November 18, 2025 • 39 mins
Mike Armstrong and Marc Fandetti discuss the market rout intensifying, sweeping up everything from tech to crypto to gold. Other than sentiment, what is driving the market sell off? Home Depot cuts outlook as home improvements slow down. Fed's Waller calls for December rate cut to bolster labor market. Americans could see a big sticker shock for turkeys this Thanksgiving.
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Episode Transcript
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Speaker 1 (00:00):
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(01:06):
Armstrong and Mark Vandetti.
Speaker 2 (01:14):
Good morning. I usually say Happy Tuesday to those listeners.
It's not terribly happy out there on Wall Street. The
wins seem to be turning a little bit on this
AI trade. We've got the NASDAC off close to two
percent in early trading and continuing a trend that we've
seen at least for the last four days, but for
the last few weeks. When it comes to the narrative
around this stock market generally and the AI trade specifically,
(01:39):
it's Mike, Mark and Tucker with you on a Tuesday morning,
And I hate to overdo it because we are still
what four percent away from all time highs, and we
are still in one of the most expensive stock markets
in history. But I'm wondering again. I don't talk to
(01:59):
you about this stuff every day, Mark, like I do, Chuck,
but your take on some degree of sentiment shift when
it comes to skepticism about this market, skepticism about the
AI trade, and frankly, the importance of Nvidia's earnings tomorrow
afternoon to either confirm or shift that narrative. When it
(02:20):
comes to the pressure that's been on some of these
companies over the last couple of weeks.
Speaker 3 (02:24):
Let's put it in perspective, as you suggested, we should
markets rose the broad stock market about thirty percent. I'm
rounding up a little bit. In twenty twenty three and
again in twenty twenty four. Information technology stocks where the
leading sector in those two markets. They've been the leading sector,
i e. The best performing sector for the majority of
the past ten or twelve years. In the market. Capitalization
(02:47):
of information technology stocks today is nearly thirty trillion dollars,
as big as the US economy. We used to talk
about the buffet ratio when stocks and you're comparing the
market capitalization, which is a stock concept. I don't mean
stock is in security that you own. I mean stock
is an a static thing. We used to compare market
cap to GDP, which is a GDP's a flow concept.
(03:10):
It's an income concept. But people like to use the
buffet ratio to get a sense for when stocks are
frothy and supplement that with measures like price to earnings
and so forth. Mike, just the tech sector today is
as big as GDP. Now think about that for a second.
I'm not saying that that is that that is self
evidently worrisome. But if you track things like the value
of stocks GDP, and you recognize that one sector is
(03:31):
as large as GDP. Again, comparing a stock concept to
a flow concept, which is a little problematic, but let's
let that go because nobody really cares. That in itself
should set you back on your heels. There gets a point,
I guess, Mike, you asked about sentiment. I think you
put the question perfectly. There gets a point in every
bull market, and we've been in one now for a
few years since the twenty twenty two pull back. Unless
(03:53):
you want it, do we count the the Tariff Liberation
Day pullback as a bear market? I don't think we do.
I haven't heard anybody referred to that way out. I
want to get lost in the weeds on what is
and isn't a but we're gonna throw like a three
year bull market? Would you agree?
Speaker 2 (04:05):
I would? Okay, Frankly, I have a tough time counting
twenty twenty five, twenty twenty two, or twenty twenty when
really thinking about a prolonged downturn. Yeah, they were all
just fair enough, quick snap of the finger downturns that
you know, bought the dip and recovered. But yes, I
think twenty twenty two was a different situation than twenty
(04:27):
twenty five.
Speaker 3 (04:27):
Okay, so we've been in a ball market for a while.
That's what I wanted to say, and see if there
were any objections from Tucker. You agree we've been in
It feels to you like we've been in.
Speaker 2 (04:35):
A ball market. Yeah, it feels to me like it's not.
It feels to you like we've been It's been pretty
good first two years. Yeah.
Speaker 3 (04:40):
So I guess the point I was going to make, Mike,
you brought up the issue of sentiment. I think that's
precisely the right issue to raise. There comes a point
in every bull market when everybody realizes, when everybody asks,
is this crazy? It happened in two thousand, ninety nine,
two thousand, where the chorus becomes louder and bigger. People
(05:01):
are always at there's always the cynic, this skeptic in
the room. It says, are things going a little too
you know, far ahead of fundamental? Someone's always asking that question.
I mean a lot of people asking it, right down
to the talking heads on the TV networks. We're at
that point now, So it's a moment of truth. Either
AI starts to fulfill promises concretely profitability wise. I mean,
(05:22):
like the hyperscalers can afford these data center investments, or
we decide that they cannot. And this would not be unusual.
It happened to every previous revolutionary technology, railroads, electrification, you
name it, the electric the electronics revolution of the late
nineteen sixties. There were booms, there were bus It wouldn't
(05:42):
be unusual.
Speaker 2 (05:43):
Yeah. I obviously I've had my own personal view on this,
which is I've been skeptical of some of this stuff
for the last few years, let alone the last few
months and the build up and the promises that are
being made. On the other hand, if there's been one
truism of this market for the last five years, it's
(06:04):
been the buy the dip mentality. And that's a big
question to me. It just does that return to this
market if we get a market sell off here again,
earlier this spring we had a twenty percent market sell off.
So I don't want to make any of these things impossible.
We're talking about a four percent sell off so far today.
If we get there, do you have that same buy
the dip mentality or to your point, has sentiments shifted
(06:27):
in some way. Have people become so concerned about financial conditions?
Have they become concerned enough about the overall narrative of
become concerned about the labor market and the state of
things that they don't go in and buy that dip
as they have every other time. There's plenty of cash around, right,
There's plenty of resources to hypothetically go buy on that dip.
But has this narrative shifted? Are we in a place
(06:50):
where investors are prepared to do so? And I think
there's plenty of evidence on either side of that equation,
you know, technicals for people that like that sort of thing.
P and NAZAC have both now slipped below their fifty
day moving average, first time in one hundred and thirty
eight trading days. The Doubt Industrial average just capped their
worst three day drop since April. I don't really follow
(07:14):
fifty day moving averages, but there are plenty of technicians
who do and look at that as a pretty bearish
sign for the market. It's the first time that that
has happened since May. That fifty day moving average mark
again right back to the tariff time period where market's
sold off substantially. So there are a few I think
both reality concerns that are flashing as well as a
(07:36):
few technical concerns that are flashing out there in markets
right now. But I'll be the first one to sit
here and say, I don't know if this is the
moment of a drop, of a more substantial drop that's
going to lead to one of those other moments that
we've seen in history. But we've been pounding the desk
for a few years now now about how expensive this
market is and the concerning rhetoric that's being used to
(07:58):
describe this new emerging technology. I don't know. I guess
one other notable thing that is important about this market.
We talk about stocks all the time, other areas of
the market are getting wrapped up in this too. Gold
is selling off, Crypto is selling off. Crypto's selling off
a heck of a lot more than the stock market.
Just taking a look. We don't often quote it, but
(08:20):
in terms of the Bitcoin drop, you had bitcoin below
ninety thousand. Briefly you had that. Yeah, so Britcoin today
actually moving up a little bit right now, but sitting
just below ninety two thousand dollars per coin. Just recently,
back in October, you had that topping one hundred and
twenty five thousand dollars per coin. So we talk about
(08:41):
the selloff in equity markets, it's been more substantial in
other areas of the markets. What do you have on
your radar now that the government's reopened You know what
in your mind could either confirm this narrative that we
are talking about right now, this sentiment shift, and what
could turn it in another direct.
Speaker 3 (09:00):
I'm personally of the mind that a big downturn is
pretty much baked into the cake. I'll stake out a
relatively pessimistic position for the short term. I guess is
tech has gotten way ahead of itself as it does
periodically or whatever. The hot sector tends to be. The
investments required on the part of the so called hyperscalers.
(09:23):
And when I say investments, I mean the data center
build out requirements. I'm going to get some of the
jargon off here. Not exactly my area, but the investments
required are just too big relative to the overall size
of investment in the economy to me to be plausible
without a massive boost of growth coming from AI in
(09:45):
the near term, AI is not going to pay for itself.
Said differently, more simply, so I don't get so tripped
up on my own words. AI is not going to
pay for itself quickly enough to allow these investments to continue.
Most that is now out there in the ether, this concern.
Michael Burry raised it, sure, other prominence, so called short sellers,
speculators who think prices will go down.
Speaker 2 (10:04):
Everest Soonderchi, the CEO of Alphabet you raised it yesterday
in an interview. We'll be talking about that.
Speaker 3 (10:08):
So now it's you could talk about im polite company now.
And when it gets to that point, it sort of
becomes the dominant theme. Couple that with evidence of weakening
in the labor market, not severe, but it's there, the
FED having to ease preemptively because they're all worried about recession.
Combine all these things, Mike and I tend to think
(10:29):
a downturn I don't know how big, sure, but I
tend to think it's baked into the cake. I e
inevitable at this point. I hope that I'm not making
a prediction so much as sharing a feeling. I hope
it's wrong.
Speaker 2 (10:41):
Yep. Let's take a quick break. When we come back.
I want I want to take the flip side of
that argument and talk about what events and data points
could turn this overall narrative quick break. We'll be back
with that next to The Financial Exchange.
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Speaker 2 (11:51):
Taking a look around at markets here. We've got a
broad based sell off that's been bouncing around here for
the last few minutes. But the SMP is off a
full percentage point, and as that go off and a
half in videos down two point six, Google's down one
a MDS down five and a quarter. I don't know
why I chose those three, but they seemed relph Actually,
I can't mention those three without mentioning Microsoft. So let's
(12:11):
see what Microsoft is doing. Please hold down two and
a half percent today as well. One of the things
that we were just talking about in between the break
market and you know, I don't like to acknowledge that
we actually have conversations when we go to ad breaks,
but we do. Uh actually will just stare occasion. No,
we usually just stand here in silence and no, no,
(12:33):
we all just need each other silent and glare at
each other like did Tucker really hit that brake at
the right. Yeah, that's how it usually goes. We were
talking in the break about this market and your point
was there's been this shift in markets without any sort
of spirits. Yeah, animal spirits, Right, it's just a sentiment.
(12:57):
There's not been a bankruptcy, there's not been a company
that's reported terrible earnings.
Speaker 3 (13:03):
No bank failure, bank, no trade war. Fed didn't surprise
us with a rate cut or a rate hike that
we have to read into, so no crazy new tariffs.
Speaker 2 (13:13):
Michaelson totally wrote a piece yesterday that I was reading,
and he talked about three different things that are, you know,
dominating this market. One has been the skepticism about the
AI trade. One has been the turn in expectations for
the Federal Reserve and their rate cuts. That was kind
of baked in, and now that sentiment has shifted towards, oh,
maybe they won't be cutting rates. And there was a
(13:34):
third piece that I didn't find relevant, so I didn't remember,
but those two items he points to, and again to
your point on this, I can see why the sentiment
shifted on the Fed. They've come out very publicly and
said you all need to pump the brakes here. We're
not sure we're gonna be cutting rates at this next meeting.
I don't see the catalyst for what shifted on AI
(13:57):
other than I guess you can point to Michael Burry,
you can to a few bags.
Speaker 3 (14:00):
It was fragile to begin with. People didn't hold their
convictions that strongly because they don't get it. I don't
fully get it. I don't get crypto. I defy anybody
whose paycheck doesn't depend on it to coherently explain to
me how crypto's useful. I defy anybody whose paycheck doesn't
depend on it to explain to me how these investments
in cap x will provide the returns necessary to facilitate
(14:22):
the investment to keep them going in AI. I mean, Mike,
so it can get to the point where you start
calling BS on stuff. Yeah, and you're more comfortable calling
BS on stuff.
Speaker 2 (14:30):
Here would be my counterpoint, just to voice it for
a leisure rare. It seems to me that everyone is
talking about how overvalued the stock market is. You have
every bank executive out there as soon. Darpachai, the CEO
of Alphabet, just gave an interview about the same subject,
saying that his company would not be immune to an
overall bubble burst in the AI trade. Obviously you have market.
(14:54):
I mean, go watch Fox Business, CNBC, Bloomberg, any of
these sources they are going to put on interview after
interview about the EYE trade. Is it overblown? Should we
be more skeptical of it? In my experience, rarely when
everyone is preparing for a downturn like that, does the
downturn actually come, I think, excuse me about some of
(15:16):
them that we've been through recently. Like nobody was talking
about COVID sinking overall markets and destroying the economy, and
then we you know, shut down the entire economy and
markets spilled over forty percent because of it. Nobody was
really prepared for Liberation Day when markets sold off by
twenty percent based on a trade proposal that nobody was anticipating.
(15:38):
And so when you have all of this positioning, or
when you have all of this sentiment of already people
are skeptical about the earnings, about the spending, I just wonder, Yeah,
I guess, are you actually going to catch investors unprepared
for this moment and see the market sync to the
(15:58):
degree of Liza could right? I mean, if you have sentiment,
just shift that dramatically to everybody now hates this stuff,
then yeah, they'll dump their shares and you will you will,
you know, move downwards because of that. But it would
be notably different than the last few markets sell offs
that we've had, at least in my perspective of thinking
about things.
Speaker 3 (16:19):
Uh. Yeah, So what you're saying is sort of a
version of the if you took a finance course, you
recognize the phrase efficient market hypothesis, which is, if it's available,
I'll state one version of it. There are lots of them,
so I'm not being very rigorous here. If something's known,
it's priced in, right, so you can't really make money
off of it. So oversimplifying, but that does sort of
make sense. So you're stating, I think a version of
(16:41):
the efficient market hypothesis. It sounds more technical than it is,
but it's just kind of common sense. If everybody knows it,
everybody can use it. Not everybody's as good as using it,
you know, I'm not as good on skates, nearly as
good as on skates as you are. So there's a
there's it, right, Sure, there is one way to think
about it. So there are reasons to object to this,
but you're stating a version of that.
Speaker 2 (17:05):
Other. The other one is go ahead the other. Just
like general investing thesis that I've always looked at, is
when the whole crowd is looking in one direction, it
oftentimes makes sense to look in the opposite.
Speaker 1 (17:19):
Feed too.
Speaker 3 (17:20):
It's and there are people that run modeled markets using
the same way that people model the same math that
people use to model avalanches and car pile ups and
other other sudden events that result in a state a
dramatic change in the state of of things. This this
feels to me a little different than some of the
(17:41):
concerns that have been raised over the past couple of years.
Couple that with the worst fiscal and monetary policy I've
ever seen in my lifetime or read about since then,
I'm serious, We've got We've handicapped monetary policy by infringing
on the independence of the Fed. Our fiscal policy is abominable,
It's been miserable for some time, though I'm not just
pending that on the incumbents here. And our trade policy
(18:05):
is incoherent and unproductive. So couple these frothy valuations with
the sudden realization that these companies actually have to make
money to pay for future enhancements to data centers. Couple
that with terrible inconsistent policy fiscal, monetary, and trade, and
you get a possible perfect storm.
Speaker 2 (18:24):
Yeah, I'm not sure that any of those latter things
that I tend to agree with you on. Terrible fiscal policy,
deficit spending, federal reserve policy when it comes to interest
rate setting, and messaging around all of that has been
lackluster at best and abysmal at worst. I'm not sure
any of that's going to contribute to what we're seeing
right now.
Speaker 3 (18:43):
No, but it ties our hands to in the response
mic it does. We've got no we've got no fiscal
policy room. Monetary they're going to start they'll blow they'll
start blowing money out as quickly as is imaginable if
the economy turns down or if the market turns down.
Speaker 2 (18:58):
But what does that do at how the price?
Speaker 3 (19:00):
What does that do for inflation? We're not in a
good place.
Speaker 2 (19:05):
Uh Mark is clearly pretty pretty upset and concerned about
where we are. So we're gonna take a quick break.
We are going to get Wall Street Watch, and we're
gonna take a full look at markets when we return.
When we come back, though, we do have to move
on from just this market shift that we seem to
be seeing. We've got earnings from Home Depot to talk about.
We've also got some talk about the FED and what
(19:28):
we're seeing there. That's all next here on the Financial Exchange.
Speaker 1 (19:41):
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TFE show. Breaking business news is always first right here
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Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
Markets extending their losses from yesterday's route, where high tech
valuations continued away on sentiment. Crypto also seeing more attention
today after Bitcoin briefly drop below ninety thousand dollars, It's
up around ninety two thousand right now. Wall Street's also
digesting the first patch of retailer earnings this morning from
Home Depot. Right now, the Dow is down over one
(20:22):
percent or five hundred and six points lower, SMP five
hundred down just about one percent or sixty five points lower,
NASDAC down one and a half percent or three hundred
and sixty two points, RUSTED two thousands down two thirds
of a percent, Tenure Treasureel down three basis points at
four point zero nine six percent, and crude oil down
(20:42):
about a quarter percent, trading just below sixty dollars at Barrel,
Home Depot falling over three percent after the home improvement
retailer missed third quarter earnings expectations, marking its third consecutive miss.
Home Depot also cut its full year profit outlook, breaking
news this hour after Microsoft and no US new strategic
partnerships with Nvidia and ai startup Entropic. Microsoft and Vidia
(21:06):
will invest a combined fifteen billion dollars in Entropic, while
Entropic committed to purchase thirty billion dollars of computing capacity
from Microsoft's a zerr cloud service. Both Microsoft and Nvidia
stocks are down over two percent. Meanwhile, we have another
major internet outage to report this morning, this time stemming
from cloud Fair. The outage is affecting several major websites
(21:29):
and services offline, including open ais Chat, GPT, and social
media platform x. However, the outage reportedly has been resolved.
Cloud Fare is down three percent, and according to The
Financial Times, activist investor Elliott Management has built a large
stake in Barrack, where Elliott was encouraged by the idea
that the gold miner could be split into two companies.
(21:52):
Berrickstock is up over one percent. I'm Tucker Silva and
that is Wall Street Watch. And remember you can watch
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(22:15):
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Speaker 2 (22:18):
We were mentioning home Depot before the break. They reported
earnings this morning, disappointed shareholders. Stock is off. What did
you say, Tucker? How much was it off?
Speaker 4 (22:26):
How about three and a half or three.
Speaker 2 (22:27):
And a half percent in early trading. Home depot matters,
just plain, a simple home Depot matters for the state
of the overall economy. Housing is an enormous piece of
our traditional economic growth engine. If it is in the
process of going through a collapse, isn't the right word.
If it's in the process of going through a period
(22:49):
of low building, low renovating, then you know it's a
bad sign for the overall state of things because it's
the single biggest asset that most Americans own, and it
is a huge pie of traditional growth in the economy.
So far this year, we've already seen the decline in
housing investment. It's been made up for by a lot
of AI investment. That's why investors have been piling into
(23:09):
some of this stuff. But unsurprisingly, Home Depot giving a
pretty dour outlook when it comes to their overall business.
The net income came in at three point six billion,
or three sixty two a share, That was down from
three point sixty five billion three sixty seven a share
the year prior. Adjusted earnings were three seventy four a share.
Expectations were for three dollars eighty four per share, and
(23:32):
sales rose two point eight percent, But importantly, COMP Sales
meeting looking at sales for all stores that were open
for at least twelve months, came in at a barely
increase point two percent for the year, missing forecast of
one point three percent. So I think it's fair to
say that, based on this earnings projection from Home Depot,
(23:54):
that people are not investing a lot more in their
homes right now. Yes, we still do have that top
ten percent who are still spending, but a lot of
others are pulling back from major projects, and even on
that top income side, I'm starting to hear rumblings, specifically
from anybody in the housing or housing adjacent industries, of
(24:14):
folks getting a little bit nervous about projects and pulling back.
Spoken to a contractor and carpenter that has seen projects
dry up. I've spoken to a few people about their
own renovations that have decided to put them off. My
brother does some hardscaping work. He's seen a cancelation on
that front for a fairly sizable project for some work
(24:35):
there around the home, and so I think we're generally
seeing some Again, most of this is coming from the
fact that Florida, Texas and other parts of the country
are in a housing slump where nobody wants to develop
new homes and so, you know, a massive piece of
home depots business is that contractor a new home building business.
But even when it comes to renos and things like that,
(24:57):
I'm seeing some shift when it comes to what people
are willing to do. That's very recent. Anything else to
add on the state of housing.
Speaker 3 (25:03):
So home depot is part of the consumer discretionary basket,
very growth sensitive for obvious reasons. Consumer So the overall
stock market this year, I'll use the Russell one thousand,
which is a little broader than the S and P
five hundred, up about thirteen and a half percent. You
can think of that as core large cap. If you
have a large cap option in your four one K plan,
might be called core large cap. That's what I'm talking about.
It's synonymous with the entire market. Consumer discretionary stocks, for
(25:27):
what this is worth, are barely positive on the year,
up point seven percent. This is real time. Infotech and
utilities for different reasons are up about twenty percent each.
Consumer discretionary stocks are flat.
Speaker 2 (25:41):
So if you're a believer.
Speaker 3 (25:42):
In stocks as an economic forecaster, and their record is mixed, there,
but at least the stock market is real time. There's
no question about prices being incorrect. So the stock market
can be a useful forecaster, and it's telling us the
pullback in tech over the last really month, in the
(26:05):
month to date period, the pullback in consumer discretionary which
I was just talking about flat on the year, are
suggesting economic weakness.
Speaker 2 (26:13):
Mic. Yeah, and again, I hate to cherry pick this
a little bit, but it's yes, no, no, But you're right,
I'm going to cherry pick further. So it's on me here.
When we talk about that consumer discretionary sector, you have
to recognize that Amazon is the biggest one, followed by Tesla,
and then you've got home Depot at third, which is yeah,
fair enough by you know, looking at it, just about
(26:35):
a fifth of Tesla and about uh an eighth of Amazon.
So yeah, really we're talking about the influence of a
few big companies on this sector as well. But yeah,
I think important to call out that consumers seem to
be at least a large percentage of consumers seem to
be out of COVID stimulus payments, not keeping up with
(26:57):
their overall expenses, and are nervous about their ible.
Speaker 3 (27:01):
Sees the market's reaction, especially over the past few weeks too,
and that may lead into our next story.
Speaker 2 (27:07):
So yeah, what is I mean, what is the FED
do in December? Their next meeting is coming up on
December tenth. Okay, so next meeting December tenth. They have
cut now is it twice?
Speaker 3 (27:19):
We're at three seven five right target, We're at.
Speaker 2 (27:21):
Three seven five, and I think they've cut twice so
far this up until a few weeks ago. Another cut
in December was fully baked in. FED has net since
come out and said, hey, pump the brakes here. We're
not so sure about that. The more I'm seeing recently,
the more I am on board was saying, there is
no reason for you to pause that overall rate cutting
cycle unless you see financial conditions reverse in the course
(27:43):
of the next few weeks. In markets rally another twenty
percent from here. I just you know, between what we're
seeing from Again, we haven't had government data for a while,
and I don't think that the FED genuinely cares about
home depot earnings. But what we're seeing from announced layoffs,
what we are are seeing from markets, to me insinuates
(28:03):
that the FED has some work to do on cutting rates.
And again, this FED has always favored the labor market
over the inflation concerns.
Speaker 3 (28:12):
Their job is to is, you know, balance the two.
The problem is we don't know exactly. We never know exactly.
We don't know even sort of vaguely right now what
the very recent trend in unemployment and inflation has been.
Speaker 2 (28:28):
Right, So I don't know.
Speaker 3 (28:31):
My gut says basic to go ahead, good, no good.
As of two months ago, I would have said absolutely not.
Inflation remains elevated, unemployment's gone up a little tiny bit.
May not be the best measure of the state of
the labor market, however, others point to mounting weakness, but
nothing alarming. More perhaps a normalization from the frantic pace
of labor market growth over the last few years. So
(28:53):
we've got elevated inflation, we've got potential slight compromise of
labor market conditions not enough to me to provide. What
the FED does is it stimulates the economy. It stimulates
a man. It does that, as we know, by controlling
the money supply, which in turn effectively allows it to
control very short term interest rates. To me, the case
(29:15):
was far from clear that we needed additional stimulus when
underlying inflation when last we knew what the estimate was
was somewhere in the low three underlying inflation.
Speaker 2 (29:27):
I think so right now. By the way, according to CME,
it's about a coin toss as to whether or not
they cut rates. Again, I won't voice my opinion of
what they should do, but in terms of what I
think they will do, I think a rate cut is
far more likely than a coin toss.
Speaker 3 (29:41):
Well, they're scared to death of a market crash because
the so called wealth effect is increased in importance, meaning
people tend to spend more. In response to a one
percent increase in stocks historically has resulted in a three
to five cent increase in spending. That number may have
gone up. We've all seen stories about top earners and
people on stocks keeping consumption going. FED knows this I
(30:05):
don't know that they think they can afford to let
the stock market sell off. I also don't know that
they can staunch any sell off if it's driven by
more fundamental or deeper concerns.
Speaker 2 (30:15):
Quick break when we come back. We did finally get
some government numbers on the labor market. I want to
talk about those when we return next on The Financial Exchange.
Speaker 1 (30:26):
Breaking business news as it happens only here on the
Financial Exchange Radio Network.
Speaker 5 (30:32):
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Speaker 1 (31:03):
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Speaker 2 (31:22):
As far as I'm aware, one of the first pieces
of government economic data to be released since the government
shutdown or since the government reopened, were the jobless claims
that we got just this morning. This is pretty stale now,
it's measuring a month ago. So I don't know what
to do with this information other than to say that
a month ago I wasn't terribly concerned about the labor market.
(31:45):
Jobless claims for the week of October eighteenth total two
hundred and thirty two thousand. That was up a little
bit from previous weeks that we had back in I
don't know what we had before that, like September. But again,
until those numbers, I don't know if you have a
figure in your mind where that reaches a real grave
concern level, But I would say if it crosses the
(32:07):
three hundred thousand threshold, we've got some questions to answer
about the state of this economy. But at two hundred
thirty two thousand, that's basically in line with where we've
been for a while now, and it has not been
enough to force up the unemployment rate. If you take
that with a shrinking workforce due to retirees plus lack
of immigration into the US. I tend to think that
(32:29):
two hundred thirty two thousand is nothing to be immensely
concerned about. Continuing claims, i e. How many people are
continuing to receive unemployment benefits came in at one point
nine to five seven million. That was up slightly from
one point nine to four to seven million the week prior.
So again, I think we will get this data on
Thursday for last week, which will be far more relevant.
(32:52):
It may take a little while to have it released,
but this data point is only important because it is
the most up to date data that we get on
the stay of the labor market. Right, nothing else that
we can get other than private when.
Speaker 3 (33:08):
You want when you use data for forecasting. It's the
point I was trying to make in the last segment
or a couple of segments ago about the stock market
being useful is because it's continually updated day. The price
is always right. People don't appreciate if you don't work
with data, you may not recognize that cleaning your that
mismeasurement is a huge problem when you're doing when you're
(33:30):
estimating economic models, doing forecasting stock markets beautiful because there's
never a measurement issue with your data, and it's always
up up to date. It's not a perfect forecaster of anything,
but useful for that reason. Similarly, the frequency of the
of the weekly jobless claims continuing claims is weekly, so.
Speaker 2 (33:46):
Very high frequency compared to say, the monthly jobs report,
which we also haven't been getting.
Speaker 3 (33:50):
Problem is there could be some measurement issues there too.
I have not seen any serious analytical not to say
it doesn't exist, I just haven't seen it analytical work
on what rate of change should be concerning, you know,
is if it goes up by two percent.
Speaker 2 (34:03):
You know, yeah, I think I have seen something, and
I don't recall where the thresholds well, and that.
Speaker 3 (34:07):
Probably changes too because relationships among these variables change.
Speaker 2 (34:10):
Well, that was the point that they made, is you know,
prior to twenty twenty five, the level of job as
claims hit the FIT reached this level would indicate that
unemployment rate's going to start ticking up. But then they
also said, you know, given where we are in twenty
twenty five with retirements plus deportations, they had no semblance
of an idea of where that number is to be concerning.
(34:30):
So again, maybe it's two fifty. Maybe it's three fifty,
but in either case, I'm comfortable saying that where we
were on October eighteenth is about where we've been for
the last twelve months and not concerned.
Speaker 3 (34:41):
I think we could say, without over analyzing it, that
if it started to go up by a lot quickly,
we should be worried.
Speaker 2 (34:48):
Agreed, Yeah, yeah, I think we'd agree on that.
Speaker 4 (34:50):
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Speaker 2 (35:57):
Some bad news out there for for my family in particular,
but you know families. This Thanksgiving, generally, turkey price is
going to be a bit of sticker shock, as wholesale
prices for a turkey have jumped forty percent from a
year ago. Why I'm focusing on my family A little
lesser known thing about me. My family's insane, especially around Thanksgiving.
(36:20):
And we generally have sixty plus people every year for Thanksgiving.
But I'm looking at by the way because it's so big.
We have family members assigned to building a spreadsheet for
who has to do what for our Thanksgiving. And this
year I'm counting five turkeys for our one hundred and
one attendees of this year's Thanksgiving. For the larger Armstrong family,
(36:42):
I am actually responsible for one of these so I'm
gonna have to figure that out. But wholesale turkey price.
Speaker 4 (36:47):
Is one cook per turkey.
Speaker 2 (36:52):
No, I am splitting this responsibility with my second cousin.
Speaker 4 (36:56):
Okay, so how many birds are you responsible for? Two?
Speaker 1 (36:59):
Okay?
Speaker 2 (36:59):
Yeah, I'm personally responsible for one, and then there's other,
you know, couples and family members that are responsible for
their own. But I'm counting five turkeys. Forty pies, forty pies.
Forty pies, yeah, all the same pie.
Speaker 3 (37:15):
No, forty pies for sixty people.
Speaker 2 (37:18):
Let's let's do the pretty big forty pies.
Speaker 1 (37:23):
Uh.
Speaker 2 (37:23):
Yeah, I don't think you need forty pies for one
hundred people. Yeah, probably not for one hundred people.
Speaker 1 (37:27):
I'm sorry.
Speaker 3 (37:27):
See I don't know where I got sixty excuse me.
Speaker 2 (37:29):
Probably probably twenty five pies would do it, wouldn't it. Yeah?
Speaker 4 (37:33):
Forty Yeah, we don't.
Speaker 2 (37:34):
Are you having a contest, yeah, it's a pieting contest.
Speaker 4 (37:38):
The Armstrong pie eating contest.
Speaker 2 (37:40):
Yeah?
Speaker 3 (37:41):
Or are you having a food fight?
Speaker 2 (37:42):
Maybe? Yeah? So it's gonna be an interesting This one,
one hundred one is a record. So I'm proud to
say that for for the family Thanksgiving, it is a record.
And the nice thing is if you don't get along
with a family member, it doesn't matter because you don't
even see them, which is which is fortunate. I don't
know the names of all the people that will be
in at ten.
Speaker 3 (38:00):
That's a big enough crowd that ice may show up.
Speaker 2 (38:02):
Yeah, it's entirely possible.
Speaker 3 (38:03):
Yeah, you have a lot of cana, right, Okay.
Speaker 2 (38:06):
Not on this side. This is my mother's side of
the family. Yeah, way around, that's true. But yeah, again,
the point of this story before I went on a
tangent about my own insane family and every year, is
that turkey pretty expensively. It's up forty percent, So.
Speaker 3 (38:23):
Maybe there's turkeys everywhere.
Speaker 2 (38:25):
Maybe, Yeah, I know, I could just run over work. Yeah,
I don't know. Maybe a good you know, Thanksgiving tofurkey
would be go over well with your family.
Speaker 3 (38:35):
Stop is terrible.
Speaker 2 (38:38):
I was going to suggest steakes, but those are even
more expensive than turkey right now, so that's not a
good IDEA quick break, A lot more to cover in
the second hour of the financial exchange. We'll be right
back
The Financial Exchange is produced by Money Matters Radio and
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(01:06):
Armstrong and Mark Vandetti.
Speaker 2 (01:14):
Good morning. I usually say Happy Tuesday to those listeners.
It's not terribly happy out there on Wall Street. The
wins seem to be turning a little bit on this
AI trade. We've got the NASDAC off close to two
percent in early trading and continuing a trend that we've
seen at least for the last four days, but for
the last few weeks. When it comes to the narrative
around this stock market generally and the AI trade specifically,
(01:39):
it's Mike, Mark and Tucker with you on a Tuesday morning,
And I hate to overdo it because we are still
what four percent away from all time highs, and we
are still in one of the most expensive stock markets
in history. But I'm wondering again. I don't talk to
(01:59):
you about this stuff every day, Mark, like I do, Chuck,
but your take on some degree of sentiment shift when
it comes to skepticism about this market, skepticism about the
AI trade, and frankly, the importance of Nvidia's earnings tomorrow
afternoon to either confirm or shift that narrative. When it
(02:20):
comes to the pressure that's been on some of these
companies over the last couple of weeks.
Speaker 3 (02:24):
Let's put it in perspective, as you suggested, we should
markets rose the broad stock market about thirty percent. I'm
rounding up a little bit. In twenty twenty three and
again in twenty twenty four. Information technology stocks where the
leading sector in those two markets. They've been the leading sector,
i e. The best performing sector for the majority of
the past ten or twelve years. In the market. Capitalization
(02:47):
of information technology stocks today is nearly thirty trillion dollars,
as big as the US economy. We used to talk
about the buffet ratio when stocks and you're comparing the
market capitalization, which is a stock concept. I don't mean
stock is in security that you own. I mean stock
is an a static thing. We used to compare market
cap to GDP, which is a GDP's a flow concept.
(03:10):
It's an income concept. But people like to use the
buffet ratio to get a sense for when stocks are
frothy and supplement that with measures like price to earnings
and so forth. Mike, just the tech sector today is
as big as GDP. Now think about that for a second.
I'm not saying that that is that that is self
evidently worrisome. But if you track things like the value
of stocks GDP, and you recognize that one sector is
(03:31):
as large as GDP. Again, comparing a stock concept to
a flow concept, which is a little problematic, but let's
let that go because nobody really cares. That in itself
should set you back on your heels. There gets a point,
I guess, Mike, you asked about sentiment. I think you
put the question perfectly. There gets a point in every
bull market, and we've been in one now for a
few years since the twenty twenty two pull back. Unless
(03:53):
you want it, do we count the the Tariff Liberation
Day pullback as a bear market? I don't think we do.
I haven't heard anybody referred to that way out. I
want to get lost in the weeds on what is
and isn't a but we're gonna throw like a three
year bull market? Would you agree?
Speaker 2 (04:05):
I would? Okay, Frankly, I have a tough time counting
twenty twenty five, twenty twenty two, or twenty twenty when
really thinking about a prolonged downturn. Yeah, they were all
just fair enough, quick snap of the finger downturns that
you know, bought the dip and recovered. But yes, I
think twenty twenty two was a different situation than twenty
(04:27):
twenty five.
Speaker 3 (04:27):
Okay, so we've been in a ball market for a while.
That's what I wanted to say, and see if there
were any objections from Tucker. You agree we've been in
It feels to you like we've been in.
Speaker 2 (04:35):
A ball market. Yeah, it feels to me like it's not.
It feels to you like we've been It's been pretty
good first two years. Yeah.
Speaker 3 (04:40):
So I guess the point I was going to make, Mike,
you brought up the issue of sentiment. I think that's
precisely the right issue to raise. There comes a point
in every bull market when everybody realizes, when everybody asks,
is this crazy? It happened in two thousand, ninety nine,
two thousand, where the chorus becomes louder and bigger. People
(05:01):
are always at there's always the cynic, this skeptic in
the room. It says, are things going a little too
you know, far ahead of fundamental? Someone's always asking that question.
I mean a lot of people asking it, right down
to the talking heads on the TV networks. We're at
that point now, So it's a moment of truth. Either
AI starts to fulfill promises concretely profitability wise. I mean,
(05:22):
like the hyperscalers can afford these data center investments, or
we decide that they cannot. And this would not be unusual.
It happened to every previous revolutionary technology, railroads, electrification, you
name it, the electric the electronics revolution of the late
nineteen sixties. There were booms, there were bus It wouldn't
(05:42):
be unusual.
Speaker 2 (05:43):
Yeah. I obviously I've had my own personal view on this,
which is I've been skeptical of some of this stuff
for the last few years, let alone the last few
months and the build up and the promises that are
being made. On the other hand, if there's been one
truism of this market for the last five years, it's
(06:04):
been the buy the dip mentality. And that's a big
question to me. It just does that return to this
market if we get a market sell off here again,
earlier this spring we had a twenty percent market sell off.
So I don't want to make any of these things impossible.
We're talking about a four percent sell off so far today.
If we get there, do you have that same buy
the dip mentality or to your point, has sentiments shifted
(06:27):
in some way. Have people become so concerned about financial conditions?
Have they become concerned enough about the overall narrative of
become concerned about the labor market and the state of
things that they don't go in and buy that dip
as they have every other time. There's plenty of cash around, right,
There's plenty of resources to hypothetically go buy on that dip.
But has this narrative shifted? Are we in a place
(06:50):
where investors are prepared to do so? And I think
there's plenty of evidence on either side of that equation,
you know, technicals for people that like that sort of thing.
P and NAZAC have both now slipped below their fifty
day moving average, first time in one hundred and thirty
eight trading days. The Doubt Industrial average just capped their
worst three day drop since April. I don't really follow
(07:14):
fifty day moving averages, but there are plenty of technicians
who do and look at that as a pretty bearish
sign for the market. It's the first time that that
has happened since May. That fifty day moving average mark
again right back to the tariff time period where market's
sold off substantially. So there are a few I think
both reality concerns that are flashing as well as a
(07:36):
few technical concerns that are flashing out there in markets
right now. But I'll be the first one to sit
here and say, I don't know if this is the
moment of a drop, of a more substantial drop that's
going to lead to one of those other moments that
we've seen in history. But we've been pounding the desk
for a few years now now about how expensive this
market is and the concerning rhetoric that's being used to
(07:58):
describe this new emerging technology. I don't know. I guess
one other notable thing that is important about this market.
We talk about stocks all the time, other areas of
the market are getting wrapped up in this too. Gold
is selling off, Crypto is selling off. Crypto's selling off
a heck of a lot more than the stock market.
Just taking a look. We don't often quote it, but
(08:20):
in terms of the Bitcoin drop, you had bitcoin below
ninety thousand. Briefly you had that. Yeah, so Britcoin today
actually moving up a little bit right now, but sitting
just below ninety two thousand dollars per coin. Just recently,
back in October, you had that topping one hundred and
twenty five thousand dollars per coin. So we talk about
(08:41):
the selloff in equity markets, it's been more substantial in
other areas of the markets. What do you have on
your radar now that the government's reopened You know what
in your mind could either confirm this narrative that we
are talking about right now, this sentiment shift, and what
could turn it in another direct.
Speaker 3 (09:00):
I'm personally of the mind that a big downturn is
pretty much baked into the cake. I'll stake out a
relatively pessimistic position for the short term. I guess is
tech has gotten way ahead of itself as it does
periodically or whatever. The hot sector tends to be. The
investments required on the part of the so called hyperscalers.
(09:23):
And when I say investments, I mean the data center
build out requirements. I'm going to get some of the
jargon off here. Not exactly my area, but the investments
required are just too big relative to the overall size
of investment in the economy to me to be plausible
without a massive boost of growth coming from AI in
(09:45):
the near term, AI is not going to pay for itself.
Said differently, more simply, so I don't get so tripped
up on my own words. AI is not going to
pay for itself quickly enough to allow these investments to continue.
Most that is now out there in the ether, this concern.
Michael Burry raised it, sure, other prominence, so called short sellers,
speculators who think prices will go down.
Speaker 2 (10:04):
Everest Soonderchi, the CEO of Alphabet you raised it yesterday
in an interview. We'll be talking about that.
Speaker 3 (10:08):
So now it's you could talk about im polite company now.
And when it gets to that point, it sort of
becomes the dominant theme. Couple that with evidence of weakening
in the labor market, not severe, but it's there, the
FED having to ease preemptively because they're all worried about recession.
Combine all these things, Mike and I tend to think
(10:29):
a downturn I don't know how big, sure, but I
tend to think it's baked into the cake. I e
inevitable at this point. I hope that I'm not making
a prediction so much as sharing a feeling. I hope
it's wrong.
Speaker 2 (10:41):
Yep. Let's take a quick break. When we come back.
I want I want to take the flip side of
that argument and talk about what events and data points
could turn this overall narrative quick break. We'll be back
with that next to The Financial Exchange.
Speaker 1 (10:54):
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Speaker 4 (11:20):
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Speaker 2 (11:51):
Taking a look around at markets here. We've got a
broad based sell off that's been bouncing around here for
the last few minutes. But the SMP is off a
full percentage point, and as that go off and a
half in videos down two point six, Google's down one
a MDS down five and a quarter. I don't know
why I chose those three, but they seemed relph Actually,
I can't mention those three without mentioning Microsoft. So let's
(12:11):
see what Microsoft is doing. Please hold down two and
a half percent today as well. One of the things
that we were just talking about in between the break
market and you know, I don't like to acknowledge that
we actually have conversations when we go to ad breaks,
but we do. Uh actually will just stare occasion. No,
we usually just stand here in silence and no, no,
(12:33):
we all just need each other silent and glare at
each other like did Tucker really hit that brake at
the right. Yeah, that's how it usually goes. We were
talking in the break about this market and your point
was there's been this shift in markets without any sort
of spirits. Yeah, animal spirits, Right, it's just a sentiment.
(12:57):
There's not been a bankruptcy, there's not been a company
that's reported terrible earnings.
Speaker 3 (13:03):
No bank failure, bank, no trade war. Fed didn't surprise
us with a rate cut or a rate hike that
we have to read into, so no crazy new tariffs.
Speaker 2 (13:13):
Michaelson totally wrote a piece yesterday that I was reading,
and he talked about three different things that are, you know,
dominating this market. One has been the skepticism about the
AI trade. One has been the turn in expectations for
the Federal Reserve and their rate cuts. That was kind
of baked in, and now that sentiment has shifted towards, oh,
maybe they won't be cutting rates. And there was a
(13:34):
third piece that I didn't find relevant, so I didn't remember,
but those two items he points to, and again to
your point on this, I can see why the sentiment
shifted on the Fed. They've come out very publicly and
said you all need to pump the brakes here. We're
not sure we're gonna be cutting rates at this next meeting.
I don't see the catalyst for what shifted on AI
(13:57):
other than I guess you can point to Michael Burry,
you can to a few bags.
Speaker 3 (14:00):
It was fragile to begin with. People didn't hold their
convictions that strongly because they don't get it. I don't
fully get it. I don't get crypto. I defy anybody
whose paycheck doesn't depend on it to coherently explain to
me how crypto's useful. I defy anybody whose paycheck doesn't
depend on it to explain to me how these investments
in cap x will provide the returns necessary to facilitate
(14:22):
the investment to keep them going in AI. I mean, Mike,
so it can get to the point where you start
calling BS on stuff. Yeah, and you're more comfortable calling
BS on stuff.
Speaker 2 (14:30):
Here would be my counterpoint, just to voice it for
a leisure rare. It seems to me that everyone is
talking about how overvalued the stock market is. You have
every bank executive out there as soon. Darpachai, the CEO
of Alphabet, just gave an interview about the same subject,
saying that his company would not be immune to an
overall bubble burst in the AI trade. Obviously you have market.
(14:54):
I mean, go watch Fox Business, CNBC, Bloomberg, any of
these sources they are going to put on interview after
interview about the EYE trade. Is it overblown? Should we
be more skeptical of it? In my experience, rarely when
everyone is preparing for a downturn like that, does the
downturn actually come, I think, excuse me about some of
(15:16):
them that we've been through recently. Like nobody was talking
about COVID sinking overall markets and destroying the economy, and
then we you know, shut down the entire economy and
markets spilled over forty percent because of it. Nobody was
really prepared for Liberation Day when markets sold off by
twenty percent based on a trade proposal that nobody was anticipating.
(15:38):
And so when you have all of this positioning, or
when you have all of this sentiment of already people
are skeptical about the earnings, about the spending, I just wonder, Yeah,
I guess, are you actually going to catch investors unprepared
for this moment and see the market sync to the
(15:58):
degree of Liza could right? I mean, if you have sentiment,
just shift that dramatically to everybody now hates this stuff,
then yeah, they'll dump their shares and you will you will,
you know, move downwards because of that. But it would
be notably different than the last few markets sell offs
that we've had, at least in my perspective of thinking
about things.
Speaker 3 (16:19):
Uh. Yeah, So what you're saying is sort of a
version of the if you took a finance course, you
recognize the phrase efficient market hypothesis, which is, if it's available,
I'll state one version of it. There are lots of them,
so I'm not being very rigorous here. If something's known,
it's priced in, right, so you can't really make money
off of it. So oversimplifying, but that does sort of
make sense. So you're stating, I think a version of
(16:41):
the efficient market hypothesis. It sounds more technical than it is,
but it's just kind of common sense. If everybody knows it,
everybody can use it. Not everybody's as good as using it,
you know, I'm not as good on skates, nearly as
good as on skates as you are. So there's a
there's it, right, Sure, there is one way to think
about it. So there are reasons to object to this,
but you're stating a version of that.
Speaker 2 (17:05):
Other. The other one is go ahead the other. Just
like general investing thesis that I've always looked at, is
when the whole crowd is looking in one direction, it
oftentimes makes sense to look in the opposite.
Speaker 1 (17:19):
Feed too.
Speaker 3 (17:20):
It's and there are people that run modeled markets using
the same way that people model the same math that
people use to model avalanches and car pile ups and
other other sudden events that result in a state a
dramatic change in the state of of things. This this
feels to me a little different than some of the
(17:41):
concerns that have been raised over the past couple of years.
Couple that with the worst fiscal and monetary policy I've
ever seen in my lifetime or read about since then,
I'm serious, We've got We've handicapped monetary policy by infringing
on the independence of the Fed. Our fiscal policy is abominable,
It's been miserable for some time, though I'm not just
pending that on the incumbents here. And our trade policy
(18:05):
is incoherent and unproductive. So couple these frothy valuations with
the sudden realization that these companies actually have to make
money to pay for future enhancements to data centers. Couple
that with terrible inconsistent policy fiscal, monetary, and trade, and
you get a possible perfect storm.
Speaker 2 (18:24):
Yeah, I'm not sure that any of those latter things
that I tend to agree with you on. Terrible fiscal policy,
deficit spending, federal reserve policy when it comes to interest
rate setting, and messaging around all of that has been
lackluster at best and abysmal at worst. I'm not sure
any of that's going to contribute to what we're seeing
right now.
Speaker 3 (18:43):
No, but it ties our hands to in the response
mic it does. We've got no we've got no fiscal
policy room. Monetary they're going to start they'll blow they'll
start blowing money out as quickly as is imaginable if
the economy turns down or if the market turns down.
Speaker 2 (18:58):
But what does that do at how the price?
Speaker 3 (19:00):
What does that do for inflation? We're not in a
good place.
Speaker 2 (19:05):
Uh Mark is clearly pretty pretty upset and concerned about
where we are. So we're gonna take a quick break.
We are going to get Wall Street Watch, and we're
gonna take a full look at markets when we return.
When we come back, though, we do have to move
on from just this market shift that we seem to
be seeing. We've got earnings from Home Depot to talk about.
We've also got some talk about the FED and what
(19:28):
we're seeing there. That's all next here on the Financial Exchange.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving market so far
today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
Markets extending their losses from yesterday's route, where high tech
valuations continued away on sentiment. Crypto also seeing more attention
today after Bitcoin briefly drop below ninety thousand dollars, It's
up around ninety two thousand right now. Wall Street's also
digesting the first patch of retailer earnings this morning from
Home Depot. Right now, the Dow is down over one
(20:22):
percent or five hundred and six points lower, SMP five
hundred down just about one percent or sixty five points lower,
NASDAC down one and a half percent or three hundred
and sixty two points, RUSTED two thousands down two thirds
of a percent, Tenure Treasureel down three basis points at
four point zero nine six percent, and crude oil down
(20:42):
about a quarter percent, trading just below sixty dollars at Barrel,
Home Depot falling over three percent after the home improvement
retailer missed third quarter earnings expectations, marking its third consecutive miss.
Home Depot also cut its full year profit outlook, breaking
news this hour after Microsoft and no US new strategic
partnerships with Nvidia and ai startup Entropic. Microsoft and Vidia
(21:06):
will invest a combined fifteen billion dollars in Entropic, while
Entropic committed to purchase thirty billion dollars of computing capacity
from Microsoft's a zerr cloud service. Both Microsoft and Nvidia
stocks are down over two percent. Meanwhile, we have another
major internet outage to report this morning, this time stemming
from cloud Fair. The outage is affecting several major websites
(21:29):
and services offline, including open ais Chat, GPT, and social
media platform x. However, the outage reportedly has been resolved.
Cloud Fare is down three percent, and according to The
Financial Times, activist investor Elliott Management has built a large
stake in Barrack, where Elliott was encouraged by the idea
that the gold miner could be split into two companies.
(21:52):
Berrickstock is up over one percent. I'm Tucker Silva and
that is Wall Street Watch. And remember you can watch
the show every day on our YouTube page. We'll have
breaking business news and all of our content is also archived,
so if you want to see an interview or discussion
about a specific topic. It's all there with the click
of a button. Just search the Financial Exchange show on
(22:15):
YouTube and hit that subscribe button.
Speaker 2 (22:18):
We were mentioning home Depot before the break. They reported
earnings this morning, disappointed shareholders. Stock is off. What did
you say, Tucker? How much was it off?
Speaker 4 (22:26):
How about three and a half or three.
Speaker 2 (22:27):
And a half percent in early trading. Home depot matters,
just plain, a simple home Depot matters for the state
of the overall economy. Housing is an enormous piece of
our traditional economic growth engine. If it is in the
process of going through a collapse, isn't the right word.
If it's in the process of going through a period
(22:49):
of low building, low renovating, then you know it's a
bad sign for the overall state of things because it's
the single biggest asset that most Americans own, and it
is a huge pie of traditional growth in the economy.
So far this year, we've already seen the decline in
housing investment. It's been made up for by a lot
of AI investment. That's why investors have been piling into
(23:09):
some of this stuff. But unsurprisingly, Home Depot giving a
pretty dour outlook when it comes to their overall business.
The net income came in at three point six billion,
or three sixty two a share, That was down from
three point sixty five billion three sixty seven a share
the year prior. Adjusted earnings were three seventy four a share.
Expectations were for three dollars eighty four per share, and
(23:32):
sales rose two point eight percent, But importantly, COMP Sales
meeting looking at sales for all stores that were open
for at least twelve months, came in at a barely
increase point two percent for the year, missing forecast of
one point three percent. So I think it's fair to
say that, based on this earnings projection from Home Depot,
(23:54):
that people are not investing a lot more in their
homes right now. Yes, we still do have that top
ten percent who are still spending, but a lot of
others are pulling back from major projects, and even on
that top income side, I'm starting to hear rumblings, specifically
from anybody in the housing or housing adjacent industries, of
(24:14):
folks getting a little bit nervous about projects and pulling back.
Spoken to a contractor and carpenter that has seen projects
dry up. I've spoken to a few people about their
own renovations that have decided to put them off. My
brother does some hardscaping work. He's seen a cancelation on
that front for a fairly sizable project for some work
(24:35):
there around the home, and so I think we're generally
seeing some Again, most of this is coming from the
fact that Florida, Texas and other parts of the country
are in a housing slump where nobody wants to develop
new homes and so, you know, a massive piece of
home depots business is that contractor a new home building business.
But even when it comes to renos and things like that,
(24:57):
I'm seeing some shift when it comes to what people
are willing to do. That's very recent. Anything else to
add on the state of housing.
Speaker 3 (25:03):
So home depot is part of the consumer discretionary basket,
very growth sensitive for obvious reasons. Consumer So the overall
stock market this year, I'll use the Russell one thousand,
which is a little broader than the S and P
five hundred, up about thirteen and a half percent. You
can think of that as core large cap. If you
have a large cap option in your four one K plan,
might be called core large cap. That's what I'm talking about.
It's synonymous with the entire market. Consumer discretionary stocks, for
(25:27):
what this is worth, are barely positive on the year,
up point seven percent. This is real time. Infotech and
utilities for different reasons are up about twenty percent each.
Consumer discretionary stocks are flat.
Speaker 2 (25:41):
So if you're a believer.
Speaker 3 (25:42):
In stocks as an economic forecaster, and their record is mixed, there,
but at least the stock market is real time. There's
no question about prices being incorrect. So the stock market
can be a useful forecaster, and it's telling us the
pullback in tech over the last really month, in the
(26:05):
month to date period, the pullback in consumer discretionary which
I was just talking about flat on the year, are
suggesting economic weakness.
Speaker 2 (26:13):
Mic. Yeah, and again, I hate to cherry pick this
a little bit, but it's yes, no, no, But you're right,
I'm going to cherry pick further. So it's on me here.
When we talk about that consumer discretionary sector, you have
to recognize that Amazon is the biggest one, followed by Tesla,
and then you've got home Depot at third, which is yeah,
fair enough by you know, looking at it, just about
(26:35):
a fifth of Tesla and about uh an eighth of Amazon.
So yeah, really we're talking about the influence of a
few big companies on this sector as well. But yeah,
I think important to call out that consumers seem to
be at least a large percentage of consumers seem to
be out of COVID stimulus payments, not keeping up with
(26:57):
their overall expenses, and are nervous about their ible.
Speaker 3 (27:01):
Sees the market's reaction, especially over the past few weeks too,
and that may lead into our next story.
Speaker 2 (27:07):
So yeah, what is I mean, what is the FED
do in December? Their next meeting is coming up on
December tenth. Okay, so next meeting December tenth. They have
cut now is it twice?
Speaker 3 (27:19):
We're at three seven five right target, We're at.
Speaker 2 (27:21):
Three seven five, and I think they've cut twice so
far this up until a few weeks ago. Another cut
in December was fully baked in. FED has net since
come out and said, hey, pump the brakes here. We're
not so sure about that. The more I'm seeing recently,
the more I am on board was saying, there is
no reason for you to pause that overall rate cutting
cycle unless you see financial conditions reverse in the course
(27:43):
of the next few weeks. In markets rally another twenty
percent from here. I just you know, between what we're
seeing from Again, we haven't had government data for a while,
and I don't think that the FED genuinely cares about
home depot earnings. But what we're seeing from announced layoffs,
what we are are seeing from markets, to me insinuates
(28:03):
that the FED has some work to do on cutting rates.
And again, this FED has always favored the labor market
over the inflation concerns.
Speaker 3 (28:12):
Their job is to is, you know, balance the two.
The problem is we don't know exactly. We never know exactly.
We don't know even sort of vaguely right now what
the very recent trend in unemployment and inflation has been.
Speaker 2 (28:28):
Right, So I don't know.
Speaker 3 (28:31):
My gut says basic to go ahead, good, no good.
As of two months ago, I would have said absolutely not.
Inflation remains elevated, unemployment's gone up a little tiny bit.
May not be the best measure of the state of
the labor market, however, others point to mounting weakness, but
nothing alarming. More perhaps a normalization from the frantic pace
of labor market growth over the last few years. So
(28:53):
we've got elevated inflation, we've got potential slight compromise of
labor market conditions not enough to me to provide. What
the FED does is it stimulates the economy. It stimulates
a man. It does that, as we know, by controlling
the money supply, which in turn effectively allows it to
control very short term interest rates. To me, the case
(29:15):
was far from clear that we needed additional stimulus when
underlying inflation when last we knew what the estimate was
was somewhere in the low three underlying inflation.
Speaker 2 (29:27):
I think so right now. By the way, according to CME,
it's about a coin toss as to whether or not
they cut rates. Again, I won't voice my opinion of
what they should do, but in terms of what I
think they will do, I think a rate cut is
far more likely than a coin toss.
Speaker 3 (29:41):
Well, they're scared to death of a market crash because
the so called wealth effect is increased in importance, meaning
people tend to spend more. In response to a one
percent increase in stocks historically has resulted in a three
to five cent increase in spending. That number may have
gone up. We've all seen stories about top earners and
people on stocks keeping consumption going. FED knows this I
(30:05):
don't know that they think they can afford to let
the stock market sell off. I also don't know that
they can staunch any sell off if it's driven by
more fundamental or deeper concerns.
Speaker 2 (30:15):
Quick break when we come back. We did finally get
some government numbers on the labor market. I want to
talk about those when we return next on The Financial Exchange.
Speaker 1 (30:26):
Breaking business news as it happens only here on the
Financial Exchange Radio Network.
Speaker 5 (30:32):
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Speaker 1 (31:03):
The Financial Exchange streams live on YouTube. Like our page
and stay up to date on breaking business news all
morning long. Base is the Financial Exchange Radio Network.
Speaker 2 (31:22):
As far as I'm aware, one of the first pieces
of government economic data to be released since the government
shutdown or since the government reopened, were the jobless claims
that we got just this morning. This is pretty stale now,
it's measuring a month ago. So I don't know what
to do with this information other than to say that
a month ago I wasn't terribly concerned about the labor market.
(31:45):
Jobless claims for the week of October eighteenth total two
hundred and thirty two thousand. That was up a little
bit from previous weeks that we had back in I
don't know what we had before that, like September. But again,
until those numbers, I don't know if you have a
figure in your mind where that reaches a real grave
concern level, But I would say if it crosses the
(32:07):
three hundred thousand threshold, we've got some questions to answer
about the state of this economy. But at two hundred
thirty two thousand, that's basically in line with where we've
been for a while now, and it has not been
enough to force up the unemployment rate. If you take
that with a shrinking workforce due to retirees plus lack
of immigration into the US. I tend to think that
(32:29):
two hundred thirty two thousand is nothing to be immensely
concerned about. Continuing claims, i e. How many people are
continuing to receive unemployment benefits came in at one point
nine to five seven million. That was up slightly from
one point nine to four to seven million the week prior.
So again, I think we will get this data on
Thursday for last week, which will be far more relevant.
(32:52):
It may take a little while to have it released,
but this data point is only important because it is
the most up to date data that we get on
the stay of the labor market. Right, nothing else that
we can get other than private when.
Speaker 3 (33:08):
You want when you use data for forecasting. It's the
point I was trying to make in the last segment
or a couple of segments ago about the stock market
being useful is because it's continually updated day. The price
is always right. People don't appreciate if you don't work
with data, you may not recognize that cleaning your that
mismeasurement is a huge problem when you're doing when you're
(33:30):
estimating economic models, doing forecasting stock markets beautiful because there's
never a measurement issue with your data, and it's always
up up to date. It's not a perfect forecaster of anything,
but useful for that reason. Similarly, the frequency of the
of the weekly jobless claims continuing claims is weekly, so.
Speaker 2 (33:46):
Very high frequency compared to say, the monthly jobs report,
which we also haven't been getting.
Speaker 3 (33:50):
Problem is there could be some measurement issues there too.
I have not seen any serious analytical not to say
it doesn't exist, I just haven't seen it analytical work
on what rate of change should be concerning, you know,
is if it goes up by two percent.
Speaker 2 (34:03):
You know, yeah, I think I have seen something, and
I don't recall where the thresholds well, and that.
Speaker 3 (34:07):
Probably changes too because relationships among these variables change.
Speaker 2 (34:10):
Well, that was the point that they made, is you know,
prior to twenty twenty five, the level of job as
claims hit the FIT reached this level would indicate that
unemployment rate's going to start ticking up. But then they
also said, you know, given where we are in twenty
twenty five with retirements plus deportations, they had no semblance
of an idea of where that number is to be concerning.
(34:30):
So again, maybe it's two fifty. Maybe it's three fifty,
but in either case, I'm comfortable saying that where we
were on October eighteenth is about where we've been for
the last twelve months and not concerned.
Speaker 3 (34:41):
I think we could say, without over analyzing it, that
if it started to go up by a lot quickly,
we should be worried.
Speaker 2 (34:48):
Agreed, Yeah, yeah, I think we'd agree on that.
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Speaker 2 (35:57):
Some bad news out there for for my family in particular,
but you know families. This Thanksgiving, generally, turkey price is
going to be a bit of sticker shock, as wholesale
prices for a turkey have jumped forty percent from a
year ago. Why I'm focusing on my family A little
lesser known thing about me. My family's insane, especially around Thanksgiving.
(36:20):
And we generally have sixty plus people every year for Thanksgiving.
But I'm looking at by the way because it's so big.
We have family members assigned to building a spreadsheet for
who has to do what for our Thanksgiving. And this
year I'm counting five turkeys for our one hundred and
one attendees of this year's Thanksgiving. For the larger Armstrong family,
(36:42):
I am actually responsible for one of these so I'm
gonna have to figure that out. But wholesale turkey price.
Speaker 4 (36:47):
Is one cook per turkey.
Speaker 2 (36:52):
No, I am splitting this responsibility with my second cousin.
Speaker 4 (36:56):
Okay, so how many birds are you responsible for? Two?
Speaker 1 (36:59):
Okay?
Speaker 2 (36:59):
Yeah, I'm personally responsible for one, and then there's other,
you know, couples and family members that are responsible for
their own. But I'm counting five turkeys. Forty pies, forty pies.
Forty pies, yeah, all the same pie.
Speaker 3 (37:15):
No, forty pies for sixty people.
Speaker 2 (37:18):
Let's let's do the pretty big forty pies.
Speaker 1 (37:23):
Uh.
Speaker 2 (37:23):
Yeah, I don't think you need forty pies for one
hundred people. Yeah, probably not for one hundred people.
Speaker 1 (37:27):
I'm sorry.
Speaker 3 (37:27):
See I don't know where I got sixty excuse me.
Speaker 2 (37:29):
Probably probably twenty five pies would do it, wouldn't it. Yeah?
Speaker 4 (37:33):
Forty Yeah, we don't.
Speaker 2 (37:34):
Are you having a contest, yeah, it's a pieting contest.
Speaker 4 (37:38):
The Armstrong pie eating contest.
Speaker 2 (37:40):
Yeah?
Speaker 3 (37:41):
Or are you having a food fight?
Speaker 2 (37:42):
Maybe? Yeah? So it's gonna be an interesting This one,
one hundred one is a record. So I'm proud to
say that for for the family Thanksgiving, it is a record.
And the nice thing is if you don't get along
with a family member, it doesn't matter because you don't
even see them, which is which is fortunate. I don't
know the names of all the people that will be
in at ten.
Speaker 3 (38:00):
That's a big enough crowd that ice may show up.
Speaker 2 (38:02):
Yeah, it's entirely possible.
Speaker 3 (38:03):
Yeah, you have a lot of cana, right, Okay.
Speaker 2 (38:06):
Not on this side. This is my mother's side of
the family. Yeah, way around, that's true. But yeah, again,
the point of this story before I went on a
tangent about my own insane family and every year, is
that turkey pretty expensively. It's up forty percent, So.
Speaker 3 (38:23):
Maybe there's turkeys everywhere.
Speaker 2 (38:25):
Maybe, Yeah, I know, I could just run over work. Yeah,
I don't know. Maybe a good you know, Thanksgiving tofurkey
would be go over well with your family.
Speaker 3 (38:35):
Stop is terrible.
Speaker 2 (38:38):
I was going to suggest steakes, but those are even
more expensive than turkey right now, so that's not a
good IDEA quick break, A lot more to cover in
the second hour of the financial exchange. We'll be right
back
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