November 24, 2025 • 39 mins
Chuck Zodda and Mike Armstrong discuss the wild week of harsh volatility tests support levels across stocks. The AI boom is driving the economy. What happens if it falters? The Fed is fixated on AI, but not ready to make a Greenspan-size bet. US inflation traders to use untested fallbacks for missing CPI. Americans are on a year-end shopping spree. What do CEOs really think about tariffs?
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Transcript
Episode Transcript
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Speaker 1 (00:00):
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(00:20):
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(01:03):
This is the Financial Exchange with Chuck Zada, and Mike Armstrong.
Speaker 2 (01:10):
We've got a shortened trading week this week because of
the Thanksgiving holiday that's going to be taking place on
It's Thursday, right, Mike.
Speaker 3 (01:18):
That's the one.
Speaker 2 (01:18):
That's the one, Yeah, Thanksgiving Thursday, And so we've got
a shortened trading week. Not too much expected in the
way of economic data. Basically nothing expected as far as
earnings that are likely to move the needle. The biggest
company I think that you can look at from an
(01:39):
earnings perspective this week is Deer, who reports on Wednesday.
They're not a tiny company by any means, but with
a market cap of one hundred and thirty billion dollars,
it's not one that really moves the market in general
at this point, which kind of strange to say about Deer.
Speaker 3 (01:55):
What is that like a thirtieth of an Nvidia?
Speaker 4 (01:58):
Uh?
Speaker 2 (01:58):
In that ballpark? Yeah, yeah, it's in that ballpark. I mean, Mike,
here's again, just like we're doing comparisons. It's half the
market cap of Salesforce. Yeah, despite having about the same
revenue that Salesforce does, and both of those companies Salesforce
actually reports next Wednesday, so about a week and a
(02:20):
half out. But in any case, we had quite a
bit of volatility last week in case you miss things
for whatever reason. It was about as choppy of a
week as you can have, not all in one direction.
But I think the star of the show was clearly
what we saw on Thursday post in Vidia, where you know,
(02:43):
we opened up about one and a half percent on
the S and P five hundred rows another half percent,
and then promptly fell three and a half percent from
there to close down more than one and a half percent,
only the fourth time in the last thirty two years
that we have seen such a move, and I think
it absolutely it's just kind of what markets are trying
to navigate right now, which is, hey, we've got concerns about,
(03:07):
you know, is there an AI bubble or not? We
don't know. We've got concerns about is there a private
credit bubble or not? We don't know. And we've got
concerns about the labor market. Is it going to continue
to slow or not? We don't know. And the market
was trying to reckon with all these things over the
past five trading days.
Speaker 3 (03:25):
Yeah, so historic volatility on Thursday of last week, Friday,
some recovery this morning, some recovery, although the DOO is
doing weird things because the Dow is a stupid index
that price waits things. So Amgen and Honeywell are bringing
down the Dow, which not terribly relevant to the rest
of the market, but they are. The question remains to meet, Chuck.
(03:47):
I mean, every time in the last five years that
we've had stocks sell off to any meaningful degree, you've
had the buy the dip mentality come in and a
bunch of cash backs up that market. And I think
through markets lofts like the one we saw in twenty
twenty five back in April. I think of the one
certainly during COVID in twenty twenty, and to a slightly
(04:08):
lesser degree, the one in twenty twenty two as well
twenty two.
Speaker 2 (04:10):
I don't think that by the dip reflex. Really it
didn't kicked in the same way.
Speaker 3 (04:14):
No people did re enter equities, but it wasn't because
they got cheaper. It was largely because the inflation concerns
that we were seeing started to dissipate and a new
narrative around AI took over. But still we have not
had that prolonged negative sentiment play out, and plenty of
people are asking if this is the time that we
(04:36):
will if the narrative is shifting now around what can
make this economy and market keep chugging along.
Speaker 2 (04:41):
So these are questions that are not going to be
answered this week. Unfortunately. If if you are looking for
the market to give a resounding hey, this is a
problem or this is not. Thanksgiving week twenty twenty five
is not where these are going to be answered. I
think the labor market questions are going to play out
(05:03):
over the next three to six months. I think the
private credit questions are going to play out over the
next year, and I think the AI data center ones
are going to play out over the next twenty four months. Unfortunately,
in the world of instant gratification, we need to know
(05:24):
whether the sixty point up move in the S and
P this morning means anything or not. And that's just
not in the cards. It's just not something that we're
going to be able to tell you. After all, if
the one hundred and ten point or one hundred and
three point down move on the S and P meant
something on Thursday, well it's been invalidated by the fact
(05:45):
that the market has retraced all of those losses in
the last two sessions now, but we still have a
ton of intra day volatility. I mean, I'm seeing half
a percent moves on the S ANDP every ten to
fifteen minutes. That's not really a healthy market environment at
the moment. So what I will tell you that the
market is actively trying to sort these things out, but
(06:07):
we're not going to actually know what's going on with
them in the actual economy for an extended period of time,
which is disappointing. If you want, you know, if you
need your answer now, you're not gonna get that. We
could do other things now, you know, we still have
some other stuff that we can talk about for this week,
and I think a good place to start is on
(06:28):
that AI boom, because even though I may, even though
I will admit to having some skepticism, I think is
the right word as to whether or not this will
pay off the way it's being priced right now. Sometimes
I think we go a little bit too far where
(06:50):
it's like, you know, people are talking, hey, like there's
too much AI spending going on right now, and it's
not good for the US economy. No, it's really good
for the US economy. This AI spending is going on
What potentially could be bad for it is if it
turns out there's too much and there's some stuff that
has to get sorted out during a few years. But
(07:11):
the amount of spending going into AI right now is
unquestionably good for the US economy at this particular point
in time.
Speaker 3 (07:19):
Yeah, there's a New York Times piece out this morning,
and the headline of it just really bothers me. So
the headline the AI boom is driving the economy. What
happens if it falters, Well, it falters, it all falls apart.
You can't just it's not useful to just throw out
that possibility, right, Like, what are the circumstances under which
(07:42):
the AI boom starts to be called under further scrutiny
and starts to fall apart and that spending starts to
dry up. I think we can all think of a
few of them, but just painting a picture of well,
what if the spending on AI suddenly disappears. Frankly, that's
not going to happen. It's not going to just disappear.
It could be valued differently, it could come in less
(08:03):
than is currently anticipated, and in all of those cases
it spells different scenarios but I find the more frequent
now conversation about, oh, well, you know, if it weren't
for AI, this economy would be falling apart. Yeah, that's true,
but we do have artificial intelligence technology companies spending billions,
(08:24):
committing to trillions of dollars worth of spending. And so
you have to take the current status quo and kind
of extrapolate out what it might mean under different scenarios,
because there are some in which it continues for several years.
Speaker 2 (08:35):
And I think the other thing to remember is that
there is going to be something that everyone in the
world considers good that comes out of this a eye bubble,
despite all of the bad that I think is coming
out of it as well. And trust me, like every
day now you read you know about some of the
stuff that these systems spit out to people that is
(08:57):
just quite honestly pretty horrible in terms of, you know,
the lack of guardrails on it. But I also do
think there are some real positives that are going to
come from it. Much as hey, despite the fact that
you know, at least once a week now I make
the joke of, hey, we should just turn the Internet off,
and you know, not turn it back on. I still
believe that overall the Internet is a force four good
(09:20):
in the world. It's just well, it's got some crap
that goes along with it. So the problem that you
see with this AI spend right now, in my opinion,
is just that everyone's being priced as a winner. If
you use AI, you're being priced as a winner. If
you make AI programs you're being priced as a winner.
If you make the chips, you're being priced as a winner.
(09:42):
And as we've seen through basically every boom and bust
cycle in history, not everyone wins. There are some losers there.
And I say that in like the nicest way possible,
not like, oh, you're a loser, but no. I mean, look,
you develop railroads and there's you know, too much development there,
and some of them go out of business. Radio, you know,
(10:04):
kicks off and everyone in their grandmother starts, you know,
a radio station, and a bunch of them go out
of business. In the nineteen twenties, and you know, the
tech bubble, we can obviously wax poetic about pets dot
com and you know, the Patriots were originally going to
play at CMGI field before everyone was like, wait, who's
CMGI do you guys have any revenue, how are you
gonna pay for the name on the stadium? This is
(10:25):
going to have some losers as well. We just don't
know who they are yet, and it's gonna take a
little bit of time.
Speaker 3 (10:31):
To get there to that point about everyone being priced
as a winner. We've focused on Oracle a lot of
the last time.
Speaker 2 (10:36):
We're starting to see a little bit of a shakeout there, maybe,
but it's just based on today's.
Speaker 3 (10:39):
Information to that point. Even today, with the sell off
at Oracle is seen right, their stock rows from to
thirty to three hundred and then fell back down to
that two thirty level, still trading at a price earnings
ratio in the mid forties.
Speaker 2 (10:54):
Yep, yep.
Speaker 3 (10:56):
So yes, you have a lot of winners still being
priced in.
Speaker 2 (11:00):
Make a quick break when we return. Do we want
to talk about like whether the Fed cares about AI
or not?
Speaker 3 (11:08):
Yeah, we can talk about whether they do and whether
they should.
Speaker 2 (11:11):
Good. I think that's a great idea, Whether the Fed
cares about AI? Should they care?
Speaker 1 (11:16):
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Speaker 2 (12:51):
The feed is fixated on AI but not ready to
make a Greenspan size bet. What does that mean?
Speaker 3 (12:58):
Michael So In the mid to late nineties, the FED
was trying to decide what to do with monetary policy
and effectively Alan Greenspan, with some disagreement from the rest
of the Federal Reserve, decided that, Hey, we think we
can keep rates lower in spite of a really rapidly
growing economy. And the reason for it is we're going
(13:19):
to see productivity growth, so, you know, effectively the pace
at which the economy is growing can be justified and
we'll be able to continue to see that growth without
tremendous inflation because we won't need to pay you know,
six hundred thousand more workers to do these jobs. The
Internet is going to lead to productivity, and it's going
(13:40):
to lead to, you know, justifying the increase in economic
activity with fewer working hours, and so basically made a
bed on Hey, we're not going to see inflation as
a result of that boom period and kind of worked.
I mean, there were certainly some ramifications of all that
low interest rates might have contributed to the dot com bust,
(14:04):
that might have contributed later to the Great Financial Crisis.
But you know, he was right in so far as
we did not have backbreaking inflation like the nineteen seventies.
Speaker 2 (14:15):
I think the part that's challenging to me is like
you talk to most people on most people in most industries,
and here's what you generally hear. If it's a blue
collar industry, you know, if you're working with your hands,
(14:39):
what you hear is that's not relevant at all to
my job right now. It's not affecting most blue collar
jobs at this point, I think is fair sure, at
least most employees, like maybe managers might be thinking about it, yep,
But most employees that are you know, plumber's, electricians, carpenters
like that, it's not impacting them. If you talk to
(15:02):
the vast majority of office workers outside of the coding field,
they'll tell you some variation of this. My boss has
instructed me that we have to use AI on a
regular basis, and so I'm doing so, but I'm not
sure how much more productive it's actually making me.
Speaker 3 (15:19):
Right now, I tend to agree with a few industry exceptions.
Speaker 2 (15:23):
Coding's the big one, where like you're seeing some real
push on that side, and everyone I talked to in
the tech space is like, yeah, this is gonna you know,
do the vast majority of coding work in short order.
The other ones that I think you hear about it
in the legal industry doing a lot of document review
and stuff like that, and then occasionally like publishing like
(15:44):
fraudulent legal briefs as a result of that and making
stuff up, which.
Speaker 3 (15:48):
You saw in Australia with that famous attorney.
Speaker 2 (15:50):
Yeah, which is kind of funny. So like, there's some places,
but I think the big thing is you talk to
the vast majority of workers and they're not telling you
about some productivity miracle that they're seeing from AI. It
doesn't mean we're not going to see it. Because remember
the Google's latest Gemini release that just came out now
(16:13):
is one of the first ones, and it's one of
the ones that people were talking about as being impressive.
It's one of the first major releases on some of
the new silicon from in videos. It's one of the
first things that you know, Blackwell has helped to develop.
And when you get those next generation of chips, maybe
you see further improvements and things like that. So just
because we're not seeing it today, I'm not going to say, oh,
(16:35):
it's never going to happen. That would be like looking
at pets dot Com in ninety seven and being like, yeah,
this people buying all their pet food on the internet. No,
not gonna happen when now we know that you know,
Chewy and Amazon and all these things are things.
Speaker 3 (16:48):
So let's forget about the bet on productivity for a
moment here, like and just admit that we don't know
if it's going to lead to massively more productivity, if
it's going to be a bigger productivity revolution than the Internet.
I don't know what's different about the US fiscal situation
this time compared to the mid nineties to justify you know,
(17:09):
higher versus lower interest rates. That that, to me is
a more interesting question because the fiscal situation of the
US is well, frankly, it's unrecognizable compared to the nineteen nineties.
Right we were running surpluses from the budget during the
nineteen nineties, we had a you know, US deficit, a
US debt stack that was fractions of what it is now,
(17:30):
even though it was considered to be too big even
back then. It puts US in a very different position.
And by the way, our population growth is a fraction
of what it was back in the nineteen nineties.
Speaker 2 (17:41):
So I think that ultimately, like you try to sort through,
you know, whether the FED can and this even before
you get into things like trade and restoring and all
this stuff. And where I tend to get to on
AI and robotics as well, is if the actual technology
(18:05):
works the way people think it can, it has the
potential to be hugely deflationary. And deflationary is not a
good thing. It's different from what we call disinflationary.
Speaker 3 (18:19):
Yeah, if nobody's bringing home income because of robotics and AI,
then prices are going to go down because nobody can
afford anything.
Speaker 2 (18:25):
Correct. When we talk about you know, what we want
to see, it's an increase in standard of living through
income's relative to cost growing. That's what you like to see.
If robots come in and replace all of our plumbers,
Carpenter's electricians, and all of our programmers and half of
(18:46):
our you know MRI, you know, radiologists and you know
this and that. Okay, Like that's kind of a problem
because all of that income goes away and we're not
sure how to replace that. Like, that's a huge demand problem.
You then have in the US economy. The thing people
are hoping for is, hey, this can make us more productive,
(19:09):
so it's cheaper to do these things, but we maintain
our jobs and our standard of living goes up because
the cost of everything becomes cheaper, which, by the.
Speaker 3 (19:20):
Way, is how the implementation of every technology in history
so far has worked. We have is it different this time?
With AI?
Speaker 2 (19:27):
Our population is tripled in the last one hundred years.
Quadrupled actually in the last hundred years. We employ ten
percent of the farmers that we used to and we
still feed ourselves. But it happened over one hundred year period.
And anyone who actually talks to, you know, a farmer
now is like, Wow, your job's still really hard and
you might be underpaid for you know, what you do,
and YadA YadA. So I think this is the challenge
(19:51):
that we try to sort through in this is what
shape does this boom bust potentially take? And the Fed
in US. I have no idea yet. Still quick break here.
Wall Street Watch is next.
Speaker 1 (20:10):
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 markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:32):
Oh after last week's wild ride, markets are beginning this
holiday shortened trading week in positive territory as traders await
or economic data releases, including the Producer Price Index and
retail sales, among others. Right now, the Dow is up
about a third of a percent, or one and forty
nine points. S and P five hundred is up just
(20:54):
over one percent or seventy points. Hired NASDAC rallying one
point nine percent or four hundred and nineteen points. Hire
Russell two thousand also up just over one percent. Ten
year Treasure real flat at four point zero five four
percent to Incrude oil down modestly, trading at fifty seven
dollars and ninety six cents a barrel. Tesla CEO Elon
(21:16):
Musk posted to x that the company has started work
on the next generation of artificial intelligence chips to be
used in cars in data centers. Tesla stock is jumping
six percent on that post, sticking with AI, where Alphabet
stock is rallying nearly six percent following glowing reviews of
its recently launched Gemini three AI model. Meanwhile, Ali bob
(21:40):
A stock is rising about five percent after the company
announced its AI app Quinn, had ten million downloads within
its first week of launching. Elsewhere, Novo nordes thinking about
seven percent after the pharmaceutical company said its highly anticipated
trial for Alzheimer's disease failed to meet its main goal.
(22:01):
Over the weekend, Wicked for Good at an impressive box
office debut, where ticket sales totaled about one hundred and
fifty million dollars, which would mark one of the biggest
domestic debuts this year. However, shares in Universal Pictures owner
Comcast are down just over one percent, and struggling retailer
Coles has named Michael Bender as its new CEO, marking
(22:23):
the third CEO that the department store has had in
the last three years. Bender has been serving as the
company's interim CEO since May. Colestock is down modestly so
far today. I'm Tucker Silva and that is Wall Street Watch.
Speaker 2 (22:38):
All right. So, one of the things that was one
of the pieces of information released last week by the
Bureau of Labor Statistics is that the October CPI caput
it will not exist in a full final form. This
is the first time that we have seen this since
we have had instruments avail that basically are built to
(23:03):
track the CPI in investment vehicles. Think about treasury bonds
that are indexed for inflation TIPS bonds as they're more
commonly referred to Treasury inflation protected securities. So the question
that people ask is, okay, like, how does this actually
work on something like that or in other areas of
(23:23):
the market where you need a reading from the October
CPI in order to be able to produce a result.
And the answer is that the contracts for these have
different covenants in them requiring fallback data to be used
in order to actually provide some kind of reading for
(23:45):
the value of the instrument. So, as an example for TIPS,
an this is according to like again the guidelines for
how TIPS work, you have to use a synthetic number
quote based on the last available twelve month change in
the CPI. So in this case, you would use CPI
(24:06):
from September of twenty four to September of twenty five.
But then if you go to the inflation derivatives market,
they have a different fallback that they use that instead
uses swap based numbers in order to provide their fallback
from and officially released CPI. So what you end up
(24:27):
with here is that you get a divergence in payouts
depending on the fallback mechanism that is used. That diverges
to the tune of about zero point two percent over
the last year as a result of this. So when
we talk about the impact of not getting an October CPI,
(24:47):
look ultimately like, I don't think anyone wakes up and
looks at their bank statement in the morning and then
he gets the CPI and says, oh, inflation wasn't as
bad last month as I thought. No, Like, you spent
the money you spent, and that's how it is. So
these are some of the ways that this actually creeps
into market functioning and how you can see, you know,
some funky things that might be there when you're trying
(25:09):
to figure out some of these items in markets.
Speaker 3 (25:13):
I think what this comes back to for me, Chuck
is over the last one hundred years, there has been
a tremendous amount of trust built for the US financial
system as a whole. And I know that sounds kind
of strange coming from people because you know, I probably
listen like I don't trust bankers on Wall Street.
Speaker 2 (25:33):
That's not what I write.
Speaker 3 (25:34):
What I mean is that internationally people settle trade in
US dollars when they trade with other countries. They want
to use US dollars because they know that it is
the most stable currency and you know, capital system out there,
and one month of missing CPI does nothing to damage that. No,
But when we talk about why you know, investors don't
(25:57):
settle funds in Chinese you on, for example, it's because
because you don't trust the data that backs up the
financial system. And again, like I said, one missing inflation
read doesn't do anything to damage that reputation. But potential
changes to how CPI gets calculated, if you have you know,
people that are someday messing with the data or saying, hey,
(26:20):
we don't want to release it on a monthly basis anymore,
those are the things that we deem really concerning because
any drawback of trust from the US financial system, and
you know, the data that frankly sometimes seems pretty unimportant,
like monthly CPI reads, actually is really important to the
functioning of the overall US financial system, which we all
(26:41):
as Americans benefit from dramatically.
Speaker 2 (26:44):
Yeah, this, as you said, like, this isn't going to
cause anyone to rethink that type of investment, but it
is something where if you start seeing more and more
of these pockets that pick up, eventually you get to
a point where you know, and again there needs to
be a lot more like we are. We're nowhere near
(27:04):
this right now, but eventually you get to a point where,
you know, a pension fund that's you know overseas says, yeah,
we need to rethink our capital allocation just because there's
a material risk related to the quality or quantity of
data being provided on instruments X, Y, and z. And
that's where it starts to matter. This won't, but just
(27:28):
give you an example. He Look, let's say that you're
an institutional investor in wherever, Like let's even say you're
an institutional investor in the United States, right and you
have an allocation to tips in your portfolio, and if
you miss this CPI reading once you say, whatever, it's
not a big deal. It happens, you know, every month,
and as long as we have data going forward, it's fine.
(27:51):
If long shut downs and missing CPI data become the norm,
then institutions may say, look, we buy these investments in
order to hedge against inflation in our bond portfolio. If
the data is not being provided such that they are
not doing that hedging, we are not going to buy them.
(28:12):
And then the US government has a funding problem related
to now you've got to change the mix of your
securities that you issue. You issue fewer tips and more
conventional bonds, and maybe the yield rises as a result
of that. So again one off. Quite honestly, I'll go
far enough to say it doesn't matter, agreed, But if
(28:32):
this becomes something that's happening once a year, which I
don't think we have evidence of that, but if it
were to, it starts to become kind of problematic. If
you get to a frequency like that, I'm going to
wait for that to happen before I start to say,
you know, this is a problem, because, quite honestly, if
it's just once and doesn't happen again, it's a non factored.
(28:57):
Americans are on a year end shopping spree. I've seen
so many divergent stories on the chuck.
Speaker 3 (29:03):
This is typical. So every year around Halloween, a bunch
of companies go out there and start talking to consumers,
and what they ask them is, hey, are you planning
on spending as much as you did last year, more
than last year or less than last year on the
holiday season? Sure, and universally everyone says, oh, I'm going
to pull back my spending because you know, that credit
card bill that I had to pay off was really painful.
(29:25):
And then you ask them again in mid November or
late November or early December, and it's like, oh, yeah,
we are spending like crazy. We are have been at TJ,
you know, We've been at Home Goods and TJ Max
every night for the last two weeks. And I'm definitely
going to all the Black Friday sales. So yeah, this
(29:45):
is not unique. This is typical. Every single year we
deal with something. And by the way, I'm not saying
that every retailer out there is going to have a
great quarter. There will be winners and losers. But every
time I read one of those stories like a corrugated
box show, mients look bad or consumers are saying that
they're going to pull back on their spending. I usually
(30:06):
just kind of ignore it and say, let's take a
look at it in January, because my guess is that
the holiday shopping spending goes up by some two odd
percent compared to last year.
Speaker 2 (30:15):
You know what, I think we can say conclusively at
this point. Sure, any concern related to spending from households
that you know, became any concern that we had because
of what we were seeing in restaurants spending trends, which
are real. There's a problem there. Yep, it's not spilling
over into the rest of retail.
Speaker 3 (30:36):
Doesn't appear too.
Speaker 2 (30:39):
You can't look at, you know, anything out there in
the broad macro picture for retail and say, yeah, this
is the problem. It's basically restaurants are continuing to report
some pretty concerning things. Travel amongst lower income households is
still not doing particularly well, but retail spending on pretty
(31:03):
much anything else seems to be cooking along at that
standard four to six percent growth rate that we've been
at all year with no change. Yeah, let's take a
quick break when we come back. Yeah, we're going to
cover this piece, but not for the reason you think.
It's the Wall Street Journal analyzing five thousand earning calls
(31:24):
to figure out what CEOs think about tariffs. We'll discuss
that when we return.
Speaker 1 (31:31):
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Speaker 2 (32:08):
Piece in the Wall Street Journal answering the question that
everyone wants to know, do CEOs actually care about tariffs?
The study that no one wanted. So here's the thing. Okay,
I'm gonna make my view very very simple. CEOs. The
(32:33):
Wall Street Journal covered. They studied whether or not CEOs
were talking about tariffs positively or negatively on their phone calls,
on their on their earnings calls. Guys, if you know
it's going to antagonize the Trump administration to talk about
tariffs on your earnings calls, you are not going to
talk about them on your earnings calls.
Speaker 3 (32:54):
These are public, These are not private earnings calls between
you and the Wall Street Journey.
Speaker 2 (32:59):
Right like the Amazon earlier this year when in a
span of a morning they didn't about face on whether
they were gonna slap a tariff's urcharge.
Speaker 3 (33:06):
Remember that, Remember that they're gonna publish it right on
Amazon dot com when you went to buy an item.
This is the It was not very long time.
Speaker 2 (33:14):
So I think that this study is worthless because even
if corporate CEOs are, you know, thinking or actually making
changes as a result of tariffs to their business, they're
not going to go out and tell you directly on
their conference call. They'll just figure out ways to make
it happen under the surface, and it will happen. So
I think that that's that's my view on this. I
(33:34):
don't know where you were gonna land.
Speaker 3 (33:36):
I found it completely useless because I mean, once again,
the Wall Street Journal has a tendency to put together
some really useless charts. And you have another one here
the share of Ernie's calls addressing tariffs, in which executives
discuss tariff risks and it's a percentage, and they have
these different like just useless to me. I think the
(33:56):
big picture, the only thing that I can draw from,
you know, conclusions about how CEOs feel about tariffs. And
this does not come from the Wall Street Journal. It's
just the general consensus that the journal agrees with is
that CEOs were deathly afraid of tariffs in April on
Liberation Day and are a lot less concerned about it today.
Speaker 2 (34:18):
Well, and look, here's the thing that I'll say about this.
What matters for anything in the economy is the rate
of change from where you were prior. Tariffs, in my opinion,
are not a huge factor in the economy in twenty
twenty six, either way, whether upeld by the Supreme Court, rejected,
or anything in between. And the reason why is because
(34:41):
the greatest possible risk is when something is first announced
in that big shift like what we saw in April
of this year, that can't happen again unless, like you see,
like a similar announcement going forward. But once they're in place,
it's not like you just like they don't just wear
on you forever. In that same way, it's okay if
(35:03):
you keep announcing more and more in changing the policy,
yes that's a problem. But ultimately, if tariffs haven't caused
problems in the economy to this point, they're not going to.
Speaker 3 (35:17):
Right, and there could be trade issues in our future.
They don't really involve the rate of tariffs. They involve
whether or not China wants to give us rare earth
materials and whether to what extent we are willing to
give them semiconductors. That's the only trade issue that really matters.
The US.
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Speaker 2 (36:44):
Mike, we got a problem in beef world. Yeah, Tyson
Foods is going to be closing a one of its
largest beef processing plants in Nebraska's in Lexington, Nebraska, and
it employs about three thousand people and slaughter there's almost
five thousand cattle per day.
Speaker 3 (37:02):
Which on the surface seems surprising to me, given the
only thing I'm focused on about beef is that prices
are through the roof. I would think that that allows
Tyson to wide margins and make a little bit more,
But ultimately it looks like this is much more of
a volume business than a price business.
Speaker 2 (37:20):
It is, and this is the issue is that apparently,
and again I'm no expert on the you know, the
beef process. I'm industry chuck.
Speaker 3 (37:30):
To be quite honest, If I knew that I was
going to have to cover a story about Beef's not
many people I would know that I would go to prioritize.
Speaker 2 (37:38):
I'm as close as you can get to an expert
without being an expert. But here's the deal. It's like
any other factory. You have to operate at max volume
for as long as possible because it's a low margin business.
And so when you have shrinking herds for a variety
of reasons, you don't get the volume of cattle going through,
(37:59):
and Ty makes the decision, Hey, we've got to close
this because you can't just scale down to fifty percent
on this and expect it to still work. Even in
another one of their facilities in Emillo, Texas, they are
moving to a one shift per day setup because again,
you can't just tell like eighty percent of the people
to come in for two shifts per day. It doesn't
(38:21):
make money if you're running the equipment in facility round
the cock like that. Instead, you get rid of a shift,
and then if that doesn't work, you close the plant
because that's the only way you can get there on it.
I did happen to have a lovely rib roast over
the weekend that I did, and I don't know if
it came from this facility, but gosh, it was tasty.
(38:42):
Getting the holiday season kicked off a little bit. We're
going to take a quick break. Hour two coming up
in a little bit
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(01:03):
This is the Financial Exchange with Chuck Zada, and Mike Armstrong.
Speaker 2 (01:10):
We've got a shortened trading week this week because of
the Thanksgiving holiday that's going to be taking place on
It's Thursday, right, Mike.
Speaker 3 (01:18):
That's the one.
Speaker 2 (01:18):
That's the one, Yeah, Thanksgiving Thursday, And so we've got
a shortened trading week. Not too much expected in the
way of economic data. Basically nothing expected as far as
earnings that are likely to move the needle. The biggest
company I think that you can look at from an
(01:39):
earnings perspective this week is Deer, who reports on Wednesday.
They're not a tiny company by any means, but with
a market cap of one hundred and thirty billion dollars,
it's not one that really moves the market in general
at this point, which kind of strange to say about Deer.
Speaker 3 (01:55):
What is that like a thirtieth of an Nvidia?
Speaker 4 (01:58):
Uh?
Speaker 2 (01:58):
In that ballpark? Yeah, yeah, it's in that ballpark. I mean, Mike,
here's again, just like we're doing comparisons. It's half the
market cap of Salesforce. Yeah, despite having about the same
revenue that Salesforce does, and both of those companies Salesforce
actually reports next Wednesday, so about a week and a
(02:20):
half out. But in any case, we had quite a
bit of volatility last week in case you miss things
for whatever reason. It was about as choppy of a
week as you can have, not all in one direction.
But I think the star of the show was clearly
what we saw on Thursday post in Vidia, where you know,
(02:43):
we opened up about one and a half percent on
the S and P five hundred rows another half percent,
and then promptly fell three and a half percent from
there to close down more than one and a half percent,
only the fourth time in the last thirty two years
that we have seen such a move, and I think
it absolutely it's just kind of what markets are trying
to navigate right now, which is, hey, we've got concerns about,
(03:07):
you know, is there an AI bubble or not? We
don't know. We've got concerns about is there a private
credit bubble or not? We don't know. And we've got
concerns about the labor market. Is it going to continue
to slow or not? We don't know. And the market
was trying to reckon with all these things over the
past five trading days.
Speaker 3 (03:25):
Yeah, so historic volatility on Thursday of last week, Friday,
some recovery this morning, some recovery, although the DOO is
doing weird things because the Dow is a stupid index
that price waits things. So Amgen and Honeywell are bringing
down the Dow, which not terribly relevant to the rest
of the market, but they are. The question remains to meet, Chuck.
(03:47):
I mean, every time in the last five years that
we've had stocks sell off to any meaningful degree, you've
had the buy the dip mentality come in and a
bunch of cash backs up that market. And I think
through markets lofts like the one we saw in twenty
twenty five back in April. I think of the one
certainly during COVID in twenty twenty, and to a slightly
(04:08):
lesser degree, the one in twenty twenty two as well
twenty two.
Speaker 2 (04:10):
I don't think that by the dip reflex. Really it
didn't kicked in the same way.
Speaker 3 (04:14):
No people did re enter equities, but it wasn't because
they got cheaper. It was largely because the inflation concerns
that we were seeing started to dissipate and a new
narrative around AI took over. But still we have not
had that prolonged negative sentiment play out, and plenty of
people are asking if this is the time that we
(04:36):
will if the narrative is shifting now around what can
make this economy and market keep chugging along.
Speaker 2 (04:41):
So these are questions that are not going to be
answered this week. Unfortunately. If if you are looking for
the market to give a resounding hey, this is a
problem or this is not. Thanksgiving week twenty twenty five
is not where these are going to be answered. I
think the labor market questions are going to play out
(05:03):
over the next three to six months. I think the
private credit questions are going to play out over the
next year, and I think the AI data center ones
are going to play out over the next twenty four months. Unfortunately,
in the world of instant gratification, we need to know
(05:24):
whether the sixty point up move in the S and
P this morning means anything or not. And that's just
not in the cards. It's just not something that we're
going to be able to tell you. After all, if
the one hundred and ten point or one hundred and
three point down move on the S and P meant
something on Thursday, well it's been invalidated by the fact
(05:45):
that the market has retraced all of those losses in
the last two sessions now, but we still have a
ton of intra day volatility. I mean, I'm seeing half
a percent moves on the S ANDP every ten to
fifteen minutes. That's not really a healthy market environment at
the moment. So what I will tell you that the
market is actively trying to sort these things out, but
(06:07):
we're not going to actually know what's going on with
them in the actual economy for an extended period of time,
which is disappointing. If you want, you know, if you
need your answer now, you're not gonna get that. We
could do other things now, you know, we still have
some other stuff that we can talk about for this week,
and I think a good place to start is on
(06:28):
that AI boom, because even though I may, even though
I will admit to having some skepticism, I think is
the right word as to whether or not this will
pay off the way it's being priced right now. Sometimes
I think we go a little bit too far where
(06:50):
it's like, you know, people are talking, hey, like there's
too much AI spending going on right now, and it's
not good for the US economy. No, it's really good
for the US economy. This AI spending is going on
What potentially could be bad for it is if it
turns out there's too much and there's some stuff that
has to get sorted out during a few years. But
(07:11):
the amount of spending going into AI right now is
unquestionably good for the US economy at this particular point
in time.
Speaker 3 (07:19):
Yeah, there's a New York Times piece out this morning,
and the headline of it just really bothers me. So
the headline the AI boom is driving the economy. What
happens if it falters, Well, it falters, it all falls apart.
You can't just it's not useful to just throw out
that possibility, right, Like, what are the circumstances under which
(07:42):
the AI boom starts to be called under further scrutiny
and starts to fall apart and that spending starts to
dry up. I think we can all think of a
few of them, but just painting a picture of well,
what if the spending on AI suddenly disappears. Frankly, that's
not going to happen. It's not going to just disappear.
It could be valued differently, it could come in less
(08:03):
than is currently anticipated, and in all of those cases
it spells different scenarios but I find the more frequent
now conversation about, oh, well, you know, if it weren't
for AI, this economy would be falling apart. Yeah, that's true,
but we do have artificial intelligence technology companies spending billions,
(08:24):
committing to trillions of dollars worth of spending. And so
you have to take the current status quo and kind
of extrapolate out what it might mean under different scenarios,
because there are some in which it continues for several years.
Speaker 2 (08:35):
And I think the other thing to remember is that
there is going to be something that everyone in the
world considers good that comes out of this a eye bubble,
despite all of the bad that I think is coming
out of it as well. And trust me, like every
day now you read you know about some of the
stuff that these systems spit out to people that is
(08:57):
just quite honestly pretty horrible in terms of, you know,
the lack of guardrails on it. But I also do
think there are some real positives that are going to
come from it. Much as hey, despite the fact that
you know, at least once a week now I make
the joke of, hey, we should just turn the Internet off,
and you know, not turn it back on. I still
believe that overall the Internet is a force four good
(09:20):
in the world. It's just well, it's got some crap
that goes along with it. So the problem that you
see with this AI spend right now, in my opinion,
is just that everyone's being priced as a winner. If
you use AI, you're being priced as a winner. If
you make AI programs you're being priced as a winner.
If you make the chips, you're being priced as a winner.
(09:42):
And as we've seen through basically every boom and bust
cycle in history, not everyone wins. There are some losers there.
And I say that in like the nicest way possible,
not like, oh, you're a loser, but no. I mean, look,
you develop railroads and there's you know, too much development there,
and some of them go out of business. Radio, you know,
(10:04):
kicks off and everyone in their grandmother starts, you know,
a radio station, and a bunch of them go out
of business. In the nineteen twenties, and you know, the
tech bubble, we can obviously wax poetic about pets dot
com and you know, the Patriots were originally going to
play at CMGI field before everyone was like, wait, who's
CMGI do you guys have any revenue, how are you
gonna pay for the name on the stadium? This is
(10:25):
going to have some losers as well. We just don't
know who they are yet, and it's gonna take a
little bit of time.
Speaker 3 (10:31):
To get there to that point about everyone being priced
as a winner. We've focused on Oracle a lot of
the last time.
Speaker 2 (10:36):
We're starting to see a little bit of a shakeout there, maybe,
but it's just based on today's.
Speaker 3 (10:39):
Information to that point. Even today, with the sell off
at Oracle is seen right, their stock rows from to
thirty to three hundred and then fell back down to
that two thirty level, still trading at a price earnings
ratio in the mid forties.
Speaker 2 (10:54):
Yep, yep.
Speaker 3 (10:56):
So yes, you have a lot of winners still being
priced in.
Speaker 2 (11:00):
Make a quick break when we return. Do we want
to talk about like whether the Fed cares about AI
or not?
Speaker 3 (11:08):
Yeah, we can talk about whether they do and whether
they should.
Speaker 2 (11:11):
Good. I think that's a great idea, Whether the Fed
cares about AI? Should they care?
Speaker 1 (11:16):
Right after this, this is your home for the most
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Speaker 2 (12:51):
The feed is fixated on AI but not ready to
make a Greenspan size bet. What does that mean?
Speaker 3 (12:58):
Michael So In the mid to late nineties, the FED
was trying to decide what to do with monetary policy
and effectively Alan Greenspan, with some disagreement from the rest
of the Federal Reserve, decided that, Hey, we think we
can keep rates lower in spite of a really rapidly
growing economy. And the reason for it is we're going
(13:19):
to see productivity growth, so, you know, effectively the pace
at which the economy is growing can be justified and
we'll be able to continue to see that growth without
tremendous inflation because we won't need to pay you know,
six hundred thousand more workers to do these jobs. The
Internet is going to lead to productivity, and it's going
(13:40):
to lead to, you know, justifying the increase in economic
activity with fewer working hours, and so basically made a
bed on Hey, we're not going to see inflation as
a result of that boom period and kind of worked.
I mean, there were certainly some ramifications of all that
low interest rates might have contributed to the dot com bust,
(14:04):
that might have contributed later to the Great Financial Crisis.
But you know, he was right in so far as
we did not have backbreaking inflation like the nineteen seventies.
Speaker 2 (14:15):
I think the part that's challenging to me is like
you talk to most people on most people in most industries,
and here's what you generally hear. If it's a blue
collar industry, you know, if you're working with your hands,
(14:39):
what you hear is that's not relevant at all to
my job right now. It's not affecting most blue collar
jobs at this point, I think is fair sure, at
least most employees, like maybe managers might be thinking about it, yep,
But most employees that are you know, plumber's, electricians, carpenters
like that, it's not impacting them. If you talk to
(15:02):
the vast majority of office workers outside of the coding field,
they'll tell you some variation of this. My boss has
instructed me that we have to use AI on a
regular basis, and so I'm doing so, but I'm not
sure how much more productive it's actually making me.
Speaker 3 (15:19):
Right now, I tend to agree with a few industry exceptions.
Speaker 2 (15:23):
Coding's the big one, where like you're seeing some real
push on that side, and everyone I talked to in
the tech space is like, yeah, this is gonna you know,
do the vast majority of coding work in short order.
The other ones that I think you hear about it
in the legal industry doing a lot of document review
and stuff like that, and then occasionally like publishing like
(15:44):
fraudulent legal briefs as a result of that and making
stuff up, which.
Speaker 3 (15:48):
You saw in Australia with that famous attorney.
Speaker 2 (15:50):
Yeah, which is kind of funny. So like, there's some places,
but I think the big thing is you talk to
the vast majority of workers and they're not telling you
about some productivity miracle that they're seeing from AI. It
doesn't mean we're not going to see it. Because remember
the Google's latest Gemini release that just came out now
(16:13):
is one of the first ones, and it's one of
the ones that people were talking about as being impressive.
It's one of the first major releases on some of
the new silicon from in videos. It's one of the
first things that you know, Blackwell has helped to develop.
And when you get those next generation of chips, maybe
you see further improvements and things like that. So just
because we're not seeing it today, I'm not going to say, oh,
(16:35):
it's never going to happen. That would be like looking
at pets dot Com in ninety seven and being like, yeah,
this people buying all their pet food on the internet. No,
not gonna happen when now we know that you know,
Chewy and Amazon and all these things are things.
Speaker 3 (16:48):
So let's forget about the bet on productivity for a
moment here, like and just admit that we don't know
if it's going to lead to massively more productivity, if
it's going to be a bigger productivity revolution than the Internet.
I don't know what's different about the US fiscal situation
this time compared to the mid nineties to justify you know,
(17:09):
higher versus lower interest rates. That that, to me is
a more interesting question because the fiscal situation of the
US is well, frankly, it's unrecognizable compared to the nineteen nineties.
Right we were running surpluses from the budget during the
nineteen nineties, we had a you know, US deficit, a
US debt stack that was fractions of what it is now,
(17:30):
even though it was considered to be too big even
back then. It puts US in a very different position.
And by the way, our population growth is a fraction
of what it was back in the nineteen nineties.
Speaker 2 (17:41):
So I think that ultimately, like you try to sort through,
you know, whether the FED can and this even before
you get into things like trade and restoring and all
this stuff. And where I tend to get to on
AI and robotics as well, is if the actual technology
(18:05):
works the way people think it can, it has the
potential to be hugely deflationary. And deflationary is not a
good thing. It's different from what we call disinflationary.
Speaker 3 (18:19):
Yeah, if nobody's bringing home income because of robotics and AI,
then prices are going to go down because nobody can
afford anything.
Speaker 2 (18:25):
Correct. When we talk about you know, what we want
to see, it's an increase in standard of living through
income's relative to cost growing. That's what you like to see.
If robots come in and replace all of our plumbers,
Carpenter's electricians, and all of our programmers and half of
(18:46):
our you know MRI, you know, radiologists and you know
this and that. Okay, Like that's kind of a problem
because all of that income goes away and we're not
sure how to replace that. Like, that's a huge demand problem.
You then have in the US economy. The thing people
are hoping for is, hey, this can make us more productive,
(19:09):
so it's cheaper to do these things, but we maintain
our jobs and our standard of living goes up because
the cost of everything becomes cheaper, which, by the.
Speaker 3 (19:20):
Way, is how the implementation of every technology in history
so far has worked. We have is it different this time?
With AI?
Speaker 2 (19:27):
Our population is tripled in the last one hundred years.
Quadrupled actually in the last hundred years. We employ ten
percent of the farmers that we used to and we
still feed ourselves. But it happened over one hundred year period.
And anyone who actually talks to, you know, a farmer
now is like, Wow, your job's still really hard and
you might be underpaid for you know, what you do,
and YadA YadA. So I think this is the challenge
(19:51):
that we try to sort through in this is what
shape does this boom bust potentially take? And the Fed
in US. I have no idea yet. Still quick break here.
Wall Street Watch is next.
Speaker 1 (20:10):
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 markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:32):
Oh after last week's wild ride, markets are beginning this
holiday shortened trading week in positive territory as traders await
or economic data releases, including the Producer Price Index and
retail sales, among others. Right now, the Dow is up
about a third of a percent, or one and forty
nine points. S and P five hundred is up just
(20:54):
over one percent or seventy points. Hired NASDAC rallying one
point nine percent or four hundred and nineteen points. Hire
Russell two thousand also up just over one percent. Ten
year Treasure real flat at four point zero five four
percent to Incrude oil down modestly, trading at fifty seven
dollars and ninety six cents a barrel. Tesla CEO Elon
(21:16):
Musk posted to x that the company has started work
on the next generation of artificial intelligence chips to be
used in cars in data centers. Tesla stock is jumping
six percent on that post, sticking with AI, where Alphabet
stock is rallying nearly six percent following glowing reviews of
its recently launched Gemini three AI model. Meanwhile, Ali bob
(21:40):
A stock is rising about five percent after the company
announced its AI app Quinn, had ten million downloads within
its first week of launching. Elsewhere, Novo nordes thinking about
seven percent after the pharmaceutical company said its highly anticipated
trial for Alzheimer's disease failed to meet its main goal.
(22:01):
Over the weekend, Wicked for Good at an impressive box
office debut, where ticket sales totaled about one hundred and
fifty million dollars, which would mark one of the biggest
domestic debuts this year. However, shares in Universal Pictures owner
Comcast are down just over one percent, and struggling retailer
Coles has named Michael Bender as its new CEO, marking
(22:23):
the third CEO that the department store has had in
the last three years. Bender has been serving as the
company's interim CEO since May. Colestock is down modestly so
far today. I'm Tucker Silva and that is Wall Street Watch.
Speaker 2 (22:38):
All right. So, one of the things that was one
of the pieces of information released last week by the
Bureau of Labor Statistics is that the October CPI caput
it will not exist in a full final form. This
is the first time that we have seen this since
we have had instruments avail that basically are built to
(23:03):
track the CPI in investment vehicles. Think about treasury bonds
that are indexed for inflation TIPS bonds as they're more
commonly referred to Treasury inflation protected securities. So the question
that people ask is, okay, like, how does this actually
work on something like that or in other areas of
(23:23):
the market where you need a reading from the October
CPI in order to be able to produce a result.
And the answer is that the contracts for these have
different covenants in them requiring fallback data to be used
in order to actually provide some kind of reading for
(23:45):
the value of the instrument. So, as an example for TIPS,
an this is according to like again the guidelines for
how TIPS work, you have to use a synthetic number
quote based on the last available twelve month change in
the CPI. So in this case, you would use CPI
(24:06):
from September of twenty four to September of twenty five.
But then if you go to the inflation derivatives market,
they have a different fallback that they use that instead
uses swap based numbers in order to provide their fallback
from and officially released CPI. So what you end up
(24:27):
with here is that you get a divergence in payouts
depending on the fallback mechanism that is used. That diverges
to the tune of about zero point two percent over
the last year as a result of this. So when
we talk about the impact of not getting an October CPI,
(24:47):
look ultimately like, I don't think anyone wakes up and
looks at their bank statement in the morning and then
he gets the CPI and says, oh, inflation wasn't as
bad last month as I thought. No, Like, you spent
the money you spent, and that's how it is. So
these are some of the ways that this actually creeps
into market functioning and how you can see, you know,
some funky things that might be there when you're trying
(25:09):
to figure out some of these items in markets.
Speaker 3 (25:13):
I think what this comes back to for me, Chuck
is over the last one hundred years, there has been
a tremendous amount of trust built for the US financial
system as a whole. And I know that sounds kind
of strange coming from people because you know, I probably
listen like I don't trust bankers on Wall Street.
Speaker 2 (25:33):
That's not what I write.
Speaker 3 (25:34):
What I mean is that internationally people settle trade in
US dollars when they trade with other countries. They want
to use US dollars because they know that it is
the most stable currency and you know, capital system out there,
and one month of missing CPI does nothing to damage that. No,
But when we talk about why you know, investors don't
(25:57):
settle funds in Chinese you on, for example, it's because
because you don't trust the data that backs up the
financial system. And again, like I said, one missing inflation
read doesn't do anything to damage that reputation. But potential
changes to how CPI gets calculated, if you have you know,
people that are someday messing with the data or saying, hey,
(26:20):
we don't want to release it on a monthly basis anymore,
those are the things that we deem really concerning because
any drawback of trust from the US financial system, and
you know, the data that frankly sometimes seems pretty unimportant,
like monthly CPI reads, actually is really important to the
functioning of the overall US financial system, which we all
(26:41):
as Americans benefit from dramatically.
Speaker 2 (26:44):
Yeah, this, as you said, like, this isn't going to
cause anyone to rethink that type of investment, but it
is something where if you start seeing more and more
of these pockets that pick up, eventually you get to
a point where you know, and again there needs to
be a lot more like we are. We're nowhere near
(27:04):
this right now, but eventually you get to a point where,
you know, a pension fund that's you know overseas says, yeah,
we need to rethink our capital allocation just because there's
a material risk related to the quality or quantity of
data being provided on instruments X, Y, and z. And
that's where it starts to matter. This won't, but just
(27:28):
give you an example. He Look, let's say that you're
an institutional investor in wherever, Like let's even say you're
an institutional investor in the United States, right and you
have an allocation to tips in your portfolio, and if
you miss this CPI reading once you say, whatever, it's
not a big deal. It happens, you know, every month,
and as long as we have data going forward, it's fine.
(27:51):
If long shut downs and missing CPI data become the norm,
then institutions may say, look, we buy these investments in
order to hedge against inflation in our bond portfolio. If
the data is not being provided such that they are
not doing that hedging, we are not going to buy them.
(28:12):
And then the US government has a funding problem related
to now you've got to change the mix of your
securities that you issue. You issue fewer tips and more
conventional bonds, and maybe the yield rises as a result
of that. So again one off. Quite honestly, I'll go
far enough to say it doesn't matter, agreed, But if
(28:32):
this becomes something that's happening once a year, which I
don't think we have evidence of that, but if it
were to, it starts to become kind of problematic. If
you get to a frequency like that, I'm going to
wait for that to happen before I start to say,
you know, this is a problem, because, quite honestly, if
it's just once and doesn't happen again, it's a non factored.
(28:57):
Americans are on a year end shopping spree. I've seen
so many divergent stories on the chuck.
Speaker 3 (29:03):
This is typical. So every year around Halloween, a bunch
of companies go out there and start talking to consumers,
and what they ask them is, hey, are you planning
on spending as much as you did last year, more
than last year or less than last year on the
holiday season? Sure, and universally everyone says, oh, I'm going
to pull back my spending because you know, that credit
card bill that I had to pay off was really painful.
(29:25):
And then you ask them again in mid November or
late November or early December, and it's like, oh, yeah,
we are spending like crazy. We are have been at TJ,
you know, We've been at Home Goods and TJ Max
every night for the last two weeks. And I'm definitely
going to all the Black Friday sales. So yeah, this
(29:45):
is not unique. This is typical. Every single year we
deal with something. And by the way, I'm not saying
that every retailer out there is going to have a
great quarter. There will be winners and losers. But every
time I read one of those stories like a corrugated
box show, mients look bad or consumers are saying that
they're going to pull back on their spending. I usually
(30:06):
just kind of ignore it and say, let's take a
look at it in January, because my guess is that
the holiday shopping spending goes up by some two odd
percent compared to last year.
Speaker 2 (30:15):
You know what, I think we can say conclusively at
this point. Sure, any concern related to spending from households
that you know, became any concern that we had because
of what we were seeing in restaurants spending trends, which
are real. There's a problem there. Yep, it's not spilling
over into the rest of retail.
Speaker 3 (30:36):
Doesn't appear too.
Speaker 2 (30:39):
You can't look at, you know, anything out there in
the broad macro picture for retail and say, yeah, this
is the problem. It's basically restaurants are continuing to report
some pretty concerning things. Travel amongst lower income households is
still not doing particularly well, but retail spending on pretty
(31:03):
much anything else seems to be cooking along at that
standard four to six percent growth rate that we've been
at all year with no change. Yeah, let's take a
quick break when we come back. Yeah, we're going to
cover this piece, but not for the reason you think.
It's the Wall Street Journal analyzing five thousand earning calls
(31:24):
to figure out what CEOs think about tariffs. We'll discuss
that when we return.
Speaker 1 (31:31):
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(31:51):
everything you might have missed. This is the Financial Exchange
Radio Network.
Speaker 2 (32:08):
Piece in the Wall Street Journal answering the question that
everyone wants to know, do CEOs actually care about tariffs?
The study that no one wanted. So here's the thing. Okay,
I'm gonna make my view very very simple. CEOs. The
(32:33):
Wall Street Journal covered. They studied whether or not CEOs
were talking about tariffs positively or negatively on their phone calls,
on their on their earnings calls. Guys, if you know
it's going to antagonize the Trump administration to talk about
tariffs on your earnings calls, you are not going to
talk about them on your earnings calls.
Speaker 3 (32:54):
These are public, These are not private earnings calls between
you and the Wall Street Journey.
Speaker 2 (32:59):
Right like the Amazon earlier this year when in a
span of a morning they didn't about face on whether
they were gonna slap a tariff's urcharge.
Speaker 3 (33:06):
Remember that, Remember that they're gonna publish it right on
Amazon dot com when you went to buy an item.
This is the It was not very long time.
Speaker 2 (33:14):
So I think that this study is worthless because even
if corporate CEOs are, you know, thinking or actually making
changes as a result of tariffs to their business, they're
not going to go out and tell you directly on
their conference call. They'll just figure out ways to make
it happen under the surface, and it will happen. So
I think that that's that's my view on this. I
(33:34):
don't know where you were gonna land.
Speaker 3 (33:36):
I found it completely useless because I mean, once again,
the Wall Street Journal has a tendency to put together
some really useless charts. And you have another one here
the share of Ernie's calls addressing tariffs, in which executives
discuss tariff risks and it's a percentage, and they have
these different like just useless to me. I think the
(33:56):
big picture, the only thing that I can draw from,
you know, conclusions about how CEOs feel about tariffs. And
this does not come from the Wall Street Journal. It's
just the general consensus that the journal agrees with is
that CEOs were deathly afraid of tariffs in April on
Liberation Day and are a lot less concerned about it today.
Speaker 2 (34:18):
Well, and look, here's the thing that I'll say about this.
What matters for anything in the economy is the rate
of change from where you were prior. Tariffs, in my opinion,
are not a huge factor in the economy in twenty
twenty six, either way, whether upeld by the Supreme Court, rejected,
or anything in between. And the reason why is because
(34:41):
the greatest possible risk is when something is first announced
in that big shift like what we saw in April
of this year, that can't happen again unless, like you see,
like a similar announcement going forward. But once they're in place,
it's not like you just like they don't just wear
on you forever. In that same way, it's okay if
(35:03):
you keep announcing more and more in changing the policy,
yes that's a problem. But ultimately, if tariffs haven't caused
problems in the economy to this point, they're not going to.
Speaker 3 (35:17):
Right, and there could be trade issues in our future.
They don't really involve the rate of tariffs. They involve
whether or not China wants to give us rare earth
materials and whether to what extent we are willing to
give them semiconductors. That's the only trade issue that really matters.
The US.
Speaker 4 (35:33):
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Speaker 2 (36:44):
Mike, we got a problem in beef world. Yeah, Tyson
Foods is going to be closing a one of its
largest beef processing plants in Nebraska's in Lexington, Nebraska, and
it employs about three thousand people and slaughter there's almost
five thousand cattle per day.
Speaker 3 (37:02):
Which on the surface seems surprising to me, given the
only thing I'm focused on about beef is that prices
are through the roof. I would think that that allows
Tyson to wide margins and make a little bit more,
But ultimately it looks like this is much more of
a volume business than a price business.
Speaker 2 (37:20):
It is, and this is the issue is that apparently,
and again I'm no expert on the you know, the
beef process. I'm industry chuck.
Speaker 3 (37:30):
To be quite honest, If I knew that I was
going to have to cover a story about Beef's not
many people I would know that I would go to prioritize.
Speaker 2 (37:38):
I'm as close as you can get to an expert
without being an expert. But here's the deal. It's like
any other factory. You have to operate at max volume
for as long as possible because it's a low margin business.
And so when you have shrinking herds for a variety
of reasons, you don't get the volume of cattle going through,
(37:59):
and Ty makes the decision, Hey, we've got to close
this because you can't just scale down to fifty percent
on this and expect it to still work. Even in
another one of their facilities in Emillo, Texas, they are
moving to a one shift per day setup because again,
you can't just tell like eighty percent of the people
to come in for two shifts per day. It doesn't
(38:21):
make money if you're running the equipment in facility round
the cock like that. Instead, you get rid of a shift,
and then if that doesn't work, you close the plant
because that's the only way you can get there on it.
I did happen to have a lovely rib roast over
the weekend that I did, and I don't know if
it came from this facility, but gosh, it was tasty.
(38:42):
Getting the holiday season kicked off a little bit. We're
going to take a quick break. Hour two coming up
in a little bit
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