Latest / Words & Numbers / Episode 427: Consumer Sentiment

Transcript

Episode 427: Consumer Sentiment · Words & Numbers

• 0:00
  Hi, I'm James and I'm Anthony and this.
• 0:02
  Is words and numbers brought to you by the fine people at Khaki,
• 0:09
  the Center for American Culture and Ideas.
• 0:12
  Aunt, what's new and exciting in your world this week?
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  James, the world is upside down. You have pointed out examples of
• 0:19
  this before, and I ran across one this past week.
• 0:24
  President Trump was on the White House grounds basically Hawking
• 0:29
  Teslas, saying this is a great car, he wants to buy one, All of
• 0:34
  this stuff do. You remember the good old days
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  when only liberals bought Teslas and conservatives crapped all
• 0:40
  over them and. Yeah.
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  And parked in the charging areas and the rolling coal and the
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  whole business. Yeah.
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  So now I'm waiting for, you know, guys that who formerly had
• 0:51
  pickup trucks with the guns on the rack, now driving the same
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  thing on a Tesla, the whole business.
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  This is one example of where how the far right has become the far
• 1:02
  left and vice versa. It just says to me that the
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  people on either extreme really don't believe in whatever they
• 1:10
  say they believe in. They believe in their team,
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  period. And whatever their team says,
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  that's where they're going to go.
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  Yep, that's what goes in. And there's an interesting thing
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  right now. I don't really know what to make
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  of it, but on the right you've got a bunch of people saying we
• 1:28
  must follow the rules, only legal immigration is any good
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  and is to be tolerated. But expelling immigrants doesn't
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  have to follow the same sorts of.
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  Rules, right, Right. Well, I thought immigration
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  rules really, really, really mattered.
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  So much so that everybody must be subject to them all the time.
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  Well, OK. I was talking to a friend of
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  mine today on this topic and I'm somewhere in the middle.
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  I think the United States became what it is because we let people
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  in freely. And I'm of that ilk.
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  However, I also understand that, look, you don't want people
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  coming in who are coming in with the objective to undermine the
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  very society that we have. And so I say, yeah, there should
• 2:18
  be some controls here. We're in this very weird space
• 2:21
  where no one seems to be advocating or or actively
• 2:26
  working toward the reasonable solution.
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  Rather, we have people on one side saying, throw the doors
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  open, everybody should come in, and people on the other side
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  saying closed doors, nobody should come in.
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  And the bulk of Americans, I think, once more, are
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  unrepresented. Yeah, as usual.
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  And I'll go a little further than you did and say I don't
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  know that we can have free and open immigration in the context
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  of a welfare state. That becomes a problem too,
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  right? Yeah.
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  I just don't think you can do that, and for all kinds of
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  obvious reasons that have nothing to do with racism, which
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  is always what one side accuses the other of.
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  Do I think that there's a tinge of racism in this?
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  Yes. Do I think it's the guiding
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  principle for the majority of Americans?
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  No. Well, you've just said something
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  that triggered a thought I've never had before.
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  I would like to take credit for that, but that's just not that
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  hard. You don't think a lot?
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  You're saying, look, you know, we, we can't just open up the
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  doors because the welfare system, people come in, they'd
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  be on it. And as you're saying that, I'm
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  thinking, well, but we could have a system wherein we say,
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  OK, you can come in, but you're not on the welfare system.
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  Yeah, that's right. But the.
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  Welfare system itself doesn't want that because the minute
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  they say, OK, there's an option here, you don't have to be
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  subject to the system. A bunch of us who are currently
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  here are going to say wait, me too.
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  That's going to bring up other issues, but you think about
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  citizenship. It doesn't have to be political
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  citizenship. You could have this other
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  category, economic citizenship. Sure, right.
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  You're literally a second class citizen if you want to call it
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  something like that. You get all the economic
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  benefits of the country without the ability to vote.
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  Well, I mean, that's basically a green card, right?
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  Yeah, it could be. And look, a lot of people would
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  take that deal because a lot of people know that the ability to
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  vote isn't nearly as important as the ability to make a living,
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  right? And, you know, most people
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  realize that. So if that sort of person wanted
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  to come here, throw the gates open.
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  But of course we won't because we're wedded to this ridiculous
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  immigration policy that we've got and.
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  I'll throw out the warning that I always throw out when we talk
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  about these things, that the type of person who would leave
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  their home for a new life somewhere that they're
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  unfamiliar with, they don't know the language, whatever it is,
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  all in the name of making a better life for themselves and
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  their families. Those are entrepreneurs.
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  Those are the people we want. And if we don't let them in,
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  somebody else will. And that's where the next
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  generation of entrepreneurs will be.
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  Yeah, I'm interested to see where it is.
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  I don't know where it's going to be.
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  There is one interesting thing that happened along these lines
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  in the past couple of weeks. The Trump administration has
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  been, let's just say, dialing back scientific research
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  funding. Have you been reading about
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  this? There's all kinds of things that
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  I think are maybe not the smartest move in terms of the
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  best thing long term for the country.
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  Nonetheless, the French government threw its arms open
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  and said scientists come. Really.
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  Yeah. We want you.
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  Yeah. We'll fund you, come on over.
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  And there's going to be a brain drain from everywhere into
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  France. Yep, I can guarantee that.
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  And who are you going to lose, exactly?
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  The people you didn't want to lose.
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  And that phenomenon is going to get worse over time because all
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  the developed countries are seeing their populations top
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  out. How do you get more and more
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  scientists? You're going to have to bring
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  them in from somewhere else. That's right.
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  And you're going to have to bid for them at some point or in
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  some way at some point. And we're not prepared to make
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  that concession right now for whatever reason.
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  So OK, I've got something a little more upbeat this weekend.
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  This just blew my mind. I'm going to read you the
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  headline, as is often my want. Scientists create magnetic
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  device to capture electricity from Earth's rotational
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  dynamics. I saw that.
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  Wasn't that fascinating? Isn't that fantastic?
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  Yeah, they built this doohickey that just kind of turns on its
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  own because of what the Earth already does and creates energy.
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  I saw that and I was in the first half second of reading it.
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  I was really excited about it. In the second-half second, I
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  thought, Oh my God, you're going to have environmentalists saying
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  stop. You're slowing down the rotation
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  of the earth, which technically is correct, although I don't
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  think it's going to be appreciable.
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  No, it's a magnetic force. I think we're going to be all
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  right. The thing that they made
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  successfully measured 18 microvolts of electricity.
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  So not a whole ton, right? Not enough to power Denver or
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  any anything like this, but this.
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  And you should read the article. It's fascinating stuff.
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  This has long been understood to be impossible due to the laws of
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  physics. And turns out the laws of
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  physics might have been maybe mistranscribed, right?
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  Yeah, yeah. 'Cause these guys just did
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  something and they claim to have eliminated all the other
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  possibilities from where these 18 microvolts could have come
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  from, right? And look, you know how these
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  things start. They start with something that
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  barely does the job and then they end five years later with
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  everybody having high speed Internet.
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  Yeah, I love that. I have to quote.
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  One of my favorite quotes about these things is I forget who it
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  was. If it's probably Asimov who says
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  the most interesting statement in science is not Eureka, it's
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  hmm, that's odd. That's right.
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  This, of course, Anthony, brings us to the foolishness of the
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  week. And having poked this particular
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  bear just a couple of weeks ago, I'm going to go right back to it
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  because you might have heard of this little thing going on in
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  Texas, the measles epidemic. Oh yeah.
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  Well, do you remember that poor child who was the first
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  catastrophe in this epidemic? Yeah, you may.
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  I don't know who it was, but you mentioned it.
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  His parents are now taken to the airwaves and they're speaking.
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  What are they saying? Yeah, I knew you'd ask.
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  They are saying that they stand by their decision not to
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  vaccinate and encourage others to do the same.
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  Their own child is dead and this, this is what they come to.
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  What? What in God's green earth is
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  wrong with these? People.
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  Yeah, but in their defense, James, I mean, come on.
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  The alternative to doubling down is admitting that you're
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  responsible for your child's death.
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  No. No parent could face that.
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  I'd cut him some slack here. However, everybody else, I'm not
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  cutting slack. I'm going to guarantee that they
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  already know that there is no way they can talk themselves out
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  of that. They already know this was a six
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  year old girl who didn't need to die.
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  Look, some 6 year old girls do. They get these horrible things
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  that we can't deal with, right? We don't have the medical
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  expertise, various forms of cancer that affect children and
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  what have you. And when it happens, the whole
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  world shuts down because it's such a God awful tragedy.
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  But when parents let it happen, well, we're in different
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  territory now. What they did was unforgivable.
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  They know that they will never forgive themselves for what they
• 10:21
  did, and nobody else will either.
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  For One Stop shopping for all things James and Aunt, visit our
• 10:28
  website wordsandnumbers.org. We give a special shout out to
• 10:33
  our Patreon sponsors who help us keep the lights on.
• 10:37
  If you'd like to contribute, go to patreon.com/words and
• 10:41
  Numbers. On that happy note, what are we
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  going to talk about this week? You said you had an idea of some
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  kind. I'm pretty ignorant as to what
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  it might be. My head has been around consumer
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  sentiment surveys of late because there's something
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  strange going on in that the fundamental economic data.
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  I've been watching this for the past 18 months, consistently
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  pointing to an economy that you know there's nothing great to
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  write home about, but it's not by any means going into
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  recession and yet can. I can I stop you for one second,
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  Cause through that same time period, indeed exactly that time
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  period, I think you've been warning us that roughly
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  speaking, 5% inflation is the new normal.
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  Deal with it. Oh yeah.
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  Do you still think that's correct?
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  Yeah. I don't think we're going to see
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  5% until Social Security starts to hit the skids, which is going
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  to be what, in seven years or so.
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  But we're currently in elevated. I forget what consumer inflation
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  is because I deal with PCE inflation, but PCE inflation is
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  running at like 2.1% versus its pre COVID average of 1.5.
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  Tell people what PCE? Is yeah, PC is personal
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  consumption expenditures. It's an inflation measure.
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  It's actually interesting because there's a conspiracy
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  theory around it that the Fed uses this PCE inflation instead
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  of consumer inflation because it's ignoring things to make
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  inflation look better. And that's not what's going on
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  here. What's going on is PCE inflation
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  is a much more stable inflation measure.
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  So from month to month, the numbers are relatively calm,
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  whereas consumer inflation's up and down all over the place.
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  Therefore, when the Fed sets policy, it looks at PCE
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  inflation because there's a lot less noise to it than looking at
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  CPI. This is what the Fed does.
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  What's happened is the media got hold of this and said, oh, the
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  Fed's looking at PC inflation. They start reporting it and it
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  gets out into the wild. It was never meant to be in the
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  wild. It's something that the Fed
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  looks at for their own internal purposes.
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  But nonetheless, yeah, go ahead, I.
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  Remember all the arguments when we would talk about the consumer
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  price index and then all of a sudden we would talk about the
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  core CPI and there were two different measures excluding
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  some variables that made a mess in the data.
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  And you wanted a clearer, more stable look at what you were
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  measuring. And people honestly thought that
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  it was a plot of some kind to keep the truth from them, right?
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  I can tell you, Aunt, that right now consumer inflation is about
• 13:27
  2.8%. Is it 2.8?
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  Thank you. Yeah.
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  As of February, yeah. If PC inflation is running half
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  a percentage point or a bit more hot than that means consumer
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  inflation is running half a percentage point or more hot.
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  That sounds about right, yeah. Now that tracks and look, 2.8 is
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  not two, right? We got used to two for a very
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  long period of time. But 2.8 is also not 6, which we
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  had kind of gotten used to a little.
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  Bit it is, but keep this in mind.
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  We're saying 2.8. Let's round it off to three. 2%
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  inflation versus 3% inflation, you say, well, that's not much.
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  It's 2 versus 3. It's basically the same number.
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  No, that's a ton. Yeah, it's. 50% more inflation.
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  And it compounds. You're right.
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  And then it compounds on top of that.
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  I do not see us going back to pre COVID inflation and if the
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  MMT people, modern monetary theory that they're making a
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  resurgence now if they get their way.
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  And of course, their thing is, go ahead and print as much money
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  as you want. You'll see this problem get even
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  worse. Right.
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  And they will get their way, because politicians love it when
• 14:38
  crackpot economists say, oh, you could spend anything you want.
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  Oh yeah, politicians love this sort.
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  Of they love it. And it turns out, aunt, that
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  politicians in both of the major parties love this sort of thing.
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  Turns out Republicans are only fiscally responsible when
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  Democrats are in the white. House, right and vice versa,
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  Yeah. And vice versa.
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  What we were talking about this before the episode began, you
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  had said to me about the MMM, tears are starting to make noise
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  and I point everybody back to 2022.
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  Do you remember when inflation hit almost 10% in mid 2022?
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  That was a direct result of following modern monetary policy
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  prescriptions. All those free checks were
• 15:21
  getting it for COVID. The government was, in effect
• 15:23
  printing money to pay for that. That's right.
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  And the fairy godmother of MMT is an economist named Stephanie
• 15:30
  Kelton, and we invited her to come on and explain repeatedly,
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  nonsense. Repeatedly.
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  And we got not one response. Yeah, not one.
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  Yeah, and you know why? Because.
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  I know why, yes. It doesn't stand scrutiny.
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  No, not at all. That's why I call it the fairy
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  godmother of MMT. This is nonsense of the first
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  rank, but let's get back to things because there is
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  something here that's really quite important.
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  So here's the strange thing, consumer sentiment.
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  And there are several entities that do this, but one of the big
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  ones is University of Michigan every month surveys American
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  households asking what's your attitude about the current
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  economic situation, specifically your own household, How are you
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  doing? How do you expect to be doing a
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  year from now? That sort of thing.
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  And that consumer sentiment survey took a nosedive last
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  month, dropping, I forget what the percentage was like a 20%
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  drop or something in the consumer sentiment was.
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  Peculiar about last month. Well, there were a couple
• 16:36
  things. One was the stock market from
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  mid February to mid March dropped 10%.
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  Yep, tariffs. The tariff scare and there was a
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  third one that was more important I wanted to talk about
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  and has escaped me, the stock market, the tariffs.
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  What was the third one, James? I give up.
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  It'll come to me as we're talking, but there were.
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  It'll come to you as we wrap up. Right, Yeah, yeah, we'll hang
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  up. I'll say.
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  Oh, here is the third one. I.
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  Don't even remember. There were several things going
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  on in the economy that people became, oh, the federal layoffs
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  that people became concerned about.
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  And I submit that what's happened here is people are
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  getting their news from the headlines.
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  And by headlines, I don't just mean which does happen, people
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  reading the headline of an article and passing it on, but
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  also the talking heads. You know, the 32nd news bike
• 17:39
  that you get on the television, Those are all headlines and
• 17:42
  they're all scary. And they're scary because.
• 17:44
  Why? Because the media, they're not
• 17:48
  in the business of producing news.
• 17:49
  They're in the business of selling advertising.
• 17:52
  And the way they do that, yeah, is by showing people scary
• 17:55
  stuff. And So what do we have?
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  We have this 10% drop in the stock market.
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  We have the tariffs, we've got 100,000 federal layoffs, all
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  this stuff. And people see this and they
• 18:06
  start panicking. And I think that's what caused
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  this decline in the consumer sentiment index.
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  Because when you look at everything else, when you look
• 18:15
  at inflation numbers, you look at real GDP numbers, you look at
• 18:19
  unemployment rate, you look at the length of unemployment, all
• 18:22
  these numbers are looking solid. They're not looking great, but
• 18:25
  they're looking solid. And they've been solid for the
• 18:27
  past 18 months. So you can say, well then
• 18:32
  there's nothing to worry about because consumers just have it
• 18:36
  wrong. And there I say no, Now there
• 18:38
  really is something to worry about.
• 18:40
  And that is. Yeah, well, I'm just going to
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  say what happens when I get a little worked up about the
• 18:46
  economy. Yeah, I stop spending money.
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  There you go. Yep.
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  And I really stop spending money.
• 18:53
  Yep, Yep. You hunker down.
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  You prepare. I crank it down to almost
• 18:58
  nothing because I look around and I say to myself, is there
• 19:02
  anything I need right now that I can't live without?
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  And the answer to that question in the United States for almost
• 19:08
  everybody is, no, not really. You need some food.
• 19:12
  You're going to need some gas in your car.
• 19:14
  And that may be about it. Got to pay your rent, right,
• 19:18
  These sorts of things. But all the extra spending just
• 19:22
  grinds to a halt. Yep, and when that happens, when
• 19:26
  people out of fear start cutting back in anticipation of bad
• 19:30
  times, sales drop, which means profits drop, which means
• 19:34
  businesses cut back on hiring. They lay off people, incomes
• 19:38
  drop, and then you have the actual recession you were
• 19:42
  fearing. It's a self fulfilling prophecy.
• 19:45
  Does that in fact happen? Do you have evidence that that
• 19:49
  comes to pass from time to time? Oh, you're asking me a hard
• 19:52
  question here. I mean, look, theoretically I
• 19:56
  can see that yes, this is precisely what's going to
• 19:59
  happen. But then I want to know, all
• 20:01
  right, how often has that? Happened.
• 20:03
  Yeah. I'd have to look back.
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  You caught me off guard with the question.
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  I have to go back and look at some data.
• 20:08
  But you'll get the negative. You'll also get in the other
• 20:10
  direction. You'll get a positive when
• 20:12
  things are looking rough. In fact, a good example of that
• 20:15
  is at 911. What did George W Bush do?
• 20:18
  First thing he gets on the news, he says, look, keep doing what
• 20:21
  you're doing. Don't let this set you back.
• 20:23
  You're planning on buying a car, Buy a car.
• 20:25
  You just keep on going. We're going to be all right.
• 20:27
  Aunt, it was even worse than that, he said.
• 20:29
  What should you do? You should go out shopping.
• 20:31
  Yeah. I was kind of horrified by it,
• 20:35
  yeah. Kind of a but from an economic
• 20:37
  perspective, he was right. I get what he was saying, but as
• 20:42
  was often the case with George W Bush, it was a touch inelegant.
• 20:46
  Yes, it was inelegant, but it was fundamentally.
• 20:49
  Correct. There might have been a better
• 20:53
  way. But look, right now, and I guess
• 20:57
  maybe I'm your Canary in the coal mine here, I kind of am the
• 21:01
  guy you're talking about. I don't think the economy is all
• 21:04
  that great right now and I don't see any reason why it's going to
• 21:06
  get a whole lot better. So I'm behaving accordingly.
• 21:11
  And your intuition is right, it's not all that great.
• 21:14
  I don't see any indication that's going to get better.
• 21:17
  But putting aside the consumer sentiment, nor do I see any
• 21:20
  indication it's going to get worse.
• 21:22
  And that's I guess the main difference, right?
• 21:24
  Because as a non economist, and you'll probably contradict me
• 21:28
  yet again. I don't know man.
• 21:33
  I, I don't know, I could see it getting much worse.
• 21:36
  And maybe that's because I have a, a hand on the jugular of the
• 21:41
  population and I hear what they say.
• 21:44
  I'm listening to what regular people are saying and they're
• 21:47
  saying a bunch of stuff like I am.
• 21:50
  And when that happens, as happened last night, I walked
• 21:53
  into this little hole in the wall restaurant at 6:00 PM and
• 21:57
  it was empty. Yep.
• 21:59
  There is nobody as prime dinner time hours right empty.
• 22:03
  I argue what you're seeing is the result of that consumer
• 22:06
  sentiment. It's people believe there's a
• 22:08
  problem. You might be right, right?
• 22:11
  But I have to work with the evidence I've got and what I can
• 22:13
  understand, right? And I'm not seeing things that
• 22:16
  are impressing me right now. And don't get me wrong, I'm not
• 22:18
  saying that there's anything erroneous about what you're
• 22:21
  seeing. What you're seeing.
• 22:22
  What you just described I consider very dangerous because
• 22:25
  it is a real problem. Sure.
• 22:28
  But it's a psychological one as opposed to a physical one.
• 22:32
  Look, this really bears drilling in for a minute, because what
• 22:36
  you're saying is that the actions of people that we can
• 22:39
  observe are understandable, indeed logical.
• 22:43
  Yes. And yet they can lead us
• 22:46
  headlong into a recession that we did not have to.
• 22:50
  Experience. That is exactly right.
• 22:51
  That is exactly right. That's really upsetting.
• 22:56
  Yeah, I don't like that at all. Well, let me throw out a
• 22:58
  possible something at least in the direction of a cure to this
• 23:02
  malady and that is to understand better the things we think scare
• 23:08
  us. So this 10% stock market drop
• 23:11
  and the headlines James were saying things like stock market
• 23:15
  crash and worst since the Great Depression, whatever it is.
• 23:19
  I expected to see people jumping off buildings from the
• 23:21
  headlines. But let's stop and put this in
• 23:24
  perspective. Even with the 10% decline, year
• 23:28
  over year stocks are up 8%. And if you go back two years,
• 23:34
  they're up on average 20% per year.
• 23:37
  In other words, over the past two years leading up to that 10%
• 23:41
  decline, stocks had risen at a far greater rate than they
• 23:46
  typically do historically. So even with the 10% drop, we're
• 23:49
  still ahead of the game. And you could check my math
• 23:53
  here, and I'd appreciate it if you did.
• 23:54
  But if you get an 8% return on your money, you're going to
• 23:57
  double your money every five years or so.
• 23:59
  Yeah. I don't know what the number is,
• 24:00
  but that's a decent return. I mean, that's a better return
• 24:03
  than portfolio managers anticipate on an ongoing basis.
• 24:08
  8%'s a big deal, yeah. Now, let me put the 100,000
• 24:12
  federal workers into perspective.
• 24:14
  The headlines were 100,000 federal workers laid off.
• 24:17
  And I feel that a lot here in Northern Virginia because that's
• 24:20
  where they all are, right? And you see houses up for sale
• 24:24
  all over the place, 100,000 workers.
• 24:27
  The federal government employs about 3 million people, so that
• 24:30
  would put the federal workers at a 3% unemployment rate.
• 24:36
  Yeah, Excuse me. Yeah, the rest of us have 4%.
• 24:44
  But you know, look, I'm going to play devil's advocate for a
• 24:47
  minute here because what I hear from young people, and I think
• 24:50
  it's fair, they they're wandering around saying, OK,
• 24:55
  housing prices haven't come down.
• 24:58
  I can't afford a down payment, and even if I could, it's 6.7%
• 25:04
  on the 30 year fixed. Yep.
• 25:07
  Oh my God. Well, how did we get here?
• 25:11
  Yeah. So one thing we can do is look
• 25:14
  back to, and it wasn't in my time, but my parents time, I was
• 25:18
  a kid then when mortgage rates were like higher than they are
• 25:23
  now, 10 percent, 13%. They were much higher than that
• 25:26
  because you could get 1819% on ACD, you could get a 19%
• 25:32
  guaranteed return. Yeah, interest rates all across
• 25:34
  the board were high. But the other thing that
• 25:36
  happened back then, you couldn't buy a house, you would not be
• 25:40
  given a mortgage if you didn't have 20% at least cash to put
• 25:44
  down on the table. Now if people are finding it
• 25:48
  hard to borrow without putting money down, OK, well that's
• 25:52
  you're living in different world.
• 25:55
  Right. But you know, when the average
• 25:56
  price of a home is $350,000, that means you got to come up
• 26:00
  with 70,000 if you want that magical 20%.
• 26:03
  And you know, I don't care who you are, saving up $70,000 is
• 26:07
  not an easy thing. Yeah, no, it's not easy.
• 26:10
  I mean, even when I was a young adult saving 20% for my first
• 26:14
  house, which was $50,000, that was a bear, right?
• 26:20
  Yeah, no, it's been difficult. But boy, I don't know.
• 26:24
  If I were on the market for a home right now, I don't know
• 26:27
  what I'd be looking at. It's disconcerting.
• 26:31
  And look, buying a house is kind of that first thought that
• 26:34
  youngish people have. You get into your mid to upper
• 26:37
  20s, people start getting married for whatever the reason,
• 26:42
  and then they start thinking we should live somewhere and have a
• 26:44
  family for whatever the reason. And, well, you can do all that
• 26:49
  right up until we should live somewhere.
• 26:52
  Right. And then it gets really hard and
• 26:55
  I don't see an answer. And if you want to talk about
• 26:58
  consumer sentiment, I think it starts there.
• 27:00
  Yeah, I think that contributes and I don't want to minimize
• 27:03
  that. If you look at the numbers,
• 27:04
  housing prices are indeed up. However, there's a footnote.
• 27:09
  The footnote at least partially compensates.
• 27:12
  The average house today has twice the square footage of the
• 27:16
  average house a generation ago. Yes, it.
• 27:20
  Comes with all this stuff that the average house didn't before,
• 27:24
  so adjusting for all those things, it's still more
• 27:27
  expensive. And it's more expensive even
• 27:30
  than inflation would indicate. You know, you're going to get,
• 27:33
  you know, X percent along the way.
• 27:35
  Housing is going well ahead of inflation.
• 27:37
  I can tell you, and I don't know to what extent, maybe to no
• 27:41
  extent this is solace to those looking to buy houses, but I'll
• 27:44
  tell you this, and this is the first time I've made this public
• 27:48
  prediction, housing prices in this country are going to tank,
• 27:52
  and they're going to tank long term because of the population.
• 27:57
  Part of what drove the ever increasing housing prices
• 28:00
  generation after generation was that there were more and more
• 28:03
  people. Generation after generation, the
• 28:05
  demand for housing kept going up and up.
• 28:08
  It's stopped now and it's going to start going down as the
• 28:10
  population declines. Great.
• 28:13
  Now I got to sell my house. No, but you're going to see, you
• 28:17
  know, the value of it. Now they'll be exceptions,
• 28:19
  various places. I think more urban areas are
• 28:22
  going to see much less of it. Rural areas are going to see a
• 28:24
  lot more of it. Yeah, I think that's probably
• 28:28
  right. Anyway, back to consumer
• 28:31
  sentiment. Is there any reasonable way that
• 28:36
  consumer sentiment can be better instructed than it now is?
• 28:40
  It's one of these things, James, and I think for all the same
• 28:44
  reasons we talk about, you know, people ask us how can we have a
• 28:48
  better body politic? Well, the voters need to do
• 28:52
  their work, which is go out, figure out what's going on,
• 28:55
  think about it, vote correctly. And by correctly, I don't mean
• 29:00
  vote for who I agree with, but rather weigh the evidence
• 29:04
  clearly. That's the problem here with the
• 29:07
  consumers. People aren't weighing the
• 29:09
  evidence clearly. They're reacting emotionally.
• 29:12
  So no, is what you've just said. We can't.
• 29:19
  Well, we do. We do it in places like this of,
• 29:21
  of showing. Look, put it in perspective, 10%
• 29:24
  market drop, not a big deal. Yeah.
• 29:27
  I mean, it stands to reason the minute you say something like
• 29:29
  consumer sentiment, you have to know that what's coming going to
• 29:34
  be variable against the truth in ways that will be
• 29:38
  counterproductive. Right.
• 29:40
  And that's just the nature of the thing.
• 29:42
  Indeed, that's probably why you want to measure it, right?
• 29:46
  You probably wouldn't have to measure it if it tracked
• 29:49
  economic reality perfectly, because who would really care?
• 29:52
  But now there's this reason to look at it, and it's because
• 29:56
  behavior kind of wanders underneath that cloud.
• 30:00
  But you know, you're asking what could we do?
• 30:03
  And I recall from our previous episode where you gave or I gave
• 30:09
  or forget which one of us did the advice, stop watching the
• 30:12
  news, that that's the same advice here.
• 30:16
  Quit watching the news. That's cold comfort to somebody
• 30:21
  who needs a mortgage. That's always going to be the
• 30:24
  fly in the ointment for me, right when people.
• 30:26
  And it's not like there's a nice option on the rental side
• 30:30
  either. Those prices have skyrocketed,
• 30:33
  so living anywhere is going to cost you.
• 30:38
  Oh well. It won't be this way forever.
• 30:42
  You think it will. I was talking to somebody today,
• 30:45
  gas here in Alexandria, VA, it's like 270 a gallon.
• 30:50
  And I was talking to somebody, oh, wow.
• 30:51
  Remember when it was $5 a gallon?
• 30:54
  And people at times thought there's no way it's ever going
• 30:57
  back down? And I said, take a deep breath,
• 31:00
  give it 12 months. It'll be back down where it was.
• 31:02
  We did the same thing with eggs. When eggs ran up, Oh my God,
• 31:05
  they're never coming down again. I said stop, take a deep breath,
• 31:07
  give it 12 months, we'll be back down.
• 31:09
  And sure enough, it was. But we don't notice that because
• 31:11
  the news, what makes the headlines is $5 gas, $6 dozen
• 31:16
  eggs. What doesn't make the news is
• 31:19
  $2.70 gas, right? Or buck fifty eggs.
• 31:23
  And remember, aunt, that there are a lot of people out there
• 31:25
  who are more like me than like you, who begin with the
• 31:29
  assumption that things will only get worse from here.
• 31:32
  Right, right. Yes.
• 31:36
  And as with the two of us, right.
• 31:38
  Because you think things will only get worse, I think things
• 31:41
  will only get better. And the truth is somewhere in
• 31:42
  between. Probably right, But of course
• 31:47
  that's what an idiot would say. Things are always just going to
• 31:50
  get worse. And the Pollyanna's say things
• 31:53
  are only going to get better. That's true.
• 31:56
  I will cheerfully admit that there's plenty of evidence that
• 31:59
  things do, in fact, get better. All I have to do is walk outside
• 32:03
  and look. Around yeah, yeah.
• 32:04
  And it's the same time, some things do get worse and we need
• 32:07
  to pay attention to them. Yep, that's right.
• 32:10
  But consumer sentiment, you know, it's that consumer part
• 32:15
  that'll get you every time. Yep.
• 32:18
  These are just people that, I mean, they act the way they act
• 32:22
  and it's hard to get anywhere with that.
• 32:25
  You kind of have to take it as a given and work around it because
• 32:29
  what people do is just what they do.
• 32:31
  It's our animal spirits. Economists have been banging
• 32:34
  their heads against the walls over that for centuries.
• 32:39
  And that's all the time we've got this week on words and
• 32:41
  numbers. Until next time, send us.
• 32:43
  E-mail wordsandnumberspodcast@gmail.com.
• 32:46
  Try to be nice to one person who doesn't deserve it till next
• 32:50
  week. Can't take it easy.
• 32:51
  See you next week, James.