September 12, 2025 • 37 mins
Mike Armstrong and Paul Lane are joined by CNBC's Michael Santoli to recap what we saw in terms of inflation data this week and why we are likely to see a 25 bps interest cut at next week's Fed meeting, as opposed to 50 bps. Plus, with the cost of healthcare continuing to climb, should employers be seeing more blame as they pass along some of the impact to their employees through payroll deductions? Barron's Paul LaMonica also hopped on to speak with the guys about Oracle's massive stock rally this week.
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Speaker 1 (00:00):
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(01:06):
and Paul Lane.
Speaker 2 (01:11):
Good morning, Happy Friday, Welcome back to the Financial Exchange.
It's Mike, Paul and Tucker with you on a Friday here,
still digesting this week's CPI report that came out this
just yesterday with hotter than expected numbers. We're gonna be
joined in just ten or so ten to fifteen minutes
by Michael san Totally from CNBC. Later in the program
(01:34):
by Paul Lamonica from Barons as well for their takes
on where this market and economy stands. But before we
get there, the labor market continuing to have this overall shift,
and just we're talking about the practice of labor hoarding
and where that situation could be going next. The other
(01:56):
piece to all of this is the remote work shift,
and to me they surprisingly kind of go hand in hand.
But the argument from some has been, look, the situation
in the labor market has been one of employers wanting
to hold on to their employees out of some sense
of desperation, out of some sense of not willing to
(02:16):
see change. And that's meant a number of things, including
a lot of folks working from home. I guess my
question would be, Paul, if we start to see a
younger demographic getting employed, does the shift in work from
home start to change as well? To be clear here,
the share of US workers who were primarily working from
(02:39):
home last year was thirteen point three percent. That's about
double where it was in twenty nineteen, about two point
three times higher. The percentage of work days spent at
home is now three point eight times higher than it
was in twenty nineteen. So that speaks to just the
hybrid piece. There's twice as many people working full time
from home, nearly four times as many people working home
(03:01):
occasionally compared to where we were in twenty nineteen. And
that's had big changes for not so much the yeah,
I guess everybody. It's had big changes for businesses in
terms of how they do business. I immediately go to
the big changes for municipalities who were used to a
whole boatload of tax revenues coming to the oft. Yeah,
(03:24):
I mean the revenue that the City of Boston, for example,
would raise from taxes on commercial properties, specifically the high
rise office buildings has taking a massive hit. And frankly,
it's you know, front and center when it comes to
the upcoming mayoral race, and it is an issue that
(03:46):
is everywhere, but you know, it concentrates and depends city
to city. I tend to think though, that if we
end up seeing I don't think it's going to be
a quick trend. But I the argument here in this
article from Bloomberg is that we've now settled into this
rate of work from home and it's not going to change.
(04:07):
And I don't know that I agree. I think that
if you start to have more baby boomers retiring over
the course of the next couple of years who have
largely been working hybrid or you know, fully remote. My
wife isn't a baby boomer, She's a millennial like I am.
(04:27):
But she works in the office one week and works
from home the next week. A twenty two year old
might not want to do that. Most twenty two year
olds that I know have well, at least when I
was twenty two, I was sharing an apartment with five
other guys. I had no interest in working remotely. You
don't think so I'm wrong?
Speaker 3 (04:48):
Yeah, they'd want to work from home.
Speaker 2 (04:50):
Yeah, huh? Are there employeers can think about?
Speaker 3 (04:55):
Think about the irresponsible twenty two or twenty three year
old that might go out on a Thursday night on
Friday they might want to be working remotely, not like
I know anyone like that. You'd much be rather hidden
in the shower shadows working remotely in some of those instances.
And I think the post college thing in general, they
wouldn't be opposed to it.
Speaker 2 (05:13):
So are the employer's going to be willing?
Speaker 4 (05:15):
Then?
Speaker 3 (05:16):
That is the better question to me is that if
the labor and I've said this before, I thought that
it would shift more back towards the employer court of
more people would be in the office if the labor
market were to weaken substantially, like if you saw an
unemployment rate of five or six percent, then the employer
would have all the muscle in the world to flex
to say no, you're going to come into the office
(05:38):
because if you don't like it, you can leave. And oh,
by the way, it's a really bad labor market that
you're about to thrust yourself into if you don't want
to play.
Speaker 2 (05:44):
That's what d Yeah, they did work pretty well.
Speaker 3 (05:47):
But I don't think as a whole the labor markets
at that point where you can make that shift. I
think ultimately that I agree with your point that these
things move in cycles. I'm not so sure that there.
I don't think the prevalence of remote work the hybrid structure.
I think it's more ingrained. But that doesn't mean if
the labor market were to shift to a really bad
(06:08):
period that it could just be everyone's back in the
office again. Maybe that flexibility's gone. I could go either
way on it, though it does seem like hybrid is
just so prevalent that most companies are okay with that.
Speaker 2 (06:21):
Willing to do it. Yeah, I don't know where I
trying to train up a twenty two year old, I
wouldn't be okay with it. But yeah, I guess you know.
It depends on place to place and where folks are
feeling comfortable. The piece of all of the employment situation
that is not really up for debate is costs around
healthcare about to shoot upwards. As they know they've been
(06:45):
increasing generally, but what we're about to see next year
is going to pre a little bit nuts. Employers are
expecting that they will need to pay almost nine percent
more per employee on average for healthcare benefits in twenty
twenty six compared to twenty twenty five. That would be
the biggest price increase in fifteen years. According to a
(07:07):
new study by Mercer, fifty nine percent of those employers
told Mercers that they plan to pass those higher prices
right along to their workers in the form of cost
cutting changes. So rather than saying, hey, you have to
pick up a bigger share of this total, they're just
going to increase deductibles, cope's other out of pocket expenses
in order to keep those net prices to the employer similar.
(07:31):
And this is one of those scenarios that gets frankly,
it gets tricky to even talk about, because everybody wants
to point a finger and say this is what is
causing all of these blow ups and health care expenses,
when the reality is there is a lot of blame
to go around here, and it's a pretty tricky scenario.
(07:52):
I don't think it's a good thing that we have
the most expensive health care in the country, or sorry,
in the world. The United States spends more on healthcare
per person than any other country in the world. But
I'm also not sure it's terribly surprising we are one
of the most expensive countries to live in the world.
We top that list in a number of different categories,
(08:14):
and so I'm not shocked by that reality. In terms
of the causes that you know are being pointed at here.
One is employers. Employers are basically saying, you know, we're
going to be keeping our cost structure the same regardless
of what these health insurance providers levy on us. So
you employee are going to end up bearing a larger
portion of that overall cost. So employers are to blame.
(08:37):
Health insurance companies are most certainly to blame. And I
mean that culminated in a you know, deranged person killing
a United Healthcare CEO last year and then a bunch
of the world applauding him, which was just I don't
need to get into that. So yeah, there's some blame there.
But you think about, if we're talking about the cost
(08:58):
control side of things, the thing that makes people angry
at health insurance companies is not how expensive they are.
The thing that makes them. The thing that makes them
angry are the denials which they're doing to try and
control costs. And then finally you have the pharmacy benefit
managers who have raised prices a lot too, and the
drugs have gotten better. We've got to take a quick break.
Michael sand Totally from CNBC joins us next here on
(09:19):
the Financial Exchange.
Speaker 1 (09:22):
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Speaker 2 (09:51):
Joining us now is CNBC's Michael sand Totally for a
look at markets hitting their all time highs and next
week's FED meeting. Meg, thanks for joining. I appreciate it.
Speaker 4 (10:01):
Yeah, go ahead to you, Thank you very much.
Speaker 2 (10:03):
Let's start right there with the Federal Reserve. We've got
a meeting next week. It's looks pretty baked for a
twenty five basis point rate cut. Do you think there's
any chance of a fifty?
Speaker 4 (10:15):
I don't think there's a significant chance of a fifty. Basically,
all the data we'd have that they'd be working with
next week is in hand. You also probably don't. You
would be unusual for the market to be priced for
twenty five this close to a meeting and have them
not at least have made.
Speaker 5 (10:33):
An effort to try and sway the market another way.
So I wouldn't foreclose on the possibility as as a whole.
It really depends on which of the members decides to
kind of migrate from, you know, still being vigilant on
inflation to saying, look, the recent labor market data has
been so weak that we need to kind of double
up and get ahead of it. It's somewhat similar to
(10:55):
what happened last year. Actually, they did not do a
July rate cut as many thought they would. The uneployment
rate tick high, and then in September they did what
they characterized as a catch up move of fifty I
don't know that whatever happens is going to change the
overall total for let's say the rest of the year
of let's say three quarters of a percentage point.
Speaker 2 (11:12):
I don't know that this changes the markets or the
narrative at all. But what's been interesting in the last
couple of meetings are the defections. You'd rarely see them,
generally speaking, the twelve FED members vote altogether. At the
last two you've seen defections. Is it possible you get
defections to both directions this time?
Speaker 4 (11:29):
Right?
Speaker 2 (11:29):
Some calling for a larger cut and some calling to
keep rates steady at this next meeting, I.
Speaker 5 (11:35):
Think you have to consider it a possibility. I think
in the end, those wanting any kind of cut would
probably line up behind you whatever the majority decides, and
not necessarily decides to dissent because of the magnitude of
a cut. But it's hard to know. But I think
even the discussion tells us what juncture we're at right now,
(11:56):
when in theory you're kind of short of your target
on both unemployment and on inflation at least a little bit,
and so that sort of creates a little bit of
a back and forth.
Speaker 2 (12:07):
So with that context in mind, what do we learn
new about the jobs market and the prices that we're
all paying at the grocery store and everywhere else this week?
Speaker 5 (12:17):
I think we're in a fascinating spot because inflation broadly speaking,
is kind of stuck around these levels let's call it
between two and a half and three percent on an
annual basis. That's not really changing. You're not seeing a
huge rush of terra flated inflation, but you're seeing it
in some core good sectors. And then just in general,
the labor market data has really turned pretty soggy. But
(12:37):
now there's also a lot of these folks wanting to
rationalize by saying that's labor supply. You're having immigration crackdowns, demographics,
So I think there's a lot of room for play
in that. What I do know is the markets for
the last month have been betting on rate cuts that
we're going to get, but we may not really need
because the underlying economy seems okay, especially outside of the
(12:58):
labor market data. That labor marketing it is really important,
but there's a chance that it's not fully reflecting the
pace of underlying economic activity. Whether it's because wealthy you
are still spending, because companies are throwing money at capital expenditures,
or all the rest. But it does seem like the
markets are priced for that kind of nirvana scenario where
(13:18):
we get lower borrowing rates, and it's not because we
have an emergency in the economy.
Speaker 2 (13:24):
By most accounts, that fed kind of missed the ball
when it came to inflation three years ago. They were
late to the game by most accounts in terms of
raising interest rates. They created a taboo around the word
transitory when it came to inflation. Is there a chance
they're missing the ball on this one again, right, They
clearly seem much more concerned about the labor market right
(13:46):
now than they do inflation. What could cause them to
be off on all the cut off sides on this one.
Once again, there's.
Speaker 5 (13:53):
No doubt that they believe, at least most people in
the committee believe there is a chance that they could
be caught off.
Speaker 4 (13:59):
Again.
Speaker 5 (14:00):
There's these examples from history. In the late sixties, this happened.
They started easing, Things were okay for a while, and
the economy overheated. It became a big inflation problem. I
do think that they have a little bit of room
to play with here, though, because by their numbers, they
remain let's say, one percentage point in terms of where
short term race are above what they consider neutral. So
(14:21):
I think they would they can kind of tell themselves, look,
we're just adjusting the race to be a little bit
less restrictive given the underlying inflation rates and source of
growth in the economy. And so until we get to it,
you know, closer to neutral, we don't necessarily have to
worry about really that we're gunning the economy and letting
it overheat. We'll see if that really holds up. These
(14:41):
models are obviously not precise, but I think that's where.
Speaker 2 (14:44):
They end up landing regardless of what the FED does next.
The AI mania and a little bit of IPO mania
now continues. We saw Oracle stock pop earlier this week,
last couple of days, been retracting a lot of that,
down about five percent in early trading so far today
so far. What's your take on the Oracle move and
(15:06):
just you know, it is a little bit strange to
see such a big pop and then of an immediate
pullback for a very mature company that's now entering into
the mainstream narrative when it comes to AI.
Speaker 5 (15:18):
Right, almost fifty year old company was considered kind of old, legacy,
boring tech. They've certainly refashioned themselves as basically an enabler
an outsourcer for a lot of this AI data center work. Now,
you did have a massive move higher in the stock
I think because just the magnitude of their forward revenue
guidance was so enormous. What it tells me is the
(15:40):
entrenched players in terms of trying to build out AI
infrastructure are in a phase of desperate urgency, and so
they're so pot committed that they're just going to keep
ramping what they think they need in terms of building capacity.
That's going to benefit those in the direct line of
all that spending. That includes Oracle, though maybe it's kind
of low margin business for them. It includes all the
semiconductor companies. Obviously Nvidia has already gotten its huge bump
(16:03):
from that. What it doesn't tell you is whether this
is going to be over investment in the end, and whether,
in fact it's going to be a winner take most
type of a platform or an environment where a lot
of the spending ends up looking redundant or ill conceived
in the end. We simply don't know that. What we
know is the numbers are massive. Open AI, which seems
(16:24):
the source of much of the Oracle revenue guidance, Boost
still has to raise money to do this right. It's
not in the days that Microsoft's got the money in
their pocket to just spend on it. So it's a
different it's a different phase of.
Speaker 4 (16:37):
This AI store.
Speaker 2 (16:38):
I agree that we don't know, Michael, but gosh, when
you talk about companies as old as Oracle getting bid
up on being the underlying infrastructure play for the latest
and greatest technology, it is really tough to not make
the comparisons to the late nineteen nineties.
Speaker 5 (16:52):
It's very true because you know, what you had back
then was old telephone companies doing the same thing. Old
telephone companies Nortel and Loosen, which was the old at
P Bell Labs type business, did in fact say hey,
we are building the broadband network of the world. We're
building we're the fiber companies. And they did it with
debt in large to a large degree. That's sort of
(17:13):
starting to be a debt financed aspect of the AI
boom too. So there is similar. It is similar, and
you know, back then the logic was, look, the main
constraint is we need broadband capacity and that's going to
enable all these wonderful things. It was true, yeah, but
the price of accessing that broadbelt crashed and nobody really
made money on it. It was all about the applications. Now,
(17:34):
I don't know if we're in for something similar in
terms of the AI part of it, but you can't
roll it out.
Speaker 2 (17:39):
Michael Santali from CNBC join us today talk about the
markets and next week's FED meeting. Always appreciate Michael, thanks
so much, and have every weekend you too.
Speaker 5 (17:48):
Thanks.
Speaker 4 (17:48):
Great to do it.
Speaker 2 (17:49):
I've got a new scam of the week here, Paul.
Small businesses facing a new threat when it comes to reviews. Effectively,
you'll get a message as a small business owner that
pays up or we're gonna start plastering your Google web
page and your Yelp page with garbage reviews.
Speaker 1 (18:05):
Wow.
Speaker 2 (18:06):
I don't know how you prevent that one.
Speaker 1 (18:09):
A tough one.
Speaker 2 (18:09):
It's a pretty good it's a pretty good scam.
Speaker 3 (18:11):
But a scummy thing to do, terrible thing.
Speaker 2 (18:13):
To do, and a pretty good scam that a lot
of people are probably gonna pay up for. One example
was given of an LA business that had a random
WhatsApp message. You know, basically I got in order to
post twenty bad reviews of your business. Pay up or
I'm gonna do it. Oh, good luck with that one.
Quick break. Wall Street Watches.
Speaker 6 (18:32):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street Watch a complete
(18:54):
look at what's moving market so far today. Right here
on the Financial Exchange Radio.
Speaker 7 (19:00):
Markets are mixed after a week filled full of inflation
and labor data. Head of the FEDS anticipated meeting on
deck next week. Right now, the Dow is down by
four tenths of one percent or two hundred and four points,
SMP five hundred completely flat, Nasdaq is up four tenths
of one percent or eighty eight points higher, Russell two
(19:22):
thousand retreating seven tenths of one percent, Tenure Treasure reeled
up six basis points now at four point zero eight percent,
and crude oil up over one and a half percent higher,
training at sixty three dollars in thirty nine cents a barrel.
Big news in the media world after CNBC reported that
Paramount Skydance was readying an offer for Warner Brothers Discovery. However,
(19:45):
as of Thursday, Warner Brothers had yet to receive an offer,
but a bid could come as soon as next week. Yesterday,
Warner Brothers stock surged twenty eight percent on the news,
Today up another fourteen percent. Meanwhile, shares in super Microcomputer
rising three percent after the AI tech firm announced it
is now delivering equipment powered by Nvidia's Blackwell Ultra technology
(20:09):
in volume two customers. Elsewhere, Open Ai and Microsoft reach
a deal to extend their partnership despite a summer of
difficult negotiations. Microsoft is up by about two percent. Adobe
raised its annual outlook for the second time this year
after reporting better than expected quarterly results. That stock is
flat at the moment. Furniture retailer rh trimmed its annual
(20:33):
outlook as it struggles with higher terror related costs and uncertainty.
That stock is down over three percent now. And Apple
delayed the launch of its new iPhone Air in China
citing regulatory approval issues. Apple is up nearly two percent
at the moment. I'm Tucker Silva and that is Wall
Street Watch. And in the previous segment, we asked you
(20:55):
the trivia question, what is the name of the smurfs
primary villain? That'll be something called Gargamel.
Speaker 6 (21:02):
I don't know.
Speaker 7 (21:03):
I never watched the Smurfs. Rob from Pittsmell, Pittsfield, Mass
is our winner today, taking home a Financial Exchange Show teacher.
Congrats to Rob. We played trivia every day here in
the Financial Exchange. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (21:18):
Paul, you want to talk buy Now, Pay Later or IPOs?
Speaker 3 (21:21):
I want to talk about this IPO story because it's
very puzzling to me. Okay, and I'll explain why. So
basically what this IPO story is talking about, how on
recent public offerings for companies that are being publicly traded
on our stock markets out there. Typically the way that
those broke out, it would be very difficult if you
were a regular Joe Schmoe like you and I, to
get access to buy shares of Facebook. I think about
(21:42):
as a famous one in twenty twelve when I started
my career, everyone wanted a piece of the Facebook IPO
and it's very hard to get. You had to go
through institutions typically to get access to those types of offerings.
Speaker 2 (21:52):
Yeah, the way this works, you typically go to an
investment banker like Goldman Sachs, like JP Morgan. You say
I want to go public. I want you to, you know,
sponsor the offering or I want several companies to sponsor
the offering. They will then take it to their clients.
They will sell the shares to those clients who support
the IPO, and then it becomes publicly traded. And that's
part of the special access that you get by working
(22:13):
with an investment bank.
Speaker 3 (22:14):
And to further that even more, though a lot of
it gets concentrated in their mutual funds or their products
the share of those companies, because I'd worked at Merrilyn
Morgan some the wirehouses that would run deals, and you'd
think being a client of the advisory for you get shares,
you get just pittances, you get really small allocations to it.
Fifty shares of Facebook, you know, doesn't move the needle
(22:36):
for these high network clients. Anyway, the way it's transitioned now,
heavier and heavier percentage of IPOs are being allocated to individuals.
And what strikes me is so puzzling about this piece
in the Wall Street Journal is they're actually stating that
the individual investors, the retail investors, are stabilizing the price
of these IPOs, and it's the institutional they never sells.
Speaker 2 (22:57):
Yo, baby, I guess, I guess this. I'm in hands.
Speaker 3 (23:00):
Thing to me coming up through the industry was always
retail is the dumb money, and they are the first
ones to panic and jump out when things get rough,
and that's usually what happens with IPOs. They pop really
quickly when they come out of the gate, but then
typically they're structured to have a ninety day lock up
where the employees can't sell their shares and after ninety
days they want to buy that house. They want to
(23:21):
buy that vacation home. So they sell off their shares,
causing a draw down in the stock, which would be,
in my mind a reason for retail investors to get
spooked and jump out. This I guess is I.
Speaker 2 (23:34):
Don't think it's I don't think this is permanent. But
I will say that since twenty twenty, there has been
a blow up in terms of the percentage of Americans
and number of Americans that are interested in stock trading
of one sort or another. And the trend line has
been buy companies that we think are cool for some
worrieson or another, and never sell them. Right you think
(23:56):
about some of these things that have occurred with other
memes companies, it's been nope, just I don't, I don't.
You know, this isn't about making money, but it's always
about making money. But like they say, you know, Roaring
Kitty publicly said things like that, Right, you know, this
is about something that I truly believe in, and I'm
(24:16):
with you. I don't think that sticks. But if you
can harness that moment in time as a new company,
it builds a whole bunch of excitement about your stock,
especially if you are a well known company like a
number of these have been recently, like Clarna, the buy now,
pay later firm. Then I can see what it does
to benefit you by offering this out to the everyday
(24:37):
retail investor, as opposed to just going after your Goldman
sas clients that have, by the way, probably never used
Golden buy now, pay later. Sure if you are, if
you are working with Goldman Sachs, my guess is you
are not accessing buy now, pay later for most of
your transactions or any of your.
Speaker 3 (24:54):
It's an interesting paradigm shift. I think all it takes
is one bad market cycle to kind of wash that out.
Speaker 2 (24:59):
But haven't gotten it yet.
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Speaker 1 (26:00):
The proceeding was paid for and the views expressed are
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Cushing and Armstrong did not endorse each other and are
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Speaker 2 (26:11):
Wall Street Journal asked for people how they use by
Now pay Later Again. We're talking about this and in
the wake of Klarna's pretty big IPO that occurred this week,
and we've both kind of scratched our heads. We're just
slightly older than the typical buy now, pay later crowd.
I think Paul and I've kind of wondered how it's
being utilized, if it is really replacing credit card transactions
(26:33):
or supplementing them in some way. In this case, Watson
Journal interviewed for people in terms of how they're using it,
and I have to say, I didn't find one of
these that I thought was an intelligent use case of
using buy now, Pay Later. It all seemed like it
didn't seem like they're all getting whacked with interest, but
it seemed like it was interesting Robin pe to pay
(26:54):
Paul or in some cases doing things that are kind
of dangerous. Aaron Moncad, who they reviewed as a software
engineer out in Seattle, says that he will oftentimes put
things on buy now, Pay later, and then take the
cash that he can afford to buy the thing with
and invest it in the stock market for those like
two weeks in between the buy now, pay later, to
(27:17):
which I would say, that's probably worked out really well
for you, but I don't even know. I would imagine
the odds of the stock market going up over a
four week time period is pretty close to a coin toss.
You're probably coming out slightly ahead there. But the problem
is if you go the other direction, then you're totally screwed.
(27:39):
If you miss one of these payments, you rack up
all these fees, and you're basically saying, hey, let's take
the money that I would have used to buy this
item and just put it on black. Right again, better
odds and putting it on black, but not buy a lot.
The other ones that are used are, hey, look, you know,
I put my discretionary stuff on this. I pay cash
for my groceries and things like that. But all of them,
(28:02):
the other stories, it just seemed to me like, Hey,
this is stuff that I wouldn't have bought if I
had to pay cash, And because I can pay for
it over four months, I'm willing to spend money that
I don't really have.
Speaker 3 (28:14):
I've never understood from the business case perspective as to
why Klarna and others why these are good businesses because oftentimes,
don't get me wrong, they're providing access to financing for
people to purs certain items. But on the credit score
a lot of things, you're typically getting the lower credit
score person, and in a time of financial upheaval, I
(28:38):
just don't know how a company like this would weather
a storm like that.
Speaker 2 (28:42):
I don't think they would. Yeah, again, we're in a
good economy, and so they're making a lot of money,
presumably on companies paying for access to this because that's
where they're making their money. Is you know, the company
that sold the mattress is paying for access to Klara
so that their customers can use it. But they're not
going to repossess the match that you bought if you
default in those payments, and so somebody would be left
(29:03):
holding the bag at the end of the day.
Speaker 3 (29:05):
It just doesn't seem like a super durable business to me,
like some others would be. Even if they went through
a downturn, you'd say, Okay, I can see how they
could pick back.
Speaker 2 (29:14):
Up quick break when we come back. Paulamonica from Baron's
joins us next, talking about Larry from Oracle. That's next
on the Financial Exchange.
Speaker 1 (29:23):
The Financial Exchange streams live on YouTube. Subscribe to our
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All morning. Long Face is the Financial Exchange Radio Network.
Speaker 8 (29:35):
Ladies and Gentlemen the weekend.
Speaker 7 (29:40):
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Speaker 2 (30:14):
Joining us now is Paul Lamonica from Baron's Happy Friday. Paul,
thanks for joining us.
Speaker 8 (30:18):
Yeah, thanks for having me.
Speaker 2 (30:20):
So let's start right off there with who was briefly
the world's richest man on Wednesday of this week, Larry Ellison.
I'm guessing with the stock price fall over the last
two days, he's not still holding that title. But what
did we see with Oracle stock and what do you
make of the I guess the big boom and then
the kind of fall apart over the last couple of
(30:40):
days that we've seen.
Speaker 8 (30:42):
Yeah, last I checked, Larry Ellison is once again trailing
Elon Musk a little bit. But yeah, I mean, I
know you have to feel really badly for him, for
both of them, for that matter. I mean, Oracle's earnings
were not fantastic by you know, the notion that they
didn't really blow away earnings expectations for the quarter. It
(31:06):
was the guidance in the outlook that really wowed everyone
that there's still all of this spending on you on
data Center's cloud that really is boosting oracles revenue and
profit growth expectations going forward. And there were reports of
the multi hundred billion dollar deal apparently that open ai
(31:30):
might be working on with Oracle, so that is very significant.
I think right now we are looking at a company
where it's I'm not going to say shades of ninety
nine two thousand just yet, because the valuation's not nearly
as crazy as what you had would say, Cisco in
(31:53):
the late nineties. But if you look at what happened
after earnings, Oracle was already a somewhat pricey stock, trading
around thirty three times forecasts before their earnings report. After earnings,
that pe went up to about forty three. So that's
a dramatic stretch in terms of what investors are willing
to pay for this company based on the expectations of
(32:14):
all this AI related growth.
Speaker 2 (32:17):
Paul plenty of listeners probably weren't investing in the late
nineties that are listening to us right now. So connect
the dots for us. I mean, I see the connections here.
It's a legacy tech company whose stock is being bid
through the roof for providing infrastructure. What are the connections
that you are seeing. What are the comparison points that
you are seeing between today and the late nineties as
(32:39):
these valuations continue to climb for not only in Nvidia
but the rest of the market as well.
Speaker 8 (32:45):
Yeah, that's a great question. I think the big difference
now is that I'd say in the late nineties, investors
were even more willing to accept the premise that the
Internet was going to be this revolution, which it turned
out to be, and that companies you know that were
(33:07):
very sketchy, to put it mildly, didn't have great business models.
Some of them didn't have revenue, let alone profits. It
was back in the day where people were doing things.
I'll still remember the stupid phrase monetizing eyeballs. It was
all about traffic. Now, I think you look at the
companies that are getting bid up on AI expectations. You
(33:29):
can call it hype if you want, Companies like Nvidia
and Oracle and Broadcom and then the hyperscalers, Microsoft, Amazon,
et cetera. There's real business there. I think the question
is when do the benefits of AI filtered down to
companies that are hoping to use AI to boost revenue
(33:50):
and cut costs. I don't think we're there yet outside
that handful of big tech companies, but the big tech
companies dominate the market. Our stats team that dal Jones
just ran me some numbers, if you want to call
them the Fine nine or Cloud nine, the Magnificent seven,
plus Oracle and Broadcom. They now make up more than
(34:12):
forty percent of the S and P five hundreds market valuation.
So in some respects, it's almost as if those other
four hundred ninety companies they don't really matter as much
as long as Nvidia, Oracle, et cetera are continuing to
do this.
Speaker 2 (34:26):
Well, while we're on the subject of Larry Ellison and
his wealth, his son David now and making his move
in this paramount Skydance potential Warner Brothers deal, what do
you make of that and what do you think of
the combination.
Speaker 8 (34:41):
Yeah, it's fascinating. As a former very long time CNN employee,
I wish all of my former colleagues all the best
with whatever happens they you know, they've lived through many
mergers before, AOL time, Warner at and T, you know,
Warner Brothers Discovery, so you know, having a new parent,
(35:03):
if that works out to be the case, wouldn't be new.
But I don't think it's a coincidence that the speculation
about this deal has really picked up steam days after
Larry Alison, David's father the game briefly the World's Richest Person.
So it will be very interesting to see. I mean,
Paramount Skuidance is technically smaller than Warner Brothers Discovery, but
(35:28):
the pockets are I think, just a little bit deeper.
Speaker 2 (35:31):
Paul Lamonica from Baron's Joints today to talk about the Oracle,
stock Pop and all the activity among the Ellison family
this week. So thanks so much for joining us. Paul,
have a great weekend.
Speaker 8 (35:41):
Thanks you too, guys.
Speaker 2 (35:43):
What do you have for us? Paul? For last story
of the day.
Speaker 3 (35:45):
Kodak is launching a vinched style toy camera with strong sales.
It's called the Charmer I guess see it, yeah, CHARMERA.
These are cameras that they're launching that are being sold
in blind boxes, so consumers don't get know what they
get until they're buying it. But it has all the
old vintage cameras from the eighties from Kodak.
Speaker 2 (36:07):
Did they make them digital or do you actually have
to digital process?
Speaker 3 (36:10):
Yeah, it's a line of inspired digital toy cameras called
the Kodak Cameras.
Speaker 2 (36:15):
I bought my kids one of these for their summer camp.
They're not allowed to have devices when they went to
summer camp, but one of the it was just a
point and shoot digital camera that could store a thousand pictures.
I kind of like the idea. I think it's awesome.
Speaker 3 (36:27):
This is reminds me of the story we covered where
landlines are remis making it come back, come back for
kids so that you don't get them exposed to the
wild world of smartphones.
Speaker 2 (36:38):
Yeah. I like it as well anything. Of course, if
I buy one of these things, I'm going to be
in company with, you know, tons of hipsters, and so
I'm not sure I'll be able to pull it off,
but nonetheless, good business. IDEA quick break for the next
forty eight hours. We'll be right back at it on Monday,
folks for a FED meeting week, So stay tuned. Have
(36:59):
a right weekend
Speaker 1 (37:11):
Sh
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(01:06):
and Paul Lane.
Speaker 2 (01:11):
Good morning, Happy Friday, Welcome back to the Financial Exchange.
It's Mike, Paul and Tucker with you on a Friday here,
still digesting this week's CPI report that came out this
just yesterday with hotter than expected numbers. We're gonna be
joined in just ten or so ten to fifteen minutes
by Michael san Totally from CNBC. Later in the program
(01:34):
by Paul Lamonica from Barons as well for their takes
on where this market and economy stands. But before we
get there, the labor market continuing to have this overall shift,
and just we're talking about the practice of labor hoarding
and where that situation could be going next. The other
(01:56):
piece to all of this is the remote work shift,
and to me they surprisingly kind of go hand in hand.
But the argument from some has been, look, the situation
in the labor market has been one of employers wanting
to hold on to their employees out of some sense
of desperation, out of some sense of not willing to
(02:16):
see change. And that's meant a number of things, including
a lot of folks working from home. I guess my
question would be, Paul, if we start to see a
younger demographic getting employed, does the shift in work from
home start to change as well? To be clear here,
the share of US workers who were primarily working from
(02:39):
home last year was thirteen point three percent. That's about
double where it was in twenty nineteen, about two point
three times higher. The percentage of work days spent at
home is now three point eight times higher than it
was in twenty nineteen. So that speaks to just the
hybrid piece. There's twice as many people working full time
from home, nearly four times as many people working home
(03:01):
occasionally compared to where we were in twenty nineteen. And
that's had big changes for not so much the yeah,
I guess everybody. It's had big changes for businesses in
terms of how they do business. I immediately go to
the big changes for municipalities who were used to a
whole boatload of tax revenues coming to the oft. Yeah,
(03:24):
I mean the revenue that the City of Boston, for example,
would raise from taxes on commercial properties, specifically the high
rise office buildings has taking a massive hit. And frankly,
it's you know, front and center when it comes to
the upcoming mayoral race, and it is an issue that
(03:46):
is everywhere, but you know, it concentrates and depends city
to city. I tend to think though, that if we
end up seeing I don't think it's going to be
a quick trend. But I the argument here in this
article from Bloomberg is that we've now settled into this
rate of work from home and it's not going to change.
(04:07):
And I don't know that I agree. I think that
if you start to have more baby boomers retiring over
the course of the next couple of years who have
largely been working hybrid or you know, fully remote. My
wife isn't a baby boomer, She's a millennial like I am.
(04:27):
But she works in the office one week and works
from home the next week. A twenty two year old
might not want to do that. Most twenty two year
olds that I know have well, at least when I
was twenty two, I was sharing an apartment with five
other guys. I had no interest in working remotely. You
don't think so I'm wrong?
Speaker 3 (04:48):
Yeah, they'd want to work from home.
Speaker 2 (04:50):
Yeah, huh? Are there employeers can think about?
Speaker 3 (04:55):
Think about the irresponsible twenty two or twenty three year
old that might go out on a Thursday night on
Friday they might want to be working remotely, not like
I know anyone like that. You'd much be rather hidden
in the shower shadows working remotely in some of those instances.
And I think the post college thing in general, they
wouldn't be opposed to it.
Speaker 2 (05:13):
So are the employer's going to be willing?
Speaker 4 (05:15):
Then?
Speaker 3 (05:16):
That is the better question to me is that if
the labor and I've said this before, I thought that
it would shift more back towards the employer court of
more people would be in the office if the labor
market were to weaken substantially, like if you saw an
unemployment rate of five or six percent, then the employer
would have all the muscle in the world to flex
to say no, you're going to come into the office
(05:38):
because if you don't like it, you can leave. And oh,
by the way, it's a really bad labor market that
you're about to thrust yourself into if you don't want
to play.
Speaker 2 (05:44):
That's what d Yeah, they did work pretty well.
Speaker 3 (05:47):
But I don't think as a whole the labor markets
at that point where you can make that shift. I
think ultimately that I agree with your point that these
things move in cycles. I'm not so sure that there.
I don't think the prevalence of remote work the hybrid structure.
I think it's more ingrained. But that doesn't mean if
the labor market were to shift to a really bad
(06:08):
period that it could just be everyone's back in the
office again. Maybe that flexibility's gone. I could go either
way on it, though it does seem like hybrid is
just so prevalent that most companies are okay with that.
Speaker 2 (06:21):
Willing to do it. Yeah, I don't know where I
trying to train up a twenty two year old, I
wouldn't be okay with it. But yeah, I guess you know.
It depends on place to place and where folks are
feeling comfortable. The piece of all of the employment situation
that is not really up for debate is costs around
healthcare about to shoot upwards. As they know they've been
(06:45):
increasing generally, but what we're about to see next year
is going to pre a little bit nuts. Employers are
expecting that they will need to pay almost nine percent
more per employee on average for healthcare benefits in twenty
twenty six compared to twenty twenty five. That would be
the biggest price increase in fifteen years. According to a
(07:07):
new study by Mercer, fifty nine percent of those employers
told Mercers that they plan to pass those higher prices
right along to their workers in the form of cost
cutting changes. So rather than saying, hey, you have to
pick up a bigger share of this total, they're just
going to increase deductibles, cope's other out of pocket expenses
in order to keep those net prices to the employer similar.
(07:31):
And this is one of those scenarios that gets frankly,
it gets tricky to even talk about, because everybody wants
to point a finger and say this is what is
causing all of these blow ups and health care expenses,
when the reality is there is a lot of blame
to go around here, and it's a pretty tricky scenario.
(07:52):
I don't think it's a good thing that we have
the most expensive health care in the country, or sorry,
in the world. The United States spends more on healthcare
per person than any other country in the world. But
I'm also not sure it's terribly surprising we are one
of the most expensive countries to live in the world.
We top that list in a number of different categories,
(08:14):
and so I'm not shocked by that reality. In terms
of the causes that you know are being pointed at here.
One is employers. Employers are basically saying, you know, we're
going to be keeping our cost structure the same regardless
of what these health insurance providers levy on us. So
you employee are going to end up bearing a larger
portion of that overall cost. So employers are to blame.
(08:37):
Health insurance companies are most certainly to blame. And I
mean that culminated in a you know, deranged person killing
a United Healthcare CEO last year and then a bunch
of the world applauding him, which was just I don't
need to get into that. So yeah, there's some blame there.
But you think about, if we're talking about the cost
(08:58):
control side of things, the thing that makes people angry
at health insurance companies is not how expensive they are.
The thing that makes them. The thing that makes them
angry are the denials which they're doing to try and
control costs. And then finally you have the pharmacy benefit
managers who have raised prices a lot too, and the
drugs have gotten better. We've got to take a quick break.
Michael sand Totally from CNBC joins us next here on
(09:19):
the Financial Exchange.
Speaker 1 (09:22):
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Speaker 2 (09:51):
Joining us now is CNBC's Michael sand Totally for a
look at markets hitting their all time highs and next
week's FED meeting. Meg, thanks for joining. I appreciate it.
Speaker 4 (10:01):
Yeah, go ahead to you, Thank you very much.
Speaker 2 (10:03):
Let's start right there with the Federal Reserve. We've got
a meeting next week. It's looks pretty baked for a
twenty five basis point rate cut. Do you think there's
any chance of a fifty?
Speaker 4 (10:15):
I don't think there's a significant chance of a fifty. Basically,
all the data we'd have that they'd be working with
next week is in hand. You also probably don't. You
would be unusual for the market to be priced for
twenty five this close to a meeting and have them
not at least have made.
Speaker 5 (10:33):
An effort to try and sway the market another way.
So I wouldn't foreclose on the possibility as as a whole.
It really depends on which of the members decides to
kind of migrate from, you know, still being vigilant on
inflation to saying, look, the recent labor market data has
been so weak that we need to kind of double
up and get ahead of it. It's somewhat similar to
(10:55):
what happened last year. Actually, they did not do a
July rate cut as many thought they would. The uneployment
rate tick high, and then in September they did what
they characterized as a catch up move of fifty I
don't know that whatever happens is going to change the
overall total for let's say the rest of the year
of let's say three quarters of a percentage point.
Speaker 2 (11:12):
I don't know that this changes the markets or the
narrative at all. But what's been interesting in the last
couple of meetings are the defections. You'd rarely see them,
generally speaking, the twelve FED members vote altogether. At the
last two you've seen defections. Is it possible you get
defections to both directions this time?
Speaker 4 (11:29):
Right?
Speaker 2 (11:29):
Some calling for a larger cut and some calling to
keep rates steady at this next meeting, I.
Speaker 5 (11:35):
Think you have to consider it a possibility. I think
in the end, those wanting any kind of cut would
probably line up behind you whatever the majority decides, and
not necessarily decides to dissent because of the magnitude of
a cut. But it's hard to know. But I think
even the discussion tells us what juncture we're at right now,
(11:56):
when in theory you're kind of short of your target
on both unemployment and on inflation at least a little bit,
and so that sort of creates a little bit of
a back and forth.
Speaker 2 (12:07):
So with that context in mind, what do we learn
new about the jobs market and the prices that we're
all paying at the grocery store and everywhere else this week?
Speaker 5 (12:17):
I think we're in a fascinating spot because inflation broadly speaking,
is kind of stuck around these levels let's call it
between two and a half and three percent on an
annual basis. That's not really changing. You're not seeing a
huge rush of terra flated inflation, but you're seeing it
in some core good sectors. And then just in general,
the labor market data has really turned pretty soggy. But
(12:37):
now there's also a lot of these folks wanting to
rationalize by saying that's labor supply. You're having immigration crackdowns, demographics,
So I think there's a lot of room for play
in that. What I do know is the markets for
the last month have been betting on rate cuts that
we're going to get, but we may not really need
because the underlying economy seems okay, especially outside of the
(12:58):
labor market data. That labor marketing it is really important,
but there's a chance that it's not fully reflecting the
pace of underlying economic activity. Whether it's because wealthy you
are still spending, because companies are throwing money at capital expenditures,
or all the rest. But it does seem like the
markets are priced for that kind of nirvana scenario where
(13:18):
we get lower borrowing rates, and it's not because we
have an emergency in the economy.
Speaker 2 (13:24):
By most accounts, that fed kind of missed the ball
when it came to inflation three years ago. They were
late to the game by most accounts in terms of
raising interest rates. They created a taboo around the word
transitory when it came to inflation. Is there a chance
they're missing the ball on this one again, right, They
clearly seem much more concerned about the labor market right
(13:46):
now than they do inflation. What could cause them to
be off on all the cut off sides on this one.
Once again, there's.
Speaker 5 (13:53):
No doubt that they believe, at least most people in
the committee believe there is a chance that they could
be caught off.
Speaker 4 (13:59):
Again.
Speaker 5 (14:00):
There's these examples from history. In the late sixties, this happened.
They started easing, Things were okay for a while, and
the economy overheated. It became a big inflation problem. I
do think that they have a little bit of room
to play with here, though, because by their numbers, they
remain let's say, one percentage point in terms of where
short term race are above what they consider neutral. So
(14:21):
I think they would they can kind of tell themselves, look,
we're just adjusting the race to be a little bit
less restrictive given the underlying inflation rates and source of
growth in the economy. And so until we get to it,
you know, closer to neutral, we don't necessarily have to
worry about really that we're gunning the economy and letting
it overheat. We'll see if that really holds up. These
(14:41):
models are obviously not precise, but I think that's where.
Speaker 2 (14:44):
They end up landing regardless of what the FED does next.
The AI mania and a little bit of IPO mania
now continues. We saw Oracle stock pop earlier this week,
last couple of days, been retracting a lot of that,
down about five percent in early trading so far today
so far. What's your take on the Oracle move and
(15:06):
just you know, it is a little bit strange to
see such a big pop and then of an immediate
pullback for a very mature company that's now entering into
the mainstream narrative when it comes to AI.
Speaker 5 (15:18):
Right, almost fifty year old company was considered kind of old, legacy,
boring tech. They've certainly refashioned themselves as basically an enabler
an outsourcer for a lot of this AI data center work. Now,
you did have a massive move higher in the stock
I think because just the magnitude of their forward revenue
guidance was so enormous. What it tells me is the
(15:40):
entrenched players in terms of trying to build out AI
infrastructure are in a phase of desperate urgency, and so
they're so pot committed that they're just going to keep
ramping what they think they need in terms of building capacity.
That's going to benefit those in the direct line of
all that spending. That includes Oracle, though maybe it's kind
of low margin business for them. It includes all the
semiconductor companies. Obviously Nvidia has already gotten its huge bump
(16:03):
from that. What it doesn't tell you is whether this
is going to be over investment in the end, and whether,
in fact it's going to be a winner take most
type of a platform or an environment where a lot
of the spending ends up looking redundant or ill conceived
in the end. We simply don't know that. What we
know is the numbers are massive. Open AI, which seems
(16:24):
the source of much of the Oracle revenue guidance, Boost
still has to raise money to do this right. It's
not in the days that Microsoft's got the money in
their pocket to just spend on it. So it's a
different it's a different phase of.
Speaker 4 (16:37):
This AI store.
Speaker 2 (16:38):
I agree that we don't know, Michael, but gosh, when
you talk about companies as old as Oracle getting bid
up on being the underlying infrastructure play for the latest
and greatest technology, it is really tough to not make
the comparisons to the late nineteen nineties.
Speaker 5 (16:52):
It's very true because you know, what you had back
then was old telephone companies doing the same thing. Old
telephone companies Nortel and Loosen, which was the old at
P Bell Labs type business, did in fact say hey,
we are building the broadband network of the world. We're
building we're the fiber companies. And they did it with
debt in large to a large degree. That's sort of
(17:13):
starting to be a debt financed aspect of the AI
boom too. So there is similar. It is similar, and
you know, back then the logic was, look, the main
constraint is we need broadband capacity and that's going to
enable all these wonderful things. It was true, yeah, but
the price of accessing that broadbelt crashed and nobody really
made money on it. It was all about the applications. Now,
(17:34):
I don't know if we're in for something similar in
terms of the AI part of it, but you can't
roll it out.
Speaker 2 (17:39):
Michael Santali from CNBC join us today talk about the
markets and next week's FED meeting. Always appreciate Michael, thanks
so much, and have every weekend you too.
Speaker 5 (17:48):
Thanks.
Speaker 4 (17:48):
Great to do it.
Speaker 2 (17:49):
I've got a new scam of the week here, Paul.
Small businesses facing a new threat when it comes to reviews. Effectively,
you'll get a message as a small business owner that
pays up or we're gonna start plastering your Google web
page and your Yelp page with garbage reviews.
Speaker 1 (18:05):
Wow.
Speaker 2 (18:06):
I don't know how you prevent that one.
Speaker 1 (18:09):
A tough one.
Speaker 2 (18:09):
It's a pretty good it's a pretty good scam.
Speaker 3 (18:11):
But a scummy thing to do, terrible thing.
Speaker 2 (18:13):
To do, and a pretty good scam that a lot
of people are probably gonna pay up for. One example
was given of an LA business that had a random
WhatsApp message. You know, basically I got in order to
post twenty bad reviews of your business. Pay up or
I'm gonna do it. Oh, good luck with that one.
Quick break. Wall Street Watches.
Speaker 6 (18:32):
Next, bringing the latest financial news straight to your radio.
Every day. It's the Financial Exchange on the Financial Exchange
Radio Network. Time now for Wall Street Watch a complete
(18:54):
look at what's moving market so far today. Right here
on the Financial Exchange Radio.
Speaker 7 (19:00):
Markets are mixed after a week filled full of inflation
and labor data. Head of the FEDS anticipated meeting on
deck next week. Right now, the Dow is down by
four tenths of one percent or two hundred and four points,
SMP five hundred completely flat, Nasdaq is up four tenths
of one percent or eighty eight points higher, Russell two
(19:22):
thousand retreating seven tenths of one percent, Tenure Treasure reeled
up six basis points now at four point zero eight percent,
and crude oil up over one and a half percent higher,
training at sixty three dollars in thirty nine cents a barrel.
Big news in the media world after CNBC reported that
Paramount Skydance was readying an offer for Warner Brothers Discovery. However,
(19:45):
as of Thursday, Warner Brothers had yet to receive an offer,
but a bid could come as soon as next week. Yesterday,
Warner Brothers stock surged twenty eight percent on the news,
Today up another fourteen percent. Meanwhile, shares in super Microcomputer
rising three percent after the AI tech firm announced it
is now delivering equipment powered by Nvidia's Blackwell Ultra technology
(20:09):
in volume two customers. Elsewhere, Open Ai and Microsoft reach
a deal to extend their partnership despite a summer of
difficult negotiations. Microsoft is up by about two percent. Adobe
raised its annual outlook for the second time this year
after reporting better than expected quarterly results. That stock is
flat at the moment. Furniture retailer rh trimmed its annual
(20:33):
outlook as it struggles with higher terror related costs and uncertainty.
That stock is down over three percent now. And Apple
delayed the launch of its new iPhone Air in China
citing regulatory approval issues. Apple is up nearly two percent
at the moment. I'm Tucker Silva and that is Wall
Street Watch. And in the previous segment, we asked you
(20:55):
the trivia question, what is the name of the smurfs
primary villain? That'll be something called Gargamel.
Speaker 6 (21:02):
I don't know.
Speaker 7 (21:03):
I never watched the Smurfs. Rob from Pittsmell, Pittsfield, Mass
is our winner today, taking home a Financial Exchange Show teacher.
Congrats to Rob. We played trivia every day here in
the Financial Exchange. See complete contest rules at Financial Exchange
Show dot com.
Speaker 2 (21:18):
Paul, you want to talk buy Now, Pay Later or IPOs?
Speaker 3 (21:21):
I want to talk about this IPO story because it's
very puzzling to me. Okay, and I'll explain why. So
basically what this IPO story is talking about, how on
recent public offerings for companies that are being publicly traded
on our stock markets out there. Typically the way that
those broke out, it would be very difficult if you
were a regular Joe Schmoe like you and I, to
get access to buy shares of Facebook. I think about
(21:42):
as a famous one in twenty twelve when I started
my career, everyone wanted a piece of the Facebook IPO
and it's very hard to get. You had to go
through institutions typically to get access to those types of offerings.
Speaker 2 (21:52):
Yeah, the way this works, you typically go to an
investment banker like Goldman Sachs, like JP Morgan. You say
I want to go public. I want you to, you know,
sponsor the offering or I want several companies to sponsor
the offering. They will then take it to their clients.
They will sell the shares to those clients who support
the IPO, and then it becomes publicly traded. And that's
part of the special access that you get by working
(22:13):
with an investment bank.
Speaker 3 (22:14):
And to further that even more, though a lot of
it gets concentrated in their mutual funds or their products
the share of those companies, because I'd worked at Merrilyn
Morgan some the wirehouses that would run deals, and you'd
think being a client of the advisory for you get shares,
you get just pittances, you get really small allocations to it.
Fifty shares of Facebook, you know, doesn't move the needle
(22:36):
for these high network clients. Anyway, the way it's transitioned now,
heavier and heavier percentage of IPOs are being allocated to individuals.
And what strikes me is so puzzling about this piece
in the Wall Street Journal is they're actually stating that
the individual investors, the retail investors, are stabilizing the price
of these IPOs, and it's the institutional they never sells.
Speaker 2 (22:57):
Yo, baby, I guess, I guess this. I'm in hands.
Speaker 3 (23:00):
Thing to me coming up through the industry was always
retail is the dumb money, and they are the first
ones to panic and jump out when things get rough,
and that's usually what happens with IPOs. They pop really
quickly when they come out of the gate, but then
typically they're structured to have a ninety day lock up
where the employees can't sell their shares and after ninety
days they want to buy that house. They want to
(23:21):
buy that vacation home. So they sell off their shares,
causing a draw down in the stock, which would be,
in my mind a reason for retail investors to get
spooked and jump out. This I guess is I.
Speaker 2 (23:34):
Don't think it's I don't think this is permanent. But
I will say that since twenty twenty, there has been
a blow up in terms of the percentage of Americans
and number of Americans that are interested in stock trading
of one sort or another. And the trend line has
been buy companies that we think are cool for some
worrieson or another, and never sell them. Right you think
(23:56):
about some of these things that have occurred with other
memes companies, it's been nope, just I don't, I don't.
You know, this isn't about making money, but it's always
about making money. But like they say, you know, Roaring
Kitty publicly said things like that, Right, you know, this
is about something that I truly believe in, and I'm
(24:16):
with you. I don't think that sticks. But if you
can harness that moment in time as a new company,
it builds a whole bunch of excitement about your stock,
especially if you are a well known company like a
number of these have been recently, like Clarna, the buy now,
pay later firm. Then I can see what it does
to benefit you by offering this out to the everyday
(24:37):
retail investor, as opposed to just going after your Goldman
sas clients that have, by the way, probably never used
Golden buy now, pay later. Sure if you are, if
you are working with Goldman Sachs, my guess is you
are not accessing buy now, pay later for most of
your transactions or any of your.
Speaker 3 (24:54):
It's an interesting paradigm shift. I think all it takes
is one bad market cycle to kind of wash that out.
Speaker 2 (24:59):
But haven't gotten it yet.
Speaker 7 (25:01):
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you can request it from their website Legal exchange show.
Speaker 1 (26:00):
The proceeding was paid for and the views expressed are
solely those of Cushing and Dolan. Cushing and Dolan and
or Armstrong Advisory may contact you offering legal or investment services.
Cushing and Armstrong did not endorse each other and are
not affiliated.
Speaker 2 (26:11):
Wall Street Journal asked for people how they use by
Now pay Later Again. We're talking about this and in
the wake of Klarna's pretty big IPO that occurred this week,
and we've both kind of scratched our heads. We're just
slightly older than the typical buy now, pay later crowd.
I think Paul and I've kind of wondered how it's
being utilized, if it is really replacing credit card transactions
(26:33):
or supplementing them in some way. In this case, Watson
Journal interviewed for people in terms of how they're using it,
and I have to say, I didn't find one of
these that I thought was an intelligent use case of
using buy now, Pay Later. It all seemed like it
didn't seem like they're all getting whacked with interest, but
it seemed like it was interesting Robin pe to pay
(26:54):
Paul or in some cases doing things that are kind
of dangerous. Aaron Moncad, who they reviewed as a software
engineer out in Seattle, says that he will oftentimes put
things on buy now, Pay later, and then take the
cash that he can afford to buy the thing with
and invest it in the stock market for those like
two weeks in between the buy now, pay later, to
(27:17):
which I would say, that's probably worked out really well
for you, but I don't even know. I would imagine
the odds of the stock market going up over a
four week time period is pretty close to a coin toss.
You're probably coming out slightly ahead there. But the problem
is if you go the other direction, then you're totally screwed.
(27:39):
If you miss one of these payments, you rack up
all these fees, and you're basically saying, hey, let's take
the money that I would have used to buy this
item and just put it on black. Right again, better
odds and putting it on black, but not buy a lot.
The other ones that are used are, hey, look, you know,
I put my discretionary stuff on this. I pay cash
for my groceries and things like that. But all of them,
(28:02):
the other stories, it just seemed to me like, Hey,
this is stuff that I wouldn't have bought if I
had to pay cash, And because I can pay for
it over four months, I'm willing to spend money that
I don't really have.
Speaker 3 (28:14):
I've never understood from the business case perspective as to
why Klarna and others why these are good businesses because oftentimes,
don't get me wrong, they're providing access to financing for
people to purs certain items. But on the credit score
a lot of things, you're typically getting the lower credit
score person, and in a time of financial upheaval, I
(28:38):
just don't know how a company like this would weather
a storm like that.
Speaker 2 (28:42):
I don't think they would. Yeah, again, we're in a
good economy, and so they're making a lot of money,
presumably on companies paying for access to this because that's
where they're making their money. Is you know, the company
that sold the mattress is paying for access to Klara
so that their customers can use it. But they're not
going to repossess the match that you bought if you
default in those payments, and so somebody would be left
(29:03):
holding the bag at the end of the day.
Speaker 3 (29:05):
It just doesn't seem like a super durable business to me,
like some others would be. Even if they went through
a downturn, you'd say, Okay, I can see how they
could pick back.
Speaker 2 (29:14):
Up quick break when we come back. Paulamonica from Baron's
joins us next, talking about Larry from Oracle. That's next
on the Financial Exchange.
Speaker 1 (29:23):
The Financial Exchange streams live on YouTube. Subscribe to our
page and stay up to date on breaking business news.
All morning. Long Face is the Financial Exchange Radio Network.
Speaker 8 (29:35):
Ladies and Gentlemen the weekend.
Speaker 7 (29:40):
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Speaker 2 (30:14):
Joining us now is Paul Lamonica from Baron's Happy Friday. Paul,
thanks for joining us.
Speaker 8 (30:18):
Yeah, thanks for having me.
Speaker 2 (30:20):
So let's start right off there with who was briefly
the world's richest man on Wednesday of this week, Larry Ellison.
I'm guessing with the stock price fall over the last
two days, he's not still holding that title. But what
did we see with Oracle stock and what do you
make of the I guess the big boom and then
the kind of fall apart over the last couple of
(30:40):
days that we've seen.
Speaker 8 (30:42):
Yeah, last I checked, Larry Ellison is once again trailing
Elon Musk a little bit. But yeah, I mean, I
know you have to feel really badly for him, for
both of them, for that matter. I mean, Oracle's earnings
were not fantastic by you know, the notion that they
didn't really blow away earnings expectations for the quarter. It
(31:06):
was the guidance in the outlook that really wowed everyone
that there's still all of this spending on you on
data Center's cloud that really is boosting oracles revenue and
profit growth expectations going forward. And there were reports of
the multi hundred billion dollar deal apparently that open ai
(31:30):
might be working on with Oracle, so that is very significant.
I think right now we are looking at a company
where it's I'm not going to say shades of ninety
nine two thousand just yet, because the valuation's not nearly
as crazy as what you had would say, Cisco in
(31:53):
the late nineties. But if you look at what happened
after earnings, Oracle was already a somewhat pricey stock, trading
around thirty three times forecasts before their earnings report. After earnings,
that pe went up to about forty three. So that's
a dramatic stretch in terms of what investors are willing
to pay for this company based on the expectations of
(32:14):
all this AI related growth.
Speaker 2 (32:17):
Paul plenty of listeners probably weren't investing in the late
nineties that are listening to us right now. So connect
the dots for us. I mean, I see the connections here.
It's a legacy tech company whose stock is being bid
through the roof for providing infrastructure. What are the connections
that you are seeing. What are the comparison points that
you are seeing between today and the late nineties as
(32:39):
these valuations continue to climb for not only in Nvidia
but the rest of the market as well.
Speaker 8 (32:45):
Yeah, that's a great question. I think the big difference
now is that I'd say in the late nineties, investors
were even more willing to accept the premise that the
Internet was going to be this revolution, which it turned
out to be, and that companies you know that were
(33:07):
very sketchy, to put it mildly, didn't have great business models.
Some of them didn't have revenue, let alone profits. It
was back in the day where people were doing things.
I'll still remember the stupid phrase monetizing eyeballs. It was
all about traffic. Now, I think you look at the
companies that are getting bid up on AI expectations. You
(33:29):
can call it hype if you want, Companies like Nvidia
and Oracle and Broadcom and then the hyperscalers, Microsoft, Amazon,
et cetera. There's real business there. I think the question
is when do the benefits of AI filtered down to
companies that are hoping to use AI to boost revenue
(33:50):
and cut costs. I don't think we're there yet outside
that handful of big tech companies, but the big tech
companies dominate the market. Our stats team that dal Jones
just ran me some numbers, if you want to call
them the Fine nine or Cloud nine, the Magnificent seven,
plus Oracle and Broadcom. They now make up more than
(34:12):
forty percent of the S and P five hundreds market valuation.
So in some respects, it's almost as if those other
four hundred ninety companies they don't really matter as much
as long as Nvidia, Oracle, et cetera are continuing to
do this.
Speaker 2 (34:26):
Well, while we're on the subject of Larry Ellison and
his wealth, his son David now and making his move
in this paramount Skydance potential Warner Brothers deal, what do
you make of that and what do you think of
the combination.
Speaker 8 (34:41):
Yeah, it's fascinating. As a former very long time CNN employee,
I wish all of my former colleagues all the best
with whatever happens they you know, they've lived through many
mergers before, AOL time, Warner at and T, you know,
Warner Brothers Discovery, so you know, having a new parent,
(35:03):
if that works out to be the case, wouldn't be new.
But I don't think it's a coincidence that the speculation
about this deal has really picked up steam days after
Larry Alison, David's father the game briefly the World's Richest Person.
So it will be very interesting to see. I mean,
Paramount Skuidance is technically smaller than Warner Brothers Discovery, but
(35:28):
the pockets are I think, just a little bit deeper.
Speaker 2 (35:31):
Paul Lamonica from Baron's Joints today to talk about the Oracle,
stock Pop and all the activity among the Ellison family
this week. So thanks so much for joining us. Paul,
have a great weekend.
Speaker 8 (35:41):
Thanks you too, guys.
Speaker 2 (35:43):
What do you have for us? Paul? For last story
of the day.
Speaker 3 (35:45):
Kodak is launching a vinched style toy camera with strong sales.
It's called the Charmer I guess see it, yeah, CHARMERA.
These are cameras that they're launching that are being sold
in blind boxes, so consumers don't get know what they
get until they're buying it. But it has all the
old vintage cameras from the eighties from Kodak.
Speaker 2 (36:07):
Did they make them digital or do you actually have
to digital process?
Speaker 3 (36:10):
Yeah, it's a line of inspired digital toy cameras called
the Kodak Cameras.
Speaker 2 (36:15):
I bought my kids one of these for their summer camp.
They're not allowed to have devices when they went to
summer camp, but one of the it was just a
point and shoot digital camera that could store a thousand pictures.
I kind of like the idea. I think it's awesome.
Speaker 3 (36:27):
This is reminds me of the story we covered where
landlines are remis making it come back, come back for
kids so that you don't get them exposed to the
wild world of smartphones.
Speaker 2 (36:38):
Yeah. I like it as well anything. Of course, if
I buy one of these things, I'm going to be
in company with, you know, tons of hipsters, and so
I'm not sure I'll be able to pull it off,
but nonetheless, good business. IDEA quick break for the next
forty eight hours. We'll be right back at it on Monday,
folks for a FED meeting week, So stay tuned. Have
(36:59):
a right weekend
Speaker 1 (37:11):
Sh
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