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What can explain the explosion of GDP? · The Financial Exchange Show

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Speaker 2: Good morning, Happy holidays, Welcome back to the Financial Exchange.
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Speaker 2: On the Tuesday ahead of Christmas, shortens trading week here,
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Speaker 2: tomorrow and closed all day on Thursday.
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Speaker 3: I don't know y.
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Speaker 2: I said that like Ron Burgundy, the markets will close
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Speaker 2: early tomorrow ahead of the Christmas holiday. You know, Safe
1:55
Speaker 2: travels to everybody that's hitting the road or train or
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Speaker 2: plane or however you're getting to where you're going this
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Speaker 2: holiday season. At eight thirty am this morning, we received
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Speaker 2: a big reading on the growth of the economy, and
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Speaker 2: grow it did. We had a GDP report at eight
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Speaker 2: thirty today that indicated in the third quarter, so ending
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Speaker 2: September thirtieth, the US economy grew at a pace of
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Speaker 2: four point three percent annualized which a few things on that. One,
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Speaker 2: A reading of four percent or above is quite rare.
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Speaker 2: Last time we had one was in twenty twenty three,
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Speaker 2: twenty one quarter two.
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Speaker 3: This reading was substantially.
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Speaker 2: Higher than where economists had estimated it to be, over
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Speaker 2: a percentage point higher than where the median forecast was
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Speaker 2: from economists on GDP, And so some big questions being
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Speaker 2: raised here like they were raised on the CPI report
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Speaker 2: in terms of hey, how accurate is this reading, but
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Speaker 2: then also bigger questions of Okay, how exactly can we
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Speaker 2: have in an economy? And granted these are different measurements periods, right,
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Speaker 2: This inflation that we saw was the November period.
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Speaker 3: This report just covers tall than November.
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Speaker 2: Yeah, July, two months September, so you know this is
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Speaker 2: further lagging data, but tough to envision having an economy
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Speaker 2: that is both growing at four point three percent and
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Speaker 2: experiencing inflation dropping at a very fast clip.
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Speaker 4: Four point three percent. This is annualized and after inflation
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Speaker 4: absolutely torrid unsustainably, so most researchers think the economy speed limit.
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Speaker 4: If you prefer to think about the balance between supply
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Speaker 4: and demand, which ultimately determines inflation We don't have to
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Speaker 4: get into that at this point, but just take it
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Speaker 4: as a given that the economy's potential growth rate is
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Speaker 4: a lot closer to two.
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Speaker 3: Maybe why is that below And.
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Speaker 4: That is a function of how much the labor force
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Speaker 4: grows and how much we as workers produce per say,
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Speaker 4: per hour.
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Speaker 2: So to givity, you got GDP for two facts, one
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Speaker 2: the growth of the population and two how productive.
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Speaker 4: That's potential or trend GDP if you're looking out five
4:05
Speaker 4: or ten years and you've got to do a GDP prediction,
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Speaker 4: which is of interest maybe to long term investors and
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Speaker 4: to companies doing capital market plan doing capital market forecasts,
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Speaker 4: capital expenditure planning, stuff like that. You want to know
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Speaker 4: how fast the labor force is going to grow, roughly
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Speaker 4: what productivity is going to be. The latter is far
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Speaker 4: harder than the format a forecast. That the sum of
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Speaker 4: those two growth rates, this is how the math works out,
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Speaker 4: gives you potential or trend GDP. It's right now about
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Speaker 4: two percent used to be three percent in the last century.
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Speaker 4: We all know that the economy doesn't grow as fast
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Speaker 4: as it used to. That's not beat necessarily because anybody
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Speaker 4: screwed up it's a product of demographics and a little
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Speaker 4: bit of luck with respect to the productivity part of
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Speaker 4: that product.
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Speaker 2: By the way, the growth rate of the US labor
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Speaker 2: force is estimated right now to be only around half
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Speaker 2: a percent.
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Speaker 4: Yeah, poultry, compared to you the last century when it
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Speaker 4: was growing at times as women enter the labor force, Yes,
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Speaker 4: and immigration was liberalized, grew a lot one to two
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Speaker 4: percent labor force cori anually typical.
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Speaker 1: Yeah.
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Speaker 2: So you can see how it's tough to see an
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Speaker 2: economy grow at four percent.
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Speaker 4: Just not possible in the absence of an explosion in
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Speaker 4: productivity driven by something like AI, which creates a whole
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Speaker 4: host of problems. By the way, for the FED, which
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Speaker 4: is easing a monetary policy, so I think stimulate demand.
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Speaker 2: The culmination of these last three reports, and the last
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Speaker 2: three that I'm pointing at our this GDP report, the
5:34
Speaker 2: inflation report for November and October, as well as the
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Speaker 2: jobs report for November and October, leaves economists kind of
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Speaker 2: scratching the mixed messages.
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Speaker 4: Is the labor market actually weakening as the unemployment rate suggests?
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Speaker 4: How do you know these are slightly different periods. This
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Speaker 4: is through Q three. The labor market data we got
5:52
Speaker 4: was through November, so it's possible that the labor market
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Speaker 4: may be picked up by a lot in October November,
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Speaker 4: and we don't know that GDP, excuse me, is overstated,
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Speaker 4: or that labor market data will be revised. These two
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Speaker 4: don't necessarily have to square by the way, GDP measures
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Speaker 4: spending by government, people and business with an adjustment for
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Speaker 4: net exports, because you don't want to double count them.
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Speaker 4: So these two don't really measure the same thing, and
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Speaker 4: we're talking about slightly different periods, but nevertheless a stark,
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Speaker 4: a starkly different message from the GDP report, which is
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Speaker 4: excellent than we've been getting from other granted more frequent,
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Speaker 4: updated more frequently. That is indicators.
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Speaker 2: So a number of things that we got recently indicate
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Speaker 2: a turning point. The turning point on inflation was like
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Speaker 2: hitting a brick wall in terms of pricing just died.
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Speaker 2: GDP accelerated in the third quarter, and all of this
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Speaker 2: would indicate one of a few things. Either we're having
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Speaker 2: a tough time actually calculating these things and we have
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Speaker 2: some errors in the methodology that are throwing things off
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Speaker 2: a bit, or we are hitting some sort of turning
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Speaker 2: point in this economy, and I think for all of
6:59
Speaker 2: those reasons, we have to just see what the data
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Speaker 2: tells us over the course the next few months.
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Speaker 4: It's possible there's some sort of productivity there's some sort
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Speaker 4: of supply side miracle going on. Productivity is increasing, maybe
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Speaker 4: due to AI or some combination of luck in AI,
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Speaker 4: I don't know, and that is allowing us to make.
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Speaker 1: More with less.
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Speaker 4: That would explain exploding GDP growth because it was a
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Speaker 4: spectacular quarter coinciding with increasing unemployment, because those two things
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Speaker 4: are weird. That would also explain the relatively quiescent inflation
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Speaker 4: in October November. It's just weird that in the past
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Speaker 4: few months everything has exhibited what would appear to be
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Speaker 4: a change in trend, breaking sharply with the prior trend.
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Speaker 3: And not all for the positive.
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Speaker 4: By the way, pay rolls are okay. Unemployment rate was bad.
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Speaker 2: Yeah, but I have to point that out, like it's
7:53
Speaker 2: not as though all the data in the last month
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Speaker 2: and a half trended and said, oh, everything's.
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Speaker 4: Great, nothing sinister here. If there was something, if somebody
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Speaker 4: it was monkey in with the numbers, we would hear
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Speaker 4: about it. Some PhD statistician at BLS at the department
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Speaker 4: one of the government calculation agencies would blow the whistle.
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Speaker 4: Nothing like that at all. It's just it's just very difficult,
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Speaker 4: given the government shut down to get the typically accurate
8:18
Speaker 4: and still under best circumstance, best of circumstances, lacking a
8:23
Speaker 4: read that we would normally.
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Speaker 2: Yet, I think I've been taught enough lessons over the
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Speaker 2: last five years about firsts in this economy that just
8:31
Speaker 2: because something looks really strange in the moment, as it
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Speaker 2: does right now, does not mean that it's impossible. You
8:38
Speaker 2: take a look at all the first that we've experienced
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Speaker 2: in this economy over the last five years between yield
8:43
Speaker 2: curven version wasn't to first, but the sam rule breaking
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Speaker 2: was a first. It was the miraculous disinflation of the
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Speaker 2: twenty twenty two's. A lot of these things that happened
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Speaker 2: that really seemed improbable at the moment. I'm just again,
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Speaker 2: I'm not willing to dismiss this moment as impossible in
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Speaker 2: terms of it being positive for the economy, but very
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Speaker 2: very odd and strange to see all these things happening
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Speaker 2: at the same time. If they continue.
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Speaker 4: Economic data, any data that has to be estimated. You
9:13
Speaker 4: don't know the true population value. You're getting a little sample.
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Speaker 4: It's like when you do a political poll, they always
9:18
Speaker 4: say plus. It's the same concept. They say plus or
9:20
Speaker 4: minus three point three or four or five points. And
9:24
Speaker 4: all that means is where ninety or ninety five percent
9:27
Speaker 4: or ninety nine percent sure that the actual value lies
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Speaker 4: within the number we gave you plus or minus whatever
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Speaker 4: they said. The margin of error in appolling context is
9:38
Speaker 4: economic data is similar and that we're sampling, so there's
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Speaker 4: always possibility of big errors.
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Speaker 3: Let's take a quick break.
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Speaker 2: When we come back, the economy very clearly avoided a
9:49
Speaker 2: recession in twenty twenty.
9:50
Speaker 3: Five, many Americans still struggling out there.
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Speaker 2: We're going to be talking about why why affordability seems
9:57
Speaker 2: to be the topic. Dujure All that next, along with
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Speaker 3: Mark.
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Speaker 2: We were talking a bit about this piece yesterday and
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Speaker 2: it morphed into a different type of conversation. But obviously
13:20
Speaker 2: we did not see a recession in twenty twenty five.
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Speaker 2: We haven't seen one really since twenty twenty and that
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Speaker 2: was a quite brief one. I would argue that we
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Speaker 2: haven't seen a real, deep, prolonged recession since. Oh wait,
13:34
Speaker 2: you know, I don't think that's there's much to argue there.
13:36
Speaker 2: That was the last time we saw something truly painful
13:41
Speaker 2: in terms of a long drawn out recession. Yet we
13:45
Speaker 2: are seeing more and more data that people are just
13:47
Speaker 2: unhappy with the state of the economy. Affordability is dominating
13:50
Speaker 2: headlines the Saint Louis, Sorry, Michigan. What's the survey of
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Speaker 2: consumers that Michigan does. The other surveys that we get
14:00
Speaker 2: just indicate people stressed about money, unhappy with the state
14:03
Speaker 2: of the economy. I'm happy with inflation in the state
14:05
Speaker 2: of the labor market, and I can understand why. I
14:10
Speaker 2: also wonder just how bad this data gets if we
14:12
Speaker 2: have an economy where we're sitting at say, seven percent unemployment, right,
14:16
Speaker 2: does it do you not see that type of you know,
14:20
Speaker 2: typical downward trend in sentiment, or do you see it
14:22
Speaker 2: get even lower than where we are now and set
14:25
Speaker 2: new lows in that event? But I do hear a
14:28
Speaker 2: lot of you know, what's the right word, like world
14:33
Speaker 2: ending concern about the state of things today. And whenever
14:37
Speaker 2: I hear that, I just I think that people just
14:39
Speaker 2: aren't good students of history when I hear people that
14:42
Speaker 2: concerned about where we are today, Because there's always a
14:47
Speaker 2: period of time that you're living in where there are
14:48
Speaker 2: some existential questions and concerns about the state of the economy, society,
14:53
Speaker 2: and the future. And we discuss this and you know,
14:57
Speaker 2: kind of a silly game of would you rather yesterd
15:00
Speaker 2: on the show? But is there any time period other
15:03
Speaker 2: than the one that you were born into or today
15:06
Speaker 2: that you would prefer to be born because in spite
15:09
Speaker 2: of all the concerns people have, and I hear people
15:10
Speaker 2: say it all the time, like, oh, I can't imagine
15:12
Speaker 2: raising children in today's society, Like.
15:15
Speaker 4: Was life better in the past at any point in
15:17
Speaker 4: the past? Is that another way of answer asking your question.
15:19
Speaker 2: Yeah, I mean we focused it more yesterday on you know,
15:22
Speaker 2: was there any points in time where you would have
15:24
Speaker 2: a better quality of life, you know, economically.
15:27
Speaker 6: Once extra said nineteen seventy if you were born in
15:29
Speaker 6: nineteen seventy.
15:31
Speaker 3: Yeah, pretty good time to be born.
15:32
Speaker 4: I mean I was born around nineteen sept plus or
15:35
Speaker 4: minus nineteen seventy two. So yeah, in this okay, So
15:40
Speaker 4: I think the way I might the way I understand
15:42
Speaker 4: your question is what generation in recent like recorded history,
15:49
Speaker 4: with an emphasis on financial metrics, was able to build
15:54
Speaker 4: enough wealth to live comfortably on average throughout their lives?
15:59
Speaker 4: Though you can't you count somebody who came into a
16:01
Speaker 4: lot of money at the end of their life when
16:04
Speaker 4: stocks boomed or something like that, because there are always
16:08
Speaker 4: odd ball examples of markets going crazy or the economy
16:12
Speaker 4: getting really good, but for only a short period. I
16:16
Speaker 4: think it is undoubtedly the case that baby boomers, anyone
16:21
Speaker 4: born between say four I'll just use the the demographic
16:24
Speaker 4: definition and say forty six to sixty four have probably
16:30
Speaker 4: have enjoyed the fastest growth in incomes and witness the
16:33
Speaker 4: fastest growth in asset prices, including home prices, if that's
16:36
Speaker 4: your measure, and I don't necessarily say that it should be,
16:39
Speaker 4: but look the answer to that question.
16:41
Speaker 2: I say, there weren't challenges, right, I mean, yeah, you were,
16:44
Speaker 2: were World War two, in great depression?
16:45
Speaker 4: There were, But for peace sake, the economy grew by
16:47
Speaker 4: four percent in the sixties, for for change in the fifties.
16:51
Speaker 4: For now baby boomers, which we only enter the workforce then, obviously,
16:54
Speaker 4: but was growing at four percent in the nineteen sixties
16:56
Speaker 4: nineteen seventies. Everybody wrings their hands about, but we still
16:59
Speaker 4: got three point roughly one percent real GDP growth, roughly
17:02
Speaker 4: the same as in the nineteen eighties and nineteen nineties.
17:05
Speaker 4: So never has a generation had a more favorable economic
17:09
Speaker 4: backdrop than.
17:09
Speaker 1: The baby boomers.
17:10
Speaker 3: That's that's just a fact.
17:11
Speaker 4: Just look at GDP as you're sort of catch all
17:15
Speaker 4: proxy for that. So I mean, I'm I don't know
17:20
Speaker 4: how to answer that question because we know how things
17:22
Speaker 4: turned out.
17:23
Speaker 2: Yeah, yeah, I mean, you know, I could make a
17:26
Speaker 2: pretty compelling argument for people to grow up in my generation.
17:29
Speaker 2: They missed the real They weren't participating in the labor
17:32
Speaker 2: force or the housing market to a large degree when
17:36
Speaker 2: during the twenty ten during the two thousands decade, which
17:39
Speaker 2: was pretty pretty rough and tumbled, They've built a lot
17:43
Speaker 2: of their wealth during one of the largest stock market
17:46
Speaker 2: return periods in history, and so it is always tough
17:50
Speaker 2: to see until you look back.
17:51
Speaker 4: But yes, though I don't want to diminish the accomplishments
17:58
Speaker 4: due to the grit of any you know, any generation.
18:01
Speaker 4: Jobs were also harder in the sixties, and so people
18:03
Speaker 4: using slide rules for God's sake, to do comp engineers
18:06
Speaker 4: using slide rules to do big multiplication problems.
18:10
Speaker 2: As so, your point would be the jobs were easier
18:12
Speaker 2: to come by, but tougher to do.
18:13
Speaker 4: Unemployment was on average lower, growth was on average higher,
18:17
Speaker 4: but manufacturing was twenty thirty percent of the economy. Those
18:20
Speaker 4: jobs were hard. My grandfather was in traction half his life.
18:26
Speaker 4: He built submarines down at eb was a welder for
18:31
Speaker 4: those of you listening nationally, that's electric boat in Groton, Connecticut.
18:35
Speaker 4: He had a tough job. These guys had a drink
18:38
Speaker 4: on the job just to dull the pain. So seriously,
18:41
Speaker 4: they weren't all alcoholics. It was like the only way
18:43
Speaker 4: to get through your damn day, I type on a laptop,
18:46
Speaker 4: I type a blog, or do some research or some
18:49
Speaker 4: portfolio work in my day job. They would love to
18:53
Speaker 4: have had that opportunity, so jobs may have been slightly
18:56
Speaker 4: easier to come by. You could raise five kids, as
18:58
Speaker 4: both my sets of grandparents did, without a college education
19:02
Speaker 4: and doing what today would be considered unskilled labor. And
19:04
Speaker 4: you could have a decent house. Now that house was
19:06
Speaker 4: a nine hundred square foot ranch. How they raised five
19:09
Speaker 4: kids in a space that small, I don't know. But
19:11
Speaker 4: the financial security is probably more attainable. But life in
19:16
Speaker 4: many ways was tougher. And of course we're not even
19:18
Speaker 4: talking about quality of healthcare today, which is nothing short
19:20
Speaker 4: of miraculous.
19:22
Speaker 2: It's a fun debate to have. And if you want
19:25
Speaker 2: a Texas show at six one seven, three six, two,
19:27
Speaker 2: thirteen eighty five. We always loved the contributions to these
19:31
Speaker 2: purely hypothetical ones.
19:32
Speaker 3: But I'm with you.
19:33
Speaker 1: It is.
19:33
Speaker 3: It is with the hindsight in place now difficult to.
19:37
Speaker 4: Have you ever had to fix your car because it
19:38
Speaker 4: broke down? Have you ever had to take the starter up?
19:40
Speaker 4: I've never had to do it, but everybody could. And
19:42
Speaker 4: of course they all came out of the war with
19:45
Speaker 4: that skills. Everybody knew how to fix everything. But I mean,
19:47
Speaker 4: we have a softer life in many respects.
19:49
Speaker 2: We do quick break when we come back. Full Market
19:53
Speaker 2: update is next with Wall Street Watch.
20:09
Speaker 1: Bringing the latest financial news straight to your radio. Every day.
20:14
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
20:20
Speaker 1: Time now for Wall Street Watch, a complete look at
20:23
Speaker 1: what's moving markets so far today right here on the
20:26
Speaker 1: Financial Exchange Radio Network.
20:29
Speaker 6: Markets are modestly higher as Wall Street reacts to a
20:32
Speaker 6: solid third quarter GDP reading, which had been delayed due
20:35
Speaker 6: to the government shutdown. The reading show the economy grew
20:39
Speaker 6: at a four point three percent annualized rate, above forecasts
20:43
Speaker 6: of three point three percent.
20:45
Speaker 3: Right now, the Dow is up.
20:49
Speaker 6: About a tenth of percent, or fifty five points higher.
20:52
Speaker 6: SMP five hundred is up two tenths of one percent,
20:55
Speaker 6: or fifteen points. NASDAK up a quarter percent or sixty
20:59
Speaker 6: one points higher. Russell two thousand is retreating about a
21:02
Speaker 6: half a percent. Ten year TREASUREELD is currently at four
21:05
Speaker 6: point one seven to one percent, mostly flat, and crude
21:09
Speaker 6: oil edging higher, trading just above fifty eight dollars a barrel.
21:13
Speaker 6: NOVNORDESK among the bigger winners on the day after the
21:16
Speaker 6: Danners drug maker said it will begin selling a pill
21:19
Speaker 6: version of its weight loss medicine we Go Vi in
21:22
Speaker 6: January after securing approval from US regulator. Shares a rallying
21:27
Speaker 6: over eight percent. Meanwhile, service Now announced it will acquire
21:31
Speaker 6: cybersecurity startup Armists and a cash dealer valued at seven
21:35
Speaker 6: point seventy five billion dollars. The enterprise software company said
21:39
Speaker 6: the deal will bolster its cybersecurity capabilities in the age
21:43
Speaker 6: of AI and more than triple its market opportunity for
21:47
Speaker 6: security and risk solutions. Service Now stock is down about
21:51
Speaker 6: two percent. Reddit stock is falling about one percent, despite
21:55
Speaker 6: equities research analysts at need Them and Company adding the
21:58
Speaker 6: social media platform to its top stock list for twenty
22:02
Speaker 6: twenty six and as a reminder, markets will close early
22:06
Speaker 6: tomorrow afternoon at one o'clock. I'm Tucker Silva and that
22:10
Speaker 6: is Wall Street Watching. In the previous segment, we asked
22:12
Speaker 6: you the trivia question, does Bruce Willis think Diehard is
22:16
Speaker 6: a Christmas movie? He said that at a twenty eighteen
22:19
Speaker 6: Comedy Central Rose His answer, no, No, Diehard is not
22:24
Speaker 6: a Christmas movie. That according to Bruce Willis, Max from
22:28
Speaker 6: New Bedford, mass is our winner today taking on the
22:30
Speaker 6: Financial Exchange Show T shirt. Congrats to Max. We play
22:34
Speaker 6: trivia every day here in the Financial Exchange See complete
22:37
Speaker 6: contest rules at Financial Exchange Show dot com.
22:40
Speaker 2: Car payments now average more than seven hundred and fifty
22:44
Speaker 2: dollars a month. Congratulations everybody. We are terrible at buying
22:47
Speaker 2: cars in this country and continue to prove that to
22:51
Speaker 2: be the case.
22:52
Speaker 3: They make the point that the idea.
22:54
Speaker 2: Of a three hundred dollars monthly payment for a new
22:57
Speaker 2: car is pretty much dead at this stage. And I
22:59
Speaker 2: do buy that point, because even if you're buying a
23:04
Speaker 2: thirty thousand dollars car and financing it over six years,
23:08
Speaker 2: you're still you know, probably looking at four five hundred
23:12
Speaker 2: dollars per month and a monthly payment, so that the
23:14
Speaker 2: idea of three hundred dollar payment, especially in today's interestraight environment,
23:17
Speaker 2: is pretty much behind you. But in this piece they
23:21
Speaker 2: interview somebody. Where's the uh, where's the quote on the
23:25
Speaker 2: thirty thousand dollars?
23:26
Speaker 1: Oh?
23:26
Speaker 3: Yes, Mark, I think.
23:28
Speaker 6: It's sound like four or five paragraphs.
23:30
Speaker 3: Well, let'm just hold over to find it.
23:33
Speaker 2: The average price of a new car broke fifty thousand
23:35
Speaker 2: dollars this fall, according to Kelly blue Book.
23:38
Speaker 3: I got it, okay, hit me, all right, me Tucker.
23:41
Speaker 6: So the paragraph reads, one problem is that automakers aren't
23:45
Speaker 6: making models with the sticker price under thirty thousand dollars, which,
23:48
Speaker 6: in theory, should present a real opportunity for car for
23:51
Speaker 6: the car companies, said Heath Bird, CFO of Sonic Automotive,
23:57
Speaker 6: a publicly traded dealership chain. You've recently told investors and
24:02
Speaker 6: analysts that until buyers have better options, affordability will become
24:06
Speaker 6: an even bigger problem.
24:08
Speaker 2: So, uh agreed about Like, wait, but you can talk
24:13
Speaker 2: about that thirty thousand dollars Mark for a minute.
24:15
Speaker 3: Mark. I believe that you drive a car that you
24:19
Speaker 3: purchased and every.
24:20
Speaker 4: Other week telling me to upgrade to the same car.
24:22
Speaker 4: Why anybody would do this, I don't know. And there's
24:24
Speaker 4: the stickers the same the smell.
24:28
Speaker 2: Okay, So I did a quick Gemini search here to
24:32
Speaker 2: try and figure out is beguiling?
24:34
Speaker 3: Hey? Is there any truth to this?
24:37
Speaker 2: And I come to the same conclusion we've brought up
24:39
Speaker 2: every single time, which is there are plenty of cars
24:42
Speaker 2: that are affordable and reasonable.
24:44
Speaker 4: They're small.
24:45
Speaker 3: Americans just don't like to buy.
24:46
Speaker 4: People laugh at you at stop, like.
24:48
Speaker 2: The Nissan Versa, the Kiak Fo, the Honda Civic, Hyundai
24:52
Speaker 2: Lantra SUPERU, and President Chevy tracks.
24:54
Speaker 4: Yeah, the Jed which.
24:57
Speaker 2: Car kicks, the Hyundaiona, the Mazda c X thirty, the
25:00
Speaker 2: Toyota Corolla Crossover. I just listed like ten cars that
25:05
Speaker 2: are all available for an MSRP of under thirty thousand dollars.
25:08
Speaker 2: Our problem is not that automakers are squeezing us and
25:12
Speaker 2: you know, refusing to make affordable cars. Our problem is
25:15
Speaker 2: that we don't buy them.
25:17
Speaker 4: It's a good second car, A compact Sedan is a
25:20
Speaker 4: good second car. But if you've got two plus kids
25:23
Speaker 4: who play hockey or something, it would be quite tight.
25:26
Speaker 4: But it'd be be an okay car for you to
25:27
Speaker 4: commute to work in, but you know you're driving another
25:30
Speaker 4: has right, can't you.
25:32
Speaker 2: Get something also drive a minivan. They're like the opposite cars.
25:35
Speaker 2: But that's but, but that's my sense.
25:38
Speaker 4: You're buying them for utility, one you commute in and
25:40
Speaker 4: the other.
25:41
Speaker 6: I mean, I'm in this similar camp. Like my wife's
25:43
Speaker 6: drives cheap Compass and it's a little bit bigger obviously,
25:47
Speaker 6: but she barely you know, drives it like I do,
25:51
Speaker 6: where I've a Jetta Sadan, which is like what thirty
25:54
Speaker 6: miles per gallon mark to get to on the highway
25:56
Speaker 6: or whatever.
25:57
Speaker 2: Maybe so we can continue to go, we can continue
26:01
Speaker 2: to bemoan the affordability Christ Team Miles when it comes
26:06
Speaker 2: to cars, but I continue at least with at least with.
26:11
Speaker 3: Cars, like with home affordability and other issues.
26:15
Speaker 2: I'm willing to say that there's plenty of blame to
26:17
Speaker 2: go around, but it's still mostly our fault.
26:20
Speaker 3: Uh, we like big cars. With cars, it is directly
26:23
Speaker 3: our fault.
26:24
Speaker 4: Americans have always preferred more, more muscle and more space to.
26:28
Speaker 3: Less and that's all well and good.
26:30
Speaker 4: Like anybody who's been in Europe knows this.
26:33
Speaker 3: I happen to be a chiefe with cars and like
26:35
Speaker 3: to drive junkie.
26:37
Speaker 2: You know, uh, not junkie. The Honestif it's a nice car,
26:40
Speaker 2: it's just your.
26:41
Speaker 1: Car is awesome.
26:41
Speaker 3: What are you talking about. That's a great car.
26:43
Speaker 2: I agree, But you know, I'm not complained about anybody
26:47
Speaker 2: that doesn't like that car, that wants to drive nicer.
26:49
Speaker 2: Our problem is that we make terrible financial decisions when
26:53
Speaker 2: it comes to cars. There's no way that somebody making
26:56
Speaker 2: seventy thousand dollars a year should be buying us.
26:58
Speaker 4: The way the financials are presented to buyers should be illegal.
27:03
Speaker 4: Most people do not have your level of knowledge of
27:06
Speaker 4: present value of cash. You've got a little financial calculator
27:09
Speaker 4: in your head because that's what you do for a living.
27:12
Speaker 4: Their practices are I'm sorry, but they are. The way
27:15
Speaker 4: they present monthly payments and so forth is borderline deceptive.
27:19
Speaker 3: I don't know.
27:20
Speaker 4: I think I understand the math, and I still roll
27:23
Speaker 4: my eyes when I get to that part of this.
27:25
Speaker 3: I don't like that they bury the MSRP. Sorry, I
27:28
Speaker 3: don't like that they bury the APR. I think that's problematic.
27:31
Speaker 3: They don't really tell you the interest right up front
27:33
Speaker 3: they tell you.
27:34
Speaker 4: That there is, and I like these guys, they got
27:36
Speaker 4: to make a living. I get that, but it's not
27:40
Speaker 4: just borderline deceptive. It's often flat out deceptive the way
27:42
Speaker 4: they present payments.
27:43
Speaker 2: We have a guide this month for December about financial
27:48
Speaker 2: planning for spouses, and I hesitate to connect this to
27:52
Speaker 2: car affordability. It's not, but it does remind me of
27:57
Speaker 2: frequent conversations I have with clients, and specifically you know,
28:03
Speaker 2: financial planning for spouses, and where we see problems. And
28:08
Speaker 2: I'll tell you I tend to not see problems from
28:12
Speaker 2: clients that have a genuine problem with their financial strategy
28:15
Speaker 2: when both spouses are on the same page, right when
28:18
Speaker 2: both you know, partners in that team come in and say,
28:22
Speaker 2: oh yeah, like, I see what you're saying here, we
28:24
Speaker 2: are spending beyond our capacity and we need to rein
28:27
Speaker 2: it in and get control over this. That tends to
28:29
Speaker 2: work pretty well. Where I have seen genuine problems, and
28:34
Speaker 2: where I've seen financial problems lean to divorce is when
28:37
Speaker 2: it's hidden, and that seems to be the real problem.
28:41
Speaker 2: And I think we are all guilty of this to
28:43
Speaker 2: a degree, myself included, Right, Like I had this conversation
28:48
Speaker 2: with my own wife recently that you know, I had
28:50
Speaker 2: just kind of taken a hold of everything, was doing
28:52
Speaker 2: it all myself, and she wasn't really fully in on
28:55
Speaker 2: the status of our of our personal finances. And this
28:58
Speaker 2: guide is not an attempt to provide you marriage counseling,
29:03
Speaker 2: but it is an attempt to provide a framework for
29:07
Speaker 2: how you need to be making decisions as a married
29:09
Speaker 2: couple as you approach retirement. There are a number of,
29:12
Speaker 2: you know, items that you look at and say, okay,
29:15
Speaker 2: if there's a significant age gap. I was meeting with
29:17
Speaker 2: somebody who you know, married couple more than a decade
29:20
Speaker 2: in age difference, that's a big threshold where you have
29:22
Speaker 2: to do some extra planning. If you have kids from
29:25
Speaker 2: separate marriages, if if it's a second marriage, there's all
29:28
Speaker 2: these added complexities, and this guid attempts to put a
29:31
Speaker 2: framework around how you should be thinking about it. It's
29:34
Speaker 2: our guide for December. It's going to get busy in
29:36
Speaker 2: your household, as I'm sure it already has. If you
29:39
Speaker 2: want to get your copy, call now at eight hundred
29:42
Speaker 2: three nine three for zero zero one again all about
29:46
Speaker 2: retirement and financial planning.
29:48
Speaker 3: For spouses. The number once again is eight hundred three
29:52
Speaker 3: nine three for zero zero one.
29:54
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
29:57
Speaker 1: registered investment advisor. Nothing in the ad or in any
29:59
Speaker 1: Armst wrong guide to specific financial, legal or tax advice.
30:02
Speaker 1: Consult your own financial, tax into state planning advisors before
30:05
Speaker 1: making any investment decisions. Armstrong make contact you to offer
30:08
Speaker 1: investment advisory services.
30:10
Speaker 2: All right, so we've already covered that there are in
30:11
Speaker 2: fact affordable cars out there, people just don't like buying them.
30:16
Speaker 2: Twenty twenty five was at least in part defined by
30:19
Speaker 2: a pretty big pivot on the part of automakers. Specifically,
30:22
Speaker 2: Ford made a massive pivot on its EV plans, and
30:25
Speaker 2: there's a couple of pieces about it today, you know,
30:27
Speaker 2: one of them saying that Ford and GM are running
30:29
Speaker 2: out of time to reinvent themselves. I didn't really know
30:32
Speaker 2: there was a timing you're going, or anyone asking them
30:34
Speaker 2: to reinvent themselves. I guess I'm kind of confused on
30:37
Speaker 2: the premise, right. I think these car companies attempted to
30:41
Speaker 2: reinvent themselves over the course of the last five years
30:44
Speaker 2: by pivoting towards electric vehicles. They realized it failed, and
30:48
Speaker 2: now they're falling back on their traditional profit makers, which
30:52
Speaker 2: are giant trucks.
30:53
Speaker 4: Well, they did make some pretty dramatic lineup changes. They
30:55
Speaker 4: said we're going to go yeah they failed, were eventually
30:57
Speaker 4: going to go all well, yeah, eventually we're going to
31:01
Speaker 4: go all electric. Right, that was the theme past few
31:03
Speaker 4: years as Ford stopped making passenger cars. It's very hard
31:06
Speaker 4: to find a Chevy passenger car you can find. So
31:09
Speaker 4: we did this exercise months ago on the area you
31:11
Speaker 4: find them in theory but not in fact. And now
31:15
Speaker 4: the political winds have changed and they're shifting their business
31:19
Speaker 4: strategy again. You've got to pity them to some extent.
31:21
Speaker 2: I mean, there's so I suppose the one area that
31:24
Speaker 2: I do worry about these companies is whether or not
31:27
Speaker 2: they can just make a profit in the US car market,
31:30
Speaker 2: because quite honestly, Ford and Chevy are having a very
31:32
Speaker 2: difficult time selling their cars anywhere other than the United States.
31:36
Speaker 3: And so it's it's virtually always been the.
31:38
Speaker 2: Case, and if China continues to make the inroads into
31:41
Speaker 2: these other markets, then that is a real question, like, hey,
31:44
Speaker 2: can Ford actually make a profit by just selling cars
31:47
Speaker 2: in the United States. I think the answer is yes,
31:49
Speaker 2: and we have enough protection around these car companies that
31:51
Speaker 2: they are probably too big to fail.
31:54
Speaker 4: Well, there's nothing wrong with buying Sedan's from abroad and
31:57
Speaker 4: buying F one to fifty's and civil Dorados and so
32:01
Speaker 4: forth that are produced domestically. There's nothing wrong with that.
32:03
Speaker 4: We're not Ford and GM weren't particularly good. And I
32:05
Speaker 4: say this as someone who drove two Forwards and several
32:09
Speaker 4: GM cars. They weren't particularly good at making cars all
32:12
Speaker 4: kinds of issues. Appearance was not their problem. Generally good
32:16
Speaker 4: looking cars, yeah, fit and finish, mechanical. You know, after
32:19
Speaker 4: a year the paint starts peeling off. Stuff like that.
32:21
Speaker 4: They just couldn't go. Now, that was actually a truck unfair.
32:24
Speaker 4: That's to be fair anyway. They just couldn't get that right.
32:27
Speaker 4: So specialize in what they do beautifully yep F one
32:29
Speaker 4: fifties and Silverados and Dodge I don't want to leave
32:31
Speaker 4: out Dodge Rams.
32:33
Speaker 3: Quick break when we come back. Stack Roulette is next.
32:37
Speaker 1: Here The Financial Exchange every day from eleven to noon,
32:40
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32:43
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33:10
Speaker 6: This segment of The Financial Exchange is brought to you
33:12
Speaker 6: by the US Virgin Islands Department of Tourism. This still
33:15
Speaker 6: time to book your holiday vacation to Saint Croix, Saint Thomas,
33:19
Speaker 6: or Saint John. Enjoy one or all three and if
33:22
Speaker 6: you act fast, you could be in Saint Croix to
33:24
Speaker 6: experience their cruciing Christmas Festival taking place this December through
33:28
Speaker 6: early January. We discover the magic of this long standing
33:31
Speaker 6: tradition with incredible food, music and entertainment. Or just go
33:35
Speaker 6: soak up the sun, stroll on white sand beaches and
33:39
Speaker 6: feel the rhythm of the heartbeat of the Islands. The
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Speaker 6: USVII is America's Caribbean paradise. Plan your winter escape now
33:45
Speaker 6: at visit USVII dot com. That's visit USVII dot com.
33:50
Speaker 3: Hey, it's Mike here on the Financial Exchange.
33:52
Speaker 2: I want to wish all of our listeners on Serious
33:55
Speaker 2: XM a very happy and healthy holiday season, Merry Christmas
33:58
Speaker 2: and a terrific New Year time.
34:00
Speaker 3: Thank you for being with us this year.
34:02
Speaker 2: All the best in twenty twenty six, and Mark, what
34:06
Speaker 2: do you have for us for Stackordlet Today.
34:07
Speaker 4: We've been talking about inflation. Apparently, according to government estimates,
34:11
Speaker 4: came to a screeching halt in October and November. There
34:14
Speaker 4: are problems with those estimates, sure, but well, taking at
34:18
Speaker 4: face value, we've been talking this morning about GDP, A
34:21
Speaker 4: scorching fourth quarter, a third quarter excuse me, GDP number
34:26
Speaker 4: that's an estimate of how much the economy grew. Jason
34:30
Speaker 4: Furman writes in The New York Times today. He's a
34:33
Speaker 4: professor of economics at Harvard, and he was head of
34:37
Speaker 4: the Council of Economic Advisors Real Don for president. Yeah,
34:41
Speaker 4: he gives some good advice when it comes to how
34:44
Speaker 4: how do you evaluate a number that suggest we government
34:48
Speaker 4: economic data, specifically that suggests the trend may have changed dramatically.
34:52
Speaker 4: Furman advises as follows when interpreting the macroeconomy, he writes,
34:57
Speaker 4: it's always best to look across a broad range of
34:59
Speaker 4: indicator over long periods of time. When a single volatile
35:03
Speaker 4: data release suggests that the economy is suddenly turned sharply
35:06
Speaker 4: for better or worse, it's usually wrong. Reality tends to
35:10
Speaker 4: be smoother, furmin rights, and more moderate. Great advice for
35:15
Speaker 4: digesting economic data in any environment. The economy doesn't make
35:20
Speaker 4: big leaps. Typically you should be suspicious of anything that
35:23
Speaker 4: suggests that it has made a big leap.
35:25
Speaker 2: So maybe an off chance that we're at a real
35:28
Speaker 2: pivot point. More likely we screwed up the measurements.
35:32
Speaker 3: More Sorry, these are just estimates. They're going to be wrong.
35:35
Speaker 2: Ye been getting asked a lot about what we think
35:38
Speaker 2: the holiday retail spending pattern looks like. I had the
35:42
Speaker 2: distinct pleasure of going to the south Shore southshirep Plaza
35:46
Speaker 2: south Shore Plaza in Braintree, Massachusetts, yesterday, which was a disaster.
35:56
Speaker 3: It was like four o'clock and.
36:00
Speaker 2: Honestly like a little bit nostalgic walking around to shopping
36:03
Speaker 2: mall two days before Christmas, So it was it was
36:06
Speaker 2: a nice visit to a very nice mall and it
36:09
Speaker 2: was packed. Visa is out with their estimates for holiday shopping,
36:14
Speaker 2: and when asked this question, I continue to say, guess
36:18
Speaker 2: what holiday shopping is probably going to bump up somewhere
36:21
Speaker 2: in the range of two to five percent, one to
36:23
Speaker 2: four percent, whichever whichever range you want to give, but
36:26
Speaker 2: you know.
36:27
Speaker 3: Mid single digits.
36:28
Speaker 2: Visa estimating that US holiday retail spending increased four point
36:32
Speaker 2: two percent year over year. That is not adjusted for inflation.
36:36
Speaker 2: So subtracting nearly three percent from that number if you
36:39
Speaker 2: want to, if you want to estimate how much additional
36:41
Speaker 2: stuff we got e commerce spending, their estimate jumped by
36:45
Speaker 2: seven point eight percent. But surprisingly to me, still physical
36:50
Speaker 2: stores are still capturing nearly three quarters of all holiday
36:54
Speaker 2: shopping spending according to Visa. So few private companies have
36:59
Speaker 2: a better read on this type of thing than Visa
37:01
Speaker 2: does given their business. Electronics in particular, saw a five
37:05
Speaker 2: point eight percent surge compared to last year, so spending
37:09
Speaker 2: on electronics don't I don't follow the iPhone cycles, so
37:14
Speaker 2: maybe that was enough to drive that one up here.
37:18
Speaker 2: But at the same time as our holiday spending is increasing,
37:23
Speaker 2: according to Visa, private credit firms are making the decision
37:28
Speaker 2: to pile into consumer debt.
37:31
Speaker 4: They're not coincidentally, right, not.
37:33
Speaker 2: Coincidentally, I mean they have a bunch of money that
37:35
Speaker 2: they're fueling that they need to spend. And yeah, they
37:38
Speaker 2: are in part contributing reampanies. That's what they're doing, is
37:43
Speaker 2: they're buying receivables from credit card companies. This big transaction
37:47
Speaker 2: was in Europe and so might not heavily impact US consumers,
37:52
Speaker 2: but yeah, they are making borrowing easier for American consumers,
37:57
Speaker 2: which is nice this time a year for the holiday
38:01
Speaker 2: shopping season, but is a you know, kind of fun
38:04
Speaker 2: and dramatic game of musical chairs for whoever it gets
38:06
Speaker 2: left holding that holding that bag once the music.
38:09
Speaker 4: So this is why it's important to pay attention to
38:10
Speaker 4: what's happened. I know you and Chuck talk about it
38:12
Speaker 4: a lot, but what's happening in private credit has implications
38:14
Speaker 4: for spending, and what's happening in private credit is related
38:17
Speaker 4: to what's happening in equity markets. Buoyant, exuberant markets generally
38:23
Speaker 4: those make it easier to spend.
38:25
Speaker 2: That's all the time we have for today's show. Markets
38:28
Speaker 2: are in the positive again as we head towards the
38:31
Speaker 2: Christmas holiday. NASDAC leading the way up four tenths of
38:33
Speaker 2: a percent, SMP up three tenths of a percent and the
38:36
Speaker 2: Dow Jones Industrial Average up a little bit more than
38:39
Speaker 2: one tenth of a percent. Have a great rest of
38:43
Speaker 2: your day, Merry Christmas, and we will catch you soon