October 17, 2025 • 38 mins
Mike Armstrong and Paul Lane discuss explain why people shouldn't bo overly surprised that markets have so far defied inflation and tariffs. Banks’ strong earnings leave investors digging deeper for trouble spots. Small businesses are being crushed by Trump’s tariffs and economists say it’s a warning for the economy. Honda wants you to teach its new robot lawnmower. Paul LaMonica (Barron's) joins the show to chat about PayPal getting $300T worth of bad news from Paxos.
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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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donation today. This is the Financial Exchange with Mike Armstrong
(01:06):
and Fallane.
Speaker 2 (01:10):
Good morning, Welcome back to the Financial Exchange. It's a
Friday here. Wall Street is in mixed territory at the moment.
We got the NASDAC off by about twenty points, whereas
Dow and SMP are slightly in positive territory. It's been
volatile so far, though we had futures markets down by
over one percent at one point. They've rebounded since the
President had some commentary on China earlier this morning that
(01:33):
was a little bit more conciliatory than what we've seen
over the last week or so, but continued turmoil when
it comes to private credit markets, first brands, bankruptcies in
that space and what it could mean for the large area,
and then look, there does seem to be I think
a shift in the narrative a bit over the course
(01:56):
of the last several weeks about concerns about the AI
boom and you know, the comparisons to be made to
the dot com bubble. Oh so, I just think the
narrative shifted a little bit. I think it's become more
in the commonplace to question that a bit more. I
think it's been more in the narrative of hey, this
is actually starting to get concerning from evaluation perspective, much
(02:19):
more than I heard back in June, July, and August.
Speaker 3 (02:22):
Yeah, I would agree with that. I think the announcements
of all the deals that OpenAI has struck with a
bunch of the big hyperscalar players in the space, the Googles,
the microsofts et cetera of an oracle that has put
more scrutiny on all this infrastructure build out. Is it
going to be justified?
Speaker 2 (02:42):
Yeah. We're also entering day seventeen of the government shutdown.
We'll be getting inflation data in spite of that shutdown
next Friday. They'll be They're deeming that data necessary because
it will determine cost of living adjustments for social Security.
Open questions as to whether we can get other data points,
such as the jobs report that was missed for September,
(03:04):
the jobs report for October that's supposed to be getting
collected right now. The data is supposed to be getting
collected right now. So continued questions about the government shutdown
and overall impact. Although to this point, I would call
the overall push from the general consumer and push back
from government employees to be I don't know, just not
the top story that's being covered, and I don't think
(03:26):
quite elevating to the point where lawmakers feel the need
to act so far that can turn pretty quickly. Next week,
in addition to that CPI print, we'll be hearing on
earnings from a few big companies, including Netflix and Tesla,
among many others, and then big interview actually on the
show on Tuesday of next week. Andrew Ross Sorkin will
(03:48):
be joining us on Tuesday during the show to talk
about his new book nineteen twenty nine, which I'm still
making my way through, but an excellent piece on the
Great Depression, and an entertaining piece too, because it really
takes it from the perspective of a lot of public
figures that we know and think about today, Winston Churchill
and Al Smith and many others who you know common
(04:12):
names even today, and a lot of the founders of
big banks that exist today. So big interview coming up
on Tuesday next week on that piece too, which I'm
excited about. But Paul, for three years now, this bull
market has continued and defied any concerns that it has
about tariffs and semiconductor restrictions and bank failures and inflation.
(04:36):
Where I guess you know is that has that been
surprising to some extent? And the New York Times has
a piece this morning that I'm I'm not sure really
what the point of it is to say, other than
markets have gone up over the last three years in
spite of concerns, to which I say, welcome to the
stock market, right, But is there any other conclusion that
(04:59):
we can raw here based on this piece, because to
me it was mainly a backward looking informational piece which
if you need information on what the markets have done
in the last three years, then go ahead and read it.
I'm not trying to completely chastise it, but I didn't
take anything out of it of importance.
Speaker 3 (05:14):
Yeah, it's the message from it could have been summarized
in probably three words, and it often is what is
used when we do TV spots. They clip out this
one thing that I say, stay the course, you know, hey, Paul,
what should everyone do? Stay the course? Like this is
kind of the takeaway from this piece is g three
years ago, you probably would have thought that we were
on the precipice of recession and potentially we could anticipate
(05:37):
weaker stock market returns, but the market has defied expectations.
But like you said, it's always kind of done that
expect It's always not what you anticipate, and there's always
going to be concerns, but ultimately it reinforces kind of
what Mark Fandetti says so much all the time. That's
ingrain in my head, you know, staying the course, believing
(05:58):
your allocation, in focusing on the long term. I will say,
looking back, it is incredible the returns if you look
at the trough of October of twenty two to where
we are today. But that's picking up perfect point in
time when markets were really low and now they're really high.
Speaker 4 (06:14):
Yeah.
Speaker 2 (06:15):
I always try and glean something useful from this, and
it's not mentioned here, but I think what I will
repeat over and over again is that valuations are in
the upper echelones of what we have ever seen. And
by valuations I mean stock price to earnings ratios, cyclically
(06:36):
adjusted price to earnings ratios, price to revenue, price to book,
price to any metric that you want to look at.
Almost all of them are in the ninety fifth plus
percentile of what we've ever seen. Unfortunately, that doesn't tell
you anything about what's going to happen in the immediate
future doesn't even tell you what's going to happen in
the long term. But what you can do is take
(06:58):
a look at other moments throughout history where you've gotten
to even similar areas, and pretty much universally what it
has led to over the course of the next decade
has been below average returns four stocks. And that's as
much as I am willing to say about where we
are in this moment is doesn't mean we're going to
have a crash, doesn't mean that we're going to have
(07:19):
a continued boom. What history has told us, though, is
every time that markets have gotten nearly as pricey or
pricier than where we are now, is that it has
meant below average turns for the future, sometimes negative, sometimes
just less positive than they usually are. But that has
been the lesson that I think that I think is
(07:41):
the one lesson you can actually take and apply to
today is historically that is what has happened when we've
gotten to where we are now.
Speaker 3 (07:48):
Yeah, that's a very fair point. If you look at
the trailing five year average on the S and P
five hundred, you're sitting around fifteen percent right now. What
do we know about the long term historical average, it's
nowhere near that high, So I think I think the argument is,
how do you get back to the normal average is
probably some periods of lesser returns to bring you back
to that kind of nine percent average that the S
(08:09):
and P will typically do over an extended.
Speaker 2 (08:10):
Period of time. Let's take a quick break when we
come back, a little bit of trivia here next on
the Financial Exchange.
Speaker 1 (08:17):
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That's DAV five k dot Boston. Time for trivia here
in the Financial Exchange and next week Orcan, the Pest
(09:35):
Control Company, will release its annual Radiest City in America list.
One city has dominated the list, coming in first for
ten years running. So our trivia question today, according to Orcan,
what has been the radiest city in America for the
last decade?
Speaker 3 (09:55):
Once again?
Speaker 5 (09:55):
According to Orcan, what has been the radiest city in
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correct response to text us to the number six one
(10:16):
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T shirt. See complete contest rules at Financial Exchange Show
dot com.
Speaker 2 (10:24):
We've been talking a lot about the Jeffries and First
Brand story Jeffries being the investment bank that had lent
a fair bit of money or originated some loans two
First Brands. Bit of breaking news on that story. Jeffrey's
chief executive, Rich Handler has told investors that the bank
believes it was quote defrauded after being grilled over its
exposure to bankrupt auto parts supplier First Brands Group. The
(10:46):
stock of Jeffries has fallen a good twenty five percent
over the course of the last month, almost all concentrated
on this one deal, which they apparently have a fair
bit of exposure to. So we'll keep you posted on,
you know, new updates on this. But Tucker brought it
to us and thought it was worth mentioning that the
term fraud, which we've been talking about in many media
outlets have been talking about, is now being echoed by
(11:07):
the CEO of the big investment bank, Jefferies. So we
are now through big bank earnings, Paul, I think the
only conclusion you can really come to with the big
banks has been that they seem fine. Yes, no real
exposure to any of this stuff in any meaningful way.
(11:28):
JP Morgan did disclose some exposure to Tricolor, but the
commentary from them has been what did Diamond say, where
there's one cockroach a few more, Yeah, something along those lines,
insinuating that hey, you know, yeah, we had this exposure here.
It doesn't matter to our bank, but we would be
surprised if there weren't more types of this exposure and
(11:51):
problems elsewhere, because when you see one, you generally see
a few any other. I guess big picture can concerns
or optimism that you can glean from the big banks.
Speaker 3 (12:03):
I think you've used the word fine before to describe
the big banks earning, but really they were there. Trementis
is probably they were very good. You know, these these
earnings were quite strong. I think what it signals is
a really increased appetite for deal making activity. You saw
investment banking fees on a lot of these big banks
rides significantly. So what does that mean from a you know,
(12:26):
optimism standpoint on the economy. Business are looking to merge
and acquire other businesses out there, and that's why you're
seeing an uptick in some of the revenue there. And
then trading activity has been really robust for these big
financial banks. They've made a lot of money off of
trading on the fixed income side and the equity side
of things. As markets have been really active this year.
(12:47):
We've talked about some of the areas of speculation in
the market. You've had a market that's done well and
there's been a lot of enthusiasm behind it. So all
those factors combined have lead to big banks doing pretty well.
And it's fair to say that some of these regional
banks actually have come in with pretty reasonable earnings as well.
Aside from some of the ones that mention their concerns
(13:07):
or mentioned losses from some of these auto manufacturer or
these auto industry companies bank recies, there's been some good
regional bank earnings too.
Speaker 2 (13:15):
There have One other company that did report just this
morning was American Express. We mentioned this one as important,
not just because it is a big company they're a
two hundred and thirty six billion dollar company now, but
speaks to the same wealth effect spending trends that we
(13:35):
have seen here. American Express obviously serving a higher end clientele,
generally higher net worth, higher income expensive credit cards. Didn't
they just roll out like a nine hundred dollars a
year annual fee credit card or was it eight hundred dollars.
Speaker 3 (13:48):
Beer's b JP, Morgan or Chase has come out with
a big one that has an annual fee in that ballpark.
I think they're the premium focus. Just like what we
talked about, these these card issuers are coming out with
some really high annual fee products for the hire income.
Speaker 2 (14:02):
In any case, American expresstock up about five percent in
early trading today after this morning's earnings guidance. They had
a solid quarter. Revenue increased eleven percent year over year,
a record eighteen point four billion, which exceeded forecasts. The
other big piece here they increased their full year twenty
twenty five guidance. On top of that, net incrim grew
(14:22):
sixteen percent to two point nine billion. Earnings per share
rose nineteen percent. Again, for any company that really services
a high net worth clientele and relies on the spending
of that clientele, it is a good news scenario right now.
Speaker 3 (14:38):
It is eight hundred and ninety five dollars that annual
fee for the American Express PLATM card. And what Chase
did is they have a Chase safhire reserve that went
from five fifty to seven hundred and ninety five dollars
for their annual fee for.
Speaker 2 (14:51):
This It seems like they're just chasing Amex.
Speaker 3 (14:55):
Yeah they are. I forget who announced it first.
Speaker 2 (14:57):
I thought it was Chase, but it was supposed to
be a stupid play on words Chase. Nobody got it.
It wasn't funny in the first place. Thanks a lot, guys.
You didn't even play the car crash joke. Thank you, Tucker.
So that leads us to the question about interest rates.
Because rates came down a full percentage point last year,
(15:18):
they've now come down. Am I losing it? Have? We
had half a percent of rate cuts? Quarter percent of
rate cuts so far this year just September. Yeah, just
a quarter.
Speaker 3 (15:27):
But another one's coming in twelve.
Speaker 2 (15:29):
Days, and twelve days we will likely get another one.
We'll talk about that. But credit card APR is not
really coming down, and I think it's important for us
to continue to revisit stories like this that actually apply
to the average consumer about why when the FED is
cutting interest rates, are we not seeing mortgage rates come
down or auto loan rates or in this case aprs
(15:50):
on credit cards coming down. The aprs on credit cards
is a little bit more surprising than mortgage rates. I
think we've pointed this statistic out before. But historically speaking,
when the FED is cutting interest rates and they are
not doing so in a recession, which again you don't
know whether or not you're in recession till after, but
(16:10):
you know, we can look back and look at this statistic.
Mortgage rates only come down about half the time. It's
a coin flip as to whether or not mortgage rates
come down when the FED is cutting outside of a recession,
and so that one's not entirely unexpected. But aprs, you know,
these are short term rates. You do generally anticipate that, Hey,
FED cuts rates, helocks come down, savings accounts come down,
(16:34):
and yes, credit card APR start to come down. Not
what has been happening so far since FED embarked on
this rate cutting cycle.
Speaker 3 (16:42):
Yeah. Jennifer DAWs, who's from Credit Ratings dot com, the
executive editor, has stated that the correlation between that FED
funds rate the cuts and credit card rates is weaker
than expected. The reason behind it, she says, it's heavily
influenced by credit conditions and individual credit scores, which I
don't really that's very broad and vague.
Speaker 2 (16:59):
Here's my summary. These credit card companies, maybe other than MX,
are terrified of their customers. They're terrified of defaults. They
are seeing balances way up, and so how do you
mitigate against the eventual default of your credit card customer.
You charge the hell out of interest.
Speaker 3 (17:14):
While you can fear and also greed right to continue
those margins on your credit card business that you just
hope you can kind of drag your feet longer before
you lower in you know, commensurate with the Fed Reserve cuts.
Speaker 2 (17:26):
Yeah, you know, you think about it for a moment here, Like,
I don't know a lot of people that are going
to be changing their credit card or applying for one
card or over another based on a nineteen and a
half versus a twenty percent interest rate. Do you like?
That's not where these companies compete.
Speaker 3 (17:42):
That's no, it's the reward, the rewards.
Speaker 2 (17:45):
It's because everyone who signs up, who signs up for
a credit card saying, ah, I'm planning on not paying
this back, So what's the lowest interest rate I can get?
It's not a mortgage, right, you don't go shop from
that perspective. Everyone who's ever gotten a credit card says,
I'm responsible. I'm going to pay this money back every month.
I'm going to get my rewards. I'm going to be
(18:07):
the perfect goody two shoes. Of course, sixty percent of
credit card holders don't do that, but I don't think
the rate's the big draw for most people.
Speaker 3 (18:15):
No, outside of those balance transfer cards, but that's a
whole nother deal where you take your balance and move
it over to a zero interest for an eighteen to
twenty four month period. Then they started hitting you with interest.
But yeah, outside of that, it's all about rewards and
other factors, not the interest rates.
Speaker 2 (18:28):
In any case, you know we'll be heading, as Paul mentioned,
into a FED meeting just before Halloween, J Powell very
likely now has a full backing to cut rates. I
think there may even be some compelling evidence depending on
what happens with these bank with these loans to different companies.
(18:49):
If we see any further cracks in the foundation, I
think you could even see a push for a fifty
percent rate cut. But right now the markets are settling
in on a twenty five basis point rate cut. In
October when the fednex meets, there's a ninety nine percent
chance of that outcome, only a one percent chance of
a further cut, So we'll be keeping an eye on
(19:09):
that but clearly, I think we've got a couple more
rate cuts through twenty twenty five, and then, yeah, things
get a little bit less certain once we get to
twenty twenty six, and you know, Jason senioritis mode at
that point because he's on his last few days in
the job. Quick break. Wall Street Watch coming up.
Speaker 1 (19:28):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street Watch. A complete
(19:52):
look at what's moving market so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (19:58):
Seeing some volatility on market today as investors way regional
bank concerns. This comes after Zion's Bancorp said it would
take a large loss accusing some borrowers of fraud. Right now,
the Dow is edging higher, up only twenty four points.
SMP five hundred is down about a quarter percent or
eighteen points. NASDAC down by six tenths of one percent
(20:21):
now or one hundred and thirty four points lower. Russell
two thousand selling off over one percent now. Ten year
treasureeled is up two basis points at three point ninety
nine to nine percent. DAN crude oil is mostly flat
dipping into negative territory at fifty seven dollars in thirty
nine cents a barrel. After yesterday's ten percent plunge. Shares
(20:44):
in Jeffries bouncing back about five percent today. Oppenheimer upgraded
the stock to outperform, with the firm said Jeffrey's exposure
to First Brands is very limited. Furthermore, The Financial Times
are recently reported that Jeffrey's chief executive has told investors
at the bank believes it was defrauded after being questioned
over its exposure to bankrupt auto parts supplier First Brands. Meanwhile,
(21:07):
another big financial name, and American Express, b third quarter
expectations and raised its full year guidance. AMMEX up by
five percent. Elsewhere, shares an ozembic maker Nova nordes falling
four percent after President Trump said the cost of the
weight loss drug could be one hundred and fifty dollars
or much lower than it is now. Oracle pulling back
(21:29):
by seven percent today following its rally yesterday after Oracle
confirmed a cloud computing deal with Meta and Apple in
Formula One announced a five year US media rights deal
that will bring all races to the Apple TV platform
beginning next season. CNBC's reporting that Apple is paying about
(21:50):
one hundred and forty million dollars per year for F
one rights. Apple shares are up by about a half percent.
I'm Tucker Silvan. That is Wall Street And in the
previous segment we asked you the trivia question. According to Orkin,
what has been the rattiest city in America for the
last decade? That would be Chicago. Dorothy from Wareham, mass
(22:12):
is our winner today taking on the Financial Exchange Show.
Speaker 2 (22:14):
T Shirt.
Speaker 5 (22:15):
Congrats to Dorothy, and we played trivia every day here
in the Financial Exchange See complete contest rules at Financial
looks Change Show dot com.
Speaker 2 (22:23):
Tucker, I'm pretty sure you just rounded to the thousandth
of a percent.
Speaker 3 (22:26):
In one of your he was he was messing around
dropping extra nine.
Speaker 5 (22:31):
Three point nine nine times.
Speaker 2 (22:35):
Yeah, yeah, you know. That is the accuracy and attention
to detail that people tune in for. So thank you.
Speaker 5 (22:43):
I'll never pass an opportunity to say, yes, I've had
some great music intros today, Tucker, So good job by you.
Speaker 3 (22:48):
There's one where I was ready to run through a
brick wall.
Speaker 5 (22:50):
Thanks thanks man.
Speaker 2 (22:51):
Yeah, unfortunately that's not a great Uh. We have a
glass studio here's not a great level of manage to
bring to a radio show. Unfortunately I didn't do it
that I wanted to. Yeah, I got it. I got it.
So small businesses, CNBC has a really actually I think,
really good piece on small businesses in tariff related costs.
They definitely cherry pick a bunch of companies that are
(23:14):
heavily affected by terrasts, but they I think bring something
home for me, which is small businesses are getting crushed
on the tariffront for those that are exposed to it,
and it may help explain part of what we're seeing
in the labor market too. We tend to focus on
big employers because they're easier to cover, We get more
data on them, they release earnings, they have to announce
(23:35):
their layoffs in very public fashion. But the fact remains
that of employees that work for private companies, so non
governmental employees, between forty five and forty seven percent of
them work for small to medium sized businesses, those with
fewer than five hundred employees, and as we've known this
whole time, those are the ones that are really struggling
(23:57):
with terrorists. It's not Walmart, right, Walmart's based gone to
their Chinese suppliers and said, we have to pay tariffs,
so lower your prices. We're going to buy it elsewhere.
And they've capitulated, by and large, they've capitulated. They've found
ways to do this. And in the cases where they
do need to pay big tariffs, guess what, they've got
pretty deep pockets. If they need to, they'll issue debt.
They probably don't even need to. They can come up
with the tariff payments. However, when you are av Universal Corp.
(24:22):
A small footwear company that's barely existed for nine years
and sells through retailers like Macy's and Nordstrom, and your
tariffy goes from seventy five hundred dollars to a quarter
million dollars, you're left in a pretty tough spot. In
this case, the the owner of the business decided to
take out a loan. He's sixty four years old. He
(24:44):
took out a line of credit coming at a thirty
two percent interest rate. Because I mean, again, you're a
small business. This is what you're looking at if you
need to take it, you know, some sort of secured
or even unsecured loan. That's the rate that you're talking about.
This is not incredibly unique one. If you're ava universal,
good luck manufacturing those shoes in the United States anywhere
(25:05):
in anytime in the near future. It's just it's not practical.
But you know, they go through a good six or
seven companies here, various few employees. But you know, you're
seeing pretty universally teriffies doubling compared to twenty twenty four
on their products coming into the United States. And so
(25:26):
while we might not be seeing it in prices, we
might not be seeing it in big publicly traded companies,
which you and I care most about here on the
Financial Exchange. I do think it helps explain what we're
seeing in the labor market.
Speaker 3 (25:38):
That you don't have just nearly as much hiring in
some of those sectors. Yeah, it's an issue that really
keep that I have a lot of concern over. Though
it won't come directly in the data that you and
I dive into every single day of publicly traded companies,
but what happens on these small to mid sized companies,
it is concerning because they do account for significant percentage
(26:00):
of GDP growth, and it is a lot of employers
out there, and you just think about some of these
increases that you're seeing in the sample of companies that
they mentioned here are unsustainable.
Speaker 2 (26:10):
The only way that they're the only reason they're paying
this instead of just throwing up their hands and saying
send the stuff back to India is because they're hoping
that they can get through one big season and then
basically there's a reprieve that the next year either there'll
be a reprieve where they just won't order the stuff.
Speaker 3 (26:25):
Right. It just that part is very concerning because you
look at what these businesses do, and it's so important
to have these businesses in our country. But how does
this not get just swallowed up by the bigger retailers
If you have these companies like UAV Technologies just just
fold up shop because they're going from a doubling in
(26:47):
the cost of the tariffs that they pay or in
some other cases that are mentioning this piece. I mean,
you're talking exorbitant increases more than double. How do you
keep the lights on?
Speaker 2 (26:56):
I'll be very surprised if five years from now, how
the general retail sector is less concentrated than it is now. Again,
retail isn't the only thing that matters, But like when
I think through that I'd be very, very surprised if
small businesses that exist today are able to continue to
(27:17):
exist five years from now at the same scale and
degree that they do. I do just think that what
it's going to mean, for better or worse, whether you
like it or dislike it, that big businesses are going
to get bigger as a result of some of these
tariffs because they can better navigate it. It's just that's
the fact of a big business is they have the attorneys,
they have the staff to be able to figure out
where is the best place for us to manufacture this
(27:38):
stuff to lessen our tariff impact, and just deal with
the tariffs in the places that it makes sense to
do so.
Speaker 5 (27:43):
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Before you make any big moves, arm yourself with the
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calling eight sixty six eight four eight five six nine
to nine right now to get your copy called Making
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(28:44):
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Speaker 1 (28:49):
The proceeding was paid for and the views expressed are
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or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong do not endorse each other and are
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Speaker 2 (29:00):
Well. While Elon Musk has been facing all sorts of
questions about Tesla's full self driving and autonomous taxis down
in Austin, Texas, Honda beating them to the punch with
their full self driving lawnmower, which we don't have pricing details.
Speaker 3 (29:17):
Yeah we done, yeah, we do.
Speaker 5 (29:17):
Bottom of the artic No, no.
Speaker 2 (29:19):
No, that's that's the manual model. So, uh, Honda hasn't
revealed for the twos unit yet, but the regular old
lawnmower that isn't autonomous is going to go for thirty
three thousand dollars.
Speaker 5 (29:31):
Wait what Yes, that's not possible.
Speaker 3 (29:35):
Espresso Mike is on his game. Good catch on that.
Speaker 2 (29:37):
Yeah, I can read, despite what some of you consist.
Speaker 5 (29:41):
So the human operated lawnmower thirty three grand?
Speaker 3 (29:45):
So can I take it on the highway? Drive it?
I just had a client who bought a used car
level too. Yeah, so good.
Speaker 5 (29:53):
Where it has to be this higher price than the
used car, right.
Speaker 2 (29:57):
Ask Honda Tucker. I'm not entirely sure. I don't think
there's gonna be a huge market for it. I think
they're gonna have to get that price down a little bit.
I mean, before I saw the price, I was like, okay,
I mean not that I would buy it, But my
brother's a landscaper. If he had one of these puppies
and you know, could send it on its way to
mow my you know, mow my lawn while he takes
care of the other jobs that need to be done
(30:19):
around my house, that that, you know, that might be
something that he could stomach at less than thirty three
thousand dollars.
Speaker 5 (30:25):
I just don't know how he feels about a self
driving lawnmower.
Speaker 2 (30:28):
Oh, I'm all on board.
Speaker 5 (30:30):
Yeah yeah, I'd have to watch from the window and
make sure it's you.
Speaker 2 (30:34):
Know, yeah, I mean, you might not want to leave
your kids out at the same time something, but you know,
you imagine the losses quick Sparky when we come back.
Paula Monica from Baron's Joint.
Speaker 3 (30:53):
Doug died, but.
Speaker 2 (30:58):
Paula Monica Baron's next Financial Exchange.
Speaker 1 (31:01):
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Ladies and Gentlemen, the weekend.
Speaker 2 (31:47):
Joining us now is Paul Lamonica from Barons talking to
us about a few different areas, but all surrounding PayPal
and their relatively abysmal year they've had. Paul, thanks for joining,
appreciate it.
Speaker 1 (31:58):
Thanks a lot.
Speaker 2 (31:59):
So let's start off with the funnier of the two stories,
if I may, because I doubt PayPal shareholders are are
laughing a whole lot of the course in the last
couple of years. But a company that PayPal hired to
mint and handle their stable coin made a seemingly three
hundred trillion dollar whipsie. So for those like myself that
(32:23):
might not understand all the ins and outs of how
these things work and get created, how does a three
hundred trillion dollar error get made on this front?
Speaker 4 (32:33):
Yeah, it's it's astonishing. Paxos is the company that was
minting this PayPal stable coin, a cryptocurrency peg to the
dollar py USD you know, competes with things like USD
coin and some of the other big cryptos you back
(32:56):
to the dollar. The problem was, you know, they just
didgitally printed and it was a mistake. Three hundred trillion dollars.
Obviously it shouldn't have been that much, and you know,
the good news, if you want to call it, that
is that in the relatively quick fashion about a half hour,
you know, Paxos was able to undo this mistake and burn,
(33:19):
as the case would be, you know, taking these assets
off the blockchain so that they no longer exist.
Speaker 2 (33:26):
They said that there was no.
Speaker 4 (33:27):
Security breach, it was an internal technical era.
Speaker 3 (33:30):
This is Paxos.
Speaker 4 (33:31):
So you know, it's a bad and somewhat amusing kind
of headline, probably more for Paxos than PayPal, but PayPal
I think, you know, got hit on it as well,
and it's been a tough week and tough year for
PayPal in general. You know, it's you know, the less
amusing story, I guess is you know, the Goldman Zachs
(33:54):
down grade earlier this week, which I wrote about.
Speaker 2 (33:56):
So just to finish up on this, because a three
hundred trillion dollar you know, fat finger error on a
keyboard seems to run directly contradictory to one of the
words that is used to describe these coins, i e.
The stable part of stable coins. And I guess, before
we move on, like, what does this indicate to you
about the possibility of yeah, errors like the one we saw, which,
(34:20):
again to their credit, was cleaned up within half an
hour and didn't cause wides read issues. But I think
of the possibility of intentional deception or fraud in this space,
given how easy it was to accidentally type in a
couple extra zeros.
Speaker 4 (34:34):
Yeah, I mean that is that's a fantastic question. I
think that people who still remain skeptical of cryptocurrencies, whether
it's Bitcoin, Ether, some of the goofyer meme coins like
doge coin, or these stable coins like the ones issued
by Circle and Tether, the two giants of the industry,
(34:55):
it does go to show that, in some respects, it's
still not all that difficult for technical glitches to happen.
Clearly it's not that hard to undo it in quick fashion.
But I think the bigger concern is what happens if
someone does intentionally, you know, wind up you know, nefariously
(35:17):
kind of hacking you know, the blockchain, and you know,
I think that does lend, uh, you know, some credence
to those who remain nervous about digital currencies and their security.
I mean, I think it's a question that is outstanding.
(35:38):
But I think, you know, the crypto bulls would argue
that this is still a safe and secure form of money.
I mean, you know, you have counterfeit paper currencies, you
have issues with credit cards and debit cards, you know.
I think financial security is a problem for the broader
monetary you know, food chain, if you will, all types
(35:59):
of currencies, and not just Krypto.
Speaker 2 (36:00):
All right, So back to PayPal for a moment, not
to kick them while they're down, but plenty of long
term shareholders will recall that not so long ago, four
years ago, the stock was trading over three hundred dollars
a share. Currently it's sitting at sixty six or so
dollars per share. Downgrade from Goldman Sacks. What did they
cite is concern?
Speaker 4 (36:19):
Yeah, Goldman Sachs obviously worried about you know, inflation remaining
a concern for consumers, as well as a weakening job market,
which could be a problem for less affluent consumers using
PayPal and Vemo and some of the other services you know.
(36:39):
But also there's a lot of competition. You know, You've
got companies like block but you know which owns a
square and cash app. I think the bigger concern would be,
you know, the competition from you know, Apple and Google,
you know, and Stripe as well. You know, in the
(37:00):
digital payments business. You know, if you want to call
a good news, you know, Goldman did downgrade the stock
to a cell. But the price target seventy, which ironically enough,
is actually higher than where it's currently trading, you know,
and the consensus price target is a little bit under
eighty two dollars a share, So that does represent decent upside,
(37:22):
but it's a mixed bag. I mean, there's a lot
of analysts that cover PayPal, about half of them ready
to buy, another half way to the hold, and there's
a smattering of cells, including Goldman Sachs out there as well.
Speaker 2 (37:34):
Paul Lamonica from Baron's joining us today, talk a little
bit about PayPal and a minor three hundred trillion dollar
era that was made over the course of the last week. Paul,
thanks so much for joining us. Appreciate it.
Speaker 5 (37:44):
Thank you very next week, appreciate it.
Speaker 2 (37:46):
Taking a look here at markets as we close in
on the noon hour, we've got the Dow and S
ANDP in slightly positive territory, but have been bouncing all
over the place. Dow up a third of a percent,
S and P five hundred up just more than a
tenth of a percent and then NASDAC on the way
down about a tenth of a percent, so again relative
calm after a rough start to the morning, but we'll
(38:07):
cover it all and more on Monday on the Financial Exchange.
Have a great weekend, everybody,
The Financial Exchange is produced by Money Matters Radio and
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(01:06):
and Fallane.
Speaker 2 (01:10):
Good morning, Welcome back to the Financial Exchange. It's a
Friday here. Wall Street is in mixed territory at the moment.
We got the NASDAC off by about twenty points, whereas
Dow and SMP are slightly in positive territory. It's been
volatile so far, though we had futures markets down by
over one percent at one point. They've rebounded since the
President had some commentary on China earlier this morning that
(01:33):
was a little bit more conciliatory than what we've seen
over the last week or so, but continued turmoil when
it comes to private credit markets, first brands, bankruptcies in
that space and what it could mean for the large area,
and then look, there does seem to be I think
a shift in the narrative a bit over the course
(01:56):
of the last several weeks about concerns about the AI
boom and you know, the comparisons to be made to
the dot com bubble. Oh so, I just think the
narrative shifted a little bit. I think it's become more
in the commonplace to question that a bit more. I
think it's been more in the narrative of hey, this
is actually starting to get concerning from evaluation perspective, much
(02:19):
more than I heard back in June, July, and August.
Speaker 3 (02:22):
Yeah, I would agree with that. I think the announcements
of all the deals that OpenAI has struck with a
bunch of the big hyperscalar players in the space, the Googles,
the microsofts et cetera of an oracle that has put
more scrutiny on all this infrastructure build out. Is it
going to be justified?
Speaker 2 (02:42):
Yeah. We're also entering day seventeen of the government shutdown.
We'll be getting inflation data in spite of that shutdown
next Friday. They'll be They're deeming that data necessary because
it will determine cost of living adjustments for social Security.
Open questions as to whether we can get other data points,
such as the jobs report that was missed for September,
(03:04):
the jobs report for October that's supposed to be getting
collected right now. The data is supposed to be getting
collected right now. So continued questions about the government shutdown
and overall impact. Although to this point, I would call
the overall push from the general consumer and push back
from government employees to be I don't know, just not
the top story that's being covered, and I don't think
(03:26):
quite elevating to the point where lawmakers feel the need
to act so far that can turn pretty quickly. Next week,
in addition to that CPI print, we'll be hearing on
earnings from a few big companies, including Netflix and Tesla,
among many others, and then big interview actually on the
show on Tuesday of next week. Andrew Ross Sorkin will
(03:48):
be joining us on Tuesday during the show to talk
about his new book nineteen twenty nine, which I'm still
making my way through, but an excellent piece on the
Great Depression, and an entertaining piece too, because it really
takes it from the perspective of a lot of public
figures that we know and think about today, Winston Churchill
and Al Smith and many others who you know common
(04:12):
names even today, and a lot of the founders of
big banks that exist today. So big interview coming up
on Tuesday next week on that piece too, which I'm
excited about. But Paul, for three years now, this bull
market has continued and defied any concerns that it has
about tariffs and semiconductor restrictions and bank failures and inflation.
(04:36):
Where I guess you know is that has that been
surprising to some extent? And the New York Times has
a piece this morning that I'm I'm not sure really
what the point of it is to say, other than
markets have gone up over the last three years in
spite of concerns, to which I say, welcome to the
stock market, right, But is there any other conclusion that
(04:59):
we can raw here based on this piece, because to
me it was mainly a backward looking informational piece which
if you need information on what the markets have done
in the last three years, then go ahead and read it.
I'm not trying to completely chastise it, but I didn't
take anything out of it of importance.
Speaker 3 (05:14):
Yeah, it's the message from it could have been summarized
in probably three words, and it often is what is
used when we do TV spots. They clip out this
one thing that I say, stay the course, you know, hey, Paul,
what should everyone do? Stay the course? Like this is
kind of the takeaway from this piece is g three
years ago, you probably would have thought that we were
on the precipice of recession and potentially we could anticipate
(05:37):
weaker stock market returns, but the market has defied expectations.
But like you said, it's always kind of done that
expect It's always not what you anticipate, and there's always
going to be concerns, but ultimately it reinforces kind of
what Mark Fandetti says so much all the time. That's
ingrain in my head, you know, staying the course, believing
(05:58):
your allocation, in focusing on the long term. I will say,
looking back, it is incredible the returns if you look
at the trough of October of twenty two to where
we are today. But that's picking up perfect point in
time when markets were really low and now they're really high.
Speaker 4 (06:14):
Yeah.
Speaker 2 (06:15):
I always try and glean something useful from this, and
it's not mentioned here, but I think what I will
repeat over and over again is that valuations are in
the upper echelones of what we have ever seen. And
by valuations I mean stock price to earnings ratios, cyclically
(06:36):
adjusted price to earnings ratios, price to revenue, price to book,
price to any metric that you want to look at.
Almost all of them are in the ninety fifth plus
percentile of what we've ever seen. Unfortunately, that doesn't tell
you anything about what's going to happen in the immediate
future doesn't even tell you what's going to happen in
the long term. But what you can do is take
(06:58):
a look at other moments throughout history where you've gotten
to even similar areas, and pretty much universally what it
has led to over the course of the next decade
has been below average returns four stocks. And that's as
much as I am willing to say about where we
are in this moment is doesn't mean we're going to
have a crash, doesn't mean that we're going to have
(07:19):
a continued boom. What history has told us, though, is
every time that markets have gotten nearly as pricey or
pricier than where we are now, is that it has
meant below average turns for the future, sometimes negative, sometimes
just less positive than they usually are. But that has
been the lesson that I think that I think is
(07:41):
the one lesson you can actually take and apply to
today is historically that is what has happened when we've
gotten to where we are now.
Speaker 3 (07:48):
Yeah, that's a very fair point. If you look at
the trailing five year average on the S and P
five hundred, you're sitting around fifteen percent right now. What
do we know about the long term historical average, it's
nowhere near that high, So I think I think the argument is,
how do you get back to the normal average is
probably some periods of lesser returns to bring you back
to that kind of nine percent average that the S
(08:09):
and P will typically do over an extended.
Speaker 2 (08:10):
Period of time. Let's take a quick break when we
come back, a little bit of trivia here next on
the Financial Exchange.
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(09:35):
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One city has dominated the list, coming in first for
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what has been the radiest city in America for the
last decade?
Speaker 3 (09:55):
Once again?
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Speaker 2 (10:24):
We've been talking a lot about the Jeffries and First
Brand story Jeffries being the investment bank that had lent
a fair bit of money or originated some loans two
First Brands. Bit of breaking news on that story. Jeffrey's
chief executive, Rich Handler has told investors that the bank
believes it was quote defrauded after being grilled over its
exposure to bankrupt auto parts supplier First Brands Group. The
(10:46):
stock of Jeffries has fallen a good twenty five percent
over the course of the last month, almost all concentrated
on this one deal, which they apparently have a fair
bit of exposure to. So we'll keep you posted on,
you know, new updates on this. But Tucker brought it
to us and thought it was worth mentioning that the
term fraud, which we've been talking about in many media
outlets have been talking about, is now being echoed by
(11:07):
the CEO of the big investment bank, Jefferies. So we
are now through big bank earnings, Paul, I think the
only conclusion you can really come to with the big
banks has been that they seem fine. Yes, no real
exposure to any of this stuff in any meaningful way.
(11:28):
JP Morgan did disclose some exposure to Tricolor, but the
commentary from them has been what did Diamond say, where
there's one cockroach a few more, Yeah, something along those lines,
insinuating that hey, you know, yeah, we had this exposure here.
It doesn't matter to our bank, but we would be
surprised if there weren't more types of this exposure and
(11:51):
problems elsewhere, because when you see one, you generally see
a few any other. I guess big picture can concerns
or optimism that you can glean from the big banks.
Speaker 3 (12:03):
I think you've used the word fine before to describe
the big banks earning, but really they were there. Trementis
is probably they were very good. You know, these these
earnings were quite strong. I think what it signals is
a really increased appetite for deal making activity. You saw
investment banking fees on a lot of these big banks
rides significantly. So what does that mean from a you know,
(12:26):
optimism standpoint on the economy. Business are looking to merge
and acquire other businesses out there, and that's why you're
seeing an uptick in some of the revenue there. And
then trading activity has been really robust for these big
financial banks. They've made a lot of money off of
trading on the fixed income side and the equity side
of things. As markets have been really active this year.
(12:47):
We've talked about some of the areas of speculation in
the market. You've had a market that's done well and
there's been a lot of enthusiasm behind it. So all
those factors combined have lead to big banks doing pretty well.
And it's fair to say that some of these regional
banks actually have come in with pretty reasonable earnings as well.
Aside from some of the ones that mention their concerns
(13:07):
or mentioned losses from some of these auto manufacturer or
these auto industry companies bank recies, there's been some good
regional bank earnings too.
Speaker 2 (13:15):
There have One other company that did report just this
morning was American Express. We mentioned this one as important,
not just because it is a big company they're a
two hundred and thirty six billion dollar company now, but
speaks to the same wealth effect spending trends that we
(13:35):
have seen here. American Express obviously serving a higher end clientele,
generally higher net worth, higher income expensive credit cards. Didn't
they just roll out like a nine hundred dollars a
year annual fee credit card or was it eight hundred dollars.
Speaker 3 (13:48):
Beer's b JP, Morgan or Chase has come out with
a big one that has an annual fee in that ballpark.
I think they're the premium focus. Just like what we
talked about, these these card issuers are coming out with
some really high annual fee products for the hire income.
Speaker 2 (14:02):
In any case, American expresstock up about five percent in
early trading today after this morning's earnings guidance. They had
a solid quarter. Revenue increased eleven percent year over year,
a record eighteen point four billion, which exceeded forecasts. The
other big piece here they increased their full year twenty
twenty five guidance. On top of that, net incrim grew
(14:22):
sixteen percent to two point nine billion. Earnings per share
rose nineteen percent. Again, for any company that really services
a high net worth clientele and relies on the spending
of that clientele, it is a good news scenario right now.
Speaker 3 (14:38):
It is eight hundred and ninety five dollars that annual
fee for the American Express PLATM card. And what Chase
did is they have a Chase safhire reserve that went
from five fifty to seven hundred and ninety five dollars
for their annual fee for.
Speaker 2 (14:51):
This It seems like they're just chasing Amex.
Speaker 3 (14:55):
Yeah they are. I forget who announced it first.
Speaker 2 (14:57):
I thought it was Chase, but it was supposed to
be a stupid play on words Chase. Nobody got it.
It wasn't funny in the first place. Thanks a lot, guys.
You didn't even play the car crash joke. Thank you, Tucker.
So that leads us to the question about interest rates.
Because rates came down a full percentage point last year,
(15:18):
they've now come down. Am I losing it? Have? We
had half a percent of rate cuts? Quarter percent of
rate cuts so far this year just September. Yeah, just
a quarter.
Speaker 3 (15:27):
But another one's coming in twelve.
Speaker 2 (15:29):
Days, and twelve days we will likely get another one.
We'll talk about that. But credit card APR is not
really coming down, and I think it's important for us
to continue to revisit stories like this that actually apply
to the average consumer about why when the FED is
cutting interest rates, are we not seeing mortgage rates come
down or auto loan rates or in this case aprs
(15:50):
on credit cards coming down. The aprs on credit cards
is a little bit more surprising than mortgage rates. I
think we've pointed this statistic out before. But historically speaking,
when the FED is cutting interest rates and they are
not doing so in a recession, which again you don't
know whether or not you're in recession till after, but
(16:10):
you know, we can look back and look at this statistic.
Mortgage rates only come down about half the time. It's
a coin flip as to whether or not mortgage rates
come down when the FED is cutting outside of a recession,
and so that one's not entirely unexpected. But aprs, you know,
these are short term rates. You do generally anticipate that, Hey,
FED cuts rates, helocks come down, savings accounts come down,
(16:34):
and yes, credit card APR start to come down. Not
what has been happening so far since FED embarked on
this rate cutting cycle.
Speaker 3 (16:42):
Yeah. Jennifer DAWs, who's from Credit Ratings dot com, the
executive editor, has stated that the correlation between that FED
funds rate the cuts and credit card rates is weaker
than expected. The reason behind it, she says, it's heavily
influenced by credit conditions and individual credit scores, which I
don't really that's very broad and vague.
Speaker 2 (16:59):
Here's my summary. These credit card companies, maybe other than MX,
are terrified of their customers. They're terrified of defaults. They
are seeing balances way up, and so how do you
mitigate against the eventual default of your credit card customer.
You charge the hell out of interest.
Speaker 3 (17:14):
While you can fear and also greed right to continue
those margins on your credit card business that you just
hope you can kind of drag your feet longer before
you lower in you know, commensurate with the Fed Reserve cuts.
Speaker 2 (17:26):
Yeah, you know, you think about it for a moment here, Like,
I don't know a lot of people that are going
to be changing their credit card or applying for one
card or over another based on a nineteen and a
half versus a twenty percent interest rate. Do you like?
That's not where these companies compete.
Speaker 3 (17:42):
That's no, it's the reward, the rewards.
Speaker 2 (17:45):
It's because everyone who signs up, who signs up for
a credit card saying, ah, I'm planning on not paying
this back, So what's the lowest interest rate I can get?
It's not a mortgage, right, you don't go shop from
that perspective. Everyone who's ever gotten a credit card says,
I'm responsible. I'm going to pay this money back every month.
I'm going to get my rewards. I'm going to be
(18:07):
the perfect goody two shoes. Of course, sixty percent of
credit card holders don't do that, but I don't think
the rate's the big draw for most people.
Speaker 3 (18:15):
No, outside of those balance transfer cards, but that's a
whole nother deal where you take your balance and move
it over to a zero interest for an eighteen to
twenty four month period. Then they started hitting you with interest.
But yeah, outside of that, it's all about rewards and
other factors, not the interest rates.
Speaker 2 (18:28):
In any case, you know we'll be heading, as Paul mentioned,
into a FED meeting just before Halloween, J Powell very
likely now has a full backing to cut rates. I
think there may even be some compelling evidence depending on
what happens with these bank with these loans to different companies.
(18:49):
If we see any further cracks in the foundation, I
think you could even see a push for a fifty
percent rate cut. But right now the markets are settling
in on a twenty five basis point rate cut. In
October when the fednex meets, there's a ninety nine percent
chance of that outcome, only a one percent chance of
a further cut, So we'll be keeping an eye on
(19:09):
that but clearly, I think we've got a couple more
rate cuts through twenty twenty five, and then, yeah, things
get a little bit less certain once we get to
twenty twenty six, and you know, Jason senioritis mode at
that point because he's on his last few days in
the job. Quick break. Wall Street Watch coming up.
Speaker 1 (19:28):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street Watch. A complete
(19:52):
look at what's moving market so far today right here
on the Financial Exchange Radio Network.
Speaker 5 (19:58):
Seeing some volatility on market today as investors way regional
bank concerns. This comes after Zion's Bancorp said it would
take a large loss accusing some borrowers of fraud. Right now,
the Dow is edging higher, up only twenty four points.
SMP five hundred is down about a quarter percent or
eighteen points. NASDAC down by six tenths of one percent
(20:21):
now or one hundred and thirty four points lower. Russell
two thousand selling off over one percent now. Ten year
treasureeled is up two basis points at three point ninety
nine to nine percent. DAN crude oil is mostly flat
dipping into negative territory at fifty seven dollars in thirty
nine cents a barrel. After yesterday's ten percent plunge. Shares
(20:44):
in Jeffries bouncing back about five percent today. Oppenheimer upgraded
the stock to outperform, with the firm said Jeffrey's exposure
to First Brands is very limited. Furthermore, The Financial Times
are recently reported that Jeffrey's chief executive has told investors
at the bank believes it was defrauded after being questioned
over its exposure to bankrupt auto parts supplier First Brands. Meanwhile,
(21:07):
another big financial name, and American Express, b third quarter
expectations and raised its full year guidance. AMMEX up by
five percent. Elsewhere, shares an ozembic maker Nova nordes falling
four percent after President Trump said the cost of the
weight loss drug could be one hundred and fifty dollars
or much lower than it is now. Oracle pulling back
(21:29):
by seven percent today following its rally yesterday after Oracle
confirmed a cloud computing deal with Meta and Apple in
Formula One announced a five year US media rights deal
that will bring all races to the Apple TV platform
beginning next season. CNBC's reporting that Apple is paying about
(21:50):
one hundred and forty million dollars per year for F
one rights. Apple shares are up by about a half percent.
I'm Tucker Silvan. That is Wall Street And in the
previous segment we asked you the trivia question. According to Orkin,
what has been the rattiest city in America for the
last decade? That would be Chicago. Dorothy from Wareham, mass
(22:12):
is our winner today taking on the Financial Exchange Show.
Speaker 2 (22:14):
T Shirt.
Speaker 5 (22:15):
Congrats to Dorothy, and we played trivia every day here
in the Financial Exchange See complete contest rules at Financial
looks Change Show dot com.
Speaker 2 (22:23):
Tucker, I'm pretty sure you just rounded to the thousandth
of a percent.
Speaker 3 (22:26):
In one of your he was he was messing around
dropping extra nine.
Speaker 5 (22:31):
Three point nine nine times.
Speaker 2 (22:35):
Yeah, yeah, you know. That is the accuracy and attention
to detail that people tune in for. So thank you.
Speaker 5 (22:43):
I'll never pass an opportunity to say, yes, I've had
some great music intros today, Tucker, So good job by you.
Speaker 3 (22:48):
There's one where I was ready to run through a
brick wall.
Speaker 5 (22:50):
Thanks thanks man.
Speaker 2 (22:51):
Yeah, unfortunately that's not a great Uh. We have a
glass studio here's not a great level of manage to
bring to a radio show. Unfortunately I didn't do it
that I wanted to. Yeah, I got it. I got it.
So small businesses, CNBC has a really actually I think,
really good piece on small businesses in tariff related costs.
They definitely cherry pick a bunch of companies that are
(23:14):
heavily affected by terrasts, but they I think bring something
home for me, which is small businesses are getting crushed
on the tariffront for those that are exposed to it,
and it may help explain part of what we're seeing
in the labor market too. We tend to focus on
big employers because they're easier to cover, We get more
data on them, they release earnings, they have to announce
(23:35):
their layoffs in very public fashion. But the fact remains
that of employees that work for private companies, so non
governmental employees, between forty five and forty seven percent of
them work for small to medium sized businesses, those with
fewer than five hundred employees, and as we've known this
whole time, those are the ones that are really struggling
(23:57):
with terrorists. It's not Walmart, right, Walmart's based gone to
their Chinese suppliers and said, we have to pay tariffs,
so lower your prices. We're going to buy it elsewhere.
And they've capitulated, by and large, they've capitulated. They've found
ways to do this. And in the cases where they
do need to pay big tariffs, guess what, they've got
pretty deep pockets. If they need to, they'll issue debt.
They probably don't even need to. They can come up
with the tariff payments. However, when you are av Universal Corp.
(24:22):
A small footwear company that's barely existed for nine years
and sells through retailers like Macy's and Nordstrom, and your
tariffy goes from seventy five hundred dollars to a quarter
million dollars, you're left in a pretty tough spot. In
this case, the the owner of the business decided to
take out a loan. He's sixty four years old. He
(24:44):
took out a line of credit coming at a thirty
two percent interest rate. Because I mean, again, you're a
small business. This is what you're looking at if you
need to take it, you know, some sort of secured
or even unsecured loan. That's the rate that you're talking about.
This is not incredibly unique one. If you're ava universal,
good luck manufacturing those shoes in the United States anywhere
(25:05):
in anytime in the near future. It's just it's not practical.
But you know, they go through a good six or
seven companies here, various few employees. But you know, you're
seeing pretty universally teriffies doubling compared to twenty twenty four
on their products coming into the United States. And so
(25:26):
while we might not be seeing it in prices, we
might not be seeing it in big publicly traded companies,
which you and I care most about here on the
Financial Exchange. I do think it helps explain what we're
seeing in the labor market.
Speaker 3 (25:38):
That you don't have just nearly as much hiring in
some of those sectors. Yeah, it's an issue that really
keep that I have a lot of concern over. Though
it won't come directly in the data that you and
I dive into every single day of publicly traded companies,
but what happens on these small to mid sized companies,
it is concerning because they do account for significant percentage
(26:00):
of GDP growth, and it is a lot of employers
out there, and you just think about some of these
increases that you're seeing in the sample of companies that
they mentioned here are unsustainable.
Speaker 2 (26:10):
The only way that they're the only reason they're paying
this instead of just throwing up their hands and saying
send the stuff back to India is because they're hoping
that they can get through one big season and then
basically there's a reprieve that the next year either there'll
be a reprieve where they just won't order the stuff.
Speaker 3 (26:25):
Right. It just that part is very concerning because you
look at what these businesses do, and it's so important
to have these businesses in our country. But how does
this not get just swallowed up by the bigger retailers
If you have these companies like UAV Technologies just just
fold up shop because they're going from a doubling in
(26:47):
the cost of the tariffs that they pay or in
some other cases that are mentioning this piece. I mean,
you're talking exorbitant increases more than double. How do you
keep the lights on?
Speaker 2 (26:56):
I'll be very surprised if five years from now, how
the general retail sector is less concentrated than it is now. Again,
retail isn't the only thing that matters, But like when
I think through that I'd be very, very surprised if
small businesses that exist today are able to continue to
(27:17):
exist five years from now at the same scale and
degree that they do. I do just think that what
it's going to mean, for better or worse, whether you
like it or dislike it, that big businesses are going
to get bigger as a result of some of these
tariffs because they can better navigate it. It's just that's
the fact of a big business is they have the attorneys,
they have the staff to be able to figure out
where is the best place for us to manufacture this
(27:38):
stuff to lessen our tariff impact, and just deal with
the tariffs in the places that it makes sense to
do so.
Speaker 5 (27:43):
Cushing and Dolan want to help you avoid costly mistakes
when it comes to gifting assets to your children. Their
brand new guide, called Making the Most of Gifting Assets,
shares crucial strategies to help you protect your legacy and
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(28:24):
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(28:44):
or you can request it from their website Legal exchange
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Speaker 1 (28:49):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong do not endorse each other and are
not affiliated.
Speaker 2 (29:00):
Well. While Elon Musk has been facing all sorts of
questions about Tesla's full self driving and autonomous taxis down
in Austin, Texas, Honda beating them to the punch with
their full self driving lawnmower, which we don't have pricing details.
Speaker 3 (29:17):
Yeah we done, yeah, we do.
Speaker 5 (29:17):
Bottom of the artic No, no.
Speaker 2 (29:19):
No, that's that's the manual model. So, uh, Honda hasn't
revealed for the twos unit yet, but the regular old
lawnmower that isn't autonomous is going to go for thirty
three thousand dollars.
Speaker 5 (29:31):
Wait what Yes, that's not possible.
Speaker 3 (29:35):
Espresso Mike is on his game. Good catch on that.
Speaker 2 (29:37):
Yeah, I can read, despite what some of you consist.
Speaker 5 (29:41):
So the human operated lawnmower thirty three grand?
Speaker 3 (29:45):
So can I take it on the highway? Drive it?
I just had a client who bought a used car
level too. Yeah, so good.
Speaker 5 (29:53):
Where it has to be this higher price than the
used car, right.
Speaker 2 (29:57):
Ask Honda Tucker. I'm not entirely sure. I don't think
there's gonna be a huge market for it. I think
they're gonna have to get that price down a little bit.
I mean, before I saw the price, I was like, okay,
I mean not that I would buy it, But my
brother's a landscaper. If he had one of these puppies
and you know, could send it on its way to
mow my you know, mow my lawn while he takes
care of the other jobs that need to be done
(30:19):
around my house, that that, you know, that might be
something that he could stomach at less than thirty three
thousand dollars.
Speaker 5 (30:25):
I just don't know how he feels about a self
driving lawnmower.
Speaker 2 (30:28):
Oh, I'm all on board.
Speaker 5 (30:30):
Yeah yeah, I'd have to watch from the window and
make sure it's you.
Speaker 2 (30:34):
Know, yeah, I mean, you might not want to leave
your kids out at the same time something, but you know,
you imagine the losses quick Sparky when we come back.
Paula Monica from Baron's Joint.
Speaker 3 (30:53):
Doug died, but.
Speaker 2 (30:58):
Paula Monica Baron's next Financial Exchange.
Speaker 1 (31:01):
The Financial Exchange Show podcast drops every day on Apple, Spotify,
and iHeartRadio. Hit that subscribe button and leave us a
five star review. You're listening to the Financial Exchange Radio Network.
The Financial Exchange is Life on Series XM's Business Radio
Channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
(31:24):
and around the world, and keep up to date on
how it might affect your wallet. That's the Financial Exchange
weekdays from eleven to noon on Series XM's Business Radio
Channel one thirty two. Face He's the Financial Exchange Radio Network.
Ladies and Gentlemen, the weekend.
Speaker 2 (31:47):
Joining us now is Paul Lamonica from Barons talking to
us about a few different areas, but all surrounding PayPal
and their relatively abysmal year they've had. Paul, thanks for joining,
appreciate it.
Speaker 1 (31:58):
Thanks a lot.
Speaker 2 (31:59):
So let's start off with the funnier of the two stories,
if I may, because I doubt PayPal shareholders are are
laughing a whole lot of the course in the last
couple of years. But a company that PayPal hired to
mint and handle their stable coin made a seemingly three
hundred trillion dollar whipsie. So for those like myself that
(32:23):
might not understand all the ins and outs of how
these things work and get created, how does a three
hundred trillion dollar error get made on this front?
Speaker 4 (32:33):
Yeah, it's it's astonishing. Paxos is the company that was
minting this PayPal stable coin, a cryptocurrency peg to the
dollar py USD you know, competes with things like USD
coin and some of the other big cryptos you back
(32:56):
to the dollar. The problem was, you know, they just
didgitally printed and it was a mistake. Three hundred trillion dollars.
Obviously it shouldn't have been that much, and you know,
the good news, if you want to call it, that
is that in the relatively quick fashion about a half hour,
you know, Paxos was able to undo this mistake and burn,
(33:19):
as the case would be, you know, taking these assets
off the blockchain so that they no longer exist.
Speaker 2 (33:26):
They said that there was no.
Speaker 4 (33:27):
Security breach, it was an internal technical era.
Speaker 3 (33:30):
This is Paxos.
Speaker 4 (33:31):
So you know, it's a bad and somewhat amusing kind
of headline, probably more for Paxos than PayPal, but PayPal
I think, you know, got hit on it as well,
and it's been a tough week and tough year for
PayPal in general. You know, it's you know, the less
amusing story, I guess is you know, the Goldman Zachs
(33:54):
down grade earlier this week, which I wrote about.
Speaker 2 (33:56):
So just to finish up on this, because a three
hundred trillion dollar you know, fat finger error on a
keyboard seems to run directly contradictory to one of the
words that is used to describe these coins, i e.
The stable part of stable coins. And I guess, before
we move on, like, what does this indicate to you
about the possibility of yeah, errors like the one we saw, which,
(34:20):
again to their credit, was cleaned up within half an
hour and didn't cause wides read issues. But I think
of the possibility of intentional deception or fraud in this space,
given how easy it was to accidentally type in a
couple extra zeros.
Speaker 4 (34:34):
Yeah, I mean that is that's a fantastic question. I
think that people who still remain skeptical of cryptocurrencies, whether
it's Bitcoin, Ether, some of the goofyer meme coins like
doge coin, or these stable coins like the ones issued
by Circle and Tether, the two giants of the industry,
(34:55):
it does go to show that, in some respects, it's
still not all that difficult for technical glitches to happen.
Clearly it's not that hard to undo it in quick fashion.
But I think the bigger concern is what happens if
someone does intentionally, you know, wind up you know, nefariously
(35:17):
kind of hacking you know, the blockchain, and you know,
I think that does lend, uh, you know, some credence
to those who remain nervous about digital currencies and their security.
I mean, I think it's a question that is outstanding.
(35:38):
But I think, you know, the crypto bulls would argue
that this is still a safe and secure form of money.
I mean, you know, you have counterfeit paper currencies, you
have issues with credit cards and debit cards, you know.
I think financial security is a problem for the broader
monetary you know, food chain, if you will, all types
(35:59):
of currencies, and not just Krypto.
Speaker 2 (36:00):
All right, So back to PayPal for a moment, not
to kick them while they're down, but plenty of long
term shareholders will recall that not so long ago, four
years ago, the stock was trading over three hundred dollars
a share. Currently it's sitting at sixty six or so
dollars per share. Downgrade from Goldman Sacks. What did they
cite is concern?
Speaker 4 (36:19):
Yeah, Goldman Sachs obviously worried about you know, inflation remaining
a concern for consumers, as well as a weakening job market,
which could be a problem for less affluent consumers using
PayPal and Vemo and some of the other services you know.
(36:39):
But also there's a lot of competition. You know, You've
got companies like block but you know which owns a
square and cash app. I think the bigger concern would be,
you know, the competition from you know, Apple and Google,
you know, and Stripe as well. You know, in the
(37:00):
digital payments business. You know, if you want to call
a good news, you know, Goldman did downgrade the stock
to a cell. But the price target seventy, which ironically enough,
is actually higher than where it's currently trading, you know,
and the consensus price target is a little bit under
eighty two dollars a share, So that does represent decent upside,
(37:22):
but it's a mixed bag. I mean, there's a lot
of analysts that cover PayPal, about half of them ready
to buy, another half way to the hold, and there's
a smattering of cells, including Goldman Sachs out there as well.
Speaker 2 (37:34):
Paul Lamonica from Baron's joining us today, talk a little
bit about PayPal and a minor three hundred trillion dollar
era that was made over the course of the last week. Paul,
thanks so much for joining us. Appreciate it.
Speaker 5 (37:44):
Thank you very next week, appreciate it.
Speaker 2 (37:46):
Taking a look here at markets as we close in
on the noon hour, we've got the Dow and S
ANDP in slightly positive territory, but have been bouncing all
over the place. Dow up a third of a percent,
S and P five hundred up just more than a
tenth of a percent and then NASDAC on the way
down about a tenth of a percent, so again relative
calm after a rough start to the morning, but we'll
(38:07):
cover it all and more on Monday on the Financial Exchange.
Have a great weekend, everybody,
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