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Why Americans Feel Worse About the Economy Despite Strong Spending · The Financial Exchange Show

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  Speaker 2: Markets as we move into the hour. S & P
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  Speaker 2: is up nine points. Dow is up 74. NASDAQ is
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  Speaker 2: down 16. So mixed markets, not really going much of anywhere.
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  Speaker 2: to this point today. Well, and we're.
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  Speaker 5: Waiting on three, I think, kind of critical pieces of
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  Speaker 5: information for markets. One will be the interest rate decision
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  Speaker 5: and subsequent press conference for the Federal Reserve decision coming
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  Speaker 5: at two press conference at 230. So investors kind of
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  Speaker 5: waiting with bated breath there. And then earnings from two
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  Speaker 5: of the largest companies in the world, Microsoft and Google's
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  Speaker 5: parent company, Alphabet, both reporting after the bell this afternoon.
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  Speaker 5: And so you've got not only Major interest rate decision,
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  Speaker 5: but also major contributors to the AI build-out, Microsoft and Alphabet,
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  Speaker 5: telling you how much they're spending and how it's going
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  Speaker 5: this afternoon.
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  Speaker 2: We do have a little bit of movement in Treasuries.
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  Speaker 2: 10-year yield is up 3.5 basis points to 5.028%. So
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  Speaker 2: back above 5 after spending a few days back in
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  Speaker 2: the high 4s for a little bit. Dollar index is
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  Speaker 2: up 0.03%, not much movement on that front. Gold feeling
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  Speaker 2: a little bit of heat from those higher rates, so
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  Speaker 2: it's at $ 4, 054. 80, down about 19 an ounce. And we've
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  Speaker 2: got crude oil continuing to creep up here. Crude's at $ 102. 44
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  Speaker 2: on West Texas Intermediate, up another 2.5%. We are seeing
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  Speaker 2: this spilling into products as well, with gas futures up
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  Speaker 2: a touch and diesel futures up about $ 0. 05 as well.
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  Speaker 2: So we've been kind of just treading water in products
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  Speaker 2: for the last, basically a week or two. Gas prices
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  Speaker 2: down a little bit. Some of that's just because of
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  Speaker 2: some better refinery numbers out of the Midwest, them getting
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  Speaker 2: back up to full capacity in the last couple weeks.
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  Speaker 2: But we'll see where we go on these items just because, obviously,
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  Speaker 2: energy costs, big one for a lot of families and
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  Speaker 2: one that people are paying pretty close attention to right now.
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  Speaker 2: We got a piece in Barron's. The Santa Rally ramps
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  Speaker 2: up today if these three things don't ruin it. First,
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  Speaker 2: before we get to the three things, Chuck.
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  Speaker 1: Yes.
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  Speaker 2: First, Michael, what is the Santa Claus rally? Because there
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  Speaker 2: are a lot of misconceptions about.
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  Speaker 5: The Santa Claus rally is the last five days of
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  Speaker 5: the year, plus the first two of the following year.
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  Speaker 2: So why are we talking about it now? I don't know.
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  Speaker 5: But what happens before Halloween? You know what it is, Chuck?
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  Speaker 5: We're talking about it now because of holiday creep. The
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  Speaker 5: Halloween decorations got to Costco in June. So Barron's needs
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  Speaker 5: to report on the Santa Claus rally in October.
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  Speaker 2: So does this mean that sell in May and go
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  Speaker 2: away is now going to happen in March? I think so.
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  Speaker 2: Is this why marches have been so crappy in equity
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  Speaker 2: markets for like the last decade?
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  Speaker 6: That must be it.
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  Speaker 5: So yeah, the premise of this is a bit nonsensical,
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  Speaker 5: but I guess the idea of the Santa Claus rally
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  Speaker 5: has certainly evolved to everyone wanting to talk about it starting,
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  Speaker 5: you know, very early on, but that's not what the
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  Speaker 5: Santa Claus rally is. Like I said, it's seven trading
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  Speaker 5: days of the year, the last five plus the first
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  Speaker 5: two of January.
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  Speaker 2: So there.
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  Speaker 5: The other piece that I just wanted to, they talk
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  Speaker 5: about trends and markets, and the piece is quoted as saying, quote,
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  Speaker 5: since 1928, the S & P 500 has climbed from
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  Speaker 5: late July to early September, slumped into late October, then
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  Speaker 5: rallied to the end of the year. The path has
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  Speaker 5: been followed this year with the benchmark gaining 3%, yada, yada, yada.
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  Speaker 5: you need some additional language for that sentence.
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  Speaker 2: Yes.
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  Speaker 5: Because the market has not, since 1928, every time, rallied
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  Speaker 5: from late July to September, then slumped and then rallied again.
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  Speaker 5: It may have on average, but averages don't really tell
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  Speaker 5: you anything about the future. So I don't think that
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  Speaker 5: that is a complete sentence as the author intended.
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  Speaker 2: Also, just some items on this. Again, when we're talking
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  Speaker 2: about like, Hey, Santa Claus Rally, the next week of
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  Speaker 2: the year, it ranks in the 43rd percentile for best weeks,
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  Speaker 2: best five-day stretches out of a year historically, like if
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  Speaker 2: you look at the S & P from a seasonal perspective.
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  Speaker 2: So very meh. The next month, okay, ranks in the
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  Speaker 2: 42nd percentile. Again, like not bad, not great, just kind
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  Speaker 2: of standard Steady Eddie. The next quarter from here, the
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  Speaker 2: next three months, does rank in the 95th percentile historically.
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  Speaker 2: But here's the other part that I'll point out about that. Mike,
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  Speaker 2: in the 95th percentile for, like, next three months in
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  Speaker 2: the S & P 500, it still is down 30%
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  Speaker 2: of the time.
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  Speaker 6: That's a lot.
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  Speaker 4: This next quarter.
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  Speaker 2: So, like, you can't just be like, well, the Santa
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  Speaker 2: Claus rally is coming and this is like a 95th
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  Speaker 2: percentile setup. Okay, it still loses money a third of
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  Speaker 2: the time.
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  Speaker 3: Yep.
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  Speaker 6: So what do you do with this? Nothing. Throw it
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  Speaker 6: in the trash.
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  Speaker 2: Yes. This is one of those where you take it,
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  Speaker 2: you read it, and you say, I don't know enough
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  Speaker 2: about this to be able to make any investment decisions
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  Speaker 2: with it. Let me toss it. What are the three
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  Speaker 2: things that could ruin the Santa Claus rally that is
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  Speaker 2: not really happening right now because it's not Santa Claus
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  Speaker 2: rally time?
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  Speaker 5: I mean, I don't think there's three. I guess you
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  Speaker 5: could point to the three that we've been talking about
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  Speaker 5: all year. Energy costs, inflation, and A.I.
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  Speaker 2: Yes, if those go badly, the Santa Claus rally would
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  Speaker 2: go badly. Okay, great. Thanks for the insight. Appreciate it.
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  Speaker 2: Let's take a quick break here. When we come back,
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  Speaker 2: we'll get to a story that I feel like we've
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  Speaker 2: been covering every week for the last six years.
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  Speaker 6: U.S.
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  Speaker 2: Consumers are disillusioned about the economy. Actually, take it back.
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  Speaker 2: We've been covering this story basically since I started in
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  Speaker 2: the business. Michael, I started in this business on November 2, 2009.
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  Speaker 6: Uh-huh.
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  Speaker 2: Has there been a period since then where we've seen
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  Speaker 2: pieces like Americans are so happy with the economy?
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  Speaker 6: They are illusioned by the economy?
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  Speaker 2: When have we ever seen that? The only point that
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  Speaker 2: I could maybe point to is maybe like late 20...
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  Speaker 2: Even 2018-19, like things were starting to get a little
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  Speaker 2: wiggly in a couple places. I'll go maybe parts of
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  Speaker 2: 2018 or 19.
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  Speaker 5: Let's take a break because we need to dive in here,
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  Speaker 5: but To your point, Chuck, you're right. However, there's been
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  Speaker 5: a change since COVID, as you acknowledge. There's been a
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  Speaker 5: change in how people respond to these things. And so
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  Speaker 5: we should talk about that change and the disillusionment Americans
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  Speaker 5: seem to be living with at the moment when it
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  Speaker 5: comes to the economy.
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  Speaker 6: Quick break. We'll be right back on The Financial Exchange.
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  Speaker 6: The right activity for you.
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  Speaker 2: This is the place to go. The irony is not
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  Speaker 2: for admission, but that's how it should be. Let's talk
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  Speaker 2: a little bit about this piece from Bloomberg Opinion. It's titled, U.S.
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  Speaker 2: Consumers Are Disillusioned About the Economy. And here's the thing.
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  Speaker 2: This is talking about the University of Michigan's Consumer Sentiment Survey. Which,
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  Speaker 2: I've made the point, I think it is broken because
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  Speaker 2: they changed their methodology by moving to online-only surveys instead
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  Speaker 2: of calling people. And so you have people saying things like, hey,
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  Speaker 2: we feel worse about the economy in August of this
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  Speaker 2: year than during the peak of the Great Recession, than
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  Speaker 2: during the peak of the inflation scare in 2022, than
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  Speaker 2: during the peak of the 1970s inflation and the 1980 recession.
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  Speaker 5: Basically.
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  Speaker 2: People in the aggregate are saying that this is the
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  Speaker 2: worst economy we have had in the last 60 years.
• 11:58
  Speaker 2: And while I admit that there are some problems with
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  Speaker 2: the economy, I can't get to worst in the last
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  Speaker 2: 60 years.
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  Speaker 5: Yeah, what's confusing to me, Chuck, is that they say
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  Speaker 5: they're disillusioned. But they don't act that way.
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  Speaker 6: Well, they seem to vote as though they're disillusioned. Yes.
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  Speaker 6: But they spend as though they're... Illusioned.
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  Speaker 2: Illusioned. Yes, they are properly illusioned.
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  Speaker 5: We do have stable growth. We have low unemployment. We
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  Speaker 5: have low-ish inflation. The theme that Somebody was talking about
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  Speaker 5: this yesterday, so it's not my original thought. I was
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  Speaker 5: at a conference yesterday and the speaker was describing.
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  Speaker 2: We all stand on the shoulders of giants and call
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  Speaker 2: ourselves tall. Agreed.
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  Speaker 5: The idea of uncertainty versus instability. People like to say
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  Speaker 5: markets hate uncertainty. They don't hate uncertainty. They deal with
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  Speaker 5: uncertainty every single day and it's about clearing that fog
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  Speaker 5: and moving on. I think plenty of people would argue
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  Speaker 5: that things seem less stable now. Less clear about what
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  Speaker 5: the policy is going to look like. Less clear about... This, that,
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  Speaker 5: or the other. And I think that maybe that's causing
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  Speaker 5: the feeling of instability.
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  Speaker 6: Maybe that's causing the result of the polls.
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  Speaker 5: But I guess that's the only realistic thing that I
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  Speaker 5: can point towards is this feeling of a lack of
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  Speaker 5: stability compared to the uncertainty of days past. And I
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  Speaker 5: do think you can perceive that in different ways. But
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  Speaker 5: to your point, it's not affecting spending. We had, what
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  Speaker 5: was it, Visa report earnings yesterday.
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  Speaker 2: Consumer spending continues just to hum along.
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  Speaker 5: Royal Caribbean, Coca-Cola, UPS all told us that the consumers
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  Speaker 5: are continuing to spend money at.
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  Speaker 6: Their businesses.
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  Speaker 2: Airlines are like, we're raising prices and we're not profitable,
• 13:36
  Speaker 2: but people are paying our fares. And yet, you get this.
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  Speaker 2: Prior to the last year, okay, not even like this
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  Speaker 2: whole cycle. Prior to the last year, the highest percentage
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  Speaker 2: of Americans in the University of Michigan Consumer Sentiment Survey,
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  Speaker 2: the highest percentage of Americans who thought their situation financially
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  Speaker 2: would be worse in a year was 29% back in 1979.
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  Speaker 2: 29% of Americans then said, hey, my situation is going
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  Speaker 2: to be worse a year from now than it is today.
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  Speaker 2: Even during the financial crisis, the peak of it, 2008 Q2,
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  Speaker 2: you got up to 23%. Remember, unemployment went to, like,
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  Speaker 2: north of 10 during that time period. Okay? Or basically, like,
• 14:26
  Speaker 2: right around 10. Even during COVID, okay, this got up to, like,
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  Speaker 2: it didn't even move during COVID because the actual market
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  Speaker 2: collapse was so brief. The most recent survey.
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  Speaker 6: 40%.
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  Speaker 2: 1% of Americans expect their finances to be worse a
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  Speaker 2: year from now.
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  Speaker 6: 41.
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  Speaker 2: The highest we've had before this was 29. So I
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  Speaker 2: go to, the survey's broken. Again, not saying that everything's perfect,
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  Speaker 2: but the survey's broken because this is not the worst
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  Speaker 2: economy that I have even lived through.
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  Speaker 5: And I was not alive in the 1970s. Yeah, I
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  Speaker 5: agree the survey's broken. I don't think there's much that...
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  Speaker 5: I'm curious, I guess, if you can overlay it with
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  Speaker 5: voting patterns and see if it tells you anything about that,
• 15:22
  Speaker 5: but I suspect it certainly doesn't tell us anything about
• 15:24
  Speaker 5: consumer spending. It doesn't seem to tell us much realistically
• 15:27
  Speaker 5: about the economy, and I suspect it won't tell you
• 15:29
  Speaker 5: much about how people are going to vote in the
• 15:31
  Speaker 5: next election.
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• 16:41
  Speaker 2: Wall Street Journal's got a piece here. It's titled, Homebuyers
• 16:43
  Speaker 2: Who Enjoyed Cheap Adjustable Mortgages Are Now Getting a Nasty Shock.
• 16:48
  Speaker 2: And basically, here's what you have are people that took
• 16:51
  Speaker 2: out adjustable rate mortgages in the last five to seven
• 16:54
  Speaker 2: years are now seeing those rates adjusting.
• 16:57
  Speaker 3: And.
• 17:00
  Speaker 2: So on some of these, you kind of look at
• 17:01
  Speaker 2: it and you're like, I don't know why you didn't
• 17:05
  Speaker 2: refinance at some point. Like the first story. That's where
• 17:08
  Speaker 2: I am. On others, you sit there and you're like, yeah,
• 17:10
  Speaker 2: these people bought with an adjustable in 22 because rates
• 17:14
  Speaker 2: had gone up and it was all they could do.
• 17:15
  Speaker 2: And the adjustment period was three years. And OK, they're struggling.
• 17:18
  Speaker 2: But the first story is a guy who bought using
• 17:22
  Speaker 2: an adjustable rate mortgage in 2019. And so he had
• 17:27
  Speaker 2: an adjustable rate that he got for Again, basically 2.75%. Great.
• 17:34
  Speaker 2: And in 2020 then, and even 2021, interest rates went
• 17:38
  Speaker 2: down into the twos for fixed rates. So the question is,
• 17:43
  Speaker 2: my dude, why did you not refinance into a fixed
• 17:46
  Speaker 2: rate product to get rid of that adjustment risk? Because
• 17:49
  Speaker 2: it wouldn't have cost you a dime. And we don't
• 17:51
  Speaker 2: have a good answer on this because now instead, his
• 17:54
  Speaker 2: payment is going up to 7.75% in January and... There
• 17:58
  Speaker 2: is no way to get back to that 2.75% rate
• 18:01
  Speaker 2: for them.
• 18:02
  Speaker 5: There are two areas I've seen this rear its ugly head. One,
• 18:07
  Speaker 5: there were a lot of people with home equity lines
• 18:09
  Speaker 5: of credit who they didn't have to wait until now,
• 18:12
  Speaker 5: but for the last three years have seen much larger
• 18:14
  Speaker 5: payments than they were used to. And so that is
• 18:16
  Speaker 5: a new phenomenon for a lot of them is, hey,
• 18:19
  Speaker 5: this made sense to me and was reasonable when rates
• 18:22
  Speaker 5: were at 4%.
• 18:23
  Speaker 6: Suddenly they're at 8% and not so much.
• 18:26
  Speaker 2: I do.
• 18:28
  Speaker 5: feel for the folks that are on adjustable rate mortgages
• 18:30
  Speaker 5: and are seeing those adjust higher. But I got to
• 18:32
  Speaker 5: tell you, I don't think it's an issue for the
• 18:33
  Speaker 5: housing market. Arms represent less than 5% of outstanding mortgages.
• 18:38
  Speaker 5: So problem for you as a household, understand, hopefully you
• 18:43
  Speaker 5: were able to refinance out of it. But the idea
• 18:47
  Speaker 5: that adjustable rate mortgages are going to cause distress in
• 18:50
  Speaker 5: the housing market in the way that higher rates are
• 18:52
  Speaker 5: seeming to start to do so in the bond market
• 18:54
  Speaker 5: is does not seem likely to me in the near future.
• 18:57
  Speaker 2: It's very much something that is likely to cause significant
• 19:01
  Speaker 2: problems at a micro level for individual borrowers. But as
• 19:05
  Speaker 2: you noted, given the concentration of adjustable rate mortgages and
• 19:09
  Speaker 2: even on those, like the level of underwriting that goes
• 19:11
  Speaker 2: on now relative to what it was 20 years ago,
• 19:15
  Speaker 2: it's not something that's going to cause a systemic issue.
• 19:18
  Speaker 2: I'm just not sure that problems with housing finance rank
• 19:22
  Speaker 2: in my top 40 items to be concerned about now.
• 19:27
  Speaker 2: It's just housing's been so slow for so long, I
• 19:30
  Speaker 2: don't know that it can become a problem. Agreed. Let's
• 19:33
  Speaker 2: take a quick break here. When we come back, we're
• 19:36
  Speaker 2: going to be joined by David Cowan, the Museum of
• 19:38
  Speaker 2: American Finance president and CEO.
• 19:40
  Speaker 1: Bringing the latest financial news straight to your radio every day.
• 19:44
  Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
• 19:50
  Speaker 6: Time now for.
• 19:51
  Speaker 1: Wall Street Watch. Tracking the stocks, the data, and the
• 19:54
  Speaker 1: headlines driving markets so far today. Right here on the
• 19:57
  Speaker 1: Financial Exchange Radio Network.
• 19:59
  Speaker 7: Markets are mostly quiet ahead of the Fed's decision at
• 20:03
  Speaker 7: 2 o'clock this afternoon where interest rates are expected to
• 20:06
  Speaker 7: remain unchanged. Wall Street will also closely monitor Fed Chairman
• 20:10
  Speaker 7: Kevin Walsh's press conference at 230. Right now, the Dow
• 20:13
  Speaker 7: is up a quarter percent or 128 points up. S
• 20:17
  Speaker 7: & P 500 is up two-tenths of a percent. NASDAQ
• 20:19
  Speaker 7: down only seven points. Russell 2000 is flat. 10-year Treasury
• 20:24
  Speaker 7: yield is up three basis points at 5.026%. Crude oil
• 20:26
  Speaker 7: up about 2.5% at $ 102 a barrel, while Brent is.
• 20:28
  Speaker 6: At $ 115 a barrel.
• 20:35
  Speaker 7: And more big tech earnings are on the way this afternoon,
• 20:38
  Speaker 7: where Google's Alphabet and Microsoft will post their anticipated third
• 20:43
  Speaker 7: quarter results. Amazon will follow tomorrow afternoon. I'm Tucker Silva,
• 20:49
  Speaker 7: and that is Wall Street Watch.
• 20:51
  Speaker 2: We're joined now by David Cowan from the Museum of
• 20:56
  Speaker 2: American Finance. We're broadcasting live from there, and David happens
• 20:58
  Speaker 2: to be the president and CEO of the museum. And, David,
• 21:03
  Speaker 2: thank you so much for joining us today.
• 21:04
  Speaker 3: I appreciate the opportunity to showcase the museum and having
• 21:07
  Speaker 3: you here broadcasting.
• 21:08
  Speaker 2: I mean, this place, I didn't know what to expect,
• 21:11
  Speaker 2: if I'm being honest. When I saw we were doing this,
• 21:13
  Speaker 2: I was like, okay, this should be cool, but is
• 21:15
  Speaker 2: it going to be just cool for me? And then
• 21:17
  Speaker 2: I showed up here and walked around. You were nice
• 21:19
  Speaker 2: enough to give me a tour, and I was just like,
• 21:21
  Speaker 2: This is unbelievable. Can I live here?
• 21:25
  Speaker 3: We always generally meet or beat visitor expectations, in part
• 21:29
  Speaker 3: because they have no idea what to even expect.
• 21:31
  Speaker 1: Yeah.
• 21:32
  Speaker 4: And so you come in here and you come out
• 21:34
  Speaker 4: leaning here. It's amazing.
• 21:35
  Speaker 3: And there's just so much to showcase. And we do
• 21:39
  Speaker 3: it through the artifacts, the interpretation. But we've also built
• 21:43
  Speaker 3: a 21st century museum. in the 20th century, you know,
• 21:47
  Speaker 3: not in the 20th century, but in the 21st century,
• 21:50
  Speaker 3: being there's lots of high tech and other things for
• 21:53
  Speaker 3: interactive experiences.
• 21:54
  Speaker 2: Talk to me a little bit about your background and
• 21:57
  Speaker 2: how this ended up being an interest for you.
• 22:01
  Speaker 4: Sure.
• 22:01
  Speaker 3: So I studied history throughout my career in college and
• 22:05
  Speaker 3: in grad school, went and got a PhD in American
• 22:07
  Speaker 3: economic history. But I did that part time working on
• 22:10
  Speaker 3: Wall Street because I was really interested in trading, free enterprise.
• 22:14
  Speaker 3: liked the whole system and making some money. And the
• 22:17
  Speaker 3: whole fact of how savers and users of capital can
• 22:20
  Speaker 3: come together in the financial system. And it all brings
• 22:23
  Speaker 3: it together. And so my background was in that. And
• 22:26
  Speaker 3: then all of a sudden, there was an opportunity here.
• 22:28
  Speaker 3: So it seemed like a perfect fit. My thesis advisor
• 22:32
  Speaker 3: is Professor Richard Silla. He's curated some of these exhibits.
• 22:36
  Speaker 3: And he's a nation's finest financial historian. And he knew
• 22:39
  Speaker 3: about this job opening. And you wake up, And it's
• 22:43
  Speaker 3: 17 years later. It's wild.
• 22:44
  Speaker 4: It's wild.
• 22:45
  Speaker 2: It's wild. When you look at the museum that you've
• 22:49
  Speaker 2: built here, what are the main things that you want
• 22:52
  Speaker 2: to convey to someone? What's the goal of the museum
• 22:55
  Speaker 2: in terms of its operations?
• 22:56
  Speaker 4: Great.
• 22:57
  Speaker 3: So the whole goal is to improve your own life,
• 23:00
  Speaker 3: your own personal financial life. But we don't go about
• 23:03
  Speaker 3: it explaining it in like a traditional way.
• 23:05
  Speaker 4: Oh, here's a stock. Here's a bond. Absolutely not.
• 23:08
  Speaker 3: We know that finance intimidates a lot of people and
• 23:11
  Speaker 3: we want people to be comfortable with it. So you
• 23:13
  Speaker 3: come in and when the first couple of galleries are
• 23:16
  Speaker 3: about currency and things that you know, and then we
• 23:18
  Speaker 3: have the whole Alexander Hamilton experience. Hamilton, our first secretary
• 23:22
  Speaker 3: of the treasury, you can actually see him in AI
• 23:25
  Speaker 3: form and interact on questions about finance. And we're hoping then,
• 23:29
  Speaker 3: that you forget what you're doing, right? And then you
• 23:32
  Speaker 3: can open your mind to the themes. So there's public, personal,
• 23:35
  Speaker 3: and private finance. Public is the government. Personal is you,
• 23:39
  Speaker 3: the visitor. And private is companies like yours. And the
• 23:43
  Speaker 3: same themes of budgeting, credit, risk, investment go true or
• 23:48
  Speaker 3: run true for Alexander Hamilton, who had to worry about
• 23:50
  Speaker 3: the credit of the country, who had to create a
• 23:52
  Speaker 3: budget for the country, the same way it has to
• 23:55
  Speaker 3: enter in your own life as a visitor. And then
• 23:57
  Speaker 3: we start to explain those risks those lessons through the
• 24:00
  Speaker 3: prism of the museum.
• 24:02
  Speaker 2: When you look at this in the context of how
• 24:04
  Speaker 2: people think about finance today, you know, obviously it's something
• 24:09
  Speaker 2: that's front and center. I mean, I remember growing up like, look,
• 24:12
  Speaker 2: I had some like conception of how the financial system works,
• 24:15
  Speaker 2: but it feels like it's much more front and center
• 24:18
  Speaker 2: than it's ever been. I don't know why that's the case,
• 24:21
  Speaker 2: but what are some of the biggest misconceptions that you
• 24:24
  Speaker 2: see from people that you're hoping the experience here can
• 24:27
  Speaker 2: educate them more thoroughly about?
• 24:29
  Speaker 3: I would start even more basically than that. You know,
• 24:32
  Speaker 3: the Federal Reserve says 37% of Americans do not have
• 24:35
  Speaker 3: $ 400 in emergency savings.
• 24:38
  Speaker 6: Sure.
• 24:38
  Speaker 4: That is horrible. We need to help people.
• 24:41
  Speaker 3: We need to have them not be intimidated by the
• 24:43
  Speaker 3: financial system and to participate in it, especially over the
• 24:48
  Speaker 3: long haul. And so we try to teach those lessons
• 24:51
  Speaker 3: here at the museum that you as a visitor can
• 24:54
  Speaker 3: participate in our final gallery, brings all those themes together
• 24:58
  Speaker 3: in a whole personal finance section because personal finance is
• 25:02
  Speaker 3: very personal. Incumbent in that are not only the lessons
• 25:05
  Speaker 3: you learned here, but your own personal financial goals and
• 25:09
  Speaker 3: then a heavy dose of compounding, which, as you are
• 25:12
  Speaker 3: well aware, is so incredible that if you just put
• 25:15
  Speaker 3: your money in and let it grow over time, that
• 25:18
  Speaker 3: it can really do miracles for you.
• 25:20
  Speaker 4: Over the long haul.
• 25:20
  Speaker 2: It's the eighth wonder of the world.
• 25:22
  Speaker 4: There you go.
• 25:22
  Speaker 2: So when you look at Americans today, we were just
• 25:26
  Speaker 2: covering last segment that the University of Michigan Consumer Sentiment
• 25:29
  Speaker 2: Survey now shows that 41% of Americans think that their
• 25:32
  Speaker 2: finances will be worse a year from now than they
• 25:36
  Speaker 2: are today. It's the highest percentage we've ever seen. Some
• 25:38
  Speaker 2: of that, Mike and I discussed, could be methodology related.
• 25:41
  Speaker 2: They changed it a few years ago, but When you
• 25:44
  Speaker 2: hear those levels of stress coming from the American population,
• 25:50
  Speaker 2: you also at the same time hear that a lot
• 25:52
  Speaker 2: of people don't trust the financial system. You say it's intimidating,
• 25:54
  Speaker 2: and a lot of people feel, hey, the little guy
• 25:56
  Speaker 2: gets screwed in the financial system today. What are ways,
• 26:00
  Speaker 2: just small ways, that this museum can take someone and
• 26:03
  Speaker 2: educate them about, hey, here's a concrete example of something
• 26:07
  Speaker 2: that can help them to improve the way that they
• 26:10
  Speaker 2: approach the financial system.
• 26:11
  Speaker 4: Sure.
• 26:11
  Speaker 3: Let's even just talk about banking. We have simple videos
• 26:14
  Speaker 3: that explain banking. But we also take a look at
• 26:17
  Speaker 3: the future of finance with blockchain and Bitcoin and tokenization
• 26:21
  Speaker 3: and the whole democratization of finance. We don't necessarily take positions,
• 26:26
  Speaker 3: but we want you to understand it better so that
• 26:29
  Speaker 3: you can utilize this in your own life.
• 26:33
  Speaker 2: You mentioned that you have a whole bunch of different
• 26:35
  Speaker 2: exhibits here. If you had to give the top three things,
• 26:40
  Speaker 2: like the three crown jewels of the Museum of American Finance,
• 26:44
  Speaker 2: like the things that someone will come in. I mean, look,
• 26:46
  Speaker 2: I came in and I saw, again, there was a
• 26:47
  Speaker 2: bond signed by George Washington. And I'm like, this is
• 26:50
  Speaker 2: the most amazing thing I've ever seen. But what are
• 26:52
  Speaker 2: the three things that if someone's like, hey, what am
• 26:54
  Speaker 2: I actually going to see there? What are some of
• 26:57
  Speaker 2: those attractions?
• 26:58
  Speaker 4: So you're going to try and make me choose between
• 26:59
  Speaker 4: my children. But here we go.
• 27:00
  Speaker 3: I am.
• 27:01
  Speaker 5: I am.
• 27:01
  Speaker 2: You have to pick your favorite.
• 27:02
  Speaker 4: You did the first one. All right.
• 27:03
  Speaker 3: And there's so much to be said about Washington's treasury bonds.
• 27:07
  Speaker 3: A direct line between that and today's $ 40 trillion worth
• 27:11
  Speaker 3: of debt. That debt was created by Alexander Hamilton's report
• 27:15
  Speaker 3: on the public credit.
• 27:16
  Speaker 4: We have that here. It's an original artifact.
• 27:19
  Speaker 3: This is, if you saw the show Hamilton, the wrap,
• 27:21
  Speaker 3: the room where it happened, what they're arguing, it's going
• 27:24
  Speaker 3: to create and honor all the leftover debt from the
• 27:27
  Speaker 3: Revolutionary War.
• 27:28
  Speaker 4: This is amazing. If you look at the communists, when
• 27:31
  Speaker 4: they come.
• 27:31
  Speaker 3: To power in Russia, they repudiate the czar's debt. The communists,
• 27:34
  Speaker 3: when they come to power in China, renege on Shanghai
• 27:37
  Speaker 3: Sheck's debt.
• 27:38
  Speaker 4: Hamilton says we're going to honor that. That is truly revolutionary.
• 27:43
  Speaker 3: But it does pass in the greatest trade in American history,
• 27:46
  Speaker 3: which is they trade the capital, Hamilton does, with the
• 27:49
  Speaker 3: Virginians to have it in the shores of the Potomac
• 27:52
  Speaker 3: 10 years hence. Buy off Philadelphia for 10 years while
• 27:55
  Speaker 3: they're building it. And that's how our whole national debt
• 27:59
  Speaker 3: is created.
• 28:00
  Speaker 5: Yeah.
• 28:00
  Speaker 4: Excuse me. Mind you.
• 28:03
  Speaker 3: He also says, though, we have to get a good
• 28:05
  Speaker 3: credit rating. And that's what that does for us. So
• 28:08
  Speaker 3: much so that within a dozen years, another one of
• 28:11
  Speaker 3: our prized objects is the Louisiana Purchase.
• 28:13
  Speaker 4: Remember, we go to Napoleon. We want to buy New Orleans.
• 28:16
  Speaker 4: We don't have the kind of money he wants.
• 28:18
  Speaker 3: It's a total price tag of $ 15 million, but we
• 28:20
  Speaker 3: got a good credit rating. The same way in your
• 28:22
  Speaker 3: own life. If you have a good credit rating, you
• 28:24
  Speaker 3: have access to borrowing. And therefore, we borrow the money
• 28:28
  Speaker 3: from the British of all people to pay Napoleon the
• 28:31
  Speaker 3: who's going to raise an army, by the way, and
• 28:32
  Speaker 3: attack the British and everybody else, because business is business,
• 28:36
  Speaker 3: war is war. But in any event, we've got a
• 28:38
  Speaker 3: great credit rating, and we've got that Louisiana purchase bond
• 28:41
  Speaker 3: right here. So that's another incredible object. But the Interactive
• 28:45
  Speaker 3: Hamilton is another fascinating thing. And then we're getting great
• 28:49
  Speaker 3: reviews on, and I know I'm giving you more than three,
• 28:52
  Speaker 3: but great reviews on our blockchain explanation and crypto. And
• 28:56
  Speaker 3: by the way, since we're here in Massachusetts, I have
• 28:59
  Speaker 3: to say we have share number 13. of the Boston
• 29:02
  Speaker 3: American League Baseball Club, 1912, otherwise known as?
• 29:07
  Speaker 2: The Boston Red Sox.
• 29:07
  Speaker 4: The Boston Red Sox. And the kids really loved that one.
• 29:11
  Speaker 2: When you look at the, I guess, the teaching overall
• 29:17
  Speaker 2: that you're doing here and, you know, what you provide
• 29:22
  Speaker 2: through this location, because, again, like, I walked through and
• 29:25
  Speaker 2: you gave me, it was maybe a half hour tour,
• 29:27
  Speaker 2: and I feel like I haven't even scratched the surface.
• 29:28
  Speaker 2: I'm going to go spend like a couple hours after
• 29:30
  Speaker 2: this just walking around. Explain to me how the Museum
• 29:34
  Speaker 2: of American Finance is free to enter.
• 29:39
  Speaker 4: It's a museum.
• 29:40
  Speaker 2: About money that doesn't cost anything to go into. Talk
• 29:43
  Speaker 2: to me about that.
• 29:44
  Speaker 3: I felt really strongly about this and in our old
• 29:46
  Speaker 3: location we did charge. The very people that need to
• 29:49
  Speaker 3: learn this the most would be the least likely to
• 29:53
  Speaker 3: plunk down $ 25 which is what a lot of museums
• 29:56
  Speaker 3: charge to come in here We want access for everyone.
• 30:00
  Speaker 3: No barriers to entry, mind you, for everything that we do.
• 30:04
  Speaker 3: We do a lot of online programming as well. So
• 30:06
  Speaker 3: how do we do it? Well, I hustle a lot,
• 30:09
  Speaker 3: as you know, and we have a great gala. We
• 30:11
  Speaker 3: have fundraisers, and we're very fortunate. We've had some great
• 30:15
  Speaker 3: lead sponsors. Fidelity is a lead sponsor. Mass Mutual is
• 30:19
  Speaker 3: a lead sponsor. Bitwise is a lead sponsor. Mark and
• 30:22
  Speaker 3: Rosalind Shankman, who's on our board, is a lead sponsor.
• 30:25
  Speaker 3: And so we're very fortunate But that is, as a 501c3,
• 30:31
  Speaker 3: I spend a good part of my time fundraising.
• 30:34
  Speaker 2: Any other items that you want people to be aware
• 30:36
  Speaker 2: of as it relates to the museum or any of
• 30:39
  Speaker 2: the items in it or any of just the general
• 30:42
  Speaker 2: education that you try to provide?
• 30:43
  Speaker 4: Sure, I want to talk about the general education.
• 30:44
  Speaker 3: If you go to our website at www.moaf.org, you're going
• 30:49
  Speaker 3: to see all the free events we do. And then,
• 30:52
  Speaker 3: particularly for high schoolers, we have a free MFA, we
• 30:55
  Speaker 3: call it, Museum Finance Academy event. That includes scholarship money
• 30:59
  Speaker 3: provided by Fitch Ratings for the highest performers. And so
• 31:03
  Speaker 3: that's a five-week, once-a-week touch plan that is in the
• 31:07
  Speaker 3: fall and spring for 11th and 12th graders.
• 31:10
  Speaker 4: So we want you to see that. We also run lots.
• 31:12
  Speaker 2: What's in that? What kind of stuff does that cover?
• 31:14
  Speaker 4: Basics of finance.
• 31:16
  Speaker 2: This is how a check works.
• 31:17
  Speaker 4: This is how a credit card works.
• 31:18
  Speaker 6: All that stuff.
• 31:18
  Speaker 4: All those basics.
• 31:19
  Speaker 6: Yeah.
• 31:20
  Speaker 3: And then all of our events, we have three upcoming events.
• 31:25
  Speaker 3: Author events, again, free of charge that are done via
• 31:27
  Speaker 3: the web. So we've got a lot of content that's
• 31:31
  Speaker 3: available to the public. That's who we're here for. And
• 31:34
  Speaker 3: we are so thankful to you for letting us come
• 31:36
  Speaker 3: on today.
• 31:37
  Speaker 2: Oh, no. Believe me. Thank you for just letting us
• 31:40
  Speaker 2: come here. This is fantastic. That's Dave Cowan. He is
• 31:43
  Speaker 2: the Museum of American Finance president and CEO. We're going
• 31:47
  Speaker 2: to take a quick break here. But when we come back,
• 31:50
  Speaker 2: we've got Stack Roulette coming up next.
• 31:53
  Speaker 1: Wall Street, the economy, and the business stories making headlines.
• 31:57
  Speaker 1: Find it all on the Financial Exchange YouTube channel with
• 32:00
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• 32:05
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• 32:10
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• 32:14
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• 32:17
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• 32:20
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• 32:31
  Speaker 2: All right, Mike, what do you got for me for
• 32:32
  Speaker 2: Stack Roulette today?
• 32:33
  Speaker 5: I've got a piece here in the New York Times
• 32:36
  Speaker 5: about the punishing housing market. And how it's squeezing renters.
• 32:40
  Speaker 5: And I don't mean to completely diminish this story, but Chuck,
• 32:45
  Speaker 5: I don't fully understand how the housing market can possibly
• 32:50
  Speaker 5: be terrible for buyers, sellers, renters and landlords, because that
• 32:56
  Speaker 5: seems to be the story that we get every single day. And, um, Certainly,
• 33:01
  Speaker 5: there are sellers who are seeing their home stay on
• 33:03
  Speaker 5: the market for longer. There are buyers who can't stay
• 33:05
  Speaker 5: in the market because mortgage rates are too high. I'm
• 33:07
  Speaker 5: sure there are renters in some markets that are having
• 33:09
  Speaker 5: a tough time finding a place. But I just don't
• 33:11
  Speaker 5: think that this can be a market that's harmful to
• 33:13
  Speaker 5: all four at the same time. And if I'm going
• 33:16
  Speaker 5: to compare to, let's say, two years ago and try
• 33:22
  Speaker 5: and determine who's I guess, most benefited from the last
• 33:26
  Speaker 5: two years of the housing market? I'd have to say
• 33:28
  Speaker 5: the renters.
• 33:28
  Speaker 2: It is, but you get it, I think, what the
• 33:32
  Speaker 2: key thing is here, which is renters have benefited for
• 33:35
  Speaker 2: the last couple of years. Yep. But as it has
• 33:38
  Speaker 2: become in the last few months, more expensive and challenging
• 33:42
  Speaker 2: to buy a house with interest rates moving up quickly.
• 33:44
  Speaker 6: More people are dropping out of the buyer's market and
• 33:46
  Speaker 6: looking into the rental market.
• 33:47
  Speaker 2: Which means that rents now are starting to adjust higher
• 33:50
  Speaker 2: because there's more demand there. And so people aren't responding
• 33:53
  Speaker 2: in terms of, oh, here's how it was a couple
• 33:55
  Speaker 2: years ago. They're responding in terms of what they're seeing
• 33:57
  Speaker 2: on their renewal rates heading into next year, which are
• 34:00
  Speaker 2: starting to track higher in terms of, you know, you
• 34:04
  Speaker 2: compare like September to September of 25. And it's, oh, okay, yes,
• 34:09
  Speaker 2: like the annual change in rents is, you know, 2.8%
• 34:14
  Speaker 2: according to the BLS data. I would venture, Tucker, can
• 34:18
  Speaker 2: you put this one on the board? If you look
• 34:20
  Speaker 2: at annual changes in rent for primary residents by this
• 34:25
  Speaker 2: time next year, it's going to be higher than 2.8%.
• 34:27
  Speaker 5: Yeah, I guess my point would be this is precisely
• 34:30
  Speaker 5: how markets are supposed to work.
• 34:32
  Speaker 6: Rates go high.
• 34:33
  Speaker 5: People move into the rental market instead of the buyer's market.
• 34:35
  Speaker 5: guess what happens? Home sellers either pull their listings or
• 34:39
  Speaker 5: lower the price. The mechanics of it. And it's balancing
• 34:43
  Speaker 5: itself out kind of as you would anticipate here.
• 34:45
  Speaker 2: I want to talk a little bit about Netflix. Netflix
• 34:49
  Speaker 2: is a fascinating one to me because they were first
• 34:53
  Speaker 2: to the game in streaming. They are the biggest in
• 34:56
  Speaker 2: the game in streaming. Actually, Disney Plus might be bigger
• 34:58
  Speaker 2: than them now on a number of subscribers basis. They
• 35:02
  Speaker 2: might be just like they're a behemoth. But Here's the thing.
• 35:06
  Speaker 2: Netflix had this crazy run from when they IPO'd in
• 35:10
  Speaker 2: 2002 basically through late last year, mid last year. Since then,
• 35:16
  Speaker 2: if you look at the one year chart, stock has
• 35:18
  Speaker 2: gone from $ 110 at this time last year down to $ 61.
• 35:23
  Speaker 2: And if you look at the three year chart, it's
• 35:24
  Speaker 2: even worse. It's gone from $ 132 down to $ 61. So
• 35:26
  Speaker 2: a 50% plus loss since the end of last June.
• 35:30
  Speaker 5: I mean, Chuck, we've been talking about the competition this
• 35:32
  Speaker 5: company is going to face for the better part of
• 35:35
  Speaker 5: a decade, and it finally happened.
• 35:36
  Speaker 2: It's what it is. And the big thing, it's not
• 35:39
  Speaker 2: even competition, though, because here's what I want to make clear.
• 35:42
  Speaker 2: The company is still growing revenue at a pretty decent clip. Like,
• 35:47
  Speaker 2: you look at the last five years, and their revenue
• 35:50
  Speaker 2: growth has averaged about 12.1%. It's slowed down to 10.6%
• 35:55
  Speaker 2: in the last year. But, again, it's not anything that's, like, horrible.
• 36:00
  Speaker 2: Their margins, you look at their operating margins... operating margins
• 36:04
  Speaker 2: right now are at 31.67%. That's the highest they've ever
• 36:09
  Speaker 2: been since they went public. The problem is they just
• 36:13
  Speaker 2: don't have anyone new to sell subscriptions to. Everyone who
• 36:18
  Speaker 2: wants a Netflix account has one, and because you can
• 36:20
  Speaker 2: just cancel and churn as you need to, it's just okay.
• 36:24
  Speaker 2: They've kind of maxed out their overall subscription numbers, so
• 36:27
  Speaker 2: they're resorting to, okay, we've got to raise the you know,
• 36:31
  Speaker 2: the price of the subscription, which is why you're seeing
• 36:33
  Speaker 2: those operating margins, you know, moving up there. So I
• 36:36
  Speaker 2: don't think they're getting pressured by competition. I think it's just,
• 36:40
  Speaker 2: there's no one else who wants it that doesn't have
• 36:42
  Speaker 2: it at any particular point in time. They can't grow
• 36:44
  Speaker 2: their subscribers that much. It's, I mean, think about it
• 36:48
  Speaker 2: like meta, just as an example. There's no one in
• 36:52
  Speaker 2: the world who sits there and is like, you know what?
• 36:54
  Speaker 2: You might create that Facebook account. I need a Facebook
• 36:56
  Speaker 2: account to like, Yes, there's one person, but it's being
• 36:59
  Speaker 2: offset by the one person with Facebook who died yesterday.
• 37:02
  Speaker 2: They're just not growing that many numbers. I just don't
• 37:06
  Speaker 2: know how Netflix has a path to further grow. They're
• 37:09
  Speaker 2: just going to look like a cable company now because
• 37:11
  Speaker 2: they've saturated the market, which is fine. They're hugely profitable.
• 37:16
  Speaker 2: They made $ 14 billion in profit last year.
• 37:19
  Speaker 6: But that's not why people were buying their stock.
• 37:21
  Speaker 2: In the past.
• 37:21
  Speaker 6: No, no.
• 37:23
  Speaker 2: And so the question for me is.
• 37:27
  Speaker 2: How much do they start pivoting more towards we need
• 37:29
  Speaker 2: to keep eyeballs more and start overpaying for larger sports
• 37:34
  Speaker 2: packages the same way all of the legacy guys do?
• 37:37
  Speaker 2: It's kind of where it feels like it's going. Taking
• 37:40
  Speaker 2: a look at markets as we head towards the top
• 37:41
  Speaker 2: of the hour. Got the S & P up 14
• 37:44
  Speaker 2: points right now. The Dow is up 138. And the
• 37:46
  Speaker 2: NASDAQ is down 18. So overall.
• 37:52
  Speaker 2: Not too much happening in the equity markets. Bonds, 10-year
• 37:55
  Speaker 2: yield up 4.3 basis points. So a modest sell-off on
• 37:58
  Speaker 2: the fixed income side of things.
• 38:00
  Speaker 6: 2.30 p.m. Fed Press Conference.
• 38:03
  Speaker 5: Aftermarket release of earnings from Microsoft and Alphabet. We will
• 38:06
  Speaker 5: have a jam-packed show tomorrow, everybody. But this is all
• 38:09
  Speaker 5: the time we have. Again, the Financial Exchange broadcasting from
• 38:12
  Speaker 5: the Museum of American Finance. And thank you to those
• 38:15
  Speaker 5: there allowing us to do this today. Appreciate it.
• 38:18
  Speaker 6: And get down here. It's awesome.