October 29, 2025 • 35 mins
In this conversation, Jon Sanchez and Jason Gaunt discuss the recent Federal Reserve interest rate cut and its implications for the market. They analyze the Fed's balance sheet, the impact of AI on major tech companies like Google and Microsoft, and the earnings reports from these companies.
The discussion highlights the volatility in the market following the Fed's announcements and the ongoing influence of AI technology on corporate strategies and financial performance.
Chapters
00:00 The Fed's Interest Rate Decision
02:26 Market Reactions and Algorithmic Trading
05:25 Understanding the Fed's Balance Sheet
08:18 Quantitative Tightening and Its Implications
10:55 Earnings Reports and Market Volatility
12:52 The Future of Interest Rates and Economic Indicators
23:57 Financial Projections and Market Dynamics
25:10 Microsoft's Investment in AI and Its Implications
26:36 Earnings Reports: Google and Microsoft
37:50 Meta's Performance and Market Reactions
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
The discussion highlights the volatility in the market following the Fed's announcements and the ongoing influence of AI technology on corporate strategies and financial performance.
Chapters
00:00 The Fed's Interest Rate Decision
02:26 Market Reactions and Algorithmic Trading
05:25 Understanding the Fed's Balance Sheet
08:18 Quantitative Tightening and Its Implications
10:55 Earnings Reports and Market Volatility
12:52 The Future of Interest Rates and Economic Indicators
23:57 Financial Projections and Market Dynamics
25:10 Microsoft's Investment in AI and Its Implications
26:36 Earnings Reports: Google and Microsoft
37:50 Meta's Performance and Market Reactions
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Good Wednesday afternoon to you. Welcome to the John Sanchez
Show on News Talk seven eighty K which it's a
pleasure to be with you and a pleasure to be
with my partner, Jason of Sanchez Gon Capital Management. Happy
FED Day, my friend.
Speaker 2 (00:14):
Yeah, happy, lots of things today day, Yeah, FED.
Speaker 1 (00:17):
Day, Earnings Day is all thrown at us today, wasn't it. Yes,
lot to consume, lots to consume. Yes. Indeed, Well, with
that said, let's get the ball roll with my friend,
because again we do have a lot of things to
share with you today. Of course, earlier today, we did
have a FED interest rate decision, and as anticipated, the
FED gave us a quarter percent interest straight cut. But
(00:40):
you know, the street's pretty smart. There was almost one
hundred percent probability that was going to happen anyway, So
no surprise there. But as we've been talking about on
this program, on the stock up dates, et cetera, talking
to our clients, it's not what the FED had to say,
it's what Jerome Palell had to say at the press
conference thirty minutes after that FED announcement came out, And
(01:01):
I guess we can kind of summarize Jay by saying
they weren't too happy with the Fed chairman, just to
be a little bit, you know, blunt, and we'll go
through some of his comments. But there was one sentence
that the chairman said that just tank this market. It
(01:22):
did rebound a bit, but it didn't like it. And
let's tell you what it is. Here's what the chairman
had to say. Remember, folks, Wall Street has always like
to remind everybody and Jason assume Wall Street is a
bunch of spoiled brats, right. If they don't get what
they want, they start pouting, they start throwing a temper
tantrum or what we call a taper tantrum. And obviously
(01:45):
the way they begin to pout is they start selling
things off. And the algorithms went absolutely nuts today as
the chairman was speaking. But back to my point. So
the chairman had one sentence in regards to the December
interest rate cut. Cause again we knew this one was
going to happen. Street was have basically had a little
or almost between ninety about ninety look at my notes here,
(02:09):
ninety point nine percent to be exact, ninety point nine
percent probability built in that we're going to get a
December rate cut. I'm going to take a guess what
that probability is now, mister.
Speaker 2 (02:22):
Gonk hold on, let me get a quarter. It is
a coin toss, I do believe correct?
Speaker 1 (02:30):
Sixty five point two percent probability? Wow, sixty five point
two all because of the following sentence, Folks, you ready
for this? A further reduction in policy rate in December
is not a foe gone conclusion. Far from it. Let
me repeat that, A further reduction and policy rate in
(02:52):
December is not a foregone conclusion. Far from it. That's
all it took. And I don't care what other positive
comments the chairman had to say about the labor market,
about the massive amount of AI spending Jason, about all
the positives that are going on, all the traders, and
who we know is the algorithms focused on? Was that sentence? Oh?
(03:15):
I mean, here comes the CNBC headlines. You know, fed
not ready for December rate cut? Mike?
Speaker 3 (03:22):
Are you serious?
Speaker 1 (03:23):
How come people just in you know again back to
the Dugonne algorithms. How come people just don't realize this
is the game that the chairman plays, right, he is
never if we came into this meeting and said oh,
it is a guarantee that we're going to have a
December rate cut, meaning those words were going to come
from out of his mouth. We'd be foolish, right, You
(03:44):
and I have been around this game too long to know.
They will never ever tell you we're data dependent, is
all they will ever say. So take it away.
Speaker 3 (03:51):
Yeah, I you know it did?
Speaker 2 (03:53):
It climbed back to sixty five percent earlier today it
was fifty four. That's where I was using my coin
loss joke.
Speaker 3 (04:02):
Yeah.
Speaker 2 (04:02):
I mean the other part two is the quantitative tightening, right, they.
Speaker 3 (04:06):
Mentioned that there we need this balance sheet.
Speaker 2 (04:08):
Yeah, their balance sheet runoff is stopping, right, So that's
part of it too. It wasn't necessarily consensus that they
were going to do that, which to some extent is
remember almost viewed as half a rate cut, right by
the fact that they're not selling bonds into the market
and essentially creating more supply. That caused a little bit
(04:34):
of a move too in interest rates. But the FED
is I mean, I think you've seen more differences of
opinion on a board, which I think is dynamite to
see I think we should be down fifty BIPs or
I think we should be raising or we should be
doing nothing. It's much better to get that than a
true a bunch of puppets that are all wanting to
(04:56):
do the same thing.
Speaker 3 (04:57):
So there's a lot of it's a you know, in.
Speaker 2 (05:00):
Consistency of opinion which goes hand in hand with that
and the political climate that we're in right now where
there's a lot of different opinions to what the right
answer is, and time and will only tell who's right.
But yeah, today today's move did all the things that
I would expect, right if the Fed is going to
say what they did and cause rates.
Speaker 3 (05:20):
To move up.
Speaker 2 (05:22):
Right, So rates moved higher today while the Fed was
cutting rates. Right, And that's the thing that everyone we've
talked about a lot is it's already discounted. So small
caps underperformed. You saw the dollar strengthened today, you saw
some at least pull back and some of the early
strength in the you know, gold and silver and those
types of things. So you know, these are good tells.
(05:43):
These are I like these kind of days. I like
to see how the market reacts when unknown nuts, when
unknown news not unknown, right, I mean, John, you're spot on.
Speaker 3 (05:54):
They always try to play this game.
Speaker 2 (05:55):
But when they say something that causes the the bees
to hover a bit around the bonnet, right, And this
is something that every investor should always be doing.
Speaker 3 (06:05):
The easy days are the ones where the.
Speaker 2 (06:07):
Market they cut rates and say we're going to continue
to cut and so on and so forth. You get
what you want, and there's not really a lot to tell.
It's more days like this, or to say, hey, what
acted weird today? Right, So if you're thinking, if you're
an investor who thinks the FED isn't going to be
able to cut as much as the market thinks, go
out and look around.
Speaker 3 (06:25):
What are those areas that didn't do well today?
Speaker 2 (06:28):
Maybe I want to make sure I'm not overly exposed
to them. I'd say the market probably would have moved
even more if we didn't have all these earnings after
hours that we'll touch on later. So I think tomorrow
will be sort of an interesting day as well, because
you don't want to blow yourself up puke in the
market when guess what the market is Meta and Microsoft
and Google and all these names. You want to see
(06:49):
what earnings are first. Now you've got that color, and
you may start to see a little bit more of
shifting of the proverbial deck chairs tomorrow and.
Speaker 1 (06:58):
When Jason says, we that color and we'll go into
great details about this. We did have meta Microsoft and
Google's earnings after the close. So if the FED meeting
wasn't enough to create volatility, yeah, wait tc or hear
what some of these stocks are doing and the after
our session that I just mentioned. But I want to
go back to a term that you just threw out.
We haven't mentioned it in a long time, and that
(07:19):
is the FED balance sheet, because again this was the
other thing that rocked the market a bit today and
why we saw the tenure yield, you know, surge eight
basis points to four h six. The two year was
up nine basis points, the five year was up eight
basis points. But way out on the curve of the
thirty year it was only up five basis points. So
you know, again that shorter end of the curve, that
two year, three year, five year, et cetera, that's where
(07:41):
the action was. So what is the FED balance sheet?
So just like a corporation of balance sheet assets and liabilities, right,
and that equals a net worth? Right, those two subtracted
together equal a net worth. Well we all know at
the peak, the Fed's balance sheet was north of four
trillion dollars. This is when they were trying to bring
interest rates down a few years ago, right during COVID
et cetera. They would actively go out and they would
(08:01):
buy mortgage backed securities and other types of things to
drive interest rights down. And they were targeting the housing market.
He's why they did mortgage backed securities. Jenny Mas, Fany
Mas and so on and so forth. But when did
the shift start? Jason, I was trying to remember before
the show when they announced they were starting to let
the balance sheet roll off. But what's have been now?
Maybe two or three meetings ago?
Speaker 2 (08:22):
Yeah, I mean, I mean it's been since they were
been lowering, right. You tend to those go hand in
hand that they're not going to constrain the balance sheet
runoff while they're also lowering rates, so they tend to
move in lock stuff. I just I think we're getting
to a point now right where not trying to be
a bear, but why does the Feds slow down their
(08:43):
balance sheet runoff? Right where if they may may be
a buyer of mortgage backed securities at some point, Because
lots of pundits are frustrated in the fact that we
can't get rates any lower, despite on mortgages, like Dwight
would attest, despite the fact that the tenure has gone lower, Right, well,
(09:03):
how do you do that?
Speaker 3 (09:04):
What drove rates lower? Last time?
Speaker 2 (09:06):
You had a hungry, hungry hippo of the Fed buying
mortgage backed security. So before they can start buying them,
they need to stop selling them. And so this could
be sort of a natural transition towards a stimulative move
of some kind if they need to to help support
housing or that part, if they see something on the horizon. Right,
(09:28):
housing stagnated in lots of areas. Even though you've seen
refis pick up, you haven't seen a lot of unless
I haven't been listening, you know, Dwight hasn't been jumping down,
clicking his heels with a ton of buyers coming in
buying the snot him and Corey of houses. It's more
of a little bit of a REFI wave, but not
a big purchasing waved.
Speaker 1 (09:48):
A big run up last week. We had Mortgage Banker's
Association data this morning, so showed a big uptick. I
mean because REFI I didn't see what the breakdown was.
Speaker 2 (09:59):
I can't but I think that's part of like there's
been some chatter that the FED may become at least
a buyer of some kind, but certainly, you know, not
as aggressive on the cell side. And in this case,
they've announced that now that they're going to be out
of the way for a while, just to see how
the market itself acts. Right, if you have a big
seller all the time in the market, do you want
(10:21):
to see what the market looks like if you're the
FED without them there. And so I think that's part
of what they may be doing, just slowing down that
quantitative tightening and let the economy not have them be involved.
Speaker 3 (10:35):
See what that does to mortgages.
Speaker 1 (10:36):
Yeah, I'm gonna take a little bit different take than you.
I agree one hundred percent, but I'm gonna throw my
opinion in of why I think they did this. And
again we'll go back when we come back from this
break and explain a little bit further with this balance
sheet is because this was probably as important with this
announcement of what they're doing with their balance sheet as
the quarter percent rate cat. So we're going to go
(10:57):
into some more details, but let's turn over to Christens now.
Right now, traffic Center. Hello, Christen, working back to the
John Sanchez Show on Newstalk seven to eighty k h
on this Fed interest straight decision day, balance sheet runoff.
And oh, by the way, Microsoft in the video they
kind of go hand at him and you said micro creature, micro, Microsoft,
meta and alphabet earning his numbers after the close, and
(11:19):
we will go into we need a whole entire segment
for those earning numbers because again there's a lot of
activity going on with those stocks in the after hours.
So we're gonna save that for when we come back
from the bottom of the break. But now we're going
to go back to the Fed interest rate decisions. So
once again, as anticipated, the Fed did give us a
quarter percent interest straight cut. The street didn't like it,
Like I said, I mean, we were during Powell's press conference,
(11:40):
we're plummeting. We were down well over two hundred. I
had a few interesting notes. I always liked to track
this and again just picking on the down side of things.
So prior to Chairman Powell beginning his speech, the Dow
Jones Industrial Average was up forty two points. When he finished,
it was down ninety NASDAC was up one hundred and
(12:02):
thirty four when he finished, was up ninety two, SMP
was up eleven, and the SMP down seven. So yeah,
like I said, a lot of volatility, but that's just
where we closed. Like I said during his test or
during his answering to the press questions, it was up
and down and all over the place, which is very typical.
So now we're again gonna go a little bit deep
(12:23):
with you. Besides, okay, okay, big deal a quarter percent cut, Yeah,
you should start seeing I got. I didn't get a
chance to check prime rate. We maybe already had an
adjustment to prime. So this is going to help some
of you, like with credit cards and if you have
some liabilities that are tied to prime, so on and
so forth. We did not. However, I'm gonna get a
fresh quote here because when I looked, not long before
(12:45):
the bond market closed, or excuse me, when the stock
market closed, we didn't have much move in the thirty
year mortgage. Yeah, you know, good thing Dwight's on here today,
fourteen basis point increase increase in the thirty year more briage.
Now it's six point two seven percent, And again tenure
was up for eight basis points. So you know, you're
(13:06):
talking almost doubling of what the tenure did today, Jason
on the thirty year mortgage. So this is now now
that you know what the mortgage market did, which you
know looks at the tenure, but more importantly is based
upon how the mortgage backed securities trade. So now let's
take you back to this crazy thing called the FED
balance sheet. So I'm not even going to come close
(13:28):
to try to explain it, because Jason, I wish I
had the recording on during the break because you gave
an excellent commentary on what's going on there. So I
want to kind of lay the table and then I'm
going to let you go back to your institutional days again.
You got a better understanding of this than I did.
So what the FED said was they're going to cease
the runoff of their treasury holdings. Okay, so they own
(13:50):
these bonds, and what that means by ceasing the runoff,
that means instead of when the treasury comes due, instead
of taking the proceeds and going back and buying more treasuries,
are going to take those proceeds and do something else
with them. Right, the FED said, The reason they're doing
this is they detected evidence in overnight lending markets that
banks were no longer a wash in surplus cash. Because remember, folks,
(14:12):
when when a bank has excess capital surplus, they can
lend it to another bank, which is the FED funds
rate that we're talking about, or they can deposit it
with a FED. And we've joked and kind of criticized
the FED many times over the years because it's very,
very profitable to park your money with a FED. And again,
it's last time you and I talked about it. I
(14:34):
don't know where it is now, but I think it
was right around four percent or something like that. It's like, hey,
not bad money, right, risk free money. Right, you're parking
it with a FED. That's risk free money. So so
again back to what they said today, they're gonna let
the run off of the treasury of holdings because they
detected a surplus a cash with no longer a surplus
a cash with banks. Now the Fed's going to continue
(14:54):
to shrink the holdings of their mortgage backed security. So again,
these mortgage backed securities, they're going to continue to let
them run off. Right, So now the FED is no
longer stepping up to artificially keep mortgage rates lower than
they should be, hence why the thirty years shot up
like it did. But they're going to replace maturing bonds
with short term treasury bills starting in December. Now, short
(15:16):
term treasuries and things like that. Again, if I go
back to the short end of the curve, Jason, two
year today up nine basis points. Three year was up
nine basis points. Those were the highest of all the
various maturities as far as the daily increase. Now go
into your explanation about dollars and all the craziness that
really goes on behind the scenes.
Speaker 2 (15:32):
Yeah, I mean again, we'll keep Ultimately the Fed is
issuing bonds, or in this case, they're allowing bonds that
they hold to mature. Typically they'll go out and do
something either with the money or like you'd mentioned, they're
(15:53):
now focused more on the short end of the curve,
which we're going to just say is more than parking it.
Speaker 3 (15:58):
Right, they're not really doing much with that in terms
of stimulus, et cetera.
Speaker 2 (16:01):
And the fact that the banks in the term of
being a wash in excess liquidity. Right, the simple way
is when you issue a bond or you sell a bond,
when the Treasury not Fed, but Treasury is selling bonds.
That mechanism takes dollars out of the system.
Speaker 3 (16:21):
Right, in order to buy a bond, what do you do?
Speaker 2 (16:23):
You go write a check and you spend your one
hundred dollars on a bond, and now you own a bond.
Speaker 3 (16:28):
It's paying you three and a half or four percent
a year. But you don't have those hundred.
Speaker 2 (16:32):
Dollars anymore, right that you aren't using Yeah, you're not
using it to go out and buy gas or groceries
or do other things. That then the guy who owns
the grocery store, right, Yeah, that sort of compounding effects.
So by them treasury issuing debt, that is pulling dollars
out of the system.
Speaker 3 (16:50):
And same thing in the case of the Fed.
Speaker 2 (16:52):
As the FED is running off their balance sheet vis
a vis either selling bonds into the market or just
not redeploying that capital back into the market by buying
other things, they're pulling liquidity out of the system because
it's just going to be parked in treasuries, right, it's
not going to be buying more bonds from other people
(17:15):
in order to keep that flow of funds going. And
they've been active on that for a long time, and
so the thought is like where the analogy we were
using during the break was throwing a rock into a pond, right,
ripples for a long time. Now they sort of want
to see what the level of the pond is because
the Fed's job is really three you know, threefold. It
(17:37):
is price stability unemployment. But that price stability part also
links into just total liquidity, right with US being the
reserve currency. Uh, you know, they do a lot in
making sure that all the banks have adequate liquidity to
to borrow and lend and do you know, cross global
type transactions through Euro dollar and things. So they don't
(17:59):
want to hold too much liquidity out of the system
because the system itself will clamp down and then we
have all those issues of overnight lending and some bank
freaks out and such and such and such.
Speaker 3 (18:10):
But they're at a point.
Speaker 2 (18:11):
Now whereas they slow down their quantitative tightening, so they're
being less tight. Right, they have been tight in running
off their balance sheet, and now they're at least slowing
the way they're doing it. I mentioned mortgages earlier in
that you know, they did stay that they're going to
continue to sell them, but as I mentioned, i've heard
chatter of that potentially reversing at some point, so I
(18:33):
know they don't want to be mortgage backed securities holder's
long term, but if something did in fact happen, they
would need to step in. So that could be a
reason why they continue to at least run that part off.
But there's a lot of interlinkages for sure. Again, it
sounds pretty goofy and complex, but there's some great websites
we can send you to. If you have any questions,
just reach out to us and I'd be happy to
(18:53):
forward them over.
Speaker 1 (18:54):
Perfect as far as the I'll read the FED interest
rate statement we come back from the break, then we'll
get to those earnings after hours. But just keep in
mind we had two dissenters. We had one dissenter that
actually was calling for a fifty basis point or half
a percent cut, and another dissenter that wanted no cut whatsoever.
So it wasn't a slam dunk, you know among the
(19:16):
the FED members there to give this quarter percent cut.
And you know, Powells asked about that. He goes, hey,
you know, everybody's individual and we try to, you know,
think as a group. But everyone's the title of their
own opinion and so on and so forth. But yeah,
but overall, you know, as we'll go through in more detail,
you know, happy with the economy. Turns are having a
little bit of a bite, Inflation is being stubborn. Let's
(19:37):
see where are some of the other takeaways. The immigration
issue going on, people being deported, starting to have an
impact in the jobs market. Definitely continue. You had a
few remarks and various discussions with the press indicating that
you know, AI is taking jobs, so on and so forth,
(19:58):
he said. All of the he was asked about all
of the AI data centers being built around the country.
He said, they're not interesstraight sensitive, meaning hey, you know
you cut rates, is that going to spur even more activity?
And he a couple of times he said, you know,
bottom line, Yeah, this is Wall Street money that's building
these things. They don't care if the Fed Cutch Trader
(20:19):
quarter percent or not. They're making enough money, et cetera.
So but anyways, those are just some of the highlights.
Let's come back. Let's hit these after ours earnings numbers
with Microsoft, with Meta and with Google, and then we'll
come back and wrap things up on the FED side
of things. It's turned over to Jack Saban News traffic
and whether Hey Jack, welcome back to the John Sanchez
(20:39):
Show on his talk seven to eighty k O waits
with Jason Gunn. All right, we're going to pause on
the FED side of things for just a moment and
take you into the after our session and once again
lets you know exactly what's going on with the big
earnings numbers again coming in not long after the closing
bell today with Microsoft, with Meta and with Google once
again on the market side, we finished down seventy four
on the dow to A was a forty seven thousand
(21:01):
and six thirty two. Now as that grows one hundred
and thirty one point five to five percent to a
new record, SMB finished chen change, which is so unusual.
Six eight hundred and ninety was our closing level. All right,
mister gon, let's say we uh get started. Let's go
with alphabet, hit the numbers, digest it, talk about it,
et cetera. So, folks, here's the numbers on Google. First,
(21:21):
let me tell you the performance of the stock regular
session after hours, and then we'll backfill into the numbers.
Regular session, Google was up six dollars and seventy four
cents two point five one percent to two seventy five seventeen.
Right now in the after hours, it's up seventeen dollars
and sixty six cents six point four two percent gain
two ninety two eighty three. So you guessed it. Good
(21:42):
earnings numbers. Here's what's going on. Revenue came in one
hundred and two point three five billion. Estimates were ninety
nine point eight nine billion. Earnings per share. What a
blowout here, Jason. Three dollars and ten cents. Estimates were
two dollars and thirty three cents. And let's talk a
little YouTube. You have a nice step before where I
get to the YouTube advertising revenue throughout that step.
Speaker 2 (22:04):
So uh, Google bought YouTube back in November of twenty
twenty six for one point six five billion dollars in
twenty six November twenty or sorry, two thousand.
Speaker 3 (22:17):
And six, not that next year, two thousand and six.
Speaker 2 (22:19):
Yeah, uh, one point sixty five billion is what they
paid for him. Google just had, through YouTube's advertising revenue
only in just the third quarter ten point two billion,
So pretty good purchase.
Speaker 3 (22:35):
I would say that was.
Speaker 1 (22:36):
A good That was a good Yeah, that was a
hundred bigger, right, Yeah, but that was just this quarter,
not just quarter quarters. Right. No, it's I'm addicted to YouTube,
Oh me too? Two at ten point two six billion
was YouTuber ad revenue estimates for ten point zero one billion.
Let's go to the Google Cloud revenue fifteen point one
(22:58):
five billion, estimates for four teen point seven to four billion,
traffic acquisition costs fourteen point eight seven billion estimates fourteen
point eight two billion. Strong demand in the cloud business
due you got it, due to AI. Company also announced
an increase in capex, or capital expenditure for fiscal twenty
twenty five. They're going to be spending between ninety one
billion to ninety three billion in capital expenditures for again
(23:21):
fiscal year twenty twenty five. Looking out to twenty twenty six,
they expect a significant increase in capex. It will provide
more details on the fourth quarter earnings call, according to
their chief financial officer. So good, good numbers on Google
and again stock cup performing as it should in the
after hour session. Yeah, I wish we could say the
same type of good news for the other two that reported.
(23:43):
Let's go to Microsoft. Here's what the stock did in
the regular session. Here's what it's doing in the after hours.
Regular session down to fifty two cents, the five forty
one fifty five. We're right down the after hours it
is down nineteen dollars and seventy one cents, a three
point six one percent loss to five hundred and twenty
two dollars a share. They took a three point one
billion dollar hit to their net income in the first
(24:04):
quarter due to the company's hefty investment in Where do
you think, Jason, what do you think? Where do you
think they're they'd be spending three point one billion in
a quarter?
Speaker 3 (24:13):
Uh? Open Ai would be my guest.
Speaker 1 (24:15):
Here you go, my friend, you're a genius. Yea, I
told you were. Yep, open Ai. Three point one billion dollars.
So again, forty one cent hit. You think Wall Street
would put that aside, But no, they're pinishing the stot.
Net income Phenomenal rose to twenty seven point seven billion,
about three dollars and seventy two cents a share a
year ago. They made three dollars and thirty cents. REV
(24:37):
came in at twenty seven point seven billion a year ago,
twenty four point sixty seven billion and If you don't
think that they're tight with open Ai, I think again.
Since first backing open Ai in twenty nineteen, Microsoft has
committed to invest thirteen billion dollars in the company, with
eleven point six billion already funded as of the end
of September. And again we remember this comes just day
(25:00):
after open ai announced that they've completed a recapitalization, which
cement that its structure is a nonprofit with a controlling
stake for it's in its for profit business. Nonprofit now
called the open Ai Foundation, holds an equity stake worth
oh a mere one hundred and thirty billion dollars. Yeah,
in its for profit arm. So yeah, it's pretty pretty remarkable.
(25:23):
But you know, again, Jason, I think this is where
people will take a deep breath and go, Okay, we
know they're investing in a lot and open ai forty
one cents a share. Hit, Okay, big deal. They still
made three dollars and seventy two cents or rev of
twenty seven point seven billion. I think commer heads will
eventually prevail, but right now they're just out of their mind.
Speaker 2 (25:46):
It's the Azure, the sort of cloud services number which
was most of the analyst, what every every quarter they've
beat estimates by three percent, so it was thirty nine
percent constant currency versus thirty seven Street was expecting, you know,
literally like forty or forty one percent. So I think
(26:06):
that's the thing that more than any just near term
reaction of sell the news. But I think you're right
on the camber heads part this company. One of the
analysts on CNBC today talking about the stranglehold that this
company has on enterprise AI usage in that they're embedded
into everyone's you know, outlook and email and teams and
(26:31):
you know, through copile all and I think that people
are just scratching the surface of using the product. So, uh,
you know, not recommending anything, but that's one to keep
an eye on that longer term proves to be a
winner unless someone comes in and quickly changes the entire system, right,
(26:53):
the entire ecosystem that most firms rely upon for their
sort of daily is.
Speaker 1 (26:59):
So the the point you're trying to make is we
always talk about the Apple ecosystem. Right, you buy an iPhone,
next thing you know, you're buying an iPad and you're
buying more and more Apple products. It's that way with
Microsoft However, it's more essentials. Right, we all use Microsoft
Office unless you're a Mac user, and then then you
still may use Microsoft Office products. But as we talk
about on Mondays with with the with Dennis, you know,
(27:21):
if you're gonna use co pilot, which the chassis of
co Pilot is chat, GPT, open AIS product, it talks
to each other, right, it'll well, I mean you've you've
created some amazing things that you're figuring out because again
as we've announced on the show on Monday, you know,
we talked about how we're implementing AI in the in
our firm, and I mean you giving almost every day
(27:44):
you're company and go, man, I just figured out this
with you know, between UH, you know all the Microsoft
suite of products and and and UH and and the
AI you know side of it. How they're again they're
talking one another, where a lot of times you can't
do that if you're if you're not using you know,
the same Microsoft type of products. So I think that's
(28:06):
pretty interesting.
Speaker 2 (28:08):
For sure, and I think it's just going to continue
to you know, it's not a it's not a big lift,
it's not a big spend for companies to add in
copilot licenses or that. But you figure for Microsoft, it's
a gazillion companies that are all spendings, you know, twenty
to thirty dollars additionally every month per user.
Speaker 3 (28:24):
That will I think.
Speaker 2 (28:26):
Get things moving pretty quick. So it's it's a it's
a good they have a good long term growth story
for sure. And that's the thing with all these megacaps, right,
I mean Google, I mean the amount of data they
have and Gemini is taking over their ad world right
where they're able to internalize so much more now and
direct that shift that wasn't there in the past.
Speaker 3 (28:45):
So it's it's incredible.
Speaker 1 (28:47):
Well, you know, the last thing, then we'll go to
break and Microsoft. Then we'll come back and talk about
metas numbers. Microsoft now owns, there's steak. Let me rephrase that,
there's steak, Microsoft Steak and open Ai now one hundred
and thirty five billion, about twenty seven percent of the
company on a on a as converted diluted basis. But
Microsoft said today on their conference call, Jason open a
(29:10):
is a quote from Yeah Sashaving Nadella said it. He
said open Ai has contracted to purchase an incremental two
hundred and fifty billion dollars of Azure services. So that's, folks,
the Azure's the cloud service of Microsoft. So open ai
is contracted to purchase two hundred and fifty billion dollars
(29:32):
and that Microsoft will no longer have the right of
first refusal as a computer provider.
Speaker 3 (29:38):
Nadella says, your circular accounting, there's.
Speaker 1 (29:40):
This, Yeah, exactly, there's the circular.
Speaker 3 (29:42):
John's circular account Yeah.
Speaker 2 (29:45):
Wait a minute, way, that's your right pocket and leverage
and left pocket.
Speaker 1 (29:51):
That bath. People yelling at me being a negative.
Speaker 3 (29:54):
But I agree with you. I feeling that I'll fight
with you.
Speaker 1 (29:58):
There you go, There you go. You look good. Nadella
also called the relationship with open ai quote one of
the most successful partnerships and investments our industry has ever seen,
adding that we continue to benefit mutually from each other's
gross across a growth excuse me, benefit from each other's
growth across multiple dimensions. So with all that said, folks,
(30:18):
because again they took a forty one cent hit on
the earnings because of their investment, we can't tell you
what to do, but hopefully, you know, like we said,
commer heads will prevail eventually, and not quite yet. Stock
still down a little over nineteen bucks after hours. All right,
final big cap earning was a meta. We'll tell you
what those numbers did in the after hours and what's
going on when we returns. Turn it over to Christin
(30:40):
Snow to wrap us up in the right now traffic center. Hello, Kristen,
Welcome back to the John Sanchez Show on Newstalk seven
to eighty KO, which with Jason Gott. Once again, we
finished down seventy four on the Dow, rose one thirty
one on the Nasdaq, and a decline. Actually, let me
rephrase that. It wasn't a full one point, so I'm
going to say it's unchanged on the SMB five hundred.
All right, A couple things we keep thinking about. So
(31:01):
once again, as we just went over in the last segment,
we had Microsoft ear needs numbers, we had alphabet slash
Google's numbers. We're going to tell you about what METAD is.
So those are the three that reported after the close.
Let me tell you what the futures are doing right
now again, very early down. Futures down fifty two, Nasdak's
down fifty seven smps lower by seven coming away off
the lows that we experience even though they started trading
(31:22):
nearly an hour ago. But as Jason and I were
chatting off the break or during the break, keep in
mind something that may come hopefully to the rescue of
the market, since it's kind of reeling on these Microsoft
and Meta numbers. The President is meeting with President she
of China. The meeting is supposed to occur at least
according to all the new sources I found at seven
(31:44):
a excuse me, seven pm hour time, so seven pm
Pacific standard time is when they are meeting, which obviously
is tomorrow for them. Once again, some things kind of
leaked out. Looks like China, well today China made the
first soybean purchase, so that's a good step. So hopefully
we'll get some more details about that, get some more
details about the rare earth. Trump coming back. Maybe some
(32:05):
indications are that he may completely eliminate or lessen the
one hundred percent tariffs that he recently announced. Remember their
total one hundred and fifty seven percent tariffs, but hey,
we'll take that one hundred percent back. You just be
at fifty seven percent tariffs. So well, we'll see what
happens there, all right, So that could be a good savior.
And then we got some some good earnings numbers out
(32:26):
to the closes tomorrow. Now back to the final big mover,
which is meta regular session. It was quiet, twenty three
cent gain is how it finished, seven to fifty one
sixty seven a share. Right now in the after hour session,
it is tumbling down fifty five dollars and sixty seven
cents seven point four to one percent loss to six
hundred and ninety six dollars I share. Why is it tumbling, Well,
(32:47):
let's get to the details. Ernie's per share seven dollars
and twenty five cents estimates six dollars and sixty nine cents. Okay,
beat revenue fifty one point two four billion estimates forty
nine point four to one billion. Beat the problem, Jason,
it's the one Big Beautiful tax bill.
Speaker 3 (33:05):
Yeah. Yeah, that's an interesting stat So how did that work?
Speaker 2 (33:08):
They?
Speaker 3 (33:08):
I had a charge.
Speaker 1 (33:09):
I can't figure this out. But Mark Zuckerberg on the
conference call said that because of the One Big Beautiful Bill,
it resulted in a one time non cash income tax charge.
Companies said they expect Trump's law to result in quote
a significant reduction in US federal cash tax payments for
the rest of twenty twenty five and for future years.
(33:31):
Third quarter sales wroute twenty six percent year over year,
which is the highest revenue growth since the first quarter
of twenty twenty four. Hit. You know the capex, Jason,
you were talking about that. I love your comment. Mentioned
that to the audience.
Speaker 2 (33:44):
Yeah, I mean, just you know, their capex guidance for
Q four is fifty six to fifty nine billion, and
they expected to be hired next year. I said, Meta
seems like the only company in this AI arms race
that when they raise capex guidance everyone freaks out like
they've all That was the store glory back with them
five hundred points ago if you're watching.
Speaker 3 (34:03):
Actually the stock traded down to ninety dollars.
Speaker 2 (34:05):
I recall at the lows back when people thought they
were overspending on reality labs and all those things, which,
as John you mentioned, what the heck does they do?
And I said, it seems like they just burn money
or something.
Speaker 3 (34:17):
But the headset right exactly.
Speaker 1 (34:20):
It makes four billion. Yeah, we got to run. Unfortunately
I went to way too fast. All right, We thank
you for joining us. God bless have a great afternoon.
We'll see tomorrow on the John Sanchez Show. John Sanchez
is a registered investment advisor, and the opinions expressed by
Sanchez Gone Capital Management, LLC on the show or their
own and do not reflect the opinions of News Talks
(34:40):
seven eighty or its pairing company, Cumulus Media. All statements
and opinions expressed are based upon information considered reliable, although
it should not be relied upon. As such, any statements
or opinions are subject to change without notice. Information presented
is for educational purposes on the end, does not intend
to make an offer or solicitation for if the sale
or purchase of any specific securities, investments, or investment strategies.
(35:05):
Investments involve risk, and, unless otherwise stated orre not guaranteed.
Information expressed does not take into account your specific situation
or objectives, and is not intended as recommendations appropriate for
any individual. Listeners are encouraged to seek advice from a
qualified tax, legal, or investment advisor to determine whether any
information presented may be suitable for their specific situation. Past
(35:27):
performance is not indicative of future performance
Good Wednesday afternoon to you. Welcome to the John Sanchez
Show on News Talk seven eighty K which it's a
pleasure to be with you and a pleasure to be
with my partner, Jason of Sanchez Gon Capital Management. Happy
FED Day, my friend.
Speaker 2 (00:14):
Yeah, happy, lots of things today day, Yeah, FED.
Speaker 1 (00:17):
Day, Earnings Day is all thrown at us today, wasn't it. Yes,
lot to consume, lots to consume. Yes. Indeed, Well, with
that said, let's get the ball roll with my friend,
because again we do have a lot of things to
share with you today. Of course, earlier today, we did
have a FED interest rate decision, and as anticipated, the
FED gave us a quarter percent interest straight cut. But
(00:40):
you know, the street's pretty smart. There was almost one
hundred percent probability that was going to happen anyway, So
no surprise there. But as we've been talking about on
this program, on the stock up dates, et cetera, talking
to our clients, it's not what the FED had to say,
it's what Jerome Palell had to say at the press
conference thirty minutes after that FED announcement came out, And
(01:01):
I guess we can kind of summarize Jay by saying
they weren't too happy with the Fed chairman, just to
be a little bit, you know, blunt, and we'll go
through some of his comments. But there was one sentence
that the chairman said that just tank this market. It
(01:22):
did rebound a bit, but it didn't like it. And
let's tell you what it is. Here's what the chairman
had to say. Remember, folks, Wall Street has always like
to remind everybody and Jason assume Wall Street is a
bunch of spoiled brats, right. If they don't get what
they want, they start pouting, they start throwing a temper
tantrum or what we call a taper tantrum. And obviously
(01:45):
the way they begin to pout is they start selling
things off. And the algorithms went absolutely nuts today as
the chairman was speaking. But back to my point. So
the chairman had one sentence in regards to the December
interest rate cut. Cause again we knew this one was
going to happen. Street was have basically had a little
or almost between ninety about ninety look at my notes here,
(02:09):
ninety point nine percent to be exact, ninety point nine
percent probability built in that we're going to get a
December rate cut. I'm going to take a guess what
that probability is now, mister.
Speaker 2 (02:22):
Gonk hold on, let me get a quarter. It is
a coin toss, I do believe correct?
Speaker 1 (02:30):
Sixty five point two percent probability? Wow, sixty five point
two all because of the following sentence, Folks, you ready
for this? A further reduction in policy rate in December
is not a foe gone conclusion. Far from it. Let
me repeat that, A further reduction and policy rate in
(02:52):
December is not a foregone conclusion. Far from it. That's
all it took. And I don't care what other positive
comments the chairman had to say about the labor market,
about the massive amount of AI spending Jason, about all
the positives that are going on, all the traders, and
who we know is the algorithms focused on? Was that sentence? Oh?
(03:15):
I mean, here comes the CNBC headlines. You know, fed
not ready for December rate cut? Mike?
Speaker 3 (03:22):
Are you serious?
Speaker 1 (03:23):
How come people just in you know again back to
the Dugonne algorithms. How come people just don't realize this
is the game that the chairman plays, right, he is
never if we came into this meeting and said oh,
it is a guarantee that we're going to have a
December rate cut, meaning those words were going to come
from out of his mouth. We'd be foolish, right, You
(03:44):
and I have been around this game too long to know.
They will never ever tell you we're data dependent, is
all they will ever say. So take it away.
Speaker 3 (03:51):
Yeah, I you know it did?
Speaker 2 (03:53):
It climbed back to sixty five percent earlier today it
was fifty four. That's where I was using my coin
loss joke.
Speaker 3 (04:02):
Yeah.
Speaker 2 (04:02):
I mean the other part two is the quantitative tightening, right, they.
Speaker 3 (04:06):
Mentioned that there we need this balance sheet.
Speaker 2 (04:08):
Yeah, their balance sheet runoff is stopping, right, So that's
part of it too. It wasn't necessarily consensus that they
were going to do that, which to some extent is
remember almost viewed as half a rate cut, right by
the fact that they're not selling bonds into the market
and essentially creating more supply. That caused a little bit
(04:34):
of a move too in interest rates. But the FED
is I mean, I think you've seen more differences of
opinion on a board, which I think is dynamite to
see I think we should be down fifty BIPs or
I think we should be raising or we should be
doing nothing. It's much better to get that than a
true a bunch of puppets that are all wanting to
(04:56):
do the same thing.
Speaker 3 (04:57):
So there's a lot of it's a you know, in.
Speaker 2 (05:00):
Consistency of opinion which goes hand in hand with that
and the political climate that we're in right now where
there's a lot of different opinions to what the right
answer is, and time and will only tell who's right.
But yeah, today today's move did all the things that
I would expect, right if the Fed is going to
say what they did and cause rates.
Speaker 3 (05:20):
To move up.
Speaker 2 (05:22):
Right, So rates moved higher today while the Fed was
cutting rates. Right, And that's the thing that everyone we've
talked about a lot is it's already discounted. So small
caps underperformed. You saw the dollar strengthened today, you saw
some at least pull back and some of the early
strength in the you know, gold and silver and those
types of things. So you know, these are good tells.
(05:43):
These are I like these kind of days. I like
to see how the market reacts when unknown nuts, when
unknown news not unknown, right, I mean, John, you're spot on.
Speaker 3 (05:54):
They always try to play this game.
Speaker 2 (05:55):
But when they say something that causes the the bees
to hover a bit around the bonnet, right, And this
is something that every investor should always be doing.
Speaker 3 (06:05):
The easy days are the ones where the.
Speaker 2 (06:07):
Market they cut rates and say we're going to continue
to cut and so on and so forth. You get
what you want, and there's not really a lot to tell.
It's more days like this, or to say, hey, what
acted weird today? Right, So if you're thinking, if you're
an investor who thinks the FED isn't going to be
able to cut as much as the market thinks, go
out and look around.
Speaker 3 (06:25):
What are those areas that didn't do well today?
Speaker 2 (06:28):
Maybe I want to make sure I'm not overly exposed
to them. I'd say the market probably would have moved
even more if we didn't have all these earnings after
hours that we'll touch on later. So I think tomorrow
will be sort of an interesting day as well, because
you don't want to blow yourself up puke in the
market when guess what the market is Meta and Microsoft
and Google and all these names. You want to see
(06:49):
what earnings are first. Now you've got that color, and
you may start to see a little bit more of
shifting of the proverbial deck chairs tomorrow and.
Speaker 1 (06:58):
When Jason says, we that color and we'll go into
great details about this. We did have meta Microsoft and
Google's earnings after the close. So if the FED meeting
wasn't enough to create volatility, yeah, wait tc or hear
what some of these stocks are doing and the after
our session that I just mentioned. But I want to
go back to a term that you just threw out.
We haven't mentioned it in a long time, and that
(07:19):
is the FED balance sheet, because again this was the
other thing that rocked the market a bit today and
why we saw the tenure yield, you know, surge eight
basis points to four h six. The two year was
up nine basis points, the five year was up eight
basis points. But way out on the curve of the
thirty year it was only up five basis points. So
you know, again that shorter end of the curve, that
two year, three year, five year, et cetera, that's where
(07:41):
the action was. So what is the FED balance sheet?
So just like a corporation of balance sheet assets and liabilities, right,
and that equals a net worth? Right, those two subtracted
together equal a net worth. Well we all know at
the peak, the Fed's balance sheet was north of four
trillion dollars. This is when they were trying to bring
interest rates down a few years ago, right during COVID
et cetera. They would actively go out and they would
(08:01):
buy mortgage backed securities and other types of things to
drive interest rights down. And they were targeting the housing market.
He's why they did mortgage backed securities. Jenny Mas, Fany
Mas and so on and so forth. But when did
the shift start? Jason, I was trying to remember before
the show when they announced they were starting to let
the balance sheet roll off. But what's have been now?
Maybe two or three meetings ago?
Speaker 2 (08:22):
Yeah, I mean, I mean it's been since they were
been lowering, right. You tend to those go hand in
hand that they're not going to constrain the balance sheet
runoff while they're also lowering rates, so they tend to
move in lock stuff. I just I think we're getting
to a point now right where not trying to be
a bear, but why does the Feds slow down their
(08:43):
balance sheet runoff? Right where if they may may be
a buyer of mortgage backed securities at some point, Because
lots of pundits are frustrated in the fact that we
can't get rates any lower, despite on mortgages, like Dwight
would attest, despite the fact that the tenure has gone lower, Right, well,
(09:03):
how do you do that?
Speaker 3 (09:04):
What drove rates lower? Last time?
Speaker 2 (09:06):
You had a hungry, hungry hippo of the Fed buying
mortgage backed security. So before they can start buying them,
they need to stop selling them. And so this could
be sort of a natural transition towards a stimulative move
of some kind if they need to to help support
housing or that part, if they see something on the horizon. Right,
(09:28):
housing stagnated in lots of areas. Even though you've seen
refis pick up, you haven't seen a lot of unless
I haven't been listening, you know, Dwight hasn't been jumping down,
clicking his heels with a ton of buyers coming in
buying the snot him and Corey of houses. It's more
of a little bit of a REFI wave, but not
a big purchasing waved.
Speaker 1 (09:48):
A big run up last week. We had Mortgage Banker's
Association data this morning, so showed a big uptick. I
mean because REFI I didn't see what the breakdown was.
Speaker 2 (09:59):
I can't but I think that's part of like there's
been some chatter that the FED may become at least
a buyer of some kind, but certainly, you know, not
as aggressive on the cell side. And in this case,
they've announced that now that they're going to be out
of the way for a while, just to see how
the market itself acts. Right, if you have a big
seller all the time in the market, do you want
(10:21):
to see what the market looks like if you're the
FED without them there. And so I think that's part
of what they may be doing, just slowing down that
quantitative tightening and let the economy not have them be involved.
Speaker 3 (10:35):
See what that does to mortgages.
Speaker 1 (10:36):
Yeah, I'm gonna take a little bit different take than you.
I agree one hundred percent, but I'm gonna throw my
opinion in of why I think they did this. And
again we'll go back when we come back from this
break and explain a little bit further with this balance
sheet is because this was probably as important with this
announcement of what they're doing with their balance sheet as
the quarter percent rate cat. So we're going to go
(10:57):
into some more details, but let's turn over to Christens now.
Right now, traffic Center. Hello, Christen, working back to the
John Sanchez Show on Newstalk seven to eighty k h
on this Fed interest straight decision day, balance sheet runoff.
And oh, by the way, Microsoft in the video they
kind of go hand at him and you said micro creature, micro, Microsoft,
meta and alphabet earning his numbers after the close, and
(11:19):
we will go into we need a whole entire segment
for those earning numbers because again there's a lot of
activity going on with those stocks in the after hours.
So we're gonna save that for when we come back
from the bottom of the break. But now we're going
to go back to the Fed interest rate decisions. So
once again, as anticipated, the Fed did give us a
quarter percent interest straight cut. The street didn't like it,
Like I said, I mean, we were during Powell's press conference,
(11:40):
we're plummeting. We were down well over two hundred. I
had a few interesting notes. I always liked to track
this and again just picking on the down side of things.
So prior to Chairman Powell beginning his speech, the Dow
Jones Industrial Average was up forty two points. When he finished,
it was down ninety NASDAC was up one hundred and
(12:02):
thirty four when he finished, was up ninety two, SMP
was up eleven, and the SMP down seven. So yeah,
like I said, a lot of volatility, but that's just
where we closed. Like I said during his test or
during his answering to the press questions, it was up
and down and all over the place, which is very typical.
So now we're again gonna go a little bit deep
(12:23):
with you. Besides, okay, okay, big deal a quarter percent cut, Yeah,
you should start seeing I got. I didn't get a
chance to check prime rate. We maybe already had an
adjustment to prime. So this is going to help some
of you, like with credit cards and if you have
some liabilities that are tied to prime, so on and
so forth. We did not. However, I'm gonna get a
fresh quote here because when I looked, not long before
(12:45):
the bond market closed, or excuse me, when the stock
market closed, we didn't have much move in the thirty
year mortgage. Yeah, you know, good thing Dwight's on here today,
fourteen basis point increase increase in the thirty year more briage.
Now it's six point two seven percent, And again tenure
was up for eight basis points. So you know, you're
(13:06):
talking almost doubling of what the tenure did today, Jason
on the thirty year mortgage. So this is now now
that you know what the mortgage market did, which you
know looks at the tenure, but more importantly is based
upon how the mortgage backed securities trade. So now let's
take you back to this crazy thing called the FED
balance sheet. So I'm not even going to come close
(13:28):
to try to explain it, because Jason, I wish I
had the recording on during the break because you gave
an excellent commentary on what's going on there. So I
want to kind of lay the table and then I'm
going to let you go back to your institutional days again.
You got a better understanding of this than I did.
So what the FED said was they're going to cease
the runoff of their treasury holdings. Okay, so they own
(13:50):
these bonds, and what that means by ceasing the runoff,
that means instead of when the treasury comes due, instead
of taking the proceeds and going back and buying more treasuries,
are going to take those proceeds and do something else
with them. Right, the FED said, The reason they're doing
this is they detected evidence in overnight lending markets that
banks were no longer a wash in surplus cash. Because remember, folks,
(14:12):
when when a bank has excess capital surplus, they can
lend it to another bank, which is the FED funds
rate that we're talking about, or they can deposit it
with a FED. And we've joked and kind of criticized
the FED many times over the years because it's very,
very profitable to park your money with a FED. And again,
it's last time you and I talked about it. I
(14:34):
don't know where it is now, but I think it
was right around four percent or something like that. It's like, hey,
not bad money, right, risk free money. Right, you're parking
it with a FED. That's risk free money. So so
again back to what they said today, they're gonna let
the run off of the treasury of holdings because they
detected a surplus a cash with no longer a surplus
a cash with banks. Now the Fed's going to continue
(14:54):
to shrink the holdings of their mortgage backed security. So again,
these mortgage backed securities, they're going to continue to let
them run off. Right, So now the FED is no
longer stepping up to artificially keep mortgage rates lower than
they should be, hence why the thirty years shot up
like it did. But they're going to replace maturing bonds
with short term treasury bills starting in December. Now, short
(15:16):
term treasuries and things like that. Again, if I go
back to the short end of the curve, Jason, two
year today up nine basis points. Three year was up
nine basis points. Those were the highest of all the
various maturities as far as the daily increase. Now go
into your explanation about dollars and all the craziness that
really goes on behind the scenes.
Speaker 2 (15:32):
Yeah, I mean again, we'll keep Ultimately the Fed is
issuing bonds, or in this case, they're allowing bonds that
they hold to mature. Typically they'll go out and do
something either with the money or like you'd mentioned, they're
(15:53):
now focused more on the short end of the curve,
which we're going to just say is more than parking it.
Speaker 3 (15:58):
Right, they're not really doing much with that in terms
of stimulus, et cetera.
Speaker 2 (16:01):
And the fact that the banks in the term of
being a wash in excess liquidity. Right, the simple way
is when you issue a bond or you sell a bond,
when the Treasury not Fed, but Treasury is selling bonds.
That mechanism takes dollars out of the system.
Speaker 3 (16:21):
Right, in order to buy a bond, what do you do?
Speaker 2 (16:23):
You go write a check and you spend your one
hundred dollars on a bond, and now you own a bond.
Speaker 3 (16:28):
It's paying you three and a half or four percent
a year. But you don't have those hundred.
Speaker 2 (16:32):
Dollars anymore, right that you aren't using Yeah, you're not
using it to go out and buy gas or groceries
or do other things. That then the guy who owns
the grocery store, right, Yeah, that sort of compounding effects.
So by them treasury issuing debt, that is pulling dollars
out of the system.
Speaker 3 (16:50):
And same thing in the case of the Fed.
Speaker 2 (16:52):
As the FED is running off their balance sheet vis
a vis either selling bonds into the market or just
not redeploying that capital back into the market by buying
other things, they're pulling liquidity out of the system because
it's just going to be parked in treasuries, right, it's
not going to be buying more bonds from other people
(17:15):
in order to keep that flow of funds going. And
they've been active on that for a long time, and
so the thought is like where the analogy we were
using during the break was throwing a rock into a pond, right,
ripples for a long time. Now they sort of want
to see what the level of the pond is because
the Fed's job is really three you know, threefold. It
(17:37):
is price stability unemployment. But that price stability part also
links into just total liquidity, right with US being the
reserve currency. Uh, you know, they do a lot in
making sure that all the banks have adequate liquidity to
to borrow and lend and do you know, cross global
type transactions through Euro dollar and things. So they don't
(17:59):
want to hold too much liquidity out of the system
because the system itself will clamp down and then we
have all those issues of overnight lending and some bank
freaks out and such and such and such.
Speaker 3 (18:10):
But they're at a point.
Speaker 2 (18:11):
Now whereas they slow down their quantitative tightening, so they're
being less tight. Right, they have been tight in running
off their balance sheet, and now they're at least slowing
the way they're doing it. I mentioned mortgages earlier in
that you know, they did stay that they're going to
continue to sell them, but as I mentioned, i've heard
chatter of that potentially reversing at some point, so I
(18:33):
know they don't want to be mortgage backed securities holder's
long term, but if something did in fact happen, they
would need to step in. So that could be a
reason why they continue to at least run that part off.
But there's a lot of interlinkages for sure. Again, it
sounds pretty goofy and complex, but there's some great websites
we can send you to. If you have any questions,
just reach out to us and I'd be happy to
(18:53):
forward them over.
Speaker 1 (18:54):
Perfect as far as the I'll read the FED interest
rate statement we come back from the break, then we'll
get to those earnings after hours. But just keep in
mind we had two dissenters. We had one dissenter that
actually was calling for a fifty basis point or half
a percent cut, and another dissenter that wanted no cut whatsoever.
So it wasn't a slam dunk, you know among the
(19:16):
the FED members there to give this quarter percent cut.
And you know, Powells asked about that. He goes, hey,
you know, everybody's individual and we try to, you know,
think as a group. But everyone's the title of their
own opinion and so on and so forth. But yeah,
but overall, you know, as we'll go through in more detail,
you know, happy with the economy. Turns are having a
little bit of a bite, Inflation is being stubborn. Let's
(19:37):
see where are some of the other takeaways. The immigration
issue going on, people being deported, starting to have an
impact in the jobs market. Definitely continue. You had a
few remarks and various discussions with the press indicating that
you know, AI is taking jobs, so on and so forth,
(19:58):
he said. All of the he was asked about all
of the AI data centers being built around the country.
He said, they're not interesstraight sensitive, meaning hey, you know
you cut rates, is that going to spur even more activity?
And he a couple of times he said, you know,
bottom line, Yeah, this is Wall Street money that's building
these things. They don't care if the Fed Cutch Trader
(20:19):
quarter percent or not. They're making enough money, et cetera.
So but anyways, those are just some of the highlights.
Let's come back. Let's hit these after ours earnings numbers
with Microsoft, with Meta and with Google, and then we'll
come back and wrap things up on the FED side
of things. It's turned over to Jack Saban News traffic
and whether Hey Jack, welcome back to the John Sanchez
(20:39):
Show on his talk seven to eighty k O waits
with Jason Gunn. All right, we're going to pause on
the FED side of things for just a moment and
take you into the after our session and once again
lets you know exactly what's going on with the big
earnings numbers again coming in not long after the closing
bell today with Microsoft, with Meta and with Google once
again on the market side, we finished down seventy four
on the dow to A was a forty seven thousand
(21:01):
and six thirty two. Now as that grows one hundred
and thirty one point five to five percent to a
new record, SMB finished chen change, which is so unusual.
Six eight hundred and ninety was our closing level. All right,
mister gon, let's say we uh get started. Let's go
with alphabet, hit the numbers, digest it, talk about it,
et cetera. So, folks, here's the numbers on Google. First,
(21:21):
let me tell you the performance of the stock regular
session after hours, and then we'll backfill into the numbers.
Regular session, Google was up six dollars and seventy four
cents two point five one percent to two seventy five seventeen.
Right now in the after hours, it's up seventeen dollars
and sixty six cents six point four two percent gain
two ninety two eighty three. So you guessed it. Good
(21:42):
earnings numbers. Here's what's going on. Revenue came in one
hundred and two point three five billion. Estimates were ninety
nine point eight nine billion. Earnings per share. What a
blowout here, Jason. Three dollars and ten cents. Estimates were
two dollars and thirty three cents. And let's talk a
little YouTube. You have a nice step before where I
get to the YouTube advertising revenue throughout that step.
Speaker 2 (22:04):
So uh, Google bought YouTube back in November of twenty
twenty six for one point six five billion dollars in
twenty six November twenty or sorry, two thousand.
Speaker 3 (22:17):
And six, not that next year, two thousand and six.
Speaker 2 (22:19):
Yeah, uh, one point sixty five billion is what they
paid for him. Google just had, through YouTube's advertising revenue
only in just the third quarter ten point two billion,
So pretty good purchase.
Speaker 3 (22:35):
I would say that was.
Speaker 1 (22:36):
A good That was a good Yeah, that was a
hundred bigger, right, Yeah, but that was just this quarter,
not just quarter quarters. Right. No, it's I'm addicted to YouTube,
Oh me too? Two at ten point two six billion
was YouTuber ad revenue estimates for ten point zero one billion.
Let's go to the Google Cloud revenue fifteen point one
(22:58):
five billion, estimates for four teen point seven to four billion,
traffic acquisition costs fourteen point eight seven billion estimates fourteen
point eight two billion. Strong demand in the cloud business
due you got it, due to AI. Company also announced
an increase in capex, or capital expenditure for fiscal twenty
twenty five. They're going to be spending between ninety one
billion to ninety three billion in capital expenditures for again
(23:21):
fiscal year twenty twenty five. Looking out to twenty twenty six,
they expect a significant increase in capex. It will provide
more details on the fourth quarter earnings call, according to
their chief financial officer. So good, good numbers on Google
and again stock cup performing as it should in the
after hour session. Yeah, I wish we could say the
same type of good news for the other two that reported.
(23:43):
Let's go to Microsoft. Here's what the stock did in
the regular session. Here's what it's doing in the after hours.
Regular session down to fifty two cents, the five forty
one fifty five. We're right down the after hours it
is down nineteen dollars and seventy one cents, a three
point six one percent loss to five hundred and twenty
two dollars a share. They took a three point one
billion dollar hit to their net income in the first
(24:04):
quarter due to the company's hefty investment in Where do
you think, Jason, what do you think? Where do you
think they're they'd be spending three point one billion in
a quarter?
Speaker 3 (24:13):
Uh? Open Ai would be my guest.
Speaker 1 (24:15):
Here you go, my friend, you're a genius. Yea, I
told you were. Yep, open Ai. Three point one billion dollars.
So again, forty one cent hit. You think Wall Street
would put that aside, But no, they're pinishing the stot.
Net income Phenomenal rose to twenty seven point seven billion,
about three dollars and seventy two cents a share a
year ago. They made three dollars and thirty cents. REV
(24:37):
came in at twenty seven point seven billion a year ago,
twenty four point sixty seven billion and If you don't
think that they're tight with open Ai, I think again.
Since first backing open Ai in twenty nineteen, Microsoft has
committed to invest thirteen billion dollars in the company, with
eleven point six billion already funded as of the end
of September. And again we remember this comes just day
(25:00):
after open ai announced that they've completed a recapitalization, which
cement that its structure is a nonprofit with a controlling
stake for it's in its for profit business. Nonprofit now
called the open Ai Foundation, holds an equity stake worth
oh a mere one hundred and thirty billion dollars. Yeah,
in its for profit arm. So yeah, it's pretty pretty remarkable.
(25:23):
But you know, again, Jason, I think this is where
people will take a deep breath and go, Okay, we
know they're investing in a lot and open ai forty
one cents a share. Hit, Okay, big deal. They still
made three dollars and seventy two cents or rev of
twenty seven point seven billion. I think commer heads will
eventually prevail, but right now they're just out of their mind.
Speaker 2 (25:46):
It's the Azure, the sort of cloud services number which
was most of the analyst, what every every quarter they've
beat estimates by three percent, so it was thirty nine
percent constant currency versus thirty seven Street was expecting, you know,
literally like forty or forty one percent. So I think
(26:06):
that's the thing that more than any just near term
reaction of sell the news. But I think you're right
on the camber heads part this company. One of the
analysts on CNBC today talking about the stranglehold that this
company has on enterprise AI usage in that they're embedded
into everyone's you know, outlook and email and teams and
(26:31):
you know, through copile all and I think that people
are just scratching the surface of using the product. So, uh,
you know, not recommending anything, but that's one to keep
an eye on that longer term proves to be a
winner unless someone comes in and quickly changes the entire system, right,
(26:53):
the entire ecosystem that most firms rely upon for their
sort of daily is.
Speaker 1 (26:59):
So the the point you're trying to make is we
always talk about the Apple ecosystem. Right, you buy an iPhone,
next thing you know, you're buying an iPad and you're
buying more and more Apple products. It's that way with
Microsoft However, it's more essentials. Right, we all use Microsoft
Office unless you're a Mac user, and then then you
still may use Microsoft Office products. But as we talk
about on Mondays with with the with Dennis, you know,
(27:21):
if you're gonna use co pilot, which the chassis of
co Pilot is chat, GPT, open AIS product, it talks
to each other, right, it'll well, I mean you've you've
created some amazing things that you're figuring out because again
as we've announced on the show on Monday, you know,
we talked about how we're implementing AI in the in
our firm, and I mean you giving almost every day
(27:44):
you're company and go, man, I just figured out this
with you know, between UH, you know all the Microsoft
suite of products and and and UH and and the
AI you know side of it. How they're again they're
talking one another, where a lot of times you can't
do that if you're if you're not using you know,
the same Microsoft type of products. So I think that's
(28:06):
pretty interesting.
Speaker 2 (28:08):
For sure, and I think it's just going to continue
to you know, it's not a it's not a big lift,
it's not a big spend for companies to add in
copilot licenses or that. But you figure for Microsoft, it's
a gazillion companies that are all spendings, you know, twenty
to thirty dollars additionally every month per user.
Speaker 3 (28:24):
That will I think.
Speaker 2 (28:26):
Get things moving pretty quick. So it's it's a it's
a good they have a good long term growth story
for sure. And that's the thing with all these megacaps, right,
I mean Google, I mean the amount of data they
have and Gemini is taking over their ad world right
where they're able to internalize so much more now and
direct that shift that wasn't there in the past.
Speaker 3 (28:45):
So it's it's incredible.
Speaker 1 (28:47):
Well, you know, the last thing, then we'll go to
break and Microsoft. Then we'll come back and talk about
metas numbers. Microsoft now owns, there's steak. Let me rephrase that,
there's steak, Microsoft Steak and open Ai now one hundred
and thirty five billion, about twenty seven percent of the
company on a on a as converted diluted basis. But
Microsoft said today on their conference call, Jason open a
(29:10):
is a quote from Yeah Sashaving Nadella said it. He
said open Ai has contracted to purchase an incremental two
hundred and fifty billion dollars of Azure services. So that's, folks,
the Azure's the cloud service of Microsoft. So open ai
is contracted to purchase two hundred and fifty billion dollars
(29:32):
and that Microsoft will no longer have the right of
first refusal as a computer provider.
Speaker 3 (29:38):
Nadella says, your circular accounting, there's.
Speaker 1 (29:40):
This, Yeah, exactly, there's the circular.
Speaker 3 (29:42):
John's circular account Yeah.
Speaker 2 (29:45):
Wait a minute, way, that's your right pocket and leverage
and left pocket.
Speaker 1 (29:51):
That bath. People yelling at me being a negative.
Speaker 3 (29:54):
But I agree with you. I feeling that I'll fight
with you.
Speaker 1 (29:58):
There you go, There you go. You look good. Nadella
also called the relationship with open ai quote one of
the most successful partnerships and investments our industry has ever seen,
adding that we continue to benefit mutually from each other's
gross across a growth excuse me, benefit from each other's
growth across multiple dimensions. So with all that said, folks,
(30:18):
because again they took a forty one cent hit on
the earnings because of their investment, we can't tell you
what to do, but hopefully, you know, like we said,
commer heads will prevail eventually, and not quite yet. Stock
still down a little over nineteen bucks after hours. All right,
final big cap earning was a meta. We'll tell you
what those numbers did in the after hours and what's
going on when we returns. Turn it over to Christin
(30:40):
Snow to wrap us up in the right now traffic center. Hello, Kristen,
Welcome back to the John Sanchez Show on Newstalk seven
to eighty KO, which with Jason Gott. Once again, we
finished down seventy four on the Dow, rose one thirty
one on the Nasdaq, and a decline. Actually, let me
rephrase that. It wasn't a full one point, so I'm
going to say it's unchanged on the SMB five hundred.
All right, A couple things we keep thinking about. So
(31:01):
once again, as we just went over in the last segment,
we had Microsoft ear needs numbers, we had alphabet slash
Google's numbers. We're going to tell you about what METAD is.
So those are the three that reported after the close.
Let me tell you what the futures are doing right
now again, very early down. Futures down fifty two, Nasdak's
down fifty seven smps lower by seven coming away off
the lows that we experience even though they started trading
(31:22):
nearly an hour ago. But as Jason and I were
chatting off the break or during the break, keep in
mind something that may come hopefully to the rescue of
the market, since it's kind of reeling on these Microsoft
and Meta numbers. The President is meeting with President she
of China. The meeting is supposed to occur at least
according to all the new sources I found at seven
(31:44):
a excuse me, seven pm hour time, so seven pm
Pacific standard time is when they are meeting, which obviously
is tomorrow for them. Once again, some things kind of
leaked out. Looks like China, well today China made the
first soybean purchase, so that's a good step. So hopefully
we'll get some more details about that, get some more
details about the rare earth. Trump coming back. Maybe some
(32:05):
indications are that he may completely eliminate or lessen the
one hundred percent tariffs that he recently announced. Remember their
total one hundred and fifty seven percent tariffs, but hey,
we'll take that one hundred percent back. You just be
at fifty seven percent tariffs. So well, we'll see what
happens there, all right, So that could be a good savior.
And then we got some some good earnings numbers out
(32:26):
to the closes tomorrow. Now back to the final big mover,
which is meta regular session. It was quiet, twenty three
cent gain is how it finished, seven to fifty one
sixty seven a share. Right now in the after hour session,
it is tumbling down fifty five dollars and sixty seven
cents seven point four to one percent loss to six
hundred and ninety six dollars I share. Why is it tumbling, Well,
(32:47):
let's get to the details. Ernie's per share seven dollars
and twenty five cents estimates six dollars and sixty nine cents. Okay,
beat revenue fifty one point two four billion estimates forty
nine point four to one billion. Beat the problem, Jason,
it's the one Big Beautiful tax bill.
Speaker 3 (33:05):
Yeah. Yeah, that's an interesting stat So how did that work?
Speaker 2 (33:08):
They?
Speaker 3 (33:08):
I had a charge.
Speaker 1 (33:09):
I can't figure this out. But Mark Zuckerberg on the
conference call said that because of the One Big Beautiful Bill,
it resulted in a one time non cash income tax charge.
Companies said they expect Trump's law to result in quote
a significant reduction in US federal cash tax payments for
the rest of twenty twenty five and for future years.
(33:31):
Third quarter sales wroute twenty six percent year over year,
which is the highest revenue growth since the first quarter
of twenty twenty four. Hit. You know the capex, Jason,
you were talking about that. I love your comment. Mentioned
that to the audience.
Speaker 2 (33:44):
Yeah, I mean, just you know, their capex guidance for
Q four is fifty six to fifty nine billion, and
they expected to be hired next year. I said, Meta
seems like the only company in this AI arms race
that when they raise capex guidance everyone freaks out like
they've all That was the store glory back with them
five hundred points ago if you're watching.
Speaker 3 (34:03):
Actually the stock traded down to ninety dollars.
Speaker 2 (34:05):
I recall at the lows back when people thought they
were overspending on reality labs and all those things, which,
as John you mentioned, what the heck does they do?
And I said, it seems like they just burn money
or something.
Speaker 3 (34:17):
But the headset right exactly.
Speaker 1 (34:20):
It makes four billion. Yeah, we got to run. Unfortunately
I went to way too fast. All right, We thank
you for joining us. God bless have a great afternoon.
We'll see tomorrow on the John Sanchez Show. John Sanchez
is a registered investment advisor, and the opinions expressed by
Sanchez Gone Capital Management, LLC on the show or their
own and do not reflect the opinions of News Talks
(34:40):
seven eighty or its pairing company, Cumulus Media. All statements
and opinions expressed are based upon information considered reliable, although
it should not be relied upon. As such, any statements
or opinions are subject to change without notice. Information presented
is for educational purposes on the end, does not intend
to make an offer or solicitation for if the sale
or purchase of any specific securities, investments, or investment strategies.
(35:05):
Investments involve risk, and, unless otherwise stated orre not guaranteed.
Information expressed does not take into account your specific situation
or objectives, and is not intended as recommendations appropriate for
any individual. Listeners are encouraged to seek advice from a
qualified tax, legal, or investment advisor to determine whether any
information presented may be suitable for their specific situation. Past
(35:27):
performance is not indicative of future performance
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