is jumping
sixteen percent elsewhere. Crypto exchange Coinbase said its quarterly profit
in revenue climb driven by growth in trading in a
surge in assets on the platform. That stock is up
(21:50):
by eight percent. Netflix anouns to ten for one stock
split to make its stock more affordable for its employees.
Netflix shares up three percent. Ring to the Financial Times,
Aquarius Holdings is in advanced talks to take US life
insurer BrightHouse Financial private, and a four billion dollar transaction
that could be announced as soon as this weekend. BrightHouse
(22:12):
shares are surging twenty two percent on that news. I'm
Tucker Silva and that is Wall Street Watch And as
a reminder of the Financial Exchange streams every day live
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(22:32):
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all that fun stuff.
Speaker 4 (22:38):
I have no idea what Tucker's talking about.
Speaker 2 (22:40):
Neither do we have anything else on AI that we
want to touch On.
Speaker 3 (22:46):
One other item, I was speaking about it with NACANON
up in Portland, Maine on our local GA and affiliate
up there. He made the comparison to He asked the
question about electricity infrastructure, which we've been talking a lot about,
and how China is able to build it out a
(23:07):
lot faster than us. But it made me start thinking
about a few years ago when we were all talking
about evs, and every car executive auto executive out there
was talking about electric vehicles and they're pushed that they
were making and we were sitting back and asking a
number of questions such as, how are you going to
charge these things? And if everyone plugs in their car
(23:27):
at the same time, how is the grid going to
handle it. I don't hear as many of those questions
repeated about AI. I mean, clearly we're talking about build
out of nukes and all sorts of stuff, but I
don't see the skepticism. And I'm wondering if we should
be more skeptical that the electricity infrastructure build out is
going to happen or if it's different this time because
(23:49):
it is literally going to be done by the same
companies that are spending on the actual product.
Speaker 4 (23:55):
Right.
Speaker 3 (23:56):
The reason or part of the reason it didn't happen
in the auto sector is because it was the end
consumer that was driving a lot of this, and it's
not the end consumer that's driving at this time around.
Speaker 2 (24:05):
It's also I think the the key different.
Speaker 4 (24:10):
There are a couple differences.
Speaker 2 (24:11):
I still think that we may have challenges building the
amount of power capacity needed to run this stuff. I
think that's a real problem just because the US does
not build power plant capacity quickly, easily or cheaply.
Speaker 4 (24:25):
We just don't.
Speaker 2 (24:28):
It is different in that there are specific needs that
you're trying to provide power for here and so, like
with electric vehicles, just as an example, you don't know
how many of them you're going to sell at what
time frame. So either a utility or even you know,
a manufacturer wouldn't want to get involved in trying to
(24:49):
manage that because they're like, I don't know what this
looks like. In this case, it's no, we are setting
up a data center that uses x gigawatts of power.
We are going to build a power plant right next
to it that you know covers half of that or
all of it, or whatever it might be.
Speaker 3 (25:07):
It's kind of funny to think about for a moment
that you know, clearly the automakers didn't have the capital
to be able to go invest in electricity generation, but
had somebody found that money to go invest they'd.
Speaker 4 (25:21):
Be raking it in right now for the wrong reason totally.
Speaker 2 (25:24):
So the other piece though is, look, I think that
when it comes to some of the stuff that's being
talked about, in particular, particularly on nuclear, which look, I
am a huge proponent of additional nuclear construction, I think
some of this is feeling awfully twenty twenty one EV
(25:46):
spacky in that you have these companies that have literally
never built a nuclear power plant before, that have no revenue,
that are being valued at billions of dollars, and that's
not going to last. There might be some that end
up coming out of that that are successful companies. But
(26:07):
if you think about like the EV manufacturers that you
know went public back in twenty one and twenty two,
in that whole range, the only two that are still
actually around are Riviant and Lucid, and their stocks are
doing terribly because the company is not anywhere near profitable,
right right, So I think it's an It's a lot
(26:28):
easier to build a car than a nuclear power plant,
and yet we're just treating it as if, Oh, these
guys are going to build like small modular nuclear reactors. Yeay,
let's do this, when they've never built a single one before.
And this is before you even get to some of
(26:49):
the questions about like the regulatory processes on these which
have been watered down over the last five to seven
years as well, where hey, some of the companies that
were initially trying to get through the Nuclear Energy Regulatory
Commission in order to build these things, we're told no,
like you don't have answers to some of the very
basic things that you need to have answers to when
it comes to nuclear safety. And now you're saying, okay,
(27:11):
let's just move ahead on this.
Speaker 4 (27:12):
Yeah, that's the that's the piece of.
Speaker 3 (27:16):
All of this that I look at everyone's asking me
right now right Who an analyst asked a Microsoft executive
are we in a bubble right now?
Speaker 4 (27:23):
Right? Was that?
Speaker 3 (27:24):
Was that the earnings call where that question came up.
It's getting asked over and over again on every major
earnings call related to AI, and some of the answers
that you hear are, yeah, look, valuations are elevated, but
look at the companies that are in here. They're super
highly concentrated and they're ultra profitable. And my answer is
(27:48):
not all of them, no, right, Like, yeah, there's a
ton of those, and that's what's driving the stock market
as a whole. But there's also all this other kind
of garbage that's our potential garbage.
Speaker 2 (27:59):
But it's also look, understand the accounting on this as well.
You have all of these future capex plans that are
being cheered right now. When those future capex plans turn
into this quarter's depreciation for that capex that was spent
three years ago, how do you still feel about it? Right,
(28:19):
Because it's it's one thing now to be like, yeah,
we're gonna spend five hundred billion dollars next year and
it's gonna build out you know, all this AI capacity. Well,
when you've built it out and it's twenty twenty eight
and now you've got fifty billion dollars of depreciation hitting
your you know, financial statements for stuff that you built
two years in the past, and then that's happening every year.
(28:40):
Is now you've got like one hundred and fifty billion
dollars in depreciation hitting for three you know, the past
three years. You're like, oh, yeah, this this doesn't necessarily
feel as good. So I'm not saying it will or
won't work, but man, the next couple of years, you
got to get the revenue because otherwise the spending is
going to catch up with you based on how the
(29:03):
accounting actually works. It's it will be a problem if
you cannot revenue wise. They always say monetized, but I
think revenue wise is the way that I want to
go with it.
Speaker 4 (29:17):
Let's take a quick break.
Speaker 2 (29:18):
When we come back, let's talk about home purchases that
are falling through.
Speaker 1 (29:21):
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Speaker 4 (30:21):
More Home part.
Speaker 2 (30:23):
More home purchases are falling through in an uncertain economy.
According to data from redfin, about fifteen percent of agreed
upon purchases were canceled in September. That's up from about
thirteen point six percent a year earlier, so about a
ten percent rise. I don't know that that is something
that is notable or.
Speaker 3 (30:44):
It's nothing to me. I like, unless you're gonna tell
me what the percentage of canceled home purchases were back
in twenty ten. This is not terribly useful context for me.
I think one thing I'm comfortable saying people are under
more financial pressure than they were a few months ago. Sure,
(31:06):
but like, hey, could this cancelation be because all government
workers are suddenly not getting paid and therefore no lender
is going to let them borrow money?
Speaker 4 (31:17):
Maybe, Oh, it could be. Yeah, if I'm a lender,
I'm not.
Speaker 3 (31:22):
If I'm a lender, I am not loaning money to
a government worker right now, would you No.
Speaker 2 (31:27):
The counter to that is, they do have some geographic trends,
and right now Jacksonville, Florida has one of the highest
rates of cancelations in the country. It's seventeen point eight
percent in September. Jacksonville is not a center of government
employee federal government activity. Instead, it's a big financial center,
like Jacksonville is a huge banking center. And it's also
(31:48):
last time I checked in Florida, which has a housing
market that has falling prices right now in access inventory.
So I think that this is something where I say, Okay,
that's interesting, but I still don't know that it necessarily
you know me, I also don't know that it means
anything about the future of where this goes, right.
Speaker 4 (32:10):
You know, Like, I don't know that it's a forward
looking indicator.
Speaker 3 (32:13):
This follows along with the housing inequality piece from Connor
Sen and he speaks to you know, just the demand
for housing right now is coming from the very high end,
and so that's where the construction is happening, is very
expensive homes with high end furnishings. And I think all
of that's true. But I don't want to lose focus
of something here. This is a symptom, not a disease, right.
(32:36):
This is the symptom of what we are seeing right now,
which is a big divide in wealth inequality, a big
divide in income inequality, and a growing upper class that
can afford things and a growing lower.
Speaker 4 (32:47):
Class that it can't afford much at all. Yes, And so.
Speaker 3 (32:51):
I think it's important to lose sight of that because
in some cases you'll have lawmakers latch onto something like
this and be like, oh, we need to we need
to fix that through housing policy. And my answer would be,
I think we should try and fix that, but through
housing policy is probably not how I would try and
do it.
Speaker 4 (33:07):
Yeah, this is the symptom, not the cause. Folks.
Speaker 3 (33:11):
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Speaker 4 (35:14):
There's a piece today in Bloomberg.
Speaker 2 (35:17):
It's titled parents are spending one hundred thousand dollars for
their kid's chance to chase baseball greatness. The first thing
that I found notable in this the sixteen year old
pitcher that is profiled in here goes by the name
of Striker Pence, which what a name. Yeah, they buried
the lead though his two brothers' names are Ace and Maverick,
(35:42):
so it's Striker Airplan and Mavericks.
Speaker 4 (35:45):
Striker, Striker Striker.
Speaker 2 (35:47):
Yeah, I mean, like you just don't get better names.
But basically what it is talking about is like, look,
you have like all this money that you know, parents
spend on you know, cleats and equipment and batting cage
and lessons and this and that, and here's the truth
of this. When it's all said and done, your kid
is not going to earn a college scholarship for athletics.
(36:11):
I'm sorry, but that's just the case. And that's how
you have to kind of approach things to begin with.
If you look at the data out there, basically you
have to be in the top one percent of all
high school athletes in your sport in order to even
get looked at for college, and then maybe a quarter
of those end up being scholarship eligible, depending on the sport,
(36:32):
and beyond that, it's maybe the top one percent of
that quarter percent that ends up actually being able to
play professionally at any level.
Speaker 3 (36:40):
Do you think that's entirety of the intent with the stuff,
because I see a lot of wealthy families who are
doing this anyway, and some of them are looking at
it as, hey, we can afford whatever school our kid chooses,
but maybe this will get them into a better school.
I think that's still pretty unlikely. But I'm wondering about
that intent. I see, if you're spending one hundred thousand
dollars on baseball, great now, then I'm I'm.
Speaker 4 (37:03):
Not sure you're looking for the scholarship.
Speaker 2 (37:04):
Here's the thing, and it's it's not to well. No, Look,
your kid's not going to get a scholarship for sports. Like,
I'm sorry, that's just how it is. And I know
there's people listening. They're like, no, mine's different, Like mine's
gonna get Okay, maybe you're the exception. I've seen the numbers. Look,
(37:25):
I not to toot my own horn. I played college.
I played two different sports. In college, I like and
I wasn't even very good. Like I was good at them,
but like, I couldn't even cut it. I've washed out
of one of them in college. I was a backup
in the other, and I was a pretty good high
school athlete. So like, and I didn't end up getting
(37:45):
any money for it as a result. So your kid
is not going to get a scholarship for sports. That's
where you need to start. If you want to do
this because they enjoy it and they just want to
get better, and you have the disposable income to do so, fine,
I think that's like reasonable, But your kid's not going
(38:08):
to get a scholarship for sports so.
Speaker 4 (38:11):
Long as I can vicariously live through them doing it.
Speaker 2 (38:16):
Let's take a quick break when we return our two
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Speaker 2 (01:11):
Chuck, Mike, and Tucker with you here, and we continue
through a busy, busy, busy, busy, busy, busy week of earnings.
Yesterday we got a couple more big earnings in the
form of HF, Sinclair and Cube Smart, And so we're
gonna spend about an hour or so talking about each
(01:31):
of those companies, with nothing else along the way, we
might dabble in Apple and Amazon. Sure, let's actually kick
things off with Amazon, just because it's again getting kind
of all the love today with how it is moving.
Amazon stock currently up about eleven percent. What did we
see from their earnings report that has investors so.
Speaker 3 (01:52):
Excited a massive surge in their Amazon Web Services business,
which is the leader in the clubhouse and in demand
for all things AI related. So, while Amazon may not
be the company that produces the tool that every single
one of us use in our daily lives when it
comes to artificial intelligence, they are certainly seemingly going to
(02:13):
be the ones I shouldn't say certainly, they are seemingly
going to be the ones providing a lot of the computing, power, storage,
and other needs when it comes to running these giant
systematic AI models.
Speaker 2 (02:24):
So the big thing is that the year of year
growth for Amazon Web Services moved from the high teens
up into the low twenty percent range. And so that
is literally what is you know, kind of driving things
when you look at this move, it's the fact that
you have a quicker pace of growth happening there, and
(02:47):
ultimately that is something that investors are focusing on as
they look at the s earnings report. The big thing
that Amazon Web Services does for Amazon when you look
at it just in terms of again the company and
the quality of the earnings. It's a high margin business
compared to their typical retail business, which is very low margin,
(03:09):
and so as you sell more stuff from Amazon Web Services,
it results in a better earnings profile overall.
Speaker 3 (03:19):
Do we want to move on to Apple or do
we want to talk about kind of the culmination of
all the AI related tech earnings this week?
Speaker 2 (03:25):
Well, I think when we talk about Amazon here, and
I want to dig in on just a couple other
things with regards to Amazon, just because again, even though
the Amazon Web Services piece is, you know, the core
driver here, there are some other things that are going
on as well that I think are worth noting. Specifically,
(03:48):
they are brick and mortar retail business, which no one
really thinks about anymore, but they still own whole foods.
Speaker 1 (03:53):
Ye.
Speaker 2 (03:54):
At this point, brick and mortar retail business is showing
some pretty strong growth as well well and solid margins.
And so it's not just Amazon Web Services that is
hitting right now. You've got some really positive momentum that's
going on in Whole Foods for whatever reason.
Speaker 3 (04:15):
Plays right into all the other stuff we've been talking
about it when it comes to consumers this year.
Speaker 4 (04:19):
It does. It does.
Speaker 2 (04:20):
It is the upper end consumer that is buying this stuff.
And so ultimately, when you look at you know, whole foods,
they're right in that demo where you say, yeah, you're
picking up on that. You're not the down market grocer
who might be you know, struggling to you know, figure
out how to maintain margins and have competitive pricing. You've
(04:42):
got whole food stores that are now seeing six to
eight percent growth for the last four straight quarters, and
that's pretty solid when you look at the landscape out
there for groceries. So I think there's something that's going
on there as well, and I think ultimately it's continue
to help the profile of the company when you look
(05:03):
at you know, just the earnings quality that is out there.
I mean, just to give you a sense, in the
last five years, if you look at the change from
Q three of twenty one to Q three of twenty five,
and this is not data that ipull this is from
an analyst by name of Raoul Sharma. If you look
at Amazon's margins during that four year period, They've gone
(05:27):
from two and a half percent to twelve percent.
Speaker 4 (05:31):
That's the story.
Speaker 2 (05:32):
They are executing at an incredibly high level. Now what's
driving that. The interesting thing is that when you look
at the incremental revenue that's being added, it is predominantly
Amazon Web services, third party sales, and advertising.
Speaker 4 (05:49):
That's where the growth is.
Speaker 2 (05:51):
The core, Hey, we you know, act as a buyer
of product and then a distributor and seller of that product.
That's not really moving like they're basically doing the same
on that side. It's all the other stuff is where
the growth is. And that's because the business of operating
a warehouse, buying you know, something from China for three
(06:13):
dollars selling it to you for six it's a low
margin business. And so Amazon, I know that we like
to think of them as a retailer. Their core first
party retail business is maybe thirty five forty percent of
their overall mix right now, compared to north of fifty
(06:34):
percent four years ago. Most of their revenue now comes
from aws, third party sellers on their platform and advertising.
Speaker 3 (06:43):
Just speaking about that margin expansion, we have to I
had to look it up. Do you know when Bezos
stepped down?
Speaker 2 (06:51):
I'm going to say twenty two July fifth, twenty twenty one,
twenty one interesting, huh.
Speaker 3 (07:04):
Now, I think you would have seen the margin expansion regardless, right,
because he's like Jassie, kind of gets thrown under the
bus sometimes on stuff, and he's overseen probably one of
the largest dollar margin expansions that we've seen a company undertake.
Speaker 2 (07:18):
Counterpoint, most of the decisions that were made that impacted
twenty two and twenty three were by We're made was
Besis while he was still there.
Speaker 3 (07:26):
Agreed, But you know, we tend to when things go wrong,
we tend to blame the current CEO, and you know,
when things are going.
Speaker 4 (07:33):
Pretty well, I think you have to acknowledge it for
a minute.
Speaker 2 (07:35):
Yeah, I think that, And part of it is also, look,
Jasse came on board and the stock promptly fell like
fifty sixty percent, by no fault of his own. It
was just, hey, it's not twenty one anymore, and everyone
isn't just buying stuff on Amazon. The recovery since then,
I think has been really impressive. I mean, the stock
is almost tripled from the twenty twenty three lows. So yeah,
(07:57):
I think you take a look at how Amazon is
excuting right now, and it's it's nothing short of excellent,
quite honestly. So I think it's pretty impressive what you're
seeing from them. You wanted to kind of touch on,
you know, trying to wrap up the whole AI related
earnings because Apple is a separate beast.
Speaker 4 (08:17):
Apple is not AI focused.
Speaker 3 (08:20):
So here's where I'm We've talked about this, but now
that we have Amazon in, we are seeing the twenty
twenty five capex between Alphabet, Microsoft, Amazon, and Meta. And
granted we're kind of cobbling some of these numbers together
because Microsoft hasn't been perfectly clear with us, but I
think we are seeing somewhere in the range of three
hundred and ninety billion dollars in CAPEX for twenty twenty five.
(08:45):
That's my best guess, and I was trying to think
of how to quantify that. First of all, that that
spending alone is larger than the market cap of Procter Gamble,
So thought that's worth mentioning.
Speaker 1 (08:58):
Yep.
Speaker 3 (08:58):
It's also two an half times the capex of those
same four companies back in twenty twenty three. Now, again,
revenues have increased, cash flows increased, profit has increased across
all of those as well. But the capital expenditures that
these companies are pouring into their AI infrastructure primarily is
(09:20):
almost unfathomable. We're approaching four hundred billion dollars in annual
spending on this AI build out, and all of them
have promised that that's going to increase in twenty twenty
six as well. And frankly, this is the whole ballgame.
That four hundred billion dollars it's approaching is the thing
that is driving employment and spending in this economy. It
(09:43):
is driving the electricity expansion, the data warehouse expansion, it
is making up for the lost investment in housing. It's
contributing towards a large degree of employment in different areas.
It is also the piece that every stock market investor
out there is going to be asking will it be
(10:03):
worth it?
Speaker 2 (10:05):
It's kind of the whole ballgame, right, And I think
the next two years are gonna be when that's gonna
be proven out. Because here's the thing, Like the next
two years, you're either gonna have the sales and revenue
to prove it or you're not. I know, I like
all these companies are trying to project out their twenty twenty,
their twenty thirty sales, and quite honestly, that's kind of
(10:27):
a red.
Speaker 4 (10:27):
Flag for me.
Speaker 2 (10:27):
It's like, okay, like you're you're telling us that your
revenue is gonna be what in twenty thirty? Like when's
the last time you heard about companies trying to project
revenue five years out? Yeah, they analysts try to because
they say, okay, if we extrapolate, here's you know, our
price target. But when I hear you know, Oracle being like, well,
our twenty thirty cloud revenue is gonna be blank, Like okay,
(10:53):
Like I know that gets everyone all excited. But by
the way, sneaky quiet, have you guys noticed what's happened
to Oracle since that big the big earnings announcement that
they've given back all the gains they they've given back
all the gains, and so like, you look at this
and the next two years are where it's going to be,
(11:13):
because ultimately you're now at a pace where in this
quarter you're big four. You know, tech spenders in the
US spent almost one hundred and twenty five billion dollars
on CAPEX. They're going to spend north of five hundred
billion dollars next year. Yea, at some point you need
to start seeing a return on that investment. Actually, Like, no,
(11:34):
Andy Jase doesn't just sit out there and say, Gay,
you know what I'm gonna do.
Speaker 4 (11:36):
I'm gonna spend a.
Speaker 2 (11:37):
Hundred billion dollars in CAPEX next year just because I
want to.
Speaker 4 (11:41):
Even Mark Zuckerberg, who's.
Speaker 2 (11:42):
You know, as as you know, hey, like, well just
capexit man, Like he's as far down that road as
you can be. And and even you know, at a
certain point it's like, okay, Mark, where's the revenue gonna
come from?
Speaker 4 (11:57):
Yep.
Speaker 2 (11:57):
So I'm not saying that we will or won't get there.
I'm saying the next two years is when it's going
to be. Okay, you've spent the money, prove that it's
going to actually benefit your Business quick Break. When we
come back, let's talk Apple after this.
Speaker 1 (12:14):
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Speaker 2 (13:06):
In addition to Amazon earnings, we also received earnings from
app Lay or Apple as they're more commonly known. And again,
like the scale is just like insane at this point,
quite honestly, they did. And again this is this is
the third quarter. This is not even the holiday quarter.
They did one hundred and two point five billion dollars
in revenue for the quarter, which is more than a
(13:27):
billion dollars a day in revenue, which is insane. The
margins continue to be absolutely robust, you know, trending near
forty percent, so you know, they're making tens of billions
of dollars each quarter here. And the stock, by the way,
is valued as such. I mean, there are four trillion
(13:49):
dollar company big things, despite you know Tim Cook saying yeah,
we expect to have, you know, a really good fourth
quarter because of people moving into you know, new iPhones
and this and that. The stock's about half percent today,
and I think when I look at the culprits, the
fact is, okay, so your iPhone sales still missed analyst
(14:09):
estimates by a couple billion dollars, so you're not as
robust as they thought they were going to be. You
are seeing you know, continued growth in that services business revenue,
which surpassed one hundred billion dollars in revenue for the
first fiscal year ever. And that's high margin business. I
mean that that's truly that's the stuff where I think
the margins on the services business are like closer to
sixty percent than forty. So overall, there's nothing in this
(14:33):
report that gives me concern about Apple. It's just also
one where you sit there and you say, Okay, the
stock has rallied thirty percent, you know since September. What's
this going to give me is fuel for the idea
that it's going to do better. You know that it
can rally more. It's a perfectly good quarter, but this
(14:55):
market is not rewarding good quarters enough right now. We
saw this with Microsoft the day before, where they had
a perfectly good quarter and we're still down three percent.
Speaker 3 (15:03):
Yeah, it was a perfectly good quarter. And it's also
a company that does not have anything of note to
say on artificial intelligence.
Speaker 4 (15:10):
Or any new products. Right.
Speaker 2 (15:11):
When's the last time you heard anyone mention whatever? The
Goofy headset was? The vision pro is that what it
was called? Yeah, you remember when that came out and
there were like five videos of people like driving wearing it.
When's the last time you saw anyone? When's the last
time you saw one of those on social media? I've
never seen I've seen a wild Yeah, I've never seen
them in person. I'm not convinced they actually exist, like
(15:34):
it might just be maybe we all just made it up.
Speaker 4 (15:37):
Like they don't talk about it anymore.
Speaker 1 (15:39):
Yeah.
Speaker 3 (15:39):
Look, Apple continues to have a very impressive business that
is not exciting enough to drive their stock price substantially
higher at.
Speaker 4 (15:47):
The moment, even though it already has this year. I
mean it's like ten percent for the year. Uh no, I.
Speaker 2 (15:52):
Think it's more than after this is yeah, eight, It's
just it it fell so much, I guess at the beginning.
So yeah, it's had a monster rally in the life
couple months, but it's you know, yeah, I didn't realize
that it had fallen so much to the first half
of the year.
Speaker 4 (16:06):
I kind of splack that out. I mean, I think
you still I don't know.
Speaker 3 (16:11):
I still give Tim Cook benefit of the doubt here
because their lack of investment on artificial intelligence is right
in the wheelhouse of all the major successes they have had,
which is they are never the first to the game. No,
they're never going to be the first the first company
to roll out a folding smartphone. They're not going to
(16:32):
be the first ones to have wireless earbuds or noise
canceling headphones or smartphones in general, they have a reputation
of taking that emerging technology and making it better, more popular,
and easier to use. I don't know how you do
that with a software as opposed to a hardware, and
(16:55):
whether or not they can be successful on that front,
but arguably they have done a pretty job of that
same thing on streaming television and other things like that,
and so I hesitate to bash them on their lack
of lack of swings at the ball when it comes
to artificial intelligence.
Speaker 2 (17:11):
We have no idea how well they're doing on stream,
Like we don't know anything about Apple TV. Plus we
have they don't really.
Speaker 3 (17:17):
Break it out, But I mean, I don't think you
can look at it and say it's been a I
guess my point would be the content they have produced
has all been pretty high level and pretty darn good.
Speaker 4 (17:30):
Yeah, they've had a number of hits on Apple TV, right.
Speaker 2 (17:33):
I wouldn't say, like there's plenty of stuff that's probably forgettable,
just doesn't make it, but they have had a number
of hits. I mean, when you're talking Ted Lasso Severance, Yeah, I'm.
Speaker 4 (17:43):
Trying to go through and think that one. They have
a couple.
Speaker 2 (17:46):
Other ones that have been pretty good as well. But
the thing for Apple is, look, because the rest of
their business is so big and they're so profitable, they
can afford to outspend anyone else for whatever they actually
want to put on streaming.
Speaker 4 (18:00):
Right.
Speaker 2 (18:00):
I think they actually did this because they have the
F one rights starting next year? Is it next year
of the year after.
Speaker 4 (18:05):
Believe it's next year.
Speaker 2 (18:07):
I mean, like they can just outbid anyone for this
stuff because it's like, oh, like you want, you know,
two billion a year, Okay, we just made that in
revenue in two days.
Speaker 4 (18:16):
We'll bid three billions.
Speaker 2 (18:17):
Sure, And so they can just pay more for that
higher quality, higher caliber content that also, by the way,
targets the more affluent person that's typically buying Apple stuff.
You know, like F one fits into this perfectly.
Speaker 4 (18:32):
I mean, think about.
Speaker 2 (18:33):
Where the races are in F one, Just as an example,
You're in freaking Monaco, You're in Vegas, you're in Miami,
You're in all these Like.
Speaker 5 (18:39):
My buddy just went to Mexico City to catch one.
Speaker 2 (18:42):
Like it's all these places, and like the whole vibe
of it is, look how much money is there. It's
and it fits right into Apple's Wheelhouse.
Speaker 3 (18:51):
So and a nice little ability to do a product
to drop into any of these hit shows too. The
morning showed Lasso shrinking. Yeah, they're all on iPhone, all
on iPhones, they're all on MacBooks, they're all on Apple products, earbuds.
Speaker 4 (19:06):
And everything else.
Speaker 3 (19:07):
Not in severance, true different, different, different setting. I would
imagine Silo and Foundation two. Those are a couple sci
fi type ones that they're probably not using. Apple products.
Speaker 2 (19:18):
Foundation is an interesting one. The first season was it
wasn't hot garbage, but it was moderately cool garbage. The
second season I thought was outstanding in for some reason,
I just haven't watched the third quick break here when
we come back, we got Wall Street Watch.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving markets so
far today, right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Markets in positive territory on the hills of more impressive
big tech earnings from the likes of Amazon and Apple.
Right now, the Dow is up modestly, only thirty points higher,
SMP five hundred, up over half a percent or thirty
five points higher. NASDAC up just over one percent or
two hundred and forty two points higher, Russell two thousand
(20:21):
is up about a half a percent ten, Your treasure
wield is down one basis point at four point zero
eight one percent, and crude oil is edging higher, trading
at sixty dollars and sixty four cents a barrel. Amazon
is among the big winners on the day after the
e commerce in web services giant b third quarter earnings
in revenue expectations, where revenue from AWS jumped twenty percent
(20:45):
during the period, marking the fastest rate of growth since
twenty twenty two. Amazon also reported aggressive plans to grow
data center capacity, shares our rallying ten percent. Meanwhile, Apple
also beat quarterly expectation, with the iPhone maker logged record sales.
The tech giant forecasts at a strong holiday quarter due
(21:06):
to strong demand from customers seeking to upgrade to the
iPhone seventeen. However, applestock is now down about a third
of a percent. Outside of tech energy giants, Exon Mobile
and Chevron reported earnings this morning, where both companies posted
lower quarterly results or excuse me, earnings, but said they
would continue to ratchet up production. Exon down over one percent,
(21:27):
while Chevron shares are up two percent. Meanwhile, social media
company Reddit saw is solid quarterly profit is revenue increase
due to higher advertising demand across industries. Reddit is jumping
sixteen percent elsewhere. Crypto exchange Coinbase said its quarterly profit
in revenue climb driven by growth in trading in a
surge in assets on the platform. That stock is up
(21:50):
by eight percent. Netflix anouns to ten for one stock
split to make its stock more affordable for its employees.
Netflix shares up three percent. Ring to the Financial Times,
Aquarius Holdings is in advanced talks to take US life
insurer BrightHouse Financial private, and a four billion dollar transaction
that could be announced as soon as this weekend. BrightHouse
(22:12):
shares are surging twenty two percent on that news. I'm
Tucker Silva and that is Wall Street Watch And as
a reminder of the Financial Exchange streams every day live
on YouTube, so you can log on now and check
out the crazy and wacky Halloween costumes that Mike and
Chuck are currently outfitting right now, and you can click
(22:32):
that subscribe button and getting a notifications and you know
all that fun stuff.
Speaker 4 (22:38):
I have no idea what Tucker's talking about.
Speaker 2 (22:40):
Neither do we have anything else on AI that we
want to touch On.
Speaker 3 (22:46):
One other item, I was speaking about it with NACANON
up in Portland, Maine on our local GA and affiliate
up there. He made the comparison to He asked the
question about electricity infrastructure, which we've been talking a lot about,
and how China is able to build it out a
(23:07):
lot faster than us. But it made me start thinking
about a few years ago when we were all talking
about evs, and every car executive auto executive out there
was talking about electric vehicles and they're pushed that they
were making and we were sitting back and asking a
number of questions such as, how are you going to
charge these things? And if everyone plugs in their car
(23:27):
at the same time, how is the grid going to
handle it. I don't hear as many of those questions
repeated about AI. I mean, clearly we're talking about build
out of nukes and all sorts of stuff, but I
don't see the skepticism. And I'm wondering if we should
be more skeptical that the electricity infrastructure build out is
going to happen or if it's different this time because
(23:49):
it is literally going to be done by the same
companies that are spending on the actual product.
Speaker 4 (23:55):
Right.
Speaker 3 (23:56):
The reason or part of the reason it didn't happen
in the auto sector is because it was the end
consumer that was driving a lot of this, and it's
not the end consumer that's driving at this time around.
Speaker 2 (24:05):
It's also I think the the key different.
Speaker 4 (24:10):
There are a couple differences.
Speaker 2 (24:11):
I still think that we may have challenges building the
amount of power capacity needed to run this stuff. I
think that's a real problem just because the US does
not build power plant capacity quickly, easily or cheaply.
Speaker 4 (24:25):
We just don't.
Speaker 2 (24:28):
It is different in that there are specific needs that
you're trying to provide power for here and so, like
with electric vehicles, just as an example, you don't know
how many of them you're going to sell at what
time frame. So either a utility or even you know,
a manufacturer wouldn't want to get involved in trying to
(24:49):
manage that because they're like, I don't know what this
looks like. In this case, it's no, we are setting
up a data center that uses x gigawatts of power.
We are going to build a power plant right next
to it that you know covers half of that or
all of it, or whatever it might be.
Speaker 3 (25:07):
It's kind of funny to think about for a moment
that you know, clearly the automakers didn't have the capital
to be able to go invest in electricity generation, but
had somebody found that money to go invest they'd.
Speaker 4 (25:21):
Be raking it in right now for the wrong reason totally.
Speaker 2 (25:24):
So the other piece though is, look, I think that
when it comes to some of the stuff that's being
talked about, in particular, particularly on nuclear, which look, I
am a huge proponent of additional nuclear construction, I think
some of this is feeling awfully twenty twenty one EV
(25:46):
spacky in that you have these companies that have literally
never built a nuclear power plant before, that have no revenue,
that are being valued at billions of dollars, and that's
not going to last. There might be some that end
up coming out of that that are successful companies. But
(26:07):
if you think about like the EV manufacturers that you
know went public back in twenty one and twenty two,
in that whole range, the only two that are still
actually around are Riviant and Lucid, and their stocks are
doing terribly because the company is not anywhere near profitable,
right right, So I think it's an It's a lot
(26:28):
easier to build a car than a nuclear power plant,
and yet we're just treating it as if, Oh, these
guys are going to build like small modular nuclear reactors. Yeay,
let's do this, when they've never built a single one before.
And this is before you even get to some of
(26:49):
the questions about like the regulatory processes on these which
have been watered down over the last five to seven
years as well, where hey, some of the companies that
were initially trying to get through the Nuclear Energy Regulatory
Commission in order to build these things, we're told no,
like you don't have answers to some of the very
basic things that you need to have answers to when
it comes to nuclear safety. And now you're saying, okay,
(27:11):
let's just move ahead on this.
Speaker 4 (27:12):
Yeah, that's the that's the piece of.
Speaker 3 (27:16):
All of this that I look at everyone's asking me
right now right Who an analyst asked a Microsoft executive
are we in a bubble right now?
Speaker 4 (27:23):
Right? Was that?
Speaker 3 (27:24):
Was that the earnings call where that question came up.
It's getting asked over and over again on every major
earnings call related to AI, and some of the answers
that you hear are, yeah, look, valuations are elevated, but
look at the companies that are in here. They're super
highly concentrated and they're ultra profitable. And my answer is
(27:48):
not all of them, no, right, Like, yeah, there's a
ton of those, and that's what's driving the stock market
as a whole. But there's also all this other kind
of garbage that's our potential garbage.
Speaker 2 (27:59):
But it's also look, understand the accounting on this as well.
You have all of these future capex plans that are
being cheered right now. When those future capex plans turn
into this quarter's depreciation for that capex that was spent
three years ago, how do you still feel about it? Right,
(28:19):
Because it's it's one thing now to be like, yeah,
we're gonna spend five hundred billion dollars next year and
it's gonna build out you know, all this AI capacity. Well,
when you've built it out and it's twenty twenty eight
and now you've got fifty billion dollars of depreciation hitting
your you know, financial statements for stuff that you built
two years in the past, and then that's happening every year.
(28:40):
Is now you've got like one hundred and fifty billion
dollars in depreciation hitting for three you know, the past
three years. You're like, oh, yeah, this this doesn't necessarily
feel as good. So I'm not saying it will or
won't work, but man, the next couple of years, you
got to get the revenue because otherwise the spending is
going to catch up with you based on how the
(29:03):
accounting actually works. It's it will be a problem if
you cannot revenue wise. They always say monetized, but I
think revenue wise is the way that I want to
go with it.
Speaker 4 (29:17):
Let's take a quick break.
Speaker 2 (29:18):
When we come back, let's talk about home purchases that
are falling through.
Speaker 1 (29:21):
Right after this, find daily interviews and full shows of
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Speaker 5 (29:49):
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Speaker 4 (30:21):
More Home part.
Speaker 2 (30:23):
More home purchases are falling through in an uncertain economy.
According to data from redfin, about fifteen percent of agreed
upon purchases were canceled in September. That's up from about
thirteen point six percent a year earlier, so about a
ten percent rise. I don't know that that is something
that is notable or.
Speaker 3 (30:44):
It's nothing to me. I like, unless you're gonna tell
me what the percentage of canceled home purchases were back
in twenty ten. This is not terribly useful context for me.
I think one thing I'm comfortable saying people are under
more financial pressure than they were a few months ago. Sure,
(31:06):
but like, hey, could this cancelation be because all government
workers are suddenly not getting paid and therefore no lender
is going to let them borrow money?
Speaker 4 (31:17):
Maybe, Oh, it could be. Yeah, if I'm a lender,
I'm not.
Speaker 3 (31:22):
If I'm a lender, I am not loaning money to
a government worker right now, would you No.
Speaker 2 (31:27):
The counter to that is, they do have some geographic trends,
and right now Jacksonville, Florida has one of the highest
rates of cancelations in the country. It's seventeen point eight
percent in September. Jacksonville is not a center of government
employee federal government activity. Instead, it's a big financial center,
like Jacksonville is a huge banking center. And it's also
(31:48):
last time I checked in Florida, which has a housing
market that has falling prices right now in access inventory.
So I think that this is something where I say, Okay,
that's interesting, but I still don't know that it necessarily
you know me, I also don't know that it means
anything about the future of where this goes, right.
Speaker 4 (32:10):
You know, Like, I don't know that it's a forward
looking indicator.
Speaker 3 (32:13):
This follows along with the housing inequality piece from Connor
Sen and he speaks to you know, just the demand
for housing right now is coming from the very high end,
and so that's where the construction is happening, is very
expensive homes with high end furnishings. And I think all
of that's true. But I don't want to lose focus
of something here. This is a symptom, not a disease, right.
(32:36):
This is the symptom of what we are seeing right now,
which is a big divide in wealth inequality, a big
divide in income inequality, and a growing upper class that
can afford things and a growing lower.
Speaker 4 (32:47):
Class that it can't afford much at all. Yes, And so.
Speaker 3 (32:51):
I think it's important to lose sight of that because
in some cases you'll have lawmakers latch onto something like
this and be like, oh, we need to we need
to fix that through housing policy. And my answer would be,
I think we should try and fix that, but through
housing policy is probably not how I would try and
do it.
Speaker 4 (33:07):
Yeah, this is the symptom, not the cause. Folks.
Speaker 3 (33:11):
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It with you.
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Speaker 4 (35:14):
There's a piece today in Bloomberg.
Speaker 2 (35:17):
It's titled parents are spending one hundred thousand dollars for
their kid's chance to chase baseball greatness. The first thing
that I found notable in this the sixteen year old
pitcher that is profiled in here goes by the name
of Striker Pence, which what a name. Yeah, they buried
the lead though his two brothers' names are Ace and Maverick,
(35:42):
so it's Striker Airplan and Mavericks.
Speaker 4 (35:45):
Striker, Striker Striker.
Speaker 2 (35:47):
Yeah, I mean, like you just don't get better names.
But basically what it is talking about is like, look,
you have like all this money that you know, parents
spend on you know, cleats and equipment and batting cage
and lessons and this and that, and here's the truth
of this. When it's all said and done, your kid
is not going to earn a college scholarship for athletics.
(36:11):
I'm sorry, but that's just the case. And that's how
you have to kind of approach things to begin with.
If you look at the data out there, basically you
have to be in the top one percent of all
high school athletes in your sport in order to even
get looked at for college, and then maybe a quarter
of those end up being scholarship eligible, depending on the sport,
(36:32):
and beyond that, it's maybe the top one percent of
that quarter percent that ends up actually being able to
play professionally at any level.
Speaker 3 (36:40):
Do you think that's entirety of the intent with the stuff,
because I see a lot of wealthy families who are
doing this anyway, and some of them are looking at
it as, hey, we can afford whatever school our kid chooses,
but maybe this will get them into a better school.
I think that's still pretty unlikely. But I'm wondering about
that intent. I see, if you're spending one hundred thousand
dollars on baseball, great now, then I'm I'm.
Speaker 4 (37:03):
Not sure you're looking for the scholarship.
Speaker 2 (37:04):
Here's the thing, and it's it's not to well. No, Look,
your kid's not going to get a scholarship for sports. Like,
I'm sorry, that's just how it is. And I know
there's people listening. They're like, no, mine's different, Like mine's
gonna get Okay, maybe you're the exception. I've seen the numbers. Look,
(37:25):
I not to toot my own horn. I played college.
I played two different sports. In college, I like and
I wasn't even very good. Like I was good at them,
but like, I couldn't even cut it. I've washed out
of one of them in college. I was a backup
in the other, and I was a pretty good high
school athlete. So like, and I didn't end up getting
(37:45):
any money for it as a result. So your kid
is not going to get a scholarship for sports. That's
where you need to start. If you want to do
this because they enjoy it and they just want to
get better, and you have the disposable income to do so, fine,
I think that's like reasonable, But your kid's not going
(38:08):
to get a scholarship for sports so.
Speaker 4 (38:11):
Long as I can vicariously live through them doing it.
Speaker 2 (38:16):
Let's take a quick break when we return our two
of the financial exchange
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