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The Middle Class Is Unraveling · The Financial Exchange Show

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  Speaker 1: and Paul Lane.
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  Speaker 2: Chuck Paul and talker with you here today, and it
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  Speaker 2: is the twelfth of November, which does this.
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  Speaker 3: Day bear any historical significance?
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  Speaker 4: You're the history major. I have no idea.
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  Speaker 2: Let me see, I'm just like thinking out loud. I
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  Speaker 2: don't think there's anything major here. We go, okay. In
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  Speaker 2: seven sixty four, I think we all remember this, Tibetan
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  Speaker 2: troops occupied Changan for fifteen days, which was the capital
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  Speaker 2: of the Tang dynasty. I know that we all remember
• 1:46
  Speaker 2: that very well. Oh, kind of interesting one. Fourteen thirty nine, Plymouth,
• 1:50
  Speaker 2: England was the first town incorporated by the English Parliament.
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  Speaker 2: That's kind of a big one like that. That's a
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  Speaker 2: pretty big step to getting to where we are today.
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  Speaker 3: See.
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  Speaker 2: In eighteen thirteen, Allied troops occupied Zwaal, Netherlands. Probably didn't
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  Speaker 2: pronounce that correctly. What else do we have in? Oh,
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  Speaker 2: this is kind of a good big one. Nineteen eighteen,
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  Speaker 2: Emperor Karl of Austria Hungary abdicates, Austria becomes a republic again,
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  Speaker 2: another thing that, you know, kind of important to getting
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  Speaker 2: us to where we are today.
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  Speaker 3: What else do we have here? Oh?
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  Speaker 2: Nineteen twenty five I saw something good there, use an
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  Speaker 2: Italy signed piece of cord about war debts, something else
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  Speaker 2: that got us to where we are today. I mean,
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  Speaker 2: like some of these are pretty important, actually, But in
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  Speaker 2: any case, if you don't want to revisit ancient history,
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  Speaker 2: we can at least talk a little bit about what's
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  Speaker 2: going on right now and what Americans are concerned about today.
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  Speaker 2: And we'll start with this piece from Bloomberg. It's titled
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  Speaker 2: It's not just affordability and Americans are anxious over jobs too,
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  Speaker 2: And really, I think this is two sides of the
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  Speaker 2: same coin in my opinion, Paul in that if go
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  Speaker 2: up but wages rise faster, people don't care. If prices
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  Speaker 2: go up and wages rise more slowly, people care. And
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  Speaker 2: this is what we are seeing for a broader swath
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  Speaker 2: of Americans right now. Bank of America had a piece
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  Speaker 2: on this in the last couple of days, which is,
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  Speaker 2: for the bottom third of Americans, wage growth over the
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  Speaker 2: last year's running at one percent while inflation's running at three. Gosh,
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  Speaker 2: that's kind of the whole thing, encapsulated one. Wages are
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  Speaker 2: trailing price growth, which means affordability is a concern and
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  Speaker 2: wages are trailing price growth because the job market is
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  Speaker 2: not as robust for those groups right now, and so
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  Speaker 2: there's no incentive for companies to pay more to retain labor.
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  Speaker 4: Yeah, the labor market has been the biggest item of focus,
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  Speaker 4: it feels like, over the last three to six months
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  Speaker 4: or so, and we'll talk about it more here. The
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  Speaker 4: Federal Reserve is really putting a keen focus on it.
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  Speaker 4: But interesting kind of parsing through our stack today. It
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  Speaker 4: seems like inflation is popping up again too as a
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  Speaker 4: potential concern. You know, you mentioned that if wages are
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  Speaker 4: rising and inflation is rising, then people are less concerned.
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  Speaker 4: I would argue that because there's also a significant percentage
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  Speaker 4: of the population that is not collecting wages, that there
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  Speaker 4: is probably a bigger camp that would fall into maybe
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  Speaker 4: wages not keeping up with inflation and that's frustrating them,
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  Speaker 4: or retirees who are living off of a more fixed income.
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  Speaker 4: Or Yes, you could argue social Security has the cost
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  Speaker 4: of living adjustment, but I think many people would argue
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  Speaker 4: that it doesn't fully cover everything that we've seen from
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  Speaker 4: a pricing increase front, so they can feel crunched too. Obviously,
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  Speaker 4: their portfolios have performed well, but for those people in
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  Speaker 4: retirement also a strain on them. Really the biggest takeaway
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  Speaker 4: that I had from twenty twenty two because it was
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  Speaker 4: really the only experience in my career that I've seen
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  Speaker 4: inflation run as rampantly as it had since the seventies,
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  Speaker 4: which I was, and I not alive or working for
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  Speaker 4: It is something that universally everyone can't stand and it
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  Speaker 4: is probably one of the most upsetting economic factors to
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  Speaker 4: individuals on a day to day basis. It really disrupts
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  Speaker 4: their lives tremendously, more so than some labor market's disruption.
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  Speaker 4: It is something that really irritates consumers and still to
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  Speaker 4: this day has ripple effects three years later because of
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  Speaker 4: all the price increases we saw there. So it's it's significant,
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  Speaker 4: but of course the labor market is too.
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  Speaker 2: So when we look at and look the you and
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  Speaker 2: I also in terms of you know, what we have
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  Speaker 2: and haven't seen. Look, I came into this business in
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  Speaker 2: the aftermath, like right as the Great Financial Crisis was unfolding,
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  Speaker 2: Like I was, I was, you know, watching as that happened,
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  Speaker 2: and so ultimately I think that part of why we
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  Speaker 2: talk about, you know, the concerns about inflation, because.
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  Speaker 3: That's the last battle that we fought.
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  Speaker 2: But you know, I remember back in that two thousand
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  Speaker 2: and nine three through twenty fourteen period, just the the
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  Speaker 2: heavy weight that everyone was carrying around, Like even if
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  Speaker 2: you weren't unemployed, it still was companies were laying people
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  Speaker 2: off because sales were really lethargic. It was a really
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  Speaker 2: lackluster recovery. There was consistent concern about is there going
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  Speaker 2: to be a double dip recession? You know, that was
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  Speaker 2: the talk of twenty eleven and twenty twelve, and it
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  Speaker 2: was just something where like the malaise that you had
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  Speaker 2: throughout the economy was palpable. Then this here, what we're
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  Speaker 2: seeing in terms of concerns about the labor market is
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  Speaker 2: people are really nervous about where things are going to
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  Speaker 2: go on that front. But when you actually look at
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  Speaker 2: what has been occurring, it's just not there as far
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  Speaker 2: as the scale of layoffs or workforce reductions. I mean, ultimately,
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  Speaker 2: right now, for the last three to four months, depending
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  Speaker 2: on the metric that you look at, the labor market
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  Speaker 2: is pretty much treading water somewhere around you know, small
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  Speaker 2: numbers of jobs added to no jobs added to maybe
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  Speaker 2: small numbers of jobs lost like that, that's what we're seeing.
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  Speaker 2: And I think it is true that we've seen a
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  Speaker 2: continuous deceleration in the labor market since mid twenty two,
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  Speaker 2: and that it was just coming from a place that
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  Speaker 2: quite honestly was.
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  Speaker 4: Just too hot, that was not over two hundred and
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  Speaker 4: fifty thousand a month average in two twenty five.
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  Speaker 3: I can pull it up.
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  Speaker 2: I don't know exactly where we were, but like, the
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  Speaker 2: labor market's been cooling for about three years.
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  Speaker 3: And the question that.
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  Speaker 2: Matters for twenty twenty six is does this continue or
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  Speaker 2: are we finding a bottom?
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  Speaker 3: Yep, if it.
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  Speaker 2: Continues, we got some issues because when you start seeing
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  Speaker 2: consistent job losses, consumer spending typically can't be maintained. And
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  Speaker 2: that's where you see kind of things go convexedly bad,
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  Speaker 2: where the pain accelerates because consumer spending, you know, takes
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  Speaker 2: a further leg down. If we bought them out in
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  Speaker 2: this range and companies have you know, all new plans
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  Speaker 2: for expansion next year because of one big beautiful Bill
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  Speaker 2: Act provisions and things like that, then you can say, okay,
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  Speaker 2: like yeah, we've got more room to run. But this
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  Speaker 2: is this is a critical time in the next three
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  Speaker 2: to six months, in my opinion, and I'm hopeful that
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  Speaker 2: we see the same thing that we've seen the last
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  Speaker 2: two years, which is a labor market that has answered
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  Speaker 2: the bell when when it's been rung and says, yep,
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  Speaker 2: we're not done yet. But I don't know what we're
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  Speaker 2: going to see, and I remain open to a wide
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  Speaker 2: range of possibilities here because none of this is set
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  Speaker 2: in stone.
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  Speaker 4: Last fall was a great example. We had similar conversations
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  Speaker 4: where the unemployment rate had ticked up from the three
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  Speaker 4: and a half percent low that it had reached to
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  Speaker 4: four to two four three, where it sits today, and
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  Speaker 4: here we are a year later, right at the same point.
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  Speaker 4: So the question is where is it a year from now?
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  Speaker 4: Where is it six four months, six months from now?
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  Speaker 2: Uh piece and CNBC. The shutdown put jobs and inflation
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  Speaker 2: data on hold. Here's when it could be back in
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  Speaker 2: what it might say. The answer is it might be
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  Speaker 2: back soon, but we don't know exactly when, and we
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  Speaker 2: don't know what it's going to say.
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  Speaker 4: That's definitely true. It seems like the earliest we could
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  Speaker 4: get any information it's Tuesday or Wednesday, the October jobs report.
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  Speaker 4: But in terms of all the other data. It seems
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  Speaker 4: like that is going to take quite a bit of
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  Speaker 4: time before.
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  Speaker 2: We might get some before Thanksgiving. Sure, now we might
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  Speaker 2: get some other data like CPI PPI. Maybe that starts
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  Speaker 2: trickling in weekly. Jobless claims probably resume next week, they
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  Speaker 2: could resume tomorrow. I don't know how long it takes
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  Speaker 2: that the doll to tabulate that and run it through
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  Speaker 2: their stuff.
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  Speaker 3: So we'll we'll see, but.
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  Speaker 2: I expect post Thanksgiving we'll be back to a regular cadence.
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  Speaker 2: But the next week or so is going to be choppy,
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  Speaker 2: especially because have you guys realized Thanksgiving is in two
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  Speaker 2: weeks in a day.
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  Speaker 4: It's it's incredible how quickly it's it's coming.
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  Speaker 2: It's it's wild. Like those poor turkeys, I mean.
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  Speaker 3: They don't know what's coming. Well, I hate to tell
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  Speaker 3: you it's already come for them.
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  Speaker 2: Yeah, you know, it's like I've seen the butterballs all
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  Speaker 2: through the grocery stores and gotta tell you, there's a
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  Speaker 2: lot of them this year.
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  Speaker 4: There's a lot of turkeys. Though there's a lot of
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  Speaker 4: them survive Everythanksgiving. They're overpopulated. Well, I mean, look, you
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  Speaker 4: gotta decimating the local population, throw a callback. Yeah.
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  Speaker 3: In any case, let's take a quick break.
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  Speaker 2: By the way, on this date in history, in twenty
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  Speaker 2: twenty one, Britney Spears Conservatorship ended, so that's kind of
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  Speaker 2: a big one quick break.
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  Speaker 3: More after this.
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  Speaker 2: Probably got a piece in the Wall Street Journal. The
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  Speaker 2: FED is increasingly torn over a December rate cut. Why
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  Speaker 2: are they getting all, you know, bent out of shape?
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  Speaker 4: Well, I think certainly one of the issues that you
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  Speaker 4: have to point to is the fact that they've been
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  Speaker 4: walking around in the dark for the last couple of
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  Speaker 4: months and had well turn the lights on Jerome hopefully
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  Speaker 4: by the end of this week that the lights are
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  Speaker 4: back on. That's one of the reasons sort of limited
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  Speaker 4: data there. But also you have these factors that have
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  Speaker 4: persisted for the last few months here with a sluggish
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  Speaker 4: labor market that we've talked about that is nowhere near
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  Speaker 4: growing like it was in twenty twenty four, and you
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  Speaker 4: also have relatively persistent inflation, and it puts the FED
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  Speaker 4: in a difficult position where typically what your view would
• 12:01
  Speaker 4: be is if you feel that the labor market is slowing,
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  Speaker 4: by taking down interest rates, you would stimulate more activity
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  Speaker 4: and more demand in the labor market, or that's the
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  Speaker 4: best tool that the Fed would have, is to bring
• 12:13
  Speaker 4: interest rates down to get the economy going. But also
• 12:16
  Speaker 4: on the other front with inflation, as we saw in
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  Speaker 4: twenty twenty two, the reason that we've reached the rates
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  Speaker 4: that we are at today is to get inflation or control,
• 12:25
  Speaker 4: typically you have to raise interest rates. So when you're
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  Speaker 4: between those two issues of a weak labor market and
• 12:30
  Speaker 4: persistent inflation, it can be difficult to know what direction
• 12:34
  Speaker 4: that they should go to. At this point in time.
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  Speaker 4: According to CEME futures, it looks like where we sit
• 12:39
  Speaker 4: around a sixty five percent probability that they will move
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  Speaker 4: forward with the rate cut coming for the December tenth meeting,
• 12:48
  Speaker 4: but still a thirty five percent chance or so that
• 12:50
  Speaker 4: they stay put.
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  Speaker 2: So I have two kind of different thoughts in my head,
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  Speaker 2: but they're the ones that get it, like the crux
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  Speaker 2: of the problem. The first is, I don't understand how
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  Speaker 2: they're not still all steam ahead to cut.
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  Speaker 3: Yeah.
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  Speaker 2: And here's my thinking on this. It's not that I'm like, yes,
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  Speaker 2: like you have to cut no matter what. It's more, Okay,
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  Speaker 2: you thought the conditions in September warranted a cut. You
• 13:19
  Speaker 2: then thought that conditions in October continued to warrant an
• 13:23
  Speaker 2: additional cut, even though we're still not getting you know,
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  Speaker 2: the government data because of the shut of the shutdown,
• 13:30
  Speaker 2: the supplemental data that's surrounding that. You know again when
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  Speaker 2: you will get the labor market, when you look get
• 13:36
  Speaker 2: you know, everything else that we're getting is not showing
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  Speaker 2: a deviation from the trend that we were on through
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  Speaker 2: September and early October. And so if you felt that
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  Speaker 2: a cut was warranted during that time, I just don't
• 13:53
  Speaker 2: know how you get to Well, we did two of
• 13:55
  Speaker 2: them and now we're fine.
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  Speaker 3: I struggle there.
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  Speaker 2: And this is also then when I get to kind
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  Speaker 2: of the the other piece that I I think it
• 14:05
  Speaker 2: forms the other side of the equation to a certain extent,
• 14:09
  Speaker 2: which is the FED over the last fourteen months has
• 14:16
  Speaker 2: now cut the FED funds right by one and a
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  Speaker 2: half percent. Like we forget that. I mean, this is
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  Speaker 2: all one cutting cycle since last September. In my opinion,
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  Speaker 2: the FED did one percentage pointing cuts last year and
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  Speaker 2: half a percent this year. The housing market is objectively
• 14:33
  Speaker 2: worse now than it was a year ago. Can you
• 14:38
  Speaker 2: point to anything that shows housing is better today than
• 14:41
  Speaker 2: it was a year ago? A little bit better for buyers,
• 14:45
  Speaker 2: But like the actual activity, the activity hasn't budged. No,
• 14:49
  Speaker 2: Pricing continues to slide in large parts of the country.
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  Speaker 4: On the mortgages probably haven't moved too much.
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  Speaker 3: They're about the same.
• 14:58
  Speaker 2: Spot is where they were at this time last year.
• 14:59
  Speaker 2: They they ran up then to around seven percent, but
• 15:02
  Speaker 2: again you're pretty much in the same spot.
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  Speaker 3: And so you know, you've.
• 15:06
  Speaker 2: Got a glut of completed new homes that are out there.
• 15:10
  Speaker 2: It's about one hundred and twenty or one hundred and
• 15:12
  Speaker 2: thirty thousand, which is the highest level that we've had
• 15:14
  Speaker 2: since twenty ten, and so like, you look at what
• 15:17
  Speaker 2: builders are telling you, and they're telling you we're gonna
• 15:19
  Speaker 2: build fewer homes. The margins are gonna be worse. And
• 15:23
  Speaker 2: so I look at it and I go, if one
• 15:26
  Speaker 2: hundred and fifty BIPs in cuts didn't move the needle
• 15:30
  Speaker 2: for housing, I'm not sure anything is going to unless
• 15:36
  Speaker 2: something really bad happens and you need to cut interest
• 15:39
  Speaker 2: rates down to like one percent. And even there, I
• 15:43
  Speaker 2: don't know how much that influences mortgage rates because the
• 15:46
  Speaker 2: long bond isn't gonna believe that you're gonna keep rates
• 15:49
  Speaker 2: at one percent forever. Sure in this world, in this environment,
• 15:53
  Speaker 2: that's not the case. So like, does the ten year
• 15:56
  Speaker 2: go from four down to three and a quarter and
• 16:00
  Speaker 2: that gets you to like five and a half on
• 16:02
  Speaker 2: mortgage rates?
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  Speaker 4: Not because of anything that's gonna happen with the Fed
• 16:06
  Speaker 4: founds rates. It would have to be some sort of
• 16:07
  Speaker 4: dramatic economics slow down.
• 16:10
  Speaker 2: The exactly, and so like I kind of look at
• 16:12
  Speaker 2: it and I go. Part of me is like, Okay,
• 16:14
  Speaker 2: they should still be cutting in December. The other part
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  Speaker 2: of me goes, they've already cut one hundred and fifty BIPs.
• 16:19
  Speaker 2: It's not like that extra quarter percent is going to
• 16:21
  Speaker 2: make a difference. When we talked about monetary policy errors,
• 16:25
  Speaker 2: we're not talking about being wrong by a quarter percent
• 16:27
  Speaker 2: because it doesn't matter.
• 16:28
  Speaker 3: Right.
• 16:29
  Speaker 2: Monetary policy errors are like, hey, we cut by one
• 16:32
  Speaker 2: hundred and fifty BIPs when we should have been raising
• 16:34
  Speaker 2: by one fifty the I agree that small the cuts
• 16:37
  Speaker 2: not going to make or break it right, So just
• 16:39
  Speaker 2: it doesn't matter. But from a messaging standpoint, I think
• 16:43
  Speaker 2: it could matter in the sense that, Okay, let's say
• 16:45
  Speaker 2: they do proceed with this twenty five base point cut
• 16:47
  Speaker 2: come December, and the thing out there has been that
• 16:52
  Speaker 2: tariffs have been companies have been withholding increasing prices because
• 16:56
  Speaker 2: of tariff impact. What if and I'm not saying this
• 16:59
  Speaker 2: could have this is going to happen, But if in
• 17:01
  Speaker 2: twenty six you start to see the dam sort of
• 17:04
  Speaker 2: break and you see price increases coming at a more
• 17:06
  Speaker 2: substantial level, then the FED is gonna have to pivot
• 17:10
  Speaker 2: their course if we see it. And then I think
• 17:13
  Speaker 2: they're worried about just the messaging that they go from
• 17:16
  Speaker 2: cutting to raising or or staying at the same level.
• 17:21
  Speaker 2: Perhaps that's the concern there. Yeah, so I hold these
• 17:25
  Speaker 2: differing views, one of which is, Okay, they probably should
• 17:28
  Speaker 2: cut in December because they've been cutting. But I'm also
• 17:32
  Speaker 2: not sure that it matters if they cut in December
• 17:36
  Speaker 2: because it hasn't mattered what they've done on rates to
• 17:39
  Speaker 2: this point. Like the problems facing the US economy, I'm
• 17:43
  Speaker 2: not sure are rate sensitive not at this point, you know, Like,
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  Speaker 2: I'm just not sure that's the case. So, yeah, how
• 17:53
  Speaker 2: does that change the labor market right like it did
• 17:56
  Speaker 2: the pass through? Is?
• 17:56
  Speaker 4: I mean you could argue, Okay, more more lending and
• 18:00
  Speaker 4: more economic activity, hire more people, but I don't think
• 18:02
  Speaker 4: that's going to be the impetus to get companies going.
• 18:05
  Speaker 2: It's normally housing is the leading indicator. So you say, okay,
• 18:08
  Speaker 2: we cut rates, mortgage rates fall, and that juice is
• 18:11
  Speaker 2: housing and that's you know what pulls us if if
• 18:14
  Speaker 2: housing is not responding to lower mortgage rates. Guys, quite honestly,
• 18:20
  Speaker 2: I don't know that the FED has the tools to
• 18:22
  Speaker 2: fix this thing.
• 18:25
  Speaker 4: No, they're gonna need to get out the hammer, and
• 18:27
  Speaker 4: they're gonna need a big inventory.
• 18:28
  Speaker 2: Yeah, they're gonna need a bigger boat.
• 18:31
  Speaker 3: So I mean, it's It's just.
• 18:33
  Speaker 2: Something where I think the questions that we're facing right
• 18:37
  Speaker 2: now are different from prior labor market concerns. And it's
• 18:43
  Speaker 2: also just the fact that, like the timing of this
• 18:45
  Speaker 2: is weird. Again, normally, consumption leads the labor market. The
• 18:50
  Speaker 2: labor market is moving while consumption is not. Right now,
• 18:53
  Speaker 2: consumption is consistently running four to six percent increase in
• 18:56
  Speaker 2: consumer spending. All the big banks are telling you that,
• 18:59
  Speaker 2: the credit card process are telling you that, everyone's telling
• 19:02
  Speaker 2: you this, and yet you still have labor market growth slowing,
• 19:09
  Speaker 2: which is not what we normally see. It's just different
• 19:14
  Speaker 2: and added to the pile of things that have been
• 19:17
  Speaker 2: different this business cycle that you know, haven't existed in
• 19:20
  Speaker 2: prior ones. Quick break here when we come back, we
• 19:23
  Speaker 2: got Wall Street Watch, and then we're talking about the
• 19:27
  Speaker 2: unraveling of Massachusetts middle class.
• 19:39
  Speaker 1: Like us on Facebook and follow us on Twitter at
• 19:42
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:46
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:51
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• 19:55
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• 19:59
  Speaker 5: Right now, markets are mixed territory, with AMD among the
• 20:02
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• 20:07
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• 20:09
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• 20:13
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• 20:16
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• 20:19
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• 20:22
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• 20:27
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• 20:49
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• 20:52
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• 20:56
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• 21:00
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• 21:04
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• 21:07
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• 21:11
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• 21:15
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• 21:20
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• 21:23
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• 21:27
  Speaker 5: shares are up seven percent at the moment. Starbucks up
• 21:31
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• 21:34
  Speaker 5: News this morning that the Trump administration would soon unveil
• 21:38
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• 21:43
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• 21:46
  Speaker 5: and gambling operator Flutter Entertainment. I'm Tucker Silva, and that
• 21:50
  Speaker 5: is Wall Street.
• 21:51
  Speaker 2: Watch from Struggling to I'm sorry, from Secure to Struggling
• 21:56
  Speaker 2: the unraveling of Massachusetts middle class. So this is a
• 22:02
  Speaker 2: pretty long piece that was put together by the Boston Globe.
• 22:07
  Speaker 2: I mean, it's I don't know, I'm looking at it.
• 22:09
  Speaker 2: It's like eight to ten pages printed out, if not more,
• 22:13
  Speaker 2: and it goes through a pretty comprehensive rundown of why
• 22:22
  Speaker 2: the things that effectively make the middle class, you know,
• 22:25
  Speaker 2: kind of what what it's historically been in the United
• 22:29
  Speaker 2: States are becoming increasingly challenging to afford in Massachusetts and
• 22:35
  Speaker 2: I think a key part of this, Paul, is first defining,
• 22:40
  Speaker 2: you know, what middle class means, because I think like,
• 22:45
  Speaker 2: if you ask people, I bet like ninety percent of
• 22:49
  Speaker 2: them would say they're middle class, but that that can't
• 22:52
  Speaker 2: be the case because that's basically all the class, Like,
• 22:56
  Speaker 2: that's that's everyone. And so when I think of middle
• 23:01
  Speaker 2: class and kind of how I would define it in
• 23:05
  Speaker 2: terms of some of the key tenets of it, I
• 23:09
  Speaker 2: think of a family, like if you think of like
• 23:12
  Speaker 2: the staples of it, a family that has jobs for
• 23:16
  Speaker 2: any of the adults in the household that want them,
• 23:19
  Speaker 2: and on those salaries, can reasonably afford either the rent
• 23:24
  Speaker 2: or mortgage payment to live in a certain area with
• 23:29
  Speaker 2: a week or two of vacation time that they can
• 23:31
  Speaker 2: take to you know, domestic locations with the family when
• 23:38
  Speaker 2: they want to that are you know, reasonably priced. Is
• 23:41
  Speaker 2: that kind of a good general area. Is there anything
• 23:43
  Speaker 2: else that you would add to that?
• 23:45
  Speaker 4: No, I think that that summarizes it pretty well. I
• 23:49
  Speaker 4: was gonna get hard numbers, but that's probably a better
• 23:51
  Speaker 4: way to contextualize it.
• 23:53
  Speaker 2: It's just kind of what do people expect out of
• 23:54
  Speaker 2: middle classness. I can pay for my house, I can
• 23:58
  Speaker 2: take the family somewhere a couple time times a year,
• 24:01
  Speaker 2: you know, not extravagant or anything like that, and I
• 24:05
  Speaker 2: can afford my basic necessities without a ton of stress
• 24:08
  Speaker 2: and worry.
• 24:09
  Speaker 4: I think that's fair. Yeah, I think that's.
• 24:10
  Speaker 3: How I would define it.
• 24:12
  Speaker 2: Where are we seeing the biggest problems with that affordability
• 24:16
  Speaker 2: in the context of this piece on Massachusetts.
• 24:18
  Speaker 4: The difficulty with Massachusetts, and again this is going to
• 24:22
  Speaker 4: vary community by community as to what that middle class
• 24:26
  Speaker 4: middle income range is that we were just kind of
• 24:29
  Speaker 4: talking about before the characteristics of it. But if you
• 24:32
  Speaker 4: look back to two thousand and half of the Boston
• 24:36
  Speaker 4: area households qualified as middle class. Where you look at
• 24:41
  Speaker 4: that number today, only forty one percent of them remains.
• 24:44
  Speaker 4: So some have either you know, promoted up to sort
• 24:48
  Speaker 4: of upper class or others have fallen by the wayside
• 24:50
  Speaker 4: on the lower income side of things. And it's a
• 24:54
  Speaker 4: multitude of different factors. One, we know the housing issues
• 24:57
  Speaker 4: that this state has. There is just not a tremendous
• 25:01
  Speaker 4: amount of new homes being built. We did see an
• 25:03
  Speaker 4: uptick around COVID in twenty one and twenty two of
• 25:07
  Speaker 4: more permitting for new houses on the market. But in
• 25:10
  Speaker 4: twenty three and twenty four we saw the two lowest
• 25:13
  Speaker 4: years of housing permits in the Boston area at least
• 25:16
  Speaker 4: since twenty twelve, so there hasn't been a tremendous uptick
• 25:19
  Speaker 4: there on the inventory side of things. The other thing
• 25:22
  Speaker 4: is childcare is incredibly expensive in this state too. I
• 25:26
  Speaker 4: was blown away by these numbers, though they make sense,
• 25:29
  Speaker 4: But twenty six seven hundred dollars is the average median
• 25:33
  Speaker 4: cost to put an infant through childcare in Massachusetts.
• 25:37
  Speaker 3: For a four year.
• 25:38
  Speaker 4: Old, it's eighteen thousand a year. And what it is
• 25:41
  Speaker 4: also helpful is that typically you want to assign in
• 25:44
  Speaker 4: a budget seven percent of a family's income to childcare.
• 25:48
  Speaker 4: If you assign that seven percent to the twenty six thousand,
• 25:51
  Speaker 4: seven hundred costs that I'm alluding to there, that's a
• 25:54
  Speaker 4: household make in three hundred eighty thousand, Chuck. That's a
• 25:56
  Speaker 4: huge number. And ultimately it just comes down to you
• 26:00
  Speaker 4: have to make so much money to live in this state.
• 26:02
  Speaker 4: And I think back to when I was going through school,
• 26:06
  Speaker 4: two teachers could comfortably and this is to the middle
• 26:09
  Speaker 4: class point that you're talking about live in the Greater
• 26:12
  Speaker 4: Boston area, raise a family and work at the local
• 26:16
  Speaker 4: high school. But now my sister is a teacher in
• 26:20
  Speaker 4: the Framham School system, and very candidly, she had the
• 26:24
  Speaker 4: discussion with us that she would not be able to
• 26:27
  Speaker 4: do to live around this area if she were to
• 26:29
  Speaker 4: marry another teacher. It's just I don't know if that
• 26:32
  Speaker 4: is possible anymore.
• 26:33
  Speaker 2: Yeah, And it gets then to the question of well,
• 26:36
  Speaker 2: what do we do about This's where I wanted to
• 26:38
  Speaker 2: go next. Yeah, because you know, look, this is clearly
• 26:42
  Speaker 2: something that is front and center in the minds of
• 26:48
  Speaker 2: the vast majority of Americans right now. You know, we've
• 26:52
  Speaker 2: been talking about pricing and affordability and inflation. We've been
• 26:56
  Speaker 2: talking about this stuff heavy duty, NonStop for the last
• 26:59
  Speaker 2: four years, going back to twenty twenty two. You can
• 27:02
  Speaker 2: even make the case five years going back to you know,
• 27:04
  Speaker 2: a decent chunk of twenty one. And so the question is, like,
• 27:08
  Speaker 2: what do we do about this? Because the obvious impulse
• 27:14
  Speaker 2: is to be able to say, well, those prices are
• 27:17
  Speaker 2: too high, we need to you know, bring those prices down.
• 27:20
  Speaker 2: But then you get into okay, what's the quote right
• 27:24
  Speaker 2: price for anything? And should the should the federal, state,
• 27:27
  Speaker 2: or city government be setting the right price and the
• 27:29
  Speaker 2: answers no, that generally doesn't work out very well. So like,
• 27:34
  Speaker 2: we have a system now that is not working for
• 27:38
  Speaker 2: an increasingly large portion of Americans.
• 27:41
  Speaker 3: What what are.
• 27:43
  Speaker 2: The issues that have led us to this point and
• 27:47
  Speaker 2: how do we correct them going forward? And what? We
• 27:54
  Speaker 2: have to look at this from a few different perspectives.
• 27:56
  Speaker 2: The first is on a local level in many different communities,
• 28:03
  Speaker 2: the problem is that for one reason or another on
• 28:05
  Speaker 2: the housing side, it's become too expensive to build and
• 28:07
  Speaker 2: too arduous a process. So can we make it easier
• 28:11
  Speaker 2: and cheaper to expand housing supply?
• 28:13
  Speaker 4: Yep?
• 28:14
  Speaker 2: And you know people say like, oh, like, can you
• 28:16
  Speaker 2: build like more low, low cost to low income housing.
• 28:19
  Speaker 2: Quite honestly, if you build more housing, eventually more and
• 28:22
  Speaker 2: more of the housing that's out there will become lower cost,
• 28:25
  Speaker 2: even if it starts out at higher cost because supply
• 28:28
  Speaker 2: and demand. It's just how it works. Like, think about
• 28:31
  Speaker 2: apartments that were built twenty years ago that were being
• 28:33
  Speaker 2: pitched as like luxury apartments. They're the ones that are
• 28:38
  Speaker 2: now no longer receiving that premium pricing because they're twenty
• 28:41
  Speaker 2: years old. Like you just it's just kind of how
• 28:44
  Speaker 2: it works. You build more and pricing comes down as
• 28:47
  Speaker 2: a result of further new building. So I think that's
• 28:51
  Speaker 2: one place that I get to on on that side
• 28:53
  Speaker 2: of things. Other things that I think, quite honestly have
• 28:58
  Speaker 2: contributed but for which I have no answer. It's the
• 29:02
  Speaker 2: increasing mbaization of the world, where every asset needs to
• 29:07
  Speaker 2: have some kind of return on it rather than just oh,
• 29:11
  Speaker 2: this does the job it's intended to. The example I'm
• 29:16
  Speaker 2: gonna site is kind of a dumb one, but I
• 29:18
  Speaker 2: think it gets at this in that because every piece
• 29:22
  Speaker 2: of real estate now has to be like run through
• 29:25
  Speaker 2: a cap table, you know, like through a pricing matrix
• 29:28
  Speaker 2: of okay, like here's the ROI that you can get
• 29:30
  Speaker 2: on this, and here's you know, the cap rate that
• 29:33
  Speaker 2: you can get.
• 29:33
  Speaker 3: From doing this.
• 29:35
  Speaker 2: Like no one is just okay with there being a
• 29:38
  Speaker 2: piece of real estate in a city that underperforms. Everyone's
• 29:40
  Speaker 2: always trying to find like the next deal so that
• 29:43
  Speaker 2: they can make it. And the answer that I give
• 29:46
  Speaker 2: on like the example, it's kind of done. But the
• 29:49
  Speaker 2: area outside TD Garden, just as an example where the
• 29:52
  Speaker 2: Bruins and Celtics play used to be a dump like
• 29:57
  Speaker 2: it used to be just dive bar after dive bar
• 29:59
  Speaker 2: after dive bar, and you go through it now and
• 30:02
  Speaker 2: they're basically all gone. Like there's the only one that's
• 30:04
  Speaker 2: left at this point is Selly's Tap yep, and everything
• 30:07
  Speaker 2: else is just the same, you know, kind of well
• 30:10
  Speaker 2: polished white subway tile, industrial interior. Like you go to
• 30:14
  Speaker 2: any of the bars there and they're basically all the same. Now,
• 30:17
  Speaker 2: there's not much differentiation. And it's because when these buildings
• 30:21
  Speaker 2: change hand now, like everyone out there is competing for
• 30:25
  Speaker 2: these because again there's not enough other construction. There's not
• 30:27
  Speaker 2: enough ways just to you know, make money, and so it's, oh, well,
• 30:30
  Speaker 2: we've got to get the return on this. And so
• 30:32
  Speaker 2: this is why, you know, the only tenant that can
• 30:35
  Speaker 2: come in here for the bar has to sell twenty
• 30:37
  Speaker 2: five dollars nachos because the cost of the real estate
• 30:41
  Speaker 2: is so expensive.
• 30:42
  Speaker 3: Now.
• 30:43
  Speaker 4: The same thing on the housing front is the builder
• 30:46
  Speaker 4: will not look at building the two thousand square foot
• 30:50
  Speaker 4: home in a nice community like Needum or one of
• 30:53
  Speaker 4: these other suburban areas. If they're gonna go for it,
• 30:56
  Speaker 4: you better believe that they're building the five thousand square
• 30:58
  Speaker 4: foot home so that they can capture you know, greater
• 31:00
  Speaker 4: margin on that.
• 31:01
  Speaker 2: So it's just like I don't know on the childcare side,
• 31:06
  Speaker 2: like how many of these like large nationwide childcare companies
• 31:09
  Speaker 2: are run by private equity firms where it's like, sure,
• 31:12
  Speaker 2: they're providing good childcare.
• 31:14
  Speaker 3: I'm not denying that, But.
• 31:16
  Speaker 2: The pricing's also because the pe firm needs to hit
• 31:19
  Speaker 2: its hurdle rate in order to get to where investors
• 31:23
  Speaker 2: are happy with it, and like that kind of feels
• 31:27
  Speaker 2: like crap, but I don't have an answer for what
• 31:30
  Speaker 2: we do about it, Like I don't know how we
• 31:33
  Speaker 2: get out of this, and I don't know. It's just
• 31:37
  Speaker 2: everything has to be so measured and so like down
• 31:39
  Speaker 2: to this and that and optimized. It's like this is
• 31:42
  Speaker 2: how you get people trying to like measure the quality
• 31:44
  Speaker 2: of their sleep through a watch, when I can just
• 31:45
  Speaker 2: wake up and be like, I didn't sleep well. I
• 31:49
  Speaker 2: know that I don't need my watch to be like, Chuck,
• 31:51
  Speaker 2: you slept like crap last night.
• 31:53
  Speaker 3: Gee, thanks feel like crap today.
• 31:56
  Speaker 4: I don't know enough about the universal pre K stuff
• 31:58
  Speaker 4: that New York City has done, and it comes with
• 32:01
  Speaker 4: a tax, so that's not so I wouldn't really love
• 32:03
  Speaker 4: that either. But on the childcare front, there's not an
• 32:06
  Speaker 4: easy fix. There's no way to optimize or enhance productivity
• 32:10
  Speaker 4: when it comes to childcare. You know, technology can step
• 32:12
  Speaker 4: in on a lot of different areas, but one thing
• 32:15
  Speaker 4: that all three of us know having young kids, that
• 32:17
  Speaker 4: there's there's no fix for that yet. There's no robot
• 32:20
  Speaker 4: out there that can take care of the kids. So
• 32:22
  Speaker 4: it's hard to move the needle there.
• 32:25
  Speaker 2: Also, if you want an unpopular opinion on what would
• 32:29
  Speaker 2: help improve housing affordability for young people, the counter intuitive answer,
• 32:34
  Speaker 2: and I'm not saying that like this is what you
• 32:36
  Speaker 2: want to do or what you don't, but the counter
• 32:38
  Speaker 2: intuitive answer raise property taxes. Young people have a surplus
• 32:44
  Speaker 2: of income but a lack of assets. The high price
• 32:47
  Speaker 2: of real estate means that the biggest impediment to them
• 32:50
  Speaker 2: buying it is typically the lack of a down payment.
• 32:53
  Speaker 2: If you raise property taxes, there are fewer people that
• 32:56
  Speaker 2: can afford to pay the current prices at the same
• 32:58
  Speaker 2: at a higher property tax level, meaning prices have to
• 33:01
  Speaker 2: come down on housing, which makes it more affordable for
• 33:04
  Speaker 2: young people who have that surplus income but not the
• 33:08
  Speaker 2: surplus assets for the down payment. The total monthly payment
• 33:12
  Speaker 2: remains the same. It's just you're giving more to the
• 33:14
  Speaker 2: city rather than to the mortgage servicer. I'm just like,
• 33:20
  Speaker 2: I'm not saying that you should or shouldn't do this,
• 33:23
  Speaker 2: but like, this is another way that you can think
• 33:26
  Speaker 2: about this stuff.
• 33:27
  Speaker 3: Quick break here.
• 33:28
  Speaker 2: When we return, Let's see, we did enough on housing here.
• 33:33
  Speaker 3: Now we can talk.
• 33:34
  Speaker 2: I got a couple other things to say on housing.
• 33:36
  Speaker 2: And then uh, let's see do I want to talk Zuck. No, Oh,
• 33:40
  Speaker 2: let's talk more about this Disney YouTube TV thing because
• 33:42
  Speaker 2: it's really grinding my gears right now. We'll do that
• 33:44
  Speaker 2: when we come back.
• 33:46
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• 33:50
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• 34:55
  Speaker 2: So, talking just a little bit more about housing quick item.
• 35:00
  Speaker 2: We've got some additional concerning signs that home builders are
• 35:04
  Speaker 2: pulling back from new construction, which unfortunately means that you'll
• 35:08
  Speaker 2: have you know, less new inventory hitting markets in order
• 35:11
  Speaker 2: to potentially move prices down. But again, the problem that
• 35:16
  Speaker 2: we come back to on housing is everyone is so
• 35:18
  Speaker 2: protective of their home values that generally in most communities,
• 35:23
  Speaker 2: one of the main reasons why people why you don't
• 35:25
  Speaker 2: have more construction is people vote against it because they're
• 35:28
  Speaker 2: concerned about their property value, and it ends up getting
• 35:31
  Speaker 2: us into a place where, like you just don't have
• 35:36
  Speaker 2: healthy and efficient property markets anymore.
• 35:38
  Speaker 3: Well, I understand a rational perspectively property value.
• 35:42
  Speaker 4: I think it's just you know, the not in my backyard,
• 35:44
  Speaker 4: just not not being overly congested. It seems like is
• 35:47
  Speaker 4: always a pushback from those who are residents, which I
• 35:51
  Speaker 4: guess can go hand in hand with the property value declining.
• 35:53
  Speaker 4: But it is something that we've talked about a lot
• 35:58
  Speaker 4: on the show over the years. But ultimately there's no
• 36:02
  Speaker 4: easy fix to solving that inventory.
• 36:05
  Speaker 2: There is just billmore. We just don't want to do it. Yeah,
• 36:08
  Speaker 2: like that is the fix. It's just we don't want
• 36:11
  Speaker 2: to do it. Nope, we're not gonna do that. Okay,
• 36:14
  Speaker 2: that's fine. Disney and YouTube, let's talk about this. I
• 36:17
  Speaker 2: will say I did claim my twenty dollars YouTube credit
• 36:21
  Speaker 2: that they made me go a website to claim, So
• 36:24
  Speaker 2: I did that apparently. Also, by the way, if you
• 36:28
  Speaker 2: happen to be a YouTube TV subscriber, one other tip
• 36:33
  Speaker 2: that a friend of mine gave me is if you again,
• 36:37
  Speaker 2: you have to go to TV do YouTube dot com.
• 36:38
  Speaker 2: You gotta do this on the website. You can't do
• 36:41
  Speaker 2: it just like on your phone or whatever. But go
• 36:44
  Speaker 2: to the settings menu and then the membership page, and
• 36:48
  Speaker 2: then near the top it says what your plan is
• 36:51
  Speaker 2: and then you can click manage if you go there.
• 36:55
  Speaker 3: Quite a few people.
• 36:56
  Speaker 2: That I know have been getting a ten dollars off
• 36:59
  Speaker 2: subscription for the next six months in order to bring
• 37:02
  Speaker 2: your cost down, because apparently if you go there to
• 37:05
  Speaker 2: that page where you can manage your subscription, it's basically
• 37:08
  Speaker 2: a retention offer because a lot of people are trying
• 37:10
  Speaker 2: to cancel, and so they'll give you ten dollars off
• 37:13
  Speaker 2: in addition to the twenty dollars that you get this month,
• 37:15
  Speaker 2: but that ten dollars is for the next six months.
• 37:18
  Speaker 2: So the question is, how much are you know, all
• 37:20
  Speaker 2: of these companies losing on this. And I guess in
• 37:26
  Speaker 2: looking at this, so YouTube tv is assumed to have
• 37:28
  Speaker 2: somewhere around ten million subscribers, is the thinking, and Disney
• 37:34
  Speaker 2: probably receives somewhere in the ballpark of between all the
• 37:38
  Speaker 2: different networks, because again it's a per channel fee, probably
• 37:42
  Speaker 2: somewhere in the ballpark of twelve to eighteen dollars per subscriber,
• 37:48
  Speaker 2: you know, at this point. And so you do the
• 37:51
  Speaker 2: math and you're like, okay, that's probably like one hundred
• 37:53
  Speaker 2: and twenty to one hundred and eighty million dollars a
• 37:55
  Speaker 2: month in you know, revenue for Disney that they lose
• 37:58
  Speaker 2: direct from YouTube. But also remember that the ad sales there.
• 38:04
  Speaker 2: I don't know exactly how it gets broken down between
• 38:06
  Speaker 2: YouTube and Disney. There's lost revenue on that side as well.
• 38:10
  Speaker 2: But everyone is, you know, kind of coming out of
• 38:13
  Speaker 2: this losing something at least because YouTube is losing some
• 38:16
  Speaker 2: subscribers as a result of this too.
• 38:19
  Speaker 4: Yes, and for YouTube, you know, luckily their parent company Google.
• 38:23
  Speaker 4: You might have heard of them before.
• 38:24
  Speaker 2: It's worth three trillion dollars.
• 38:27
  Speaker 4: So when it comes to muscling around, you better believe
• 38:31
  Speaker 4: that Google cares a little bit less about this than
• 38:34
  Speaker 4: Disney does.
• 38:34
  Speaker 2: Does Google have a mascot? Disney's got the mouse. Google
• 38:40
  Speaker 2: doesn't have one.
• 38:41
  Speaker 3: Do they?
• 38:41
  Speaker 4: No, just just we should.
• 38:43
  Speaker 2: Come up with a mascot for every tech company. Let's
• 38:46
  Speaker 2: let's do that at some point. Quick breakout or two
• 38:48
  Speaker 2: coming up in a bit