September 5, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the current state of the housing market and what it means if the government declares a national housing emergency. Luke Kawa (Sherwood News) joins the show to chat about surging Broadcom. World meat prices reach new highs as consumers clamor for beef. Paul LaMonica (Barron's) stops by to talk about DraftKings and FanDuel's recent struggles.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:42):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:11):
Chuck, Mike and tuccer with you, and it is a
job's Friday, and we've got markets selling off on a
weaker than expected jobs report was twenty two thousand jobs
created and the unemployment rate rising to four point three percent. Again,
just you look for silver linings and there's just not
many in this report. I guess you could say, look,
(01:32):
net job growth was still positive, but ultimately a pretty
weak report that continues a trend that's been going on
for a little while now. And ultimately, I think the
question that is out there in my mind is, look
what changes this trend, because typically the best way to
predict where the economy is going in the future is
to see where it's been over the last few months.
(01:54):
And there's definitely been a slow down on the labor market.
It's something where maybe we're seeing some signs of that reversing.
If you look at the indeed jobs posting data that's
out there now through and it's still through August twenty second,
you're seeing a little bit of a bounce in August
in in job openings, but that doesn't necessarily translate to
(02:16):
hiring right away. It could be something where there's you know,
a three to six month delay there, and so you
just kind of have to watch and see how things evolve.
The other piece that you are seeing is that when
you looked at the data on wages from indeed kind
of matches up with you know, some of the other
stuff that we're seeing in terms of you know, weakness
(02:37):
and purchasing power in this report. But ultimately, this report,
in my mind, solidifies you're almost guaranteed to have at
least a twenty five basis point cut from the Fed
in twelve days, and it puts on the table the
possibility of a larger one. What would be needed for
that larger one, in my opinion, Number one, I think
(02:58):
you need to have, you know, continued acceleration in initial
jobbles claims are continuing claims.
Speaker 3 (03:03):
Next week we saw a slight uptick of what nine
thousand more than very modest, nothing huge, nothing to write
home about.
Speaker 2 (03:09):
Uh. And you would also need to see a CPI
and PPI report next week that come in better than
expected as well. I think would be a tough putt
for me to be saying, okay, let me, you know,
do a half percent cut. If you know core CPI
comes into point four percent next week instead of point
three or below.
Speaker 4 (03:30):
That's the toughest part.
Speaker 3 (03:31):
Of analyzing what the Fed does, because it's very easy
to inject what you would do. Ultimately, what matters is
what the Fed governors would do, and I think they'd
be more willing to cut than either of us would.
And so, yeah, I'm not sure what you need out
of the CPI report. I'm not sure what you mean
to get a half percent. Yeah, yeah, I just think
(03:51):
there's a bigger willingness to do that from this federal
reserve than.
Speaker 2 (03:56):
Unless the CPI comes in hot.
Speaker 4 (03:58):
Yeah, CPI comes in hot, it's off the table.
Speaker 2 (04:00):
If if you get core CPI coming in at point
two percent next week, totally opens the door to a
half percent cut, and quite legitimately too, like it starts
to show, okay, like, yeah, there's been a couple of
wobbles in core CPI, but they've just been wabbles, they
haven't been a full change in direction. And if that's
the case, Yeah, the labor market's decelerating faster than inflation's accelerating,
(04:23):
you absolutely can move forward with a half percent cut.
Speaker 5 (04:25):
Red.
Speaker 2 (04:26):
Let's talk a little bit about mortgages and mortgage rates.
Just you know, while we're talking about interest rates, here's
the thing. Mortgage rates have come down over the last
month or so. The thirty year fixed rate national average
right now, according to Mortgage News Daily, is it's six
four five. With the ten year treasury down another ten
(04:47):
basis points today, you could be in the six to
three range in short order.
Speaker 3 (04:52):
Here, Chuck, I was speaking with two people who are
getting mortgages right now, and they are in the sixty
two to six three range. Again excellent credit rating, you know,
So there are people getting mortgages now at this at
this level.
Speaker 2 (05:03):
And look, if you want to go the adjustable mortgage route,
which again I'm not saying that you should or shouldn't,
it's just it's an option that's out there if you're
trying to manage the payment in the short term. You've
got seven six arms that are out there now in
the five to seven range. And like it starts to
look you know, more reasonable. Now, the question is, okay,
what is actually needed to get people off the sidelines.
(05:24):
And the first problem is it needs to be the
spring because home sales fall off a cliff heading into
the end of the year. Yeap, Like if you actually
look at the data as it relates to just the
just the volume of transactions that we see, you know,
during different points in the year. It's it's really really
(05:48):
clear in terms of what happens there on a weekly basis.
When we look at home sales, you generally peak somewhere
in the late May early June range. With around the
last couple of years, at least, it's been around seventy
to eighty thousand sales per week. Sure, as you get
(06:08):
into September that number drops to around sixty thousand, and
by year end you're doing around forty five thousand sales.
So there's just not no one wants to buy a
home right before Christmas. Correct, You don't want to be
moving during the holidays, Yes, plain and simple. And so
the first thing is, Okay, it's great that rates are lower.
(06:30):
Not a lot of people want to be buying a
home right now. So like, yes, there's still are people
that do, but it's just not the same kind of volume.
So it doesn't help to clear the inventory that's out there.
So the first problem is timing. You need these lower
rates to last another six months, you know, possible, but
uncertain they may they look rates may be lower by
(06:51):
the spring week. We don't know. It's very much possible.
But when you talk about what we've seen here rates
moving from the high sixes to i'll call six three
the low sixes, like that's the borderline of low and
mid sixes. Hey, a half a percent shift in mortgage
rates means that you can spend up to on a
(07:12):
you know, conforming twenty percent down conventional mortgage for thirty
years generally about four to five percent more, and so
the affordability gets a little bit better in terms of
your monthly payment. Is that enough to offset continued increases
in insurance premiums, property taxes and electricity rates on the margins?
(07:33):
Does it get things moving enough?
Speaker 1 (07:36):
Maybe?
Speaker 2 (07:36):
I'm just not sure right now. It's it's something where
you know, if you got the thirty or fixed rate
down into the high fives, I'd say, okay, there's probably
enough juice there this with all the other costs that
have gone up. I'm not sure it's quite enough, but
it'll definitely help check. Yesterday, Scott Bessant discussed something that actually,
(07:59):
sorry it was no labor day interview quote, we may
declare a national housing emergency in the fall.
Speaker 4 (08:06):
We're in the fall.
Speaker 3 (08:07):
H Do you have any clarity about what a national
housing emergency would mean?
Speaker 2 (08:13):
I don't. So if you look at like the things
that were done the last time that we've seen something
along these lines, which was back in you know, late
two thousand and eight, when gosh, like you want to
talk about emergencies, I mean, we're talking about as bad
as it gets. So if you look at the things
that were done back then, it was predominantly to try
(08:36):
to backstop lending markets and things along those lines like that.
That was the bulk of what we saw during previous
you know, national housing emergencies. The stuff that's being talked
about in a couple of these pieces, I'm just not
sure is actually feasible. So like when when you talk
about a few of these things, or like some of
it just doesn't matter. There's a piece from market Watch
(08:58):
Five ways the Trump administration could addressed the housing crisis.
Free up federal land to build housing, guys, doesn't make
a difference. It doesn't matter if you're freeing up a
bunch of land in Nevada. Yeah, It's the problem is
in the places that people are trying to actively move
right now, not in federal land that's you know, more
remote and stuff like that. Not that it doesn't matter
(09:20):
at all, but yeah, the high demand for housing and
the week supply is not in the West, where all
the federal land is concentrated.
Speaker 3 (09:28):
It's in the southeast. It's in the Midwest and northeast.
Oh you're saying the demand for housing right now. Demand
for housing right now is that's where and the lack
of demands in the southeast.
Speaker 2 (09:38):
And this doesn't fix that either, which again, like sometimes
the market just has to do what the market does.
Increase flexibility on what and where you know, builders can build,
so helping to change local zoning laws.
Speaker 4 (09:48):
I would love to see it. I don't know how
they do it.
Speaker 2 (09:50):
Good luck listen. Our show is based in the northeast
in Massachusetts. Massachusetts passed something a few years ago called
a few years ago called the MBTA Communities Act, which
basically tried to push towns near mass Transit to develop
more housing. Even with like the state government trying to
do this instead of the federal one. A ton of
(10:11):
towns have pushback and it's basically been a flop. It
hasn't really moved the way people thought it would. So
no one wants to change their zoning laws when DC
tells them to lowering mortgage rates. The you don't really
have the executive branch able to do that directly. It'll
happen if the economy slows as it is, and this
could provide a nice counterbalance where hey, if the economy
(10:32):
is slowing, great, lower mortgage rates can unlock housing and
maybe you get things moving there. Let's take a quick break.
When we come back, we're gonna be joined by Luke
Kauwa from Sherwood News. Right after this, we're talking broadcom
on the Financial Exchange.
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Speaker 2 (11:43):
As promised. We're now joined by Luke Kawa from Sherwood News.
We're talking a little bit of semiconductors with Luke today. Luke,
how you doing doing great?
Speaker 7 (11:53):
Thanks for having me, Luke.
Speaker 2 (11:54):
We've got Broadcom stock up about nine percent today, We've
got AMD down six in video down three and a half.
Why the the why is everyone trade in places inside
the semiconductor space today?
Speaker 5 (12:07):
See?
Speaker 7 (12:07):
I find this very interesting. If you would go back,
you know, three months ago, six months ago, one would
think a Broadcom report where they say, hey, you know,
we're doing good, sales beat expectations and by the way,
we also think revenues are going to improve significantly from here.
That that would be a kind of rising tide lifts
all boats phenomenon that is decidedly not happening here. So
(12:29):
I think, first, you know, you have to think about
how much expectations have changed here ahead of Broadcom's report.
So what I would suggest is that you know, the
reason why there is some softness and the likes of
Nvidia and AMD is because you're starting to see traders
treat to the AI game as a little more zero sum.
If you look even right now at the you know,
(12:52):
change in market cap, how much broad cooms added versus
how much Nvidia and am D of lost, it's pretty
much the same at this point. So I think one
interesting thing that could be added on to the AMD
story is a few months ago they launched a new
line of chips, introduced them. Wall Street was incredibly bullish
(13:12):
on the prospects for those chips to be materially adding
to AMD's forward sales. You saw sales estimates for AMD
rise much faster than the likes of Nvidia, for instance,
and Seaport Securities yesterday cut the stock to neutral and said, basically,
we've done some channel techs, we've talked around and it
doesn't seem like their new chips are gaining much traction
(13:35):
that that business is doing too well. So it does
seem for that stock in particular, there's a little bit
of a level setting that's going on here.
Speaker 2 (13:43):
When we look at Broadcom, one of the big things
that they announced they have new ten billion dollar mystery
customer who everyone speculates is going to be open ai
What does this mean in terms of I guess just
the whole ecosystem that is out there. Open Aiye to
this point has been Hey, we're running the models that
(14:06):
everyone wants to use. Are they trying to more vertically
integrate as well? I mean, what's kind of your read
on this?
Speaker 7 (14:13):
I think it's interesting. I think there's myriad takes one
could have on this. Kind of where I fall in
is Hey, despite Nvidia's protestations to the contrary recently, if
you saw some of their social media posts, the AI
boom right now is more supply constrained than demand constrained.
It's difficult to effectively keep equipping yourself with the top
(14:35):
of the line supplies if you're a hyperscaler, just because
they're hard to get your hands on. So do you
want all of Nvidia's top of the state of the
art materials, even though you might have to wait longer
and longer, and by that time they're already working on
the next generation and that's six months away, or are
we going okay if we need to speed up this process.
If we want to speed up this process, is actually
(14:56):
more expedient for us to be diversifying our suppliers a
little more, taking you know, some from Broadcom, having our
own line of custom chips there, also using in videos
GPUs and kind of full system architecture there. So I
think this is more a means of hey, I think
for the underlying AI trade, this is more a matter
of hey, how do we fast track this? How do
(15:19):
we keep this train moving as fast as possible? Because
companies hyperscalers at least it does seem to be adding
to their sales a heck of a lot and a
reasonable reason for them to want to keep that process
at accelerated a pace as possible.
Speaker 2 (15:35):
I have to ask you this question anytime that we're
talking about AI. I know that no one knows the
answer to it, but interested just to get your thought
on it. Luke, when do people start to care about
actual revenue and profitability from AI? Because they haven't to
this point, which is fine, Like there's plenty of businesses
where that's the case for a while, but you got
(15:56):
like four to five hundred billion dollars in data center
spend that's going to be coming next year, and at
some point you say, look, this is going to need
to start, you know, paying for itself. When do people
start caring? Is the sign that you know, we might
be seeing this as more of a zero sum game.
Does it show that we're approaching that or are we
not there yet?
Speaker 7 (16:16):
I mean I would I would somewhat question the premise
a little bit. I do think that if you just
look at how much are sales up versus how much
is capax up. Of course you can attribute all of
the sales increase to AI. Companies might try to, but
right now you're you're effectively seeing even in a one
year timeframe, trailing one year sales versus trailing one year
(16:37):
capacks increases at the hyperscalers. It's you know, the sales
are going up by more than the capacks. So even
on a cash flow basis, it doesn't seem to be
that negative at this point, and of course you would
hope to get more than one year's use out of
out of that. I think kind of in terms of
the question marks people have about the longevity or the
(16:59):
breadth of the AI trade, and this is something that
ties into the price action.
Speaker 1 (17:02):
Today.
Speaker 7 (17:03):
We know that in Video right now has a very
concentrated customer base over half of its revenues for direct
AI hardware sales our three customers. One of those customers
is now reported to be effectively also trying to diversify
its supply there. So it's more a matter of we're
seeing the depth. Are we seeing the breadth in the
(17:25):
AI trade? Effectively? As more and more enterprise companies adopt
this for enterprise purposes or see other ways to use
AI to improve their businesses, do you start to see
more breadth and less depth. I think that to me
would be a kind of key marker of justifying or
validating how much spend has gone into this and how
(17:48):
much may be needed to continue going into this to
have kind of durable, ongoing payoff periods.
Speaker 4 (17:54):
That makes sense.
Speaker 2 (17:55):
One more question on is we only have about a
minute left, but I'm curious to get the sense of Look,
the last time that we saw a build up of
this scale for you know, anything tech related was you know,
the tech bubble with all of the infrastructure related to
the Internet and ultimately the companies that ended up winning
in the long run, weren't the companies that built the infrastructure,
(18:16):
they were the companies that operated on it. How do
we reconcile that in this case? Sorry, only about thirty
seconds for you to give that answer.
Speaker 7 (18:23):
All good, Hey, very a very interesting dynamic. Matt Phillips
at Sherwood has reported on this recently that you've seen
a bit in recent weeks a bit of a shuffling
of the AI trade away from kind of the picks
and shovel space to more of the software providers, some
of whom were supposed to have their lunch eaten by
AI effectively or be rendered somewhat obsolete. So I do
(18:44):
think the market is kind of in this period of
rotating between Hey, we have all these revenues from the
chip makers now, but you know those could go away
in a and a bust ai Ala dot com. But also,
you know, we do have these end users that are
seeing their stocks perform, you know, fairly well in recent
weeks in contrast to some of the picks in trouble.
(19:04):
So I think that's a digestion process that the market
is rotating to and fro as the days, weeks, months
go on.
Speaker 2 (19:12):
Very good, Luke, appreciate you joining us today. Thank you
so much for the time, pleasure, pleasure that is Luke
Cowa with Sherwood News. We're going to take a quick
break here. When we come back, we've got trivia, we've
got Wall Street Watch, and we've got Beef.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:58):
Markets in negative territory on the heels of a weaker
than expected August jobs report, where only twenty two thousand
jobs were added last month, well below forecasts of seventy
five thousand. The government also revised its numbers from earlier
in the summer and said the economy lost a net
thirteen thousand jobs in June, marking its first decline since
(20:18):
December of twenty twenty. Right now, the Dow is down
by over half a percent, two hundred and forty five
points lower, SMP five hundred also down by a half
a percent, Nasdaq down by three tenths of one percent.
Russell two thousand is dipping into negative territory. Ten year
treasureel down ten basis points at four point zero seven percent,
(20:39):
and crude oil is down nearly three percent now trading
its sixty one dollars in sixty one cents a barrel.
Broadcom jumping ten percent after the chip and software maker
swung to a profit, beating expectations for its quarterly sales.
The company also noted its AI related revenue sword sixty
three percent. Hi Meanwhile, Lulu Lemon shares are tanking eighteen
(21:03):
percent after the eth leisure ware company's full year guidance
missed estimates. Lulu also cut its outlook, citing tariffs, and
a new financial filing revealed that Tesla's board is asking
investors to approve a new pay package for CEO Elon
Musk that could be worth as much as one trillion
dollars over the next decade. Tesla shares a rising three
(21:27):
percent on that news. I'm Tucker Silva, and that is
Wall Street Watch, and we haven't done trivia yet, so
let's do it here today is our final look at
Famous Ben's this entire week. In August of nineteen seventy two,
Michael Jackson released his second solo studio album, Ben the
title track for the album was the first number one
(21:49):
hit for Michael Jackson as a solo artist. So trivia
question today, what was Michael Jackson's song ben About? Once again?
What was Michael Jackson and Son ben About? Be the
first person today to text us at six one seven
three six two thirteen eighty five with the correct answer,
you know, win a Financial Exchange Show T shirt once again.
(22:12):
The first correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (22:23):
World meat prices reach new highest consumers clamor for beef chuck.
Speaker 3 (22:29):
According to the Bureau of Labor Statistics, year over year,
beef prices up eleven point three percent and my personal favorite,
uncooked beef steaks twelve.
Speaker 4 (22:39):
Point four percent year over year increases July to July.
Speaker 2 (22:44):
It's been a tough year.
Speaker 3 (22:45):
Yeah, yeah, you wonder why people are so pessimistic about
our future.
Speaker 2 (22:50):
So look, basically, you've got, you know, a bunch of
problems that are causing thinning, herd's, combination of disease, drought,
you know, a whole bunch of different things, and so
as a result, you don't have as many cows, and
as a result of that, you obviously don't have as
many steaks. Steaks come from the cow, as I taught
my five year old a couple weeks ago. It's kind
of an eye opening conversation, but no, I think it
(23:14):
went pretty well. Actually it helped that I was showing
her the diagram of like this is you know, the
the the flank steak here, and this is where the
rib roast comes from, you know, so like we went
through the whole cow. Yeah, and it was it was,
It was good.
Speaker 3 (23:29):
But that sounds like it went significantly better than my
wife's puberty conversation last night.
Speaker 4 (23:33):
So good job.
Speaker 2 (23:36):
I'm not Yeah, don't engage. Let's let's continue, shall we. H.
You've got you've got beef prices moving up and there's
nothing that we can really do to get them down.
It's just one of those things where it's going to
be cyclical, kind of like eggs were, you know, last
year with bird flu and things like that. And unfortunately,
(23:58):
for you know, people who enjoy, you know, a good
stake or two every now and then, it's not really
changing in the near future. We continue to see be futures,
cattle future prices moving up over the last couple weeks,
and so things are gonna get worse before we get better.
Speaker 3 (24:12):
There, folks want to talk to you about two upcoming
events here from the Financial Exchange. As we've been discussing
the labor market in particular, but the economy as a
whole seems to be at potentially some.
Speaker 4 (24:28):
Pivot point right now.
Speaker 3 (24:30):
You've got the FED potentially cutting rates, You've got markets
trading near all time highs on the artificial intelligence boom,
and a lot of folks wondering what comes next. If
you are too, please join us on one of two dates.
The first one is going to be down at the
Margaritaville Resort on Cape cod on October ninth. Second will
(24:50):
be at the Showcase super Lux in Chestnut Hill on
October sixteenth. We'll be doing a live broadcast of this
show the Financial Exchange. You can join us for free
and catch a live broadcast followed by a lunch where
we discuss the markets, to discuss the economic trends and get
into the details of what we are seeing when it
comes to this country's outlook. If you would like to
(25:12):
reserve your spot, do so now as these do fill
up again, it's down on Cape Cod at the Margaritaville
Resort on October ninth, or at the Showcase super Lux
and Chestnut Hill on October sixteenth, and you can reserve
your spot by calling eight hundred three nine three four
zero zero one. Again limited availability, so please call on
book your spot at eight hundred three nine three four
(25:36):
zero zero one.
Speaker 1 (25:37):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal, or tax advice. Consult
your own financial, tax, and estate planning advisors before making
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Speaker 2 (25:53):
Michael's talk a little bit about Lulu Lemon in depth.
So they reported earnings yesterday and basically their guidance was
it bad to quite bad, and they're saying it's because
of tariffs. Ultimately, like you actually look at the numbers
and what they're telling you, and yes, that the profit
side is certainly going to be impacted by tariffs, there's
(26:16):
no doubt on that side of things. But I think
that when you know, you talk about okay, is it
tariffs or is it something else. The revenue guide being
you know, three to five percent below where they had
been previously guiding. That tells me you have a demand problem, because.
Speaker 3 (26:34):
That's what matters check because this is a company that
has been defined by pricing power like no other company
out there for the last several years.
Speaker 4 (26:41):
And if they're losing it, I.
Speaker 2 (26:42):
Mean, I'm there right now. I went to the lu
Lemon website, which the only time I ever do it
is when we cover them on the show to talk
about how expensive their stuff is, and I see, this
is a spanks guy. I am. It helps with you know,
the midsection on me a little bit. So for best sellers,
the first thing that comes up for men is the
metal vent Tech short sleeve shirt. It's seventy eight dollars. Yeah,
(27:07):
like human dollars, not you know, like anything. It's seventy
eight dollars. They have an Evolution short sleeve polo shirt
for eighty eight. And so the question that I ask
is why, I mean, but that hasn't been enough. That
hasn't been a problem for them to this point. But
if you have an environment where people are, you know,
(27:30):
paying more attention to pricing, right now and this and that,
this is the first stuff that goes because quite honestly,
and look, this is what I do. You can go
to freaking old Navy and get eight workout shirts that
cost the same amount as this one workout shirt from
Lululemon and there's not that much of a difference. Probably
I wouldn't know. I've never worn a single Lulu Elemon thing.
(27:52):
Is there?
Speaker 4 (27:53):
I mean, is this the same thing that we see
with like exercise fads?
Speaker 1 (27:58):
Right?
Speaker 3 (27:58):
I know it's different. It's fast, and there are plenty
of fashion companies that have remained relevant for a lot
longer than the Bowflex or Peloton, but this company became
incredibly popular, incredibly quickly. And every time I log onto Facebook,
I see five companies trying to pick off little pieces
of their business.
Speaker 4 (28:17):
Here and there.
Speaker 2 (28:18):
Yeah, it's looks tough. It's a tough business. And the
other piece that I wonder, if you're just seeing in general,
that whole ath leisure space kind of feels like it
peaked five or six years ago.
Speaker 4 (28:31):
I mean, it probably peaked during COVID.
Speaker 2 (28:33):
I mean just look at what you're seeing from like
Nike and under Armour, and like this is not just
a Lulu Lemon store. I mean, you're seeing this across
the board with anything athletic, leisurely, you know, yeah, oriented,
and so I think there's something to that as well.
The other thing just from quite honestly again, like I'm
(28:54):
not the target person for this. I know they have
a men's section, but their bread and butter is selling,
you know, workout close to women. Asking my wife about
She's like, there's stuff's overpriced and no one wants to
buy it anymore. Like that's it's kind of the vibe
that that I get on this.
Speaker 4 (29:10):
No STIMMI checks, no Lululemon.
Speaker 2 (29:12):
Let's take a quick break when we return. Paul Monica
from Baron's joined us after this.
Speaker 1 (29:18):
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(29:40):
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Speaker 6 (29:58):
This segment of the Financial Exchange brought to you by
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Speaker 2 (30:32):
Joining us now is Paul Amonica from Barons and we're
gonna be talking a little bit about sports gambling stocks here, Paul,
How you doing good?
Speaker 5 (30:43):
Thanks? How are you guys doing good?
Speaker 2 (30:44):
I know you put together a piece on a couple
of these companies. Can you talk a little bit about
what was in there?
Speaker 5 (30:50):
Yeah, Draft Kings and Flutter Entertainment, which is the owner
of FanDuel. They dominate the legal sports betting market. I mean,
they have by far the biggest market share, over half
of the overall market in the US, even though there's
a lot of competition from the likes of MGM and Caesars,
(31:12):
you know, fanatics and obviously even ESPN with their branded
sports you know gambling service that's run by the casino
company Pen Entertainment. But Banduel and DraftKings remain the leaders
and that's reflected I think in their stocks as well.
DraftKings shares up more than twenty percent this year, fan
(31:34):
Duel up more than fifteen percent, I believe at last check.
So they've had strong years, and I think investors are
hopeful that more, you know people are going to be
betting even more money on you know, legal NFL games.
This year, the American Gaming Association I think had an
estimate of you know, a nearly you know, ten percent
(31:55):
increase in betting on sports to about thirty billion this year.
Speaker 2 (31:59):
So we haven't seen any signs that you know, sports
betting is peaking. It still is growing in terms of
the overall activity level.
Speaker 5 (32:07):
Yeah, it still is growing, and like I said, the
largest two companies are increasingly grabbing market share. So that's
I think one of the reasons why those two stocks
have done well. But as is always the case, and
you know gamblers know this firsthand as well as investors,
sometimes you have to take money off the table, you know.
(32:28):
I think DraftKings and Flutter FanDuel are both solid companies
that deserve, you know, their market leading positions. But the
valuations are starting to look a little stretched as well,
more so for DraftKings than for Flutter. But you know,
they're training at premium prices and given their run up
(32:48):
this year, maybe they pull back a little bit. But
you know, that being said, obviously we're heading into seasonally
a very strong time for these companies. In addition to
pro football, you have college football, you have the start
of the NBA season, the Major League Baseball playoffs, So
there's a lot of sports activity out there for gamblers
(33:10):
to wager on.
Speaker 2 (33:11):
A couple of sports. Leagues have seen some gambling scandals
in the last year. I know the NBA has, I
know Major League Baseball has any signs that there might
be pushback coming, either you know, legislatively or from leagues
about this, or is the goose just too golden for
them to do anything about it.
Speaker 5 (33:31):
Yeah, I think the leagues have to look at it
very seriously. Anything that compromises the integrity of the game
is a huge concern, and I think you do have
to wonder if there are going to be legislatively some
changes that could impact the industry. I mean, one thing
that is interesting is that it got snuck into the
(33:55):
one big beautiful bill, you know, Trumps stimulus plan that
was by Congress that you know, there's a provision now
that makes it more difficult for gamblers to deduct losses
or tax purposes, and that is something that could be problematic.
You know, now whether or not that causes people to
(34:18):
say that, okay, instead of legally betting, I'm going to
bet with you know, bookies underground so I don't have
to report income. And you know, obviously that is one
of the things that when you are betting through a
legal sports app there is a record of it. You
can't hide your wins and losses from the government. Usually
(34:39):
not a problem when you're losing money, but that might
be a concern now if it's no longer you know,
something that gamblers can count on to be able to
get some tax ad advantageous you know issues, you know,
if they are actually losing money.
Speaker 2 (34:55):
Well, you mentioned that these two companies are gaining markets share.
How came the established companies you can't compete in this
space as well. I mean I see MGM bet commercials
all over the place. You know, they've got casinos. Why
are the traditional casino operators not on the cutting edge here?
What they miss out on?
Speaker 5 (35:12):
Yeah, it's a great question. I mean I'm not so sure.
I mean, I think, as is often the case in
emerging businesses, you wind up having tech savvy companies that
are able to take advantage of, you know, being a
first mover. I think that maybe some of the casino
companies were a little late to the game, you know,
(35:35):
concerned about what legal online sports betting might do to
their actual very profitable sports books at physical casinos. And
you know, I think MGM and Caesars some of the
other companies they're doing a good job. And as you mentioned,
I mean, not a day goes by where you're not
seeing a commercial. I guess you what, John ham now
(35:57):
of mad Men fame for MGM is the latest. But
I think that DraftKings and fan Duel, they've proven that
they've been able to use that first mover advantage and
run with it.
Speaker 2 (36:11):
Very good, Paul, appreciate you joining us. Have a great weekend.
Speaker 5 (36:16):
Thanks will do go Giants Go Hoop. You know that
team that beat the New Year.
Speaker 2 (36:25):
Yeah, it's a little staticky, asked.
Speaker 5 (36:31):
On the Financial Exchange.
Speaker 2 (36:33):
Well, we'll see what the results are on Monday. In
any case, thanks again, Paul, have a great weekend. That
is Paul Monica from Baron's Trivia.
Speaker 6 (36:42):
Question we asked on the prior segment was what was
Michael Jackson's song ben about it will be a rat
or Killer Rat? Mike from Barnstable Masses our winner today
taking home a Financial Exchange Show t shirt. Congrats to Mike,
and we played trivia every day here in the Financial Exchange.
See complete con test rules at Financial look Change show
dot com.
Speaker 2 (37:03):
Michael, what else do we have to get through?
Speaker 4 (37:05):
Tesla is social Security? Tesla trillion dollars.
Speaker 2 (37:09):
So here's the thing. It's like a hugely excessive pay package.
It's also really unlikely that he actually gets paid that
whole thing. I went through and looked at some of
the benchmarks that need to be hit, and you have
things like, hey, Tesla for the last like three tranches
needs to hit four hundred billion dollars in EBITDA in
a twelve month period. Right now they're at like ten
(37:31):
billion dollars. So like quite honestly have to do if
they grow their revenue by forty x while he's still
alive from here, fine, like pay him more. Like okay,
Like it's probably worth I know it sounds crazy to
say like a trillion dollars is worth it, But I
don't know, like if you can actually do something that
crazy pressive, Fine, have at it, Like do I think
(37:54):
it's gonna get there? No, just because it's just a
huge number. But I don't know in this case, if
you really, if the board wants to do this, in
the shareholders vote on it. Okay, I at it at
this point, Like we've been down this road before.
Speaker 3 (38:09):
I'm not gonna like make a big hullabaloo about executive
com It's.
Speaker 2 (38:13):
Just a trillion dollars. It's not like anything crazy. We're
done for the day, done for the week. We'll see
you next week. Bunch of inflation data coming up. Make
sure you tune in
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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(01:06):
and Mike Armstrong.
Speaker 2 (01:11):
Chuck, Mike and tuccer with you, and it is a
job's Friday, and we've got markets selling off on a
weaker than expected jobs report was twenty two thousand jobs
created and the unemployment rate rising to four point three percent. Again,
just you look for silver linings and there's just not
many in this report. I guess you could say, look,
(01:32):
net job growth was still positive, but ultimately a pretty
weak report that continues a trend that's been going on
for a little while now. And ultimately, I think the
question that is out there in my mind is, look
what changes this trend, because typically the best way to
predict where the economy is going in the future is
to see where it's been over the last few months.
(01:54):
And there's definitely been a slow down on the labor market.
It's something where maybe we're seeing some signs of that reversing.
If you look at the indeed jobs posting data that's
out there now through and it's still through August twenty second,
you're seeing a little bit of a bounce in August
in in job openings, but that doesn't necessarily translate to
(02:16):
hiring right away. It could be something where there's you know,
a three to six month delay there, and so you
just kind of have to watch and see how things evolve.
The other piece that you are seeing is that when
you looked at the data on wages from indeed kind
of matches up with you know, some of the other
stuff that we're seeing in terms of you know, weakness
(02:37):
and purchasing power in this report. But ultimately, this report,
in my mind, solidifies you're almost guaranteed to have at
least a twenty five basis point cut from the Fed
in twelve days, and it puts on the table the
possibility of a larger one. What would be needed for
that larger one, in my opinion, Number one, I think
(02:58):
you need to have, you know, continued acceleration in initial
jobbles claims are continuing claims.
Speaker 3 (03:03):
Next week we saw a slight uptick of what nine
thousand more than very modest, nothing huge, nothing to write
home about.
Speaker 2 (03:09):
Uh. And you would also need to see a CPI
and PPI report next week that come in better than
expected as well. I think would be a tough putt
for me to be saying, okay, let me, you know,
do a half percent cut. If you know core CPI
comes into point four percent next week instead of point
three or below.
Speaker 4 (03:30):
That's the toughest part.
Speaker 3 (03:31):
Of analyzing what the Fed does, because it's very easy
to inject what you would do. Ultimately, what matters is
what the Fed governors would do, and I think they'd
be more willing to cut than either of us would.
And so, yeah, I'm not sure what you need out
of the CPI report. I'm not sure what you mean
to get a half percent. Yeah, yeah, I just think
(03:51):
there's a bigger willingness to do that from this federal
reserve than.
Speaker 2 (03:56):
Unless the CPI comes in hot.
Speaker 4 (03:58):
Yeah, CPI comes in hot, it's off the table.
Speaker 2 (04:00):
If if you get core CPI coming in at point
two percent next week, totally opens the door to a
half percent cut, and quite legitimately too, like it starts
to show, okay, like, yeah, there's been a couple of
wobbles in core CPI, but they've just been wabbles, they
haven't been a full change in direction. And if that's
the case, Yeah, the labor market's decelerating faster than inflation's accelerating,
(04:23):
you absolutely can move forward with a half percent cut.
Speaker 5 (04:25):
Red.
Speaker 2 (04:26):
Let's talk a little bit about mortgages and mortgage rates.
Just you know, while we're talking about interest rates, here's
the thing. Mortgage rates have come down over the last
month or so. The thirty year fixed rate national average
right now, according to Mortgage News Daily, is it's six
four five. With the ten year treasury down another ten
(04:47):
basis points today, you could be in the six to
three range in short order.
Speaker 3 (04:52):
Here, Chuck, I was speaking with two people who are
getting mortgages right now, and they are in the sixty
two to six three range. Again excellent credit rating, you know,
So there are people getting mortgages now at this at
this level.
Speaker 2 (05:03):
And look, if you want to go the adjustable mortgage route,
which again I'm not saying that you should or shouldn't,
it's just it's an option that's out there if you're
trying to manage the payment in the short term. You've
got seven six arms that are out there now in
the five to seven range. And like it starts to
look you know, more reasonable. Now, the question is, okay,
what is actually needed to get people off the sidelines.
(05:24):
And the first problem is it needs to be the
spring because home sales fall off a cliff heading into
the end of the year. Yeap, Like if you actually
look at the data as it relates to just the
just the volume of transactions that we see, you know,
during different points in the year. It's it's really really
(05:48):
clear in terms of what happens there on a weekly basis.
When we look at home sales, you generally peak somewhere
in the late May early June range. With around the
last couple of years, at least, it's been around seventy
to eighty thousand sales per week. Sure, as you get
(06:08):
into September that number drops to around sixty thousand, and
by year end you're doing around forty five thousand sales.
So there's just not no one wants to buy a
home right before Christmas. Correct, You don't want to be
moving during the holidays, Yes, plain and simple. And so
the first thing is, Okay, it's great that rates are lower.
(06:30):
Not a lot of people want to be buying a
home right now. So like, yes, there's still are people
that do, but it's just not the same kind of volume.
So it doesn't help to clear the inventory that's out there.
So the first problem is timing. You need these lower
rates to last another six months, you know, possible, but
uncertain they may they look rates may be lower by
(06:51):
the spring week. We don't know. It's very much possible.
But when you talk about what we've seen here rates
moving from the high sixes to i'll call six three
the low sixes, like that's the borderline of low and
mid sixes. Hey, a half a percent shift in mortgage
rates means that you can spend up to on a
(07:12):
you know, conforming twenty percent down conventional mortgage for thirty
years generally about four to five percent more, and so
the affordability gets a little bit better in terms of
your monthly payment. Is that enough to offset continued increases
in insurance premiums, property taxes and electricity rates on the margins?
(07:33):
Does it get things moving enough?
Speaker 1 (07:36):
Maybe?
Speaker 2 (07:36):
I'm just not sure right now. It's it's something where
you know, if you got the thirty or fixed rate
down into the high fives, I'd say, okay, there's probably
enough juice there this with all the other costs that
have gone up. I'm not sure it's quite enough, but
it'll definitely help check. Yesterday, Scott Bessant discussed something that actually,
(07:59):
sorry it was no labor day interview quote, we may
declare a national housing emergency in the fall.
Speaker 4 (08:06):
We're in the fall.
Speaker 3 (08:07):
H Do you have any clarity about what a national
housing emergency would mean?
Speaker 2 (08:13):
I don't. So if you look at like the things
that were done the last time that we've seen something
along these lines, which was back in you know, late
two thousand and eight, when gosh, like you want to
talk about emergencies, I mean, we're talking about as bad
as it gets. So if you look at the things
that were done back then, it was predominantly to try
(08:36):
to backstop lending markets and things along those lines like that.
That was the bulk of what we saw during previous
you know, national housing emergencies. The stuff that's being talked
about in a couple of these pieces, I'm just not
sure is actually feasible. So like when when you talk
about a few of these things, or like some of
it just doesn't matter. There's a piece from market Watch
(08:58):
Five ways the Trump administration could addressed the housing crisis.
Free up federal land to build housing, guys, doesn't make
a difference. It doesn't matter if you're freeing up a
bunch of land in Nevada. Yeah, It's the problem is
in the places that people are trying to actively move
right now, not in federal land that's you know, more
remote and stuff like that. Not that it doesn't matter
(09:20):
at all, but yeah, the high demand for housing and
the week supply is not in the West, where all
the federal land is concentrated.
Speaker 3 (09:28):
It's in the southeast. It's in the Midwest and northeast.
Oh you're saying the demand for housing right now. Demand
for housing right now is that's where and the lack
of demands in the southeast.
Speaker 2 (09:38):
And this doesn't fix that either, which again, like sometimes
the market just has to do what the market does.
Increase flexibility on what and where you know, builders can build,
so helping to change local zoning laws.
Speaker 4 (09:48):
I would love to see it. I don't know how
they do it.
Speaker 2 (09:50):
Good luck listen. Our show is based in the northeast
in Massachusetts. Massachusetts passed something a few years ago called
a few years ago called the MBTA Communities Act, which
basically tried to push towns near mass Transit to develop
more housing. Even with like the state government trying to
do this instead of the federal one. A ton of
(10:11):
towns have pushback and it's basically been a flop. It
hasn't really moved the way people thought it would. So
no one wants to change their zoning laws when DC
tells them to lowering mortgage rates. The you don't really
have the executive branch able to do that directly. It'll
happen if the economy slows as it is, and this
could provide a nice counterbalance where hey, if the economy
(10:32):
is slowing, great, lower mortgage rates can unlock housing and
maybe you get things moving there. Let's take a quick break.
When we come back, we're gonna be joined by Luke
Kauwa from Sherwood News. Right after this, we're talking broadcom
on the Financial Exchange.
Speaker 1 (10:46):
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(11:07):
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Speaker 6 (11:18):
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Speaker 2 (11:43):
As promised. We're now joined by Luke Kawa from Sherwood News.
We're talking a little bit of semiconductors with Luke today. Luke,
how you doing doing great?
Speaker 7 (11:53):
Thanks for having me, Luke.
Speaker 2 (11:54):
We've got Broadcom stock up about nine percent today, We've
got AMD down six in video down three and a half.
Why the the why is everyone trade in places inside
the semiconductor space today?
Speaker 5 (12:07):
See?
Speaker 7 (12:07):
I find this very interesting. If you would go back,
you know, three months ago, six months ago, one would
think a Broadcom report where they say, hey, you know,
we're doing good, sales beat expectations and by the way,
we also think revenues are going to improve significantly from here.
That that would be a kind of rising tide lifts
all boats phenomenon that is decidedly not happening here. So
(12:29):
I think, first, you know, you have to think about
how much expectations have changed here ahead of Broadcom's report.
So what I would suggest is that you know, the
reason why there is some softness and the likes of
Nvidia and AMD is because you're starting to see traders
treat to the AI game as a little more zero sum.
If you look even right now at the you know,
(12:52):
change in market cap, how much broad cooms added versus
how much Nvidia and am D of lost, it's pretty
much the same at this point. So I think one
interesting thing that could be added on to the AMD
story is a few months ago they launched a new
line of chips, introduced them. Wall Street was incredibly bullish
(13:12):
on the prospects for those chips to be materially adding
to AMD's forward sales. You saw sales estimates for AMD
rise much faster than the likes of Nvidia, for instance,
and Seaport Securities yesterday cut the stock to neutral and said, basically,
we've done some channel techs, we've talked around and it
doesn't seem like their new chips are gaining much traction
(13:35):
that that business is doing too well. So it does
seem for that stock in particular, there's a little bit
of a level setting that's going on here.
Speaker 2 (13:43):
When we look at Broadcom, one of the big things
that they announced they have new ten billion dollar mystery
customer who everyone speculates is going to be open ai
What does this mean in terms of I guess just
the whole ecosystem that is out there. Open Aiye to
this point has been Hey, we're running the models that
(14:06):
everyone wants to use. Are they trying to more vertically
integrate as well? I mean, what's kind of your read
on this?
Speaker 7 (14:13):
I think it's interesting. I think there's myriad takes one
could have on this. Kind of where I fall in
is Hey, despite Nvidia's protestations to the contrary recently, if
you saw some of their social media posts, the AI
boom right now is more supply constrained than demand constrained.
It's difficult to effectively keep equipping yourself with the top
(14:35):
of the line supplies if you're a hyperscaler, just because
they're hard to get your hands on. So do you
want all of Nvidia's top of the state of the
art materials, even though you might have to wait longer
and longer, and by that time they're already working on
the next generation and that's six months away, or are
we going okay if we need to speed up this process.
If we want to speed up this process, is actually
(14:56):
more expedient for us to be diversifying our suppliers a
little more, taking you know, some from Broadcom, having our
own line of custom chips there, also using in videos
GPUs and kind of full system architecture there. So I
think this is more a means of hey, I think
for the underlying AI trade, this is more a matter
of hey, how do we fast track this? How do
(15:19):
we keep this train moving as fast as possible? Because
companies hyperscalers at least it does seem to be adding
to their sales a heck of a lot and a
reasonable reason for them to want to keep that process
at accelerated a pace as possible.
Speaker 2 (15:35):
I have to ask you this question anytime that we're
talking about AI. I know that no one knows the
answer to it, but interested just to get your thought
on it. Luke, when do people start to care about
actual revenue and profitability from AI? Because they haven't to
this point, which is fine, Like there's plenty of businesses
where that's the case for a while, but you got
(15:56):
like four to five hundred billion dollars in data center
spend that's going to be coming next year, and at
some point you say, look, this is going to need
to start, you know, paying for itself. When do people
start caring? Is the sign that you know, we might
be seeing this as more of a zero sum game.
Does it show that we're approaching that or are we
not there yet?
Speaker 7 (16:16):
I mean I would I would somewhat question the premise
a little bit. I do think that if you just
look at how much are sales up versus how much
is capax up. Of course you can attribute all of
the sales increase to AI. Companies might try to, but
right now you're you're effectively seeing even in a one
year timeframe, trailing one year sales versus trailing one year
(16:37):
capacks increases at the hyperscalers. It's you know, the sales
are going up by more than the capacks. So even
on a cash flow basis, it doesn't seem to be
that negative at this point, and of course you would
hope to get more than one year's use out of
out of that. I think kind of in terms of
the question marks people have about the longevity or the
(16:59):
breadth of the AI trade, and this is something that
ties into the price action.
Speaker 1 (17:02):
Today.
Speaker 7 (17:03):
We know that in Video right now has a very
concentrated customer base over half of its revenues for direct
AI hardware sales our three customers. One of those customers
is now reported to be effectively also trying to diversify
its supply there. So it's more a matter of we're
seeing the depth. Are we seeing the breadth in the
(17:25):
AI trade? Effectively? As more and more enterprise companies adopt
this for enterprise purposes or see other ways to use
AI to improve their businesses, do you start to see
more breadth and less depth. I think that to me
would be a kind of key marker of justifying or
validating how much spend has gone into this and how
(17:48):
much may be needed to continue going into this to
have kind of durable, ongoing payoff periods.
Speaker 4 (17:54):
That makes sense.
Speaker 2 (17:55):
One more question on is we only have about a
minute left, but I'm curious to get the sense of Look,
the last time that we saw a build up of
this scale for you know, anything tech related was you know,
the tech bubble with all of the infrastructure related to
the Internet and ultimately the companies that ended up winning
in the long run, weren't the companies that built the infrastructure,
(18:16):
they were the companies that operated on it. How do
we reconcile that in this case? Sorry, only about thirty
seconds for you to give that answer.
Speaker 7 (18:23):
All good, Hey, very a very interesting dynamic. Matt Phillips
at Sherwood has reported on this recently that you've seen
a bit in recent weeks a bit of a shuffling
of the AI trade away from kind of the picks
and shovel space to more of the software providers, some
of whom were supposed to have their lunch eaten by
AI effectively or be rendered somewhat obsolete. So I do
(18:44):
think the market is kind of in this period of
rotating between Hey, we have all these revenues from the
chip makers now, but you know those could go away
in a and a bust ai Ala dot com. But also,
you know, we do have these end users that are
seeing their stocks perform, you know, fairly well in recent
weeks in contrast to some of the picks in trouble.
(19:04):
So I think that's a digestion process that the market
is rotating to and fro as the days, weeks, months
go on.
Speaker 2 (19:12):
Very good, Luke, appreciate you joining us today. Thank you
so much for the time, pleasure, pleasure that is Luke
Cowa with Sherwood News. We're going to take a quick
break here. When we come back, we've got trivia, we've
got Wall Street Watch, and we've got Beef.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch. A complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:58):
Markets in negative territory on the heels of a weaker
than expected August jobs report, where only twenty two thousand
jobs were added last month, well below forecasts of seventy
five thousand. The government also revised its numbers from earlier
in the summer and said the economy lost a net
thirteen thousand jobs in June, marking its first decline since
(20:18):
December of twenty twenty. Right now, the Dow is down
by over half a percent, two hundred and forty five
points lower, SMP five hundred also down by a half
a percent, Nasdaq down by three tenths of one percent.
Russell two thousand is dipping into negative territory. Ten year
treasureel down ten basis points at four point zero seven percent,
(20:39):
and crude oil is down nearly three percent now trading
its sixty one dollars in sixty one cents a barrel.
Broadcom jumping ten percent after the chip and software maker
swung to a profit, beating expectations for its quarterly sales.
The company also noted its AI related revenue sword sixty
three percent. Hi Meanwhile, Lulu Lemon shares are tanking eighteen
(21:03):
percent after the eth leisure ware company's full year guidance
missed estimates. Lulu also cut its outlook, citing tariffs, and
a new financial filing revealed that Tesla's board is asking
investors to approve a new pay package for CEO Elon
Musk that could be worth as much as one trillion
dollars over the next decade. Tesla shares a rising three
(21:27):
percent on that news. I'm Tucker Silva, and that is
Wall Street Watch, and we haven't done trivia yet, so
let's do it here today is our final look at
Famous Ben's this entire week. In August of nineteen seventy two,
Michael Jackson released his second solo studio album, Ben the
title track for the album was the first number one
(21:49):
hit for Michael Jackson as a solo artist. So trivia
question today, what was Michael Jackson's song ben About? Once again?
What was Michael Jackson and Son ben About? Be the
first person today to text us at six one seven
three six two thirteen eighty five with the correct answer,
you know, win a Financial Exchange Show T shirt once again.
(22:12):
The first correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (22:23):
World meat prices reach new highest consumers clamor for beef chuck.
Speaker 3 (22:29):
According to the Bureau of Labor Statistics, year over year,
beef prices up eleven point three percent and my personal favorite,
uncooked beef steaks twelve.
Speaker 4 (22:39):
Point four percent year over year increases July to July.
Speaker 2 (22:44):
It's been a tough year.
Speaker 3 (22:45):
Yeah, yeah, you wonder why people are so pessimistic about
our future.
Speaker 2 (22:50):
So look, basically, you've got, you know, a bunch of
problems that are causing thinning, herd's, combination of disease, drought,
you know, a whole bunch of different things, and so
as a result, you don't have as many cows, and
as a result of that, you obviously don't have as
many steaks. Steaks come from the cow, as I taught
my five year old a couple weeks ago. It's kind
of an eye opening conversation, but no, I think it
(23:14):
went pretty well. Actually it helped that I was showing
her the diagram of like this is you know, the
the the flank steak here, and this is where the
rib roast comes from, you know, so like we went
through the whole cow. Yeah, and it was it was,
It was good.
Speaker 3 (23:29):
But that sounds like it went significantly better than my
wife's puberty conversation last night.
Speaker 4 (23:33):
So good job.
Speaker 2 (23:36):
I'm not Yeah, don't engage. Let's let's continue, shall we. H.
You've got you've got beef prices moving up and there's
nothing that we can really do to get them down.
It's just one of those things where it's going to
be cyclical, kind of like eggs were, you know, last
year with bird flu and things like that. And unfortunately,
(23:58):
for you know, people who enjoy, you know, a good
stake or two every now and then, it's not really
changing in the near future. We continue to see be futures,
cattle future prices moving up over the last couple weeks,
and so things are gonna get worse before we get better.
Speaker 3 (24:12):
There, folks want to talk to you about two upcoming
events here from the Financial Exchange. As we've been discussing
the labor market in particular, but the economy as a
whole seems to be at potentially some.
Speaker 4 (24:28):
Pivot point right now.
Speaker 3 (24:30):
You've got the FED potentially cutting rates, You've got markets
trading near all time highs on the artificial intelligence boom,
and a lot of folks wondering what comes next. If
you are too, please join us on one of two dates.
The first one is going to be down at the
Margaritaville Resort on Cape cod on October ninth. Second will
(24:50):
be at the Showcase super Lux in Chestnut Hill on
October sixteenth. We'll be doing a live broadcast of this
show the Financial Exchange. You can join us for free
and catch a live broadcast followed by a lunch where
we discuss the markets, to discuss the economic trends and get
into the details of what we are seeing when it
comes to this country's outlook. If you would like to
(25:12):
reserve your spot, do so now as these do fill
up again, it's down on Cape Cod at the Margaritaville
Resort on October ninth, or at the Showcase super Lux
and Chestnut Hill on October sixteenth, and you can reserve
your spot by calling eight hundred three nine three four
zero zero one. Again limited availability, so please call on
book your spot at eight hundred three nine three four
(25:36):
zero zero one.
Speaker 1 (25:37):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal, or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (25:53):
Michael's talk a little bit about Lulu Lemon in depth.
So they reported earnings yesterday and basically their guidance was
it bad to quite bad, and they're saying it's because
of tariffs. Ultimately, like you actually look at the numbers
and what they're telling you, and yes, that the profit
side is certainly going to be impacted by tariffs, there's
(26:16):
no doubt on that side of things. But I think
that when you know, you talk about okay, is it
tariffs or is it something else. The revenue guide being
you know, three to five percent below where they had
been previously guiding. That tells me you have a demand problem, because.
Speaker 3 (26:34):
That's what matters check because this is a company that
has been defined by pricing power like no other company
out there for the last several years.
Speaker 4 (26:41):
And if they're losing it, I.
Speaker 2 (26:42):
Mean, I'm there right now. I went to the lu
Lemon website, which the only time I ever do it
is when we cover them on the show to talk
about how expensive their stuff is, and I see, this
is a spanks guy. I am. It helps with you know,
the midsection on me a little bit. So for best sellers,
the first thing that comes up for men is the
metal vent Tech short sleeve shirt. It's seventy eight dollars. Yeah,
(27:07):
like human dollars, not you know, like anything. It's seventy
eight dollars. They have an Evolution short sleeve polo shirt
for eighty eight. And so the question that I ask
is why, I mean, but that hasn't been enough. That
hasn't been a problem for them to this point. But
if you have an environment where people are, you know,
(27:30):
paying more attention to pricing, right now and this and that,
this is the first stuff that goes because quite honestly,
and look, this is what I do. You can go
to freaking old Navy and get eight workout shirts that
cost the same amount as this one workout shirt from
Lululemon and there's not that much of a difference. Probably
I wouldn't know. I've never worn a single Lulu Elemon thing.
(27:52):
Is there?
Speaker 4 (27:53):
I mean, is this the same thing that we see
with like exercise fads?
Speaker 1 (27:58):
Right?
Speaker 3 (27:58):
I know it's different. It's fast, and there are plenty
of fashion companies that have remained relevant for a lot
longer than the Bowflex or Peloton, but this company became
incredibly popular, incredibly quickly. And every time I log onto Facebook,
I see five companies trying to pick off little pieces
of their business.
Speaker 4 (28:17):
Here and there.
Speaker 2 (28:18):
Yeah, it's looks tough. It's a tough business. And the
other piece that I wonder, if you're just seeing in general,
that whole ath leisure space kind of feels like it
peaked five or six years ago.
Speaker 4 (28:31):
I mean, it probably peaked during COVID.
Speaker 2 (28:33):
I mean just look at what you're seeing from like
Nike and under Armour, and like this is not just
a Lulu Lemon store. I mean, you're seeing this across
the board with anything athletic, leisurely, you know, yeah, oriented,
and so I think there's something to that as well.
The other thing just from quite honestly again, like I'm
(28:54):
not the target person for this. I know they have
a men's section, but their bread and butter is selling,
you know, workout close to women. Asking my wife about
She's like, there's stuff's overpriced and no one wants to
buy it anymore. Like that's it's kind of the vibe
that that I get on this.
Speaker 4 (29:10):
No STIMMI checks, no Lululemon.
Speaker 2 (29:12):
Let's take a quick break when we return. Paul Monica
from Baron's joined us after this.
Speaker 1 (29:18):
Miss any of the show. The Financial Exchange Show podcast
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
button and leave us a five star review. This is
the Financial Exchange Radio Network. The Financial Exchange is now
available every day from eleven to noon non Serious XM's
Business radio Channel one thirty two. Stay informed about the
(29:40):
latest from Wall Street, fiscal policy, and breaking business news
every day. The Financial Exchange is life on Serious XM's
Business radio Channel one thirty two. This is the Financial
Exchange Radio Network. Ladies and gentlemen the weekend.
Speaker 6 (29:58):
This segment of the Financial Exchange brought to you by
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Speaker 2 (30:32):
Joining us now is Paul Amonica from Barons and we're
gonna be talking a little bit about sports gambling stocks here, Paul,
How you doing good?
Speaker 5 (30:43):
Thanks? How are you guys doing good?
Speaker 2 (30:44):
I know you put together a piece on a couple
of these companies. Can you talk a little bit about
what was in there?
Speaker 5 (30:50):
Yeah, Draft Kings and Flutter Entertainment, which is the owner
of FanDuel. They dominate the legal sports betting market. I mean,
they have by far the biggest market share, over half
of the overall market in the US, even though there's
a lot of competition from the likes of MGM and Caesars,
(31:12):
you know, fanatics and obviously even ESPN with their branded
sports you know gambling service that's run by the casino
company Pen Entertainment. But Banduel and DraftKings remain the leaders
and that's reflected I think in their stocks as well.
DraftKings shares up more than twenty percent this year, fan
(31:34):
Duel up more than fifteen percent, I believe at last check.
So they've had strong years, and I think investors are
hopeful that more, you know people are going to be
betting even more money on you know, legal NFL games.
This year, the American Gaming Association I think had an
estimate of you know, a nearly you know, ten percent
(31:55):
increase in betting on sports to about thirty billion this year.
Speaker 2 (31:59):
So we haven't seen any signs that you know, sports
betting is peaking. It still is growing in terms of
the overall activity level.
Speaker 5 (32:07):
Yeah, it still is growing, and like I said, the
largest two companies are increasingly grabbing market share. So that's
I think one of the reasons why those two stocks
have done well. But as is always the case, and
you know gamblers know this firsthand as well as investors,
sometimes you have to take money off the table, you know.
(32:28):
I think DraftKings and Flutter FanDuel are both solid companies
that deserve, you know, their market leading positions. But the
valuations are starting to look a little stretched as well,
more so for DraftKings than for Flutter. But you know,
they're training at premium prices and given their run up
(32:48):
this year, maybe they pull back a little bit. But
you know, that being said, obviously we're heading into seasonally
a very strong time for these companies. In addition to
pro football, you have college football, you have the start
of the NBA season, the Major League Baseball playoffs, So
there's a lot of sports activity out there for gamblers
(33:10):
to wager on.
Speaker 2 (33:11):
A couple of sports. Leagues have seen some gambling scandals
in the last year. I know the NBA has, I
know Major League Baseball has any signs that there might
be pushback coming, either you know, legislatively or from leagues
about this, or is the goose just too golden for
them to do anything about it.
Speaker 5 (33:31):
Yeah, I think the leagues have to look at it
very seriously. Anything that compromises the integrity of the game
is a huge concern, and I think you do have
to wonder if there are going to be legislatively some
changes that could impact the industry. I mean, one thing
that is interesting is that it got snuck into the
(33:55):
one big beautiful bill, you know, Trumps stimulus plan that
was by Congress that you know, there's a provision now
that makes it more difficult for gamblers to deduct losses
or tax purposes, and that is something that could be problematic.
You know, now whether or not that causes people to
(34:18):
say that, okay, instead of legally betting, I'm going to
bet with you know, bookies underground so I don't have
to report income. And you know, obviously that is one
of the things that when you are betting through a
legal sports app there is a record of it. You
can't hide your wins and losses from the government. Usually
(34:39):
not a problem when you're losing money, but that might
be a concern now if it's no longer you know,
something that gamblers can count on to be able to
get some tax ad advantageous you know issues, you know,
if they are actually losing money.
Speaker 2 (34:55):
Well, you mentioned that these two companies are gaining markets share.
How came the established companies you can't compete in this
space as well. I mean I see MGM bet commercials
all over the place. You know, they've got casinos. Why
are the traditional casino operators not on the cutting edge here?
What they miss out on?
Speaker 5 (35:12):
Yeah, it's a great question. I mean I'm not so sure.
I mean, I think, as is often the case in
emerging businesses, you wind up having tech savvy companies that
are able to take advantage of, you know, being a
first mover. I think that maybe some of the casino
companies were a little late to the game, you know,
(35:35):
concerned about what legal online sports betting might do to
their actual very profitable sports books at physical casinos. And
you know, I think MGM and Caesars some of the
other companies they're doing a good job. And as you mentioned,
I mean, not a day goes by where you're not
seeing a commercial. I guess you what, John ham now
(35:57):
of mad Men fame for MGM is the latest. But
I think that DraftKings and fan Duel, they've proven that
they've been able to use that first mover advantage and
run with it.
Speaker 2 (36:11):
Very good, Paul, appreciate you joining us. Have a great weekend.
Speaker 5 (36:16):
Thanks will do go Giants Go Hoop. You know that
team that beat the New Year.
Speaker 2 (36:25):
Yeah, it's a little staticky, asked.
Speaker 5 (36:31):
On the Financial Exchange.
Speaker 2 (36:33):
Well, we'll see what the results are on Monday. In
any case, thanks again, Paul, have a great weekend. That
is Paul Monica from Baron's Trivia.
Speaker 6 (36:42):
Question we asked on the prior segment was what was
Michael Jackson's song ben about it will be a rat
or Killer Rat? Mike from Barnstable Masses our winner today
taking home a Financial Exchange Show t shirt. Congrats to Mike,
and we played trivia every day here in the Financial Exchange.
See complete con test rules at Financial look Change show
dot com.
Speaker 2 (37:03):
Michael, what else do we have to get through?
Speaker 4 (37:05):
Tesla is social Security? Tesla trillion dollars.
Speaker 2 (37:09):
So here's the thing. It's like a hugely excessive pay package.
It's also really unlikely that he actually gets paid that
whole thing. I went through and looked at some of
the benchmarks that need to be hit, and you have
things like, hey, Tesla for the last like three tranches
needs to hit four hundred billion dollars in EBITDA in
a twelve month period. Right now they're at like ten
(37:31):
billion dollars. So like quite honestly have to do if
they grow their revenue by forty x while he's still
alive from here, fine, like pay him more. Like okay,
Like it's probably worth I know it sounds crazy to
say like a trillion dollars is worth it, But I
don't know, like if you can actually do something that
crazy pressive, Fine, have at it, Like do I think
(37:54):
it's gonna get there? No, just because it's just a
huge number. But I don't know in this case, if
you really, if the board wants to do this, in
the shareholders vote on it. Okay, I at it at
this point, Like we've been down this road before.
Speaker 3 (38:09):
I'm not gonna like make a big hullabaloo about executive
com It's.
Speaker 2 (38:13):
Just a trillion dollars. It's not like anything crazy. We're
done for the day, done for the week. We'll see
you next week. Bunch of inflation data coming up. Make
sure you tune in
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