Latest / The Financial Exchange Show / What is happening to the housing market in Texas?

Transcript

What is happening to the housing market in Texas? · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
is hosted by employees of the Armstrong Advisory Group, a
0:05
registered investment advisor. All opinions expressed are solely those of
0:09
the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
or anyone else. Investments can lose money. This program does
0:14
not offer any specific financial or investment advice. Please consult
0:17
your own financial, tax, and estate planning advisors before making
0:20
any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
this program do not endorse each other or their services.
0:26
Armstrong and Money Matters Radio do not compensate each other
0:28
for referrals and are not affiliated. This is The Financial
0:34
Exchange with Chuck Zada and Mike Armstrong, your exclusive look
0:39
at business and financial news affecting your day, your city,
0:43
your world. Stay informed and up to date about economic
0:46
and market trends plus breaking business news every day. The
0:50
Financial Exchange is a proud partner of the Disabled American
0:53
Veterans Department of Massachusetts. Help us support our great American
0:57
heroes by visiting DAV five K Boston and making a
1:01
donation today. The DAV five K Boston is presented by
1:05
Veterans Development Corporation. This is the Financial Exchange with Chuck
1:09
Zada and Mike Armstrong.
1:13
Speaker 2: Charles, Michael and Thomas with you as we kick off
1:16
the second hour of our show. Today, the Dow is
1:20
off one hundred and forty two points, about a third
1:22
of a percent, The smp is down eighteen points, about
1:24
a third of a percent, and the Nasdaq down sixty
1:27
two points, also about a third of a percent. So
1:29
how's that for everything moving in the same direction, at
1:32
least as far as your your broad market indices. The
1:35
tenure US Treasury up four point three basis points to
1:39
four point one one percent. Remember it was just a
1:42
few weeks ago that the tenure Treasury was sitting pretty
1:46
you know, comfortably right around you know, three six five,
1:50
three six six for you know, the better part of
1:52
a week leading into the Federal Reserve meeting where they
1:55
cut interest rates, and since then it has been a
1:58
one sided move to the upside, with that also carrying
2:01
through into mortgages, with Mortgage News Daily reporting that the
2:05
national average for the thirty year fixed rate mortgage hitting
2:08
six point sixty seven yesterday, meaning today these numbers hold
2:12
on the tenure Treasury you're probably getting over six point
2:14
seven on that thirty year fixed rate mortgage.
2:17
Speaker 3: So all of that hype.
2:19
Speaker 2: From you know, early September about hey, you know, rates
2:22
are in the low sixes, you can get into the
2:24
fives if you're you know, buying some points or this
2:26
and that. Gosh that that sure seems quint now, doesn't it.
2:30
Speaker 4: Mike, Yeah, gone in the other direction.
2:33
Speaker 5: I think that's been as surprising as it was that
2:37
mortgage rates got down to six one five for a
2:38
lot of people, the fact that the Fed cut rates
2:41
fifty base points and then rates surge back up to
2:44
like sixty six has been equally surprising for people, I think.
2:47
Speaker 4: But again, the rates only.
2:48
Speaker 5: Moved down because the market knew that the Fed was
2:51
going to cut those rates.
2:52
Speaker 4: Once they did, and then you got a hot.
2:54
Speaker 5: And expect the jobs report, it makes sense for it
2:56
to bounce back in the other direction.
2:58
Speaker 2: So you've got that going on with rates and stocks.
3:01
Oil West Text Intermediate back up a dollars seventy seven
3:05
a barrel two and a half percent to seventy five
3:07
oh one. This on the back of a couple interviews
3:11
uh and of different Israeli Cabinet members suggesting that they
3:16
are nearing the response time for the Iranian ballistic missile
3:22
attack last week.
3:24
Speaker 3: So you've got oil pushing up again.
3:26
Speaker 2: We've got the TRIPA national average for gas prices also
3:29
up another seven tenths of ascent overnight to three twenty
3:33
one and two tenths of a stent of a cent
3:36
still you know, floating around that three twenty range at
3:39
the moment. And we've got gold today up sixteen sixty
3:42
an ounce to twenty six forty two and sixty cents.
3:47
Speaker 3: Mike, anything catching your eye market wise at this point?
3:51
Speaker 4: None that coverage, Juck.
3:52
Speaker 2: Okay, let's talk a little bit about the uh well,
3:56
I guess the the optimistic view of the Dallas housing market.
3:59
This Connorson from Bloomberg Opinion. It's looking good for home
4:03
buyers in Dallas and Austin, meaning it's looking bad for
4:05
home sellers. It's looking bad for Yeah, there's that's the
4:09
other side of it, and not just for home sellers.
4:12
Speaker 3: I want to talk about home builders. Also.
4:15
Speaker 2: Some data that I saw yesterday, I just need to
4:17
pull it up here we go. This is from Carl
4:21
Whittaker at Real Page, and I think some of this
4:25
may have made its way into here. I'm trying to
4:28
just see if any of it did. No, I didn't
4:32
see any of it in here, so I just making
4:33
sure I didn't read it in two places at the
4:34
same time. So, in terms of some of these stats
4:39
on just the Texas housing market in general, in the
4:42
third quarter, Texas saw forty two hundred units started for
4:48
the quarter for the entire state. In the first quarter
4:52
of twenty twenty three, Austin's metro area saw fifty nine
4:57
hundred units just on its own. So in terms of
5:00
how how dramatically housing construction activity is pulled back in Texas,
5:06
the entire state of Texas had fewer homes started in
5:09
the third quarter than Austin did alone. In the first
5:11
quarter of twenty twenty three. The Houston metro area had
5:16
three hundred and thirteen new units started in the third quarter.
5:20
Houston is home to seven point five million people in
5:22
its metro area, and they started three hundred and thirteen
5:26
new units of housing.
5:28
Speaker 4: Not great, Bob, not great.
5:30
Speaker 2: That's the lowest figure dating back to two thousand for
5:33
a single quarter of housing starts in Houston.
5:36
Speaker 4: So Texas at this point.
5:38
Speaker 3: CHUCKN.
5:38
Speaker 5: Tucker is one of seven states that has more inventory
5:41
in September of twenty twenty four than they did in
5:44
September twenty nineteen.
5:45
Speaker 4: Do you want to just tell you the other six states?
5:47
Or do you guys want to try and guess?
5:48
Speaker 3: Just tell?
5:49
Speaker 2: Can I guess you can get Jesus Florida yes, Louisiana no, uh,
5:57
Colorado yes, the Codas No, Nevada, No, Wyoming, no, Nevada No.
6:05
Speaker 5: Massachusetts definitely not so. Nationally, total housing inventory is about
6:12
three quarters of where it was in September of twenty nineteen.
6:15
Seven states now exceed twenty nineteen levels. They include Tennessee, Texas, Idaho, Florida, Colorado, Utah,
6:23
and Arizona. Massachusetts in New Hampshire still sitting at about
6:28
half of the twenty nineteen inventory levels. That's even worse
6:33
in Connecticut for whatever reason, Maine, Vermont, Rhode Island, from
6:38
what I've seen, are all similarly in that boat. But okay,
6:42
like looking at this, what does this mean to me?
6:45
At least there continue to be some states where it's
6:52
beginning to look more like a buyer's market. It's beginning
6:57
to shift in some of these states that had a
7:00
boat load of migration to them during the early stages
7:04
of COVID. You think about that list that I just
7:06
gave you, Idaho, Florida, Texas, Tennessee, Colorado, Utah, Arizona. Right,
7:11
How many people from California moved to a number of
7:15
those states. How many people from New York, New Jersey
7:17
and Massachusetts moved to Florida during COVID. And you're starting
7:21
to see some of that tick back in the other
7:23
direction here, And I look at it as encouraging that, hey,
7:28
there are now seven states where we actually have more inventory.
7:32
The counterpoint is that there's forty three states where there's
7:35
much less.
7:36
Speaker 4: Inventory than there was pre COVID.
7:39
Speaker 5: And with rates now moving back into that six and
7:42
a half percent range, I'm not sure you have anything
7:47
move like, you know, the higher rates are we're heading
7:52
to a third spring housing market with rates over six percent,
7:57
I don't see a real compelling reason for inventory to
8:00
pop back up on that news absent a recession.
8:04
Speaker 2: No, And I think it's it's something where when you
8:08
look at what this economy in theory needs again.
8:12
Speaker 3: I know that everyone got.
8:13
Speaker 2: All you know, hopped up, you know, last week with
8:16
the jobs report being like, oh, look, that like the
8:18
look at these jobs like this is great, but A
8:20
it's one month, and b the the extrapolation from some
8:23
of the underlying metrics doesn't look great over the next
8:26
six months. And so the problem is in order to
8:30
avoid it might be that the case I'm not saying
8:32
that this is I'm saying it might be that where
8:34
we're heading is Look, if you really want to avoid recession,
8:38
you got to get mortgage rates down to five seven five.
8:40
But the only thing that gets rates to five seven
8:42
five is a recession.
8:43
Speaker 3: Right, It's it.
8:47
Speaker 2: That's the danger of where we are right now. Again,
8:49
I'm not saying that that is how it will play out,
8:52
because look, if there's one thing that this economy's done
8:54
for the last two years, it's surprised to the upside
8:57
We've it's just been like bad away and parrying all
9:01
these attempts at you know, oh, this is gonna be
9:03
the recession, and it said no, no, no, like that's
9:06
that's not happening. This feels and has felt a little different.
9:11
But the date of the last six weeks has been better.
9:15
Speaker 4: It's been good.
9:16
Speaker 2: It's been better. So I don't know, We're gonna have
9:19
to see what happens here. But we've got this period
9:21
now where the next few months to day it is
9:22
just gonna be a mess because of these hurricanes, and
9:24
so it's hard to say what we're gonna be able
9:26
to glean from it. But yeah, if you look at
9:30
some of these housing markets, if you are a seller
9:32
in them, it's it's not looking great for you, and
9:36
it's not looking good. The other problem with markets that
9:39
get heavily tilted towards buyers is the first thing that
9:43
you see is just a huge drop in activity because
9:46
sellers say, no, I'm not going to like, I'm not
9:49
ready to cut my price yet.
9:51
Speaker 5: Which again is just crazy to me in the context
9:54
of pricing in some of these markets, having like doubled over.
9:57
Speaker 4: The last decade.
9:58
Speaker 5: You talk about Florida, owned that home for a decade,
10:01
even with the hit you might be taken, you've probably
10:04
doubled your investment.
10:05
Speaker 2: So and the problem is when you have that lack
10:08
of activity, that sucks a ton out of the economy
10:12
locally because all the money that's tied up in equity
10:17
doesn't get released out into the economy the way it
10:19
normally does, where hey, five percent of that home equity
10:22
goes out to the agents and people spend a couple
10:25
percent more on you know, new furniture and movers and
10:28
this and that, and when that stops happening, that's a
10:32
real problem. And the first place that you see it like,
10:37
I wish someone had an index of this. I wish
10:39
it was like, this is the first time I've ever
10:41
said this in my life that I wish something was
10:42
more of a centralized market.
10:43
Speaker 3: With less competition.
10:45
Speaker 2: I wish we could get better data on what's going
10:48
on with moving companies on a regular basis, you know
10:51
how like open table back in twenty twenty told us
10:53
about how bookings were changing as COVID was coming through.
10:56
Speaker 3: I wish there was something.
10:58
Speaker 2: Similar that could tell us how bookings for moved was
11:00
changing across the country, because it would like that would
11:04
be such valuable data.
11:05
Speaker 5: Yeah, I would imagine there's not a single moving company
11:08
that makes up more than ten percent of market share.
11:11
Speaker 3: I don't even know if there's any to get to that, right.
11:13
Speaker 2: You know, it's because remember there's there's a ton of
11:16
people who just don't even use movers, They move themselves,
11:19
and so it's it's tough to glean everything. But I man,
11:22
if we could have that data, it would be great.
11:25
Someone probably has it somewhere.
11:26
Speaker 3: I'm sure.
11:27
Speaker 2: Let's take a quick break after this. We've got trivia
11:30
and then we're talking A yeah, I get I guess
11:34
this will be a fun one. It's titled groceries are
11:37
more affordable now than in twenty nineteen, So why.
11:40
Speaker 3: Are people still so mad about the prices? We'll cover
11:43
that when we return.
11:45
Speaker 1: Tune in for trivia brought to you by Applebee's every
11:49
day at eleven twenty. For your chance to win cool prizes,
11:52
text us at six one seven three, six two one
11:55
three eighty five and use keyword Applebee's. Complete rules are
11:58
available at Financial Exchange Show dot com. FACE is the
12:02
Financial Exchange Radio Network. Miss any of the show. Catch
12:05
up in your convenience by visiting Financial Exchange Show dot
12:09
com and clicking the on demand icon, where you'll find
12:11
all of our interviews and full showers. FACE is your
12:15
home for the latest business and financial news in New
12:17
England and around the country. This is the Financial Exchange
12:21
Radio Network.
12:23
Speaker 4: Folks.
12:23
Speaker 5: We had a great live event live broadcast the Financial
12:26
Exchange this Tuesday out at the MGM and Springfield. We've
12:29
got one more coming up and space is filling up
12:32
here for October twenty fourth, down in Hyenas set the
12:35
Double Tree Resort and Suites on Hyannas. Again it's a
12:38
live broadcast of this show, the Financial Exchange on October
12:41
twenty fourth. Ed Lambert, the host of the XTK Morning Show,
12:45
will be joining us. We're gonna be doing it, like
12:47
I said, a live broadcast followed by an educational lunch
12:50
with the Armstrong Advisory Group. So come down check out
12:53
the show. You know you get down to the cape
12:56
and beautiful time a year with a little bit less traffic.
12:58
Come check out a live broadcast of the show as
13:01
well as have a free lunch on us after the fact,
13:03
as we talked to you about state of the market's
13:06
economy and heading into less than fewer than thirty days
13:09
before the election, and by October twenty fourth, we'll really
13:12
be closing in there. You can get a bunch more
13:15
information by going to Armstrong Advisory dot com slash events.
13:19
But once again, it's a live broadcast of the Financial
13:22
Exchange on October twenty fourth from the DoubleTree Resort and
13:25
Suites on Hyanas. You can check it out by going
13:28
to Armstrong Advisory dot com, slash events, or you can
13:31
call us at eight hundred three to nine three four
13:33
zero zero one.
13:35
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
13:38
registered investment advisor. Nothing in the ad or in any
13:40
Armstrong guide a specific financial, legal, or tax advice. Consult
13:43
your own financial tax into state planning advisors before making
13:46
any investment decisions. Armstrong may contact you to offer investment
13:49
advisory services.
13:51
Speaker 2: Mike, we now come to this piece from MarketWatch. Groceries
13:55
are more affordable now than in twenty nineteen. So why
13:57
are people still so mad about price? Yeah, just shut
14:01
up and pay. So here's the thing when we talk
14:06
about this piece. What it's talking about here is that
14:09
it takes fewer hours of work to afford a week's
14:12
worth of groceries now than it did five years ago.
14:15
Speaker 5: That's always how I think about my price in bananas.
14:18
This this is gonna cost me fifteen minutes. This is
14:21
for the average worker.
14:23
Speaker 2: Now, first thing that we need to realize is that, Okay,
14:26
if that's the case for the average worker, there's always
14:28
you know, the average is right in the middle. And again,
14:31
even if we're talking about different ways that we can
14:33
you know, look at things statistically, the median is really
14:35
like the fiftieth percentile. Look that there are always people
14:38
where that's not the case. For just because the average
14:41
is above doesn't mean that there aren't some in some
14:44
cases a large number of people who are below and
14:47
might be worse off, like half correct. Other things that
14:51
we need to remember, just when we talk about like
14:54
basic human psychology, Mike, what was the you know, just
15:01
in general, let me ask you this, are your bananas
15:04
better now than in twenty nineteen.
15:06
Speaker 3: No, it's the milk better.
15:09
Speaker 4: No, the eggs, No, the bread same, it's.
15:13
Speaker 3: The same bread.
15:14
Speaker 2: In some cases, you can actually make the case, hey
15:16
it's worse because I'm not getting as much of it, right,
15:18
Yeah you could cereal maybe if something stays the same
15:23
but you're paying more for it, How does that make
15:25
you feel.
15:27
Speaker 5: Mad, Chuck, It gets me so upset. It makes me unhappy.
15:32
Speaker 3: It does. Look.
15:32
Speaker 2: I understand that this is, you know, kind of basic
15:37
in everything, But what upsets people about inflation is two things.
15:43
The first is, hey, this is the same thing it
15:46
was before and it's more expensive now.
15:48
Speaker 3: I don't like that. And the other is.
15:50
Speaker 2: That look again, as we talked about it at the
15:53
intro to this. Just because the average US worker might
15:56
have more purchasing power now as it relates to gross
16:01
doesn't mean that everyone doesn't. So just to be like, well,
16:03
the average is fine, so you shouldn't be upset.
16:07
Speaker 3: I don't know.
16:07
Speaker 5: That's that's kind of it's it's it's dumb, and it's
16:11
not how anyone thinks about anything. No, phrasing your grocery
16:15
prices in terms of a percentage of your gross income
16:19
is not useful to anyone.
16:21
Speaker 3: No, No, I disagree that.
16:23
Speaker 2: I think it is useful, but I also think that
16:27
you can't do it based on the national average.
16:29
Speaker 3: That's where my problem is with this.
16:31
Speaker 2: Sure, you know there are plenty of families who have
16:34
not seen their wages go up by as much as
16:36
the national average. And so if those families are feeling
16:40
worse off, well, yes they they they can say, yeah,
16:44
I feel a little bit worse off.
16:47
Speaker 5: Now everyone's gonna feel a little bit worse off here,
16:50
because again, the way that we think about prices is
16:52
not in relation to our income. Some of them, about
16:55
half of them truly, are going to be worse off
16:58
based on this.
16:59
Speaker 2: So I think that this piece of like in terms
17:02
of like telling people how to feel about what's happened
17:04
over five years.
17:07
Speaker 3: I don't like these ones. Now.
17:09
Speaker 2: I think we can look at where the economy is
17:12
today and be like, hey, inflation in terms of the
17:15
rate of change of prices is better. If if you're
17:19
talking about being upset about, you know, how prices have
17:21
evolved over the last five years. Sure, I get it,
17:24
but hey, inflation is in a much better spot now.
17:27
The unemployment rate is still low, and so if you're
17:30
trying to evaluate the economy today, it's tough to evaluate
17:33
it as anything other than good but potentially degrading. Sure,
17:37
and not degrading in like, hey, I'm being mean to you,
17:40
but like it's getting worse.
17:43
Speaker 3: That's kind of where the economy is right now.
17:44
Speaker 2: We're concerned about the possibility of recession, but it's been
17:48
really good recently, and the inflation that we've largely felt
17:52
in twenty twenty one, twenty two, and even twenty three
17:56
has improved meaningfully.
17:58
Speaker 3: But we can still be upset about the prices.
18:01
Speaker 1: Bringing the latest financial news straight to your radio every day,
18:06
it's the Financial Exchange on the Financial Exchange Radio Network.
18:11
The Financial Exchange show podcast drops every day on Apple, Spotify,
18:15
and iHeartRadio. Hit that subscribe button then leave us a
18:19
five star review. You're listening to the Financial Exchange radio
18:23
network Mike.
18:24
Speaker 2: This morning, we got information from the Social Security Administration
18:27
on the cost of Living adjustment or COLA for twenty
18:32
twenty five, and it came in.
18:36
Speaker 3: At two and a half percent.
18:37
Speaker 4: That was me trying to do a drumroll.
18:39
Speaker 3: Sorry, it wasn't good. Ye, that was all drum rell.
18:41
Speaker 4: Yeah, actually setting my ring on the desk.
18:44
Speaker 5: It was a whole thing happened, and that's exactly where
18:47
they were predicted to come in. We do not yet
18:49
have the Medicare premiums for twenty twenty five. For anybody
18:53
that's not collecting Social Security, you might be unfamiliar, but
18:56
your Medicare premiums usually get deducted right out of your
18:59
Social Security, which affects how much of that increase you
19:03
actually see in your bank account.
19:05
Speaker 4: At the end of the day.
19:07
Speaker 5: But yeah, we are likely based on where inflation is
19:10
right now, at least heading towards a period of time
19:12
that was probably pretty similar to the twenty tens when
19:16
cola's were relatively muted and a lot of them ended
19:19
up getting eaten up by Medicare cost increases, so we'll
19:23
see where that comes in. I think the average, the
19:27
range that I've seen for Medicare Part B premium increases
19:30
was somewhere in the ten dollars a month range up
19:32
to the one eighty five range from where we are now,
19:36
and those I think have to be released in the
19:38
next five days, so we should know pretty soon where
19:41
that lands. But the days of the you know, big
19:44
seven eight percent increases on, so security seem to be
19:47
behind us for now.
19:49
Speaker 3: Well, and quite honestly, you don't want those.
19:54
Speaker 5: Right, It's telling you something pretty terrible about the state
19:57
of the economy if that's happening.
19:59
Speaker 2: Right, those mean that inflation has been really really high.
20:02
Like everyone's like, yeah, I love like a seven percent
20:04
cost of living adjustment. Well, the way that you get
20:06
there is you have the cost of living actually go
20:08
up by seven percent in a year.
20:10
Speaker 3: Yes, So you'd prefer not to see.
20:12
Speaker 2: That, all things being equal, Again, I'm looking just at
20:16
the chart of where these have been historically, aside from
20:19
you know, the late seventies, early eighties, and a couple
20:24
you know outliers here, you know, nineteen ninety one, after
20:27
you know, the Gulf War in two thousand and nine,
20:29
when oil prices had spiked in two thousand and eight,
20:32
if you remember, that was back when oil got up to.
20:34
Speaker 3: One hundred and fifty a barrel.
20:36
Speaker 2: Aside from those you know, few outliers, generally, the cost
20:39
of living adjustment has been somewhere between two and four percent. Yeah,
20:43
now you did have after two thousand and nine. This
20:45
was one of those I just like looking at the
20:47
history of this because it reminds me of some of
20:49
the stuff that we went through. Two thousand and nine,
20:51
you saw a five point eight percent cost of living
20:53
adjustment because remember oil prices were high through the end
20:56
of the summer of eight, which is when the key
20:59
measurement takes place. But then the economy fell off a cliff,
21:04
and so for twenty ten and twenty eleven there was
21:08
no cost of living adjustment, right because the CPI that
21:12
they use in order to measure this, it did not
21:15
get back above those two thousand and eight levels until
21:18
twenty eleven, and so you had two straight years in
21:22
the early twenty tens where you did not have a
21:26
cost of living adjustment. You also had that happen in
21:29
twenty sixteen as well that on the back of oil
21:32
price is falling off a cliff in twenty fifteen, and
21:36
so again. Other than these you know few outliers, Generally,
21:40
somewhere between two and four percent is where that cost
21:42
of living adjustment is landed. And I think that's if
21:45
you're trying to plan going forward. I think that's a
21:48
nice baseline that you can use for future years, even
21:51
if you're not quite sure you know where it's gonna
21:53
end up.
21:53
Speaker 5: By the way, what is a reasonable complaint on the
21:55
part of seniors is that, quite frankly, their prices are
22:00
not all that dictated by the price of oil, whereas
22:04
medical costs have been, you know, on the rise pretty
22:07
significantly over the last few decades, and I remember that
22:09
being a big conversation like twenty ten's oh great gas
22:12
prices fell. I barely drive, but the cost of a
22:16
nurse to come into my home a few hours a
22:18
week is skyrocketing, and my social security is going nowhere.
22:22
Reasonable concern and complaint as far as I'm concerned, There
22:26
has to.
22:26
Speaker 2: Be someone out there that's actually happy with the cost
22:28
of living adjustment. They get though, right, there's got to
22:32
be at least one person.
22:34
Speaker 4: Uh yeah, yeah somewhere.
22:36
Speaker 3: You know.
22:37
Speaker 2: Again, if we're talking about averages, yes, there are those.
22:40
You know that there are groups of people that you know,
22:42
typically have their costs go up more than what that
22:45
average is. But there also are people that have their
22:47
costs go up less. True, we just never hear from them,
22:51
I guess. No, No, we'd like to complain myself included.
22:55
Speaker 3: I don't know what I did.
22:55
Speaker 4: I don't know what I would do if I couldn't complain.
22:57
Speaker 3: About the weather. Isn't that why we do this show?
23:00
Speaker 4: Yeah?
23:01
Speaker 2: Yeah, it's like just to like get it all out there, right,
23:04
That's why I do At least. Let's talk a little
23:07
bit about junk bonds, Mike. There's a piece in Barons.
23:11
It's titled own Junk in your Retirement Portfolio Not as
23:14
crazy as it.
23:15
Speaker 3: Sounds, and what it's talking about.
23:17
Speaker 2: Junk bonds are low quality bonds that have a higher
23:20
risk of default than investment grade bonds, and they're called
23:24
junk because they're not as good. Like, it's nothing crazy there.
23:29
What you get for buying junk is typically a higher
23:33
yield than what you get on investment grade bonds. And
23:38
this piece talks about, Hey, it's not necessarily a bad
23:42
thing to have something like this in a retirement portfolio.
23:46
But I think when we talk about owning junk bonds,
23:51
I think one of the things that you have to
23:53
understand is, hey, the risk of owning like a single
23:56
one is incredibly high unless you are actually you know
24:00
someone who has you know, experienced studying what causes individual
24:05
companies to default. Generally, I would say, unless you have
24:09
like a ton of experience, buying individual junk bonds for
24:12
yourself is about as risky as it can get out
24:14
there in the fixed income world. And when it comes
24:17
to how junk bonds perform in recessions and downturns and
24:20
areas of concern, they behave much more like equities than
24:23
they do bonds, which typically offer you a little bit
24:26
more stability and in some cases can even appreciate in
24:29
value during a time of economic concern.
24:31
Speaker 5: Now, the point is made here the junk bonds. I
24:34
don't know what yield they're using here, but as the
24:37
time of writing this, the junk bonds were yielding seven
24:39
point two percent, which is more than double the rate
24:42
of the broader US bond market. They're measuring that at
24:45
three point four percent. I'm not sure where on the
24:48
yield curve they're measuring that, because the ten years up
24:50
over four at this point in ten, But I think,
24:53
you know, contextually, you should also if you're if you're
24:56
considering this asset class, understand the historical sp between those things,
25:01
and it varies. But that's the way to look at
25:04
it is, Hey, how much more are junk bonds paying
25:07
compared to what's generally considered the risk free rate of
25:10
return i e.
25:11
Speaker 4: Treasuries? And right now it's not at all time lows.
25:15
Speaker 5: But it's pretty darn low. It's it's pretty darn low
25:18
in terms of a difference between between what you get
25:22
from a junk bond versus what you get from a treasury,
25:26
meaning I guess you know, one of the potential meetings
25:29
here being if the economy deteriorates and some of those
25:31
companies start defaulting, Uh, you could be not really getting
25:37
paid that premium that you are hoping for.
25:39
Speaker 2: So again, I think ultimately, each individual investor needs to,
25:45
you know, make their decisions on these things based on
25:48
their risk tolerance and understanding. But look, every investment in
25:52
a in an investment portfolio, you need to understand the
25:55
role that it's playing and.
25:56
Speaker 3: Why you're doing it.
25:57
Speaker 2: If you simply you're looking at the yield on junk
25:59
bonds and you're like, oh, like, look at these they're paying,
26:01
you know, north of seven percent or north of eight
26:03
or whatever it is on in any particular day, Okay,
26:06
ask yourself why they are.
26:08
Speaker 5: Yeah, I would go, I would go. I'm gonna cite
26:11
a common one that I hear. Oh, Mike or whoever
26:16
I heard about this company or this holding on CNBC
26:20
or Bloomberg. You know, the person on there was really
26:23
bullish about it, and it's yielding seven percent? What do
26:27
you think? My very first question to you is going
26:30
to be what what does it do? And if you
26:32
cannot answer what does it do? Then you have no
26:36
business investing in it. That you can go without saying.
26:39
But I can't tell you how many times I have
26:41
that exact same conversation.
26:43
Speaker 4: What does the company do? Oh?
26:44
Speaker 5: I have no idea? The second oh sells cigarettes the babies?
26:48
Like oh, okay, Like got it? Uh, maybe we should
26:51
look into that a little bit.
26:53
Speaker 2: The second question, and I know this is gonna sound weird,
26:56
but the second question is why does it do? Like, okay,
26:59
now that you know what it does, Like why why
27:02
do you think they have any edge in doing what
27:05
they do?
27:06
Speaker 3: What makes them better than everyone else?
27:08
Speaker 4: Sure?
27:09
Speaker 2: And again, these are just like basic building blocks that
27:12
you need to be asking as you're looking at different
27:14
potential investments. But if you can't answer the what and why.
27:19
Speaker 5: A chart that somebody puts on Bloomberg is not a
27:23
good enough reason to invest in something.
27:25
Speaker 2: No, I've said it over and over again. If your
27:28
investment strategy is based on what you read in publications
27:32
that are publicly available, you have no alpha. Anything that
27:38
becomes public information cannot be alpha because once everyone knows it,
27:44
that's it, Like, that's it, it's it's it's gone. Alpha
27:48
is private information, not material non public information which is illegal,
27:54
but private information. Hey, I built this model that analyzes
27:58
whether or not companies defail, and it's more accurate than
28:02
the rating agencies.
28:03
Speaker 3: Am I gonna tell everyone about it?
28:05
Speaker 6: No?
28:06
Speaker 2: Because if I do that, then everyone will know how
28:08
to do this and I won't have any edge. The
28:10
edge is the stuff that you keep to yourself in
28:15
a portfolio based on why I read it in Barns
28:17
or I read it on CNBC or I read it
28:19
in the Wall Street Journal.
28:21
Speaker 4: Not likely to be successful.
28:23
Speaker 2: Especially look, we cover stuff that the Wall Street Journal
28:26
covers two weeks before they do.
28:29
Speaker 3: Happens a lot.
28:30
Speaker 2: Yeah, I'm not saying that we're first, like we read
28:33
it somewhere too, So you have to remember there's always
28:38
someone that's there first, and if your whole strategy as well,
28:43
I'm doing.
28:43
Speaker 3: What you know.
28:44
Speaker 2: They wrote a uh uh uh huh too late, too late.
28:49
Let's take a quick break here. When we return, we'll
28:53
do a little bit of stack roulette.
28:55
Speaker 1: The Financial Exchange streams live on YouTube and like our
28:59
page and stay up to date on breaking business news
29:01
All morning loan. Thisa is the Financial Exchange Radio Network.
29:06
Miss any of the show. The Financial Exchange Show podcast
29:09
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
29:13
button and leave us a five star review. This is
29:16
the Financial Exchange Radio Network.
29:20
Speaker 6: This segment of The Financial Exchange is brought to you
29:23
in part by the US Virgin Islands Department of Tourism.
29:26
The US Virgin Islands are Saint Croix, Saint Thomas, and
29:29
Saint John. Summer is over, so now's the time to
29:32
start looking at a fabulous holiday vacation, and there's no
29:35
better place than the US Virgin Islands. Enjoy perfect weather,
29:38
world class dining, incredible beaches, and a vibrant nightlife. No
29:42
passport is needed, and there's no money to exchange. Take
29:44
your next vacation in America's Caribbean paradise for the United
29:48
States Virgin Islands. Go to visit USVII dot com to
29:51
book your trip. That's visit USVII dot com.
29:55
Speaker 5: Mike, what do you have for the Roulette of the
29:57
stack today, Chuck, I smell a rat. If anybody hasn't
30:02
seen the stories of FedEx packages getting lifted by porch pirates,
30:07
specifically going after AT and T iPhones, I've seen videos
30:11
of this actually right here in Nita, Massachusetts, New York, Pennsylvania, Delaware, Virginia, Michigan, Georgia, Florida,
30:17
and Texas have all submitted doorbell videos of the same thing.
30:22
Basic premise here, a FedEx driver drops off a box
30:25
with an iPhone from AT and T. Then a person
30:27
walks up, sometimes wearing an Amazon delivery vest, and takes
30:30
the package almost immediately. They caught two people down in
30:34
Texas who were doing this, who had tracking information from
30:38
FedEx detailing where these phones were being delivered. So I
30:43
don't know where the problem is, but very obviously someone
30:46
is getting iPhone tracking information from It can only be
30:50
really one of two places, either AT and T or FedEx.
30:54
I don't think Apple would have any of the data,
30:56
because these are phones being bought by AT and T
30:59
from AT and T, and somehow it's getting leaked and
31:04
people are getting it and it is I mean one,
31:07
you know, disheartening, frustrating, annoying for the customer, annoying for FedEx,
31:11
for AT and T, but also like potentially dangerous, right
31:14
you think about the confrontations that are eventually going to
31:17
happen here and somebody's going to eventually get hurt here.
31:21
I don't know what it. Can it be anything else
31:23
other than a leak, a hack.
31:27
Speaker 3: I have no idea.
31:28
Speaker 2: I don't know how like the tracking numbers for FedEx
31:32
are generated.
31:34
Speaker 3: I don't know if it's.
31:36
Speaker 5: It's certainly not public information, I guess would be my
31:39
point here, because that would be outrageously dangerous to just
31:41
have tracking numbers with addresses all over them and names,
31:45
and so somewhere someone is getting this stuff and it's
31:51
kind of been proven out because it's literally happening within
31:53
moments of the packages being dropped off.
31:56
Speaker 2: Yeah. Look, I don't have any answer for it. I
31:58
don't know how and why it's happening. Uh. The easy
32:01
way to stop this is to require signature for delivery.
32:05
Speaker 4: Seems pretty easy.
32:06
Speaker 3: It's it's not hard.
32:08
Speaker 5: Now, thousand dollars a thousand to two thousand dollars computer
32:12
that goes in your pocket, like I would want a signature.
32:16
Speaker 2: I mean, well, here's the catch twenty two on this.
32:20
We're ordering more stuff for delivery because we're not home
32:23
and we're too busy in this and that. So it's like,
32:25
oh no, sorry, I'm working, I can't sign for it. Well, okay,
32:29
we got to figure something out that's better than this,
32:33
because like this, this is the whole problem, is that
32:35
we're just delivering packages when no one's home, and so
32:39
like this is why it happens. If you start delivering
32:42
packages when people are home and having them come to
32:45
the door to take them inside, then you don't have
32:48
any more porch pirates because there's nothing sitting outside.
32:51
Speaker 4: Just a rather silly issue.
32:54
Speaker 5: Well, if somebody wants to steal my razor blades, go
32:58
for it. But if I'm getting a twelve hundred dollars
33:00
phone delivered, ask for my signature or deliver it somewhere else.
33:05
Speaker 2: Yeah, it would seem to me that that's, uh, that's
33:08
kind of the least that you can do on uh.
33:11
Speaker 5: But also AT and T and FedEx find out who
33:13
is leaking your information to porch pirates and make sure
33:16
that stuff doesn't happen, because that's again as annoying as like,
33:20
we could solve these problems otherways, but.
33:23
Speaker 4: Eventually someone's gonna.
33:25
Speaker 3: Get hurt with this.
33:25
Speaker 5: Somebody's gonna beat the living piss out of somebody, and
33:29
it's gonna be bad.
33:30
Speaker 3: What's the what's the remedy on this?
33:31
Speaker 2: Like, if let's say your phone is stolen off your porch,
33:36
does AT and T automatically send you a new one?
33:38
Do you have to provide evidence? Do you have to
33:40
buy a new one? Like, what's what's the process?
33:42
Speaker 4: Great question?
33:43
Speaker 5: I mean, I would hope that either FedEx or AT
33:46
and T is responsible for this.
33:49
Speaker 2: You would think so if if you're not going to
33:51
require signature, then someone has to guarantee that.
33:54
Speaker 3: Product getting me.
33:54
Speaker 5: Yeah, yeah, I would imagine there's some insurance picking this
33:58
up that is rather frustrated by the whole process.
34:00
Speaker 2: Yes, the insurance carriers are getting hit with big losses. Yeah,
34:04
it's not actually hurricanes, it's ports pirates.
34:07
Speaker 4: No, it's hurricanes.
34:08
Speaker 3: It's it's hurricanes and wildfires. Yeah.
34:10
Speaker 2: Let's see Amazon announce that they are testing adding miniature warehouses,
34:15
so like ant sized to whole food supermarkets. Okay, not
34:19
ant sized. And what they are trying to do with
34:23
this is.
34:25
Speaker 4: Compete with Walmart?
34:28
Speaker 2: Is that what this is? Does Walmart do this right now?
34:30
Speaker 1: No?
34:30
Speaker 5: I mean I just think Walmart, you've got a scenario
34:33
where you can go in, you can buy tires and
34:35
groceries or gotchausey And so to me, this is you know,
34:40
Amazon's version of this.
34:43
Speaker 4: I don't know how it'll work. It seems intriguing to me.
34:46
Speaker 2: It's basically saying, look, you can order something on Amazon,
34:48
and when you get your food at Whole Foods, you
34:50
can pick up that Amazon order there too. Kind of interesting, Yeah,
34:54
kind of interesting.
34:55
Speaker 4: It's innovative. I like it.
34:56
Speaker 5: I don't know what it really looks like to go
34:58
to a Whole Foods wh an Amazon warehouse attached to
35:01
the back of it. Like that's gonna be a whole
35:03
logistical thing to have to figure out. And I would
35:05
imagine there's not a lot of Whole food like I
35:07
think about the Whole Foods that I go to every
35:10
once in a while. He ain't gonna fit a parking
35:13
lot that's going to be able to constantly fit eighteen
35:15
wheelers in and out of it.
35:16
Speaker 4: So I don't know how that's going to work.
35:18
Speaker 5: But logistically, if you can find the right locations for
35:21
this and put the things together.
35:23
Speaker 4: It's been Walmart's strategy.
35:25
Speaker 5: It's been fairly successful in terms of, you know, being
35:28
able to both deliver to home as well as pick up.
35:30
And I can see it being helpful for Amazon too.
35:33
Uh you know, Walmart I just think has the advantage
35:36
of I can actually browse at a Walmart.
35:38
Speaker 4: I can't do that in Amazon.
35:40
Speaker 2: Mike, you stand up for the Tesla ROBOTAXI event tonight?
35:43
Speaker 4: No, definitely not.
35:45
Speaker 2: It's seven pm Pacific time, like what talking about? Like you,
35:51
I feel like we're gonna be underwhelmed because I got
35:53
the ball in that one. Wouldn't you do it at
35:55
noon if it was something you wanted everyone to see.
35:58
Speaker 3: I don't know.
35:58
Speaker 2: Yeah, we'll see it tomorrow will recap that and more
36:01
on the Financial Exchange m