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August 29, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss how the future of the Fed came to rest on Lisa Cook. Alibaba creates AI chip to help China fill Nvidia void. Why the S&P 500 could be at risk of a 10% to 20% pullback if ether falls behind bitcoin again. Paul LaMonica, Barron's, joins the show to chat Salesforce's difficult year. Zuckerberg's AI hires disrupt Meta with swift exits and threats to leave.
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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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(00:42):
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(01:06):
and Mike Armstraw.

Speaker 2 (01:10):
Kicking things off here to Chuck, Mike and Tucker with you.
And this morning we had personal consumption expenditure inflation data
that came out at eight thirty am Eastern. It showed
on the headline reading point two percent month over month
and two point six percent year over year inflation. And
for the core PCE data we saw a point three

(01:31):
percent month over month and two point nine percent year
over year. All those numbers basically in line with expectations.
The core number towards the higher end of expectations, but
still nothing unexpected there. Despite that, you do have stocks
selling off today, with the Dow Jones Industrial Average holding

(01:52):
up the best out of the bunch, down one hundred
and seventy four points about a third of a percent,
SP five hundred down forty seven points, three quarters of
a percent, and the Nasdaq is down two hundred and
sixty one points. Are about one and a quarter percent
right now. As this is a tech driven sell off
that's happening. Modest selloff happening in bonds as well on
the long end of the curve not too much, but

(02:14):
the tenure Treasury now up three basis points to four
point two three seven percent, so a little bit of
money exiting bonds. It's unclear to me, uh if this
is you know, related to this morning or just end
of month rebalancing and this and that. Again, one day
does not make a trend, so let's not read too
much into any of this. Here we've got oil down

(02:36):
fifty four cents a barrel to sixty four h six
the triple A national avatur Gas prices also sliding almost
a cent to three twenty and one tenth of a cent,
as that refinery outage in the Midwest is starting to
abate and get production back up to speed, and so
price is falling there, just as an example in Michigan,
prices down two point seven cents overnight as supply is

(02:59):
coming back online for the region. Finally, gold up twenty
seven to fifteen ounces, back above thirty five hundred for
the first time in a little while, and so gold
making some runs towards new highs as it reacts to
the inflation data that we saw this morning as well.
Remember when we look at the all time high on gold,

(03:22):
we get just above this level here a couple months back.
But looking to see if we can get to all
new all time highs on gold, which I don't know.
I think it would be kind of fun. Yahoo.

Speaker 3 (03:35):
Anything else to add, Mike that you're seeing at the gold.

Speaker 2 (03:40):
That's all I had to add. Actually, Okay, thank you, Mike.
I appreciate that. New York Times with the piece how
the future of the FED came to rest on Lisa Cook, Mike,
what's the peace?

Speaker 3 (03:50):
Lay out here?

Speaker 4 (03:51):
That this is all going to test out the Fed's
independence for those who haven't read much about which would
be huff if you listen to the show and read
any economic pieces. Lisa Cook, one of the voting members
of the Federal Reserve, has been fired by the President
for alleged lies on her mortgage application. Right, I guess

(04:16):
alleged mortgage fraud. Yeah, alleged mortgage fraud. Let's put it
that way. The fraud itself was alleged show taking place
I think in twenty twenty one or twenty twenty two.
In any case, what is testing the independence is whether
or not the President, even in a case of you know,

(04:37):
alleged fraud, has the right to terminate someone for cause. Now,
this is going to play its way out in the courts. Typically,
you know, most experts that I've heard of when they
talk about firing for cause in a rule like this,
it's more about gross negligence while on the job at
the Federal Reserve rather than something that occurred no really

(05:00):
related to the job. But all that's gonna be put
to the test. And so that's how that future kind
of came to fall on Lisa Cook's shoulders. Is okay,
Can something that I did five years in the past
or a decade in the past be used as cause
to terminate me in the role as a governor of

(05:21):
the Federal Reserve. It's never been tested before, and it's
about to be.

Speaker 3 (05:25):
Yeah.

Speaker 2 (05:26):
And so look, there's a hearing that's going on right
now as we speak with regards to Cook is looking
for eight I can't remember if it's a stay or
a temporary straining order to be put in place on
the firing while this works its way through the court system,
But there's a pretty good chance, based on everything I've read,

(05:47):
this ends up making its way to the Supreme Court,
probably in the next two to six months, depending on
the exact timeline. And so look, I think ultimately where
you know what we know and what we don't know,
there's you know, it's just kind of messy right now.

Speaker 3 (06:05):
Uh we we we haven't.

Speaker 2 (06:08):
Even seen any of the actual documents, right so, like
we we don't know what's actually on them. Uh So
she may or may not have actually committed fraud to
try to lower a second mortgage rate.

Speaker 4 (06:20):
That's possible.

Speaker 2 (06:21):
We don't know right now, right Uh if she did,
does that rise to the level of being able to
fire her for cause from the Fed? Also don't know
very much unknown If you are one of the FED governors,
even if it doesn't rise to the level of being
able to be fired for cause, is it still something

(06:44):
that should preclude you from having that role?

Speaker 4 (06:49):
I guess that's an interesting question, right if this had
been brought up at a Senate confirmation hearing, would it
have is that? Is it disqualified? Disqualifying? I don't you
know these are That's not the same thing, right, you know,
being disqualified by the Senate confirmation versus being terminated are
two different things. But I genuinely don't know the answer

(07:10):
to that question. And I you know, I wonder if
anyone's looked like, Okay, did somebody that's ever been appointed
to the FED where they ever convicted of some sort
of financial crime. I would doubt. I would doubt that
was the case, but anything's possible.

Speaker 2 (07:24):
So there's a lot of questions that are in play here,
and obviously this is going to be a big issue
that people follow over the next you know, probably a
couple quarters. Again, I don't think we get a final
resolution on this, probably until early in twenty six unless
Cook decides, hey, I'm just gonna step down because this
is just too much of a distraction. But given you know,

(07:47):
kind of what she's doing to this point in terms
of contesting it, I don't think she just suddenly wake
up tomorrow and be like, Okay, I'm done.

Speaker 4 (07:53):
Yeah. It seems to me that she wants this to
be a test case that goes to the Supreme Court.

Speaker 2 (07:58):
It sure does, so we're gonna have to watch to
see how this plays out. But again, I don't think
we know anything definitively right now about exactly you know,
what has gone on. There's gonna be a whole, you know,
thing that has to play out here as far as
you know, the justice system, and we'll see where we
are at the back end of that. I think that's
basically where I land right now, I feel like additional

(08:20):
piece here. I feel like some context about the Fed's independence.

Speaker 4 (08:24):
Here is a little bit helpful. I don't want to
go too deep into it. But the Supreme Court itself,
in a very recent ruling, and I don't remember who
was in regard to is another firing of an agency head,
basically confirmed the president's power to remove that individual, while
also specifically mentioning the Federal Reserve as one agency where
they didn't have such powers.

Speaker 2 (08:47):
Yeah, so this was I pulled it just because I
wanted to find where it was. And so this is
it was related to President Trump trying to remove gwyn
Wilcox from the NLRB and Kathy Harris from the MSPB YEP,
and pretty much they argued that their firings were against

(09:10):
federal law because they can only be removed for cause.
And the Supreme Court said, no, like you basically you're
not you know, this is not the case for you.
But and this is the big butt that you know
that basically is is the whole crux of why.

Speaker 4 (09:27):
We're here right now.

Speaker 2 (09:29):
But they pretty much said, look, this is not related
to the FED. In this ruling, specifically, the quote here
the fit is a quote uniquely structured quasi private entity
that follows in the distinct historical tradition of the First
and Second Banks of the United States. So the Supreme

(09:50):
Court literally, and I say that, you know, with its
actual meeting, not the one that's used on the Bachelor
or the Bachelorette. The Supreme Court literally said, yes, the
President can fire members of these other independent boards, but
you cannot touch the FED.

Speaker 1 (10:08):
Right.

Speaker 4 (10:08):
And there was not some other Supreme Court, it was this.
It was these nine members saying that. So again, I
have no clue where this goes.

Speaker 2 (10:17):
Markets are betting that it doesn't go anywhere, is my
read on this, because otherwise you would have had more
movement in markets this week. And this was just a
really boring week until today, quite honestly. And today's not
even over, so we might even end up closing flat
by the time it's all said and done.

Speaker 4 (10:32):
Today could be take a quick break here.

Speaker 2 (10:35):
When we return, it's do a little bit of trivia
and then we're gonna talk Ali Baba and Ai. Sure
that sounds great, we'll do that right after this.

Speaker 1 (10:45):
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(11:06):
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Speaker 5 (11:26):
This segment of The Financial Exchange brought to you in
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(11:46):
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for trivia here on the Financial Exchange, and it's our
final of World War two trivia here as the month
of August comes to a close, So here we go.
As soon as news broke of Japan's attack on Pearl Harbor,

(12:09):
America's favorite future game show host dropped out of college
and enlisted in the Navy and trained as a fighter pilot.
After his stint in the Navy, this man started hosting
his first game show in nineteen fifty six, which began
a run of game show hosting that would last fifty
one years. So trivia question today, which famous game show

(12:33):
host was a naval fighter pilot in World War Two?
Once again, which famous game show host was a naval
fighter pilot in World War Two? Be the fourth person
today at text us at six one seven three six
two thirteen eighty five with correct answer, and you win
a Financial Exchange Show T shirt.

Speaker 4 (12:52):
Once again, the.

Speaker 5 (12:53):
Fourth correct response to text us to the number six
one seven three six two thirteen eighty five will win
that team shirt. See complete contest rules at Financial Exchange
Show dot com.

Speaker 2 (13:05):
Wall Street Journal exclusive Ali Baba creates AI chip to
help China fill in video void and basically the run
through of this and look, this is definitely one of
those where you have to ask the question, like why
am I reading this?

Speaker 1 (13:22):
Now? Sure?

Speaker 2 (13:24):
The read through on this is that Alibab and other
Chinese electronics companies. Ali Bob is not even a Chinese
electronics company really.

Speaker 6 (13:33):
You know.

Speaker 2 (13:33):
I mean they have like a cloud computing business, but
I don't think they've really done a ton in chip
design before this.

Speaker 4 (13:38):
Nope.

Speaker 2 (13:40):
Basically, these companies are trying to come up with, you know,
alternatives to in video chips. And I'm just gonna read
one sentence that I think is really interesting to me
in here, and this is the one in July, Shanghai
based Meta x so not US Meta, but this is
Meta x I know. Confusing rolled out a new chip

(14:02):
that it said could serve as a replacement for the
H twenty, which is in videos chip that they that
they currently have the licenses to sell in China. The
chip has bigger memory than the AGE twenty, boosting its
power for AI tasks, although it consumes more electricity. Metax
said Wednesday that they're preparing for mass production.

Speaker 4 (14:22):
Of the chip.

Speaker 2 (14:23):
Mike, what word in that paragraph do I think is
the most important?

Speaker 4 (14:29):
Electricity? Yeah?

Speaker 2 (14:31):
You want to know why you want to the bottleneck
that China doesn't have power. You can build power plants
in China all day. If I went to the Chinese
government right now and said, hey, I've got a plan.
Here's how I'm gonna do it. Love the work you
guys have done. What can you do for me?

Speaker 4 (14:49):
They would damn a river for you tomorrow.

Speaker 3 (14:51):
Not they would put.

Speaker 2 (14:52):
A nuclear power plant on my head and say, go
and do what you want to do.

Speaker 3 (14:57):
You know, no problem, have at it.

Speaker 4 (15:00):
You got it. Yeah, far fewer electricity constraints in the
United States has That's true.

Speaker 2 (15:04):
So here's where I'm going with this. China's chips might
not Again, I have no idea. I'm not an electrical engineer.
I have no idea like the details of any of this.
But let's assume for the moment that this article is
correct and that China's chips are not as strong as
in videos are at AI tasks. China could be making

(15:28):
the bet. You know what, You're right. From a quality perspective,
we can't compete, But you know where we can compete.
It's the same place we compete everywhere else, quantity. We're
gonna just make a boatload of these. We got plenty
of power plants that we can build in order to
power them, even if they're less efficient. And you better
believe that we're gonna make it up with building five

(15:51):
billion of these things instead of you know, the two
billion and video chips that we want to buy or
whatever it is.

Speaker 4 (15:57):
Yeah, it's easy to buy. It's easy to believe that
that could be the route that they might end up taking.
And the question that you and I can't possibly answer
is to what degree do you need to produce these
things to compete with something as efficient as in videos
blackwell or the next generationship that they produce. I have

(16:18):
no idea on that front. It's unanswerable. It probably doesn't
matter though.

Speaker 2 (16:22):
I Mean, if there's one thing that China is known for,
if there's one thing I think China should be known for,
it is consistent over production of goods relative to the
market demand for them. So if there's one thing that
they're going to be really good at, it's producing way
too many of these things. They might not be great,
but hey, just throw a bunch of them at the

(16:44):
problem and see what happens. And oh, by the way,
the other piece that is interesting to me then is, Mike,
what's the what's the problem that we see worldwide when
it comes to Chinese overproduction of goods?

Speaker 4 (16:58):
It crashes every other domestic p of them.

Speaker 2 (17:00):
Yes, dumping, Yeah, it's okay, Like great, you know, now
we're gonna export this overproduction everywhere else.

Speaker 4 (17:07):
Problem for Nvidia if that occurs, right.

Speaker 2 (17:10):
I mean, I'm just I'm just thinking through this and saying, look,
there's really good reasons why europe might say, hey, we're
not going to buy these Chinese chips. Remember the whole
thing with Huawei and five G networks a few years back.
But think about some of those marginal buyers that the
Trump administration was trying to secure earlier this year. Think

(17:30):
about Saudi Arabia, think about the UAE, think about you know,
other Gulf states and things like that. Hey, if China
comes to them and says, hey, number one, like, we're
bigger buyers of your oil now because the US is
producing so much. Hey, if you want us to keep
buying your oil in these quantities, how about you buy
our chips instead of the American ones. I don't know, like,

(17:50):
I don't know that those conversations are happening yet, but you.

Speaker 4 (17:54):
Can be sure that this is most certainly the conversation
that the CEO of Nvidio Jensen Wig, is bringing to
the president and bringing to his advisors of if you
don't let us sell, then this is what you get instead. Correct,
And it's a compelling argument. I don't I'm not sure.
I'm not sure I get there, Like, yeah, it's compelling

(18:16):
argument for why I would sink in Video's business. I
don't think it gets to the point where, yeah, we
should just sell the Chinese are blackwell, you know, latest
and greatest chips. But it is a compelling argument as
to why it could be a threat to.

Speaker 2 (18:27):
Their business even there, like when we say threat to
their business, not like in Video goes out of business
because of this. Sure, it's they just lose that marginal
buyer that isn't Max seven right now potentially.

Speaker 3 (18:38):
So I think this is interesting, and I got to admit,
like my spidy.

Speaker 4 (18:43):
Sense is kind of tingling on this right now. Well,
because it's not just a report out of China that
they can make these chips. What's happening concurrently with it
is in Vidia can't sell their chips to China, right
we're getting confirmation.

Speaker 3 (18:55):
Well India in Video can, but China will buy them.

Speaker 4 (18:58):
That's my point is that they're they're not selling and
so if this were just a you know, solo report
out of China. I'd say, okay, well, maybe maybe not,
but the fact that Nvidia is not having a luck
selling their H twenty chips to Chinese buyers indicates that
maybe there is something here in terms of a competitive
product from a domestic maker of the semiconductors. Yeah, so

(19:19):
this is interesting to me.

Speaker 2 (19:21):
Again, I feel like there's some something going on here
that has my antenna up. Quick break here, we've got
the trivia answer. We've got Wall Street Watch when we return.

Speaker 1 (19:33):
Okay, bringing the latest financial news straight to your radio
every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street. Watch a complete
look at what's moving market so far today right here

(19:56):
on the Financial Exchange Radio Network on the final trading.

Speaker 3 (20:00):
Yeah, August markets are in.

Speaker 5 (20:01):
Negative territory, seeing a pretty modest sell off here as
Wall Street reacts to the core PC index, the Fed's
preferred measure of inflation, with no surprises coming in line
with expectations. Right now, the Dow is down by four
tenths of one percent, or one hundred and eighty six points.
SMP five hundred now down seven tenths of one percent

(20:22):
or forty six points, Nasdaq down over one percent lower
two hundred and forty three points lower. Russell two thousand
is down by six tenths of one percent. Ten year
Treasure reeled up three basis points at four point two
three eight percent in crude oil down about one percent,
trading right around sixty four dollars a barrel. According to

(20:42):
the Wall Street Journal, Ali Baba has created a new
verse Little chip to fill the void left by Nvidia's
restricted access to the Chinese market. Ali Baba shares a
jumping eleven percent on that news. Meanwhile, Dell Technology hiked
it's annual outlook driven by strong AI demand. However, the
tech company offered saw for guidance for the current quarter,
sending shares down by ten percent. Sticking with tech, where

(21:05):
Marvel Technologies is down by fifteen percent after AI chip
maker's data center revenue fell short of estimates. The company
also reported lackluster guidance for the current quarter. Elsewhere by
now pay Later company, A firm is seeing its stock
leap fifteen excuse me, twelve percent after it swung to
profit in the previous quarter, surpassing expectations, and Caterpillar revealed

(21:29):
it now expects the net impact from tariffs to be
as much as one point eight billion dollars this year,
sending shares in the construction equipment maker down by four percent.
I'm Tucker Silvan Nai is Wall Street Watch and in
the previous segment we asked you the question which famous
game show host was a naval fighter pilot in World

(21:50):
War Two? That would be Bob Barker. And our winner
today is Bob from Sebago Lake, Maine taking home a
financial Shane showed t shirt. Congrats to Bob, and we
play trivia every day here in the Financial Exchange See
complete contest rules at Financial Exchange Show dot com.

Speaker 2 (22:07):
We join now by Todd Lutsky from the law firm
of Cushing and Dolan. Mister Lutsky, how are you today?

Speaker 7 (22:14):
I am never better in you doing well?

Speaker 4 (22:16):
Todd.

Speaker 2 (22:16):
There are a bunch of different types of trust out there.
How does someone actually pick the right one for their
specific situation?

Speaker 6 (22:23):
So that really the only way you can do it
is become educated about the different kinds of trusts are
out there, and the way to do that is perhaps
sit with an estate planning attorney. If you don't, obviously
there's a guide We're giving away that's going to be
helpful in that. But I'll get to that in a minute.
But you know, you can only read so much about
this stuff. Sometimes you just need you need you know
that in person, you know, English version, lay person version

(22:47):
of the explanation of how they work. But I can
tell you a couple of things that's driven probably primarily
by the size of your estate, that that will help
so certainly much larger estates are probably more in the
revote world at least to begin with, and then if
they need gifting, they would get into the gifting irrevocable trusts.
I would say smaller estates are probably going to be

(23:09):
able to stay just what the revocable trust world. And
then of course age is another factor. I think you
figure the older you are and the size of the
estate might dictate, you know, a little smaller estate, but
over sixty five. Now I'm thinking about nursing homes and
protecting it from the nursing home and now I need
you know, some kind of an irrevocable nursing home trust.

(23:32):
And maybe lastly, when you're adding the value of your estate,
don't forget about life insurance because that is a tricky
asset that can throw your estate into a much higher
value than you think about because it doesn't pay out
till you die, so you tend to not count it,
and that might need to go into an irrevocable life
insurance trust. So many kinds out there.

Speaker 2 (23:53):
Todd When does someone need to review the planning they've
already done to make sure that the tools they selected
before are still the right one for them today.

Speaker 6 (24:01):
So excellent question. So one, of course we think about age.
Maybe I did my planning fifteen years ago, twenty years ago,
and I was, you know, in my early fifties. Well
now I'm seventy. Well that not only has age changed
because the time has gone by, so that might make
me want to shift from a revocable trust to an
irrevocable trust, but also assets, right, maybe the assets have

(24:25):
changed and maybe have grown significantly, which might need you
to look at the documents you have and see if
they if they still work. So and of course tax
laws change. So I think it's all of those things.
Plus I think just time in general, you should always
just review. I'm thinking once every ten years at a minimum,
depending on the size of your estate. If you're much larger, estates.

(24:46):
You probably want to think about it. At least you
know large estates. I don't have problem calling every December.
You know it's year end. What's happening and what should
we be thinking about? So, folks, estate planning requires some thought.
It's a living, breathing idea and the plan the guide
we're given away this month and it's the end of
the month. It's the top seven estate planning trusts. So this,

(25:09):
if nothing else, will help educate you as to what
type of document might be right for you, what type
of trust might be right for you. They explain how
they work, from revocable to irrevocable, to special needs trust
to Nominee Realty Trust. There's something in there for everyone.
Help get yourself started with a state planning or review,

(25:31):
as Chuck said, and figure out what plan might be
right for you. Now The guide Top seven estate Planning
Trusts eight sixty six eight four eight five six nine
nine or Legal Exchange Show dot com. One last Time
eight sixty six eight four eight five six nine nine
or Legal Exchange Show dot com.

Speaker 3 (25:52):
Todd, thanks for joining us today.

Speaker 6 (25:54):
Always a pleasure.

Speaker 1 (25:55):
The proceeding was paid for and the music express are
solely those of Cushing and Dolan. Cushing and Dolan in
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.

Speaker 2 (26:06):
Mike, do you ever get the sense that Tucker when
he's you know, kind of looking through different articles, you know,
at six in the morning, it comes across Jess, comes
across one and just like smiles and goes that'll show them.

Speaker 4 (26:23):
I do? Is it the one from market Watch?

Speaker 3 (26:26):
It is?

Speaker 2 (26:27):
It's titled why the S and P five hundred could
be at risk of a ten to twenty percent pullback
if Ether falls behind Bitcoin? Again, Like, what the heck
are we talking about here?

Speaker 4 (26:38):
Even I, which is like, what the hell is this crap?
I don't know. I'm also worried about the ratio of
unicorns to shroot bucks right now and how that might
impact markets.

Speaker 2 (26:52):
Well, I've been told that when mercury is in retrograde,
and at the same time, if it's rainy, you need
to go and buy paper.

Speaker 4 (27:02):
So I, in spite of the title of the article,
I decided to go through and read it. And do
you regret that decision? I do. I was thoroughly disappointed.
It basically claimed some trends since twenty eighteen, which is
really useful. Oh we got seven whole years of data
wisful back data, then called out a few exceptions where

(27:23):
these rules did not apply, and then went on to
explain zero logical reason why this happened in the past
or would hold true in the future. So huh with you?
If you don't put it on your your list for Festivus,
then I'll make sure I do check.

Speaker 2 (27:42):
Are we are we getting to the point where the
Internet's just bad? Because here's the thing, Michael, No, I'm
I'm kind of like having this epiphany. I had this,
Like I was talking to someone about this yesterday in
another respect. But the only reason that this is published

(28:05):
is because it's so cheap to do so. Like if
if you had to go out and actually print this
on paper and pay for those costs and go through
the work of distributing it, you would just give up
and be like no.

Speaker 4 (28:19):
Sorry, Like I'm not gonna do it. It's not worth it.
But click.

Speaker 2 (28:24):
You know, people always say like you're entitled to your opinion,
and it's true you are, but you aren't entitled to
like have people agree with your opinion, and the problem
is that the Internet has made it so that we
all think that everyone should agree with our opinion, when
more often than not, most people you're myself included, tend
to be wrong a decent amount of the time.

Speaker 4 (28:45):
Yeah, and so.

Speaker 2 (28:48):
I just don't think that the Internet is good because
of this blank statement. You now like it's it's totally
fun kind to have your opinions. You don't always need
to share them.

Speaker 4 (29:03):
Yeah, yeah, you know, some of them we can just.

Speaker 2 (29:05):
Keep to ourselves and it's just fine, you know. But
that's just uh, that's just me. So yeah, this is
one of those.

Speaker 3 (29:14):
Again.

Speaker 4 (29:15):
If if you read this and.

Speaker 3 (29:16):
Made an investment decision based on it, good riddance.

Speaker 4 (29:18):
I'm sorry.

Speaker 2 (29:20):
I just don't know how it's gonna work out for you.
Let's take a quick break. When we come back, we're
gonna be joined by Paul Lamonica from Barons right after this.

Speaker 1 (29:32):
The Financial Exchange is Life on Serious XM's business radio
channel one thirty two weekdays from eleven to noon. Get
the latest business and financial news from across the country
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 a series XM's business
radio channel one thirty two Face. He's the Financial Exchange

(29:54):
Radio Network. Find daily interviews and full shows of the
Financial Exchange no or YouTube page. Subscribe to our page
and get caught up on anything and everything you might
have missed. This is the Financial Exchange Radio Network.

Speaker 7 (30:09):
Ladies and gentlemen the weekend.

Speaker 2 (30:17):
As promised, We're now joined by the one and only
Paul o'monica from Barons and we're talking about Salesforce today.

Speaker 4 (30:26):
Paul, how you doing?

Speaker 7 (30:28):
I'm good? Thanks?

Speaker 4 (30:28):
Are you guys doing doing well?

Speaker 2 (30:30):
Salesforce stock has had a challenging year a year today,
down almost twenty five percent even you take a look at,
you know, kind of its track records since being moved
into the Dow, and it's done worse than the company
it replaced, Exonmobile. So what do we make of Salesforce
and where they stand and their prospects for the future.

Speaker 8 (30:54):
Yeah, Salesforce is going to be reporting earnings next week.
Growth made be a little sluggish, looking at you know,
below ten percent year over year increase on sales and earnings,
which is obviously not spectacular. But I think when you
look at this stock and how it's been beaten up

(31:15):
so much. It's now trading at evaluation pe in the
low twenties, so it's around the market multiple.

Speaker 7 (31:24):
Usually trades at a big premium.

Speaker 8 (31:26):
It's probably not going to get back to those levels
anytime soon, as long as growth doesn't pick up. But
it's arguably just way over sold and undervalued at this point,
given that it's about a you know, ten.

Speaker 7 (31:39):
Year low on its valuation.

Speaker 8 (31:41):
And I think the big issue is that there are
a lot of concerns about what AI is going to
do to enterprise software offerings. Does it make it a
little bit less of a compelling value for big corporations
to be spending so much money on the multi year contracts.
But I think that investors aren't giving the company enough

(32:04):
credit for its own agentic AI software offerings. That you know,
if you turn on the TV, anyone that still does
that in twenty twenty five, you can't miss all those
Matthew McConaughey, Woody House and Salesforce commercials, and as absurd
as they might be, you know that they are spending
a lot of money to promote their AI offerings, you know,

(32:25):
and you got to think that's going to gain some traction.

Speaker 2 (32:27):
So this is what I was going to ask, how
can all of these companies that currently don't have inroads
with you know, enterprises in these areas that are developing AI,
how are they getting all of the credit for future
revenue that hasn't yet happened when Salesforce is getting no
credit for the same thing.

Speaker 7 (32:46):
Yeah.

Speaker 8 (32:47):
No, it's a great question, and I think that there
is clearly a lot of excitement, and you're seeing that
with Microsoft and Alphabet, you know, having stronger years than Salesforce.
I think there is this recognition, you know, it's not
just the chat gbts of the world and the startups.

(33:08):
I think that there is this notion that Gemini on
Alphabet and Copilot with Microsoft, that they have a bit
of a head start over companies like Salesforce.

Speaker 7 (33:19):
But you know, Salesforce is a.

Speaker 8 (33:21):
Company that is entrenched in so many big businesses, not
just with their core CRM platform, but also with Slack,
with some of the other acquisitions that they've been making
over the past couple of years. So I think investors
are probably underestimating the ability of Mark Benioff to come
up with a legitimate AI strategy that will eventually yield

(33:47):
you know, more revenue and profit growth. And as I
point out at the end of the piece, there are
some activists involved.

Speaker 7 (33:53):
In this stock as well.

Speaker 8 (33:56):
So worst case scenario figure that there's more pressure to
try and push Salesforce to make changes, and they actually
did that a couple of years ago, and it's one
of the reasons why, after you know, lagging for a bit,
you know, the stock you know, doubled in twenty twenty three.

Speaker 2 (34:13):
I believe, Yeah, isn't one of the other pieces with Salesforce, Like,
they're not the same company they were in the twenty
tens where you know, they were consistently you know, struggling
with free cash flow, their margins were bad and it
was just grow at all costs. They're a really profitable
company right now, that is, you know, making a boatload
of profit and to this point that hasn't really changed.

Speaker 8 (34:37):
No, I mean, it's a it is clearly a more
mature company now. They have done numerous acquisitions. As you
pointed out, I mean, they're one of the worst stocks
in the Dow.

Speaker 7 (34:48):
Let's let that sink in. Salesforce is in the Dow.

Speaker 8 (34:50):
This is not by any means a company that is
an underdog anymore. I think there was that period of
time where you f help that they were struggling to
compete with Microsoft and Oracle and SAP.

Speaker 7 (35:05):
I think the issue is probably the narrative has changed
a little.

Speaker 8 (35:08):
Bit, so it's not so much that they're you know,
lagging behind legacy software companies.

Speaker 7 (35:13):
It's that, you know, there are just concerns about.

Speaker 8 (35:17):
You know, what the future of software looks like in
an AI world, so you know that might be you know,
more of you know, a fundamental challenge for them going forward.

Speaker 2 (35:28):
Very good, Paul, appreciate you joining us today. I hope
you have a great Labor Day weekend and we'll catch
up with you in September.

Speaker 7 (35:35):
Yep, thanks a lot, send you guys have a good
long weekend.

Speaker 2 (35:38):
That is Paul Monica from Baron's talking about Salesforce. Mike,
do you mind if I go into this Financial Times
piece on Meta's AIU vision just because gosh, some of
the quotes that came out of this are just really
really good in terms of it basically talks about, hey,
Mett has been hiring a bunch of these AI scientists

(36:00):
and they're not getting along and they're just leaving.

Speaker 4 (36:04):
Is basically they are all the smartest person in the room. Yes,
this is very brictable, so like things that have happened here.

Speaker 2 (36:11):
Acdding to the tumult, a handful of new Ai staff
have already decided to leave after brief tenures, according to
people familiar with the matter. This includes Ethan Knight, a
machine learning scientists who joined the company weeks ago. Another,
Avi Verma, a former Open Ai researcher, went through Metas
onboarding process.

Speaker 4 (36:26):
But never showed up for his first day.

Speaker 2 (36:29):
You got a nine figure deal for Meta and you're
not showing up for your first day. Man, things must
not be great like other things that we have here.
This is just a really kind of wild one. In
a tweet on x on Wednesday, reshab Argowal, a research
scientist who started at Meta in April, announced his departure.
He said that while Zuckerberg and Wang's pitch was incredibly compelling,

(36:50):
he quote felt the pull to take on a different
kind of risk without giving more detail, is he going
dirt biking with evil and evil?

Speaker 4 (36:59):
I have no idea whether this is a Meta thing
or a just asininely overconfident employee thing. But in either case,
it's kind of humorous. I think the other thing I
can do is laugh about it.

Speaker 2 (37:13):
I think it's a meta thing because here's how their
own like corporate pr responded to questions on this. We
appreciate that there's outsized interest in seemingly every minute detail
of our AI efforts, no matter how inconsequential or mundane.
But we're just focused on doing the work to deliver
personal superintelligence.

Speaker 4 (37:31):
Okay, ye, like okay, And.

Speaker 2 (37:34):
Then Meta also said they were talking about how Zuckerberg
is too like, you know, micromanaging this division. Also Meta
said this allegation was quote manufactured tension without basis in fact,
that's clearly being pushed by dramatic navel gazing busy boddies.
I gotta tell you, you better hope that you better

(37:56):
hope that this stuff pays off for you. Otherwise you're
gonna look like just the most we're confident, like a
bunch of not nice people. What else is in a while,
he's returning to his roots. He's returning to his roots.
All is saved. Let's take a quick break for the
entire long weekend. I hope you all listening have a

(38:17):
great Labor Day weekend, and when we see you next time,
it'll be September.

Speaker 4 (38:22):
We'll see you then
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