Does Anyone Hear the Consumer?

And as usual, and, uh, we're happy to hear, um, from Chris. We haven't. We didn't hear from him last week. Chris, we'll go ahead and hear from you. You were gone on a trip, uh, for a week. I know you enjoyed your time away from, uh, from your desk and, and, and so forth.

I'm happy to have you back. How's it going?

[00:00:45] Chris Versace: Bob, Bob, are you in a time machine? I was here last week. Bob, wake up. Smell the coffee. What's going on over there? Are you, you know what it is, Bob? You are thoroughly bamboozled by market volatility. That's what's going on. Or is it, or is it perhaps that you're worried that the growth train that is Chipotle is now off the tracks because Brian Nichols is no longer at Chipotle, he's going to save Starbucks, which one is it?

[00:01:10] Bob Lang: And I'm just, I'm just joshing you, Chris. I'm just joshing you, Chris. How are things going?

[00:01:15] Chris Versace: Things are great, Lindsey. I gotta be honest. I am not buying that weak save of Bob's. Clearly, he's bamboozled by something. Lindsey, help me here. Let's, let's, let's fix this. Um, we got a big week in the markets, right? A lot of inflation data coming.

We've got some, uh, retail earnings coming. so a lot's going on. and I know we're going to get to all of it. But, Lindsey, as we prep this conversation, we'll talk about Home Depot, we'll talk about some new Fed data that's out there, I imagine that you have something you want to talk about.

You know, a little birdie told me about dividend stocks.

[00:01:51] Lindsey Bell: Yeah, I'm looking to dig into some dividend stocks. I think it may be a forgotten asset class So we'll dig into that today, but I do think that there's going to be a focus on the consumer with home d what we heard from home depot We've been talking about it for the last three weeks the slowdown in consumer spending.

We heard it from the new york fed as delinquencies are rising and concerns over over the future Kind of weigh on the consumer. So I know we'll dig into all that, but I, so I really want to look at retail sales and some of them, some of the other retailers are going to report this week to, to get more info on that.

[00:02:24] Bob Lang: And I would say, uh, Chris, adding to that, you know, the, the retail sales number, which came in last month, uh, was, was pretty strong and, and actually, I'm looking for a little bit more, uh, strength from that as we, uh, Head into back to school. A lot of retail stores do a lot of big sales. From July into August as kids get ready to go back to school.

I mean, I'm not, we're not just talking Walmart target, but a lot of other retail outlets as well, too. So I'm thinking that this, , number that we're, that we're looking at, , here is going to be pretty strong and leading into, into the fall season. And then. Eventually pushing into the holiday season. So I think this is a very important, data point for not just for the economy, but also for the federal reserve.

[00:03:10] Chris Versace: totally agree. It's, uh, it's going to be a big week of data and we're going to, hash through it all, but. We have to remember, too, that the market was volatile, not as volatile this week, and I think we could all agree that the big misnomer with folks is that, folks who get scared during volatile times, you can, you know, kind of hurt yourself a little bit if you're not prepared, because sometimes Volatility brings opportunity.

We'll talk more about that and all we just described right after the break.

All right folks, in our opening comments, uh, we talked about the plethora of things that we're going to chew through today, trying to bring some context, some perspective, and of course, telling you what does it all mean. I think we talked a lot in our opening comments about the consumer, so let, let's just kick it off there with the big question group.

Is now the time to be concerned about the consumer, Lindsay, what do you think?

[00:04:13] Lindsey Bell: Well, so I think when it comes to the consumer, the key data point in the Fed is also starting to focus on this now is jobs. Jobs have suddenly become probably maybe a little bit more important than the inflation data that we're getting at this point in time because Is the consumer slowing down?

In my, and Bob, you and I have talked about this before, in my experience, as long as the consumer has a job and they're employed, they'll continue to spend. But the question is, is how much money do they have to spend? Because what we did see in the last PCE report is, is that the spending was good and income was up, but spending was higher than income increased and the savings rate went down.

So, So the question becomes utilization of credit, which, which can last for longer than any of us might want it to write. And if interest rates are coming down, this was a thought that I had would love to hear what you guys are thinking is of interest rates are coming down and people are starting to feel the squeeze just because because prices of groceries and other things are still really high versus three or four years ago, and people are You know, I still haven't let that go.

I know I haven't every time I leave the grocery store. I'm like what how much should I pay But my thinking is home equity loans are going to start coming back into the fold. Oh

[00:05:28] Chris Versace: interesting

[00:05:29] Lindsey Bell: economy going That was just this morning. What do you think chris?

[00:05:33] Chris Versace: So I I was thinking about it from a different perspective, right?

As interest rates come down, cost of borrowing or hurdle rates for infrastructure, construction, you know, other capital, you know, improvement projects, those start to come down. So we could actually see that help inflate certain aspects of the economy that maybe, you know, they haven't had there. They haven't.

Continue to invest at the pace that they should have. It could be something that maybe starts to break free the logjam of the markets, you know, but I think we also need to kind of think about that from, you know, what does it mean from economic activity? But what does that mean from the stock market as well?

Because we know and Bob is the counselor has drilled this into my head many times that the stock market is a forward looking animal by about six months. So if we're thinking about that, as we sit here, , six months from now is august, september, october, november, december, january. In theory, we're kind of into the rate cutting cycle, so it could mean that folks get a little more, excited about homebuilders or other, other economically interest rate sensitive names.

Bob, I think you have something to add there.

[00:06:44] Bob Lang: So I'm thinking about the last time the interest rate cycle started coming down, and that was probably around the pandemic time in 2020 middle of 2020 and we started and when they cut rates down to zero and we held them there for a couple of years.

What happened? Lindsay really comes up with a very interesting point here. What happened back then? You know, we didn't see a big drop in home prices, but we did see a lot of people coming out with, uh, he locks our home equity line of credit. They came out and borrowed money against their homes. In turn, a lot of demand for Homes, uh, was rising all through the country, especially in, in hot areas like Florida and, uh, Arizona and Texas and so forth.

So, um, home prices, not only state where they were, but they became elevated. So a lot of money was pulled out of these homes, for spending purposes. Now we could get into another cycle like that again.

[00:07:42] Chris Versace: Maybe. I say that because, you know, you're talking about this happening during the pandemic when the Fed really put the interest rate pedal to the floor to, not revive the economy, but, you know, throw out a life preserver or several life preservers and people weren't necessarily working.

They were fear, fearful. Right. You know, so I, I can understand some of that activity regarding maybe a surge in the, in the use of, of tapping your home equity loan and some of these things that I, I think the question is. We might see some of that, but are we going to see the same degree that we did during the pandemic, Lindsay?

What do you think?

[00:08:22] Lindsey Bell: it's going to be interesting. I definitely think the rationale behind the tapping that type of credit is going to be different. I think it's going to be different, not only than the pandemic, I'm period, but also the financial crisis time period, too. So it's literally I think it'll be consumers trying to make ends meet with higher prices because wages have slowed so significantly.

And so, so that's where I think the difference is. But, but I think it's going to be something to watch because, as you, as you know, like, usually. I mean, usually the rise of that type of credit is not a, not a good thing.

[00:08:59] Chris Versace: Correct. Correct. So, so Bob and Lindsay, let me ask you, you know, we, we are kind of moving into the part of the earnings season.

We've got about 10 percent of the S& P 500 left to report. We tend to see that shift into retailers because they have what we would call funny fiscal years. Most of them end in January, which means they're starting to report their July quarter. Correct. Um, is Home Depot the canary in the coal mine for the consumer?

And I'm asking you this because they had cut their same store or their comp sales growth from about negative 1 percent previously to down 3 to 4%. That's a big drop.

[00:09:36] Bob Lang: I would say yes to your answer, the canary in the coal mine. I think that there, uh, we have a lot of, consumers shopping at, at Home Depot More so people who are just doing large projects for their homes.

Now, I remember the last earnings call, Chris, back in May. Uh, I believe the CEO said that large projects were being delayed, uh, for a couple of quarters perhaps, uh, down the road. I didn't hear that, from the call this morning. I could be mistaken, but I hear the CEO say that. So that could be a positive.

There probably could be a reason why the stock isn't getting hammered, today, but certainly, that drop that you talk about, the, the comp sales is, uh, is a little bit concerning for, uh, for the company and Lindsay.

[00:10:20] Lindsey Bell: so what I would say is like Home Depot is like a unique, tell of the consumer because it's, it's levered to the housing market, but it's also like these big projects, do it yourself projects, or even they also have a chunk that's the professional, um, you know, contractors that go in and buy stuff from Home Depot too, and that side of the business has done well, but if you look at the consumer, the do it yourselfers, those are still big projects, like you said, so these aren't, this isn't the low end or even lower middle, you know, And of a consumer that we're talking about is it's a consumer that that has the means typically to spend and they're probably a little more savvy about what's happening with interest rates, too.

And so I do think that they are kind of they're aware that the Fed is is lowering rates and if they're financing those projects, they're going to to take their take their time and wait to see where where things land if they can get a cheaper rate to finance the project. So, you know, the CFO did mention.

They have a deferral mindset. Um, so I think that's something to keep in mind. Comps have been down for seven quarters in a row at Home Depot. But again, that's because they shot up to the moon during the pandemic era. And so I think this is a little bit of a normalization. And I just think that the consumer is, in general, I think all consumers.

Are taking a little bit of a breather to assess the situation, but I think this is a little bit of a different consumer, a little more high end. I think the average spend is like 1000 at Home Depot.

[00:11:43] Bob Lang: Well, I was gonna say that, you know, Walmart's coming out with earnings this week, and I know, it'll be out on Thursday morning, and the one thing I caught from Walmart last quarter when they reported in May is they're, they're not just going after the lower end consumer, but they're going middle market consumer, even higher end consumer, which, was pretty interesting on their call.

So I'll be interested to hear what they, say about their, mix of customers, uh, this time around, and what they see going forward in terms of spending habits into the holidays.

[00:12:14] Lindsey Bell: Yeah, Walmart's collecting that, trade down from the high end. And that's so that that popped the stock.

but I was going to add, at, at home Depot, what benefits them is home prices, as long as home prices are stable to going higher, they're, they're going to have business coming. They're going to have sales.

But, um, as soon as those home prices, that's like the kind of leading indicator for a Home Depot and a Lowe's.

[00:12:38] Chris Versace: so when you guys are thinking about Walmart, because it is a very different, big box retailer compared to say, Best Buy or compared to say, um, Home Depot, like we were just talking about, you know, I, I agree.

I do think they are well positioned to pick up incremental share, especially as consumers continue to perceive the cost of everyday essentials, groceries, retail products, whatever. Are continuing to tick higher. Um, and I think if we look at the number of folks that live paycheck to paycheck, which is actually continued to grow over the last few quarters, there'll be more people looking to stretch those dollars.

So I do think Walmart is well positioned. I would say Costco. The same, although the demographics for Costco are slightly different. But, you know, the thing that folks always forget about Walmart is it's the largest grocery chain in the U. S. So by default, as people are looking to stretch those dollars, they can go there and kind of fight the inflation or the higher prices you'll see at, uh, Sprouts Farmers Market, Whole Page, I mean, sorry, Whole Foods, or, uh, you know, or some of the others that are out there.

And for what it's worth. My local grocery store is a Harris Teeter, which is owned by Kroger Kroger, and I'll just say this. It sucks.

[00:13:54] Lindsey Bell: I got Harris Teeter too. I agree. I agree.

[00:13:57] Chris Versace: Ridiculous. Anyway, anyway, but, but what about you guys? I mean, have you guys seen any data out there that says the consumers are proactively saying I'm tapped out?

I'm not going to spend any more or I'm going to spend less than I previously thought I would.

[00:14:16] Lindsey Bell: So what I, I saw, and maybe Bob, you might have shared this with me, is that Bank of America, Brian Moynihan, the CEO, he had a recent interview, um, with CBS News, and what he said was that in July and August, the consumer has reduced their, their spending, the growth in their spending year over year.

It's at 3%. It was double that last year in July and August. So they've reduced their spending, they cut it in half. But the on the other side of that equation, he said that that is more aligned with 2017, 18, 19 growth rates. So maybe it's a normalization. I think there's a lot of things. I think the consumer is they're seeing they're uncertain about what the election means.

For them from a financial perspective. They feel the stalling out in the job market that we've talked about endlessly and they still believe the prices are way too high even if inflation is is cooling or moderating so I think their their mentality is let's just kind of wait and see I think they're going to muddle along but I do think we're due for a slowdown in spending and i've said that a couple times here

[00:15:22] Bob Lang: I heard that from Brian Moynihan as well, too, uh, Lindsay, but I also heard from the CEO of Visa and, uh, MasterCard and American Express, listen to all those.

So American Express probably more in line with travel, um, business, travel consumer, but Visa and MasterCard are right to the heart of where the consumer spending is all about. And they, they did also, um, say that. Spending has started to slow down from a consumer side. and even, I think Visa actually said on a corporate side, Chris, that spending is starting to slow down a bit.

I didn't quite hear that from American Express, which means that, you know, travel, travel business, uh, maybe remains a little bit more robust, but we did hear from other companies like Airbnb. Saying, um, they took their numbers down going forward, so they see some issues and some problems with the consumer and even corporate going, uh, going forward for them.

So it's kind of a mixed bag here, but I would, agree with Lindsay that it seems like the consumer is slowly slowing down.

[00:16:23] Chris Versace: I agree with the comment, Bob, that, um, we're likely to see corporations kind of dial back their spending heading into the election because it is kind of an unknown for them.

It's likely to be a close race. Although I do help. Well, as I mentioned with you, Bob, earlier this morning, I do hope one person, I'll just say this. I hope he gets his clock cleaned, but, you know, we will see what happens. And of course, we, as investors have to assess policies, not necessarily, uh, candidates, you know, so for us, it's really going to matter what happens, but you can see companies doing the same thing, waiting to see how it all shakes out and what policies come forth.

let's wrap this up and move on. Um, in terms of what does it mean, folks, I think you've got to be very mindful about the consumer. And as it relates to earnings, we have a sea of retailer earnings, a sea of consumer facing company earnings coming. And the odds are that given the growing concerns about consumer spending, Then expected guidance in the second half of the year that could weigh on S and P 500 consensus earnings expectations that in turn couldn't keep the market a little volatile, but but let's move on.

And we were talking a little bit about the election. And Lindsay, I think you wanted to talk about the election and some influences on the economy. We just kind of teased it a little bit. But what else are you seeing there?

[00:17:47] Lindsey Bell: Yeah, I mean, I think that, when you think about the economy, it does have an impact on the election, um, what you, what you typically see is that, uh, you know, Ryan Dietrich of Carson Group shared a chart, showing what it looks like, what the market typically does in a lame duck.

where the, where the sitting president runs and wins in the next year versus a new, a new president. And I believe it's like the lame duck, which you could say is Kamala Harris because it's essentially the same policies. it's not really great for, the stock market. but I mean, who's to say is, is, is Trump really a new, Regime.

I mean, we've known that we know that regime too, right? I,

[00:18:24] Chris Versace: I, I just like how you totally skipped over Biden in the, you know, several months. He has remaining Lindsay. That's what I liked because

[00:18:31] Lindsey Bell: that's what investors are thinking. They're thinking six months ahead, right? We're over

[00:18:39] Bob Lang: I thought the lame duck period is actually right after the election.

And into like the third week in January when the new, that's, it's usually a much shorter, , period of, uh, but, but I think Lindsey's right because he's, he's not, doing much. I think when you go back to the 1960s, the last time you had a president who was in office and decided not to run, which was Lyndon Johnson 1968. that was a very volatile period for the markets. I was all of about one and a half years old back then. So I don't remember, but I did look at my history and I saw that, uh, there was a, quite a volatile period during that, you know, six to seven months. But from the time that he, he, he bowed out until the election, until the, um, until the early part of 1969.

So I think, um, you know, you're onto something there, Lindsay, with that, uh, with that comment about that.

[00:19:29] Chris Versace: Bob, do you see my face? How can you remember what happened in the 1960s, and you can't remember I was on the podcast last week?

[00:19:37] Bob Lang: You gotta follow, you gotta, gotta learn, you gotta learn from history, Chris.

You gotta read, you gotta go, go back in history and see what happens. Remember, history

[00:19:45] Chris Versace: Lindsay, you see this? He's running for office here. He's not answering the question.

[00:19:49] Lindsey Bell: He's saying we gotta write him notes, show notes.

[00:19:51] Chris Versace: Yeah, I Dickies to his forehead or something. I don't know what's going on.

Um, so just in sticking with the election. I'm just curious. Did either of you tune in to the X spectacle? That was Elon Musk and Donald Trump.

[00:20:08] Lindsey Bell: I did not tune in, but I saw it didn't start for 40 minutes. There was a. I don't know, there was a, an attack on the servers or, or maybe it was just too many people dialing in.

My takeaway just from that, the conversation, the fact that that's even a debate is like, is, is that an indication of how, decisive our country is? Like, we're questioning, like, We've gotten to a point where we can't take anything at face value. We have to question everything.

[00:20:34] Chris Versace: I agree. I, I was, I, I, I didn't tune in.

Um, but I was pleased to see that must tweet it out or Xed out or whatever it is, that he'd be happy to do something similar with, Kamala Harris, which I think would be fair, um, I think if they, you know, had a series of events like that, that would be great. But to your point, Lindsay, about this, and I'm using air quotes here, cyber attack, uh, during their spaces.

I, I think it is funny now whether or not it actually happened. I do think it's a big reminder for folks about cybersecurity that they, that every investor, in my opinion, should own some. And I'm just gonna give you one little stat. That will hammer this home, folks. And that's that so far this year, almost 2.

7 billion, that's billion with a B, records of personal information, including social security numbers, I'm leaning in to say that, have been leaked this year. If you need any further proof that you've got to own cyber security in your portfolio, I don't know what it is. I

[00:21:32] Bob Lang: found it interesting that, Donald Trump would take to Twitter because he, he's associated with, uh, true social, right?

I mean, what, why would he go to that platform when he's already got another platform that, is part of DJT, that's the stock, uh, DJ, uh, interactive. Why would he go to Twitter? And obviously Elon owns the company. As opposed to going to his own platform. And

[00:21:57] Lindsey Bell: he paid for advertisement on Axe.

[00:22:00] Chris Versace: So, Lindsay, do you want to take that softball question, or can I hit it out of the park?

[00:22:04] Lindsey Bell: No, you hit it out of the park. Go for

[00:22:05] Chris Versace: it. All right, here we go, Bob. Why would Donald Trump do that? what is the install base and number of followers that Elon Musk has and is going to listen to this? clearly, Trump also has to, you know, start reaching more people just because if you look at the polls, Harris has given him a real run for his money, and I believe, uh, Is out a couple points, you know, subject to the standard deviation.

So, um, I wouldn't be surprised if this election cycle, I won't even say heats up, it's going to explode because it's going to be contentious, it's going to be close.

[00:22:37] Bob Lang: no question about it. And with 80 some odd days left to go before the election, um, a lot of things can change and a lot of things are going to move.

And, um, you know, again, you know, all these polls, I don't think they mean anything until the last poll, which is on, uh, which is an early part of November. So,

[00:22:53] Chris Versace: all right. So, uh, who wants to wrap this up? Tell everybody what it means. Cause I, I've got a PS on the end of whatever you're going to say.

[00:22:59] Bob Lang: The election is going to have some influence through the next, um, 80 or so days before, there's some influence on the markets over the next 80 or so days. I think it's important for us to all understand and keep it in perspective. That, what is going to happen is are probably already priced into the markets.

I think, um, there's a lot of volatility precedent in the market already. If you look at the, volatility futures term structure, the curve, it's already pricing in a lot of chaos, a lot of volatility in the markets. So it's already there. It's already in there.

And, um, I think what, what we need to do is just to try and determine Uh, how much of the data is going to affect things as opposed to some of these, uh, macro issues that seem to always pop up and then all of a sudden go away, like last week with the, uh, with the yen, uh, carry trade, it was, uh, it was, it caused, uh, wreaked havoc on the markets for a day, a day and a half, and all of a sudden it's gone away.

Nobody's talking about it anymore, right? But, but, you know, it was enough to drop the markets 4%. In one day, we've recovered a lot of that, lost ground, but still, it's just, uh, these macro issues just appear and then they disappear. I'm just like that. So I think the election is going to be just the same way.

[00:24:12] Chris Versace: So, on top of that soliloquy, I'm going to just quickly add the P. S. which is contentious presidential election season. I continue to like trade desk, and I think we're going to see a real ramp in digital advertising over the next 80 days. Lindsay, I got a question for you as as we move on, C. M. E.

Fed watch tool shows 100 basis points cut three Fed meetings. with the Atlanta Fed GDP now model at 2. 9%. You buying this?

[00:24:40] Lindsey Bell: I'm not buying it. Like, I think there's room for the Fed to start cutting to send a signal, communicate to the markets.

That they are actively watching the consumer that we talked a lot about already in the job market As well as inflation which we have all acknowledged and the fed has acknowledged Has come in nicely we saw ppi that was that was a positive because ppi actually year over year We're probably going to talk about this right as it was going up on a year over year basis It ticked down on a year over year basis for the month

[00:25:14] Chris Versace: I'll go you one step further.

It ticked up in April, May, and June. And then all of a sudden we have this big surprise with the July data. A welcome surprise, right? But it just kind of begs the question though, is, is, is the Fed likely to see this, Bob, and go, man, we're back on track, baby. Or is it kind of like, hmm, we could be getting head faked again.

Gotta be careful. What do you think?

[00:25:41] Lindsey Bell: Wait, can I just finish? Let me just finish real quick. So I think, I don't think that four cuts are 100 basis points is warranted, but I do think that that. That it's enough to get them started and let, it's totally just a communication acknowledgement type of thing. But like, I, I'm like two, two cuts maybe.

That's where I'm at.

[00:25:59] Chris Versace: Lindsay, you just stole my reply. Dammit. I was gonna say, all right, all right, brain. If you're not thinking four, are you still sticking with two? That was my question. Apparently you are.

[00:26:11] Lindsey Bell: I am. Now Bob, I'm sorry to cut you off, Bob.

[00:26:13] Bob Lang: I'm I'm in the same camp as you, Lindsay. I think two cuts is probably where the Fed is going to be.

And what's interesting is that I think the first cut is going to come in September. But along with September's rate move, Chris and Lindsay is we're going to get a new set of projections. Right. And they will be projecting where Fed funds futures are going to land at the end of 2024. So there's going to be two more meetings after that.

So, two more meetings left. I think we should be able to see that if, uh, if the Fed is at 4. 7 to 4. 8, that equates to two rate cuts. And one of them comes in in September. We can expect one more rate cut. And I think, um, for lack of a better word, the markets are gonna have a hissy fit, Chris, I think the markets are gonna be in an uproar much like they were in April when they're when the markets were expecting up to upwards of six rate cuts.

In 2024, and I don't think that the, um, the Fed is going to fuel that fire anymore and anticipating more and more great cuts. I think they're going to dial it back, dial it back for the for the for the markets. I think all the Fed, uh, Speakers are probably going to say the same thing next week. And when we come into Jackson Hole, and I certainly don't think that that they want to be too presumptive about about rate cuts.

Still looking at data. They're going to still say the same things. I don't think Powell is going to say anything different if he comes out and talks about the economy and talk about the inflation and unemployment next week in the at the Jackson Hole conference.

[00:27:52] Chris Versace: I think that's right. It sounds like a, uh, old house martin song.

I don't know if either of you guys know who those are, but it's, uh, the song is, you know, get up off our knees. In this case, I would say we're out over our skis. That's what I would say. and that's the what does it mean, for that. Uh, Lindsey, I did tease earlier, you want to talk about dividends.

my suspicion without knowing anything of what you're going to say, Lindsey, is this. Dividend stocks have underperformed because there has been an alternative, uh, with savings rates, you know, whatever it's that, uh, you know, high 4. 4, 4. 5 percent risk free, but As we embark upon this rate cutting cycle, dividend stocks, maybe they come back into vogue.

[00:28:39] Lindsey Bell: Exactly. I think people forgot about them because they could get, they could get such great rates that, you know, in a savings account or a money market account. But as those rates come down, once the Fed starts cutting, and you know, maybe it's not, once those rates come down and you take into account the volatility that Bob was talking about, dividends.

they have a place in a portfolio chris, I think

and i've always been a fan like truth be told i've always been a fan of dividends and the Dividend aristocrats dividend aristocrats have really been like underperforming because they don't have a lot of the growth prospects that everybody is is starving for um, or is the popular trade now, but But I just want to point out that during the market drawdown between mid July and August 5th, call it, the S& P is down 8.

5%. Well, the DVY, which is the iShares dividend ETF, it was down 4. 7%. And that's exactly what that is supposed to do. So, it shields you from the downside, but then you don't get as much on the upside, typically, either. that being said, and I think I know what you're going to say. The caveat is, is that over the long term, like several years, decades, dividends cannot perform the S& P 500 on a total return basis.

[00:30:00] Chris Versace: That was not what I was going to say. But, but, but, so my question was just when you, when you did those comparisons just then, Lindsay, was that price return or total return? You know, because when you look at these dividend products, you really got to look at total return.

[00:30:16] Lindsey Bell: Okay. So that was price return, but still, it still stands.

the spread is a little tighter if you do it on total return because the total return for the DVY or the dividend yield on the DV is three six and the s and p 500, it's like one four. So,

[00:30:30] Chris Versace: yeah. Yeah, I mean that's, yeah, that's great.

[00:30:32] Lindsey Bell: So you do get a little bit, a tighter spread there, but still, it outperforms.

And that's the other point is the yield of 3.6 to 10 years. At, like today, it's a 3 8, 3 9. You're getting closer to, I mean, obviously you want risk free over. The volatility.

[00:30:48] Chris Versace: so where, where do you draw the line then? Right? Because I'm hearing what you're saying, Lindsay, and I, I think you're right. But we also know that there are other buckets of dividend payers out there.

Some, some reads in particular, that pay, Well, above, that rate that you just quoted that three, six, that three, eight summer for summer fives, you know, and, and sometimes I think we need to be careful because when you see like too good of a dividend yield, it's almost a warning sign.

Right?

[00:31:15] Bob Lang: Yes.

[00:31:16] Chris Versace: You know, can they continue to pay this? but, are there some areas, And read land that you might be interested in.

[00:31:23] Lindsey Bell: I haven't dug into like the individual sector, though. The problem I have with like the read sector within the, I always look at it within the S and P 500 and it's such a small sector and it's really concentrated to, what I will say is you did see real estate on that rebound that we saw from August 5th to, to last night.

Call it. the real estate sector has been doing well because of the anticipation, I think, of rate cuts, for that exact reason. So that is an opportunity. I think it's just, it's just, you just have to look at the, the totality of your portfolio and, and your exposure to different, sectors and asset classes.

And, you know, if you prefer real estate over just a more broad DVY, then that's your choice.

[00:32:03] Bob Lang: I would, I would also add that, the really quiet one that I've noticed and really boring one, you know, utilities. Chris and Lindsay are up 15% in 2024, the XLU. and this is an area where, a lot of, big money tends to hide out in trying to find yield.

it's, it's been a beautiful looking chart. I mean, it, it dropped a bit in February, but it's been making higher highs, higher lows. It's a beautiful looking chart. It's near all time highs. The XLU. and, the utilities outperforming the industrials, the Nasdaq, the small caps, uh, and the S.

P. 500, um, all together in 2024 is a pretty remarkable, feat if you ask me.

[00:32:40] Chris Versace: Let me let me tie it all together before Lindsay tells us all what this means. Reits, Utes, what's what? What area kind of overlaps in that? Well, it shouldn't be a big surprise to anybody. It's gonna be data center. Um, if you take a look at what's driving, you know, the real upswing in utility demand, it's data center and the expected build out not just over the next year or two, but through 2030.

and then as far as Reits go, data center REITs. I mean, I think that as rates come down and you see this continued flow of spending that's going to drive their utilization rates, I think folks are going to revisit those. Um, but Lindsay, since you're the dividend whiz here, wrap it up.

[00:33:20] Lindsey Bell: Yeah. So all I would say to wrap it up is that it's a style of investing that it's worth considering now that we expect interest rates to go up.

To come down. It's a way to add diversification to your equity portion of your portfolio. and it's also something to think about all that money that's in money market accounts when those rates go down, where do you want to go? it helps with volatility, which Bob told us is going to continue at least in through the election.

if not after that, and also if you do believe that economic growth is slowing, even if it's just for the near term. This could add cushion to that type of portfolio. So it protects you on the downside. You don't get as much on the upside, but over the long term, those dividends compound and that's where the value is.

[00:34:02] Chris Versace: Excellent. Thank you so much, Lindsay. And I know we're running tight on time, but there's one last thing I want to squeeze in before we wrap up the entire podcast. That is the news that Chipotle CEO Brian Nichols is moving to Starbucks, replacing, uh, what did you call it, Lindsay? Yeah. A lame duck over at Starbucks.

A guy who hasn't gotten anything right. Even Jim Kramer took the guy to task. But here's my question to the two of you. Who has more room to gain going forward? Starbucks? Because of Nichols and his innovative use of the menu, or do you think Chipotle can continue to ride it out without the, uh, the Newport Beach, uh, CEO star?

What do you think?

[00:34:43] Bob Lang: I would say that I think Starbucks is going to benefit from this just because Brian Nichol has a great track record. He came from, he came to Chipotle from Taco Bell. Did a miracle job over there at Taco Bell when they, when they were having some problems, uh, he took over Chipotle right after they had, issues with, uh, lettuce and so forth and, shut down a lot of restaurants and, and threw out a lot of food.

The stock really got hammered back then. He came in a few years later and really turned things around, but I think he's, he's reached the point with Chipotle, Chris, that, uh, You know, I think there's a ceiling here and he's hit the ceiling and, uh, he sees an opportunity here with Starbucks to rejuvenate the brand.

he's a real positive guy. He's very optimistic. he's an idea generator. So he's going to put some new ideas together. and I think, in a couple of years from now, people are going to see Starbucks as, uh, as one of the shining, uh, retail names out there once again.

[00:35:36] Chris Versace: What do you think, Lindsey?

[00:35:37] Lindsey Bell: Yeah, so my take is two things like number one, like, you know, him as an operator, but then I do, but two things that you can tell, look at the stock price performance when the announcement was made right through the roof. so I think the writings on the wall for, for Starbucks, it's a, a huge positive that that means that the bar has been set that much higher and his timeframe is probably getting compressed.

Right? I mean, I'm sure they'll give him the benefit of the doubt, but they gave the last guy, what, a little over a year to get things done. So he's going to have to move quickly, and that could be, that'll be great for the company, and I'm sure he'll do a fantastic job. But my next question is, who's going to take the spot at Chipotle?

[00:36:15] Chris Versace: That's a great question. That is a great, and I don't have the answer to it. But I do want to build on what you just said, Lindsay, because, you know, Chipotle is, by and large, a quick service, company. Starbucks, there's a lot of moving pieces there, right? Because it's not just the U.

S., their next largest market is China, and they're continuing to expand internationally. I don't know how much, Nichols knows about that. Maybe he has some exposure from his time at Yum, but Yum also had, um, Yum, China. So he may not be as familiar with that market, but there's also massive partnerships with PepsiCo on their bottled beverage business of food.

You know, there's just a lot of other moving pieces. So, you know, my, my concern is that for everybody who's, you know, celebrating today, um, he could very well toss out the kitchen sink after his first 90 days in office, so to speak. So, you know, I would wait and see what happens. I think

[00:37:08] Bob Lang: I'm gonna, I'm gonna throw a wild guess out there, Chris and Lindsay.

Um, I think the next Chipotle CEO is going to be coming from McDonald's. It won't be hit that CEO, but it'll be, it'll be somebody, some executive coming from McDonald's. That's just my guess. Haven't heard a thing,

[00:37:23] Chris Versace: but

[00:37:23] Bob Lang: it's just, uh, I'll throw that out

[00:37:25] Chris Versace: there. The headhunters aren't calling you for ideas, Bob.

[00:37:28] Bob Lang: No, I, my, my, I, uh, I'm in the middle of a podcast, Chris. I can't, I can't take calls right now.

[00:37:33] Chris Versace: All right. Well, why don't you end this segment then, Bob, so we can move on.

[00:37:37] Bob Lang: Yeah. So, you know, I think what we learned here is that, you know, obviously with, Starbucks and, with the changes that were made over there, um, I think it's going to be a real, a real positive for that company.

And, You know, it's just throw another thing out there, Chris and Lindsay, that, you know, I mean, there's a lot of companies out there. That are, are, are looking probably on the cusp of, changing CEOs as well, too. I mean, I'm, I'm looking at you Intel, these companies have just been horrendous and, you know, Lindsay talks about dividend paying stocks, you know, Intel.

Is now a huge dividend paying stock. And why is that? Cause the stock's gone way, way down or actually, or actually, you know, I, uh, didn't they cut their dividend, uh, last week? I think they did. Is that right, Chris? I

[00:38:18] Chris Versace: don't know. I w I don't know. I wasn't here last week. Of course.

[00:38:26] Bob Lang: So, you know, Nike as well, too, is another, uh, and I can Intel Dow stock Dow industrial stocks there, but there are high yielding stocks now, especially Nike is, but there's a reason for that because the stock prices come down quite sharply. So, uh, you know, there's, I think there's a lot of, uh, of heads on the chopping board.

Uh, down the road here, and we could see a lot of heads rolling and a lot of names shifting into, uh, into other things. I look at a name that we have in the, um, in the street portfolio. Chris, uh, ServiceNow. they were, uh, atrociously run. They bring in the guy from SAP.

[00:39:00] Chris Versace: Bill McDermott. Yeah.

[00:39:01] Bob Lang: Bring him in from SAP and he just does an incredible job. So a lot of times, you know, uh, a lot of people think that, you know, there's a little, uh, controversy there with, uh, changing CEOs. But in that particular case, and I think in the same case with Starbucks here, uh, it could be a real positive going forward.

[00:39:17] Chris Versace: I like the way nobody has said it could be a negative for Chipotle, but that's the segment. All right, folks, we'll be right back to wrap it all up.

All right, folks, we're heading into the homestretch here on this episode of, uh, the, what does it mean podcast? And man, did we cover a lot, you know, our opening comments about market volatility, renewed concerns. About the consumer and our warning about, earnings, forecasts coming out of retailers as the earning season shifts increasingly in that way.

But we also gave you some other data to support that, whether it was from the New York Fed or even, uh, Bank of America's recent CEO interview. Uh, we quickly touched on the disruption that the election could be on the economy, reminded you that, hey, you need to own cybersecurity stocks, talked about PPI and why.

Nobody here thinks we're going to see four rate cuts before the end of the year. Bob, did I miss anything?

[00:40:13] Bob Lang: you pretty much nailed it here. I think, you know, we're, we're in the, dog days of summer here right now. And, uh, and oftentimes, you know, people go on vacation, especially these next couple of weeks as we lead into Labor Day.

Um, we're going to see trading desks thinning out. We're going to see the B traders stepping up with the A traders just telling them Do no harm. Don't make any mistakes. Don't don't do anything. Uh disastrous to ruin our portfolios while we're on vacation So it's going to lead to a lot of volatility, uh in the markets, over the next couple of weeks I think uh thing once when we get back from labor day, which is on september 2nd I think we'll have a little bit more clarity and a lot of things, uh, to discuss some more things to discuss as we come closer.

It'll be two months exactly to the election once we get back after Labor Day. So I think that all in all, I think that that's, um, you know what we're looking at. A lot of volatility. And as you said early on, Chris, volatility is creating creating opportunities. Um every single day

[00:41:14] Chris Versace: agreed Lindsay anything to add to that

[00:41:17] Lindsey Bell: Oh, all I would say is like the final my final thought is that there's a lot of mixed data good and bad There's a slowdown happening which is going to allow the fed to cut not only is Is inflation cooling but but so is the consumer?

And so and that's what you typically see in a rate cutting cycle, but I think we're just in this awkward period where we're starting to see a slowdown and we don't know where that goes. Does it get worse? Do we stall out and get better? So

[00:41:44] Chris Versace: I think it's a great time to use these last couple weeks in the potential volatility That could bring opportunity or more opportunity depending Um to kind of reposition as necessary for your holdings You know if you're if you're really skewed toward the consumer perhaps it's time to take some of those chips off the table I'll share that we did just that earlier this week You Uh, over at the street pro portfolio, taking a chips off the table for a beauty company, starting to position them or reposition those dollars into a name that, uh, I kind of, I didn't say it, but I'll say it now.

It's poised to benefit from that, uh, data center power pain point. Say that three times fast. Bob and Lindsay, I dare you. but that's where we are. And of course, this is all an evolving, Arena as we get more information, we'll continue to update our thoughts and in turn our thoughts and share them with you.

So thank you folks for listening, and we'll see you back next week for another. What does it mean?