November 1, 2024 • 38 mins
Chuck Zodda and Mike Armstrong discuss the unbelievably bad October jobs report that saw only 12,000 jobs added, well below expectations. What supports the idea that the Fed will cut at their next meeting? Amazon shares rise on robust demand and a surge in infrastructure spending. How would you rank to top five tech companies in their pursuit of AI domination? When the price of your burrito clashes with your 'reference price'.
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Episode Transcript
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Speaker 1 (00:00):
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zada and Mike Armstrong.
Speaker 2 (01:13):
Chuck, Mike and Chucker with you today here kicking off
the first day of November.
Speaker 3 (01:20):
And wrapping up the busiest week of the year.
Speaker 2 (01:25):
Are we gonna go year? It's up there. We had
another one like this. I forget when it was. It
was maybe May or July, somewhere in that ballpark. I
can't remember when. But yeah, we've been cranking this week.
Speaker 3 (01:36):
Actually, no, I'm gonna declare it busiest week of the
year because aside from everything that we're talking about.
Speaker 2 (01:41):
You also have the election on Tuesday. So I'm giving it.
Speaker 3 (01:45):
I'm giving the week of October twenty whatever, this was
the busiest week of the year.
Speaker 2 (01:49):
Destination. What election? Oh you hadn't heard. Yeah, yeah, there's
this thing Tuesday. You really got to get out there.
And what do I do? Give voting advice on air?
How do I vote? What's a vote? How does this work?
In any case? Look, here's just I need to recap
September and October. September remember negative seasonality, like everyone was, ah,
(02:13):
September is gonna be bad man, watch out well September.
The S and P five hundred opened at six fifty
six twenty three. It closed at fifty seven sixty two.
That's more than two percent gain for the month of September.
Then everyone says, hey, after bad September comes October, and
you know markets are usually good in October. SP five
(02:35):
hundred open October at fifty seven fifty seven, closed at
fifty seven oh five, little less than a one percent loss. Okay.
This is why you don't rely on something like seasonality
to just be like, oh, I gotta buy or sell
because she's no, no, no, no, what rhyme do we
have for November? Uh don't care? Yeah, okay, yeah, whatever,
it is what it is. And so let's kick things
(02:56):
off here though, with a discussion about the report this morning,
because thirty am, Yeah, eight thirty am the final jobs
report to be released during daylight savings time after so
not ever, but for the year. Okay, it's a big one. No,
it's a big one.
Speaker 3 (03:15):
Also, you know the last jobs report three days five
days before the election.
Speaker 2 (03:19):
What election? Yeah, yeah, I'm Mike. I'm just pretending it's
not happening because I don't want to do anything with it. Anymore.
I just I can't do it anymore.
Speaker 3 (03:28):
No, you're pretending it's not happening because you don't want
this time to go away. You just want to live
in pre election world for the rest of your life.
Speaker 2 (03:34):
Mike. If it were up to me, we would announce
the candidates at eight am on a Monday, vote for
them all day Tuesday, and be done with it by Wednesday. Yeah.
Speaker 4 (03:43):
Instead, we have the best thing about this election being
we might get more genuine messages if it was only
twenty four hours. The best thing about this election being
over is then on Wednesday we get to learn who's
running in twenty twenty eight.
Speaker 2 (03:57):
That's how much it sucks. Now, how much it sucks.
It's like, oh good, this is over. Well, I'd like
to announce my candidacy for the twenty twenty Come on, man,
give me a break anyways. Job Support. This morning, eight
thirty am Eastern daylight time, we received the jobs numbers
for October. They came in bad, twelve thousand jobs added.
(04:21):
The unemployment rate, though didn't move, stayed steady at four
point one percent. And before we go further, there's a
whole one page caveat that the PLS puts in here,
which is, hey, we had hurricanes that hit on September
twenty sixth October ninth. Our data collection period was ten
days starting on October tenth, and so basically we're not
(04:47):
entirely sure how accurate the data was. We don't see
any unique response rates as it relates to the areas
struck by these hurricanes, but instead response rates in general
were just awful across the board, is what they wrote, like,
we just didn't get many responses inconclusion, And I've been
saying this like for the last month and a half,
(05:09):
not month and a half because these hurricanesent hit then,
but for the last like three to four weeks. Throw
it out. This entire report basically useless. It's not to
say that like you can't say this report wasn't bad
like it was, But we don't know if there's gonna
be a huge bounce back next month because of jobs
that weren't counted here. We don't know if this is
actual weakness. This is one report that I don't think
(05:32):
you can tell anything out of as a results here.
Speaker 3 (05:36):
So contextualizing how bad that was, the average number of
jobs created over the last twelve months before this was
one hundred and ninety three thousand, So twelve thousand in
that context is quite bad, quite quite bad. Expectations going
in were for one hundred thousand jobs created, you get created,
you got twelve. So I agree throw it out, but
(05:58):
also acknowledge it was bad if you do want the
part of this.
Speaker 2 (06:00):
And there are things that I think you can glean
from this that that are bad. Non farm payrolls for
the last two months revised downward. August revised down by
eighty one thousand, September revised down by thirty one thousand.
This is as they get more data in yep, more
respond hey, look correct. So the data again was not
good in those revisions, and those were not impacted by hurricanes.
(06:25):
So this is something that you can point to and
be like, oh, like, that's kind of problematic that the
job growth that we thought we had is a little
bit weaker.
Speaker 3 (06:33):
Here unsurprising pieces manufacturing employment decreased by forty six thousand
in October Boeing strike.
Speaker 2 (06:38):
If you did, if you didn't have that going on,
that's basically flat. So again you can also you know,
wrap that up into this. Things that I don't think
are necessarily related to the hurricanes or Boeing strike. Temporary
help service is continuing on its you know, decline, dropping
by forty eight thousand people for the month. Temporary helps
(07:00):
services are generally one of the leading indicators of where
an economy is going, the reason being right out of
the gate after a recession, first people, you hire temp
help because you're not sure if you need the full
time help yet. Who do you get rid of? Is
your heading into one? Yeah, get rid of the temp
workers because you want to keep your full time people
in case it doesn't turn out to be a recession.
Speaker 3 (07:17):
We don't know that many four oh one k or
unemployment anyway, that's for the staffing agency to take care of.
Speaker 2 (07:21):
They'll handle that, we can get rid of them.
Speaker 3 (07:24):
The counterpoint there, obviously, is that we've lost five hundred
and seventy seven thousand temporary help jobs since March of
twenty twenty two and no recession. No recession, So I
don't know, maybe it's just a late.
Speaker 2 (07:38):
Now I'll go through the rest of this day to
just saying, hey, what in the absence of not of
knowing like which way this is actually going to go.
As far as how the revisions look in the future
and what we get next month. Let's talk about this
job's report for what it actually is, because I do
think there's a chance. Look as much as we say, hey,
this could be skewed, there's a chance it isn't like,
(07:58):
there's a chance that this is is the deal and
this is what you get even after more data, future
revisions and so on and so forth. Unemployment rate steady
at four point one percent, somewhat reassuring that it's not
ticking back up. So that's that's kind of one of
your few good pieces I think that you have here
other things that are not great. As you know, kind
(08:22):
of go through this. The duration of unemployment seems to
be lengthening. Those unemployed for fifteen to twenty six weeks
increased by one hundred and fifteen thousand, Those unemployed five
to fourteen weeks increased by ninety eight thousand, Those unemployed
for less than five weeks decrease by thirty four thousand.
So there's a lengthening of unemployment that's happening. That's not
(08:42):
typically something that's good that you like to see that
headline number of twelve thousand jobs created. Hey, if you
get that on a repeated basis unemployment rate is going up.
I know it didn't this month. Yeah, that's not enough
job creation to keep pace with the growth of our workforce.
I know it didn't this month. But quite honestly, it's
because of rounding that we saw this month. So last month,
(09:03):
just as an example, it came in at four point
one percent because the unrounded number was like four point
zh five three or something like that. This year, the
unrounded number, or this month, the unrounded number is four
point one four something. I think. So ultimately, rounding is
something that hey, when you strip it away, the unemployment
(09:24):
rate actually looks like it's ticking up a little bit.
Here again the caveat being you know, what does this
this ultimately mean this report? I don't know. I don't
think that you can make any conclusive thoughts about this
in terms of what it means for the US economy
at this point other than, hey, if this turns out
to be accurate, it's a bad report. Like there's no
(09:46):
other way to put it other than that. Yeah, but
we just don't know how accurate it actually is. Other things,
the U six the underemployment rate holding steady at seven
point seven percent, So I guess that. It's a good
point that you have here. But overall, this is a
report that if you were to duplicate it twelve times over, well,
(10:10):
unemployment's not holding it four to one. Like you are
seeing unemployment rise probably in the ballpark of one percent
over the course of a year. If you get this
kind of job creation for a full year.
Speaker 3 (10:21):
Yeah, again, I think there are parts of this where
you just you say you don't know.
Speaker 2 (10:26):
There are other parts where you do know.
Speaker 3 (10:28):
The forty four thousand job loss in manufacturing does not
occur if the Boeing workers are back to work, correct
like that, that's pretty definitive. The other stuff about why
only twelve thousand jobs were created, you just have no
idea how much of that was hurricane related and how
much of it was just related to The other piece
I think about is Okay, they talked about how response
rates state by state didn't seem that far off, and
(10:50):
so where is there just a lack of response due
to something like an election and then the responses are
going to come pouring in later.
Speaker 2 (10:57):
Maybe you don't know.
Speaker 3 (10:59):
So again, obviously, i'd be shocked if Donald Trump hasn't
already posted about this job's report and how it indicates
that we're in a recession. Take everything with a grain
of salt, because we simply do not know what this
looks like.
Speaker 2 (11:14):
No, look, I've been saying all month, Hey, whatever you
get here, you kind of just toss it in the
pile and say, Okay, we're gonna need more information. But
this report if duplicated in subsequent months, yeah, you've got
a real problem in the labor market. Then let's take
a quick break here and when we come back, talk
(11:35):
a little bit about the FED. That's right, We've got
a FED meeting next Wednesday. Also, so look, if you
want to say definitively, hey, this is the busiest two
week stretch of the year, then you got it one.
Like man, we're cooking with with some gas here, let's
take a quick break. We're talking FED. Right after this,
(11:57):
whoa stream.
Speaker 1 (11:58):
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Speaker 5 (12:19):
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Speaker 2 (12:54):
So next week we have a FED meeting. It's actually
the only FED meeting of the year this year that
taking place on a Thursday rather than the standard Wednesday.
I presume that's because of the election. It's a two
day meeting, so they probably maybe if things off Wednesday,
maybe they take the day off on Tuesday to vote.
You know. Jay Powell's like, yeah, I'm gonna I'm gonna
take the day off and go vote. So we got
(13:18):
a FED meeting next week, and where we stand right now.
According to the CMA, the projections right now are for
a ninety nine point eight percent chance of a quarter
percent cut next Thursday.
Speaker 3 (13:31):
So let's do you want to roll down the evidence
and see if there's anything in your mind that would
run contradictory to that.
Speaker 2 (13:41):
Uh, there's nothing in my mind that would run contract
yeah to it. I don't see anything that sways you
from that.
Speaker 3 (13:47):
The jobs report came in weak, The Jolt report came
in fine, but weaker than the previous month.
Speaker 2 (13:54):
The big thing, the Fed's not going to go from
fifty BIPs to just a zero. Hey, we need to
hold if you want something that would undermine FED credibility. Hey,
we cut half a percent because we're nervous and we
want to get in front of you know, any weakness.
A month later ever, cutting again, Well you know what,
we actually don't need to cut now. Yeah, well then
you didn't need to go fifty BIPs. Yeah. The real
(14:15):
question here is what happens in uh December, as far
as the December eighteenth meeting. In my opinion, and this
is gonna be one in which you have, you know,
another month of data from really two months of data
because you're gonna get all the rest of the October
data coming in. You're gonna have November jobs. You're gonna
have November CPI like, you're gonna have, you know, some
(14:36):
some good stuff over the next couple months that you
can look at. And so right now, if you kind
of back into it, it's about an eighty percent chance
that the FED cuts rates by another quarter percent in
December at the moment. That's kind of what we're looking
at here. But you know, the Fed. The main thing
that the Fed's been looking at in order to you know,
(14:57):
make the case for hey, we need to move a
little bit more quickly here, there's been the labor market
and outside of this report that we just got, the
prior to jobs reports have been quite good and in
fact showed the unemployment rate turning back down. So I
do think that there's you know, potentially an inflection point
here about what happens in December and January, and that's
(15:19):
really where the action is going to be, which is, hey,
what do you think the economic data is going to
show over the next two to three months, and that's
going to impact where the FED goes from here.
Speaker 3 (15:28):
But to your point, with two meetings before December. I
tough to see any significant moves on inflation given where
we know where oil prices are right now and the
trajectory there.
Speaker 2 (15:37):
And the FED won't make moves based on oil prices.
Wouldn't anyway.
Speaker 3 (15:41):
And again, in spite of what was objectively a bad
jobs report this morning, you didn't see the unemployment rate
tick up. No, you saw bad hiring numbers, but you
didn't see more a larger portion of Americans saying they
can't find work.
Speaker 2 (15:57):
Just that.
Speaker 3 (15:57):
Again, I don't want to minimize this, just that the
existing ones are on unemployment for longer, but no uptick there.
And so those are what you have to see for
the FED to start changing their mind in one direction
or another.
Speaker 2 (16:10):
And we're just not getting it right now. Should we
talk a little bit about Amazon or do we have
more on the Fed? I think found pictures kind of straightforward.
Speaker 3 (16:18):
Actually it it's complicated where the economy is going, but
it's not complicated where the FED needs to be right now.
Speaker 2 (16:25):
Yeah, I think that's a great summary. Amazon. Their shares
are up at one point I know pre market, I
haven't looked just now, but their shares right now are
up about six and a half percent and they just
can't break through that two hundred dollars mark right now
for some reason. And what we've got going on with
Amazon is, hey, they're making a boatload of money. Their
(16:49):
cloud services division continues to chug right along. They are
planning on spending a an absolutely insane amount of money
in capex for bill holding out AI capability.
Speaker 3 (17:01):
Can we talk about so and again, qualifying this money
is just tough to do because everyone's spending billions of dollars.
But analysts had been anticipating that Amazon would spend seventeen
point six billion dollars in the third quarter on this
capex that'd be a rise of forty two percent. Instead,
they increase spending by eighty one percent to twenty two
(17:23):
point six billion dollars, spend an extra five billion dollars
in the quarter without blinking, and shareholders like, yeah, yeah,
that sounds good. Cool, do more, do more? To be fair, Uh,
they did beat on revenue. They had a pretty solid
quarter in terms of you know, actually what everybody thinks
of Amazon for in terms of selling stuff at their
online store and getting it delivered.
Speaker 2 (17:44):
To your house.
Speaker 3 (17:46):
Their actual payoff from this investment in artificial intelligence the
only place that I can see it is people leasing
cloud space from them, which is not a bad place
to be. That's a huge growth enter for them. But
unlike Microsoft, unlike Google, I'm like Meta, I don't see
any real discussion of product development on Amazon side. And
(18:07):
maybe that's fine.
Speaker 2 (18:08):
I thought they had.
Speaker 3 (18:09):
A couple things that they We're talking about Alexa, they're
discussing it, but you know, Meta is actually pointing to saying, hey, this,
many customers of ours started using our tools to develop
new ads and put it out there. Eyeballs on Facebook's
platform were there for an extra twenty minutes, and we're
attributing that to AI. I'm not seeing that from Amazon
(18:30):
right now. It's not to say you won't in the future,
but I'm just this quarter not seeing much from Amazon
in terms of, hey, what's the payoff outside of people
outside of businesses taking up more cloud space on your networks.
Speaker 2 (18:43):
Yeah, I think that's fair that they are building a
bunch of stuff for businesses, like different selling tools and
stuff like that. So you know, we'll see where it
ends up going.
Speaker 3 (18:52):
But it's that would actually be low hanging fruit, right
if you're a vendor on that platform and you can
use AI to develop a video on how your product works,
which should be really easy.
Speaker 2 (19:03):
So the stuff that I'm seeing on their side is
like they're more trying to sell like virtual assistance, conversational analytics,
employee productivity tools. Yeah, some creativity stuff because they've got,
you know, their their AI stuff that they run as well.
I just find it wild that this part of their
(19:23):
business literally is an accident and now it's the most
important part of their business.
Speaker 3 (19:28):
Spending eighty billion what was it, twenty two billion dollars
on it a corn.
Speaker 2 (19:31):
Yeah, quick break here. When we come back, We've got
Wall Street watching a little more on Amazon.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
The markets are rallying in reaction to, well not really
in reaction to the October job support.
Speaker 2 (20:06):
It's more of a bounce back from yesterday. But the
job support.
Speaker 5 (20:08):
We saw twelve thousand jobs added last month, well short
of expectations of one hundred thousand. As the economy as
the labor force saw the effects of two significant hurricanes
and the ongoing Boeing strike. Unemployment rate held steady at
four point one percent, And on top of all that,
we're digesting big third quarter earnings from Amazon, Apple and others.
(20:31):
Right now, the Dow is up by nearly five hundred
points to one in a quarter percent, SMP five hundreds
up by sixty two points just over one percent, and
the NASDAC up nearly one and a half percent or
two hundred and fifty five points. Rusted two thousands up
by one and a third percent as well. Ten year
treasure realed up by two basis points at four point
(20:51):
three or three zero percent, and crude oil up nearly
two percent higher, trading at seventy dollars in fifty five
cents a barrel. He was on jumping seven percent after
the e commerce giant posted stronger than expected third quarter
earnings and impressive cloud and ad growth. Revenues for its
Amazon Web services also climb nineteen percent year over year.
(21:14):
Paulamonica of Barons will give his thoughts on Amazon coming
up on the show at eleven forty five. Meanwhile, Apple
also beat third quarter estmates on the top and bottom lines,
showing a revenue growth of six percent, driven by a
rebound in iPhone sales. However, the tech giants outlook for
sales growth missed Street forecasts. That stock is off by
(21:35):
nearly one percent. Elsewhere, Exxon Mobile and Chevron posted lower
quarterly profits as energy prices sank and fuel making margins narrowed. However,
those stocks are up half a percent and four percent, respectively.
Struggling chip maker Intel posted a record sixteen point six
billion dollar loss in the previous quarter, but said its
(21:55):
outlook for sales was improving. That stock up by seven
percent and Boeing up by three percent. After the playmaker
agreed to a new offer which with its machinist union
with the hopes of bringing the seven week strike to
an end. The deal would include thirty eight percent raises
over the next four years, with a vote on the proposal.
Speaker 2 (22:16):
Coming for Monday. I'm Tucker Silva and that's Wallstree. Watch Chuck.
Speaker 3 (22:21):
We had five major tech companies. I know they're not
necessarily all considered tech companies by s and PAK a
little bit, but tech companies report earnings this week. Apple, Amazon, Microsoft,
Google parent Alphabets, Facebook parent Meta I'm no tech analyst.
I know looking through these earnings, we can see how
the stock market reacted to each of them. YadA, YadA, YadA.
(22:44):
I'm more interested in one thing. Let's assume that we
all buy that artificial intelligence is going to be this
seismic productivity changer. Based on what we saw this week
from earnings, Where would you put these five tech companies
if you're rank them in terms of their influence in
that space or their opportunity for the future. I'm trying
(23:07):
to think through it in terms of what we're seeing
right now. And you know, I've maintained for a while
that Microsoft seems to be the low hanging fruit here
and has the biggest opportunity when it comes to artificial
intelligence because they're approaching it from two different sides. But
I'm interested in your take. Where would you rank these
if you're looking at, Hey, these companies are doing the
(23:27):
best thing. The best is a tough word, the most
productive and most profitable things with AI today and in
the future.
Speaker 2 (23:37):
So if we're talking about the potential for like greatest
profit expansion, probably Microsoft or Amazon Cloud story, Microsoft is
there is right there in every single office sect in America, yeah, Hey,
here's our tools that'll help you, you know, be twenty
percent more productive and only cost you five percent of
(23:58):
an employee's salary. Great. I can increase headcount without increasing headcount.
Yeah like that, that's the promise for Microsoft. If you're
looking at Amazon, it's all those resellers, Hey, find better
ways to sell your stuff, you know, manage your inventor
ya da yah like all that stuff. Okay, fine, And
they also happen to be in a lot of businesses backyards,
right Like.
Speaker 3 (24:19):
Sure, Amazon's cloud storage and computing business is massive.
Speaker 2 (24:23):
Meta and Google are in one business and one business only,
and that's selling ads. Yeah I know that, Like they
do like other stuff for fake, but they do one
thing for real, and that is they sell Like Meta's
revenue was ninety six or ninety eight percent ads, Google's
like seventy five percent ads, and the rest, by the way,
is just a bunch of YouTube TV subscriptions that, oh
what do they do? They sell ads?
Speaker 3 (24:44):
So ultimately I struggle with that one because I constantly
kind of poop poo and look down at their ability
to grow that revenue. But am I am I, you know,
am I missing the ball once again? On Meta and
Google and out on an alphabet's ability to sell more
ads based on the the leverage of age.
Speaker 2 (25:04):
There's only so much ad budget. That's like, here's the thing.
Here's why Microsoft and Amazon are more interesting to me.
If you are a company, what's the number one biggest
expense that you typically have? Headcount? That's where the money
can be spent. Usually like number like four or five
(25:25):
is advertising and marketing and stuff like. It's it's like it,
you know, like you go through the list. It's like, Okay,
I got headcount, then I got my you know, overhead
with you know, my office space and this and that,
Like you go down the list. You know. I think
that the bulk of the spending growth can potentially be
in convincing companies, hey, don't hire more people, buy our
(25:46):
services and get more out of your current people. With
Google and Meta, it's hey, how can we sell more ads? Well,
who's increasing their ad budget exponentially? There's only so much
product actually sell. Like if if you go to a
company and say, hey, if you increase your AD budget
by fifty percent, you know, here's what you can do. Well,
(26:08):
most companies can't increase their AD budget by that much.
They just they don't have that money available. On the
other hand, headcount, you know, consistently year and year out
might go up ten, fifteen to twenty percent. Spend that
on services, not on new heads. Convincing case Apple, it's
all selling devices. It's a bit of a wild card.
(26:29):
It's it's all selling devices, and I don't think there's
any there there.
Speaker 3 (26:34):
Yeah, I don't buy the Alexa devices. I don't buy
the Apple devices. I'm not saying it won't exist. I
just don't know what you do with it. Here.
Speaker 2 (26:40):
Well, no, here's the fascinating thing. In my opinion, I
think Apple may end up having the most useful day
to day approach to AI out of any of these,
but they won't be able to make money off it.
You go, Microsoft, Hey, you've got an employee that you're paying,
you know, eighty thousand dollars a year. You could hire
another one, or you could pay us an extra ten
(27:02):
thousand dollars for services that replicate another employee. Right, Like,
that's a sales point with Apple. It's hey, Apple, build
me an automation that you know, when I get home
every day, turns on my smart lights and turns on
this and that they can't monetize that.
Speaker 3 (27:19):
No, no, you can't monetize the household usefulness.
Speaker 2 (27:22):
Of the right. You can't monetize convenience. You can't.
Speaker 3 (27:27):
It's just a lot less worthwhile than business headcount reduction.
Speaker 2 (27:32):
Well, it's a one time sale on the device. And
here the way that Apple and theory could is, Okay,
we've got this installed user base of I don't know
a billion people worldwide. However, many people have Apple devices. Okay,
you're gonna start paying us twenty dollars a month to
access Apple Intelligence, like we'll have, you know, the free thing.
(27:53):
The free version does this. If you want to do
the real stuff, pay us this. Most people need that.
I don't know. I most know. I don't think so
either right now. It could be completely wrong there, but
this is what I get at when I'm like, hey,
Apple might have the most useful stuff to the most people,
(28:15):
but I don't know how they get there from a
dollar's perspective. And that's kind kind of interesting to me.
The counterpoint to that, man, Apple always figures out how
to make money. They do. They're not bad at it,
pretty good actually, So that's kind of interesting to me.
As far as again, where all of these companies are going.
(28:36):
Apple had their earnings this week as well. They were fine,
but find's not good enough to keep your stock you
know where it was. They're down one percent today, even
after falling a little bit yesterday.
Speaker 3 (28:46):
Yep, they've been projecting a seven percent increase in sales.
Apple didn't completely contradict that, but they said low single
digits to mid single digits, and that's not good enough
in this context.
Speaker 2 (28:56):
Let's take a quick break here. When we come back,
we're talking bow and burritos. One story or two? Will
you have to tune in to find out Right after
this text.
Speaker 1 (29:06):
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Speaker 5 (29:31):
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Speaker 2 (30:11):
Micha. Let's talk a little bit about Boeing's latest offer
to their machinists. They have now offered a thirty eight
percent wage increase over four years. That's up from the
original offer of twenty five and the newly rejected offer
of thirty five percent. So basically, hey, here's an extra
you know, three quarters of percent a year, and the
(30:33):
union is going to be voting on this deal on Monday.
This offer still does not restore pensions, which is something
that we covered as a key demand of union leaders,
but Boeing would further increase four to oh one K contributions.
They are also offering a twelve thousand dollars ratification bonus,
(30:54):
up from seven thousand, but that previous offer also had
a five thousand dollars four to one K bonus so
they're not really adding more for the ratification bonus. It's
just you you can get your money now instead of
having that retirement. So where free burritos for life? Two?
Uh no, the different story? Got it?
Speaker 3 (31:13):
Different story? Yes, I don't know. I mean they rejected
the first one by ninety percent. They rejected the second
one by sixty odd percent. The trend would seemingly be
the longer this is going on, the more machinists are
willing to vote on something like this.
Speaker 2 (31:26):
But this barely moves the needle.
Speaker 3 (31:28):
So if you rejected the last one, I'm not sure
why this moves the needle for you other than yeah,
it's been like seven weeks and I'm starting to struggle.
Speaker 2 (31:36):
I got two possibilities here. Either this gets rejected like
fifty two to fifty three. I don't think this is
enough to get it over the hump. No, I don't.
Or I could see this being something where it's like, hey,
all you're doing is moving that signing bonus money around.
This is a slap in the face eighty percent rejection.
Speaker 3 (31:57):
Think so, I don't think the union would bring it
to their members if they thought it would get rejected
by eighty percent.
Speaker 2 (32:04):
Probably true, but they brought the first one that got
rejected pretty badly they did. I think that was probably
just you had to do that in the process. Yeah,
you have to show like, hey, this is house. I
don't know if this gets it over the hump I
just don't know if it gets it over the hump here.
But maybe it's it's a baby. This is one vote
(32:24):
that we will know the answer of on Tuesday. They
usually tabulate these pretty quickly, so that'll be is this
actually Tuesday? Is this Monday? Well, the votes on Monday,
but we'll have it tuesday. Yeah, so it's uh that
that'll be great. We'll have some election results to cover
on Tuesday. Yeah, it's wonderful. Let's talk a little bit
about burritos. Now, indeed, what is your burrito reference price?
(32:47):
Seven ninety nine? I'm sorry to hear that, Tucker, what's your.
Speaker 5 (32:50):
I'm gonna say nine bucks, So I.
Speaker 2 (32:53):
Don't have a burrito reference price, by the way, nine
ten buckshere in that range. Reference price it's a fancy
word that economists use when they're trying to sound, you know,
very smart, smarter than the average person, and it basically is, hey,
what's the price that you're used to and that you
see as a fair cost for services. So if someone
came to you and said, Mike, I'm gonna charge you
(33:13):
eight dollars to replace your roof, you'd be like, Okay,
what's the scam? Yeah, because that's well below the reference
price for a roof. On the other hand, if you
walked into a McDonald's and they said, okay, you're getting
a big mac. That'll be two hundred dollars, you would
also say, again, you say, what's the scam? What's going
on here?
Speaker 3 (33:29):
So other big reference prices that everybody has a five
dollars foot long from subway, they really drove that one home.
And you do wonder about those strategies in hindsight, right
like the dollar menu the dollar menu, was that a
good idea having a company whose name is five below
or or dollar dollar general, Like you know, these are
(33:51):
companies that are by name tied to or by jingle
tied to a certain reference point. And I think in
subways case, for instance, it really struggled to get away
from that for a while.
Speaker 2 (34:02):
If do you know what I would call my like
discount retail chain, now we're naming. If I were naming
one and this is anyone can use this. I'm not
copyriting it or anything like if anyone wants to start
a dollar store with chuck, no, I don't want to
be involved retail. No, thank you feel like a million
(34:24):
it's too long? Like a million, that's better? How would
just million milk get get rid of get rid of
the like? Okay? In any case, we all have these
reference prices, and the big thing is, look, when inflation
isn't moving very far, you know, when you we're seeing
(34:44):
prices go up one to.
Speaker 3 (34:45):
Two percent a year, someone, we can maintain it. They
made I mean, that's the five dollars foot long? Was
that five dollars for like a decade and a half.
Speaker 2 (34:52):
It was like fifteen years. Yeah, So A, they can
maintain that, But B, you're even if prices do move
a little bit on things other than the five dollars
foot long. How many people paid attention to the price
of a big Mac from two thousand to twenty twenty. Nobody. Yeah,
it just wasn't a topic of conversation because the price
moves are slow, and so you like, it's kind of
like when you boil the frog in water slowly. It
(35:16):
doesn't hop out. You turn the water heat up slowly
so the frog doesn't realize it's being boiled alive. I've
done this, actually, Oh no, I haven't. No, why would
I often references them like why would anyone boil a frog?
Like what kind of To be fair, the French frog legs?
Never had them? Actually, but you fry them? Do you?
(35:37):
The only time I've ever heard you don't boil them?
I've never had them, to be honest, I have. But
the point that I'm making is, Hey, when things go
up slowly, you don't even really notice. That's kind of
the general premise of one to two percent inflation, even
two to three. Hey, you don't really notice. When prices
move twenty percent in a three year period, You're like, hey,
(35:58):
what gives? Right? What's going on? Like this is not
what I'm used to. And so those reference prices we
come back and we say, no, that burrito at Chipotle
is supposed to be twelve dollars even with guac, not
eighteen without. And that's what kind of gets us upset,
is that it's that difference between the reference price that
(36:19):
we have and what something actually costs today. And you know,
you see a few of these.
Speaker 3 (36:24):
So one person talked about their crispy rice bowl from
Sweet Green, a fast casual places out there. It went
from fifteen to eighteen dollars, and I get how that
disrupts your reference price, and extra three bucks for lunch
is not fun. It's also below the total inflation rate
that we've seen for dining out over the last few years.
Speaker 2 (36:45):
I think there's one other thing that needs to be
taken into account here, and that's mental rounding. You get
something for fifteen, you're like, that's fifteen bucks. It shows
up at eighteen instead of seventeen. Hey I'm paying twenty
bucks for lunch now, yeah, like you do that mental rounding,
And so I think that that's the same reason, Hey,
why do you sell everything at two ninety nine because
(37:06):
it doesn't have a three in the first digit, and
so that that rounding does happen as well. Where Okay,
if it goes from fifteen to sixteen, that's still pretty close.
Sixteen to seventeen, it's fine. Eighteen, man, this is almost
twenty dollars now, like you feel it on that side. Also,
I think the most interesting one to me is the
(37:27):
gasoline reference.
Speaker 3 (37:28):
Point, which is it's so so different, both region by
region and generationally.
Speaker 2 (37:37):
Not even generationally even just month, Like, we reset that
reference point quickly because you're always filling up.
Speaker 3 (37:44):
Yeah, you're always frequently, but yeah, you know, you talk
to a baby boomer who might genuinely have a reference
point on gasoline of like ninety nine cents, And that's
that's where I am. On this and everything above that.
It's expensive for me. Anything below four bucks a gallon
seems pretty reasonable.
Speaker 2 (38:03):
Let's take a quick break here, and when we come back.
We got our two coming up in just a little bit.
We're talking holidays, shopping, we're talking oil, and we're talking
Intel and a whole lot more when we return
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(01:04):
by Veterans Development Corporation. This is the Financial Exchange with
Chuck Zada and Mike Armstrong.
Speaker 2 (01:13):
Chuck, Mike and Chucker with you today here kicking off
the first day of November.
Speaker 3 (01:20):
And wrapping up the busiest week of the year.
Speaker 2 (01:25):
Are we gonna go year? It's up there. We had
another one like this. I forget when it was. It
was maybe May or July, somewhere in that ballpark. I
can't remember when. But yeah, we've been cranking this week.
Speaker 3 (01:36):
Actually, no, I'm gonna declare it busiest week of the
year because aside from everything that we're talking about.
Speaker 2 (01:41):
You also have the election on Tuesday. So I'm giving it.
Speaker 3 (01:45):
I'm giving the week of October twenty whatever, this was
the busiest week of the year.
Speaker 2 (01:49):
Destination. What election? Oh you hadn't heard. Yeah, yeah, there's
this thing Tuesday. You really got to get out there.
And what do I do? Give voting advice on air?
How do I vote? What's a vote? How does this work?
In any case? Look, here's just I need to recap
September and October. September remember negative seasonality, like everyone was, ah,
(02:13):
September is gonna be bad man, watch out well September.
The S and P five hundred opened at six fifty
six twenty three. It closed at fifty seven sixty two.
That's more than two percent gain for the month of September.
Then everyone says, hey, after bad September comes October, and
you know markets are usually good in October. SP five
(02:35):
hundred open October at fifty seven fifty seven, closed at
fifty seven oh five, little less than a one percent loss. Okay.
This is why you don't rely on something like seasonality
to just be like, oh, I gotta buy or sell
because she's no, no, no, no, what rhyme do we
have for November? Uh don't care? Yeah, okay, yeah, whatever,
it is what it is. And so let's kick things
(02:56):
off here though, with a discussion about the report this morning,
because thirty am, Yeah, eight thirty am the final jobs
report to be released during daylight savings time after so
not ever, but for the year. Okay, it's a big one. No,
it's a big one.
Speaker 3 (03:15):
Also, you know the last jobs report three days five
days before the election.
Speaker 2 (03:19):
What election? Yeah, yeah, I'm Mike. I'm just pretending it's
not happening because I don't want to do anything with it. Anymore.
I just I can't do it anymore.
Speaker 3 (03:28):
No, you're pretending it's not happening because you don't want
this time to go away. You just want to live
in pre election world for the rest of your life.
Speaker 2 (03:34):
Mike. If it were up to me, we would announce
the candidates at eight am on a Monday, vote for
them all day Tuesday, and be done with it by Wednesday. Yeah.
Speaker 4 (03:43):
Instead, we have the best thing about this election being
we might get more genuine messages if it was only
twenty four hours. The best thing about this election being
over is then on Wednesday we get to learn who's
running in twenty twenty eight.
Speaker 2 (03:57):
That's how much it sucks. Now, how much it sucks.
It's like, oh good, this is over. Well, I'd like
to announce my candidacy for the twenty twenty Come on, man,
give me a break anyways. Job Support. This morning, eight
thirty am Eastern daylight time, we received the jobs numbers
for October. They came in bad, twelve thousand jobs added.
(04:21):
The unemployment rate, though didn't move, stayed steady at four
point one percent. And before we go further, there's a
whole one page caveat that the PLS puts in here,
which is, hey, we had hurricanes that hit on September
twenty sixth October ninth. Our data collection period was ten
days starting on October tenth, and so basically we're not
(04:47):
entirely sure how accurate the data was. We don't see
any unique response rates as it relates to the areas
struck by these hurricanes, but instead response rates in general
were just awful across the board, is what they wrote, like,
we just didn't get many responses inconclusion, And I've been
saying this like for the last month and a half,
(05:09):
not month and a half because these hurricanesent hit then,
but for the last like three to four weeks. Throw
it out. This entire report basically useless. It's not to
say that like you can't say this report wasn't bad
like it was, But we don't know if there's gonna
be a huge bounce back next month because of jobs
that weren't counted here. We don't know if this is
actual weakness. This is one report that I don't think
(05:32):
you can tell anything out of as a results here.
Speaker 3 (05:36):
So contextualizing how bad that was, the average number of
jobs created over the last twelve months before this was
one hundred and ninety three thousand, So twelve thousand in
that context is quite bad, quite quite bad. Expectations going
in were for one hundred thousand jobs created, you get created,
you got twelve. So I agree throw it out, but
(05:58):
also acknowledge it was bad if you do want the
part of this.
Speaker 2 (06:00):
And there are things that I think you can glean
from this that that are bad. Non farm payrolls for
the last two months revised downward. August revised down by
eighty one thousand, September revised down by thirty one thousand.
This is as they get more data in yep, more
respond hey, look correct. So the data again was not
good in those revisions, and those were not impacted by hurricanes.
(06:25):
So this is something that you can point to and
be like, oh, like, that's kind of problematic that the
job growth that we thought we had is a little
bit weaker.
Speaker 3 (06:33):
Here unsurprising pieces manufacturing employment decreased by forty six thousand
in October Boeing strike.
Speaker 2 (06:38):
If you did, if you didn't have that going on,
that's basically flat. So again you can also you know,
wrap that up into this. Things that I don't think
are necessarily related to the hurricanes or Boeing strike. Temporary
help service is continuing on its you know, decline, dropping
by forty eight thousand people for the month. Temporary helps
(07:00):
services are generally one of the leading indicators of where
an economy is going, the reason being right out of
the gate after a recession, first people, you hire temp
help because you're not sure if you need the full
time help yet. Who do you get rid of? Is
your heading into one? Yeah, get rid of the temp
workers because you want to keep your full time people
in case it doesn't turn out to be a recession.
Speaker 3 (07:17):
We don't know that many four oh one k or
unemployment anyway, that's for the staffing agency to take care of.
Speaker 2 (07:21):
They'll handle that, we can get rid of them.
Speaker 3 (07:24):
The counterpoint there, obviously, is that we've lost five hundred
and seventy seven thousand temporary help jobs since March of
twenty twenty two and no recession. No recession, So I
don't know, maybe it's just a late.
Speaker 2 (07:38):
Now I'll go through the rest of this day to
just saying, hey, what in the absence of not of
knowing like which way this is actually going to go.
As far as how the revisions look in the future
and what we get next month. Let's talk about this
job's report for what it actually is, because I do
think there's a chance. Look as much as we say, hey,
this could be skewed, there's a chance it isn't like,
(07:58):
there's a chance that this is is the deal and
this is what you get even after more data, future
revisions and so on and so forth. Unemployment rate steady
at four point one percent, somewhat reassuring that it's not
ticking back up. So that's that's kind of one of
your few good pieces I think that you have here
other things that are not great. As you know, kind
(08:22):
of go through this. The duration of unemployment seems to
be lengthening. Those unemployed for fifteen to twenty six weeks
increased by one hundred and fifteen thousand, Those unemployed five
to fourteen weeks increased by ninety eight thousand, Those unemployed
for less than five weeks decrease by thirty four thousand.
So there's a lengthening of unemployment that's happening. That's not
(08:42):
typically something that's good that you like to see that
headline number of twelve thousand jobs created. Hey, if you
get that on a repeated basis unemployment rate is going up.
I know it didn't this month. Yeah, that's not enough
job creation to keep pace with the growth of our workforce.
I know it didn't this month. But quite honestly, it's
because of rounding that we saw this month. So last month,
(09:03):
just as an example, it came in at four point
one percent because the unrounded number was like four point
zh five three or something like that. This year, the
unrounded number, or this month, the unrounded number is four
point one four something. I think. So ultimately, rounding is
something that hey, when you strip it away, the unemployment
(09:24):
rate actually looks like it's ticking up a little bit.
Here again the caveat being you know, what does this
this ultimately mean this report? I don't know. I don't
think that you can make any conclusive thoughts about this
in terms of what it means for the US economy
at this point other than, hey, if this turns out
to be accurate, it's a bad report. Like there's no
(09:46):
other way to put it other than that. Yeah, but
we just don't know how accurate it actually is. Other things,
the U six the underemployment rate holding steady at seven
point seven percent, So I guess that. It's a good
point that you have here. But overall, this is a
report that if you were to duplicate it twelve times over, well,
(10:10):
unemployment's not holding it four to one. Like you are
seeing unemployment rise probably in the ballpark of one percent
over the course of a year. If you get this
kind of job creation for a full year.
Speaker 3 (10:21):
Yeah, again, I think there are parts of this where
you just you say you don't know.
Speaker 2 (10:26):
There are other parts where you do know.
Speaker 3 (10:28):
The forty four thousand job loss in manufacturing does not
occur if the Boeing workers are back to work, correct
like that, that's pretty definitive. The other stuff about why
only twelve thousand jobs were created, you just have no
idea how much of that was hurricane related and how
much of it was just related to The other piece
I think about is Okay, they talked about how response
rates state by state didn't seem that far off, and
(10:50):
so where is there just a lack of response due
to something like an election and then the responses are
going to come pouring in later.
Speaker 2 (10:57):
Maybe you don't know.
Speaker 3 (10:59):
So again, obviously, i'd be shocked if Donald Trump hasn't
already posted about this job's report and how it indicates
that we're in a recession. Take everything with a grain
of salt, because we simply do not know what this
looks like.
Speaker 2 (11:14):
No, look, I've been saying all month, Hey, whatever you
get here, you kind of just toss it in the
pile and say, Okay, we're gonna need more information. But
this report if duplicated in subsequent months, yeah, you've got
a real problem in the labor market. Then let's take
a quick break here and when we come back, talk
(11:35):
a little bit about the FED. That's right, We've got
a FED meeting next Wednesday. Also, so look, if you
want to say definitively, hey, this is the busiest two
week stretch of the year, then you got it one.
Like man, we're cooking with with some gas here, let's
take a quick break. We're talking FED. Right after this,
(11:57):
whoa stream.
Speaker 1 (11:58):
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Speaker 5 (12:19):
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Speaker 2 (12:54):
So next week we have a FED meeting. It's actually
the only FED meeting of the year this year that
taking place on a Thursday rather than the standard Wednesday.
I presume that's because of the election. It's a two
day meeting, so they probably maybe if things off Wednesday,
maybe they take the day off on Tuesday to vote.
You know. Jay Powell's like, yeah, I'm gonna I'm gonna
take the day off and go vote. So we got
(13:18):
a FED meeting next week, and where we stand right now.
According to the CMA, the projections right now are for
a ninety nine point eight percent chance of a quarter
percent cut next Thursday.
Speaker 3 (13:31):
So let's do you want to roll down the evidence
and see if there's anything in your mind that would
run contradictory to that.
Speaker 2 (13:41):
Uh, there's nothing in my mind that would run contract
yeah to it. I don't see anything that sways you
from that.
Speaker 3 (13:47):
The jobs report came in weak, The Jolt report came
in fine, but weaker than the previous month.
Speaker 2 (13:54):
The big thing, the Fed's not going to go from
fifty BIPs to just a zero. Hey, we need to
hold if you want something that would undermine FED credibility. Hey,
we cut half a percent because we're nervous and we
want to get in front of you know, any weakness.
A month later ever, cutting again, Well you know what,
we actually don't need to cut now. Yeah, well then
you didn't need to go fifty BIPs. Yeah. The real
(14:15):
question here is what happens in uh December, as far
as the December eighteenth meeting. In my opinion, and this
is gonna be one in which you have, you know,
another month of data from really two months of data
because you're gonna get all the rest of the October
data coming in. You're gonna have November jobs. You're gonna
have November CPI like, you're gonna have, you know, some
(14:36):
some good stuff over the next couple months that you
can look at. And so right now, if you kind
of back into it, it's about an eighty percent chance
that the FED cuts rates by another quarter percent in
December at the moment. That's kind of what we're looking
at here. But you know, the Fed. The main thing
that the Fed's been looking at in order to you know,
(14:57):
make the case for hey, we need to move a
little bit more quickly here, there's been the labor market
and outside of this report that we just got, the
prior to jobs reports have been quite good and in
fact showed the unemployment rate turning back down. So I
do think that there's you know, potentially an inflection point
here about what happens in December and January, and that's
(15:19):
really where the action is going to be, which is, hey,
what do you think the economic data is going to
show over the next two to three months, and that's
going to impact where the FED goes from here.
Speaker 3 (15:28):
But to your point, with two meetings before December. I
tough to see any significant moves on inflation given where
we know where oil prices are right now and the
trajectory there.
Speaker 2 (15:37):
And the FED won't make moves based on oil prices.
Wouldn't anyway.
Speaker 3 (15:41):
And again, in spite of what was objectively a bad
jobs report this morning, you didn't see the unemployment rate
tick up. No, you saw bad hiring numbers, but you
didn't see more a larger portion of Americans saying they
can't find work.
Speaker 2 (15:57):
Just that.
Speaker 3 (15:57):
Again, I don't want to minimize this, just that the
existing ones are on unemployment for longer, but no uptick there.
And so those are what you have to see for
the FED to start changing their mind in one direction
or another.
Speaker 2 (16:10):
And we're just not getting it right now. Should we
talk a little bit about Amazon or do we have
more on the Fed? I think found pictures kind of straightforward.
Speaker 3 (16:18):
Actually it it's complicated where the economy is going, but
it's not complicated where the FED needs to be right now.
Speaker 2 (16:25):
Yeah, I think that's a great summary. Amazon. Their shares
are up at one point I know pre market, I
haven't looked just now, but their shares right now are
up about six and a half percent and they just
can't break through that two hundred dollars mark right now
for some reason. And what we've got going on with
Amazon is, hey, they're making a boatload of money. Their
(16:49):
cloud services division continues to chug right along. They are
planning on spending a an absolutely insane amount of money
in capex for bill holding out AI capability.
Speaker 3 (17:01):
Can we talk about so and again, qualifying this money
is just tough to do because everyone's spending billions of dollars.
But analysts had been anticipating that Amazon would spend seventeen
point six billion dollars in the third quarter on this
capex that'd be a rise of forty two percent. Instead,
they increase spending by eighty one percent to twenty two
(17:23):
point six billion dollars, spend an extra five billion dollars
in the quarter without blinking, and shareholders like, yeah, yeah,
that sounds good. Cool, do more, do more? To be fair, Uh,
they did beat on revenue. They had a pretty solid
quarter in terms of you know, actually what everybody thinks
of Amazon for in terms of selling stuff at their
online store and getting it delivered.
Speaker 2 (17:44):
To your house.
Speaker 3 (17:46):
Their actual payoff from this investment in artificial intelligence the
only place that I can see it is people leasing
cloud space from them, which is not a bad place
to be. That's a huge growth enter for them. But
unlike Microsoft, unlike Google, I'm like Meta, I don't see
any real discussion of product development on Amazon side. And
(18:07):
maybe that's fine.
Speaker 2 (18:08):
I thought they had.
Speaker 3 (18:09):
A couple things that they We're talking about Alexa, they're
discussing it, but you know, Meta is actually pointing to saying, hey, this,
many customers of ours started using our tools to develop
new ads and put it out there. Eyeballs on Facebook's
platform were there for an extra twenty minutes, and we're
attributing that to AI. I'm not seeing that from Amazon
(18:30):
right now. It's not to say you won't in the future,
but I'm just this quarter not seeing much from Amazon
in terms of, hey, what's the payoff outside of people
outside of businesses taking up more cloud space on your networks.
Speaker 2 (18:43):
Yeah, I think that's fair that they are building a
bunch of stuff for businesses, like different selling tools and
stuff like that. So you know, we'll see where it
ends up going.
Speaker 3 (18:52):
But it's that would actually be low hanging fruit, right
if you're a vendor on that platform and you can
use AI to develop a video on how your product works,
which should be really easy.
Speaker 2 (19:03):
So the stuff that I'm seeing on their side is
like they're more trying to sell like virtual assistance, conversational analytics,
employee productivity tools. Yeah, some creativity stuff because they've got,
you know, their their AI stuff that they run as well.
I just find it wild that this part of their
(19:23):
business literally is an accident and now it's the most
important part of their business.
Speaker 3 (19:28):
Spending eighty billion what was it, twenty two billion dollars
on it a corn.
Speaker 2 (19:31):
Yeah, quick break here. When we come back, We've got
Wall Street watching a little more on Amazon.
Speaker 1 (19:41):
Like us on Facebook and follow us on Twitter. Act
TFE show breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall Street.
Watch a complete look at what's moving markets so far
today right here on the Financial Exchange Radio Network.
Speaker 5 (20:01):
The markets are rallying in reaction to, well not really
in reaction to the October job support.
Speaker 2 (20:06):
It's more of a bounce back from yesterday. But the
job support.
Speaker 5 (20:08):
We saw twelve thousand jobs added last month, well short
of expectations of one hundred thousand. As the economy as
the labor force saw the effects of two significant hurricanes
and the ongoing Boeing strike. Unemployment rate held steady at
four point one percent, And on top of all that,
we're digesting big third quarter earnings from Amazon, Apple and others.
(20:31):
Right now, the Dow is up by nearly five hundred
points to one in a quarter percent, SMP five hundreds
up by sixty two points just over one percent, and
the NASDAC up nearly one and a half percent or
two hundred and fifty five points. Rusted two thousands up
by one and a third percent as well. Ten year
treasure realed up by two basis points at four point
(20:51):
three or three zero percent, and crude oil up nearly
two percent higher, trading at seventy dollars in fifty five
cents a barrel. He was on jumping seven percent after
the e commerce giant posted stronger than expected third quarter
earnings and impressive cloud and ad growth. Revenues for its
Amazon Web services also climb nineteen percent year over year.
(21:14):
Paulamonica of Barons will give his thoughts on Amazon coming
up on the show at eleven forty five. Meanwhile, Apple
also beat third quarter estmates on the top and bottom lines,
showing a revenue growth of six percent, driven by a
rebound in iPhone sales. However, the tech giants outlook for
sales growth missed Street forecasts. That stock is off by
(21:35):
nearly one percent. Elsewhere, Exxon Mobile and Chevron posted lower
quarterly profits as energy prices sank and fuel making margins narrowed. However,
those stocks are up half a percent and four percent, respectively.
Struggling chip maker Intel posted a record sixteen point six
billion dollar loss in the previous quarter, but said its
(21:55):
outlook for sales was improving. That stock up by seven
percent and Boeing up by three percent. After the playmaker
agreed to a new offer which with its machinist union
with the hopes of bringing the seven week strike to
an end. The deal would include thirty eight percent raises
over the next four years, with a vote on the proposal.
Speaker 2 (22:16):
Coming for Monday. I'm Tucker Silva and that's Wallstree. Watch Chuck.
Speaker 3 (22:21):
We had five major tech companies. I know they're not
necessarily all considered tech companies by s and PAK a
little bit, but tech companies report earnings this week. Apple, Amazon, Microsoft,
Google parent Alphabets, Facebook parent Meta I'm no tech analyst.
I know looking through these earnings, we can see how
the stock market reacted to each of them. YadA, YadA, YadA.
(22:44):
I'm more interested in one thing. Let's assume that we
all buy that artificial intelligence is going to be this
seismic productivity changer. Based on what we saw this week
from earnings, Where would you put these five tech companies
if you're rank them in terms of their influence in
that space or their opportunity for the future. I'm trying
(23:07):
to think through it in terms of what we're seeing
right now. And you know, I've maintained for a while
that Microsoft seems to be the low hanging fruit here
and has the biggest opportunity when it comes to artificial
intelligence because they're approaching it from two different sides. But
I'm interested in your take. Where would you rank these
if you're looking at, Hey, these companies are doing the
(23:27):
best thing. The best is a tough word, the most
productive and most profitable things with AI today and in
the future.
Speaker 2 (23:37):
So if we're talking about the potential for like greatest
profit expansion, probably Microsoft or Amazon Cloud story, Microsoft is
there is right there in every single office sect in America, yeah, Hey,
here's our tools that'll help you, you know, be twenty
percent more productive and only cost you five percent of
(23:58):
an employee's salary. Great. I can increase headcount without increasing headcount.
Yeah like that, that's the promise for Microsoft. If you're
looking at Amazon, it's all those resellers, Hey, find better
ways to sell your stuff, you know, manage your inventor
ya da yah like all that stuff. Okay, fine, And
they also happen to be in a lot of businesses backyards,
right Like.
Speaker 3 (24:19):
Sure, Amazon's cloud storage and computing business is massive.
Speaker 2 (24:23):
Meta and Google are in one business and one business only,
and that's selling ads. Yeah I know that, Like they
do like other stuff for fake, but they do one
thing for real, and that is they sell Like Meta's
revenue was ninety six or ninety eight percent ads, Google's
like seventy five percent ads, and the rest, by the way,
is just a bunch of YouTube TV subscriptions that, oh
what do they do? They sell ads?
Speaker 3 (24:44):
So ultimately I struggle with that one because I constantly
kind of poop poo and look down at their ability
to grow that revenue. But am I am I, you know,
am I missing the ball once again? On Meta and
Google and out on an alphabet's ability to sell more
ads based on the the leverage of age.
Speaker 2 (25:04):
There's only so much ad budget. That's like, here's the thing.
Here's why Microsoft and Amazon are more interesting to me.
If you are a company, what's the number one biggest
expense that you typically have? Headcount? That's where the money
can be spent. Usually like number like four or five
(25:25):
is advertising and marketing and stuff like. It's it's like it,
you know, like you go through the list. It's like, Okay,
I got headcount, then I got my you know, overhead
with you know, my office space and this and that,
Like you go down the list. You know. I think
that the bulk of the spending growth can potentially be
in convincing companies, hey, don't hire more people, buy our
(25:46):
services and get more out of your current people. With
Google and Meta, it's hey, how can we sell more ads? Well,
who's increasing their ad budget exponentially? There's only so much
product actually sell. Like if if you go to a
company and say, hey, if you increase your AD budget
by fifty percent, you know, here's what you can do. Well,
(26:08):
most companies can't increase their AD budget by that much.
They just they don't have that money available. On the
other hand, headcount, you know, consistently year and year out
might go up ten, fifteen to twenty percent. Spend that
on services, not on new heads. Convincing case Apple, it's
all selling devices. It's a bit of a wild card.
(26:29):
It's it's all selling devices, and I don't think there's
any there there.
Speaker 3 (26:34):
Yeah, I don't buy the Alexa devices. I don't buy
the Apple devices. I'm not saying it won't exist. I
just don't know what you do with it. Here.
Speaker 2 (26:40):
Well, no, here's the fascinating thing. In my opinion, I
think Apple may end up having the most useful day
to day approach to AI out of any of these,
but they won't be able to make money off it.
You go, Microsoft, Hey, you've got an employee that you're paying,
you know, eighty thousand dollars a year. You could hire
another one, or you could pay us an extra ten
(27:02):
thousand dollars for services that replicate another employee. Right, Like,
that's a sales point with Apple. It's hey, Apple, build
me an automation that you know, when I get home
every day, turns on my smart lights and turns on
this and that they can't monetize that.
Speaker 3 (27:19):
No, no, you can't monetize the household usefulness.
Speaker 2 (27:22):
Of the right. You can't monetize convenience. You can't.
Speaker 3 (27:27):
It's just a lot less worthwhile than business headcount reduction.
Speaker 2 (27:32):
Well, it's a one time sale on the device. And
here the way that Apple and theory could is, Okay,
we've got this installed user base of I don't know
a billion people worldwide. However, many people have Apple devices. Okay,
you're gonna start paying us twenty dollars a month to
access Apple Intelligence, like we'll have, you know, the free thing.
(27:53):
The free version does this. If you want to do
the real stuff, pay us this. Most people need that.
I don't know. I most know. I don't think so
either right now. It could be completely wrong there, but
this is what I get at when I'm like, hey,
Apple might have the most useful stuff to the most people,
(28:15):
but I don't know how they get there from a
dollar's perspective. And that's kind kind of interesting to me.
The counterpoint to that, man, Apple always figures out how
to make money. They do. They're not bad at it,
pretty good actually, So that's kind of interesting to me.
As far as again, where all of these companies are going.
(28:36):
Apple had their earnings this week as well. They were fine,
but find's not good enough to keep your stock you
know where it was. They're down one percent today, even
after falling a little bit yesterday.
Speaker 3 (28:46):
Yep, they've been projecting a seven percent increase in sales.
Apple didn't completely contradict that, but they said low single
digits to mid single digits, and that's not good enough
in this context.
Speaker 2 (28:56):
Let's take a quick break here. When we come back,
we're talking bow and burritos. One story or two? Will
you have to tune in to find out Right after
this text.
Speaker 1 (29:06):
Us six one seven three six two one three eight
five with your comments and questions about today's show. This
is the Financial Exchange Radio Network. The Financial Exchange Show
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You're listening to the Financial Exchange Radio Network.
Speaker 5 (29:31):
The Ultimate Boston Sports Auction to benefit the Disabled American
Veterans Department of Massachusetts is coming this Monday. Your chance
to see the world champion Celtics, the Bruins, the Red Sox,
and the Patriots, plus autograph merch from Pedro Martinez, Chris Staff, Porzingis,
Brandon Carlow, and much more, one massive auction for incredible experiences,
(29:54):
all to benefits the Disabled American Veterans Department of Massachusetts.
The auction begins this at eleven am. That's this coming
Monday at eleven am. Keep it here on the Financial
Exchange and help support our great American heroes.
Speaker 2 (30:11):
Micha. Let's talk a little bit about Boeing's latest offer
to their machinists. They have now offered a thirty eight
percent wage increase over four years. That's up from the
original offer of twenty five and the newly rejected offer
of thirty five percent. So basically, hey, here's an extra
you know, three quarters of percent a year, and the
(30:33):
union is going to be voting on this deal on Monday.
This offer still does not restore pensions, which is something
that we covered as a key demand of union leaders,
but Boeing would further increase four to oh one K contributions.
They are also offering a twelve thousand dollars ratification bonus,
(30:54):
up from seven thousand, but that previous offer also had
a five thousand dollars four to one K bonus so
they're not really adding more for the ratification bonus. It's
just you you can get your money now instead of
having that retirement. So where free burritos for life? Two?
Uh no, the different story? Got it?
Speaker 3 (31:13):
Different story? Yes, I don't know. I mean they rejected
the first one by ninety percent. They rejected the second
one by sixty odd percent. The trend would seemingly be
the longer this is going on, the more machinists are
willing to vote on something like this.
Speaker 2 (31:26):
But this barely moves the needle.
Speaker 3 (31:28):
So if you rejected the last one, I'm not sure
why this moves the needle for you other than yeah,
it's been like seven weeks and I'm starting to struggle.
Speaker 2 (31:36):
I got two possibilities here. Either this gets rejected like
fifty two to fifty three. I don't think this is
enough to get it over the hump. No, I don't.
Or I could see this being something where it's like, hey,
all you're doing is moving that signing bonus money around.
This is a slap in the face eighty percent rejection.
Speaker 3 (31:57):
Think so, I don't think the union would bring it
to their members if they thought it would get rejected
by eighty percent.
Speaker 2 (32:04):
Probably true, but they brought the first one that got
rejected pretty badly they did. I think that was probably
just you had to do that in the process. Yeah,
you have to show like, hey, this is house. I
don't know if this gets it over the hump I
just don't know if it gets it over the hump here.
But maybe it's it's a baby. This is one vote
(32:24):
that we will know the answer of on Tuesday. They
usually tabulate these pretty quickly, so that'll be is this
actually Tuesday? Is this Monday? Well, the votes on Monday,
but we'll have it tuesday. Yeah, so it's uh that
that'll be great. We'll have some election results to cover
on Tuesday. Yeah, it's wonderful. Let's talk a little bit
about burritos. Now, indeed, what is your burrito reference price?
(32:47):
Seven ninety nine? I'm sorry to hear that, Tucker, what's your.
Speaker 5 (32:50):
I'm gonna say nine bucks, So I.
Speaker 2 (32:53):
Don't have a burrito reference price, by the way, nine
ten buckshere in that range. Reference price it's a fancy
word that economists use when they're trying to sound, you know,
very smart, smarter than the average person, and it basically is, hey,
what's the price that you're used to and that you
see as a fair cost for services. So if someone
came to you and said, Mike, I'm gonna charge you
(33:13):
eight dollars to replace your roof, you'd be like, Okay,
what's the scam? Yeah, because that's well below the reference
price for a roof. On the other hand, if you
walked into a McDonald's and they said, okay, you're getting
a big mac. That'll be two hundred dollars, you would
also say, again, you say, what's the scam? What's going
on here?
Speaker 3 (33:29):
So other big reference prices that everybody has a five
dollars foot long from subway, they really drove that one home.
And you do wonder about those strategies in hindsight, right
like the dollar menu the dollar menu, was that a
good idea having a company whose name is five below
or or dollar dollar general, Like you know, these are
(33:51):
companies that are by name tied to or by jingle
tied to a certain reference point. And I think in
subways case, for instance, it really struggled to get away
from that for a while.
Speaker 2 (34:02):
If do you know what I would call my like
discount retail chain, now we're naming. If I were naming
one and this is anyone can use this. I'm not
copyriting it or anything like if anyone wants to start
a dollar store with chuck, no, I don't want to
be involved retail. No, thank you feel like a million
(34:24):
it's too long? Like a million, that's better? How would
just million milk get get rid of get rid of
the like? Okay? In any case, we all have these
reference prices, and the big thing is, look, when inflation
isn't moving very far, you know, when you we're seeing
(34:44):
prices go up one to.
Speaker 3 (34:45):
Two percent a year, someone, we can maintain it. They
made I mean, that's the five dollars foot long? Was
that five dollars for like a decade and a half.
Speaker 2 (34:52):
It was like fifteen years. Yeah, So A, they can
maintain that, But B, you're even if prices do move
a little bit on things other than the five dollars
foot long. How many people paid attention to the price
of a big Mac from two thousand to twenty twenty. Nobody. Yeah,
it just wasn't a topic of conversation because the price
moves are slow, and so you like, it's kind of
like when you boil the frog in water slowly. It
(35:16):
doesn't hop out. You turn the water heat up slowly
so the frog doesn't realize it's being boiled alive. I've
done this, actually, Oh no, I haven't. No, why would
I often references them like why would anyone boil a frog?
Like what kind of To be fair, the French frog legs?
Never had them? Actually, but you fry them? Do you?
(35:37):
The only time I've ever heard you don't boil them?
I've never had them, to be honest, I have. But
the point that I'm making is, Hey, when things go
up slowly, you don't even really notice. That's kind of
the general premise of one to two percent inflation, even
two to three. Hey, you don't really notice. When prices
move twenty percent in a three year period, You're like, hey,
(35:58):
what gives? Right? What's going on? Like this is not
what I'm used to. And so those reference prices we
come back and we say, no, that burrito at Chipotle
is supposed to be twelve dollars even with guac, not
eighteen without. And that's what kind of gets us upset,
is that it's that difference between the reference price that
(36:19):
we have and what something actually costs today. And you know,
you see a few of these.
Speaker 3 (36:24):
So one person talked about their crispy rice bowl from
Sweet Green, a fast casual places out there. It went
from fifteen to eighteen dollars, and I get how that
disrupts your reference price, and extra three bucks for lunch
is not fun. It's also below the total inflation rate
that we've seen for dining out over the last few years.
Speaker 2 (36:45):
I think there's one other thing that needs to be
taken into account here, and that's mental rounding. You get
something for fifteen, you're like, that's fifteen bucks. It shows
up at eighteen instead of seventeen. Hey I'm paying twenty
bucks for lunch now, yeah, like you do that mental rounding,
And so I think that that's the same reason, Hey,
why do you sell everything at two ninety nine because
(37:06):
it doesn't have a three in the first digit, and
so that that rounding does happen as well. Where Okay,
if it goes from fifteen to sixteen, that's still pretty close.
Sixteen to seventeen, it's fine. Eighteen, man, this is almost
twenty dollars now, like you feel it on that side. Also,
I think the most interesting one to me is the
(37:27):
gasoline reference.
Speaker 3 (37:28):
Point, which is it's so so different, both region by
region and generationally.
Speaker 2 (37:37):
Not even generationally even just month, Like, we reset that
reference point quickly because you're always filling up.
Speaker 3 (37:44):
Yeah, you're always frequently, but yeah, you know, you talk
to a baby boomer who might genuinely have a reference
point on gasoline of like ninety nine cents, And that's
that's where I am. On this and everything above that.
It's expensive for me. Anything below four bucks a gallon
seems pretty reasonable.
Speaker 2 (38:03):
Let's take a quick break here, and when we come back.
We got our two coming up in just a little bit.
We're talking holidays, shopping, we're talking oil, and we're talking
Intel and a whole lot more when we return
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