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Social Security is running out of funds and time · The Financial Exchange Show

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  Speaker 1: and Mike Armstrong.
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  Speaker 2: Chuck, Mike and Ben with you, and we got stocks
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  Speaker 2: in somewhat mixed territory at the moment, with the Dow
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  Speaker 2: Jones Industrial Average holding just above where it closed on Wednesday,
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  Speaker 2: up twenty eight points right now about a tenth of
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  Speaker 2: a percent, the SB five hundred, which was up around
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  Speaker 2: thirty points shortly after the open, now down fifteen, so
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  Speaker 2: about three quarters of a percent reversal, and this being
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  Speaker 2: dragged entirely by the Nasdaq, which is now down almost
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  Speaker 2: two thirds of a percent, about one hundred and thirty
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  Speaker 2: five points. And the only news that I have on this,
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  Speaker 2: and this basically came out at the same time, so
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  Speaker 2: I think you can point in a pretty straight line
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  Speaker 2: on this. But the Wall Street Journal reporting that the
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  Speaker 2: US is preparing action targeting chip plants in China, not militarily,
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  Speaker 2: but specifically talking about an export control crackdown where the
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  Speaker 2: US is seeking to revoke waivers for Samsung, sk Henix
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  Speaker 2: and Taiwan Semi that allow them to use US tech
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  Speaker 2: in Chinese factories without case by case licenses. So obviously
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  Speaker 2: the place that we're going to go on this then is, Okay,
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  Speaker 2: does this you know shift in posture from the US
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  Speaker 2: mean that China is going to say, okay, fine, you
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  Speaker 2: want to do this, No more rare earths for you,
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  Speaker 2: but this is kind of good. I think we're just
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  Speaker 2: gonna go round and round on this for a little bit,
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  Speaker 2: just because I don't think China's just gonna be, you know,
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  Speaker 2: happy and okay with you know what the US tries
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  Speaker 2: to do here. So that's what we've got moving the
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  Speaker 2: equity markets right now. Bond's tenure Treasury up one basis
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  Speaker 2: point to four point four oh five percent. Not much
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  Speaker 2: movement there. We've got the national average four thirty year
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  Speaker 2: fixed rate mortgages at six point eight seven percent. That's
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  Speaker 2: been in a tight range for the last two months,
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  Speaker 2: between six eight two and seven oh seven, so not
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  Speaker 2: really any movement in either direction on mortgage rates. Oil
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  Speaker 2: West Text Intermediate up another twelve cents a barrel to
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  Speaker 2: seventy five twenty six, And unfortunately, about a month or
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  Speaker 2: so ago, I made the point that hey oil, you know,
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  Speaker 2: gas prices hadn't been moving, so I'm not saying anything
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  Speaker 2: on them until they move either below three ten or
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  Speaker 2: above three twenty. The unfortunate thing is, according to the
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  Speaker 2: triple a national average or gas prices. We're now up
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  Speaker 2: to three twenty one and seven tenths. That's up about
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  Speaker 2: ten cents a gallon in the last week now, and
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  Speaker 2: based on the projections that I've seen from people in
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  Speaker 2: the industry, looks like we still might have anywhere from
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  Speaker 2: another five to fifteen cents to go, depending on you know,
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  Speaker 2: exactly how prices move here, but probably getting into that
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  Speaker 2: three twenty five to three thirty five a gallon range
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  Speaker 2: nationally as we head into uh basically like peak driving
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  Speaker 2: season right around fourth of July. So we'll obviously have
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  Speaker 2: to pay close attention to what's going on in the
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  Speaker 2: Middle East, as any type of ceasefire has the potential
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  Speaker 2: to move those prices back down into the three ten range.
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  Speaker 2: If we see an escalation in the coming weeks, you've
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  Speaker 2: got the potential for gas prices heading north of three
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  Speaker 2: point fifty in a pretty quick hurry. And so we'll
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  Speaker 2: see where we go. I do not know what is
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  Speaker 2: coming next. They do not involve me in either the
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  Speaker 2: military planning nor the nuclear negotiations. I've tried to get in.
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  Speaker 2: They won't let me into the group chats. But we'll
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  Speaker 2: see we'll see what happens there.
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  Speaker 3: The reporting from the Wall Street Journal, Chuck, I just
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  Speaker 3: I find this one paragraph interesting. The chip makers would
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  Speaker 3: likely see case by case licenses from the US government
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  Speaker 3: to supply their Chinese factories well, looking to replace US
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  Speaker 3: equipment with alternatives from Japan and Europe. This setup that
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  Speaker 3: is at least being reported on by the Wall Street Journal,
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  Speaker 3: can either be looked at as an escalation and very
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  Speaker 3: likely will be by the Chinese. From the US side,
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  Speaker 3: it sounds remarkably similar to the process that the Chinese
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  Speaker 3: set up on the export of rare earth materials. We're
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  Speaker 3: going to create this new oversight board. Everyone's gonna have
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  Speaker 3: to apply case by case basis, and we're going to
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  Speaker 3: decide whether or not we approve the exports. And so
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  Speaker 3: I think you're right that we're going to be kind
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  Speaker 3: of circling all of this back and forth with the
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  Speaker 3: Chinese in terms of escalation. Meet in London or Geneva,
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  Speaker 3: resolve some of this stuff, and you know, and then
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  Speaker 3: escalate again, which is where we are today.
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  Speaker 2: At least by the way you're looking at that piece
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  Speaker 2: in the Wall Street Journal, I am yeah. The headero
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  Speaker 2: graphic for it is this Taiwan semiconductor facility in Nanjing, China.
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  Speaker 2: Doesn't it look freaking cool? Yeah?
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  Speaker 3: I hesitate to the compliment the Chinese too much, but
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  Speaker 3: it's it's a really cool looking facility that's sitting out
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  Speaker 3: over there. It's probably a very polluted body of water,
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  Speaker 3: but yeah, it looks it looks pretty spaceship, futuristic.
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  Speaker 2: The thing just looks cool. I'm not saying anything beyond that,
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  Speaker 2: but it looks cool. Yeah, it does. Very futuristic looking. Yeah.
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  Speaker 2: It's it's on stilts, which I don't know why. Looks
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  Speaker 2: like it's about to take off. Yeah, it does. It
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  Speaker 2: looks like the thing might just, you know, fly away sometime.
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  Speaker 2: But anyways, Uh, let's talk a little bit about social security.
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  Speaker 2: It's our top story for the hour, and looking at
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  Speaker 2: what we have here piece of the New York Times
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  Speaker 2: social securities finances a road further risking benefit cuts. The
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  Speaker 2: reason it's our top story is that the Social Security
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  Speaker 2: Administration conducts an annual review where they say, Okay, here
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  Speaker 2: are the projections for the Social Security Trust Fund, and
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  Speaker 2: here is what we think is going to happen, and
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  Speaker 2: here's how benefits could be impacted. And they came out
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  Speaker 2: with that update. Was it late Wednesday or was it yesterday?
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  Speaker 2: I can't remember when I saw it. I think I
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  Speaker 2: heard it Wednesday. Yeah, so I heard it Wednesday. Here
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  Speaker 2: is what they are saying is that the Social Security
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  Speaker 2: Old Age and Survivor's Insurance Trust Fund is on schedule
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  Speaker 2: to be depleted in twenty thirty three. That is a
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  Speaker 2: year earlier than they had previously projected. And Mike I
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  Speaker 2: did the math, stayed up all last night doing it.
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  Speaker 2: It's eight years from.
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  Speaker 3: Now, so it makes it very likely that the next
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  Speaker 3: elected president will oversee the depletion of the trust fund
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  Speaker 3: and need to reform it.
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  Speaker 2: Maybe.
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  Speaker 3: I mean, given that most presidents that are elected get
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  Speaker 3: a second term, that's kind of where I'm.
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  Speaker 2: Unless they do a really bad job and then you
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  Speaker 2: only get one, in which case I still believe the
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  Speaker 2: twenty thirty two election might be the first one in
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  Speaker 2: American history that no one wants to win because you
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  Speaker 2: got to fix this then, and you can be rest
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  Speaker 2: assured that it won't get fixed until right around then.
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  Speaker 2: Right it'll be Christmas of twenty thirty two, and we're
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  Speaker 2: gonna be sitting around like still talking to you this
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  Speaker 2: or they could do that, but.
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  Speaker 3: Which just a reminder on something that we bring up
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  Speaker 3: every time. That is the dumbest way to fix this,
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  Speaker 3: because if you wait until twenty thirty two, the measures
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  Speaker 3: you have to take to fix the problem are much
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  Speaker 3: more severe than what you could do today by fixing
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  Speaker 3: the problem.
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  Speaker 2: Yes, and the reason why the trust fund is going
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  Speaker 2: to be depleted a year earlier than.
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  Speaker 3: Expected is because of Democrats stealing from it, Republicans stealing
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  Speaker 3: from it.
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  Speaker 2: No. No, the Social Security Fairness Act, which pays a
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  Speaker 2: bunch of public sector workers that previously had pension offset
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  Speaker 2: language in their social security claims, it basically undoes that,
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  Speaker 2: and now they can claim, you know, higher social security,
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  Speaker 2: which is basically the exact opposite reason that the weapon
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  Speaker 2: things like that were put in back in the eighties
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  Speaker 2: was in order to make the program more sustainable. This,
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  Speaker 2: whether you say it's right, wrong, or whatever. Effectively, if
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  Speaker 2: all you're doing is paying out more benefits but not
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  Speaker 2: fixing the you know, input side of the equation, you're
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  Speaker 2: not making the program more sustainable. And this is a great,
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  Speaker 2: great symbolic gesture that basically is everything that's going on
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  Speaker 2: in American finances right now.
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  Speaker 3: I love that the only bills that get bipartisan support
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  Speaker 3: are the ones that run up unfunded deficits.
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  Speaker 2: Yes, yes, So here's what this means. Look, if you
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  Speaker 2: are fifty nine years old today and you're gonna hit
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  Speaker 2: full retirement age age sixty seven in twenty thirty three,
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  Speaker 2: you will only get seventy seven percent of your Social
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  Speaker 2: Security payment if nothing changes.
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  Speaker 3: If nothing changes, are a massive caveat here, folks, right,
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  Speaker 3: and Mike.
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  Speaker 2: And I are both on record that, hey, generally it's
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  Speaker 2: bad policy to screw people over right as you enter
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  Speaker 2: retirement for two reasons. One the people end up upset
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  Speaker 2: and two they're retired, which means they have a ton
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  Speaker 2: of time to vote against you in the upcoming elections
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  Speaker 2: or protest against you, both either one. You know, So
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  Speaker 2: generally it's not a great thing to upset sixty seven
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  Speaker 2: year olds, which is also why we've been conducting just
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  Speaker 2: massive wealth transfers to baby boomers for the last decade. Now,
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  Speaker 2: which you're welcome again. But I think that when we
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  Speaker 2: look at this, Mike and I are both of the opinion, Hey,
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  Speaker 2: it's really unlikely that you see just a straight up
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  Speaker 2: benefit cut in twenty thirty three how we fix this
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  Speaker 2: is likely a combination of higher taxes, lower benefits over time,
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  Speaker 2: maybe some means testing of the program, things along those lines.
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  Speaker 2: But the idea that, hey, you've been paying into the
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  Speaker 2: system and here's you know, a twenty three percent haircut
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  Speaker 2: relative to what you thought you were going to be getting.
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  Speaker 2: I don't think, Mike and I really think that that's reasonable.
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  Speaker 2: But I acknowledge, Hey, it's a remote possibility that you
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  Speaker 2: have to at least consider. But is that the reason
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  Speaker 2: to claim Social Security at age sixty two? Probably not,
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  Speaker 2: because if it doesn't happen that way, now you've screwed
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  Speaker 2: yourself for the remainder of your retirement for something that
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  Speaker 2: didn't happen. Faux life.
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  Speaker 3: I have to say, Chuck, I agree with you on
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  Speaker 3: the first point there, that we are unlikely to get
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  Speaker 3: those cuts.
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  Speaker 2: I'm not. I'm starting to come around to the idea.
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  Speaker 2: Huh yeah.
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  Speaker 3: I'm starting to come around to the idea that we're
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  Speaker 3: not actually going to fix the problem. We're just going
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  Speaker 3: to spend the money.
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  Speaker 2: We're just going to change the rules and say it's
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  Speaker 2: now okay to pay out one hundred percent, even if
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  Speaker 2: it adds to deficits. I think that's only a slight
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  Speaker 2: majority of where I think will go.
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  Speaker 3: But I just I see no evidence anywhere in the
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  Speaker 3: last twenty five years that our elected officials are willing
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  Speaker 3: to make difficult decisions about cutting benefits and raising taxes.
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  Speaker 3: There's I hesitate to think of actually a single scenario
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  Speaker 3: where both those things have been done at the same time.
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  Speaker 3: You've had limited instances where they have cut benefits. You've
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  Speaker 3: had limited instances where they raise benefits and raise taxes Obamacare.
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  Speaker 3: I've seen no evidence anywhere since I think Bush, since
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  Speaker 3: pre Bush, where they have raised taxes and cut benefits
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  Speaker 3: at the same time.
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  Speaker 2: And that's what you need to do to fix our skins.
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  Speaker 2: I could be.
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  Speaker 3: Wrong, tell me if I'm wrong, anybody, but I don't.
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  Speaker 3: I don't think I'm wrong. So yeah, I think they
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  Speaker 3: just spend the money. The closest dumb, dumb, dumb solution,
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  Speaker 3: the closest.
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  Speaker 2: Thing that we've seen to cutting benefits and Social Security is,
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  Speaker 2: you know, just changing some of the programs and stuff like.
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  Speaker 2: You can't do the file and to spend anything, Yeah,
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  Speaker 2: you can't. Yah the one that I always loved, You
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  Speaker 2: can collect your solid security invest it for eight years,
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  Speaker 2: pay it back and move up to the higher threshold,
• 12:29
  Speaker 2: which admittedly, like the only people that could do that
• 12:31
  Speaker 2: were the people that didn't need it to live off. Right,
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  Speaker 2: So it's kind of like, Okay, I understand why they
• 12:35
  Speaker 2: did away with that, even though I gotta say, really
• 12:38
  Speaker 2: cool idea, right, yeah, but you can you can obviously
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  Speaker 2: see why they don't let you do that anymore, is
• 12:46
  Speaker 2: because if you really needed your Social Security you wouldn't
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  Speaker 2: just be able to pay it all back and move
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  Speaker 2: up to a higher benefit. Right, take a quick break here.
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  Speaker 2: When we come back, we are going to we don't
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  Speaker 2: is that? Next? We are doing trivia? Yeah, well that's
• 13:02
  Speaker 2: what the next we'll do trivia and then we'll talk
• 13:04
  Speaker 2: about auto prices as well.
• 13:07
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• 13:47
  Speaker 4: Time now for trivia on the Financial Exchange. Well fifty
• 13:51
  Speaker 4: years ago today, the first summer blockbuster movie hit theaters
• 13:56
  Speaker 4: across the country. The movie in question was a assive success,
• 14:00
  Speaker 4: earning over one hundred million dollars in the US alone,
• 14:03
  Speaker 4: which was a record at the time, and adding an
• 14:05
  Speaker 4: additional four hundred and fifty million dollars worldwide. So today's
• 14:10
  Speaker 4: question is what was the first summer blockbuster movie? What
• 14:15
  Speaker 4: was the first summer blockbuster movie? Be the fourth person
• 14:20
  Speaker 4: who texts us at six one seven three six two
• 14:23
  Speaker 4: one three eighty five with the correct correct answer, and
• 14:26
  Speaker 4: you'll win a Financial Exchange Show t shirt. The fourth
• 14:28
  Speaker 4: correct response will be our winner. See the complete contest
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  Speaker 4: rules at Financial Exchange Show dot com.
• 14:34
  Speaker 2: Mike, one of the pieces that we have to work
• 14:37
  Speaker 2: with on the tariff puzzle are the auto tariffs that
• 14:40
  Speaker 2: are in place and the estimates that I've seen in
• 14:43
  Speaker 2: this one kind of points in that direction as well. Uh,
• 14:47
  Speaker 2: are that hey, once these you know are basically in
• 14:50
  Speaker 2: full effect in ear through that you know, pre imported supply,
• 14:54
  Speaker 2: and you're seeing these auto parts tariffs in place, the
• 14:57
  Speaker 2: expectation is that this is going to push the average
• 14:59
  Speaker 2: cost of a vehicle up by somewhere in the ballpark
• 15:03
  Speaker 2: of around seventeen hundred dollars per car.
• 15:07
  Speaker 3: What's the average purchase price of a vehicle in the
• 15:10
  Speaker 3: US now? Are we up over fifty? So this has
• 15:14
  Speaker 3: the potential to push it above there.
• 15:16
  Speaker 2: So you're talking about, you know, a three and a
• 15:18
  Speaker 2: half to four percent jump in car prices the average.
• 15:22
  Speaker 2: As a result, it's not going to be for every
• 15:24
  Speaker 2: car though.
• 15:25
  Speaker 3: Sure this is you know, very obviously damaging and challenging
• 15:32
  Speaker 3: for American consumers. It does not account for how much
• 15:35
  Speaker 3: new steel, aluminum you know, potentially gets manufactured in the
• 15:38
  Speaker 3: United States in the future, or other items and you know,
• 15:41
  Speaker 3: all else equal, right, We've got other issues with car manufacturing.
• 15:45
  Speaker 2: I guess my big question.
• 15:47
  Speaker 3: Is Americans viewpoint of car pricing so distorted based on
• 15:53
  Speaker 3: how we buy them that this is very noticeable to them.
• 15:59
  Speaker 2: Tell me about that point.
• 16:00
  Speaker 3: Well, so like, okay, so I bought a car, as
• 16:03
  Speaker 3: you know, a few weeks ago. Now go through the price,
• 16:09
  Speaker 3: go through everything, you know, ready to go. When I'm
• 16:11
  Speaker 3: ready to go. They do not bring out anything when
• 16:15
  Speaker 3: it comes to the price of the vehicle. Instead, they
• 16:18
  Speaker 3: bring out the financing options, no interest rates attached to
• 16:21
  Speaker 3: them at all, by the way, because they have not
• 16:22
  Speaker 3: yet run my credit at this point. Sure, and they
• 16:25
  Speaker 3: just show me, Okay, here's your monthly payment given a
• 16:30
  Speaker 3: down payment of two five and ten thousand dollars, if
• 16:33
  Speaker 3: you want to do a forty eight, sixty or seventy
• 16:35
  Speaker 3: two month car loan. And nowhere in there do I
• 16:38
  Speaker 3: see the end price of the vehicle listed at all.
• 16:42
  Speaker 2: And so.
• 16:44
  Speaker 3: It's kind of tough to pick out a two thousand
• 16:46
  Speaker 3: dollars or seventeen hundred dollars price increase when the majority
• 16:49
  Speaker 3: of Americans are buying their cars in this fashion.
• 16:52
  Speaker 2: So let's let's do this out this way. Then, wouldn't
• 16:56
  Speaker 2: it be noticeable for the average American buying a new
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  Speaker 2: And remember, the average American buying a new car is
• 17:02
  Speaker 2: not an average American. The ones who are buying new
• 17:05
  Speaker 2: cars tend to be wealthier. Yep. And like it's you,
• 17:09
  Speaker 2: I always say, like, you know, we make fun of
• 17:11
  Speaker 2: you know, like Americans on average pay like X dollars
• 17:14
  Speaker 2: for new cars, Like how can we do that? The
• 17:16
  Speaker 2: fact is most Americans aren't because they can't, right. But
• 17:20
  Speaker 2: the ones who do, okay, they bring out the financing
• 17:23
  Speaker 2: options and generally like the standard. At this point, I
• 17:25
  Speaker 2: wish it weren't this way, but the standard is a
• 17:28
  Speaker 2: sixty month car loan five years. If you're adding thirty
• 17:33
  Speaker 2: dollars a month to that, does that affect how the
• 17:36
  Speaker 2: average American buys cars? It should, I'm not sure it does.
• 17:41
  Speaker 2: I don't know right exactly. Now Here's the thing I
• 17:45
  Speaker 2: have had, like the when people are negotiating on houses
• 17:49
  Speaker 2: as an example, and like someone's like, well, you know,
• 17:53
  Speaker 2: they want four to twenty five and I only want
• 17:55
  Speaker 2: to pay four twenty, Like they won't meet me in
• 17:57
  Speaker 2: the middle. My advice is very often like just do
• 18:01
  Speaker 2: if you like the house, just do it, because it's
• 18:02
  Speaker 2: like an extra ten dollars a month for thirty years
• 18:05
  Speaker 2: to live where you want. Like that, that ten dollars
• 18:08
  Speaker 2: a month isn't going to make the difference in this case.
• 18:12
  Speaker 2: For a car, which is a depreciating asset that you're
• 18:14
  Speaker 2: gonna own again, like depends on the person buying it.
• 18:19
  Speaker 2: There are some people who buy new cars that get
• 18:21
  Speaker 2: a new one like every three years. There's someone will
• 18:23
  Speaker 2: hold this thing for fifteen years. But you look at
• 18:25
  Speaker 2: and you go, am, I like, can I on this
• 18:29
  Speaker 2: car paying extra thirty dollars a month? I can? And
• 18:34
  Speaker 2: so here here's I guess where I land which is
• 18:36
  Speaker 2: Americans might not change their car buying behavior as a
• 18:39
  Speaker 2: result of it. They might still buy the car, but
• 18:42
  Speaker 2: they're gonna have less money to spend elsewhere. Yeah, that's
• 18:48
  Speaker 2: kind of where I end up landing is, Yeah, there's
• 18:51
  Speaker 2: gonna be less money to go other places then, because
• 18:55
  Speaker 2: I'm not sure that again, with how Americans buy cars,
• 18:59
  Speaker 2: that that makes a difference. What percentage of people like
• 19:02
  Speaker 2: walk up and you're like, hey, I'm gonna write you
• 19:04
  Speaker 2: a check for that car? Very few? You know, by
• 19:07
  Speaker 2: the way, Bezos probably leases.
• 19:09
  Speaker 3: Scary statistic for you, Chuck. According to lending Tree, the
• 19:13
  Speaker 3: average auto loan term for new cars is sixty eight
• 19:16
  Speaker 3: point six months now, which is not good. Nope, which
• 19:21
  Speaker 3: is not good. See average.
• 19:24
  Speaker 2: The framework that I've always liked on buying cars, if
• 19:30
  Speaker 2: the price is more than ten percent of your income,
• 19:33
  Speaker 2: probably shouldn't be doing it. Quick Break Wall Street watches Next.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio. Every day.
• 19:45
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 1: Time now for Wall Street. Watch a complete look at
• 19:54
  Speaker 1: what's moving market so far today right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 20:00
  Speaker 4: It's eleven thirty four and markets are mixed right now.
• 20:04
  Speaker 4: The Dow Jones is up over one hundred and twenty
• 20:06
  Speaker 4: one points, or three tenths of a percent. The S
• 20:08
  Speaker 4: and P five hundred is essentially flat, up one point
• 20:11
  Speaker 4: twenty one points. The Nasdaq is down over sixty points,
• 20:15
  Speaker 4: or three tenths of a percent. Jack in the Box
• 20:19
  Speaker 4: shares a phone one point eight percent after a Stifel
• 20:22
  Speaker 4: downgrade to hold from buy. The firm said the Trump's
• 20:25
  Speaker 4: administration Trump Administration's immigration policies are a headwind for Jack
• 20:30
  Speaker 4: in the Box. Its cent Your shares are down five
• 20:32
  Speaker 4: point five percent after the it company reported a six
• 20:36
  Speaker 4: percent drop in new bookings in US currency and its
• 20:39
  Speaker 4: fiscal third quarter to seventeen point seven three billion dollars overall. However,
• 20:44
  Speaker 4: accent Your topped expectations, posting earnings of three dollars and
• 20:48
  Speaker 4: forty nine cents per share on revenue of seventeen point
• 20:51
  Speaker 4: seven three billion dollars. Analysts had expected per share earnings
• 20:55
  Speaker 4: of three dollars and thirty two cents on revenue of
• 20:58
  Speaker 4: seventeen point three billion. Specialty building products company GMS stock
• 21:03
  Speaker 4: is up over twenty seven percent as a bidding war
• 21:06
  Speaker 4: for GMS has reportedly developed between QXO and home Depot.
• 21:12
  Speaker 4: QXO said late Wednesday that it was offering ninety two
• 21:15
  Speaker 4: dollars and twenty cents per share, while the Wall Street
• 21:18
  Speaker 4: Journal reported Friday that home Depot had also made an
• 21:21
  Speaker 4: offer privately. And finally, we're looking at Kroger shares are
• 21:25
  Speaker 4: up over nine percent after the company raised its full
• 21:29
  Speaker 4: year sales forecast, held its profit outlook steady, and posted
• 21:32
  Speaker 4: results for its most recent quarter that were mixed. The
• 21:35
  Speaker 4: company is navigating an increasingly competitive environment, with Walmart and
• 21:39
  Speaker 4: Costco gaining share in grocery. I am Ben Kitchen, and
• 21:43
  Speaker 4: that is Wall Street Watch taking a look at trivia
• 21:46
  Speaker 4: right now. The question was what was the first summer
• 21:49
  Speaker 4: blockbuster movie? Your answer Jaws. Jaws shifted the focus of
• 21:54
  Speaker 4: Hollywood to releasing big budget films during the summer, targeting
• 21:57
  Speaker 4: a wider audience and generating significant revenue. Today's winner is
• 22:02
  Speaker 4: Kathy in South Weymouth. She will be taking home a
• 22:05
  Speaker 4: financial Exchange show t shirt. We played trivia every day
• 22:07
  Speaker 4: here on the Financial Exchange. See complete contest rules at
• 22:11
  Speaker 4: Financial Exchange Show dot com.
• 22:13
  Speaker 2: Mike, did you tell me am I making it up
• 22:15
  Speaker 2: that you rode in a Weaimo in the last year.
• 22:18
  Speaker 3: I've done it a few times. Actually, I was on
• 22:21
  Speaker 3: business in both San Francisco and Phoenix over the course
• 22:24
  Speaker 3: of last year, and so yeah, I've taken three or
• 22:26
  Speaker 3: four of them.
• 22:27
  Speaker 2: Now where do you call them through? What is there?
• 22:29
  Speaker 3: You have to have a dedicated app. Yep, you have
• 22:31
  Speaker 3: a dedicated Waymo app on your phone. You, at least
• 22:34
  Speaker 3: in the cities that I visited, cannot call them on
• 22:36
  Speaker 3: any other apps. I think that they might have integrated
• 22:39
  Speaker 3: with Uber and Austin, but I could be wrong about that.
• 22:41
  Speaker 2: But yeah, you have a.
• 22:42
  Speaker 3: Dedicated Waymo app, just like Uber or Lyft, and you
• 22:45
  Speaker 3: use that to call them.
• 22:47
  Speaker 2: So Weaimo is sending its cars back to Manhattan beginning
• 22:52
  Speaker 2: next month. They were in there through twenty twenty one,
• 22:56
  Speaker 2: just conducting mapping of the area. Might say, like, why
• 23:00
  Speaker 2: do you need a map of New York City? It's
• 23:02
  Speaker 2: not that kind of mapping, it's you know, the actual
• 23:05
  Speaker 2: like street by street, how much room do we have
• 23:09
  Speaker 2: to maneuver the cars mapping, so they're gonna be back
• 23:11
  Speaker 2: doing that. And also they will have human drivers just
• 23:16
  Speaker 2: because New York City law, I'm sorry, New York State
• 23:18
  Speaker 2: law doesn't allow for vehicles to operate without a person
• 23:22
  Speaker 2: at the wheel. Weimo's obviously pushing for changes to that,
• 23:26
  Speaker 2: but they are trying to you know, potentially get back
• 23:30
  Speaker 2: into it is obviously a huge area for ride hailing.
• 23:34
  Speaker 2: And the big question. It's interesting because on one level,
• 23:38
  Speaker 2: you think about New York City and you're like, man,
• 23:39
  Speaker 2: what a perfect spot for these vehicles. The counterpoint to
• 23:44
  Speaker 2: it is, unlike other grid based you know, metro areas
• 23:52
  Speaker 2: Phoenix is one that you mentioned. Sure, New York City
• 23:55
  Speaker 2: is constantly evolving in that like the number of like
• 23:58
  Speaker 2: street closure. Oh, this whole lanes closed because you know,
• 24:03
  Speaker 2: there's like something happening here and the guy loading a
• 24:08
  Speaker 2: couch into his penthouse, so we've got this road blocked off.
• 24:12
  Speaker 2: That stuff happens at a pretty high rate in New
• 24:14
  Speaker 2: York City, and so it does face some additional challenges
• 24:18
  Speaker 2: in navigating the specifics of the roads, but the overall
• 24:21
  Speaker 2: grid makes it, you know, more manageable. But there's just
• 24:25
  Speaker 2: like the fact that it's New York City and weird
• 24:27
  Speaker 2: stuff happens there that you have to deal with.
• 24:29
  Speaker 3: Yeah, I think the only challenge when I think about
• 24:31
  Speaker 3: New York is weather, quite honestly, like seeing these things
• 24:33
  Speaker 3: operate in Phoenix and San Francisco. One, they're not going
• 24:37
  Speaker 3: to take the entire island of Manhattan, or at least
• 24:40
  Speaker 3: not at once. They carve out a section of the
• 24:42
  Speaker 3: city where they say, this is where we're going to operate.
• 24:44
  Speaker 3: And so do I really think that you have, you know,
• 24:47
  Speaker 3: on a per mile basis, more distractions and disruptions than
• 24:51
  Speaker 3: you would in San Francisco. Now I kind of have
• 24:53
  Speaker 3: my doubts. What you do have is fewer days of
• 24:58
  Speaker 3: clear sunshine than you would get in San Francis or Phoenix.
• 25:00
  Speaker 3: And so are these systems really ready for go time when.
• 25:06
  Speaker 2: You know a.
• 25:06
  Speaker 3: Good portion of the days are at least rain and
• 25:10
  Speaker 3: oftentimes other weather conditions. But you know, again, it's New York.
• 25:13
  Speaker 3: You're not dealing with snow in the same way that
• 25:16
  Speaker 3: you would be Portland, Maine, for example, And so.
• 25:19
  Speaker 2: I don't know.
• 25:19
  Speaker 3: New York seems doable if they can get the rules
• 25:22
  Speaker 3: behind them on it.
• 25:23
  Speaker 2: To me, yeah, but you got to deal with in
• 25:25
  Speaker 2: New York in your brown sludge the day after it snows. Yeah. Yeah,
• 25:30
  Speaker 2: that just covers the entire city.
• 25:32
  Speaker 3: Yeah yeah, so you don't have that in San Francisco.
• 25:35
  Speaker 3: I can agree there, folks. I want to talk to
• 25:37
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• 25:40
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• 25:42
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• 25:43
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• 25:46
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• 25:50
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• 25:52
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• 25:56
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• 26:39
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• 26:53
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• 26:56
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• 26:58
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• 27:18
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• 27:29
  Speaker 2: Mike, I want to pull forward this piece on Japanese
• 27:31
  Speaker 2: inflation because I think there's something it's not even brewing
• 27:36
  Speaker 2: there at this point. It's brewed and continuing to brew.
• 27:39
  Speaker 2: It might be overbrewing at this point, but so you've
• 27:44
  Speaker 2: got Japanese inflation running hot at the moment. Japan's core
• 27:51
  Speaker 2: inflation rate that was reported overnight climbed to three point
• 27:55
  Speaker 2: seven percent year over year, and that is obviously core
• 28:00
  Speaker 2: is stripping out food prices. Headline inflation actually came in
• 28:04
  Speaker 2: at three five, a little below. And this is all
• 28:06
  Speaker 2: happening with a backdrop of rice prices in Japan now
• 28:10
  Speaker 2: up one hundred and one point seven percent year over year.
• 28:14
  Speaker 2: That is their largest increase in over half a century.
• 28:18
  Speaker 2: And I know next to nothing about the Japanese rice market.
• 28:23
  Speaker 2: So everything that you're about to hear from me I
• 28:26
  Speaker 2: learned this morning, which is fine, but interestingly so that
• 28:32
  Speaker 2: the Japanese rice market is basically cut off from the
• 28:35
  Speaker 2: rest of the world. They don't really allow for much
• 28:38
  Speaker 2: in the way of imports, they don't have much in
• 28:41
  Speaker 2: the way of exports, and so it becomes a very
• 28:44
  Speaker 2: fragile market because you don't have, you know, this big
• 28:47
  Speaker 2: network of suppliers that you can choose from, and so
• 28:50
  Speaker 2: when things get disrupted there apparently it just is an
• 28:54
  Speaker 2: incredibly volatile market where you can just see these huge
• 28:57
  Speaker 2: swings depending on exactly how things move.
• 29:01
  Speaker 3: But for example, the orange crop in Florida fails, prices
• 29:05
  Speaker 3: go up, but it is not as catastrophic as the
• 29:08
  Speaker 3: rice market in Japan.
• 29:08
  Speaker 2: As what you correct, we might be like, Okay, bring
• 29:11
  Speaker 2: in you know, as many Costa Rican oranges as you can,
• 29:13
  Speaker 2: and you know, bring in as many Panamanian oranges as
• 29:15
  Speaker 2: you can, and we'll figure it out. It's not the
• 29:18
  Speaker 2: same with Japan and rice. And so the piece that
• 29:24
  Speaker 2: you're really struggling with here is the Bank of Japan
• 29:26
  Speaker 2: is just kind of pinned in right now and doesn't
• 29:30
  Speaker 2: have any easy ways out of this. What they are
• 29:33
  Speaker 2: talking about trying to do because they can't find buyers
• 29:39
  Speaker 2: for their long term bonds, is they are talking about
• 29:44
  Speaker 2: trying to shift the issuance more towards the short end,
• 29:48
  Speaker 2: where people may be, you know, more amenable to buying.
• 29:51
  Speaker 2: But it doesn't actually solve the inflation problem. It just
• 29:53
  Speaker 2: allows you to place your debt right now. And the
• 29:57
  Speaker 2: thing I come back to, the US has done some
• 29:58
  Speaker 2: of this in the last year as well, not to
• 30:00
  Speaker 2: you know this extent, but I was reminded by a
• 30:03
  Speaker 2: friend of mine that back in the nineteen nineties, there
• 30:06
  Speaker 2: was a period where ninety nine percent of Brazil's borrowing
• 30:11
  Speaker 2: was being done on a three to six month basis
• 30:14
  Speaker 2: because no one wanted to buy long term Brazilian bonds
• 30:17
  Speaker 2: because of the inflation problem. And ultimately it doesn't solve it.
• 30:21
  Speaker 2: It just kind of pushes it out and means that, yeah,
• 30:23
  Speaker 2: we've got this huge inflation problem, and maybe you can
• 30:26
  Speaker 2: inflate your old debt problems away through that while you know,
• 30:29
  Speaker 2: repressing your you know, country's population through high inflation. But this, unfortunately,
• 30:36
  Speaker 2: I think, is an ugly thing that we're going to
• 30:38
  Speaker 2: be seeing more and more of, and none of this
• 30:41
  Speaker 2: ends well. Eventually, it ends with something breaking because people
• 30:44
  Speaker 2: do not like high inflation. And just moving around the
• 30:47
  Speaker 2: maturities of your bond issuance in order to solve it
• 30:50
  Speaker 2: is not actually fixing the problem. And the problem that
• 30:54
  Speaker 2: you have is that in order to historically fix inflation,
• 30:57
  Speaker 2: you need to do the opposite of what you're doing
• 30:59
  Speaker 2: and basically raise rates and allow for that inflation to
• 31:03
  Speaker 2: be beaten into submission. But no one likes to do
• 31:06
  Speaker 2: that because then it triggers a recession, and those are
• 31:08
  Speaker 2: obviously unpalatable as well, so I think that we are
• 31:11
  Speaker 2: in some dodgy times for a number of countries dealing
• 31:14
  Speaker 2: with inflation problems. And what I will say on this front,
• 31:18
  Speaker 2: pay attention to Japan because there is no aside from
• 31:23
  Speaker 2: the US dollar, there is no more important currency for
• 31:26
  Speaker 2: world financial markets than the en So pay attention to
• 31:30
  Speaker 2: what's going on there, even if you don't normally do so.
• 31:33
  Speaker 2: Quick break here. When we return, we're going to be
• 31:36
  Speaker 2: joined by Paul Lamonica from Barons right after this.
• 31:42
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• 32:17
  Speaker 2: Ladies and gentlemen the weekend.
• 32:23
  Speaker 4: This segment of The Financial Exchange is brought to you
• 32:25
  Speaker 4: in part by the US Virgin Islands Department of Tourism.
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• 32:51
  Speaker 2: Joining us on the line right now is Paul Lamonica
• 32:55
  Speaker 2: from Barons and Paul, it's great to chat with you today.
• 33:00
  Speaker 2: Thank you very much. Appreciate it, Paul. When we look
• 33:03
  Speaker 2: at this piece that you have out there today, it's
• 33:06
  Speaker 2: talking about credit card annual fees going up. What are
• 33:09
  Speaker 2: we seeing in the landscape as far as the magnitude
• 33:12
  Speaker 2: of annual fee increases.
• 33:15
  Speaker 5: Yeah, there's you know what we have right now is
• 33:18
  Speaker 5: that Chase with its Sapphire card. They're going to be
• 33:22
  Speaker 5: going up, you know, to a pretty fty annual fee
• 33:28
  Speaker 5: from where they were and you know that's something that
• 33:32
  Speaker 5: you know, they are talking about it being you know,
• 33:36
  Speaker 5: good for customers because there's a lot more features that
• 33:39
  Speaker 5: they are going to be having. But the Sapphire Reserve,
• 33:43
  Speaker 5: you know, Credit Card had an annual fee of you know,
• 33:48
  Speaker 5: of you know, five fifty. It's going up to seven
• 33:51
  Speaker 5: ninety five. When they first launched it almost a decade ago,
• 33:54
  Speaker 5: it was at four fifty. Now again they're promising you know,
• 33:58
  Speaker 5: more access to airport lounges and you know, better points
• 34:03
  Speaker 5: boosting program and promotional credits with a lot of partners
• 34:07
  Speaker 5: like Apple and door Dash. But you know, this is
• 34:09
  Speaker 5: coming at a time where there's speculation that you could
• 34:13
  Speaker 5: have American Express raising its annual fee potentially do a
• 34:16
  Speaker 5: thousand for Platinum cards. So the question is what does
• 34:19
  Speaker 5: this mean for Capital One. They have their venture X program,
• 34:23
  Speaker 5: which is quote unquote only at three ninety five. If
• 34:27
  Speaker 5: they hold that steady, then maybe they'll be able to
• 34:30
  Speaker 5: gain some market share from the likes of JP, Morgan
• 34:33
  Speaker 5: and MX. And you know, obviously Capital One is you know,
• 34:37
  Speaker 5: a company that has done really well in recent years.
• 34:40
  Speaker 5: They just finished the merger with Discover, which they're hoping
• 34:44
  Speaker 5: will boost profits as well.
• 34:46
  Speaker 2: When you look at these annual fees, how much of
• 34:50
  Speaker 2: you know, corporate revenue. Does this make up for all
• 34:52
  Speaker 2: of these companies? Is this a big line item for
• 34:55
  Speaker 2: them or is this just something that kind of gets
• 34:57
  Speaker 2: people into the ecosystem and the real stuff is made elsewhere.
• 35:01
  Speaker 5: Yeah, it's really more of the latter. I mean, these
• 35:03
  Speaker 5: are all three very diversified giant financial services companies, Capital
• 35:09
  Speaker 5: One JP, Morgan Chased, American Express JP Morgan probably the
• 35:12
  Speaker 5: most diversified of the three because of the Wall Street ties,
• 35:16
  Speaker 5: the investment banking business they have in addition to the
• 35:19
  Speaker 5: consumer banking business as well. But yes, these are companies
• 35:24
  Speaker 5: that all do want to keep people within their you know,
• 35:28
  Speaker 5: quote unquote walled gardens. And I think Capital One even
• 35:31
  Speaker 5: more so because of the discovered deal, you know, giving
• 35:35
  Speaker 5: them more of a competitive presence versus the other payment giants,
• 35:40
  Speaker 5: course Visa and MasterCard, as well as American Express. So
• 35:44
  Speaker 5: I think for Capital One, it really might behoove them
• 35:47
  Speaker 5: to you know, keep their annual membership fee a little
• 35:52
  Speaker 5: bit lower to try and gain even more market share.
• 35:56
  Speaker 2: Paul, these are all you know, kind of upper tier
• 35:58
  Speaker 2: credit cards that you're talking about raised these fees. Are
• 36:00
  Speaker 2: we seeing fees going up on mid tier and lower
• 36:03
  Speaker 2: tier ones as well, or is this just isolated to
• 36:07
  Speaker 2: those premium cards at the moment.
• 36:09
  Speaker 5: Yeah, I think that the headlines are more about the
• 36:12
  Speaker 5: premium cards than your average standard credit cards, which you know,
• 36:17
  Speaker 5: these companies all offer quote unquote lower end cards as well.
• 36:22
  Speaker 5: But I think this is definitely a case where companies
• 36:26
  Speaker 5: like JP, Morgan, Chase, Visa, and Capital I'm sorry, MX
• 36:29
  Speaker 5: and Capital one recognize that there are higher end consumers,
• 36:35
  Speaker 5: more affluent customers at the upper end of the income
• 36:38
  Speaker 5: chain that can afford and absorb these costs a little
• 36:42
  Speaker 5: bit more than you know, lower income consumers relying on
• 36:47
  Speaker 5: credit cards for spending. You're not really going to try
• 36:49
  Speaker 5: and squeeze them at a time where rates are already
• 36:52
  Speaker 5: you know, probably high for a lot of these credit cards.
• 36:55
  Speaker 5: You know, not to mention just the annual.
• 36:56
  Speaker 2: Fees as well.
• 36:57
  Speaker 5: You know a lot of lower end credit cards don't
• 36:59
  Speaker 5: have the same annual fees as well, because they're not
• 37:01
  Speaker 5: offering these same perks.
• 37:04
  Speaker 2: Paul, at a time when everyone is focused on inflation,
• 37:08
  Speaker 2: is this kind of a dangerous time for companies to
• 37:10
  Speaker 2: be raising these annual fees.
• 37:13
  Speaker 5: It is questionable whether or not you will see consumers, Bock.
• 37:18
  Speaker 5: I think the bet is that once you have one
• 37:23
  Speaker 5: of these cards, switching may not be easy to do,
• 37:28
  Speaker 5: or it might be, you know, kind of a pain
• 37:30
  Speaker 5: to do because you're already locked in with points, especially
• 37:33
  Speaker 5: when they're tied to travel rewards, being airlines or hotels.
• 37:38
  Speaker 5: So you know, I think that's the bet that maybe
• 37:40
  Speaker 5: consumers are not going to leave even if they are
• 37:45
  Speaker 5: seeing higher prices. It's kind of similar strategy to what
• 37:47
  Speaker 5: you're maybe getting with Netflix and some of the streaming companies,
• 37:50
  Speaker 5: where you know they're raising prices, but if you like
• 37:53
  Speaker 5: watching certain shows that are only on these platforms, what
• 37:57
  Speaker 5: are you going to do? You can't say, you know,
• 37:59
  Speaker 5: oh well Netflix just raised their fee and I like
• 38:03
  Speaker 5: watching squid games, so I'll go to Disney Plus and
• 38:06
  Speaker 5: get instead, which doesn't let me watch squid game.
• 38:09
  Speaker 2: So Paul, we've got to run. Appreciate you joining us,
• 38:12
  Speaker 2: have a great weekend, and we'll catch up you this soon.
• 38:15
  Speaker 2: That is Paul and Monica from Barons. We're done for
• 38:18
  Speaker 2: the week. Everyone enjoy the weekend. We'll see you back
• 38:21
  Speaker 2: here on Monday.