Jobs, Cars, AI and Financial Freedom!
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Jobs, cars, AI and financial freedom. You're listening to Motley Fool Money. Welcome to Motley Fool Money. I'm Jason Moser. Joining me today, it's Motley Fool Chief Investment Officer, Andy Cross. Andy, thanks for being here.

Jason, thanks for having me on the holiday week. Yes, holiday week indeed. On today's show, we're going to take a closer look at the state of the EV market. Cloudflare is, I guess, standing up to AI. We've got some stocks that make us want to celebrate financial freedom. But first, Andy, let's talk jobs and banks. The jobs report came out this morning, a day early due to the holiday weekend. It seemed like a

Pretty good report. Market's receiving it well. It was good on the state and local government side, whereas the federal side, it seemed like there's some more headwinds, which I guess shouldn't be surprising given the last few months with Doge and their efforts to try to sort of

trim the fat, so to speak. But what did you see in this jobs report that stood out to you? Yeah, Jason, I think it was a good report. It certainly was ahead of the consensus, but it wasn't blazingly great like it was maybe a few years ago. We saw, interesting, we saw the futures. You mentioned the stocks rebound nicely. And the

the expectations for a rate cut had dropped from 25% in July down to less than 7%. Clearly, as the yields moved higher, on the strength of this report, investors are betting that maybe those rate cuts that they were maybe expecting in the summer are going to get pushed out. But what was really interesting to me is, inside, underneath the hood, Jason,

Healthcare and services very strong, accounted for 40% of the 147,000 net gains. As you mentioned, state and government accounted for 32% of those gains as well. What was also fascinating, Jason, speaks to a little bit of the news we saw this week. Construction accounted for about 10% of the overall gains and specialty contracting construction.

focusing on very specialty roofing, supplying, things like that, they were accounted for 100% of the construction gains. That also speaks to why I think we saw Home Depot

going after and putting out that acquisition for GMS, another specialty retailer distributor, to build out their distribution business on the contracting side. So, strength there, I think, speaks to that acquisition of why it's so attractive for Home Depot. Yeah, I'm glad you brought Home Depot up because it does seem to me like we're in a position where it

The conversation goes on and on about housing supply. It seems like there's just not enough supply to meet the demand. But when you look further out, you see the opportunity there. Whether it's homebuilders, whether it's home improvements, retailers like Home Depot or Lowe's, it seems like they're poised for...

pretty good stretch here going forward as we see more investment made in the housing market here domestically. Jason, I think we just have to see rates start to normalize. That did not show up in this report. That's something that's going to -- I didn't look at the home building stocks today.

that's going to be a challenge, just the rate environment. Now, I think over time, that will start to come down for a variety of reasons. I think that will lessen, but certainly today we saw those rates jump on the strength of this report.

Interesting, Jason, also still seeing some of the stress on those white-collar jobs, management, business, and financial. That unemployment increased from 2.2% to 2.4%. Professional unemployment increased a little bit. Sales and offices unemployment rate increased a little bit, even though the unemployment rate was pretty steady.

We are seeing a little bit of stress on the office and those white-collar jobs, which kind of gets back to that quote from the Ford CEO talking about how at some point in the near future, expecting that 50% of white-collar jobs could be eliminated or replaced by AI. Wow. That's just an amazing statistic to think about there in a...

I'm hoping that our jobs are still safe, AC, but we'll see. - Yeah, well, I think we're gonna see a lot more of that in the next year or so. A lot of this show up in some of this job data, so I'm paying attention to that very closely. - Yeah, I think that makes a lot of sense.

Okay, let's pivot into banks here because just this past week, we saw the banks all go through the stress test, right? The Fed went through the stress test with all the banks here. And in all 22 banks that were examined by the Fed last week past 2020,

stress test, right? And this is something that really kind of popped up on the radar through the great financial crisis over a decade ago. But now, I mean, it's encouraging to see at least that we're kind of putting the banks through this

sort of regular regimen of making sure that they're okay and healthy. It sounds like in this case, the Fed noted they found that large banks are well positioned to weather a severe recession, which is encouraging. Now, the result here shouldn't be surprising. We saw a lot of dividend increases and we saw a lot of share repurchase authorizations.

Yeah, Jason, it was a little bit of a milder stress test. They had lowered the bar a little bit, I think, in a more normal environment, which I think makes sense. Now, expecting the test looks at a 30% drop in real estate prices or a 33% drop in home prices.

And if the unemployment rate skyrockets or increases, but that's a little bit more milder than what they had before when the banks were in a little bit more difficult spot. So a little bit of a, of a lower bar, but the banks jumped way over it. And we saw these increases. We saw Goldman increased their dividend by 33% JPM, JP Morgan by 7% bank of America by 8%. So naturally we're going to see them start to return capital more to shareholders because that's essentially what banks are doing. You know, they take in a lot of capital and,

and they make good profits on their earnings base, and they spit that back out to shareholders. I think the markets would have been disappointed had we not seen those dividend increases after this announcement from the Fed. One thing I thought was interesting, they're talking about this stress test process. It can be taxing, it can produce volatility in this financials market. The Fed is looking at this and saying, "Okay, well,

We're going to try to address this volatility. And ultimately, we're going to propose that we basically average two consecutive years of stress test results as opposed to just going year by year by year. What do you make of that? Does that make sense to you? And just...

giving us a little bit more of an average. It seems a bit more long-term thinking in my mind. Yeah, I think so. I mean, I think it tends, same thing like jobs, like we talked about the jobs earlier, it's one month and you really have to look at the average over time. And so we don't want to make too much of any one period. And I think the same thing with looking at these tier one capital ratios, undoubtedly the banks are in a much better spot now. Undoubtedly, they're well more, they're better capitalized. And we saw that not just in the little bit of a mile, more milder test that they achieved in past, but

And the fact that so many of them, I think almost all of them, I think, as you mentioned, all of them passed. So, we're seeing these large banks well-capitalized. And I think that measurement over time is what I think investors really want to pay attention to. I think banks are interesting. I used to own Bank of America. I sold it last year, and the stock's actually up since I sold it, and I had already made like 40% or 50% on it.

I think banks are in a good spot. The valuations have started to creep up. They have those on a per-book value basis or earnings basis. They are more elevated than historical norms. I think that's the expectation that, hey, over the next couple of years, the economy is going to be in decent enough shape and the banks well-capitalized to be able to take advantage of a pretty healthy consumer out there on both the commercial side and the retail side. Next up, EV sales feel some headwinds.

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Andy, we saw an auto report this week that was, I guess, mixed would be the best way to put it. We saw some good things, we saw some bad things. But it does seem like

While automakers saw sales slow down a little bit, it feels like maybe there were some impulse buying there in the front half of the year due to tariff uncertainty and whatnot. Tesla really stood out here. I mean, when we talk about EVs, I mean, Tesla's going to be obviously the headline maker there. But Tesla, they've run to a little bit of a buzzsaw here, right? Tesla global vehicle sales fell by 13.5%.

in the second quarter compared to a year ago. And it wasn't just Tesla that felt this. I mean, other automakers are feeling the pressure here. But what do you make of this? Do you feel like... Was this a lot of front-loading where people impulse buying, getting out there on the front half of the year because of tariff uncertainty? Or is there a little bit more to make of this? No, we certainly saw...

Outside of Tesla, when you look at Ford's deliveries, they were up 14% or the unit sales up 14% this quarter. Very healthy on the Ford side, but not on the EV side. So it was all on the industrial combustion engine and the hybrid for Ford's growth. But as you mentioned, Jason,

Tesla saw continued weakness through this quarter. You mentioned the deliveries fell 13.5%. Now, that was above the whisper numbers out there. I think that's why you saw the stock react positively. And I think the concern was it was just going to be so much worse.

So, a little bit higher than the whisper numbers, even though it was below the published stated estimate numbers. It was higher than the first quarter, so we saw a little bit of improvement into the second quarter. Cybertruck and the other category, which is the smallest part of Tesla's sales,

fell almost 52%. So, that was a continued weakness. And we see continued struggles with them in China, as we're seeing more and more heated-up competition really start to ramp up into China. So, obviously, Tesla has some of these branding issues. They're well-documented. We've talked about them before. The story for Tesla is not -- it's just the investing case is not about what is happening right now. It's really what's going to happen with

full self-driving, the robo-taxi, all of those initiatives, even into robotics, that is going to be, if it works out, the big driving case and success factor for Tesla. So, I think the expectations were, these were two bad quarters. And if you're an

driving sale, he's running the sales department, and hopefully start to rebound a little bit throughout the second half of the year. Hopefully, we'll get some new models and some refreshed brand acceptance out there for Tesla shareholders. We're not going to just pick on Tesla here. Ford, Hyundai, Kia, they all reported

heavy drops in their EV sales. Ford said EV sales fell more than 30% from a year ago. Yeah. It's interesting to me to see that GM actually sort of bucked the trend there. They said their EV sales more than doubled

from the same time last year, which I just thought was fascinating. I don't even know. What is the GM EV? I mean, what's out there driving this? I know. And just you think about just Ford's success across outside of EV. I mentioned the strength in the combustible and the hybrids, really. And across, really, they're so big into SUVs and trucks. And they saw a massive growth in those during the quarter. I think a lot of that was pulled forward, as you mentioned earlier, Jason. Yeah.

We saw tariff increases. Ford had their employee pricing for all promotions, so they went out there on the pricing side. We'll see how that ends up on the gross margins. It'll be something to watch with Ford. But clearly, having a lot of success in hybrid and combustible engines. It is interesting to see, their EV is just not getting a lot of traction. They had that recall on the Mustang Mach-E.

Think about GM having some success there. I don't know if that is the story for the future of GM. Clearly, EVs right now, as they are continuing to work through a lot of their battery technology, I think that's just a continued struggle in the market and not getting that much acceptance from the marketplace, especially with oil and gas prices where they are so nicely low these days.

Coming up, Cloudflare jumps into the AI ring and a couple of stocks to celebrate our financial freedom. This episode is sponsored by SoFi.

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Andy, there's some interesting news from Cloudflare this week. We've been batting this back and forth here at work. According to the company right now, they're basically giving their new customers

that sign up to use Cloudflare, they're going to be asked if they want to allow or block AI crawlers, right? That AI technology that goes through there and scrapes websites to get all of this data that feeds those large language models. The company will also allow publishers to charge AI crawlers for access using a new pay-per-crawl model. Now, Andy, this makes me think a bit. The first thing I thought about when I read into this

It makes me think a bit about Amazon and Amazon's mission to be the most customer-centric company in the world. This seems like, from Cloudflare's perspective, this seems like a very customer-centric move, right? They're saying, hey, we want to help you protect your data. We want to help you protect your content and the stuff you're creating. I mean, I understand the other side of it as well, right? I mean...

the data needs to be out there in order for these large language models to improve and train. And do you, do you feel like this is a, is this a smart move by Cloudflare? Oh, I think it is Jason. I mean, Cloudflare is accountable for maybe 20% of the, of, of,

global internet traffic out there. They're a content delivery network and a cybersecurity firm. So helping their publishing clients and other clients move data around. And so protecting them and taking their interests in mind is very smart for Cloudflare. And I actually was very

positive on this. This is a business that I owned before and sold earlier this year. But I just think this is actually a very positive move because no one is really addressing the elephant in the room, I think, Jason. It gets back to the online advertising business. Matthew Prince, in his blog at Cloudflare, when he talked about what they're dubbing Content Independence Day, July 1st, Content Independence Day, for them to help protect these publishers.

He talked about the evolution of online search and advertising, starting with the history of Google in that blog post. And I think now he is starting to address, listen, to support the publishers that are responsible for so much content out there and the creators, we have to help them to be able to support

the models that go into the AI engines that so many of us now are relying on. So they're starting to address the business model behind of what this might look like. They even talked about maybe opening a marketplace where AI engines and AI chatbot companies like OpenAI and Perplexity and even Google itself and others can collaborate with publishers in there. So

I find that very encouraging because this is changing so fast. I'm glad someone with the

reach of a Cloudflare is talking about this. But of course, it is talking their own book because they're trying to support some of their key clients in the publisher realm. Of course. Yeah. I mean, Cloudflare is like 20% of all internet traffic. I mean, this is not a small player in the industry. Do you feel like this is something that has the potential to snowball and maybe cause some near-term headwinds in the advancement of AI? Yeah.

I don't think so, Jason. I don't think so. The concern is, and I'm sure, in fact, I think maybe we heard from the likes of OpenAI, and there is technology out there that is part of websites to help tell and direct search crawling engines, go here, don't go here, but it's not enforced. It's more guidance. I think what Cloudflare is saying, we need another level of security.

They will be concerned, but I do think this starts to, like I said before, address how do we continue to get new, fresh content out there and have that get monetized in a way that supports those content creators, but also says, no, we need that content because it's a very competitive marketplace now.

We have so many from deep-seeking others in China creating more advanced LLMs out there that they are continuing to invest in.

and they're probably not abiding by maybe all the rules out there. So, it's a very competitive space. I just think I'm glad that we're seeing some conversation around how we can do this better in a sustainable way for all of the players and stakeholders going forward. Yeah, and it's worth noting, too. I mean, Cloudflare has already got customers, right? They've talked about early adopters here. There's Conde Nast, Time, Pinterest, Quora, Reddit. I mean, so there are companies jumping on board, and these are companies...

Obviously, responsible for a lot of content that's out there on the internet. It'll be interesting to see how this develops. Andy, tomorrow, of course, is the 4th of July. In the immortal words of Homer Simpson, "Stand back while I celebrate freedom." Before we wrap up today, what is a stock? I thought this would be fun to take a look at some of the stocks that we like here.

Before we wrap up, what's a stock in your own portfolio that makes you think, man, I love having that one in there? That stock or those stocks, they're leading me to my financial freedom.

Jason, I have a few I'll mention, including one that's also a little bit of a miss by me, too, from an allocation perspective. Obviously, I've talked about NVIDIA's importance in my portfolio. It's done so well. It's up more than 1,200% for me. It's a large position in my portfolio. Netflix, also one that's done very well for my portfolio.

my family, and I'm just very thankful to see those into the portfolio along with Chipotle. But one that goes under the radar that we never talk about, that I invested in years ago, more than 10 years ago, is a little company called RBC Barings. The ticker symbol is RBC. I think the ticker symbol used to be R-O-L. I'm feeling a little Ron Gross here, Andy. Yeah. It does high-precision

ball bearings -- it's all about ball bearings these days, Jason -- ball bearings and other technology that goes into aerospace and defense. And I think from the likes of Transdime and Howmet and others that we've talked about, that aerospace market continues to grow at mid-single digits over years and years. It's very technical. You need very, very complex technical machinery that goes into our airplanes, goes into our equipment.

And so RBC has just played into this growth market and it's just thumped the market over time, making smart little acquisitions, growing their business, getting some margin expansion. And just one, when I look back on it, it kind of goes under the radar. I didn't unfortunately add enough to it, Jason. I wish I had added more to it along the way, but that one, that one's up very nicely as a multi-bagger for me and one that I'm happy to see in my portfolio.

I love all those names. When I look at my portfolio, I feel the same way. There's so many companies in there that I'd love to see that I own them day after day after day. Growth-style investments, I'm thinking of things like the Trade Desk and Cloudflare, as we mentioned before. Companies have just performed very well for me over time. Then I look to the boring state companies. Home Depot stands out to me. To me,

that's like when you're, when you're a kid and you wake up and it's Christmas morning and you go find all the presents. Like that's what I feel like every time I go into home Depot, I'm just always eyes saucered and just looking all over the place. And I know that 20 years from now, I'm still going to be going to home Depot because I'm going to need to do something or I'm going to want to do something for my house and get the dividends coming in along the way. And then, you know, I talked about this with David Gardner recently, just waste management. I mean,

I mean, just a

boring business, right? But hey, we produce a lot of trash. And that's the company that just has the biggest network in the country as far as disposal sites. So, waste management and Home Depot on the dividend side are just companies that I look at in my portfolio and I think, man, you know what? I'm really glad I own those. Yeah, Jason, this is why I love investing because there's so many different ways to make money and to hopefully earn our way towards that financial freedom from growth to dividends to value and all things in between in international and

So looking across my portfolio, having such an appreciation, like you were saying, from the likes of Home Depot, which is my largest position, all the way down to some small cap companies.

We'll leave it there. Andy Cross, thank you so much for being here. Have a great 4th of July. We'll see you next time. Thanks, Jason. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against it. 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 are provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Jason Moser. Thanks for listening. We'll see you next time.