September 11, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss consumer prices rose at annual rate of 2.9% in August and jobless claims that are nearing a four-year high. What are the expectations for next week's Fed meeting? Oracle may be having its Nvidia moment. Or it could be a repeat of 1999. IPO mania is back. Or is it the dot-com bubble all over again?
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Speaker 1 (00:01):
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(01:06):
Zada and Mike Armstraw.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you here on a Thursday.
Quite a bit of economic data that we received this morning.
Also a little bit of follow up on some of
the big moves from yesterday, most notably Oracles thirty five
percent jump, and we'll be digging into that. We'll be
talking about nice little swath of IPOs this week as
well and what that may mean for the market.
Speaker 3 (01:33):
But we begin with the two pieces.
Speaker 2 (01:35):
Of economic data that came out this morning. At eight
thirty am. We received CPI Consumer Price Index data from
the Bureau of Labor Statistics. We also received weekly jobless
claims data from the Department of Labor. Michael, where would
you like to begin?
Speaker 4 (01:50):
I don't know, Chuck. Neither of them are terribly good.
Speaker 5 (01:52):
Let's, I guess start with the bigger one, the monthly
release of inflation on the consumer price index front, which
we owed a slight increase from where we were last month,
after where we were last month was kind of getting
a little bit uncomfortably high. So running through the details here,
we saw headline CPI jump up four tenths percent compared
(02:15):
to last month. That's the doubling of the rate that
we saw in July in terms of where that came from,
though a lot of it was food and energy, and
so when you strip that out, we're about tied with
where we were last month.
Speaker 3 (02:27):
No, we're not.
Speaker 5 (02:29):
Point three percent month over versus point two July. Core
I think was point three, Chuck, I'm.
Speaker 3 (02:37):
Looking at it right now. It's point two.
Speaker 2 (02:38):
Really, okay, I'm looking at it right here. July and
June we're both point two. Unless the BLS report is
lying to me.
Speaker 5 (02:47):
The BLS report is probably lying to me, or my
numbers are wrong. Hold on a second, Yeah, you're right,
all items less, No, all items less food and energy.
We're up point three percent in the month of July
twenty twenty five point two the preme.
Speaker 3 (03:00):
Let's see what line am I looking at?
Speaker 5 (03:02):
Oh?
Speaker 3 (03:02):
Sorry, I'm looking at just good?
Speaker 5 (03:04):
Yes, so right to see that, guys market tape do
the rest of the show is their tape?
Speaker 4 (03:10):
Can we marke it anymore?
Speaker 3 (03:13):
So?
Speaker 5 (03:14):
In either case, whether a point two or point three,
what we're seeing now is inflation for the last three
months at least accelerating a little bit from where I
think our comfort zone might be. And this has been
nothing new Chuck right. We've been sitting around this three
percent level for a few months now, but if you
take the last three months, you're heading closer to that
(03:34):
three to five level if you're going to just average
the last three months. And so the question is how
much longer does that continue? And it also speaks to
probably a lot of unhappiness in households because where a
lot of that inflation is coming from is food and
energy inflation. Right now, energy I think people probably have
less issue with given where gas prices are, but on
(03:55):
the food side of things, that that's a pretty quick
pace if that continues.
Speaker 3 (04:01):
Yeah.
Speaker 2 (04:01):
The interesting thing on the food side, I've had a
number of people in the last month or so ask
me about what's been going on with grocery prices. I've
been like, well, what do you mean And they're like, well,
I'm seeing you know, higher prices in a number of areas.
And I'm like, well, can you can you tell me
more about what it is that that you're seeing. I'm
you know, trying to get a sense of hey, is
this a is this one area? Is it you know,
(04:24):
spread out? And the thing that I've been hearing from
them is, hey, this is this is showing up, you know,
predominantly for them on the produce side. That that's where
they've been telling me it's it's you know, beef prices
are up. We've covered that at length, but they're telling me, hey,
this is happening on the produce side. And so I
looked in the data here to see what we had,
(04:45):
and the unadjusted percentage change for July through August was
one point two percent for the month. On fruits and vegetables,
the seasonally adjusted was one point six. So this is
one case where the anecdotes that I've been hearing mesh
with what we see in the data, which is one
of the fastest you know, rising areas of food prices
(05:05):
is on the produce side. On the other side, like
eggs or flat for the month, there's no change on
that side. Beef continuing to move up at a fast clip. Now,
beef prices are up thirteen point nine percent year over
year and two point seven percent for the month. Continuing
to just see that moving forward at this point. But
what we're seeing on fruits and vegetables is a new thing.
(05:28):
For the full year, they're only up one point nine
percent year over year, But now You've got this one
point six percent in a month. It's basically saying, hey,
all of that, you know, growth in fruit and vegetable
prices happened in August. Is this going to be something
that continues or is it a one off? The FED
doesn't care about food and fuel price changes, not because
(05:51):
they don't care about human beings. It's simply because they're
not often indicative of long term shifts that tend to
stick around. For an example of this, look at egg prices.
They went up really sharply for about six months and
then came down really sharply for about four months. And
so it's not something that tends to have sticking power
(06:12):
usually because it's because of transitory factors a bad harvest,
a bird flu with this that whatever. Those things don't
tend to stick around generally with food, with fruit and
vegetable prices, you know, we can look at some of
the things and say, Okay, is there anything that's potentially
(06:32):
longer term here? And the one thing that I do
come back to is something to potentially watch it's not
a definite thing. Is when we talk about the illegal
immigration crackdown, a lot of folks who are not in
the country legally tend to work in the agriculture area,
and so you wonder if this is driving up labor
costs for farms and things like that and potentially reducing
(06:53):
supply of fruits and vegetables. And so it's something that
I put on my car just to monitor. I'm not
saying that this is going to happen or not, but
just hey, let's pay attention to this and see if
it becomes a trend.
Speaker 3 (07:05):
Right now, it's one month in the data.
Speaker 2 (07:07):
That's not really worth you know, getting too excited about.
But let's see if this becomes something that has staying
power or if this is just you know, one off
and then we kind of go back to where we were.
Speaker 5 (07:18):
Could it be terriff related to I just I'm thinking
about my grocery basket and what goes in there, and
when it comes to fruit and vegetables, bananas, oranges, avocados,
these are not things that are grown generally speaking, in
the United States.
Speaker 3 (07:34):
I do.
Speaker 5 (07:35):
I don't even know off the top of my head though,
if like bananas and avocados are subject to tariff right now,
I believe they are.
Speaker 2 (07:43):
They are, so in terms of you know, what you
see here. Some of this could be terraf related, Like
banana's up six point six percent in the last year,
two point one percent in the month.
Speaker 3 (07:52):
So maybe because quite literally, we don't.
Speaker 2 (07:54):
Grow any bananas in the United States, right, It's just
that they don't grow here. Other things that we do
grow in the US, you know, let us as an example,
up three and a half percent for the month. Tomatoes
up three and four and a half percent for the month.
These are but some of these can be explained by
transitory factors. Yeah, tomatoes just as an example. You look
at it, and at least in the northeast, talk to
(08:16):
anyone who's put tomato plants in their gardeners here. It's
been a brutal harvest because it's been so dry, just
hasn't been much much that's been going on there.
Speaker 3 (08:25):
And this is not just a New England thing.
Speaker 2 (08:28):
You will get you know, other areas of the country
that grow them and they're facing you know, the same problems.
So this is why I look at this and I
say some of this could be transitory, some not. But
you gotta kind of watch and see the stuff that is,
you know, more troublesome is the stuff that's not going
on here, which is, hey, the hit to use cars
and trucks is starting to show up the last two months,
(08:50):
up half a percent in July, up another one percent
in August. So you're starting to see that seeping in
things like apparel that is now showing, you know, sign
where the last three months we've gone and basically averaged
point three to five percent for apparel, so that's running
it more than a four percent annualized clip.
Speaker 3 (09:10):
Other things that we saw, this one.
Speaker 2 (09:11):
That I don't think will stick around, and this bodes
well for next month's inflation report. Shelter costs upe point
four percent for the month after back to back ones
at point two. There's not really anything out there to
me that points to that point four being sustainable right now.
We'll have to kind of watch and see how it evolves.
Transportation services up one percent. This is something where you're
(09:33):
starting to see a little bit of a rebound in airfares.
The reason being airlines have finally gotten to the point
where they've cut the capacity that they think they need
to and so now they're raising prices on the remaining
capacity because they don't have to try to fill as
many planes. So that could have some staying power potentially.
But overall, I think you look at this report and
(09:54):
you got a couple new things to monitor. Again, that
the food situation is new, and so you say, okay,
let's see if there's something there. But it's one month.
But overall, I don't think it's dramatically out of line
with what we've seen for the last several months, which
is inflation, particularly core inflation, still running a little bit elevated.
But given the situation in the labor market and how
(10:16):
things may be worsening there, the FED I think could
be Quite honestly, I go stronger that the FED is
completely justified in beginning to move forward with rate cuts
YEP next week. And so let's take a quick break,
and when we come back, let's talk about what we
saw from jobless claims, and that will dovetail nicely into
(10:36):
a discussion of the labor market and the FED.
Speaker 1 (10:39):
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Speaker 2 (11:52):
My final note just on the inflation data before we
get to jobbles claims.
Speaker 3 (11:58):
Yeah please.
Speaker 2 (12:00):
Big thing that we are seeing here is that if
you look at this in terms of two components, services
and goods, and specifically core like this like toss the
food stuff away just because it's not what the FED
cares about because a lot of that tends to be transitory.
Speaker 3 (12:14):
YEA, core services.
Speaker 2 (12:17):
Inflation is basically running at three and a half percent
right now and has been at three and a half
percent for the last four months or so. Core goods inflation,
which was around negative two in Q three of last year,
(12:38):
started to inflect upward then, so even before any tariff stuff.
This is this goes back you know, a full year
now before tariffs or any of that. Core goods started
to inflect up, but have accelerated up recently, and now
we're closing in on three percent. And this is kind
of the whole crux of this is, look, inflation kind
of bottomed in the high twos on the on the
core range because of core goods falling, while core you know,
(13:02):
services were still elevated, you know, around four percent declining slowly.
What we're seeing now is not much progress being made
on core services, but core goods accelerating up. And so
I think it gets to the point where you know,
you sit here and you say, okay, all of the
data out there is consistent with probably low threes core inflation,
(13:24):
so low threes long term inflation, and for whatever reason,
one reason or another. I'm not saying this is good, bad,
or anything else. I'm just saying it is. The decision
that's being made by the Fed and basically by markets
right now is Hey, it's okay that inflation is gonna
be a little bit hotter. We got to deal with
the unemployment question first.
Speaker 5 (13:43):
Yeah, that is, that is the trade off it's being made.
It really raises an interesting question of just how much
can they actually cut in an environment like this. And
I know that big bets are being made right now
on a lot of them, but it becomes challenging on
inflations like this.
Speaker 2 (14:01):
Yeah, And the other interesting piece just that I'll point
out if you look at the twenty fourteen through twenty
nineteen period, so before anyone was like really concerned about
inflation and before it was a thing. If you look
during that period, core services typically was running at about
a three percent to three and a quarter percent annualized clip,
like that's where it tended to land. Core goods was
(14:24):
typically seeing about half a percent to one percent deflation
on an annual basis.
Speaker 5 (14:29):
So you think about and that's how you got to too.
You got tech coming down and getting cheaper, You've got
used cars, things like that, sorts of that stuff just
moderating or coming down generally speaking in the twenty tens.
And that's how you got to like, yeah, somewhere around
two percent inflation with services ran around three.
Speaker 3 (14:46):
Goods ran you know, slightly negative. And that's how you
got there.
Speaker 2 (14:49):
It wasn't just that every like Defen doesn't try to
make every price grow at two. They try to get
you know, the whole thing, you know, with price stability,
somewhere around two percent. And generally the mix that we
we saw on the twenty tens, services ran about three
to three and a half percent. Goods ran negative half
percent to negative one percent.
Speaker 5 (15:07):
Each year, TV's got cheaper, vacations got more expensive.
Speaker 2 (15:10):
Yes, let's talk a little bit about the weekly jobbles
claims number. So here's what we saw. Weekly initial claims
jumped to two hundred and sixty three thousand. That was
a jump of twenty seven thousand from the prior week.
And this starts to get into you know, hey, I
think I said last week, like, if you start to
(15:31):
see like three four weeks in a row above two sixty,
that's where I start to get concerned. You've got one now,
So I'm still not quite concerned for a couple reasons.
The first is, obviously, it's it's one week, so anything
weird can happen in one week. Second piece, it looks
like something weird might have happened this week. Texas, for
whatever reason, saw its weekly jobbles claims jump from sixteen
(15:54):
thousand to thirty two thousand. Now, this could be a
case where you say, oh, OK, the oil industry has
announced a bunch of layoffs recently. Maybe this is, you know,
showing up there. Because Texas is oil country. We've talked
a little bit about what's going on in agriculture. Maybe
you're seeing some signs of things there. I don't think
it would show up in new unemployment claims though, more
(16:15):
you know, hey, we need to hire more in the
agriculture sector. So I don't think that clips clicks. But
I think ultimately there could be something weird that's just
going on with the Texas datea this week, kind of
like when all the New York City school bus drivers
got laid off a week later than normal in the
spring because of you know, when the school calendar fell,
and so we saw a one week jump there. It
(16:35):
could be that other things Remember this is right around
labor Day. Labor Day moves around from year to year.
Maybe there was something weird with the seasonal adjustments things
like that. So I don't know that I necessarily make
anything of this one week yet, other than to say, hey,
if the next couple weeks come in at these levels,
(16:57):
around these levels or higher, Okay, now we got something
that we got to talk about.
Speaker 5 (17:03):
Taking this in context with the last week's jobs report,
I mean, how do we contextualize the overall state of
the labor market for the Federal Reserve members in terms
of how they're looking at it?
Speaker 6 (17:14):
Right?
Speaker 5 (17:14):
I mean, you know, it's one thing for us to
contextualize it, but what really matters in the short term
is how the Fed is thinking about it. You did
see an uptick in the unemployment rate, you saw a
pretty weak job creation number, and then was it yesterday
that you got the annual revisions in there with nine
day Tuesday? Okay, so nine hundred thousand fewer jobs actually
(17:34):
created over the course of the last month with those revisions.
Speaker 2 (17:37):
Oh no, No, that was over the last that was twenty
twenty four, in early twenty five, not over the last month, last.
Speaker 5 (17:43):
Twelve months, Yes, yeah, sorry, did I say last month doesn't?
Speaker 3 (17:46):
Yeah?
Speaker 4 (17:47):
Okay, yes, I.
Speaker 3 (17:47):
Would have been that really bad.
Speaker 5 (17:49):
Then the Fed's got a cut by you know, two percent,
So over the last year, fewer jobs created than was
previously understood. How is the FED contextualizing again? I don't
think that any of that has much to do with
today's jobless claims number. That would have to be a
story that continues for a few weeks. But with all
of this context, I kind of do get to where
(18:10):
they are seemingly pointing, which is, we do have to
overlook this inflation data because there is significant weakening on
the labor side.
Speaker 2 (18:18):
And this is where the breakdown that I just gave,
I think kind of puts it all into you know
how they'll think about it. They're gonna look at core
goods and say, hey, that's because of tariffs. And once
those tariff price increases come through, Core Goods is going
to go back to doing what it used to do,
which is half percent to one percent annual decline. Core
services might be plateauing around three and a half percent,
(18:38):
but it really only needs to get down to like
three to be where it was before. Great we can do,
you know, that'll probably happen over the next year or so.
On the other hand, the labor market, once it gets
moving in one direction, the only thing that tends to
stop it is an intervention, and so we need to intervene,
is what the Fed's thinking. And I don't think that
that thinking is wrong, provide that this is what we
(19:00):
continue to see on the inflation side. I'm not saying that,
you know, three and a quarter three and a half
percent inflation is good. What I'm saying is it's not worsening,
but the labor market is. And in a situation where
neither side is really where you want it to be,
you've got to deal with the problem that is worstening
first and then move on to the other one.
Speaker 3 (19:20):
And I think that's totally defensible.
Speaker 2 (19:22):
And if I were on the FED, which no one
would ever want me there, I'd so, yeah, we got
to go a quarter percent next next week, with plans
to maybe go heavier in October if the labor market
worsens further. Quick Break when we return It's Wall Street.
Speaker 1 (19:37):
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Speaker 6 (20:00):
Market seeing a nice little bump today is Walster rereacts
to a key inflation measure posted this morning, where the
consumer price index increased two point nine percent on an
annual basis, in line with expectations, yet hotter than July's
gain of two point seven percent. Jobless claims data also
came in slightly above estimates.
Speaker 3 (20:21):
Right now, the.
Speaker 6 (20:22):
Dow is up just over one percent higher, or five
hundred and seven points, SMP five hundred is up six
tens of one percent, or forty three points higher, NASDAC
up just over half a percent, or one hundred and
nineteen points. Russell two thousand is up nearly one percent,
Tenure Treasure reeled down three basis points at four percent,
and crude oil is down nearly two percent today, training
(20:46):
its sixty two dollars and fifty cents a barrel after
its best day since nineteen ninety two. On the heels
of its optimistic AI revenue projections. Oracle shares are slightly
retreating from yesterday's thirty six percent surge, down five percent today. Separately,
the Wall Street Journal reported it struck a three hundred
(21:06):
billion dollar cloud deal with open Ai. Meanwhile, recent meme
stock open Door jumping fifty four percent after the online
housing platform named a top Shopify executive as its next CEO.
Elsewhere after its three percent pullback yesterday following an overall
underwhelming product event, Apple shares are up about eight tenths
(21:28):
of one percent today after a successful IPO yesterday, where
shares jumped fourteen percent in its debut. Shares in the
buy now, pay later platform Klarna are falling two percent today.
Kroger climbing nearly one percent after the grocery store chain
posted mixed quarterly results where it beat earnings expectations but
fell just short of revenue estimates. And energy drink company
(21:53):
Celsius is climbing about three percent after Goldman Sachs gave
the stock a buy rating with the banks at Celsius
has posted strong growth in is in a quickly growing category.
I'm Tucker Silvan, that is Wallstreet Watch, Mike.
Speaker 2 (22:08):
Anything else that you want to cover as it relates
to any of the economic data from this morning.
Speaker 5 (22:16):
No, I'm sure it'll seep through to other stories as
the day goes on Chuck.
Speaker 2 (22:21):
All Right, so now that we've gotten that out of
the way, let's talk about next week's FED meeting, because gosh,
it's gonna be exciting fireworks. It actually really won't be
that exciting. I think we kind of know what's happening.
The piece that is interesting, Lisa Cook is going to
be back and present for this FED meeting. The Supreme
(22:43):
Court did agree to hear the Trump administration's appeal related
to her firing being denied by a lower court. Was
that late last week or early this week? I can't
even remember this week. I believe this week. So, but
an expedited appeal does not mean by next FED meeting.
It probably means by Thanksgiving.
Speaker 5 (23:05):
Yeah, the next FED meetings in six days to be yes,
five days, and the press conferences in six days.
Speaker 2 (23:10):
So I suspect that the Supreme Court will likely have
a ruling out on this before your end, probably before Thanksgiving.
But Cook will be at that FED meeting, and also
potentially present is Stephen Moran, who was on the Council
of Economic Advisors for the President but was put forward
as the replacement for Kugler.
Speaker 3 (23:31):
What was that about a month ago?
Speaker 2 (23:32):
I think when Adrana Kugler decided to step down, and
so he cleared the Senate Banking Committee yesterday and potentially
could be confirmed by the full Senate in the next
couple of days. And so it steads the stage for
a widely expected quarter percent cut with the interesting possibility
(23:54):
that you could see descents to both sides for the
first time that I can remember on this.
Speaker 5 (24:00):
Yeah, so we talk about this. I think it's worth
an explanation.
Speaker 3 (24:03):
Again.
Speaker 5 (24:04):
This is a twelve member voting committee. They almost what
would you guess, like ninety percent of the time act unanimously.
Speaker 3 (24:15):
It might even be more than that.
Speaker 5 (24:17):
So most of the time, the vast majority of the
time they vote unanimously on which direction to go. The
last two meetings, you've had to sense pushing for lower
interest rates at this meeting. To your point, Chuck, which
would be incredibly abnormal, would be you clearly have some
voting members that want rates to go lower, and perhaps
(24:38):
even more than twenty five basis points. And then I
think they're likely to your point, are some folks that
are looking at this inflation data and saying I'm not
so sure. I don't know, though, Chuck, I tend to
think that you don't have anyone on that committee that
is going to be so firmly stuck to keeping rates
right where they are right now that they would descent
to the upside.
Speaker 4 (25:00):
Well, we'll have to see.
Speaker 3 (25:02):
I don't know. I mean, it's Look, here's the thing.
Speaker 2 (25:04):
Even though last segment I said, I think the Fed
it like can completely justify cutting a quarter percent right
now because the labor market's worsening, while the inflation picture,
you can make a case, is kind of just stagnating
out there.
Speaker 3 (25:17):
Yep.
Speaker 2 (25:19):
I think that there's room for someone who says, yeah,
these two risks are still both out there, and given
the potential for labor supply disruptions, there's a chance that
you might not see the unemployment rate move up much
further from here, And so you could be justified in
saying I don't want to do anything.
Speaker 4 (25:38):
Yeah, you could.
Speaker 2 (25:40):
The point that you make, and that I think you
know you kind of get from Powell from his Jackson
Whole speech, is when Powell gives the go ahead to
move in a direction. Usually he's pretty good at corralling
the rest of the committee, and so the signal from
August and that Jackson Hole speech is it's time to go,
(26:02):
and so I think given that, it would be surprising
to see a descent saying yes, I don't want to
cut rates now. It's not impossible, but it's a lower likelihood.
Speaker 5 (26:16):
The other counterpoint to my own perspective on this is
he undoubtedly has less ability to corral today given his
yes longevity compared to a couple of years ago. And
so you're right, there's going to be more willingness to dissent,
I think, and that could take place on either side here.
Most recently the descents have been towards lower rates, but
(26:36):
as Powell's influence wanes here in the last few months
of his role as chair, we could see that happen.
The interesting thing, too, Chuck. On the bond side, we
now have that ten year down below four percent, the
first time that's happened since since April fourth, right on
(26:58):
the cusp of the tariff announce Men's win markets freaked out.
I wonder if you have a take on the precipitous
drop that we've seen in that ten year benchmark over
the course of just the last week or so.
Speaker 2 (27:08):
It's it's all about jobs, and it's basically, Hey, if
the Fed's saying that they're gonna go and if the
labor market's weakening, we got to fix that first before
we worry about inflation. Is what the bond market is saying.
Whether that is right or wrong, we're gonna find out
over the next year.
Speaker 3 (27:26):
You know.
Speaker 2 (27:27):
That's not one that I think you call a win
by year end. I think it's one where, hey, you're
gonna have to see how this evolves by next year,
because if the economy does bottom in the next few
months and starts to reaccelerate, and now you're saying, okay,
like job's growth is picking back up again, inflation is
still running you know, three to three and a half,
(27:48):
and nominal growth is heading towards six that ten years
dramatically overpriced, then, right, if you have a deeper recession
that goes for a little bit longer, okay, Like, yeah,
you could probably justify it, but there's there are a
lot of eggs in the basket right now. For yeah,
rates are gonna be lower for longer. And I'm not
(28:10):
saying it's right or wrong. I don't know, but by
the end of next year, we're gonna find out. I mean, look,
if if the tenuere is still below.
Speaker 3 (28:20):
I'll give some wiggle rom on this.
Speaker 2 (28:22):
If the ten years below four and a half at
the end of next year, then this bond signal is
the right one.
Speaker 3 (28:27):
Right. If it's above four and a half, then oops.
Speaker 2 (28:30):
Like it's basically saying, hey, we we didn't need to
cut that much because this was a short term wiggle
in the economy and not a real slot, not a
real recession. Just take a quick break here. When we
come back, I do want to talk more about Oracle
from me. Yesterday just a monster day, and so we'll
talk about what they're doing today and what it means
(28:51):
after this.
Speaker 1 (28:52):
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Speaker 3 (29:24):
Alriting.
Speaker 2 (29:25):
So let's talk a little bit about the company known
as Oracle. So they reported earnings on Tuesday, and as
part of that they talked about, you know, future commitments
for purchases from their customers and specifically, like the term
(29:49):
that gets used when when talking about this is RPOs. Now,
this is not if you're a football fan, This is
not the run pass option. So I don't want you
to get, you know, all excited about that. This which
talking about remaining performance obligations and rbos. Just so that
you're aware of this, they are not guaranteed revenue. And
(30:11):
this is the direct quote from Oracle. They represent the
total value of contracted revenue that has not yet been recognized,
often tied to future performance obligations. And so if you
look at Oracles RPOs over the last couple of years,
they had risen from around sixty six billion dollars in
November of twenty three two one hundred and thirty eight
(30:34):
billion dollars in May of this year, and then just
jumped in one quarter at a four hundred and fifty
five billion. This is all because of the Stargate deal
between Oracle and open Ai, for you know, three hundred
billion dollars in cloud contracts that that Oracle is going
to deliver to open Ai over a three to four
year time period, which is all well and good. I'm
(30:55):
not saying that it's not. I'm just saying a couple
of things on this. The first is that when we
look at this, there are a couple different things that
you have to remember. The first is open AI does
not have any cash of its own just sitting around
to pay this. They don't, true, yep, they rely right
(31:19):
now on a bunch of funding in order to actually
pay their bills. So they don't just have like three
hundred and seventeen billion dollars. Their cash flow is not
three hundred and seventeen billion dollars. Their revenue run rate
is not like they don't have this money there.
Speaker 3 (31:33):
So the first question that you have in.
Speaker 2 (31:35):
Terms of hey, how ironclad is this is they can't
open Ai actually, you know, pay this. The second one
is will open AI actually pay this? Yes, they may
have signed a contract to do so. But we see
companies change their plans for construction all the time. Look
at all of the car companies that we're going to
be building EV plants and decided, O, G, like, we
(31:56):
can't sell that many evs, we don't need to actually
do this, and they changed their mind and delayed them,
and so on and so forth. The other piece on
this is no one asked or even seemed to care
on the conference call, Hey, what's the what's the return
on investment going to be here? You know, okay, you're
gonna be you know, getting three hundred billion dollars in contracts.
(32:19):
What's it gonna cost you in order to actually build
that and deliver it? What's the ROI on it? And
so these are the reasons why, in my opinion, that
Oracle stock, since it's big jump yesterday up to a
three hundred and forty five bucks a share, it's back
down today to around three ten. So it's given back
(32:40):
ten percent in you know, a twenty four hour period.
It obviously still has a massive gain there. But you
look at this and you say, okay, there are definitely
some questions that need to be answered here. And also
this is not actually new spending that is that no
one knew about. It's just it finally reached the stage
where it was formal enough that op that Oracle could
(33:02):
put it on their earnings report.
Speaker 4 (33:07):
Yeah.
Speaker 5 (33:08):
Uh, it's not the only giant move that kind of
has people scratched. I don't know if it has people
scratching their heads, but it is just another comparison point
that you can pretty easily make to the late nineties,
and I know that those are getting drawn out and
many of those comparisons being made. But I just see
(33:30):
it over and over again.
Speaker 3 (33:32):
And let's look.
Speaker 2 (33:33):
If we're gonna make comparisons to the nineteen nineties, then
let's make comparisons to the nineteen nineties. Oracle in the
nineteen nineties had an accounting scandal directly related to revenue recognition.
Speaker 3 (33:47):
Well, let's let's let's.
Speaker 2 (33:48):
They had a problem related to this. Uh, they had,
you know, settlements with regulators related to how are you
recognizing revenue?
Speaker 3 (33:58):
And what's going on.
Speaker 4 (34:00):
Here, folks.
Speaker 5 (34:02):
The markets have been inexorably tied to what's been going
on in the artificial intelligence space, and that has made
a lot of sense for quite some time, and it
is truly contributing to real development in the economy. When
we talk about deals like this one with Oracle or
other types of providers, we are talking about real dollars
(34:22):
invested and real infrastructure put into the ground. All of
that having been said, this excitement is drawing many comparisons
to the nineteen nineties, the dot com boom and then
that following bust cycle. And we are not the only
ones making those comparisons. I want to talk to you
all about a two part live broadcast of this show
(34:45):
with a seminar from the Armstrong Advisor Group that we
are doing this fall, two locations, two separate dates, and
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One of them is going to be down at the
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will be a showcase super Lux in Chestnut Hill on
October sixteenth. Again October ninth, October sixteenth. I'm gonna give
(35:09):
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if you are staring down this market and economy and wondering, hey,
how could this develop at the next stage and what
might that mean for me and my financial strategy?
Speaker 4 (35:22):
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Speaker 1 (35:49):
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Speaker 2 (36:05):
Mike, do we want to talk about tech stocks are
doing so well that investors are starting to worry or
IPO mania?
Speaker 5 (36:14):
I feel there's a little bit more meat on the
IPO bone.
Speaker 3 (36:18):
Talk to me.
Speaker 5 (36:20):
We have seen now, I mean it's been a relatively few,
but how many do we have scheduled now in terms
of AI and tech related names or frankly, even names
that aren't terribly related to AI who are just trying
to take advantage of the moment here pushing into the
publicly traded market. And a few years ago this was
(36:42):
not universally taken with open arms, but it seems to
be a little bit more in terms of excitement about
it over the course of the last few months. Would
you agree on that trend line?
Speaker 3 (36:52):
Yeah, I think so.
Speaker 5 (36:54):
In and of itself, probably not a concern, but again,
one more quiver in the or arrow in the quiver
of those making the comparisons to that pre dot com moment.
Speaker 2 (37:10):
The question, as you always have to ask, then, is
is this nineteen ninety seven or two thousand?
Speaker 4 (37:16):
You know, it's or neither, right, Like, you know, is
it all over?
Speaker 2 (37:19):
Like if you think we're heading towards a bus, then
remember like the dot com bubble went on for a
long time. I mean, it wasn't just something where you
were like, hey, we had two good years and it
fell apart.
Speaker 3 (37:32):
It was half a decade.
Speaker 2 (37:35):
And this puppy, quite honestly, just got started two and
a half years ago. And who's to say it can't
go on longer morph into something else? And you know,
it's I'm not saying that this is going to go
up forever, because like stocks always have pullbacks at some
point because something happens. But I do think it's important
(37:56):
to recognize, hey, this has been a really resilient market
all year, and there have been a number of challenges
even in the last month or two that haven't really
gone anywhere for it. It's like every time we say, oh, gee,
like this looks a little dodgy, it's a couple of
days and then that's kind of it. And that's that's
where we are right now with markets. It won't stay
that way forever, but it's where we are today. Quick
(38:21):
Break Hour two coming up in a bit
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(01:06):
Zada and Mike Armstraw.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you here on a Thursday.
Quite a bit of economic data that we received this morning.
Also a little bit of follow up on some of
the big moves from yesterday, most notably Oracles thirty five
percent jump, and we'll be digging into that. We'll be
talking about nice little swath of IPOs this week as
well and what that may mean for the market.
Speaker 3 (01:33):
But we begin with the two pieces.
Speaker 2 (01:35):
Of economic data that came out this morning. At eight
thirty am. We received CPI Consumer Price Index data from
the Bureau of Labor Statistics. We also received weekly jobless
claims data from the Department of Labor. Michael, where would
you like to begin?
Speaker 4 (01:50):
I don't know, Chuck. Neither of them are terribly good.
Speaker 5 (01:52):
Let's, I guess start with the bigger one, the monthly
release of inflation on the consumer price index front, which
we owed a slight increase from where we were last month,
after where we were last month was kind of getting
a little bit uncomfortably high. So running through the details here,
we saw headline CPI jump up four tenths percent compared
(02:15):
to last month. That's the doubling of the rate that
we saw in July in terms of where that came from,
though a lot of it was food and energy, and
so when you strip that out, we're about tied with
where we were last month.
Speaker 3 (02:27):
No, we're not.
Speaker 5 (02:29):
Point three percent month over versus point two July. Core
I think was point three, Chuck, I'm.
Speaker 3 (02:37):
Looking at it right now. It's point two.
Speaker 2 (02:38):
Really, okay, I'm looking at it right here. July and
June we're both point two. Unless the BLS report is
lying to me.
Speaker 5 (02:47):
The BLS report is probably lying to me, or my
numbers are wrong. Hold on a second, Yeah, you're right,
all items less, No, all items less food and energy.
We're up point three percent in the month of July
twenty twenty five point two the preme.
Speaker 3 (03:00):
Let's see what line am I looking at?
Speaker 5 (03:02):
Oh?
Speaker 3 (03:02):
Sorry, I'm looking at just good?
Speaker 5 (03:04):
Yes, so right to see that, guys market tape do
the rest of the show is their tape?
Speaker 4 (03:10):
Can we marke it anymore?
Speaker 3 (03:13):
So?
Speaker 5 (03:14):
In either case, whether a point two or point three,
what we're seeing now is inflation for the last three
months at least accelerating a little bit from where I
think our comfort zone might be. And this has been
nothing new Chuck right. We've been sitting around this three
percent level for a few months now, but if you
take the last three months, you're heading closer to that
(03:34):
three to five level if you're going to just average
the last three months. And so the question is how
much longer does that continue? And it also speaks to
probably a lot of unhappiness in households because where a
lot of that inflation is coming from is food and
energy inflation. Right now, energy I think people probably have
less issue with given where gas prices are, but on
(03:55):
the food side of things, that that's a pretty quick
pace if that continues.
Speaker 3 (04:01):
Yeah.
Speaker 2 (04:01):
The interesting thing on the food side, I've had a
number of people in the last month or so ask
me about what's been going on with grocery prices. I've
been like, well, what do you mean And they're like, well,
I'm seeing you know, higher prices in a number of areas.
And I'm like, well, can you can you tell me
more about what it is that that you're seeing. I'm
you know, trying to get a sense of hey, is
this a is this one area? Is it you know,
(04:24):
spread out? And the thing that I've been hearing from
them is, hey, this is this is showing up, you know,
predominantly for them on the produce side. That that's where
they've been telling me it's it's you know, beef prices
are up. We've covered that at length, but they're telling me, hey,
this is happening on the produce side. And so I
looked in the data here to see what we had,
(04:45):
and the unadjusted percentage change for July through August was
one point two percent for the month. On fruits and vegetables,
the seasonally adjusted was one point six. So this is
one case where the anecdotes that I've been hearing mesh
with what we see in the data, which is one
of the fastest you know, rising areas of food prices
(05:05):
is on the produce side. On the other side, like
eggs or flat for the month, there's no change on
that side. Beef continuing to move up at a fast clip. Now,
beef prices are up thirteen point nine percent year over
year and two point seven percent for the month. Continuing
to just see that moving forward at this point. But
what we're seeing on fruits and vegetables is a new thing.
(05:28):
For the full year, they're only up one point nine
percent year over year, But now You've got this one
point six percent in a month. It's basically saying, hey,
all of that, you know, growth in fruit and vegetable
prices happened in August. Is this going to be something
that continues or is it a one off? The FED
doesn't care about food and fuel price changes, not because
(05:51):
they don't care about human beings. It's simply because they're
not often indicative of long term shifts that tend to
stick around. For an example of this, look at egg prices.
They went up really sharply for about six months and
then came down really sharply for about four months. And
so it's not something that tends to have sticking power
(06:12):
usually because it's because of transitory factors a bad harvest,
a bird flu with this that whatever. Those things don't
tend to stick around generally with food, with fruit and
vegetable prices, you know, we can look at some of
the things and say, Okay, is there anything that's potentially
(06:32):
longer term here? And the one thing that I do
come back to is something to potentially watch it's not
a definite thing. Is when we talk about the illegal
immigration crackdown, a lot of folks who are not in
the country legally tend to work in the agriculture area,
and so you wonder if this is driving up labor
costs for farms and things like that and potentially reducing
(06:53):
supply of fruits and vegetables. And so it's something that
I put on my car just to monitor. I'm not
saying that this is going to happen or not, but
just hey, let's pay attention to this and see if
it becomes a trend.
Speaker 3 (07:05):
Right now, it's one month in the data.
Speaker 2 (07:07):
That's not really worth you know, getting too excited about.
But let's see if this becomes something that has staying
power or if this is just you know, one off
and then we kind of go back to where we were.
Speaker 5 (07:18):
Could it be terriff related to I just I'm thinking
about my grocery basket and what goes in there, and
when it comes to fruit and vegetables, bananas, oranges, avocados,
these are not things that are grown generally speaking, in
the United States.
Speaker 3 (07:34):
I do.
Speaker 5 (07:35):
I don't even know off the top of my head though,
if like bananas and avocados are subject to tariff right now,
I believe they are.
Speaker 2 (07:43):
They are, so in terms of you know, what you
see here. Some of this could be terraf related, Like
banana's up six point six percent in the last year,
two point one percent in the month.
Speaker 3 (07:52):
So maybe because quite literally, we don't.
Speaker 2 (07:54):
Grow any bananas in the United States, right, It's just
that they don't grow here. Other things that we do
grow in the US, you know, let us as an example,
up three and a half percent for the month. Tomatoes
up three and four and a half percent for the month.
These are but some of these can be explained by
transitory factors. Yeah, tomatoes just as an example. You look
at it, and at least in the northeast, talk to
(08:16):
anyone who's put tomato plants in their gardeners here. It's
been a brutal harvest because it's been so dry, just
hasn't been much much that's been going on there.
Speaker 3 (08:25):
And this is not just a New England thing.
Speaker 2 (08:28):
You will get you know, other areas of the country
that grow them and they're facing you know, the same problems.
So this is why I look at this and I
say some of this could be transitory, some not. But
you gotta kind of watch and see the stuff that is,
you know, more troublesome is the stuff that's not going
on here, which is, hey, the hit to use cars
and trucks is starting to show up the last two months,
(08:50):
up half a percent in July, up another one percent
in August. So you're starting to see that seeping in
things like apparel that is now showing, you know, sign
where the last three months we've gone and basically averaged
point three to five percent for apparel, so that's running
it more than a four percent annualized clip.
Speaker 3 (09:10):
Other things that we saw, this one.
Speaker 2 (09:11):
That I don't think will stick around, and this bodes
well for next month's inflation report. Shelter costs upe point
four percent for the month after back to back ones
at point two. There's not really anything out there to
me that points to that point four being sustainable right now.
We'll have to kind of watch and see how it evolves.
Transportation services up one percent. This is something where you're
(09:33):
starting to see a little bit of a rebound in airfares.
The reason being airlines have finally gotten to the point
where they've cut the capacity that they think they need
to and so now they're raising prices on the remaining
capacity because they don't have to try to fill as
many planes. So that could have some staying power potentially.
But overall, I think you look at this report and
(09:54):
you got a couple new things to monitor. Again, that
the food situation is new, and so you say, okay,
let's see if there's something there. But it's one month.
But overall, I don't think it's dramatically out of line
with what we've seen for the last several months, which
is inflation, particularly core inflation, still running a little bit elevated.
But given the situation in the labor market and how
(10:16):
things may be worsening there, the FED I think could
be Quite honestly, I go stronger that the FED is
completely justified in beginning to move forward with rate cuts
YEP next week. And so let's take a quick break,
and when we come back, let's talk about what we
saw from jobless claims, and that will dovetail nicely into
(10:36):
a discussion of the labor market and the FED.
Speaker 1 (10:39):
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Speaker 2 (11:52):
My final note just on the inflation data before we
get to jobbles claims.
Speaker 3 (11:58):
Yeah please.
Speaker 2 (12:00):
Big thing that we are seeing here is that if
you look at this in terms of two components, services
and goods, and specifically core like this like toss the
food stuff away just because it's not what the FED
cares about because a lot of that tends to be transitory.
Speaker 3 (12:14):
YEA, core services.
Speaker 2 (12:17):
Inflation is basically running at three and a half percent
right now and has been at three and a half
percent for the last four months or so. Core goods inflation,
which was around negative two in Q three of last year,
(12:38):
started to inflect upward then, so even before any tariff stuff.
This is this goes back you know, a full year
now before tariffs or any of that. Core goods started
to inflect up, but have accelerated up recently, and now
we're closing in on three percent. And this is kind
of the whole crux of this is, look, inflation kind
of bottomed in the high twos on the on the
core range because of core goods falling, while core you know,
(13:02):
services were still elevated, you know, around four percent declining slowly.
What we're seeing now is not much progress being made
on core services, but core goods accelerating up. And so
I think it gets to the point where you know,
you sit here and you say, okay, all of the
data out there is consistent with probably low threes core inflation,
(13:24):
so low threes long term inflation, and for whatever reason,
one reason or another. I'm not saying this is good, bad,
or anything else. I'm just saying it is. The decision
that's being made by the Fed and basically by markets
right now is Hey, it's okay that inflation is gonna
be a little bit hotter. We got to deal with
the unemployment question first.
Speaker 5 (13:43):
Yeah, that is, that is the trade off it's being made.
It really raises an interesting question of just how much
can they actually cut in an environment like this. And
I know that big bets are being made right now
on a lot of them, but it becomes challenging on
inflations like this.
Speaker 2 (14:01):
Yeah, And the other interesting piece just that I'll point
out if you look at the twenty fourteen through twenty
nineteen period, so before anyone was like really concerned about
inflation and before it was a thing. If you look
during that period, core services typically was running at about
a three percent to three and a quarter percent annualized clip,
like that's where it tended to land. Core goods was
(14:24):
typically seeing about half a percent to one percent deflation
on an annual basis.
Speaker 5 (14:29):
So you think about and that's how you got to too.
You got tech coming down and getting cheaper, You've got
used cars, things like that, sorts of that stuff just
moderating or coming down generally speaking in the twenty tens.
And that's how you got to like, yeah, somewhere around
two percent inflation with services ran around three.
Speaker 3 (14:46):
Goods ran you know, slightly negative. And that's how you
got there.
Speaker 2 (14:49):
It wasn't just that every like Defen doesn't try to
make every price grow at two. They try to get
you know, the whole thing, you know, with price stability,
somewhere around two percent. And generally the mix that we
we saw on the twenty tens, services ran about three
to three and a half percent. Goods ran negative half
percent to negative one percent.
Speaker 5 (15:07):
Each year, TV's got cheaper, vacations got more expensive.
Speaker 2 (15:10):
Yes, let's talk a little bit about the weekly jobbles
claims number. So here's what we saw. Weekly initial claims
jumped to two hundred and sixty three thousand. That was
a jump of twenty seven thousand from the prior week.
And this starts to get into you know, hey, I
think I said last week, like, if you start to
(15:31):
see like three four weeks in a row above two sixty,
that's where I start to get concerned. You've got one now,
So I'm still not quite concerned for a couple reasons.
The first is, obviously, it's it's one week, so anything
weird can happen in one week. Second piece, it looks
like something weird might have happened this week. Texas, for
whatever reason, saw its weekly jobbles claims jump from sixteen
(15:54):
thousand to thirty two thousand. Now, this could be a
case where you say, oh, OK, the oil industry has
announced a bunch of layoffs recently. Maybe this is, you know,
showing up there. Because Texas is oil country. We've talked
a little bit about what's going on in agriculture. Maybe
you're seeing some signs of things there. I don't think
it would show up in new unemployment claims though, more
(16:15):
you know, hey, we need to hire more in the
agriculture sector. So I don't think that clips clicks. But
I think ultimately there could be something weird that's just
going on with the Texas datea this week, kind of
like when all the New York City school bus drivers
got laid off a week later than normal in the
spring because of you know, when the school calendar fell,
and so we saw a one week jump there. It
(16:35):
could be that other things Remember this is right around
labor Day. Labor Day moves around from year to year.
Maybe there was something weird with the seasonal adjustments things
like that. So I don't know that I necessarily make
anything of this one week yet, other than to say, hey,
if the next couple weeks come in at these levels,
(16:57):
around these levels or higher, Okay, now we got something
that we got to talk about.
Speaker 5 (17:03):
Taking this in context with the last week's jobs report,
I mean, how do we contextualize the overall state of
the labor market for the Federal Reserve members in terms
of how they're looking at it?
Speaker 6 (17:14):
Right?
Speaker 5 (17:14):
I mean, you know, it's one thing for us to
contextualize it, but what really matters in the short term
is how the Fed is thinking about it. You did
see an uptick in the unemployment rate, you saw a
pretty weak job creation number, and then was it yesterday
that you got the annual revisions in there with nine
day Tuesday? Okay, so nine hundred thousand fewer jobs actually
(17:34):
created over the course of the last month with those revisions.
Speaker 2 (17:37):
Oh no, No, that was over the last that was twenty
twenty four, in early twenty five, not over the last month, last.
Speaker 5 (17:43):
Twelve months, Yes, yeah, sorry, did I say last month doesn't?
Speaker 3 (17:46):
Yeah?
Speaker 4 (17:47):
Okay, yes, I.
Speaker 3 (17:47):
Would have been that really bad.
Speaker 5 (17:49):
Then the Fed's got a cut by you know, two percent,
So over the last year, fewer jobs created than was
previously understood. How is the FED contextualizing again? I don't
think that any of that has much to do with
today's jobless claims number. That would have to be a
story that continues for a few weeks. But with all
of this context, I kind of do get to where
(18:10):
they are seemingly pointing, which is, we do have to
overlook this inflation data because there is significant weakening on
the labor side.
Speaker 2 (18:18):
And this is where the breakdown that I just gave,
I think kind of puts it all into you know
how they'll think about it. They're gonna look at core
goods and say, hey, that's because of tariffs. And once
those tariff price increases come through, Core Goods is going
to go back to doing what it used to do,
which is half percent to one percent annual decline. Core
services might be plateauing around three and a half percent,
(18:38):
but it really only needs to get down to like
three to be where it was before. Great we can do,
you know, that'll probably happen over the next year or so.
On the other hand, the labor market, once it gets
moving in one direction, the only thing that tends to
stop it is an intervention, and so we need to intervene,
is what the Fed's thinking. And I don't think that
that thinking is wrong, provide that this is what we
(19:00):
continue to see on the inflation side. I'm not saying that,
you know, three and a quarter three and a half
percent inflation is good. What I'm saying is it's not worsening,
but the labor market is. And in a situation where
neither side is really where you want it to be,
you've got to deal with the problem that is worstening
first and then move on to the other one.
Speaker 3 (19:20):
And I think that's totally defensible.
Speaker 2 (19:22):
And if I were on the FED, which no one
would ever want me there, I'd so, yeah, we got
to go a quarter percent next next week, with plans
to maybe go heavier in October if the labor market
worsens further. Quick Break when we return It's Wall Street.
Speaker 1 (19:37):
Watch Like us on Facebook and follow us on Twitter
at TFE show. Breaking business news is always first right
here on the Financial Exchange Radio Network. Time Now for
Wall Street Watch a complete look at what's moving market
so far today right here on the Financial Exchange Radio Network.
Speaker 6 (20:00):
Market seeing a nice little bump today is Walster rereacts
to a key inflation measure posted this morning, where the
consumer price index increased two point nine percent on an
annual basis, in line with expectations, yet hotter than July's
gain of two point seven percent. Jobless claims data also
came in slightly above estimates.
Speaker 3 (20:21):
Right now, the.
Speaker 6 (20:22):
Dow is up just over one percent higher, or five
hundred and seven points, SMP five hundred is up six
tens of one percent, or forty three points higher, NASDAC
up just over half a percent, or one hundred and
nineteen points. Russell two thousand is up nearly one percent,
Tenure Treasure reeled down three basis points at four percent,
and crude oil is down nearly two percent today, training
(20:46):
its sixty two dollars and fifty cents a barrel after
its best day since nineteen ninety two. On the heels
of its optimistic AI revenue projections. Oracle shares are slightly
retreating from yesterday's thirty six percent surge, down five percent today. Separately,
the Wall Street Journal reported it struck a three hundred
(21:06):
billion dollar cloud deal with open Ai. Meanwhile, recent meme
stock open Door jumping fifty four percent after the online
housing platform named a top Shopify executive as its next CEO.
Elsewhere after its three percent pullback yesterday following an overall
underwhelming product event, Apple shares are up about eight tenths
(21:28):
of one percent today after a successful IPO yesterday, where
shares jumped fourteen percent in its debut. Shares in the
buy now, pay later platform Klarna are falling two percent today.
Kroger climbing nearly one percent after the grocery store chain
posted mixed quarterly results where it beat earnings expectations but
fell just short of revenue estimates. And energy drink company
(21:53):
Celsius is climbing about three percent after Goldman Sachs gave
the stock a buy rating with the banks at Celsius
has posted strong growth in is in a quickly growing category.
I'm Tucker Silvan, that is Wallstreet Watch, Mike.
Speaker 2 (22:08):
Anything else that you want to cover as it relates
to any of the economic data from this morning.
Speaker 5 (22:16):
No, I'm sure it'll seep through to other stories as
the day goes on Chuck.
Speaker 2 (22:21):
All Right, so now that we've gotten that out of
the way, let's talk about next week's FED meeting, because gosh,
it's gonna be exciting fireworks. It actually really won't be
that exciting. I think we kind of know what's happening.
The piece that is interesting, Lisa Cook is going to
be back and present for this FED meeting. The Supreme
(22:43):
Court did agree to hear the Trump administration's appeal related
to her firing being denied by a lower court. Was
that late last week or early this week? I can't
even remember this week. I believe this week. So, but
an expedited appeal does not mean by next FED meeting.
It probably means by Thanksgiving.
Speaker 5 (23:05):
Yeah, the next FED meetings in six days to be yes,
five days, and the press conferences in six days.
Speaker 2 (23:10):
So I suspect that the Supreme Court will likely have
a ruling out on this before your end, probably before Thanksgiving.
But Cook will be at that FED meeting, and also
potentially present is Stephen Moran, who was on the Council
of Economic Advisors for the President but was put forward
as the replacement for Kugler.
Speaker 3 (23:31):
What was that about a month ago?
Speaker 2 (23:32):
I think when Adrana Kugler decided to step down, and
so he cleared the Senate Banking Committee yesterday and potentially
could be confirmed by the full Senate in the next
couple of days. And so it steads the stage for
a widely expected quarter percent cut with the interesting possibility
(23:54):
that you could see descents to both sides for the
first time that I can remember on this.
Speaker 5 (24:00):
Yeah, so we talk about this. I think it's worth
an explanation.
Speaker 3 (24:03):
Again.
Speaker 5 (24:04):
This is a twelve member voting committee. They almost what
would you guess, like ninety percent of the time act unanimously.
Speaker 3 (24:15):
It might even be more than that.
Speaker 5 (24:17):
So most of the time, the vast majority of the
time they vote unanimously on which direction to go. The
last two meetings, you've had to sense pushing for lower
interest rates at this meeting. To your point, Chuck, which
would be incredibly abnormal, would be you clearly have some
voting members that want rates to go lower, and perhaps
(24:38):
even more than twenty five basis points. And then I
think they're likely to your point, are some folks that
are looking at this inflation data and saying I'm not
so sure. I don't know, though, Chuck, I tend to
think that you don't have anyone on that committee that
is going to be so firmly stuck to keeping rates
right where they are right now that they would descent
to the upside.
Speaker 4 (25:00):
Well, we'll have to see.
Speaker 3 (25:02):
I don't know. I mean, it's Look, here's the thing.
Speaker 2 (25:04):
Even though last segment I said, I think the Fed
it like can completely justify cutting a quarter percent right
now because the labor market's worsening, while the inflation picture,
you can make a case, is kind of just stagnating
out there.
Speaker 3 (25:17):
Yep.
Speaker 2 (25:19):
I think that there's room for someone who says, yeah,
these two risks are still both out there, and given
the potential for labor supply disruptions, there's a chance that
you might not see the unemployment rate move up much
further from here, And so you could be justified in
saying I don't want to do anything.
Speaker 4 (25:38):
Yeah, you could.
Speaker 2 (25:40):
The point that you make, and that I think you
know you kind of get from Powell from his Jackson
Whole speech, is when Powell gives the go ahead to
move in a direction. Usually he's pretty good at corralling
the rest of the committee, and so the signal from
August and that Jackson Hole speech is it's time to go,
(26:02):
and so I think given that, it would be surprising
to see a descent saying yes, I don't want to
cut rates now. It's not impossible, but it's a lower likelihood.
Speaker 5 (26:16):
The other counterpoint to my own perspective on this is
he undoubtedly has less ability to corral today given his
yes longevity compared to a couple of years ago. And
so you're right, there's going to be more willingness to dissent,
I think, and that could take place on either side here.
Most recently the descents have been towards lower rates, but
(26:36):
as Powell's influence wanes here in the last few months
of his role as chair, we could see that happen.
The interesting thing, too, Chuck. On the bond side, we
now have that ten year down below four percent, the
first time that's happened since since April fourth, right on
(26:58):
the cusp of the tariff announce Men's win markets freaked out.
I wonder if you have a take on the precipitous
drop that we've seen in that ten year benchmark over
the course of just the last week or so.
Speaker 2 (27:08):
It's it's all about jobs, and it's basically, Hey, if
the Fed's saying that they're gonna go and if the
labor market's weakening, we got to fix that first before
we worry about inflation. Is what the bond market is saying.
Whether that is right or wrong, we're gonna find out
over the next year.
Speaker 3 (27:26):
You know.
Speaker 2 (27:27):
That's not one that I think you call a win
by year end. I think it's one where, hey, you're
gonna have to see how this evolves by next year,
because if the economy does bottom in the next few
months and starts to reaccelerate, and now you're saying, okay,
like job's growth is picking back up again, inflation is
still running you know, three to three and a half,
(27:48):
and nominal growth is heading towards six that ten years
dramatically overpriced, then, right, if you have a deeper recession
that goes for a little bit longer, okay, Like, yeah,
you could probably justify it, but there's there are a
lot of eggs in the basket right now. For yeah,
rates are gonna be lower for longer. And I'm not
(28:10):
saying it's right or wrong. I don't know, but by
the end of next year, we're gonna find out. I mean, look,
if if the tenuere is still below.
Speaker 3 (28:20):
I'll give some wiggle rom on this.
Speaker 2 (28:22):
If the ten years below four and a half at
the end of next year, then this bond signal is
the right one.
Speaker 3 (28:27):
Right. If it's above four and a half, then oops.
Speaker 2 (28:30):
Like it's basically saying, hey, we we didn't need to
cut that much because this was a short term wiggle
in the economy and not a real slot, not a
real recession. Just take a quick break here. When we
come back, I do want to talk more about Oracle
from me. Yesterday just a monster day, and so we'll
talk about what they're doing today and what it means
(28:51):
after this.
Speaker 1 (28:52):
Text, does six one seven, three, six two five with
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Speaker 3 (29:24):
Alriting.
Speaker 2 (29:25):
So let's talk a little bit about the company known
as Oracle. So they reported earnings on Tuesday, and as
part of that they talked about, you know, future commitments
for purchases from their customers and specifically, like the term
(29:49):
that gets used when when talking about this is RPOs. Now,
this is not if you're a football fan, This is
not the run pass option. So I don't want you
to get, you know, all excited about that. This which
talking about remaining performance obligations and rbos. Just so that
you're aware of this, they are not guaranteed revenue. And
(30:11):
this is the direct quote from Oracle. They represent the
total value of contracted revenue that has not yet been recognized,
often tied to future performance obligations. And so if you
look at Oracles RPOs over the last couple of years,
they had risen from around sixty six billion dollars in
November of twenty three two one hundred and thirty eight
(30:34):
billion dollars in May of this year, and then just
jumped in one quarter at a four hundred and fifty
five billion. This is all because of the Stargate deal
between Oracle and open Ai, for you know, three hundred
billion dollars in cloud contracts that that Oracle is going
to deliver to open Ai over a three to four
year time period, which is all well and good. I'm
(30:55):
not saying that it's not. I'm just saying a couple
of things on this. The first is that when we
look at this, there are a couple different things that
you have to remember. The first is open AI does
not have any cash of its own just sitting around
to pay this. They don't, true, yep, they rely right
(31:19):
now on a bunch of funding in order to actually
pay their bills. So they don't just have like three
hundred and seventeen billion dollars. Their cash flow is not
three hundred and seventeen billion dollars. Their revenue run rate
is not like they don't have this money there.
Speaker 3 (31:33):
So the first question that you have in.
Speaker 2 (31:35):
Terms of hey, how ironclad is this is they can't
open Ai actually, you know, pay this. The second one
is will open AI actually pay this? Yes, they may
have signed a contract to do so. But we see
companies change their plans for construction all the time. Look
at all of the car companies that we're going to
be building EV plants and decided, O, G, like, we
(31:56):
can't sell that many evs, we don't need to actually
do this, and they changed their mind and delayed them,
and so on and so forth. The other piece on
this is no one asked or even seemed to care
on the conference call, Hey, what's the what's the return
on investment going to be here? You know, okay, you're
gonna be you know, getting three hundred billion dollars in contracts.
(32:19):
What's it gonna cost you in order to actually build
that and deliver it? What's the ROI on it? And
so these are the reasons why, in my opinion, that
Oracle stock, since it's big jump yesterday up to a
three hundred and forty five bucks a share, it's back
down today to around three ten. So it's given back
(32:40):
ten percent in you know, a twenty four hour period.
It obviously still has a massive gain there. But you
look at this and you say, okay, there are definitely
some questions that need to be answered here. And also
this is not actually new spending that is that no
one knew about. It's just it finally reached the stage
where it was formal enough that op that Oracle could
(33:02):
put it on their earnings report.
Speaker 4 (33:07):
Yeah.
Speaker 5 (33:08):
Uh, it's not the only giant move that kind of
has people scratched. I don't know if it has people
scratching their heads, but it is just another comparison point
that you can pretty easily make to the late nineties,
and I know that those are getting drawn out and
many of those comparisons being made. But I just see
(33:30):
it over and over again.
Speaker 3 (33:32):
And let's look.
Speaker 2 (33:33):
If we're gonna make comparisons to the nineteen nineties, then
let's make comparisons to the nineteen nineties. Oracle in the
nineteen nineties had an accounting scandal directly related to revenue recognition.
Speaker 3 (33:47):
Well, let's let's let's.
Speaker 2 (33:48):
They had a problem related to this. Uh, they had,
you know, settlements with regulators related to how are you
recognizing revenue?
Speaker 3 (33:58):
And what's going on.
Speaker 4 (34:00):
Here, folks.
Speaker 5 (34:02):
The markets have been inexorably tied to what's been going
on in the artificial intelligence space, and that has made
a lot of sense for quite some time, and it
is truly contributing to real development in the economy. When
we talk about deals like this one with Oracle or
other types of providers, we are talking about real dollars
(34:22):
invested and real infrastructure put into the ground. All of
that having been said, this excitement is drawing many comparisons
to the nineteen nineties, the dot com boom and then
that following bust cycle. And we are not the only
ones making those comparisons. I want to talk to you
all about a two part live broadcast of this show
(34:45):
with a seminar from the Armstrong Advisor Group that we
are doing this fall, two locations, two separate dates, and
limited time to sign up for these seminars and live broadcasts.
One of them is going to be down at the
Margaritaville Resort on Cape that's on October ninth. The other
will be a showcase super Lux in Chestnut Hill on
October sixteenth. Again October ninth, October sixteenth. I'm gonna give
(35:09):
you the number where you can get more details. But
if you are staring down this market and economy and wondering, hey,
how could this develop at the next stage and what
might that mean for me and my financial strategy?
Speaker 4 (35:22):
This these are the dates for you. This is the
event for you.
Speaker 5 (35:27):
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Speaker 1 (35:49):
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 in visors before
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Speaker 2 (36:05):
Mike, do we want to talk about tech stocks are
doing so well that investors are starting to worry or
IPO mania?
Speaker 5 (36:14):
I feel there's a little bit more meat on the
IPO bone.
Speaker 3 (36:18):
Talk to me.
Speaker 5 (36:20):
We have seen now, I mean it's been a relatively few,
but how many do we have scheduled now in terms
of AI and tech related names or frankly, even names
that aren't terribly related to AI who are just trying
to take advantage of the moment here pushing into the
publicly traded market. And a few years ago this was
(36:42):
not universally taken with open arms, but it seems to
be a little bit more in terms of excitement about
it over the course of the last few months. Would
you agree on that trend line?
Speaker 3 (36:52):
Yeah, I think so.
Speaker 5 (36:54):
In and of itself, probably not a concern, but again,
one more quiver in the or arrow in the quiver
of those making the comparisons to that pre dot com moment.
Speaker 2 (37:10):
The question, as you always have to ask, then, is
is this nineteen ninety seven or two thousand?
Speaker 4 (37:16):
You know, it's or neither, right, Like, you know, is
it all over?
Speaker 2 (37:19):
Like if you think we're heading towards a bus, then
remember like the dot com bubble went on for a
long time. I mean, it wasn't just something where you
were like, hey, we had two good years and it
fell apart.
Speaker 3 (37:32):
It was half a decade.
Speaker 2 (37:35):
And this puppy, quite honestly, just got started two and
a half years ago. And who's to say it can't
go on longer morph into something else? And you know,
it's I'm not saying that this is going to go
up forever, because like stocks always have pullbacks at some
point because something happens. But I do think it's important
(37:56):
to recognize, hey, this has been a really resilient market
all year, and there have been a number of challenges
even in the last month or two that haven't really
gone anywhere for it. It's like every time we say, oh, gee,
like this looks a little dodgy, it's a couple of
days and then that's kind of it. And that's that's
where we are right now with markets. It won't stay
that way forever, but it's where we are today. Quick
(38:21):
Break Hour two coming up in a bit
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