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Why inflation is the lesser evil · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:06
Speaker 1: Zada and Mike Armstrong.
1:11
Speaker 2: Chuck, Mike and Tucker with you here today, and as
1:14
Speaker 2: we take a look around the markets as we move
1:18
Speaker 2: into a new week, the Dow Jones Industrial Average is
1:21
Speaker 2: up point zero six percent, or twenty nine points. The
1:25
Speaker 2: S and P five hundred's up ten points, the Nasdaq
1:27
Speaker 2: is up fifty eight, So anywhere from about a tenth
1:29
Speaker 2: of a percent to a quarter percent move upwards on
1:32
Speaker 2: your major indices, all them. We're down very modestly to
1:35
Speaker 2: kick off the day, maybe quarter percent, not even in
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Speaker 2: most cases. And so again just kind of continuing this
1:42
Speaker 2: you know, grind up that we're seeing where there's not
1:45
Speaker 2: too much that's exciting that's happening in any of the direction.
1:47
Speaker 2: But it's just a slow and steady grind up quarter percent,
1:51
Speaker 2: half percent each day, and that eventually gets you into
1:54
Speaker 2: some pretty good places when you're looking at equities. When
1:56
Speaker 2: we take a look at what's going on in the
1:59
Speaker 2: bond world today, ten year Treasury down eight tenths of
2:02
Speaker 2: a basis point to four point one three to one percent.
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Speaker 2: The interesting thing that is worth noting last week, Mike,
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Speaker 2: what did the Federal Reserve do with the Fed funds rate?
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Speaker 2: They cut it. They did twenty five basis points. Okay,
2:16
Speaker 2: because the interesting thing is that, according to Mortgage News Daily,
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Speaker 2: the national average for the thirty year fixed rate mortgage
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Speaker 2: is back up to six point three seven percent. That
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Speaker 2: is a quarter percent move up in a span of
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Speaker 2: two days from where it was on the sixteenth of September.
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Speaker 3: So the exact same thing that happened last fall, it's
2:37
Speaker 3: gonna be cuts rates. It's gonna be wild if we
2:40
Speaker 3: end up seeing the exact same thing, it would be surprising.
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Speaker 3: Now it's again, it's been like three days, so let's
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Speaker 3: not overreact to this. But this is what we saw
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Speaker 3: last fall, where the Fed started cutting interest rates, Growth
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Speaker 3: came back and the ten year went back up north
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Speaker 3: of four and a half and the thirty year fixed
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Speaker 3: rate mortgage went back north of seven. I know that
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Speaker 3: every real estate age listening to our show right now
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Speaker 3: is like, Chuck, if that happens, I can't deal with
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Speaker 3: the two years in a row not heading into the spring.
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Speaker 2: I can't do it. So just know that we're thinking
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Speaker 2: of you. We can't control interest rates here on the show,
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Speaker 2: but it would be not great for the spring housing
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Speaker 2: season if we saw the exact same thing happen again
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Speaker 2: two years in a row.
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Speaker 3: Here last segment we were chatting a little bit about
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Speaker 3: the FED, and before we move on, I just want
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Speaker 3: to say thanks to listener Steve, who who emailed in
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Speaker 3: over the weekend or last week to the show with
3:31
Speaker 3: a really thoughtful question and commentary on the FED its
3:37
Speaker 3: role and was the reason we were in fact talking
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Speaker 3: about the FED during the last segment. So thanks Steve
3:43
Speaker 3: for listening. Youtubo can text the show at six one
3:45
Speaker 3: seven three six two thirteen eighty five and we'll do
3:48
Speaker 3: our best to get to questions and comments as they
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Speaker 3: come in. But thanks to Steve for listening and right
3:54
Speaker 3: now pretty thoughtful email.
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Speaker 2: A couple other items, Oil West Text Intermediate down eighteen
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Speaker 2: cents of barrel to sixty two fifty Right now, the
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Speaker 2: TRIPAA national averageur gas prices remains at three eighteen and
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Speaker 2: four tenths of ascent. Aside from a couple of days
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Speaker 2: here and there, we have been between three ten and
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Speaker 2: three twenty a gallon for the last six months with
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Speaker 2: no major moves in either direction. Finally, Gold up another
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Speaker 2: fifty four to ten and ounced to thirty seven to
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Speaker 2: fifty nine and ninety cents today. That's another one and
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Speaker 2: a half percent up. It is another new all time
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Speaker 2: high for gold, and the yellow metal continues to chug
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Speaker 2: along into the fall right now. So that's going on there.
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Speaker 2: I want to talk a little bit about this piece
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Speaker 2: here from Connor Sen in Bloomberg Opinion. It's titled Inflation
4:41
Speaker 2: is the Lesser Evil, and basically what it is arguing,
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Speaker 2: what Connor's arguing is, hey, until you start to see
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Speaker 2: some positive momentum developing in the housing market and in
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Speaker 2: the jobs market, the Fed's got to keep cutting rates
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Speaker 2: because we've forgotten how bad recessions are.
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Speaker 3: Yeah, Connor is not. This is not the first time
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Speaker 3: Connor has made this argument, and it is It is
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Speaker 3: an interesting, you know, thought exercise to go through what
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Speaker 3: is worse for the country a one percent rise in
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Speaker 3: inflation or a one percent rise in unemployment? And I
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Speaker 3: think I do buy his argument that for the nation
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Speaker 3: as a whole, a one percent rise in unemployment is
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Speaker 3: worse than a one percent rise in inflation.
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Speaker 2: The flip side.
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Speaker 3: Of that coin is a one percent rise in inflation
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Speaker 3: I think is far less popular with the general public
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Speaker 3: than a one percent rise in unemployment. We've talked about
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Speaker 3: this effect as well. But when inflation goes up, every
5:42
Speaker 3: single American feels it. Yes, when unemployment goes up, a
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Speaker 3: small fraction of Americans feel that. And so the think
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Speaker 3: I think the public opinion lesson we learned is if
5:54
Speaker 3: you're trying to get re elected, if you are trying
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Speaker 3: to determine am I doing a good job from the
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Speaker 3: general public's perspective, you know, inflation is a much more
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Speaker 3: serious problem than a slight increase in unemployment. But if
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Speaker 3: we're going to genuinely grade things on, hey, what's worse
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Speaker 3: for the nation, what's better for the nation, and what
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Speaker 3: would be more important to combat? I tend to agree
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Speaker 3: with Connor that higher unemployment is a bigger societal issue.
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Speaker 2: The counterpoint to what you just said in terms of
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Speaker 2: everyone feels higher inflation, not everyone feels higher unemployment. Not
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Speaker 2: everyone feels higher unemployment directly, but they do feel indirectly
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Speaker 2: in that Hey, when unemployment goes up, if you are
6:30
Speaker 2: looking for a new job, hard to find one, hard
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Speaker 2: to find one, and at your own jobs, your manager
6:36
Speaker 2: comes in and says, hey, great job Mike this year.
6:38
Speaker 2: Really appreciate you. You know, with all the work you know,
6:40
Speaker 2: it's been a tough year. You know, here's a firm handshake.
6:43
Speaker 2: We've had to let a lot of people go. We
6:45
Speaker 2: don't have room in the budget for raises this year.
6:47
Speaker 3: Here's a subscription to the Jelly Month of the Month
6:49
Speaker 3: club rather than your usual annual bonus.
6:52
Speaker 2: Exactly.
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Speaker 3: Yes, so, but I think still, you know the the narrative,
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Speaker 3: and I think the real evidence of the last five
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Speaker 3: years has been Wow, we have pretty good tools to
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Speaker 3: combat higher unemployment and make people feel like they are
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Speaker 3: at least dealing with it in different ways via unemployment
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Speaker 3: payments and especially during COVID, all sorts of extra benefits
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Speaker 3: that we're paid out. But when it comes to inflation,
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Speaker 3: it's just, hey, this is what it is, and even
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Speaker 3: my wage might be keeping pace with that, it still
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Speaker 3: feels really bad.
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Speaker 2: Now. The other counter to this is everyone always thinks, hey,
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Speaker 2: I'm a really good worker. I'm gonna be the one
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Speaker 2: who escapes any problems with headcount during a recession, and unfortunately,
7:40
Speaker 2: like that can't always be the case. Even good workers
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Speaker 2: lose jobs during a recession. Yeah, so I.
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Speaker 3: Ask the question. I think no, I answered my own question,
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Speaker 3: what's worse for society? A one percent bump up in
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Speaker 3: unemployment or inflation. And that's that's to me an interesting question.
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Speaker 3: What's worse for societ? I'd to check though, a ten
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Speaker 3: percent bump in unemployment or a ten percent bump in inflation.
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Speaker 3: So you're saying, does this change the higher it gets?
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Speaker 2: Okay, So let me just I want to make sure
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Speaker 2: that I'm just thinking of this the right way. Yeah,
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Speaker 2: would it be worse if we had fourteen percent unemployment
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Speaker 2: right now or thirteen percent inflation? Right? Probably fourteen percent unemployment?
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Speaker 3: Yeah, I guess it holds true regardless of the uh,
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Speaker 3: the percentage increase that you're talking about.
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Speaker 2: I'm not saying either a good but it's just like,
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Speaker 2: fourteen percent unemployment means that if you know seven people,
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Speaker 2: one of them is unemployed. Yeah, and if look, the
8:48
Speaker 2: average person knows more. If you know seventy people, seven
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Speaker 2: of them are unemployed and not you know, retired, like
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Speaker 2: if you know seventy working people, Yeah, I mean like that.
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Speaker 2: That's also there are two things that tend to be
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Speaker 2: really destabilizing to society. Really high inflation is one, and
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Speaker 2: really high unemployment is the other. Right, because it's either, hey,
9:12
Speaker 2: we're really upset because you're making us all pay too
9:14
Speaker 2: much for this, or hey, we're all sitting around here,
9:18
Speaker 2: we got nothing to do. Screw you guys. You know,
9:21
Speaker 2: like neither of these are good. Yeah, and so yeah.
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Speaker 3: It was just a thought exercise for me, like, is
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Speaker 3: there a threshold by which inflation becomes the bigger problem?
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Speaker 3: I don't think there is. I think unemployment for society
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Speaker 3: is always the bigger issue.
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Speaker 2: What's the ratio? What's the magic number? Then? Where if
9:41
Speaker 2: we say, okay, is a ten percent rise in unemployment
9:45
Speaker 2: or fifteen percent rise in inflation works? I think one
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Speaker 2: point five might be around there, because if you asked
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Speaker 2: me fourteen percent unemployment or twenty percent inflation, I might
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Speaker 2: go with the unemployment side. If you asked me ten
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Speaker 2: percent unemployment or thirteen percent inflation, I might go with
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Speaker 2: the unemployment. I mean, thirteen percent inflation is one and
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Speaker 2: a half times as bad as it got three years ago.
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Speaker 3: Okay, So interesting thought exercise about our own feelings about this. Yes,
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Speaker 3: does the FED share any of our feelings on this?
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Speaker 3: Or do they wait them?
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Speaker 2: No, they don't have feelings.
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Speaker 3: If you were to tie down FED members on how
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Speaker 3: they vote, do they wait these two equally, would they
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Speaker 3: agree unemployment is a worse problem for society than inflation?
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Speaker 2: Their actions tell you that they think that, yeah, because
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Speaker 2: they tend to agree with this, At least in J.
10:40
Speaker 2: Powell's FED. They have always aired on the more dubvish
10:44
Speaker 2: side because they have not wanted to cause a recession,
10:48
Speaker 2: whereas there have been ample instances where they have not been,
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Speaker 2: in my opinion, hawkish enough to stem the tide on inflation. Right,
11:00
Speaker 2: we should start our own central bank MIC. I feel
11:04
Speaker 2: like the existing one might have some problems with that.
11:06
Speaker 2: We could anti trust sure, yeah, you know, yeah, I
11:10
Speaker 2: don't think we'd have a case or funding and one
11:13
Speaker 2: does not simply anti trust. I think there's another verb
11:16
Speaker 2: I need to put in there, but no, just yeah
11:18
Speaker 2: throughout buzzwords. Okay, democracy, Let's take a quick break when
11:25
Speaker 2: we return, Let's do a little bit of trivia, and
11:29
Speaker 2: then we want to talk return to office or the
11:32
Speaker 2: housing market. Let's go at the housing market. Okay, let's
11:34
Speaker 2: talk housing when we return.
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Speaker 2: Peater from Washington Post many Americans can't buy homes, get jobs,
13:18
Speaker 2: or move in this stuck economy. And this is kind
13:23
Speaker 2: of what we're hearing from a lot of people. Pretty wild.
13:28
Speaker 3: The chart on the percentage of US population that's moved
13:31
Speaker 3: in the past year, we're down at something below twelve
13:34
Speaker 3: and a half percent as of just twenty twenty two.
13:37
Speaker 3: COVID didn't count, but yeah, we were up in the
13:41
Speaker 3: high teens in the two thousands and twenty tens decade,
13:46
Speaker 3: and we've dropped pretty precipitously.
13:50
Speaker 2: Around twelve percent. Yeah, it's anything you attribute that to
13:53
Speaker 2: other than housing costs. I mean, there was a Have
13:56
Speaker 2: we all just woken up to the fact that moving sucks? No, No,
14:00
Speaker 2: we haven't. I don't think that's it.
14:02
Speaker 3: I think remote work maybe plays a bigger role today,
14:07
Speaker 3: so that can account for some fractions.
14:09
Speaker 2: Like half of this happened two thirds of this happened
14:12
Speaker 2: before twenty twenty, right, you know, So was there this
14:16
Speaker 2: huge rise in remote work from twenty six twenty eighteen?
14:18
Speaker 2: Not really? I think, Well, let's actually no, no, no, no.
14:25
Speaker 3: I'm just thinking like how people did business has changed
14:29
Speaker 3: a lot over that time, but it changed a lot
14:31
Speaker 3: more severely in twenty twenty, So I tend to agree.
14:34
Speaker 3: I don't think that can be attributed too much. I mean,
14:36
Speaker 3: the Great financial crisis occurred in there and that forced
14:39
Speaker 3: a whole bunch of people to relocate. But again that
14:43
Speaker 3: dropped after eight. I think this is largely an affordability question, right.
14:47
Speaker 3: It dropped in O eight because people lost jobs and
14:49
Speaker 3: couldn't afford to move, and then it's dropped since then
14:52
Speaker 3: based on housing prices being through the roof.
14:55
Speaker 2: Let me just put out some alternative hypothesis and you
14:58
Speaker 2: can tell me if there's something to the more if
15:00
Speaker 2: they're dumb. Demographically we've gotten older, sure buy it. Does
15:06
Speaker 2: that have an impact because baby boomers saying, no, I
15:08
Speaker 2: just want to stay here, I'm not moving anymore, and
15:10
Speaker 2: so there's you know, greater percentage of people in that
15:12
Speaker 2: demo evans that could be part of it. Other things
15:17
Speaker 2: when we look at this from the perspective of hey,
15:20
Speaker 2: who typically does the most moving people in their twenties. Right, Again,
15:26
Speaker 2: it's a lot easier to move when you have no
15:28
Speaker 2: stuff than when you're taking the dog and the grill
15:33
Speaker 2: and all the stuff with you. Right. Sure, if we
15:37
Speaker 2: look at people in their twenties right now, are there
15:41
Speaker 2: changes in their moving habits? Not even talking about buying,
15:44
Speaker 2: but just again, this is moving. Is there something fundamentally
15:48
Speaker 2: different there? And I'm just trying to think of Look,
15:51
Speaker 2: when I graduated from school, you know, I might have
15:54
Speaker 2: you know, thirty people that I knew from my class
15:57
Speaker 2: that we're working in the city I was living in,
15:59
Speaker 2: and a bunch of them would move every year, and
16:02
Speaker 2: you get new ones coming in. Is there anything that's
16:04
Speaker 2: disrupted that the tooth?
16:07
Speaker 3: The only thing that I can think that's changed compared
16:11
Speaker 3: to a decade and a half or two decades ago
16:14
Speaker 3: is the financial piece of it. Those students are laying
16:18
Speaker 3: with more debt, and the cost of renting an apartment
16:21
Speaker 3: is a lot higher, even in when expressed as a
16:24
Speaker 3: percentage of your income. Like all of those things are true,
16:28
Speaker 3: the college debt and the college cost compared to what
16:31
Speaker 3: you can expect to earn after college is higher as
16:34
Speaker 3: a percentage, as is the rent.
16:36
Speaker 2: As a percentage of that entry level compensation. So both
16:39
Speaker 2: of those I think go back to the first argument
16:41
Speaker 2: of affordability. What about business consolidation And what I mean
16:45
Speaker 2: by this is if you look at, you know, the
16:49
Speaker 2: largest employers in the country, they take up a bigger
16:53
Speaker 2: share of the overall employment picture than they did previously.
16:56
Speaker 2: Is there anything too, Hey, I wud it used to
16:59
Speaker 2: be that I would have We've had to move across
17:00
Speaker 2: the country to work at Amazon. Now they've got an
17:03
Speaker 2: office in Boston. I can do it here. It could
17:10
Speaker 2: be done, like you can tell me it's dumb, like
17:11
Speaker 2: it's fine. You could see something I would be I'm
17:16
Speaker 2: trying to think it through.
17:17
Speaker 3: Hey, is there a bigger concentration and therefore no need
17:21
Speaker 3: to relocate? I don't know that there is much there
17:24
Speaker 3: because the overall if we were going to see an
17:27
Speaker 3: effect there, I would expect less overall employment because there's
17:31
Speaker 3: not as many competitors. There's just no need to hire
17:34
Speaker 3: quite as many people. There's not as much duplication of efforts,
17:36
Speaker 3: and we're not seeing that. We're seeing a total higher
17:39
Speaker 3: level of employment. So I'm not sure. I'm not tryed
17:41
Speaker 3: by that one.
17:42
Speaker 2: What about the businesses that we work in? In two
17:48
Speaker 2: thousand and six, there were fourteen million people working in
17:51
Speaker 2: manufacturing today there are twelve million. In two thousand and six,
17:56
Speaker 2: there were four million people working in warehousing. Today it's
17:59
Speaker 2: six million. There were twenty two million on various state, federal,
18:05
Speaker 2: and city payrolls. Now there's twenty three million. Leisure hospitality
18:09
Speaker 2: was thirteen million, now it's seventeen. Is there anything in
18:12
Speaker 2: terms of the mix of jobs that is making it
18:15
Speaker 2: harder to move because people don't have to move as
18:17
Speaker 2: much to find work.
18:19
Speaker 3: There could be something there. I'm not sure what would
18:21
Speaker 3: make you move more frequently. As a manufacturer, you've got
18:24
Speaker 3: to go where the factory is, you do again, I
18:28
Speaker 3: point to that as mainly a remote work factor. You know,
18:31
Speaker 3: how many people do you? I was talking to one
18:34
Speaker 3: just last Monday. I worked for forty years and investments
18:39
Speaker 3: used to fly all over the place and relocate for
18:41
Speaker 3: that next consultancy job. Today those same customers are perfectly
18:47
Speaker 3: comfortable doing all of those meetings via zoom.
18:50
Speaker 2: So what I do know is that when we look
18:54
Speaker 2: at what makes an economy dynamic, it is you can
18:59
Speaker 2: kind of like, you know, this is a circular logic
19:00
Speaker 2: and everything, but like the very definition of dynamic is
19:03
Speaker 2: like you know, in motion able to change. When people
19:06
Speaker 2: aren't moving either jobs or locations, things get a little
19:10
Speaker 2: bit more stuck and it's not good for the economy.
19:14
Speaker 2: We talk about things like, you know, money velocity. Hey,
19:17
Speaker 2: if your money's not turning over, if you're not you know,
19:19
Speaker 2: seeing it move throughout the economy, that's not good. It's
19:22
Speaker 2: the same with people. Yeah to a. I mean, you
19:25
Speaker 2: don't want like too much. We all need a little stability,
19:27
Speaker 2: but you need a little bit of you need the
19:30
Speaker 2: catfish in there to you know, move things around a
19:32
Speaker 2: little bit. Quick break. When we return, we got Wall
19:36
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Speaker 4: week after the Fed reduce interest rates last week. Investors
20:06
Speaker 4: are also weighing the loom of a potential or the
20:09
Speaker 4: looming thread of a potential government shutdown after a bill
20:12
Speaker 4: was rejected on Friday, and later this week, we'll get
20:15
Speaker 4: another look at inflation when the personal consumption expenditures Price
20:20
Speaker 4: Index is unveiled right now. The Dow is edging higher
20:24
Speaker 4: about thirty two points higher almost a tenth of a percent.
20:27
Speaker 4: SMP five hundred is up eleven points, nearly two cents
20:31
Speaker 4: of one percent, and the Nasdaq is up nearly three
20:33
Speaker 4: tenths of one percent, or fifty eight points higher. RUSS
20:37
Speaker 4: two thousand is mostly flat. Tenure treasureel flat as well,
20:41
Speaker 4: at four point one four five percent, and crude oil
20:45
Speaker 4: down about a third of a percent, rating at sixty
20:47
Speaker 4: two dollars forty five cents a barrel. Some merger news
20:51
Speaker 4: in the real estate space this morning after Compass agreed
20:54
Speaker 4: to acquire Anywhere real Estate for one point six billion dollars.
20:59
Speaker 4: Compass down about eleven percent, while Anywhere real Estate stock
21:04
Speaker 4: is surging about fifty two percent. Meanwhile, Pfizer agreed to
21:08
Speaker 4: pay up to seven point three billion dollars for anti
21:12
Speaker 4: obesity drug maker met Sarah. Pfizer stock is climbing over
21:17
Speaker 4: two percent elsewhere. The Washington Post is reporting that the
21:20
Speaker 4: Trump administration plans to announce today that pregnant woman's use
21:24
Speaker 4: of tailanol is potentially linked to autism. Shares in tailan
21:29
Speaker 4: all parent company ken View is thinking about seven percent.
21:33
Speaker 4: Fox up about one percent after President Trump yesterday said
21:37
Speaker 4: the Murdochs are likely to be involved in the deal
21:40
Speaker 4: to save TikTok. In the US, Morgan Stanley upgraded Applied
21:44
Speaker 4: Materials to overweight from equal way, where the bank noted
21:47
Speaker 4: that the chip maker trades at an attractive valuation relative
21:51
Speaker 4: to peers. Applied Material shares are up about three percent.
21:56
Speaker 4: I'm Tucker Silva and that is Wall Street Watch. And
21:58
Speaker 4: in the previous segment, we asked you trivia question which
22:02
Speaker 4: NBC sitcom was Lisa kudro on simultaneously as friends that
22:07
Speaker 4: would be mad about you. Our winner today was Tara
22:10
Speaker 4: from north Brookfield, mass Taking on the Financial Exchange Show. Teacher.
22:14
Speaker 4: Congrats to Tara. We play trivia every day here in
22:17
Speaker 4: the Financial Exchange. See complete contest rules at Financial Exchange Show.
22:21
Speaker 2: Dot com Return to Office seems like it's been in
22:25
Speaker 2: the news just about everywhere in the last year or so.
22:28
Speaker 2: My running theory is, hey, this is how companies are
22:31
Speaker 2: trying to get people to quit so they don't have
22:33
Speaker 2: to do layoffs.
22:34
Speaker 3: Whether it's JP, Morgan, Amazon, plenty of them have been
22:38
Speaker 3: either eliminating their remote work policies or reducing.
22:42
Speaker 2: Them in meaningful ways here and there. The interesting thing
22:45
Speaker 2: is that according to the data that is out there,
22:50
Speaker 2: you're not really seeing a net increase in corporate attendance.
22:55
Speaker 2: So what gives Yeah, I don't know, I would have.
23:02
Speaker 3: I guess the answer to me is, yeah, you've had
23:04
Speaker 3: some big public announcements, but either they didn't have teeth
23:07
Speaker 3: and they're not enforcing them, or you know, Microsoft is
23:12
Speaker 3: a big employer, but they're just not enough to move
23:15
Speaker 3: the needle on the national story here.
23:19
Speaker 2: Your take, no One. Actually, it's the combination of if
23:26
Speaker 2: you've been remote for any extended period of time, a
23:30
Speaker 2: lot of those people don't want to go back in
23:31
Speaker 2: the office full time. So they say, Okay, I'm not
23:34
Speaker 2: going back with this company. I'm just going to go
23:35
Speaker 2: find another remote role, even though there aren't as many,
23:39
Speaker 2: and the ones where hey, I need to work at
23:42
Speaker 2: this company because like I have no other options for
23:44
Speaker 2: this reason or another. I think a lot of them
23:46
Speaker 2: are working things out with their managers. As you kind
23:49
Speaker 2: of mentioned it. It's no different from you remember all
23:54
Speaker 2: the concern three four years ago when people were looking
23:57
Speaker 2: at like commercial real estate and they were like, oh,
23:59
Speaker 2: this is going to be a huge problem, like all
24:02
Speaker 2: these empty buildings, Like, no one's gonna pay these loans,
24:04
Speaker 2: YadA YadA, take down hedge funds. Yeah, no one wants
24:07
Speaker 2: to take the bath on it. So they just negotiate
24:09
Speaker 2: the deals out and they say, Okay, kick the can
24:12
Speaker 2: down the road. You know, fine, you can keep paying
24:14
Speaker 2: whatever you're paying for another X number of years and
24:17
Speaker 2: we'll deal with it later. It's probably the same with
24:20
Speaker 2: a lot of managers where hey, if you've got you know,
24:22
Speaker 2: a high performing employee who corporate saying hey, you got
24:26
Speaker 2: to get them back in the office, right, and they're like, no,
24:29
Speaker 2: I'm gonna walk. They're probably like, hey, all right, can
24:32
Speaker 2: you come back in like one day a week and we'll,
24:35
Speaker 2: you know, we'll figure it out, like it'll be okay.
24:38
Speaker 2: No one wants to do anything stupid, right. Yeah. It
24:42
Speaker 2: kind of feels like that to me.
24:44
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25:49
Speaker 2: Cardboard box demand is slumping, and this is something that's
25:53
Speaker 2: not usually good news for any economy. And the interesting
25:57
Speaker 2: thing on cardboard boxes is a lot of times when
26:00
Speaker 2: we think about cardboard boxes, we think about one company,
26:04
Speaker 2: and one company only Amazon Amazon. We're like, oh, that
26:07
Speaker 2: must be bad for Amazon. In fact, most cardboard boxes
26:10
Speaker 2: aren't actually used for shipping stuff, and you'll be like, okay,
26:15
Speaker 2: chuck late, what are they used for? The answer is groceries.
26:19
Speaker 2: You're thinking corrugated cardboard versus cereal boxes, cookie boxes, you know,
26:24
Speaker 2: all that stuff. The vast majority of cardboard boxes are groceries.
26:28
Speaker 2: So the question that I think is worth asking is, hey,
26:31
Speaker 2: does we cardboard box demand say something specifically about Americans
26:37
Speaker 2: and what they are buying and shipping or does it
26:40
Speaker 2: say something about how they're eating? Habits may be changing,
26:43
Speaker 2: and I don't know. What I do know is that
26:47
Speaker 2: overall cardboard box demand is declining by low single digits,
26:50
Speaker 2: which is pretty big in the broad scheme of things.
26:52
Speaker 2: I mean, you think about how resilient some of this
26:54
Speaker 2: stuff tends to be, and that's kind of a big deal.
26:58
Speaker 2: But I can't help but think about, Hey, one of
27:01
Speaker 2: the biggest trends in the last couple of years is
27:05
Speaker 2: these weight loss drugs or zempic and things like that.
27:08
Speaker 2: Are people shifting away from buying prepackaged snacks the way
27:13
Speaker 2: they used to? It is that where a lot of
27:14
Speaker 2: the drop is happening. Is it on the corrugated side
27:17
Speaker 2: where it's happening. I don't know, because we don't really
27:21
Speaker 2: get into it. But these numbers are pretty stunning.
27:25
Speaker 3: So boxmits overall have fallen from the record highs reached
27:28
Speaker 3: during the pandemic, No kidding, makes sense to the lowest
27:31
Speaker 3: level since twenty sixteen. Okay, you know, I could buy
27:34
Speaker 3: that though it has been a changing economy, you have
27:39
Speaker 3: people not feeling so good about their financial future. Okay,
27:42
Speaker 3: I can buy that. We have a lot of other
27:44
Speaker 3: statistics that are comparable to twenty sixteen. On a per
27:47
Speaker 3: capita basis, box shipments per American are down more than
27:52
Speaker 3: twenty percent from nineteen ninety nine, and box shipments specifically,
27:59
Speaker 3: I suppose that does still include the cereal box too. Yeah,
28:02
Speaker 3: that's like, it's not like not to end user. Correct,
28:05
Speaker 3: it's it's still just total boxes. But the lowest per
28:09
Speaker 3: capita since ninety nine to me is shocking because Amazon
28:15
Speaker 3: didn't exist in the same way it does now at
28:17
Speaker 3: ninety nine.
28:18
Speaker 2: No, but how much more efficient are they at packing now?
28:21
Speaker 2: And this is the other thing that I get into overall,
28:24
Speaker 2: when you look at what boxes are measured, and they're
28:26
Speaker 2: measured in square feet, and so if you are seeing
28:31
Speaker 2: the same number of items being shipped in much less
28:36
Speaker 2: square footage of box. I mean, how many times in
28:38
Speaker 2: like two thousand and seven did you order a new
28:40
Speaker 2: TV remote and it came in a box the size
28:43
Speaker 2: of the Chrysler building.
28:44
Speaker 3: All right, So yeah, here's here's my answer. Then, year
28:47
Speaker 3: over year declines in box shipments is a tell about
28:51
Speaker 3: the economy overall. Twenty year changes in box shipments tells
28:56
Speaker 3: you nothing.
28:57
Speaker 2: Correct the twenty year because that's like saying, well, we're
29:00
Speaker 2: burning less, you know, aviation fuel than we used to. Yes,
29:03
Speaker 2: that's because generally each year we get like three percent
29:06
Speaker 2: more efficient through newer engines and things like that.
29:09
Speaker 3: But year over year changes can tell you something. It
29:11
Speaker 3: could be, it could be I'm not saying it'll tell
29:14
Speaker 3: you that it's a weak economy, but I do think
29:16
Speaker 3: it can tell you something that American behavior is changing,
29:21
Speaker 3: and generally, I think my conclusion would be they seem
29:24
Speaker 3: to be buying fewer things. Although no, that doesn't really
29:29
Speaker 3: work out in retail sales day.
29:30
Speaker 2: Look at the This is why I'm saying, like, I
29:32
Speaker 2: don't know what this means. It means something, but I
29:38
Speaker 2: don't know what it means. Bad news for creators of
29:44
Speaker 2: cardboard boxes. Yes, provisionally, the only thing we can declare correct,
29:48
Speaker 2: Like when you put a melting ice cube in a
29:50
Speaker 2: cardboard box, nothing good happens. So I can tell you
29:55
Speaker 2: like that that business is a problem right now. But
29:59
Speaker 2: do I know what it says about the US economy?
30:03
Speaker 2: I really don't. I'm kind of confused about it because.
30:08
Speaker 3: You can see why you would have bet on the
30:10
Speaker 3: other side of this trade, by the way, right totally
30:13
Speaker 3: you are like, Oh, I guess if you had to
30:15
Speaker 3: be buying more and more stuff. If you had asked
30:17
Speaker 3: me in twenty fifteen, where is demand for cardboard boxes
30:20
Speaker 3: going to go up? There would only be one answer,
30:23
Speaker 3: and it'd be way up, and it would have been
30:25
Speaker 3: dead wrong.
30:25
Speaker 2: Yeah. So I don't know what this means, but it
30:30
Speaker 2: means something, which should also be the model of our show.
30:37
Speaker 2: I don't know what this means, but it means something. Yeah. Yeah,
30:40
Speaker 2: put it on a shirt. We'll do it up. Let's
30:42
Speaker 2: take a quick break. When we come back, it's time
30:44
Speaker 2: for stack Roulette.
30:46
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32:06
Speaker 2: Michael, what have you for? Stack roulettes. Millennials are stuck
32:09
Speaker 2: in an old lazy story.
32:10
Speaker 3: Here's the piece from Bloomberg, basically making the point that
32:15
Speaker 3: the narrative about millennials where they couldn't afford anything, they
32:19
Speaker 3: were bad with money and everything was stacked against them,
32:25
Speaker 3: but mostly that they were lazy and bad with money
32:28
Speaker 3: has once again proven to be Maybe it was true,
32:32
Speaker 3: but it hasn't affected their ability to move on in life.
32:37
Speaker 3: Here are some statistics about the average American millennial these days.
32:42
Speaker 3: Fifty five percent own homes. They're now nearly a third
32:46
Speaker 3: richer than baby boomers were at a similar point in
32:48
Speaker 3: their lives. Millennials own a dollar thirty five for every
32:53
Speaker 3: dollar boomers did at the same age Millennial. I guess
32:57
Speaker 3: that's not inflation adjustice is inflation suitlation adjusted?
33:01
Speaker 2: Okay?
33:01
Speaker 3: Millennial households average net worth around ninety thousand dollars in
33:05
Speaker 3: twenty sixteen, now estimated to be around four times that size.
33:08
Speaker 3: So again, what we've basically found is all these doomsday stories.
33:14
Speaker 2: About how millennials were going to.
33:17
Speaker 3: Completely shake everything up from demographics standpoint and wealth perspective
33:22
Speaker 3: have been flipped on their head once again. And I
33:25
Speaker 3: found this one interesting because I was just at a
33:26
Speaker 3: conference and one of the pieces that was being talked
33:29
Speaker 3: about was gen z and how different they are and
33:33
Speaker 3: how they don't like to stay in the same job
33:34
Speaker 3: for long, And I just.
33:36
Speaker 2: Wait a minute, is that is that the millennials music
33:38
Speaker 2: I hear.
33:39
Speaker 3: I took a step back and I said, guys, this
33:42
Speaker 3: is the exact same thing they said about my generation.
33:44
Speaker 3: Guess what, there are a bunch of twenty something year
33:46
Speaker 3: olds that don't have families, don't have big paying jobs,
33:51
Speaker 3: and don't own homies. Yet give it a decade, and
33:54
Speaker 3: I bet they're going to want to stay in jobs
33:56
Speaker 3: for longer, get stability from benefits, and completely contradict everything
34:01
Speaker 3: that you're talking about saying about them right now.
34:03
Speaker 2: Because this is how it always is, always how it is.
34:06
Speaker 3: So I would just encourage everyone to be very suspicious
34:10
Speaker 3: of any publication telling you that this generation's different. In
34:14
Speaker 3: some they are different. Of course they're different. They listen
34:16
Speaker 3: to different music, they wear different clothes. Even those things
34:20
Speaker 3: repeat themselves. But when they get to their mid thirties
34:23
Speaker 3: and start having kids and careers, I'm betting that they
34:26
Speaker 3: look a lot like millennial generation did, and then Gen
34:30
Speaker 3: X before that and Boomers before them.
34:32
Speaker 2: Oh you mean that the boomers that were all the
34:33
Speaker 2: hippies go into woodstock, right? You know? Like this is
34:37
Speaker 2: the thing, is the case. Twenty three year olds are
34:40
Speaker 2: going to twenty three year old, that's what they're gonna do.
34:43
Speaker 2: And if you're just gonna like see every new generation
34:46
Speaker 2: of twenty three year olds coming through and be like, Oh,
34:49
Speaker 2: they're lazy and they can't do any work, and they're not,
34:53
Speaker 2: you know, serious people. None of us were serious people
34:57
Speaker 2: at like twenty two, not consistently at least, I mean,
35:00
Speaker 2: most of us pretended to be for a while. But
35:03
Speaker 2: like when you're twenty two, a lot of dumb stuff
35:07
Speaker 2: is done by you.
35:09
Speaker 3: I think there are some legitimate truths and differences between
35:12
Speaker 3: these generations. Like I've seen some pretty compelling stuff like, oh,
35:16
Speaker 3: you know, baby boomers are far more reliant, for example,
35:21
Speaker 3: on in person institutions that can visit in person, whereas
35:26
Speaker 3: you know, younger generations don't put as much of an
35:29
Speaker 3: emphasis on that sort of thing. And so there are
35:32
Speaker 3: some differences that I think are out there, but.
35:35
Speaker 2: Even that's just mistaking. Like the difference is in the means,
35:40
Speaker 2: not in what's actually being done. And like what I
35:42
Speaker 2: mean by that is every generation has the stuff that's
35:45
Speaker 2: like kind of sacred to them, is like the things
35:48
Speaker 2: that they remember from when they were like twenty three,
35:51
Speaker 2: because like those are like your formative experiences, and so
35:56
Speaker 2: you think about it. And just as an example, when
35:58
Speaker 2: I talk to you know, my parents about when when
36:00
Speaker 2: they were growing up, they'd be like, oh, yeah, I
36:02
Speaker 2: like to use the phone. Like man, when we were
36:04
Speaker 2: first young, like we had party lines and you know,
36:06
Speaker 2: you were you know, have to make sure that no
36:08
Speaker 2: one was on those. And then finally it was just
36:10
Speaker 2: okay using the house phone, and you'd use the house
36:12
Speaker 2: phone the whole time. For you, me and Tucker, we
36:15
Speaker 2: still remember dial up internet and if you were on
36:17
Speaker 2: the dial up internet, no one could call the house
36:20
Speaker 2: and that was like the thing. And the way that
36:22
Speaker 2: you'd communicate wasn't on the phone. It was their Aol
36:25
Speaker 2: instant messenger, and now it's snapchat and TikTok and like,
36:29
Speaker 2: the tools evolve, but ultimately you're doing the same thing.
36:33
Speaker 2: You're just communicating or doing something through a different way.
36:36
Speaker 2: So I don't think there's any real fundamental difference between generations.
36:41
Speaker 2: It's just they use whatever tools are new at the time.
36:44
Speaker 2: Except for those gen xers. Those guys are screwed up.
36:46
Speaker 2: Who see. That's the gen X joke is that no
36:50
Speaker 2: one remembers the gen xers and all the ones listening.
36:53
Speaker 2: Oh juggle, you remembered us. I did. I appreciate you here,
36:56
Speaker 2: Thanks for listening. I also want to say one thing
36:59
Speaker 2: about millennials, and this this piece here, it's talking about
37:02
Speaker 2: you know how well they've done financially. Now, fascinating chart
37:06
Speaker 2: that my buddy Brent Donnelly put together. He's my favorite, Brent,
37:10
Speaker 2: and the S and P five hundred it's ratio on Friday,
37:14
Speaker 2: from its twenty year low got above ten x. The
37:18
Speaker 2: S and B bottomed at six sixty six back in
37:21
Speaker 2: two thousand and nine, and it went over sixty six
37:23
Speaker 2: hundred in the last couple of days. It's only the
37:26
Speaker 2: second time in history that the S and P five
37:29
Speaker 2: hundred has ten x within a twenty year window. The
37:33
Speaker 2: only other time was the tech bubble again, when it's
37:38
Speaker 2: fifteen x from its low. Okay, so you're saying we
37:42
Speaker 2: got a ways to go. We could have like another
37:44
Speaker 2: fifty percent from here, who knows. But the point that
37:46
Speaker 2: I make millennials have been helped out by a generational
37:50
Speaker 2: market over the last fifteen years where all stock and
37:53
Speaker 2: really even if it's just putting stuff into a four
37:55
Speaker 2: oh one k, you've been helped by that and so
37:59
Speaker 2: the thing that I think you do, you have to
38:00
Speaker 2: be cognitant of markets. Typically don't do that every fifteen
38:04
Speaker 2: to twenty years. You need to think about, Okay, if
38:08
Speaker 2: gen Z is behind the eight ball, they're probably not
38:10
Speaker 2: going to be assisted by the same thing. Let's take
38:13
Speaker 2: a quick break for the entire rest of the day,
38:17
Speaker 2: and we're going to see you tomorrow on the financial Exchange.
38:20
Speaker 2: It'll be great.