WRFH/Radio Free Hillsdale 101.7 FM - Wall Street Weekly: Macy’s and the Mayflower

Episode Date: November 17, 2023

Join George and guest host Joe Colaizzi as they use their financial know-how to give listeners a behind the scenes tour of Thanksgiving’s most cherished institutions.

Welcome to Wall Street Weekly, a show where your host, George and Patrick, cut through the financial jargon to keep you educated and informed about the markets that affect our lives. Enjoy the show. This is the highly informing, overperforming radio show on Radio Free Hillsdale 101.7 FM, and we've got a surprise today on Wall Street Weekly. No, it's not we're giving all of our listeners free money, although we would love to do that. But joined alongside in the co-pilot's chair isn't Patrick Scott, who unfortunately is sick today. Rather, the next best option, Mr. Joe Kalezi.

Hello, George. Thanks for having me on here. I'm happy to inform our viewers that I will be taking Patrick's spot permanently. This is a decision that I made right now. No, I think Patrick's coming back. Though you did do a great job with our UAW strike show, which you can find on Twitter, also known as X at Wall Street Pod. And I want to remind our audience that this show is for entertainment purposes only,

as always, make financial decisions with proper counsel from financial professionals. Today's show is also unique because we're not going to talk about current events. And why is that, Joe? Because it's Thanksgiving. This episode will be airing for two weeks, so we want to make it relevant, talk about Thanksgiving. And I think we should start off by talking about something that happened 400 years ago. I don't know if you've heard of pilgrims. Have you ever heard of them?

Really? No. What do they do? They go on, dare I say, a pilgrimage somewhere, perhaps? Very astute observation, Joe. So, yes, these pilgrims went from the United States. kingdom where they were being oppressed for their religious beliefs to America. It was a struggle.

Many of them perished along the way, but they set what many people would consider a civilization that would serve as a model for the modern American society. We all know that story, even Joe. It's coming back to me, bits and pieces. Now, I don't want to downplay the role of the pilgrims. And many of those people put up their life savings and took on debt to travel to the new world. But the London merchant adventures also put up 7,000. pounds. Joe, do you have any idea how much 7,000 pounds is? I don't know. That's got to weigh like what,

like three baby elephants, right? Americans will do anything to not use the metric system. No, so 7,000 pounds. I couldn't find what exactly it was worth, but for skilled labor, people say it's one to two shillings per day. Pounds is a measure of currency. So that would translate between 250 and 500 years worth of 17th century skilled labor wages. Pretty impressive. not a small amount, well into the seven figures. And was it a good investment? I guess you'll have to wait and find out. Interestingly enough, the investors actually wanted the pilgrims to go to Jamestown.

They did a lot of work and had been granted a patent. But that patent was superseded. There was someone from their rival merchant company that had an in-with-a-judge who gave them a patent that superseded that. So unfortunately, they had to look elsewhere. Now, this investment company was set up like a trust. In exchange for initial funding, the Pilgrims agreed to send investors a portion of whatever wealth that they came upon. And this was a pretty common agreement back in the day where people would get free passage or reduced fair passage and then work for the people who funded it.

Now, back to investing. This was not a great investment for the London merchants. The first time the ship returned to England was after a winter that left nearly half of the original settlers dead. So investors were disappointed that their first dividend amounted to nothing. One investor was so mad that he actually sold his share, kind of created a secondary market, which is pretty interesting. But I digress. The second payment sent back to Great Britain was approximately 500 pounds worth of goods,

which if you do the math is about a 7% return. But it was captured by the French on the passage over the Atlantic. So they're batting 0 for 2 at this point. Surely the third ship has got to be the lucky number 3rd. times the charm. Well, the third payment actually made it all the way to the English channel before being stolen by pirates. We don't know how much that was worth, but people speculate it was probably similar to the second one. And the investors were pretty mad at that point, realizing that they might never get their original investment back. They sold their shares back

to the pilgrims, which effectively ridded the pilgrims of their obligation. Investors in the Mayflower's voyage lost 75% of their initial investment without accounting for opportunity cost, Which is... Hang on, I know this. I know this. This is not even finances, this economics. It's the cost of doing something that is measured in what you have to give up in order to do it. What would you spend 7,000 pounds on in Great Britain 400 years ago?

I don't know, probably like a... I would buy, I would buy, you think that could buy a house? You said seven figures, so I could buy like a feudal territory. I could be the lord over a feudal territory with that. I actually just went pheasant hunting last weekend, so I'm thinking having a nice little pheasant farm. A pheasant farm? Yeah.

How many pheasants do you think 7,000 pounds could buy you? Probably a lot. We'll have our research department look into this after the episode. And you can look in our show notes. We'll probably have those there. So 75% is pretty significant. But looking back to the Jamestown colony, investors lost 100% of their 180,000 pound investment,

which is 25 times more than what was lost with the pilgrims. For the investors, it's probably not completely out of the blue. Like modern investors who try to invest in China, India, Africa, those places, there's somewhat of an expectation you might not get all your money back. But if it does pay off, you're expecting to hit big. So it was risky, but it still begs the question. Was it a worthwhile investment?

I think it depends on how long term you want to look at it. Like, am I willing to sit on an index for, what, 400 years for it to pay out? I don't know. If I was willing, I think I'd be sitting fairly pretty right now. but kind of an interesting question for investors today as there's more of a push for esg and other types of investing like how much returns are you willing to forego to invest in something you believe in one example that i think brings up how is a society we've kind of come around to this is you've heard of kickstarter before right right yeah and it's the idea where people put their new inventions their new

products they try to raise money and for a lot of these people you give them 15 or 20 bucks and they just send you a letter saying thank you. You don't really get anything in return. I've also heard people who invest in like cancer companies because they think if I lose my money, at least I lost it trying to cure cancer. I don't know. Kind of an interesting way to look at things, but even if the merchant adventures might not have been too thrilled at the time, I think most of us would thank them for their contribution and what they've meant to this country. Now I said we wouldn't talk about current events, but I lied because I'm going to talk about Black Friday and some Thanksgiving events, but that happens every year.

It's not kind of lying. You patently lied. Sorry. I don't even know how to respond to that. The guest is trying to take over the show. Essentially, what's coming down the pipe for the next couple weeks is Black Friday. Interesting aside, one of three days each year where the stock market closes at 1 p.m. instead of 4 p.m.

What are the other three days? Or the other two days would be Christmas Eve and then 4th of July Eve. Eve. But some good news for many of our listeners. Thanksgiving is expected to be around 30% cheaper this year for the average American driven in part due to the reduction in turkey prices. What about my tofu turkey? My, what is it, a tofurky? Tofurky, yeah.

Aren't those made in Utah? I have no idea. We got to look this up. Oregon, I knew it was somewhere on the West Coast. You should stop by my house for Thanksgiving, George. We got the Tofurkey, we got the Beyond Burger. We got the gallons of soylent, like delicious, delicious soy and soy and soy. seed oils, all you can eat because no one else is going to eat them.

For the health conscience, go to the Klazzi's house. Should I, should I drop the Adi in the description? No, no, you don't have to do that. Okay. Well, anyways, if you are a turkey enthusiast, unlike Joe, you can actually purchase a part of Butterball Corporation by investing in the parent company, Seaboard Corporation. Butterball, obviously, the turkey that we all know and love. I should say, when you invest in Seaboard Corporation, butterball is only a small portion of that.

Their primary revenue driver is commodity trading and shipping. However, during the Thanksgiving season, they sell 300 million pounds worth of Butterball turkeys. So within, I believe, it's a two-week period, they sell 30% of the turkeys they'll sell over the course of the year. Now, you might be wondering, does all this Butterball Crypto fan result in better stock market performance during the week of Thanksgiving? Actually, it does. So given 72 years of S&P 500 data, on average, for a two-day period, there's historically been around a 15th, percent chance that the index will go up. However, on Wednesday and Friday of trading for the week of Thanksgiving, 60 out of 72 times the SMP 500 closed Friday at a higher level than when

it opened Wednesday, meaning an 83.33% success rate. And Joe, you have more data on this, right? Absolutely. So we were saying like analysts are suggesting that Thanksgiving and Black Friday sales may actually act as a sentiment indicator among consumers for the market. In other words, strong retail numbers during this period could signal the start of a robust shopping season and then this leading to the potential boost in the stock market prices we can expect the days following. And this is definitely significant because we're forecasting holiday purchases to rise 3 to 4% from last year. So, you know, some good, at least short-term indicators coming out of this Thanksgiving season. However, we do have a little bit of caution this season as some of these indicators which we mentioned before are reminiscent of the 2007 holiday shopping season, which also ended on a positive note with retail sales also being up around 3%. But the NRF said that the economic pressures in 2007, such as the weak housing market and the consumer credit crunch, as it was called, caused the sales climate to almost immediately deteriorate going into the season.

We jump forward to now consumers this year are facing a similar weak housing market due to high interest rates, which are essentially keeping people out of the real estate market. And consumer credit has reached almost a breaking point, according to the New York Federal Reserve, which said that credit card debt had reached an all-time high of $1 trillion earlier this year, leaving nearly 60% of consumers worried about their ability to get more credit, if need be. So these are not really great numbers going into, especially this winter shopping season for Christmas and so on. Further concerning is the New York Fed's findings that nearly 14% of people expect to lose their jobs next year, regardless of how we cut this cake, going to immensely impact the economic outlook for 2024.

With recession fears, high inflation, high interest rates, and ultimately low consumer purchasing power, we may be seeing some sort of similar holiday season to that of 2007, which preceded, of course, the 2008 financial crisis. So definitely a lot to be cautious about going into this holiday season, I would say. Yeah, it's been such a weird, probably 18 months, the amounts of mixed signals that we've been getting with the primary thing being jobs and unemployment, maintaining their very low level, some of the lowest levels we've seen.

But being that most people who are decision makers, and, you know, shoppers and all that have lived through the 2008 financial crisis. I think there is a large amount of worry. And you said the credit crunch credit card crisis feels like that's been going on for a while now. But like you said, that statistic, that 60% of people are worried about their ability to get more credit, especially at rates that are double what they used to be. And we're also like, you know, even going beyond the realms of these economic indicators. particularly for Thanksgiving, we're talking about sentiment indicators.

And so, like, the direct effect that the consumer sentiment has on the stock market, which, you know, like you said, having a lot of people who are in the market right now who have lived through the 2008 financial crisis, if they're going to be cautious, this might lag behind some stock prices, you know, and might contribute to some downward-looking 2004. And I could also see it that people live through 2008. they saw people acting rashly and pulling their money out. And then obviously you see this amazing rebound 2009, 2010 leading into the 2010s bull market. So I wonder if that's why some stock prices maybe haven't fully reflected new information. You can never be fully sure, I guess. However, I think people are willing having seen a couple crashes and recoveries to try to hold tight for longer than maybe you would ordinarily see. Only time will tell, I guess.

You're listening to Wall Street Weekly on Radio Free Hillsdale 101.7 FM. I'm George. I'm Patrick. You're not Patrick. I'm Joe. Joe Kalezy, who actually has a new season of his show coming this spring. He just informed me. So be sure to look out for elephants in the room as they come roaring back in the spring of 2024.

Thank you for that. George, thank you for that. Now, Joe, I recently saw in the news that Macy's stock popped after quarter three earnings. That was actually today on November 16th, 2023, they're up about 6%, which leads me into talking about their biggest advertising campaign of the year, the Macy's Thanksgiving Day Parade. Just a quick history of the Macy's Thanksgiving Day parade. It's actually approaching its 100th year anniversary next year, as it's the second oldest parade on Thanksgiving in the nation behind only Philadelphia and actually tied with a city right in our neighborhood, Detroit. The first parade, however, looked pretty different. Macy's was a big institution at the time in New York City,

and they decided that for Thanksgiving Day, they were going to have a parade. And to make it a spectacle, they told people about it and actually borrowed animals from the Central Park Zoo to march in the parade. It's estimated that 250,000 people showed up for the initial Macy's Thanksgiving Day parade. Now, from 1924, three years later, you really started to see the evolution of the parade when Goodyear began making helium balloons that could be flown in the parade. From my understanding, they had a couple big black helium balloons that were just gigantic and a spectacle for how big they were.

In addition, they had Felix the Cat, which was a character balloon, that was actually filled up with air and just held up by stilts. Perhaps one of the most fascinating things that they did was actually let the balloons go, the helium balloons go at the end of the parade, and they awarded people $100. whoever found the balloons and returned them back to Macy's. Adjusted for inflation, that's about $1,600 in today's money. Now, you might expect that during the Great Depression, the parade fell out of favor. It actually seems to be one of the high points of the year for New Yorkers,

something that was almost a constant, even though it had only been around for a couple years at that point. By the mid-1930s, over a million people started lining the streets of New York to watch this massive parade. and in 1934, the first, what we might consider modern balloon, was flown, a helium-filled Mickey Mouse. Even Mickey couldn't save the Macy's Thanksgiving Day parade from the early 1940s. From 1942 to 1945, the parade was discontinued due to rations on helium and rubber.

Additionally, the parade was very popular to those on the East Coast, but a majority of the nation had no exposure to the parade. That was until 1947 when Miracle on 34th Street became a hit Christmas classic. The very next year, the Macy's Thanksgiving Day parade became nationally televised. As they say, the rest is history. Well, the parade has had its up and down since then, including some incidents where balloons got away, knocking down light poles and injuring attendees. It seems to be such an integral part of our culture that it's hard to imagine a Thanksgiving Thursday

where the parade isn't on TVs all across America. Still, it's pretty crazy when you take a step back and realize the proportions to which this event has grown. Now, Joe, do you want to tell us just a few financial facts about this parade and how extreme it is? Sure, some fun financial facts. This is obviously no shock, a very costly event. Macy's actually annually spends about $13 million for the parade,

which makes it even more costly than Capital Fourth's Independence Day fireworks show, which comes out at around $7 million annually. And what I found even more surprising, Times Square's New Year's Eve ball drop, which only ended up being about $2.4 million a year, which I'd found that to be insane. But I guess route and the amount of people present at this Thanksgiving Day parade might warrant the sort of inflated costs that Macy has to pay out for that.

You see those wonderful balloons, those floats as they're called, How much would you wager it cost to fill those up, George? Are you asking me because you want to know? Or are you asking as a quiz? Well, I mean, I feel like you've hit me with a couple quiz questions already here in the episode. So this is graded. This is going on your GPA. How much money within the realm of about $50,000 I'll allow?

Do you think that Macy's, it costs Macy's to fill up all of their balloons? My independent research found around $150,000 to $300,000. This was not open note. This was not open note. Okay. Am I right, though? Yes, about 150 to 300,000 to fill up, which, again, is insane. But actually, like, that number even pales into comparison to the taxes they have to pay New York on that 13 million they spend,

which is out to around $800,000 just in taxes alone. A lot of big money going into this parade. Even crazier is the fact that the $13 million you mentioned is just Macy's doesn't even take into account the other corporations who invest into the parade. So, yeah, some very big money going into this event. but obviously they find it worthwhile to keep doing it. Also interesting that there's 50 million viewers of the Macy's Thanksgiving Day parade, which someone brought up the comparison that I think game six of the NBA finals was 16 million or even less than that. Well, I think just everyone kind of like, because my family always did this.

Like you wake up Thanksgiving Day and like someone has it on the TV. And so like that I'm sure is like the average sort of viewer, if you will. They just like, oh, tradition. Macy's Thanksgiving Day parades on. It's Thanksgiving. Throw it up on the TV. I'm sure they make a ton of money off of ad space because of that. Because, you know, you're talking about something similar in viewership to a major league basketball game or like the Super Bowl even.

I think Super Bowl is like a hundred million. So, you know, half of the Super Bowl, which is still incredible. And for a lot of retailers, this is a way to launch into Black Friday, Cyber Monday and the holiday season. I feel like maybe our audience wants to know us on a more personal level. So what do we do over the Thanksgiving holiday? Well, I, for one, you know, go back home to my humble home with my family. We gather around the table, maybe watch a little bit of football. Let's see, we dine, of course, in a butterball turkey, but I've got a lot of Italian in my family.

So we like to spice things up a little bit. Some pasta yifagoi, some spaghetti, you know, other stereotypical Italian foods. you can expect those on the table next to the turkey, stuffing, green bean cassero, etc. Definitely a fun time for everybody involved. Do you ever get like the jellied cranberry canned stuff? I don't like cranberries. You don't like cranberries? We get them, yeah.

But like I just like, if it's on my plate, I just like set it to the side. Okay. Yeah. How about you? What do you guys do for Thanksgiving? Well, we do a lot of hunting at our household. So that, you know, occupies most of the time. But yeah, same thing.

Watching football as a, as a major Green Bay Packers fan, usually. getting bullied by my uncles from Minnesota. But yeah, overall, a great time to get closer in a way to friends and family. I feel like Thanksgiving is kind of like the one remaining big feast day, at least in my household, that we really go all out on. Oh, that's cool. Yeah. But with that being said, thank you, Joe, for coming on.

Late notice to Wall Street Weekly. Oh, no problem. It's a great pleasure to be on here. But yeah, of course, the boys at Wall Street Weekly. I say anytime. Absolutely. Well, we're glad to have you, but even happier that we're going to have Patrick on two weeks from today. When we bring you our first annual Wall Street Weekly Christmas special, we're really excited looking forward to that. And on a broader note, each week we're really excited to be able to bring you finance stories that me and Patrick have found interesting over the course of the week.

And for that, we want to thank you whether you listen online via podcast or on the radio dial on Radio Free Hillsdale 101.7 FM for letting you. me and Patrick share our passion with you. And from our station to your home, we want to wish you a very happy Thanksgiving. And thank you for taking the time today to tune into Wall Street Weekly on Radio Free Hillsdale 101.7 FM.