Good morning everybody. Welcome to another wild and woolly week on the stock market with the sense of things.

Jeff and Ron here. Today we’re going to go over a little bit of of course what happened in history. Ron’s got some good

stuff on credit cards and gas inflation pricing 20 years of mortgage history and

then the debt of the top seven stocks in the S&P 500 and NASDAQ. I’m going to cover a couple little economic points

today and then I did an in-depth analysis of Chairman Walsh’s testimony or his presser this week, which there’s

really four what I consider four key points that came out of that that I think are going to shape the future of the Fed as we go. So stay tuned. We’ll be right back on in just one second.

Hey everybody, welcome to the show. Ron, how are you my friend?

Good. I’m all excited and giddy. My hair is standing up on the back of my neck for earnings. Yes. Oh yeah.

Microsoft was up. Meta was down.

Yeah. which at least I will say the the market just is bipolar at this point. It’s either

tech and AI or everything else and it was like everything else up until this morning and then now it’s the exact

opposite. It’s and of the top 10 this year. Yeah.

And like you know what they will figure it out. I don’t know how long it’s going to take. They’ll figure it out. It’s like Google they’ll figure it out. Apple though they were lagging behind too.

They figured out they’re at an all-time high. So yeah, they have the smartest people in the world. They’ll figure out they’re also the biggest companies on

the planet for a reason. It wasn’t that they lucked into it or they’ve just ambled along.

Will they have the momentum quarter to quarter? Probably not, but they’ll figure it out.

But you look at the Microsoft numbers. I was looking at the earnings on that.

Azure is up 47%. That is insane on that big of a one. It’s probably the oldest

of those cloud platforms that are out there. And don’t get me wrong, I thought it was absolutely terrible and I still

think it’s terrible, but it’s a lot less terrible and it that Microsoft ecosystem is just out there in the big companies

and it’s going to continue to be. So, they’re improving. Well, I’m excited to to really hear Amazon. I just happened

to hear an interview with their head of kind of the AWS AI part of the company

and it was off the chart. That part of the company is growing so insanely fast that it’s going to be interesting to

see. They were saying that it took I think I said this last week. They were saying it took six years for AWS part of

the company to reach a billion dollars in sales. It has taken less than three years for them to reach $12 billion AI.

So, it’s that I think the Amazon store part of the company I think is going to be such a non-starter with the company

and they’re making money on the AI and the cloud side of the business and it doesn’t really matter what the the online store does. And Amazon reports tonight.

Yep.

And they got a pretty reasonable multiple so we’ll see what happens.

Yeah. Yep. And Apple tomorrow. So, you know, I think the big four, I call these first three the three amigos. So, you know, they throw their hands on their

hips and kick their hips out. And remember, the top five companies is 30% plus or minus of Nvidia’s revenue.

So, keep spending money, guys. What happened this week in history?

Some interesting things. 1776 delegates signed into the Declaration of Independence. I think this is interesting because I believe if you

pulled a hundred a thousand people and you said, “Hey, when did the delegate sign the Declaration of Independence?”

They would all say July 4th and here it is. It was the end of July because Thomas Jefferson wrote it as the Declaration.

John Hancock was the president of the Congress or in charge of it. But it wasn’t until this week that they all signed it as we note.

They had to have it printed. That was the thing. It was it was actually what it was. It was wild. I’ve been watching a documentary on Netflix excellent called The American

Experiment. So the original one was small, but then they had a bigger one that it was then obviously then

transposed to. So yeah, pretty cool.

But do you know the one interesting thing about the original document?

What’s that? There was actually one only one signer of the original document, John Hancock.

That could have been on July 4th, but the delegates the delegates and actually the full suite of delegates didn’t sign it for almost a year.

There was two or three that did not. They abstained. Yep.

Quick. All right. 1861 world’s world’s first weather forecast.

Don’t ask me why I put this in here, but I find it interesting because there are people that are obsessed with the weather. So, I thought it was interesting. 1861.

Hey, the weather channel is on TV for a reason. People watch I The scary thing is when I was traveling a lot, of

course, telev the the TV and hotels was always terrible and nothing I wanted to watch. The Weather Channel has some of

the coolest like liveaction, you know, reality type shows and stuff like that. I would watch those for hours on end.

I hear you.

I don’t do that when I’m at home, but I do that when I’m on the road.

We’ve had a lot of car manufacturer news over the last couple months. 1909, General Motors buys Cadillac and keeps adding to their stable.

1949, plane crashes in Empire State Building killed. Just heard that this week. Yeah, I was at military. Quite a few planes that have

crashed into New York buildings. Why would you want to be above the 10th or 15th floor on any of them?

I don’t really want to be in New York, period. So, it solves the problem.

1945, USS Indianapolis torpedoed after delivering the atomic bomb. What movie

was famous for one of the characters telling the story? Of course, Jaws. Very good. Quint.

Quint was on the USS Arizona. He had the tattoo removed.

Which is why he’s so obsessed with hunting sharks. Here’s to your leg. Here’s to my leg. That’s right. Remember what this was?

She broke my heart. There it is. It broke my heart. Mary Sue, whatever.

1958, NASA is created. 1972, comedian George Carlin is arrested for his seven

dirty words routine. Charges were later dropped. I will tell you, I never went out of my way to watch George Carlin. He

was all right. He just seemed like the old man next door, get off my lawn, even when he was in his 30s. But he definitely had some great routines, and

this was I loved the My favorite routine was him talking about getting older, you’re pushing 50. And yeah,

that’s a great routine, too. Just I the thing with Carlin and my wife and I were talking about this the other day and we’re like Carlin and Red Fox and that

generation of comedians, oh my god, they would be cancelled today. And I’m like, no, they wouldn’t because they don’t care. They they just literally they wouldn’t care.

Yeah, they wouldn’t care at all. They would just keep doing what they did best. 194074 House begins impeachment of Nixon. The

one I didn’t put in here was he actually I think this in this week in history he turned over the Watergate tapes per

subpoena. I think once he did that then they began the impeachment proceedings.

1976 if you’ve ever watched the documentary on it. It’s crazy. David Burkowitz later to be known as the son of Sam murder’s

first victim. I read the article again because I forgot and then I remembered. Do you know how they caught him?

I don’t remember. You know what? I just saw the movie probably about a year or so ago again. I can’t remember how the heck they caught unpaid parking ticket. That’ll tell you

the level of detective and police work because they did all the traditional things and here was an unpaid parking

ticket in the area where there was a murder, a couple of murders and they just traced it back to him and then they found submachine guns or whatever. Yeah.

Kind of crazy.

and defend and he was defended by my cousin Vinnie.

Oh, that’s right. 1976 Bruce Caitlyn Jenner waves the Olympic decathlon.

The most amazing.

I’ll tell this story very quickly. I’ll shorten it up. I remember in the early 90s, remember in the news in the supermarkets, the rags, the aliens are

coming, the aliens had sex with me, all that cra those crazy things. I remember one of the headline stories back in the

early 90s. I can’t remember which one came in the world or whatever with a picture of Bruce Jenner saying he’s conver he’s going to be transgender turning into a woman.

Of course, everybody’s like, “Oh, stop.” I mean, whatever.

Hannah of man wanted the the Kathlon and here it is 30 or 30 plus years later. It happened.

Chopped off or not, but who cares? I think the the thing was I think the thing that impressed me most about him.

I saw him speak at an insurance conference because he he actually that’s where what his job was. He was an insurance guy because his dad was an

insurance guy and he was talking about the training that it took to do the decathlon and he’s literally goes nine

hours of my day every day was spent training for that.

Yeah. 12 12 years for one week in history.

I think it was within a couple of months after he won it person that supported the most he divorced his wife. Yes.

Or what cuz he wanted to wear a dress. That’s 1978 Animal House. No.

Released in theaters. The first of several National Lampoon movies. There’s only one good one after it. 1980.

They should have stopped there. Yes, I agree. 1981, The Wedding of the Century.

Charles and Diana Wed.

Well, we knew that was going to last forever, didn’t we?

Yeah. If you watch The Crown, you can see why.

I don’t know why I had this in here, but cannibal and serial killer Jeffrey Dmer is caught.

Well, we had we had to get another one in there with Son of Sam, too. Yeah, but this was beyond. Yeah.

Yeah. It’s tough to say one is worse than the other, but this was worse than the other. Do you know what they did about 25, 30 years later? I shouldn’t even be telling this.

He had no money. Everything was taken away from him. He was putting John I think it was for 300 years, right?

They auctioned off many of his items.

One of his items people bought was a fork. Cuz they’re like, “Do you realize whose fork that is and what he used?” He could have eaten people with this.

Wow. Yes. But there are ghouls out there that help I used to work with one. I used to work

with a guy who was obsessed with serial killers when I worked for one of the largest financial firms. He was obsessed with serial killers and he collected

items from John Wayne Gasey and all they’re podcast for that stuff. Yes, they’re weird.

The that and the ones that the women that want to date them and stuff. I’m like, okay, this is just weird. they get married.

Credit card spending and gas prices. So, credit card spending was up during this period of time mainly because of the World Cup.

Makes sense.

Yep. And what we’re still seeing here is some slowing in some other areas.

Probably during the summer, not as many people are going to the department store, but it it should be interesting.

Look how much gas has gone up. But it’s been a combination of things, which is why I found this

other chart that obviously people travel a lot more during the summertime. But the gas prices have ticked up. We’ll see

where it is over the next couple of weeks. Amazingly, we’re we’re still bomb and gas has come down. But

yeah, you look at it months will continue on for quite some time.

2022 was a mess, but you look at this year, it’s like it’s yes, it’s up, but

it’s not up to the point where it’s just blowing people out of the water.

And it’s within striking distance of where we were a year or so ago. So, it it’s been amazing. And

something something the media latches on to and loves to Oh, of course. Yeah. They’ll beat on it non-stop, but when you look at the numbers, you’re like, “Okay, yes, oil is

up, but it’s not up anywhere near what I would have thought it would have been at this point with disruptions that have happened.” And it was like the market

kind of shruged off the whole Houthy thing with Saudi Arabia. But I think what it’s done is you kept poking the bear with Saudi Arabia and now Saudi

Arabia is like, “You know what? I’m going to start kicking the living, you know what out of everybody at this point.” Yep. Yep. But I think we’ll be talking about that for a while.

I agree.

So mortgage rates, I brought this up because everybody think was blaming Biden and blaming Powell for the mortgage rate.

The Fed rate has nothing to do with the 30-year. It’s the 20 and the 30-year Treasury because that’s how the banks

manage the risk on it. And I got to tell you, I I was wrong. I really thought mortgage rates with the Fed rate coming

down in the bond markets that it would be sub 555 at this point and it’s not even close.

It’s hanging in there and I’ll go over a little bit of that. Chairman Wars made a kind of a little point about this in his speech too which was I think interesting. You there?

There you are. I thought you locked up there. Nope. Go ahead. Oh, sorry.

All right. Here we go. Top seven. You know, I refuse to use that word to describe them. Look at where we were 15 years ago. Yep.

As the amount of debt because these have been the largest companies. They’ve been getting larger and they’ve been basically building and expanding and

exploding their business through just organic growth and cash flow. And here they are with basically financing a lot of their AI debt.

Yeah. Or their AI investment. Excuse me. They’re financing it with a lot of that.

I This cannot be sustainable. Obviously, we all know it’s not, but how long? I don’t know. What are your thoughts on

this? Because they got to be having very favorable interest rates. They’re not paying the same interest rates you or I are. Oh, of course.

Yeah. They’re floating these bonds in the on the the stock market and or on the bond market and they’re all AAA credit. They’re not they’re definitely

not paying the rates that even my company would pay and anything like that. So I personally think it’s not necessarily a bad thing to have debt on

the books. Traditionally they’ve carried zero debt and yes they’ve added a little bit there but okay so it’s what 500

billion in total debt for the entire seven companies.

Four or what six of the seven of those are trillion dollar companies at this point. The debt per the size of the companies is really not that outlandish.

I hear you, but this is what I would have liked to have seen. The debt for the other 493.

Yeah. To see where that is not that. I bet you totaled it doesn’t equal that.

But I guarantee you as a percentage of capital or market value versus what the

debt is, I guarantee you it’s way higher with the other 493.

That percentage, I bet you, is way higher. It’d be interesting to see that.

Yeah, I agree. Okay. All right. What do you got?

Let me go real quickly here and share my screen. Let me figure out where the heck that screen is here. Hold

on. There we go. Had to move it to see it here. All right. So, a couple things on the economy, the economic calendar

that I think are interesting. We got GDP this morning. That’s lagging a little bit. Now, year-over-year, it’s way

higher than what the expectations were, or actually, no, it’s not way higher.

It’s 1.5%. Personal consumption expenditures 3.2 versus 2.1. Uh, that is

we I think PCE is staying up there a little bit more. If we look at like out of the way here, the personal income and outlays. So, this is really PCE here.

Month overmonth up.2. It was consensus.3 month overmonth here.3 versus 4. The PC

price index was actually down where it was supposed to be year-over-year still 3.7. So, it’s hanging in there. So, one

of the things I wanted to really do is get a little bit of an analysis of Chairman Worsh’s speech that he did this

week because I really think it it told a lot and I’m not sure if the market quite gets Worsh because he’s really a

straight shooter and he doesn’t beat around the bush like the last three Fed chairman we’ve had. I think the last one

that we had that was so straightforward and out was Greenspan. the rest of them when you would listen to him literally

was just from them. So some of the things that came out of here I really pulled four things he was emphatic about that they are holding steady with rates.

No rate cut, no rate hike at all. He just was flat out we’re not looking at either right now. The Fed voted 9 to3 hold rates at three and a half to 3.75.

He’s by the way the three denters wanted a rate.

Yeah, I know. which is just idiotic. The economy, he said the economy r remains resilient. Labor market remains solid

with the one the one thing I did not cover is that this week’s unemployment report actually was way lower than they

expected. They were expecting 305. It came in at 19 87. And that’s been really declining rapidly, especially when you

looked at what the estimates are versus what it’s been. and it’s been really declining for about the last three three to four reports that have come out. He

did state though that inflation is still above target. So they don’t really see an urgency to move rates yet one way or

another. He did reiterate and he made a very big point of this. There is only one target and that is 2%. So he

basically said there’s no soft inflation target. We’re not like, “Yeah, we want to, but we’ll take 2.5 or whatever.”

They are focused on 2%. He also said one month of lower inflation is not enough for that to for them to make any

decisions. He’s really stressing restoring Fed credibility, which is his biggest priority, and that the inflation

fight is not over. His base case is we’re going to be higher for longer. And he’ll relate that in this last point.

the new Fed philosophy, let the markets price the economy. And he made a point of saying, “Play the ball, not the

referee.” That Treasury yields, they’ve risen. And his belief is the reason that they’ve risen is the Fed has stepped

back from being the one that provides forward guidance. And he’s letting they’re letting the market make decisions. And that’s his read on why

they’ve seen Treasury yields rise a little bit, which I honestly think the longer range of the market has been doing this for a while. They really

haven’t cared about what on the short end is and what the Fed’s doing. They’ve been pricing risk in there. His belief is investors should react to the data,

not what the Fed hints. So, we’re probably going to see more market volatility and fewer policy clues coming out of the Fed going forward. Last but

not least, he really finished up his speech going over what he sees as how the AI investment is reshaping the

economy. AI capex is growing nearly 20% annually, which we’ve seen out of the three major players at this point that

have reported Google, Meta, and Microsoft. We’ll hear Amazon tonight and I would guess the same thing there.

Major spending in that area. I would not put a whole lot of credence into a into Amazon’s numbers because almost always

the Amazon gets wpped on because they’re willing to spend money to make money in the long run and they’ve been proven to do that time and time again.

Okay.

That AI is boosting manufacturing and productivity.

However, that is driving demand for chips and infrastructure. And that’s one of the things that he’s saying that the Fed is unsure if inflation is temporary

or more lasting because of the spend on the chips and the infrastructure and everything else. So it the one thing is

that AI is now influencing their monetary policy decision or discussions as they go forward. So I think this was

a really good speech. It was much more in-depth than his first one last month, which he basically was like, “All right,

10, it was about a 10-minute speech and he was done.” And he didn’t really answer a lot of questions. I think he was able to come in this time and really

show, okay, this is what we’re now talking about as we’re moving forward.

And I think it’s a more healthy system than, okay, we’re just in there thinking

about employment and inflation. and they’re really taking a look at where that inflation is coming from and what they feel like that’s going to be over the long run.

Yeah. Look, they’re always going to say they’re data dependent, but even with the 250 or 300 PhDs they have in the

building, they still don’t know. And this it’s been this way for decades is and now they can apply AI models and it’s still not going to tell them

because typically major events, crisises, whatever you want to call it, are from exogenous shocks that

you can’t throw into an AI model when that’ll happen.

Yeah. No, you can’t. But I think you can react a little bit better to it because you can analyze the data so much faster.

What I would like to see is the Fed kind of change its model a little bit to maybe follow a little bit more along

with Truflation’s model where they actually scarf data from other sources instead of relying on technology from

the 1990s of making phone calls and sending emails to people and record because I get them all the time. I’m on

the Fed’s thing. I get these things all the time from SBA and the Fed asking me are you hiring more? Are you this? Are

you making capital expenditures and all that and I’m like I that email that comes into I read about once every 3

weeks. So if other business owners are like me, I don’t really even deal with to me that’s opinion not data.

It is. You could say you’re hiring. Yep.

But you didn’t say whether you’re hiring one person or 100 people.

Yeah. And those that those are factors that are important because what if you can’t hire 100 people? What if you can only hire 20? So those are just it’s

like the the Michigan sentiment number which comes out right before like 10 or 15 sec. People have that data before it’s actually published.

But the whole idea is that it’s all opinion.

Yeah. Is at an alltime at an all-time low or 30-year low that we saw from last podcast. But it’s all opinion. It’s not opinion.

It’s completely opinion. Yeah. It’s not dependent and there is no way of really measuring okay what’s a good number’s the bad number and all that the morning

and then they were asking questions they didn’t have their coffee yet or they got 17 other emails that day and they didn’t answer you know they just

they were annoyed and they w didn’t want to deal with it. Yeah, I agree and you take all this stuff with a grain of salt. I I love economics and I love to

see what it is but I I also you know my opinion on economists most of the time.

I think one the vast majority of them only think with one brain. You have 200 people in that building in the the 10

billion dollar building or whatever the hell they’ve just built. You have 200 people in that building that all think exactly the same basically. And I don’t

think there’s enough dissenting opinions in there of it being that true collegiate environment where you’re like okay we’ve got this versus that. But I

think we’re starting to see a little bit more of that on the Fed governor’s board. There’s less of that one mind think and you do have dissenters that

are, hey, no, I don’t believe in this. I think we should raise interest rates.

And the rest of the crowd goes, you’re a bunch of idiots. No, we’re not doing that. We got six weeks or so to the next.

Yeah. And I wouldn’t say anything happens at that because it’s right before the election and they’re damned if they do. Damned things before the election.

Yeah. But they’re damned if they do, damned if they don’t. I could see some kind of move after that election in in December, but yeah, they’re not going to do anything before that.

All right. All right, folks. Thanks for joining us once again. Hopefully you enjoyed this, and we will see you guys back here the very next time.