TRANSCRIPT
Jeff Kikel: Good morning, Cents of things. This is Jeff and Ron here once again for
another update on what’s going on in the world, what’s going on in the markets,
and hopefully a little humor and information for you as well. Ron, how you doing, my friend?
Ron Lang: Good kind of slow news wise.
Most earning season’s over Yeah, not a lot on the economic front,
Saturday is june if you could believe that and then the political season heats up, so it’ll be
time to turn off the tv and all the websites So we don’t have to see any of that garbage.
Jeff Kikel: I stopped watching regular tv years ago. So we just watch Basically, I watch old shows
that have been around for years and binge watch old shows So it really doesn’t [00:01:00] change
much for me there and it just makes me mad to watch the news in the morning. So
Ron Lang: It’s just look if it was all good news.
Ron Lang: Nobody would watch it. They know bad news sells
Jeff Kikel: Yeah, absolutely. So yeah, it’s just, it’s crazy. One of the things I watched this week
I was interested in, Eversoft. I just look at what happened this day in history and all that. And I
found some unique things, some very cool things that actually happened this week in history.
Jeff Kikel: So I wanted to share that with the audience here. Let me share my screen.
Jeff Kikel: So this was probably the most interesting, I just happened to pull it
up and it was yesterday. Edmund Hillary and Tenzing Norgay reached the Everest summit,
the first people to reach the summit of Everest in 1953, this week in history.
Ron Lang: And without a map because all of all the people that came through since
have at least had a [00:02:00] map on where to go I’ve had a
Jeff Kikel: map and those guys did it with very little oxygen and all
that I mean it was pretty impressive less supplies yeah, literally, yeah,
and not the not a 40 000 people that were down there as a support team for him as well.
Jeff Kikel: So extremely The last person I was impressed going up
to Everest at this point. This week in history, 1940 or 1848,
Wisconsin enters the union. And now we had cheese as part of the as part of our, 50 states
Ron Lang: and milk with your steak. If you go into a steakhouse there, milk, dairy with our steak.
Ron Lang: Yes. Awesome. I never understood that.
Jeff Kikel: 1917, May 29th, 1917, Mr. John F. Kennedy was born,
future president of the United States at that point.
Ron Lang: And the baseball player Ted Williams was born that year too.
Jeff Kikel: Really? Did not know that. [00:03:00] 2003, Bob Hope celebrated his 100th birthday on
May 29th. 2003 they actually renamed Hollywood and Vine, Bob Hope Square as a result of him.
Jeff Kikel: So, interesting there. He did die July of that year, so he at least made it to
100. And then last but not least this Sunday was the Indianapolis 500. It was the 108th
running of the Indianapolis 500, and it began in 1911, this week in history.
Ron Lang: Have you ever been to the track? I was at the track. I did the tour.
Ron Lang: It was very interesting.
Jeff Kikel: It is. Yeah, it is one of my absolute, absolute favorite tracks in the world. That one
in Willow spray. That one, Willow Springs and a couple of others are my absolute favorite,
but yeah, it’s just such a neat core. And and just the history of it is just absolutely amazing.
Jeff Kikel: I love the museum. Yeah. Yeah. Yeah. It’s really cool. [00:04:00] Okay. As you said at
the beginning, really not a whole lot of Things going on. We’re coming to the end of earning
season. I, what I thought was interesting this week some earnings came out. It was interesting
that I, and for purposes of total sharing with the audience, I do own three of these.
Jeff Kikel: So this is part of why I was paying attention,
but we’ve been talking about the. We’ve been talking about the consumer,
and we’ve seen almost like a trade down into to retail, from the higher end stuff down
into the the lower end, the Walmarts and, the dollar generals and things like that.
Jeff Kikel: So that’s been an interesting trend. However, this week, it was actually
an interesting thing from a point of view of, like Abercrombie and Fitch,
that’s a, what I wouldn’t consider it a high end retailer. I wouldn’t consider
it a low end retailer. They’re just a middle of the road, blue out earnings.
Jeff Kikel: This week blew out [00:05:00] earnings and revenues off the charts. So
regardless of what’s going on with the consumer, there are companies that are really getting their
stuff together. I think Dick’s Sporting Goods is another really good example of that. It’s
Ron Lang: interesting because retail’s all over the place.
Ron Lang: Yeah. There’s other retailers have fallen flat on their face. Home Depot CEO came out
a couple of days ago and talked about how weak the consumer is getting. And they guided lower for the
balance of the year. Home Depot is a pretty good barometer for what’s going on. And I think it’s a
Jeff Kikel: barometer for the, the I think real estate sector in general,
because with, with the lack of, you have so many people that are staying in place.
Jeff Kikel: In their homes, because, hey, if I’m going to go and I’m going to move,
I’m going to leave my nice cushy 3 percent mortgage and go and get a six or six or
7 percent mortgage at that point. I think a lot of those folks also had been the ones
that. Stayed in their places and said, you know what, I’m going to upgrade my house.
Jeff Kikel: I’m going to do a lot of fixing up. They’re done with that [00:06:00] now. So it’s
an interesting cycle when you have a slowdown in real estate, like we’re seeing one that doesn’t
look like it’s going to change anytime soon. And I, I think one, it is that the consumer saying,
okay, I just, I just don’t have the money to make these major renovations to my house.
Jeff Kikel: But I think a lot of it got front loaded. During the pandemic. And,
we’re seeing the end of it now where it’s okay, people aren’t doing big bathroom remodels.
They’re not doing all that stuff that they did a couple of years back. What’s your thoughts?
Ron Lang: You’re a hundred percent correct. In a way you could do it.
Ron Lang: Yeah. They pulled the demand forward post COVID and even since then, and you’re right,
because of the high interest rates of people aren’t moving, they’re investing in their own
homes. Cause if they do want to sell one day. As we all know my houses are money pits. You
got to put money in it at some point I will tell you advanced auto surprised me because I do have
some clients in it Yeah, and it’s a turnaround story the c suite completely changed in the last
year and a half [00:07:00] and literally this stock fell off the map before the c suite changed
and it has come back nicely but this is another interesting thing because I got two left hands
when it comes to a car, but people that, keep up their own cars, they go to advanced auto parts and
O’Reilly, all of those O’Reilly and a few of the other pep boys and they go there and they get it.
Ron Lang: And that’s going to continue to happen because. Cars are so freaking
expensive right now So people are putting money into their cars to keep up and as
you know As opposed to a house car cars need a hell of a lot more maintenance
Jeff Kikel: than a house and I was hearing something the other day,
the average age of a car now is like 12 years.
Jeff Kikel: Yeah. So I don’t feel so bad because I keep cars forever. I’m like,
okay, that’s fine. I, for the 1st time in probably 10 years,
I’ve got 2 cars that are less than, 10 years old at this [00:08:00] point,
but I’ve still got my truck that I’ve had for, God is 12 years. I’ve replaced an engine in it.
Jeff Kikel: The thing’s going to last forever. At this point, and that was a perfect example of, not
that I couldn’t afford it when, 2020 was rolling around and I was having problems with my truck.
Honestly, it was cheaper to every truck that I looked at that was used. Was more expensive than.
Jeff Kikel: It was basically worse than my truck at the time and it was a cost of fortune. For
six grand, I replaced the engine transmission and rear end. So it was basically an old,
a new truck with a, an old outside at this point.
Ron Lang: Hey, if I could go to advanced auto parts and replace my rear end, I’d do it too.
Jeff Kikel: We all have said that. I think, another interesting one has been Kava. I
think they’re in the right place at the right time. It’s a relatively new stock,
but they are just knocking the cover off. You
Ron Lang: know how you know how those work. Remember when Shake Shack came out?
Ron Lang: Yeah. [00:09:00] Unless they’re saying we’re adding 50 new
locations or 100 new locations this year, the profitability is secondary to the high growth,
which is ridiculous. Yeah. But once they get to scale,
Now it’s all about profitability. Prices go up and the consumer suffers.
Jeff Kikel: Yeah, but the interesting yeah, the interesting thing about them though
is they’re actually been profitable really profitable and their revenues have been good.
Jeff Kikel: So I mean that’s the interest That’s what
Ron Lang: i’m saying now. Now. It’s a gross story. Not a profitability story.
Jeff Kikel: Yeah, absolutely couple interesting ones too bank of nova
scotia royal bank of canada it’s not something we talk much about here in the united states But
I mean their revenue or their revenues were off the charts huge Each of them
Ron Lang: canada only has six bags true something like that And their banking
standards are much different than ours And as far as loans as far as as far as cash
position things like that They’re typically always in much better shape [00:10:00] than
the majority of our banks Especially the region of the small banks in the regionals
Jeff Kikel: They just don’t have a lot of small banks and regionals up there.
Jeff Kikel: It’s, and that’s the truth around the world. You look at, any other of the, the
countries around the world, pretty much it’s five or six big banks in each country. And that’s it.
Ron Lang: From what I understand in Canada, to try to get a banking charter
is near impossible because of the standards they have that they wrap a fence around.
Ron Lang: If you don’t have this, you can’t have a bank, which is good for the consumer,
which is good for, the lack of loosening of credit to people that shouldn’t be getting credit.
Jeff Kikel: Correct. Yeah. I think the only challenge with that,
and I, that’s the one thing I do love about our system here is.
Jeff Kikel: That regional bank is the one that banks you for,
especially for businesses. Those regional banks bank the businesses, which, if you’re, if you
were dealing with a bunch of big banks, they may or may not bank. They may not take the risk on,
small companies, which I think that’s the beauty of our system here [00:11:00] in this country.
Jeff Kikel: Another big one. And on the downside this morning,
Salesforce came in just ugly and that’s a rarity for them. For first
Ron Lang: revenue miss since 2006.
Jeff Kikel: It’s, always consistently. I think it’ll be one of those ones to
look at. Because I think the response was, outlandishly huge on the downside.
Jeff Kikel: I’m looking for another 40 or 50
Ron Lang: point downside before it’s a buy.
Jeff Kikel: Yeah. Yeah. And it’s one of those, it’s what, when I when I
look from an option standpoint, it’s what I call a sunrise or what’s called
a sunrise demise. And yeah it’s, I think it’s going to get whacked for a while.
Jeff Kikel: Just from the simple fact of, I, I think I haven’t listened to the earnings
call yet. But it’ll be interesting to see where they’re coming from that perspective
Ron Lang: But remember, I was in that business for many years. Yeah,
and for the most part it’s based on users Yeah, so if companies are laying off Then
they don’t need as many licenses and that, that reduces their revenue year over year.
Ron Lang: So that could be [00:12:00] another canary to look at is wait a
minute. If user licensing is going down now, there is competition,
but Salesforce tries to make you sticky and can’t get off that platform, so maybe
the companies aren’t getting off. They’re just reducing the amount of people, reducing
Jeff Kikel: staff.
Jeff Kikel: Yeah, exactly. And that, and you’re starting to see that, I was listening to one of
my recruiters that. Works out of my office here. And, he was having this conversation and he was
talking about how companies are starting to cut things like sales training and things like that
as it gets tighter, which means that, the salespeople may be the next people to go.
Jeff Kikel: At that point, which is starting to cut your own throat,
as you start cutting Salesforce down salespeople
Ron Lang: producing, you don’t get rid of them, so maybe they just overhired. Who knows?
Jeff Kikel: Yeah, it could be a couple of things this week real GDP came in.
This was the second read. So for those of you that don’t know during a quarter,
there’s three different reads on [00:13:00] GDP.
Jeff Kikel: So there’s a first read, a second read, and then the third and final
read. So this one is indicating still, and I think it’s very likely it’s still going
to continue to be that way, a drop in GDP as the previous quarter was 1. 6, this quarter
is reading twice in a row, 1. 3. So it is GDP slowing a little bit, still moving positive.
Jeff Kikel: The big thing I think for this week is, and this is really what’s.
What the Fed looks at is PCE. So personal consumption expenses they don’t necessarily
look at other factors like CPI and things like that anymore. They typically look at PCE and I
think that’s going to be a big number. It will be coming out on Friday this week.
Jeff Kikel: We’ll report it next week, but. It’ll be a big one to look at because although it has
come down, it came down from a high point of 5. 5% it is still persistently [00:14:00] hanging in
there around three. And it’s been slowly eking its way back upward. So this is going to be a big one
because that is the indicator of, okay, is the fed going to do anything with an interest rate change?
Jeff Kikel: I personally think it’s going to flatten out or maybe go up a little bit, which,
that person, that pretty much takes an interest rate drop off the table. What’s your thoughts?
Ron Lang: When all these numbers come out Unfortunately, it’s a headline number,
right? Yep. BCE. Here’s the number the problem is that You and I don’t have the
time to do this. You got to dig down into the numbers. You got to know what it is
because You may see a number that may be a good reading But the underpinnings of that
of how the sausage is made may not make sense And from the smart people that I do follow that
Literally do an autopsy on all this stuff there, everybody sees the cracks [00:15:00] widening.
Ron Lang: I mean nobody has the timing on it, but yeah You really see leveling off of a lot of the
numbers where you’re not seeing major Gyrations in some of the numbers that’s really when it what
it comes down to but pce is the they say it’s the fed’s favorite number over the cpi I get
it. I truly do but as you know all the financial media, you know cpi this and cpi that and Just it
gets a little overwhelming even for the average individual But the idea is at the end of the day
to put a bow on it is When we’re looking at these numbers How do we put that into the crockpot?
Ron Lang: Synthesize a thesis to say, Hey, this is what to expect. This is why like we,
we said it before, if I ever come back reincarnated, one of the three things
would be as an economist, because you can ask six, six economists,
what’s gonna happen six months from now? You’re gonna get six different answers.
Jeff Kikel: Absolutely .
Ron Lang: So you could get six economists to look at that PCE [00:16:00] number,
not the main number, but the internals of it. They get six different opinions.
So how do you aggregate all this to say, okay, this is how I’m going to make an
investment decision or an allocation on a portfolio. It’s very difficult.
Ron Lang: Yeah, it is.
Jeff Kikel: And once again, that number that,
that’s the magic number. I think that’s the misnomer that you hear in the news.
Oh the Fed’s looking for 2 percent inflation. They’re looking for 2 percent on inflation. The
PC and it ain’t anywhere close. It’s still running at basically three at this point.
Jeff Kikel: So they got a long way to go to get down to that too, which it’s been running that,
back all the way, into the early two thousands, it’s been running at that 2%,
between 2 percent and 1 percent back up and down, and it’s got a long way to go and I,
this is like that, that last 10 pounds you’re trying to lose, it’s like next to impossible.
Jeff Kikel: To to get that going it’s a lot of work that takes to get that pce down again
And I just [00:17:00] don’t see it happening anytime soon and all the a lot
Ron Lang: of the fed governors have come out again. We’ve been saying it
for a year What have they been saying hire for longer? They’re still saying that yeah,
I forget about the two percent target for the cpi It’s all the other numbers All the
other numbers that go into that crock pot that’s saying hire for longer if the economy
is still running hot and more importantly People are hired and they’re spending money.
Ron Lang: There’s no reason to reduce it. Yeah, which is not good for certain
things I realize that but the idea is you don’t want to make the economy too hot
Jeff Kikel: No, and I you know, I think the higher interest rates across the board The interesting
thing is companies now have gotten used to it and they’ve absorbed it So you’re still you know,
you’ve still got companies that are making their earnings numbers I thought that was the
thing that, everybody said, Oh, it’s gonna, it’s gonna cause, companies to just blow up.
Jeff Kikel: It isn’t. They’ve adjusted to it. They know it’s going to be higher for longer.
So they’ve just worked [00:18:00] around that. I think now it’s really going to be that consumer,
which is a major part of our economy. Yeah. If
we see increases in unemployment and things like that’s really where the You
know that’ll accelerate those cracks more than here’s the difference with
Ron Lang: the businesses and we can wrap up on this Businesses borrow to expand.
Jeff Kikel: Yep.
Ron Lang: The reason why there’s not a lot of business borrowing free throw out real estate
business borrowing to expand the business or whatever is because Things are still
good for them. Yeah revenues coming in. They have profits out of those profits They could
use those profits to reinvest and expand when are we going to see businesses, borrow
money when there’s a downturn in the economy and they’re like, hey Let’s invest on the way down.
Ron Lang: We’ll do better on the way up and that’s the way the smart businesses do it Yeah,
because it’s just too expensive to borrow money today rates go back down
to one or 2%. If we have a major pullback [00:19:00] or recession,
that’s when you’re going to see business borrowing skyrocket again.
Jeff Kikel: Yeah. And it’s just not there.
Jeff Kikel: You had a lot of borrowing going on over the last, let’s say seven to 10 years as
rates were so low companies were, big companies were borrowing, but they were borrowing to buy
back stock. Yeah. At that point they weren’t necessarily only had one or two percent. That’s
free it’s free money basically to be able to go in there and increase your stock price and everything
else interestingly enough and we’ll leave on this Interestingly enough, you know the meme stocks.
Jeff Kikel: I was hearing something about What is it? Oh,
good boy. I went down this path and now I GameStop.
Ron Lang: Yeah.
Jeff Kikel: The means stock shot up, GameStop, they actually
Ron Lang: sold
Jeff Kikel: a whole bunch of stock in the market. Made like 900 some odd thousand or
900 million or something like that. And they’re using that to reinvest back into their business.
Jeff Kikel: So just that last time
Ron Lang: too, actually
Jeff Kikel: they did
Ron Lang: it to [00:20:00] pay off debt.
Jeff Kikel: Yeah. This time they’re doing it more for,
like expansion and adjustment to their business or whatever, but yeah, it’s. It’s hilarious with
with that. And you just wonder if there’s some collusion going on out there with some of that
Ron Lang: stuff.
Ron Lang: GameStop will be around in some form or
capacity. Movie theaters are going to go the way of drive ins, unfortunately.
Jeff Kikel: Yeah. And it, it makes sense. Honestly I’ve been to a one
movie theater and probably three years. I just don’t enjoy it, and
Ron Lang: half the time I gotta be a good movie to make a worthwhile.
Ron Lang: I’ve gone to I’ve gone to see to one of the mission impossibles and Top Gun Maverick.
Jeff Kikel: Yeah, it’s really
Ron Lang: in the theater.
Jeff Kikel: Yeah, those big ones where it’s, something big. Other than that,
I’m like, eh. Doesn’t really, it doesn’t really excite me to go and see the theater anymore.
Ron Lang: When the movie comes out in the theater and then it’s back on streaming two weeks later,
Jeff Kikel: correct.
Ron Lang: How did I do that? If it wasn’t for a great,
why would I go see a rom com in a theater? Come on.
Jeff Kikel: Correct.
Ron Lang: Correct. You go watch
Jeff Kikel: [00:21:00] rom coms. Come on. Now you just stay in your house and watch them, but yeah.
Ron Lang: Yeah. All good.
Jeff Kikel: All right, folks. Thank you for joining us. Once again, we’re trying to keep
these a little bit shorter and and give you just good, quick hits of information.
Jeff Kikel: Please make sure that you hit that up, up like button. Let us know that
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Jeff Kikel: So thank you for being out there and we will see you back here the very next time.