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Are millennials the reason for exploding rental prices? · The Financial Exchange Show

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  Speaker 3: Yeah, I was trying to figure out what to make
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  Speaker 3: of that because bonds were reacting wildly. Stocks weren't moving
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  Speaker 3: at all, and I was like, what is this? And
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  Speaker 2: Losses, and then some today bonds down ten year treasury
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  Speaker 2: yield down another six point six basis points to four
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  Speaker 2: point four to six percent. Right now, the price of
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  Speaker 2: West Texas intermediate oils at seventy one oh four barrel.
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  Speaker 2: That's down twenty five cents a barrel today. Triple A
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  Speaker 2: National avagur gas prices though it's moving in the wrong direction,
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  Speaker 2: and a lot of this is due to the West Coast.
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  Speaker 2: There's some refineryalitages there, and so the Triple A national
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  Speaker 2: averages right now at three sixteen and five tenths of ascent.
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  Speaker 2: That should come back down over the next couple weeks
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  Speaker 2: into that three to ten range, but at least initially
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  Speaker 2: some refineryalitages pushing prices up, mostly on the West coast,
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  Speaker 2: but also Illinois for some reason is spiked and Pennsylvania
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  Speaker 2: as well. I don't really know why, but it's happening
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  Speaker 2: right now. And we've got gold today down twenty nine
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  Speaker 2: dollars announced to twenty nine to sixteen, and so gold
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  Speaker 2: taking a little bit of a breather after a pretty,
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  Speaker 2: you know, pretty strong run over the last couple months
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  Speaker 2: or so. Peace in fortune, I love the headline. Are
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  Speaker 2: millennials the reason single family home rents are off the charts.
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  Speaker 2: A new Zillo report looks at the numbers.
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  Speaker 3: So I'm gonna give you the answer, Chuck. The answer
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  Speaker 3: is actually, yes, millennials are the reason that single family
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  Speaker 3: home rents are off the charts. But to that millennials,
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  Speaker 3: it is their mere existence that makes millennials that makes
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  Speaker 3: home prices off the charts, and so in the same way,
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  Speaker 3: shouldn't exist millennials in the same way that boomers not
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  Speaker 3: dying and moving out of their homes is driving up
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  Speaker 3: single family home prices. Yes, millennials wanting homes for their
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  Speaker 3: children to live in is driving up single family home rents.
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  Speaker 3: So your prescription, just to be clear, is millennials can't
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  Speaker 3: stop having kids, and no more.
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  Speaker 2: Kids for millennials and boomers need to That's that's it.
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  Speaker 2: I mean, that is you're going to work for Bloomberg.
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  Speaker 4: That is the.
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  Speaker 3: Logical conclusion that Fortune seems to be coming up with
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  Speaker 3: here is Yes, because millennials exist and want to live
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  Speaker 3: inside homes, they are driving up home prices.
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  Speaker 2: Can we all just.
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  Speaker 3: Say, look, the reason home prices are expensive because we're
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  Speaker 3: not building any homes, right.
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  Speaker 2: I mean, if you're gonna blame millennials, for home prices. Oh,
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  Speaker 2: such a fundamental bad understanding of it. I guess like,
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  Speaker 2: if you're gonna blame them for home prices being so high,
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  Speaker 2: then who do you have to blame for flat screen
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  Speaker 2: TV prices being so low? This seems like a mad libs.
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  Speaker 2: So here's the deal is. You have Millennials now are
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  Speaker 2: the single biggest cohort in the United States. They surpassed
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  Speaker 2: the boomers maybe a year or two ago, somewhere like that.
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  Speaker 2: And so yes, whatever millennials do is going to have
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  Speaker 2: an outsize impact on the economy.
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  Speaker 3: Yeah, if they all go back to avocado toast, we're
• 5:08
  Speaker 3: gonna see avocado prices go to egg prices.
• 5:10
  Speaker 2: Never let in travel, never left. Nope, No, there you go.
• 5:14
  Speaker 2: I took a couple of years off from the avocado.
• 5:17
  Speaker 2: But I'm I'm guawking pretty hard these days. I gotta say, guactoast.
• 5:21
  Speaker 2: I am no, not guactoast. I get home and I guawk.
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  Speaker 2: Now it's my place of zen is just mashing an avocado.
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  Speaker 2: So anyways, millennials are the biggest cohort. And look the
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  Speaker 2: millennial generation right now, it's millennials are not perpetually twenty
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  Speaker 2: one years old. Let's like make that clear. I know,
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  Speaker 2: for the longest time we've referred to as people right
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  Speaker 2: out of college as millennials, but it's actually not like
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  Speaker 2: the definition millennials are anyone born between I think it's
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  Speaker 2: like nineteen eighty, nineteen seventy nine and nineteen ninety six.
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  Speaker 5: It's one of my biggest pet peeves going is that
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  Speaker 5: people still think of twenty one.
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  Speaker 2: Yes.
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  Speaker 5: Yeah, Like I hear boomers complaining about millennials when they're
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  Speaker 5: talking about like eighteen to twenty year olds.
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  Speaker 2: That's not a millennial. Stop it. I decide I'm a millennial.
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  Speaker 2: Don't you want to still be twenty one? Yeah?
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  Speaker 3: I actually think it'd be not bad if we just
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  Speaker 3: refer to all people between the ages of fifteen and
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  Speaker 3: twenty five permanently as millennials.
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  Speaker 2: So what are we now, jen x No, what do
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  Speaker 2: I get? I don't know?
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  Speaker 3: People with backs that aren't working as well as they
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  Speaker 3: used to. I guess that's fine. So here's the deal is,
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  Speaker 3: there's not enough housing, and millennials are having kids and
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  Speaker 3: they want space of their own. They're not content to
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  Speaker 3: just live in apartments in cities. They want yards and
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  Speaker 3: bedrooms for the kids and stuff like that. Yes, and
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  Speaker 3: so if you can't afford to buy the place because
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  Speaker 3: of down payments and interest rates in YadA YadA, you say, okay,
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  Speaker 3: we're gonna rent a single family home. And so single
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  Speaker 3: family home rents have been moving up rather rapidly. So yes,
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  Speaker 3: I guess you can blame millennials for wanting what their
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  Speaker 3: parents had. And again you're blaming exist on existence.
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  Speaker 2: I know, but if we didn't exist, this wouldn't be
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  Speaker 2: a problem. Man, I've got the Thanos solution. It's here's
• 7:16
  Speaker 2: the markets. The housing market, kill off half the population.
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  Speaker 2: Got to tell you wouldn't work. Wouldn't work. You know
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  Speaker 2: what would happen? Okay, great, let's get rid of all
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  Speaker 2: these houses because there's no demand from and prices would
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  Speaker 2: still be high.
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  Speaker 4: My lord.
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  Speaker 3: So yeah, it's I guess there's a few There are
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  Speaker 3: a few things in housing that I just I do
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  Speaker 3: find fairly interesting that turned out to not be true. Right, Like,
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  Speaker 3: remember a decade ago, all the stories were about housing
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  Speaker 3: markets are going to collapse because baby boomers are going
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  Speaker 3: to move out of their single family homes. This is
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  Speaker 3: a massive cohort. They've just never moved and they just
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  Speaker 3: didn't like everybody got it wrong, and so I'm sure
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  Speaker 3: that we are misguided in our views of things now
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  Speaker 3: and maybe baby boomers are finally going to start moving away,
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  Speaker 3: and maybe now we're gonna have a shortag job.
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  Speaker 2: But it's not living facility. There's like cemeteries in every property.
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  Speaker 2: I got't tell you that my in laws once I
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  Speaker 2: got to tell this story, this is great. They were
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  Speaker 2: looking for a house like three years ago, like in
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  Speaker 2: the peak of like the housing bubble and everything. Now
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  Speaker 2: it's not really a bubble because hasn't really popped yet.
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  Speaker 2: In the peak of like the housing frenzy in twenty
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  Speaker 2: twenty one, yeah.
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  Speaker 3: When they were like fifty person lines outside of open houses.
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  Speaker 2: So they go to this one place and you go
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  Speaker 2: in and it's like, okay, like the houses. It's an
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  Speaker 2: older house, like from the seventeen hundreds, but it's been
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  Speaker 2: you know, updated a little bit, and you know, nice place.
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  Speaker 2: You go down the basement and on one side of
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  Speaker 2: the basement there are these giant wide doors, and we're
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  Speaker 2: trying to figure it out, and finally, like we asked
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  Speaker 2: the agent because my wife and I are there also
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  Speaker 2: just kind of looking around, like what's the deal with these, Like,
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  Speaker 2: why why are there these wide doors just going out
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  Speaker 2: on the side of the house like it was built
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  Speaker 2: onto a hill. They're like, oh, well, the property used
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  Speaker 2: to be a mortuary actually originally, sure, and so these
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  Speaker 2: were the doors so that the hearse could back up
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  Speaker 2: in order to load the coffins out of the basement. Okay,
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  Speaker 2: is there anything else you want to tell us about
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  Speaker 2: the property? Do you guys see that cemetery down the
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  Speaker 2: corner with like the seven gravestones, Yeah, that's actually dated
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  Speaker 2: into the lot. And beyond that, the family that currently
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  Speaker 2: lives here has a deeded that they'll be allowed to
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  Speaker 2: be buried here even once the property is transferred. Thank you.
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  Speaker 2: I think we'll be moving on.
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  Speaker 3: I don't know, it seems like anway to make interesting friends. Sure,
• 9:41
  Speaker 3: you know, juice situation going.
• 9:43
  Speaker 2: On, quiet neighbors, you know, but uh yeah, lit like,
• 9:46
  Speaker 2: oh I didn't realize that's what was going on here.
• 9:50
  Speaker 2: But thanks, Like it's I found it interesting, you know,
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  Speaker 2: it was kind of cool, but uh, ultimately just you know,
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  Speaker 2: just it wasn't quite gonna work.
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  Speaker 3: Yeah, just every piece that gets written about housing is
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  Speaker 3: just hilarious in New and uninvented ways, and.
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  Speaker 2: This is a good one.
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  Speaker 3: That millennials are to blame for rising rent prices in
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  Speaker 3: single family homes, Yes, they are.
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  Speaker 2: To take a quick break. When we come back, Ted
• 10:14
  Speaker 2: Rossman from Bank Rate joins us to talk about the
• 10:17
  Speaker 2: New York Fed's credit card debt report right after this.
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  Speaker 3: Joining us now is Ted Rossman from bank Rate join
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  Speaker 3: us talk about the New York Fed debt report that
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  Speaker 3: came out just yesterday.
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  Speaker 2: Ted, thanks for joining us.
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  Speaker 4: Appreciated of course, thanks for having me so.
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  Speaker 3: I'm sure I do not need to tell anyone listening
• 11:39
  Speaker 3: that interest rates are, you know, multi decade highs right now,
• 11:44
  Speaker 3: especially on things like credit cards and mortgages.
• 11:47
  Speaker 4: What did we see out of this most recent report?
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  Speaker 3: How bad has the situation got, especially gotten especially in
• 11:52
  Speaker 3: that revolving credit space.
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  Speaker 6: The most notable finding is that Americans owe about one
• 11:58
  Speaker 6: point two trillion dollars on their credit cards, and that's
• 12:01
  Speaker 6: up four percent over the past quarter. It's up seven
• 12:04
  Speaker 6: percent over the past year. If we zoom out a
• 12:07
  Speaker 6: little bit. What's most significant is that figure is up
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  Speaker 6: fifty seven percent from the first quarter of twenty twenty one.
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  Speaker 6: That was when balance has really started to lift off
• 12:17
  Speaker 6: after the pandemic, because they actually fell in twenty twenty
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  Speaker 6: because of stimulus funds and people spending last during the pandemic.
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  Speaker 6: But ever since then, it's been off to the races.
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  Speaker 6: Inflation and high interest rates have made it harder to
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  Speaker 6: pay off this debt. Half of card holders are carrying
• 12:33
  Speaker 6: debt from month to month.
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  Speaker 3: So I hate to be alarmist about this type of thing,
• 12:38
  Speaker 3: and I always keep going back to we have experienced
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  Speaker 3: a lot of inflation over the course of the last
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  Speaker 3: five years, an abnormal and an unusual amount of inflation
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  Speaker 3: that most Americans aren't used to. When we take a
• 12:50
  Speaker 3: look at credit card balances and other forms of debt
• 12:53
  Speaker 3: compared to pre COVID, pre all this inflation kicking off
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  Speaker 3: and pre all the stimulus that helped pay down the debt,
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  Speaker 3: are we in a pretty similar place or are we
• 13:01
  Speaker 3: in a significantly worse place? Inflation counted in these balances
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  Speaker 3: when you'd look at the data.
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  Speaker 6: The rate of change has slowed lately, okay, But in
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  Speaker 6: general a lot of the past few years, balances were
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  Speaker 6: growing a lot faster than they were pre pandemic. So
• 13:18
  Speaker 6: credit card debt's one of these interesting things where generally speaking,
• 13:21
  Speaker 6: it rises over time, other than something really weird like
• 13:24
  Speaker 6: the pandemic or the financial crisis, Generally speaking, credit card
• 13:28
  Speaker 6: balances grow a few percentage points every year, and that's
• 13:32
  Speaker 6: because of economic growth. It's because of population growth, more
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  Speaker 6: people using cards, less people using cash. These are balances too.
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  Speaker 6: It's important to remember that they don't distinguish between what's
• 13:43
  Speaker 6: paid in fall at the end of the month and
• 13:44
  Speaker 6: what's not sure. If you can be among those paying
• 13:47
  Speaker 6: in full and avoiding interest and taking full advantage of
• 13:50
  Speaker 6: rewards and convenience and buyer protections, then credit cards really
• 13:54
  Speaker 6: work for you. So it's this kind of tale of
• 13:57
  Speaker 6: two cities thing. I don't see credit card balances as
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  Speaker 6: a risk to the overall economy. In some respects, this
• 14:03
  Speaker 6: is actually supporting economic growth, and the debt to income
• 14:07
  Speaker 6: ratio is pretty low on a historical basis. But at
• 14:10
  Speaker 6: the individual level, that's where we see some of the
• 14:13
  Speaker 6: pockets of trouble when it comes to more people carrying
• 14:16
  Speaker 6: more debt for longer periods of time.
• 14:18
  Speaker 3: Did we see a typical bump up in the fourth
• 14:20
  Speaker 3: quarter here with holiday shopping and that type of thing.
• 14:23
  Speaker 3: I'm sure that happens almost every year, given their habits
• 14:27
  Speaker 3: around spending at your end.
• 14:30
  Speaker 6: We did. Yeah, it wasn't as big of a pop
• 14:32
  Speaker 6: as we've seen in some other recent years, but still
• 14:35
  Speaker 6: a pretty good pop in the fourth quarter.
• 14:37
  Speaker 2: Normally, the cadence is.
• 14:39
  Speaker 6: That credit card balances usually follow a little bit. In
• 14:41
  Speaker 6: Q one people have the post holiday detox, they use
• 14:45
  Speaker 6: tax refund money to pay off debt, and then balances
• 14:48
  Speaker 6: usually rise in the second and third quarters, and then
• 14:50
  Speaker 6: they really spike in the fourth quarter around the holidays.
• 14:54
  Speaker 6: It followed the pretty typical pattern this year. I would say,
• 14:58
  Speaker 6: now it'll be interesting to watch this current quarter when
• 15:01
  Speaker 6: that gets reported in a few months. Do people follow
• 15:04
  Speaker 6: through on the usual expectation of paying these balances down.
• 15:09
  Speaker 6: We haven't seen quite as much in recent years in
• 15:12
  Speaker 6: terms of tax refund money going towards debt. We're also
• 15:17
  Speaker 6: seeing headwinds like higher prices and elevated interest rates. So
• 15:21
  Speaker 6: my expectation is balances may fall a little bit this quarter,
• 15:25
  Speaker 6: but perhaps not as much as we've gotten used to
• 15:28
  Speaker 6: in the first quarter.
• 15:29
  Speaker 3: Ted At the end of last year, we saw the
• 15:32
  Speaker 3: Federal Reserve lowering interest rates, and credit card rates oftentimes
• 15:35
  Speaker 3: can tie to that and come down at the same time.
• 15:38
  Speaker 3: But at the end of last year as well, you
• 15:40
  Speaker 3: had the Consumer Financial Protection Bureau putting in new rules
• 15:43
  Speaker 3: when it comes to credit cards. The Trump administration themselves
• 15:46
  Speaker 3: has talked to about ten percent in stright caps on
• 15:49
  Speaker 3: credit cards. Have companies just been saying, hey, we need
• 15:52
  Speaker 3: to hold on to our high interest rates for the
• 15:54
  Speaker 3: time being until we see how this stuff plays out.
• 15:56
  Speaker 3: Or have you actually seen average rates come down on balances.
• 16:01
  Speaker 6: We've seen a little bit of a decline, but not
• 16:03
  Speaker 6: all that noticeable. Credit Card rates peaked at twenty point
• 16:06
  Speaker 6: seventy nine percent on average last August. That was an
• 16:09
  Speaker 6: all time record. Now we're down to twenty point one.
• 16:12
  Speaker 6: So it's interesting that the FED has cut by a
• 16:16
  Speaker 6: full point and yet the average credit card rate has
• 16:19
  Speaker 6: come down less. It's come down about sixty nine bases points.
• 16:24
  Speaker 6: Some of that has to do with the way rates
• 16:26
  Speaker 6: are calculated, and we're talking about new offers which are
• 16:29
  Speaker 6: easier to keep elevated than existing customers. There's a few
• 16:33
  Speaker 6: other sort of wonky statistical explanations, but you know, a
• 16:37
  Speaker 6: big one is that credit card delinquencies are at their
• 16:39
  Speaker 6: highest point since twenty eleven, and with that as the backdrop,
• 16:44
  Speaker 6: issuers have not been in a rush to lower rates.
• 16:47
  Speaker 6: I mean, honestly, even if credit card rates fell a
• 16:49
  Speaker 6: few points from here, they would.
• 16:51
  Speaker 2: Still be high.
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  Speaker 6: So that's where the advice is take matters into your
• 16:54
  Speaker 6: own hands, pay it all if you can. If you
• 16:57
  Speaker 6: need more time, get a zero percent balance transfer card,
• 17:01
  Speaker 6: or work with a reputable nonprofit credit counselor These are
• 17:04
  Speaker 6: some ways to lower the bite of high rates.
• 17:06
  Speaker 3: Ted Rossman from Bank Grade joining to taker to us
• 17:09
  Speaker 3: about the state of credit card debt and debt in
• 17:12
  Speaker 3: general from the Federal Reserves Credit and Debt Survey for
• 17:15
  Speaker 3: fourth quarter of this year. Ted, thanks so much for
• 17:18
  Speaker 3: joining us.
• 17:18
  Speaker 2: Appreciate it. We'll talk to you again soon.
• 17:20
  Speaker 6: Sounds good. Thank you.
• 17:21
  Speaker 5: All right, let's do a little bit of trivia here
• 17:23
  Speaker 5: on the Financial Exchange, and Saturday Night Live is currently
• 17:28
  Speaker 5: celebrating its fiftieth anniversary, with festivities going on this entire weekend.
• 17:34
  Speaker 5: The first episode of SNL aired on October fifteenth, nineteen
• 17:40
  Speaker 5: seventy five, which is apparently going to be rebroadcasted on
• 17:43
  Speaker 5: this Saturday night. By the way, just an FYI, so
• 17:47
  Speaker 5: trivia question today, who hosted the first episode of Saturday
• 17:52
  Speaker 5: Night Live? Once again? Who hosted the first episode of
• 17:56
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• 18:00
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• 18:03
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• 18:06
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• 18:10
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• 18:12
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• 18:16
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• 18:20
  Speaker 2: Uh following up just on the real estate piece that
• 18:23
  Speaker 2: we were talking about in the first segment piece from
• 18:26
  Speaker 2: Wall Street Journal, and this is something that I think
• 18:28
  Speaker 2: bears watching for real. You've got a situation where there
• 18:32
  Speaker 2: was a ton of construction that happened in twenty twenty,
• 18:36
  Speaker 2: twenty twenty one. In early twenty two in terms of multifamily, right,
• 18:40
  Speaker 2: a lot of big multifamily developments that because interest rates
• 18:44
  Speaker 2: were low, high demand for housing people moving to the
• 18:46
  Speaker 2: sun Belt, a ton of inventory came on the market.
• 18:50
  Speaker 2: It's one of the reasons why rent growth has been
• 18:52
  Speaker 2: relatively muted in the multifamily space over the last year
• 18:56
  Speaker 2: and a half. Now, there then came this brick wall
• 19:00
  Speaker 2: where rates went up and construction costs went up and
• 19:03
  Speaker 2: basically multifamily starts slowed to a halt over the last
• 19:07
  Speaker 2: couple of years. So at the end of this year,
• 19:10
  Speaker 2: you're basically gonna run out of you know, the rapid
• 19:14
  Speaker 2: increase in multifamily inventory and go to a much slower pace.
• 19:17
  Speaker 2: So this piece makes the point, hey, you might be
• 19:19
  Speaker 2: heading towards higher rents coming at that point. The question
• 19:23
  Speaker 2: that I think is out there is what appetite is
• 19:27
  Speaker 2: there for people to actually take on higher rents? And
• 19:30
  Speaker 2: if they can't, do they consider, you know, kind of
• 19:33
  Speaker 2: deforming households and merging back in. We'll talk more after
• 19:37
  Speaker 2: this break.
• 19:42
  Speaker 1: Bringing the latest financial news straight to your radio. Every day,
• 19:46
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• 19:52
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• 19:55
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• 19:59
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• 20:09
  Speaker 5: All right, trivia question today was who hosted the first
• 20:13
  Speaker 5: episode of.
• 20:14
  Speaker 2: Saturday Night Alive.
• 20:16
  Speaker 5: That would be George Carlin Winter Today of the Financial
• 20:20
  Speaker 5: Change Show t shirt was John from Braintree, Mass. Congrats
• 20:24
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• 20:27
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• 20:31
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• 20:33
  Speaker 2: Continuing on this rent conversation, So you've got this situation
• 20:38
  Speaker 2: where the amount of inventory in the multifamily space, the
• 20:43
  Speaker 2: growth and it's just gonna slow dramatically at the end
• 20:46
  Speaker 2: of this year. And so this piece in the Wall
• 20:48
  Speaker 2: Street Journal makes the point, Hey, once you get to
• 20:51
  Speaker 2: that point, you know, the population growth is basically staying
• 20:53
  Speaker 2: the same, and so you might see higher rents because
• 20:58
  Speaker 2: landlords will have fewer vacant season they'll be able to
• 21:01
  Speaker 2: demand higher rents. And it points out, i'll quote here,
• 21:05
  Speaker 2: it'll be very hard for the headline inflation number to
• 21:07
  Speaker 2: reach the FEDS two percent goal without a slowdown in
• 21:09
  Speaker 2: housing costs. So here's the thing, though, remember that inflation
• 21:15
  Speaker 2: all else being equal is and I know this is
• 21:19
  Speaker 2: really reductive, but it's it's companies raising prices. If rents
• 21:25
  Speaker 2: go up and people accept those rent increases, there are
• 21:29
  Speaker 2: a few different possibilities in terms of where this goes.
• 21:33
  Speaker 2: The first is they accept those rent increases, and those
• 21:36
  Speaker 2: rent increases eat through the rest of their discretionary spending power,
• 21:41
  Speaker 2: and so they can't spend as much on going out
• 21:44
  Speaker 2: to dinner or traveling and all these other things, and
• 21:47
  Speaker 2: so those costs come down and it offsets. The other is, hey,
• 21:53
  Speaker 2: they their rents go up and they get itchy and
• 21:56
  Speaker 2: start looking for, you know, a raise, and start demanding more,
• 21:58
  Speaker 2: and maybe they get a bigger raise, and that does
• 22:00
  Speaker 2: produce some inflation then, but the other.
• 22:04
  Speaker 4: Third month they borrow a whole bunch more money.
• 22:06
  Speaker 3: You always underestimate America's willingness to make stupid financial decisions.
• 22:11
  Speaker 2: They can only go so.
• 22:12
  Speaker 4: Long, it can't.
• 22:13
  Speaker 2: And the other piece is, hey, what if they don't
• 22:16
  Speaker 2: accept those rent increases? What if they say, look, I'm
• 22:19
  Speaker 2: already stretched too far and instead I'm going to take
• 22:23
  Speaker 2: on an extra roommate. And now you've got a smaller
• 22:26
  Speaker 2: number of households out there that can still fit into
• 22:29
  Speaker 2: the available number of units.
• 22:31
  Speaker 4: So you could see that.
• 22:32
  Speaker 3: The other piece that I want to bring up, which
• 22:34
  Speaker 3: is maybe a little bit too technical, but Chuck, most
• 22:37
  Speaker 3: reporting that I've seen shows that rent costs actually declined
• 22:41
  Speaker 3: year over year. Right now, yes, nationally, have we seen
• 22:44
  Speaker 3: any such reduction in the shelter cost made into the
• 22:47
  Speaker 3: CPI reports that we see?
• 22:49
  Speaker 2: No? And the reason why is there's a huge lag
• 22:51
  Speaker 2: that's built into it in terms of how it works out,
• 22:54
  Speaker 2: and so that's likely going to work its way through this.
• 22:56
  Speaker 3: Year possibly, right we have failed to see it, and
• 22:59
  Speaker 3: rent has been relative muted for a couple of years
• 23:01
  Speaker 3: so far, And so I'm I'm just not sure. You
• 23:05
  Speaker 3: know a lot of assumptions here that rent could go
• 23:07
  Speaker 3: up in the future. Again, all else equal, I would
• 23:10
  Speaker 3: suspect it would. But when we start seeing that in
• 23:13
  Speaker 3: inflation data and whether or not it influences the FEDES
• 23:16
  Speaker 3: decision making, a lot of questions that are open on
• 23:20
  Speaker 3: that front.
• 23:20
  Speaker 5: If you're nearing retirement age and are concerned about how
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• 24:26
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• 24:28
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• 24:37
  Speaker 2: We then have one of my favorite headlines that I've
• 24:39
  Speaker 2: seen this year. The piece doesn't match up to the
• 24:41
  Speaker 2: glory of the headline. The jobs are there, but America
• 24:44
  Speaker 2: must now create the workers robots. How does one go
• 24:48
  Speaker 2: about creating workers? You know, it's like, go, okay, this
• 24:51
  Speaker 2: is very technical. Let me see how we get it.
• 24:53
  Speaker 3: All comes back to our Valentine's Day story from yesterday,
• 24:56
  Speaker 3: chock of as. We need to stigmatize single people and
• 25:00
  Speaker 3: encourage them to have more babies so we can create
• 25:02
  Speaker 3: work future workers.
• 25:03
  Speaker 2: But that's future workers, you know, like a baby comes
• 25:07
  Speaker 2: out of the womb and you can't really put it
• 25:08
  Speaker 2: to work now, true, you know, they're kind of like
• 25:12
  Speaker 2: little slugs for a while. They're very cute slugs, but
• 25:15
  Speaker 2: they can't really do much. Yeah.
• 25:17
  Speaker 3: True, So how do we create workers? We retrain workers,
• 25:21
  Speaker 3: is what they are really talking about. Is there any
• 25:23
  Speaker 3: evidence that we're good at that? No, Actually we're quite
• 25:26
  Speaker 3: a bit of evidence that were pretty big. Like I
• 25:28
  Speaker 3: used to be all about like, oh, like the idea
• 25:30
  Speaker 3: of job retraining. It sounds great, but a job is
• 25:34
  Speaker 3: more complicated than that. And I don't just mean like
• 25:36
  Speaker 3: doing the job. There's a lot of our identity that's
• 25:40
  Speaker 3: tied up in a job, you know, like you lose
• 25:43
  Speaker 3: your job.
• 25:43
  Speaker 2: Like as an example, I'm gonna look at West Virginia
• 25:46
  Speaker 2: just because West Virginia has been economically downtrodden for the
• 25:51
  Speaker 2: last twenty thirty years now, and quite honestly, it kind
• 25:54
  Speaker 2: of sucks not West Virginia, but like the fact that
• 25:58
  Speaker 2: this is where it is, because look the for better
• 26:01
  Speaker 2: for worse. The prior two hundred years, West Virginia was
• 26:04
  Speaker 2: kind of the engine of the US economy, Like it
• 26:07
  Speaker 2: produced the coal that allowed us to do everything, and
• 26:13
  Speaker 2: the fact that it is what it is right now
• 26:14
  Speaker 2: is kind of sad because there are families that have
• 26:16
  Speaker 2: been there for generations that hey, like my grandfather was
• 26:20
  Speaker 2: a coal miner, My dad was a coal miner. I was,
• 26:22
  Speaker 2: and then the jobs went away, And like it's a
• 26:24
  Speaker 2: pretty common refrain that you hear. And you know, the
• 26:29
  Speaker 2: people who are all about job retraining are well, like
• 26:31
  Speaker 2: you just have to, you know, train those people to
• 26:34
  Speaker 2: you know, be you know, plumbers, or you can train
• 26:37
  Speaker 2: them to learn how to code or you really.
• 26:40
  Speaker 3: What you're talking about is training them to move somewhere
• 26:41
  Speaker 3: else and do a different job.
• 26:43
  Speaker 2: And that's a tough sell, and it's it's hard because
• 26:47
  Speaker 2: our identity is tied up in those jobs and in
• 26:50
  Speaker 2: the locations that we live.
• 26:52
  Speaker 4: Yeah, and just say, to be honest, most jobs can't
• 26:54
  Speaker 4: be done remotely.
• 26:55
  Speaker 2: No, the vast majority of them can't. I mean, I'm
• 26:57
  Speaker 2: guessing probably like thirty percent of jobs can be.
• 27:00
  Speaker 3: And especially the ones that are in extremely high demand
• 27:02
  Speaker 3: right now, can't be done remotely.
• 27:04
  Speaker 2: Correct. So when you talk about this, and specifically this
• 27:08
  Speaker 2: is talking about like skilled workers, one doesn't simply become
• 27:12
  Speaker 2: a skilled worker. I mean, I've been in the financial
• 27:14
  Speaker 2: industry for almost sixteen years now. I thought I was
• 27:21
  Speaker 2: a skilled worker somewhere around year two or three. I
• 27:25
  Speaker 2: probably wasn't until you're eight or nine, you know, like
• 27:29
  Speaker 2: it takes a while to actually get there. You think
• 27:33
  Speaker 2: you're there before you actually are. I'd also say that
• 27:37
  Speaker 2: I don't know, No, so we're.
• 27:38
  Speaker 3: Not great at training workers to become skilled workers in
• 27:43
  Speaker 3: certain areas. I'd also say that there's a fair bit
• 27:46
  Speaker 3: of evidence that the US government doesn't have a lot
• 27:49
  Speaker 3: of great expertise of identifying appropriate areas of investment, right Like, No,
• 27:55
  Speaker 3: you take a look at where you know private investment
• 27:58
  Speaker 3: has been made by the US government, and there's been
• 28:00
  Speaker 3: a lot of misses, And so I'm not sure you
• 28:03
  Speaker 3: want the US government saying, hey, here is where we
• 28:06
  Speaker 3: are going to go retrain workers.
• 28:11
  Speaker 2: So I don't know.
• 28:11
  Speaker 3: I'm not saying that this isn't needed, because clearly, especially
• 28:15
  Speaker 3: if we are going to see a AI shift, a
• 28:19
  Speaker 3: shift to domestic production of semiconductors, we are going to
• 28:22
  Speaker 3: need some labor that we don't really have the skills
• 28:25
  Speaker 3: for right now. Where that's going to come from, I'm unsure.
• 28:30
  Speaker 2: If you want to bring a lot of manufacturing in
• 28:33
  Speaker 2: general back to the US, those are skills that a
• 28:35
  Speaker 2: lot of US workers don't have. Yeah, how many US
• 28:39
  Speaker 2: workers have worked on an assembly line? Not many, not
• 28:44
  Speaker 2: too many.
• 28:46
  Speaker 3: So it comes back to a few questions of Okay,
• 28:48
  Speaker 3: do you just take the risk and attempt to have
• 28:50
  Speaker 3: the US government train the workers. I suppose you could
• 28:52
  Speaker 3: do it in the way of offering tax credits for
• 28:54
  Speaker 3: companies that provide retraining of workers.
• 28:59
  Speaker 2: Or how do you prove like that you're retraining of work?
• 29:03
  Speaker 2: Like what does that even mean? Like do you have
• 29:06
  Speaker 2: to prove like think about the compliance associated with that. Okay,
• 29:09
  Speaker 2: so I need to prove that this person didn't have
• 29:12
  Speaker 2: training in this in order to get the I mean,
• 29:15
  Speaker 2: now you're just building administrative blow.
• 29:17
  Speaker 3: I think about what I've heard of from like semiconductor
• 29:20
  Speaker 3: manufacturers that are doing on the job training programs and
• 29:23
  Speaker 3: things like that, and that that does exist. There are
• 29:26
  Speaker 3: there are universities that are putting together training programs on it.
• 29:29
  Speaker 3: But again, yeah, it's it's complicated. The third option is
• 29:33
  Speaker 3: you identify and increase legal migration of people that do
• 29:37
  Speaker 3: have the skill sets, and that's going to be an
• 29:39
  Speaker 3: area that is fraught with disagreement.
• 29:41
  Speaker 2: Yeah, let's take a quick break here. When we come back,
• 29:44
  Speaker 2: Paul Lamonica from Barons joins us right after this.
• 29:49
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• 29:51
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• 29:55
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• 29:57
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• 30:01
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• 30:09
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• 30:18
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• 30:20
  Speaker 6: Ladies and gentlemen the weekend.
• 30:32
  Speaker 2: Joining us now on the line is the one and
• 30:35
  Speaker 2: only paul A Monica from Baron's We're talking a little
• 30:38
  Speaker 2: bit about Palenteer today, Paul, How are you on good days?
• 30:42
  Speaker 7: How you guys going.
• 30:43
  Speaker 2: We're doing great here, not as well as Palenteer, which
• 30:48
  Speaker 2: was up I believe somewhere around like five hundred percent
• 30:51
  Speaker 2: or four hundred percent last year and now up fifty
• 30:53
  Speaker 2: five percent this year. What are they doing right at
• 30:58
  Speaker 2: this point aside from everything exactly?
• 31:01
  Speaker 7: Yeah, I mean it's been it's been a stunning run
• 31:03
  Speaker 7: for the stock. I think investors are extremely excited in
• 31:10
  Speaker 7: an almost cult like way about their you know, hopes
• 31:16
  Speaker 7: for riding the AI wave, you know, given they have
• 31:21
  Speaker 7: a big business with you know contract you know, contracting
• 31:24
  Speaker 7: for the defense of you know Department here in the
• 31:27
  Speaker 7: US as well as other you know, defense agencies around
• 31:30
  Speaker 7: the world, but also expanding that business. You know, they're
• 31:33
  Speaker 7: big data AI analytics for commercial corporate customers as well.
• 31:39
  Speaker 7: And I think it's a company that a lot of
• 31:41
  Speaker 7: people are viewing in a similar light to Innvidia in
• 31:45
  Speaker 7: the sense that they have this first mover advantage. They
• 31:49
  Speaker 7: have a visionary CEO and Alex Karp who's compared favorably
• 31:53
  Speaker 7: to Jensen Wong in Vidia. So I think that's one
• 31:57
  Speaker 7: of the reasons why this stock has served urged. But
• 32:00
  Speaker 7: it does beg the question of is this too far,
• 32:04
  Speaker 7: too fast? And a pe of more than two hundred
• 32:06
  Speaker 7: times earnings estimates, it's it's just a lot to digest
• 32:11
  Speaker 7: in such a short period of time.
• 32:13
  Speaker 2: Well, and I guess look, here's the thing that I'm
• 32:16
  Speaker 2: trying to sort through on this is in video like
• 32:18
  Speaker 2: that their revenue is doubled year over year, the margins
• 32:21
  Speaker 2: are sixty plus percent. There's you know, you've you've you
• 32:24
  Speaker 2: see the pipeline out there of companies saying, hey, here's
• 32:27
  Speaker 2: gonna be our Capex the next couple of years. And
• 32:29
  Speaker 2: even though it's expensive, you say, Okay, I can see
• 32:32
  Speaker 2: a world in which this makes sense with Palenteer. And again,
• 32:37
  Speaker 2: I'm I guess I am trying to to poop poo it.
• 32:40
  Speaker 2: I guess I am. I look at it and I go, Okay.
• 32:45
  Speaker 2: The revenue's up thirty percent year over year. The margins
• 32:48
  Speaker 2: are ten percent. It's a fine company, like it's. It's
• 32:53
  Speaker 2: it's making money, it's cash flow positive, like it. It
• 32:55
  Speaker 2: looks good. It's not to say that like this is
• 32:57
  Speaker 2: some horrible company. But can't I find a bunch of
• 33:00
  Speaker 2: companies out there with thirty percent growth last year and
• 33:05
  Speaker 2: ten percent margins? And why is this one getting all
• 33:07
  Speaker 2: the love?
• 33:08
  Speaker 6: Yeah?
• 33:09
  Speaker 7: I mean, obviously, I think a lot of it is
• 33:11
  Speaker 7: it is part of you know, the trend that is,
• 33:15
  Speaker 7: you know, helped lift the entire market over the past
• 33:19
  Speaker 7: year and a half or so. You know, so being
• 33:22
  Speaker 7: you know, a major kind of poster child for AI
• 33:25
  Speaker 7: helps And again I think there is that cult like following.
• 33:28
  Speaker 7: But you know what's interesting is, you know, as I
• 33:31
  Speaker 7: wrote in my story, it's actually not a stock that
• 33:35
  Speaker 7: is as shorted as you might expect I mean short interest,
• 33:38
  Speaker 7: you know, better investors betting against it, you know, thinking
• 33:41
  Speaker 7: that the stock's going to go down. It's only about
• 33:44
  Speaker 7: four percent or so of the float, which is relatively
• 33:48
  Speaker 7: low for a stock that has done this well. I
• 33:51
  Speaker 7: mean companies that are you know, hated by short sellers
• 33:55
  Speaker 7: tend to have you know, twenty percent or higher short interest.
• 34:00
  Speaker 7: Market average is only about two percent of shares being
• 34:03
  Speaker 7: held short. So Palenteer, I think it's a company that
• 34:07
  Speaker 7: investors are either afraid to short it because they don't
• 34:10
  Speaker 7: want to get squeezed even higher, or they just don't
• 34:12
  Speaker 7: feel that, despite its valuation, that it's something that you
• 34:16
  Speaker 7: should bet against because it does have the strong fundamentals.
• 34:19
  Speaker 7: But all that being said, if you own the stock,
• 34:23
  Speaker 7: it probably behooves you to take a little bit of
• 34:26
  Speaker 7: money off the table. I mean, I closed my piece
• 34:28
  Speaker 7: with you know a manager who said that he is
• 34:32
  Speaker 7: every time that the stock doubles, he takes some money
• 34:37
  Speaker 7: off the table, even if he's worried that, you know,
• 34:40
  Speaker 7: he may miss further upside and be wrong by you know,
• 34:45
  Speaker 7: worrying that the stock you may go down. He'd rather
• 34:48
  Speaker 7: be safe than sorry, as he jokes in the story.
• 34:51
  Speaker 7: Luck has been your copilot in this case, So pulling
• 34:54
  Speaker 7: some chips off the table isn't the worst thing in
• 34:57
  Speaker 7: the world to do.
• 34:58
  Speaker 2: When you look at Pounder does this, I guess the
• 35:03
  Speaker 2: question that I have is you noted that they have
• 35:05
  Speaker 2: you know, a number of defense contracts and this and that.
• 35:07
  Speaker 2: With all of the talk about reigning in spending in government.
• 35:11
  Speaker 2: How is that not affecting the view on this negatively?
• 35:15
  Speaker 7: No, it is.
• 35:15
  Speaker 2: It is a great question.
• 35:17
  Speaker 7: I think that there are legitimate worries in the Trump
• 35:21
  Speaker 7: administration with the Elon Musk and Doge about what could
• 35:25
  Speaker 7: happen to defense spending going forward. But you don't get
• 35:29
  Speaker 7: the sense, you know, maybe the Defense Department cuts back
• 35:34
  Speaker 7: on people, and maybe there is a chance that they
• 35:39
  Speaker 7: slow some of the classic you know, military spending on
• 35:45
  Speaker 7: actual you know, weapons, missiles, et cetera, if they feel
• 35:50
  Speaker 7: that there's not a need for that in this current world.
• 35:53
  Speaker 7: But I seriously doubt, particularly with the Elon Musk being
• 35:57
  Speaker 7: an AI proponent as well, that they would cut back
• 36:01
  Speaker 7: on any real AI tech investments. So Palenteers probably you know,
• 36:07
  Speaker 7: maybe not immune to any Doge like cuts to the
• 36:12
  Speaker 7: d O D budget. They probably are less, there's less risk.
• 36:16
  Speaker 7: I think of Palenteer having you know, defense spending, you know,
• 36:21
  Speaker 7: coming down in a major way on their technology.
• 36:24
  Speaker 2: Very good. Appreciate the time, Paul, have a good one.
• 36:27
  Speaker 7: Thanks a lot, you too.
• 36:28
  Speaker 2: That is Paul Lamonica from Baron's talking about Palenteer.
• 36:33
  Speaker 3: Relatively harmless but still misleading. AI Story of the day,
• 36:37
  Speaker 3: Oh yeah, what do we got? A popular true crime
• 36:40
  Speaker 3: series that was airing on YouTube was actually all fake,
• 36:44
  Speaker 3: entirely created using chat GPT to come up with the
• 36:47
  Speaker 3: ideas and then an AI image generator to come up
• 36:50
  Speaker 3: with the images used to create the story.
• 36:53
  Speaker 2: On YouTube, the.
• 36:54
  Speaker 3: Most popular video, tell husband's secret gay love affair with
• 36:58
  Speaker 3: step son ends in Grizzly Murder, was watched by some
• 37:01
  Speaker 3: two million people. When interviewed by the When the creator
• 37:06
  Speaker 3: was interviewed, he claimed that this he didn't really see
• 37:11
  Speaker 3: the problem that quote true crime is entertainment masquerading as news,
• 37:16
  Speaker 3: and that his content was less exploitive than traditional true
• 37:19
  Speaker 3: crime media. I think the main problem that I have
• 37:22
  Speaker 3: with the whole story is the fact that you called
• 37:24
  Speaker 3: it true crime. It's false, but it is kind of
• 37:29
  Speaker 3: a weird segment that Americans are a bit fascinated with.
• 37:33
  Speaker 3: The seventeenth most popular podcast on Spotify is Crime Junkies,
• 37:38
  Speaker 3: which is a true crime podcast, and there are dozens
• 37:41
  Speaker 3: of those different true crime podcasts that are out there.
• 37:45
  Speaker 3: But yeah, when you create something using AI and call
• 37:48
  Speaker 3: it true crime and then get taken down by YouTube
• 37:52
  Speaker 3: because it's not true crime.
• 37:55
  Speaker 2: So a couple interesting questions as a result of this
• 37:57
  Speaker 2: one would this have been popular if not referred to
• 38:00
  Speaker 2: as true crime but instead just you know, like and
• 38:06
  Speaker 2: clearly this is someone who's like talented at doing this,
• 38:10
  Speaker 2: get a real job. No, not get a real job, Blake.
• 38:12
  Speaker 2: I don't know, like call it fake crime or like
• 38:14
  Speaker 2: write fiction or whatever. I don't know, Like you're clearly
• 38:17
  Speaker 2: good at this, So I don't know, do something with it.
• 38:21
  Speaker 2: We're gonna take a break through the entire weekend. We'll
• 38:23
  Speaker 2: see you back here Monday, and Monday we'll see you
• 38:25
  Speaker 2: back here on the Financial Exchange next week