Business Matters Full Broadcast (July 23)

Nearly two out of five Americans worry that they can't pay their bills. Meanwhile, Delta Airlines disruptions continue coming up today on Business Matters. Good afternoon, and thank you very much for joining me here today. I'm your host, Don Ma. Starting off with markets, as always, down on Wall Street, small cap stocks continue their march up. The Russell index up over 1% today, but that's about the only bright spot here. The three major U.S. indexes finishing in the red today. The Dow down one-tenth of a percent. NASDAQ down one-tenth of a percent as well, and falling below the 18,000 mark. So big movers here. UPS down 12%, and this is after its weak earnings report. More on that later in the show. Tesla shares down 2%, and 4% in after market trading. Its earnings were just released. Moving on from markets, the Secret Service has a new temporary director after former director Kimberly Cheadle stepped down this morning. President Biden is expected to announce a new permanent replacement in the coming days. But in the meantime, Ronald Roe will be acting director. He's been with the Secret Service for 24 years, and he's going to take the reins as the agency faces heavy criticism for security lapses that allowed gunmen to shoot at former President Donald Trump. Here's some clips from Capitol Hill today. I still think there needs to be an investigation into former Director Cheadle's role in the attempted assassination of President Trump. There may be criminal charges coming in the future. I don't understand why she came to Congress yesterday if she was going to give so little information. They have information about what happened. And she even acknowledged she had information and she just refused to give it to Congress and give it to the American public. Now, of course, those comments were in response to Cheadle's resignation today. In her resignation statement, Cheadle again admitted that the agency had failed in its duty. President Joe Biden thanking her for her service and saying an independent review to get to the bottom of what happened on July 13th continues. Meanwhile, the high cost of living in parts of the country is stressing out many workers here. A new poll finding nearly 40% of Americans worry most or all of the time that their family income won't be enough to meet expenses. And this is up from 28% who expressed those same concerns in December 2021. And it is similar to the numbers seen during the Great Recession 17 years ago. So to cope, significant numbers of Americans said they are adding side jobs, for example, cutting down on driving as well and putting more expenses on credit cards. The poll was conducted in June among a random national sample of more than 2,000 adults. Now, let's also keep our fingers crossed here because things may be looking up for Americans interested in buying a new home. A recent report from real estate marketplace Zillow found that nearly one in four home sellers offered price cuts in June. So this is the actually highest level that month since 2018 many years ago. And according to the report, there were 23% more active listings last month compared to June last year. This could be easing pressure for potential homebuyers who feel like they have to make a snap decision. Homes are sitting on the market for an average of about 15 days, which is four days longer than last year. Now, keeping that report in mind, at the same time, U.S. home sales last month fell to the slowest pace since December. And this is the fourth straight month in decline in home resales. And this is according to the National Association of Realtors. So here's property analyst Robert Helms explaining exactly why we're seeing this. Yeah, I think there's two things that are going on. Obviously, people are a little hesitant with rates as high as they are stubbornly high. You have some folks that are holding off buying. And I think people are just hesitant to buy when they believe interest rates may be coming down in the next few months. So a bit more on that weak home building and permits data, suggesting here that the housing market contracted in the second quarter. So in total, there were about 1.3 million unsold homes at the end of last month. And this is an increase of about 3 percent from May and up 23 percent from June last year. But the median existing home price still soaring to an all-time high of over 426,000 dollars. So this is one of those times where we have sales down and prices up. If we get interest rates to come down in a meaningful way, I'm going to guess we're going to have more demand and more demand will create an environment where we'll see prices go up, at least in certain markets. So keep this in mind. At June's sales pace, it would take about four months to exhaust the current inventory of existing homes. And for your information, that was the highest level since May 2020. And a four to seven month supply is actually viewed as a healthy balance between supply and demand. Once the market normalizes a little more, I would expect to see sales go up and I'm going to guess in the strongest markets, net in-migration, good job growth, healthy economy, we'll see prices go up as well. As you know, the U.S. housing market has been mired in a slump dating back to 2022. And that was when mortgage rates began to climb from pandemic-era lows. Existing home sales sank to a nearly 30-year low last year as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to mortgage buyer Freddie Mac. All right, moving on from that, Vice President Kamala Harris has secured enough supports of Democratic delegates to be named her party's 2024 presidential nominee. So more high-profile Democrats now endorsing her, including Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries. Harris' first campaign stop was in Milwaukee today. She says she has what it takes to beat Donald Trump. We just had the best 24 hours of grassroots fundraising in presidential campaign history. As well, Kamala Harris praising President Joe Biden and his record as president. He says he will address the nation on Wednesday evening. Now, in her speech, Harris promised affordable health care, fair pay for workers, better retirement benefits as well. Harris also highlighted other policy priorities, including gun control and, of course, abortion rights. Now, the Department of Transportation is investigating Delta Airlines. So Delta canceled about 450 flights this morning in total. Over 5,500 flights starting last Friday have been canceled. Families just lay on here on the ground since Friday. People have been here since Friday. I say it's like a war zone. It really feels that way. As you can see, airlines are still reeling from Friday's CrowdStrike software crash. But Delta's situation is by far the most severe. Reports that passengers have lived in airports for four days straight. Ex-users tweet about canceled flights with no reimbursement, no rental cars, missing luggage. And WNBA star Angel Reese posted that, quote, The airport is a ridiculous disaster right now. And that they lost her bags. Delta said in a news release that over half its systems worldwide are based on Windows. And the CrowdStrike update hit only Windows computers. So this is forcing Delta to manually repair and manually reboot all its systems. Cybersecurity expert Dean Giffen told us this takes time. They have to boot the app from a safe mode solution, from a safe mode. After the safe mode, they have to delete the file that caused the problem, the configuration file, and then the computer will boot up completely fine. I think if we go back, it means that we have a big, huge IT team, right, in order to support, to run all those endpoints. And there is a huge shortage in the cyber industry. Giffen suggests that companies install updates in a test environment first, instead of updating live, which can disrupt businesses if the update is faulty. Of course, it's too late now for Delta. Passengers are furious. And joining us live now is travel expert Jen Ruiz. Jen, how are you doing today? I'm doing very well. How are you? I'm good. Thank you very much for your time today. So what questions should the Federal Transit Administration be asking of Delta here? First, I think it's important to ask why has Delta taken longer than other airlines to rebound after the IT outage? And what particularly is Delta doing to make sure that they can curtail the number of people that are in the airport without a solution right now? Do you think anything has happened like this before to an airline? I think airlines have had issues before where their servers had crashed. I think that the extent of the delay here and how long it's taken Delta to get back on track, most people expected that by the end of the weekend, this should be resolved. So the fact that it's now several days out from the initial issue, and it doesn't seem like any progress is being made is what's concerning. So of course, resolving it is one issue, but will it be difficult for Delta to make it up to customers? It will. And I think it starts with that, with taking accountability. You hear the frustrations of people at the airport because they don't know what's happening, because they're not being communicated with, because they don't have a way to find a solution. And I think that Delta right now is kind of digging its head in the sand as opposed to confronting this head on and providing alternative methods and solutions for customers. So there definitely will be a delayed compensation point where you'll have to be dealing with all of these passengers that experience these issues. Now, in your expertise, do you think this will have a lasting reputational damage on Delta? I think it can. And we've seen that with Southwest, when they had issues that were similar to this, and they had a big crash. But airlines in general can regain their customers because people understand that these problems happen, and they wouldn't even blame Delta if Delta was forthcoming, if they were able to provide vouchers right off the bat, as opposed to leaving people guessing, as opposed to leaving people waiting and completely shutting down avenues of customer service. Now, what does Delta need to do in order to make sure that this doesn't happen again in the future? There's not much you can do if it's something that's a global outage. And I don't think that anybody blames Delta for having had the initial problem. It's how to respond to the problem. And so I think Delta in general has had issues with staffing, with its planes. I myself had a nonstop flight from Tampa to LAX the week before the outage, where I ended up spending four hours in Atlanta Airport at 3 a.m., six hours after I was supposed to arrive in LAX. So these are problems that Delta has ongoing. And so I think that they really need to assess, do they have the right staff? Are they paying their staff enough to be motivated to deal with all of these problems? Do they have enough planes? Are they maintaining the planes well enough that they're going to be able to complete these flights without having to divert to Atlanta for now maintenance issues that come up at the last minute before even a global IT outage? And I think these are things that Delta needs to really deal with. And they are a legacy carrier. A lot of people are loyal to Delta. So I think they can bounce back from this if they take accountability and actually steps to remedy the problem. Okay. So on the point of compensation, what should passengers be expecting? Unfortunately, in the U.S., there is no universal compensation for the delays or cancellations of flights. And if your flight is going to or from Europe, that's a different story. And EU regulations apply. But in the U.S., you would be subject to the compensation provided by that individual airline's terms of service. So in this case, Delta does not provide that. What you do get per the Department of Transportation is your money back to the original form of payment if you do not accept an alternate booking. So for the people that are at the airport and maybe are not home and they still need to get home, that is not the best solution because even if they get their money back for the Delta flight, they still have to pay for another flight now at the last minute and at an inflated rate. All right, Jen, great insight. Thank you very much today. All right, we have some breaking news now. Earnings just out after the bell. Google parent company Alphabet meets earnings expectations but misses on YouTube ad revenue. Some information on Google's advertising plans coming up. Alphabet shares up over 1% after market trading. Alphabet revenue was up 14% year over year. Tesla shares now down over 6% in after-hours trading. Tesla missed earnings expectations in the second quarter, although its revenue was higher than analysts had expected. Earnings results from earlier in the day were mixed, though. Coca-Cola and GM both beat second-quarter estimates, but UPS missed. Now, despite inflation driving up Coke product prices, the company's revenue still grew more than $12 billion. So as for GM, gas-powered trucks are fueling its profits, while its journeys through a slower-than-anticipated EV transition. Overall, S&P Global Rating is anticipating flat-ish auto sales throughout next year. Affordability and high interest rates are key roadblocks. Meanwhile, UPS shares that two new e-commerce customers have flooded its network with slower, lower-profit delivery services. UPS would not confirm any names, but based on descriptions, the customers are likely Xi'an and Timu. An Israeli cybersecurity startup has walked away from a $23 billion offer from Google's parent company, Alphabet. This is according to a report by Reuters based on a Wiz memo. In the Wiz memo, its CEO did not name Google or Alphabet. Instead, it said that just saying no was tough. This would have been Alphabet's largest-ever acquisition. Neither Wiz nor Alphabet have officially acknowledged deal talks. Wiz offers AI-powered, cloud-based cybersecurity. It helps identify and remove critical risks on cloud platforms. And the company said that it will now focus on an initial public offering. Stay on Google here. Chrome browser users, listen up. Google is continuing to track you. After years of pledging to phase out third-party cookies from Chrome, the company announced that it will be keeping the tiny bits of code that tracks users on the internet. Google makes most of its money from advertisers who are concerned cookie removal would limit their ability to collect information for personalized ad targeting and make them dependent on Google's user database. Google said it will introduce a new experience that lets people make informed choices that applies to their web browsing. Families plan to spend an average of nearly $900 on back-to-school shopping this year. Meanwhile, stay tuned for the story of a small business entrepreneur who was surprised to become an official clothing maker for Ralph Lauren and the USA Olympic team. Hi, folks. Do you trust this economy? What if you could receive a strong, fixed rate of return that's not correlated to the stock market or the Fed? 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The deputy director of the Secret Service will take temporary charge of the agency after former director Kimberly Cheeto stepping down this morning. Cheeto faced bipartisan calls for resignation after she admitted the agency failed to protect former President Donald Trump during an assassination attempt. And Vice President Kamala Harris now has enough delegates to secure her party's nomination. More high-profile Democrats now endorsing her, including Senate Majority Leader Chuck Schumer and House Minority Leader Akeem Jeffries. And the federal government is launching an investigation into Delta Airlines over thousands of delayed flights. Delta was one of the companies hit hardest by the tech outage that riled global networks last week. Delta says it's going to cooperate with the investigation. Now, as we get closer to August, the start of the school year is getting closer, and already many families have started back-to-school shopping. Parents should be prepared to spend a lot this year. We take a look at how much families are spending and ways to score some deals. The start of the new school year is just around the corner, and that means it's time to start thinking about back-to-school shopping. We're expecting consumers shopping for back-to- school and back-to-college to spend at near record amounts. Parents are preparing to spend big on supplies this year. The National Retail Federation estimates families with children in elementary through high school plan to spend an average of $874.68 on school supplies, clothes, electronics, based on their annual survey. While that's $15 less than last year's record of $890.07, it's still the second highest amount in the survey's history. Nationally, the group expects U.S. families will spend close to $39 billion on back-to-school shopping. The top reason people say that they start early is to spread out their budget. Parents are budgeting on average about $310 for electronics, $254 on clothing and accessories, $142 for school supplies, and $171 for shoes. College students are bracing to spend even more, with the average student expecting to out $1,364.75 on items for the upcoming school year. We know that things like electronics are a much bigger portion of back-to-school and college spending than they used to be. So, what are some ways families can save? We know that discount stores have certainly carried a larger variety of school supplies, and as consumers are looking for value these days, that is another top destination for them. And last but not least, a story of how American businesses can work together to strengthen the country. This one starts with Ralph Lauren contacting a family-owned traditional leather working business in Maine to make the official USA Olympic team belt. NTD's Sean Marshall has more. Michael Lyons couldn't believe it when Ralph Lauren asked him to be the official belt maker of Team USA for the 2024 Paris Olympics. Our first reaction was, wow, this is amazing that a company of that size and stature would be reaching out to such a small business. Thanks to another local business giving his name to Ralph Lauren, a small family-owned leather working business was given a place in history on the waists of U.S. Olympic athletes. The only catch was every part of the belt had to be sourced from the USA. And that sounds like a relatively easy thing to make happen until you start sending out emails and making phone calls and finding where the materials are made. So, it was an extensive research project to identify who the sub-suppliers could be to help us pull this all together and make it happen. It's been an interesting journey for Lyons and his family. It all started with a bad back. The doctor told Lyons to stop carrying his thick wallet of leather in his back pocket, but the square wallet wouldn't properly fit in his front pocket. I'll be a son of a gun. The pocket is actually curved. So, I came back and said, all right, I'm going to build a wallet which is curved so it will fit the contour of the front pocket. So, we built some prototypes, went through the process, and quite accidentally, we ended up turning that into a business. With his experience of designing new products and corporate world knowledge, he started making wallet prototypes. Michael began learning about leather and design. He obtained two patents on a front pocket wallet design that was shaped to fit the cut of your front pants pocket. And that's how making leather wallets led to the start of a small leather products family business, which eventually led to an American entrepreneur manufacturing the USA Olympic team's belts for Ralph Lauren. Sean Marshall, NTD News. All right. That's all the stories we have for you today on Business Matters. Thank you very much for watching. Now, if you have any feedback for the episode, please feel free to let me know. You can email us at business at ntd.com or leave a comment online. I do read them. And once again, thank you very much. We'll see you back here tomorrow. Transcribed by https://otter.ai