August 21, 2025 • 38 mins
Chuck Zodda and Paul Lane chat Walmart slumping after rare profit miss, cites higher claims as culprit. the EU and US lay out next steps on tariffs to rebalance trade ties. Fed minutes reveal broad support for holding rates steady. Powell's big gamble in final Jackson Hole speech. Boston landlords are frustrating with the local government over valuations. Chipotle teams up with Zipline for drone burrito delivery.
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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(01:06):
and Paul Lane.
Speaker 2 (01:11):
Chuck Paul and talker with you, and we kick things
off looking at Walmart earnings from this morning and Walmart
stock down about four percent. Paul, what did we see
from Walmart?
Speaker 3 (01:24):
Chuck out. I thought it was overall a pretty good
quarter that reported. But ultimately it seems like the concern
here with the market is that their profitability numbers fell
in a little bit short of estimates. Their earnings per
share came in at sixty eight cents to share versus
what Wall Street had expected of seventy four census share.
A lot of that reason for the miss on the
(01:45):
earnings front, the retailer sited was insurance claims, lead legal charges,
and restructuring costs that weigh down on profitability. But otherwise,
outside of that, I understand, you know, that's what the
street cares about, is the missed there. There were many
positives that I took away from this report. Unless you know,
you can feel free to disagree. But the sales growth
(02:08):
that they're anticipating for the rest of the fiscal year
is going to be ranging from three point seventy five
percent to four point seventy five percent. That's up from
where it previously was so continuing to see strong sales
growth for the remainder of the year. They reported comp
sales growth of four point six percent in Q two
compared to last year. Like we just talked about the
(02:28):
last couple of days, how Target has seen declining sales
growth and some of these other retailers, granted on the
home improvement SIDEM, Home Depot and Low's have barely been
able to scratch out one percent. And I know Walmart's
business is a different makeup, but still some pretty good
numbers there. Their e commerce side of things continues to
roar twenty five percent growth there, and the CEO CFO
(02:52):
rather stating that the consumer has continued to be quite
resilient in terms of the face of tariff impact. Tier
They saw prices rise across items in the US about
one percent in the quarter. You had a little bit
of mixed messaging from the CEO differing slightly from the
cfo's commentary about the consumer being resilient, mentioning that some
(03:14):
of these discretionary purchases showed a little bit of sensitivity
to tariffs. But overall, I take this as a whole
as a pretty good quarter for Walt Walmart stock had
been bid up pretty high, so some of this selloff
could just be as a result of the fact that
it's been on a tear.
Speaker 2 (03:30):
Yeah, I think that when when I look at this,
it's something where you've got, you know, a number of
good items that you mentioned in terms of, you know,
the the e commerce sales moving up. But I think
the big thing is, look, if you look at their
net sales projections and you know that higher guidance that
(03:51):
they gave, they also gave guidance as to earnings for
the full year that were basically unchanged, like less than
a one percent shift in earning, And what that implies
is basically, look, the reason that we are expecting net
sales to rise is because we think our cost of
good sould is going to rise, and as sets, we're
going to try to pass that through. So it's not
(04:12):
really they're not expecting stronger organic growth. It's just they're
going to be seeing some higher costs and they're going
to be passing that through to maintain margins because Walmart
operates on a pretty tight leash when it comes to
their margins, just like most retailers. I mean this is
you can go back one hundred and fifty years and
find you know, information on grocery stores basically, you know,
(04:35):
grocery stores and retailers saying, hey, we're trying to operate,
you know, at low margins in order to you know,
maximize sales. And that's Walmart's game. They've just leveraged it
better than anyone else because of you know, the when
and where they operate. So when you have margins of
you know, four percent, you don't have a ton of
wiggle room to be able to absorb higher prices. You
(04:56):
can do a little bit of it, but ultimately you
gotta pass those through. You can't just be like, Okay,
our costs are going up by three percent, We're gonna
let you know, three quarters of our profit go away. No,
it doesn't really work like that. You can't do that.
So when I look at Walmart, I think that the
second piece that you said makes it makes a ton
of sense, which is, look, it's a company that's been
(05:17):
on a tear and it's priced expensively. I mean, I
don't know that people realize this right now. They should.
Walmart right now trades at thirty seven times forward earnings,
meaning projected earnings for the next twelve months. To put
this in perspective, in Vidia trades it forty times forward
(05:38):
earnings right now. Now, the earnings growth projections for Nvidia
are steeper, So you can make a case it's priced,
you know, way more steeply than Walmart. But in terms
of hey, what does everyone think their next twelve months
earnings are gonna be and what's their price relative to that,
the two companies are priced pretty darn closely at the moment.
And I think we all can agree that, Hey, as
(05:59):
much as you know, Walmart is really really consistent in
its business, it's not doing the things that Nvidia has
been doing over the last couple of years. Nor is
it going to suddenly start doing that. You know, We're not.
We're not gonna see walmart sales suddenly start going up
fifty percent year over year and their profit going up
two hundred percent year over year because they sell pita chips,
(06:19):
not computer chips. It's just it is what it is.
So I think the two things that can absolutely be
true here are, Hey, Walmart continues to show they're a
great operator. Their e commerce business is showing some really
good growth. I think they're up to I think like
twenty percent of all their sales now being online through
Walmart dot Com, which is huge given you know where
(06:41):
they've come from in the last five to seven years.
And I think ultimately having that grocery piece attached to them,
where what is it, like fifty percent of their sales
I think are groceries as well, So keep in mind,
like most people don't buy a ton of groceries online
through Walmart like that the data is not strong on
(07:02):
that side, and that basically means that like forty to
fifty percent of their non grocery sales are coming online,
which is huge. Like that's that's huge for them. So
I think overall it's a well run company. There's nothing
too exciting about it, but they continue to execute well.
And in this environment right now, you're going to pay
(07:22):
for good execution, and I think that's the reason why
it's still isn't priced as highly as it is. The
thing that I wonder about with Walmart and this I
even I've said this before about other companies, like you know,
you look at take Apple or Microsoft as an example.
So like let's say that Apple has you know, a
bad year two, what does that actually look like and
(07:49):
why does this is gonna sound kind of dumb at first,
but assuming that you own Apple stock, even if they
had a bad year or two, why would the price
move down? And I know that sounds kind of dumb
because I'm basically saying why should applestock ever go down?
(08:10):
But I want you to hear me out for a minute.
So the the reasons why you know, markets tend to
price things, you know, to try to price things efficiently,
is because, hey, if you don't, then you get caught
by surprised by someone you know, pulling an end around
on you, and all of a sudden you're like, oh,
like what happened? Example would be okay, let's say that
you are you know, what's a what's a bad company?
(08:34):
Right beyond meat? Okay, not a bad company, but just
a bad stock. Okay, how dare you? No, we're not
gonna do this. We're not gonna do this, not here. Okay,
this is the war room. You can't fight here. So
you take beyond meat right now. And the worry with
beyond meat is very real in that, hey, it's one
(08:54):
hundred and eighty two million dollar company. They're not profitable,
they're free cash flows negative, they don't have a lot
of cash on hand, they could go out of business,
and if they declare bankruptcy and you still own the shares,
you have nothing. I think that we can all generally
agree that in the short term, the risk of bankruptcy
to an Apple or Microsoft or even a Walmart is
(09:15):
pretty low, and likewise, the idea that someone's going to
come in with some monster bid to acquire them is
also kind of low as well. So I guess you
kind of look at them and I have this weird
thought from time to time on them where I just
look at the stocks and I'm like, why does anyone
trade these? Because they can't really go out of business tomorrow.
(09:38):
They're not going to be acquired by anyone, so who
really cares what the fair value is for these?
Speaker 3 (09:43):
Anyways, I would push back on that because ultimately, the
reason why Walmart can trade at thirty five thirty five
times forward earnings is because of the perception of them,
like you mentioned before, as good operators and good executors.
Speaker 2 (09:59):
But if for some.
Speaker 3 (10:00):
Reason that story change for whatever reason, whether it is
something that is at the corporate level, loss of employees,
some sort of scandal that hits them, the same thing
can apply for Apple too. Ultimately, the reason that they're
able to command these high valuations part of it is
just kind of the reputation story around them, where fundamentally
(10:23):
I don't think you could really make the argument that Walmart,
given its business, should trade it thirty five times earnings,
But it's trading that way because of kind of the
premium that it commands for its reputation. Those things take
a hit, then you can see a differing story as
to where it would trade. I guess that would be
the thought I would have.
Speaker 2 (10:42):
Sure. I just I kind of look at these sometimes
and I'm like, I don't know, Like nothing's really gonna happen.
It's notable in either direction, or like it doesn't seem
like it. You know, even look at all the AI
hype and everyone's like, oh Apple doesn't have you know, AI. Well,
they still have forty percent margins, So like who cares?
Like if if AI starts to threaten their business, then
(11:03):
actually care. But otherwise I don't know, Like do we
really need to Does CNBC need something to.
Speaker 3 (11:09):
Talk about the global market share in China declining? For
for Okay, that's concerned they could sell less product there.
That's twenty percent of their sales and they're decreasing their
I'm not saying, but why should that affect the price
of the stock based on their revenue relative to what they're.
Speaker 2 (11:29):
I guess here's what I'm getting, Like, these companies are.
Speaker 3 (11:32):
So developed that you're saying revenue couldn't shift that much
to jigger it one way or another.
Speaker 2 (11:38):
I know that what I'm saying is going to sound dumb,
and I know that it's not one hundred percent true,
But like, is Apple going to go the way of digital?
Like everyone always likes to be like, oh, all these
like seventies and eighties tech companies went out of business
and it happened to that kind of thing, Like you
really think with how entrenched Apple is today, it's going
to happen to them because they like. Comparing Apple to
(11:59):
Kodak is like comparing a Ferrari to a horse drawn carriage.
Speaker 3 (12:04):
I'm drawing blank on historical their scott Their size and
scale is crazy, but I'm sure there has been historical
examples of companies that you thought g has researched. But
they're a company that probably twenty years ago you would
say that they could do no wrong, and they couldn't
go through what was a period that was really challenging.
Did they go to business No, but it looked a
(12:25):
lot different going forward. Could they spread themselves too thin? Yeah,
not to think with some other examples, it's just hard.
I have this thought that goes through my head.
Speaker 2 (12:33):
I don't fully believe it, but sometimes I'm just like,
why why should that go down? Like just because they
sold fewer iPhones, Like they're still making a boatload of money.
Who cares how many they sold this quarter?
Speaker 3 (12:44):
There probably was a horse and buggage company out there
that got crushed by Ford back in the day. Maybe
I'm sure, I'm sure, but not the size of Apple.
Speaker 2 (12:53):
I get it. And look, I'm sure all the AI
people are just like looking at me around the corner,
just like ooh, like Chuck's gonna be wrong. I get it.
But I have these thoughts that bubble up occasionally, and
I just to let you guys know that's it's the worroom.
Take a quick break. When we return, we'll talk a
little bit about the details from the EU and US
trade agreement that were unveiled this morning.
Speaker 1 (13:15):
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Speaker 2 (13:45):
All right, this morning, somewhere in the seven to eight
o'clock hour, I don't know exactly when we saw the
text of the deal between the US and EU posted
by the White House online. What we learn through the
actual written deal here.
Speaker 3 (14:08):
Basically what the case is going to be for certain
areas of imports. There will be potentially the ability for
the EU to import things such as cars, pharmaceuticals, or
semiconductors at a fifteen percent tariff rate. If you look
(14:28):
at autos that was previously at twenty seven and a
half percent, it would come down to fifteen percent. However,
there are some conditions that the EU would need to
meet in order to get those preferential rates on some
of those sectoral discounts that I mentioned before. What those
conditions are. The EU will have to eliminate its own
tariffs on US industrial goods, as well as opening the
(14:50):
door to the US to be able to sell agricultural
goods as well as seafood into the EU, So that
was probably the biggest piece. And to me, it seems
as if fifteen percent is kind of going to be
the standard level for most of assuming the conditions get met.
Speaker 2 (15:11):
Seems like it. Yeah, And so obviously the you know,
the question is going to be predominantly when it comes
to the EU. Hey, how do the automakers deal with this?
Because the literal and metaphorical engine for the EU is
the German auto Sector're glad we got that one in there.
And so obviously, look, if it's more expensive to send
(15:32):
Volkswagens and Mercedes over to the US, hey, that's going
to be a thing. Both those companies do have facilities
that they operate in the United States, but if you
look at what they mostly make in the US, it
is a lot of the SUVs and stuff that we
tend to buy. If you are buying a Mercedes Sedan
as an example, they are exporting that from Germany. Likewise,
(15:53):
if you look at a number of Volkswagen models, it's
the same situation as well. So it's not at all
or nothing, and we'll have to figure out how they
deal with pricing and margins, because look, auto business, it's
tough business. It's like, hey, let's spend you know, fifty
billion dollars developing this plant, and then we're gonna eke
out you know, five to seven percent margins if we're
lucky and there's no recession over the next ten years,
(16:14):
and that'll figure out how to pay for this thing.
So it's it's a tough business to be in and
they're gonna have to figure out how to adapt. That's
the only only thing that you can say about it.
Speaker 3 (16:25):
Particularly a concern for Germany. As you mentioned, that had
imported thirty five billion of autos and auto parts in
twenty twenty four to the US, and it's a huge
part of their economy. So this is something that is
of significant importance to Germany.
Speaker 2 (16:39):
Let's talk a little bit about the Fed minutes that
we saw yesterday. These came out I think it was
like two pm somewhere in that ballpark, and it's really
interesting what we saw actually from the Fed minutes. Normally
I don't really pay much attention to them. If I'm
being one hundred percent honest, I'm kind of like, okay,
like who cares what, Like the tenor of the meeting was,
(17:03):
it's not really important to me. But we got a
whole bunch of detail about kind of not who thought what,
but like what quantity of people at the FED meeting
thought what? And I found it, you know, useful to
kind of break this down into different categories. So what
did most people believe? Inflation is above the two percent goal?
(17:27):
The tariff effect can take time to seep in, and
those were kind of the two big things that the
majority of people believed. Several people thought that the risks
were balanced, that they were concerned about acid valuations specifically,
like kind of market valuations and real estate and prices
like that being you know, high, expect some weaker growth
(17:49):
in the second half of the year and are starting
to see signs of slower income growth hitting consumers as well. Okay,
then what were the things that a few people noted.
Tariff passed through has been kind of limited so far.
Businesses are trying to avoid passing on costs. Tariffs could
be a one time price bump, or they could cause
(18:09):
persistent inflation, Like you had both sides expressed there by
a few people. Immigration policies hurting labor supply. This I
think we're going to continue to hear more about over
the next six months, weakening housing demand, and you know,
those are kind of the big things there. And then
you got to, hey, what did a couple members believe
(18:29):
tariffs are masking true inflation which is closer to two percent?
Expectations are driven by overall inflation, and households have low
delinquencies and there's not much you know, concern on on
that side of things. So I think overall, the message
from this was actually a little bit more hawkish than
what we heard a couple weeks ago, in that it
(18:51):
was pretty much, hey, most of us didn't really want
to do anything. A few people actually thought we should
raise rates, and there were a couple that you know,
publicly that already yes, I wanted to you know, lower rates.
Speaker 3 (19:02):
Yeah, that was most publicized, the cutting rate piece.
Speaker 2 (19:07):
Yeah, because no one voted to raise rates in the
last meeting. But it sounds like there were a few
people that actually talked about it as if, Okay, maybe
we should And what I wonder about on this in
terms of the Fed minutes, it's a little bit more
hawkish tilt than I think people were expecting. Is it
a preview of what we're gonna hear from mister Powell?
(19:28):
Jackson Hole tomorrow. The good news when we come back,
We're gonna preview that preview after this.
Speaker 1 (19:40):
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):
After beginning of the day well into negative territory, markets
are now relatively flat at the moment as traders digest
significant retailer earnings from Walmart and await FED chairman Jerome
Powell's speech in Jackson Hole tomorrow morning. At the moment,
the Dow is down by two tenths of one percent
or ninety points lower. SMP five hundred is down over
(20:21):
a tenth of a percent or eleven points lower, Nasdaq
down a tenth of a percent as well, or twenty
points lower. Russell two thousand mostly flat at the moment.
Tenure treasure yield is up three basis points at four
point three two eight percent. In crude oil is up
about half a percent higher, trading right around sixty three
(20:42):
dollars a barrel. Walmart reported rapid sales growth in the
second quarter and raised its outlook, saying it is winning
over shoppers with grocery discounts and fash shipping. However, the
retail giant missed earnings expectations on an adjusted basis, sending
shares four percent lower on the day. According to the
Wall Street Journal, Meta has frozen hiring in its artificial
(21:04):
intelligence division after spending months scooping up researchers and engineers.
Shares in the Facebook parent company are down over half
a percent. Speaking of hiring freezes, Novo Nordisk announced to
hiring freeze in non critical areas as it looks to
fend off competition and control costs. Shares in the Ozepic
(21:24):
and wegovie maker are up over one percent. Meanwhile, beauty
and sense company Cody is seeing its stock plunge nineteen
percent after it posted an unexpected quarterly net loss. The
Rimmel owner is expanding into fragrance myths and said consumers
still want to pamper themselves. Cracker Barrel plunging over twelve
(21:45):
percent after the restaurant and gift shop chain on Wilden
updated logo earlier this week, leading to criticism on social
media and new streaming services from ESPN and Fox officially
launched today, making their cable network offerings available for a
monthly subscription that's not confusing in the least bed and
doesn't overwhelm me at all. Disney is down by one percent,
(22:08):
while Fox is up modestly. I'm Tucker Silvan and that
is Wall Street Watch.
Speaker 2 (22:13):
So tomorrow j Powell is going to give his annual
speech at Jackson Hole, and the lingering question out there
is what shade of purple will Jay Powell's tie be.
I've prepared a selection for you. I'm curious to hear
what you guys think. Is it gonna be just, you know,
(22:34):
base purple? Is that what we're going with? Are we
going with something more amethyst in nature? Maybe a mauve,
maybe a raspberry, something along those lines. Violet? What direction
do you think he's gonna take the tie in?
Speaker 3 (22:49):
I'll goo violet solid or pattern solid? Tucker, any thoughts.
Speaker 4 (22:55):
I don't know. But he's gonna wear his finest denim
jeans because it is a Friday.
Speaker 2 (22:59):
You think he's going jeans? Took him to the.
Speaker 4 (23:02):
Dry cleaner like Michael Scott did.
Speaker 1 (23:03):
Yep.
Speaker 2 (23:05):
I don't know if Jay Powell. I feel like ja
Powell gardens and khakis, not that there's anything wrong with that.
Speaker 4 (23:12):
Well, then you know he's making a speech though, but it.
Speaker 3 (23:14):
Is a Friday.
Speaker 4 (23:15):
You know, he's still on a trip to keep the cash.
Speaker 2 (23:18):
I don't know. Let me ask this, does Ja Powell
own a pair of shorts?
Speaker 1 (23:25):
Oh?
Speaker 4 (23:26):
Yeah, he's a cargo guy, cargo shorts.
Speaker 3 (23:28):
You think he's the down of the mafia, doesn't wear shorts.
Speaker 2 (23:31):
I think I think he wears sweatshorts.
Speaker 4 (23:33):
I think he's a cargo shorts guy. I think he's
got all that gardening equipment he's got to handle, you know, I.
Speaker 2 (23:37):
See him as as as sweatshorts, maybe even like cut
off sweatshorts Bill Belichick style. But for the pants.
Speaker 3 (23:45):
Actually, one of these articles to tie into something from
the stack, did mention that he works out quite a bit,
So he definitely has shorts. He's got a personal trainer.
Speaker 2 (23:54):
I don't know.
Speaker 3 (23:54):
Some some people were.
Speaker 2 (23:55):
Pants worker outers. You know, you always have that one
guy at the gym that is in you know, full pants,
full like you know, long sleeves, just working up the sweat.
But we digress. Jackson Hole question is what is Powell's
speech going to be like? Now. Three years ago, back
in twenty twenty two, he delivered arguably his most hawkish
(24:18):
speech of his tenure. The rumor out there is that
he rewrote it actually like the night before, just because
he was unhappy with what he had done previously. The
S and P five hundred promptly puked about fifteen percent
through mid October, and then we've been on a steady
upward clip since then, with you know, a couple of
hiccups here and there the other you know years you
(24:40):
will get again. Kind of the most I'm looking at
the post pandemic era just because like seeing what Jay
Powell said in twenty nineteen is not really relevant to
where the economy is today. You look the other three years,
you know, kind of during that time period, and Powell had,
you know, some mixed speeches to the point where last
year arguably one of his most dubbish speeches. Hey, the
(25:01):
we believe, you know, it's appropriate to now, you know,
pay more attention to the unemployment risk and you know,
the balance of risks have changed. And even with that,
by the way, the market kind of anticipated it and
fell like four or five percent shortly after over the
next week or so before bottoming. So the trend over
the last four years has been whatever Powell has said,
(25:21):
the market really hasn't liked it in the subsequent weeks.
But what is he actually going to say? The people
that are plugged into to Powell think it's going to
be with a hawkish tilt, but with no specificity, so
that basically no one can grab on to anything. I
kind of wonder if Powell wants to be more specific here.
(25:42):
And I mentioned that only because of two things. The
first is obviously Powell and the President not getting along great,
and this is a chance for him to show FED independence.
The second piece, this is this is his last speech
at jackson Hole. No matter what, he will not be
the FED chair at this time next year, and so
(26:03):
it's a chance for him to kind of leave a legacy.
And I wonder if he's thinking about that in terms
of how he frames his speech. I'm not saying that
that will be more dubbish or more hawkish. I don't know,
but it's going to be his last Jackson Hole speech,
and I wonder if he thinks about it in that
context and pushes in one direction more than he otherwise
(26:26):
would have.
Speaker 3 (26:26):
Because of that, certainly sentiment on FED independence. I could
potentially see that being something that Powell focuses on during
this discussion. I would say that in general, the specificity
I would imagine will be incredibly limited, probably to your
point on the Hawky stance. He'll mention some of the
concerning pieces with potential increases to inflation and the cooling
(26:50):
labor market, but not commit to anything and ask for
us to see several more months of data. That's probably
how he'd play it, right down the middle. Well, something
that's more longer term will be interesting. Any sort of
commentary he has on longer term Federal Reserve monetary policy.
One of the big decisions that was made pre pandemic
(27:11):
was this idea of letting inflation run hotter than two percent,
because for the last ten or fifteen years or so,
we never talked about inflation all because there wasn't really
any inflation out there.
Speaker 2 (27:20):
It was lower for a while. It was this idea
of average inflation targeting. Hey, if we've been at you know,
one seven for the last five years, maybe it running
at two five for a few years. Isn't the worst thing.
Speaker 3 (27:30):
That I don't think is going to be part of
the plans going forward, because when we got up to
nine percent in twenty twenty two and the mistakes that
were made thinking that inflation was transitory, pretty good indication
of not having that be part of the future plans.
But that, along with some other concepts just in terms
of what monetary policy looks like going forward, that will
be the other piece of it. It will be a
(27:51):
much more minor part of the speech in terms of
what pundits focus on the next day, but also something
that will be interesting to follow.
Speaker 2 (27:59):
The interesting piece on this is how projections for the
September meeting have evolved over the last week. Just as
an example, if we go back a week ago, you
had a one hundred percent chance of I'm sorry, it
was a ninety two percent chance of a quarter percent
rate hike. At the September meeting. Yesterday it was down
(28:24):
to an eighty two point four percent chance, and today
it's a seventy five point three percent chance. So we've
kind of seen this backsliding, and it's been because of
a few different things that we've gotten as far as
you know, different data points that have come out during
that time. Quite honestly, like you look at how the
data has come out, and you say, okay, I can understand,
you know, how we may have gotten near Obviously, you
(28:46):
had the Fed Minutes yesterday. This morning you had the
Philly Fed Manufacturing Index, which came in with not really
a great reading, but prices paid continued to increase there. Likewise,
SMP Global MANU Facturing PMI came in hotter than expected,
with you know, some signs of pricing pressure as well,
and so what you're starting to see showing up in
(29:09):
more of the data is additional pricing pressure. And quite honestly,
the data, as far as economic activity goes, as we've
talked about, hasn't been as bad as people feared. And
so I think aside from that Job's report at the
beginning of this month, you look at the data in
the aggregate and you're kind of like, Okay, I'm not
sure the economy is worsening, And if it isn't worstening,
(29:33):
doesn't that mean that cuts probably don't need to happen
and we need to see what happens with pricing. This
is just what the market might be thinking right now.
This can obviously all change over the next three weeks.
If we get some weekly jobless claims numbers that start
to trend higher, if we get another week jobs report,
(29:54):
you know, these are things that could alter the balance
here and move us much much closer to you know,
a certainty of a cut again. But at this point,
the trend has been in the opposite direction over the
last week or so, and we'll have to see how
it evolves clearly through Powell's speech tomorrow, So this will
be a again. I think it'll be really interesting to
(30:15):
listen to because, quite honestly, and this is the tough
part right now, I think there's a compelling case for cuts.
I think there's also a compelling case to do nothing,
and I think there's a compelling case to hike if
you think that the inflation stuff that's happening on services
is potentially sticking around. So all I know is I'm
(30:38):
really happy that I'm not sitting in J. Powell's chair
because I'd be there trying to find my three sided coin,
being like what am I gonna do? Because I don't
know how to handle it.
Speaker 3 (30:48):
I can't tell you how many times that thought has
popped in my head as too, I'm so glad I
don't have to do this.
Speaker 2 (30:53):
Job right and here's the thing. It's really in terms
of your actual decision making, there's.
Speaker 3 (31:03):
Not that pretty by to do yes or no.
Speaker 2 (31:05):
You know, it's okay, every six six weeks, we're gonna
get the gang together and we're gonna decide. You know,
up down are the same. But it like there's a
lot that goes into it, and if you get it wrong,
oh boy.
Speaker 3 (31:17):
It's I've compared it to being a referee before. It's
you get a ton of heat if you get it wrong,
but not a lot of credit if you do things right.
Speaker 2 (31:25):
It's, you know, a referee, you have a lot of
little decisions you have to make.
Speaker 3 (31:29):
I'm not saying the yes and no piece, just the
credit piece.
Speaker 2 (31:31):
This is just like you show up every six weeks
and that's that's it. I mean, I'm not saying he's
not working in the interrum. He obviously is. But ultimately
you're judge based on your actions, not based on your thoughts.
And so man, imagine imagine having eight things that you
do each year and and that's it, and and all
(31:51):
the pressure that goes into it with basically like the
global economy just resting on your shoulders. It's a lot,
it is. It is. I don't know how you deal
with that kind of pressure. To be honest, it's it's
quite a bit. Let's take a quick break when we return. Oh,
this is a good one. We're going to talk about
Boston property valuations because.
Speaker 3 (32:13):
This very interesting story.
Speaker 2 (32:14):
This is a really good story and I think a
fascinating look at a problem that could be hitting a
number of different cities and states in the coming years.
Speaker 1 (32:24):
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(32:44):
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Speaker 4 (32:56):
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Speaker 2 (33:28):
Piece from Baloomberg today. Crazy vacancies forced Boston landlords to
challenge valuations. And what it talks about is that owners
of office buildings in the city of Boston have challenged
assess values for three hundred and eighty eight different commercial
buildings in downtown Boston this year. That is an eighty
three percent jump from the same time period in twenty
(33:51):
twenty four. And the big thing is Boston receives a
ton of its tax revenue from commercial property taxes. Likewise,
those commercial properties, often office buildings, do not have the
same level of occupancy that they did five, six, seven
years ago for obvious reasons. And so you have landlords
(34:12):
that are out there. And again sometimes these are small,
you know, individuals that have you know, a six thousand
square foot you know, small office building that's out there.
Sometimes they are you know, the giant office buildings on
State Street and so on and so forth. And the
big thing is that property taxes supply about three quarters
(34:33):
of the city's four point eight billion dollar budget. They
have already lowered the collect the assessed value of properties
by twelve percent over the past two years. But you've
got landlords out there saying no, like this needs to
be you know, discounted close to fifty percent. So who's
actually right. It's probably somewhere in between, because obviously the
(34:54):
landlords are going to want to pay as little property
tax as possible. Likewise, the City of Boston wants to
collect as much as possible in terms of where the
assessed values actually land. Look, things probably weren't going to
stay as good as they were, you know, in twenty
eighteen and twenty nineteen forever. They're probably not going to
stay as bad as they are right now. And you
don't want to have to be making big adjustments every
(35:15):
year based on, you know, assessing where vacancy in this
and that is. And so I think it is pointing
towards these tax valuations having to come down. But now
you're blowing a hole in city budgets, and the question
is where do you come up with the revenue to fill.
Speaker 3 (35:31):
That's the question that was popping around my head Okay,
how would you even go about fixing this if you're
talking about three quarters of revenue. The short answer is
there's not a real immediate fix to it, and that
twelve percent lowering that they've done over the last two
years is a start. I think maybe the fifty percent
value decline on the office building is a little rich,
(35:51):
but I don't think it's that far off from maybe
thirty percent, right Chuck. In terms of value. The problem
is there's such limited transactions that there's not a lot
of comparisons that you can make on the sales side
because people aren't selling these office buildings. But it's a
really difficult mine. And then on the backs of that,
you also have those residential owners in Boston, which there
(36:14):
aren't many, but they will have to pick up more
of their share of property tax revenue if they could
see their property taxes increases as a results of that.
So that's a big concern that politicians have. Michelle wou
is running for reelection and trying to still push more
of that through commercial property landlords. The need for more
(36:38):
revenue on the tax side of things from them.
Speaker 2 (36:40):
Now some of this also one of the people they
interview here I'll quote on this. So a property from
this landlord is one of the few to win debatement.
The city agreed to take nearly two million office initial
fourteen point two million dollars assessment for an eleven story
court square office building that he says it's about two
thirds empty. If your building is two thirds empty, maybe
you got to lower the prices that you're you know,
(37:00):
asking for on it. Also, I mean this cuts both ways.
Who's to say that you need to get those prices
you know for your building as well? So there's that
let's see this bone story. No, I don't want to
do that. I want to hop forward to Chipotle. I'm
really glad the Tucker put this in. They're teaming up
(37:21):
with a company called Zipline to test drone burrito delivery.
And I am here to tell you.
Speaker 3 (37:28):
Hell no, you're in uh ah, thought about it, you are.
Speaker 4 (37:31):
I'm talking about this for ten years now, right.
Speaker 3 (37:32):
First of all, yeah, I feel like this concept is not.
Speaker 2 (37:35):
We've been covering this since I had hair, so like
this is just not a new idea. Second, if there's
one thing that I don't want delivered by drone, it's
a three pound burrito that could land on my head
if you put it in the wrong spot, or if
it falls out of the little carrying case, or however
they do it. Beyond that, As I've said before, I
just don't want a million small drones flying about in
(37:57):
the skies. It doesn't strike me as the kind of
environment that I would like to live in.
Speaker 3 (38:03):
It seems like the Thomas vehicle would probably be the
more likely.
Speaker 2 (38:08):
Now, if you need to get you know, medical supplies
to a remote, you know place in you know the mountains. Sure,
I understand why drone delivery makes sense. Otherwise, uh huh,
quick break here, Hour two coming up.
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(00:42):
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heroes by visiting DAV five K Boston and making a
donation today. This is the Financial Exchange with Chuck Zada
(01:06):
and Paul Lane.
Speaker 2 (01:11):
Chuck Paul and talker with you, and we kick things
off looking at Walmart earnings from this morning and Walmart
stock down about four percent. Paul, what did we see
from Walmart?
Speaker 3 (01:24):
Chuck out. I thought it was overall a pretty good
quarter that reported. But ultimately it seems like the concern
here with the market is that their profitability numbers fell
in a little bit short of estimates. Their earnings per
share came in at sixty eight cents to share versus
what Wall Street had expected of seventy four census share.
A lot of that reason for the miss on the
(01:45):
earnings front, the retailer sited was insurance claims, lead legal charges,
and restructuring costs that weigh down on profitability. But otherwise,
outside of that, I understand, you know, that's what the
street cares about, is the missed there. There were many
positives that I took away from this report. Unless you know,
you can feel free to disagree. But the sales growth
(02:08):
that they're anticipating for the rest of the fiscal year
is going to be ranging from three point seventy five
percent to four point seventy five percent. That's up from
where it previously was so continuing to see strong sales
growth for the remainder of the year. They reported comp
sales growth of four point six percent in Q two
compared to last year. Like we just talked about the
(02:28):
last couple of days, how Target has seen declining sales
growth and some of these other retailers, granted on the
home improvement SIDEM, Home Depot and Low's have barely been
able to scratch out one percent. And I know Walmart's
business is a different makeup, but still some pretty good
numbers there. Their e commerce side of things continues to
roar twenty five percent growth there, and the CEO CFO
(02:52):
rather stating that the consumer has continued to be quite
resilient in terms of the face of tariff impact. Tier
They saw prices rise across items in the US about
one percent in the quarter. You had a little bit
of mixed messaging from the CEO differing slightly from the
cfo's commentary about the consumer being resilient, mentioning that some
(03:14):
of these discretionary purchases showed a little bit of sensitivity
to tariffs. But overall, I take this as a whole
as a pretty good quarter for Walt Walmart stock had
been bid up pretty high, so some of this selloff
could just be as a result of the fact that
it's been on a tear.
Speaker 2 (03:30):
Yeah, I think that when when I look at this,
it's something where you've got, you know, a number of
good items that you mentioned in terms of, you know,
the the e commerce sales moving up. But I think
the big thing is, look, if you look at their
net sales projections and you know that higher guidance that
(03:51):
they gave, they also gave guidance as to earnings for
the full year that were basically unchanged, like less than
a one percent shift in earning, And what that implies
is basically, look, the reason that we are expecting net
sales to rise is because we think our cost of
good sould is going to rise, and as sets, we're
going to try to pass that through. So it's not
(04:12):
really they're not expecting stronger organic growth. It's just they're
going to be seeing some higher costs and they're going
to be passing that through to maintain margins because Walmart
operates on a pretty tight leash when it comes to
their margins, just like most retailers. I mean this is
you can go back one hundred and fifty years and
find you know, information on grocery stores basically, you know,
(04:35):
grocery stores and retailers saying, hey, we're trying to operate,
you know, at low margins in order to you know,
maximize sales. And that's Walmart's game. They've just leveraged it
better than anyone else because of you know, the when
and where they operate. So when you have margins of
you know, four percent, you don't have a ton of
wiggle room to be able to absorb higher prices. You
(04:56):
can do a little bit of it, but ultimately you
gotta pass those through. You can't just be like, Okay,
our costs are going up by three percent, We're gonna
let you know, three quarters of our profit go away. No,
it doesn't really work like that. You can't do that.
So when I look at Walmart, I think that the
second piece that you said makes it makes a ton
of sense, which is, look, it's a company that's been
(05:17):
on a tear and it's priced expensively. I mean, I
don't know that people realize this right now. They should.
Walmart right now trades at thirty seven times forward earnings,
meaning projected earnings for the next twelve months. To put
this in perspective, in Vidia trades it forty times forward
(05:38):
earnings right now. Now, the earnings growth projections for Nvidia
are steeper, So you can make a case it's priced,
you know, way more steeply than Walmart. But in terms
of hey, what does everyone think their next twelve months
earnings are gonna be and what's their price relative to that,
the two companies are priced pretty darn closely at the moment.
And I think we all can agree that, Hey, as
(05:59):
much as you know, Walmart is really really consistent in
its business, it's not doing the things that Nvidia has
been doing over the last couple of years. Nor is
it going to suddenly start doing that. You know, We're not.
We're not gonna see walmart sales suddenly start going up
fifty percent year over year and their profit going up
two hundred percent year over year because they sell pita chips,
(06:19):
not computer chips. It's just it is what it is.
So I think the two things that can absolutely be
true here are, Hey, Walmart continues to show they're a
great operator. Their e commerce business is showing some really
good growth. I think they're up to I think like
twenty percent of all their sales now being online through
Walmart dot Com, which is huge given you know where
(06:41):
they've come from in the last five to seven years.
And I think ultimately having that grocery piece attached to them,
where what is it, like fifty percent of their sales
I think are groceries as well, So keep in mind,
like most people don't buy a ton of groceries online
through Walmart like that the data is not strong on
(07:02):
that side, and that basically means that like forty to
fifty percent of their non grocery sales are coming online,
which is huge. Like that's that's huge for them. So
I think overall it's a well run company. There's nothing
too exciting about it, but they continue to execute well.
And in this environment right now, you're going to pay
(07:22):
for good execution, and I think that's the reason why
it's still isn't priced as highly as it is. The
thing that I wonder about with Walmart and this I
even I've said this before about other companies, like you know,
you look at take Apple or Microsoft as an example.
So like let's say that Apple has you know, a
bad year two, what does that actually look like and
(07:49):
why does this is gonna sound kind of dumb at first,
but assuming that you own Apple stock, even if they
had a bad year or two, why would the price
move down? And I know that sounds kind of dumb
because I'm basically saying why should applestock ever go down?
(08:10):
But I want you to hear me out for a minute.
So the the reasons why you know, markets tend to
price things, you know, to try to price things efficiently,
is because, hey, if you don't, then you get caught
by surprised by someone you know, pulling an end around
on you, and all of a sudden you're like, oh,
like what happened? Example would be okay, let's say that
you are you know, what's a what's a bad company?
(08:34):
Right beyond meat? Okay, not a bad company, but just
a bad stock. Okay, how dare you? No, we're not
gonna do this. We're not gonna do this, not here. Okay,
this is the war room. You can't fight here. So
you take beyond meat right now. And the worry with
beyond meat is very real in that, hey, it's one
(08:54):
hundred and eighty two million dollar company. They're not profitable,
they're free cash flows negative, they don't have a lot
of cash on hand, they could go out of business,
and if they declare bankruptcy and you still own the shares,
you have nothing. I think that we can all generally
agree that in the short term, the risk of bankruptcy
to an Apple or Microsoft or even a Walmart is
(09:15):
pretty low, and likewise, the idea that someone's going to
come in with some monster bid to acquire them is
also kind of low as well. So I guess you
kind of look at them and I have this weird
thought from time to time on them where I just
look at the stocks and I'm like, why does anyone
trade these? Because they can't really go out of business tomorrow.
(09:38):
They're not going to be acquired by anyone, so who
really cares what the fair value is for these?
Speaker 3 (09:43):
Anyways, I would push back on that because ultimately, the
reason why Walmart can trade at thirty five thirty five
times forward earnings is because of the perception of them,
like you mentioned before, as good operators and good executors.
Speaker 2 (09:59):
But if for some.
Speaker 3 (10:00):
Reason that story change for whatever reason, whether it is
something that is at the corporate level, loss of employees,
some sort of scandal that hits them, the same thing
can apply for Apple too. Ultimately, the reason that they're
able to command these high valuations part of it is
just kind of the reputation story around them, where fundamentally
(10:23):
I don't think you could really make the argument that Walmart,
given its business, should trade it thirty five times earnings,
But it's trading that way because of kind of the
premium that it commands for its reputation. Those things take
a hit, then you can see a differing story as
to where it would trade. I guess that would be
the thought I would have.
Speaker 2 (10:42):
Sure. I just I kind of look at these sometimes
and I'm like, I don't know, Like nothing's really gonna happen.
It's notable in either direction, or like it doesn't seem
like it. You know, even look at all the AI
hype and everyone's like, oh Apple doesn't have you know, AI. Well,
they still have forty percent margins, So like who cares?
Like if if AI starts to threaten their business, then
(11:03):
actually care. But otherwise I don't know, Like do we
really need to Does CNBC need something to.
Speaker 3 (11:09):
Talk about the global market share in China declining? For
for Okay, that's concerned they could sell less product there.
That's twenty percent of their sales and they're decreasing their
I'm not saying, but why should that affect the price
of the stock based on their revenue relative to what they're.
Speaker 2 (11:29):
I guess here's what I'm getting, Like, these companies are.
Speaker 3 (11:32):
So developed that you're saying revenue couldn't shift that much
to jigger it one way or another.
Speaker 2 (11:38):
I know that what I'm saying is going to sound dumb,
and I know that it's not one hundred percent true,
But like, is Apple going to go the way of digital?
Like everyone always likes to be like, oh, all these
like seventies and eighties tech companies went out of business
and it happened to that kind of thing, Like you
really think with how entrenched Apple is today, it's going
to happen to them because they like. Comparing Apple to
(11:59):
Kodak is like comparing a Ferrari to a horse drawn carriage.
Speaker 3 (12:04):
I'm drawing blank on historical their scott Their size and
scale is crazy, but I'm sure there has been historical
examples of companies that you thought g has researched. But
they're a company that probably twenty years ago you would
say that they could do no wrong, and they couldn't
go through what was a period that was really challenging.
Did they go to business No, but it looked a
(12:25):
lot different going forward. Could they spread themselves too thin? Yeah,
not to think with some other examples, it's just hard.
I have this thought that goes through my head.
Speaker 2 (12:33):
I don't fully believe it, but sometimes I'm just like,
why why should that go down? Like just because they
sold fewer iPhones, Like they're still making a boatload of money.
Who cares how many they sold this quarter?
Speaker 3 (12:44):
There probably was a horse and buggage company out there
that got crushed by Ford back in the day. Maybe
I'm sure, I'm sure, but not the size of Apple.
Speaker 2 (12:53):
I get it. And look, I'm sure all the AI
people are just like looking at me around the corner,
just like ooh, like Chuck's gonna be wrong. I get it.
But I have these thoughts that bubble up occasionally, and
I just to let you guys know that's it's the worroom.
Take a quick break. When we return, we'll talk a
little bit about the details from the EU and US
trade agreement that were unveiled this morning.
Speaker 1 (13:15):
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Speaker 2 (13:45):
All right, this morning, somewhere in the seven to eight
o'clock hour, I don't know exactly when we saw the
text of the deal between the US and EU posted
by the White House online. What we learn through the
actual written deal here.
Speaker 3 (14:08):
Basically what the case is going to be for certain
areas of imports. There will be potentially the ability for
the EU to import things such as cars, pharmaceuticals, or
semiconductors at a fifteen percent tariff rate. If you look
(14:28):
at autos that was previously at twenty seven and a
half percent, it would come down to fifteen percent. However,
there are some conditions that the EU would need to
meet in order to get those preferential rates on some
of those sectoral discounts that I mentioned before. What those
conditions are. The EU will have to eliminate its own
tariffs on US industrial goods, as well as opening the
(14:50):
door to the US to be able to sell agricultural
goods as well as seafood into the EU, So that
was probably the biggest piece. And to me, it seems
as if fifteen percent is kind of going to be
the standard level for most of assuming the conditions get met.
Speaker 2 (15:11):
Seems like it. Yeah, And so obviously the you know,
the question is going to be predominantly when it comes
to the EU. Hey, how do the automakers deal with this?
Because the literal and metaphorical engine for the EU is
the German auto Sector're glad we got that one in there.
And so obviously, look, if it's more expensive to send
(15:32):
Volkswagens and Mercedes over to the US, hey, that's going
to be a thing. Both those companies do have facilities
that they operate in the United States, but if you
look at what they mostly make in the US, it
is a lot of the SUVs and stuff that we
tend to buy. If you are buying a Mercedes Sedan
as an example, they are exporting that from Germany. Likewise,
(15:53):
if you look at a number of Volkswagen models, it's
the same situation as well. So it's not at all
or nothing, and we'll have to figure out how they
deal with pricing and margins, because look, auto business, it's
tough business. It's like, hey, let's spend you know, fifty
billion dollars developing this plant, and then we're gonna eke
out you know, five to seven percent margins if we're
lucky and there's no recession over the next ten years,
(16:14):
and that'll figure out how to pay for this thing.
So it's it's a tough business to be in and
they're gonna have to figure out how to adapt. That's
the only only thing that you can say about it.
Speaker 3 (16:25):
Particularly a concern for Germany. As you mentioned, that had
imported thirty five billion of autos and auto parts in
twenty twenty four to the US, and it's a huge
part of their economy. So this is something that is
of significant importance to Germany.
Speaker 2 (16:39):
Let's talk a little bit about the Fed minutes that
we saw yesterday. These came out I think it was
like two pm somewhere in that ballpark, and it's really
interesting what we saw actually from the Fed minutes. Normally
I don't really pay much attention to them. If I'm
being one hundred percent honest, I'm kind of like, okay,
like who cares what, Like the tenor of the meeting was,
(17:03):
it's not really important to me. But we got a
whole bunch of detail about kind of not who thought what,
but like what quantity of people at the FED meeting
thought what? And I found it, you know, useful to
kind of break this down into different categories. So what
did most people believe? Inflation is above the two percent goal?
(17:27):
The tariff effect can take time to seep in, and
those were kind of the two big things that the
majority of people believed. Several people thought that the risks
were balanced, that they were concerned about acid valuations specifically,
like kind of market valuations and real estate and prices
like that being you know, high, expect some weaker growth
(17:49):
in the second half of the year and are starting
to see signs of slower income growth hitting consumers as well. Okay,
then what were the things that a few people noted.
Tariff passed through has been kind of limited so far.
Businesses are trying to avoid passing on costs. Tariffs could
be a one time price bump, or they could cause
(18:09):
persistent inflation, Like you had both sides expressed there by
a few people. Immigration policies hurting labor supply. This I
think we're going to continue to hear more about over
the next six months, weakening housing demand, and you know,
those are kind of the big things there. And then
you got to, hey, what did a couple members believe
(18:29):
tariffs are masking true inflation which is closer to two percent?
Expectations are driven by overall inflation, and households have low
delinquencies and there's not much you know, concern on on
that side of things. So I think overall, the message
from this was actually a little bit more hawkish than
what we heard a couple weeks ago, in that it
(18:51):
was pretty much, hey, most of us didn't really want
to do anything. A few people actually thought we should
raise rates, and there were a couple that you know,
publicly that already yes, I wanted to you know, lower rates.
Speaker 3 (19:02):
Yeah, that was most publicized, the cutting rate piece.
Speaker 2 (19:07):
Yeah, because no one voted to raise rates in the
last meeting. But it sounds like there were a few
people that actually talked about it as if, Okay, maybe
we should And what I wonder about on this in
terms of the Fed minutes, it's a little bit more
hawkish tilt than I think people were expecting. Is it
a preview of what we're gonna hear from mister Powell?
(19:28):
Jackson Hole tomorrow. The good news when we come back,
We're gonna preview that preview after this.
Speaker 1 (19:40):
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):
After beginning of the day well into negative territory, markets
are now relatively flat at the moment as traders digest
significant retailer earnings from Walmart and await FED chairman Jerome
Powell's speech in Jackson Hole tomorrow morning. At the moment,
the Dow is down by two tenths of one percent
or ninety points lower. SMP five hundred is down over
(20:21):
a tenth of a percent or eleven points lower, Nasdaq
down a tenth of a percent as well, or twenty
points lower. Russell two thousand mostly flat at the moment.
Tenure treasure yield is up three basis points at four
point three two eight percent. In crude oil is up
about half a percent higher, trading right around sixty three
(20:42):
dollars a barrel. Walmart reported rapid sales growth in the
second quarter and raised its outlook, saying it is winning
over shoppers with grocery discounts and fash shipping. However, the
retail giant missed earnings expectations on an adjusted basis, sending
shares four percent lower on the day. According to the
Wall Street Journal, Meta has frozen hiring in its artificial
(21:04):
intelligence division after spending months scooping up researchers and engineers.
Shares in the Facebook parent company are down over half
a percent. Speaking of hiring freezes, Novo Nordisk announced to
hiring freeze in non critical areas as it looks to
fend off competition and control costs. Shares in the Ozepic
(21:24):
and wegovie maker are up over one percent. Meanwhile, beauty
and sense company Cody is seeing its stock plunge nineteen
percent after it posted an unexpected quarterly net loss. The
Rimmel owner is expanding into fragrance myths and said consumers
still want to pamper themselves. Cracker Barrel plunging over twelve
(21:45):
percent after the restaurant and gift shop chain on Wilden
updated logo earlier this week, leading to criticism on social
media and new streaming services from ESPN and Fox officially
launched today, making their cable network offerings available for a
monthly subscription that's not confusing in the least bed and
doesn't overwhelm me at all. Disney is down by one percent,
(22:08):
while Fox is up modestly. I'm Tucker Silvan and that
is Wall Street Watch.
Speaker 2 (22:13):
So tomorrow j Powell is going to give his annual
speech at Jackson Hole, and the lingering question out there
is what shade of purple will Jay Powell's tie be.
I've prepared a selection for you. I'm curious to hear
what you guys think. Is it gonna be just, you know,
(22:34):
base purple? Is that what we're going with? Are we
going with something more amethyst in nature? Maybe a mauve,
maybe a raspberry, something along those lines. Violet? What direction
do you think he's gonna take the tie in?
Speaker 3 (22:49):
I'll goo violet solid or pattern solid? Tucker, any thoughts.
Speaker 4 (22:55):
I don't know. But he's gonna wear his finest denim
jeans because it is a Friday.
Speaker 2 (22:59):
You think he's going jeans? Took him to the.
Speaker 4 (23:02):
Dry cleaner like Michael Scott did.
Speaker 1 (23:03):
Yep.
Speaker 2 (23:05):
I don't know if Jay Powell. I feel like ja
Powell gardens and khakis, not that there's anything wrong with that.
Speaker 4 (23:12):
Well, then you know he's making a speech though, but it.
Speaker 3 (23:14):
Is a Friday.
Speaker 4 (23:15):
You know, he's still on a trip to keep the cash.
Speaker 2 (23:18):
I don't know. Let me ask this, does Ja Powell
own a pair of shorts?
Speaker 1 (23:25):
Oh?
Speaker 4 (23:26):
Yeah, he's a cargo guy, cargo shorts.
Speaker 3 (23:28):
You think he's the down of the mafia, doesn't wear shorts.
Speaker 2 (23:31):
I think I think he wears sweatshorts.
Speaker 4 (23:33):
I think he's a cargo shorts guy. I think he's
got all that gardening equipment he's got to handle, you know, I.
Speaker 2 (23:37):
See him as as as sweatshorts, maybe even like cut
off sweatshorts Bill Belichick style. But for the pants.
Speaker 3 (23:45):
Actually, one of these articles to tie into something from
the stack, did mention that he works out quite a bit,
So he definitely has shorts. He's got a personal trainer.
Speaker 2 (23:54):
I don't know.
Speaker 3 (23:54):
Some some people were.
Speaker 2 (23:55):
Pants worker outers. You know, you always have that one
guy at the gym that is in you know, full pants,
full like you know, long sleeves, just working up the sweat.
But we digress. Jackson Hole question is what is Powell's
speech going to be like? Now. Three years ago, back
in twenty twenty two, he delivered arguably his most hawkish
(24:18):
speech of his tenure. The rumor out there is that
he rewrote it actually like the night before, just because
he was unhappy with what he had done previously. The
S and P five hundred promptly puked about fifteen percent
through mid October, and then we've been on a steady
upward clip since then, with you know, a couple of
hiccups here and there the other you know years you
(24:40):
will get again. Kind of the most I'm looking at
the post pandemic era just because like seeing what Jay
Powell said in twenty nineteen is not really relevant to
where the economy is today. You look the other three years,
you know, kind of during that time period, and Powell had,
you know, some mixed speeches to the point where last
year arguably one of his most dubbish speeches. Hey, the
(25:01):
we believe, you know, it's appropriate to now, you know,
pay more attention to the unemployment risk and you know,
the balance of risks have changed. And even with that,
by the way, the market kind of anticipated it and
fell like four or five percent shortly after over the
next week or so before bottoming. So the trend over
the last four years has been whatever Powell has said,
(25:21):
the market really hasn't liked it in the subsequent weeks.
But what is he actually going to say? The people
that are plugged into to Powell think it's going to
be with a hawkish tilt, but with no specificity, so
that basically no one can grab on to anything. I
kind of wonder if Powell wants to be more specific here.
(25:42):
And I mentioned that only because of two things. The
first is obviously Powell and the President not getting along great,
and this is a chance for him to show FED independence.
The second piece, this is this is his last speech
at jackson Hole. No matter what, he will not be
the FED chair at this time next year, and so
(26:03):
it's a chance for him to kind of leave a legacy.
And I wonder if he's thinking about that in terms
of how he frames his speech. I'm not saying that
that will be more dubbish or more hawkish. I don't know,
but it's going to be his last Jackson Hole speech,
and I wonder if he thinks about it in that
context and pushes in one direction more than he otherwise
(26:26):
would have.
Speaker 3 (26:26):
Because of that, certainly sentiment on FED independence. I could
potentially see that being something that Powell focuses on during
this discussion. I would say that in general, the specificity
I would imagine will be incredibly limited, probably to your
point on the Hawky stance. He'll mention some of the
concerning pieces with potential increases to inflation and the cooling
(26:50):
labor market, but not commit to anything and ask for
us to see several more months of data. That's probably
how he'd play it, right down the middle. Well, something
that's more longer term will be interesting. Any sort of
commentary he has on longer term Federal Reserve monetary policy.
One of the big decisions that was made pre pandemic
(27:11):
was this idea of letting inflation run hotter than two percent,
because for the last ten or fifteen years or so,
we never talked about inflation all because there wasn't really
any inflation out there.
Speaker 2 (27:20):
It was lower for a while. It was this idea
of average inflation targeting. Hey, if we've been at you know,
one seven for the last five years, maybe it running
at two five for a few years. Isn't the worst thing.
Speaker 3 (27:30):
That I don't think is going to be part of
the plans going forward, because when we got up to
nine percent in twenty twenty two and the mistakes that
were made thinking that inflation was transitory, pretty good indication
of not having that be part of the future plans.
But that, along with some other concepts just in terms
of what monetary policy looks like going forward, that will
be the other piece of it. It will be a
(27:51):
much more minor part of the speech in terms of
what pundits focus on the next day, but also something
that will be interesting to follow.
Speaker 2 (27:59):
The interesting piece on this is how projections for the
September meeting have evolved over the last week. Just as
an example, if we go back a week ago, you
had a one hundred percent chance of I'm sorry, it
was a ninety two percent chance of a quarter percent
rate hike. At the September meeting. Yesterday it was down
(28:24):
to an eighty two point four percent chance, and today
it's a seventy five point three percent chance. So we've
kind of seen this backsliding, and it's been because of
a few different things that we've gotten as far as
you know, different data points that have come out during
that time. Quite honestly, like you look at how the
data has come out, and you say, okay, I can understand,
you know, how we may have gotten near Obviously, you
(28:46):
had the Fed Minutes yesterday. This morning you had the
Philly Fed Manufacturing Index, which came in with not really
a great reading, but prices paid continued to increase there. Likewise,
SMP Global MANU Facturing PMI came in hotter than expected,
with you know, some signs of pricing pressure as well,
and so what you're starting to see showing up in
(29:09):
more of the data is additional pricing pressure. And quite honestly,
the data, as far as economic activity goes, as we've
talked about, hasn't been as bad as people feared. And
so I think aside from that Job's report at the
beginning of this month, you look at the data in
the aggregate and you're kind of like, Okay, I'm not
sure the economy is worsening, And if it isn't worstening,
(29:33):
doesn't that mean that cuts probably don't need to happen
and we need to see what happens with pricing. This
is just what the market might be thinking right now.
This can obviously all change over the next three weeks.
If we get some weekly jobless claims numbers that start
to trend higher, if we get another week jobs report,
(29:54):
you know, these are things that could alter the balance
here and move us much much closer to you know,
a certainty of a cut again. But at this point,
the trend has been in the opposite direction over the
last week or so, and we'll have to see how
it evolves clearly through Powell's speech tomorrow, So this will
be a again. I think it'll be really interesting to
(30:15):
listen to because, quite honestly, and this is the tough
part right now, I think there's a compelling case for cuts.
I think there's also a compelling case to do nothing,
and I think there's a compelling case to hike if
you think that the inflation stuff that's happening on services
is potentially sticking around. So all I know is I'm
(30:38):
really happy that I'm not sitting in J. Powell's chair
because I'd be there trying to find my three sided coin,
being like what am I gonna do? Because I don't
know how to handle it.
Speaker 3 (30:48):
I can't tell you how many times that thought has
popped in my head as too, I'm so glad I
don't have to do this.
Speaker 2 (30:53):
Job right and here's the thing. It's really in terms
of your actual decision making, there's.
Speaker 3 (31:03):
Not that pretty by to do yes or no.
Speaker 2 (31:05):
You know, it's okay, every six six weeks, we're gonna
get the gang together and we're gonna decide. You know,
up down are the same. But it like there's a
lot that goes into it, and if you get it wrong,
oh boy.
Speaker 3 (31:17):
It's I've compared it to being a referee before. It's
you get a ton of heat if you get it wrong,
but not a lot of credit if you do things right.
Speaker 2 (31:25):
It's, you know, a referee, you have a lot of
little decisions you have to make.
Speaker 3 (31:29):
I'm not saying the yes and no piece, just the
credit piece.
Speaker 2 (31:31):
This is just like you show up every six weeks
and that's that's it. I mean, I'm not saying he's
not working in the interrum. He obviously is. But ultimately
you're judge based on your actions, not based on your thoughts.
And so man, imagine imagine having eight things that you
do each year and and that's it, and and all
(31:51):
the pressure that goes into it with basically like the
global economy just resting on your shoulders. It's a lot,
it is. It is. I don't know how you deal
with that kind of pressure. To be honest, it's it's
quite a bit. Let's take a quick break when we return. Oh,
this is a good one. We're going to talk about
Boston property valuations because.
Speaker 3 (32:13):
This very interesting story.
Speaker 2 (32:14):
This is a really good story and I think a
fascinating look at a problem that could be hitting a
number of different cities and states in the coming years.
Speaker 1 (32:24):
Miss any of the show, catch up at your convenience
by visiting Financial Exchange Show dot com and clicking the
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in full shows. This is your home for the latest
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This is the Financial Exchange Radio Network business and financial
(32:44):
news affecting the markets and your wallet. We've got it
all straight from Wall Street right here on the Financial
Exchange Radio Network.
Speaker 4 (32:56):
The Financial Exchange is a broad partner of the Disabled
American or its Department of Massachusetts and now's the perfect
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support our great American heroes by joining us for the
(33:17):
DAV five k. There's a DAV five k dot Boston
to register or to make a donation today. That's DAV
fivek dot Boston.
Speaker 2 (33:28):
Piece from Baloomberg today. Crazy vacancies forced Boston landlords to
challenge valuations. And what it talks about is that owners
of office buildings in the city of Boston have challenged
assess values for three hundred and eighty eight different commercial
buildings in downtown Boston this year. That is an eighty
three percent jump from the same time period in twenty
(33:51):
twenty four. And the big thing is Boston receives a
ton of its tax revenue from commercial property taxes. Likewise,
those commercial properties, often office buildings, do not have the
same level of occupancy that they did five, six, seven
years ago for obvious reasons. And so you have landlords
(34:12):
that are out there. And again sometimes these are small,
you know, individuals that have you know, a six thousand
square foot you know, small office building that's out there.
Sometimes they are you know, the giant office buildings on
State Street and so on and so forth. And the
big thing is that property taxes supply about three quarters
(34:33):
of the city's four point eight billion dollar budget. They
have already lowered the collect the assessed value of properties
by twelve percent over the past two years. But you've
got landlords out there saying no, like this needs to
be you know, discounted close to fifty percent. So who's
actually right. It's probably somewhere in between, because obviously the
(34:54):
landlords are going to want to pay as little property
tax as possible. Likewise, the City of Boston wants to
collect as much as possible in terms of where the
assessed values actually land. Look, things probably weren't going to
stay as good as they were, you know, in twenty
eighteen and twenty nineteen forever. They're probably not going to
stay as bad as they are right now. And you
don't want to have to be making big adjustments every
(35:15):
year based on, you know, assessing where vacancy in this
and that is. And so I think it is pointing
towards these tax valuations having to come down. But now
you're blowing a hole in city budgets, and the question
is where do you come up with the revenue to fill.
Speaker 3 (35:31):
That's the question that was popping around my head Okay,
how would you even go about fixing this if you're
talking about three quarters of revenue. The short answer is
there's not a real immediate fix to it, and that
twelve percent lowering that they've done over the last two
years is a start. I think maybe the fifty percent
value decline on the office building is a little rich,
(35:51):
but I don't think it's that far off from maybe
thirty percent, right Chuck. In terms of value. The problem
is there's such limited transactions that there's not a lot
of comparisons that you can make on the sales side
because people aren't selling these office buildings. But it's a
really difficult mine. And then on the backs of that,
you also have those residential owners in Boston, which there
(36:14):
aren't many, but they will have to pick up more
of their share of property tax revenue if they could
see their property taxes increases as a results of that.
So that's a big concern that politicians have. Michelle wou
is running for reelection and trying to still push more
of that through commercial property landlords. The need for more
(36:38):
revenue on the tax side of things from them.
Speaker 2 (36:40):
Now some of this also one of the people they
interview here I'll quote on this. So a property from
this landlord is one of the few to win debatement.
The city agreed to take nearly two million office initial
fourteen point two million dollars assessment for an eleven story
court square office building that he says it's about two
thirds empty. If your building is two thirds empty, maybe
you got to lower the prices that you're you know,
(37:00):
asking for on it. Also, I mean this cuts both ways.
Who's to say that you need to get those prices
you know for your building as well? So there's that
let's see this bone story. No, I don't want to
do that. I want to hop forward to Chipotle. I'm
really glad the Tucker put this in. They're teaming up
(37:21):
with a company called Zipline to test drone burrito delivery.
And I am here to tell you.
Speaker 3 (37:28):
Hell no, you're in uh ah, thought about it, you are.
Speaker 4 (37:31):
I'm talking about this for ten years now, right.
Speaker 3 (37:32):
First of all, yeah, I feel like this concept is not.
Speaker 2 (37:35):
We've been covering this since I had hair, so like
this is just not a new idea. Second, if there's
one thing that I don't want delivered by drone, it's
a three pound burrito that could land on my head
if you put it in the wrong spot, or if
it falls out of the little carrying case, or however
they do it. Beyond that, As I've said before, I
just don't want a million small drones flying about in
(37:57):
the skies. It doesn't strike me as the kind of
environment that I would like to live in.
Speaker 3 (38:03):
It seems like the Thomas vehicle would probably be the
more likely.
Speaker 2 (38:08):
Now, if you need to get you know, medical supplies
to a remote, you know place in you know the mountains. Sure,
I understand why drone delivery makes sense. Otherwise, uh huh,
quick break here, Hour two coming up.
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