September 26, 2025 • 38 mins
Mike Armstrong and Paul Lane disucss why millions of Americans are becoming economically invisibile. Mike Simonsen, Chief Economist at Compass, joins the show to chat about the state of the housing market and where interest rates need to be to get things moving again. Costco tops earnings and revenue estimates as warehouse club gains more members. Starbucks is in a big mess. Paul LaMonica, Barron's, joins the show to chat how O’Reilly Auto Parts set themselves apart from other national autoparts retailers.
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Speaker 1 (00:00):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul Lane.
Speaker 2 (01:13):
More than happy Friday, and welcome back to the Financial Exchange.
We've got an exciting next hour for you. The chief
economist of Compass real Estate, Mike Simonson, is gonna be
joining us at the next segment, and then Paul Amonica
from Baron's gonna be joining us later on in the program.
This morning at eight thirty am, we got our release
from the Bureau of Economic Analysis, Yes BA, on the
(01:35):
state of inflation and did not surprise. This is our
second reading on inflation. CPI usually comes or always comes
earlier in the month, and this reading showed a similar story,
which is inflation, while it has been heating up a
bit in the last three months, remains in a I
would say, relatively uncomfortable level, but not worrisome enough to
(01:57):
drive the Fed to change their path, which is towards
cutting interest rates. The reading on inflation that you did
get this morning, the headline inflation number up two point
seven percent year over year, when you strip out food
and energy up two point nine percent, and those same
figures up point three and point two for the month,
and that's about where they've been since June. We've seen
(02:18):
these upticks since June whereas the months beforehand we're pretty
muted on the inflation front of things. We have a
new teriff announcement from the White House when it comes
to branded and pharmaceuticals that are manufactured outside the United States.
This headline, I think is going to be probably misinterpreted
(02:39):
by a lot of folks. So important to keep in
mind that this is just branded pharmaceuticals. It does not
apply to generics. But some of those branded pharmaceuticals are
looking at one hundred percent teriffreriate if the parent companies
are not investing in manufacturing inside the United States. And
I think might be a shot across the bow in
terms of what could be to come for generics, but
(02:59):
probably not a whole lot of willingness to do that
at this point. Near Caasser from Bloomberg writes, millions of
Americans becoming economically invisible. Paul, this is a story that
we have highlighted many times in kind of a different
light over the course of the last few months and years,
which is increasingly the spending in this nation is coming
(03:22):
from the top ten percent of income earners, and I'm
certain that when you look at the top half, it's
got to account for a whole lot of the spending,
but half of the total spending in this country is
coming from the top ten percent of income earners. And
so when we hear stories about this, I think this
fits right into that same narrative, which is quite literally
when you look at broad statistics about the economy, when
(03:45):
you look at consumer spending, when you look at inflation,
when you look at wages, there is a wide swath
of the American public, probably that bottom third or so,
that really do not move the needle at this point
for the state of the overall economy, and likewise probably
helps explain why the data on the numbers who's spending
what where does not seemingly match up with the data
(04:09):
on sentiment that we get on a regular basis.
Speaker 3 (04:11):
The bottom sixty percent of wage earners account for less
than a fifth of consumption in this country. That's down
from more than twenty six percent three decades ago. So
we were at twenty six percent for the bottom sixty
percent of wage earners three decades ago. That number is
now lower than twenty percent today. So you have sixty
percent numerically of the workforce, you know, eighty million plus
(04:36):
workers that are contributing less than twenty percent of overall
consumer spend. It's this weird phenomenon where numerically there are
more people statistically numbers wise, that are in a rougher
economic place, but you're in this uncomfortable economists spot where
you say it doesn't really matter as much for the
(04:58):
dollars and cents that are being spent around this.
Speaker 2 (05:01):
I hesitate to say it doesn't matter because I said
that too, and you just said it, and it's an
accurate description. Here's what it doesn't matter for. It does
not matter for the corporate profits of major US companies, right.
And those major US companies drive things like the stock market,
they drive major spending in the AI trade. And so
when we say it doesn't matter, I think that can
sound a little bit cold, and I don't think we're
(05:22):
intending for it to be cold. It is just the
literal reality of what moves the needle for this big
picture of the economy, for inflation, for GDP, for major companies,
and the answer is decreasingly sixty percent of Americans are
what moves the needle, right, And that's a pretty terrifying number.
(05:43):
And it's on top of I think a theme that
I keep hearing from folks, which is, what does the
job market look like ten years from now?
Speaker 4 (05:50):
With aim?
Speaker 2 (05:51):
Are my skills going to be valued in the same
way because unlike well, I guess, similar to other technologies
in the past, but this technology especially is designed with
one real thing in mind, which is to emulate human beings.
And look, there's other automation systems that have done the
same in the past. That you know, every technology in
(06:14):
some way is made to make people more efficient, but
this one does seem a little bit different on that front.
I think people are rightly afraid of it for that circumstance.
And what a lot of the writing has been around
is how are we going to ensure that this technology
does not make the wealth and income situation that we're
dealing with more diversions now even worse down the road. Sure,
(06:34):
and so we're seeing that there, and I think it
is a little bit tough to evaluate. We've got to
take quick break when we come back. Mike Simonson, chief
economist at Compass, joining us next on the show to
talk a bit about the state of the housing market,
what he's expecting for the end of the year here
and then obviously all eyes will be on that spring
market as well. Mike's with us next.
Speaker 1 (06:57):
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Speaker 2 (07:48):
Join us now. Is the chief economist at Compass real Estate,
Mike Simonson. Mike, thanks as always for joining us, and
congratulations are an order. I don't think we've spoken since
the new role, so congratulations on the new role at
one of from my perspective, one of the fastest growing
real estate firms out there.
Speaker 1 (08:03):
Thank you very much. It's all great to be here.
Speaker 2 (08:05):
So in your new role as chief economists there. I'm
sure you spend a lot of time addressing the staff
of realtors at Compass and what are you telling them
here as we head into what I would assume is
usually a pretty slow period of time for real estate transactions.
The closer we get to Thanksgiving, I've got to imagine
(08:27):
that's when things really dry up. But what are you
seeing out there and what are you telling the realtors
a Compass?
Speaker 5 (08:32):
Yeah, so yeah, my job is really to help everyone
understand the US housing market, and that's buyers and sellers
as well as the professionals in the organization. So yeah,
so it is, it's a fall, it's in September. We
actually have a little bit of a last gasp of
the housing market in the US. Is actually there's really
(08:53):
two markets happening right now. There's a Midwest and Northeast
and then there's the sun Is there are two different
things going on, and so in the Midwest and Northeast
inventory is still actually very tight. There's not a lot
of people selling homes moving you know, like the over
(09:14):
the years, we've been moving north to south, and as
it got expensive to move, we're moving a lot less
right now. And then that's not just mortgage rates, it's
also insurance and all the other things. So we're moving
a lot less commonly right now. It's also the job
market because because companies aren't hiring very quickly, we're not
quitting our job in Boston to buying one in Orlando,
(09:38):
and so we're not selling our house in Boston to
buy in Orlando. Or Inventories at very high levels in
Orlando and still very tight in the Northeast. So that's
a really a really notable split in the US right now.
Speaker 2 (09:54):
I hate to get overly specific here, but I have
been just just amazed by what's been going Onnnecticut has
been reliably the worst inventory situation in the country. I
know this applies to most of the Northeast, but you know,
if there's something unique about Connecticut and its proximity to
New York, perhaps that's making it such a difficult market
to buy a home right now.
Speaker 5 (10:14):
You know, you're right that Connecticut has been like just
barely maybe one or two percent more homes unsold on
the market than a year ago. For much of the year,
it was fewer homes, and so, you know, I think
that it is the in this phenomenon. It's more commonly
(10:36):
the suburban areas than the urban areas. So for example,
I was in Chicago this week, and the same thing's
happening in Chicago. There's inventory in downtown condos in Chicago,
but in suburban Chicago it's very tight. And it's like,
those are the folks who were you know, selling and
move and south, and those are the folks who are
(10:57):
holding on still. And there may be you know, the
city of New York has actually had you know, like
a reasonable demand for home so like and growth in
the economy, so that could spill over into Connecticut and
be part of the factor that like there's less supply
(11:17):
and demand isn't as lighted as it is in much
of the country.
Speaker 2 (11:22):
Mike, I'm aware of this story that you've told of
two housing markets in this nation, the sun Belt versus
Midwest and Northeast, and just how different those markets look.
And the question that comes to mind for me is why.
And I've been you know, putting together some answers. You know,
it's a reversal of COVID trends. That's where a lot
of the homes were built over the last several years.
Insurance costs go up. Is there a but honestly, like,
(11:46):
none of those to me explain all of it. Is
there a really concise story as to why the Sun
Belt is seeing such an uptick in inventory right now?
And is there something that reverses that trend or at
least equalizes that market, because it does not seem as
though that that increased volume is leading to way more
transactions and way more price cuts.
Speaker 5 (12:06):
Yeah, so it is in fact all those things. I
called it the great stay where we are staying in
our towns, We're staying our homes longer, we're staying in
our jobs longer. So you know, because companies aren't aren't
hiring very quickly, we're not quitting our jobs were and
so we're doing so all of these things were like
(12:27):
it's related to COVID and the you know, I have
a great mortgage from the pandemic, and you know, the
companies have the right staff size from the pandemic, so
all of those things, and they don't need to hire more.
So all of those things are conspiring to keep us
in place longer. The and and so you're right, like
(12:47):
in the places where we've been building a lot of
houses because we've been moving.
Speaker 1 (12:50):
Very quickly there.
Speaker 5 (12:53):
Now we when we slow When we slow down that move,
we those that inventory builds up in a place like
western Florida, like Tampa, we have right now we have
outbound migration, so Tampa is actually shrinking. We have also
things like dramatically higher insurance costs. So you know, if
(13:14):
you had a house in Tampa that you used for
a couple of weeks a year, it used to be
very cheap to hold that. Now it's suddenly got more
expensive to hold that. So even if we're not moving,
those also come back on the market. So you have
all of these factors that are going together right now.
My guess is when does this change? When does it end?
And when we get into a business cycle where companies
(13:36):
are hiring again and we are more confident about our
ability to quit our jobs, you know, those kinds of
elements in this in the business cycle, when those kick
in again, then we can move. Then we will say,
you know what, Okay, I put off my move to
Florida or to Arizona or.
Speaker 1 (13:54):
For three years.
Speaker 5 (13:55):
Now now it's time to move. So we're in a
in a you know, a restricted to now and at
some point those like that, the governors get lifted and
allow us to start moving again.
Speaker 2 (14:10):
So, Mike, I won't try and nail you down on
where you think interest rates are going, because I don't
know about you. I find that to be a loser's
game of trying to predict where that's going to be.
But can you instead try and give me a sense
of where you think interest rates might need to be
for people to stop feeling so locked into their current situation.
Speaker 5 (14:30):
Yeah, there have been in the last three years, there
have been two moments when interest rates mortgage the thirty
year mortgage rate got close to six percent, and in
both of those types, so it was the beginning of
twenty three and it was September last year, and both
of those moments turned into an uptick in buyer demand,
(14:53):
more transactions, and actually pushed home crisis higher surprisingly quickly.
Surprisingly to me, I was surprised by the reaction both
of those times. So I look at six percent as
a as a sort of threshold where we start to
move the needle. We start to see, oh, there's more
transactions happening, there's you know, people are are you know,
(15:15):
feeling like a move is affordable, and so there's been
only two moments in the last three years. When when
that happened? The six and a half percent is not enough,
and so when the when when when rates are roughly
around six that means some people are getting rates in
(15:35):
the fives and those people are starting to feel affordable.
So that's that's really a level I am interested in.
What's interesting right now is that the jobs market is
arguably deteriorating. The the unemployment rate is ticking up, the
(15:55):
hiring rates are very low, that job creation rates are
very low. And so does that mean in twenty twenty six,
if the job market is worse, the economy is slower,
does that mean that number needs to be even lower
before we move the needle. Maybe that threshold moves lower
(16:16):
in the coming year. But as of right now, the
two times that we've gotten close to six percent, we
could see the neil move on housing demand.
Speaker 2 (16:24):
Yeah, that all else equal statement is all threatened right now.
Mike Simonson, chief economist at Compass, joining us today talk
about the state of the national housing market. I really
appreciate you coming on, Mike, and we'll talk to you
again soon.
Speaker 5 (16:37):
You right, we'll touch on all right.
Speaker 6 (16:39):
Time for trivia here on the Financial Exchange and it's
the final day of TV sitcom trivia here that we've
been doing the entire week, So here we go. Everybody
Loves Raymond ran from ninety six to two thousand and
five on CBS. The show was nominated for sixty nine
Emmy Awards, and one fifteen most of the cast members
won an Emmy Award for their perform Lawrence is on
(17:00):
the show. Of the main five actors on the show,
only one failed to win an Emmy Award. So our
triview question today, who is the only actor on Everybody
Loves Raymond to not win an Emmy Award during their
time on the show? Once again, who is the only
actor on Everybody Loves Raymond to not win an Emmy
(17:23):
Award during their time on the show? Be the third
person today to text us at six one seven three
six two thirteen eighty five with the correct answer you know,
win a Financial Exchange Show T shirt.
Speaker 4 (17:35):
Once again.
Speaker 6 (17:36):
The third correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (17:46):
I'm gonna give this one to Tucker. Tucker, you want
us to talk about costco or Zillo Zillo Zillo. All right, uh,
Zillo just hit their first profitable year in the last
thirteen Uh. The last time they did this was twenty
two twelve, and they have gone through a few rough
tracks here. They tried buying houses unsuccessfully. They tried a
(18:07):
few different things that didn't work well. But they seem
to be getting the point that, hey, we are one
of the most popular forget about real estate websites, like
we are one of the most popular websites out there
that Americans like to browse, and let's maximize the utility
of that. And finally finding a way to make a
profit here.
Speaker 3 (18:23):
Well, it's funny the context of the article in the
Wilsted Journal here largely a lot of the improvements on
the profitability have been from cutting expenses. It's like, uh aha,
suddenly we realize that if we cut overhead and trim
down some of the stock based compensation, that we would
generate a profit. Who knew by cutting our expenses that
we would go to profitability. They all are also diversifying
(18:45):
their services a little bit, trying to make money from
mortgage origination, rental listings, and software for real estate professionals.
Speaker 4 (18:51):
So those have been helpful.
Speaker 2 (18:53):
Here's what I think they need to go further, Like
this company has so many eyeballs on their listings every
single day, they need to be adveraged to us, like, hey,
you really like the look of that house. I keep
seeing you look at it, because that's how people are
using this site now. It's not to actually buy real estate.
It's just as a hobby. You like the look of
that kitchen, here's the same one from Ikia. You know,
(19:15):
advertise that type of thing. I think that they have
so many eyeballs, it's becoming more of a social media
platform than it is a true real estate platform, and
I think they underappreciate how much more they could advertise.
Quick break, we'll have the trivia winner and then talk
some costco Next.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:58):
Markets and Knicks Territory. After yesterday's pullback, where investors are
reacting to the core PCE index posted earlier this morning,
which climbs zero point two percent last month, in line
with estimates. Right now, the Dow is up by about
a half a percent or.
Speaker 4 (20:14):
Two hundred and thirty six points.
Speaker 6 (20:16):
SMP five hundred is up nearly three tenths of one
percent or eighteen points. NASDAC dipping by seven points at
the moment. Rust two thousand is up two tenths of
one percent, Tenure treasreel currently at four point one point
eight three percent, and crude oil is up over two
percent higher today training at sixty six dollars and thirty
(20:38):
three cents a barrel. Furniture and home good stocks are
seeing attention today after President Trump announced tariffs on imported
items such as kitchen cabinets, an upholstered furniture, Williams Snowman
down by nearly one percent, while our h is falling
over three percent. Wayfair, on the other hand, is actually
(20:58):
up almost one percent. President Trump also announced that he
will impose a twenty five percent tariff on imported heavy trucks.
Sending shares Impewter Built and Kenworth Owner Packcar up by
over five percent. Pharmaceutical stocks are also in the spotlight
after Trump announced a one hundred percent tariff on branded
patented imported drugs, exempting companies building plants in the US, Eli, Lilly,
(21:24):
Murk are all edging higher, while Nova Nordisk is down
over one percent. Meanwhile, Intel stock climbing another three percent
at the moment, now on pace four fourth straight day
of gains. Following a report from The Wall Street Journal
that CEO Lip Bhutan has approached Apple, Taiwan Semiconductor and
other companies about investments or partnerships, and Costco shares falling
(21:47):
nearly two percent after the warehouse retailer posted higher sales
and profit in the previous quarter. However, same store sales
growth missed street expectations. The company also noted that newly
extended store hours were paying off. I'm Tucker Silva and
that is Wall Street Watch And in the previous segment,
well you asked you the trivia question. Who was the
(22:09):
only actor on Everybody Loves Raymond to not win an
Emmy Award during their time on the show. For some reason,
it was Peter Boyle, who played Frank Baron and was
probably the best character on the show. Dottie from Saugust,
Mass is our winner today, taking home the Financial Exchange
showed t shirt. Congrats to Dottie, and we played trivia
every day here in the Financial Exchange See complete contest
(22:30):
rules at Financial Exchange Show dot com.
Speaker 2 (22:32):
Costco stock actually moving down today after what was described
as a pretty good earnings report. Stock hasn't really moved
a whole lot over the course of the last year.
They're up about two and a half percent for the
past twelve months today down a little bit over two
percent in early trading. I I don't know the details
of what investors were looking for out of this earnings report.
(22:54):
Their e commerce sales did bump up by thirteen and
a half percent. I just have to say, like, I'm
amazingly impressed by this company's performance and kind of where
they stand in the retail space right now. Again, stock
price not reflecting any big changes on this front in
the last twelve months, but last five years, this company's
up a hundred and seventy percent. Having so, I hadn't
(23:17):
shopped really at Costco much at all until this year
when we changed from Bja's because a new one opened
in our area. I think there's something that sets them apart, like, yes,
they are a big box discount retailer, where you can
go get all your stuff, presumably at a slightly lower
price point, although I don't know that that's really what
draws people in now. Costco has done an amazing job
(23:41):
at setting themselves apart with specific products that people will
go to the store. For sure, their tequila, for example,
my uncle will only drink tequila Costco Kirkland brand tequila,
and when covid struck, the dude went out and bought
like fifteen bottles of tequila because he wasn't sure when
he'd be able to go back to Costco. They have
(24:02):
clothing that people will actually go to Costco just to
buy the special brand of clothing that is apparently, you know,
maybe a knockoff of Lululemon, but now here nor.
Speaker 4 (24:10):
What they are right.
Speaker 2 (24:12):
They are becoming, in my mind, a bit of a tjxplay,
how like you're going to Costco sometimes because you've heard
that this slightly rare product that they don't usually keep
in stock might be at that TJX, sorry, at that
Costco store. They're creating this kind of treasure hunt type vibe.
I mean, heck treader hunt. They literally were selling gold
(24:33):
bars over the last few years and selling out of them.
I think that Costco really from that perspective, occupies a
different space than BJ's and Sam's Club do.
Speaker 4 (24:42):
Oh definitely.
Speaker 3 (24:43):
I mean really, they spend no money on marketing at all,
so all of their marketing is word of mouth from customers.
So it points to what you're talking about there, is
that specific customers have this loyalty to brands, whether it's
the Kirklum brand or specific items from Costco. They talk
about it and probably the reason you got a membership
is because you had probably heard of all these people
(25:04):
who really enjoy the experience. The reason I got onto
it is my wife and my father in law were
huge proponents of it, and all of a sudden it
got me into that world too, where I love about
their business. It's so simple and straightforward. It's thirteen to
fourteen percent margins on pretty much everything that they sell,
so you know you're getting a fair price. And then
also the quality of stuff that they present is really
(25:27):
strong and that's what keeps people coming back to generate
the free casful from that membership fee that they drive
from every year.
Speaker 2 (25:35):
Do you have the membership that gets you in a
half hour early?
Speaker 4 (25:38):
My father in law does we mooch you off that
a little bit.
Speaker 2 (25:40):
Yeah, yeah, that's critical.
Speaker 4 (25:42):
On the weekends. It's crazy.
Speaker 3 (25:43):
Why because if you go on a Saturday it is
an absolute zoo. If you're taking your young children, you
have to worry about them getting mowed down by Do not.
Speaker 2 (25:52):
Take young children to grocery shopping. That's like come on,
parenting one on one.
Speaker 3 (25:56):
No, we'll do it for kill time in the winter
if it's slow.
Speaker 4 (25:59):
Yeah, hell on Earth.
Speaker 2 (26:02):
My wife and I have this debate all the time, like,
I'm going shopp I'm gonna take the kids.
Speaker 4 (26:05):
Like, what a terrible idea.
Speaker 2 (26:06):
They're gonna grab everything off the shelves, they're gonna try
and put it in the car. They're gonna ride in
the cart and then climb on the cart. Terrible idea.
Speaker 3 (26:12):
Leave you kid, you don't know how desperate winter gets.
Speaker 4 (26:15):
Well send it to a playplace in the winter. Good
luck with that.
Speaker 2 (26:17):
Yeah, I don't know. I don't have a good alternative.
That's what Uncle Walt's there for.
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Speaker 1 (27:19):
The proceeding was paid for and the views expressed are
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Cushing and Armstrong did not endorse each other and are
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Speaker 2 (27:30):
Starbucks still working on that turnaround story and not seemingly
getting there, and stock prices reflecting it as such. The
year to date, this company has lost about ten percent
of their value over the last five years, they have
gained nothing, their stocks basically flat over five years. New
CEOs in there trying to work a turnaround story, closing stores,
trying to simplify things. But the more I thought about this,
(27:52):
so the real problem that you know, the CEO has identified,
at least one of the big problems he's identified, is
the crazy number of customizations you can make when you
go to a Starbucks. And I was comparing this too, Like,
imagine you walk into even a fancy bar, Paul, you
walk into a high end bar where they're all about cocktails.
Speaker 4 (28:13):
Yep.
Speaker 2 (28:14):
You don't go up to the bartender and say, hey,
I'd like you to mix the rum with the uh
with this specific you know, sweetener, and then add a
little bit of that flavor in there for me and
make this specific cocktail that I just dreamed up for me.
Speaker 4 (28:31):
You just pick what's on the list.
Speaker 2 (28:33):
You either pick a very well known cocktail like a
Manhattan that they're definitely going to know how to make,
or you go look at their list of you know,
inventive cocktails and go with that. That's not the Starbucks model.
The Starbucks model is you have it exactly the way
that you want, and if we screw it up, we're
going to remake it for you. And because of the
number of ingredients that we carried, there's something like hundreds
(28:53):
of thousands of different possible combinations, and we're going to
do it all for less than a cocktail costs, right,
and the like even the largest one. If you make
one of those what was the let's see a Venti
white mocha quad shot, two shots on two on top,
all the milk, extra hot caramel drizzle inside the cup,
and extra whipped cream. Like you think about that, that
(29:17):
type of specification and customization should cost something outrageous over
ten dollars, and probably doesn't. And so I don't know
how they get themselves out of this conundrum because.
Speaker 6 (29:30):
They just stop assessing the orders like this is the menu.
Speaker 2 (29:34):
I think they lose customers.
Speaker 4 (29:35):
No, they don't.
Speaker 2 (29:36):
I think I don't know they do.
Speaker 6 (29:38):
I think if you have enough variety of like the uh,
the sweet coffee drinks and with the regular coffee drinks
like variety agreed.
Speaker 2 (29:47):
I think that's what they need to do it. I
think they need to do it because that's how I
would assume bartenders and bars make money is they you know,
pre mix a whole bunch of stuff for the items
that are on their menu, and so even if they're
really complex, they can just make it hap been pretty quickly,
and Starbucks can't. And so I think that's the only
choice they have is to simplify the menu further. Yeah,
and I think they're terrified to do so well.
Speaker 3 (30:08):
Also, the other piece of this is that they have
to commit one way or another, and it sounds like
they're committing back to the older way of Previously Starbucks.
You went to for the experience to sit down there
and enjoy your latte and you know, utilize the Wi Fi,
and it was more experiential.
Speaker 2 (30:23):
Bring your typewriter.
Speaker 3 (30:25):
But now with the prevalence of the mobile online ordering system,
it's become much more transactional, and so you sort of
have to pick one way or another. Are you the
neighborhood coffee shop or are you trying to be like
the Duncan of the world where it's really focused on
just hammering out more mobile orders as.
Speaker 6 (30:42):
Fast as you guys see the new store concepts for Starbucks. Yeah, no, no,
for something else, Well, I thought there was lucking in here.
Speaker 4 (30:53):
Just make it some way.
Speaker 6 (30:54):
I mean the images are out there. They're definitely going
back to the coffee shop vibe.
Speaker 4 (30:58):
Now is it? Does it look nice? Loser? Internet right there?
You look at it. You'll do it. You do it? No,
you do it.
Speaker 2 (31:05):
Let's take a quick break and Paula Monica's joining us next.
Speaker 4 (31:08):
He'll do it.
Speaker 1 (31:10):
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(31:31):
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Speaker 6 (31:48):
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can still help our great American heroes. The race is Saturday,
November eighth, a Castle Island and you can visit DAV
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(32:08):
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Go to DAV five k dot Boston and make your
donation today.
Speaker 3 (32:18):
We are now joined by Paul Lamonica from Barons to
talk a little bit about a specific stock that we'll
get to.
Speaker 4 (32:26):
In just a moment. But Paul, thanks so much for
joining us. Thanks a lot, So Paul.
Speaker 3 (32:30):
We got oh O'Reilly Auto Parts on the dock. We're
gonna be talking about o'relly and in particular, this company
has done quite well this year. It's up thirty percent
year to date, and the company's sales forecasts are growing
while it's peers it appear to be declining. What are
(32:52):
some of the reasons behind just how well this company
has performed and just the execution and underlying o'rally' success
here to date.
Speaker 7 (33:00):
Yeah, it's a great question, I think you know. In particular,
they've been looks like taking market share probably from advanced
autoparts and genuine parts. AutoZone, which reported earnings earlier this week,
is another very solid competitor, and I think a lot
of people look at O'Reilly and AutoZone as the leaders
in this industry, but O'Reilly in particular, I think has
(33:22):
done a great job of opening up a lot of
these regional distribution centers across the country, and that enables
them to get parts to stores and mechanics at lightning speed.
One analyst that I quoted in the piece talked about
how he was at a store doing a channel check
(33:43):
and employees there were telling him that they can get
parts in as quick quickly as twenty minutes from one
of their regional distribution hubs. So that's great for customers
if you're walking in and need a break bad or
you know oil or obviously the oils usually in the store,
but if you need something that's not there, odds are
(34:05):
you're going to get it pretty quickly. And with consumers
now driving clunkers for longer instead of buying new cars,
there's a lot of need for those repairs every now
and then, and I think a lot of people like
to do it themselves for cost effective reasons.
Speaker 3 (34:21):
That's blown me away is that the average aid of
a US vehicle on US roads is in over twelve years,
I believe, right, and that has I imagine been a
huge catalyst for the company in terms of its success.
Is that something that the CEO and executives have noted,
that the amount of used cars out there is helping
their business.
Speaker 7 (34:41):
Yeah, without question, either you used cars or people just
holding on to cars for longer. I mean, it does
seem a little counterintuitive. You might think that, oh no,
if GM and Ford are having slower sales and if
people are driving electric more, that would be a problem.
(35:01):
But it doesn't seem to be the case. It's counterintuitive,
but I think that the older the vehicle fleet is
for cars and trucks across the country, that's probably better
for O'Reilly, especially for those DIY customers that want to
do the repairs themselves.
Speaker 3 (35:18):
Are they seeing any impact from tariffs in terms of
their products.
Speaker 7 (35:23):
Yeah, I mean tariffs have been a concern, but so far,
it seems like consumers are willing to pay the higher prices,
or at least they're paying the higher prices. No one's
obviously going in and saying Yay, I'm paying more money,
but they aren't going to stop making the necessary purchases
(35:45):
for maintenance and repairs. And I think O'Reilly and autos
don't have also done a decent job of keeping some
of those costs down so that they don't have to
pass all of the tariff related expenses to consumers. So
this seems to be a little bit more of a
tariff resistant consumer company than others. And it's why one
(36:05):
analyst you know, came up we all talk about the
Magnificent seven and the former fang stocks. An analyst and
UBS said that o'reiley is the O in the cow
stocks of three fantastic retailers, Costco which reported earning last night,
o'reiley and Walmart being the w.
Speaker 4 (36:24):
We'll see if that takes hold.
Speaker 3 (36:26):
Paul A Monica from Baron's Paul, thanks so much for
the time this week.
Speaker 4 (36:30):
Really appreciate it.
Speaker 3 (36:31):
Have ay great weekend you too, Thanks guys, Paul.
Speaker 2 (36:35):
Experts are saying that by now, pay later vacations are
a bad idea. If you need an expert to tell
you that booking a vacation that you can't afford and
using buy now, pay later for an asset that immediately
depreciates once you purchase it, I don't know who needs
that advice, But like you know, we talk about Carlans
(36:58):
being irresponsible because those are quickly depreciating asset using buy now,
pay later to buy groceries or pizza from what was
the one that we covered a few years ago. Papa
John's allows you to buy pizza buy now, pay later one.
If you are one of these buy now, pay later
(37:19):
firms and that company, then that person doesn't pay you back.
What exactly are you collecting on because the piece is gone,
And even if you could collect on it, even if
they any the whole thing, I don't think you're gonna
be able to resell it. Same goes for a vacation,
and I just imagine somebody now some of these companies,
they do require you to make the payment in full
before you depart on your vacation. So it's like, Okay,
(37:39):
I've booked it in January, I'm leaving August. I have
to be have it fully paid.
Speaker 4 (37:42):
Could he use this for college spring break?
Speaker 2 (37:44):
Imagine for a moment that you can't make the payments,
then you still have to go on the vacation because
it's not cancelable, And the entire time you're just dressing
about the fact that you lost your job and have
to go on this wonderful safari through Africa. And like,
what a my terrible way.
Speaker 4 (38:01):
You can't pay, you can't pay enough to have a
great vacation. It's worth it, got it, It's just kidding.
Speaker 2 (38:06):
Uh uh. Markets are mixed, The Nasdaq is off about
a bit more than a tenth of a percent, s
m P and Dower positive. As we end the show today,
we'll be backed at it on Monday. Have a great weekend, everybody,
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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the hosts, do not reflect the opinions of Armstrong Advisory
or anyone else. Investments can lose money. This program does
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your own financial, tax, and estate planning advisors before making
(00:20):
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(00:43):
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(01:03):
This is the Financial Exchange with Mike Armstrong and Paul Lane.
Speaker 2 (01:13):
More than happy Friday, and welcome back to the Financial Exchange.
We've got an exciting next hour for you. The chief
economist of Compass real Estate, Mike Simonson, is gonna be
joining us at the next segment, and then Paul Amonica
from Baron's gonna be joining us later on in the program.
This morning at eight thirty am, we got our release
from the Bureau of Economic Analysis, Yes BA, on the
(01:35):
state of inflation and did not surprise. This is our
second reading on inflation. CPI usually comes or always comes
earlier in the month, and this reading showed a similar story,
which is inflation, while it has been heating up a
bit in the last three months, remains in a I
would say, relatively uncomfortable level, but not worrisome enough to
(01:57):
drive the Fed to change their path, which is towards
cutting interest rates. The reading on inflation that you did
get this morning, the headline inflation number up two point
seven percent year over year, when you strip out food
and energy up two point nine percent, and those same
figures up point three and point two for the month,
and that's about where they've been since June. We've seen
(02:18):
these upticks since June whereas the months beforehand we're pretty
muted on the inflation front of things. We have a
new teriff announcement from the White House when it comes
to branded and pharmaceuticals that are manufactured outside the United States.
This headline, I think is going to be probably misinterpreted
(02:39):
by a lot of folks. So important to keep in
mind that this is just branded pharmaceuticals. It does not
apply to generics. But some of those branded pharmaceuticals are
looking at one hundred percent teriffreriate if the parent companies
are not investing in manufacturing inside the United States. And
I think might be a shot across the bow in
terms of what could be to come for generics, but
(02:59):
probably not a whole lot of willingness to do that
at this point. Near Caasser from Bloomberg writes, millions of
Americans becoming economically invisible. Paul, this is a story that
we have highlighted many times in kind of a different
light over the course of the last few months and years,
which is increasingly the spending in this nation is coming
(03:22):
from the top ten percent of income earners, and I'm
certain that when you look at the top half, it's
got to account for a whole lot of the spending,
but half of the total spending in this country is
coming from the top ten percent of income earners. And
so when we hear stories about this, I think this
fits right into that same narrative, which is quite literally
when you look at broad statistics about the economy, when
(03:45):
you look at consumer spending, when you look at inflation,
when you look at wages, there is a wide swath
of the American public, probably that bottom third or so,
that really do not move the needle at this point
for the state of the overall economy, and likewise probably
helps explain why the data on the numbers who's spending
what where does not seemingly match up with the data
(04:09):
on sentiment that we get on a regular basis.
Speaker 3 (04:11):
The bottom sixty percent of wage earners account for less
than a fifth of consumption in this country. That's down
from more than twenty six percent three decades ago. So
we were at twenty six percent for the bottom sixty
percent of wage earners three decades ago. That number is
now lower than twenty percent today. So you have sixty
percent numerically of the workforce, you know, eighty million plus
(04:36):
workers that are contributing less than twenty percent of overall
consumer spend. It's this weird phenomenon where numerically there are
more people statistically numbers wise, that are in a rougher
economic place, but you're in this uncomfortable economists spot where
you say it doesn't really matter as much for the
(04:58):
dollars and cents that are being spent around this.
Speaker 2 (05:01):
I hesitate to say it doesn't matter because I said
that too, and you just said it, and it's an
accurate description. Here's what it doesn't matter for. It does
not matter for the corporate profits of major US companies, right.
And those major US companies drive things like the stock market,
they drive major spending in the AI trade. And so
when we say it doesn't matter, I think that can
sound a little bit cold, and I don't think we're
(05:22):
intending for it to be cold. It is just the
literal reality of what moves the needle for this big
picture of the economy, for inflation, for GDP, for major companies,
and the answer is decreasingly sixty percent of Americans are
what moves the needle, right, And that's a pretty terrifying number.
(05:43):
And it's on top of I think a theme that
I keep hearing from folks, which is, what does the
job market look like ten years from now?
Speaker 4 (05:50):
With aim?
Speaker 2 (05:51):
Are my skills going to be valued in the same
way because unlike well, I guess, similar to other technologies
in the past, but this technology especially is designed with
one real thing in mind, which is to emulate human beings.
And look, there's other automation systems that have done the
same in the past. That you know, every technology in
(06:14):
some way is made to make people more efficient, but
this one does seem a little bit different on that front.
I think people are rightly afraid of it for that circumstance.
And what a lot of the writing has been around
is how are we going to ensure that this technology
does not make the wealth and income situation that we're
dealing with more diversions now even worse down the road. Sure,
(06:34):
and so we're seeing that there, and I think it
is a little bit tough to evaluate. We've got to
take quick break when we come back. Mike Simonson, chief
economist at Compass, joining us next on the show to
talk a bit about the state of the housing market,
what he's expecting for the end of the year here
and then obviously all eyes will be on that spring
market as well. Mike's with us next.
Speaker 1 (06:57):
Miss any of the show. Catch up and your unions
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This is the Financial Exchange Radio Network. The Financial Exchange
(07:18):
is Life on Series XM's Business Radio channel one thirty
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This is the Financial Exchange Radio Network.
Speaker 2 (07:48):
Join us now. Is the chief economist at Compass real Estate,
Mike Simonson. Mike, thanks as always for joining us, and
congratulations are an order. I don't think we've spoken since
the new role, so congratulations on the new role at
one of from my perspective, one of the fastest growing
real estate firms out there.
Speaker 1 (08:03):
Thank you very much. It's all great to be here.
Speaker 2 (08:05):
So in your new role as chief economists there. I'm
sure you spend a lot of time addressing the staff
of realtors at Compass and what are you telling them
here as we head into what I would assume is
usually a pretty slow period of time for real estate transactions.
The closer we get to Thanksgiving, I've got to imagine
(08:27):
that's when things really dry up. But what are you
seeing out there and what are you telling the realtors
a Compass?
Speaker 5 (08:32):
Yeah, so yeah, my job is really to help everyone
understand the US housing market, and that's buyers and sellers
as well as the professionals in the organization. So yeah,
so it is, it's a fall, it's in September. We
actually have a little bit of a last gasp of
the housing market in the US. Is actually there's really
(08:53):
two markets happening right now. There's a Midwest and Northeast
and then there's the sun Is there are two different
things going on, and so in the Midwest and Northeast
inventory is still actually very tight. There's not a lot
of people selling homes moving you know, like the over
(09:14):
the years, we've been moving north to south, and as
it got expensive to move, we're moving a lot less
right now. And then that's not just mortgage rates, it's
also insurance and all the other things. So we're moving
a lot less commonly right now. It's also the job
market because because companies aren't hiring very quickly, we're not
quitting our job in Boston to buying one in Orlando,
(09:38):
and so we're not selling our house in Boston to
buy in Orlando. Or Inventories at very high levels in
Orlando and still very tight in the Northeast. So that's
a really a really notable split in the US right now.
Speaker 2 (09:54):
I hate to get overly specific here, but I have
been just just amazed by what's been going Onnnecticut has
been reliably the worst inventory situation in the country. I
know this applies to most of the Northeast, but you know,
if there's something unique about Connecticut and its proximity to
New York, perhaps that's making it such a difficult market
to buy a home right now.
Speaker 5 (10:14):
You know, you're right that Connecticut has been like just
barely maybe one or two percent more homes unsold on
the market than a year ago. For much of the year,
it was fewer homes, and so, you know, I think
that it is the in this phenomenon. It's more commonly
(10:36):
the suburban areas than the urban areas. So for example,
I was in Chicago this week, and the same thing's
happening in Chicago. There's inventory in downtown condos in Chicago,
but in suburban Chicago it's very tight. And it's like,
those are the folks who were you know, selling and
move and south, and those are the folks who are
(10:57):
holding on still. And there may be you know, the
city of New York has actually had you know, like
a reasonable demand for home so like and growth in
the economy, so that could spill over into Connecticut and
be part of the factor that like there's less supply
(11:17):
and demand isn't as lighted as it is in much
of the country.
Speaker 2 (11:22):
Mike, I'm aware of this story that you've told of
two housing markets in this nation, the sun Belt versus
Midwest and Northeast, and just how different those markets look.
And the question that comes to mind for me is why.
And I've been you know, putting together some answers. You know,
it's a reversal of COVID trends. That's where a lot
of the homes were built over the last several years.
Insurance costs go up. Is there a but honestly, like,
(11:46):
none of those to me explain all of it. Is
there a really concise story as to why the Sun
Belt is seeing such an uptick in inventory right now?
And is there something that reverses that trend or at
least equalizes that market, because it does not seem as
though that that increased volume is leading to way more
transactions and way more price cuts.
Speaker 5 (12:06):
Yeah, so it is in fact all those things. I
called it the great stay where we are staying in
our towns, We're staying our homes longer, we're staying in
our jobs longer. So you know, because companies aren't aren't
hiring very quickly, we're not quitting our jobs were and
so we're doing so all of these things were like
(12:27):
it's related to COVID and the you know, I have
a great mortgage from the pandemic, and you know, the
companies have the right staff size from the pandemic, so
all of those things, and they don't need to hire more.
So all of those things are conspiring to keep us
in place longer. The and and so you're right, like
(12:47):
in the places where we've been building a lot of
houses because we've been moving.
Speaker 1 (12:50):
Very quickly there.
Speaker 5 (12:53):
Now we when we slow When we slow down that move,
we those that inventory builds up in a place like
western Florida, like Tampa, we have right now we have
outbound migration, so Tampa is actually shrinking. We have also
things like dramatically higher insurance costs. So you know, if
(13:14):
you had a house in Tampa that you used for
a couple of weeks a year, it used to be
very cheap to hold that. Now it's suddenly got more
expensive to hold that. So even if we're not moving,
those also come back on the market. So you have
all of these factors that are going together right now.
My guess is when does this change? When does it end?
And when we get into a business cycle where companies
(13:36):
are hiring again and we are more confident about our
ability to quit our jobs, you know, those kinds of
elements in this in the business cycle, when those kick
in again, then we can move. Then we will say,
you know what, Okay, I put off my move to
Florida or to Arizona or.
Speaker 1 (13:54):
For three years.
Speaker 5 (13:55):
Now now it's time to move. So we're in a
in a you know, a restricted to now and at
some point those like that, the governors get lifted and
allow us to start moving again.
Speaker 2 (14:10):
So, Mike, I won't try and nail you down on
where you think interest rates are going, because I don't
know about you. I find that to be a loser's
game of trying to predict where that's going to be.
But can you instead try and give me a sense
of where you think interest rates might need to be
for people to stop feeling so locked into their current situation.
Speaker 5 (14:30):
Yeah, there have been in the last three years, there
have been two moments when interest rates mortgage the thirty
year mortgage rate got close to six percent, and in
both of those types, so it was the beginning of
twenty three and it was September last year, and both
of those moments turned into an uptick in buyer demand,
(14:53):
more transactions, and actually pushed home crisis higher surprisingly quickly.
Surprisingly to me, I was surprised by the reaction both
of those times. So I look at six percent as
a as a sort of threshold where we start to
move the needle. We start to see, oh, there's more
transactions happening, there's you know, people are are you know,
(15:15):
feeling like a move is affordable, and so there's been
only two moments in the last three years. When when
that happened? The six and a half percent is not enough,
and so when the when when when rates are roughly
around six that means some people are getting rates in
(15:35):
the fives and those people are starting to feel affordable.
So that's that's really a level I am interested in.
What's interesting right now is that the jobs market is
arguably deteriorating. The the unemployment rate is ticking up, the
(15:55):
hiring rates are very low, that job creation rates are
very low. And so does that mean in twenty twenty six,
if the job market is worse, the economy is slower,
does that mean that number needs to be even lower
before we move the needle. Maybe that threshold moves lower
(16:16):
in the coming year. But as of right now, the
two times that we've gotten close to six percent, we
could see the neil move on housing demand.
Speaker 2 (16:24):
Yeah, that all else equal statement is all threatened right now.
Mike Simonson, chief economist at Compass, joining us today talk
about the state of the national housing market. I really
appreciate you coming on, Mike, and we'll talk to you
again soon.
Speaker 5 (16:37):
You right, we'll touch on all right.
Speaker 6 (16:39):
Time for trivia here on the Financial Exchange and it's
the final day of TV sitcom trivia here that we've
been doing the entire week, So here we go. Everybody
Loves Raymond ran from ninety six to two thousand and
five on CBS. The show was nominated for sixty nine
Emmy Awards, and one fifteen most of the cast members
won an Emmy Award for their perform Lawrence is on
(17:00):
the show. Of the main five actors on the show,
only one failed to win an Emmy Award. So our
triview question today, who is the only actor on Everybody
Loves Raymond to not win an Emmy Award during their
time on the show? Once again, who is the only
actor on Everybody Loves Raymond to not win an Emmy
(17:23):
Award during their time on the show? Be the third
person today to text us at six one seven three
six two thirteen eighty five with the correct answer you know,
win a Financial Exchange Show T shirt.
Speaker 4 (17:35):
Once again.
Speaker 6 (17:36):
The third correct response to text us to the number
six one seven three six two thirteen eighty five will
win that T shirt. See complete contest rules at Financial
Exchange Show dot com.
Speaker 2 (17:46):
I'm gonna give this one to Tucker. Tucker, you want
us to talk about costco or Zillo Zillo Zillo. All right, uh,
Zillo just hit their first profitable year in the last
thirteen Uh. The last time they did this was twenty
two twelve, and they have gone through a few rough
tracks here. They tried buying houses unsuccessfully. They tried a
(18:07):
few different things that didn't work well. But they seem
to be getting the point that, hey, we are one
of the most popular forget about real estate websites, like
we are one of the most popular websites out there
that Americans like to browse, and let's maximize the utility
of that. And finally finding a way to make a
profit here.
Speaker 3 (18:23):
Well, it's funny the context of the article in the
Wilsted Journal here largely a lot of the improvements on
the profitability have been from cutting expenses. It's like, uh aha,
suddenly we realize that if we cut overhead and trim
down some of the stock based compensation, that we would
generate a profit. Who knew by cutting our expenses that
we would go to profitability. They all are also diversifying
(18:45):
their services a little bit, trying to make money from
mortgage origination, rental listings, and software for real estate professionals.
Speaker 4 (18:51):
So those have been helpful.
Speaker 2 (18:53):
Here's what I think they need to go further, Like
this company has so many eyeballs on their listings every
single day, they need to be adveraged to us, like, hey,
you really like the look of that house. I keep
seeing you look at it, because that's how people are
using this site now. It's not to actually buy real estate.
It's just as a hobby. You like the look of
that kitchen, here's the same one from Ikia. You know,
(19:15):
advertise that type of thing. I think that they have
so many eyeballs, it's becoming more of a social media
platform than it is a true real estate platform, and
I think they underappreciate how much more they could advertise.
Quick break, we'll have the trivia winner and then talk
some costco Next.
Speaker 1 (19:39):
Bringing the latest financial news straight to your radio. Every day,
It's the Financial Exchange on the Financial Exchange Radio Network.
Time now for Wall Street. Watch a complete look at
what's moving markets so far today right here on the
Financial Exchange Radio Network.
Speaker 6 (19:58):
Markets and Knicks Territory. After yesterday's pullback, where investors are
reacting to the core PCE index posted earlier this morning,
which climbs zero point two percent last month, in line
with estimates. Right now, the Dow is up by about
a half a percent or.
Speaker 4 (20:14):
Two hundred and thirty six points.
Speaker 6 (20:16):
SMP five hundred is up nearly three tenths of one
percent or eighteen points. NASDAC dipping by seven points at
the moment. Rust two thousand is up two tenths of
one percent, Tenure treasreel currently at four point one point
eight three percent, and crude oil is up over two
percent higher today training at sixty six dollars and thirty
(20:38):
three cents a barrel. Furniture and home good stocks are
seeing attention today after President Trump announced tariffs on imported
items such as kitchen cabinets, an upholstered furniture, Williams Snowman
down by nearly one percent, while our h is falling
over three percent. Wayfair, on the other hand, is actually
(20:58):
up almost one percent. President Trump also announced that he
will impose a twenty five percent tariff on imported heavy trucks.
Sending shares Impewter Built and Kenworth Owner Packcar up by
over five percent. Pharmaceutical stocks are also in the spotlight
after Trump announced a one hundred percent tariff on branded
patented imported drugs, exempting companies building plants in the US, Eli, Lilly,
(21:24):
Murk are all edging higher, while Nova Nordisk is down
over one percent. Meanwhile, Intel stock climbing another three percent
at the moment, now on pace four fourth straight day
of gains. Following a report from The Wall Street Journal
that CEO Lip Bhutan has approached Apple, Taiwan Semiconductor and
other companies about investments or partnerships, and Costco shares falling
(21:47):
nearly two percent after the warehouse retailer posted higher sales
and profit in the previous quarter. However, same store sales
growth missed street expectations. The company also noted that newly
extended store hours were paying off. I'm Tucker Silva and
that is Wall Street Watch And in the previous segment,
well you asked you the trivia question. Who was the
(22:09):
only actor on Everybody Loves Raymond to not win an
Emmy Award during their time on the show. For some reason,
it was Peter Boyle, who played Frank Baron and was
probably the best character on the show. Dottie from Saugust,
Mass is our winner today, taking home the Financial Exchange
showed t shirt. Congrats to Dottie, and we played trivia
every day here in the Financial Exchange See complete contest
(22:30):
rules at Financial Exchange Show dot com.
Speaker 2 (22:32):
Costco stock actually moving down today after what was described
as a pretty good earnings report. Stock hasn't really moved
a whole lot over the course of the last year.
They're up about two and a half percent for the
past twelve months today down a little bit over two
percent in early trading. I I don't know the details
of what investors were looking for out of this earnings report.
(22:54):
Their e commerce sales did bump up by thirteen and
a half percent. I just have to say, like, I'm
amazingly impressed by this company's performance and kind of where
they stand in the retail space right now. Again, stock
price not reflecting any big changes on this front in
the last twelve months, but last five years, this company's
up a hundred and seventy percent. Having so, I hadn't
(23:17):
shopped really at Costco much at all until this year
when we changed from Bja's because a new one opened
in our area. I think there's something that sets them apart, like, yes,
they are a big box discount retailer, where you can
go get all your stuff, presumably at a slightly lower
price point, although I don't know that that's really what
draws people in now. Costco has done an amazing job
(23:41):
at setting themselves apart with specific products that people will
go to the store. For sure, their tequila, for example,
my uncle will only drink tequila Costco Kirkland brand tequila,
and when covid struck, the dude went out and bought
like fifteen bottles of tequila because he wasn't sure when
he'd be able to go back to Costco. They have
(24:02):
clothing that people will actually go to Costco just to
buy the special brand of clothing that is apparently, you know,
maybe a knockoff of Lululemon, but now here nor.
Speaker 4 (24:10):
What they are right.
Speaker 2 (24:12):
They are becoming, in my mind, a bit of a tjxplay,
how like you're going to Costco sometimes because you've heard
that this slightly rare product that they don't usually keep
in stock might be at that TJX, sorry, at that
Costco store. They're creating this kind of treasure hunt type vibe.
I mean, heck treader hunt. They literally were selling gold
(24:33):
bars over the last few years and selling out of them.
I think that Costco really from that perspective, occupies a
different space than BJ's and Sam's Club do.
Speaker 4 (24:42):
Oh definitely.
Speaker 3 (24:43):
I mean really, they spend no money on marketing at all,
so all of their marketing is word of mouth from customers.
So it points to what you're talking about there, is
that specific customers have this loyalty to brands, whether it's
the Kirklum brand or specific items from Costco. They talk
about it and probably the reason you got a membership
is because you had probably heard of all these people
(25:04):
who really enjoy the experience. The reason I got onto
it is my wife and my father in law were
huge proponents of it, and all of a sudden it
got me into that world too, where I love about
their business. It's so simple and straightforward. It's thirteen to
fourteen percent margins on pretty much everything that they sell,
so you know you're getting a fair price. And then
also the quality of stuff that they present is really
(25:27):
strong and that's what keeps people coming back to generate
the free casful from that membership fee that they drive
from every year.
Speaker 2 (25:35):
Do you have the membership that gets you in a
half hour early?
Speaker 4 (25:38):
My father in law does we mooch you off that
a little bit.
Speaker 2 (25:40):
Yeah, yeah, that's critical.
Speaker 4 (25:42):
On the weekends. It's crazy.
Speaker 3 (25:43):
Why because if you go on a Saturday it is
an absolute zoo. If you're taking your young children, you
have to worry about them getting mowed down by Do not.
Speaker 2 (25:52):
Take young children to grocery shopping. That's like come on,
parenting one on one.
Speaker 3 (25:56):
No, we'll do it for kill time in the winter
if it's slow.
Speaker 4 (25:59):
Yeah, hell on Earth.
Speaker 2 (26:02):
My wife and I have this debate all the time, like,
I'm going shopp I'm gonna take the kids.
Speaker 4 (26:05):
Like, what a terrible idea.
Speaker 2 (26:06):
They're gonna grab everything off the shelves, they're gonna try
and put it in the car. They're gonna ride in
the cart and then climb on the cart. Terrible idea.
Speaker 3 (26:12):
Leave you kid, you don't know how desperate winter gets.
Speaker 4 (26:15):
Well send it to a playplace in the winter. Good
luck with that.
Speaker 2 (26:17):
Yeah, I don't know. I don't have a good alternative.
That's what Uncle Walt's there for.
Speaker 6 (26:22):
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(27:07):
by calling eight six six eight four eight five six
nine nine. That's eight six six eight four eight five
six nine to nine, or you can request it from
their website Legal exchange show dot com.
Speaker 1 (27:19):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (27:30):
Starbucks still working on that turnaround story and not seemingly
getting there, and stock prices reflecting it as such. The
year to date, this company has lost about ten percent
of their value over the last five years, they have
gained nothing, their stocks basically flat over five years. New
CEOs in there trying to work a turnaround story, closing stores,
trying to simplify things. But the more I thought about this,
(27:52):
so the real problem that you know, the CEO has identified,
at least one of the big problems he's identified, is
the crazy number of customizations you can make when you
go to a Starbucks. And I was comparing this too, Like,
imagine you walk into even a fancy bar, Paul, you
walk into a high end bar where they're all about cocktails.
Speaker 4 (28:13):
Yep.
Speaker 2 (28:14):
You don't go up to the bartender and say, hey,
I'd like you to mix the rum with the uh
with this specific you know, sweetener, and then add a
little bit of that flavor in there for me and
make this specific cocktail that I just dreamed up for me.
Speaker 4 (28:31):
You just pick what's on the list.
Speaker 2 (28:33):
You either pick a very well known cocktail like a
Manhattan that they're definitely going to know how to make,
or you go look at their list of you know,
inventive cocktails and go with that. That's not the Starbucks model.
The Starbucks model is you have it exactly the way
that you want, and if we screw it up, we're
going to remake it for you. And because of the
number of ingredients that we carried, there's something like hundreds
(28:53):
of thousands of different possible combinations, and we're going to
do it all for less than a cocktail costs, right,
and the like even the largest one. If you make
one of those what was the let's see a Venti
white mocha quad shot, two shots on two on top,
all the milk, extra hot caramel drizzle inside the cup,
and extra whipped cream. Like you think about that, that
(29:17):
type of specification and customization should cost something outrageous over
ten dollars, and probably doesn't. And so I don't know
how they get themselves out of this conundrum because.
Speaker 6 (29:30):
They just stop assessing the orders like this is the menu.
Speaker 2 (29:34):
I think they lose customers.
Speaker 4 (29:35):
No, they don't.
Speaker 2 (29:36):
I think I don't know they do.
Speaker 6 (29:38):
I think if you have enough variety of like the uh,
the sweet coffee drinks and with the regular coffee drinks
like variety agreed.
Speaker 2 (29:47):
I think that's what they need to do it. I
think they need to do it because that's how I
would assume bartenders and bars make money is they you know,
pre mix a whole bunch of stuff for the items
that are on their menu, and so even if they're
really complex, they can just make it hap been pretty quickly,
and Starbucks can't. And so I think that's the only
choice they have is to simplify the menu further. Yeah,
and I think they're terrified to do so well.
Speaker 3 (30:08):
Also, the other piece of this is that they have
to commit one way or another, and it sounds like
they're committing back to the older way of Previously Starbucks.
You went to for the experience to sit down there
and enjoy your latte and you know, utilize the Wi Fi,
and it was more experiential.
Speaker 2 (30:23):
Bring your typewriter.
Speaker 3 (30:25):
But now with the prevalence of the mobile online ordering system,
it's become much more transactional, and so you sort of
have to pick one way or another. Are you the
neighborhood coffee shop or are you trying to be like
the Duncan of the world where it's really focused on
just hammering out more mobile orders as.
Speaker 6 (30:42):
Fast as you guys see the new store concepts for Starbucks. Yeah, no, no,
for something else, Well, I thought there was lucking in here.
Speaker 4 (30:53):
Just make it some way.
Speaker 6 (30:54):
I mean the images are out there. They're definitely going
back to the coffee shop vibe.
Speaker 4 (30:58):
Now is it? Does it look nice? Loser? Internet right there?
You look at it. You'll do it. You do it? No,
you do it.
Speaker 2 (31:05):
Let's take a quick break and Paula Monica's joining us next.
Speaker 4 (31:08):
He'll do it.
Speaker 1 (31:10):
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
life on Serious XM's Business Radio channel one thirty two.
This He's the Financial Exchange Radio Network. Find daily interviews
(31:31):
and full shows of the Financial Exchange on our YouTube page.
Subscribe to our page and get caught up on anything
and everything you might have missed. This is the Financial
Exchange Radio Network. Ladies and gentlemen, the weekend.
Speaker 6 (31:48):
This year's DAV five k is sold out, but you
can still help our great American heroes. The race is Saturday,
November eighth, a Castle Island and you can visit DAV
fivek dot Boston to make it of any amount to
support our troops. Your gifts help fund free rides to
medical appointments for veterans, and the nation's first da B
(32:08):
led housing initiative providing homes for single veterans and veteran families.
Go to DAV five k dot Boston and make your
donation today.
Speaker 3 (32:18):
We are now joined by Paul Lamonica from Barons to
talk a little bit about a specific stock that we'll
get to.
Speaker 4 (32:26):
In just a moment. But Paul, thanks so much for
joining us. Thanks a lot, So Paul.
Speaker 3 (32:30):
We got oh O'Reilly Auto Parts on the dock. We're
gonna be talking about o'relly and in particular, this company
has done quite well this year. It's up thirty percent
year to date, and the company's sales forecasts are growing
while it's peers it appear to be declining. What are
(32:52):
some of the reasons behind just how well this company
has performed and just the execution and underlying o'rally' success
here to date.
Speaker 7 (33:00):
Yeah, it's a great question, I think you know. In particular,
they've been looks like taking market share probably from advanced
autoparts and genuine parts. AutoZone, which reported earnings earlier this week,
is another very solid competitor, and I think a lot
of people look at O'Reilly and AutoZone as the leaders
in this industry, but O'Reilly in particular, I think has
(33:22):
done a great job of opening up a lot of
these regional distribution centers across the country, and that enables
them to get parts to stores and mechanics at lightning speed.
One analyst that I quoted in the piece talked about
how he was at a store doing a channel check
(33:43):
and employees there were telling him that they can get
parts in as quick quickly as twenty minutes from one
of their regional distribution hubs. So that's great for customers
if you're walking in and need a break bad or
you know oil or obviously the oils usually in the store,
but if you need something that's not there, odds are
(34:05):
you're going to get it pretty quickly. And with consumers
now driving clunkers for longer instead of buying new cars,
there's a lot of need for those repairs every now
and then, and I think a lot of people like
to do it themselves for cost effective reasons.
Speaker 3 (34:21):
That's blown me away is that the average aid of
a US vehicle on US roads is in over twelve years,
I believe, right, and that has I imagine been a
huge catalyst for the company in terms of its success.
Is that something that the CEO and executives have noted,
that the amount of used cars out there is helping
their business.
Speaker 7 (34:41):
Yeah, without question, either you used cars or people just
holding on to cars for longer. I mean, it does
seem a little counterintuitive. You might think that, oh no,
if GM and Ford are having slower sales and if
people are driving electric more, that would be a problem.
(35:01):
But it doesn't seem to be the case. It's counterintuitive,
but I think that the older the vehicle fleet is
for cars and trucks across the country, that's probably better
for O'Reilly, especially for those DIY customers that want to
do the repairs themselves.
Speaker 3 (35:18):
Are they seeing any impact from tariffs in terms of
their products.
Speaker 7 (35:23):
Yeah, I mean tariffs have been a concern, but so far,
it seems like consumers are willing to pay the higher prices,
or at least they're paying the higher prices. No one's
obviously going in and saying Yay, I'm paying more money,
but they aren't going to stop making the necessary purchases
(35:45):
for maintenance and repairs. And I think O'Reilly and autos
don't have also done a decent job of keeping some
of those costs down so that they don't have to
pass all of the tariff related expenses to consumers. So
this seems to be a little bit more of a
tariff resistant consumer company than others. And it's why one
(36:05):
analyst you know, came up we all talk about the
Magnificent seven and the former fang stocks. An analyst and
UBS said that o'reiley is the O in the cow
stocks of three fantastic retailers, Costco which reported earning last night,
o'reiley and Walmart being the w.
Speaker 4 (36:24):
We'll see if that takes hold.
Speaker 3 (36:26):
Paul A Monica from Baron's Paul, thanks so much for
the time this week.
Speaker 4 (36:30):
Really appreciate it.
Speaker 3 (36:31):
Have ay great weekend you too, Thanks guys, Paul.
Speaker 2 (36:35):
Experts are saying that by now, pay later vacations are
a bad idea. If you need an expert to tell
you that booking a vacation that you can't afford and
using buy now, pay later for an asset that immediately
depreciates once you purchase it, I don't know who needs
that advice, But like you know, we talk about Carlans
(36:58):
being irresponsible because those are quickly depreciating asset using buy now,
pay later to buy groceries or pizza from what was
the one that we covered a few years ago. Papa
John's allows you to buy pizza buy now, pay later one.
If you are one of these buy now, pay later
(37:19):
firms and that company, then that person doesn't pay you back.
What exactly are you collecting on because the piece is gone,
And even if you could collect on it, even if
they any the whole thing, I don't think you're gonna
be able to resell it. Same goes for a vacation,
and I just imagine somebody now some of these companies,
they do require you to make the payment in full
before you depart on your vacation. So it's like, Okay,
(37:39):
I've booked it in January, I'm leaving August. I have
to be have it fully paid.
Speaker 4 (37:42):
Could he use this for college spring break?
Speaker 2 (37:44):
Imagine for a moment that you can't make the payments,
then you still have to go on the vacation because
it's not cancelable, And the entire time you're just dressing
about the fact that you lost your job and have
to go on this wonderful safari through Africa. And like,
what a my terrible way.
Speaker 4 (38:01):
You can't pay, you can't pay enough to have a
great vacation. It's worth it, got it, It's just kidding.
Speaker 2 (38:06):
Uh uh. Markets are mixed, The Nasdaq is off about
a bit more than a tenth of a percent, s
m P and Dower positive. As we end the show today,
we'll be backed at it on Monday. Have a great weekend, everybody,
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