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How the housing market is changing · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zada,
1:06
Speaker 1: and Mark Fandetti.
1:22
Speaker 2: We're two here on the Financial Exchange, Chuck, Mark and
1:24
Speaker 2: Tucker with you, and it is pretty grim out there
1:28
Speaker 2: in financial markets this morning. The Dow Jones Industrial Average
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Speaker 2: off just shy of nine hundred points, about two and
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Speaker 2: a quarter percent, the sp five hundred down one hundred
1:37
Speaker 2: and twenty one points about two point three percent, and
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Speaker 2: the Nasdaq can pose it down four hundred and twenty
1:42
Speaker 2: three points or two point six percent. Russell two thousand
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Speaker 2: also down about two percent as well, So all major
1:48
Speaker 2: US indices not really doing so hot today. You get
1:52
Speaker 2: the ten year Treasury that is selling off as well,
1:56
Speaker 2: not as much as it was earlier in the day,
1:58
Speaker 2: but the ten year is down, I'm sorry, up to
2:00
Speaker 2: four point three six two percent, up three and a
2:02
Speaker 2: half basis points. As a result, expect to see some
2:07
Speaker 2: movement upward in mortgage rates today. On Friday, Mortgage News
2:11
Speaker 2: Daily had the national thirty or fixed rate average at
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Speaker 2: six point eight seven percent, probably getting into that sixty
2:16
Speaker 2: nine to six nine to two range. So mortgage rates
2:19
Speaker 2: staying close to seven as we progress through the spring
2:23
Speaker 2: housing season. Oil we've got down a dollar sixty five
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Speaker 2: a barrel to sixty three to Zho three. That is
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Speaker 2: again kind of been fluttering in the low sixties for
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Speaker 2: a little while. Now the tripa national average for gas
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Speaker 2: prices moving back up two tenths of ascent to three
2:39
Speaker 2: point fifteen and three tenths, So again just can't get
2:42
Speaker 2: conclusive movement down, you know, below three dollars on a
2:45
Speaker 2: national average. We're stuck about five percent above that at
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Speaker 2: the moment. And gold continuing just to rocket to uh,
2:52
Speaker 2: you know, new all time highs up almost three percent today,
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Speaker 2: ninety nine dollars and forty cents to thirty four to
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Speaker 2: twenty seven and eight cents right now. The other piece
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Speaker 2: that I'll add on this the US dollar, despite the
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Speaker 2: long end of the yield curve, selling off US dollar
3:07
Speaker 2: down three quarters of a percent today, which is a
3:09
Speaker 2: pretty sizable move. I mean, I know most people listening
3:13
Speaker 2: don't care about foreign exchange as far like quite honestly,
3:17
Speaker 2: aside from like the last three weeks, have we ever
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Speaker 2: spent any meaningful period of time covering foreign exchange? Tucker, No, No,
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Speaker 2: we don't, really, like occasionally here seven years ago.
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Speaker 3: I bet most people don't know, because I didn't know,
3:31
Speaker 3: and I remember an economics teacher making fun of me
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Speaker 3: because I asked. I didn't know dollars traded like assets
3:37
Speaker 3: trade on our currency literally currency market. So I'm guessing
3:41
Speaker 3: a lot of you don't know that I didn't unless
3:44
Speaker 3: you're told. So when we say the dollar weekends, we
3:46
Speaker 3: mean it takes more dollars to buy yen or euros
3:49
Speaker 3: or whatever currency you're comparing it to, or gold or oil,
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Speaker 3: if you want to think of those things, those alternative
3:56
Speaker 3: forms of currency. So I don't it's not a coincidence.
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Speaker 3: I was gonna say, I don't think it is not
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Speaker 3: a coincidence that gold continues to go up as the
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Speaker 3: dollar declines. Those two things are two sides of the
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Speaker 3: same coin. If you think of gold as an alternative currency.
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Speaker 3: It may not be right now, but it was recently
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Speaker 3: and certainly historically, on and off, maybe more on than off,
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Speaker 3: it has been. Think about gold going up when the
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Speaker 3: dollar is going down, or gold going up on the
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Speaker 3: dollar is well, actually it's we only think about it
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Speaker 3: in terms of dollars. So what I was about to
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Speaker 3: say was really stupid, gold going up the dollar going down.
4:27
Speaker 3: Think of it as gold as a currency strengthening relative
4:29
Speaker 3: to the dollars or why. Maybe it's political reasons. The
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Speaker 3: treasuries and no longer are safe haven to buy treasuries, you
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Speaker 3: need to convert whatever currencies you have into dollars. All
4:39
Speaker 3: of these things are interconnected. You can't have a trade war,
4:42
Speaker 3: you can't improve the standing of the dollar. You can't
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Speaker 3: cheapen the dollar to help your exporters without having an
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Speaker 3: impact on interest rates and other asset prices and the
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Speaker 3: price we all pay to buy homes and finance other
4:53
Speaker 3: things that we need to live.
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Speaker 2: Let's talk a little bit about the state of the
4:58
Speaker 2: housing market right now. There's a p here from Tucker.
5:01
Speaker 2: Where's this from?
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Speaker 4: I believe those market Watch the housing piece.
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Speaker 2: Yeah, yeah, Margaret whatever excuse me, Barns, Barns, sorry, barons.
5:13
Speaker 2: It's titled more homes, few buyers, even price cuts. How
5:16
Speaker 2: the housing market has changed. And first thing that I
5:19
Speaker 2: will say, this is not a universal headline for everywhere
5:22
Speaker 2: in the United States. If you happen to be in
5:24
Speaker 2: the New England region, where our show is based out
5:27
Speaker 2: of and where most of our listeners are, it still
5:30
Speaker 2: is very very tight from an inventory perspective in some states. Connecticut,
5:35
Speaker 2: for whatever reason, still has only twenty five percent of
5:38
Speaker 2: twenty nineteen level inventory. Most of the New England states
5:42
Speaker 2: are between like fifty and seventy percent of twenty nineteen
5:46
Speaker 2: level inventory. If you go to Florida, Texas, even you know,
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Speaker 2: you're starting to get this into parts of Georgia, Tennessee, Arizona,
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Speaker 2: you're now actually north of twenty nineteen inventory in some
6:01
Speaker 2: cases by like fifteen to twenty percent. And what we
6:05
Speaker 2: are starting to see right now is, again it still
6:09
Speaker 2: is regional at this point, but in large portions of
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Speaker 2: the country and really a lot of the ones where
6:15
Speaker 2: there's the most housing activity just because again you just
6:19
Speaker 2: have more construction happening in the southeast and Southwest than
6:22
Speaker 2: you do in you know, the Pacific Northwest and the
6:25
Speaker 2: Midwest and the northeast. But ultimately, what we are seeing
6:29
Speaker 2: right now is one of the slowest spring housing seasons
6:34
Speaker 2: that we've seen in a while, and it's especially on
6:37
Speaker 2: a per unit basis. You just have inventories now that
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Speaker 2: are about thirty five percent above last year. So inventories
6:44
Speaker 2: have risen a ton. We're only about eighteen nineteen percent
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Speaker 2: below you know, twenty nineteen inventory nationwide, but transactions are
6:53
Speaker 2: still pretty much in line with last year. And that's
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Speaker 2: before you really get into the tariff impact, because anyone
6:58
Speaker 2: who was buying a place the first week in April,
7:01
Speaker 2: they'd made the decision to put offers in, you know,
7:03
Speaker 2: over the previous couple months. Now you start getting the
7:06
Speaker 2: people looking at it saying, gee, you know, what does
7:09
Speaker 2: the economy look like? Should I or shouldn't I do this?
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Speaker 2: And I'll be interested to see what we get in
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Speaker 2: pending home sales data over the next couple of weeks
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Speaker 2: as we start to really get into that active decision
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Speaker 2: making process for people. Since April second, but overall, you're
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Speaker 2: seeing things on a national level that are slower in
7:29
Speaker 2: the housing market than any point we've seen in the
7:31
Speaker 2: last five years.
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Speaker 3: Now, Mark, it would be encouraging if we got more
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Speaker 3: evidence that the housing market. This is gonna sound stupid,
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Speaker 3: and it might be stupid. This isn't really my area,
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Speaker 3: but how's a national housing market has proved to be destabilizing,
7:45
Speaker 3: or at least it did in two thousand and seven
7:47
Speaker 3: to two thousand and nine. Prior to that, prices were
7:50
Speaker 3: not high. They were highly correlated, but they weren't like
7:53
Speaker 3: perfectly correlated. You could have a bust in Florida, and
7:56
Speaker 3: they did. They had bust after busts every.
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Speaker 2: Five to seven years. Like you say, Miami is constantly
8:01
Speaker 2: either dramatically overbuilt or underbuilt depending on the year. It's
8:04
Speaker 2: never just the right amount of housing.
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Speaker 3: Normally that doesn't sink the national economy. So my hope
8:09
Speaker 3: is with improvements regulatory and in terms of in terms
8:16
Speaker 3: of other practices, I'll just leave it at that because
8:19
Speaker 3: I'm out of my depth quickly here. My hope is
8:21
Speaker 3: the housing market is more fragmented than it used to be,
8:24
Speaker 3: so that any the inevitable sinkholes in housing are contained.
8:29
Speaker 2: What I will say, based on the data that we
8:31
Speaker 2: have a nationally foreclosures continue to be down relative to
8:36
Speaker 2: twenty nineteen. So not a problem, not something that is
8:40
Speaker 2: causing an issue. Also, when you look at loan to
8:43
Speaker 2: value on properties nationwide, you don't really have any signs
8:48
Speaker 2: that households are over levered and that you know, you
8:51
Speaker 2: don't have this any you know, robust evidence that g
8:55
Speaker 2: everyone's like ninety five percent loan to value where you
8:58
Speaker 2: know people that are levered, you know on a hundred
9:00
Speaker 2: and ten percent over the value of the homes. Most
9:02
Speaker 2: people at this point, and this is again based on
9:05
Speaker 2: current pricing, are anywhere from you know, a forty to
9:08
Speaker 2: seventy percent loan to value ratio, and that means you've
9:11
Speaker 2: got plenty of cushion to absorb you know, smaller price changes.
9:15
Speaker 2: But also just based on where inventories are, prices aren't
9:19
Speaker 2: going to be moving nationally in the same direction you
9:22
Speaker 2: have in large portions of Texas and Florida now home
9:27
Speaker 2: price is falling from their peak. You do not have
9:31
Speaker 2: that really in any metro area in the Northeast. You
9:35
Speaker 2: do still get in you know, some rural areas, but
9:37
Speaker 2: that's been unfortunately, you know, the case for a little
9:40
Speaker 2: while now, just because of the movement away from rural
9:44
Speaker 2: areas in general. But there's nothing in the housing market
9:48
Speaker 2: to me that suggests nationally we have any kind of
9:53
Speaker 2: consistent problem or a market that is moving all in
9:57
Speaker 2: one direction.
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Speaker 3: Yeah, we'll have to wait until unemployment starts to raise. Inevitably,
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Speaker 3: there will be a recession. We don't try to forecast
10:02
Speaker 3: recessions here is generally foolish to do so. But there
10:05
Speaker 3: are strong indications of economic weakening, as everybody knows, and
10:10
Speaker 3: as we've been talking about. It'll be interesting to see
10:12
Speaker 3: what happens to some of those metrics which looks strong
10:14
Speaker 3: but are based on backward looking or at the very
10:18
Speaker 3: least stale statistics. If indeed the economy so offense.
10:21
Speaker 2: Just take a quick break. When we return, we'll do
10:24
Speaker 2: a little bit of trivia, and then we'll be talking
10:27
Speaker 2: student loan payments.
10:28
Speaker 1: After this Tara fever is in high gear. We've got
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Speaker 1: the latest on what might be next and how long
10:35
Speaker 1: it might last, only here on the Financial Exchange Radio Network.
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10:55
Speaker 2: All right.
10:56
Speaker 4: Time to tribute here on the Financial Exchange and on
10:59
Speaker 4: this day's back. In nineteen eighty six, Heraldo Rivera opened
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Speaker 4: al Capone's vault on live television. The event was a
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Speaker 4: ratings boon for Rivera and wgn SO trivia question today,
11:12
Speaker 4: what did Heraldo Rivera find an al Capone's vault? Once again,
11:16
Speaker 4: what did Heraldo Rivera find in al Capone's vaults? That's
11:21
Speaker 4: the question today. Be the third person today to text
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Speaker 4: us at six, one, seven, three, six, two thirteen eighty
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Speaker 4: five with the correct answer, and you get a brand
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Speaker 2: Once again, the.
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Speaker 4: Third correct response to text us at six one, seven, three, six,
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Speaker 4: two thirteen eighty five will win that T shirt. See
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Speaker 4: complete contest rules at Financial Exchange Show dot com.
11:46
Speaker 2: Peace In the New York Times, millions of student loan
11:49
Speaker 2: borrowers are behind on payments. I'll quote here only one
11:53
Speaker 2: third of the thirty eight million Americans who have borrowed
11:55
Speaker 2: money to pay for college or graduate school and should
11:58
Speaker 2: be making payments actually are. According to government data. Loan
12:02
Speaker 2: servicers estimate that this year around four million people have
12:06
Speaker 2: been reported to credit bureaus for late payments, and researches
12:09
Speaker 2: at the Federal Bank Reserve of Federal Reserve Bank of
12:12
Speaker 2: New York project that number will climb past nine million
12:15
Speaker 2: by the end of June. Those rising numbers have implications
12:18
Speaker 2: for the broader economy, which has already shown signs of
12:21
Speaker 2: slow and low. Credit scores can prevent people from renting
12:23
Speaker 2: or buying homes and push them into price price riskier
12:26
Speaker 2: loans for cars, emergency cash, and other everyday needs. Mark
12:31
Speaker 2: It would seem to me that this is another potential
12:35
Speaker 2: headwind for the US economy. But I don't really know
12:39
Speaker 2: the context of this other then, Hey, you had student
12:42
Speaker 2: loan payments, you know, suspended for a little while, not
12:45
Speaker 2: a little while, a good while. Uh. And then you
12:48
Speaker 2: also had UH borrowers not penalized on making those loan
12:53
Speaker 2: payments for you know, further beyond that. So now that
12:57
Speaker 2: you have, you know, all of that coming together, it
12:59
Speaker 2: is another potential headwind for the US. I just don't
13:01
Speaker 2: know how to contextualize it in terms of the potential
13:04
Speaker 2: impact on the economy.
13:05
Speaker 3: Now, but it is an example of how the economy
13:07
Speaker 3: was running on COVID stimulus and policy fumes to an
13:11
Speaker 3: unusual extent for even the past three years. You've said
13:15
Speaker 3: many times internally, and I'm sure here as well, that
13:17
Speaker 3: COVID made a lot of economic data difficult to use
13:23
Speaker 3: in traditional models and forecasts because it changed relationships. Spending
13:27
Speaker 3: was goosed by the stimulus packages that were passed by
13:31
Speaker 3: both Trump won and Biden. Biden's was bigger and contributed
13:36
Speaker 3: to inflationary pressures that were percolating up for several months.
13:39
Speaker 3: We all know that now. This is another example of
13:41
Speaker 3: how COVID policy goosed. Spending continues to even to this day.
13:45
Speaker 3: Two thirds of student loan borrows who should be making
13:48
Speaker 3: payments or not? I can't put that in the content.
13:51
Speaker 2: One third or not? Two thirds are only.
13:54
Speaker 3: One third who have borrowed? Actually, oh, two thirds are Yeah, no,
13:59
Speaker 3: I'm not. You're right to question me after my report.
14:02
Speaker 2: It's worse than I thaw.
14:03
Speaker 3: A company that we weren't talking about in the last hour.
14:05
Speaker 2: No, that's bad.
14:06
Speaker 3: Yeah, so whatever. If it was one third, I'd be mortified.
14:10
Speaker 3: Two thirds, I don't even know how to react. What
14:12
Speaker 3: what are we gonna do with these people? We've been
14:14
Speaker 3: carrying them since Trump won during COVID, when student loan
14:18
Speaker 3: payments were suspended. Biden never figured it out. The current
14:22
Speaker 3: administration is now putting their feet to the fire, but
14:24
Speaker 3: they're not making payments anyway. You can't. You can never
14:27
Speaker 3: get it out of a default. You can't. You can
14:29
Speaker 3: never get away, I should say, at least financially, in
14:32
Speaker 3: terms of financial consequences from a default on one of
14:35
Speaker 3: these suckers. This could be a drag, a minor one, arguably,
14:39
Speaker 3: but a drag for a very long period of time. Sorry,
14:42
Speaker 3: I don't have a good no I have with the deal.
14:46
Speaker 3: If you forgive these lines. I mean, I can't morally
14:48
Speaker 3: you think that's that's repulsive. They they're obligated.
14:51
Speaker 2: But so here's the thing. So if if you look
14:55
Speaker 2: at this from the perspective of not only just how
14:59
Speaker 2: do we fix this now, but how do we make
15:01
Speaker 2: sure we don't get back here again in five years? Yeah,
15:04
Speaker 2: you can't. Like even if you said, okay, let's forgive
15:07
Speaker 2: the loans, and I'm not suggesting that you do. Even
15:09
Speaker 2: if you said, okay, let's forgive these you're gonna be
15:12
Speaker 2: right back here in five years because this is still
15:15
Speaker 2: how the college financial system is structured. Right, You're not
15:20
Speaker 2: fixing the actual root cause of the problem. You're basically saying, hey,
15:25
Speaker 2: looks like you're bleeding there in your foot. We're gonna
15:28
Speaker 2: put a bandage on it, not realizing that there's like
15:30
Speaker 2: a bullet in your foot and you know, like you've
15:32
Speaker 2: got to actually deal with that before you put the
15:34
Speaker 2: bandage on. And so the root cause of the problem
15:39
Speaker 2: is that you have a bunch of money that is
15:43
Speaker 2: going towards colleges to pay for education that unfortunately is
15:49
Speaker 2: not actually resulting in incomes growing quickly enough to be
15:53
Speaker 2: able to pay back that's the key point. Yeah, that's
15:56
Speaker 2: that that money. It's it's not that college is a
15:59
Speaker 2: bad invent. It's just it's not a good enough investment
16:03
Speaker 2: in a lot of cases. And quite honestly, at the
16:06
Speaker 2: risk of sounding like an elitist, you know whatever, at
16:10
Speaker 2: the risk of sounding like the elitist ivy leaguer that
16:12
Speaker 2: I am, the reason why is when you go to college,
16:16
Speaker 2: every school gives you the potential to get a great education,
16:21
Speaker 2: every single one. Like you have smart professors at every
16:23
Speaker 2: single college out there. What you don't have at every
16:27
Speaker 2: single college is the network of people that are already
16:32
Speaker 2: making a boatload of money after college to help you
16:35
Speaker 2: get into good paying jobs after college. And that's the
16:39
Speaker 2: thing that they don't tell you on the admissions tour
16:42
Speaker 2: is like they don't tell you that you can get
16:44
Speaker 2: a really good education anywhere as long as you put
16:47
Speaker 2: the work in. Like it's not you have good professors college.
16:50
Speaker 1: Is.
16:51
Speaker 2: The thing that's amazing to me about college is you
16:53
Speaker 2: can go to just about any college in the country
16:55
Speaker 2: and you have world class professors at just about all
16:59
Speaker 2: of them, and they're required to talk to you actually
17:04
Speaker 2: at like office hours, like they're required to have one
17:07
Speaker 2: on one time with you, and you can do that anywhere.
17:11
Speaker 2: And the secret is, look is, quite honestly, unless you
17:17
Speaker 2: can go to like a top twenty five school, find
17:23
Speaker 2: the cheapest college that you can go to get the
17:25
Speaker 2: most out of it, that you can spend time with
17:28
Speaker 2: your professors, spend time learning and everything, and you'll generally
17:32
Speaker 2: come out ahead from people that are spending private you know,
17:35
Speaker 2: tuition payments to colleges that aren't at that ultra elite level.
17:40
Speaker 3: Back to wages for a second. I want to use
17:43
Speaker 3: this and make it a teachable moment for me. I'm
17:44
Speaker 3: thinking through it. I'm not sure teach not qualified too,
17:47
Speaker 3: but I will say this, there's a There are first
17:50
Speaker 3: best solutions and second best solutions. Another example is tariffs.
17:54
Speaker 3: If you want to encourage manufacturing, first best solution is
17:56
Speaker 3: you subsidize it or provide other incentives. Second best solace
18:00
Speaker 3: would be to tariff everything that's coming in. That's a
18:02
Speaker 3: blunt instrument and it will have unintended consequences, as we're
18:06
Speaker 3: now living through. If you want to allow people to
18:11
Speaker 3: afford higher education and then pay it back, I guess
18:18
Speaker 3: to your point, find ways of increasing their wages or
18:22
Speaker 3: otherwise making student loan debt more manageable, kicking the can
18:27
Speaker 3: loan forgiveness. These are second best or maybe even third
18:31
Speaker 3: best solutions. They don't treat, as you were getting at
18:34
Speaker 3: with your analogy, the root of the problem. We seem
18:37
Speaker 3: to be suffering from a plague of second and third
18:40
Speaker 3: best solutions to things over the past few years, not
18:44
Speaker 3: getting at the root and therefore not solving any of
18:46
Speaker 3: these problems.
18:47
Speaker 2: So yeah, I think ultimately you've got to solve the
18:50
Speaker 2: root cause of the problem, which is, hey, how do
18:54
Speaker 2: you actually get this to how do you get college
18:56
Speaker 2: to pay off the way that you know it used to,
19:00
Speaker 2: because quite honestly, for most of the twentieth century, collins
19:03
Speaker 2: did pay off really well in terms of actually building wealth.
19:07
Speaker 2: Today you get the income boosts still, but the extra
19:12
Speaker 2: money that you're paying in loans eats through that and
19:14
Speaker 2: prevents you generally from saving as much as you would
19:17
Speaker 2: have previously. By the way, this is, this data is
19:20
Speaker 2: all publicly available. The Saint Louis fed has a bunch
19:22
Speaker 2: of studies on this exact topic that are fantastic for
19:26
Speaker 2: trying to understand this. Let's take a quick break here
19:30
Speaker 2: when we come back, we get the trivia answer next.
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Speaker 4: Trivia question today was what did Heraldo Rivera find an
20:13
Speaker 4: al Capone's vault. Well, that would be absolutely nothing aside
20:17
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20:21
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20:40
Speaker 2: Piece of New York Times Day, Will a federal judge
20:42
Speaker 2: break up Google? As a side note, I love that
20:48
Speaker 2: the name of the judge presiding over the Google trial
20:51
Speaker 2: is Judge Meta? Is it really? Yes, it's spelled differently.
20:56
Speaker 2: It's spelled hta. That's great, but I can't make that up.
21:00
Speaker 2: I really hope that the guy who's presiding over the
21:04
Speaker 2: Meta trial is like Jim Apple or something like that.
21:08
Speaker 2: I don't think it is, but I do enjoy that
21:10
Speaker 2: there's a judge meta that is presiding over the Google trial.
21:13
Speaker 2: So anyways, Google last summer had an antitrust trial that
21:17
Speaker 2: they lost. They lost it in August of last year,
21:21
Speaker 2: and so there is now a three week hearing that
21:24
Speaker 2: started today to help decide on the remedy for what
21:30
Speaker 2: actually has to happen to Google since they lost that.
21:33
Speaker 2: So the Justice Department wants the judge to break Google
21:40
Speaker 2: up by basically forcing them to sell off their browser Chrome.
21:44
Speaker 2: And remember, if you're running through someone's Internet browser, they
21:47
Speaker 2: get a ton of information about every single website that
21:51
Speaker 2: you visit. And they also want Google to have to
21:56
Speaker 2: hand over some of the data that they have to
21:59
Speaker 2: other companies in the space. In response, Google has asked
22:03
Speaker 2: the judge to slightly restrict its ability to make deals,
22:07
Speaker 2: such as the fact that Google is the default search
22:11
Speaker 2: browser on all Apple devices, so not search browser, but
22:15
Speaker 2: search engine on Apple devices. So there's a little bit
22:18
Speaker 2: of a difference of opinion here in terms of, you know,
22:20
Speaker 2: what each side thinks should happen, And I'm really curious
22:25
Speaker 2: to see what is actually decided here just because again,
22:30
Speaker 2: we haven't had a big anti trust case in an
22:32
Speaker 2: anti trust remedy in decades in the United States. You've
22:36
Speaker 2: had all these like small little ones on you know,
22:38
Speaker 2: when Staples tried to buy Office Depot that got shot down,
22:41
Speaker 2: and you're like, okay, so you're not gonna let them
22:43
Speaker 2: merge with each other. But meanwhile Amazon's eating both their
22:46
Speaker 2: launch anyway, So what are we really doing here? But this,
22:49
Speaker 2: I think is really interesting to see what could happen
22:53
Speaker 2: and where this company ends up.
22:54
Speaker 3: It's it might be exciting if you're a shareholder. You
22:57
Speaker 3: suppose they the most extreme remedy here is the breakup, right, yes,
23:02
Speaker 3: in which case, God, you were gonna say.
23:03
Speaker 2: No, no, I was just looking at you.
23:06
Speaker 3: I wasn't talking all right, all right, So the most
23:09
Speaker 3: extreme remedy would be the breakup, in which case you
23:12
Speaker 3: get like a pro rate of share. So you're a
23:14
Speaker 3: shareholder right now in one company, but that company is
23:17
Speaker 3: gonna get broken up. A simple example might be, well,
23:19
Speaker 3: Android is worth half the business and Search is worth
23:22
Speaker 3: half the business. So just there are other channels that
23:25
Speaker 3: I'm there are other business sports that I'm ignoring, But
23:27
Speaker 3: you get two stocks for every one you had before.
23:31
Speaker 3: They will have independent boards of directors, management, and the
23:34
Speaker 3: opportunity to grow, presumably in ways that they couldn't before,
23:38
Speaker 3: because they're no longer worried about They no longer get
23:41
Speaker 3: the government breathing down their necks. So sure, an existing
23:44
Speaker 3: share I don't know what happens. I googled quickly to
23:47
Speaker 3: see if there was any empirical if there's any data
23:50
Speaker 3: on this I.
23:50
Speaker 1: Did actually do.
23:51
Speaker 3: Yeah, I don't trust AI won't necessarily source what in
23:56
Speaker 3: anyway different topics. Yeah, so it could be kind of
23:59
Speaker 3: exciting you if you're a shareholder. The growth prospects could
24:02
Speaker 3: be greater. I don't know what happens to earnings multiples
24:05
Speaker 3: like pe and stuff like that on the shares of
24:08
Speaker 3: the broken up company, because again, you get, like in
24:10
Speaker 3: my little example, you get two shares for everyone you've
24:12
Speaker 3: got there, both worth half as much at first. Sure,
24:14
Speaker 3: but their growth prospects might be better as individual entities
24:16
Speaker 3: could be better, could be worse. You don't y, Yeah,
24:18
Speaker 3: but I'm I'm just trying to look at the bright
24:21
Speaker 3: side here. If you own it right now, you're confident
24:23
Speaker 3: in growth prospects in management, presumably, I'm talking about somebody
24:26
Speaker 3: that owns the stock individually, not through an index fund
24:29
Speaker 3: or something like that. So it's not necessarily the end
24:31
Speaker 3: of the world. And there are probably lots of examples
24:33
Speaker 3: of companies that more than prospered children companies, those that
24:40
Speaker 3: came out of a breakup that were more highly value
24:43
Speaker 3: than they were before.
24:44
Speaker 2: I mean, if you want examples of this, look no
24:47
Speaker 2: further than Boeing, United Airlines, United Technologies we covered last week.
24:52
Speaker 2: There's all were spun off. It actually end up being
24:54
Speaker 2: nineteen thirty five. I think we I looked up, but
24:57
Speaker 2: they all were spun out because of a push from
25:01
Speaker 2: the federal government that the operators of airlines should not
25:05
Speaker 2: also be involved in the manufacturer of airplanes. And things
25:09
Speaker 2: turn out pretty well over the next eighty years for
25:11
Speaker 2: all three of those companies, as it turned out. So
25:14
Speaker 2: it's not necessarily given that a breakup is inherently a
25:18
Speaker 2: bad thing for shareholders. It may be, it may not be,
25:20
Speaker 2: but you never really know. I still think if you
25:25
Speaker 2: wanted to get really interesting with this, don't spin off.
25:29
Speaker 2: I mean, look, you can spin off you know, a
25:30
Speaker 2: specific product if you want, but I say spin them
25:34
Speaker 2: off by geography and then let them compete to expand
25:38
Speaker 2: into each other's geography and see who does it best.
25:41
Speaker 2: It's way harder to try to do that because I
25:43
Speaker 2: hear the listeners being like, Chuck, how are you gonna
25:46
Speaker 2: spin off like Google Boston from Google, like Raley Durham,
25:50
Speaker 2: And the answer is you just say, look, this is
25:52
Speaker 2: your selling area. You have to like segment your operations
25:55
Speaker 2: in the next year so that you're only selling in
25:56
Speaker 2: this area, and then split up, you know, this way,
26:00
Speaker 2: and then you guys can compete into each other's territory
26:02
Speaker 2: and see what happens. I think would be wild to
26:05
Speaker 2: see what they end up coming up with, but I
26:07
Speaker 2: don't think that's what's actually gonna happen. More likely than not,
26:11
Speaker 2: you're gonna end up with some meeting in the middle
26:12
Speaker 2: here where it's probably some restrictions on how they can
26:16
Speaker 2: do business. Maybe they end up spinning off one part
26:18
Speaker 2: of it. I don't know, But I just think it's
26:21
Speaker 2: interesting that we actually have an anti trust remedy to discuss,
26:24
Speaker 2: and not just why won't anyone do anything about anti trust?
26:28
Speaker 2: It's exciting to me.
26:29
Speaker 3: Yeah, as investors, there are other implications too, like will
26:32
Speaker 3: they all be held in an index of leading companies
26:35
Speaker 3: like the S and P five hundred, Will they all qualify?
26:37
Speaker 3: S and P makes that determination somewhat subjectively. Yeah, yeah,
26:41
Speaker 3: so there'll be a lot of it. I'm not saying
26:42
Speaker 3: I'm hoping for this outcome, but there it will be
26:45
Speaker 3: be an interesting little.
26:46
Speaker 2: Exercise, folks, if you have questions about your retirement specifically,
26:51
Speaker 2: one of the big questions heading into retirement for people
26:53
Speaker 2: is like, not like it is how much money do
26:57
Speaker 2: I need to retire? And ultimately that it boils down
27:00
Speaker 2: to one number before anything else. It's not actually how
27:03
Speaker 2: much is in your portfolio? The question is how much
27:06
Speaker 2: money are you spending on a monthly basis? And budgeting
27:11
Speaker 2: is just a huge, huge portion of trying to figure
27:14
Speaker 2: out what your retirement looks like. And before you like
27:17
Speaker 2: turn off and click and you're like, oh, like budgeting
27:19
Speaker 2: Like that sounds boring. It's not trying to figure out
27:21
Speaker 2: like each and every expense necessarily, but more, hey, how
27:25
Speaker 2: much are you spending in general? What are you spending
27:28
Speaker 2: on that you like? What are you spending money on
27:30
Speaker 2: that you know you don't really enjoy? And then trying
27:33
Speaker 2: to optimize for hey, how can I spend more of
27:36
Speaker 2: my money on the stuff that I like. It's not
27:38
Speaker 2: always about spending less. It's how can I spend more
27:40
Speaker 2: on the stuff that I like because you want to
27:42
Speaker 2: do more of that? And how can I spend less
27:44
Speaker 2: on the stuff that isn't as important to me? Or
27:47
Speaker 2: that's just background noise. Armstrong Advisory Group has a guide
27:50
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27:53
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28:15
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
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28:20
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Speaker 1: your own financial, tax, and estate planning advisors before making
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28:30
Speaker 2: Great piece in the Wall Street Journal titled why It's
28:33
Speaker 2: so difficult for robots to make your Nike sneakers? And
28:38
Speaker 2: this gets it one of the fundamental problems that robots
28:41
Speaker 2: have right now, which is do you guys big Wayne
28:45
Speaker 2: Wayne's World fans? Sure, Mark, average average world fan. I guess, okay,
28:50
Speaker 2: average wayness world.
28:51
Speaker 3: I'm the median.
28:52
Speaker 2: It's fine. You know. When I forget it's when they
28:56
Speaker 2: go to produce the show at the TV network and
29:00
Speaker 2: you know, Garth does his we fear change line and
29:03
Speaker 2: then smashes. I forget what it is, but he smashes something.
29:06
Speaker 2: That's kind of how robots are. They don't like change.
29:09
Speaker 2: And what I mean by that is robots don't get
29:12
Speaker 2: anxious or anything. But if something is just a little
29:15
Speaker 2: tiny bit off, robots cannot adapt to it. And specifically
29:19
Speaker 2: with textiles, it's a problem in a way that it
29:22
Speaker 2: isn't with hard materials. Here's why, Mark, If I am
29:26
Speaker 2: asking a robot to hammer a nail into a piece
29:29
Speaker 2: of wood, ultimately, all it's gonna do is just hammer
29:33
Speaker 2: that nail, and that nail is going to keep going
29:35
Speaker 2: into the woods. It's hard object meets hard object and
29:38
Speaker 2: it just keeps going. I follow you if I ask
29:41
Speaker 2: a robot two fold clothing gravity and the fact that
29:45
Speaker 2: that clothing bends in a way that is obviously far
29:50
Speaker 2: more what's the word that I'm looking for. It's far
29:55
Speaker 2: more bendy. There's a better word there.
29:59
Speaker 3: Oh, I guess to the material.
30:00
Speaker 2: No, it's just like it's more like uh loose, it's
30:03
Speaker 2: more yeah, what what.
30:04
Speaker 3: Do you more?
30:06
Speaker 2: Whatever?
30:07
Speaker 1: It is.
30:09
Speaker 3: Something metals though, that's wy I'll use it for clothing.
30:13
Speaker 2: It's fine. If you're wearing metal clothing, then this this
30:15
Speaker 2: fits you. Here's the deal is if you are instead
30:19
Speaker 2: trying to, you know, sew through a piece of soft fabric,
30:25
Speaker 2: the fabric moves in ways that a piece of wood
30:27
Speaker 2: and a nail don't, and robots can't handle that. They
30:32
Speaker 2: and so if something's off by a quarter of an inch,
30:35
Speaker 2: you end up with the fabric being compressed in one
30:37
Speaker 2: way and it doesn't end up working the same way
30:40
Speaker 2: that you thought it would. It's the same reason why
30:43
Speaker 2: despite all of the chatter about oh, like you know,
30:46
Speaker 2: fast food, they're just gonna replace all of their back
30:48
Speaker 2: of house you know, employees with burger flippers, they can't
30:51
Speaker 2: do it because you know what, if they could, they
30:54
Speaker 2: would have. At this point, you go into like half
30:56
Speaker 2: the McDonald's or taco bells out there, it's all kiosks
30:59
Speaker 2: out front, and it's still people flipping burgers and putting
31:02
Speaker 2: fries into oil because that burger has the same problem.
31:06
Speaker 3: It's soft.
31:08
Speaker 2: You ever expect, how's a robot gonna handle soft uncooked
31:11
Speaker 2: ground beef delicately? No, it won't. That's the thing.
31:16
Speaker 3: Can't be gentle.
31:17
Speaker 2: The robots are not gentle. They're not gentle with the meat.
31:22
Speaker 3: They're training some robots to do things that one might
31:25
Speaker 3: characterize as gentle. Can they not repurpose those for.
31:29
Speaker 2: They're training them and they're very expensive, and so how
31:33
Speaker 2: does that work when you're trying to make shoes or burgers?
31:39
Speaker 2: So I just I found this. So this is the
31:41
Speaker 2: problem is I don't know, because these are problems that
31:45
Speaker 2: will eventually be solved. It's probably just with like more
31:48
Speaker 2: practice and more money and eventually it becomes cost competitive.
31:51
Speaker 2: But this is why robots just they can't. You can't
31:54
Speaker 2: just be like, oh, robot can do that, Like it's
31:56
Speaker 2: it's the same thing over and over. They struggle with
31:59
Speaker 2: soft surfaces and its response to gravity. Quite honestly, gravity
32:04
Speaker 2: confuses robots.
32:07
Speaker 3: It's wild, stupid, stupid machines.
32:10
Speaker 2: Just take a quick break. When we come back, we'll
32:12
Speaker 2: do a little bit of stack roulette. After this, I
32:15
Speaker 2: had not thought about that change.
32:20
Speaker 1: The global trade war is in full swing. How long
32:22
Speaker 1: will it last? Is anyone's gas? Keep it here for
32:25
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32:29
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32:49
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33:17
Speaker 2: Mike, what do you got for me? For stock rou lets?
33:20
Speaker 3: Chuck from the Financial Times which comes out of London,
33:23
Speaker 3: But well, it's a widely read financial newspaper. It's like
33:26
Speaker 3: the Wall Street Journal for the world headline, US thrift
33:28
Speaker 3: stores bank on a windfall from tariffs. I hadn't thought
33:31
Speaker 3: about this angle. I'll just read the first couple of
33:34
Speaker 3: lines here. Thrift stores are betting that the pain that
33:37
Speaker 3: conventional retailers are expected to endure from tariffs will be
33:40
Speaker 3: their gain. Many are bracing themselves. Of course, retailers are
33:43
Speaker 3: for turbulent times, but resale is a rare industry, and
33:45
Speaker 3: that their supply comes from non tarifable if you will
33:51
Speaker 3: sources they list here. The two big publicly traded retail
33:57
Speaker 3: entities thread up as one savers value Village is another.
34:00
Speaker 3: Their share prices are skyrocketing in anticipation of their relative
34:05
Speaker 3: advantage in an environment where everything becomes more expensive. I
34:09
Speaker 3: don't see how that doesn't spill over into what they
34:13
Speaker 3: into what they sell. If the price of all year subs,
34:15
Speaker 3: of all these substitutes go up, then I guess your
34:19
Speaker 3: prices have to go up to But at least they
34:20
Speaker 3: won't be forced to immediately pass price increases through me.
34:26
Speaker 2: Read this headline from the New York Times. This from
34:28
Speaker 2: last week, but we didn't have a chance to cover it.
34:32
Speaker 2: Just because things have been busy. Astronomers detect a possible
34:36
Speaker 2: signature of life on a distant planet. The planet is
34:42
Speaker 2: known by the name K two dash eighteen lowercase B
34:46
Speaker 2: and in orbit to start one hundred and twenty light
34:48
Speaker 2: years away, which means we can't get there. It would
34:51
Speaker 2: take us a while, like beyond our lifetime least hours.
34:55
Speaker 2: But I'm going to quote here. A repeated analysis of
34:58
Speaker 2: the exoplanets atmosphere suggests an abundance of a molecule that
35:04
Speaker 2: on Earth has only one known source living organisms such
35:08
Speaker 2: as marine algae. Now I can tell you I talked
35:12
Speaker 2: to a buddy of mine who is an astrophysicist. Actually,
35:16
Speaker 2: of course I do have one astrophysicist friend. He would
35:20
Speaker 2: everyone should like, we should all have one guy that
35:23
Speaker 2: we can run this by to be like, what do
35:25
Speaker 2: you think. His response was literally, wouldn't bet the farm
35:31
Speaker 2: on it, probably wouldn't even bet a case of beer
35:34
Speaker 2: on it. So he kind of poop pooed. He was like,
35:36
Speaker 2: the evidence is there, but it's it's weak, so you
35:38
Speaker 2: don't really know because he can only glean so much
35:41
Speaker 2: from like analyzing light signatures from planets one hundred and
35:45
Speaker 2: twenty million or one hundred and twenty light years away.
35:47
Speaker 2: So unfortunately he wasn't quite as optimistic as I was
35:51
Speaker 2: when I first read this piece, but I know I
35:55
Speaker 2: was really hoping he was gonna be like, this is this.
35:57
Speaker 3: Is being reported well near definity, you can't produce where
36:04
Speaker 3: the molecule is go ahead.
36:06
Speaker 2: Even the reporting on here. There's a guy a planetary
36:08
Speaker 2: scientists from Johns Hopkins who said it's not nothing, it's
36:11
Speaker 2: a hint, but we can't conclude it's habitable yet. So
36:14
Speaker 2: even he was like it, so, maybe.
36:17
Speaker 3: We can't take pictures of these planets. They're too far right,
36:19
Speaker 3: So we have to infer what's happening by the way
36:23
Speaker 3: light reflects through their atmosphere, and we can infer from
36:26
Speaker 3: that it's way molecules are there. Is that right?
36:29
Speaker 2: Yes, it's basically every atom sends back, or every molecule
36:33
Speaker 2: sends back a certain signature of what kind of light
36:35
Speaker 2: it reflects, and based on that you can say, okay,
36:38
Speaker 2: this is what we think is present in the atmosphere there.
36:41
Speaker 2: The problem is when it's one hundred and twenty light
36:43
Speaker 2: years away, it's really far, and so there's a lot
36:46
Speaker 2: of distortion from everything else that is going on in
36:49
Speaker 2: between you and that planet.
36:50
Speaker 3: So there's a cloud of gas in the way. Yes,
36:53
Speaker 3: we might get some of what's in the cloud of gas,
36:56
Speaker 3: I don't know.
36:57
Speaker 2: But yeah, not even like big cloud of gas, just
36:59
Speaker 2: like sporat dust or other em like electromagnetic interference that's
37:03
Speaker 2: going through there from you know, other stuff that's going
37:05
Speaker 2: on with Listen, it's a big universe, all right, there's
37:09
Speaker 2: a lot happening out there. It's it's not you know,
37:11
Speaker 2: not just us sitting here like, hey, I'm again we
37:14
Speaker 2: don't know that there's life anywhere else. But it's a
37:16
Speaker 2: big universe, so we'll see.
37:18
Speaker 3: So you're not excited about this or your your measure,
37:21
Speaker 3: your your your curtailing, you're you're tempering your.
37:24
Speaker 2: Here's the thing. So on one hand, my my friend
37:27
Speaker 2: who is an astrophysicist, was like, I wouldn't bet on it,
37:30
Speaker 2: which kind of poo pooed it.
37:31
Speaker 3: Also, how did you get this number?
37:32
Speaker 2: The counter to that is you talk to generally any
37:35
Speaker 2: scientist about anything, and they'll usually poop poo it because
37:39
Speaker 2: that's just that's the responsible thing to do, right, Like
37:42
Speaker 2: scientists are just kind of trained, well we're not really sure,
37:46
Speaker 2: so hold up before we, you know, say anything definitive.
37:49
Speaker 2: So I'm trying to filter it through all of this
37:52
Speaker 2: and overall exciting, but not like et waving at us.
37:57
Speaker 3: One of the strangest developments in my lifetime is when
38:00
Speaker 3: Clinton decided to announce that there was definitive evidence. So
38:03
Speaker 3: he did this in ninety six, and they even used
38:05
Speaker 3: it in a movie clip not too long after that.
38:07
Speaker 3: It just seemed wildly ahead of things they are responsible
38:10
Speaker 3: and has since been kind of debunked, which is why
38:12
Speaker 3: you don't get too excited exactly.
38:13
Speaker 1: Now.
38:14
Speaker 2: Markets remain in negative territory. The dows off one thousand,
38:16
Speaker 2: ninety four points, the SMP's down one hundred and fifty four,
38:18
Speaker 2: Nasdaq down five thirty so another tough day in markets.
38:22
Speaker 2: We'll be back tomorrow on the Financial Exchange.