Where Consumer Confidence Sits Right Now

0:00All right. So we're going to talk about where consumer confidence sits right now. And Neil, I came up with this topic because I was at an event last week and there are a lot of YPO-ers that were there. So a lot of entrepreneurs or operators, owners. You mean you were at a YPO event last week? Well, yeah. I was at a YPO event last week. No, but no, no, no. It wasn't just a YPO event because they brought key associates, some marketing leaders. So that's why I said it that way. Okay. Because, yeah, I'm like, I got a picture from David. He's like, oh, I'm with Eric and then we're at a YPO event. Yeah, yeah, yeah.

0:30No, there are a lot of marketing leaders there too. So I met a guy and he runs a company in Canada where they have hundreds of brick and mortar stores and they really look at, they sell things that are trending, right? And so what I mean by that is if you see a product on TikTok, then, and it seems like a product that a lot of people would buy, well, they would be the first ones that would be on top of it, right? And so my main point here is, as I was talking, I was like, where do you see consumer sentiment right now? What kind of trends do you see? And this guy was like, well, we haven't seen spending slow down from Gen Z customers.

1:10So kids, basically, kids to teenagers. They're spending a bunch because really, they don't have anything to do after school. And so they have money, they have allowances and things like that to spend. Now, where they see spending, where spending has really dried up ever since 2022 is with moms. Moms have stopped spending. They're taking a defensive position, just like companies are taking a defensive position. So largely, that's interesting to me because the adults have stopped spending at least. And I think when Neil and I talk on the phone, we're just like, that's our sense too. Looking at ad agency data, looking at clients and all that, and even talking to friends, it feels like everyone's playing defense.

1:45And so I thought that was an interesting data point to kind of revive this conversation. The funny thing is, is Dentsu just took down their forecast. Their stock went down because of earnings and what's happening with Outlook in the future, which is one of the biggest global ad agencies. I think they have like 60 plus thousand employees. WPP, and I believe it was also Omnicom, said things aren't that bad. But you want to know what no one's really thinking about when these ad agencies are talking about income? A lot of marketing spend happens in Q4, and they're really going to see it in Q4, and they're really going to feel the pain.

2:22With interest rates just continually climbing, I understand in tourism and places like that, people have been aggressive in hiring. Airbnb ended up releasing something about sentiment. The Airbnb founder, Brian Chesky. Brian Chesky. And I believe there, I could be wrong, but I'm pretty sure when they did that, their stock went down. I'm actually trying to look it up right now. No, they're, they're up in the last, no, they're down 5 % in the last month, 5.5. Where was the CEO? Airbnb, Airbnb, Airbnb goes back to its roots, focusing on private room rentals. There was a whole article on this. I forgot where it was.

3:04I can't find it, but it was just a little bit nervous on the future and what it holds. And people are slowly starting to see the results from the bad economy. And when I say results, as in things aren't going as well as they thought. And if I had to guess, the Airbnb announcement was probably May 9th, because that's when the stock dipped a lot. So I'm pretty sure that's when Brian ended up saying that news. I'm trying to actually find it. It's on CNBC, Brian, Airbnb, CNBC. I wish I pulled that up, but you can continue as I look it up, Eric. Yeah. You know what I'm trying to pull up right now is the Association of American Railroads.

3:49They will always show real time kind of traffic data on how really. So here, I'm trying to pull it up right now. Oh, I can't pull it up. So anyway, my point is consumer sentiment is coming down. And a lot of it, a lot of the spend seems to be propped up by younger people, at least according to this person. And so when I talk to a lot of entrepreneurs, and I think Neil has done this as well, the sentiment is still there's more pain to come. And I think taking a defensive posture, just not financial advice, by the way, but at least I'm taking defensive posture. I believe Neil's taking a defensive posture as well.

4:26And we're kind of waiting to see how things unfold. Now is not necessarily the time to be aggressive. It's not financial advice. It's just what we think. And your mileage may vary though, right? Because depending on the industry that you're in, maybe now is the time to be aggressive with your marketing. But I think I'm just speaking in general terms right now. And these are just two people with their thoughts and who knows what's going to happen. Yeah, we don't know what's going to happen, but we are seeing it on the marketing side when we look at all ad agencies that we know, like the founders.

4:58I know a lot of these guys who have sold their company for 500 plus million dollars. That's a lot of money seeing 20, 30 % drops in revenue. Just think about that for a bit. When people cut in a bad market, what do they cut first? Marketing. Why do they cut marketing? Typically because they're not seeing the results that they used to. It's not that someone's not performing. A lot of times it's because the economy or other factors that they can't control. Now let's be logical for a minute. Whether the economy is down or up, if companies could keep spending more and make way more revenue and profit, do you think they would keep spending even in a down market?

5:35Yes, of course. Who's going to turn away free profit? The reason companies are seeing a pullback isn't because of, hey, people are worried, it's because businesses are actually seeing a pullback in revenue. Dude, check this out before we go. So I'm sharing my screen. So what I like to look at, I learned from Uncle Warren Buffett here. And this is when you search for weekly rail traffic data, this shows the railroads, basically stuff being shipped, right? Like stuff moving around, inventory being moved around, people purchasing stuff, right? And so in the red line here, you can see this is 2021.

6:10And 2021, we know that to be a pretty good year because a lot of printing going on, a lot of stimmy checks, a lot of PPPs and things like that. So you can see that it's a pretty healthy, it's where the chart is the highest, right? Orange is 2022. And then this bright blue over here is 2023. It's significantly less than the volume from 2021 and 2022. Am I making sense here so far, Neil? It is. So think of railroads as products moving, whether it's oil or whether it's transportation oil or packages or goods, just stuff moving. If there's less demand, what happens? Less people put stuff on those trains so things aren't moving as frequently, which means sentiment is down overall.

6:57Yep. And this is 2020 when the sickness hit, We'll just call it the sickness so we didn't get filtered. And you can see it dropped a ton, right? It dropped like a bunch of bricks. And then, oh, here comes the money printing machine. And it goes up, up, up, up, up, right? And then, you know, at the end of the year, it's, or what is it? Maybe the beginning of the year, it slows down. But this is bad. So this is pre-recession too. Like we haven't even declared a recession yet. No. And it doesn't matter if we declare a recession or not. We all know that the economy is not as strong as people are saying or, oh, it'll be a soft landing or not.

7:36We're not economists. We don't know any of this. But what we do know is we've already felt some of the impact. Is it going to get worse or better? Eric and I can't predict either of that. I believe Eric and I's sentiment is both that it's going to be still painful for the rest of this year and even going into next year. Hopefully next year it starts turning around, but it's not going to be a light switch where it just all of a sudden gets better. That's not usually how things work. but it'll take some time and we're going to be in some pain for a while. Mark my words too. When, when the sickness first hit, we thought we'd be out of it in a couple months or so and we're way off.

8:10And so if we just say, Hey, this is only going to last a year or two years or so, who knows, man, some of these things have lasted decades or sometimes they lasted a couple of years. So who knows? That is it for today though. You do your own research. Hope you enjoyed this episode. Please don't forget to rate, view, subscribe, and we will see you later.