September 19, 2025 • 38 mins
Mike Armstrong and Marc Fandetti discuss which areas of the country are being hit the hardest by unemployment. Grocery prices have jumped up. Is it actually the grocery stores to blame? Eversource gas customers face 13 percent rate increase this winter. Reasons why getting rid of quarterly reports helps markets and companies. Paul LaMonica ( Barron's) joins the show chat about the recent IPOs including StubHub.
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Episode Transcript
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Speaker 1 (00:00):
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(00:43):
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(01:07):
and Mark Vandetti.
Speaker 2 (01:12):
Good morning, Happy Friday, Welcome back to the Financial Exchange.
It's Mike, Mark and Tucker with you on a Friday here.
It's been a fairly busy week in terms of we
had the FED meeting. There's been a few other data
points coming out, the jobless claims numbers that once again
seem to have had a data issue in them, this
time with North Carolina, last week with Texas. But the
(01:36):
big move was the FED moving rates downward by a
quarter of a percent next meeting scheduled slated for late October,
where markets are betting they will continue to move down
on rates. The FED members themselves when they project things
out a little bit less clear. And my takeaway from
the press conference at least was j Powell always sounds
(01:57):
a little bit confused, but the read on the state
of the economy and where things go from here seemed
especially questionable. From the Fed share on was that Wednesday
Wednesday afternoon, And for good reason. I think I do
think he's in a position where it is relatively unclear
whether you need to be more worried about inflation than unemployment.
(02:20):
Mark has a different opinion, which is you definitely need
to be more worried about inflation than unemployment.
Speaker 3 (02:24):
Right now, about what do the facts say?
Speaker 4 (02:28):
Forget about where you think the labor market's going. What
do we know? Unemployment is at four point three percent.
It's come up from three point four over a year ago,
but historically speaking, it's still low, maybe too low, Mike.
We don't know what the so called natural rate is.
We don't know what the rate of unemployment is that
will cause pressure on wages and therefore prices. The economy
is changing structurally, the White House is making changes to
(02:50):
the labor force. The natural rate might be rising. That's
one point I'd make. We also know that GDP is
growing at trend or better so called potential GDP estimates
of this. The Atlanta Fed calculates a GDP now figure
sodas the New York Fed. Both are in the threes.
I'm not so sure about New York, so I retract that,
But the Atlanta Fed has us growing at above trend.
(03:11):
That snapshot you made this point in the last hour.
Markets record highs, financial conditions, record loose conditions. None of
this screams cut rates, never mind by a lot. And oh,
by the way, the icing on top of all this
is inflation remains elevating.
Speaker 2 (03:28):
Were all debate of their market is what does scream
cut rates? Is what's been the job pace? Create a
pace of job creation for the twenty twenty five calendar year,
because I think it's probably average under fifty thousand.
Speaker 4 (03:39):
Yeah, we're at about seventy this year. If you look
at payrolls versus one hundred and sixty seven last year
and versus two and yeah, forty or fifty Yeah. My
question though, I will give you that, but what if
that was too high, as evidenced by the high inflation
at the time, But if the labor market was unnaturally
tight because of all the COVID stimulus, the delayed monetary
(03:59):
pol reaction, and it's now normalizing, we don't know that
that's not the case. Look, Mike, honest, people can disagree
on this, but you and you certainly come at this
from a good faith point of view. But I would
argue that based on what we know today, the risks
seem to be more in balance than tilted toward slowing
(04:21):
growth increasing unemployment. To me, the risks seem more balanced
than that. If indeed you put some weight on inflation
increasing as being an adverse outcome. It does depend on
your ideology, if you will, it depends on how naturally
hawkish you are. I'm an old fashioned conservative. When it
comes to physical policy, I would prefer inflation be squashed.
I like a target rate of zero or one, maybe
(04:44):
two at best, because it can get out of hand
quickly otherwise. So some of it depends on ideology as well.
So like the political backdrop right now is what makes
this especially dangerous. The White House is trying to take
the FED over. They're very open about this, and they've
installed a puppet at the FED who will do the
bidding of the President. That's unprecedented in anybody's lifetime. No
way of knowing how this pans out.
Speaker 2 (05:05):
To your point on the unemployment situation, we were sitting
at four point two percent unemployment in August of last year.
Right now we're sitting at four point three percent. You
can say what you will about the hiring state of hiring.
The unemployment rate and the national level has not significantly
changed a year over year. There's probably a number of
different reasons for that, but that's the state of things
at the national level.
Speaker 3 (05:26):
When it comes to unemployment.
Speaker 2 (05:28):
I bring that up because just an hour ago we
received data on the state by state changes in employment
for the month of August. This always comes out a
couple weeks after the national data, and we're seeing some
interesting trends I think, especially here in the Northeast that
I wanted to call out. So in Massachusetts, where we're
doing this program, unemployment rate in August of last year
(05:49):
was sitting at four point two percent, almost no exactly
at the national average. We're now sitting at four point
eight percent. It's a pretty big uptick. In Connecticut, they
were sitting at three point two percent. They're now sitting
at three point eight percent. Similar big uptick there.
Speaker 3 (06:04):
DC.
Speaker 2 (06:05):
We've talked about some of the slowdowns and issues there
in the housing market, for example, five to three up
to six percent now in d C. And there are
several other states that are experiencing something similar. Right New Hampshire,
unemployment's up four tenths of a percent instead of six
tenths but still at an ultra low level. Unemployment in
(06:25):
New Hampshire's three percent. It was two point six back
in August of last year. New Jersey you've seen it
rise four tenths of a percent. In Oregon, you've seen
it go up eight tenths of a percent. In terms
of states that are seeing declines in unemployment, New York
unemployment down four tenths of a percent. In Illinois you're
seeing it down six tenths of percent, Indiana down eight tenths,
Kentucky down five tenths. So the story, as it always is,
(06:52):
is the national economy differs.
Speaker 3 (06:55):
You know, it's a heck of a lot different when
you drill in and look.
Speaker 2 (06:57):
At a state by state basis, and I don't think
you can and tell anything. Sometimes, for instance, people will
look at Nevada and say, oh, that's always a precursor
to things. And to be fair, the unemployment rate in
Nevada is down by four tenths of a percent. The
argument there is, hey, when the economy is really falling apart,
the first thing people cancel is their trip to go
gamble in Las Vegas. But I do just wonder at
(07:22):
the impact for those who are listening to this program
in New England, what it means now to have the
unemployment rate jumping six tenths of a percent in this
state where I think you can easily explain it, I
mean biotech companies which saw a ton of funding over
the last beginning of COVID time are seeing that dry
up and getting questioned a lot more universities in this
(07:44):
area are losing funding. So I think I would explain
it that way. But for you know, if this is
indeed happening mainly in the Boston area, which I suspect,
that could have some pretty big implications for the overall
New England area. And what I am confident about, Mark
is if we had seen the unemployment rate going from
four to two to four eight at the national level,
(08:07):
you and I would be having a very different conversation
about the state of the economy, and the state of
it depends on it should go.
Speaker 4 (08:13):
Why if it's due to a big surge in the
labor force? Takes people time to find I'm splitting here
just for fun, but it's but you're right, but you
have an hour or so, what the hell.
Speaker 2 (08:23):
Let's be honest, right, If we had seen the unemployment
rate by six times bump up by six tens of
percent over twelve months, it would be concerned.
Speaker 4 (08:30):
It would be note worthy, to say the least, if
it was combined with a deceleration and spending, a drop
in industrial production, a drop in capacity utilization, a drop
in all the factors tracked by the end by the
folks who arbitrate the definition of recession at the NBER
here in Massachusetts, that would be more concerning my I
(08:53):
guess you have to weigh that against what you're seeing elsewhere,
and you're not seeing signs of economics slow down elsewhere.
I would point again to estimates of GDP today based
on real time indicators, and of course capital markets, which
have a mixed record, to say the least of predicting
expansions and recession. But you cannot ignore the fact that
(09:13):
stocks are at an all time high and financial conditions
for all intents and purposes at an all cycle low.
Speaker 2 (09:18):
So my takeaway is there are some big regional differences
in the state of the economy. Yeah, and for those
I know there's a lot of folks who live and
work in Massachusetts right now, if it feels different than
the national scenario, it should. It is different than the
national scenario. We are seeing a markedly higher unemployment rate
here and other factors that Chuck brought up that I
(09:41):
hadn't really considered when we talked about this last You know,
many of the other states out there. So take a
look at Texas, for example, a lot of employment in
industries that have been affected by changes in migration and deportations.
Construction farming, for example, we don't do a whole lot
of either of them those in Massachusetts. And so if
(10:02):
you're seeing the labor force for those particular industries dry
up in some parts of the country, we wouldn't really
notice that in Massachusetts, and so that is another compelling
factor I think when it comes to all of this.
But my overall point is if you're out there and
you're looking for a job right now and the labor
market feels like garbage in Massachusetts, I can kind of
(10:23):
understand that given what we have seen in the pace
of change over the course of the last twelve months
here and.
Speaker 3 (10:29):
In other parts of the New England region.
Speaker 2 (10:31):
Let's take a quick break when we come back. We're
gonna play it a little bit of trivia. Following that,
I want to talk about grocery prices. We've seen some
pretty big spikes, especially on some key areas eggs, meat.
I want to talk about what might be driving it
and what we're actually seeing in the data.
Speaker 3 (10:46):
That's next here on the financial Exchange.
Speaker 1 (10:48):
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Speaker 5 (11:24):
All right time for sure of you here on the
Financial Exchange. In today's Jimmy Fallon's fifty first birthday, Fallon,
who hosts the Tonight's Show, is the sixth permanent host
in the show's history. So trivia question today, what year
did Jimmy Fallon begin hosting The Tonight Show?
Speaker 3 (11:41):
Once again?
Speaker 5 (11:41):
What year did Jimmy Fallon begin hosting The Tonight Show?
Be the third person today to textas at six one
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and you want a Financial eks Change Show T shirt?
Once again? The third correct response to Texas to the
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(12:01):
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Show dot com.
Speaker 2 (12:06):
Well Mark grocery prices are not pleasant. I will say
I get a little bit biased towards this because all
the grocery stores around me are the closest ones to me,
rather are Rosch Brothers, Whole Foods.
Speaker 3 (12:20):
And Wegman's.
Speaker 2 (12:20):
And I'm lazy, so I don't often go out of
my way to go to somewhere like Costco or market Basket.
But we did the other day, and honest to God,
like I think a full basket of groceries from market
Basket was or sorry, full cart. Well, the groceries. I
have three kids, We buy a lot of groceries on
a weekly basis. I gotta say I think it was
(12:42):
seventy five dollars cheaper than what I can get at
Wegmans or Whole Foods.
Speaker 3 (12:45):
Maybe one hundred dollars cheaper. It was.
Speaker 2 (12:48):
It was shocking, just kind of gross actually when I
reflected on it, how much cheaper everything was at market Baskets.
So you know, I'm just here to congratulate the folks
that managing to keep grocery prices at a much more
reasonable place than some of their fancy.
Speaker 4 (13:04):
Items you buy private label stuff or is it.
Speaker 3 (13:07):
Not all as the same stuff.
Speaker 2 (13:09):
It's just like fish meat, everything is so much cheaper
there that it really does start to add up. I'm
sure that differences on like Pete's coffee is probably not
all that different, But like when I take a look
at the per pound fish prices, for example, it is
it's flooring.
Speaker 3 (13:24):
But that is beside the point. What we were talking
about is.
Speaker 2 (13:27):
The fact that regardless of how cheap market basket is,
grocery prices.
Speaker 3 (13:30):
Generally have been through the roof and it keeps rotating.
Speaker 1 (13:33):
Right.
Speaker 2 (13:33):
We had egg prices that were a big concern at
the end of last year beginning of this year. Now
it's beef prices that have gone through the roof. I think,
up some twelve percent year over year. And so whenever
something like this has happened, everybody's looking for a scapegoat.
In fact, egg prices made it into presidential debates last year,
which was kind of silly because I think everybody knew
(13:54):
that no president has the ability to just immediately stop
bird flu and prevent egg prices from going through the roof.
But in terms of laying out what's going on here.
I mean, One, we've seen just general inflation tremendously over
the last five years, and so I think there's just
a perception that everything's more expensive, and you notice groceries
(14:16):
a lot more because you tend to buy the same
things every week and so you notice it more. H Two,
the Russian invasion of Ukraine drove up food prices pretty quickly,
and while that's not still driving them higher now, that
was a factor.
Speaker 3 (14:30):
Three.
Speaker 2 (14:30):
Tariffs are in place here. We don't grow any bananas
or coffee in the United States so far as I know.
I'm sure somebody out there listening is like, no, I
saw a banana tree in southern California one time. Great,
good for you, but we don't buy Nobody buys the
bananas in the grocery store from an American farm, and
so these items are not exempt from tariffs. And so
a number of the items in your basket are subject
(14:55):
to tariffs and are seeing price increases in all likelihood
because of those increases.
Speaker 3 (15:00):
Is the last piece.
Speaker 2 (15:02):
That I don't think we're ever going I think it's
gonna be a long time before we get any sort
of reliable data on But I suspect that large portions
of the agricultural industry in the United States, as well
as the food processing industries in the United States, are
done by either people who are undocumented immigrants or who
(15:27):
have a immediate family member who is an undocumented immigrant.
And so with the big changes in deportations this year,
this is one of the main industries that I think
the President himself has acknowledged, because you know, farmers who
support him came out and said like, hey, I can't
find anybody to hire because of these immigration crackdowns. I
(15:47):
suspect that that is going to play a role in
food prices too, But it's really hard for anyone to
say right now if it's happening having an immediate impact
that oh yeah, farmers are having to hire other workers
at higher wages and their four food prices are going up.
I think that's a tougher dot to connect, but I
suspect it is one that will be connected eventually.
Speaker 4 (16:06):
Everything you've just pointed out represents a reduction in supply, right, tariffs, immigration,
and those are directly attributable to policies we're imposing it.
You may think those policies are great, but you cannot
deny that they reduce supply. When you do that in
the face of constant or increasing demand, and when the
Fed cuts rates as it did this week, as it
did last fall, when the government accelerates tax rebates, as
(16:28):
it's going to do in the first part of next year,
you are fueling demand in the face of constricting supply.
This is a lot Does this sound familiar Early twenty
twenty one, anybody COVID was restricting supply. Government was with
a fire hose squirting money out at anybody who had
the hands to grab it. This is probably not going
(16:52):
to be as acute, but the factors are the same.
You've got supply contracting, demand staying the same or maybe
even going up. The result will be increased underlying inflation.
All LSEQL, and by all l SQL I mean assuming
there's not a big economic shock that causes a demand
contraction from some unforeseen corner of the world.
Speaker 3 (17:11):
The other positive or if it's positive.
Speaker 2 (17:14):
But the other piece of this that I will point
out is during the COVID supply shocks, it would there
were very little things you could have done in terms
of policy to reverse some of those supply shocks. Right,
you would have had a tough time convincing China to
just say, hey, reopen your economy and start making everything today.
If we see banana prices go through the roof, for example,
(17:34):
because there's some disease that affects foreign grown bananas and
prices start going through the roof, I can pretty easily
see the President saying, hey, it's kind of an emergency,
We're going to wave tariffs on bananas for.
Speaker 4 (17:48):
Six or put price control. My guess is we'll see
price controls on various subcategories in the next year going
up to an election. They can't back off their core policy,
which is tariff's and labor supply restrictions. And by the way,
we say supply shocks, we mean anything that inhibits the
economy's ability to produce. If you take labor out of
the economy, you're reducing supply. If you throw up trade barriers,
(18:11):
you're reducing supply. There are other examples, but those are
the most conspicuous at present.
Speaker 3 (18:17):
Yeah.
Speaker 4 (18:17):
So yeah, my guess is you'll see some combination. Nixon
did this, it's not unheard of. Didn't work. It controlled
prices for a little bit, then they were removed and
inflation exploded again. But you'll see some attempt I imagine
at controlling specific prices in the next year.
Speaker 3 (18:31):
Yeah, we will see.
Speaker 2 (18:32):
I think, like I said, every time that things have
gotten to be really big pain points for companies or consumers,
the policy has just been Okay, we can kind of
reshape the trade policy.
Speaker 3 (18:44):
Or Brazil is a good example.
Speaker 2 (18:46):
I don't know if this is still the case, but
they implemented these big tariffs on Brazilian goods and then
they went through an exempted seven of the top ten
products that we actually import from Brazil because they realize like,
oh yeah, yeah, things will come to true reaching halt
when it came to China trade, like oh, we really
can't make anything without rare earth. So we're going to
kind of back off some of these policies and make
sure that it does not completely send the American economy
(19:07):
into tailspin. So that's what I keep taking away from
all of this is, yes, the tariffs are likely starting
to have an impact on prices. The reason that we're
not seeing prices through the roof is because of this
intentional policy of putting it out and then backing it off.
Quick Break Wall Street Watch is coming up.
Speaker 1 (19:24):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
(19:46):
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 (20:00):
Markets are now little changed as the FED filled week concludes.
Wall Street continuing to monitor developments from the call this
morning between President Trump and Chinese President g this morning.
Right now, the Dow is down by only seven points.
SMP five hundred could not be more flat. Wow, that
(20:21):
is flat, and the Nasdaq is up about a tenth
of a percent or thirty two points higher. Russell two
thousand is down six tenths of one percent, Tenure treasreeled
is up three basis points at four point one three
five percent, and crude oil pulling back one percent today
trading just below sixty three dollars a barrel. FedEx rising
(20:43):
over two percent after the delivery. Giants said it expects
a one billion dollar ter related hit to its annual earnings.
As for the previous quarter, FedEx posted stronger than expected results. Meanwhile,
home builder Lennar saw its profit decline for a fourth
straight quarter as its sales for the previous quarter missed forecasts.
Earnings did, however, beat expectations. Leonar down over two percent
(21:08):
after its stock surged twenty two percent yesterday in reaction
to Nvidia investing five billion dollars in the company. Intel
shares of pulling back over one percent today. Furthermore, City
downgraded the stock to sell from neutral, saying Intel stock
is pricing in success and its leading edge foundry business
that it believes has minimal chance to succeed. And JP
(21:32):
Morgan upgraded its price target of Apple stock to two
hundred and eighty dollars per share from two hundred and
fifty do five dollars per share, with a firm said
demand for the tech giants new slate of iPhones is
strong based on early sales across Asia. Apple shares are
up nearly two percent. I'm Tucker Silva and that is
Wall Street Watch. And in the previous segment, we asked
(21:54):
you the trivia question, what year did Jimmy Fallon begin
hosting the tonight show? That would be twenty four. David
from Braintreemass is our winner today, taking home a Financial
Exchange Show T shirt. Congrats to David, and we played
trivia every day here in the Financial Exchange See complete
contest rules at Financial Exchange Show dot com.
Speaker 2 (22:13):
Exciting news if you're an ever source gas customer, because
you're gonna be facing a thirteen percent rate increase this winter.
Of that rate increase that has been approved, eleven percent
is attributed to maintenance and infrastructure investments, two percent to
the cost of supply, and less than one percent to
public public benefits.
Speaker 3 (22:31):
So basically, we didn't maintain.
Speaker 2 (22:33):
Our stuff well enough for years, or the legislature didn't
allow us to improve rates enough to improve our infrastructure
quite enough. If you're on national grid. Meanwhile, they're asking
for a three point eight percent hike this winter. But
I guess that makes me happy that I'm on oil.
Probably not oil is probably gonna be worse, would be
my guest. But in any case, yeah, you're seeing some
(22:55):
big upticks. We were talking a lot about inflation on
the food side, so I didn't want to leave heating
your home out of the equation.
Speaker 3 (23:01):
Here.
Speaker 2 (23:04):
The big story I think with all of this, or
what I would guess, you know, I hate to make
predictions about something as unpredictable as the cost of energy,
but it's hard for me to see an environment given
the environment we're in. It's hard for me to see
a scenario where electricity costs delivered to your home moderate
(23:27):
anytime in the next few years.
Speaker 4 (23:29):
Michael, why are you getting me further worked up about inflation?
Speaker 2 (23:32):
Yeah, like, taking a look at this scenario here, and
I know, like this is a big contributor to potential
inflation here. But let's think through logically what you would
need to see happen for electricity rates to come down.
I mean, I guess if we went into a big
recession and manufacturing dropped off a ledge that didn't want happen, though,
(23:54):
But every other scenario that I think of, like, Okay,
it's getting more costly to maintain our old, outdated infrastructure.
We keep having natural disasters like wildfires that cost a
bunch of money on the utility companies to rebuild that infrastructure.
And now we have these giant monsters of new demand
(24:14):
coming from the AI space. Again, granted they're not building
data centers here in Massachusetts. It's happening mainly in the midwest. Wisconsin.
Speaker 3 (24:22):
Just get out to another.
Speaker 2 (24:23):
Deal for one, but again, basic supply and demand. What
happens when you add a bunch of demand to the
grid generally speaking, prices will go up and then you
will see supply come online to feed that additional demand.
But that's last time I checked. It was not a
(24:44):
quick process to get a new electricity generation plant.
Speaker 3 (24:48):
Approved, zoned, and built, And so I don't know.
Speaker 2 (24:52):
I have a tough time seeing a scenario other than
a really bad economic recession where industrial demand comes down,
oil prices come down, gas prices come down, and therefore generation.
Speaker 3 (25:04):
Prices come down.
Speaker 2 (25:05):
That's the only scenario I see where these prices moderate
anytime in the near future.
Speaker 4 (25:10):
And as you point out, it is nationwide. There are
variations by geography, but it is nationwide, and this is
another reason why inflation is more likely to surprise on
the upside. Honest, people can disagree about this, but the
evidence I think points to continued elevated inflation at the
very least with the possibility of a breakout, and in
(25:32):
retrospect the fed's talk and the fed's actions over Sorry,
I have to tie everything back to this because it
is the driver will have it will in retrospect not
be judged well by history.
Speaker 1 (25:43):
Very ill advice.
Speaker 2 (25:44):
The one positive of all this, by the way, I
do seem to see a big tie change in terms
of people's attitude towards nuclear power right now. And so
you know, I think ten years from now we might
have a really nice, reliable grid that uses something like
nuclear to power a big chunk of it.
Speaker 4 (26:03):
And I think that'd be fam how the tragedy this is.
Speaker 3 (26:07):
But I think it's gonna take a decade to get there.
Speaker 4 (26:08):
In the nineteen eighties, people pointed out France gets eighty
percent of their nuclear power energy excuse me, electricity from
nuclear power. These were arguments that were very lively in
the eighties and nineties. We did nothing because in part
it was big oil that suppressed it. In part it
was just that oil was cheaper. In part that people
were afraid because of Three Mile Island and the scare
(26:29):
tactics that were employed as a result of the occasional
regrettable safety accidents that occurred at nuclear power plants. But
we had the ability to address this decades ago, and
by the way, for those of you concerned about it, it
would have solved the or would have made big strides
towards mitigating human cost climate change if you believe in that,
but even if you don't, if you believe in lower
(26:50):
energy prices which every red blood capitalist does. I mean
that we sort of we backed ourselves into this corner.
Speaker 3 (26:56):
We cast time to start in the eighties. Best time
to start was yesterday. So hopefully, like a lot of things.
Speaker 5 (27:00):
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Speaker 3 (28:13):
Mark.
Speaker 2 (28:14):
The debate over companies reporting earnings quarterly is firing back up. Yeah,
this came up during the first Trump administration. I believe
Barack Obama pushed it to right now, if you're publicly traded,
you report your earnings every single every ninety days, and
it's a requirement.
Speaker 3 (28:32):
There's been this now renewed push to say why do
we need to do that?
Speaker 2 (28:37):
The Wall Street journalists coming out and condemning it, saying
it's a terrible idea.
Speaker 3 (28:41):
I'm having a tough time buying the arguments.
Speaker 2 (28:43):
But to be fair, I've never worked at a publicly
traded company, and I've never been employed as a stock analyst.
So what would we lose by going to twice a
year earnings reports?
Speaker 4 (28:53):
Exactly what you'd expect valuable information. Potentially, there's actually a
way to test this. You can ask does knowing earnings
quarterly as opposed to every six months help me to
better predict the long term trend in earnings, which is
presumably what's of interest to a long term investor or?
Am I indifferent between getting earnings every three or six
(29:14):
months in terms of my obile?
Speaker 3 (29:16):
How would you test it? If no US companies do it.
Speaker 4 (29:19):
You would take the last you would there is a
way to do it. It's a good question. You would
assume that earnings arrive every six as opposed to every
three months. You would then put in yourself half position. Yeah,
ignore the last three months, assume you only had the
six months prior to that, and then ask does getting
the additional three months allow me to better forecast the trend?
(29:40):
It's the test is statistical. It gets a little involved,
but I've done it, others have probably done it more
rigorously than I have, and it's not overwhelming. But the
quarterly frequency gives you better forecasts of the trend in
earnings than a semi annual frequency. So statistic that may improve.
(30:01):
We don't have that, unfortunately, as you know.
Speaker 3 (30:03):
But no.
Speaker 4 (30:04):
So you raise another question, at what costs though the
benefits outweigh the costs. The answer to that is very
hard to quantify. The benefits. Benefits include market efficiency, probably
stocks get priced more effectively efficiently if you will, they're better.
The value today is a better representation of the present
value of the earnings they're likely to generate, if you
(30:25):
want to use that as your definition of efficiency. So
you lose that market efficiency. And if you're a short
term trader, the more frequent the earnings, the more information
you have to trade on. It's unquestionably valuable. My guess is, Mike,
when you consider the effects and aggregate those that I
just mentioned market efficiency and the profits and the price
so called price discovery benefits of having more information, my
(30:47):
guess is those outweigh the accounting costs. And oh, by
the way, if you're worried about those, wouldn't a first
best solution be will streamline it. Go to regulators and
companies and ask them what would make How do we
cut your costs without reducing valuable information? As opposed to
an off the cuff, I think it should be every
six months. I'd love to see a serious effort at
quantifying benefits from reducing.
Speaker 2 (31:10):
I say, less regulation. You're required to do it once
a year, and if you want to do more, go
for it.
Speaker 4 (31:14):
But what if you lose What if traders and long
term investors lose valuable information, which, when quantified, exceeds those benefits.
Speaker 2 (31:21):
If companies find it to be valuable for their stocks,
let the market decide.
Speaker 4 (31:27):
Okay, sorry, I agree wholeheartedly.
Speaker 3 (31:29):
Quick break. Paul A Monica from Baron's joins us.
Speaker 1 (31:31):
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Speaker 2 (32:41):
Paul Amonica from Barons joins US now and uh paul
Ipomania's back companies listing at a pretty hefty clip. I
don't think we're quite back in twenty twenty one status
by any stretch. But for those taking a look at
these recent IPOs, I guess, how do you judge the
market and what comes next? And then as you're right,
(33:04):
how do you avoid the froth?
Speaker 6 (33:06):
Yeah, it's a great question. There have been, you know,
companies like the stable coin issuer Circle Figma design software
company that actually had a deal to sell itself to
Adobe a full a few years ago, and then there
were any trust concerns, so that deal wound up not happening,
and to Figma's benefit because Figma went public, you know,
(33:30):
not that long ago, at evaluation even higher than what
Adobe offered to pay for it. There's you know, just
a lot of froth out there, and you know, I
think investors have to be concerned because a lot of
times the expectations are very high. These companies then report
earnings once they're public, and they're even if they're slightly disappointing,
(33:51):
the stocks come tumbling down. So Circle and Pigma, for example,
still up sharply from their offering price, but down a
lot from the peak they hit in their first few
days of trading. And for a lot of individual investors,
that's where they're getting access to these socks. They're not
getting even if they put in for allocations on Robinhood
or Schwab, They're not necessarily getting shares at the IPO price.
(34:15):
They're buying in the aftermarket at the inflated prices.
Speaker 2 (34:18):
Paul, back in twenty twenty twenty twenty one, it was
really defined by that spack boom that we saw, and
we are distinctly not seeing that right now. I'm sure
there have been a few companies using that vehicle. But
is this just a market where hey, people are going
back to those big bankers because they rely on them.
Is it bad taste from the busts that you saw
(34:41):
after the spack boom in twenty twenty twenty one, or
a they're actually regulatory changes that are pushing these companies
back over to the giants investment banks to make this happen.
Speaker 6 (34:50):
Yeah, I think it's hard not to recognize that back
in twenty twenty one, there was that exuberance in the
I hesitate to call it post COVID, because obviously we
were still dealing with the pandemic in twenty twenty one,
but the market had reopened in a way that many
(35:13):
companies felt that rush to go public, and it was
easier and quicker to do it through those blank check
deals the spack vehicle. Now, I think there has been
that bounce back and companies recognized that they need the
validity of Wall Street investment banks going on these actual
roadshows to try and drum up interest from institutional investors
(35:37):
and not just retail as well. So I think that's
why you're seeing more companies go public the traditional way
than through this background.
Speaker 2 (35:46):
I'm encouraged at least that we are not seeing every
company that goes public just absolutely taking off.
Speaker 3 (35:52):
We had stub Hub premiere just this week.
Speaker 2 (35:55):
What did we see in the day of the IPO
and now trading see when it comes to the giant
ticket player.
Speaker 6 (36:03):
Yeah. I mean, let's be honest, you you don't want
to say that a company's IPO is a disappointment because
it stumbles on the first day. Take a look at
you know, what happened with core Weave earlier this year,
AI company that went public late March, terrible timing, right
before Liberation Day. It didn't have a great debut at first,
but has now gone bonkers, you know, as the AI
(36:27):
trade has come luring back to life. Not so sure
that's gonna happen with StubHub. StubHub fell on its debut day.
StubHub fell yesterday and it's down again so far today.
And you know, maybe it's the case where, you know,
investors recognize that the fundamentals aren't that great. You know,
the they they're losing money. They're obviously very susceptible to
(36:52):
trends in music. Not having Taylor Swift on tour this
year is a big problem for the company's revenue stream.
And then you you know, you look at what's happening
with Live Nation and ticket Master and the FTC, you know,
complaint about ticket resales that probably isn't helping sentiment either.
Speaker 2 (37:11):
Paul only about thirty seconds here, But any other big
names that you're aware of or that have been hinting
of an IPO in the last what is it, three
and a half months of the year here as we
head into the fourth quarter.
Speaker 6 (37:23):
Yeah, I mean, you know, companies you know are likely
to still go public take advantageist demand sources. I spoke
to my story mentioned you know, Discord as a potential company,
Revolute you know as one as well. You know, we're
just gonna have to wait and see data bricks. You know,
(37:43):
big Ai company also you know, worth about one hundred
billion already, could be one to keep an eye out for.
But I don't expect the really gigantic unicorns your SpaceX's
or open ais to go public just yet.
Speaker 2 (38:00):
Paula Monica from Baron's joining us on this Friday talk
about the IPO market. Appreciate it as always, Paul, have
a great weekend and have a great weekend all listeners
to good weather weekend out there, so enjoy. We'll be
right back at it on Monday.
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Speaker 2 (01:12):
Good morning, Happy Friday, Welcome back to the Financial Exchange.
It's Mike, Mark and Tucker with you on a Friday here.
It's been a fairly busy week in terms of we
had the FED meeting. There's been a few other data
points coming out, the jobless claims numbers that once again
seem to have had a data issue in them, this
time with North Carolina, last week with Texas. But the
(01:36):
big move was the FED moving rates downward by a
quarter of a percent next meeting scheduled slated for late October,
where markets are betting they will continue to move down
on rates. The FED members themselves when they project things
out a little bit less clear. And my takeaway from
the press conference at least was j Powell always sounds
(01:57):
a little bit confused, but the read on the state
of the economy and where things go from here seemed
especially questionable. From the Fed share on was that Wednesday
Wednesday afternoon, And for good reason. I think I do
think he's in a position where it is relatively unclear
whether you need to be more worried about inflation than unemployment.
(02:20):
Mark has a different opinion, which is you definitely need
to be more worried about inflation than unemployment.
Speaker 3 (02:24):
Right now, about what do the facts say?
Speaker 4 (02:28):
Forget about where you think the labor market's going. What
do we know? Unemployment is at four point three percent.
It's come up from three point four over a year ago,
but historically speaking, it's still low, maybe too low, Mike.
We don't know what the so called natural rate is.
We don't know what the rate of unemployment is that
will cause pressure on wages and therefore prices. The economy
is changing structurally, the White House is making changes to
(02:50):
the labor force. The natural rate might be rising. That's
one point I'd make. We also know that GDP is
growing at trend or better so called potential GDP estimates
of this. The Atlanta Fed calculates a GDP now figure
sodas the New York Fed. Both are in the threes.
I'm not so sure about New York, so I retract that,
But the Atlanta Fed has us growing at above trend.
(03:11):
That snapshot you made this point in the last hour.
Markets record highs, financial conditions, record loose conditions. None of
this screams cut rates, never mind by a lot. And oh,
by the way, the icing on top of all this
is inflation remains elevating.
Speaker 2 (03:28):
Were all debate of their market is what does scream
cut rates? Is what's been the job pace? Create a
pace of job creation for the twenty twenty five calendar year,
because I think it's probably average under fifty thousand.
Speaker 4 (03:39):
Yeah, we're at about seventy this year. If you look
at payrolls versus one hundred and sixty seven last year
and versus two and yeah, forty or fifty Yeah. My
question though, I will give you that, but what if
that was too high, as evidenced by the high inflation
at the time, But if the labor market was unnaturally
tight because of all the COVID stimulus, the delayed monetary
(03:59):
pol reaction, and it's now normalizing, we don't know that
that's not the case. Look, Mike, honest, people can disagree
on this, but you and you certainly come at this
from a good faith point of view. But I would
argue that based on what we know today, the risks
seem to be more in balance than tilted toward slowing
(04:21):
growth increasing unemployment. To me, the risks seem more balanced
than that. If indeed you put some weight on inflation
increasing as being an adverse outcome. It does depend on
your ideology, if you will, it depends on how naturally
hawkish you are. I'm an old fashioned conservative. When it
comes to physical policy, I would prefer inflation be squashed.
I like a target rate of zero or one, maybe
(04:44):
two at best, because it can get out of hand
quickly otherwise. So some of it depends on ideology as well.
So like the political backdrop right now is what makes
this especially dangerous. The White House is trying to take
the FED over. They're very open about this, and they've
installed a puppet at the FED who will do the
bidding of the President. That's unprecedented in anybody's lifetime. No
way of knowing how this pans out.
Speaker 2 (05:05):
To your point on the unemployment situation, we were sitting
at four point two percent unemployment in August of last year.
Right now we're sitting at four point three percent. You
can say what you will about the hiring state of hiring.
The unemployment rate and the national level has not significantly
changed a year over year. There's probably a number of
different reasons for that, but that's the state of things
at the national level.
Speaker 3 (05:26):
When it comes to unemployment.
Speaker 2 (05:28):
I bring that up because just an hour ago we
received data on the state by state changes in employment
for the month of August. This always comes out a
couple weeks after the national data, and we're seeing some
interesting trends I think, especially here in the Northeast that
I wanted to call out. So in Massachusetts, where we're
doing this program, unemployment rate in August of last year
(05:49):
was sitting at four point two percent, almost no exactly
at the national average. We're now sitting at four point
eight percent. It's a pretty big uptick. In Connecticut, they
were sitting at three point two percent. They're now sitting
at three point eight percent. Similar big uptick there.
Speaker 3 (06:04):
DC.
Speaker 2 (06:05):
We've talked about some of the slowdowns and issues there
in the housing market, for example, five to three up
to six percent now in d C. And there are
several other states that are experiencing something similar. Right New Hampshire,
unemployment's up four tenths of a percent instead of six
tenths but still at an ultra low level. Unemployment in
(06:25):
New Hampshire's three percent. It was two point six back
in August of last year. New Jersey you've seen it
rise four tenths of a percent. In Oregon, you've seen
it go up eight tenths of a percent. In terms
of states that are seeing declines in unemployment, New York
unemployment down four tenths of a percent. In Illinois you're
seeing it down six tenths of percent, Indiana down eight tenths,
Kentucky down five tenths. So the story, as it always is,
(06:52):
is the national economy differs.
Speaker 3 (06:55):
You know, it's a heck of a lot different when
you drill in and look.
Speaker 2 (06:57):
At a state by state basis, and I don't think
you can and tell anything. Sometimes, for instance, people will
look at Nevada and say, oh, that's always a precursor
to things. And to be fair, the unemployment rate in
Nevada is down by four tenths of a percent. The
argument there is, hey, when the economy is really falling apart,
the first thing people cancel is their trip to go
gamble in Las Vegas. But I do just wonder at
(07:22):
the impact for those who are listening to this program
in New England, what it means now to have the
unemployment rate jumping six tenths of a percent in this
state where I think you can easily explain it, I
mean biotech companies which saw a ton of funding over
the last beginning of COVID time are seeing that dry
up and getting questioned a lot more universities in this
(07:44):
area are losing funding. So I think I would explain
it that way. But for you know, if this is
indeed happening mainly in the Boston area, which I suspect,
that could have some pretty big implications for the overall
New England area. And what I am confident about, Mark
is if we had seen the unemployment rate going from
four to two to four eight at the national level,
(08:07):
you and I would be having a very different conversation
about the state of the economy, and the state of
it depends on it should go.
Speaker 4 (08:13):
Why if it's due to a big surge in the
labor force? Takes people time to find I'm splitting here
just for fun, but it's but you're right, but you
have an hour or so, what the hell.
Speaker 2 (08:23):
Let's be honest, right, If we had seen the unemployment
rate by six times bump up by six tens of
percent over twelve months, it would be concerned.
Speaker 4 (08:30):
It would be note worthy, to say the least, if
it was combined with a deceleration and spending, a drop
in industrial production, a drop in capacity utilization, a drop
in all the factors tracked by the end by the
folks who arbitrate the definition of recession at the NBER
here in Massachusetts, that would be more concerning my I
(08:53):
guess you have to weigh that against what you're seeing elsewhere,
and you're not seeing signs of economics slow down elsewhere.
I would point again to estimates of GDP today based
on real time indicators, and of course capital markets, which
have a mixed record, to say the least of predicting
expansions and recession. But you cannot ignore the fact that
(09:13):
stocks are at an all time high and financial conditions
for all intents and purposes at an all cycle low.
Speaker 2 (09:18):
So my takeaway is there are some big regional differences
in the state of the economy. Yeah, and for those
I know there's a lot of folks who live and
work in Massachusetts right now, if it feels different than
the national scenario, it should. It is different than the
national scenario. We are seeing a markedly higher unemployment rate
here and other factors that Chuck brought up that I
(09:41):
hadn't really considered when we talked about this last You know,
many of the other states out there. So take a
look at Texas, for example, a lot of employment in
industries that have been affected by changes in migration and deportations.
Construction farming, for example, we don't do a whole lot
of either of them those in Massachusetts. And so if
(10:02):
you're seeing the labor force for those particular industries dry
up in some parts of the country, we wouldn't really
notice that in Massachusetts, and so that is another compelling
factor I think when it comes to all of this.
But my overall point is if you're out there and
you're looking for a job right now and the labor
market feels like garbage in Massachusetts, I can kind of
(10:23):
understand that given what we have seen in the pace
of change over the course of the last twelve months
here and.
Speaker 3 (10:29):
In other parts of the New England region.
Speaker 2 (10:31):
Let's take a quick break when we come back. We're
gonna play it a little bit of trivia. Following that,
I want to talk about grocery prices. We've seen some
pretty big spikes, especially on some key areas eggs, meat.
I want to talk about what might be driving it
and what we're actually seeing in the data.
Speaker 3 (10:46):
That's next here on the financial Exchange.
Speaker 1 (10:48):
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Speaker 5 (11:24):
All right time for sure of you here on the
Financial Exchange. In today's Jimmy Fallon's fifty first birthday, Fallon,
who hosts the Tonight's Show, is the sixth permanent host
in the show's history. So trivia question today, what year
did Jimmy Fallon begin hosting The Tonight Show?
Speaker 3 (11:41):
Once again?
Speaker 5 (11:41):
What year did Jimmy Fallon begin hosting The Tonight Show?
Be the third person today to textas at six one
seven three six two thirteen eighty five with the correct answer,
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(12:01):
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Show dot com.
Speaker 2 (12:06):
Well Mark grocery prices are not pleasant. I will say
I get a little bit biased towards this because all
the grocery stores around me are the closest ones to me,
rather are Rosch Brothers, Whole Foods.
Speaker 3 (12:20):
And Wegman's.
Speaker 2 (12:20):
And I'm lazy, so I don't often go out of
my way to go to somewhere like Costco or market Basket.
But we did the other day, and honest to God,
like I think a full basket of groceries from market
Basket was or sorry, full cart. Well, the groceries. I
have three kids, We buy a lot of groceries on
a weekly basis. I gotta say I think it was
(12:42):
seventy five dollars cheaper than what I can get at
Wegmans or Whole Foods.
Speaker 3 (12:45):
Maybe one hundred dollars cheaper. It was.
Speaker 2 (12:48):
It was shocking, just kind of gross actually when I
reflected on it, how much cheaper everything was at market Baskets.
So you know, I'm just here to congratulate the folks
that managing to keep grocery prices at a much more
reasonable place than some of their fancy.
Speaker 4 (13:04):
Items you buy private label stuff or is it.
Speaker 3 (13:07):
Not all as the same stuff.
Speaker 2 (13:09):
It's just like fish meat, everything is so much cheaper
there that it really does start to add up. I'm
sure that differences on like Pete's coffee is probably not
all that different, But like when I take a look
at the per pound fish prices, for example, it is
it's flooring.
Speaker 3 (13:24):
But that is beside the point. What we were talking
about is.
Speaker 2 (13:27):
The fact that regardless of how cheap market basket is,
grocery prices.
Speaker 3 (13:30):
Generally have been through the roof and it keeps rotating.
Speaker 1 (13:33):
Right.
Speaker 2 (13:33):
We had egg prices that were a big concern at
the end of last year beginning of this year. Now
it's beef prices that have gone through the roof. I think,
up some twelve percent year over year. And so whenever
something like this has happened, everybody's looking for a scapegoat.
In fact, egg prices made it into presidential debates last year,
which was kind of silly because I think everybody knew
(13:54):
that no president has the ability to just immediately stop
bird flu and prevent egg prices from going through the roof.
But in terms of laying out what's going on here.
I mean, One, we've seen just general inflation tremendously over
the last five years, and so I think there's just
a perception that everything's more expensive, and you notice groceries
(14:16):
a lot more because you tend to buy the same
things every week and so you notice it more. H Two,
the Russian invasion of Ukraine drove up food prices pretty quickly,
and while that's not still driving them higher now, that
was a factor.
Speaker 3 (14:30):
Three.
Speaker 2 (14:30):
Tariffs are in place here. We don't grow any bananas
or coffee in the United States so far as I know.
I'm sure somebody out there listening is like, no, I
saw a banana tree in southern California one time. Great,
good for you, but we don't buy Nobody buys the
bananas in the grocery store from an American farm, and
so these items are not exempt from tariffs. And so
a number of the items in your basket are subject
(14:55):
to tariffs and are seeing price increases in all likelihood
because of those increases.
Speaker 3 (15:00):
Is the last piece.
Speaker 2 (15:02):
That I don't think we're ever going I think it's
gonna be a long time before we get any sort
of reliable data on But I suspect that large portions
of the agricultural industry in the United States, as well
as the food processing industries in the United States, are
done by either people who are undocumented immigrants or who
(15:27):
have a immediate family member who is an undocumented immigrant.
And so with the big changes in deportations this year,
this is one of the main industries that I think
the President himself has acknowledged, because you know, farmers who
support him came out and said like, hey, I can't
find anybody to hire because of these immigration crackdowns. I
(15:47):
suspect that that is going to play a role in
food prices too, But it's really hard for anyone to
say right now if it's happening having an immediate impact
that oh yeah, farmers are having to hire other workers
at higher wages and their four food prices are going up.
I think that's a tougher dot to connect, but I
suspect it is one that will be connected eventually.
Speaker 4 (16:06):
Everything you've just pointed out represents a reduction in supply, right, tariffs, immigration,
and those are directly attributable to policies we're imposing it.
You may think those policies are great, but you cannot
deny that they reduce supply. When you do that in
the face of constant or increasing demand, and when the
Fed cuts rates as it did this week, as it
did last fall, when the government accelerates tax rebates, as
(16:28):
it's going to do in the first part of next year,
you are fueling demand in the face of constricting supply.
This is a lot Does this sound familiar Early twenty
twenty one, anybody COVID was restricting supply. Government was with
a fire hose squirting money out at anybody who had
the hands to grab it. This is probably not going
(16:52):
to be as acute, but the factors are the same.
You've got supply contracting, demand staying the same or maybe
even going up. The result will be increased underlying inflation.
All LSEQL, and by all l SQL I mean assuming
there's not a big economic shock that causes a demand
contraction from some unforeseen corner of the world.
Speaker 3 (17:11):
The other positive or if it's positive.
Speaker 2 (17:14):
But the other piece of this that I will point
out is during the COVID supply shocks, it would there
were very little things you could have done in terms
of policy to reverse some of those supply shocks. Right,
you would have had a tough time convincing China to
just say, hey, reopen your economy and start making everything today.
If we see banana prices go through the roof, for example,
(17:34):
because there's some disease that affects foreign grown bananas and
prices start going through the roof, I can pretty easily
see the President saying, hey, it's kind of an emergency,
We're going to wave tariffs on bananas for.
Speaker 4 (17:48):
Six or put price control. My guess is we'll see
price controls on various subcategories in the next year going
up to an election. They can't back off their core policy,
which is tariff's and labor supply restrictions. And by the way,
we say supply shocks, we mean anything that inhibits the
economy's ability to produce. If you take labor out of
the economy, you're reducing supply. If you throw up trade barriers,
(18:11):
you're reducing supply. There are other examples, but those are
the most conspicuous at present.
Speaker 3 (18:17):
Yeah.
Speaker 4 (18:17):
So yeah, my guess is you'll see some combination. Nixon
did this, it's not unheard of. Didn't work. It controlled
prices for a little bit, then they were removed and
inflation exploded again. But you'll see some attempt I imagine
at controlling specific prices in the next year.
Speaker 3 (18:31):
Yeah, we will see.
Speaker 2 (18:32):
I think, like I said, every time that things have
gotten to be really big pain points for companies or consumers,
the policy has just been Okay, we can kind of
reshape the trade policy.
Speaker 3 (18:44):
Or Brazil is a good example.
Speaker 2 (18:46):
I don't know if this is still the case, but
they implemented these big tariffs on Brazilian goods and then
they went through an exempted seven of the top ten
products that we actually import from Brazil because they realize like,
oh yeah, yeah, things will come to true reaching halt
when it came to China trade, like oh, we really
can't make anything without rare earth. So we're going to
kind of back off some of these policies and make
sure that it does not completely send the American economy
(19:07):
into tailspin. So that's what I keep taking away from
all of this is, yes, the tariffs are likely starting
to have an impact on prices. The reason that we're
not seeing prices through the roof is because of this
intentional policy of putting it out and then backing it off.
Quick Break Wall Street Watch is coming up.
Speaker 1 (19:24):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
(19:46):
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 (20:00):
Markets are now little changed as the FED filled week concludes.
Wall Street continuing to monitor developments from the call this
morning between President Trump and Chinese President g this morning.
Right now, the Dow is down by only seven points.
SMP five hundred could not be more flat. Wow, that
(20:21):
is flat, and the Nasdaq is up about a tenth
of a percent or thirty two points higher. Russell two
thousand is down six tenths of one percent, Tenure treasreeled
is up three basis points at four point one three
five percent, and crude oil pulling back one percent today
trading just below sixty three dollars a barrel. FedEx rising
(20:43):
over two percent after the delivery. Giants said it expects
a one billion dollar ter related hit to its annual earnings.
As for the previous quarter, FedEx posted stronger than expected results. Meanwhile,
home builder Lennar saw its profit decline for a fourth
straight quarter as its sales for the previous quarter missed forecasts.
Earnings did, however, beat expectations. Leonar down over two percent
(21:08):
after its stock surged twenty two percent yesterday in reaction
to Nvidia investing five billion dollars in the company. Intel
shares of pulling back over one percent today. Furthermore, City
downgraded the stock to sell from neutral, saying Intel stock
is pricing in success and its leading edge foundry business
that it believes has minimal chance to succeed. And JP
(21:32):
Morgan upgraded its price target of Apple stock to two
hundred and eighty dollars per share from two hundred and
fifty do five dollars per share, with a firm said
demand for the tech giants new slate of iPhones is
strong based on early sales across Asia. Apple shares are
up nearly two percent. I'm Tucker Silva and that is
Wall Street Watch. And in the previous segment, we asked
(21:54):
you the trivia question, what year did Jimmy Fallon begin
hosting the tonight show? That would be twenty four. David
from Braintreemass is our winner today, taking home a Financial
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Speaker 2 (22:13):
Exciting news if you're an ever source gas customer, because
you're gonna be facing a thirteen percent rate increase this winter.
Of that rate increase that has been approved, eleven percent
is attributed to maintenance and infrastructure investments, two percent to
the cost of supply, and less than one percent to
public public benefits.
Speaker 3 (22:31):
So basically, we didn't maintain.
Speaker 2 (22:33):
Our stuff well enough for years, or the legislature didn't
allow us to improve rates enough to improve our infrastructure
quite enough. If you're on national grid. Meanwhile, they're asking
for a three point eight percent hike this winter. But
I guess that makes me happy that I'm on oil.
Probably not oil is probably gonna be worse, would be
my guest. But in any case, yeah, you're seeing some
(22:55):
big upticks. We were talking a lot about inflation on
the food side, so I didn't want to leave heating
your home out of the equation.
Speaker 3 (23:01):
Here.
Speaker 2 (23:04):
The big story I think with all of this, or
what I would guess, you know, I hate to make
predictions about something as unpredictable as the cost of energy,
but it's hard for me to see an environment given
the environment we're in. It's hard for me to see
a scenario where electricity costs delivered to your home moderate
(23:27):
anytime in the next few years.
Speaker 4 (23:29):
Michael, why are you getting me further worked up about inflation?
Speaker 2 (23:32):
Yeah, like, taking a look at this scenario here, and
I know, like this is a big contributor to potential
inflation here. But let's think through logically what you would
need to see happen for electricity rates to come down.
I mean, I guess if we went into a big
recession and manufacturing dropped off a ledge that didn't want happen, though,
(23:54):
But every other scenario that I think of, like, Okay,
it's getting more costly to maintain our old, outdated infrastructure.
We keep having natural disasters like wildfires that cost a
bunch of money on the utility companies to rebuild that infrastructure.
And now we have these giant monsters of new demand
(24:14):
coming from the AI space. Again, granted they're not building
data centers here in Massachusetts. It's happening mainly in the midwest. Wisconsin.
Speaker 3 (24:22):
Just get out to another.
Speaker 2 (24:23):
Deal for one, but again, basic supply and demand. What
happens when you add a bunch of demand to the
grid generally speaking, prices will go up and then you
will see supply come online to feed that additional demand.
But that's last time I checked. It was not a
(24:44):
quick process to get a new electricity generation plant.
Speaker 3 (24:48):
Approved, zoned, and built, And so I don't know.
Speaker 2 (24:52):
I have a tough time seeing a scenario other than
a really bad economic recession where industrial demand comes down,
oil prices come down, gas prices come down, and therefore generation.
Speaker 3 (25:04):
Prices come down.
Speaker 2 (25:05):
That's the only scenario I see where these prices moderate
anytime in the near future.
Speaker 4 (25:10):
And as you point out, it is nationwide. There are
variations by geography, but it is nationwide, and this is
another reason why inflation is more likely to surprise on
the upside. Honest, people can disagree about this, but the
evidence I think points to continued elevated inflation at the
very least with the possibility of a breakout, and in
(25:32):
retrospect the fed's talk and the fed's actions over Sorry,
I have to tie everything back to this because it
is the driver will have it will in retrospect not
be judged well by history.
Speaker 1 (25:43):
Very ill advice.
Speaker 2 (25:44):
The one positive of all this, by the way, I
do seem to see a big tie change in terms
of people's attitude towards nuclear power right now. And so
you know, I think ten years from now we might
have a really nice, reliable grid that uses something like
nuclear to power a big chunk of it.
Speaker 4 (26:03):
And I think that'd be fam how the tragedy this is.
Speaker 3 (26:07):
But I think it's gonna take a decade to get there.
Speaker 4 (26:08):
In the nineteen eighties, people pointed out France gets eighty
percent of their nuclear power energy excuse me, electricity from
nuclear power. These were arguments that were very lively in
the eighties and nineties. We did nothing because in part
it was big oil that suppressed it. In part it
was just that oil was cheaper. In part that people
were afraid because of Three Mile Island and the scare
(26:29):
tactics that were employed as a result of the occasional
regrettable safety accidents that occurred at nuclear power plants. But
we had the ability to address this decades ago, and
by the way, for those of you concerned about it, it
would have solved the or would have made big strides
towards mitigating human cost climate change if you believe in that,
but even if you don't, if you believe in lower
(26:50):
energy prices which every red blood capitalist does. I mean
that we sort of we backed ourselves into this corner.
Speaker 3 (26:56):
We cast time to start in the eighties. Best time
to start was yesterday. So hopefully, like a lot of things.
Speaker 5 (27:00):
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Speaker 1 (28:02):
The proceeding was paid for and The views expressed are
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or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong do not endorse each other and are
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Speaker 3 (28:13):
Mark.
Speaker 2 (28:14):
The debate over companies reporting earnings quarterly is firing back up. Yeah,
this came up during the first Trump administration. I believe
Barack Obama pushed it to right now, if you're publicly traded,
you report your earnings every single every ninety days, and
it's a requirement.
Speaker 3 (28:32):
There's been this now renewed push to say why do
we need to do that?
Speaker 2 (28:37):
The Wall Street journalists coming out and condemning it, saying
it's a terrible idea.
Speaker 3 (28:41):
I'm having a tough time buying the arguments.
Speaker 2 (28:43):
But to be fair, I've never worked at a publicly
traded company, and I've never been employed as a stock analyst.
So what would we lose by going to twice a
year earnings reports?
Speaker 4 (28:53):
Exactly what you'd expect valuable information. Potentially, there's actually a
way to test this. You can ask does knowing earnings
quarterly as opposed to every six months help me to
better predict the long term trend in earnings, which is
presumably what's of interest to a long term investor or?
Am I indifferent between getting earnings every three or six
(29:14):
months in terms of my obile?
Speaker 3 (29:16):
How would you test it? If no US companies do it.
Speaker 4 (29:19):
You would take the last you would there is a
way to do it. It's a good question. You would
assume that earnings arrive every six as opposed to every
three months. You would then put in yourself half position. Yeah,
ignore the last three months, assume you only had the
six months prior to that, and then ask does getting
the additional three months allow me to better forecast the trend?
(29:40):
It's the test is statistical. It gets a little involved,
but I've done it, others have probably done it more
rigorously than I have, and it's not overwhelming. But the
quarterly frequency gives you better forecasts of the trend in
earnings than a semi annual frequency. So statistic that may improve.
(30:01):
We don't have that, unfortunately, as you know.
Speaker 3 (30:03):
But no.
Speaker 4 (30:04):
So you raise another question, at what costs though the
benefits outweigh the costs. The answer to that is very
hard to quantify. The benefits. Benefits include market efficiency, probably
stocks get priced more effectively efficiently if you will, they're better.
The value today is a better representation of the present
value of the earnings they're likely to generate, if you
(30:25):
want to use that as your definition of efficiency. So
you lose that market efficiency. And if you're a short
term trader, the more frequent the earnings, the more information
you have to trade on. It's unquestionably valuable. My guess is, Mike,
when you consider the effects and aggregate those that I
just mentioned market efficiency and the profits and the price
so called price discovery benefits of having more information, my
(30:47):
guess is those outweigh the accounting costs. And oh, by
the way, if you're worried about those, wouldn't a first
best solution be will streamline it. Go to regulators and
companies and ask them what would make How do we
cut your costs without reducing valuable information? As opposed to
an off the cuff, I think it should be every
six months. I'd love to see a serious effort at
quantifying benefits from reducing.
Speaker 2 (31:10):
I say, less regulation. You're required to do it once
a year, and if you want to do more, go
for it.
Speaker 4 (31:14):
But what if you lose What if traders and long
term investors lose valuable information, which, when quantified, exceeds those benefits.
Speaker 2 (31:21):
If companies find it to be valuable for their stocks,
let the market decide.
Speaker 4 (31:27):
Okay, sorry, I agree wholeheartedly.
Speaker 3 (31:29):
Quick break. Paul A Monica from Baron's joins us.
Speaker 1 (31:31):
Next, The Financial Exchange Show podcast drops every day on Apple, Spotify,
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(31:51):
it here for the latest business and financial news and
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Financial Exchange Radio Network. Ladies and gentlemen the weekend.
Speaker 5 (32:10):
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Speaker 2 (32:41):
Paul Amonica from Barons joins US now and uh paul
Ipomania's back companies listing at a pretty hefty clip. I
don't think we're quite back in twenty twenty one status
by any stretch. But for those taking a look at
these recent IPOs, I guess, how do you judge the
market and what comes next? And then as you're right,
(33:04):
how do you avoid the froth?
Speaker 6 (33:06):
Yeah, it's a great question. There have been, you know,
companies like the stable coin issuer Circle Figma design software
company that actually had a deal to sell itself to
Adobe a full a few years ago, and then there
were any trust concerns, so that deal wound up not happening,
and to Figma's benefit because Figma went public, you know,
(33:30):
not that long ago, at evaluation even higher than what
Adobe offered to pay for it. There's you know, just
a lot of froth out there, and you know, I
think investors have to be concerned because a lot of
times the expectations are very high. These companies then report
earnings once they're public, and they're even if they're slightly disappointing,
(33:51):
the stocks come tumbling down. So Circle and Pigma, for example,
still up sharply from their offering price, but down a
lot from the peak they hit in their first few
days of trading. And for a lot of individual investors,
that's where they're getting access to these socks. They're not
getting even if they put in for allocations on Robinhood
or Schwab, They're not necessarily getting shares at the IPO price.
(34:15):
They're buying in the aftermarket at the inflated prices.
Speaker 2 (34:18):
Paul, back in twenty twenty twenty twenty one, it was
really defined by that spack boom that we saw, and
we are distinctly not seeing that right now. I'm sure
there have been a few companies using that vehicle. But
is this just a market where hey, people are going
back to those big bankers because they rely on them.
Is it bad taste from the busts that you saw
(34:41):
after the spack boom in twenty twenty twenty one, or
a they're actually regulatory changes that are pushing these companies
back over to the giants investment banks to make this happen.
Speaker 6 (34:50):
Yeah, I think it's hard not to recognize that back
in twenty twenty one, there was that exuberance in the
I hesitate to call it post COVID, because obviously we
were still dealing with the pandemic in twenty twenty one,
but the market had reopened in a way that many
(35:13):
companies felt that rush to go public, and it was
easier and quicker to do it through those blank check
deals the spack vehicle. Now, I think there has been
that bounce back and companies recognized that they need the
validity of Wall Street investment banks going on these actual
roadshows to try and drum up interest from institutional investors
(35:37):
and not just retail as well. So I think that's
why you're seeing more companies go public the traditional way
than through this background.
Speaker 2 (35:46):
I'm encouraged at least that we are not seeing every
company that goes public just absolutely taking off.
Speaker 3 (35:52):
We had stub Hub premiere just this week.
Speaker 2 (35:55):
What did we see in the day of the IPO
and now trading see when it comes to the giant
ticket player.
Speaker 6 (36:03):
Yeah. I mean, let's be honest, you you don't want
to say that a company's IPO is a disappointment because
it stumbles on the first day. Take a look at
you know, what happened with core Weave earlier this year,
AI company that went public late March, terrible timing, right
before Liberation Day. It didn't have a great debut at first,
but has now gone bonkers, you know, as the AI
(36:27):
trade has come luring back to life. Not so sure
that's gonna happen with StubHub. StubHub fell on its debut day.
StubHub fell yesterday and it's down again so far today.
And you know, maybe it's the case where, you know,
investors recognize that the fundamentals aren't that great. You know,
the they they're losing money. They're obviously very susceptible to
(36:52):
trends in music. Not having Taylor Swift on tour this
year is a big problem for the company's revenue stream.
And then you you know, you look at what's happening
with Live Nation and ticket Master and the FTC, you know,
complaint about ticket resales that probably isn't helping sentiment either.
Speaker 2 (37:11):
Paul only about thirty seconds here, But any other big
names that you're aware of or that have been hinting
of an IPO in the last what is it, three
and a half months of the year here as we
head into the fourth quarter.
Speaker 6 (37:23):
Yeah, I mean, you know, companies you know are likely
to still go public take advantageist demand sources. I spoke
to my story mentioned you know, Discord as a potential company,
Revolute you know as one as well. You know, we're
just gonna have to wait and see data bricks. You know,
(37:43):
big Ai company also you know, worth about one hundred
billion already, could be one to keep an eye out for.
But I don't expect the really gigantic unicorns your SpaceX's
or open ais to go public just yet.
Speaker 2 (38:00):
Paula Monica from Baron's joining us on this Friday talk
about the IPO market. Appreciate it as always, Paul, have
a great weekend and have a great weekend all listeners
to good weather weekend out there, so enjoy. We'll be
right back at it on Monday.
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