Americans' Credit Card Debt Hits $1 Trillion

In this podcast, Motley Fool senior analysts Jason Moser and Matt Argersinger and host Dylan Lewis discuss:

• What the Producer Price Index is saying about the cost of goods and services.
• Americans hitting $1 trillion in credit card debt and what it means for consumers' health.
• Earnings updates from Disney, UPS, and Axon.
• Two stocks on Jason's and Matt's radar: Sky Harbor and Home Depot. 

Motley Fool host Deidre Woollard talks with Tom Larsen, a senior director at Corelogic, about extreme weather's impact on homeowners and insurers.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on August 11, 2023.

Dylan Lewis: We've got updates on PPI, UPS and AB InBev, Motley Fool Money starts now. Everybody needs money, that's why they call it money. From Fool global headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Dylan Lewis joining me in studio Motley Fool Senior Analyst, Jason Moser and Matt Argersinger. Guys, great to have you both here at it. Dylan, we've got an inside look at how extreme weather is impacting homeowners and insurers, updates from Disney and a surprising deal in beer, but we are kicking things off this week looking at the big macro specifically Matt, we are looking at inflation. Normally when we talk inflation, we're looking at CPI, not the case this week, we're looking at PPI.

Jason Moser: It's maybe the ugly step OCP, yeah. That's probably not fair, but it doesn't get as much fanfare as CPI, but it isn't measure of costs of goods and services that manufacturers and producers receive, so it's pretty important, and you had a monthly change on Friday of 0.3% for July, that's the biggest monthly gain since January, and it's up from a month in June where the reading was unchanged, so you can conclude right there that, hey, inflation is not exactly going away. If you drill down into the data, the services component in particular rose a 0.5% for the month, that's largest gain since August of last year, and that was far higher than the goods prices segment, which was up just 0.1%, so I think to me, this reinforces a couple of things. Its first something we've talked about before, which does feel like there's a slowdown in the goods part of the economy and we've seen that with reports from Amazon target UPS, which we'll talk about, but it's the services side that seems to be the stickiest when it comes to inflation. I think it also reinforces the idea that rates are going to be high and probably remain higher for longer than most analysts separate it, so it's certainly not something a lot of people are predicting six months ago. Higher rates, sticking around and not necessarily a good thing for borrowers, and there's a lot of borrowing activity that's going on. First-time ever American credit card debt passes one trillion according to the New York Fed, balances up nearly 50 billion in the recent quarter, Matt. What do we make of hitting this milestone?

Matt Argersinger: Well, one trillion is a big number, so I think that's probably got a lot of people's attention, but we are dealing with a bigger economy, and relative to household net worth, it's not that big of a deal. Except for this one aspects which I think a lot of people are overlooking. If you look at the data from the Federal Reserve Bank of New York, the 30-day delinquency rate on credit cards was up to 7.2%, that's the highest level since 2012. The rate of change, by the way, is really accelerating. We're at roughly 4% on that delinquency rate at the end of 2021, we're now at 7.2%, and a lot of people saying, well, we're just getting back to pre-COVID levels for that. But remember where we are today. We're in a position where interest rates are a lot higher, we don't have an ocean of federal stimulus about to hit consumer wallets. I think it is when you look at that, when credit cards, when you look at auto loan delinquencies which are also rising sharply, it does start to worry me a little bit. 

Dylan Lewis: One of the things that is a big part of the debt conversation right now, Jason, I know you've been following the story is the resumption of student loan interests and the expectation that student loans going to be being paid again soon. How do you factor that into the macro picture that we're looking at?

Jason Moser: Yeah. I think Matty made a very good point there in regard to the credit card debt on its own, that number, it's not that big of a deal, is not that big of a number when you look at the bigger picture. But I think when you dig a little bit deeper, to ask yourself the question, why is that happening? I think that's really the question asked. Why are these balances going up? I think it is a mix of things, part of that is absolutely. You're seeing the student loan payments, getting ready to kick back and is going to be something that plays into this somewhat. But you look at the dynamics playing out in the economy today, car ownership, it's more expensive than ever. Homeownership. If you're a new buyer looking for an entry-level home good loan because those are few and far between now, and then there's data out there too that says household income adjusted for inflation taxes is around 9.1% below where it was in April 2020. That again tells you that consumers having a little bit of a harder time making ends meet what you do when that happens, while you start buying things on credit, and that ultimately gets us to where we are today. Now when you add to that, the fact that student loan payments are getting ready to start back up, there are some big numbers they come into play here. If you got around 44 million federal student loan borrowers today.

Now, throughout this stretch where those payments were put on pause. I think something to the tune of maybe 18% actually continued paying during that stretch. The overwhelming majority took that hiatus. They weren't paying anything on. What that just means is, we are going to have a lot of student loan payments coming back into player, that money is not going to be going back into the economy. I don't make everybody is going to be settling out their credit card bills on time. I think more likely see delinquencies rise, that tends to skew a little bit younger because you're not as well-established, you're probably not making as much money, but you're still struggling to make ends meet. It's a very conflicted economy these days, and I think that is seen in that PPI and CPI data right there, it's going to be very interesting to see how this plays out because the reasonable expectation is that it's going to make for a tougher consumer environment, but with employment where it is today, I don't know, I guess we have to wait and see.

Matt Argersinger: I like what JayMo said about effecting younger people more because I think about it, if you are a young person in this economy, and for some of the things JayMo said, hard to buy a house, rents are rising, you're back to making student loan payments, you've probably got a car payment that's really high. You don't have a lot of savings or investments, it's just tough out there. If you're an older person, established person professional, you probably don't have a student loan, you probably have a fixed rate mortgage below 4% on your house, you're earning the highest interest on your savings investments that you have in your entire life or career, I think of it as rich person stimulus in the paradoxical way that the Fed raising rates is actually help people that have high savings and investments. I don't want to make a younger person versus Richerson argument. But if you're looking at where the economy is going to be affected the most, it's probably going to be those in their 20s and '30s, who aren't buying a house and still struggling to build savings.

Jason Moser: We talked about it a lot, I think when we look at these big picture economic numbers, we know it's not evenly felt. It's something that gets distributed differently depending on what you're subject to and when what your financial situation might be. I want to try to take all these different factors that we've put together here and try to get to one like health of the consumer read. It seems to me generally we would expect credit cards to be somewhere where that spending can go, even if people are a little bit tighter. Matt is the takeaway here, that extra room that people have isn't going to be there anymore.

Matt Argersinger: Well, that's what I think, and I think something else JayMo said about the job market. As long as the unemployment rate stays at 3.6%, as long as someone who wants a job, it's capable of doing a job, you can get a job, I don't think we're going to see last stress here, but there is now no more margin of safety like you said, Dylan. If there is any stress in the economy, especially when it comes to jobs, that's where I think you're going to see a lot of pain.

Dylan Lewis: Coming up after the break, we've got an update on the House of Mouse and a labor deal worth celebrating, stay right here, is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Dylan Lewis here in studio with Jason Moser and Matt Argersinger. One of the major stories, I think for the big businesses of the market this year, Jason, is the fact that Disney is a little bit of a business in crossroads. We have some leadership things going on there. We have all of the things that are going on, on the labor side with people that work in the entertainment business. We have a business that's struggled a little bit as of late, they reported earnings this week. What did you see in the results?

Jason Moser: We've talked a lot about Disney and how one of the advantages of investing in a company like Disney is. It has a number of different ways that it can do well. It has a number of different ways that it generates money so weakness in one or two segments, can usually be taken up for by strength in another segment. What we're seeing, unfortunately, with Disney right now, is there seems to be weakness in virtually every segment. It's a business in transition. They are really having to pivot into becoming this modern day media company. For all of the credit that we get get Netflix to the year is about really being the first-to-market in streaming, really blazing that trail. We're starting to see the advantages. If we didn't realize those advantage before, they're very apparent now. But with Disney, it's not just streaming. They're having issues getting their streaming operations profitable, but the park side of the businesses are really killing it right now. They're having some issues in theater releases. Obviously, a ton of leadership question, can this company move on from Bob Iger.

It's an interesting setup here that they have with Penn and ESPN and we'll talk about that in a minute. But in regard to the company that the quarter itself, I think that with the streaming part of the business in such a state of transition, we looked at the park side of the business and say, well maybe the strength there will help make up for the weakness and streaming and parks that OK for the quarter. But it wasn't something that was exceptional. I would say Disney World results themselves or down year over year. Now, when you look at the domestic park attendance that did grow slightly year over year. That is coming off of a very difficult comparable from last year with the 50th anniversary celebrations. I think that's encouraging news. Now, when you look at spending, spending was relatively comparable to the prior year. Typically, we like to see that per capita spending going up, but it's just getting more and more expensive to even go to Disney World now. I think that's something as we talked about the consumer in the a segment. You see that playing out with businesses like Disney. Consumer to consumers just can't spend quite as much if they can even make it to Disney World in the first place.

Dylan Lewis: I would also say one thing the market, we noticed, the market just doesn't like uncertainty and they don't like uncertainty around business models. They don't like to question where a company is going to be a year or two years from now, they want to see a trajectory. I think the problem with Disney is it keeps getting in its own way because we don't know exactly what's going to happen to ESPN. I know Jason was about to talk about that or the Hulu segment or just the perks and the cost cutting that's going on. What is this business is going to look like in a year? I think that's where you can look at Disney and say, well, the IP is fantastic. They do have this multifaceted business that can often prop one other business up. But I don't think the market has confidence, not anymore because it's the overall confidence in the business based on all the moving parts is creating serious questions. Let's zoom in on that ESPN piece of Disney's business. This was such a strong pillar of Disney's business for a while. They announced layoffs awhile back of some of their top and most recognized talent. The recent news with ESPN is they're partnering up with Pen and their sports book is rebranding as ESPN bet. Is this something that can revitalize this segment, Jason?

Jason Moser: I don't know if it will revitalize it, but I think it at least gives ESPN a shot. ESPN has definitely been big. One of the bigger question marks in regard to this company over the last several years. Again, as this streaming landscape continues to take shape, I think that in regard to the relationship with Penn, clearly Penn needed Disney more than Disney needed Penn or ESPN. But it was close. ESPN needed them to. I think Penn needed it just a little bit more because I think in hindsight, Penn had probably a little buyer's remorse when it came to Barstool. Being able to part ways the way they did made a lot of sense. I think bringing ESPN into that universe makes sense from the perspective of there's a brand recognition there through the content that you're getting through ESPN. There's a ton of data. You got a ton of eyeballs, a ton of advertising opportunities that come with it. It's part of what the solution will ultimately be for ESPN. The flip side of that, when you look at their streaming performance for the quarter, generally speaking, average revenue per paying subscriber continues to grow with virtually every property modestly, with the exception of ESPN+, which actually declined incrementally. Again, it really is going to be, I think understanding the future regard ESPN is going to boil down to partnerships. We got the partnership with Penn. We know that ESPN has interested in trying to partner up with leagues in some way to help distribute content and monetize that content. But again, I mean, this is going to be Bob Iger's swan song here, I think. This is probably as last shot. I think it was very telling, he's bringing in outside consultants to try to help solve this problem because it's not an easy one.

Dylan Lewis: Busy week for Disney and a busy week for another business, UPS, the company announced its earnings, but the earnings, Matt, we're secondary to the deal that UPS struck with its union workers.

Matt Argersinger: That was the headliner because you know what, that did fortunately for UPS and for the Teamsters, but fortunately for you, but UPS avoided would have been a pretty costly strike. That would've really hurt revenue and volumes. The fact that they got that deal done and the fact that your average or your UPS driver could earn as much as $170,000 in pay and benefits by the end of the contract. Those drivers and workers work really hard. That's a great deal for them and I think in a good deal for the company. But turning to the earnings, it gets to something we were talking earlier in the show about the goods part of this economy. It especially volumes. If you look at the domestic segment for UPS, the average daily volume there was down 9.9% year over year. International volume down 6.6% and this is a business with a lot of operating leverage. When that happens, margins come way down and you have a earnings-per-share down 22.8% year over year. The company also lowered full-year revenue and operating margin guidance, and I would say, that's bad news. I think the Teamsters deals is a good news story. But you also have to take that good news with the idea that, hey, in the long run, what do UPS's margins look like if they've made this pretty generous deal with the Teamsters. That's I think, one long-term where you have to consider what is the margin profile for this business in the long run. But certainly when volumes backup, hopefully in the near future of this business will pick back up as well.

Dylan Lewis: Much of what I saw about UPS and the deal that they struck the coverage on that was, wow, we are seeing a flood of interest for people applying these jobs. UPS is a major player and a major employer in logistics. What do you think the ripple effects are for other businesses in this space when we see such big numbers and big coverage on a deal like this?

Matt Argersinger: Well, personally, I think I would look pretty good and brown shorts. I think my wife would. But I think you're right. These deals, although there's specific to this union, specific TPS, definitely I've repercussions for other businesses. If an Amazon worker, for example, Walmart worker sees this a deal getting struck does it put wage pressure on other industries. I think it certainly does.

Jason Moser: On social media, such a funny place. You see everybody just chiming in on this 100 and said they were just anchoring to this $170,000 number. It seems like overwhelmingly most or like how in the world does UPS driver make that much money listed here, man. Those men and women work harder than my guy thing most I've got your back UPS. We love you. Congratulations, because that is well on.

Dylan Lewis: One more story before we wrap up the segment, shares of Axon up 15% this week after the company reported just under 400 million in revenue beating expectations and adjusted earnings, Jason, that doubled expectations. I'm happy to see it because I'm a shareholder. But I feel like this is one of those companies that just flies under the radar. People don't realize it just continues to put up results.

Jason Moser: It does fly under the radar. I'm happy like you, I'm not a shareholder, but I did recommend this in my augmented reality service a number of years ago. It's such a strong business for a number of reasons. It's the top dog and its space. It's helping solve a real and ongoing problem and civil unrest while also living true to it's mission, which is to protect life. I think there's something to that. You have the taser side of the business. The hardware side of the business and then you couple that with this software side of the business which has the Axon Cloud, your tremendous growth rates and just looking at the quarter, the Axon Cloud and services revenue, $133 million, that was up 62% from a year ago. This is an interesting stat here. I went back to April 2021. Annual recurring software revenue at that time stood at $242 million. Today, annual recurring revenue as if this announcement grew 52% to $559 million. The thing is, once they get locked in with these forces, the switching costs don't take long to really grow with a business like this, the value proposition that they offer their customers is tremendous. As that time goes on, the switching costs grow. It gives Axon a chance to raise prices, expand those margins a little bit. I think we can all pretty much count on the fact that civil unrest, it's going to be here for the rest of our lives. It's just human nature.

Dylan Lewis: Like I said, market doesn't like what's going on at Disney, but they love businesses where there's this high-margin recurring revenue. [OVERLAPPING] It's up to 38% of Axon's revenue stream, as you said Jason, so that's big.

Jason Moser: Well, they also made an acquisition during the quarter, which I think is really cool is company called sky hero, which is a Brussels-based company that focuses on drones and ground-based vehicles for primarily indoor tactical use cases. But you could just all of a sudden see how this company is expanding, what it does to new markets just with little simple acquisitions like this.

Dylan Lewis: I've always been a huge fan. Always felt like this is a business that has the financial profile of a tech company, but the security of government contracts, how can you not love it?

Jason Moser: Hey listen, you're going to keep me in line because I don't want to be tased. 

Dylan Lewis: Jason Moser, Matt Argersinger and fellows, we'll see a little bit later in the show. Up next, we've got to look at how weather events and wildfires are impacting insurance coverage in states like Florida and California. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. Severe weather conditions have dominated headlines this summer, from wildfires in Canada to extreme heat in Texas and Arizona. These weather events affect people on the ground and they're impacting the way insurers and risk experts look at the map. To understand how, Motley Fool Money's Deidre Woollard caught up with Tom Larsen, a Senior Director at CoreLogic specializing in catastrophe modeling and helping real estate professionals, insurers, and government agencies understand and manage risk.

Deidre Woollard: Well, I wanted to speak to you because I wanted to give myself and our listeners a better understanding of how people and governments and businesses plan for what really can't be planned, which is natural catastrophes. How do you and the team at CoreLogic build the models to even look at risk like this?

Tom Larsen: To build the models, first is the realization that people, governments, businesses, they accept risk today. We get in an automobile to go to work. The goal with cat modeling is to translate this abstract risk of, there could be a bad event into the types of metrics, the frequency, and severity of loss that we use to assess all these other risks, so that is our goal. How we build the models is you take these models, modeling and natural catastrophe, first, you look at understanding of what has happened in the past, is go through, we have a good record, 120 years of hurricane activity and we go through it. We can extend that to natural severe convective storm events, wildfires. We go back and develop and really understand what has happened. We take the physics and understand and decompose that event into what happens on the ground at every single location. Then there's an engineering aspect of trying to understand, well, what are the consequences of 150-mile-hour winds or a strong ground motions and into what does it cost to repair it? That would turn it into that and underlying this is an probability of its occurrence. We can run through burn simulations and to be able to give you an understanding of what can happen in how likely is it to occur.

Deidre Woollard: Let's talk a little bit about fires because I'm in the Washington DC area. We've been dealing with some of the impact of the smoke from the fires in Canada, which have really blanketed a lot of the East coast and I lived in California as well. How has the process of assessing fire damage shifted?

Tom Larsen: Wildfires are increasingly being seen by risk-takers, insurers primarily as a material risk. That's a translation because its material now is, I need to manage it a little bit more precisely and certainly the regulatory level as well because the consequences of not managing our insolvencies and unpaid insurance claims. Those consequences even go to businesses we've seen in the paradise fire. We saw a number of bankruptcies and insolvencies. What it means to a model is it's a lot more scrutiny on the specifics because homework people are making actions to mitigate the risk and you have to be able to develop a model that can account for the individual actions of a homeowner to mitigate. The models becoming are better at this thing at really understanding the consequences of it and hopefully encouraging people to mitigate the risk.

Deidre Woollard: Well, you've got major insurers, State Farm and others leaving California farmers. I know it is limiting their policies. What does that mean for the state as more of these insurers leave?

Tom Larsen: There's a lot of impact that one, but insurers, I think we're not seeing much right now. These companies actions have limited the availability of insurance for homes. In prior crises, when that has happened, it leads to slower home purchases because you can't get a mortgage for your house unless you have hazard insurance. It certainly leads to higher prices in insurance, but it's also an availability challenge. I don't think we've seen it in California, but maybe that's because the homeowner purchase rates right now are abnormally low because of other issues, the interest rates primarily. There is a longer-term concern. It's not just availability, but it's also cost. What's being done though, I think are some positive actions really focusing on being able to mitigate. Go back to your paradise example. Paradise has now become a test case in, how do we build a safer community? It's not just financial insurance of a home because it's too expensive, it's how do I really reduce the risk? How do I demonstrate that for an insurer to be able to offer me lower rates because my community has invested in safer zones and better hardening of the perimeter of the communities?

Deidre Woollard: You mentioned cost, in Florida, the average homeowner insurance policy, it's around $6,000. My mother lives down there. She's thinking this might be the last year she pays her policy because she can't afford it. I feel I'm worried other people might make a similar decision, and if so, if you have people that own their homes outright and can make that choice not being insured, what are some of the longer-term repercussions?

Tom Larsen: I listen with sadness because that decision of hers is being made by many others. The demographic cohorts that most represents the people who choose not to are older folks on a fixed income, where they'd been in that home for awhile and because they don't have a mortgage, they have the option of not ensuring themselves. Focusing on catastrophes, you see it's growing cohort, a growing fraction of people that have done that and then the damage occurs, and they lose probably the largest asset. It's heartbreaking. The challenge is the cost, it fairly accurately represent what is the cost to protect that asset? Is it the price that's the problem or can we reduce that price through better defenses? It's hardening homes or in the case of wildfire, can we de-risk it in the surrounding area?

Deidre Woollard: Part of the problem it seems to me is that we're building where we shouldn't or where it's riskier. Certainly, that's been a concern in California. We build because that's where people want to live and that's where the money is and people are willing to pay for houses in risky areas. Will that change over time? Will homebuilders and developers be less willing to take on that risk if they know that there's potential for more damage?

Tom Larsen: There's different ways. Pragmatic perspective of that is that's where people prefer to go and the homebuilders, they're serving to their community. The challenges there, there is a case for optimism. Now CoreLogic data scientists using the real estate transaction data. Have been able to show that there's greater appreciation for homes that are perceived to being of lower risk. That's a case for optimism because maybe it will be as if the home is worth more, it's higher appreciation assets worth more. Then maybe we can start de-risking homes. Maybe people will be incentivized to build beyond the building codes, the minimum standard to strengthen their homes. Despite their living in riskier areas, there is hope that we can build safer homes. People will want to, will prefer a safer home and will invest in the stronger homes that will offset their decision to live in a risky area.

Deidre Woollard: But is that enough given the forecast of how these wildfires and other things might increase?

Tom Larsen: It's never enough. It's a game of inches. You work away too and so there are reasons for optimism, but there are also a lot of challenges. There's a lot of homes. Building codes don't change. When you update a building code, you don't strengthen the buildings that are already built. The case of your mother, she's unlikely to want to invest a lot of money in a stronger roof or pre-emptively because it's not an unreasonable bet that she won't see a hurricane in her life. There's continual work on it trying to de-risk this, but it will be a concern. Ten years from now, we'll still be talking about it. It will be probably a little bit less if we use normalize by the number of people are at risk, but there's still be extreme risk in these areas.

Dylan Lewis: Coming up after the break, Jason Moser and Matt Argersinger return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money.

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, so don't buy or sell stocks based solely on what you hear. I'm Dylan Lewis, joined again by Jason Moser and Matt Argersinger. We've got radar stocks, but first, a few more stories to round this out this week. Once valued at $47 billion, WeWork's future seems to be uncertain. In a filing this week, Matt, the co-working companies, said there were substantial doubts that it could stay in business. You dug in. What do you think?

Matt Argersinger: Well, yeah, the late great Sam Zell, probably the greatest, I would say US real estate investor of all time said in 2019, this is when WeWork was originally going public at that ludicrous valuation that you just said. He said, it was destined to fail then. He said that because he'd seen this exact office subletting business model try and fail for 50 years. Really, he's been why he was watching since in the '50s. It was always about when you're marrying these long-term liabilities, these long-term mass leases which short-term leases, in this case, short-term little subscription model, it's never going to work. Of course, we know what happened and all the things that came out of WeWork, the allegations about Adam Neumann, potential fraud, the mismanagement of money. It was a failed IPO there in 2019. I think the comeback that they had in 2021 when they came public again via SPAC was really surprising to me. There was actually a moment in time in 2021 where I felt, you know what, maybe just maybe in a post-COVID world, WeWork's model actually works. That it was ahead of its time that maybe we are moving to this co-working co-sharing office paradigm where because of the pandemic, it's not as if corporations want to have these massive headquarters, or major long-term leases, they want to go to this subscription model. I thought for a split second, it actually might work, but no, Sam Zell was still right. Now the company is on the verge of bankruptcy. It's just what an evolution over the last 5, 6 years.

Dylan Lewis: In addition to just being an incredible story to watch, WeWork is a major real estate tenant, especially in the New York City market. What does the uncertain future of this business bode for commercial real estate, especially in some of these big city?

Matt Argersinger: At the margin, it hurts a lot. Because I think this was a very popular tenant, became a very popular tenant for a lot of office buildings that were looking to fill space and lease a lot of square footage. This takes them out of that picture, or at least really hurts them in that. I think at the margin it certainly hurts. In the long run, it doesn't matter a whole lot. I think there's more to deal with in the commercial real estate space than the short-term office model. We've also got a deal to talk about this week that will make for some good happy-hour talk. Cannabis company Tilray is buying eight craft beer brands from Anheuser-Busch. The $85 million all-cash deal will give Tilray Shock Top, Breckenridge brewery, Redhook Brewery, among others. Jason, you're wearing a stone brewing shirt. Somebody go to you first on this one. Clearly a fan of the craft beer. Tilray is the fifth largest craft beer business in the US with this deal. What do you make of this? This is a huge transformation for this business.

Jason Moser: It is. It is a big transformation and this is really interesting because this takes me back to a company that I enjoyed digging into many years ago. One of the first companies I really dug into when I first got here at the Fool, Matt here at Boston Beer. We had such a good time digging into that and understanding the same and lineups brand. Another company that far less known was accompanied called Craft Brew Alliance. That's ultimately what this is. This collection of brands more, or less is the Craft Brew Alliance acquisition that Anheuser-Busch InBev completed, I think back in 2020. Brands like Redhook, and Widmer Brothers, you get square miles side, or in a number of others. They're good brands, they're not top-tier. I think Craft Beer has built a little bit of a snobby reputation, but that's for good and bad reasons, I guess. I think one of the challenges in the Craft Beer space, it has become very local, getting that stuff out nationally unless you had that distribution in place and a nationally well-known brand is just going to be difficult really to make a lot of progress. These are, I guess I'd call them second tier brands are not as well known, but in a lot of cases still very good beer. You look at Widmer Brothers, the history behind that beer had plenty of their offerings. It's a good stuff. I think this actually Number 1, this gives Tilray a chance to diversify a little bit, become a little bit more than just what they have been in pursuing the cannabis market. But also in the space where pricing is becoming a little bit tougher, I think they're going to be able to compete a little bit on pricing because these aren't brands that necessarily command top-shelf pricing, but I think that's OK in a lot of cases, consumers are looking to save a little bit here and there. You get a good quality offering without having to pay necessarily that same heady price tag.

Dylan Lewis: Let's get over to stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Matt, you're up first. What are you looking at this week?

Matt Argersinger: Dylan, I'm going with Sky Harbour Group. The ticker is SKYH and that's Harbour.

Dylan Lewis: Dan, immediately, this one from me is a bid out there on the risk curve. Not only did this company come public via SPAC, which I know is a four-letter word these days. It's essentially a pre-revenue company, but I love the business model behind this one. So Sky Harbour builds and operates airport hangers. They ran out to businesses and individuals that own private aircraft. They also offer a variety services related to that activity. If you think about how much demand there is for air travel, the desire for wealthy individuals, or businesses to fly into major markets but not have to deal with the time and hassles, it takes to go through traditional airport. I think it's an attractive model. Then I think I see big demand. There's certainly seeing big demand. Now, I have questions about whether they can reach scale quickly enough to be a profitable company. They report second record results next week. I don't own shares yet, but I'm watching this one really close.

Dan Boyd: Are these SPACs not scared you silly yet. What are you doing?

Dylan Lewis: I know.

Matt Argersinger: We're just talking about WeWork.

Matt Argersinger: I know, but I think at this point in 2023, maybe the SPAC actually survive like Sky Harbour, maybe that. Those are the ones that are going to do really well.

Dylan Lewis: Wow, pre-revenue company. Who are you, and what have you done with it?

Matt Argersinger: I had to go ahead to 180 from Ron Gross because I've been too much Ron Gross lately, as you know it's been.

Dan Boyd: The proverbial cap to you.

Dylan Lewis: Dan, a question about Sky Harbour.

Dan Boyd: When I saw that, you'd put us on the notes, Dylan, I got excited. I was like Sky Harbour in Phoenix. I've been there. I've been to that airport. Wonderful. Then when Matt pointed out the /u/, I knew something was up here. Then he said pre-revenue and I thought to myself, that it sounds like a company that don't make any money.

Matt Argersinger: You're not wrong, Dan.

Dylan Lewis: Jason, what do you have on your radar this week?

Jason Moser: Well, this is, I know Dan loves this company and one of his favorites Home Depot ticker is HD and then Home Depot earnings seasons wrapping up. We do have some retail earnings next week and Home Depot, I think kicks us off. Looking forward to seeing what the narrative is this go around. You look back the last quarter in management really noted the consumer shift away from products and toward services. Home Depot's results definitely spoke to that. Furthermore, their guidance spoke to that. They pulled back on guidance a little bit, noting that the consumer is a little bit more pressured than before. Some of their money was being allocated more toward services, things like travel as opposed to services. I do think it's interesting when we were talking about earlier on in regard to interest rates and talking about how many homeowners are now locked into these ultra-low interest rates, are these fixed mortgages that are 2-3%.

I put myself in that class. I consider that one of my greatest assets is our 30-year fixed mortgage below 3%, I think it is. I think that's going to keep a lot of people in their houses for a while. Typically, when people decide not to move but stick around their houses for a while, that lights to fire on some home projects, which could be good for their do-it-yourself segment. I think one thing to keep an eye on with Home Depot lumber deflation. That's something that continues to play out as a headwind on the top line. When you look at lumber as a part of Home Depot's business is about 9% of their overall business. We do see that pressuring the top line a little bit, although it's not as much pressure on the margin side, which is good for them. Pro backlogs remain healthy, but they are clearly lower than they were from a year ago. Larger scale products or projects are just being pulled back is just the money's not there. For me, it's going to be paying attention to how they see the rest of this year playing out, how they see this low interest rate, or this high-interest rate environment working in their favor or against them. See they mentioned anything about those low-interest rate mortgages.

Matt Argersinger: Jason, I think you just gave me an idea for official Motley Fool Money, merchandise. We could have t-shirts just say, my mortgage is below 3%.

Dan Boyd: That's a serious flex.

Dylan Lewis: A big-time flex. Dan, a question about Home Depot.

Dan Boyd: Jason, have you ever seen a Home Depot parking lot that wasn't busy?

Jason Moser: No. Any I go to a Home Depot fairly regularly because as a homeowner, I like doing that stuff, consider myself handy. I'm there pretty frequently. That's why I own shares myself. The crazy thing is the Home Depot that I go to, it's right next to a Costco and that thing has a parking lot that makes airports jealous.

Dylan Lewis: The Double Whammy that's going on Home Depot. Dan, which company is going on your watch list this week?

Dan Boyd: I don't love going to Home Depot, which is true. I do love the option to go to Home Depot. We're going to Home Depot this time.

Dylan Lewis: It's good to know that it's there. Jason Moser, Matt Argersinger. Thanks for being here, guys.

Jason Moser: Thanks.

Dylan Lewis: That's going to do it for this week's Motley Fool Money radio show. The show is mixed by Dan Boyd. I'm Dylan Lewis. Thanks for listening. We'll see you next time.