August 20, 2025 • 38 mins
Chuck Zodda and Paul Lane discuss how the Fed should deal with US stagflation risks. Lowe's beats on quarterly earnings and buys home pros business for $8.8B. Newbie investors are taking more risks than experienced ones. Why the Russell 2000 has a real chance to beat the S&P 500 - finally. Chipotle aims news rewards programs at college students.
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Episode Transcript
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Speaker 1 (00:00):
The Financial Exchange is produced by Money Matters Radio and
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(00:20):
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Exchange with Chuck Zada and Paul Lane, your exclusive look
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(00:42):
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(01:05):
and Paul Lane.
Speaker 2 (01:08):
Well, let's Chuck and Paul and talker with you. And
stocks are down. The Dow Jones Industrial Average, which doesn't
have a lot of technology names, not many technology names
in it, down eighty two points, so not much less
than a quarter percent. But then you get to some
of the other indices which do have tech stocks in them,
(01:28):
and it's not ideal. Today. The SMP is down fifty
seven points, just shy of one percent. The NASDAK is
off one point seven percent, about three hundred and sixty
three points, so NASDAK off about three percent in the
last two days right now, which I think that based
on our conversations, we can point to as a modest
(01:48):
decline in stocks that is escalating towards a pullback, but
not there yet and still well short of a correction
and even further short of a bear market. But nonetheless
us we do have stocks selling off today and this
has been pretty consistent over the course of the morning
so far. Bonds, on the other hand, not really doing
(02:10):
a ton in either direction. A little bit of a
bid for them, with the ten year treasury down two
point one basis points to four point two eight one,
so a little bit happening on that side of things.
When we take a look at what's going on with
the commodities, the ones that people you know actually care about,
(02:30):
and notice, oil is up forty eight cents a barrel
to sixty two eighty three on West Texas intermedia, and
gold is up thirty three twenty one ounce to thirty
three ninety one and ninety cents. If you're big into
palladium and platinum, well, I don't know anything about them
other than the fact that they both start with P.
So there's that. And on mortgage rates, we're continuing to
(02:55):
see mortgage rates fluttering around that six and a half
to six six range right now, up one basis point
compared to yesterday. It's six point six percent on the
national average four thirty year fixed rate mortgages from Mortgage
News Daily. So overall, equities down, bonds not really moving.
Oil and gold up modestly is the story of the day.
(03:17):
The story of Friday is that Jay Powell is going
to climb out of a bat infested cabin in Jackson Hole.
Speaker 3 (03:25):
Hope he has nicer accommodations than that.
Speaker 2 (03:28):
Didn't you read the story last week? No, they had
to push back when they were going to be arriving
because the cabins had eight bats in them, and so
they had to push back the arrival date to make
sure that the bats were out. They tested them for rabies.
They all came back negative.
Speaker 4 (03:45):
Did they put sheets together like in Black Sheep and
try to push it out the door?
Speaker 2 (03:48):
It's it's unclear exactly. I mean, I don't think Jay
Powell does his own extermination. It doesn't really seem like
that's his thing.
Speaker 4 (03:58):
Not a handy guy.
Speaker 3 (04:00):
And they're they're scrutinizing the FED in terms of what
they're expending on their accommodation. So perhaps this is the
pivot here. They're now staying in bad infested cabins instead
of the million dollar expansion of the facility.
Speaker 2 (04:10):
I see Jay as being more of a gardener than
someone who does his own dry wall. But that's just me,
you know. I can see him walking in from outside
and saying, Chuck, take a look at these cherry tomatoes.
Do you see any signs of these? Do you see
any signs of inflation on these cherry tomatoes? No, whit,
because I've done an outstanding job, thank you. Uh So,
(04:34):
In any case, Jay Pollin and the gang. They are
out at Jackson Hole this week, and there's a piece
here from the Financial Times and it asked the question, look,
what first sentence, what should j Powell say about the
US economy when addressing the Jackson Hole symposium this week?
(04:55):
And again, this is something that happens every year, so
we have a little bit of a track record on,
you know, kind of how he's done on this. If
you want to look on the duvish side, look no
further than last year, when the statement was effectively, hey,
the balance of risks has changed and we need to
be prepared to respond appropriately given what they had been
seeing in the labor market at that time, which had
(05:17):
some concerns while the inflation rate was continuing to decline
over the course of last summer. So he said, look,
we need to be more dovish. The counter to this
is what we saw in twenty twenty two, when he basically,
you know, took a sledgehammer to the idea that the
FED was done, you know, raising rates and said, no,
(05:38):
we've still got some work to do and kicked off
another fifteen percent decline in stocks into October before they
finally bottomed in October of twenty twenty two. So the
question is at this point, look, you've got unemployment. Where
the unemployment rate and again this is the piece that matters,
is the unemployment rate currently sits at four point two
(05:59):
percent and has basically been pretty darn stagnant there over
the last year or so. I mean, you can make
it convince in case the job market has not materially
changed a ton over the last year. Again, right now,
if you go back a year ago, excuse me, the
unemployment rate in August of twenty twenty four four point
(06:23):
two percent, what is it today? Four point two percent?
That is no change on a statistical basis. This despite
the fact that the rate of job growth has slowed,
But it's also coincided with a point in time where
the number of people in the workforce that growth has
slowed as well. And the FED, with all the tools
(06:46):
they have at their disposal, they cannot put people into
the workforce. They can't do it. They don't have a
button they can push, that says ad worker. And so
the question is, look, if unemployment isn't moving up at
this point in time, which last summer it was, we
had seen it move from about three and a half
up to four point two percent. Hence the concern if
(07:08):
unemployment isn't moving up, but inflation is showing signs of
moving up, and there are still some concerns that unemployment
may move up in the future, how do you talk
about that in a way that convinces any one of anything.
It's not an enviable position to be in, Paul.
Speaker 3 (07:25):
No, Ultimately, it's such a difficult position, and I'm sure
we're gonna get very little commentary that is significant. Maybe
I could be proven wrong, but ultimately, if I'm sitting
in his shoes, there is no reason to take one
hard stance one way or another, because ultimately we're still
(07:46):
trying to digest the full economic impact from the policies
that were put into place in April, and what we've
learned over the course of the last three or four
months or so is that it is unclear yet the
impact of tariffs. Perhaps it will be very muted and
there won't be much in the way of impact. There's
also a counter argument to say that there was a
(08:07):
front loading impact of imports and we haven't seen the
full effect of them. So from a monetary policy standpoint,
it's hard to make a declaration one way or another.
There are so many things that are in flux the
labor market. If you want to sit and make the
argument it's in a good place. You can outline all
the pieces. You said, four point two percent unemployment, nothing's
changed over a year. If you want to go the
(08:29):
other way, oh, continuing claims for extended period times, unemployment
that has ticked up, hiring has slowed, things like that.
There is just no clear direction on either of these things.
So your best bet kind of kick the can down
the road a little bit and see what the fall
has to bring.
Speaker 2 (08:47):
I have all kinds of thoughts as to where Jay
Powell may go with this, because, on one hand, if
there's one thing that you can point to for Powell
and the Fed under his watch, they've generally acted with
a doubvish bias when faced with questions of what to do.
Last year when they started cutting interest rates, Okay, do
(09:08):
you need to cut by half a percent? You know,
to kick that off. Not necessarily, but they did back
in twenty twenty two when inflation was ratcheting up. They
moved really slowly at first. I still remember they raised
rates of quarter percent in March, and Powell was you know, all, hey,
we don't want to move faster because this Russian invasion
of Ukraine might alter you know, the balance and blot guys.
(09:31):
It's you know, the oil supplies are going to be
disrupted and commodities are going to be disrupted, and you
think that that's going to be good for inflation? Like no,
like you guys got to speed up. In late twenty eighteen,
when faced with questions as to the runoff of the
FED balance sheet, Powell said, nope, we're on autopilot. And
(09:52):
then a little bit later had to pivot and there
were no more rate hikes and that was it because
he didn't want to deal with a any any volatility
in the bond market. So I think that when I
look at Powell, there's one side of me that says, hey,
Powell has generally always aired on the douvish side of things.
(10:15):
You know, I think he wants to be hawkish, but
his actual behavior tends to be more dovish more than
anything else. So there's part of me that says, okay,
like he's gonna tea things up on that side. But
you've obviously got the relationship with President Trump, which I
think at this point you can say is not ideal.
(10:36):
It's not an ideal working relationship between the two of them.
I don't think there's there's much love lost between the
two and so part of me looks at that and says, Okay,
if there's another thing that Jay Powell's done over the
course of this year shorter timeframe, he wants to maintain
the idea of FED independence, Definitely, and is there any
better way to maintain the idea of FED independence than
(10:57):
at Jackson Hole, saying I mean again, I don't think
he'll do this, but he in theory could say, hey, look,
we've got inflation ratcheting up right now, unemployment is still
at or near historic lows. You guys are lucky we're
not hiking today. I don't think he'll do that, But like,
if he really wanted to go that route, that's where
(11:19):
he could go. What is he ultimately going to end
up saying here? Probably more of what we've heard for
the last couple of years, which is where data dependent
will go where the data tells us. Right now, we're
still trying to analyze the risks and as they evolve,
we'll do what we need to do. I don't think
he's really going to throw a major bone to either
(11:39):
the Hawks or Doves just because I think he wants
to keep his options open for the fall, because quite honestly,
I don't think he really knows exactly what we're going
to see over the next few months.
Speaker 3 (11:50):
None of us.
Speaker 2 (11:50):
Two. Let's take a quick break here. When we come back,
we've got trivia and we're talking lows earnings.
Speaker 1 (11:56):
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Speaker 4 (12:36):
Now it's a great time to register for the dav
five K taking place Saturday November eighth that Fort Independence
on Castle Island. Theresa has sold out each of the
past four years, and slots are continuing to fill up quickly,
so don't delay. Visit DAV five k dot Boston and
reserve your spot, or join our team here at the
(12:56):
Financial Exchange by registering under team TFE. That's Saturday, November
eighth for this year's DAV five K. Sign up now
at DAV five k dot Boston. Time for trivia here
in the Financial Exchange. Going to continue our World War
two trivia question theme here this month and our look
at famous leaders will continue today. Trivia question who is
(13:19):
the Supreme Commander of the Allied Forces in Europe?
Speaker 2 (13:23):
Once again?
Speaker 4 (13:23):
Who is the Supreme Commander of the Allied Forces in Europe?
Be the fourth person today to text us at six
one seven three six two thirteen eighty five with correct answer,
and you win a Financial Exchange Show T shirt once again.
The fourth correct response to text us to the number
six one seven three six two thirteen eighty five will
(13:45):
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (13:50):
Paul, we had Low's report earnings before the bell Today?
Are there stocks staring to new highs as a result?
See what I did there? Yes, those hies.
Speaker 3 (14:02):
If you will here you it is up. It was
up three percent earlier in trading, but looks like it's
only up about close to one percent at the moment.
This was a pretty good quarter from Loew's, Chuck. We
saw them come in and beat on earnings. They anticipate
that the full year fiscal sales will range from eighty
(14:23):
four and a half to eighty five and a half billion.
That's up from previous forecasts. And they also made an
acquisition in the home professional space, purchasing foundation building materials
for eight point eight billion. This is off the heels
of them also purchasing Arson Design Group earlier this year,
(14:43):
and really reiterates between Low's and Home Depot. There's been
a tremendous amount of focus on building out the professional
contractor space. If you look at the total sales from
Home Depot we covered their earnings the other day, about
fifty five percent of their sales are two professional contractors.
They've done a tremendous amount of investment in building out
that space. There seems to be sort of the thought
(15:05):
that that business is, you know, the ticket items are
going to be bigger, but also a little bit more
resilient and less fickle than the typical do it yourself
for who might push back some products. Lows the way
that they make up their sales, they're only about thirty
percent pros, seventy percent the typical, you know, regular weekend
joe do it yourself. So that was some of the
(15:26):
bigger takeaways is Low's also having this focus on trying
to build out its professional contractor side of things, but
from an income perspective, earnings things like that. Overall, relatively
good quarter from Lows. They echo some of the similar
trends that Home Depot said that, you know, the home
improvement demand we've talked about the real estate market is weaker,
(15:47):
but they still came in with, you know, pretty solid
sales growth.
Speaker 2 (15:50):
Here, let's talk a little bit about this piece from Barons.
The headline on it is newbie investors are taking more
risks than experienced one survey fines. This is from Fidelity's
first ever State of the American Investors study. They released
this on Tuesday, and they surveyed about two thousand American
(16:11):
adults with twenty five thousand dollars or more of investable assets.
They split respondents into three groups. Those who have fewer
than five years of investing experience those with six to
ten of those with eleven or more, and what they
saw was that novice investors tended to be more confident
(16:33):
than their experienced peers. Fifty six percent believed that their
portfolios would perform better next year, compared with thirty four
percent of season investors. And investing novices also had higher
risk tolerances, with eighteen percent saying they were pursuing quote
risk on strategies. And it's tough to tell if there's
any meat here, just because this is the first time
(16:54):
Fidelity has done this, so you can't compare it to
prior studies or prior generations or anything like that. But
I think in general it's not surprising to me that
newer investors tend to be more confident, probably wrongly so
either A like you think about investors over the last
(17:15):
fifteen years in general, if you just started investing recently,
you've basically only seen you know, secular bull markets in
the United States. You haven't seen any kind of long
term bear market in quite a while. If you're new
to investing, so you've probably done pretty decently. The other
piece is, look, I remember when you know I was
starting out, I know, heard an idea from someone about,
(17:38):
you know, investing, and I'd be like, oh, yeah, like
that's it, Like I'm a genius. I'm gonna be able
to do this, and like I'll just wait for it
to compound and do this and that and then lo
and behold, Hey, it didn't work out all the time.
And it's like, oh, so it doesn't just work like that.
So I'm not surprised by the results of this. No.
Speaker 3 (17:54):
It echoes the conversation we had on the show yesterday,
where early on, you're willing to take more risks, you
want a higher reward, you want to double your five
hundred bucks that you put in versus the older investor
has a lot more capital. They want to protect that more.
And when you're early on investing, you hear something at
a bar, or you bump into somebody that has an idea,
(18:16):
and just like you were saying, oh, that sounds great,
I'll invest in it, and the greed sort of lights
up that you'll be able to double your money or
whatever the case. Sure, maybe the interesting thing that I
found from the study and you learn the hard way,
but that's not the case, is that sixty four percent
of investors thought that they would match or exceed their
performance from last year. But fifty percent of investors think
that the market is going to perform worse than last year,
(18:39):
which is sort of a I'm gonna do great, but
the market is going to go down. An experienced investor
would tell you good luck beating the market by that
significance of a sum. It is dang near and possible
to do.
Speaker 2 (18:55):
If it were that easy to do consistently, you could
probably make more money by managing other people's money than
doing it just for yourself, which is why it's really
hard for even experienced investment managers to do that. It's
what works for you one year can get you absolutely
bludge in the next year or next week. You just
(19:17):
don't know. Case in point. Look at anything related to
AI last week versus this week, like you just don't
know what you're gonna get. Quick break here. When we
come back, we've got the Trivia Answer and Wall Street Watch.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:00):
Well. The selloff in the tech sector is escalating today,
although not as bad as about an hour ago, is
traders react to more retailer earnings. Wall Street does also
waiting minutes from the FEDS July meeting, due out at
two o'clock this afternoon. Right now, the Dow is up
modestly by twenty two points, SMP five hundred is down
nearly half a percent, or twenty nine points, and the
(20:22):
Nasdaq now down one percent or two hundred and eight points.
Russell two thousand is off by nearly seven tenths of
one percent. Ten year Treasure reeled down one basis point
at four point two nine to one percent. In crude
oil up one percent higher today, trading at sixty three
dollars a barrel. Target down by seven percent after the
retailer posted its eleventh straight quarter of flat or falling sales.
(20:47):
The company noted improving quarterly traffic in sales trends, but
also noted terrorf related in other cost pressures and challenging
retail conditions. However, the bigger news from Target is the
appointment of COO Michael Fidelki as its next CEO, succeeding
Brian Cornell. Meanwhile, Lows boosted its annual outlook after beating
(21:08):
earnings forecast for the second quarter. The Home improvement of
retailer also announced it agreed to buy distributor Foundation building
materials for eight point eight billion dollars a low stock
is up modestly. Another retailer in TJX, seeing gains of
three percent after the TJ Max and Home Goods parent
company lifted its annual profit forecast after reporting better than
(21:29):
expected second quarter results where consumers flocked to discount stores
in search of deals elsewhere. CNBC reporting that Intel is
in talks with other large investors to receive an equity
infusion at a discounted price. Intel is down by six
percent after its recent skid pall Andeer shares a down
over five percent now, bringing its total losses over the
(21:53):
last five sessions to about eighteen percent. And car rental
company Hurts seeing a gain of about five percent after
announced it will begin selling use cars on Amazon Autos
in four different cities as soon as today, and we'll
expand to forty five locations nationwide. I'm Tucker Silva and
that is Wall Street Watch. And in the previous segment,
(22:15):
we asked you the trivia question who is the Supreme
Commander of the Allied Forces in Europe? That would be
Dwight D. Eisenhower. Michael from Longmeadow, Mass is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to Michael,
and we play trivia every day here in the Financial
Exchange See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:37):
Piece here from market Watch whether Russell two thousand has
a real chance to beat the S and P five hundred. Finally,
so here's what gets outlined in this piece. Small caps
are cheap relative to large caps. Okay, they've been cheap
for twenty years. Who cares. Valuation is not a reason
(22:59):
for something to move up or down.
Speaker 3 (23:02):
Yeah, I love talking about this piece. Not specific to
whether or not Russell two thousand is a good bet
right now, but more this common rhetoric with portfolio construction
was has always been, going back to studies done in
the eighties that are, and the inception of the Russell
(23:22):
two thousand that came off this study, was that you
needed small caps in your portfolio because yes, they'd be
more volatile over time, but they would outperform their larger
cap peers.
Speaker 2 (23:31):
And the idea of the small cap premium exactly.
Speaker 3 (23:34):
And so when we're talking about small caps, we're talking
about smaller sized company. Large caps would be the big
ones that we talk about every single day. But if
you look at the performance of the S and P
five hundred compared to that of the Russell two thousand,
the S and P has crushed it ten years, fifteen years,
twenty years, and even if you go back since inception,
the S and P five hundred now is better performing
(23:57):
from a total return standpoint than the Russell two thousand.
I just wonder recently, I've questioned that theory myself, that
the market conditions have changed dramatically, where the quality of
the companies in the Russell two thousand they tend to
be not profitable, they tend to be heavily leveraged. And
you can say that this is just a point in
(24:18):
time where interest rates are a little bit higher, but
also you have a private equity market that can keep
these companies longer private, for much longer than they could previously.
So I just wonder if that paradigm shift really is
still something that should be taken as just true fact
as when you do portfolio construction.
Speaker 2 (24:38):
This is not physics here. It's something where market conditions
are always evolving. Economic conditions are always evolving. And though
there are some truths that you can come back to
that you should at least pay attention to, generally you
never get the exact same response all the time on
the same timeline, simply because things are always a little
(24:58):
different than they were four and just because something might
have even lasted for twenty thirty forty years doesn't mean
it's gonna last for the next twenty thirty forty I
remember back in you know, around two thousand and five,
all people wanted to buy were emerging market stocks because
they've been absolutely you know, bludgeoning US equities on a
relative basis. It was all about Brazil and China and
(25:19):
India and Russia. And now you look at performance for
the last twenty years and you're like, ooh, like, I
hope I didn't continue doing that, because it completely reversed it.
I mean, you look at Chinese markets for the last
twenty years, they're basically flat. Like it's it's just just
because something worked for even a decade or two doesn't
(25:39):
mean it's gonna work for the next couple.
Speaker 3 (25:41):
I was reading something. And this goes way back in
the nineteen fifties. They used to have to pay a
higher divin and yield on stocks for people to own
them because of the risk that went with them over bonds. Yeah,
and now think about how counterintuitive that was when someone
was quoting the piece saying it will change. It's never
It's never changed since really, I mean stocks just there's
some divid in pay out there, but it's not that
(26:01):
same in balance that you had previously.
Speaker 4 (26:03):
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Speaker 2 (27:00):
All right, we got to talk a little bit about
data centers here because this is absolutely going to be
just a massive story over the next couple of years.
And we're not going to talk about whether AI is
good or bad, because I don't know, it's both. We
cover that enough about like whether we like AI or don't.
This is specifically about the economics and feasibility of the
(27:22):
massive scale in data center construction that we're seeing right now.
So if you go back and look at twenty fourteen
in the United States, in twenty fourteen, data centers used
about one percent of all US electricity. It's not very much.
One in every one hundred watts, vaults, whatever you want
to measure it in was used. It would probably be
(27:43):
wats or a lot hours, but anyways, those were one
percent of all electricity usage in the US. Was data
centers today with the expansion that we've seen in particular
over the last five years. It's up to around four
point four percent. Okay, that's a you know, or fold increase,
but sure, we can figure this out. The projections are
(28:05):
that by twenty twenty eight, three years from now, you're
going to be around twelve percent of all electricity usage
in the US is from data centers. And here's the
problem is that we do not build enough new capacity
on the power generation side to be able to power
all of these data centers as cheaply as we're powering
them today. And so what you are already starting to
(28:28):
see are significant increases in the price of electricity because
you have these data centers now competing with you know,
residential homes for the same power. And if you know
anyone who works in the business of developing power generation,
they'll tell you that it sucks. It takes quite literally
(28:52):
eight to twelve years from start to finish to get
a project moving approved, you know, all the regular quatory
approvals and everything constructed and then hooked up to the
interconnection and data centers. On the other hand, it doesn't
take that long. It can be a year or two
from you know, start to finish, and so what we
(29:13):
have here is going to be a huge mismatch between
electricity supply and demand. And you're already starting to see
this years and some of this year and some of
the interconnection auctions for wholesale electricity prices. You're seeing double
and even in some cases triple digit price increases on
the wholesale market that are eventually going to have to
(29:35):
get through to the end buyer just because the interconnection
can't eat all of those costs. And so I gotta
tell you there's a real problem here because you can't
develop electricity generation quickly enough in the US to keep
up with this. And this is going to absolutely be
(29:56):
a major political battle over the next two to three years,
is too how do we manage electricity costs for all
of this AI slop that gets generated.
Speaker 3 (30:06):
The state of Virginia is a great example of They
have the most data centers out there. They have six
hundred data centers, and they use those data centers use
as much electricity as two million households. That's half of
the households in the state. Virginia took a very lack
stance on allowing for data centers to be built within
their state. But I can guarantee you if that you
were to ask any Virginia residents from electricity standpoint, the
(30:29):
total cost increase. I mean, we've all seen it. They're
feeling the burden of that. Plus there's also issues with
water consumption. There's a lot of negatives that can come
from the data center build out that I don't think
regular people would be as familiar with. It's really a
huge problem, and the grid is not equipped to handle it,
(30:51):
like you mentioned, and even more investment in the grid.
The way that the grid is structured, there's gonna need
to be other avenues that are utilized for this power generation,
and we're not anywhere close to being able to satisfy
the consumption need that's going to be here if AI
keeps trending the way it is, so data centers, like
you said, could be under huge scrutiny for development some
(31:13):
of these other states around the country.
Speaker 2 (31:15):
Quick break here when we come back. We got stack
rou Let.
Speaker 1 (31:20):
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Speaker 2 (32:02):
Paul, what do you got for me for stacks?
Speaker 3 (32:05):
Talk a little bit about some fast food joints you
called Chipotle? What do you call it? Fast casual?
Speaker 2 (32:12):
Fast casual?
Speaker 3 (32:13):
Little fast casual and fast food shatter here?
Speaker 2 (32:15):
How come there's no fast formal food category.
Speaker 3 (32:19):
I don't think you can have fast and formal.
Speaker 2 (32:22):
We're going to work on that.
Speaker 3 (32:24):
Chipotle is aiming to target college students, which is a
big percentage of their store can what would be store
visitors around college campuses. That's really where Chipotle has a
lot of their presence. They're trying to create a system
where college students can spend money at Chipotle and get
(32:46):
rewards bonuses that might get them a free burrito, but
also some dorm decord. They are going to tell me
they're going to be offering a collection of bean bag chairs,
doormats saying leave my Chipotle here. An embroidered pillar pillow
that says it's okay to be a little extra, so
(33:08):
some little Chipotle swag with those burrito purchases for those
kids going back to school here in September. That compares
with McDonald's strategy of keeping its value meals around. Big
Max had soared to big mcmeals had soared to eighteen
bucks in someplaces throughout the country. There's been this huge
focus by McDonald's to have their five dollar breakfast and
(33:31):
their value meals come back, and they just recently agreed
to have its US franchisees keep some of these combo
meals in place that are fifteen percent cheaper than the
sum of those individual parts together for the next six
months plus here because they've seen a lot of success there. Chipotle,
on the other hand, has been struggling. They have seen
(33:52):
a four percent drop in their same store sales, so
they're trying to reignite things. Chuck with a little bit
of dorm room decor for those burrito per fascinating.
Speaker 2 (34:02):
I don't think it's no more, you know, but you know,
just you don't want to. Yeah, when I'm in college,
I really wanted Chipotle doormat. That's really gonna get me
some like serious swag like, oh yeah, that's just great.
Speaker 3 (34:17):
You see the guy in the second floor, he's got
a Chipotle doormat.
Speaker 2 (34:20):
Yeah, I can't wait. Uh Walmart shrimp may have been
exposed to radioactive material, FDA says, So apparently this is
with regards to some shrimp out of Indonesia. The two
questions that I have are how did they get exposed
to radioactive material in why Indonesia? And number two, where
can I get some? This is how you turn into
(34:43):
shrimp man.
Speaker 3 (34:44):
Fried shrimp, nuclear shrimp.
Speaker 2 (34:47):
It's probably not a great eddie. I think it's what
did it say? Caesium is in there and that's not
stuff that you want to be anywhere near. So apparently
it was shrimp exported to I believe thirteen states.
Speaker 3 (34:57):
Thirteen states Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, Ohio, Oklahoma, Pennsylvania, Texas,
and West Virginia.
Speaker 2 (35:06):
Did you say Louisiana?
Speaker 3 (35:07):
Yes? I did.
Speaker 2 (35:08):
Why are we buying what kind of shrimp? Was it
Indonesian shrimp and sending it to Louisiana?
Speaker 3 (35:17):
Yes, frozen shrimp, But I believe.
Speaker 2 (35:18):
They have shrimp in Louisiana. I've been there a few times.
Why do we need to get frozen shrimp from Indonesia
and send it to like the shrimp capital of the
United States.
Speaker 3 (35:32):
Especially with tariffs in place, you think that they'd look
to uh Bubba Gump Shrimp to get their shrimp from
rather than going all the way over to Indonesia.
Speaker 2 (35:40):
I'm just saying, what are we doing here? New York
Times with a piece titled come one, Come On, buy
your TV subscriptions here, and it's talking about how Americans
now starting to sign up for multiple services through a
single provider instead of apps cable. It sounds like cobble,
I think, is how it's pronounced. But look, people want
(36:02):
things bundled because honestly, unbundled services are bad for everyone. Look,
we had a golden age of unbundling in the late
twenty tens because everyone underpriced their product and lost money
on it, which was great for us. But once companies
finally realize that, oh gee, we can't just lose money
forever on this, it's no longer great for us or
(36:24):
for them. And so what you find is that the
cable bundled despite having two hundred channels and you're like, well,
I only watch six of these. The fact is you
pay a cent a month for all of the ones
that you don't watch, and no one else watches. The
content providers still get the revenue from that. You really
don't pay anything more, and the stations that you do
(36:45):
want you get cheaper still because not everyone wants those. Either.
The highest cable rights fees out there ESPN, I don't
know what they are today. The last time I looked,
they were like eight to twelve dollars per month is
kind of where it was. But there's a reason why
ESPN on it's dedicated streaming apps, is more expensive than that,
and it's because not everyone watches ESPN. Even the most
(37:08):
watched football games of the year, the Super Bowl and
stuff like that. You get maybe half of Americans that
actually watch, and the other half subsidizes the whole thing,
but you subsidize them watching QBC, and so it all
works together so that you all get better deals and
the companies get revenues. So we're gonna head back to bundling.
(37:30):
It's just the worst part of this is that it's
gonna end up going through streaming instead of cable, which
By the way, streaming is just a less efficient transmission
mechanism for cable in terms of the amount of data
that you have to send back and forth. So we've
basically reinvented cable, but less efficient.
Speaker 3 (37:49):
Yes, and it's interesting. YouTube TV is kind of an
example of a company that came out really cheap on
the pricing front, but they're increasing their prices more and more.
To be I'm not saying that they're equal to cable,
but they're getting pretty close.
Speaker 2 (38:02):
It doesn't feel as fun as when it was forty
dollars a month now that it's.
Speaker 3 (38:05):
Eighty two exactly.
Speaker 2 (38:07):
But I digress. Markets remain negative, though not as bad
as they were earlier. There's still plenty of time in
the day, and don't worry, we're gonna be here tomorrow.
We'll recap what happened today and talk about a whole
bunch of new stuff then
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts, do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
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your own financial, tax, and estate planning advisors before making
(00:20):
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Exchange with Chuck Zada and Paul Lane, your exclusive look
at business and financial news affecting your day, your city,
(00:42):
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(01:05):
and Paul Lane.
Speaker 2 (01:08):
Well, let's Chuck and Paul and talker with you. And
stocks are down. The Dow Jones Industrial Average, which doesn't
have a lot of technology names, not many technology names
in it, down eighty two points, so not much less
than a quarter percent. But then you get to some
of the other indices which do have tech stocks in them,
(01:28):
and it's not ideal. Today. The SMP is down fifty
seven points, just shy of one percent. The NASDAK is
off one point seven percent, about three hundred and sixty
three points, so NASDAK off about three percent in the
last two days right now, which I think that based
on our conversations, we can point to as a modest
(01:48):
decline in stocks that is escalating towards a pullback, but
not there yet and still well short of a correction
and even further short of a bear market. But nonetheless
us we do have stocks selling off today and this
has been pretty consistent over the course of the morning
so far. Bonds, on the other hand, not really doing
(02:10):
a ton in either direction. A little bit of a
bid for them, with the ten year treasury down two
point one basis points to four point two eight one,
so a little bit happening on that side of things.
When we take a look at what's going on with
the commodities, the ones that people you know actually care about,
(02:30):
and notice, oil is up forty eight cents a barrel
to sixty two eighty three on West Texas intermedia, and
gold is up thirty three twenty one ounce to thirty
three ninety one and ninety cents. If you're big into
palladium and platinum, well, I don't know anything about them
other than the fact that they both start with P.
So there's that. And on mortgage rates, we're continuing to
(02:55):
see mortgage rates fluttering around that six and a half
to six six range right now, up one basis point
compared to yesterday. It's six point six percent on the
national average four thirty year fixed rate mortgages from Mortgage
News Daily. So overall, equities down, bonds not really moving.
Oil and gold up modestly is the story of the day.
(03:17):
The story of Friday is that Jay Powell is going
to climb out of a bat infested cabin in Jackson Hole.
Speaker 3 (03:25):
Hope he has nicer accommodations than that.
Speaker 2 (03:28):
Didn't you read the story last week? No, they had
to push back when they were going to be arriving
because the cabins had eight bats in them, and so
they had to push back the arrival date to make
sure that the bats were out. They tested them for rabies.
They all came back negative.
Speaker 4 (03:45):
Did they put sheets together like in Black Sheep and
try to push it out the door?
Speaker 2 (03:48):
It's it's unclear exactly. I mean, I don't think Jay
Powell does his own extermination. It doesn't really seem like
that's his thing.
Speaker 4 (03:58):
Not a handy guy.
Speaker 3 (04:00):
And they're they're scrutinizing the FED in terms of what
they're expending on their accommodation. So perhaps this is the
pivot here. They're now staying in bad infested cabins instead
of the million dollar expansion of the facility.
Speaker 2 (04:10):
I see Jay as being more of a gardener than
someone who does his own dry wall. But that's just me,
you know. I can see him walking in from outside
and saying, Chuck, take a look at these cherry tomatoes.
Do you see any signs of these? Do you see
any signs of inflation on these cherry tomatoes? No, whit,
because I've done an outstanding job, thank you. Uh So,
(04:34):
In any case, Jay Pollin and the gang. They are
out at Jackson Hole this week, and there's a piece
here from the Financial Times and it asked the question, look,
what first sentence, what should j Powell say about the
US economy when addressing the Jackson Hole symposium this week?
(04:55):
And again, this is something that happens every year, so
we have a little bit of a track record on,
you know, kind of how he's done on this. If
you want to look on the duvish side, look no
further than last year, when the statement was effectively, hey,
the balance of risks has changed and we need to
be prepared to respond appropriately given what they had been
seeing in the labor market at that time, which had
(05:17):
some concerns while the inflation rate was continuing to decline
over the course of last summer. So he said, look,
we need to be more dovish. The counter to this
is what we saw in twenty twenty two, when he basically,
you know, took a sledgehammer to the idea that the
FED was done, you know, raising rates and said, no,
(05:38):
we've still got some work to do and kicked off
another fifteen percent decline in stocks into October before they
finally bottomed in October of twenty twenty two. So the
question is at this point, look, you've got unemployment. Where
the unemployment rate and again this is the piece that matters,
is the unemployment rate currently sits at four point two
(05:59):
percent and has basically been pretty darn stagnant there over
the last year or so. I mean, you can make
it convince in case the job market has not materially
changed a ton over the last year. Again, right now,
if you go back a year ago, excuse me, the
unemployment rate in August of twenty twenty four four point
(06:23):
two percent, what is it today? Four point two percent?
That is no change on a statistical basis. This despite
the fact that the rate of job growth has slowed,
But it's also coincided with a point in time where
the number of people in the workforce that growth has
slowed as well. And the FED, with all the tools
(06:46):
they have at their disposal, they cannot put people into
the workforce. They can't do it. They don't have a
button they can push, that says ad worker. And so
the question is, look, if unemployment isn't moving up at
this point in time, which last summer it was, we
had seen it move from about three and a half
up to four point two percent. Hence the concern if
(07:08):
unemployment isn't moving up, but inflation is showing signs of
moving up, and there are still some concerns that unemployment
may move up in the future, how do you talk
about that in a way that convinces any one of anything.
It's not an enviable position to be in, Paul.
Speaker 3 (07:25):
No, Ultimately, it's such a difficult position, and I'm sure
we're gonna get very little commentary that is significant. Maybe
I could be proven wrong, but ultimately, if I'm sitting
in his shoes, there is no reason to take one
hard stance one way or another, because ultimately we're still
(07:46):
trying to digest the full economic impact from the policies
that were put into place in April, and what we've
learned over the course of the last three or four
months or so is that it is unclear yet the
impact of tariffs. Perhaps it will be very muted and
there won't be much in the way of impact. There's
also a counter argument to say that there was a
(08:07):
front loading impact of imports and we haven't seen the
full effect of them. So from a monetary policy standpoint,
it's hard to make a declaration one way or another.
There are so many things that are in flux the
labor market. If you want to sit and make the
argument it's in a good place. You can outline all
the pieces. You said, four point two percent unemployment, nothing's
changed over a year. If you want to go the
(08:29):
other way, oh, continuing claims for extended period times, unemployment
that has ticked up, hiring has slowed, things like that.
There is just no clear direction on either of these things.
So your best bet kind of kick the can down
the road a little bit and see what the fall
has to bring.
Speaker 2 (08:47):
I have all kinds of thoughts as to where Jay
Powell may go with this, because, on one hand, if
there's one thing that you can point to for Powell
and the Fed under his watch, they've generally acted with
a doubvish bias when faced with questions of what to do.
Last year when they started cutting interest rates, Okay, do
(09:08):
you need to cut by half a percent? You know,
to kick that off. Not necessarily, but they did back
in twenty twenty two when inflation was ratcheting up. They
moved really slowly at first. I still remember they raised
rates of quarter percent in March, and Powell was you know, all, hey,
we don't want to move faster because this Russian invasion
of Ukraine might alter you know, the balance and blot guys.
(09:31):
It's you know, the oil supplies are going to be
disrupted and commodities are going to be disrupted, and you
think that that's going to be good for inflation? Like no,
like you guys got to speed up. In late twenty eighteen,
when faced with questions as to the runoff of the
FED balance sheet, Powell said, nope, we're on autopilot. And
(09:52):
then a little bit later had to pivot and there
were no more rate hikes and that was it because
he didn't want to deal with a any any volatility
in the bond market. So I think that when I
look at Powell, there's one side of me that says, hey,
Powell has generally always aired on the douvish side of things.
(10:15):
You know, I think he wants to be hawkish, but
his actual behavior tends to be more dovish more than
anything else. So there's part of me that says, okay,
like he's gonna tea things up on that side. But
you've obviously got the relationship with President Trump, which I
think at this point you can say is not ideal.
(10:36):
It's not an ideal working relationship between the two of them.
I don't think there's there's much love lost between the
two and so part of me looks at that and says, Okay,
if there's another thing that Jay Powell's done over the
course of this year shorter timeframe, he wants to maintain
the idea of FED independence, Definitely, and is there any
better way to maintain the idea of FED independence than
(10:57):
at Jackson Hole, saying I mean again, I don't think
he'll do this, but he in theory could say, hey, look,
we've got inflation ratcheting up right now, unemployment is still
at or near historic lows. You guys are lucky we're
not hiking today. I don't think he'll do that, But like,
if he really wanted to go that route, that's where
(11:19):
he could go. What is he ultimately going to end
up saying here? Probably more of what we've heard for
the last couple of years, which is where data dependent
will go where the data tells us. Right now, we're
still trying to analyze the risks and as they evolve,
we'll do what we need to do. I don't think
he's really going to throw a major bone to either
(11:39):
the Hawks or Doves just because I think he wants
to keep his options open for the fall, because quite honestly,
I don't think he really knows exactly what we're going
to see over the next few months.
Speaker 3 (11:50):
None of us.
Speaker 2 (11:50):
Two. Let's take a quick break here. When we come back,
we've got trivia and we're talking lows earnings.
Speaker 1 (11:56):
After that, 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
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(12:17):
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Speaker 4 (12:36):
Now it's a great time to register for the dav
five K taking place Saturday November eighth that Fort Independence
on Castle Island. Theresa has sold out each of the
past four years, and slots are continuing to fill up quickly,
so don't delay. Visit DAV five k dot Boston and
reserve your spot, or join our team here at the
(12:56):
Financial Exchange by registering under team TFE. That's Saturday, November
eighth for this year's DAV five K. Sign up now
at DAV five k dot Boston. Time for trivia here
in the Financial Exchange. Going to continue our World War
two trivia question theme here this month and our look
at famous leaders will continue today. Trivia question who is
(13:19):
the Supreme Commander of the Allied Forces in Europe?
Speaker 2 (13:23):
Once again?
Speaker 4 (13:23):
Who is the Supreme Commander of the Allied Forces in Europe?
Be the fourth person today to text us at six
one seven three six two thirteen eighty five with correct answer,
and you win a Financial Exchange Show T shirt once again.
The fourth correct response to text us to the number
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(13:45):
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (13:50):
Paul, we had Low's report earnings before the bell Today?
Are there stocks staring to new highs as a result?
See what I did there? Yes, those hies.
Speaker 3 (14:02):
If you will here you it is up. It was
up three percent earlier in trading, but looks like it's
only up about close to one percent at the moment.
This was a pretty good quarter from Loew's, Chuck. We
saw them come in and beat on earnings. They anticipate
that the full year fiscal sales will range from eighty
(14:23):
four and a half to eighty five and a half billion.
That's up from previous forecasts. And they also made an
acquisition in the home professional space, purchasing foundation building materials
for eight point eight billion. This is off the heels
of them also purchasing Arson Design Group earlier this year,
(14:43):
and really reiterates between Low's and Home Depot. There's been
a tremendous amount of focus on building out the professional
contractor space. If you look at the total sales from
Home Depot we covered their earnings the other day, about
fifty five percent of their sales are two professional contractors.
They've done a tremendous amount of investment in building out
that space. There seems to be sort of the thought
(15:05):
that that business is, you know, the ticket items are
going to be bigger, but also a little bit more
resilient and less fickle than the typical do it yourself
for who might push back some products. Lows the way
that they make up their sales, they're only about thirty
percent pros, seventy percent the typical, you know, regular weekend
joe do it yourself. So that was some of the
(15:26):
bigger takeaways is Low's also having this focus on trying
to build out its professional contractor side of things, but
from an income perspective, earnings things like that. Overall, relatively
good quarter from Lows. They echo some of the similar
trends that Home Depot said that, you know, the home
improvement demand we've talked about the real estate market is weaker,
(15:47):
but they still came in with, you know, pretty solid
sales growth.
Speaker 2 (15:50):
Here, let's talk a little bit about this piece from Barons.
The headline on it is newbie investors are taking more
risks than experienced one survey fines. This is from Fidelity's
first ever State of the American Investors study. They released
this on Tuesday, and they surveyed about two thousand American
(16:11):
adults with twenty five thousand dollars or more of investable assets.
They split respondents into three groups. Those who have fewer
than five years of investing experience those with six to
ten of those with eleven or more, and what they
saw was that novice investors tended to be more confident
(16:33):
than their experienced peers. Fifty six percent believed that their
portfolios would perform better next year, compared with thirty four
percent of season investors. And investing novices also had higher
risk tolerances, with eighteen percent saying they were pursuing quote
risk on strategies. And it's tough to tell if there's
any meat here, just because this is the first time
(16:54):
Fidelity has done this, so you can't compare it to
prior studies or prior generations or anything like that. But
I think in general it's not surprising to me that
newer investors tend to be more confident, probably wrongly so
either A like you think about investors over the last
(17:15):
fifteen years in general, if you just started investing recently,
you've basically only seen you know, secular bull markets in
the United States. You haven't seen any kind of long
term bear market in quite a while. If you're new
to investing, so you've probably done pretty decently. The other
piece is, look, I remember when you know I was
starting out, I know, heard an idea from someone about,
(17:38):
you know, investing, and I'd be like, oh, yeah, like
that's it, Like I'm a genius. I'm gonna be able
to do this, and like I'll just wait for it
to compound and do this and that and then lo
and behold, Hey, it didn't work out all the time.
And it's like, oh, so it doesn't just work like that.
So I'm not surprised by the results of this. No.
Speaker 3 (17:54):
It echoes the conversation we had on the show yesterday,
where early on, you're willing to take more risks, you
want a higher reward, you want to double your five
hundred bucks that you put in versus the older investor
has a lot more capital. They want to protect that more.
And when you're early on investing, you hear something at
a bar, or you bump into somebody that has an idea,
(18:16):
and just like you were saying, oh, that sounds great,
I'll invest in it, and the greed sort of lights
up that you'll be able to double your money or
whatever the case. Sure, maybe the interesting thing that I
found from the study and you learn the hard way,
but that's not the case, is that sixty four percent
of investors thought that they would match or exceed their
performance from last year. But fifty percent of investors think
that the market is going to perform worse than last year,
(18:39):
which is sort of a I'm gonna do great, but
the market is going to go down. An experienced investor
would tell you good luck beating the market by that
significance of a sum. It is dang near and possible
to do.
Speaker 2 (18:55):
If it were that easy to do consistently, you could
probably make more money by managing other people's money than
doing it just for yourself, which is why it's really
hard for even experienced investment managers to do that. It's
what works for you one year can get you absolutely
bludge in the next year or next week. You just
(19:17):
don't know. Case in point. Look at anything related to
AI last week versus this week, like you just don't
know what you're gonna get. Quick break here. When we
come back, we've got the Trivia Answer and Wall Street Watch.
Speaker 1 (19:40):
Bringing the latest financial news straight to your radio. Every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:00):
Well. The selloff in the tech sector is escalating today,
although not as bad as about an hour ago, is
traders react to more retailer earnings. Wall Street does also
waiting minutes from the FEDS July meeting, due out at
two o'clock this afternoon. Right now, the Dow is up
modestly by twenty two points, SMP five hundred is down
nearly half a percent, or twenty nine points, and the
(20:22):
Nasdaq now down one percent or two hundred and eight points.
Russell two thousand is off by nearly seven tenths of
one percent. Ten year Treasure reeled down one basis point
at four point two nine to one percent. In crude
oil up one percent higher today, trading at sixty three
dollars a barrel. Target down by seven percent after the
retailer posted its eleventh straight quarter of flat or falling sales.
(20:47):
The company noted improving quarterly traffic in sales trends, but
also noted terrorf related in other cost pressures and challenging
retail conditions. However, the bigger news from Target is the
appointment of COO Michael Fidelki as its next CEO, succeeding
Brian Cornell. Meanwhile, Lows boosted its annual outlook after beating
(21:08):
earnings forecast for the second quarter. The Home improvement of
retailer also announced it agreed to buy distributor Foundation building
materials for eight point eight billion dollars a low stock
is up modestly. Another retailer in TJX, seeing gains of
three percent after the TJ Max and Home Goods parent
company lifted its annual profit forecast after reporting better than
(21:29):
expected second quarter results where consumers flocked to discount stores
in search of deals elsewhere. CNBC reporting that Intel is
in talks with other large investors to receive an equity
infusion at a discounted price. Intel is down by six
percent after its recent skid pall Andeer shares a down
over five percent now, bringing its total losses over the
(21:53):
last five sessions to about eighteen percent. And car rental
company Hurts seeing a gain of about five percent after
announced it will begin selling use cars on Amazon Autos
in four different cities as soon as today, and we'll
expand to forty five locations nationwide. I'm Tucker Silva and
that is Wall Street Watch. And in the previous segment,
(22:15):
we asked you the trivia question who is the Supreme
Commander of the Allied Forces in Europe? That would be
Dwight D. Eisenhower. Michael from Longmeadow, Mass is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to Michael,
and we play trivia every day here in the Financial
Exchange See complete contest rules at Financial Exchange Show dot com.
Speaker 2 (22:37):
Piece here from market Watch whether Russell two thousand has
a real chance to beat the S and P five hundred. Finally,
so here's what gets outlined in this piece. Small caps
are cheap relative to large caps. Okay, they've been cheap
for twenty years. Who cares. Valuation is not a reason
(22:59):
for something to move up or down.
Speaker 3 (23:02):
Yeah, I love talking about this piece. Not specific to
whether or not Russell two thousand is a good bet
right now, but more this common rhetoric with portfolio construction
was has always been, going back to studies done in
the eighties that are, and the inception of the Russell
(23:22):
two thousand that came off this study, was that you
needed small caps in your portfolio because yes, they'd be
more volatile over time, but they would outperform their larger
cap peers.
Speaker 2 (23:31):
And the idea of the small cap premium exactly.
Speaker 3 (23:34):
And so when we're talking about small caps, we're talking
about smaller sized company. Large caps would be the big
ones that we talk about every single day. But if
you look at the performance of the S and P
five hundred compared to that of the Russell two thousand,
the S and P has crushed it ten years, fifteen years,
twenty years, and even if you go back since inception,
the S and P five hundred now is better performing
(23:57):
from a total return standpoint than the Russell two thousand.
I just wonder recently, I've questioned that theory myself, that
the market conditions have changed dramatically, where the quality of
the companies in the Russell two thousand they tend to
be not profitable, they tend to be heavily leveraged. And
you can say that this is just a point in
(24:18):
time where interest rates are a little bit higher, but
also you have a private equity market that can keep
these companies longer private, for much longer than they could previously.
So I just wonder if that paradigm shift really is
still something that should be taken as just true fact
as when you do portfolio construction.
Speaker 2 (24:38):
This is not physics here. It's something where market conditions
are always evolving. Economic conditions are always evolving. And though
there are some truths that you can come back to
that you should at least pay attention to, generally you
never get the exact same response all the time on
the same timeline, simply because things are always a little
(24:58):
different than they were four and just because something might
have even lasted for twenty thirty forty years doesn't mean
it's gonna last for the next twenty thirty forty I
remember back in you know, around two thousand and five,
all people wanted to buy were emerging market stocks because
they've been absolutely you know, bludgeoning US equities on a
relative basis. It was all about Brazil and China and
(25:19):
India and Russia. And now you look at performance for
the last twenty years and you're like, ooh, like, I
hope I didn't continue doing that, because it completely reversed it.
I mean, you look at Chinese markets for the last
twenty years, they're basically flat. Like it's it's just just
because something worked for even a decade or two doesn't
(25:39):
mean it's gonna work for the next couple.
Speaker 3 (25:41):
I was reading something. And this goes way back in
the nineteen fifties. They used to have to pay a
higher divin and yield on stocks for people to own
them because of the risk that went with them over bonds. Yeah,
and now think about how counterintuitive that was when someone
was quoting the piece saying it will change. It's never
It's never changed since really, I mean stocks just there's
some divid in pay out there, but it's not that
(26:01):
same in balance that you had previously.
Speaker 4 (26:03):
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Speaker 2 (27:00):
All right, we got to talk a little bit about
data centers here because this is absolutely going to be
just a massive story over the next couple of years.
And we're not going to talk about whether AI is
good or bad, because I don't know, it's both. We
cover that enough about like whether we like AI or don't.
This is specifically about the economics and feasibility of the
(27:22):
massive scale in data center construction that we're seeing right now.
So if you go back and look at twenty fourteen
in the United States, in twenty fourteen, data centers used
about one percent of all US electricity. It's not very much.
One in every one hundred watts, vaults, whatever you want
to measure it in was used. It would probably be
(27:43):
wats or a lot hours, but anyways, those were one
percent of all electricity usage in the US. Was data
centers today with the expansion that we've seen in particular
over the last five years. It's up to around four
point four percent. Okay, that's a you know, or fold increase,
but sure, we can figure this out. The projections are
(28:05):
that by twenty twenty eight, three years from now, you're
going to be around twelve percent of all electricity usage
in the US is from data centers. And here's the
problem is that we do not build enough new capacity
on the power generation side to be able to power
all of these data centers as cheaply as we're powering
them today. And so what you are already starting to
(28:28):
see are significant increases in the price of electricity because
you have these data centers now competing with you know,
residential homes for the same power. And if you know
anyone who works in the business of developing power generation,
they'll tell you that it sucks. It takes quite literally
(28:52):
eight to twelve years from start to finish to get
a project moving approved, you know, all the regular quatory
approvals and everything constructed and then hooked up to the
interconnection and data centers. On the other hand, it doesn't
take that long. It can be a year or two
from you know, start to finish, and so what we
(29:13):
have here is going to be a huge mismatch between
electricity supply and demand. And you're already starting to see
this years and some of this year and some of
the interconnection auctions for wholesale electricity prices. You're seeing double
and even in some cases triple digit price increases on
the wholesale market that are eventually going to have to
(29:35):
get through to the end buyer just because the interconnection
can't eat all of those costs. And so I gotta
tell you there's a real problem here because you can't
develop electricity generation quickly enough in the US to keep
up with this. And this is going to absolutely be
(29:56):
a major political battle over the next two to three years,
is too how do we manage electricity costs for all
of this AI slop that gets generated.
Speaker 3 (30:06):
The state of Virginia is a great example of They
have the most data centers out there. They have six
hundred data centers, and they use those data centers use
as much electricity as two million households. That's half of
the households in the state. Virginia took a very lack
stance on allowing for data centers to be built within
their state. But I can guarantee you if that you
were to ask any Virginia residents from electricity standpoint, the
(30:29):
total cost increase. I mean, we've all seen it. They're
feeling the burden of that. Plus there's also issues with
water consumption. There's a lot of negatives that can come
from the data center build out that I don't think
regular people would be as familiar with. It's really a
huge problem, and the grid is not equipped to handle it,
(30:51):
like you mentioned, and even more investment in the grid.
The way that the grid is structured, there's gonna need
to be other avenues that are utilized for this power generation,
and we're not anywhere close to being able to satisfy
the consumption need that's going to be here if AI
keeps trending the way it is, so data centers, like
you said, could be under huge scrutiny for development some
(31:13):
of these other states around the country.
Speaker 2 (31:15):
Quick break here when we come back. We got stack
rou Let.
Speaker 1 (31:20):
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(31:41):
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Speaker 2 (32:02):
Paul, what do you got for me for stacks?
Speaker 3 (32:05):
Talk a little bit about some fast food joints you
called Chipotle? What do you call it? Fast casual?
Speaker 2 (32:12):
Fast casual?
Speaker 3 (32:13):
Little fast casual and fast food shatter here?
Speaker 2 (32:15):
How come there's no fast formal food category.
Speaker 3 (32:19):
I don't think you can have fast and formal.
Speaker 2 (32:22):
We're going to work on that.
Speaker 3 (32:24):
Chipotle is aiming to target college students, which is a
big percentage of their store can what would be store
visitors around college campuses. That's really where Chipotle has a
lot of their presence. They're trying to create a system
where college students can spend money at Chipotle and get
(32:46):
rewards bonuses that might get them a free burrito, but
also some dorm decord. They are going to tell me
they're going to be offering a collection of bean bag chairs,
doormats saying leave my Chipotle here. An embroidered pillar pillow
that says it's okay to be a little extra, so
(33:08):
some little Chipotle swag with those burrito purchases for those
kids going back to school here in September. That compares
with McDonald's strategy of keeping its value meals around. Big
Max had soared to big mcmeals had soared to eighteen
bucks in someplaces throughout the country. There's been this huge
focus by McDonald's to have their five dollar breakfast and
(33:31):
their value meals come back, and they just recently agreed
to have its US franchisees keep some of these combo
meals in place that are fifteen percent cheaper than the
sum of those individual parts together for the next six
months plus here because they've seen a lot of success there. Chipotle,
on the other hand, has been struggling. They have seen
(33:52):
a four percent drop in their same store sales, so
they're trying to reignite things. Chuck with a little bit
of dorm room decor for those burrito per fascinating.
Speaker 2 (34:02):
I don't think it's no more, you know, but you know,
just you don't want to. Yeah, when I'm in college,
I really wanted Chipotle doormat. That's really gonna get me
some like serious swag like, oh yeah, that's just great.
Speaker 3 (34:17):
You see the guy in the second floor, he's got
a Chipotle doormat.
Speaker 2 (34:20):
Yeah, I can't wait. Uh Walmart shrimp may have been
exposed to radioactive material, FDA says, So apparently this is
with regards to some shrimp out of Indonesia. The two
questions that I have are how did they get exposed
to radioactive material in why Indonesia? And number two, where
can I get some? This is how you turn into
(34:43):
shrimp man.
Speaker 3 (34:44):
Fried shrimp, nuclear shrimp.
Speaker 2 (34:47):
It's probably not a great eddie. I think it's what
did it say? Caesium is in there and that's not
stuff that you want to be anywhere near. So apparently
it was shrimp exported to I believe thirteen states.
Speaker 3 (34:57):
Thirteen states Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Missouri, Mississippi, Ohio, Oklahoma, Pennsylvania, Texas,
and West Virginia.
Speaker 2 (35:06):
Did you say Louisiana?
Speaker 3 (35:07):
Yes? I did.
Speaker 2 (35:08):
Why are we buying what kind of shrimp? Was it
Indonesian shrimp and sending it to Louisiana?
Speaker 3 (35:17):
Yes, frozen shrimp, But I believe.
Speaker 2 (35:18):
They have shrimp in Louisiana. I've been there a few times.
Why do we need to get frozen shrimp from Indonesia
and send it to like the shrimp capital of the
United States.
Speaker 3 (35:32):
Especially with tariffs in place, you think that they'd look
to uh Bubba Gump Shrimp to get their shrimp from
rather than going all the way over to Indonesia.
Speaker 2 (35:40):
I'm just saying, what are we doing here? New York
Times with a piece titled come one, Come On, buy
your TV subscriptions here, and it's talking about how Americans
now starting to sign up for multiple services through a
single provider instead of apps cable. It sounds like cobble,
I think, is how it's pronounced. But look, people want
(36:02):
things bundled because honestly, unbundled services are bad for everyone. Look,
we had a golden age of unbundling in the late
twenty tens because everyone underpriced their product and lost money
on it, which was great for us. But once companies
finally realize that, oh gee, we can't just lose money
forever on this, it's no longer great for us or
(36:24):
for them. And so what you find is that the
cable bundled despite having two hundred channels and you're like, well,
I only watch six of these. The fact is you
pay a cent a month for all of the ones
that you don't watch, and no one else watches. The
content providers still get the revenue from that. You really
don't pay anything more, and the stations that you do
(36:45):
want you get cheaper still because not everyone wants those. Either.
The highest cable rights fees out there ESPN, I don't
know what they are today. The last time I looked,
they were like eight to twelve dollars per month is
kind of where it was. But there's a reason why
ESPN on it's dedicated streaming apps, is more expensive than that,
and it's because not everyone watches ESPN. Even the most
(37:08):
watched football games of the year, the Super Bowl and
stuff like that. You get maybe half of Americans that
actually watch, and the other half subsidizes the whole thing,
but you subsidize them watching QBC, and so it all
works together so that you all get better deals and
the companies get revenues. So we're gonna head back to bundling.
(37:30):
It's just the worst part of this is that it's
gonna end up going through streaming instead of cable, which
By the way, streaming is just a less efficient transmission
mechanism for cable in terms of the amount of data
that you have to send back and forth. So we've
basically reinvented cable, but less efficient.
Speaker 3 (37:49):
Yes, and it's interesting. YouTube TV is kind of an
example of a company that came out really cheap on
the pricing front, but they're increasing their prices more and more.
To be I'm not saying that they're equal to cable,
but they're getting pretty close.
Speaker 2 (38:02):
It doesn't feel as fun as when it was forty
dollars a month now that it's.
Speaker 3 (38:05):
Eighty two exactly.
Speaker 2 (38:07):
But I digress. Markets remain negative, though not as bad
as they were earlier. There's still plenty of time in
the day, and don't worry, we're gonna be here tomorrow.
We'll recap what happened today and talk about a whole
bunch of new stuff then
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