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Are credit card interest rates bringing left and right together? · The Financial Exchange Show

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  Speaker 2: Good morning, Welcome back to the Financial Exchange. We've got
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  Speaker 2: a broad rally in markets today as we continue discussion
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  Speaker 2: of our top story, which is tariffs on Mexico and
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  Speaker 2: Canada being suspended, as well as retaliatory terraffs being placed
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  Speaker 2: in effect in China. Starting was it February fourteenth, Paul
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  Speaker 2: February tenth. February tenth, Dow Jones Industrial Average moving up
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  Speaker 2: seventy four points, a little bit less than one fifth
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  Speaker 2: of a percent, S and P five hundred up thirty
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  Speaker 2: eight or two thirds of a percent. NASDAK up a
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  Speaker 2: full one and a quarter percent, two hundred and forty
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  Speaker 2: one points, yield on the ten year treasury moving further
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  Speaker 2: down just by a hair down to four point five
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  Speaker 2: to three one percent. The price for a barrel of
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  Speaker 2: oil now sitting at seventy two to ninety one. That
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  Speaker 2: was up significantly in early trading because those tariffs that
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  Speaker 2: were announced did include a ten percent tariff rate on
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  Speaker 2: imported oil and other energy items from Canada. Obviously that's
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  Speaker 2: off the table now and you're seeing those prices come
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  Speaker 2: back down to earth. But early trading yesterday oil prices
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  Speaker 2: were up significantly national average for a gallon of gas
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  Speaker 2: sitting at three dollars and eleven cents. I'm rounding a
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  Speaker 2: little bit there. And finally, the rate on a thirty
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  Speaker 2: year fixed rate mortgage. Oh god, this is not fun.
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  Speaker 2: Seven point zero five percent is the average rate on
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  Speaker 2: that for those here in New England who are primarily
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  Speaker 2: looking at a jumbo rate because that's balance of over
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  Speaker 2: four point fifty. Now I think it is you're looking
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  Speaker 2: at seven point three three percent on that jumbo thirty
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  Speaker 2: year fixed anything else catching your eyes so far this morning,
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  Speaker 2: Paul no so feeling left behind a growing in a
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  Speaker 2: growing economy. Middle income people feel that they are kind
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  Speaker 2: of losing some traction and cutting back on spending. Now
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  Speaker 2: I hesitate to buy this because I don't know where
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  Speaker 2: we are seeing it. To reference some of this, the
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  Speaker 2: economy grew by an annual rate of two point eight
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  Speaker 2: percent in twenty twenty four, especially in the last three
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  Speaker 2: months of the year, though, you saw consumer spending move
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  Speaker 2: up sharply at a pace of four point two percent
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  Speaker 2: just during those last three months, So that was a
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  Speaker 2: pretty significant uptick. And a few things are being discussed there.
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  Speaker 2: I mean, obviously it's the holiday shopping season, but we're
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  Speaker 2: comparing that to the previous holiday shopping season. You did
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  Speaker 2: see some concern of tariff, so I do believe, and
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  Speaker 2: I saw some individuals saying, Hey, I'm going to buy
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  Speaker 2: this car before tariffs potentially get implemented here. So I
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  Speaker 2: wonder if there was some tariff effect. And then I
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  Speaker 2: think there was some election effect there, maybe some excitement
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  Speaker 2: about a Donald Trump presidency and what that might mean
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  Speaker 2: for the economy and tax rates. Maybe some you know,
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  Speaker 2: again that only accounts for about half the country. The
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  Speaker 2: other half of the country maybe some therapy spending. I
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  Speaker 2: don't know to call it otherwise, But the question remains, Hey,
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  Speaker 2: we've faced a tremendous amount of inflation over the last
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  Speaker 2: five years that has dissipated, but those price levels that
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  Speaker 2: we've reached have not gone away, and wages still haven't
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  Speaker 2: quite kept pace for a good chunk of Americans. And
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  Speaker 2: what are they facing as we head into twenty twenty five,
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  Speaker 2: which the answer is higher debt burdens and a still
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  Speaker 2: very challenging real estate market.
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  Speaker 1: Yeah.
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  Speaker 3: I think you can't be understated that the debt burden piece.
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  Speaker 3: As much as listeners probably laugh at us sort of
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  Speaker 3: poo pooing a seven and a quarter in thirty year
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  Speaker 3: fixed mortgage interest rate, because you know, historically there's many
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  Speaker 3: out there who had much higher rates than that. But
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  Speaker 3: if you look at the combination of the affordability on
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  Speaker 3: homes in terms of their price versus the interest rates
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  Speaker 3: that we sit right now, it's a really difficult spot.
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  Speaker 3: And that's close to a third of your income going
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  Speaker 3: to those shelter cost payments. So I think that is
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  Speaker 3: really impactful when you're looking at this demographic that they
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  Speaker 3: define as thirty thousand to one hundred and thirty thousand
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  Speaker 3: of income and families that they're really feeling that severe
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  Speaker 3: burden there. And also it's just to me, we've covered
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  Speaker 3: a lot of pieces like this on the show Mic.
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  Speaker 3: It just reiterates how significant inflation can make people feel
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  Speaker 3: about their situation. And these people who fall in this
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  Speaker 3: these tiers here between these lower and middle income thresholds,
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  Speaker 3: just it continues to come back Serve rep to survey
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  Speaker 3: that they feel neglily impacted. And I don't know if
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  Speaker 3: it takes one more year of inflation at mild levels
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  Speaker 3: call it the two and a half to three percent range,
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  Speaker 3: that we've been into have this subside and not be
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  Speaker 3: something that we talk about or that people feel. But
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  Speaker 3: this housing market is, it's a it's problematic. I don't
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  Speaker 3: see an easy fix for that unless rates were to
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  Speaker 3: revert back to five or four percent on the thirty
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  Speaker 3: year fix, and that would speak to a bigger economic
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  Speaker 3: problem than anything on the housing right front.
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  Speaker 2: Like if you get the five percent interest rates, and
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  Speaker 2: that means the economy is in the dumps, it so
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  Speaker 2: probably sparks demand for housing in a way that won't
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  Speaker 2: bring down prices. So there's not an easy fix to
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  Speaker 2: the housing market. To your point, it's a complex combination
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  Speaker 2: of construction costs and zoning requirements that probably isn't going
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  Speaker 2: to be fixed easily. On the same Trump subject of
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  Speaker 2: credit cards, Paul and Tucker, what do Bernie Sanders and
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  Speaker 2: Josh Holly have in common? I know we don't get
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  Speaker 2: into politics much, but the answer is apparently that the
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  Speaker 2: two senators, who I can't imagine agree on much other
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  Speaker 2: than this, are saying that they will propose a ten
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  Speaker 2: percent cap on credit card interest rates to be voted on.
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  Speaker 2: This was a policy that Donald Trump himself campaigned on.
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  Speaker 2: It seems completely contradictory to every other policy that has
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  Speaker 2: been proposed out there from the Trump administration. But nonetheless,
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  Speaker 2: we are seeing more of that horseshoe theory that I've described,
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  Speaker 2: which is when you have extremes on the right hand left,
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  Speaker 2: they tend to agree on things and form kind of
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  Speaker 2: a horseshoe there when it comes to certain policies, and
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  Speaker 2: we are seeing it here. It's all also been brought
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  Speaker 2: up by Elizabeth Warren as an example here. I have
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  Speaker 2: no idea if this is actually going to be voted on,
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  Speaker 2: and I don't think that it would pass Congress quite frankly,
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  Speaker 2: but it does depend heavily on how serious Donald Trump
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  Speaker 2: is about putting his name on the line for this
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  Speaker 2: type of bill.
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  Speaker 3: Is there even a need for this, because I don't
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  Speaker 3: think people understand the ramification.
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  Speaker 2: That this would have on your access to credit.
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  Speaker 3: Because I understand how punitive the credit card interest rates
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  Speaker 3: are these days. They average around twenty three percent and
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  Speaker 3: at the high end thirty percent. For those people out
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  Speaker 3: there that have credit card debt, I cannot pound the
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  Speaker 3: table hard enough to say, do whatever you can to
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  Speaker 3: pay them off, because you're only benefiting the company that
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  Speaker 3: issues the card. Because they're making a significant.
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  Speaker 2: Amount benefiting me too. Right for the points, but so
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  Speaker 2: thank you.
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  Speaker 3: If this ten percent cap occurs, Mike doesn't get his,
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  Speaker 3: which is concerning for me.
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  Speaker 2: But also why for you? Am I fire here because
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  Speaker 2: I'm not getting close? I don't know.
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  Speaker 3: I want you to be happy, happy boss, happy life.
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  Speaker 3: But also the access to credit out there will significantly decrease,
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  Speaker 3: and for those people who truly need it as a
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  Speaker 3: bridge loan of sorts, it's just gonna dry up because
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  Speaker 3: there's gonna be no impetus out for these card companies
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  Speaker 3: to offer the rewards that they're offering and also to
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  Speaker 3: offer that financial bridge from an interest rate perspective, if
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  Speaker 3: they're capped to ten percent, I agree the twenty three
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  Speaker 3: percent and thirty is exorbitant and probably too high, but
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  Speaker 3: the ten percent cap doesn't get you there.
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  Speaker 2: Frankly, it's exorbitant, very very high, and appropriate for the risk. Yeah,
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  Speaker 2: defaults are not low for credit cards. It's very common
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  Speaker 2: to deal with this sort of thing. In addition, they
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  Speaker 2: have massive liability that they have to cover from fraudulent
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  Speaker 2: transactions that occur all the time, and it's very frustrating
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  Speaker 2: that these are the rates that they charge, but they
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  Speaker 2: charge these rates, people can't find the money elsewhere. Yeah,
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  Speaker 2: and so to your point, I don't know what the
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  Speaker 2: effect would be immediately of a ten percent cap on
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  Speaker 2: interest rates, but I can assure you that most of
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  Speaker 2: those contracts would say, Okay, we are dramatically bringing down
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  Speaker 2: our credit availability to those consumers that we have. We
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  Speaker 2: are probably canceling what contracts we can and doing away
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  Speaker 2: with new offers, and again probably dramatically reshaping the points,
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  Speaker 2: agreements and things that are in place with credit cards.
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  Speaker 2: And maybe that's what we want. I think there's plenty
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  Speaker 2: to be criticized about the credit card industry, and you know,
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  Speaker 2: the incentives that they have to issue credit to people
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  Speaker 2: that can't ever afford to pay it back. But I'd
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  Speaker 2: rather approach it from that perspective than just say, okay,
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  Speaker 2: new rule, it's okay. You know what it is. It's
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  Speaker 2: akin to me to the grocery price story, like, hey,
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  Speaker 2: we're going to fix grocery prices. This is the same story,
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  Speaker 2: but on credit cards. And I think because we hate
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  Speaker 2: banks a little bit more than we do grocery store owners,
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  Speaker 2: people are more on board. But if you go and
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  Speaker 2: fix prices, which is what you are doing by proposing
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  Speaker 2: a ten percent cap on credit cards. Then what you're
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  Speaker 2: going to get as shortages of credit, no doubt.
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  Speaker 3: That only result, just as you We have even talked
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  Speaker 3: about it from the business perspective too. There's a lot
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  Speaker 3: of businesses that need access to credit to run their operations.
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  Speaker 3: And it's not always credit cards that they're borrowing from,
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  Speaker 3: but that's part of the equation, and the access to
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  Speaker 3: liquidity is important for businesses out there, and it would
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  Speaker 3: dry up, It just absolutely would dry up.
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  Speaker 2: Why would you want to lend? I don't want to
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  Speaker 2: overstep the bounds. Like credit card companies will still want
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  Speaker 2: to do business with people with eight hundred credit scores,
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  Speaker 2: they just will refuse to do business with somebody with
• 10:44
  Speaker 2: a four hundred credit score. And your limit's going to
• 10:46
  Speaker 2: be a lot lower. Why you know, why would that
• 10:48
  Speaker 2: be one hundred percent? So that will be the net
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  Speaker 2: result here. And yeah, it is no different than saying, okay,
• 10:55
  Speaker 2: the max that you can charge on eggs is this,
• 10:58
  Speaker 2: and the max that you can charge on milk is why.
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  Speaker 2: It will produce the exact same results that you would
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  Speaker 2: expect from that type of thing. So I won't say
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  Speaker 2: it's impossible, but I think for it to happen, Donald
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  Speaker 2: Trump's going to really need to go push senators to
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  Speaker 2: make it happen, and I'm not sure he's willing to
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  Speaker 2: do so. Quick break. When we come back, we'll have
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• 12:46
  Speaker 2: Renter affordability has actually improved a little bit. In twenty
• 12:49
  Speaker 2: twenty four and twenty twenty four, the median income among
• 12:53
  Speaker 2: renters was fifty four thousand, seven hundred and fifty two dollars,
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  Speaker 2: which is up five point three percent from twenty twenty
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  Speaker 2: three and considerably higher than twenty nineteen. What seems to
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  Speaker 2: be happening with this study is not purely a case
• 13:08
  Speaker 2: of rent getting cheaper. In fact, that's happening in very
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  Speaker 2: few markets. But what you are having is a larger
• 13:16
  Speaker 2: renter pool because few people are buying homes. That's driving
• 13:22
  Speaker 2: up the median or average rent that those renters take home,
• 13:27
  Speaker 2: and an inventory market that in much of the country
• 13:29
  Speaker 2: has improved. So you go to places like Austin, Texas,
• 13:32
  Speaker 2: where their population has grown quite a bit. The number
• 13:35
  Speaker 2: of renters there has grown quite a bit, but they
• 13:37
  Speaker 2: built so much over the course of the last decade
• 13:40
  Speaker 2: that the increases in rent, while they have been significant,
• 13:43
  Speaker 2: are not nearly as significant as the average income or
• 13:46
  Speaker 2: median income that renters are taking home. That follows a
• 13:49
  Speaker 2: trend in many areas that are not New England, to
• 13:52
  Speaker 2: be clear, followed by Austin in terms of most affordable
• 13:58
  Speaker 2: metros for rent. Again, this is not purely just looking
• 14:01
  Speaker 2: at the price of rent. You're comparing it to the
• 14:04
  Speaker 2: median income of renters in those areas. You've got Houston, Dallas,
• 14:09
  Speaker 2: Salt Lake City, Raleigh, Denver, Phoenix, DC, Baltimore, and Nashville.
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  Speaker 2: And most of those cities follow one trend that I'm
• 14:18
  Speaker 2: familiar with, which is they've allowed a lot more development
• 14:21
  Speaker 2: than New England cities have. Taking the number one spot
• 14:25
  Speaker 2: for least affordable Paul Proms Rhode Island. Baby, it's an
• 14:30
  Speaker 2: interesting way, it's an interesting study here. I don't know
• 14:34
  Speaker 2: if this is a fair comparison. And here's why I'm
• 14:37
  Speaker 2: taking a look right now at the MBTA. And if
• 14:40
  Speaker 2: I want to get from well, let's just take the
• 14:44
  Speaker 2: commuter rail from Providence, Rhode Island direct into South Station.
• 14:49
  Speaker 2: It takes me a little bit over an hour to
• 14:51
  Speaker 2: do so it's a very Boston commutable city. And there's
• 14:56
  Speaker 2: for some reason that I'm sure in economists somewhere has
• 14:59
  Speaker 2: studied real difference between the Massachusetts and Rhode Island economies.
• 15:02
  Speaker 2: Just to give you a sense for what I'm talking
• 15:04
  Speaker 2: about here, the median household income in Massachusetts as of
• 15:09
  Speaker 2: twenty twenty three was one hundred and six thousand, five
• 15:12
  Speaker 2: hundred dollars. Rhode Island was sitting at eighty thousand dollars.
• 15:20
  Speaker 2: That's a big difference between those two states. And so
• 15:22
  Speaker 2: what you seem to have happening here is Rhode Island
• 15:25
  Speaker 2: becoming a lot less affordable because you have people living
• 15:28
  Speaker 2: in Providence commuting to Boston and increasing their wages substantially.
• 15:33
  Speaker 2: And I've seen some of this firsthand. I know a
• 15:36
  Speaker 2: nurse personally who had a really rough commute. I think
• 15:40
  Speaker 2: she was probably commuting an hour and a half each way,
• 15:43
  Speaker 2: but was able to nearly double her wages by working
• 15:46
  Speaker 2: at a hospital in Boston compared to a comparable job
• 15:49
  Speaker 2: in Rhode Island. And that's a fascinating case study to
• 15:52
  Speaker 2: me of like what went wrong in Rhode Island in
• 15:55
  Speaker 2: terms of you know, employment, opportunity development is it's something
• 15:59
  Speaker 2: economically that just didn't fire right for Rhode Island compared
• 16:02
  Speaker 2: to Massachusetts. Policy wise. My first mind just goes to
• 16:07
  Speaker 2: a reputation for corruption in the city of Providence, but
• 16:10
  Speaker 2: I don't know that that would explain it all away.
• 16:12
  Speaker 2: In either case. That is a fascinating study of why
• 16:16
  Speaker 2: Providence is so unaffordable. Seems to be Hey, folks from
• 16:20
  Speaker 2: Boston or folks working in Boston are commuting there and
• 16:23
  Speaker 2: saving a boatload on rent compared to say, renting in
• 16:25
  Speaker 2: back Bay Boston.
• 16:26
  Speaker 4: Yeah.
• 16:26
  Speaker 3: It's an interesting piece, but really, like you said, the
• 16:28
  Speaker 3: headline of this piece ties down to what areas have
• 16:31
  Speaker 3: expanded their real estate footprint in the multi family sector
• 16:33
  Speaker 3: over the course of the last couple of years, and
• 16:35
  Speaker 3: you hit on some of the key ones there, Austin,
• 16:37
  Speaker 3: Nashville and others. It's really a classic, you know, economic
• 16:42
  Speaker 3: concept of supplying demand that really has generated all of
• 16:44
  Speaker 3: the rental market for these other states. But it's so
• 16:47
  Speaker 3: foreign to us in New England because it just doesn't
• 16:51
  Speaker 3: apply here.
• 16:52
  Speaker 2: I'll say it over and over again. Like you know,
• 16:54
  Speaker 2: I genuinely do not believe that people actually want more
• 16:59
  Speaker 2: of affordable housing. Like I know, we cover pieces all
• 17:03
  Speaker 2: like this all the time. I know people talk about
• 17:06
  Speaker 2: it and say they are really sorry for their family
• 17:09
  Speaker 2: members and feel bad for their kids who can't afford
• 17:12
  Speaker 2: to buy a home. But when you press them on
• 17:14
  Speaker 2: it and you say, yeah, but are you willing to
• 17:17
  Speaker 2: sacrifice the value of your own home in the form
• 17:22
  Speaker 2: of additional housing and more population in your area, the
• 17:26
  Speaker 2: answers almost uniformly know. And we see that over and
• 17:29
  Speaker 2: over when it comes to local towns voting on zoning,
• 17:32
  Speaker 2: as just happened here in need A Massa Chusetts. And look,
• 17:35
  Speaker 2: that wasn't a referendum directly on hey, what's going to
• 17:38
  Speaker 2: happen to the value of my home? But it was
• 17:40
  Speaker 2: a referendum on I don't want more traffic, I don't
• 17:43
  Speaker 2: want more problems parking, I don't want a bunch of big,
• 17:47
  Speaker 2: tall buildings and what has been a small town. And
• 17:49
  Speaker 2: so we just have this misconception of what will be
• 17:53
  Speaker 2: successful solutions when it comes to creating housing that is
• 17:59
  Speaker 2: able to be afforded by the average population and the
• 18:01
  Speaker 2: answer very clearly, right, Like, when you look at these
• 18:05
  Speaker 2: cities that have affordable housing, they are not doing anything
• 18:08
  Speaker 2: miraculous when it comes to job development or you know,
• 18:12
  Speaker 2: increasing their residence wages way faster than the rest of
• 18:15
  Speaker 2: the country. That was not what this story was about.
• 18:17
  Speaker 2: Did it happen a little bit, right? Like did the
• 18:21
  Speaker 2: relocated sure? Like, you know, did you have that around
• 18:23
  Speaker 2: the edges. Yes, are more people renting now because they
• 18:26
  Speaker 2: can't afford to buy homes and rates are too high. Also, yes,
• 18:31
  Speaker 2: and that's driving up the average wage that's in this equation.
• 18:34
  Speaker 2: But the main story here that you can see from
• 18:37
  Speaker 2: the vast majority of cities we're here that we talked about, Austin, Houston, Dallas,
• 18:43
  Speaker 2: Salt Lake City, Raleigh, Denver, Phoenix, uh DC, probably not,
• 18:48
  Speaker 2: but Baltimore, Nashville. All of these are cities who have
• 18:51
  Speaker 2: focused on we're going to allow for the building of housing.
• 18:55
  Speaker 2: And I'm sure plenty of people that live there say
• 18:57
  Speaker 2: I barely recognize this place and I don't want to
• 18:59
  Speaker 2: live here anymore. But many more have said, I'm going
• 19:02
  Speaker 2: to relocate to these places because it's somewhere that housing
• 19:05
  Speaker 2: is actually affordable and attainable on a reasonable amount of income,
• 19:11
  Speaker 2: which I genuinely don't think you can say that about
• 19:14
  Speaker 2: a good portion of New England when we take a
• 19:16
  Speaker 2: look at the housing supply here. Let's take a quick
• 19:19
  Speaker 2: break when we come back. Aside from all the tariff news,
• 19:23
  Speaker 2: Elon Musk has been rattling cages, as he usually does.
• 19:26
  Speaker 2: We'll be covering that and the work in Doge coming
• 19:29
  Speaker 2: up next.
• 19:41
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• 20:07
  Speaker 2: All right.
• 20:07
  Speaker 4: Trivia question today was how many vice presidents would go
• 20:11
  Speaker 4: on to become presidents.
• 20:13
  Speaker 2: I'll be fifteen.
• 20:14
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• 20:17
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• 20:25
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• 20:28
  Speaker 2: I mentioned earlier Elon Musk continuing to rattle cages, and
• 20:32
  Speaker 2: we won't really dive into the politics side of it.
• 20:34
  Speaker 2: But one thing did kind of catch my attention, which
• 20:37
  Speaker 2: was his work in Treasury, And the allegations, if true,
• 20:42
  Speaker 2: are in my mind, a big problem, which are that
• 20:46
  Speaker 2: Elon Musk allegedly got access to the US Treasury's systems
• 20:51
  Speaker 2: and was able to actually log into them and view data.
• 20:55
  Speaker 2: And here's why that's a problem. Elon Musk not a
• 20:57
  Speaker 2: government employee, not a political appointee who would go through
• 21:01
  Speaker 2: a Senate confirmation, and very obviously has some big conflicts
• 21:05
  Speaker 2: of interest built in. He owns how SpaceX tesla or
• 21:10
  Speaker 2: runs SpaceX tesla X, So he's got some massive conflicts
• 21:16
  Speaker 2: of interest here, which aren't a problem if you are
• 21:20
  Speaker 2: sitting on the outside and advising the president. The second
• 21:23
  Speaker 2: you start to get Social Security numbers of government employees,
• 21:27
  Speaker 2: the second you start to get payment systems and where
• 21:30
  Speaker 2: people's paychecks are going, that suddenly becomes a real problem.
• 21:36
  Speaker 2: And hopefully those allegations don't turn out to be quite
• 21:39
  Speaker 2: as true as are being proposed here. And the Trump
• 21:42
  Speaker 2: administration has already come out and said, look, you know,
• 21:45
  Speaker 2: he does not act without direct approval from the White
• 21:49
  Speaker 2: House and things like that. But I think there are
• 21:51
  Speaker 2: going to be some questions levied now at elon Musk
• 21:54
  Speaker 2: and just what sort of access he's being granted to
• 21:58
  Speaker 2: granted as part of all of this.
• 21:59
  Speaker 3: Yeah, so right now now he's what's deemed a special
• 22:01
  Speaker 3: government employee, which is a temporary status that allows them
• 22:04
  Speaker 3: to work for the White House for one hundred and
• 22:05
  Speaker 3: thirty days without having to file all the financial disclosure
• 22:08
  Speaker 3: forms required for a regular White House employee. So that
• 22:12
  Speaker 3: you know, allows for some flexibility there. But to your point,
• 22:15
  Speaker 3: there are significant contracts of conflicts of interest here, and
• 22:19
  Speaker 3: you've got an employee who kind of comes from the
• 22:22
  Speaker 3: Silicon Valley background where he's typically used to entrepreneurships and
• 22:25
  Speaker 3: things moving extremely fast up against a lot of bureaucracy
• 22:29
  Speaker 3: where things tend to move a little bit slower, and
• 22:32
  Speaker 3: in some cases, when you're dealing with nasal security for
• 22:35
  Speaker 3: good reason, you have to take a little more time
• 22:36
  Speaker 3: and be a bit more thorough as to who you
• 22:38
  Speaker 3: will allow access to.
• 22:39
  Speaker 2: I mean, that's the whole point of the appointment process here.
• 22:41
  Speaker 2: It's like, you know, far be it for me to
• 22:44
  Speaker 2: dive too much into politics here, but I think it's
• 22:47
  Speaker 2: very reasonable to ask, like, what whose interests are you
• 22:50
  Speaker 2: working on? Behalf of I think you have some good
• 22:53
  Speaker 2: ideas when it comes to making the government. I don't
• 22:56
  Speaker 2: debate any of that, but your action in the past
• 23:00
  Speaker 2: when it comes to issues of free speech, attitudes towards China,
• 23:06
  Speaker 2: these are all things that I think you know are
• 23:09
  Speaker 2: reasons why you aren't a political and pointee. And the
• 23:12
  Speaker 2: more integrated you get into the system of government, the
• 23:16
  Speaker 2: more desperately I want answers to some of those questions
• 23:18
  Speaker 2: about those conflicts and about those past actions and statements
• 23:21
  Speaker 2: when it comes to appeasing you know, frankly our biggest
• 23:25
  Speaker 2: rival out there, which is China.
• 23:27
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• 24:29
  Speaker 2: Fords F one fifty seems to be they are electric
• 24:32
  Speaker 2: rather at Ford F one fifty falling deeply behind Tesla's
• 24:36
  Speaker 2: cybertruck in what this article caused a deepening ev crisis?
• 24:41
  Speaker 2: I think it might only be a crisis for Ford,
• 24:43
  Speaker 2: who's really struggling with it and losing a lot of
• 24:46
  Speaker 2: money on it. But the Lightning stated range is two
• 24:49
  Speaker 2: hundred and thirty miles, which is not very far to
• 24:51
  Speaker 2: begin with. And then when you talk about any sort
• 24:53
  Speaker 2: of different road conditions like hauling something, towing something, or
• 24:58
  Speaker 2: going slightly uphill, that degrades and does not seem to
• 25:02
  Speaker 2: be selling quite like the cyber truck. The Ford company
• 25:07
  Speaker 2: has already made a bit of a pivot on their
• 25:09
  Speaker 2: EV aspirations. They scrapped the plan for a giant electric
• 25:12
  Speaker 2: suv out of concerns for demand, and they seem to
• 25:15
  Speaker 2: be pivoting now more towards lower cost, smaller electric vehicles,
• 25:20
  Speaker 2: as well as extended range evs, which are plug in hybrids.
• 25:25
  Speaker 2: But I think, look, I've talked about this at length.
• 25:30
  Speaker 2: I think most people have a lot of range anxiety
• 25:32
  Speaker 2: when they're talking about a car. I've talked about buying
• 25:36
  Speaker 2: a low range EV recently, but that's only because I
• 25:39
  Speaker 2: have a commute of like eight miles and our family
• 25:41
  Speaker 2: owns three cars. I really cannot Can you imagine buying
• 25:45
  Speaker 2: a car for one hundred thousand How much does a
• 25:48
  Speaker 2: Ford Lightning f one to fifty go for like eighty
• 25:50
  Speaker 2: thousand dollars? That gets you two hundred and thirty miles.
• 25:55
  Speaker 2: I can't like that being your primary vehicles. It seems very.
• 26:00
  Speaker 3: And on top of that, the infrastructure is not the
• 26:02
  Speaker 3: same to your typical gas fill ups, So you have
• 26:05
  Speaker 3: a two hundred and thirty mile radius and you then
• 26:07
  Speaker 3: you have the added fear of not as if you
• 26:10
  Speaker 3: have a gas station on every single corner that you could,
• 26:13
  Speaker 3: you know, fill up at.
• 26:14
  Speaker 2: In the same regard, yeah, so, I mean they are
• 26:17
  Speaker 2: gaining access to Tesla's charging infrastructure, which I recognize, but
• 26:21
  Speaker 2: I'm not sure. I keep going back to these hybrids,
• 26:25
  Speaker 2: and they are focusing in on them now too, saying, hey,
• 26:28
  Speaker 2: we see some demand for these plug in hybrids that
• 26:32
  Speaker 2: can get as much as seven hundred miles per charge,
• 26:34
  Speaker 2: because I think they've correctly identified that. Until we have
• 26:38
  Speaker 2: some breakthrough in charge time or availability of charging, I
• 26:43
  Speaker 2: just don't think you can sell these cars very well
• 26:45
  Speaker 2: or cost.
• 26:46
  Speaker 3: You know, they'd have to beat on cost significant. If
• 26:49
  Speaker 3: you saw really high energy prices for a sustained period
• 26:51
  Speaker 3: of time, then you could see more capital going that direction.
• 26:55
  Speaker 3: But that ebbs and flows.
• 26:57
  Speaker 2: I've made it really clear that I have the dorkiest
• 27:00
  Speaker 2: cars out there. I have a Civic a CRV and
• 27:03
  Speaker 2: a Toyota CNA minivan. So like I, you know, I
• 27:05
  Speaker 2: am not a good resource for what people actually like
• 27:08
  Speaker 2: in terms of cars, But I'll tell you I was
• 27:10
  Speaker 2: kind of curious, Okay, what would be the lowest entry
• 27:12
  Speaker 2: point I could get for a recently made EV and
• 27:16
  Speaker 2: granted these things caught on fire for an extended period
• 27:18
  Speaker 2: of time. But the old the twenty twenty two Chevy
• 27:21
  Speaker 2: Bolt EUV, which is like a small size, all electric
• 27:26
  Speaker 2: small suv with only EV battery. What I like about
• 27:31
  Speaker 2: it is also has like the super CRUs features that
• 27:34
  Speaker 2: complete compete with Tesla's self driving features. Those things are
• 27:37
  Speaker 2: going for like less than twenty grand. That speaks to
• 27:40
  Speaker 2: just a lack of demand for EV's generally in my view,
• 27:43
  Speaker 2: is you know, if you can get a two year
• 27:46
  Speaker 2: old EV now for under twenty grand, that's a different
• 27:51
  Speaker 2: range of affordability than we were talking about previously.
• 27:53
  Speaker 4: Lisa Leni, by the way, Yeah, the range on the
• 27:55
  Speaker 4: twenty twenty five Lightning was anywhere between forty nine eight
• 28:00
  Speaker 4: seven five to eighty seven thousand.
• 28:02
  Speaker 2: It's a wide range. It's a thirty thousand dollars price
• 28:06
  Speaker 2: range on a car.
• 28:07
  Speaker 3: What cars are like that A lot like where if
• 28:09
  Speaker 3: you actually boil down to it like a real car
• 28:11
  Speaker 3: that you're actually gonna buy, it's probably skewing on.
• 28:13
  Speaker 2: That higher range. Imagine it comes with electric engines and
• 28:16
  Speaker 2: crank windows, So forty nine thousand just has two wheels
• 28:18
  Speaker 2: instead of four. Let's take a quick break. When we
• 28:22
  Speaker 2: come back. Stack Roulette here on the Financial Exchange.
• 28:26
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• 28:29
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• 29:05
  Speaker 2: As markets remain in positive territory, all kick things off
• 29:08
  Speaker 2: here with Stacker let Paul, which is not a happy
• 29:12
  Speaker 2: story but probably just the beginning of things out in California,
• 29:16
  Speaker 2: State Farm, which is the largest homeowners insurance company in California,
• 29:20
  Speaker 2: has gone to state regulators yesterday requesting to urgently approve
• 29:25
  Speaker 2: a twenty two percent average rate increase in the state, which,
• 29:30
  Speaker 2: as you can imagine, it's a pretty worrying sign for
• 29:33
  Speaker 2: that state's insurance market. This is, I mean, the literal
• 29:37
  Speaker 2: dust has barely settled in California and they are finding
• 29:40
  Speaker 2: the need to go do this and a lot more
• 29:43
  Speaker 2: to come here. But State Farm has already received more
• 29:46
  Speaker 2: than eighty seven hundred claims from the LA fires alone,
• 29:49
  Speaker 2: paid more than a billion dollars to their customers. According
• 29:53
  Speaker 2: to the company, they're going to have to pay out
• 29:55
  Speaker 2: significantly more. And then there is also that rule in California.
• 30:00
  Speaker 2: If the state run insurer of last Resort, whose name
• 30:04
  Speaker 2: is escaping me right now, becomes insolvent, then every insurer
• 30:07
  Speaker 2: that does business in the state needs to kick in
• 30:10
  Speaker 2: to make it solvent. So probably a lot more to
• 30:13
  Speaker 2: come here. And I think there's more than just this
• 30:17
  Speaker 2: twenty two percent increase that is likely to go into
• 30:19
  Speaker 2: place here, because in all likelihood, State Farm and many
• 30:22
  Speaker 2: other insurers are going to have to kick in to
• 30:24
  Speaker 2: make the insured last resort solvent and therefore have the
• 30:28
  Speaker 2: ability to pass those costs along to their customers to
• 30:30
  Speaker 2: a limited extent. So I think the other message is
• 30:36
  Speaker 2: beware in all states these companies, not the insurer. In
• 30:40
  Speaker 2: all other states across the country, you are likely to
• 30:42
  Speaker 2: see this type of thing occurring in terms of raid increases.
• 30:45
  Speaker 2: These companies are going to be looking for where they
• 30:47
  Speaker 2: can earn money to make up for their massive losses there,
• 30:51
  Speaker 2: And you're seeing a lot more. I get a lot
• 30:54
  Speaker 2: of questions from people like, I don't understand I've had
• 30:58
  Speaker 2: no accidents, my insurers jacking up my premiums by forty percent.
• 31:02
  Speaker 2: The answer, if you're wondering why that is happening to
• 31:05
  Speaker 2: you where you live, the answer is not that you
• 31:07
  Speaker 2: are necessarily a high risk to the insurance market in general.
• 31:10
  Speaker 2: The answer is that that insured does not want your business.
• 31:15
  Speaker 2: They are telling you, in a not so disguised fashion,
• 31:18
  Speaker 2: we are trying to pull out out of this state
• 31:21
  Speaker 2: and not issue as many policies here, and so we
• 31:23
  Speaker 2: are bumping up your premiums by forty percent because we
• 31:26
  Speaker 2: have too much risk in this area. We don't want
• 31:29
  Speaker 2: to be located in southern New Hampshire as much as
• 31:31
  Speaker 2: we already are, and so go find another insurer. And
• 31:34
  Speaker 2: in those types of cases, you oftentimes will find another
• 31:37
  Speaker 2: insured that says, yeah, certainly, I know we don't have
• 31:40
  Speaker 2: that type of risk. I'm happy to ensure this property
• 31:42
  Speaker 2: at a much cheaper cost. But don't necessarily assume that. Hey,
• 31:46
  Speaker 2: when you get a giant premium increase, it's because every
• 31:49
  Speaker 2: insurance company is doing it. No, oftentimes it is purely
• 31:52
  Speaker 2: a risk mitigation strategy of them saying we're too concentrated
• 31:56
  Speaker 2: in Los Angeles. We need to get out, not going
• 32:00
  Speaker 2: to cancel the policy. Let's just jack up the premiums
• 32:02
  Speaker 2: by fifty percent and see what they pay.
• 32:04
  Speaker 3: Or you get the sort of ripple effect of perhaps
• 32:07
  Speaker 3: you're insurer is ensuring in areas that aren't as safe,
• 32:10
  Speaker 3: but you're in that pool and happen to be in
• 32:11
  Speaker 3: a safer state, but you still are subject to the
• 32:13
  Speaker 3: premium increases as well because they're trying to cover themselves there.
• 32:17
  Speaker 3: This is going to be a huge issue that we're
• 32:20
  Speaker 3: going to cover for the next couple of years, the
• 32:22
  Speaker 3: homeowers insurance market in general, Mike, there's just going to
• 32:25
  Speaker 3: be a lot of negativity and a lot of difficulty
• 32:29
  Speaker 3: operating in that market going forward here. So it's something
• 32:32
  Speaker 3: that will continue to monitor. But it's amazing to see
• 32:34
  Speaker 3: that that quickly on State Farm. Maybe they can cut
• 32:37
  Speaker 3: back on some of their advertising expenses and rere's all
• 32:40
  Speaker 3: of this so I don't have to see all those
• 32:41
  Speaker 3: damn commercials during all the football games. Jake's job exactly.
• 32:45
  Speaker 3: I've got a story here about Alphabet or Google. They're
• 32:48
  Speaker 3: set to report their Q four financials after the market
• 32:51
  Speaker 3: closed today, one of the Big seven Magnificent seven companies.
• 32:55
  Speaker 3: What I'll be interested to see from Google besides the
• 32:58
  Speaker 3: typical quarterly numbers is any of their commentary on the
• 33:03
  Speaker 3: Chinese AI startup Deep Sea. I'm sure, Mike you guys
• 33:05
  Speaker 3: talked about this a ton in last week's show, but
• 33:08
  Speaker 3: it's something that's been of an area of interest to
• 33:11
  Speaker 3: me that I've tracked, you know, quite closely since it
• 33:13
  Speaker 3: came out. Google has its own model, which is Gemini
• 33:17
  Speaker 3: two point zero. The amount of AI models out there
• 33:20
  Speaker 3: is getting a bit congested or there's a significant amount
• 33:24
  Speaker 3: of competition in the space, and Deep Seak really had
• 33:27
  Speaker 3: some of those issues arise to the forefront as to
• 33:29
  Speaker 3: what model is going to win out and driving down
• 33:33
  Speaker 3: the overall costs in model development as well as just
• 33:37
  Speaker 3: the uses of some of these models.
• 33:39
  Speaker 2: So really be.
• 33:39
  Speaker 3: Interesting to see any type of commentary they have. What
• 33:41
  Speaker 3: type of capital expenditures are is Google looking at for
• 33:45
  Speaker 3: quarters going forward here in terms of spend out on
• 33:48
  Speaker 3: you know, chips and servers and data centers. That will
• 33:51
  Speaker 3: be something that I want to focus on to see
• 33:54
  Speaker 3: how much they're willing to comment on this most recent
• 33:57
  Speaker 3: news story.
• 33:57
  Speaker 2: Yeah, it is going to be and I hate to
• 34:00
  Speaker 2: say it doesn't matter, but to some extent, their forecasts
• 34:04
  Speaker 2: and their you know, answers about the most recent quarter
• 34:07
  Speaker 2: are kind of irrelevant. What investors and analysts are going
• 34:11
  Speaker 2: to be looking for is what investments have you made
• 34:15
  Speaker 2: that may no longer be relevant given the innovation out
• 34:17
  Speaker 2: of China this week, last week. That's that's what investors
• 34:20
  Speaker 2: are going to care about, is you know, how do
• 34:22
  Speaker 2: you leverage it? If it ends up being true? What
• 34:23
  Speaker 2: do you do? And that's that's the big overarching question
• 34:28
  Speaker 2: that I think investors are going to be asking. And
• 34:31
  Speaker 2: you could see some swings one direction or another based
• 34:33
  Speaker 2: on all that. And that's after the bell today, right
• 34:36
  Speaker 2: after the bell today. Amazon is after the bell tomorrow
• 34:39
  Speaker 2: or Thursday after the bell day, Tuesday, got it. In
• 34:44
  Speaker 2: addition to that, I know we have some of the
• 34:46
  Speaker 2: weight loss drugs coming out as well. Literally Novid nordis
• 34:49
  Speaker 2: just if we're talking about high flyer companies that have
• 34:51
  Speaker 2: had a pretty tremendous couple of years, those bear mentioning
• 34:55
  Speaker 2: as well. New York Times is a sale of how
• 34:58
  Speaker 2: a sale of TikTok talk would work and who might
• 35:02
  Speaker 2: buy it along those lines. Donald Trump, President Trump yesterday,
• 35:07
  Speaker 2: I think maybe yeah, yesterday signed an executive order that
• 35:10
  Speaker 2: outlines plans for a government run sovereign wealth fund. This
• 35:15
  Speaker 2: is something that's been talked about before. This is not
• 35:16
  Speaker 2: a new subject, and he had talked about it on
• 35:18
  Speaker 2: the campaign trail. To discuss the sovereign wealth fund, I
• 35:22
  Speaker 2: want to describe another one that has existed for a
• 35:25
  Speaker 2: long time, and Norway there's been a sovereign wealth fund
• 35:28
  Speaker 2: there since the nineteen sixties. Here's basically how it works.
• 35:32
  Speaker 2: The government, because of their oil reserves, has operated with
• 35:36
  Speaker 2: surpluses for decades and very regularly collects more in revenue.
• 35:42
  Speaker 2: The government does then they spend out on their citizens,
• 35:45
  Speaker 2: and so as a means of developing kind of a
• 35:48
  Speaker 2: rainy day fund, they have established a sovereign wealth fund
• 35:51
  Speaker 2: that they have used to fund all sorts of expenditures
• 35:53
  Speaker 2: for their citizens over the years. The obvious key difference,
• 35:58
  Speaker 2: if you were listening to me right there, is that's
• 36:00
  Speaker 2: Norway government has run a surplus for decades. If we
• 36:07
  Speaker 2: start a sovereign wealth fund, thirty dollars debt with massive
• 36:12
  Speaker 2: deficits six to seven percent annual deficits. There's a real
• 36:16
  Speaker 2: question of how do you fund this thing? Do you
• 36:18
  Speaker 2: direct all new Social Security payments into it? Do you
• 36:22
  Speaker 2: uh you know, does it? Is it getting used to
• 36:25
  Speaker 2: support more than Social Security? Like a big overarching questions.
• 36:29
  Speaker 2: Donald Trump did sign an executive order uh basically outlining
• 36:33
  Speaker 2: plans for a government run sovereign wealth fund, but Congress
• 36:37
  Speaker 2: controls the power of the purse, and there are large
• 36:39
  Speaker 2: questions looming about just how you would fund this sort
• 36:43
  Speaker 2: of thing because last I checked, we were trying to
• 36:46
  Speaker 2: cut government expenses. Didn't we cover a dose? We did
• 36:53
  Speaker 2: government efficiency. This might do this long term, but in
• 36:56
  Speaker 2: the short term, let's be clear about one thing. It
• 36:58
  Speaker 2: increases spending course unless you're able to divert the funds
• 37:01
  Speaker 2: from somewhere else. And so that's the main question is Okay,
• 37:05
  Speaker 2: I'm all on board with a sovereign wealth fund that
• 37:08
  Speaker 2: may be run properly and make some strategic investments. I'm
• 37:13
  Speaker 2: not sure that TikTok would be the first strategic investment
• 37:17
  Speaker 2: that I would make. And that is what's being talked
• 37:19
  Speaker 2: about here is a US developed sovereign wealth fund being
• 37:22
  Speaker 2: an investor in TikTok. We can disagree on all that,
• 37:25
  Speaker 2: though the main question that I have is sovereign wealth
• 37:29
  Speaker 2: funds can be valuable. They can outperform the performance that
• 37:33
  Speaker 2: we've gotten historically on the Social Security Trust Fund if
• 37:37
  Speaker 2: managed properly. But where the heck's the money going to
• 37:40
  Speaker 2: come from? Because this administration has been all about government efficiency,
• 37:45
  Speaker 2: and how many government eployees are going to add to
• 37:48
  Speaker 2: run a sovereign wealth fund, I guess would be my
• 37:50
  Speaker 2: main question to all this. That is all the time
• 37:53
  Speaker 2: we have for today's financial exchange. Markets remain open and
• 37:56
  Speaker 2: strongly in positive territory, now holding on to a gain
• 38:00
  Speaker 2: of about thirty points, a little bit less than a
• 38:02
  Speaker 2: tenth of a percent, the S and P up thirty
• 38:04
  Speaker 2: five points, or about six tenths of a percent, and
• 38:07
  Speaker 2: the Nasdaq still leading the way, up two hundred and
• 38:09
  Speaker 2: twenty five points, a little bit more than one percent.
• 38:12
  Speaker 2: We'll have earnings from Google tomorrow, earnings from Amazon on Thursday.
• 38:17
  Speaker 2: Have a great rest of your week, folks, and we'll
• 38:18
  Speaker 2: see you here tomorrow.