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Would you pay higher taxes to save Social Security? · The Financial Exchange Show

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Speaker 2: Good morning and welcome back to the Financial Exchange. Hope
1:14
Speaker 2: everybody had a nice Super Bowl Sunday, even though game
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Speaker 2: was a little bit one sided if you will, but
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Speaker 2: you know, one sided against a team like Kansas City.
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Speaker 2: I feel like a lot of people can get get behind.
1:26
Speaker 2: So I hope everybody had a nice Sunday. Taking a
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Speaker 2: look at our top story the day would be Trump
1:33
Speaker 2: announced tariffs on steel and aluminum important from overseas, looking
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Speaker 2: at a potential twenty five percent tariffs on any country
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Speaker 2: sending steel and aluminum into the United States. This follows
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Speaker 2: lots of news around the steel industry. If you recall,
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Speaker 2: nip on Steel out of Japan was attempting to acquire
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Speaker 2: US steal that was rejected by the Biden administration and
1:55
Speaker 2: announced that the Trump campaign would also have rejected such
1:58
Speaker 2: a deal. But it faces well and markets, by the way,
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Speaker 2: either completely unconcerned about new tariffs on aluminum or steel
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Speaker 2: or not really buying that they are likely to happen.
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Speaker 2: Because Dow, SMP, and NASDAC all strongly in positive territory,
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Speaker 2: with the NASDAK leading the way this morning, it is
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Speaker 2: fair to say that there have been plenty of experiences
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Speaker 2: in the United States with tariffs on steel and aluminum.
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Speaker 2: This has been a frequented item to face trade sanctions
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Speaker 2: in tariffs over the course of the last several decades,
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Speaker 2: and we will see where it goes into place. Already
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Speaker 2: the United States has in place tariffs on Chinese made
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Speaker 2: aluminum and steel products. Many other countries have followed suit
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Speaker 2: in that regard, And if I'm just purely conjectured, you know,
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Speaker 2: pure conjecture on how this might not go into tariffs
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Speaker 2: would be, or how these tariffs might not actually go
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Speaker 2: into fact would be. Hey, any country that imposes tariffs
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Speaker 2: on Chinese made steel and aluminum will waive it on yours.
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Speaker 2: I wouldn't be surprised if that's the quote deal that
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Speaker 2: gets announced, even though many countries across the globe already
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Speaker 2: have import tariffs on Chinese made steel.
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Speaker 3: So I don't know. Maybe this is a serious one.
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Speaker 2: Maybe it's not going to be the one that breaks
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Speaker 2: the US economy, because again, we've dealt with foreign tariffs
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Speaker 2: on steel limited products before and it hasn't been a
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Speaker 2: big change to things. But the piece that we've been
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Speaker 2: lamenting about this is just I don't know the purpose
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Speaker 2: of the tariffs. Is it to protect the US steel industry,
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Speaker 2: is it to punish China? Is it to raise revenue?
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Speaker 2: It would be a lot easier to cover and invest
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Speaker 2: based on this if we had a sense for the
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Speaker 2: purpose of the actual levies. But time will tell. We
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Speaker 2: will see if these do in fact go into place,
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Speaker 2: and if so, for how long? Anything else to add
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Speaker 2: on tariffs?
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Speaker 3: This morning, mark because I think we can move on. Otherwise,
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Speaker 3: let's move on.
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Speaker 2: Americans would pay higher taxes to save social Security. That
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Speaker 2: is based on a number of surveys that we have
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Speaker 2: seen over the course of the last year. Trust fund
4:00
Speaker 2: is set up to fill a shortfall between when the
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Speaker 2: government takes in for Social Security and what it pays out.
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Speaker 2: That is due to run out of money. The trust
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Speaker 2: Fund is due to run out of money now in
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Speaker 2: twenty thirty five, just a decade away, could be sooner
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Speaker 2: depending on what happens with taxes, because remember, this administration
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Speaker 2: wants to waive all taxes on Social Security benefits which
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Speaker 2: go directly to the Trust fund. Nonetheless, twenty thirty five
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Speaker 2: is the date that runs out and continues to seem
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Speaker 2: to be the third rail of politics, and so I
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Speaker 2: will be very curious to see how it is dealt with,
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Speaker 2: because I don't think that any politician can cut benefits
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Speaker 2: for at least for older Americans and have any success
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Speaker 2: in running for office.
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Speaker 3: Ever.
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Speaker 4: Now, I don't know why they always raise the specter
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Speaker 4: of that. It's not like it's ever happened, and I'm
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Speaker 4: not being sarcastic. It hasn't. Reforms have always consisted of
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Speaker 4: higher taxes or changes in the retirement age or other
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Speaker 4: actuarial Yeah.
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Speaker 2: You know, there's a number of different ways to skin
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Speaker 2: the cat though, And what I would point out is
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Speaker 2: that while benefits, you're right, have never actually been reduced
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Speaker 2: current taxation taxation of benefits. Under the Reagan administration, the
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Speaker 2: benefits were not taxed. And then in order to you know,
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Speaker 2: raise reglue, they said, hex Street, different question, We're going
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Speaker 2: to raise taxes on Social Security. So could you right now,
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Speaker 2: just if you're not aware, up to eighty five percent
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Speaker 2: of your benefit is taxable under the current scheme for
5:27
Speaker 2: Social Security, so there is always a portion that's not taxable.
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Speaker 2: Could you say, okay, going forward, up to one hundred
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Speaker 2: percent of your Social Security benefit is taxable. Yes, that
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Speaker 2: is a solution or a you know, possible item that
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Speaker 2: is probably on the table for lawmakers that are going
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Speaker 2: to have to figure this out. My point would merely be,
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Speaker 2: while this is the stupid, dumbest way to deal with this,
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Speaker 2: I don't think this gets dealt with prior to twenty
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Speaker 2: thirty five or prior to whenever the trust Fund runs out.
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Speaker 2: I don't think it is an issue that is dealt
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Speaker 2: with under the Trump administration because it is such a
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Speaker 2: third rail that any are going to be unpopular.
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Speaker 4: He has no interest. It's not something you ever talked about.
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Speaker 2: So, yeah, it has not come up You're right as
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Speaker 2: an item that he campaigned on of hey, I'm going
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Speaker 2: to be the one that solves the social Security problem.
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Speaker 3: In fact, his solutions would make it worse, make it worse.
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Speaker 4: His strategy is the Ostrich strategy. Head on the ground,
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Speaker 4: it's not a problem. It's just deny that it's an issue.
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Speaker 2: The problem with fixing Social Security is that there simply.
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Speaker 3: Isn't a simple solution.
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Speaker 2: Everyone has proposed different solutions out there, but I think
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Speaker 2: it's frequently, it is frequently overestimated how easy it would
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Speaker 2: be to fix this. Yeah, I feel like people are actuarily,
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Speaker 2: you know, like the solutions that I hear harder.
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Speaker 4: Than extending the retirement age, raising the retirement age, and
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Speaker 4: maybe tweaking taxation of benefits.
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Speaker 2: So the uh, is it harder than that, chief actuary?
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Speaker 2: Or let's see, who was it that put this together?
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Speaker 2: Somebody with experience in the socialecurity administration put together a
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Speaker 2: number of different items that would go and attempt to
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Speaker 2: fix this problem, and just to give you a sense
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Speaker 2: for them, they are not insignificant. So first off, he
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Speaker 2: proposed increasing taxable wage base slowly to about three hundred
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Speaker 2: thousand dollars from the current cap of where it is now.
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Speaker 2: That would account for about nineteen percent of the solution.
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Speaker 2: Increasing payroll tax would account for another five tax all
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Speaker 2: benefits for all individuals with one hundred thousand dollars of income,
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Speaker 2: that would be another solution that would only make up
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Speaker 2: a small portion cutting benefits. You'd have to increase the
7:35
Speaker 2: full retirement age for the top forty percent of earners.
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Speaker 3: Is this individual's solution? Increase the average period?
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Speaker 2: So the averaging period is how many years of Social
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Speaker 2: Security you have to pay into in order to get
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Speaker 2: full benefits. It's currently at thirty five years, you'd have
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Speaker 2: to bump it up to forty years. You'd have to
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Speaker 2: entirely eliminate dependent spouse benefits, so you know, your husband
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Speaker 2: doesn't work in the workforce, instead raises your kids. He
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Speaker 2: used to get a Social Security benefit, he no longer
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Speaker 2: would be placing all proceeds from taxing Social Security benefits
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Speaker 2: into the soci Security Trust Fund. So part of this
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Speaker 2: person's solution is saying we're going to rob Medicare in
8:17
Speaker 2: order to fund social Security because right now, proceeds from
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Speaker 2: taxing soci Security benefits get split up between Medicare and
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Speaker 2: Social Security, and he's saying, well, we're going to take
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Speaker 2: that from the Medicare bucket and instead fill the Social
8:28
Speaker 2: Security bucket. My point is that, yes, it is, you know,
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Speaker 2: fairly simple. Raise the benefit age, tax benefits more, tax
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Speaker 2: income more, and you will fix the problem. But I
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Speaker 2: don't think people realize just how significant that might be.
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Speaker 2: You might have to raise the retirement age pretty significantly
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Speaker 2: in order to make this work. You might need to
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Speaker 2: increase the taxation of income pretty considerably in order to
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Speaker 2: make it all work.
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Speaker 3: And the sooner less pain.
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Speaker 2: You know, that is exactly my point the dumbest solution
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Speaker 2: that you could have would be kicking this year.
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Speaker 4: You wait, the penalty gets more severe, exactly.
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Speaker 2: And you know, just if you're thinking about refilling this bucket, right,
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Speaker 2: if you start refilling the bucket in twenty thirty four,
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Speaker 2: you're going to need to refill it at a much
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Speaker 2: faster pace.
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Speaker 3: Than you would by doing it now.
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Speaker 2: But again, because it's such a third rail, I don't
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Speaker 2: think it gets dealt with. And frankly, if I'm going
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Speaker 2: to give my opinion, I don't think the actual actuarial
9:23
Speaker 2: problem ever actually gets dealt with. My opinion would be
9:27
Speaker 2: they don't solve the issue. They just change the rules.
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Speaker 2: And what I mean by that is they'll just say, Okay,
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Speaker 2: it used to be by law social Security could only
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Speaker 2: be paid out of taxation and the trust fund. They'll say,
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Speaker 2: now just put it into the general account and will
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Speaker 2: borrow money to pay the Social Security benefits, just like
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Speaker 2: we do everything else, which is the dumbest solution. Then
9:49
Speaker 2: you're just talking about adding to the deficit. Then you're
9:51
Speaker 2: talking about not really fixing a true demographic problem that
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Speaker 2: we have in this country. But what about anyone's experience
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Speaker 2: with lawmakers thinks that they are actually going to deal
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Speaker 2: with the responsible wave, you know, fixing a fiscal problem.
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Speaker 2: That'd be my takeaway quick break when we come back,
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Speaker 2: going to do a little bit of trivia for you
10:15
Speaker 2: next on the Financial Exchange. Then I talk about everyone's
10:18
Speaker 2: favorite fast food restaurant and their declining sales that they
10:22
Speaker 2: saw in the most recent quarter.
10:23
Speaker 3: We'll be right back with that next.
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Speaker 5: Sam for trivia here on the Financial Exchange. Last night,
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11:55
Speaker 2: Mark McDonald's one of those rare companies that reported on
11:58
Speaker 2: a Monday. This morning before the bell, stock is up
12:01
Speaker 2: over four percent, nearly five percent in early trading so far.
12:04
Speaker 2: We'll have Coca Cola reporting tomorrow, another big global company
12:08
Speaker 2: with lots of sales overseas.
12:09
Speaker 3: What what do investors seem to be happy about? What
12:11
Speaker 3: did they actually tell us in terms of their business
12:14
Speaker 3: in the most recent.
12:14
Speaker 4: Honestly, I'm just reading up on it right now. What
12:18
Speaker 4: do they seem to be happy about? The French fries?
12:25
Speaker 2: Helpful us, James. Here's why it might be a little
12:29
Speaker 2: bit surprising.
12:31
Speaker 3: But you just were for investors, we were.
12:36
Speaker 4: Remarking, I'll through the usual breezy radio thing and pretend
12:39
Speaker 4: I know what I'm talking about.
12:40
Speaker 3: Thank you. We radio show.
12:42
Speaker 1: We were.
12:44
Speaker 3: We were not having conversation between just you and I
12:47
Speaker 3: right now. I'm not sure if.
12:48
Speaker 4: Dock price was I'm sorry, this is this is this
12:51
Speaker 4: is live, this is live. Yeah, stock price was up
12:53
Speaker 4: despite slightly sagging fourth quarter US sales, which is I
12:58
Speaker 4: understand it from the report this morning, is due to
13:01
Speaker 4: people spending less per visit makes so.
13:04
Speaker 3: Same store sales in the US down one point four percent.
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Speaker 4: So traffic okay, sales lower, therefore less per visit. McDonald's
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Speaker 4: attribute it attributes it to increasingly strapped low income consumers.
13:16
Speaker 4: We make up a disproportionate share of their sales. But
13:19
Speaker 4: at the same time, their store opening plans remain quite aggressive.
13:22
Speaker 4: Twenty two hundred new locations globally projected for this year.
13:25
Speaker 4: Six You said, you know a ton of this stuff,
13:28
Speaker 4: because I was just scanning it. You were, as you
13:31
Speaker 4: were bringing up the top, and I was just surprised
13:33
Speaker 4: at the feverish pace of expected to opening six hundred
13:37
Speaker 4: new outlets in the US, where people are upset at
13:39
Speaker 4: the results, Mike.
13:41
Speaker 2: The foreign sales did, by the way, make up for
13:44
Speaker 2: a lot of what you saw in the US. And
13:47
Speaker 2: the interesting thing about how McDonald's operates in the United States,
13:50
Speaker 2: most of their stores are franchises, so they have a
13:54
Speaker 2: business model that works here in the US. Overseas, they
13:57
Speaker 2: really don't do as much franchising. They are largely corporate
14:00
Speaker 2: owned locations overseas, and so when those sales do well,
14:03
Speaker 2: it can go further to the bottom line. The problem,
14:06
Speaker 2: obviously with overseas sales is when the dollar does as
14:09
Speaker 2: well as it has, you've got to take those sales
14:12
Speaker 2: in euros or Canadian dollars and then translate them back
14:15
Speaker 2: into US dollars, which doesn't look quite as good. But nonetheless,
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Speaker 2: I think I don't know. My takeaway for the day
14:21
Speaker 2: would be investors basically giving them a check mark, saying, well,
14:27
Speaker 2: the currency problems that we're seeing right now might not
14:29
Speaker 2: last forever, and so long as you're not actually seeing
14:31
Speaker 2: sales decline globally, we don't.
14:34
Speaker 3: Have that much to worry about.
14:35
Speaker 2: It's also not a stock that has performed tremendously well
14:38
Speaker 2: over the course of the last year. The stock's only
14:40
Speaker 2: up about six and a half percent for the last
14:42
Speaker 2: twelve months, so I think generally investors asking some questions
14:46
Speaker 2: about the overall fast food business model. Generally, I don't
14:50
Speaker 2: think this is something new. You've seen a lot of
14:52
Speaker 2: inflation on those price points, and there's been a real
14:55
Speaker 2: narrowing of the gap between a fast food restaurant like this,
14:58
Speaker 2: like Chipotle, like Wendy's and others, compared to a sit
15:02
Speaker 2: down restaurant like TGI Friday's, who are suddenly able to
15:05
Speaker 2: offer a price point that looks pretty similar to fast food.
15:09
Speaker 4: Do you think people are over the e Coli outbreak?
15:11
Speaker 3: I'd forget.
15:12
Speaker 4: I certainly am they attribute part of the soft relatively four.
15:17
Speaker 3: Yes, it was October. Yeah, yeah, somebody died, right, I'm
15:22
Speaker 3: not sure about the lie. I think I think somebody
15:25
Speaker 3: died from this a Coli outbreak.
15:26
Speaker 2: You should confirm that, because I don't want to accuse
15:28
Speaker 2: a company of killing somebody without having some real.
15:31
Speaker 3: Yrrect I got it. Yeah, but yeah.
15:34
Speaker 2: Nonetheless, investors fairly happy with McDonald's sales, and I will
15:38
Speaker 2: admit I probably went like a decade without going to
15:42
Speaker 2: McDonald's or maybe visiting like once a year. Now that
15:45
Speaker 2: I have kids, man like, it is the easiest thing
15:48
Speaker 2: you can possibly do. It is the easiest meal that
15:51
Speaker 2: you can possibly supply your children. I recognize it's terrible
15:55
Speaker 2: for them, and I shouldn't do it frequently, But if
15:57
Speaker 2: you're on the road, I don't know.
15:59
Speaker 4: How terrible are nuggets if you don't have them every day?
16:02
Speaker 3: Everything in moderation, right, how terrible are times a week?
16:07
Speaker 4: There's not a ton of I've looked at the nutrition
16:09
Speaker 4: content of like the McChicken fair staple.
16:12
Speaker 3: I don't know, but here's my barometer. Just don't get
16:15
Speaker 3: the mayo, the the remember the old Maybe you didn't
16:18
Speaker 3: do this and I don't know third grade or whenever
16:20
Speaker 3: it was, but did you ever do the experiment of
16:23
Speaker 3: taking one of their items and just sticking it into
16:25
Speaker 3: a jar and seeing how mold fails to develop on
16:28
Speaker 3: it like any other real food nor.
16:32
Speaker 5: Yeah, it's the quality of the food and any fast
16:35
Speaker 5: food place again, Yeah, use.
16:37
Speaker 4: A lot of what preservatives? Y?
16:39
Speaker 1: Yeah?
16:40
Speaker 5: Okay, I avoid all.
16:41
Speaker 4: I would never waste food like that, Michael, that's a
16:43
Speaker 4: silly question to ask.
16:44
Speaker 3: Yeah, that's fair.
16:45
Speaker 4: I ever saw somebody do that with a McChicken, break
16:49
Speaker 4: the jar? Ruin the experiment?
16:51
Speaker 2: Thanks two months away. My experiment New York times. Why
16:56
Speaker 2: transferring credit card debt won't pay it off. I've got
16:59
Speaker 2: to for you. It's right in the title transferring credit
17:04
Speaker 2: card debt won't help pay it off. Yeah, because you
17:07
Speaker 2: are just moving it from one source to another. I
17:10
Speaker 2: get that this can be tempting. So credit card transfers effectively,
17:17
Speaker 2: what you'll see marketed all the time is transfer your
17:19
Speaker 2: balance over to this card twenty one months. We'll give
17:22
Speaker 2: you twenty one months no interest. There'll be a big
17:26
Speaker 2: old transfer fee of you know, one percent of the
17:29
Speaker 2: balance in some cases, but you won't have to pay interest.
17:32
Speaker 2: And so you put on those rose colored glasses and
17:34
Speaker 2: you say, well, I'm going to really change this year,
17:36
Speaker 2: and I'm going to pay off this debt. And if
17:38
Speaker 2: I do so, then this is a great deal. And
17:41
Speaker 2: you're right. You can do the math on this, and
17:43
Speaker 2: it is a good deal in a lot of cases
17:46
Speaker 2: if you're able to transfer a credit card balance over
17:50
Speaker 2: to another source and pay it off without interest, like absolutely.
17:55
Speaker 2: Prerequisite to doing that is you have to ask yourself,
17:58
Speaker 2: what has changed about my life that is actually going
18:01
Speaker 2: to allow me to behave in a way that was
18:03
Speaker 2: different from the course of the last several years. Because
18:06
Speaker 2: how many times I have seen people tell me that
18:09
Speaker 2: they are going to be disciplined over the next year
18:11
Speaker 2: and find ways to pay off that credit card without
18:14
Speaker 2: actually any means of doing so. I can tell you
18:19
Speaker 2: that I need both hands in, both feet in or
18:20
Speaker 2: to count it. So that is the piece that I
18:23
Speaker 2: am always suspicious about, and I got to I'm trying
18:27
Speaker 2: to think of like the lesson on credit cards that
18:29
Speaker 2: I'm trying to impart, but I think the big one
18:31
Speaker 2: is if I'm a parent, like for my kids, my
18:36
Speaker 2: parents when I was a teenager, said hey, you should
18:40
Speaker 2: get a you know, a credit card, you should start
18:42
Speaker 2: building your credit score. I do not intend on delivering
18:45
Speaker 2: that message to my own children. I don't think the
18:47
Speaker 2: credit score is worth the risk of credit cards from
18:51
Speaker 2: what I see to the general public, which is more
18:53
Speaker 2: than half of people cannot control their spending on credit
18:57
Speaker 2: cards and don't pay off their balance.
18:59
Speaker 3: It devast eight people.
19:00
Speaker 2: And I think that's the main lesson that I have
19:02
Speaker 2: for people that are coming into the financial universe right
19:05
Speaker 2: now is most people probably shouldn't use credit cards.
19:08
Speaker 4: And those who do have one and have a balance,
19:11
Speaker 4: like say RFK Junior of a million plus.
19:15
Speaker 3: Oh, what do you counsel?
19:17
Speaker 4: Just get paid down the highest interest rate debt you
19:19
Speaker 4: have as quickly as possible.
19:20
Speaker 3: Is that the Go listen to Dad round Advice, Go
19:23
Speaker 3: listen to Dave Ramsey. I guess if you're in that
19:24
Speaker 3: position like, that's sacrifice everything that you have that brings
19:28
Speaker 3: you pleasure to.
19:29
Speaker 2: Pay down that credit card, because otherwise it'll eat you alive.
19:32
Speaker 2: Quick Break, We'll have the trivia winner when we come back.
19:34
Speaker 2: And then Disney incredibly cost you to go on vacation.
19:39
Speaker 2: There just keeps going up. We'll talk about that next.
19:41
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19:45
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:51
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20:11
Speaker 5: Trivit Question Today was name one of the two artists
20:14
Speaker 5: to perform three times during the Big Games halftime show.
20:18
Speaker 5: I'll be Gloria Stepan and Justin. Timberlake and Steffond performed
20:22
Speaker 5: in nineteen ninety two, ninety five, and ninety nine, and
20:25
Speaker 5: Timberlake performed with in Sync in two thousand and one
20:28
Speaker 5: with Janet Jackson in two thousand and four in his
20:31
Speaker 5: solo act in twenty eighteen. Matt from South Yarmouth, Mass
20:36
Speaker 5: is our winner today taking home a Financial Exchange Show
20:40
Speaker 5: T shirt, and we played trivia every day here on
20:43
Speaker 5: the Financial Exchange. See complete contest rules at Financial Exchange
20:47
Speaker 5: Show dot com.
20:48
Speaker 2: Wall stret Journal reporting that even Disney's worried about the
20:50
Speaker 2: high cost of a Disney vacation.
20:54
Speaker 3: I've seen pieces like this before.
20:56
Speaker 2: Walstert Journal actually does a pretty good job if you're curious,
20:58
Speaker 2: breaking down all the costs. Here this first example, I'll
21:02
Speaker 2: just give you of a woman named Kindall who's a
21:08
Speaker 2: bank compliance officer in Delaware, and the stick of the
21:11
Speaker 2: shock that she had with her family. Two days of
21:14
Speaker 2: park tickets running eleven hundred dollars, passes that let them
21:17
Speaker 2: skip the line on popular rides two hundred eight dollars,
21:20
Speaker 2: a meal with costumed characters including Donald and Disney two
21:24
Speaker 2: hundred nineteen dollars, and two Mickey Mouse bubble wands running
21:27
Speaker 2: you sixty dollars and sixty eight cents. So doing the
21:30
Speaker 2: math there, you're up above fifteen hundred dollars before you
21:33
Speaker 2: pay for hotels at the at the Disney resorts here,
21:39
Speaker 2: and in her case, she came to about three thousand
21:42
Speaker 2: dollars for her family and two children. And you know,
21:47
Speaker 2: Disney obviously, you know, getting asked questions about the cost
21:51
Speaker 2: of their parks. But frankly, how do I put this.
21:57
Speaker 2: I actually think this.
21:58
Speaker 3: Is the right play for Disney.
22:00
Speaker 2: And this is I'm going to make a bigger statement
22:03
Speaker 2: about all this, which is, this is kind of the
22:06
Speaker 2: direction that most industries have been going over the course
22:10
Speaker 2: of the last several decades, which is, we are either
22:14
Speaker 2: going to cater to low income Americans with very inexpensive products,
22:21
Speaker 2: or we are going to cater to the wealthy. And
22:24
Speaker 2: Disney has, for better or worse, increasingly.
22:30
Speaker 5: Sorry, increasingly quoad cough, wow.
22:36
Speaker 2: Sorry, guys, increasingly Disney has become a product for the wealthy.
22:42
Speaker 2: It is not really They're not really going after a
22:45
Speaker 2: certain type of consumer anymore of saying that we are
22:47
Speaker 2: trying to appeal to somebody on a lower en.
22:49
Speaker 4: Yeah, drop the pretense, guys, You're a business.
22:52
Speaker 3: They are a business.
22:52
Speaker 2: And I think it speaks more largely to the fact
22:55
Speaker 2: that we've had a pretty big hollowing out of the
22:58
Speaker 2: middle class over the last several decades.
23:00
Speaker 3: So if you want to run a successful business, well.
23:03
Speaker 4: Good, Okay, people without a college degree have fallen behind.
23:08
Speaker 4: The real wages have gone virtually nowhere in thirty years.
23:11
Speaker 4: People in favored industries with college degrees have been doing
23:16
Speaker 4: very well. I just wanted to clarify. So depends, I guess,
23:21
Speaker 4: on how you define middle class. And I know I'm
23:24
Speaker 4: saying the obvious.
23:25
Speaker 2: Yep, it does, But I think this follows my point
23:29
Speaker 2: with This follows the trend that we see in many,
23:33
Speaker 2: many other industries, right, whether it's clothing and fashion items,
23:37
Speaker 2: whether it is you know, home furnishings or vacations, it's
23:43
Speaker 2: really being customized to hey, low price target and we're
23:47
Speaker 2: going to sell these at volume and do really well,
23:49
Speaker 2: or extremely high priced target and cater to the wealthiest
23:52
Speaker 2: Americans out there.
23:53
Speaker 4: Some of you might be old enough to remember that vacations,
23:56
Speaker 4: Ski vacations, Disney vacations, they were the domain of the
24:00
Speaker 4: wealthy yea up until maybe the nineteen eighties.
24:04
Speaker 2: Yeah, I was gonna say, when when did airfare become
24:06
Speaker 2: really affordable class? Yeah, And so I recognize that people
24:13
Speaker 2: are understandably frustrated by the cost of a Disney vacation.
24:18
Speaker 2: But let's be like anybody that hasn't been to Disney
24:21
Speaker 2: over the course of the last decade. This is a
24:24
Speaker 2: luxury vacation. They make it any stretch of the imagination
24:29
Speaker 2: like this is this is the highest of high end
24:32
Speaker 2: vacations you can have.
24:33
Speaker 4: But I think you're onto something and that this trend
24:35
Speaker 4: will continue. Businesses should probably drop the pretense that they're
24:38
Speaker 4: trying to be egalitarian. An exclusive vacation is a symbol
24:43
Speaker 4: of status, among other things, and it was for decades
24:46
Speaker 4: the preserve of the wealthy. I'm old enough to remember
24:49
Speaker 4: that when tripped to Disney was something the rich kids did,
24:52
Speaker 4: or ski trips or something the rich kids did, not
24:54
Speaker 4: something those of us who were middle class very comfortable.
24:56
Speaker 4: But middle class sure people were excluded from that for
25:00
Speaker 4: economic reasons, and it wasn't the end of the world.
25:03
Speaker 4: I'm not saying I like the increasing exclusivity of I'll
25:07
Speaker 4: just call them travel elaborate travel vacations, but that's the direction.
25:12
Speaker 3: It is the financial reality of it.
25:14
Speaker 2: And again, I don't know what Disney is supposed to
25:17
Speaker 2: do differently unless they are going to open up a
25:20
Speaker 2: separate experience that is catering to a.
25:23
Speaker 3: Lower want to go there, which nobody's going to want
25:25
Speaker 3: to go there.
25:26
Speaker 2: So I think they are like it or hated taking
25:30
Speaker 2: the right steps here because they are trying to create
25:33
Speaker 2: a truly once in a lifetime magical experience and it's
25:36
Speaker 2: going to cost a boatload of money. It's going to
25:38
Speaker 2: outpace inflation, and the customers that they want to cater
25:42
Speaker 2: to are more than willing to pay it. Which, again,
25:46
Speaker 2: like it or hate it, that's the economics of running
25:49
Speaker 2: a giant theme park that tries to make every experience magic.
25:54
Speaker 4: Because yeah, that's just it. They have to keep up
25:57
Speaker 4: with people's demand for something new in dazzling. You wouldn't
26:01
Speaker 4: go to Orlando wherever you're to ride a ferris wheel.
26:04
Speaker 3: You wouldn't go to Orlando in July to yeah, ride
26:07
Speaker 3: a ferris wheel.
26:08
Speaker 4: To go through It's a small world again, right, you
26:10
Speaker 4: need something new and exciting star wars here, these things, Yeah,
26:14
Speaker 4: they're so capital intensive, so we demand new, increasingly stimulating experiences.
26:21
Speaker 4: It probably shouldn't surprise us.
26:24
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28:19
Speaker 2: Good news, Trump Media and Technology wants to manage your
28:22
Speaker 2: investment portfolio. The company has filed for trademarks on a
28:27
Speaker 2: series of exchange traded funds and separately managed accounts. The
28:32
Speaker 2: financial products include the fund unclear. They include funds labeled
28:36
Speaker 2: Made in America and energy Independence and honestly no comment
28:40
Speaker 2: at this point in time. It's fairly easy to start
28:42
Speaker 2: up your own investment company and begun begin this stuff.
28:48
Speaker 3: Yeah, I'll keep it to myself now, Okay, fair enough.
28:51
Speaker 2: I have several comments, and I don't think this is
28:53
Speaker 2: terribly tasteful of a sitting president, which, to be clear
28:57
Speaker 2: comment he has no, he has no say in the
29:01
Speaker 2: running of Trump Technology right now. So I do dislike
29:08
Speaker 2: that piece of it. But I'm actually I want to
29:10
Speaker 2: approach this from a different standpoint, which is with the
29:16
Speaker 2: normalization of so many different investment quote products that are
29:21
Speaker 2: out there right Let's look at you know, the three X.
29:25
Speaker 2: There's one that came out just yesterday. It was two
29:28
Speaker 2: x ETF that was a leveraged investment on I think
29:33
Speaker 2: Trump Media and Technology stock itself.
29:35
Speaker 3: No, it wasn't. It was two times leveraged on the
29:37
Speaker 3: Trump cryptocurrency.
29:39
Speaker 4: Sounds like a good idea.
29:40
Speaker 3: And my point is not that I don't think.
29:44
Speaker 2: My point is I think you should be able to
29:47
Speaker 2: do this type of stuff. But the lines between what
29:51
Speaker 2: is gambling and speculation and what is considered investing have
29:57
Speaker 2: gotten so thoroughly blurred that that I worry about the
30:01
Speaker 2: future of investing. I just worry that, like with the Internet,
30:05
Speaker 2: we're going to get to a point where people have
30:08
Speaker 2: a truly difficult time differentiating between oh yeah, this fund
30:13
Speaker 2: buys mainstream, large US companies, this one tracks a cryptocurrency
30:18
Speaker 2: that I've never heard of it, And how do I
30:19
Speaker 2: differentiate the to them because they get marketed to me
30:22
Speaker 2: in the exact same.
30:23
Speaker 4: They're both called investments. Confusingly, the finance industry is calling
30:27
Speaker 4: crypto an asset class, which it probably is not. Asset
30:31
Speaker 4: class has a most definition. When the asset class, you
30:33
Speaker 4: think large company equity, small company empties, treasury bonds, highyal bonds,
30:37
Speaker 4: distinct asset classes. They move together within categories, they don't
30:40
Speaker 4: always co move perfectly outside of categories, and for the
30:43
Speaker 4: most part, they're generative. They participate in the growth of
30:46
Speaker 4: the economy. Crypto is not generative. It's pretty scammy. It
30:50
Speaker 4: doesn't have widespread applications. It's an interesting potential technology. And
30:55
Speaker 4: on top of that, you've got the opportunity for foreign
30:59
Speaker 4: buyers to come in and scoop some of this stuff
31:01
Speaker 4: up just to influence the politician whose family is launching
31:06
Speaker 4: these products. That's that's another but related concern. You want
31:10
Speaker 4: to keep those two things separate. This president seems intent
31:13
Speaker 4: on blurring those lines. We'll see where it goes, although
31:15
Speaker 4: he claims to not have any direct involved.
31:17
Speaker 3: Yeah and so well.
31:18
Speaker 2: I do have a fair bit of criticism of the
31:20
Speaker 2: last administration's approach to crypto and you know how the
31:23
Speaker 2: regulators seemingly didn't give a lot of guidance as to
31:27
Speaker 2: what was okay and what was not okas and considered
31:29
Speaker 2: hostible and many.
31:30
Speaker 3: But I do wonder if we start swinging in another direction.
31:34
Speaker 2: Here and what the long term implications of that, because
31:36
Speaker 2: I think what it probably leads to and probably should
31:40
Speaker 2: lead to, is a general mistrust of the financial securities
31:43
Speaker 2: industry and that could have ramifications that we're not really
31:48
Speaker 2: thinking about.
31:48
Speaker 4: Your financial stability implications, people not trusting capital markets implications.
31:54
Speaker 2: Yeah, could be serious. Let's take a quick break when
31:57
Speaker 2: we come back. Bit of stack Roulette is next.
32:00
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33:12
Speaker 2: Mark, we were talking about the middle class a little
33:13
Speaker 2: bit before, and this is out of the stack here,
33:16
Speaker 2: but I was looking for some evidence to help support
33:18
Speaker 2: my argument that, look, there has been a shrinking middle class,
33:20
Speaker 2: and best I could come up with was a study
33:22
Speaker 2: back in twenty twenty one from Pew Research Center. And
33:25
Speaker 2: unfortunately I don't have the definitions of what they mean
33:28
Speaker 2: by lower income, middle income, and upper income, but I
33:32
Speaker 2: believe it's basically taking a look at household income around
33:35
Speaker 2: the median and defining lower median and upper and putting
33:39
Speaker 2: households into each of these. In nineteen seventy one, according
33:42
Speaker 2: to their data, a quarter of Americans fell into that
33:45
Speaker 2: lower income threshold, sixty one percent into the middle income threshold,
33:50
Speaker 2: and fourteen percent into the upper income bucket. In twenty
33:54
Speaker 2: twenty one, that lower income was up to twenty nine percent,
33:57
Speaker 2: so slight increase. The middle income was down to fifty
34:00
Speaker 2: percent from sixty one, and the upper income was up
34:03
Speaker 2: substantially fourteen to seventeen I'm sorry, fourteen to twenty one
34:06
Speaker 2: percent of American households falling into that upper income number.
34:11
Speaker 2: And so this is probably the only or some of
34:14
Speaker 2: the best day I can get to support the point that. Look,
34:17
Speaker 2: that middle class, which back in the nineteen seventies likely
34:21
Speaker 2: was made up of a large portion of people without
34:23
Speaker 2: college degrees. There was people working in good manufacturing jobs
34:27
Speaker 2: that could get those types of jobs and pensions without
34:30
Speaker 2: that type of without that type of support, made up
34:33
Speaker 2: a larger portion, and so there were probably more products
34:35
Speaker 2: and services catered to that middle income household. And as such,
34:41
Speaker 2: today that larger higher income threshold, not only as it
34:44
Speaker 2: grown in terms of the total percentage of people there,
34:47
Speaker 2: but in terms of the wealth that those upper income
34:50
Speaker 2: folks have, it is substantially larger the wealth the upper
34:55
Speaker 2: income threshold. The median income back in nineteen seventy was
34:59
Speaker 2: a hundred and thirty thousand dollars in that upper income bucket.
35:02
Speaker 2: Today it's back in twenty twenty one, it was two
35:04
Speaker 2: hundred twenty thousand, a nearly seventy percent increase, whereas that
35:09
Speaker 2: middle income group went from fifty nine to ninety and
35:11
Speaker 2: the lower income went from twenty to thirty. So that's
35:15
Speaker 2: what I would I guess put together in terms of
35:17
Speaker 2: stats about that middle income group. And you know, I
35:21
Speaker 2: don't think it's a good thing that more people are
35:23
Speaker 2: falling into that lower income group. But it does explain
35:27
Speaker 2: to me why many companies, many product producers are looking
35:33
Speaker 2: at either that lower income bucket or that higher income
35:36
Speaker 2: bucket in order to make money in this world, and.
35:38
Speaker 4: Why politicians have all become populist. Unfortunately, at the root
35:43
Speaker 4: of all this is the skills gap. People with higher
35:46
Speaker 4: skills because they're college educated or because they joined a
35:50
Speaker 4: trade and they put in their time and now they're
35:53
Speaker 4: masters in their trade. Whether you're an electrician or a
35:55
Speaker 4: joiner or whatever you happen to do. Higher skilled workers
35:58
Speaker 4: make more money, so it's a skill gap story at root,
36:01
Speaker 4: and tariffs are not going to fix that and some
36:04
Speaker 4: of these other sort of flashy band aids.
36:08
Speaker 3: Unfortunately, what do you have for us? Sack relet mark.
36:10
Speaker 4: We talked a lot about inflation expectations perking up last month.
36:13
Speaker 4: According to the University of Michigan survey of consumers, it
36:16
Speaker 4: was a dramatic rise, a full percentage point from a
36:18
Speaker 4: little over three to a little over four. We speculated,
36:21
Speaker 4: maybe it's due to tariffs, maybe it's due to some
36:24
Speaker 4: other policy rated people anticipating some other policy driven excuse
36:29
Speaker 4: me change, But the you know, the New York Fed
36:32
Speaker 4: also surveys consumer inflation expectations using similar methodology, and theirs
36:38
Speaker 4: haven't budged really, So yeah, I.
36:39
Speaker 3: Was surprised when when's the most recent data they have
36:42
Speaker 3: sort last month? I don't know what.
36:43
Speaker 4: The collection periods overlapped a little bit. The survey methods
36:46
Speaker 4: do differ. The questions, the way they phrase the questions differ. Obviously,
36:51
Speaker 4: these are random samples, so they're different populations that I
36:54
Speaker 4: either not the same groups of people, but I was
36:57
Speaker 4: surprised to see it didn't budge at all, which suggests
36:59
Speaker 4: maybe we should hold or at least I should with
37:01
Speaker 4: whole judgment on inflation expectations and potential problems that that
37:05
Speaker 4: creates for the FED, because we've got some conflicting results here,
37:08
Speaker 4: and the FED will no doubt take note of this.
37:12
Speaker 2: Yeah, yeah, that is fascinating, because you're right, the Michigan
37:16
Speaker 2: Sentiment Survey does get a lot of publicity in news,
37:18
Speaker 2: especially when it produces a dramatic result, like a full
37:21
Speaker 2: percentage point increase in expectations, But if it doesn't get
37:25
Speaker 2: confirmed elsewhere, then you kind of have to wait and
37:28
Speaker 2: see news.
37:29
Speaker 3: Mike.
37:30
Speaker 4: I thought I was where I was doing some serious
37:32
Speaker 4: an ringing, but this is this is certainly a welcome development.
37:37
Speaker 2: Markets remain strongly in positive territory. The Nasdaq is currently
37:41
Speaker 2: up two hundred and fifteen points or one point one percent,
37:43
Speaker 2: the SMP up thirty six or six tenths of a percent,
37:46
Speaker 2: in the Dow Jones Industrial Average up ninety points or
37:49
Speaker 2: one fifth of one percent. Yield on the ten year
37:52
Speaker 2: Treasury moving down slightly below four point four sorry four
37:56
Speaker 2: point for four point five per and the yield on, sorry,
38:01
Speaker 2: the cost of a thirty year mortgage, now up to
38:03
Speaker 2: seven point zero three percent. That is all the time
38:06
Speaker 2: we have for today's financial exchange. We'll be right back
38:09
Speaker 2: at it tomorrow, folks, so tune in.