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Why a 10% credit card interest rate cap a bad idea · The Financial Exchange Show

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Speaker 1: Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and Chucker with you. And we've got markets
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Speaker 2: not really doing.
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Speaker 3: Much of anything, quite honestly, they're selling off in early
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Speaker 3: trading this morning, and we admit it this very minute.
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Speaker 2: Yeah, you know, like the SMP is literally flat on
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Speaker 2: the day. Yeah, Dow was off eighty six points, the
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Speaker 2: Naazak composites up twenty three. So it's like everything's within
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Speaker 2: like a tenth or two tenths of a percent of
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Speaker 2: where it closed. Tenure Treasury selling off again like one
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Speaker 2: point four basis points almost nothing, four point one eighty
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Speaker 2: five percent. Dollar Index down zero point three six percent
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Speaker 2: to ninety eight point five to three five.
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Speaker 3: The one place you are seeing a fair bit of volatility.
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Speaker 2: Metals, same place you've been seeing it for the last
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Speaker 2: few months.
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Speaker 3: Over up six bucks an ounce to up seven and
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Speaker 3: three quarters percent, and gold up one hundred and thirty
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Speaker 3: bucks two point nine percent on the day. Thank you
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Speaker 3: to and no gold what's his name? Goldbem Yeah, yeah, yeah,
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Speaker 3: make sure.
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Speaker 2: And then we've got crude oil West Text Intermediate down
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Speaker 2: four cents a barrel to fifty nine oh seven, the
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Speaker 2: Triple A National avatur gas prices up one tenth of
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Speaker 2: a cent to two seventy nine and six tenths, so
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Speaker 2: market's pretty quiet. This despite the announcement from the Federal
2:24
Speaker 2: Reserve late last night that Jerome Powell is now subject
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Speaker 2: to criminal proceedings in a grand jury based out of
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Speaker 2: the DC area. We don't know anything more on the specifics,
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Speaker 2: but Powell did release a pretty combative for him statement
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Speaker 2: last night that's about two minutes long, in which he said, uh,
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Speaker 2: this is obstensibly about the renovation and my testimony to Congress,
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Speaker 2: but make no mistake, this is actually about the fact
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Speaker 2: that I'm not cutting interest rates as fast as the
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Speaker 2: White House wants me to remember.
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Speaker 3: So I think the important thing is to consider with this.
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Speaker 3: We have talked at length on this program about the
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Speaker 3: importance of central bank independence and not allowing the president
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Speaker 3: to direct interest rates setting policy. It can have some
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Speaker 3: pretty ugly effects, and we've seen that in other countries.
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Speaker 3: The what I've been thinking through the second and third
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Speaker 3: order implications for all of this, I think what becomes
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Speaker 3: clear is it sets up the Federal Reserve and the
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Speaker 3: White House on a collision course that's pretty unavoidable at
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Speaker 3: this point, and that's in spite of the fact that
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Speaker 3: Ja Powell is going to be out of his role
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Speaker 3: in May.
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Speaker 2: I think it's potentially avoidable. I think they like, here's
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Speaker 2: the thing. I'm not saying that this will or won't happen,
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Speaker 2: But when it comes to the FED, we've been seeing
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Speaker 2: this game of cat and mouse for the last year now,
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Speaker 2: and to this point nothing's actually happened. I'm not saying
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Speaker 2: that it will or won't. I'm just saying, I don't know.
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Speaker 2: The White House likes to float rile balloons on the
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Speaker 2: FED left and right, Like I can count at least
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Speaker 2: three or four separate instances where this has been the case.
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Speaker 2: And if the market doesn't move the way that they
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Speaker 2: want it too based on it, they tend to go
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Speaker 2: in the other direction. And I think they're fine with
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Speaker 2: it either way.
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Speaker 3: Yeah, I think where I see maybe collision course is
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Speaker 3: too strong a phrasing. Then let's say this is all
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Speaker 3: dismissed by the Grand Jury and nothing moves on it,
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Speaker 3: and we move along here. I just think that at
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Speaker 3: this stage now there is this implied threat from the
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Speaker 3: White House that hey, if you don't follow along with
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Speaker 3: my suggestions, this is what can result. And so Therefore,
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Speaker 3: you never know how the board members are going to react,
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Speaker 3: but my guess would be that several of them might
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Speaker 3: dig in further here, and the next Federal Reserve chair
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Speaker 3: could be met by a pretty hostile voting board, I
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Speaker 3: think is what is a very likely possible outcome. I
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Speaker 3: guess would be a board of members who don't seem
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Speaker 3: to have much of a problem with j. Powell and
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Speaker 3: probably have clearly worked well with him over the years,
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Speaker 3: and are looking at this and saying, are we going
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Speaker 3: to stand for it? Are we going to fight for
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Speaker 3: in our independence? And my guests would be they're going
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Speaker 3: to fight for their independence just like Jay Powell is currently.
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Speaker 3: So my senses be this makes the next chair's job
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Speaker 3: significantly harder to direct. Whatever their policy looks like, presumably
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Speaker 3: lower interest rates. It's going to make the job tougher
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Speaker 3: given this implied threat.
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Speaker 2: Wall Street Journal report actually not a report, I guess.
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Speaker 2: This was a post by the President on truth social
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Speaker 2: on It was late Friday afternoon or Friday evening, I believe,
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Speaker 2: where he basically said, I'll read some of the quotes,
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Speaker 2: please be informed that we will no longer let the
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Speaker 2: American public be ripped off by credit card companies that
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Speaker 2: are charging rates of interest, of interest rates of twenty
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Speaker 2: to thirty percent and even more. He then said that
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Speaker 2: there will be a ten percent cap that is put
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Speaker 2: in place beginning on January twentieth. Now it's unclear what
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Speaker 2: authority the White House has to actually do this, but
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Speaker 2: the fact is, whenever you try, and we've talked about
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Speaker 2: this with rent control, Yeah, whenever you try to control
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Speaker 2: the price of something, what you end up doing is
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Speaker 2: restricting the supply of it. It's why whenever rent control
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Speaker 2: gets proposed by someone running for the mayor of Boston,
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Speaker 2: New York City or San Francisco, we sit there and
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Speaker 2: we say, guys, this isn't actually going to solve the
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Speaker 2: housing problem. It's going to end up, you know, with
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Speaker 2: fewer units being constructed and available.
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Speaker 3: So I am very suspicious that this will ever pass
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Speaker 3: or go into effect. But I take your point that. Look,
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Speaker 3: banks reserve the right to crancel your credit card at
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Speaker 3: their discretion. Pretty much at their discretion. They can use
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Speaker 3: any number of reasons to do so, and so.
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Speaker 2: The likely one they can't is that they don't like you.
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Speaker 3: Yeah, I mean, you know, they even do it figure
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Speaker 3: based on protected classes and things like that, but very
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Speaker 3: easy for them to say, Okay, while previously we were
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Speaker 3: willing to extend credit cards to anyone with a credit
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Speaker 3: score of X, now, given these new caps, we're going
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Speaker 3: to be canceling credit cards for anyone with a credit
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Speaker 3: score under six hundred and fifty, well within their rights
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Speaker 3: to do so. And so what is the likely outcome
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Speaker 3: of a cap on interest rates? Fewer extensions of credit
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Speaker 3: and a problem with a bunch of Americans being able
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Speaker 3: to borrow money?
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Speaker 2: Or I'll put the other piece out there, or Okay,
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Speaker 2: you're gonna cap how much we can make on credit
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Speaker 2: card interest rates? Great? How would you like hire mortgage rates?
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Speaker 2: Or how would you like to be paying more in
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Speaker 2: checking account.
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Speaker 3: Fees or land account fees?
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Speaker 2: On your head? It's any time that you try to
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Speaker 2: micro manage one part of the economy, you end up
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Speaker 2: with it's playing whack a mole, except the moles get
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Speaker 2: like they coming out of unexpected places, not just the
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Speaker 2: thing that you're trying to whack. California says, hey, the
7:56
Speaker 2: fast food minimum wage can be this, but the rest
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Speaker 2: of the minimum wages that well, okay, we don't really
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Speaker 2: know what the ramifications of that are going to be. Likewise,
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Speaker 2: if you do find a way to cap credit card
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Speaker 2: interest rates at ten percent, which again it's unclear that
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Speaker 2: the White House possesses the ability to do so.
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Speaker 3: It's actually pretty clear that they don't because when President
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Speaker 3: Biden tried to cap credit card late visa at eight bucks,
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Speaker 3: Texas court shut it down. Okay, I think that it's
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Speaker 3: unlikely to pass, but yeah, the likely effects would probably
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Speaker 3: not be great for consumers, would be my guest.
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Speaker 2: You likely have a significant contraction in available credit for Americans,
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Speaker 2: which then probably means, based on what I know about
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Speaker 2: Americans and their spending habits, I'm one of them, we
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Speaker 2: tend to spend up to the level that the banks
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Speaker 2: allow us to, and I think it would probably have
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Speaker 2: some pretty nasty repercussions for the American economy if tens
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Speaker 2: of millions of people suddenly had their credit cards canceled.
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Speaker 3: By the way, we didn't have to go think about
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Speaker 3: this for a while, because this is not a new idea.
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Speaker 3: Senator Bernie Sanders proposed this and put forward a bill
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Speaker 3: in February of twenty twenty five proposing exactly this ten
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Speaker 3: percent credit card interest rates. He co sponsored it with
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Speaker 3: Senator Josh Holly. So this is not a new idea.
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Speaker 3: This is something that has been proposed by many populists
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Speaker 3: over the course of the last few years, and we
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Speaker 3: have thought about it and kind of considered what the
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Speaker 3: ramifications would be here. And so A, unless Congress is
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Speaker 3: going to pass the law, I don't think it's going
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Speaker 3: to happen. B If it did, I'm not sure it
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Speaker 3: would result in the things that the President actually wants.
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Speaker 2: It's also a band aid that doesn't address the root cause.
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Speaker 2: The problem is not that too many Americans are paying
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Speaker 2: twenty five percent on a credit card bill. The problem
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Speaker 2: is why do they have that outstanding bill to begin with?
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Speaker 2: And until you can address the root causes trying to
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Speaker 2: lower the interest rate on that, it ain't gonna do
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Speaker 2: it anyways like that, that's not going to be the solution.
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Speaker 2: The question is why are there that many people that
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Speaker 2: have that much outstanding so so they're paying that interest.
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Speaker 3: If rent is too high, you don't impose rent control.
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Speaker 3: If credit card payments are too high, you don't propose
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Speaker 3: caps on credit cards. And uh, what's another one that
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Speaker 3: we've toyed with over the last few years.
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Speaker 2: That just groceries. We have the grocery thing.
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Speaker 3: If home affordability doesn't work, you don't cap what banks
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Speaker 3: can charge in mortgage rates.
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Speaker 2: Remember the Harris campaign was saying we're gonna like cap
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Speaker 2: you know, grocery rate increases it like exper Okay, shortages,
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Speaker 2: good luck getting your groceries there.
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Speaker 3: So the same thing will apply here. You cap what
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Speaker 3: companies can charge and you will have shortages. So want
10:49
Speaker 3: to break up the banks because they're too big and
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Speaker 3: there's too much you know, Visa holds too much power
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Speaker 3: over consumers. All on board, like.
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Speaker 2: Brett, you want more competitions for credit card rates? Okay,
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Speaker 2: that like, how about it?
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Speaker 3: That doesn't have to do with credit card rates, but
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Speaker 3: you know it's built in the transaction fees and stuff
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Speaker 3: like that. But yeah, that is not likely in my
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Speaker 3: view to solve the problem.
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13:32
Speaker 2: I want to talk a little bit about Florida real estate.
13:35
Speaker 2: There is a piece that's out in the Wall Street
13:39
Speaker 2: Journal today and I'm going to quote from it here.
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Speaker 2: Although older people continue to arrive in greater numbers than
13:44
Speaker 2: those who leave, that net migration is varied by income bracket.
13:48
Speaker 2: In the past decade, In twenty twenty three, it grew
13:51
Speaker 2: five percent from a decade earlier for households with inflation
13:54
Speaker 2: adjusted incomes of at least one hundred and twenty five
13:57
Speaker 2: thousand and headed by someone sixty five year old. By comparison,
14:01
Speaker 2: the flow of similar households with inflated adjusted incomes of
14:04
Speaker 2: seventy five thousand or less shrank by forty four percent. Again,
14:10
Speaker 2: these are inflation adjusted incomes, so it's not just oh, like,
14:13
Speaker 2: you know, inflation made this happen. So this is you know,
14:16
Speaker 2: there's something going on here, and quite honestly, there something
14:22
Speaker 2: going on is the insurance premiums for owning a house.
14:28
Speaker 2: And the other piece, uh, is that if you look
14:32
Speaker 2: at mobile home communities, as has been happening in just
14:35
Speaker 2: about every other industry, there's been a ton of consolidation
14:37
Speaker 2: and private equity money going in, and the new owners
14:41
Speaker 2: are jacking up the rents of the land, making them
14:44
Speaker 2: unaffordable for families who want to move down there. And
14:48
Speaker 2: what are typically, you know, affordable places to live.
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Speaker 3: I don't want to make this over the complicated. Florida
14:53
Speaker 3: is not as cheap as it used to be. No, so,
14:55
Speaker 3: I mean interestingly, I was taking a look. Nerd wallet
14:58
Speaker 3: has a nice easy cost of living calculator that you
15:01
Speaker 3: can compare different cities So when you compare to the
15:04
Speaker 3: highest cost areas in the country, like Boston or New
15:07
Speaker 3: York City, Yeah, Florida's still cheaper, right, I mean much
15:10
Speaker 3: cheaper so Boston. I just chose two cities, Boston compared
15:13
Speaker 3: to Tampa. Sure, if you have one hundred and fifty
15:16
Speaker 3: thousand dollars income in Boston, you would need an income
15:19
Speaker 3: of about one hundred thousand dollars to maintain that same
15:21
Speaker 3: cost of living. According to NERD wallets, housing costs cheaper
15:24
Speaker 3: sixty percent cheaper than Boston, healthcare costs thirty five percent cheaper,
15:28
Speaker 3: food cost higher. But you know a lot of these
15:30
Speaker 3: things are cheaper. But this article talks about a family
15:33
Speaker 3: from Michigan. And so if we take a look at
15:35
Speaker 3: Detroit compared to Tampa, it's about the same Florida's. Tampa
15:39
Speaker 3: is about five percent cheaper than what you would experience
15:43
Speaker 3: in Detroit. If you're listening from Portland, Maine right now,
15:46
Speaker 3: you know there's only a fifteen percent cost of living
15:50
Speaker 3: difference between going down to Florida. That gap used to
15:53
Speaker 3: just be bigger. I think, plain and simple, that's the
15:55
Speaker 3: story here is a bunch of people moved to Florida
15:58
Speaker 3: it drove prices higher. There are other factors at work too,
16:02
Speaker 3: but largely I think it's been a change in net migration,
16:04
Speaker 3: and the cost of housing has gone up, not only
16:07
Speaker 3: because more people are living there, also because of insurance
16:10
Speaker 3: related issues that are unique to Florida and a few
16:14
Speaker 3: other places.
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Speaker 2: But the interesting thing to me and is this is
16:18
Speaker 2: not just a Florida phenomenon. The twenty tens, In my opinion,
16:23
Speaker 2: one of the defining features was people moving from high
16:29
Speaker 2: cost of living areas to low cost of living areas.
16:32
Speaker 2: For that for a massive delta in that cost it
16:36
Speaker 2: civily retirees, no, not even retireees, Like think about think
16:41
Speaker 2: about your friends, Mike, back when you were like twenty seven,
16:45
Speaker 2: and think about the ones who are like, hey, I
16:47
Speaker 2: moved out to Denver, and think about how, yeah, it's
16:50
Speaker 2: it's so cheap out here, and all I do is
16:52
Speaker 2: ski and I hike and it's so cheap. Denver is
16:57
Speaker 2: freaking expensive. Now you go and you look at again,
17:01
Speaker 2: like you can kind of like go down the list
17:03
Speaker 2: of yuppie millennial cities. It's my defining characteristic Raleigh, Nashville, Nashville,
17:11
Speaker 2: Like you can go through this Austin, Texas. Like these
17:15
Speaker 2: are places that used to be cheap, that, for better
17:18
Speaker 2: or for worse, have gotten overrun by our friends, and
17:20
Speaker 2: we might have screwed them up a little bit in
17:22
Speaker 2: doing so. But nature is healing.
17:25
Speaker 3: Okay, get made fun of wearing a cowboy hat in Austin.
17:29
Speaker 2: Listen, I've been to Austin a number of times. It's great,
17:32
Speaker 2: but like tech Brozil, run you out of the bar, right,
17:36
Speaker 2: it's different from what it was ten fifteen years ago.
17:40
Speaker 2: So I guess where I'm going is nature's starting to
17:44
Speaker 2: heal in some respects in that if you look at
17:47
Speaker 2: what's going on with home prices in Austin, just as
17:49
Speaker 2: an example, they're down like seventeen percent in the last
17:52
Speaker 2: year and a half. Now.
17:53
Speaker 3: You know what's really interesting to me too, is I
17:56
Speaker 3: don't know that gen X wants to retire to Florida
17:59
Speaker 3: in Arizona. Again. I know we're talking about all these groups,
18:03
Speaker 3: but I'm just I don't hear when I speak to
18:07
Speaker 3: gen X clients. And you know, folks that what's the
18:10
Speaker 3: oldest gen X are right now probably pushing sixty.
18:13
Speaker 2: Something like sixty one, sixty two probably.
18:15
Speaker 3: So do you hear that demo talking about relocating to
18:19
Speaker 3: Florida and Arizona. I just don't. And you know what,
18:22
Speaker 3: we talk about how these things are going to change,
18:24
Speaker 3: and then they don't. So maybe they're just not that
18:26
Speaker 3: stage of life yet. But I don't hear it as
18:28
Speaker 3: this goal. In fact, I hear it mocked a little
18:30
Speaker 3: bit from that generation.
18:32
Speaker 2: I don't know. I don't think I have enough talking
18:36
Speaker 2: experience with that demo to be able to say yes,
18:40
Speaker 2: like it's definitively different from before or the same as before.
18:43
Speaker 3: I also say, I hear a lot more people talking about, Hey,
18:46
Speaker 3: if I really want to save on cost of living,
18:48
Speaker 3: I'm going to go to Costa Rica or Portugal again,
18:51
Speaker 3: something that wouldn't have been even considered by some previous generations. Again,
18:55
Speaker 3: these are all just my own narratives that I'm hearing of. Oh,
18:59
Speaker 3: you know, what does it look like to move abroad?
19:01
Speaker 3: The dollar goes a long way, Florida is not as
19:04
Speaker 3: cheap as it used to. I'll be very interest to see, hey,
19:06
Speaker 3: does that next generation of retirees still find Florida and
19:10
Speaker 3: Phoenix to be desirable.
19:12
Speaker 2: Part of me wonders how much of that is there's
19:17
Speaker 2: a big swath of Baby boomers and Silent generation members
19:22
Speaker 2: before them that owned those places as second properties even
19:27
Speaker 2: before they retired. And that's different because of the affordability. Now, yeah,
19:32
Speaker 2: quick break here, Wall Street Watch answer.
19:34
Speaker 3: I'm sorry.
19:34
Speaker 2: Wall Street Watch is next with the trivia answer as well.
19:41
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
19:46
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
Speaker 1: Time now for Wall Street Watch. A complete look at
19:55
Speaker 1: what's moving markets so far today right here on the
19:58
Speaker 1: Financial Exchange Radio netw work well.
20:01
Speaker 4: Market started the day in solif mode, but have since
20:04
Speaker 4: evened out as traders prepare for a busy week ahead,
20:07
Speaker 4: including a fresh look at inflation tomorrow morning, in addition
20:09
Speaker 4: to retail sales and bank earnings this week. But the
20:13
Speaker 4: big story today surrounds the FED after news that US
20:16
Speaker 4: prosecutors are investigating FED shair Jerome Powell over his testimony
20:20
Speaker 4: about the Central Banks building renovation project. Right now, the
20:24
Speaker 4: Dow is down by over tenth of a percent, or
20:26
Speaker 4: seventy eight points lower. SMP five hundred is up only
20:30
Speaker 4: one point, Nasdaq is up two tenths of a percent
20:33
Speaker 4: or fifty two points higher. RUSTED two thousand is completely flat.
20:37
Speaker 4: Tenure Treasure reeled up one basis point a four point
20:39
Speaker 4: one point eight nine percent, and crude oil up about
20:42
Speaker 4: four tenths of a percent, rating a fifty nine dollars
20:45
Speaker 4: and thirty five cents a barrel. Several bank stocks seeing
20:48
Speaker 4: losses on the day after President Trump called for credit
20:50
Speaker 4: card rates to be capped at ten percent for one year.
20:54
Speaker 4: Trump did not provide additional details on how it would work.
20:57
Speaker 4: JP Morgan, Visa Master Carter down anywhere between one and
21:01
Speaker 4: two percent. Meanwhile, according to CNBC, Apple is joining forces
21:05
Speaker 4: with Google to power its AI features for products such
21:09
Speaker 4: as Siri later this year. Alphabet shares are up about
21:12
Speaker 4: a quarter percent. Alphabet also hit four trillion dollars in
21:15
Speaker 4: market cap this morning. In more developments on the Warner
21:18
Speaker 4: Brothers Discovery front, Paramount said this morning it plans to
21:21
Speaker 4: launch a proxy fight four board seats at Warner Brothers
21:24
Speaker 4: Discovery as it continues pushing its hostile bid for the company.
21:28
Speaker 4: Paramount also filed a lawsuit seeking to force Warner to
21:31
Speaker 4: release more information about its merger agreement with Netflix. Warner
21:36
Speaker 4: stock is off about two percent. I'm Tucker Silvan, that
21:40
Speaker 4: is Wall Street watching. On the previous segment, we asked
21:42
Speaker 4: you to the trivia question what year did Jeff Bezo
21:45
Speaker 4: step down as Amazon CEO? Well, that would be twenty
21:48
Speaker 4: twenty one. Dan from Brinfield, Mass is our winner today
21:51
Speaker 4: taking on my Financial Exchange Show T shirt. Congrats to Dan.
21:55
Speaker 4: If we play trivia every day here in the Financial
21:57
Speaker 4: Exchange see complete contest rules at Financial Exchange Show dot com.
22:02
Speaker 2: Peace in Baron's retiring early is looking more difficult the
22:07
Speaker 2: new game plans. What are we talking about here.
22:09
Speaker 3: Michael Well, There's been this movement for better part of
22:13
Speaker 3: decade and finally, Well more recently has adopted the acronym
22:17
Speaker 3: FIRE for financially Independent retire early. And the FIRE movement
22:21
Speaker 3: was kind of extreme. It was the idea of, hey,
22:23
Speaker 3: save fifty to seventy percent of your income, live really conservatively,
22:28
Speaker 3: and if you do, you might be able to pull
22:29
Speaker 3: off retirement at.
22:30
Speaker 2: Like forty eight one being a day. It was, you know,
22:33
Speaker 2: like a very it was a very aggressive movement to
22:38
Speaker 2: cut expenses and maximize savings. Often, I think oftentimes in
22:43
Speaker 2: the early days of it, like very much at the
22:45
Speaker 2: expensive quality of life, right.
22:47
Speaker 3: And so they make the argument that that's tougher to
22:50
Speaker 3: do now. I think the one area where I would
22:52
Speaker 3: agree would be we've had much more inflation over the
22:55
Speaker 3: course of the last ten years than we did the
22:58
Speaker 3: previous ten or the previous twenty, or really any time
23:01
Speaker 3: period since the seventies or eighties, and if we continue
23:04
Speaker 3: to then it will make it more difficult in the
23:07
Speaker 3: future as well. Everything else that they talk about in here, though,
23:10
Speaker 3: sequence of return risk, inflation risk, those aren't more. Sorry,
23:16
Speaker 3: the inflation risk might be more pronounced now than it
23:18
Speaker 3: was before, but the sequence of return risk to me
23:21
Speaker 3: is not any more pronounced and more of an issue
23:24
Speaker 3: now than it was a decade ago. I think the
23:26
Speaker 3: only thing that you know you have to be thinking
23:29
Speaker 3: about now, if you're thinking about it, is markets are
23:32
Speaker 3: extremely expensive right now. So will I have that disastrous
23:36
Speaker 3: sequence of return early on in my retirement plan?
23:39
Speaker 2: Yeah, And I think that ultimately all of these Even
23:43
Speaker 2: you mentioned you know, the inflation risk being higher now,
23:46
Speaker 2: I don't know that it is higher. It's just hey,
23:48
Speaker 2: in the recent history, that inflation risk had turned into
23:51
Speaker 2: realized inflation in the way that it hadn't for the
23:53
Speaker 2: last forty years. But that risk is always out there
23:57
Speaker 2: and always present, and so so I think the big
24:01
Speaker 2: thing is if you're talking about in early retirement, whether
24:04
Speaker 2: that's a retirement at sixty two or retirement at forty two,
24:09
Speaker 2: like however you wanted to find you know, early like
24:11
Speaker 2: if you mean different things to different people.
24:13
Speaker 3: Hint, the forty two one is gonna be tougher than
24:15
Speaker 3: the sixty two one.
24:17
Speaker 2: Ultimately it boils down to the same two things. How
24:21
Speaker 2: much do you spend and how much do you save? Yeah,
24:25
Speaker 2: and the it's the interplay between those.
24:27
Speaker 3: That sequence of return thing. I just want to point
24:30
Speaker 3: it out as because all the you know, investment or
24:33
Speaker 3: financial advisor people listening right now understand this and have
24:37
Speaker 3: studied it. But if you are planning on let's call
24:40
Speaker 3: it a fifty year retirement, sequence of return is what
24:45
Speaker 3: it's really talking about here is if you average a
24:49
Speaker 3: seven percent investment return throughout the course of your forty years,
24:54
Speaker 3: the results to whether or not you have enough money
24:57
Speaker 3: to retire can vary dramatically depending on how you get
25:01
Speaker 3: that average seven percent. Yes, largely if you have a
25:04
Speaker 3: big market crash the day you retire, the likelihood of
25:06
Speaker 3: you getting there is dramatically decapped. If that sequence of
25:12
Speaker 3: return hits you early on, and so that's what they're
25:15
Speaker 3: talking about with this. But I think the key messages
25:19
Speaker 3: a lot of people love the idea of retiring early.
25:22
Speaker 3: I think all of us love the idea of retiring
25:25
Speaker 3: or slowing down in our work earlier than anticipated. And
25:29
Speaker 3: I think the message that I have is it is
25:31
Speaker 3: tough enough to retire on time. It requires a lot
25:34
Speaker 3: of dissipated If you're going to do so early, then
25:37
Speaker 3: you need to have a plan in place well ahead
25:40
Speaker 3: of time, and you have to be considering these things
25:42
Speaker 3: like sequence of return risk. You have to be testing
25:44
Speaker 3: the idea of what if inflation runs a percentage point
25:47
Speaker 3: higher than what I am anticipating. Because when you retire early,
25:51
Speaker 3: that's years and year. It's not only the missed out
25:53
Speaker 3: income and savings that you won't have, it is the
25:56
Speaker 3: extra years of taking money out of your savings that
25:59
Speaker 3: you have to play for, not to mention all the
26:02
Speaker 3: other complexities. When is my social security going to start?
26:04
Speaker 3: How am I going to get health insurance? If I
26:07
Speaker 3: have kids, you know what stage of life are they
26:09
Speaker 3: going to be and are they going to need financial
26:11
Speaker 3: assistance that I've planned for? There are a ton of
26:14
Speaker 3: questions that come along with the idea of retiring early.
26:17
Speaker 3: They are not insurmountable. I know plenty of people that
26:19
Speaker 3: retire before sixty five and make do without Medicare for
26:22
Speaker 3: a period of time. Sure, you just have to do
26:24
Speaker 3: the planning. If you could use some assistance on that
26:27
Speaker 3: planning piece, call Armstrong Advisory Group. It's what we do
26:30
Speaker 3: for hundreds of clients. We would love to do it
26:32
Speaker 3: for you too. You know, talk to us about what
26:35
Speaker 3: those plans really are and how you might be able
26:37
Speaker 3: to achieve them. The numbers eight hundred three nine three
26:41
Speaker 3: for zero zero one. You can book your time for
26:44
Speaker 3: us to call you as well at Armstrong Advisory dot com.
26:46
Speaker 3: But that number is eight hundred three nine three for
26:49
Speaker 3: zero zero one.
26:50
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
26:53
Speaker 1: registered investment advisor. Nothing in the ad or in any
26:55
Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
26:58
Speaker 1: your own financial tax, send a state planning advisors before
27:01
Speaker 1: making any investment decisions. Armstrong make contact you to offer
27:04
Speaker 1: investment advisory services.
27:06
Speaker 2: I want to talk a little bit about this market
27:09
Speaker 2: Watch piece on millennials, because.
27:13
Speaker 3: Really still allowed to whine millennials, I do it.
27:17
Speaker 2: All the time. Yeah, I guess I actually don't. My
27:20
Speaker 2: daughter does, but she's five.
27:22
Speaker 3: I win all the time.
27:23
Speaker 4: I did twenty minutes ago in the break.
27:25
Speaker 2: You didn't really whine, though.
27:27
Speaker 3: It's more of a heavy cry with bouts of laughing
27:33
Speaker 3: in between silence afterwards from the studio.
27:36
Speaker 2: So there's this piece here. It's it's titled There's nothing
27:39
Speaker 2: we can do. The Great Millennial career crisis has workers
27:42
Speaker 2: giving up on ever owning homes or paying off their
27:44
Speaker 2: student loans. So two things are true at the same time.
27:48
Speaker 2: The first is there are millennials that are in positions where,
27:54
Speaker 2: because of the decisions they made on how to pay
27:59
Speaker 2: for coledge, most notably when they were younger, they're basically
28:04
Speaker 2: screwed unless their financial situation changes dramatically.
28:07
Speaker 3: Agreed, And I agree that that sucks because I don't
28:09
Speaker 3: think as a sixteen or seventeen year old you had
28:11
Speaker 3: the qualifications to be able to make that decision. But nonetheless,
28:14
Speaker 3: there you are.
28:14
Speaker 2: Quite honestly, like, no one tells you what it means
28:17
Speaker 2: to borrow one hundred thousand dollars. They just say, hey,
28:20
Speaker 2: here's the money, Like it's it's pretty unethical what we
28:26
Speaker 2: do to people to have them make those decisions that
28:30
Speaker 2: I just I don't think we give them enough information
28:34
Speaker 2: to make an informed decision. I do think millennial parents
28:37
Speaker 2: who have gone through this now we're not going to
28:39
Speaker 2: make the same decisions with their kids, though.
28:40
Speaker 3: Agree.
28:41
Speaker 2: But the other piece that I will say is this
28:43
Speaker 2: piece is all about, you know, these millennials that are
28:46
Speaker 2: in these these difficult situations. Financially, basically, every metric out
28:53
Speaker 2: there that compares on an inflation adjusted basis millennial home
28:59
Speaker 2: ownership rates, investment savings rates, portfolio sizes everything with prior generations.
29:05
Speaker 2: We're right there shows that they're pretty much in line
29:07
Speaker 2: with prior generations, and so there is no meaningful difference
29:13
Speaker 2: in the aggregate amount of you know, wealth saved and
29:16
Speaker 2: generated and earned by millennials.
29:20
Speaker 3: So I'm looking at a chart right now just to
29:22
Speaker 3: this is data from First American, which is a title
29:25
Speaker 3: services company who obviously cares about home ownership rates because
29:28
Speaker 3: that's how they make all their money. Millennials did trail
29:32
Speaker 3: behind just about every other generation in terms of home
29:35
Speaker 3: ownership for quite a period of time. It took us
29:37
Speaker 3: longer to get into those homes.
29:39
Speaker 2: Yeah.
29:39
Speaker 3: Today. However, with the oldest millennials I think being forty
29:43
Speaker 3: one or forty two years old, we have surpassed now
29:48
Speaker 3: Gen X home ownership rates at that same age, Yes,
29:52
Speaker 3: and we're closing in on Boomers and the Silent generation
29:55
Speaker 3: and all of those. It was like a couple percentage points.
29:58
Speaker 3: Now we are right there and we're past again. We
30:00
Speaker 3: are past Gen X in terms of home ownership rates
30:03
Speaker 3: by early forties, so we're delayed. But again, every generation
30:09
Speaker 3: has different challenges. Gen Z is staring a bunch of
30:12
Speaker 3: them right staring at a bunch of them right now.
30:15
Speaker 3: Like home owner affordability for gen Z in their twenties
30:20
Speaker 3: is a lot worse than it was for millennials.
30:23
Speaker 2: And if you want to go back and like look
30:25
Speaker 2: at other financial issues, I mean take gen X just
30:28
Speaker 2: as an example. So gen X again, you were kind
30:31
Speaker 2: of coming of age in you know, nineteen eighty. Like
30:35
Speaker 2: Gen X, prime earning years got whacked one to two
30:38
Speaker 2: by tech bubble and financial crisis. You go back and
30:42
Speaker 2: you look at the Boomers. Okay, your prime earning years
30:45
Speaker 2: you get whacked by inflation for a decade. Go back
30:48
Speaker 2: and look at the style generation Okay, maybe you had
30:50
Speaker 2: things fine economically, you had to fight World War two,
30:54
Speaker 2: Like that's worse than any of us have had to
30:55
Speaker 2: deal with just in terms of you know, like and
30:58
Speaker 2: boomers had that.
30:59
Speaker 3: Too of a different way war. So you know, like, yes,
31:03
Speaker 3: I want to acknowledge that that the last two generations
31:06
Speaker 3: have not had millennials.
31:08
Speaker 2: That Global War on Terror, yes, admittedly liked did some
31:12
Speaker 2: real damage to a large number of people. But again, like,
31:18
Speaker 2: no generation gets out without dealing with something going on financially.
31:24
Speaker 2: You know, you go what was before? The style of
31:27
Speaker 2: generation now don't even know? They the Great Depression, like
31:29
Speaker 2: it there's no free lunch. There's a reason why they
31:33
Speaker 2: say that is because there is actually no free lunch.
31:36
Speaker 2: They say there's free lunch, but there is none, Like
31:39
Speaker 2: we all got to pay for lunch somehow.
31:41
Speaker 3: So which one is the worst generation? Though?
31:44
Speaker 2: Like that we disliked the most interpreted however you want. Well,
31:48
Speaker 2: gen X will always say that no one talks about them,
31:50
Speaker 2: so they're just happy that we're mentioning them today. That's true,
31:53
Speaker 2: So there's that. We love you, gen X. Let's take
31:55
Speaker 2: a quick break here and when we return, Stack rule.
32:00
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33:10
Speaker 2: Mike, what do you got for stack roulettes?
33:12
Speaker 3: Walmart is teaming up with Google's Gemini to try and
33:15
Speaker 3: make it easier for shoppers to find and buy products,
33:18
Speaker 3: and I have no real semblance of an idea of
33:22
Speaker 3: how successful or unsuccessful this is gonna be. This is
33:24
Speaker 3: not how I use artificial intelligence in any way today.
33:28
Speaker 3: It's also pretty reminiscent of the arguments I remember hearing
33:31
Speaker 3: about the amount of money that Amazon was pouring into
33:34
Speaker 3: Alexa during its early stages. Sorry for everyone who's homespeaker
33:37
Speaker 3: just beaped, but the argument there was, Hey, if we
33:41
Speaker 3: roll out this really intelligent home device that you can
33:46
Speaker 3: speak to, then people are gonna order more stuff from Amazon.
33:50
Speaker 3: And it didn't happen. Just playing example, there's no evidence
33:54
Speaker 3: of support that those devices resulted in bigger purchases. And
33:57
Speaker 3: so I guess my question is, what about this tie
34:00
Speaker 3: up is going to make it so that people will
34:02
Speaker 3: spend more at Walmart? And you know, again, maybe this
34:06
Speaker 3: is different this time. I just don't. I don't really
34:10
Speaker 3: see why it would be. Like, again, they're pretty good
34:13
Speaker 3: at I can see how they might be good at saying, hey,
34:16
Speaker 3: summarize customer reviews for me of this type of product
34:19
Speaker 3: and this that or the other. But is it going
34:21
Speaker 3: to result in me clicking purchase more frequently? Yeah? I
34:26
Speaker 3: don't see a lot of evidence.
34:27
Speaker 2: We'll see it's gonna be wild when the only mass
34:34
Speaker 2: market uses of AI are to sell ads. Yeah, you know,
34:40
Speaker 2: it's it's where we're going. It's here's the thing. I
34:44
Speaker 2: hold two thoughts in my head at the same time
34:45
Speaker 2: on this. The first is every single person I know
34:49
Speaker 2: that works in tech development is like, this is game
34:54
Speaker 2: changing stuff because it lets them code completely differently than
34:57
Speaker 2: they did previously. Yep. But there's also a shocking lack
35:02
Speaker 2: of understanding that three hundred and thirty million Americans do
35:10
Speaker 2: not work in coding like the for I'm guessing it's
35:15
Speaker 2: probably like a couple million, like two to three million
35:17
Speaker 2: Americans do. And you get these pieces that are like
35:19
Speaker 2: and not for long by the way, this is transformed
35:22
Speaker 2: like the way that I work, because it can do
35:24
Speaker 2: like iterations on this in the background to do this
35:26
Speaker 2: and that, And I read these things and I'm like, wow,
35:28
Speaker 2: like that's really cool, and then I think about like
35:31
Speaker 2: what the like what everyone else does for work which
35:36
Speaker 2: is not coding, and hey, like I've actually heard now
35:40
Speaker 2: instead of two companies where leaders have banned their teams
35:47
Speaker 2: from using chat GPT to write emails because they're just
35:50
Speaker 2: getting sick of seeing them, they're like, I know that.
35:55
Speaker 2: They're like, I know that this is a fifty seven
35:57
Speaker 2: year old guy who's worked with me for thirty years.
35:59
Speaker 2: His emails are usually all lower case, like spelling errors
36:03
Speaker 2: and everything, but I know it's him writing it. And
36:05
Speaker 2: now I'm just getting crap that's being fed to me
36:07
Speaker 2: and so what teen par and it's it's it's not him,
36:11
Speaker 2: and I don't like that. So I have people that
36:13
Speaker 2: are getting that. I have other ones that are like, no,
36:15
Speaker 2: this is making up, you know, fake stuff. So the
36:19
Speaker 2: two thoughts of that holder look for certain jobs. I
36:22
Speaker 2: think that this is absolutely transformative stuff for the vast
36:27
Speaker 2: majority of Americans. I don't know if they actually want
36:29
Speaker 2: anything to do with AI. I just don't think they do,
36:36
Speaker 2: or at least not enough to make it as interesting
36:40
Speaker 2: financially as it's priced right now. And yeah, we're gonna
36:46
Speaker 2: find out in the next couple of years. I want
36:47
Speaker 2: to talk about beans, go for it. Did you know
36:50
Speaker 2: that there is a quarterly bean.
36:53
Speaker 3: Club like the Jelly of the Month club.
36:57
Speaker 2: Rancho Gordo Okay found it in twenty nineteen. They're now
37:01
Speaker 2: selling two point five million pounds of beans a year.
37:03
Speaker 2: I don't know if that's a lot or little. I mean,
37:04
Speaker 2: sounds like it's a lot, but it's probably a little.
37:06
Speaker 2: In the broad scheme of beans.
37:07
Speaker 3: These are not coffee beans. These are bean beans, bean beans.
37:10
Speaker 2: So they've got all different kinds. They've got black, white,
37:13
Speaker 2: navy red, King City, pink, green, baby lime, a yellow
37:16
Speaker 2: split pee. They got their eye of the goat beans
37:21
Speaker 2: that are out there.
37:22
Speaker 3: So why is this special? Because I walk down to
37:26
Speaker 3: the grocery aisle and I see giant bags of beans
37:28
Speaker 3: for days.
37:29
Speaker 2: I guess these taste better for some reason, I guess,
37:35
Speaker 2: and I don't really know, And I say this, look,
37:38
Speaker 2: I'm as pro bean as you get. They've got a
37:40
Speaker 2: wait list, I literally. So yesterday, daughter wakes up from
37:43
Speaker 2: her nap. What do you want for a snack? Beans?
37:46
Speaker 3: We had a bean snack to get eating straight out
37:48
Speaker 3: of the canvas, straight out of the well.
37:50
Speaker 2: You rinse them first, you know, you gotta get the
37:53
Speaker 2: slime off them. But like literally sitting there, she goes, Daddy,
37:58
Speaker 2: will you come over and have these beans with me.
38:00
Speaker 2: And how could I say no to that?
38:02
Speaker 3: Right?
38:02
Speaker 2: I had to have the beans with her. They were
38:05
Speaker 2: dark red kidney beans.
38:07
Speaker 3: Yesterday hopefully, well, this company's got a wait list for
38:10
Speaker 3: their beans. They must be pretty special. It must be.
38:13
Speaker 2: Waitless for beans. Markets remain broadly flat. We're done for
38:18
Speaker 2: the day. Back at it tomorrow. We'll see you then.