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Americans are passing on Europe in favor of road trips · The Financial Exchange Show

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Speaker 2: Our two here on the Financial Exchange, Chuck, Mike and
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Speaker 2: Tucker with you. We got markets very modestly negative, no
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Speaker 2: major movement today overall. The daw was actually only off
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Speaker 2: about one and a half. But we've gotten a pretty
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Speaker 2: significant bounce off those lows. Those still some laggards that are,
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Speaker 2: off a couple percentage points, and Video down half a
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Speaker 2: percent and Tesla down about three percent. Those some of
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Speaker 2: the biggest drags. But look, this is you know, kind
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Speaker 2: little bit of pain that is being felt, but again,
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Speaker 2: overall you're not really seeing anything too significant. As we
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Speaker 2: sit here today.
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Speaker 3: Bonds were moving down earlier in trading. I saw the
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Speaker 3: ten year off I think about eleven bait. Sorry, the
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Speaker 3: yield on the ten year was up by about eleven
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Speaker 3: basis points today Now it's up about six basis points.
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Speaker 3: Even on the thirty year only up about seven, So
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Speaker 3: that trade has It's still taking place, but calmed down
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Speaker 3: a fair bit since around nine am this morning.
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Speaker 2: Oil not moving very much, down eighteen cents a barrel
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Speaker 2: to sixty two to thirty one on West Texas Intermediate.
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Speaker 2: We got gold rallying pretty strongly today, up fifty one
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Speaker 2: to twenty an ounce to thirty two, thirty eight and
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Speaker 2: forty cents. Want to kick things off with this story
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Speaker 2: from the Wall Street Journal. It's titled europe Is out
2:56
Speaker 2: road trips are in Welcome to the scale back vacation
3:01
Speaker 2: and what it talks about. It gives a couple anecdotes
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Speaker 2: to this effect as well. But hey, in light of
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Speaker 2: some of the uncertainty that is out there in the economy,
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Speaker 2: people are changing their vacation plans, in some cases scaling
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Speaker 2: them back. They talk about one such family who they
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Speaker 2: were planning on heading out to San Diego for Comic Con,
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Speaker 2: the big comic not festival, but convention obviously at the
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Speaker 2: end of July. Instead they said said, you know what,
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Speaker 2: we're going to cancel this and we're not going to
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Speaker 2: go this year, just because we're a little bit nervous about,
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Speaker 2: you know, what things look like economically.
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Speaker 3: For what I found intriguing is we actually had something
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Speaker 3: resembling hard data and here from the Wall Street Journal,
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Speaker 3: they got a hold of something from Bank of America
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Speaker 3: that had card data, and what it found is that
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Speaker 3: year over year, the transactions per household on airlines and lodging.
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Speaker 3: Good detail that gives you a chart at least that
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Speaker 3: we can work off of, those are down about from
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Speaker 3: this chart that I'm seeing, it looks like seven ish
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Speaker 3: percent compared to this time last year. Yeah, so that's
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Speaker 3: a meaningful decline. And you go take a look at
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Speaker 3: restaurants and everything else, they're up compared to the same
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Speaker 3: time last year. And so I do look at that.
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Speaker 3: This is not a hey, everybody's pulling back on everything story.
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Speaker 3: This is a bit of a domestic story of Americans
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Speaker 3: specifically pulling back on spending on airlines and lodging. The
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Speaker 3: other area that I think we are very definitively seeing it,
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Speaker 3: and this article mentions it. The volume of Canadian travel
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Speaker 3: to the US down about fifteen percent year over year.
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Speaker 3: I suspect that the same thing is true when you
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Speaker 3: go look at, for instance, European or Latin American travel
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Speaker 3: to the United States as well right now, somewhat for
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Speaker 3: different reasons. There's certainly some stuff around immigration, there's some
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Speaker 3: stuff around just general frustration with the United States and
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Speaker 3: its policies, and I think that's all culminating and stuff
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Speaker 3: that we're seeing from the likes of Delta Airlines talking
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Speaker 3: about cutting roots, cutting seats, and not hiring quite as
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Speaker 3: much as they're planning on now.
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Speaker 2: The question on this is going to be is any
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Speaker 2: of this actually big enough to cause a shift in
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Speaker 2: the US economy. And Mike and I have the same
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Speaker 2: view on this, which is generally, look us, not US people.
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Speaker 2: Americans generally don't stop spending unless forced to, and so
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Speaker 2: what we've seen in this case is, yes, we've seen
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Speaker 2: a decline in both transactions and actual dollars spending on
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Speaker 2: airlines and hotels and things like that, but it's shifted
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Speaker 2: elsewhere where. People have been buying more cars right now,
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Speaker 2: and people have been going out for you know, more
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Speaker 2: meals as you indicated, and so it's not that the
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Speaker 2: spending level has dropped precipitously overall, it's just the categories
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Speaker 2: of where people are spending has been shifting. Now, could
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Speaker 2: this end up being a large enough magnitude move to
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Speaker 2: then result in, you know, layoffs across airlines, which then
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Speaker 2: impacts spending elsewhere. Sure it could, but I'm just not
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Speaker 2: sure there's enough meat there for me to like get
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Speaker 2: behind anything that's even borderline recessionary.
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Speaker 3: Yeah. Some stories that are part of these narratives that
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Speaker 3: I'm hearing too is, oh, you know I opened up
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Speaker 3: my uh my portfolio in April and I decided to
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Speaker 3: cancel the trip. Well then did you rebook it waiting
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Speaker 3: until May? When you saw it in May? You know, Hey,
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Speaker 3: you know I finally saw my credit score get hit
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Speaker 3: from the student loans kicking back in, and you know
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Speaker 3: I can no longer go on that trip. Call me naive,
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Speaker 3: but I don't think that person that couldn't pay their
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Speaker 3: student loan was the same one that was buying a
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Speaker 3: first class ticket on Delta. So I just I'm not
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Speaker 3: You never know you don't.
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Speaker 2: I mean someone by festival festival tickets.
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Speaker 3: Fiscally responsibility takes some really weird turns. But I get
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Speaker 3: the sense that that was predominantly sixty five plus year
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Speaker 3: olds who have been retired and are planning out their
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Speaker 3: dream vacations for the last few years, and I've been
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Speaker 3: slowly pulling those back. So I'm just not sure. No,
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Speaker 3: I'm not buying that the market dip or that the
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Speaker 3: fears about the economy are what's driving a decrease in travel.
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Speaker 3: I am buying that, you know, maybe it happened for
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Speaker 3: a few weeks. I'm buying that foreigners going into the
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Speaker 3: United States or buy you know, yes, booking on domestic airlines,
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Speaker 3: those might be, you know, playing a role in this.
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Speaker 3: I'm not there that. You know, so many Americans are
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Speaker 3: concerned about the economy that they're changing their their travel plans.
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Speaker 2: No, I'm not either. I think it's something to monitor
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Speaker 2: and see, you know, how it evolves. But I'm just
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Speaker 2: not there yet.
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Speaker 3: And and by the way, even if they are there
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Speaker 3: with their travel plans, I think they're going to spend
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Speaker 3: the money elsewhere, like you mentioned.
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Speaker 2: Yeah, it's look, we've got a lot of data on
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Speaker 2: this going a lot of good data going back, you know,
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Speaker 2: sixty seventy years now. It's Americans are bad with money.
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Speaker 2: It's pretty rare for the savings rate to increase before
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Speaker 2: a recession. That's not usually how it works, you know
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Speaker 2: when you look at it. I'm just pulling up the
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Speaker 2: chart right now just so I can actually give some
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Speaker 2: hard data on this and not just you know, speaking extemporaneously,
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Speaker 2: just what I love to do obviously. Okay, so here
8:16
Speaker 2: this is actually perfect. It's exactly what I wanted. So
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Speaker 2: let's talk about Heading into the nineteen seventy recession, these
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Speaker 2: savings rate dropped from twelve point three percent down to
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Speaker 2: eleven point one just prior to the recession, and then
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Speaker 2: during the recession rose up to over thirteen percent. It
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Speaker 2: then coming out of it, dropped again down to eleven
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Speaker 2: and a half percent, before rising back up to thirteen
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Speaker 2: percent fourteen percent, I'm sorry. During the nineteen seventy three
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Speaker 2: seventy four recession. The savings rate afterwards dropped from twelve
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Speaker 2: point seven percent all the way down to ten before
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Speaker 2: bouncing back up during the nineteen eighty recession. Heading into
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Speaker 2: y two k the tech bubble, Over the course of
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Speaker 2: the entire nineties, the savings rate dropped from ten percent
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Speaker 2: down to around four before spiking up to north of
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Speaker 2: six percent during the tech bubble and nine to eleven recession.
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Speaker 2: It then fell from that five to six percent range
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Speaker 2: down to around two before the financial crisis, before spiking
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Speaker 2: up to north of seven over the course of the
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Speaker 2: financial crisis. Americans save more only when forced to by
9:23
Speaker 2: the fact that a recession is actually happening. The spending otherwise,
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Speaker 2: it just moves around, and yeah, people aren't spending on
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Speaker 2: airfare right now. They spent on cars bigly, like you
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Speaker 2: better believe it. So I think that my view on spending,
9:41
Speaker 2: a spending drop by Americans is not going to be
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Speaker 2: the cause of a recession this year. If you want
9:48
Speaker 2: to look for the places where you could have it.
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Speaker 2: Two possible factors in terms of where a recession could
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Speaker 2: come from. Number One, businesses saying we don't know what
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Speaker 2: the tariff environment's going to be, like, we are going
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Speaker 2: to pull back on spending because we need to protect
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Speaker 2: our business and make sure that we're not out over
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Speaker 2: our skis. The corollary to that is, hey, we're taking
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Speaker 2: a hit from teriffs because we're trying to eat some
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Speaker 2: of the tariff cost. We need to lay people off
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Speaker 2: in order to maintain our margins, and that causes the
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Speaker 2: spending drop that causes a recession. Those are the two
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Speaker 2: possibilities out there, Americans saying we're a little bit nervous
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Speaker 2: about the economy and we're just gonna not those facts
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Speaker 2: are not in evidence.
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Speaker 3: All that haven't been said. You own a restaurant in Portland, Maine.
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Speaker 3: You own a.
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Speaker 2: Bed and breakfast in you know, the Lakes region in
10:43
Speaker 2: New Hampshire.
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Speaker 3: Yeah, whatever you operate in Burlington, Vermont, you're probably feeling that,
10:48
Speaker 3: I mean, whatever you operate having a tough time coming
10:51
Speaker 3: up Brewery brew Spencer, Dispenser in Burlington, Vermont. Yeah, I
10:56
Speaker 3: think you are going to have a struggle this summer.
10:59
Speaker 3: You might have a more difficult time than before because, yeah,
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Speaker 3: Canadian tourism is down fifteen percent to the United States,
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Speaker 3: and frankly, a lot of it happens in some of
11:07
Speaker 3: those areas.
11:08
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11:11
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Speaker 2: Peace Day from the Financial Times, and it dovetails with
13:28
Speaker 2: the piece from the Wall Street Journal as well. Are
13:31
Speaker 2: big oil companies prepared for a prolonged market downturn? The
13:36
Speaker 2: second one is US drillers say peak shale has arrived,
13:40
Speaker 2: basically saying they expect production to start declining over the
13:44
Speaker 2: next year or so. And it gets it something that
13:48
Speaker 2: we've talked about quite a bit, which is, look, you
13:51
Speaker 2: can have high oil prices or you can have well
13:57
Speaker 2: it's this, you can have highigh oil prices and high
14:01
Speaker 2: US production. You cannot have low oil prices and high
14:05
Speaker 2: US production. You have to do for a long period
14:07
Speaker 2: of times.
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Speaker 3: Yeah, and by the way, if big oil companies are
14:10
Speaker 3: not prepared for a prolonged market downturn, then their boards
14:14
Speaker 3: need to be brought out and fired, because it is
14:16
Speaker 3: an industry that is defined by exactly what we are
14:19
Speaker 3: seeing right here, which is boom and bust. So of
14:21
Speaker 3: course they're prepared.
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Speaker 2: Quite honestly, they've spent the last five years preparing for this.
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Speaker 2: There's a reason why they weren't drilling a ton of
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Speaker 2: new wells over the last few years, and it's because
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Speaker 2: they didn't think the prices where they were were sustainable
14:34
Speaker 2: and og By the way, they're right because they know
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Speaker 2: more about energy prices than I do.
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Speaker 3: It's not to say that you won't have bankruptcies in
14:42
Speaker 3: the energy space should oil prices stay at sixty dollars
14:48
Speaker 3: ish or below. There of course will be there, always are.
14:52
Speaker 3: But this isn't the question. It's are big oil companies prepared?
14:55
Speaker 3: And you better bet that BP Shell and Exon Mobil
14:59
Speaker 3: are ready for or a period of time where oil
15:01
Speaker 3: prices don't look so attractive. Yeah, and this gets not
15:04
Speaker 3: say it'll happen. I'm just no, But this gets it
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Speaker 3: the question then, which is, look, us shale has been
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Speaker 3: the marginal producer in energy markets for the last fifteen
15:13
Speaker 3: years now. It has been the swing producer. It hasn't
15:16
Speaker 3: been you know, Opecker, you know, and it's been US producers.
15:21
Speaker 3: But what we are seeing here is with shale wells.
15:25
Speaker 3: And again this is from my admittedly crude understanding of that,
15:33
Speaker 3: but you get it.
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Speaker 2: Shale wells decline much more rapidly than conventional oil wells
15:39
Speaker 2: in terms of their production capacity. It's something where there's
15:43
Speaker 2: a relatively rapid drop off over the first three to
15:46
Speaker 2: four years. And so what that means is that you
15:48
Speaker 2: have to be in the business of constantly drilling new wells.
15:51
Speaker 2: Because you don't just drill it and say, okay, this
15:53
Speaker 2: is going to produce x barrels a day for the
15:55
Speaker 2: next ten years. I'm good. You have to build in
15:58
Speaker 2: significant declines of like anywhere from like thirty to fifty
16:01
Speaker 2: percent over a three to five year period that that
16:04
Speaker 2: will is going to decline in production. And so ultimately
16:09
Speaker 2: what that means is, hey, if companies right now are
16:12
Speaker 2: making the choice to slow down on shale exploration. There
16:17
Speaker 2: is something over the next few years that is going
16:19
Speaker 2: to show up in US production because US production is
16:22
Speaker 2: not stable with it being predominantly shale driven at this point, right,
16:28
Speaker 2: So what it means is potentially lower US production over
16:33
Speaker 2: the next several years. And that's a decision that is
16:38
Speaker 2: you know, it's not going to be easily reversed. You
16:41
Speaker 2: don't just wake up one morning and say, hey, you
16:44
Speaker 2: know what, let's drill in it oil. Well, let's see,
16:46
Speaker 2: let's see how it goes. These are decisions that these
16:49
Speaker 2: companies plan out on, you know, decade long time horizons,
16:53
Speaker 2: and so if that decision is being made now, it's
16:57
Speaker 2: not going to be reversed anytime soon.
16:59
Speaker 3: Part of the question to me then is one, I
17:03
Speaker 3: don't think you or I have the expertise to know
17:05
Speaker 3: just how dry the shale is. But should prices bump
17:12
Speaker 3: back up to one hundred bucks a barrel, which who
17:15
Speaker 3: knows Saudi's can make it happen tomorrow? Does the United
17:18
Speaker 3: States eventually have the same pumping impulse that brings those
17:23
Speaker 3: prices to back down, or are we no longer capable
17:26
Speaker 3: of being that release valve for when prices shoot up,
17:30
Speaker 3: because that's been a defining factor of the US frankly
17:34
Speaker 3: of the global oil market over the last fifteen years
17:38
Speaker 3: has been Hey, whenever prices get really high up there,
17:41
Speaker 3: the US just starts pumping and brings it back down,
17:43
Speaker 3: sometimes to their own detriment.
17:45
Speaker 2: I think twenty twenty two is the example that I
17:48
Speaker 2: would give now to say US shale, like US producers
17:53
Speaker 2: are not moving in the same fashion they used to
17:55
Speaker 2: because twenty twenty two, if it happened ten years ago,
17:57
Speaker 2: if it happened in twenty twelve, you would have had
18:00
Speaker 2: the rig count double in the United States. And instead,
18:05
Speaker 2: let me pull it up, because this is one of
18:06
Speaker 2: those those puppies that I do have out there. Instead,
18:09
Speaker 2: when you look at what happened in twenty twenty two
18:12
Speaker 2: for the US rig count, let's see, US is purple here, Okay.
18:18
Speaker 2: At the end of twenty twenty one, five hundred and
18:21
Speaker 2: eighty six rigs in the ground in the United States.
18:24
Speaker 2: By the end of twenty two you went up to
18:29
Speaker 2: seven to seventy nine, So it was like a fifty
18:30
Speaker 2: percent bump. So still you know, but again that was
18:33
Speaker 2: on oil prices doubling and then by middle of twenty three,
18:37
Speaker 2: you were right back down to where you were before,
18:39
Speaker 2: and you've basically hung out there since. So you compare
18:44
Speaker 2: this to what we saw back in you know, the
18:49
Speaker 2: mid two thousands. Rig count went from eight forty five
18:53
Speaker 2: in two thousand and three up to twenty eighteen in
18:56
Speaker 2: two thousand and eight. Rigs more than doubled over that
18:59
Speaker 2: time period, and then since then you've just been on
19:03
Speaker 2: a kind of a state of client. Some of this
19:04
Speaker 2: is because we've gotten better at drilling, so you just
19:06
Speaker 2: don't need as many rigs in the ground because you
19:08
Speaker 2: don't have to do If you don't have to drill
19:10
Speaker 2: as many holes and you can get the same output,
19:13
Speaker 2: saves you money, which is part of how they've been
19:14
Speaker 2: able to be cost competitive in these prices, as opposed
19:18
Speaker 2: to needing seventy eighty of barrel oil to be able
19:21
Speaker 2: to compete. But as that marginalill play that swing producer,
19:27
Speaker 2: I don't think they're them right now. Quick break. When
19:29
Speaker 2: we come back, we get the trivia answer, and then
19:31
Speaker 2: we'll talk about people filing for Social Security early. Why
19:34
Speaker 2: are so many people doing it? We'll discuss after this.
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Speaker 4: Trivia question today was who was the first female host
20:13
Speaker 4: to join the SNL Five Timers Club LB?
20:16
Speaker 2: Candice Bergen.
20:17
Speaker 4: Bergen hosted the third episode of SNL and became the
20:20
Speaker 4: first female to host five episodes of SNL when she
20:24
Speaker 4: hosted in May nineteen ninety. Winner today of the Financial
20:30
Speaker 4: Exchange Show t show was Allen from Burke, Maine. Congrats
20:33
Speaker 4: to Allen, and we played trivia every day here on.
20:36
Speaker 2: The Financial Exchange.
20:37
Speaker 4: See complete contest rules at Financial Exchange Show dot com.
20:41
Speaker 2: Mike, why are so many retirees filing for Social Security
20:45
Speaker 2: earlier than they used to?
20:46
Speaker 3: I think there's a few things going on here, but
20:48
Speaker 3: just to cite the facts here, an additional two hundred
20:52
Speaker 3: and seventy six thousand people filed for Social Security benefits
20:56
Speaker 3: in the fiscal year that ended in April, so year
20:59
Speaker 3: over year thirteen percent bump from the previous year in
21:02
Speaker 3: terms of Social Security filers. And you cannot just explain
21:06
Speaker 3: that with older Americans, Like, yes, the baby boomers are
21:09
Speaker 3: getting older, more of them are either being forced onto
21:12
Speaker 3: Social Security or becoming eligible for it, But that does
21:15
Speaker 3: not explain the entire gap here. There's not thirteen percent
21:20
Speaker 3: more baby boomers in this year than there were the
21:22
Speaker 3: previous year. A few other things are going on. One,
21:25
Speaker 3: some fifty thousand people suddenly became eligible for Social Security
21:29
Speaker 3: on their own earnings records due to the Social Security
21:32
Speaker 3: Fairness Act. So if you haven't read up on what
21:34
Speaker 3: that is, you probably know about it if you're a
21:37
Speaker 3: teacher or other government worker. But a whole bunch of
21:39
Speaker 3: other people became eligible for Social Security that weren't previously.
21:43
Speaker 3: So that's part of that two seventy six. But I
21:46
Speaker 3: honestly think there's more things going on here. I think
21:48
Speaker 3: that people are genuinely paying attention to the news about
21:52
Speaker 3: the funding of Social Security, the fact that it is
21:57
Speaker 3: not getting enough revenue in to continue to cover payments forever,
22:01
Speaker 3: the fact that they are cutting jobs at the Social
22:04
Speaker 3: Security Administration. Then, frankly, whenever you have market volatility, you
22:07
Speaker 3: do see Social Security filings tick up a little bit.
22:10
Speaker 3: But here's my overall conclusion, I don't know exactly what's
22:14
Speaker 3: pushing this up. I think it's probably a combination of
22:17
Speaker 3: what I mentioned, increased worry about the program itself, concern
22:22
Speaker 3: about the state of the economy, obviously the Social Security
22:24
Speaker 3: Fairness Act pushing more people onto the program as well.
22:27
Speaker 3: But one thing that I see over and over again
22:30
Speaker 3: is retirees treating social Security differently than just about any
22:36
Speaker 3: other asset or income stream that they have. Yeah, and
22:40
Speaker 3: that one is a bit confounding to me. They put
22:43
Speaker 3: it on this this separate category compared to say they're
22:48
Speaker 3: four to oh one K or any other thing. And
22:52
Speaker 3: my conclusion is, just don't do that. Just treat it
22:54
Speaker 3: like you do any other asset that you have. And
22:57
Speaker 3: it is an asset. It is a guarantee from the
23:01
Speaker 3: Social Security Administration to pay you an income stream for
23:04
Speaker 3: the rest of your life, and so you should treat
23:06
Speaker 3: it as such rather than treating it as this kind
23:08
Speaker 3: of mythical guarantee that you have later in life. Because
23:12
Speaker 3: that's where I see mistakes getting made, is, oh, you know,
23:15
Speaker 3: I have to treat this differently than I would my
23:17
Speaker 3: IRA or the pension that I have for my employer
23:20
Speaker 3: because it's so security. Yeah.
23:23
Speaker 2: And I think the other thing that you and I
23:26
Speaker 2: have you know, talked about quite a bit is, let's
23:29
Speaker 2: say that we get to twenty twenty or twenty thirty
23:32
Speaker 2: two or thirty three, whenever the trust fund ends up
23:36
Speaker 2: quote running out. Do either of us actually believe that
23:41
Speaker 2: there's a significant chance they're just going to be like, well, oh,
23:45
Speaker 2: you retired people are screwed, except to twenty percent, you know,
23:48
Speaker 2: drop in Social Security and deal with it.
23:50
Speaker 3: Yeah. Not certainly, not for any prolonged period of time.
23:54
Speaker 3: I mean, I think it's unlikely that it happens at all.
23:57
Speaker 3: If it did happen, I think it would be like
23:58
Speaker 3: a thirty day warning where all of a sudden lawmakers
24:03
Speaker 3: are getting panicked calls.
24:04
Speaker 2: When you can't do anything about it anyways, then true,
24:07
Speaker 2: Like you, here's the thing. If you claim early all
24:10
Speaker 2: you're doing is making that worse down the road, then yep.
24:13
Speaker 3: So my point would be that very frequently the program
24:18
Speaker 3: itself is frequently misunderstood. The likely solutions to how they
24:23
Speaker 3: fix the problem, I think are also pretty misunderstood. But
24:27
Speaker 3: if you find yourself thinking about that Social Security program
24:30
Speaker 3: differently than you do every other asset or income stream
24:33
Speaker 3: that you have. I think it requires a rethink. First
24:35
Speaker 3: of all, learn all the rules, Learn how it works,
24:38
Speaker 3: Learn what the rules are. If you claim at sixty
24:39
Speaker 3: two versus seventy, how much of an increase you end
24:42
Speaker 3: up getting. It's not just an increase on your birthday.
24:44
Speaker 3: There's a pro rated increase. There's rules around whether you
24:47
Speaker 3: are medicare age, whether you are full retirement age, how
24:50
Speaker 3: much you're able to earn on the side. There's all
24:52
Speaker 3: these important rules. Not to mention how it's actually taxed.
24:56
Speaker 3: But you need to treat it just like you would
24:58
Speaker 3: any other bucket of money that you're in titled to,
25:00
Speaker 3: and if you could use some assistance on the planning
25:03
Speaker 3: around that benefit, understanding the full context of your retirement strategy,
25:09
Speaker 3: and then when to pull the Social Security based on
25:11
Speaker 3: that rather than based on what your cousin Vinnie did,
25:15
Speaker 3: or you know, fears about the Social Security Administration staffing
25:18
Speaker 3: or your four to oh one K, or whether or
25:20
Speaker 3: not the program can still fund itself ten years from now.
25:23
Speaker 3: That's the way to judge all this, because none of
25:25
Speaker 3: us know any of those other things. I don't know
25:27
Speaker 3: how long you or Vini are going to live. I
25:29
Speaker 3: don't know how they're going to fix the program, but
25:31
Speaker 3: we do know how the rules work today in the
25:33
Speaker 3: state of your personal financial scenario. And if you are
25:37
Speaker 3: again making these decisions in a vacuum, I would really
25:40
Speaker 3: encourage you to give us a call here at Armstrong
25:42
Speaker 3: Advisory Group to build that plan, to build that strategy
25:44
Speaker 3: so you can make an informed decision. The numbers eight
25:47
Speaker 3: hundred three nine three four zero zero one. Again, that's
25:50
Speaker 3: the number four the Armstrong Advisory Group. We'll sit down
25:53
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25:58
Speaker 1: One was paid for by Armstrong Advisory Group, a registered
26:02
Speaker 1: investment advisor. Nothing in the ad or in any Armstrong
26:05
Speaker 1: guide a specific financial, legal or tax advice. Consult your
26:07
Speaker 1: own financial tax into state planning advisors before making any
26:10
Speaker 1: investment decisions. Armstrong make contact you to offer investment advisory services.
26:16
Speaker 2: Let's see, do we want to talk about condos or
26:19
Speaker 2: EV's let's go evs okay, so Wall Street Journal Exclusive
26:24
Speaker 2: or it's titled GM is pushing hard to tank California's
26:27
Speaker 2: EV mandate and kind of wild because you know, coming
26:32
Speaker 2: out of twenty twenty and into twenty one. You could
26:35
Speaker 2: make an argument the GM was the most aggressive out
26:39
Speaker 2: of any major automaker in trying to commit to building evs.
26:44
Speaker 3: Yeah, they all were pushing it out, Toyota and Honda,
26:49
Speaker 3: so the Japanese automakers were not fully on board. But
26:51
Speaker 3: you go talk to Volkswagen General Motors for they were
26:55
Speaker 3: all making this public statement and push.
26:58
Speaker 2: And it's to the point now where GM sent an email.
27:02
Speaker 2: I don't know who it was because obviously the company
27:04
Speaker 2: can't send an email like someone at the company had to,
27:07
Speaker 2: but it was an email sent to all white collar employees,
27:12
Speaker 2: we need your help. Emission standards that are not aligned
27:15
Speaker 2: with market realities pose a serious threat to our business
27:18
Speaker 2: by undermining consumer choice and vehicle affordability. And then basically saying, hey,
27:24
Speaker 2: go and talk to your senators in order to try
27:29
Speaker 2: to basically nullify this California rule about that bans new gas,
27:38
Speaker 2: bans the sale of new gas cars and trucks. And
27:40
Speaker 2: basically what this is for how this works mechanically is
27:46
Speaker 2: the Senate has a waiver in place that allows California
27:50
Speaker 2: to send its own tailpipe emissions. Because it's a huge state,
27:54
Speaker 2: it's got fifty some on million people. Sure, And this
27:57
Speaker 2: is basically saying, hey, we want the Senate to vote
28:00
Speaker 2: to revoke that waiver, so California can't do this anymore.
28:06
Speaker 3: So here's where I land on this. I think the
28:09
Speaker 3: policy's done. Which one California's trying to require all vehicles
28:14
Speaker 3: be electric by twenty thirty five, I think is a
28:17
Speaker 3: bad idea. And I think it's going to her state
28:19
Speaker 3: with rolling blackouts yeah every summer. I think it's going
28:21
Speaker 3: to dramatically hurt the citizens of that state. But if
28:25
Speaker 3: you're going to revoke their power to make stupid decisions,
28:29
Speaker 3: That's where I'm kind of struggling. And I know that
28:32
Speaker 3: it's auto emission standards, and I recognize that these are
28:35
Speaker 3: national country companies that are selling to many markets and
28:38
Speaker 3: how complicated that makes it. But just again, we talk
28:41
Speaker 3: about this all the time. Fast forward seven years and
28:44
Speaker 3: there's a different Congress in there that is much more
28:47
Speaker 3: liberal leaning. Imagine they go and tell Texas you cannot
28:50
Speaker 3: have any gas powered vehicles anymore, or any diesel powered
28:53
Speaker 3: vehicles anymore. That this is the power that Congress is
28:56
Speaker 3: saying that they have, and I'm well'm not sure that
28:58
Speaker 3: you want them to have.
28:59
Speaker 2: That we're already said they haven't, right like it was
29:02
Speaker 2: already through an Act of Congress that did this.
29:04
Speaker 1: Yep.
29:05
Speaker 2: So I don't know what the right answer is other
29:07
Speaker 2: than this, we are not going to be one hundred
29:12
Speaker 2: percent EVS in twenty thirty.
29:14
Speaker 3: Five regardless of California's rules.
29:17
Speaker 2: So here, I guess here's the question. Is GM lobbying
29:20
Speaker 2: the wrong people? Is the question I would raise because honestly,
29:26
Speaker 2: given like what we're seeing with EV adoption right now,
29:29
Speaker 2: wouldn't you rather spend your time, effort and less money
29:33
Speaker 2: lobbying California you know, politicians instead? Maybe?
29:37
Speaker 3: But here's what would really be nice for GM, as
29:39
Speaker 3: if there are no longer a patchwork of rules when
29:42
Speaker 3: it came to a mission standard state by state. And
29:44
Speaker 3: I think that's what they're trying to get to is, hey,
29:46
Speaker 3: we want one national standard.
29:47
Speaker 2: Well, the standard has basically been California yep. Because again,
29:51
Speaker 2: this has been in place for a long time. This
29:52
Speaker 2: is not a I forget, I don't know when this
29:54
Speaker 2: originally went into place, not the EV mandate, but like
29:57
Speaker 2: the the waiver for California's ability to set its own
30:01
Speaker 2: emission standards. Yeah, this has been in place, I want
30:03
Speaker 2: to say, like thirty or forty years, right, So California
30:06
Speaker 2: is basically set kind of where US emission standards are going.
30:10
Speaker 2: They've gotten this one horribly wrong because you're just not
30:14
Speaker 2: getting two one hundred percent ev adoption ten years from now.
30:17
Speaker 2: You're you're just not and I'm not even sure that
30:22
Speaker 2: that's where you should be going.
30:25
Speaker 3: Yeah, from a number of perspectives, it does not work
30:27
Speaker 3: for you for your state.
30:31
Speaker 2: So with that, let's take a quick break and when
30:34
Speaker 2: we come back, we'll talk about something else right after
30:37
Speaker 2: this in stack Roulette, this.
30:40
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31:05
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31:36
Speaker 2: Mike, what do you got for stack Roulette?
31:38
Speaker 3: Student loan borrowers are starting to see their credit scores plummet.
31:43
Speaker 3: Just a couple interviews that they did with folks who
31:46
Speaker 3: did not start making payments on their student loans after
31:49
Speaker 3: the deadlines. As a reminder of these deadlines, October of
31:52
Speaker 3: twenty twenty three is when payments resumed, but they were
31:56
Speaker 3: shielded from the consequences of not making payments because they
31:59
Speaker 3: weren't allowed to. The agencies were not allowed to report
32:03
Speaker 3: to credit bureaus for another year. That has now begun,
32:07
Speaker 3: and those credit scores are dropping pretty rapidly, so loan
32:11
Speaker 3: servicers began reporting delinquent accounts to credit bureaus in January
32:15
Speaker 3: of this year. Wage garnishments for borrowers who are more
32:18
Speaker 3: than two hundred and seventy days late on payments are
32:21
Speaker 3: expected to resume.
32:22
Speaker 2: Quote soon.
32:23
Speaker 3: I've seen a June date for anyone on Social Security.
32:26
Speaker 3: I assume that that's the same case for collecting wages.
32:31
Speaker 3: There are a few interviews done here, and I.
32:33
Speaker 2: Just some of them are not particularly sympathetic.
32:36
Speaker 3: No, they're not. And look, I am sympathetic for people
32:41
Speaker 3: that genuinely can't afford this stuff. But the interviews that
32:44
Speaker 3: are getting done here, I don't want to mention her name,
32:46
Speaker 3: they do in the article, but a woman who lives
32:47
Speaker 3: down in Florida who's twenty six years old, basically admitted
32:50
Speaker 3: to completely ignoring the emails she was getting because they
32:54
Speaker 3: didn't think they were specific to her, even though they
32:57
Speaker 3: kept saying like start your payments, start your payment, get
32:59
Speaker 3: back on. And one that's just like crazy. You graduated
33:07
Speaker 3: with a degree, you knew you borrowed money, and you're
33:08
Speaker 3: getting emails from the Department of Education to start your
33:11
Speaker 3: payments and you just completely ignore them. Two who would
33:15
Speaker 3: hire you? I'm just gonna throw my hand up. I
33:20
Speaker 3: would not hire somebody who consistently admits that they ignored
33:25
Speaker 3: and then just thought the emails weren't relevant to her,
33:28
Speaker 3: or somebody who had this much instance. I don't know
33:30
Speaker 3: how much she had in the student loan debt. But
33:32
Speaker 3: that's not a great indication of your attention to detail.
33:37
Speaker 2: No, again, there are certain situations where you're like, there's
33:40
Speaker 2: another person who had surgery and emergency surgery and lost
33:42
Speaker 2: their job and they can't make the payments.
33:44
Speaker 3: I feel genuinely bad for you, and I think there
33:46
Speaker 3: should be a better system in place to allow you
33:48
Speaker 3: to restructure some of this debt in some way. And
33:51
Speaker 3: I don't feel great about that one. But to the
33:54
Speaker 3: woman who just ignored all the emails until their credit
33:56
Speaker 3: score dropped by one hundred and fifty points, I'm like,
33:59
Speaker 3: what do we even doing here?
34:00
Speaker 2: But again, the reason why you can't restructure this is
34:03
Speaker 2: because if you actually allowed the restructuring, the interest rates
34:07
Speaker 2: would have to be twice as high as they are.
34:08
Speaker 3: Yeah, that's the real answer here is there is not
34:12
Speaker 3: underwriting for student loans in the way that there are
34:16
Speaker 3: any other type of debt out there. So therefore we
34:18
Speaker 3: make the decision that, hey, because there's no underwriting, because
34:21
Speaker 3: we're not going to limit the you know, the issuance
34:24
Speaker 3: of these loans, We're also not going to allow them
34:27
Speaker 3: to go through bankruptcy and get restructured. Yeah, and that's
34:31
Speaker 3: that's a trade off.
34:32
Speaker 2: And look, if if you want to know why the
34:37
Speaker 2: finance of college are broken, that that's basically it. And
34:39
Speaker 2: there's there's no there's no benchmark that colleges need to
34:45
Speaker 2: clear in order to I mean there are benchmarks, but
34:50
Speaker 2: they're not like.
34:50
Speaker 3: They're very low. They're very low in what you can
34:54
Speaker 3: for what credentials you need to maintain to be able
34:57
Speaker 3: to receive federal student loans.
34:58
Speaker 2: Because here's the thing, if you actually this is not
35:01
Speaker 2: my original thoughts, so I'm not going to claim that
35:03
Speaker 2: it is, but here's the way that you actually fix
35:06
Speaker 2: college if you really want to, which no one does,
35:09
Speaker 2: because then the gravy train stops. Number One, you say, okay,
35:14
Speaker 2: we are going to allow for student loans to be
35:16
Speaker 2: able to be discharged, which means they have to be underwritten.
35:19
Speaker 2: So you're going to actually underwrite student loans, which means
35:22
Speaker 2: higher rates. Number Two, you're going to go to colleges
35:26
Speaker 2: and you're gonna say, in order to receive federal student
35:29
Speaker 2: loan money, you need to commit to at least half
35:33
Speaker 2: of your students coming from families that make less than
35:38
Speaker 2: the median income in the United States, because otherwise, all
35:42
Speaker 2: you're doing is you're giving a bunch of money to
35:43
Speaker 2: people above that median income already to send them to
35:46
Speaker 2: a place where that you're then going to be entrenching
35:48
Speaker 2: them in the upper echelons of earnings power based on
35:52
Speaker 2: what we see from how colleges reflect higher earnings over
35:57
Speaker 2: the course of a lifetime. So if you actually want
35:59
Speaker 2: to be of opinion that you know this happens, okay, fine,
36:02
Speaker 2: you want tax exempt status as an institution on your endowment,
36:07
Speaker 2: commit to actually having half your students coming from below
36:11
Speaker 2: median income households. You don't have to be like, no,
36:13
Speaker 2: it comes from like this race or this gender. But
36:16
Speaker 2: if we're going to give you a bunch of money
36:17
Speaker 2: to send people to school, then you need to send
36:20
Speaker 2: people to school that do not have good incomes and
36:23
Speaker 2: actually need that money.
36:26
Speaker 3: But we're not gonna do that because then the gravy
36:28
Speaker 3: train stops. Yeah, and even with that, I'm not sure. Yeah,
36:32
Speaker 3: the gravy train stops from a number of perspectives. You
36:34
Speaker 3: remember too, that one of the main ways these colleges
36:37
Speaker 3: fund themselves is be from a whole bunch of wealthy
36:40
Speaker 3: foreign students. Yes, and that would completely screw up that
36:43
Speaker 3: formula totally.
36:44
Speaker 2: Again, we're not going to do this. I'm not saying
36:46
Speaker 2: it's realistic. I'm just saying this is where we are.
36:49
Speaker 2: We're not going to fix it. Is a condo really
36:53
Speaker 2: worth it right now?
36:53
Speaker 4: Well?
36:54
Speaker 2: Which one? What does that even mean? Is a condo
36:58
Speaker 2: right now? Like that's like like is the road crowded?
37:01
Speaker 2: Like I don't know, there's lots of the man So
37:05
Speaker 2: here's the deal. Yeah, at a certain point, despite rising
37:08
Speaker 2: HOA fees, rising insurance fee premiums, you know all this stuff,
37:12
Speaker 2: condos can make sense if you walked up to me
37:14
Speaker 2: right now and are like, hey, I'll give you a
37:17
Speaker 2: free condo on South Beach. Done, I'm in, sign me up.
37:21
Speaker 2: Free condo on South Beach.
37:22
Speaker 1: I'm in.
37:23
Speaker 2: But am I gonna pay five million dollars for a
37:25
Speaker 2: condo on South Beach that has you know, a ten
37:28
Speaker 2: thousand dollars a month? You know, No, I'm not going
37:31
Speaker 2: to because it's insane since you don't know where the
37:34
Speaker 2: cost structures going on.
37:35
Speaker 1: Now.
37:36
Speaker 3: Couple of things about a condo that would worry me
37:37
Speaker 3: right now, what is the state of the association's finances
37:41
Speaker 3: and how do I know it, yep, because you don't
37:42
Speaker 3: usually audit these things when you're buying a single condo. Two,
37:46
Speaker 3: what is the association's feeling towards short term rentals if
37:49
Speaker 3: I'm planning on doing that, because they can change those
37:51
Speaker 3: rules at a whim, And if you're buying one for
37:56
Speaker 3: a place other than to live in yourself, that could
37:59
Speaker 3: be a real concern for you.
38:01
Speaker 2: So is a condo worth it right now?
38:03
Speaker 3: No clue.
38:05
Speaker 2: But if you wanted to give me a free condo,
38:07
Speaker 2: I'd figure it out. So yeah, there's a price at
38:10
Speaker 2: which everything is worth it, even condos. Let's take a
38:14
Speaker 2: quick break for the entire rest of the day, and
38:17
Speaker 2: we'll see it tomorrow with more financial exchange.