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Can Elon Musk actually make the government more efficient? · The Financial Exchange Show

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Paul Lane and Mark Fandetti.
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Speaker 2: Kicking off the second hour of the Financial Exchange here.
1:16
As I mentioned, markets in relatively mixed territory no longer
1:21
as much enthusiasm from the post election rally, but certainly
1:24
we had quite a run up in the last week
1:27
or so. We did have a CPI inflation report come
1:30
out this morning at eight thirty an am. And what
1:33
we saw from the October CPI is that the consumer
1:36
Price Index increase point two percent month over month for
1:40
the month of October. The twelve month inflation rate hit
1:44
two point six percent. If you look at core CPI,
1:47
which strips out the impacts of food and energy costs,
1:51
that figure increased point three percent month over month and
1:54
is now running at a three point three percent rate annually.
1:59
In general, the markets seem to be relatively mixed in
2:02
terms of their reaction to this October CPI report. I
2:06
would point out that for the Federal Reserve and future
2:09
interest rate cuts, heading into this morning, there was about
2:12
a sixty percent probability according to CEME Futures Group, that
2:17
the Federal Reserve would cut interest rates on their December
2:20
eighteenth meeting coming up, that probability now stands at eighty
2:24
two percent that they will cut interest rates by a
2:26
quarter of a percent. So this report that we saw
2:29
on the CPI front likely reinforcing this idea that we
2:32
will continue to see another quarter basis point cut come
2:37
the December meeting. Here mark anything else that you'd like
2:40
to add on the inflation report front that I didn't.
2:42
Speaker 3: Hit all pour some cold water on as I like
2:45
to do. You referenced core inflation, which is one way
2:49
of getting at the trend in inflation. What the Fed
2:52
needs to know is what is the state of underlying
2:55
price pressures in the economy, which is in turn a function,
2:59
as we talked about on the last hour, of how
3:01
fast the economy is growing relative to its potential. The
3:04
economy has grown, and we'll get into this, I think
3:06
in the next couple of stories in a more political context.
3:09
The economy has been growing above what most researchers think
3:12
is its potential growth rate. It's speed limit if you like.
3:14
It's in the red zone, a bit that puts upward
3:17
pressure on prices. So it's not surprising that core inflation
3:21
and another measure of the trend in inflation an alternative
3:25
core measure if you like the median, just the one
3:27
in the middle. Same concept does it work here as
3:31
when you look at the median home price or the
3:33
median salary, the median doesn't get doesn't get headfaked by
3:38
the big observations on the negative or the positive side.
3:43
Median inflation also came in at point three percent. So
3:46
if you annualize recent month over month changes in core
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and by that I mean just extrapolate out what they
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would be over a twelve month period in traditional core
3:56
and in median, you get inflation somewhere in the three
3:58
and a half percent range. That is consistent with an
4:01
economy that's a little bit frenetic, little bit overheated relative
4:06
to its potential. FED may have more work to do here.
4:08
Speaker 2: You mentioned, you know, it is a healthy economy. And
4:11
there's a piece here in the Boston Globe this morning
4:13
that goes over Trump and what he's inheriting from an
4:18
economy perspective. And there's really there's two camps. There's the
4:22
camp that we track pretty closely because of our job
4:25
the economists and looking at metrics like unemployment, GDP, growth
4:30
and other measures of that nature. That points to the
4:33
fact that the United States has had a pretty healthy
4:36
economy and just backed up by what Mark said on
4:38
the GDP front, the economy has been growing at a
4:41
good pace. However, there are other camps of people out
4:44
there on the ground who just feel the impacts of inflation,
4:47
which are detrimental to your take home pay. And there's
4:53
a lot of Americans out there that lament the fact
4:56
that we've seen prices increase anywhere from twenty five to
4:59
thirty percent, depending on what basket of goods you're looking at,
5:02
over the course of the last three or four years. However,
5:05
in this piece, they make the point in the globe
5:08
that Trump is taking over an economy besides the impacts
5:11
of inflation that we've seen over the last several years,
5:14
that is in a pretty good place. We have unemployments
5:17
sitting at four point one percent, GDP growth remains relatively strong,
5:21
and there could be a situation where, if inflation is
5:24
able to stay at this pretty static level relative to
5:28
what we saw in twenty twenty two, that he could
5:31
be stepping into a reasonably strong economy.
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Speaker 3: Just remember these numbers a year or two years from now,
5:37
and it's really easy. Two three and four. Headline inflation
5:41
over the past year is a little over two percent,
5:43
but I'm gonna round down and call it two. As
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we was just affirmed this morning. Two ish three is
5:50
where real gross domestic product GDP is running right now.
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That's about the year over year change. I'm rounding up
5:58
just a little bit. Don't panel me too much for that.
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It just makes it an easier mnemonic, an easier thing
6:03
to remember. Four is where the unemployment rate is today,
6:07
two three and four. A year from now, two years
6:11
from now, voters will again be asking the question and
6:13
be better off now than when this guy, whoever it
6:15
happens to in this case is Trump, But could ask
6:18
it relative to when Biden's tenure began or ended? Are
6:21
we better off now than we were then? Now you
6:23
could say, I don't believe those numbers. I think the
6:25
government's fudging them. That's fine, but you've got to submit
6:29
ahead of time evaluation criteria for the person assuming office.
6:35
Speaker 1: Now.
6:35
Speaker 3: If you don't like those, pick another one, but pick
6:37
it ahead of time and then stick with it. Two
6:40
three and four are a tough triplet to beat for
6:45
that holy for that trinity. If you like of economic statistics.
6:50
As you said, Paul, the three most important things is
6:52
we all learn in our first economics class GDP, unemployment, inflation.
6:57
There are many other measures, but those sum up on
7:00
a very high level the health of the economy. You
7:02
could say you don't agree, and by the way the
7:05
vote went a couple of weeks ago, a lot of
7:07
people don't agree. But you have to pick a measure
7:10
of keeping score ahead of time and then stick with
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it again. I think two three and four for inflation,
7:16
for GDP and unemployment is going to be a very
7:18
hard triplet to beat.
7:20
Speaker 2: And it's interesting parallels they make in this piece. The
7:22
Boston Globe mentions that when Clinton took over the White
7:25
House in nineteen ninety two, it was coming off a
7:28
somewhat similar period of time where the US economy had
7:31
been in a recession for about a year and a
7:34
half prior to that, and George Bush was blamed for
7:38
that recession. As a result, Clinton took over and the
7:41
impact of the recession subsided over his tenure, not due
7:45
to anything that Bill Clinton necessarily did, but just due
7:47
to how the economy ebbs and flows.
7:50
Speaker 3: The crazy thing about that one is that that recession
7:52
went from the end of ninety to March of ninety one.
7:56
It had been over a year and a half before
7:58
that election took place. In that final quarter of HW's term,
8:02
George HW. Bush's term was something like two and a
8:04
half percent. Don't quote me exactly on that, but when
8:07
the number came out, it was like a blockbuster, so
8:09
much so that people thought that it was fudged, at
8:11
least people on the left did. The Fed kept rates
8:14
too high for too long. George H. W. Bush knew it.
8:17
He had too much class to browbeat the Fed publicly,
8:20
but it cost him that election and Clinton inherited. We
8:23
now know a relatively strong economy, with the exception of unemployment,
8:27
which was somewhere I think in the sevens at the time.
8:29
And then Clinton made the right choices too, to his credit,
8:32
but to the larger point I think is the one
8:34
you're making, Paul, which is a lot of this is luck.
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Speaker 2: And another area that we need to examine is some
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news that came out I believe either this morning or
8:45
late last night was Trump picking Musk and Vivic vivek
8:50
Remeaswami for a government efficiency effort. And so we'll touch
8:53
upon this a little bit now, and perhaps you will
8:55
even bleed in and we'll cover it after the break.
8:57
But their focus is going to be on developing governmental
9:02
efficiencies and perhaps trying to it seems cut wasteful expenditures
9:08
and restructure federal agencies. That's a direct snippet of That
9:13
is a direct quote from President elect Donald Trump that
9:16
was mentioned on Tuesday. And the area that I want
9:18
to start with this conversation is on the wasteful expenditure
9:23
side of things. If you take a look at our
9:25
federal budget, it's about six point seventy five trillion, and
9:29
if you scrutinize what we spend that money on, a
9:33
huge percentage is based on spending in social security, Medicare, defense,
9:40
and vet and benefits for vets. If you look at
9:43
the pie, it's anywhere from two thirds to almost seventy
9:46
percent plus in terms of what we spend as a country.
9:50
And those are areas that no politician wants to touch
9:53
with a ten foot poll. So this idea that they're
9:56
going to create this government efficiency effort, it's going to
10:00
be very hard to make much of a budgetary impact
10:03
when two thirds plus of your budget is off the table.
10:06
Speaker 3: Here, something's got to be done. Do we now spend
10:09
more on interest on the debt than we do on defense.
10:12
We've said that before, it's been that, that's been widely reported.
10:15
You've probably heard it, but that should stop you in
10:18
your tracks. That's thirteen percent of the federal budget.
10:21
Speaker 2: Elaborate on that a little bit more. Are just to
10:24
simplify for listeners out there, the interest that we have
10:27
to pay on US treasury debt that we have lent
10:30
out to a lot of us. We're the ones holding
10:33
it foreign to the public. I think I looked at
10:36
the stat today, it's we have three quarters of it.
10:38
And when I say we, Mark and I just you know,
10:40
all of us in this country are are big holders
10:42
of US debt the interest assessed with those payments. So
10:46
if you're buying US treasuries, any of the listeners out there,
10:48
you're investor buying a four percent or five percent treasury
10:51
the cost of servicing that interest over the course of
10:53
the year, we spend more money on that than we
10:56
do for our defense department. That is staggering, and it's
10:59
worth reinforce and.
11:00
Speaker 3: It's growing faster than the economy as a result, and
11:03
that's where it starts to get a little scary. So
11:05
something has to be done. Republicans, I'll depart from my
11:09
usual sort of analyst mindset here and just make up
11:14
sort of political statement. They have to do something, and
11:16
they seem determined to the president, though I'm not sure
11:19
he's never shown an interest in reducing the debt. His
11:22
first term record is to put it mildly terrible. Even
11:27
before COVID, before you jump in and say COVID, COVID, No,
11:29
before COVID, the deficit doubled and he added three and
11:32
a half trillion, So it's not really his thing. And
11:36
naming a commission feels like a cop out, pall. It
11:38
feels like a way to say, ope, commission's looking at it. Yeah,
11:41
it's theater.
11:42
Speaker 1: Uh.
11:42
Speaker 3: He wouldn't say it's theater, but it is. He can say,
11:44
go talk to Elon. He doesn't have to make any decisions.
11:47
Congress doesn't even have to act that. We're waiting for Elon.
11:50
It's gonna take We all know where commissions go. We
11:52
all know where we what we do with something. When
11:54
we want to kill it, you assign it to a committee.
11:57
Speaker 2: Yeah, that's an interesting position to put them and I'm
12:00
glad you you let it out that way. So it
12:02
remains to be seen what the impacts will be from
12:06
this alleged committee. It's supposed to their work is supposed
12:09
to conclude by July fourth of twenty twenty six. They're
12:13
supposed to give us.
12:14
Speaker 3: You've gotta be kid made, Paul.
12:15
Speaker 2: If so, we will see what efforts made there. It's
12:23
just I just don't know what you cut? What? What?
12:27
Speaker 1: What?
12:27
Speaker 3: Are they going to find a cut but putting it
12:29
giving them a twenty twenty suit that is two years
12:31
almost two years from now. Then it goes to the president.
12:35
He's got to consider it, build it into a budget
12:37
for that year, for the next year, He'll be out
12:39
of office before even if they accepted it all, he'd
12:41
be out of office before they were able to implement it. Moreover,
12:45
can Congress do anything in the meantime or are they
12:47
gonna feel handcuffed by what Elon's doing? What if they
12:51
want to? Senate Republicans appear to be quite committed to
12:53
cutting spending. Are they hamp are they hamstrung now by
12:56
this effort? I think it's good political theater for him,
12:59
but I don't know if it's good given the process
13:02
that normally has to be followed.
13:03
Speaker 2: It's what can be so problematic about four your terms
13:07
is that you can try to just drag your feet
13:09
and ultimately no politician wants to make spending cuts because
13:12
those are not popular at all. And from a commerce perspective,
13:15
you're in the same boat. You just want to get
13:17
re elected to the next term. But it just makes
13:21
me upset oftentimes that no one has the fiscal discipline
13:24
to step in and make painful decisions.
13:26
Speaker 3: I hate this commission. We just elected these people because
13:28
they told us they would take action. Now they tell
13:30
us they're punting it to a committee that'll come back
13:33
in two years. Unacceptable.
13:35
Speaker 2: Don't you think we're going to take a break here
13:37
on the Financial Exchange, But when we come back, or
13:40
when we talking a little bit more about inflation and
13:43
particularly the impact on the vehicle on a loan market
13:47
right after this break.
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Speaker 2: All right time for trivia.
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Speaker 4: Here on the Financial Exchange we we're giving away a
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Financial Exchange Show T shirt on this day. In nineteen
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ninety five, the seventeenth James Bond film, GoldenEye, premiered in
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theaters across the country. GoldenEye was the first James Bond
14:31
film to feature Pierce Brosnan as the famed secret agent.
14:36
Trivy questions today, how many actors have Portrade James Bond
14:40
in a movie? Once again, how many actors have Portrade
14:43
James Bond in a movie? Be the third person today
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to texts us at six one seven three six two
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correct response will be our winner by texting six one
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seven three six two three teen eighty five. See complete
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contest rules at Financial Exchange Show dot com.
15:05
Speaker 2: Title of a piece here from market Watch cars We're
15:08
once a financial engine of America's middle class. Now they
15:11
are quote unquote a wealth killer. What we've seen over
15:14
the course of the last couple years with all the
15:17
inflation impacts. Is the average cost for a new vehicle
15:21
as of September sits around forty seven thousand or forty
15:25
eight thousand dollars, depending on where you look. Now, used cars,
15:29
according to Edmunds, are coming in around twenty seven thousand
15:33
to purchase them, and now the average car monthly payment
15:36
sits at about seven hundred bucks, and one in five
15:40
car payments are over one thousand dollars. This is a
15:44
commentary on the fact that, hey, cars are a pretty
15:48
significant portion of American's budget. I was actually surprised it
15:51
was quote to here that seventeen percent of household spending
15:55
goes towards cars. Obviously, the biggest expense is housing coming
15:59
in third, but second two housing was vehicle spending at
16:04
seventeen percent. That should come down a little bit mark here,
16:08
as it seems as if the inventories for vehicles are
16:11
at a much better level than they were in twenty
16:14
twenty two, where they're forty percent off inventory levels. But
16:18
certainly it is an area between interest rates going up
16:21
and the increase in car prices that that monthly payment's
16:24
a lot higher for folks out there.
16:26
Speaker 3: Yeah, the interest payments so it's prices have actually moderated
16:33
price increases on new I just looked this up. I'm
16:36
not an expert, but a CPI Consumer Price IndX, which
16:40
we talked about earlier today a couple of times they
16:42
have a sub index. It measures new car prices, and
16:46
new car prices after skyrocketing. You all know this year
16:49
over year ten twelve percent for a couple of years there,
16:51
they've finally started to disinflate, which is interesting. I did
16:54
not know that. But year over year, as of the
16:57
most recent read today, new car prices are down a
16:59
little over a percent, but rates are much higher than
17:01
they were in say, twenty twenty two. So interest the
17:04
interest portion of your typical payment. And I'm just gonna
17:08
oversimplify here and use a very generic example of a
17:12
sixty month loan, using again the Federal Reserve Database information
17:17
on loan rates. Interest payments could be sixty percent, sixty
17:20
percentage points, but sixty percent higher. So for every dollar
17:23
in interest a month you're paying, it's now a dollar
17:25
sixty So I guess the killer is the massive jump
17:28
that we experience, like with many items post COVID, plus
17:32
the financing rates. I'm not telling you anything you don't
17:33
already know, but that that is quite a steep increase
17:37
and has pushed new cars even for the relatively wealthy.
17:40
There's been a lot of story I have you noticed that,
17:41
a lot of stories over the past week about people
17:43
who would we would consider wealthy, who buy high end cars,
17:46
who can't afford you anymore or refuse to pay the
17:50
thousands of dollars in interest payments a year that would
17:53
be required to afford No.
17:54
Speaker 2: No, I'm in a market for a new vehicle and
17:57
looking at some of the new vehicle costs. I mean, granted,
18:00
I'm looking at minivan. My wife vetoed the minivan, but
18:06
the Chevy, the Chevy Suburban is what I've been scrutinizing,
18:09
and a new one of those, and granted, I get it,
18:12
the thing's an absolute bus, but there's they're so staggering
18:16
that I just really can't justify the monthly spend that
18:20
goes with purchasing a new vehicle for what is a
18:23
depreciating asset. Yeah. I just feel like there should be
18:27
a swell of demand towards used car prices, and perhaps
18:30
that's reflected a little bit from some of the CPI
18:33
data that we had. It's just it's hard to stomach
18:35
looking at new cars that in this case for the suburbans,
18:39
it's you know, seventy five eighty K you're talking for
18:43
a new one of those, So it's it's staggering here.
18:46
I want to touch on something real quick. Actually, maybe
18:49
we'll we'll cover this a little bit after the break.
18:51
We had a listener Texan who was stating that Mark
18:56
and I are missing the point regarding the Government Efficiency
19:00
Committee that we spoke about before in terms of its
19:04
impact and what its focus is. So what we're gonna
19:07
do here is we're gonna come up here on a
19:09
quick break. But when we do come back, Mark and
19:12
I will respond to that text from the listener and
19:14
dive in a little bit more on the Government Efficiency
19:17
Committee that was put together with Elon la Musk and
19:21
Vivek Raswami. That was announced yesterday, So we're gonna cover
19:24
that right after this break.
19:40
Speaker 5: Bringing the latest financial news straight to your radio. Every day,
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Speaker 1: This is the Financial Exchange Radio Network.
20:07
Speaker 4: All Right, trivia question today was how many actors have
20:11
portray James Bond in a movie? That would be seven,
20:15
starting with Sean Connery nineteen sixty two. Seven actors have
20:18
portray James Bond, including the often forgotten Casino Royale in
20:23
nineteen sixty seven, which starred David David Nevin Nivin. I
20:28
don't know, never heard of him. Wayne from West Haven,
20:31
Connecticut is our winner today, taking home a Financial Exchange
20:35
Show T shirt. Congrats there, and we played trivia every
20:39
day here on the Financial Exchange See complete contest rules
20:44
at Financial Exchange Show dot com.
20:45
Speaker 3: Ever heard of David nine Nivinvin? I think it is
20:49
actually mispronounced.
20:50
Speaker 1: Yeah, yeah, no, I never heard of them.
20:52
Speaker 3: Hey guys, yeah, Paul's no way you have either, right,
20:55
no chance?
20:55
Speaker 2: Zero chance? Okay, no chance. So, as I mentioned before
20:59
the break, we had a listener email into us pushing
21:02
back on some commentary that Mark and I had surrounding
21:06
the Government Efficiency Committee that was put together yesterday by
21:10
President Trump appointing or I don't know if it's there's
21:14
a formal appointment, but tagging let's waited it at a
21:17
job done. Elon Musk and Vivek, I'm spending as part
21:22
of this committee to focus on cutting back some government inefficiencies.
21:28
And so the listener here says that we are way
21:30
off the point that the commission is to expose and
21:33
cut government waste within the government, getting rid of programs, earmarks,
21:37
and employees, fattening government spending. It is intended to is
21:42
not intended to address cutting social promans and budgets that
21:46
must still go through Congress fully in agreement there of course,
21:49
we agree that it has to go through Congress. That's
21:51
the way things work. The point that I was making
21:53
before is that if we're looking at cutting in efficiencies
21:57
and things like that, the federal spend was six point
22:00
seventy five trillion over the last fiscal year. We are
22:04
running at a deficit currently that sits close to two
22:07
trillion dollars in terms of our country, what we take
22:10
in revenue versus what is spent, there's a deficit about
22:13
two trillion.
22:14
Speaker 3: There.
22:15
Speaker 2: I made the point about social programs because if you
22:17
look at that six point seventy five trillion of spending,
22:20
five point three trillion of it, according to a piece
22:23
done in Bloomberg today, covers social security, Medicare and military
22:28
expenses and coverage for vets. So five point three trillion
22:33
of the six point seventy five is spoken for pretty much.
22:36
You're not gonna see cuts to that, So that leaves
22:40
about a trillion and a half of other expenses out there,
22:44
spread across other departments. The idea that substantial cuts are
22:47
going to be made from this initiative, to me, is
22:50
extremely unlikely. And that's the point I was making.
22:52
Speaker 3: That's one angle the point I was making. And Laurie,
22:56
thank you for the text. And she's right. There's a
23:00
broad mandate associated with this what is it commission? He's
23:04
calling himself a department. This is all out there in cyberspace.
23:07
None of this actually exists. Presumably Congress would have to
23:10
create it. The President can't just conjure up.
23:12
Speaker 2: It's like a special task force that Dwight has from
23:14
the office.
23:16
Speaker 3: That's what it feels like to me. So, Laurie, my
23:18
point here is that part of their remit is to
23:21
cut spending. He is going to use this. Paul made
23:25
the point in the last hour, in the last segment
23:27
that spending cuts are tough. Nobody wants to do them.
23:29
Not since Gingrich Clinton have. We had a coherent, determined
23:35
effort to cut spending and it ended in surpluses in
23:38
the two thousands, and we're starting from a much bigger
23:40
hole now. My point on this, Laurie, is that they
23:42
will use this politician's will to punt on this issue.
23:45
When Trump is pressed for where are you going to
23:47
cut spending, mister President, just say we're going to wait
23:48
for the commission. We're going to wait for Elon. Elon's
23:51
gonna do it. He thinks he solved. It's just his
23:54
nature as a showman. He snapped his fingers, tweeted it.
23:57
Elon retweeted it, and they think the problem is or
24:00
a solution is underweight. It's not to your point and
24:03
your text, Lori, Congress has to act. By the time
24:05
they get a hold of this, it's going to be
24:07
twenty twenty seven. They're not going to do anything before
24:10
then because they've got a wait for Elon's commission. I
24:13
think this does exactly the opposite of holding Congress's feet
24:16
to the fire. I think it makes them hesitant, possibly
24:20
to offer their own suggestions out of fear of subverting
24:24
what the president of what the president elects seems to
24:26
be putting into place muddies the waters and is effectively
24:30
a cop out.
24:32
Speaker 2: Another separating from that piece there regarding the Efficiency Committee,
24:36
another thing that we haven't covered in this show in
24:39
regards to tariff which tariffs, which has been a really
24:42
popular subject of discussion, is potentially retaliatory efforts from a
24:48
lot of these other countries here. And there's a piece
24:50
in the New York Times where Mexico signals that it
24:53
could hit back at the United States with terrafts of
24:55
its own. If I quote here from Marcelo E. Brad,
25:00
the Mexico's economy minister, in a radio interview from Monday,
25:03
if you put twenty five percent tariffs on me, I
25:05
have to react with tariffs. Structurally, we have the conditions
25:09
to play in Mexican's favor, he added. So that's something
25:12
that does need to be considered here as well, that
25:14
often there can be retaliatory tariffs when you start these initiatives,
25:18
and it's just something to think about when we have
25:20
these discussions.
25:21
Speaker 3: Yeah, it's called a trade war. It's the international economists
25:27
who study this. Economists who specialize international economics, I should say,
25:33
they're sort of playful phrase for this is tit for tat.
25:37
You don't the knock on effects of tariffs. We talked
25:41
about the domestic effects in the last hour, higher prices,
25:45
inferior quality over time because you're coddling certain industries, and
25:50
the fact that these tariffs are supposed to be temporary,
25:52
at least in theory, they never actually go away. Because
25:55
now the private sector reorients itself. It starts to another
25:58
economics term for you, rent to seek, which means devote
26:02
resources not to growing the economic pie, but to getting
26:04
a bigger share of it. It's called rent seeking. It's
26:07
a kind of useful term. Everybody's going to be rent
26:09
seeking now. Oh, mister president, please give give us an exception.
26:12
Mister President, here's a campaign contribution. Oh, I'll buy some
26:15
of your DJT stock. Please give us an exception. Not
26:18
alleging illegal activity, but there's the temptation to do that.
26:22
You almost have to as a business person. So you
26:23
get all this rent seeking domestically, which weighs on growth,
26:27
and then the retaliatory tariffs, which further pushes up prices
26:32
and has a knock on effects of its own. It
26:35
doesn't end in a good way. They never have trade wars.
26:38
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27:42
Speaker 2: One of the areas that has been relatively sluggish is
27:48
the housing market across the United States, and what we've
27:50
seen recently here is the average thirty year fixed rate
27:54
mortgage on conforming loan balances of seven hundred and sixty
27:57
six k or less had inc slightly to six point
28:02
eight percent eighty six percent from six point eight one percent.
28:05
I think I'm looking at a chart the other day.
28:07
It hit its recent low in September around six point
28:11
one percent, but now those thirty year fixed mortgage rates
28:14
still sit at close to seven percent. Application demand for
28:19
mortgages out there over the course of the last week
28:22
was relatively flat. A lot of people are presumed to
28:26
be sort of waiting out what the new presidency will
28:29
look like and its impact on rates going forward. The
28:32
US ten year treasury had spiked quite a bit after
28:35
the news of President Trunk winning the election, where it
28:39
had increased about sixteen or seventeen basis points and now
28:43
sits at about four point four one percent. So be
28:47
interesting to see what type of impact it has here
28:51
on mortgage applications, But for right now, not a tremendous
28:53
amount of growth.
28:54
Speaker 3: So in year one, if they cut we have to
28:55
break or anything here. Could you go radio amateur? Sorry?
29:00
If they cut taxes but not spending in year one,
29:02
If they impost tariffs in year one. I hate to
29:04
keep coming back to this, but it's all that's on
29:06
anybody's mind for the next several months. I would assume interesting,
29:08
oh SSEQUL rates probably go up unless the economy really slows.
29:12
It's always an all else equal proposition, and you always
29:15
run into trouble when you say, well, this is going
29:17
to cause that because you're not You're not accounting for
29:19
other variables which can change. But all those equal rates
29:22
should go up, making housing and cars more expensive. In
29:27
addition to the knock on effects of tariffs that we
29:29
talked about, which would presumably affect things like washing machines,
29:31
as they did in twenty seventeen, huge tariffs on washing
29:34
machines in twenty seventy to.
29:35
Speaker 2: The place right, right and good, and the impact of
29:39
that was higher prices actually for domestic washing machines. In
29:41
a study that they found similar to what you mentioned
29:43
before is you can kind of be more aggressive from
29:46
a pricing perspective when you're the only game in town.
29:48
Speaker 3: Domestically, you gotta wonder do people take action in anticipation
29:52
of these tariffs? Do they? I know some companies are
29:54
already saying we are stocking up on parts. I'll just
29:58
call them parts and anticipation. How widespread is that? Does
30:02
that boost Chucksada ask this question. I thought it was
30:04
a good ones that boost economic activity in the short term,
30:07
but you're just pulling it forward. These big policy changes
30:11
have all kinds of direct and foreseeable and less direct
30:16
and more subtle effects, which is why forecasting is. It's
30:20
always tricky. But it's really hard right now.
30:22
Speaker 2: Particularly just to close out the mortgage piece here. That
30:25
is an area where on interest rates, it is just
30:29
an impossible game to play to project you know where
30:32
long term interest rates are going to go. And in particular,
30:34
I do want to highlight longer term ones here. When
30:36
you're looking at the thirty year fixed mortgage that is
30:39
pretty well tethered to the US tenure Treasury will Mark
30:42
and I speak about the Federal Reserve and cutting interest rates,
30:45
that's on the shorter end of the curve. Many people
30:47
in this country have thirty year fixed mortgages. There are
30:50
fewer that operate under variable rates which are more heavily
30:53
tied to what you see from the Federal Reserve and
30:56
it's overnight lending rate there. So we're going to take
30:59
a quick break here on the Financial Exchange, but when
31:02
we come back, we'll be doing a little bit of
31:04
stock roulette. That's right after this.
31:07
Speaker 1: Fine daily interviews and full shows of the Financial Exchange
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Speaker 4: The Financial Exchange wants to thank all of you took
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32:24
Speaker 2: All right, it's time for a little bit of stock
32:27
thro roulette. Mark. I'll let you bat lead off here.
32:30
Speaker 3: If you've ever lost luggage, you know that can be
32:33
mind numbingly frustrating and perplexing, like where did it go?
32:36
Why did I tag it? How in the world did
32:39
it end up on another flight? There's a possible solution,
32:45
and you probably would have thought of this. It's amazing
32:47
that airlines took so long to catch on Apple air
32:51
tag data. Currently, it's unique to your tag in your phone,
32:58
but they will allow you to share it, and they
33:01
will allow you to share it, more importantly with airlines,
33:05
which could solve the problem of down what sort of
33:07
magic hole did your luggage go?
33:10
Speaker 2: So you could tag this air You gotta have the
33:14
air tag, you stick it on your your phone.
33:16
Speaker 4: How do you share it with the airline? Though that
33:18
doesn't make sense.
33:20
Speaker 3: Apparently you can share the location just like you can
33:22
your own party. You can share the air tag data.
33:25
I'm sorry didn't explain that way.
33:26
Speaker 2: You got it? Got it?
33:27
Speaker 3: You could share the airline or you will be able
33:29
to when things get up and running and when they
33:32
update their software to accommodate this.
33:34
Speaker 2: I think that frequent travelers were doing this practice on
33:38
their own, but the sharing piece is probably the new
33:40
wrinkle here.
33:41
Speaker 3: That's the missing link of airlines.
33:43
Speaker 2: Let us it's you know you and you and I
33:45
put the air tag on it. We can see where
33:47
it's going. But the airline being able to have that
33:49
data be shared with them seamlessly is not something.
33:53
Speaker 3: Don't they know the plane is heavier than it should be?
33:55
I mean they weigh everything, they know what the plane ways.
33:58
They I guess where the variable. They don't how much
34:00
we weigh. Maybe they're more sophisticated ways of determining whether
34:03
something is or is not on a plane that should be.
34:04
But you would think they would have come up with this.
34:07
Speaker 4: According to a twenty twenty three at air Travel consumer
34:10
report by the Department of Transportation, more than two point
34:14
six million pieces of luggage were mishandled by airlines two
34:18
point six million.
34:21
Speaker 2: I wonder how much luggage moves through on a yearly basis, though,
34:24
to give them, to give them a fair shake, because
34:28
I mean at TSA checkpoints, I think the record is
34:30
a couple million, three million? Maybe might be the record
34:34
a day you have movement of people moving. I'm I
34:37
may need to be fact check Tucker on that, you know,
34:39
just from the Department of Transportation. No, No, what the
34:42
hell do you want for me? No, I'm one. I'm
34:45
just saying, is two point six million a lot? We
34:47
don't know relative to the size?
34:49
Speaker 4: Is what is mishandled? Does that just mean lost or
34:52
does that mean you messed up my luggage and it's destroyed.
34:55
I don't know what that means.
34:56
Speaker 2: Yeah, that those are two very different consequence.
35:00
Speaker 3: Either way, Presumably the incidence of permanently lost luggage will
35:03
shrink providing you have air tags or something like it.
35:07
Speaker 2: The resolution you think would be found a lot quicker
35:10
with the.
35:11
Speaker 3: Share the air tech technology is hardly new.
35:14
Speaker 2: Right right, similar along the lines of airlines. And I
35:18
do want to give a quick shout out to a
35:22
listener who had texted in regarding my car problem, mentioning
35:25
the Hyundai Palisade instead of the Chevy Suburban. Unfortunately, I
35:30
have three kids that are under the age of four,
35:31
so I'm stuck getting the biggest car in the market,
35:33
and the Hyundai Palacid Palisade is a mid size suv.
35:37
Speaker 4: Unfortunately I got to go a third row seat though, yeah,
35:41
like that's too small.
35:43
Speaker 2: We have the Chevy Traverse right now. But you basically
35:46
eliminate all of your trunk space when you put up
35:48
that third row, and when you have strollers and stuff.
35:51
That's where you get into like the minivan and like
35:54
suburban ranges because we have a third row right now,
35:57
but it just eliminates all your trunk space. Anyway, that's
35:59
enough about Paul's car troubles. Speaking of airlines, though, mark
36:04
Spirit Airline moves towards bankruptcy after it's filing recent most
36:09
recent filing where it looks like this is going to
36:12
occur within the next week or two. Famously, they had
36:15
a merger schedule with Frontier. This was back in twenty
36:18
twenty two. I forgot that it's been this long since
36:21
they were set to merge. But then what happened. Jet
36:24
Blue jumped in with a higher offer they won Spirit
36:27
investors over. However, in January, a federal judge barred Jet
36:31
Blue from acquiring Spirit, ruling that the deal would be
36:34
detrimental to competition. So this now means that, let's.
36:37
Speaker 3: Just said put everybody out of work. That's brilliant, that's
36:40
not Actually this is going to happen.
36:41
Speaker 2: This now means that Spirit is going to have to
36:43
go through some form of restructuring. Like I said, they
36:46
haven't formally announced the bankruptcy yet. However, their stock is
36:50
down to it was a dollar share in after hours
36:54
trading and down substantially of course as of open market today.
36:58
But they had reflected about sixty one million dollars lower
37:03
in revenue on their recent quarter report. So it'll be
37:05
interesting to see what happens on the restructuring front. And
37:08
I'd be a little bit concerned with any Spirit Airlines
37:11
flights that I had over the course of the next
37:13
couple of months. I don't have any personally, but you
37:15
might be a little bit wary of booking any flights
37:17
on Spirit just yet until.
37:19
Speaker 3: Because the services potentially.
37:21
Speaker 2: Yes, as they shake through all this. But you know,
37:24
I don't think that Jet Blue merger would have made
37:26
the most sense. The airline game is, man, that's a
37:28
brutal business, just an absolutely brutal business. So it'll be
37:31
interesting to see who steps in to bail Spirit out,
37:35
because I would imagine that they will operate in some way,
37:38
shape or form. Taking a look around at markets, we've
37:41
got the Dow Jones up about one hundred eighty points
37:44
are close to a half percent, the S and P
37:46
five hundred almost up about a quarter of a percent,
37:48
and the Russell two thousand up about two thirds of
37:52
a percent. The US ten year Treasury sits pretty flat
37:55
at four point four to two percent, and we've got
37:58
West Texas Intermediate it's sitting around sixty eight dollars a barrel.
38:04
It's all the time that we have for today's episode
38:06
of the Financial Exchange, but we'll be back at it
38:08
tomorrow morning at ten am. Thanks so much for joining us,
38:11
and have a great rest of day.