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Friendship Breakup Costs Tesla
00:40:24
You can’t maintain all of your friendships from the school year through summer vacation.
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- [00:02]
Unknown Speaker
On WhatsApp, no one can see or hear your personal messages. Whether it's a voice call message or sending a password to WhatsApp, it's all just this. So whether you're sharing the streaming password in the family chat or trading those late night voice messages that could basically become a podcast, your personal messages stay between you, your friends and your family. No one else, not even us. WhatsApp message privately with everyone.
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Ricky Mulvey
It's summer. You can't keep all your friendships from the school year. This week's Motley Fool Money radio show starts now.
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Jason Moser
Everybody needs money. That's why they call it money.
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Ricky Mulvey
The best things in life are free, but you can give them to.
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Jason Moser
From Fool Global Headquarters.
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David Meyer
This is Motley Fool Money.
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Ricky Mulvey
It's the Motley Fool Money radio show. I'm Ricky Mulvey. Joining me on the Internet today, it's Motley fool senior analysts Jason Moser and David Meyer. Fools. Great to have you both here.
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Unknown Speaker
Ricky, it's awesome to be here.
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Ricky Mulvey
We've got earnings from CrowdStrike and Lululemon, but I mean, come on, how are we not going to talk about the breakup between Elon Musk and President Trump? First up, though, we're keeping our eye on the ball. We're starting with some economic data. Before we get to the juicy stuff. J the unemployment rate stands at 4.2%. And while jobs were added above estimates, this report also says that the US added almost 100,000 fewer jobs than estimates thought in the prior two months. Something almost embarrassing, as embarrassing as a vocal crack. I'm seeing headlines that the labor market is softening. I'm seeing headlines that this report is strong. What say you?
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Jason Moser
Yeah, this is an economy. There's this sort of duality, right. The reality of the situation is that things are okay. I mean, we've been kind of worried that we're standing on a cliff here as of late. But I mean, employment, yes, it slowed down a little bit. Wage growth was there, albeit slower as well. All things put together, I mean, things are okay. And we're not close to teetering into a recession, it would appear. But then there's this anxiety, right, from consumers, from businesses as we work our way through exactly what the impacts of all of this tariff stuff will ultimately look like and how that could impact business activity. Will it increase inflation? For now, though, things look pretty good. I think the question that I get from this, because it seems like everything's kind of okay, it's going to be interesting to see how the Fed sort of reacts to this in the back half of the year. I mean, there's a lot of analysts out there that are positing that we probably could see the Fed be a little bit more aggressive with interest rate cuts in the back half of the year, particularly as inflation continues to abate. But it all still kind of hinges on what in the world is going to happen with this tariff talk. And that still just remains entirely unclear.
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Ricky Mulvey
And traders are optimistic to your point of a recession on the prediction market, Kalshi, the odds of a recession this year are at 27%, something that remains surprising to me since we are coming off a quarter of economic contraction and according to the book, two of those gives you a recession. And we also have fewer ships coming in to the port of Los Angeles. This is a very confusing economic time for any observer. We're going to dive into some, some jobs, trends, tariffs, the economy with Bloomberg's Stacy Vanek Smith later in the show. So I'll wrap up the economic talk there and stick with earnings. We're going to focus on the business. And starting with our earnings chatter, we've got CrowdStrike, David, the cybersecurity giant and full favorite reported earlier this week. Here's some of the numbers. Total revenue grew to more than $1 billion. That was a 20% increase from the prior year, 97% gross retention for its services. That's pretty good for a company still coming off an outage. However, investors did not like the guidance going forward. What stood out to you in the results?
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Unknown Speaker
Two things. Almost $200 million of annual recurring revenue added during the quarter, bringing the total to more than 4.4 billion and a free cash flow margin of 25%. When I put those two numbers together, that shows me that there's plenty of demand for its products and services and that the company is generating value from that growth.
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Ricky Mulvey
That is a good report from CEO George Kurtz. He said, quote, what excites me the most is the necessity Agentic AI is creating for CrowdStrike Holding Inc's AI native security, end quote. So if you're going to understand the business and the growth path moving forward, you need to understand the AI agents that this cybersecurity giant is implementing. So we'll start here. Why is Kurtz so excited about about agentic AI?
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Unknown Speaker
Yeah, it's actually on the other side that he's excited because AI agents were by customers of CrowdStrike. They actually create threat vectors for bad actors. So the more agents that are being created and they're being created very, very quickly right now the market opportunity is only going up from there. So I would also be excited about an increase in a market opportunity of a market where I am a leader.
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Ricky Mulvey
I heard a quote on Search Engine, which is PJ Votes podcast, that basically cybersecurity is the only business that gets worse every single year in technology because you have so many new threat actors coming in that these businesses are trying to keep up with. And then when you look at the balance sheet here or the financials, CrowdStrike has authorized $1 billion for share buybacks. This is also a company that likes to issue a lot of stock and it makes sense. That's how you attract software talent. But how excited should the investors be us on the retail side about this $1 billion in potential share buybacks?
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Unknown Speaker
So the first thing is, I actually agree with your previous statement. That's the paradox of cybersecurity. It's always needed and always growing because bad actors are always out there. But at getting to your question about repurchases at today's prices, I am not excited about that buyback at all. There has to be better ways of investing that money than buying back very expensive shares. I get it. It's about trying to control dilution. But there has to be plenty of things for CrowdStrike to be investing in going forward.
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Jason Moser
Yeah, I was going to say, I bet you they really wish they executed this a year ago, right?
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Unknown Speaker
Absolutely.
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Jason Moser
More than doubled since that outage. And like you, Dave, I mean, I'm definitely not excited by this. And I am, I bet dollars to donuts that there is no way this even remotely brings that share count down. Now, that's not unique. We see that all of the time in this. In this space.
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Unknown Speaker
Correct.
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Jason Moser
But still, it's worth remembering.
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Ricky Mulvey
So for those listening, you have a few options. When you have that extra cash. You can keep that cash on the balance sheet. Or what's wrong with the special dividend? You can pay a special dividend to your shareholders from time to time if you think your share price is a little high. Other companies do that. Jmo, let's move to Lululemon. Lululemon, the maker of stretchy pants and other fashions, is down about 18% this morning. Man, how bad are tariffs for this business, Jason?
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Jason Moser
Stretchy pants? Yeah, I mean, listen, it is. It is exposed to this tariff environment like, like most other others in its space. Now, I'm not sure that they necessarily have the same exposure. If you look at their 10k, for example, and they quantify their supply chain exposure there, 35% of fabrics originated from Taiwan, 28% from China mainland and 11% from South Korea. Now on the flip side of that, the raw materials that they use, things like content labels, elastics, buttons, clasps, draw cords, all of that really essentially originates from Asia Pacific and mostly the China mainland. So they do have that exposure there. But they are also working on trying to mitigate that. And it'll just remain to be seen how well they can pull that off. But it's worth noting, I mean, their inventories at the end of the first quarter were up on a dollar basis 23%, $1.7 billion versus $1.3 billion a year ago. So that definitely something to keep in, keep an eye on.
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Ricky Mulvey
Well, something that has investors in Lululemon like me shaking in our ABC pants is that a lot of this growth is coming internationally. And if you're buying shares of Lululemon, you have to recognize that a lot of that sales growth is coming from the mainland of China where it's selling finished products. So if you're hanging on to Lululemon stock, you're buying into that story. But right now Lululemon has gotten absolutely crushed. It's at a basically a grocery store earnings multiple which to me says no growth is ever coming again for this company. What's the market saying about this, about Lululemon right now? And maybe what say you?
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Jason Moser
I mean, you're right about the international growth. It's China revenue is up 22% versus the Americas, up only 2%. And CEO Calvin McDonnell noted on the call, he said that, you know, their sense is that US consumers remain very cautious and are being very intentional about their buying decisions. And that just flows right into discretionary spending and impacts a company like Lululemon. In regard to the multiple, I mean, I think the multiple makes sense today. You're right, this thing has gotten crushed. And at around 18 times full year earnings estimates, that's low historically speaking. However, it also is because essentially it's pricing in no earnings growth. I mean, they essentially are not going to grow earnings this year. So then the question you have to ask yourself is what does it look like beyond just the year? If you think the company can return back to modest top line growth and really bringing it down to the bottom line for more robust earnings growth, then today would make a lot of sense as a potential buying opportunity. My sense is the multiple it will ultimately be assigned is somewhere in the middle. Right. 18 seems low for a company that I think can still grow, but I don't know that I'd be buying this company at 70 times earnings either.
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Unknown Speaker
One thing to always remember about Lululemon is that these are, these buyers have discretionary income and they love this product. So over the long term, that has served the company well.
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Ricky Mulvey
After the break, it's the rumble between President Trump, Elon Musk and the impact on Tesla. Stay right here. You're listening to Motley Fool Money.
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Unknown Speaker
I can tell that we are gonna be friends.
- [10:57]
Ricky Mulvey
Welcome back to Motley Fool Money. I'm Ricky Mulvey here with Motley fool senior analysts David Meyer and Jason Moser. JMO and David, we talk about businesses a lot on this show. What we don't talk about often is friendship. And what we've learned this week is that some friendships don't last forever. And that is the case with Elon Musk and President Donald Trump. If you want the receipts of their beef, you can check out X and Truth Social. But Musk is throwing barbs over the big beautiful bill and the impacts on the national debt. Turns out Elon Musk really does care about that. And President Trump, of course, likes his bill. And during this, I don't even know if you say a full out fist fight, sparring match, whatever metaphor you want to use. They're not happy with each other. Tesla stock has taken a fall. More than $150 billion gone in market cap in just one trading day. Fools. I'm going to give this to Jason first. What is the most expensive breakup you've ever had?
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Jason Moser
Boy, that escalated quickly. And I'm not gonna get into my personal life on this show, Ricky, but I think this is, given what we know about both people, this seemed inevitable and who knows what tomorrow brings. But both very strong willed and probably stubborn is a word that works here too. The back and forth has been entertaining, I guess. I mean, unless you're a Tesla shareholder, and I'm not, but I'd imagine they probably don't really care for these, these barbs going back and forth. But I think it's important to note that the impact here on Tesla could be significant regard to the bill. Right. The bill essentially eliminates a credit worth as much as $7,500 for buyers of certain Tesla models and other EVs by the end of the year. And according to JP Morgan analysis here, I mean, that would translate to a roughly $1.2 billion hit to Tesla's full year profit. So that's not insignificant. And then you couple that with separate legislation that's been passed by the Senate based on California's EV sales mandates. I mean, that's another potential $2 billion headwind to Tesla's sales, right, according to JP Morgan. So you're looking at some legislation here that could have a meaningful impact on the business if it passes in its current form. But then I saw the tweet there from Musk. He was like, okay, whatever, let the credit expire, right? Go ahead and go as is, you know, fix the rest of the bill. So who, who knows how this will all shake out. But, but it's, it's been, it's been quite, quite a couple of days, I think.
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Ricky Mulvey
Once you start accusing the president of being on certain lists and threatening to release those lists, I would guess that he is not going to take your calls anymore. David, I am not going to ask you about your personal life. I'll just assume that you've never had a $150 billion breakup. But Tesla is in a very weird spot right now, right? Because we have seen what happens when brands get political. Usually it' sort of going to the left. We've now seen it with brands going to the right. Tesla has managed to upset people on both sides. If you like Trump, you may not be happy with Elon Musk right now. And if you're on the left, you may not like what he has done when he was in the White House during his one month tour of Doge. Do you think Tesla can break this trend of brands getting hurt for the long term when they get political?
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Unknown Speaker
So that's a very interesting question. I think the answer is yes, but only if Musk stops focusing on the soap opera and starts focusing on the things that will drive the future value of Tesla here. So what do I mean for Tesla? It's like, okay, let's get full self driving, let's get that out, let's get the cyber cabs out, let's get progress with the Optimus robots. All the things that are going to drive the future value of the company. Put your attention there. Stop this nonsense. You work for the shareholders and you're a huge shareholder. I realize that money may not matter to him, but it does matter to the people that have invested in his company so he can break the cycle. Get focused on what is important for the future value of the company. And ultimately I think at some point he will do that.
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Ricky Mulvey
Ed, you know what if I can give him advice, if you're both listening, if you got an issue with someone, a phone call is always better. A coffee is always better. It's always tough once you start airing it out on Social media. Let's get back to earnings. Let's get back to earnings because maybe the quietest trillion dollar company on the market reported this week and that is Broadcom. David, revenue rose 20% on the year here. This is an AI fueled growth story that I think not a ton of people are talking about. But what did we learn about the chip business from Broadcom's report this week?
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Unknown Speaker
We learned that the demand for AI chips remains high and is growing fast. So within its AI semiconductor revenue that increased 46% which easily outpaced the entire chip segment that it has at 17% growth. And quite frankly that's good for Broadcom and anybody supporting that industry.
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Ricky Mulvey
And Broadcom's chips, you know, we talk about Nvidia and the GPUs that allow these like AI LLMs to run. Broadcom's chips are more of a connective tissue. They're working in the background doing memory and networking for running these AI workloads. And their customers include the big tech companies we talk about more often on the show. So for, for listeners that are less familiar with this space, why do these big tech companies need Broadcom chip?
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Unknown Speaker
It's a great question that can be answered with a question. Do you want your AI to work? If so, you need to be able to spread the computing around the data center and stitch it back together to deliver the answers you're looking for. And that's what Broadcom's chips does. That's pretty important. That's got to be done if we want this to work. Broadcom chips make it happen.
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Ricky Mulvey
And then as we wrap up on the Broadcom topic, anything else in the report really stand out to you?
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Unknown Speaker
No, that. Just that 46% growth in the AI semiconductor part of their business. That's phenomenal. I mean it just really is. That steals the show.
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Ricky Mulvey
Let's wrap up with DocuSign. JMO. DocuSign's revenue, this may surprise you, is actually up from a year ago and many investors have been out on this. Covid fallen angel. I've clicked on DocuSigns. What's happening with the business?
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Jason Moser
Yeah, this is a bit of a good news, bad news quarter and you know, we'll get into the good news here in a minute but, but why is the stock down? It really is about the billings and the subsequent guidance for the coming quarter. Now it's worth noting that they actually raised guidance for the full year, but I think the outlook for the coming quarter maybe has the market wondering how that's exactly going to play out. Management misforecast the billings number and that came in a little bit lighter. It's worth noting we've seen this before with this company. It is partly a bill story. Billings that's ultimately a timing issue. So it can be difficult to predict. I kind of wonder if they shouldn't just eliminate from even guiding on buildings, to be honest with you. But I mean talking about the good news, like you said, top line revenue up we saw what, 8%. We saw dollar net retention rate of 101%. The positive trend there continues. Total customers up 10% surpassing 1.7 million in large customers. We talk about this metric a lot with DocuSign. Large customers spending over $300,000 annually with the company grew 6% from the year ago quarter. So I mean, I understand the building's concerns, but there was also a lot to like in the report.
- [18:50]
Ricky Mulvey
And then quickly, this company has been telling investors a turnaround story for a while now. You can lose a lot of money waiting on turnaround stories. We've got 20 seconds left. Yes, no, maybe. Are you buying the Turnaround story at DocuSign?
- [19:02]
Jason Moser
Cautiously optimistic. I think all of the metrics that matter point towards this company still growing and that's ultimately encouraging.
- [19:17]
Ricky Mulvey
David Meyer and Jason Moser, gentlemen, we will see you a little bit later in the show. But up next, we're going to make sense of the economy, this strange economy with Bloomberg's Stacy Vanek Smith. Stay right here. You're listening to Motley Fool Money.
- [19:34]
David Meyer
Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus guided learning paths with content designed to fit your unique interests. No sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more@schwab.com trading oh no, no, I.
- [20:06]
Ricky Mulvey
Never go to work. Oh, no, no, I never go to work. Oh no, no, I never go to work. Oh no. You're listening to Motley Fool Money. I'm Ricky Mulvey. The economy is in an interesting spot. The labor market looks hot on the surface, but it's a different story for college grads. And as tariffs came online, inflation actually cooled. Helping me make sense of this is Stacy Vanek Smith. You may have heard her on Marketplace or the Indicator from Planet Money. She's the co host of a new show called Everybody's Business. Vanek Smith joined me earlier this week to make sense of the job market and tariffs. Stacey Vanek Smith co hosts the podcast Everybody's Business from Bloomberg Business Week. Welcome to Motley Fool Money.
- [20:46]
Stacy Vanek Smith
Thanks, Ricky. It's great to be here. It's great to see you.
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Ricky Mulvey
What an interesting time to check in on the job market because, oh my gosh, what we're seeing is this very healthy picture at the surface, the U6 rate, which includes marginally attacked workers.
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Stacy Vanek Smith
You're going deep. The U6 rate. Let's go all in. Yes.
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Ricky Mulvey
Because that's people who want to work a little bit more. It's the biggest, broadest understanding of the labor market as we look at the April numbers. And we'll have new numbers by the time you're hearing this, but not when we're recording this. That was down April to April. You heard at the last press conference from Jerome Powell. Quote, the unemployment rate remains low in the labor market, is at or near maximum employment, end quote. Stacey, this sounds like a labor market that is firing all cylinders, but there seems to be a lot of issues and problems under the surface.
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Stacy Vanek Smith
I completely agree. I think this is just one of the most interesting job markets I've ever seen. I don't think I would have ever even imagined a disconnect like this would be possible because everything from my training and I've been looking at business and economic issues for a long time. You know, it's usually the job market's something that you feel like. There's a reason I think that people know about the unemployment number. It's probably the most easy to talk about of all economic indicators. I think. I feel like it's the one people pay attention to the most because it's the one you feel and affects our day to day lives. So I tend to think of it as something that connects very easily with my lived reality. And it just does not feel at all like the job market's in a good place. It feels like it's in a bad place. And all the signs would point to a bad job market. But you're so right. If you look at the numbers, this job market's super strong. Like unemployment's near historic lows. We just got the jolts report, maybe the best name of an economic report that I know. But it's like, I think it's job openings, labor turnover, something. But that report came out and it looks great, like job openings are up, hiring went up more than expected. I just. I don't know, Ricky. I don't know. I have some thoughts, but it's such a disconnect.
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Ricky Mulvey
The good news is you're on a podcast, so you're welcome to share those thoughts. And the Jolts report is an interesting one. That's one that I've called before, the take your job and stuff it index, because it's people voluntarily quitting their job, usually with the belief that you can go out and find another job if you're willing to do that. You've also done some reporting with college grads right now you looked into how the job market is looking for entry level workers, which is sort of at the most risk of getting cut out by AI, especially for white collar jobs. What have you heard from them?
- [23:33]
Stacy Vanek Smith
Yeah, I did. He I'm based in New York and so Columbia had their graduation last week and so I went up and talked to some of the graduates about how they were feeling. They are also all feeling. Everyone I talked to felt pretty bad about the job market, except for one woman who was in engineering who said she felt like everyone she knew had a job. Everybody else I talked to, when I talked to like a dozen people, everybody felt terrible about it. The computer science graduates felt terrible about it. I talked to one young man and he had a job, but he said about 40% of his fellow graduates in computer science did not have jobs. The electrical engineering graduates I spoke to said the market was terrible. Like everybody just said, universities are cutting funding, research is going down, our job for computer science getting replaced by AI. Like you said, they were feeling terrible about the job market. Yeah.
- [24:28]
Ricky Mulvey
So can you make any sense of that disconnect then? You have this very healthy surface number. You have college grads feeling not great. In the last quarter, GDP went down, economic growth slowed a little bit, and you would expect to see jobs really reacting to that. And yet it is a full employment picture in the economy, according to our Fed chief.
- [24:51]
Stacy Vanek Smith
Well, I think there are few things going on. I mean, the short answer is I don't know. Like I just don't know. I'm so puzzled. A couple things to keep in mind is that sometimes jobs are a little bit of a lagging indicator because companies will often wait a little bit to lay people off if times get tough. And especially because we had that really hot job market during the pandemic. And so it was hard for businesses to find workers in a lot of cases. So they might be more hesitant than they would have been before to let people go. Just knowing that it can be hard to find good people. There's a lot of uncertainty right now. I think maybe companies are Waiting and seeing a little bit. So maybe they are just kind of holding their cards close to their vest and waiting to make moves. But I mean, another part of it is maybe the sectors that are hiring versus the sectors that are experiencing layoffs. I looked into the jewels report a little bit and sectors like health care and social assistance, those are hiring. A lot of the jobs are that and business services. The ones laying people off are like manufacturing and leisure and hospitality. Especially leisure and hospitality I think is pretty visible. So it could just be the sectors that are hiring might be sort of less visible than the other ones. Also, as humans we tend to be oriented more towards the bad news a little bit. Like I do think there tends to be a little bit of a negativity bias sometimes because we're trying to, you know, and we went through such a trauma with COVID so maybe that's part of it. I have trouble believing that. But I don't know. Like I'm looking at the numbers, I can't, I don't know, it doesn't make any sense to me. What about you?
- [26:31]
Ricky Mulvey
I mean some of its vibe from looking at LinkedIn, I see a lot of like job searching posts on LinkedIn. But then I realized like there's a tremendous amount of bias in that sample. One of. One of which is because LinkedIn has this feature of the open to work sticker.
- [26:47]
Unknown Speaker
Yes.
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Ricky Mulvey
So it used to be not as visible if someone was looking for a job or just posting on LinkedIn. And then there's also a selection bias there where if one is posting regularly on LinkedIn they are more likely to be looking for a job. And then I think there was a lot of gains. I haven't looked at the jolts report, but I would guess, you know, with the slowdown in white collar work, the only way that that makes sense is if there is some makeup in what you said is health care work and then service and hospitality, even if it's not travel and leisure. So that part would be my guess.
- [27:18]
Stacy Vanek Smith
We're also journalists and media is like a hot mess right now. So we might have a skewed view. And just because the things the people we know and our colleagues are, you know, it's a difficult moment for media.
- [27:31]
Ricky Mulvey
Yeah. And I'll also be curious to see what the long term effects of a lot of these moves are. I have one of my buddies who is a software engineer. A lot of the work that is done at an entry level is talent development for a lot of big organizations. And when that's passed to AI, his point is you're just going to have a slow leakage because everyone who knows things is going to move to different organizations or retirement. And then you're going to be stuck with this longer term problem where you've developed no internal talent to take on the roles that middle managers and senior leaders need to do at your company. And you basically, you've eviscerated your farm system to use it, to use a baseball metaphor. I don't know if that'll entirely be true. Businesses are pretty nimble. But I do wonder if a lot of these companies are creating long term problems for themselves by getting rid of the entry level positions.
- [28:23]
Stacy Vanek Smith
I think that's probably true. I mean, and that could account for why it's such a hard moment for recent grads in computer science to get jobs. Because the one young man I keep wanting to say, the kid that I talked to, he was not a kid, he was a graduate in computer science with a job that he had lined up. But he said a lot of the entry level coding jobs were just being done by AI. He said he was using AI to do a lot of his coding. And I was like, do you think you would have had an assistant for that? He's like, he, you know, maybe he's like, certainly would have taken a lot more of my time. And he, I think, was at a little bit of a higher level. So he was okay. But I think a lot of the, you're right, a lot of the jobs that would have gone to people starting out that helped to build a pipeline, that helped to kind of funnel people into a career. I think a lot of those, you know, especially in certain fields, are getting snapped up by AI for sure.
- [29:15]
Ricky Mulvey
The other biggest economic story is tariffs. This is a tough topic to prerecord, but we shall try. We've had to make some edits in the past to let the listeners know, because you record something one day and then it turns out by Friday when you're listening that things get a little trickier. But from your economic lens, what are your biggest questions about this tariff story right now?
- [29:36]
Stacy Vanek Smith
I mean, tariffs. I'm so interested in this and simultaneously also so a little bit scared of it. I mean, I think the big story. You're so right. I mean, a friend of mine, I do a lot of work for Marketplace, the public radio show, and I was talking to my editor there and she said they will not assign any feature stories on tariffs anymore because things change so fast. She's like, we keep having to kill stories. I mean, I think Trump has changed tariff policies more than 50 times since he's taken office. 50 times. I mean, usually trade deals, I mean, these are slow, creaking wheels in the economy. Like, they spend years hammering them out, and then they're sort of in place forever, ever. And these are sleepy, sleepy topics. There's this trade economist, Chad Bown, who's wonderful, and he has this podcast called Trade Talks. And I remember during Trump won calling him, and he was just like, this used to be the sleepiest job. And everyone would be like, what is there to even talk about? Do you ever get tired of talking about nafta? And now his phone is ringing off the hook because there are so many changes. I mean, I think the change is one of the big stories, honestly. All the back and forth, all the uncertainty. I think that there's a lot of speculation as to why Trump is doing that. Part of it's just that he likes making deals and he changes his mind, and it's the threat that he can use. To me, what it shows us. I mean, the American consumer has been the powerhouse of the global economy for decades now. I mean, American consumer spending is like two thirds of the US economy, but it's also like almost 20% of the global economy. And so that is a lot of muscle to flex. And I think Trump likes having that muscle to flex. But also the entire world's economy has kind of accommodated itself around us buying tons of stuff. And if that actually changes or even changes a little, like, I think the ripples from that are gonna be immense. And if these tariffs do go through at the scale that I think Liberation Day introduced, then I think we're in for a real problem. Argentina, like, I always think about Argentina. Cause I've done some reporting on Argentina. They put a whole bunch of protectionist tariffs in place in 2010. It completely destroyed their economy. Completely destroyed their economy. And that's what. That is what keeps me up at night, I guess.
- [32:15]
Ricky Mulvey
And this is subject to change, but consumers are probably going to spend if prices don't rise dramatically. And right now, the economy is pretty much in the soft landing that the Fed wanted a while ago. Throughout this tariff spat, you had maximum employment mentioned by Fed Chair Powell. And you're also pretty close to that 2% inflation rate. I know 2.1% will round it. I would have thought that through Liberation Day, through these tariff policies, you would see prices rise immediately. And I know you've done reporting on small businesses that are trying to figure out how to adjust prices. But what do you make of, you know, inflation staying pretty cool even throughout these, these economic tariff spat, economic dispute, trade war, whatever you want to call it.
- [33:02]
Stacy Vanek Smith
I mean this was a big shock to me too. I mean this was like another layer of Vibe session because I was just like, you know, when the inflation report was coming out, the consumer price index, the cpi, this last one, I was like, okay, here we go. Because the tariffs have now been in place for a few months and even though there's been a lot of back and forth, businesses have been padding their prices. Businesses have had to try to find a way to cope with all the change too. So a lot of them, like I talked to one florist who was putting a flat foot fee onto all of his bouquets cuz the tariffs on each of his flowers, which all came from different countries was changing all the time. I still can't wrap my head around the fact inflation came down and everyone's like, well it's just a month of reprieve because businesses were able to stockpile stuff, you know, like Apple Tim cook airlifted like 600 tons of iPhones out of China. Like airlifted it. So I mean there is potentially some lag there. And I mean I just don't know anymore. I feel like curiouser, it's like the through the looking Glass economy. It is like the Lewis Carroll economy. Nothing seems to match up with what I think. And every time a report comes out and I'm like okay, here we go. Now we're gonna see the stuff that I know we will see. We don't see it. And it could be that there is a lag in the case of the CPI and inflation numbers. I don't know.
- [34:22]
Ricky Mulvey
Yeah, I need to steal my own or get my own phrase like Kyla Scanlon got with Vibe session. I need the opposite because you got economic growth slowing down and yet the job market still appears to be strong on the surface. And also the market is pretty close to all time highs. I mean as of record this week, the S and P is pretty much made up from all of the losses that it initially withstood from Liberation Day and its traders have completely brushed it off. But I think we are in a more volatile market. Stacy, as we wrap up any, any other economic storylines you're watching that you're, you're curious about right now?
- [35:00]
Stacy Vanek Smith
Well, the thing that I'm watching, and maybe I'm watching it because it's the thing that kind of lines up with the reality I've been observing, but it is the bond market the bond market does seem to be flashing red, especially with the big beautiful bill, the tax cut extension going through Congress, which could potentially add $4 trillion to the deficit. The bond market does seem to be flashing red. Like you said, nothing else is. So yes, we've got to come up with our anti vibe session word, Ricky, but I will be watching the bond market along with the markets and the jobs numbers and inflation.
- [35:36]
Ricky Mulvey
Stacey Vanek Smith, she's got a show Everybody's business. You can find it on podcasts. Appreciate your time and your insight. Thanks for joining us on Motley Fool Money.
- [35:44]
Stacy Vanek Smith
Thanks, Ricky. Great to be here.
- [35:51]
Ricky Mulvey
As always. People on the program may have interests in the stocks they talk about in the Motley fool may have formal recommendations for, against, don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by advertisers, advertisements or sponsored content provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Up next, Radar Stocks stay right here. You're listening to I'm Ricky Mulvey, joined again by Jason Moser and David Meyer. Before we get to Radar Stocks, just want to point out this is Rick Engdahl's final radio show. Rick is in the studio with us, the online studio, a longtime fool multimedia extraordinaire behind Rule Breaker, Investing, Motley Fool Money and Motley Fool Answers. He is a folk artist who somehow ended up at the fool and an artist who's fixed problems that you, the listener, will never know existed. Rick, you are a total joy to work with. I will miss having you in recordings and I look forward to seeing you in Colorado. Man, I'm gonna miss you.
- [37:01]
Jason Moser
You're here, here, here.
- [37:02]
Rick Engdahl
Thank you very much. And I will miss you all, too.
- [37:05]
Ricky Mulvey
All right, enough with the sentimentality. Let's get to stocks on our radar. That's promised every show. We gotta do it. Our man behind the glass for the final time, Rick Engdahl is going to hit you with a question. Jason, you're up first. What are you looking at this week?
- [37:17]
Jason Moser
Sure, a little company called Amazon. You may have heard of it. Ticker is amzn, and you're coming off a pretty good core. But in news that is both fascinating and a little scary at the same time, Amazon's reportedly close to beginning testing human, like autonomous delivery methods, or in simpler terms, robots that deliver packages to your door. I mean, this is certainly quite futuristic and likely a ways away from becoming reality. But they're starting to test this stuff out. And given that it's working on humanoid robots for its warehouses, it's not that big of a leap to see how the technology could proliferate in time. So, you know, of course agentic AI is behind it all in allowing these robots to actually understand and act on natural human language. It seems the future is now.
- [38:08]
Ricky Mulvey
Rick, you got a quick question about Amazon or humanoid robots?
- [38:12]
Rick Engdahl
Well, as you know, I tend to ask a little bit offbeat and witty questions. And since I have to hand this off, I'm going to have ChatGPT ask these questions for me. So I asked for some witty questions. Here you go. Is Amazon still a buy now or just a warehouse full of investor hopes?
- [38:27]
Jason Moser
I think that given the number of ways this company makes its money, I got to consider this thing a buy. Still leave it today.
- [38:34]
Ricky Mulvey
All right, real quick, David, was that.
- [38:36]
Rick Engdahl
Witty enough for you?
- [38:37]
Ricky Mulvey
Because it's your last show, I'll give you a 7 out of 10. David, quickly, what's on your radar this week?
- [38:42]
Unknown Speaker
So mine is workflow management software company Asana Ticker is Asan. This was a high flyer pre pandemic that has come back down to earth and it's a more mature company today. It's still growing, but now it's generating cash and it has a very bright future with its AI related software that it's selling. Multiples are, I think, attractive today. So this is one that I am going to be looking at after letting go of the company in 2022.
- [39:11]
Rick Engdahl
Rick, this one's even better. Let's see, is Asana the future of work or just working on its future?
- [39:17]
Ricky Mulvey
Wow.
- [39:18]
Unknown Speaker
It's a little of both because customers are using the software more and more and that's a good thing for both the user and Asana.
- [39:25]
Rick Engdahl
I appreciate you guys actually answering my questions there because they were really bad. I'm sure that AI will improve over time.
- [39:32]
Ricky Mulvey
What are you putting on your watch list?
- [39:34]
Rick Engdahl
Oh, I should wait. Hold on a sec to type in. Apparently I'm going with Amazon.
- [39:39]
Ricky Mulvey
Okay, we'll leave it there. Rick Angdahl, Jason Moser, David Meyer, thank you for being here. Thank you for listening to this week's Motley Fool Money.