August 15, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss potential Fed chair David Zervos backs aggressive interest rate cuts. What is ahead for the 10-year treasury rate after Fed rate cuts? The US is discussing taking a stake in Intel. SpaceX gets billions from the government. It gives nothing back in taxes. The reason is obvious. Consumers are losing patience with $17 salads. Paul LaMonica, Barron's, joins the show to chat about Otis.
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Speaker 1 (00:00):
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(00:43):
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(01:06):
and Mike Armstraw.
Speaker 2 (01:11):
Chuck, Mike and Ben with you here, and we've got
a modest sell off taking place across the S and
P and Nasdaq, with those two indices down a third
of a percent and half a percent respectively at the moment.
The Dow being spared by the fact that United Health,
which is one of the thirty components in the Dow,
(01:31):
is up twelve percent today, not on any news related
to what the company's actually doing, but just based on
the fact that Berkshire Hathaway, in their quarterly thirteen F
report that they have to file every quarter with the SEC,
announced that they had bought about five million shares of
the company, works out about a third of a percent
of Berkshire's portfolio. But hey, that's good enough for the
(01:53):
stock to rally twelve percent today, and so with it
being one of thirty components in the Dow, now is
flat on the day, up fourteen points, so not too
much movement there. In interest rate world, we've got the
ten year Treasury up seven tenths of a basis point
to four point three percent. Mortgage News Daily currently has
(02:15):
the national average for thirty year fixed rate mortgages at
six point five to six percent, So we've gotten down,
you know, kind of into that mid six range, which
may be providing a little bit of additional support to
the housing sector right now. But it's unclear exactly where
we go from here, and we'll have to see how
mortgage rates and interest rates evolve over the coming weeks
(02:35):
and months.
Speaker 3 (02:36):
Good to know that Warren Buffett and good old nearly
century old investor can still move markets like that, right.
Speaker 2 (02:42):
The thing is, it's probably not even him that made
the decision, most definitely not. He kind of retired, you know. Well, no,
he's effective end of the year, you know, so's he's
still Yeah, but I'm sure, yeah he's What do you
think Warren Buffett does in his free time? Diet coke? No,
he does that during his work time too, Like, what
what does he do in his free time that's different
(03:03):
from his worktime? Like? Do we do we have any
guy's ninety four?
Speaker 3 (03:08):
It's got to be a lot of naps, right, I mean,
let's be honest.
Speaker 2 (03:13):
Maybe maybe Okay, even so I returned to my point,
do you think Warren Buffett has an off switch?
Speaker 1 (03:22):
Like?
Speaker 2 (03:22):
I don't really think he does. I think he just
enjoys the game so much that that's kind of what
he does. You know. It's it's not like some of
these other guys where you hear about, you know, oh
like Jeff Bezos is you know, off on his yacht
in you know this place, and the SAS CEO is
DJing exactly, David Salomon DJ's you know at parties in
New York that probably are you know, mediocre ish, you know,
(03:45):
like you hear these thing You're right.
Speaker 3 (03:46):
Warren Buffet's probably kind of annoying on that front, where
like you want to talk about your recent vacation trip
and his you know, his previous travels to Spain, and
he's instead talking about the time he visited the Central
Bank there and gave them a vice on this that
or the other.
Speaker 2 (04:01):
Right, Or he's like, oh, so you went on a trip,
Oh you stayed in to Marriott. What was the service?
Like how much did he pay? Yeah, you know, did
they clean the room every night or every other night?
You just get the sense there's not really an off
switch with the guy, and maybe there is, maybe like
he secretly is just this bridge player.
Speaker 4 (04:20):
According to The Washington poste avid bridge player playing a
few hours each week. He reads up to five hundred
pages a day, and he also enjoys playing the ukulele.
Speaker 2 (04:30):
I didn't know about the ukulele. That's right, okay, So
ukulelean bridge good. I'm I'm I'm glad we actually hashed
this out because it makes me feel better about myself.
I know that because I'm a bridger ukulele player, but
just knowing that Warren Buffett even takes time off.
Speaker 3 (04:46):
I know that I'm generalizing here, but I mean bridge
is pretty fitting of a ninety.
Speaker 2 (04:51):
Four year old.
Speaker 3 (04:54):
I don't know about the ukulele. I'm having a tougher
time connecting that one to his age. But you know,
of the top ten act tivities you would have had
me guess for someone in his demographics born in nineteen thirty,
the bridge was up there.
Speaker 2 (05:06):
Yeah. You know, I would have liked to see cribbage
on the on the board as well. You know that
that feels like it would have been a good one too.
Gold is up five dollars in ounce to thirty three
eighty eight and twenty cents, and Oil West Text Intermediate
down fifty one cents per barrel to sixty three forty
five last couple of days, we've gotten the names of
(05:28):
some additional potential FED chairs. I'm not really convinced that
many of these are actually in the running. I think
some of them are just you know, putting names out there,
because that's what every administration does. They just put names
out there to kind of hide that, hey, they've probably
already made a decision, you know, or at least narrowed
things down to a short list. This is what you
do in all of these, you know, decisions. It's just
(05:49):
kind of how it works. One of the people that
is reportedly under consideration is David Zervos, who is the
chief market strategist at Jeffreys. If if you google him,
you'll get at me like, this guy is the chief
market strategist. But yeah, he is, and he's generally a
pretty sharp guy. He is also now, you know, again
(06:10):
in the running for this talking about, yeah, we need
to you know, potentially be going forward with some very
rapid interest rate cuts in the fields of what we're
seeing in the economy. Because hey, if you're campaigning to
the president who makes the decision, he is saying I
want lower interest rates, and so you've got to say
I want lower interest rates too. The piece that's going
(06:32):
to be interesting in all of this is whoever does
end up getting in, how do they end up actually
enacting policy, because we've we've talked about this with Scott Besson.
Just as an example, Bessont last year was very very
critical of Treasury Secretary Janet Yellen for issuing too much
short term debt and not enough long term debt. Besson
gets into the job, and what does he do continues
(06:53):
the exact same mix that Yellen had been going through,
because ultimately, when faced with actually making policy, he realized, Okay,
this is you know, kind of where things are, and
this is what I need to do. So I'm not
really surprised that Zervos is saying this, because if you
want the job, you've got to say you want lower
interest rates. But ultimately I'm not sure that zerv is
(07:15):
really a serious candidate for this. I still think it's
one of the Kevins most likely, uh, with Waller or
Besent kind of as you know, two A and two
B as as the candidates that are out there.
Speaker 3 (07:30):
Seems that way to me, although you'd keep having sources
floating that Waller is the top contender, which I just
I kind of doubt. Here's the thing about a lot
of reporting over the last week though, saying Waller is
the top contender.
Speaker 2 (07:42):
Here's here's the case for Waller that makes him a
slam dunk if you pick him, in my opinion. The
first is he's already been appointed by President Trump. Trump
appointed him in twenty eighteen or nineteen, I forget the
exact year. So the two of them know each other.
They've already gone through this process once. Say the same
thing about J Powell. You could what even then, even
in his first term, President Trump was not a huge J.
(08:04):
Powell fan publicly, you know, Like, so you can say
that Waller arguably has been the most spot on in
this business cycle for the last five years. He has
nailed every turn and has gotten every single thing right.
And I believe Waller when when he says, like, with
(08:24):
with conviction, we need to be cutting rates now, because
he's got the track record recently from the from a
position on the inside, yep. And so I look at it,
and he's the pick where you could say, look, he's
already been confirmed once, he has the good track record,
and he's been you know, appointed by Trump. They have
a relationship, like it makes almost too much sense. The
(08:48):
counter to it is, I think the president really likes
Kevin Hassett and you know has to.
Speaker 3 (08:54):
I also don't think Waller is going to bend in
the same way others might can, or at least in
the same way that Mike. Let's be honest, we have
no idea. Like we we think that we know these people,
we don't know any of them. You know, we get
the stories that come out and this and that, and
(09:15):
you know, five years ago, would you have said, Hey,
j Powell is gonna you know, lead the charge for
FED independence. I have no idea, you know, so like
we don't actually know these people and who believes in
what and who actually is going to act in this way,
and that once you actually get into the position where
you're at the helm of anything, oftentimes most people's behavior
(09:38):
changes a little bit because you've become a little more
risk averse.
Speaker 2 (09:41):
It's just kind of how all of us are wired. Like, yeah,
we all talk a big game when we're you know,
on the outside looking in, and then when we're actually
in the position, it's kind of like, Okay, I better
not screw this up now, you know. It's it's just
kind of how most people are. It's it's the nature
of the beast. So I I don't, you know, pretend
to know how anyone's going to actually act once they're
(10:02):
in those positions. We're gonna have to see because oftentimes
there is a big disconnect between how people speak and
what they actually do. Fair let's take a quick break.
When we return, let's talk about the tenure treasury and specifically, Hey,
if the Fed does start cutting interest rates next month,
what does it mean for long term treasury rates?
Speaker 1 (10:25):
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Speaker 4 (11:06):
Time now for trivia on the Financial Exchange During World
War Two, the Germans held an advantage over the Allies
because of coded messages sent via their Enigma machines. British
mathematician Alan Turing eventually broke the code with a machine
he designed. Today's question who portrayed Alan Turing in the
twenty fourteenth film The Imitation Game? Who portrayed Alan Turing
(11:29):
in the twenty fourteenth film The Imitation Game? Be the
fourth person who text us at six one seven three
six two one three eight five with the correct answer,
and you'll win a Financial Exchange Show t shirt. The
fourth correct response will be our winner. See complete contest
rules at Financial Exchange Show dot com.
Speaker 2 (11:47):
Piece and barons, What's ahead for the ten year treasury
rate after the FED cuts? The answer is no, one knows.
Speaker 3 (11:55):
It's it's well, but they don't know because it's actually
like fifty fifteen.
Speaker 2 (12:00):
Yeah, we've had much. Interesting when you look at FED
cutting cycles, there have been some in which you have
seen the tenure treasury slide to lower interest rates during
those cutting cycles. There are others where the tenure treasury
has moved up during those cutting cycles, and you don't
know which environment you are in until after the fact.
(12:21):
And it's again all of this is based on the
idea of if you think of the tenure treasury as
a series of short term interest rate bets that can
evolve in different ways. So, as an example, after the
Great Recession, during the Great Recession, when the FED was
cutting tenyere treasury rate went down significantly. And the reason
(12:43):
why was because in the post Great Recession era, the
expectation and eventual outcome was that growth and inflation were
dramatically lower in that post recession period. And so it's
no surprise that the ten year treasury if you look
at how the rate evolved during that time, uh, you know,
(13:04):
November of two thousand and seven, about a year before
the Great Recession ten years at three nine seven. By
the time you got to you know, October of twenty ten,
it was at two six three and then one five
to one by July of twenty twelve. On the other hand,
if you look just in recent history just a year ago,
in fact, Fed started cutting rates last September, the ten
(13:28):
year treasury from September through early January went from three
six six to four seven nine. So even as the
FED cut rates, the long end of the curve went
in the other direction, the reason being it became apparent
that the US was not going to go into recession
and that growth and or inflation would stay higher for longer,
and so the ten year treasury saw its rate rise
(13:51):
in that case.
Speaker 3 (13:52):
So the important lesson here is very simple. Uh, if
the Fed does cut rates later this fall, which most
investors believe they will, you got about a fifty to fifty.
Speaker 2 (14:01):
Chance of mortgage rates coming down. Coin flip. It's a
coin flip.
Speaker 3 (14:05):
Now if they end up cutting and we have a
written something that looks like a recession at that point
in time, which would be somewhat surprising for that to
develop between now and September. But in times of you know,
FED rate cuts during a recession, yeah, long term rates
tend to come down to when they cut in a
relatively strong economy, which again you don't know until after,
(14:29):
but when they do, it's fifty to fifty as to
what's going to happen with those longer term rates.
Speaker 2 (14:33):
So do not bank on it.
Speaker 3 (14:36):
Bank on your savings rates coming down, do not bank
on those mortgage rates coming down.
Speaker 2 (14:41):
Yeah. Fair, Yeah, I think that's fair.
Speaker 3 (14:45):
I want to talk Intel because their stock's moving some
twenty odd percent last time I checked.
Speaker 2 (14:50):
Yeah, let's talk a little bit about Intel here. So
was this was this yesterday? Hold on what? Okay?
Speaker 3 (14:58):
Yeah, sorry, I moved to twenty percent yesterday. Yes, yeah,
it moved.
Speaker 2 (15:01):
Yeah, but like twelve percent during the day in like
eight percent after hours, I think it was. So here's
the deal the with Intel. It apparently is at a
point now where the US government is considering taking a
stake in the company. Okay, So let's let's start there.
(15:25):
And I mean, do we have.
Speaker 3 (15:28):
History here on our side of other cases where private
company or publicly traded companies have had stakes taken in
them by the US government.
Speaker 2 (15:37):
Generally not unless there's something really wrong, right, you know.
I think GM, after the uh Ford, Chrysler, Bank of
America Chrysis, like, they didn't have stakes taken they just
had money given to them. Yeah, I guess you know,
GM was the one that was like placed into federal
receivership basically owned by the US government. Yeah. So look,
(16:00):
I think that when you look at this, there are
two questions that you need to ask on this. The
first one is the one that I don't have the
answer for, which.
Speaker 3 (16:10):
Is why I think I can maybe come up with
a reason why. The reason why, I guess would be
if for some reason you get cut off from Taiwan,
you need a successful Intel.
Speaker 2 (16:29):
Why not to like be you know, a three year old?
But why yeah too?
Speaker 3 (16:37):
If you cannot have Taiwan Semi or somebody else developing
chips in your home country, then who else is going
to do it? If you cannot get your supply of
semis out of Taiwan, then you want a domestic chip
manufacturing company here?
Speaker 2 (16:52):
Why does it have to be Intel? And I guess
what I'm asking is Good has facilities in the US? Yep,
Samsung semiconductor facilities in the US. LG has facilities in
the US.
Speaker 3 (17:04):
Well, clearly, I think the answer is none of them
are American companies. Okay, why does that matter the facilities
are in the US. I don't have an answer. Yeah,
I don't have an answer. I suppose in theory maybe
it's Hey, if I, you know, in wartime, tried to
take control of those facilities as an emergency power, would
I have the the intellectual capacity to be actually to
(17:29):
run them properly?
Speaker 1 (17:31):
Well?
Speaker 2 (17:31):
Sure you have the workers that work there.
Speaker 1 (17:32):
Yeah?
Speaker 2 (17:33):
Again, you know, I don't know. I guess what I'm
getting at is if the US really believes that semiconductors
are that important which I can buy, Like, I'm someone
who's talked about this quite a bit, and I want
to have a certain amount of domestic production of them
for purposes of whether it's military or civilian. You like,
you can make a national security argument on all of this. Yep.
(17:58):
Why is the US owning a steak in Intel the
best way to get there?
Speaker 3 (18:03):
I'm not sure. And you know, clearly the Biden administration
had their own ideas about this. They packed passed the
Chips Act with bipartisan support in Congress, and it did
not involve taking a steak in any publicly traded company.
Speaker 2 (18:16):
And can we stay right there for a second. Yeah,
What would the response have been if the Biden administration
said we're going to take a ten percent stake in
Intel and the government's gonna help run it.
Speaker 5 (18:29):
Uh?
Speaker 2 (18:29):
The answer would have been no, thank you? Right, excuse me, Like,
we're not gonna do this Like that would have been
the answer. No, that wouldn't have It would have been
I think much stronger than that. There are two places
that I get to on this. There's a completely justifiable
reason why the US government wants to have a guaranteed
supply of semiconductors. There's also a reason why you might
(18:50):
even want to say, look, maybe the US government should
produce some of its own semiconductors in order to take
it out of you know, private sector hands for government purpose.
Is like, there's a case to be made on that
side of things. This you kind of look at and
you're like, what are we getting here? Like what are
we actually like? What are we trying to do here?
(19:11):
And I don't really get to any good answers on it.
Speaker 3 (19:14):
I don't either hasn't happened yet. It's all rumor at
this stage, but yeah, it you do have a tough
time connecting all the dots on why this would be
good for the American public.
Speaker 2 (19:25):
Let's take a quick break. When we return, we've got
the Trivia Answer and Wall Street Watch.
Speaker 1 (19:44):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:03):
That's eleven thirty four and markets are still mixed at
this hour, Dow Jones is up seventy six percent, or
just under two tenths of a percent, The SMP five
hundred is up thirteen points or two tenths of excuse
me down thirteen points, down two tents of percent, and
the Nasdaq is down just under eighty points, or three
(20:23):
tenths of a percent. Target shairs are down one point
five percent after Bank of America downgraded Target to underperform
from neutral and trimmed its price target on the stock.
Target's long term outlook is deteriorating as the company falls
further behind its piers, The bank said. All To Beauty
and Target also agreed to end their partnership. United Health
(20:43):
shares are soaring up twelve and a half percent. The
advance comes after Warren Buffett's Berkshire Hathaway revealed a stake
of five million shares worth about one point six billion dollars.
The big short investor Michael Burry and APPLELUSA Management's David
Tepper also disclosed sizeable stakes in the company. If the
UNH gains hold through the end of the session, it
(21:04):
will mark the stock's best day in five years. Semiconductor
equipment manufacturer Applied Materials is off thirteen percent after the
company's current quarter outlook trailed estimates from analysts. Applied Materials
fiscal third quarter earnings and revenue topped Wall Street expectation.
Intel shares are up four point four percent, adding to
Thursday's seven percent gain. The chip maker jumped after Bloomberg
(21:27):
reported that the Trump administration is in talks to buy
a stake in Intel, which would help fund factories Intel
is building in Ohio. And finally, Hymns and Hers shares
a down one percent following a Bloomberg report that said
the Federal Trade Commission is investigating the company's business practices.
The FDC is reportedly reviewing whether Hymns and Hers makes
it too hard for customers to cancel their subscription. I
(21:50):
am Ben Kitchen and that was Wall Street Watch. And
our trivia question today was who portrayed Alan Turing in
the twenty fourteen film The Imitation Game. That be none
other than Benedict Cumberbatch. Jay and Plimpton is our winner
this week or today, and Jay will be receiving a
Financial Exchange Show t shirt. We play trivia every day
(22:10):
here on the Financial Exchange. See complete contest rules at
Financial Exchange show dot com.
Speaker 3 (22:15):
I think you could pull off some really solid week
long trivia just about people that have the name ben
in them.
Speaker 2 (22:23):
I got it. Yeah, done.
Speaker 4 (22:25):
Yeah, next week we're scrapping more world.
Speaker 2 (22:29):
Famous Benz. Sorry, what about infamous Benz either? All right,
those are my favorite.
Speaker 4 (22:35):
Trivia question for you. What's my favorite Michael Jackson song?
Speaker 2 (22:40):
No, it can't be that well played. Uh So, we
have a piece from market Watch will Powell use Jackson
Hole speech to push back on hopes for a September
rate cut. Honestly, I find this piece boring. I want
instead talk about this one from the New York Times,
specifically talking about the Jackson Hole meeting. M got to
(23:00):
skip the first couple paragraphs and then read a bit.
But first, lodge staff and conference organizers have had to
deal with the bats. A suspected colony of bats recently
took up residents in a block of cabins on the property,
which is run by the Grand Teton Lodge Company. The
bats are thought to have snuck through a small, roughly
half inch hole on the roof of one of the
rooms and through a connected attic space access seven other cabins.
(23:24):
Seven of the eight bats were captured and screened for rabies,
all of which tested negative good, but one was set
free by a guest.
Speaker 3 (23:31):
You're right, that is more interesting than the question as
to whether or not Hill Grants stand in Jackson Hole.
Speaker 2 (23:36):
Imagine J Powell shows up and gets bitten by a
rabid bat? What does that do to like? How you
have to change the timeline of the fed chair? Yeah?
Speaker 3 (23:44):
Well I would you know, hope they can figure that
out a few shots and get that taken care of
right quick.
Speaker 2 (23:51):
This then takes me to this piece that been included
in the stack today from the AP radioactive wasp ness
found at site where you US once made nuclear bombs.
This seems bad. I mean when I think of basically
every comic book in history, they all start with radioactive
(24:15):
wasp nests.
Speaker 3 (24:18):
You know, Chuck, I'm supposed to do an advertisement for
Armstrong Advisor Group next, and I just I don't know
how to work that into radioactive wasps nests.
Speaker 2 (24:27):
Well, it's about legacy planning, isn't it. Yeah? Yeah, it is.
I guess if you're concerned about radioactive wasps, call and
get the Armstrong Advisor Group's free guide on leaving a legacy.
I think, so, oh God, where have we gone?
Speaker 4 (24:45):
This ad was brought to you by Armstrong Advice.
Speaker 3 (24:47):
So we do actually have a guide about leaving a
lasting legacy that has nothing to do with bats, wasps
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Speaker 2 (24:58):
But you just never know how you're gonna go.
Speaker 3 (25:00):
So I'm saying the guide, while not about any of
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(25:20):
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Speaker 1 (25:36):
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 into state planning advisors before making
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Speaker 2 (25:51):
Mike, do we want to talk about fewer Americans moving
expensive salads or smart watches? None?
Speaker 3 (25:57):
I want to talk about SpaceX. Sure, so the New
York Times has a piece SpaceX gets billions from the
government and gives little to nothing back in taxes, and
they somehow wrote five or six pages about the fact that, yeah,
of course they don't.
Speaker 2 (26:12):
They don't make any money.
Speaker 3 (26:14):
They lost money for years and years, have giant losses
on their books, and so therefore they don't pay any
taxes because you pay taxes as a corporation when you
make money. Sure, how did that take seven pages?
Speaker 2 (26:25):
Why is that a thing?
Speaker 1 (26:26):
Like?
Speaker 2 (26:26):
They okay, they're not Why is up said about this?
They're like they're not profitable? Right now? This is fine?
Like you wouldn't expect if if I had no income,
you wouldn't be like, Hey, you didn't earn anything, why
are you paying no taxes? Well, I didn't make any money,
so how could I do that? You know, it's just yeah,
it's lunacy. Plenty of eight, plenty of good reasons. You
(26:47):
set an elon musk. You did pay any sales taxes
this year? Well, I didn't buy anything, like, sorry, Like,
what do you want me to do? Well, you didn't
pay your car registration fee, I walk to work.
Speaker 1 (26:58):
What do you want?
Speaker 2 (26:59):
What do you want for me here? Okay? Sorry, I
can move on. Now, what does you want to talk about?
H Okay? I want to go with seventeen dollars salads? Okay.
So it's talking about how a lot of the expensive
kind of fast casual places Chipotle, Sweet Green, Kava have
(27:19):
been struggling this year, and why is this the Is
this the case if we finally reach the point where
it's just like the prices are too high and people
don't see the value anymore. Is it as I positive yesterday? Hey,
these are places that are typically you know, these restaurants
are typically in places that tend to be a little
bit more democrat leaning right now, and Democrats are reporting
(27:42):
more concerned about the economy, So maybe they're pulling back
on spending in these areas. I don't know. Is it just, Hey,
people are pulling back from restaurants in general, and this
is the first thing that we're seeing here. But ultimately,
you know, I do wonder if there's a point where
people just say, no, I got it. I'm not paying
(28:04):
that for that anymore. It doesn't make sense to me
your thoughts.
Speaker 3 (28:11):
Yeah, I have a tough time blaming it on anything
other than what you just came to, which is, I know,
Kava makes good food, but at eighteen bucks, I'm just gonna.
Speaker 2 (28:21):
Go sit down at a restaurant or I'm gonna cook
it home. I don't know, I did, you know.
Speaker 3 (28:26):
We can blame it on all sorts of other things,
but yeah, people are getting more price sensitive these days
compared to where they were just a few years ago.
And so what seems, with some exceptions, what seems to
be selling right now is value.
Speaker 2 (28:42):
It does. It does, And again I don't know how.
I don't know what the path is for these companies
to change the perception of value. Which it's hard because like,
here's the thing. Let's look at Chipotle, which Chipotle's a
pretty mature franchise at this one, Like Kava and Sweet
Green are still you know, up and coming, they're still
(29:04):
trying to do you know, more rapid expansion. Yeah, Chipotle's
pretty you know, tried and true. Here here's the thing
about Chipotle. They're operating margins right now are seventeen percent
which is pretty darn fat for a restaurant like it's
it's good, it's It's. One of the reasons why the
stock is historically traded, you know, so expensively, is because
it's been expanding quickly and maintaining good margins. But it
(29:29):
does tell you, look that the reason that their prices
are so high is they've got some pretty fat margins there.
I mean, you typically talk to most people in the
food business, whether it's grocery stores or restaurants, and you're
talking somewhere in single digits for margins, right, you know,
that's that's kind of where you normally live. And so
part of this might have to be, Hey, we can't
(29:52):
maintain margins the way that we want to, but then
what does that mean for the stock if you know,
if we have to do that. These are real questions
that are facing these businesses at this particular point in time. Now,
if we look at Sweet Green, which I can't remember
exactly when they ip old, let me take a quick
(30:12):
look here just to refresh myself. Okay, they've been public
for almost four years now, was back in the fall
of twenty one. Sweet Green does not have the same
potential here. Sweet Greens. They're not profitable today. They have
negative free cash flow. Sweet Green cannot say, Okay, we'll
figure this out and create more value by cutting prices
(30:33):
because they would just lose more money then. Yeah, so
they don't have the ability to do that. Kava. When
we talk about them, they went public I think about
a year ago. Their margins are more normal. That seven
percent is their operating margin negative free cash flow. So again,
there's there's only so much room for them to maneuver.
Chipotle might be the best position to get out of
the tailspin that they're in right now, simply because they
(30:56):
have margin that they can work with. These other ones
it's a little bit tougher, and they're gonna have to
really figure this out and play around with some different
levers that they can pull because they can't really do
much on pricing given where their margins are. That's kind
of where we are there to take a quick break
when we return. Paul A Monica from Baron's joins us
(31:17):
after this.
Speaker 1 (31:19):
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Speaker 5 (31:51):
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Speaker 4 (32:09):
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k dot Boston.
Speaker 2 (32:27):
As promised, We're now joined by the one and only
Paulmonica here to talk a little bit about Otis. Paul,
what's going on with OTIS today?
Speaker 1 (32:38):
Yeah?
Speaker 6 (32:38):
OTIS shares are down this year, but the Elevator and
Escalator leader there's some promising signs why the company could
have a decently rising stock price going forward. Spoke to
the CEO recently about why she is opted Mystic after
(33:01):
our recent trip she took to Asia to see customers
in China, South Korea, and India. Those are markets where
there is you know, pretty strong demand, particularly for refurbishing,
you know, the services side of the business, and that's
something that in America as well, a lot of elevators
(33:21):
need to be modernized and as a result of that,
Otis generates a steady you know, income and revenue stream
from all those maintenance costs. So that's something that is
potentially good news for the company, and the stock is
trading at a reasonable valuation and discount to some of
its European peers.
Speaker 2 (33:43):
When we look at Otis, how much of the breakdown
and revenue is you know, new construction installations versus that
maintenance that you mentioned. Do you have any any sense
of what that looks like.
Speaker 6 (33:54):
Yeah, the maintenance side is you know, continuing to grow
pretty rapidly, and I need to look up what the
you know, the most recent numbers were, but yeah, it's
just split between you know, new orders as well as uh,
you know, their services business and maintenance business if you
(34:17):
look right now, Yeah, services, their net sales were up
about six percent in the most recent order. And you
know that is you know three point six billion overall,
you know, in revenue, and the services side of that
business is the line shared. It's two point three billion
(34:38):
of the three point six billion of the overall sales.
So definitely it is a lot of the maintenance side
of the business. That is, you know, increasing their revenue
is supposed to you know, new orders for you know,
new buildings that are being constructed. And what happened.
Speaker 2 (34:55):
Who are the other competitors that even operate in this space,
I don't really know.
Speaker 6 (35:01):
Yeah they are you know, not really you know companies
that are household names in the US. Otis is by
and large the major company. Otis does compete with Schindler
Holding and Cone, which are two of you know, European rivals.
But I think Otis, you know, and especially now in
(35:23):
the past couple of years, because it's a standalone company.
Remember this used to be part of United Technologies UTX,
the you know, big conglomerate that has a large defense business.
But UTX spun off Otis and also carrier the HVAC
Giant into two separate companies, so that otis now is portrayes,
(35:43):
you know, on its own, separate from United Technologies.
Speaker 2 (35:48):
What does this company do to to grow? I guess then,
you know, since the spinoff, they had a good first
couple of years there. But you know, the stocks at
eighty seven bucks to share right now basically the same
place that it was at in August of twenty one,
So it's had four years where the price hasn't really moved.
Is this just kind of a low growth business overall
now or is there anything they can do to kind
of beef things up here? Yeah?
Speaker 6 (36:09):
I mean I think, you know, in some respects, there's
only so much that the company can do because they
are somewhat reliant to you know, a certain extent on
construction around the world. You know, the maintenance side of
the business is something that as long as they're able
to get these steady contracts with customers in office buildings,
(36:31):
residential buildings, you know, retailers, you know, for elevators and
to a lesser extent, escalators, that's something that can help
you know, ju sales. But I think the valuation, it's
you know, trading around twenty two times earnings estimates for
this year. Earnings growth is steady at about ten percent
or so over the next few years, so it's not
(36:52):
trading at an absurdly high valuation given that you have
slow and steady growth. But yeah, make no mistake. If
you want something you know, sexy and exciting, you know,
there's Nvidio, there's Meta, there's mag seven companies.
Speaker 2 (37:05):
Oh, it is not going to be confused with that.
Speaker 6 (37:07):
But this is a solid industrial name in a business
that's you know, not going to be made obsolete by
AI anytime soon. There's there's no such thing as a
chat chept elevator. Last I checked.
Speaker 2 (37:23):
Very good, No, there is not. Paul, appreciate you joining us.
Thanks so much for the time, and I hope you
have a great weekend.
Speaker 6 (37:29):
Thanks a lot, san you guys.
Speaker 2 (37:30):
That is Paul Lamonica talking about Otis Mike any last
items that we haven't gotten to that you want to
touch on today. Yeah.
Speaker 3 (37:39):
A really expensive and highly important attorney in Australia who
charges god knows what and I think refers to himself
as the King or other people referred to him as
the King, had to apologize to a judge because he
or one of his clerks used a bunch of AI
to cite case law that didn't exist, and delayed a
whole bunch of stuff because of bad uses of artificial intelligence.
(38:03):
I'd be really pissed paying for that defense attorney for
god knows the hourly rate, and then getting in trouble
because he used AI.
Speaker 2 (38:09):
I gotta be honest, Like, here's the thing, Like, if
you lie to a court, generally, like it's looked upon
pretty unfavorably. It should be lying. How is this any different?
Like you're making stuff up. It's just you didn't like
do it yourself. Yeah, it's it's kind of infuriating. Quick
break for the entire weekend. We're back on Monday. We
(38:29):
will see you then,
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
not offer any specific financial or investment advice. Please consult
your own financial, tax, and estate planning advisors before making
(00:20):
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Exchange with Chuck Zada and Mike Armstrong, Your exclusive look
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(00:43):
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Financial Exchange is a proud partner of the Disabled American
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heroes by visiting DAV five Doc Boston and making a
donation today. This is the Financial Exchange with Chuck Zadath
(01:06):
and Mike Armstraw.
Speaker 2 (01:11):
Chuck, Mike and Ben with you here, and we've got
a modest sell off taking place across the S and
P and Nasdaq, with those two indices down a third
of a percent and half a percent respectively at the moment.
The Dow being spared by the fact that United Health,
which is one of the thirty components in the Dow,
(01:31):
is up twelve percent today, not on any news related
to what the company's actually doing, but just based on
the fact that Berkshire Hathaway, in their quarterly thirteen F
report that they have to file every quarter with the SEC,
announced that they had bought about five million shares of
the company, works out about a third of a percent
of Berkshire's portfolio. But hey, that's good enough for the
(01:53):
stock to rally twelve percent today, and so with it
being one of thirty components in the Dow, now is
flat on the day, up fourteen points, so not too
much movement there. In interest rate world, we've got the
ten year Treasury up seven tenths of a basis point
to four point three percent. Mortgage News Daily currently has
(02:15):
the national average for thirty year fixed rate mortgages at
six point five to six percent, So we've gotten down,
you know, kind of into that mid six range, which
may be providing a little bit of additional support to
the housing sector right now. But it's unclear exactly where
we go from here, and we'll have to see how
mortgage rates and interest rates evolve over the coming weeks
(02:35):
and months.
Speaker 3 (02:36):
Good to know that Warren Buffett and good old nearly
century old investor can still move markets like that, right.
Speaker 2 (02:42):
The thing is, it's probably not even him that made
the decision, most definitely not. He kind of retired, you know. Well, no,
he's effective end of the year, you know, so's he's
still Yeah, but I'm sure, yeah he's What do you
think Warren Buffett does in his free time? Diet coke? No,
he does that during his work time too, Like, what
what does he do in his free time that's different
(03:03):
from his worktime? Like? Do we do we have any
guy's ninety four?
Speaker 3 (03:08):
It's got to be a lot of naps, right, I mean,
let's be honest.
Speaker 2 (03:13):
Maybe maybe Okay, even so I returned to my point,
do you think Warren Buffett has an off switch?
Speaker 1 (03:22):
Like?
Speaker 2 (03:22):
I don't really think he does. I think he just
enjoys the game so much that that's kind of what
he does. You know. It's it's not like some of
these other guys where you hear about, you know, oh
like Jeff Bezos is you know, off on his yacht
in you know this place, and the SAS CEO is
DJing exactly, David Salomon DJ's you know at parties in
New York that probably are you know, mediocre ish, you know,
(03:45):
like you hear these thing You're right.
Speaker 3 (03:46):
Warren Buffet's probably kind of annoying on that front, where
like you want to talk about your recent vacation trip
and his you know, his previous travels to Spain, and
he's instead talking about the time he visited the Central
Bank there and gave them a vice on this that
or the other.
Speaker 2 (04:01):
Right, Or he's like, oh, so you went on a trip,
Oh you stayed in to Marriott. What was the service?
Like how much did he pay? Yeah, you know, did
they clean the room every night or every other night?
You just get the sense there's not really an off
switch with the guy, and maybe there is, maybe like
he secretly is just this bridge player.
Speaker 4 (04:20):
According to The Washington poste avid bridge player playing a
few hours each week. He reads up to five hundred
pages a day, and he also enjoys playing the ukulele.
Speaker 2 (04:30):
I didn't know about the ukulele. That's right, okay, So
ukulelean bridge good. I'm I'm I'm glad we actually hashed
this out because it makes me feel better about myself.
I know that because I'm a bridger ukulele player, but
just knowing that Warren Buffett even takes time off.
Speaker 3 (04:46):
I know that I'm generalizing here, but I mean bridge
is pretty fitting of a ninety.
Speaker 2 (04:51):
Four year old.
Speaker 3 (04:54):
I don't know about the ukulele. I'm having a tougher
time connecting that one to his age. But you know,
of the top ten act tivities you would have had
me guess for someone in his demographics born in nineteen thirty,
the bridge was up there.
Speaker 2 (05:06):
Yeah. You know, I would have liked to see cribbage
on the on the board as well. You know that
that feels like it would have been a good one too.
Gold is up five dollars in ounce to thirty three
eighty eight and twenty cents, and Oil West Text Intermediate
down fifty one cents per barrel to sixty three forty
five last couple of days, we've gotten the names of
(05:28):
some additional potential FED chairs. I'm not really convinced that
many of these are actually in the running. I think
some of them are just you know, putting names out there,
because that's what every administration does. They just put names
out there to kind of hide that, hey, they've probably
already made a decision, you know, or at least narrowed
things down to a short list. This is what you
do in all of these, you know, decisions. It's just
(05:49):
kind of how it works. One of the people that
is reportedly under consideration is David Zervos, who is the
chief market strategist at Jeffreys. If if you google him,
you'll get at me like, this guy is the chief
market strategist. But yeah, he is, and he's generally a
pretty sharp guy. He is also now, you know, again
(06:10):
in the running for this talking about, yeah, we need
to you know, potentially be going forward with some very
rapid interest rate cuts in the fields of what we're
seeing in the economy. Because hey, if you're campaigning to
the president who makes the decision, he is saying I
want lower interest rates, and so you've got to say
I want lower interest rates too. The piece that's going
(06:32):
to be interesting in all of this is whoever does
end up getting in, how do they end up actually
enacting policy, because we've we've talked about this with Scott Besson.
Just as an example, Bessont last year was very very
critical of Treasury Secretary Janet Yellen for issuing too much
short term debt and not enough long term debt. Besson
gets into the job, and what does he do continues
(06:53):
the exact same mix that Yellen had been going through,
because ultimately, when faced with actually making policy, he realized, Okay,
this is you know, kind of where things are, and
this is what I need to do. So I'm not
really surprised that Zervos is saying this, because if you
want the job, you've got to say you want lower
interest rates. But ultimately I'm not sure that zerv is
(07:15):
really a serious candidate for this. I still think it's
one of the Kevins most likely, uh, with Waller or
Besent kind of as you know, two A and two
B as as the candidates that are out there.
Speaker 3 (07:30):
Seems that way to me, although you'd keep having sources
floating that Waller is the top contender, which I just
I kind of doubt. Here's the thing about a lot
of reporting over the last week though, saying Waller is
the top contender.
Speaker 2 (07:42):
Here's here's the case for Waller that makes him a
slam dunk if you pick him, in my opinion. The
first is he's already been appointed by President Trump. Trump
appointed him in twenty eighteen or nineteen, I forget the
exact year. So the two of them know each other.
They've already gone through this process once. Say the same
thing about J Powell. You could what even then, even
in his first term, President Trump was not a huge J.
(08:04):
Powell fan publicly, you know, Like, so you can say
that Waller arguably has been the most spot on in
this business cycle for the last five years. He has
nailed every turn and has gotten every single thing right.
And I believe Waller when when he says, like, with
(08:24):
with conviction, we need to be cutting rates now, because
he's got the track record recently from the from a
position on the inside, yep. And so I look at it,
and he's the pick where you could say, look, he's
already been confirmed once, he has the good track record,
and he's been you know, appointed by Trump. They have
a relationship, like it makes almost too much sense. The
(08:48):
counter to it is, I think the president really likes
Kevin Hassett and you know has to.
Speaker 3 (08:54):
I also don't think Waller is going to bend in
the same way others might can, or at least in
the same way that Mike. Let's be honest, we have
no idea. Like we we think that we know these people,
we don't know any of them. You know, we get
the stories that come out and this and that, and
(09:15):
you know, five years ago, would you have said, Hey,
j Powell is gonna you know, lead the charge for
FED independence. I have no idea, you know, so like
we don't actually know these people and who believes in
what and who actually is going to act in this way,
and that once you actually get into the position where
you're at the helm of anything, oftentimes most people's behavior
(09:38):
changes a little bit because you've become a little more
risk averse.
Speaker 2 (09:41):
It's just kind of how all of us are wired. Like, yeah,
we all talk a big game when we're you know,
on the outside looking in, and then when we're actually
in the position, it's kind of like, Okay, I better
not screw this up now, you know. It's it's just
kind of how most people are. It's it's the nature
of the beast. So I I don't, you know, pretend
to know how anyone's going to actually act once they're
(10:02):
in those positions. We're gonna have to see because oftentimes
there is a big disconnect between how people speak and
what they actually do. Fair let's take a quick break.
When we return, let's talk about the tenure treasury and specifically, Hey,
if the Fed does start cutting interest rates next month,
what does it mean for long term treasury rates?
Speaker 1 (10:25):
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Speaker 4 (11:06):
Time now for trivia on the Financial Exchange During World
War Two, the Germans held an advantage over the Allies
because of coded messages sent via their Enigma machines. British
mathematician Alan Turing eventually broke the code with a machine
he designed. Today's question who portrayed Alan Turing in the
twenty fourteenth film The Imitation Game? Who portrayed Alan Turing
(11:29):
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Speaker 2 (11:47):
Piece and barons, What's ahead for the ten year treasury
rate after the FED cuts? The answer is no, one knows.
Speaker 3 (11:55):
It's it's well, but they don't know because it's actually
like fifty fifteen.
Speaker 2 (12:00):
Yeah, we've had much. Interesting when you look at FED
cutting cycles, there have been some in which you have
seen the tenure treasury slide to lower interest rates during
those cutting cycles. There are others where the tenure treasury
has moved up during those cutting cycles, and you don't
know which environment you are in until after the fact.
(12:21):
And it's again all of this is based on the
idea of if you think of the tenure treasury as
a series of short term interest rate bets that can
evolve in different ways. So, as an example, after the
Great Recession, during the Great Recession, when the FED was
cutting tenyere treasury rate went down significantly. And the reason
(12:43):
why was because in the post Great Recession era, the
expectation and eventual outcome was that growth and inflation were
dramatically lower in that post recession period. And so it's
no surprise that the ten year treasury if you look
at how the rate evolved during that time, uh, you know,
(13:04):
November of two thousand and seven, about a year before
the Great Recession ten years at three nine seven. By
the time you got to you know, October of twenty ten,
it was at two six three and then one five
to one by July of twenty twelve. On the other hand,
if you look just in recent history just a year ago,
in fact, Fed started cutting rates last September, the ten
(13:28):
year treasury from September through early January went from three
six six to four seven nine. So even as the
FED cut rates, the long end of the curve went
in the other direction, the reason being it became apparent
that the US was not going to go into recession
and that growth and or inflation would stay higher for longer,
and so the ten year treasury saw its rate rise
(13:51):
in that case.
Speaker 3 (13:52):
So the important lesson here is very simple. Uh, if
the Fed does cut rates later this fall, which most
investors believe they will, you got about a fifty to fifty.
Speaker 2 (14:01):
Chance of mortgage rates coming down. Coin flip. It's a
coin flip.
Speaker 3 (14:05):
Now if they end up cutting and we have a
written something that looks like a recession at that point
in time, which would be somewhat surprising for that to
develop between now and September. But in times of you know,
FED rate cuts during a recession, yeah, long term rates
tend to come down to when they cut in a
relatively strong economy, which again you don't know until after,
(14:29):
but when they do, it's fifty to fifty as to
what's going to happen with those longer term rates.
Speaker 2 (14:33):
So do not bank on it.
Speaker 3 (14:36):
Bank on your savings rates coming down, do not bank
on those mortgage rates coming down.
Speaker 2 (14:41):
Yeah. Fair, Yeah, I think that's fair.
Speaker 3 (14:45):
I want to talk Intel because their stock's moving some
twenty odd percent last time I checked.
Speaker 2 (14:50):
Yeah, let's talk a little bit about Intel here. So
was this was this yesterday? Hold on what? Okay?
Speaker 3 (14:58):
Yeah, sorry, I moved to twenty percent yesterday. Yes, yeah,
it moved.
Speaker 2 (15:01):
Yeah, but like twelve percent during the day in like
eight percent after hours, I think it was. So here's
the deal the with Intel. It apparently is at a
point now where the US government is considering taking a
stake in the company. Okay, So let's let's start there.
(15:25):
And I mean, do we have.
Speaker 3 (15:28):
History here on our side of other cases where private
company or publicly traded companies have had stakes taken in
them by the US government.
Speaker 2 (15:37):
Generally not unless there's something really wrong, right, you know.
I think GM, after the uh Ford, Chrysler, Bank of
America Chrysis, like, they didn't have stakes taken they just
had money given to them. Yeah, I guess you know,
GM was the one that was like placed into federal
receivership basically owned by the US government. Yeah. So look,
(16:00):
I think that when you look at this, there are
two questions that you need to ask on this. The
first one is the one that I don't have the
answer for, which.
Speaker 3 (16:10):
Is why I think I can maybe come up with
a reason why. The reason why, I guess would be
if for some reason you get cut off from Taiwan,
you need a successful Intel.
Speaker 2 (16:29):
Why not to like be you know, a three year old?
But why yeah too?
Speaker 3 (16:37):
If you cannot have Taiwan Semi or somebody else developing
chips in your home country, then who else is going
to do it? If you cannot get your supply of
semis out of Taiwan, then you want a domestic chip
manufacturing company here?
Speaker 2 (16:52):
Why does it have to be Intel? And I guess
what I'm asking is Good has facilities in the US? Yep,
Samsung semiconductor facilities in the US. LG has facilities in
the US.
Speaker 3 (17:04):
Well, clearly, I think the answer is none of them
are American companies. Okay, why does that matter the facilities
are in the US. I don't have an answer. Yeah,
I don't have an answer. I suppose in theory maybe
it's Hey, if I, you know, in wartime, tried to
take control of those facilities as an emergency power, would
I have the the intellectual capacity to be actually to
(17:29):
run them properly?
Speaker 1 (17:31):
Well?
Speaker 2 (17:31):
Sure you have the workers that work there.
Speaker 1 (17:32):
Yeah?
Speaker 2 (17:33):
Again, you know, I don't know. I guess what I'm
getting at is if the US really believes that semiconductors
are that important which I can buy, Like, I'm someone
who's talked about this quite a bit, and I want
to have a certain amount of domestic production of them
for purposes of whether it's military or civilian. You like,
you can make a national security argument on all of this. Yep.
(17:58):
Why is the US owning a steak in Intel the
best way to get there?
Speaker 3 (18:03):
I'm not sure. And you know, clearly the Biden administration
had their own ideas about this. They packed passed the
Chips Act with bipartisan support in Congress, and it did
not involve taking a steak in any publicly traded company.
Speaker 2 (18:16):
And can we stay right there for a second. Yeah,
What would the response have been if the Biden administration
said we're going to take a ten percent stake in
Intel and the government's gonna help run it.
Speaker 5 (18:29):
Uh?
Speaker 2 (18:29):
The answer would have been no, thank you? Right, excuse me, Like,
we're not gonna do this Like that would have been
the answer. No, that wouldn't have It would have been
I think much stronger than that. There are two places
that I get to on this. There's a completely justifiable
reason why the US government wants to have a guaranteed
supply of semiconductors. There's also a reason why you might
(18:50):
even want to say, look, maybe the US government should
produce some of its own semiconductors in order to take
it out of you know, private sector hands for government purpose.
Is like, there's a case to be made on that
side of things. This you kind of look at and
you're like, what are we getting here? Like what are
we actually like? What are we trying to do here?
(19:11):
And I don't really get to any good answers on it.
Speaker 3 (19:14):
I don't either hasn't happened yet. It's all rumor at
this stage, but yeah, it you do have a tough
time connecting all the dots on why this would be
good for the American public.
Speaker 2 (19:25):
Let's take a quick break. When we return, we've got
the Trivia Answer and Wall Street Watch.
Speaker 1 (19:44):
Bringing the latest financial news straight to your radio every day.
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street Watch, a complete look at
what's moving market so far today right here on the
Financial Exchange Radio Network.
Speaker 4 (20:03):
That's eleven thirty four and markets are still mixed at
this hour, Dow Jones is up seventy six percent, or
just under two tenths of a percent, The SMP five
hundred is up thirteen points or two tenths of excuse
me down thirteen points, down two tents of percent, and
the Nasdaq is down just under eighty points, or three
(20:23):
tenths of a percent. Target shairs are down one point
five percent after Bank of America downgraded Target to underperform
from neutral and trimmed its price target on the stock.
Target's long term outlook is deteriorating as the company falls
further behind its piers, The bank said. All To Beauty
and Target also agreed to end their partnership. United Health
(20:43):
shares are soaring up twelve and a half percent. The
advance comes after Warren Buffett's Berkshire Hathaway revealed a stake
of five million shares worth about one point six billion dollars.
The big short investor Michael Burry and APPLELUSA Management's David
Tepper also disclosed sizeable stakes in the company. If the
UNH gains hold through the end of the session, it
(21:04):
will mark the stock's best day in five years. Semiconductor
equipment manufacturer Applied Materials is off thirteen percent after the
company's current quarter outlook trailed estimates from analysts. Applied Materials
fiscal third quarter earnings and revenue topped Wall Street expectation.
Intel shares are up four point four percent, adding to
Thursday's seven percent gain. The chip maker jumped after Bloomberg
(21:27):
reported that the Trump administration is in talks to buy
a stake in Intel, which would help fund factories Intel
is building in Ohio. And finally, Hymns and Hers shares
a down one percent following a Bloomberg report that said
the Federal Trade Commission is investigating the company's business practices.
The FDC is reportedly reviewing whether Hymns and Hers makes
it too hard for customers to cancel their subscription. I
(21:50):
am Ben Kitchen and that was Wall Street Watch. And
our trivia question today was who portrayed Alan Turing in
the twenty fourteen film The Imitation Game. That be none
other than Benedict Cumberbatch. Jay and Plimpton is our winner
this week or today, and Jay will be receiving a
Financial Exchange Show t shirt. We play trivia every day
(22:10):
here on the Financial Exchange. See complete contest rules at
Financial Exchange show dot com.
Speaker 3 (22:15):
I think you could pull off some really solid week
long trivia just about people that have the name ben
in them.
Speaker 2 (22:23):
I got it. Yeah, done.
Speaker 4 (22:25):
Yeah, next week we're scrapping more world.
Speaker 2 (22:29):
Famous Benz. Sorry, what about infamous Benz either? All right,
those are my favorite.
Speaker 4 (22:35):
Trivia question for you. What's my favorite Michael Jackson song?
Speaker 2 (22:40):
No, it can't be that well played. Uh So, we
have a piece from market Watch will Powell use Jackson
Hole speech to push back on hopes for a September
rate cut. Honestly, I find this piece boring. I want
instead talk about this one from the New York Times,
specifically talking about the Jackson Hole meeting. M got to
(23:00):
skip the first couple paragraphs and then read a bit.
But first, lodge staff and conference organizers have had to
deal with the bats. A suspected colony of bats recently
took up residents in a block of cabins on the property,
which is run by the Grand Teton Lodge Company. The
bats are thought to have snuck through a small, roughly
half inch hole on the roof of one of the
rooms and through a connected attic space access seven other cabins.
(23:24):
Seven of the eight bats were captured and screened for rabies,
all of which tested negative good, but one was set
free by a guest.
Speaker 3 (23:31):
You're right, that is more interesting than the question as
to whether or not Hill Grants stand in Jackson Hole.
Speaker 2 (23:36):
Imagine J Powell shows up and gets bitten by a
rabid bat? What does that do to like? How you
have to change the timeline of the fed chair? Yeah?
Speaker 3 (23:44):
Well I would you know, hope they can figure that
out a few shots and get that taken care of
right quick.
Speaker 2 (23:51):
This then takes me to this piece that been included
in the stack today from the AP radioactive wasp ness
found at site where you US once made nuclear bombs.
This seems bad. I mean when I think of basically
every comic book in history, they all start with radioactive
(24:15):
wasp nests.
Speaker 3 (24:18):
You know, Chuck, I'm supposed to do an advertisement for
Armstrong Advisor Group next, and I just I don't know
how to work that into radioactive wasps nests.
Speaker 2 (24:27):
Well, it's about legacy planning, isn't it. Yeah? Yeah, it is.
I guess if you're concerned about radioactive wasps, call and
get the Armstrong Advisor Group's free guide on leaving a legacy.
I think, so, oh God, where have we gone?
Speaker 4 (24:45):
This ad was brought to you by Armstrong Advice.
Speaker 3 (24:47):
So we do actually have a guide about leaving a
lasting legacy that has nothing to do with bats, wasps
or that other story about bunnies that we'll get to later.
Speaker 2 (24:58):
But you just never know how you're gonna go.
Speaker 3 (25:00):
So I'm saying the guide, while not about any of
those things, is about understanding affordable and reasonable ways to
plan for your estate, plan, what you need and plays
at different stages of life, different tools that are out there,
how to know whether or not you need a trust.
It's a financial advisor's Guide to Leaving a legacy, and
(25:20):
you can get your copy by calling eight hundred three
nine three for zero zero one. As you might be
able to tell, I'm just barely keeping it together here
Armstrong Advisory dot com, or please do give us a
call at eight hundred three nine three for zero zero one.
Speaker 1 (25:36):
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 into state planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (25:51):
Mike, do we want to talk about fewer Americans moving
expensive salads or smart watches? None?
Speaker 3 (25:57):
I want to talk about SpaceX. Sure, so the New
York Times has a piece SpaceX gets billions from the
government and gives little to nothing back in taxes, and
they somehow wrote five or six pages about the fact that, yeah,
of course they don't.
Speaker 2 (26:12):
They don't make any money.
Speaker 3 (26:14):
They lost money for years and years, have giant losses
on their books, and so therefore they don't pay any
taxes because you pay taxes as a corporation when you
make money. Sure, how did that take seven pages?
Speaker 2 (26:25):
Why is that a thing?
Speaker 1 (26:26):
Like?
Speaker 2 (26:26):
They okay, they're not Why is up said about this?
They're like they're not profitable? Right now? This is fine?
Like you wouldn't expect if if I had no income,
you wouldn't be like, Hey, you didn't earn anything, why
are you paying no taxes? Well, I didn't make any money,
so how could I do that? You know, it's just yeah,
it's lunacy. Plenty of eight, plenty of good reasons. You
(26:47):
set an elon musk. You did pay any sales taxes
this year? Well, I didn't buy anything, like, sorry, Like,
what do you want me to do? Well, you didn't
pay your car registration fee, I walk to work.
Speaker 1 (26:58):
What do you want?
Speaker 2 (26:59):
What do you want for me here? Okay? Sorry, I
can move on. Now, what does you want to talk about?
H Okay? I want to go with seventeen dollars salads? Okay.
So it's talking about how a lot of the expensive
kind of fast casual places Chipotle, Sweet Green, Kava have
(27:19):
been struggling this year, and why is this the Is
this the case if we finally reach the point where
it's just like the prices are too high and people
don't see the value anymore. Is it as I positive yesterday? Hey,
these are places that are typically you know, these restaurants
are typically in places that tend to be a little
bit more democrat leaning right now, and Democrats are reporting
(27:42):
more concerned about the economy, So maybe they're pulling back
on spending in these areas. I don't know. Is it just, Hey,
people are pulling back from restaurants in general, and this
is the first thing that we're seeing here. But ultimately,
you know, I do wonder if there's a point where
people just say, no, I got it. I'm not paying
(28:04):
that for that anymore. It doesn't make sense to me
your thoughts.
Speaker 3 (28:11):
Yeah, I have a tough time blaming it on anything
other than what you just came to, which is, I know,
Kava makes good food, but at eighteen bucks, I'm just gonna.
Speaker 2 (28:21):
Go sit down at a restaurant or I'm gonna cook
it home. I don't know, I did, you know.
Speaker 3 (28:26):
We can blame it on all sorts of other things,
but yeah, people are getting more price sensitive these days
compared to where they were just a few years ago.
And so what seems, with some exceptions, what seems to
be selling right now is value.
Speaker 2 (28:42):
It does. It does, And again I don't know how.
I don't know what the path is for these companies
to change the perception of value. Which it's hard because like,
here's the thing. Let's look at Chipotle, which Chipotle's a
pretty mature franchise at this one, Like Kava and Sweet
Green are still you know, up and coming, they're still
(29:04):
trying to do you know, more rapid expansion. Yeah, Chipotle's
pretty you know, tried and true. Here here's the thing
about Chipotle. They're operating margins right now are seventeen percent
which is pretty darn fat for a restaurant like it's
it's good, it's It's. One of the reasons why the
stock is historically traded, you know, so expensively, is because
it's been expanding quickly and maintaining good margins. But it
(29:29):
does tell you, look that the reason that their prices
are so high is they've got some pretty fat margins there.
I mean, you typically talk to most people in the
food business, whether it's grocery stores or restaurants, and you're
talking somewhere in single digits for margins, right, you know,
that's that's kind of where you normally live. And so
part of this might have to be, Hey, we can't
(29:52):
maintain margins the way that we want to, but then
what does that mean for the stock if you know,
if we have to do that. These are real questions
that are facing these businesses at this particular point in time. Now,
if we look at Sweet Green, which I can't remember
exactly when they ip old, let me take a quick
(30:12):
look here just to refresh myself. Okay, they've been public
for almost four years now, was back in the fall
of twenty one. Sweet Green does not have the same
potential here. Sweet Greens. They're not profitable today. They have
negative free cash flow. Sweet Green cannot say, Okay, we'll
figure this out and create more value by cutting prices
(30:33):
because they would just lose more money then. Yeah, so
they don't have the ability to do that. Kava. When
we talk about them, they went public I think about
a year ago. Their margins are more normal. That seven
percent is their operating margin negative free cash flow. So again,
there's there's only so much room for them to maneuver.
Chipotle might be the best position to get out of
the tailspin that they're in right now, simply because they
(30:56):
have margin that they can work with. These other ones
it's a little bit tougher, and they're gonna have to
really figure this out and play around with some different
levers that they can pull because they can't really do
much on pricing given where their margins are. That's kind
of where we are there to take a quick break
when we return. Paul A Monica from Baron's joins us
(31:17):
after this.
Speaker 1 (31:19):
Here the Financial Exchange every day from eleven to noon,
Non Serious XM's Business Radio Channel one thirty two. Keep
it here for the latest business and financial news and
the trends on Wall Street. The Financial Exchange is now
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(31:41):
streams live on YouTube. Subscribe to our page and stay
up to date on breaking business news all morning long.
Face is the Financial Exchange Radio Network.
Speaker 5 (31:51):
Ladies and gentlemen the weekend, The Financial Exchange is a
proud partner of the Disabled American Veterans Department of Massachusetts,
and now's the perfect time to register for this year's
five K at Castle Island by visiting DAV fivek dot Boston.
Speaker 4 (32:09):
The event will sell out again, so if you're interested
in participating, now's the time to reserve your spot. Come
out and help support our great American heroes by joining
us for the DAV five K. Visit Dav fivek dot Boston,
register or to make a donation. Today that's Dave five
k dot Boston.
Speaker 2 (32:27):
As promised, We're now joined by the one and only
Paulmonica here to talk a little bit about Otis. Paul,
what's going on with OTIS today?
Speaker 1 (32:38):
Yeah?
Speaker 6 (32:38):
OTIS shares are down this year, but the Elevator and
Escalator leader there's some promising signs why the company could
have a decently rising stock price going forward. Spoke to
the CEO recently about why she is opted Mystic after
(33:01):
our recent trip she took to Asia to see customers
in China, South Korea, and India. Those are markets where
there is you know, pretty strong demand, particularly for refurbishing,
you know, the services side of the business, and that's
something that in America as well, a lot of elevators
(33:21):
need to be modernized and as a result of that,
Otis generates a steady you know, income and revenue stream
from all those maintenance costs. So that's something that is
potentially good news for the company, and the stock is
trading at a reasonable valuation and discount to some of
its European peers.
Speaker 2 (33:43):
When we look at Otis, how much of the breakdown
and revenue is you know, new construction installations versus that
maintenance that you mentioned. Do you have any any sense
of what that looks like.
Speaker 6 (33:54):
Yeah, the maintenance side is you know, continuing to grow
pretty rapidly, and I need to look up what the
you know, the most recent numbers were, but yeah, it's
just split between you know, new orders as well as uh,
you know, their services business and maintenance business if you
(34:17):
look right now, Yeah, services, their net sales were up
about six percent in the most recent order. And you
know that is you know three point six billion overall,
you know, in revenue, and the services side of that
business is the line shared. It's two point three billion
(34:38):
of the three point six billion of the overall sales.
So definitely it is a lot of the maintenance side
of the business. That is, you know, increasing their revenue
is supposed to you know, new orders for you know,
new buildings that are being constructed. And what happened.
Speaker 2 (34:55):
Who are the other competitors that even operate in this space,
I don't really know.
Speaker 6 (35:01):
Yeah they are you know, not really you know companies
that are household names in the US. Otis is by
and large the major company. Otis does compete with Schindler
Holding and Cone, which are two of you know, European rivals.
But I think Otis, you know, and especially now in
(35:23):
the past couple of years, because it's a standalone company.
Remember this used to be part of United Technologies UTX,
the you know, big conglomerate that has a large defense business.
But UTX spun off Otis and also carrier the HVAC
Giant into two separate companies, so that otis now is portrayes,
(35:43):
you know, on its own, separate from United Technologies.
Speaker 2 (35:48):
What does this company do to to grow? I guess then,
you know, since the spinoff, they had a good first
couple of years there. But you know, the stocks at
eighty seven bucks to share right now basically the same
place that it was at in August of twenty one,
So it's had four years where the price hasn't really moved.
Is this just kind of a low growth business overall
now or is there anything they can do to kind
of beef things up here? Yeah?
Speaker 6 (36:09):
I mean I think, you know, in some respects, there's
only so much that the company can do because they
are somewhat reliant to you know, a certain extent on
construction around the world. You know, the maintenance side of
the business is something that as long as they're able
to get these steady contracts with customers in office buildings,
(36:31):
residential buildings, you know, retailers, you know, for elevators and
to a lesser extent, escalators, that's something that can help
you know, ju sales. But I think the valuation, it's
you know, trading around twenty two times earnings estimates for
this year. Earnings growth is steady at about ten percent
or so over the next few years, so it's not
(36:52):
trading at an absurdly high valuation given that you have
slow and steady growth. But yeah, make no mistake. If
you want something you know, sexy and exciting, you know,
there's Nvidio, there's Meta, there's mag seven companies.
Speaker 2 (37:05):
Oh, it is not going to be confused with that.
Speaker 6 (37:07):
But this is a solid industrial name in a business
that's you know, not going to be made obsolete by
AI anytime soon. There's there's no such thing as a
chat chept elevator. Last I checked.
Speaker 2 (37:23):
Very good, No, there is not. Paul, appreciate you joining us.
Thanks so much for the time, and I hope you
have a great weekend.
Speaker 6 (37:29):
Thanks a lot, san you guys.
Speaker 2 (37:30):
That is Paul Lamonica talking about Otis Mike any last
items that we haven't gotten to that you want to
touch on today. Yeah.
Speaker 3 (37:39):
A really expensive and highly important attorney in Australia who
charges god knows what and I think refers to himself
as the King or other people referred to him as
the King, had to apologize to a judge because he
or one of his clerks used a bunch of AI
to cite case law that didn't exist, and delayed a
whole bunch of stuff because of bad uses of artificial intelligence.
(38:03):
I'd be really pissed paying for that defense attorney for
god knows the hourly rate, and then getting in trouble
because he used AI.
Speaker 2 (38:09):
I gotta be honest, Like, here's the thing, Like, if
you lie to a court, generally, like it's looked upon
pretty unfavorably. It should be lying. How is this any different?
Like you're making stuff up. It's just you didn't like
do it yourself. Yeah, it's it's kind of infuriating. Quick
break for the entire weekend. We're back on Monday. We
(38:29):
will see you then,
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