In this podcast, Motley Fool analyst David Meier and host Mary Long discuss:
- The macro factors influencing The Fed's interest rate decision.
- CEO Andy Jassy's letter to Amazon employees.
- Albertsons turnaround and market-beating potential (or lack thereof).
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A full transcript is below.
This podcast was recorded on June 18, 2025.
Mary Long: Andy Jassy has got a warning for Amazon employees. You're listening to Motley Fool Money. I'm Mary Long, joined today by David Meier. David, great to see you. Thanks for being here.
David Meier: Great to see you, too.
Mary Long: We're going to dive right in, but before we get to today's main stories, first, we got to step back and highlight some of today's headlines. David, here's what's happening in the business world that caught my eye this morning. Perhaps, first and foremost, the Fed meets later today after we record the show. Economic data suggests that inflation is receding, that the labor market is relatively solid. Typically, that would indicate that the central bank is more likely to back off and lower rates, but Powell seems unlikely to do that, even though he's facing continued pressure from President Trump to do so. We'll park on that in just a minute once we get to the rest of the headlines. Another thing that caught my eye, the Genius Act passed the Senate yesterday. If you're wondering what that is, it's about Stablecoins.
The bill still needs to pass the House and to be signed by the president before it or to become law. Largely what it seeks to do is regulate Stablecoins. It would require Stablecoin issuers to hold reserves that fully back those Stablecoins. It also proposes a federal framework for Stablecoin issuance at a time when companies like Amazon and Walmart are allegedly moving toward Stablecoin style payment options. Last but not least, we got more news from Congress. Bloomberg reported yesterday that the White House is considering policies that would ban pharmaceutical companies from directly advertising to patients. If this would go into effect, it would leave a nearly $11 billion hole in the advertising world. In 2024, pharma companies spent $10.8 billion on direct to consumer pharmaceutical ads. The US is an international anomaly in this space. It's one of the only countries that allows for DTC advertising of pharma products. The only other country that allows this is New Zealand. David, lots of time on the headlines, but let's park on the Fed meeting for a minute. I mentioned slowing inflation and perhaps surprisingly solid labor market up top. Those indicators would typically suggest a rate cut, you've got a lot of other things going on in the world today. You've got continuing attacks and tensions between Israel and Iran. You've got rising oil prices. You've got the unseen impact of tariffs. If you're Jerome Powell, what are you looking at to make your decision that's going to come out later today?
David Meier: All that uncertainty ahead, and you touched on a lot of it. [LAUGHTER] Yeah, if we go back to the tensions in Israel and Iran, which could push up oil prices, that's a major contributor to inflation. We don't know the impact of tariffs. Are they on again, off again? What's the rate? The rates going up? The rates coming down. We just don't know. But most of those things that we've talked about, could actually push inflation higher. I understand the idea behind cutting rates, but cutting rates now would actually be a catalyst for even more inflation. I actually think if they cut rates anytime soon, the bond market is going to sell off. What that's going to mean is higher rates. It's not going to go as they intend. If I'm Jerome Powell, I'm looking at it the uncertainty, I'm not changing rates right now.
Mary Long: With that in mind, let's switch places. If you're not Jerome Powell anymore, but you're back to being yourself, senior analyst David Meier. [LAUGHTER] Do you plan to make any changes to your portfolio based on Powell's decision today, whatever it may be?
David Meier: No, not today. The reason is is because I don't think rates are going to change. But more importantly, nothing is being done to change my process right now. Me and other fools, we look for great companies, strong advantages that have large market opportunities ahead of them that they can capture and that are trading at reasonable prices for long term results. What Jerome Powell or any Fed share does to short term rates doesn't really affect that. Unless there's something happening in the economy that is forcing them to change rates, then I would have to incorporate that into my process.
Mary Long: David Meier, it sounds like you'd make a pretty good Jerome Powell, but we'll keep you as David Meier. We like it that way. That's our news rundown. Later on in the show, we'll be talking about Amazon and AI plus Albertsons' turnaround. But before we get to all that, a quick word from our sponsors.
We're back and we're going to be talking a bit about Amazon. CEO Andy Jassy sent out a letter to employees the other day that's making headlines. It had the vague but newsy title, some thoughts on Generative AI. David, the memo walks through examples of Amazon's AI progress. There's more to it that we'll get to in a second. But we'll pause here. What do you think Amazon's biggest AI play is right now?
David Meier: Right now it is still providing AI infrastructures to customers through Amazon Web Services. That is just enormous. Demand is very strong, and we're still very early in that cycle. We know companies want to bring AI into their fold as a capability. Yes, lots of them are turning to AWS. The other place, though, is advertising. Think about Amazon has an amazing amount of data on all the products that it sells and where advertisers want to make product placements and things like that. AI will definitely help customers place ads better, which should lead to higher prices for ads, which would be good for Amazon shareholders.
Mary Long: The beginning of the letter, I think Jassy took about 15 paragraphs to walk through the AI advancements that the company was making. But the big point of it, or at least what caught the attention of Amazon employees was Jassy's note about employment. He warned that the AI technology is likely to replace employees in future years. It was not specific about other details, like when exactly this might happen and what jobs AI might fully replace. This is not terribly different or surprising. Jassy is not the first CEO to make these vague comments. Whenever these headlines come out, they make headlines, but there can be noise. What should investors actually take away from this letter?
David Meier: You're right. AI is definitely going to change the way employees work. Employers know this, employees know this. We just don't know how that change is going to play out right now and that's a little scary. But as an investor, what I want to hear is, I want to hear how companies are managing both their technical capital, meaning how much are they investing in AI? Where is that money going? How is it doing? But as well as how is their human capital? What investments are they making there? Because at the end of the day, people are still important. For me as an investor, as someone who looks at management as an important category to analyze when looking at an investment opportunity, I want to see those who make their human capital more productive not just by cutting. That's the easy thing to do. I want to see them lead and bring the human capital to make it more productive that's beneficial for the company, beneficial for the employees, beneficial for all stakeholders, and in the end, beneficial for shareholders.
Mary Long: I'm glad you mentioned human capital. I guess my follow up question would be, how exactly do you as an investor, measure that, evaluate that, and keep track of it? You talked about this a bit with Nick Sciple another analyst on The Morning Show earlier today. While you've got Amazon and others saying, AI is going to trim the workforce, it's going to take jobs. You also got news that Meta allegedly offered $100 million bonuses to snag OpenAI's top employees. As you AI products matter, but right now, you also need smart people to build those products. As an investor, how do you get a good sense of which companies are winning the race for AI talent? Is it just, hey, who's shelling out the most money to get these big names?
David Meier: Absolutely not. Think about sports, you do want productive athletes on the field, on the court, and sometimes you have to pay for them. That's the way markets work. But paying the most for talent is not necessarily winning the race for talent. What I want to see is I want to see companies getting the most out of their talent. That's difficult to measure. I'm not an employee at any of these companies, so I don't have inside information to see how things are going but I can use the financial statements, I can use management's commentary. I'm going to give you a quick example with a company that I'm fairly familiar with called Sport Radar, the ticker s SRAD. They recently made a big investment in AI and AI talent. They actually restructured their business at the end of 2024 in order to make AI the focus. We're already seeing the direct impact of that. We've seen a little bit stronger growth, a little bit better cash flow. We have commentary from management saying, this is working. Again, it's ROIC. It's return on investment on talent, not just investment.
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Mary Long: We'll keep on the talent train for a bit, but attack it from a slightly different angle. The Wall Street Journal had an interesting profile out the other day of Susan Morris. She's the CEO of Albertsons. She just came into this role about a month ago, but she's been at the company for decades, got her start working at the grocer when she was in high school, selling lottery tickets at the store's customer service counter. Morris comes to the helm of Alberton's when the company is in a bit of an interesting spot. Albertons spent years trying to merge with Kroger only to have had that deal blocked in December and seems to be in a bit of a pickle right now. In the company's last fiscal year, its profit declined 26%. Morris, for her credit, has plans to cut cost and save about $1.5 billion over the course of the next three years. But still, seems to be a tough time to be at the helm of Albertsons. David, how much of this company's troubles have to do with the blocked Kroger merger?
David Meier: Probably not much. I would hope that the executives there could walk and chew gum at the same time. What I mean is, yes, it does take time and effort to try to effect a merger. But at the same time, the day to day focuses on the operations of the business. I would think it's more of a day to day thing, like how many customers are coming in? Do we have the right merchandise? How much is it costing to do this? How are our labor relations, all those things like that. Like I said, I think the merger blocked merger didn't help. But these are things that should have been paid attention to along the way.
Mary Long: Morris's plan involves some cost cutting. Is there anything else that you would like to see in order for her to successfully turn this company around?
David Meier: Yes, cost cutting is obviously the easiest thing, the low hanging fruit. The bigger challenge would be, do I have the right data about what merchandise I need to put in the stores? Are the customers that I'm attracting, are they buying the things that I have in the store? What are my price points? Are those right? How much promotion, couponing? This is a very complicated business. We have to get all of those things right, and the worst part of it is, it's only to make a very slim margin. Now, this is the way the grocery business works all over. None of this is really unique to Albertsons. Albertsons has to basically get its own shop in order, pardon the pun. It's going to take getting in, again, to the details of what is everything that is happening in our operations. From Susan Morris' background, she might be the perfect person to do that, given that she used to work directly in the stores.
Mary Long: Her background, notwithstanding, how much faith do you actually have in her ability to execute this? If you look at this stock, do you think that Albertsons has the potential to beat the S&P over the next five years?
David Meier: That's going to be difficult, but I think it's difficult for any grocer. Again, we're talking companies that make on the order of 1-3% margins. This is about throughput. You need to get lots of customers in the store buying lots of things all the time. The other challenge that they have, is we don't necessarily buy things the same way we used to 10, 20 years ago, maybe even two years ago. We're starting to see the rise of Instacart and companies like that. Again, this is why I think you need to go back to the data. What is the data telling you about what people want and where is Albertsons meeting them in order to effect that transaction?
Mary Long: We'll pivot briefly to Albertsons perhaps chief competitor, Kroger. That grocer reports on Friday. Is there anything that you're going to be looking out for to gauge a success of that business or just maybe the industry at large?
David Meier: I will say this. I took a quick peek at the Kroger stock chart, and because it's not a company I follow enormously, I don't follow it a lot. It's actually done very well. If I look at their margins, they're pretty steady. Growth is slow. But what I want to know is, what do they say about the consumer? Because if they say the consumer is healthy shopping with them and things like that, one, not only is that good for Kroger, but two, that should be a good sign for the rest of the economy broadly.
Mary Long: 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. 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 are sponsored content and provide for informational purposes only. To see our Fool advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Mary Long. Thanks for listening. We're off tomorrow for Juneteenth, but we'll be back on Friday. See you then. David Meier, always a pleasure to have you on. Thank you so much for spending your morning with us and for dropping some insights from Motley Fool Money.
David Meier: Thank you for having me.
