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Current state of the US labor market · The Financial Exchange Show

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  Speaker 2: Good morning, Welcome back to the Financial Exchange. Markets have
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  Speaker 2: turned positive for the day, at least for the moment,
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  Speaker 2: now up forty eight points one tenth percent, SMP similar
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  Speaker 2: percentage wise one tenth percent, and NAZAC leading the way
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  Speaker 2: up a quarter of one percent. Here Tomorrow, we will
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  Speaker 2: have a report from the Bureau of Labor Statistics on
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  Speaker 2: the rate of inflation. The CPI report comes out tomorrow.
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  Speaker 2: Week from tomorrow, we'll have the Federal Reserve meeting. We
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  Speaker 2: get PPI, the Producer Price Index on Thursday. Frankly, not
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  Speaker 2: a lot of folks pay too close of attention to that.
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  Speaker 2: I'm sure there are economists out there that put it
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  Speaker 2: in their models, but doesn't make as many headlines. We
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  Speaker 2: also have the initial jobless claims that will be coming
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  Speaker 2: out on Thursday morning at eight thirty, and that's kind
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  Speaker 2: of where I want to start this hour is a
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  Speaker 2: read on the overall state of the labor market. Because
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  Speaker 2: we've talked at length, and maybe you and I haven't marked,
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  Speaker 2: but the when I when I look at overall, you
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  Speaker 2: know four point two percent unemployment inflation rates that are
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  Speaker 2: you know, sub three percent overall, a labor force participation
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  Speaker 2: rate that is generally higher than what we saw for
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  Speaker 2: most of the twenty tens decade, and is at you know,
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  Speaker 2: rates that we haven't seen since the late nineties. It's
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  Speaker 2: tough to look at that and say, oh, that's a
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  Speaker 2: that's a rough job market. But in other ways it's
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  Speaker 2: showing some signs of stagnating and that you know, it
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  Speaker 2: isn't as problematic as a labor market that is in
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  Speaker 2: free fall, but does pose some unique challenges, I guess,
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  Speaker 2: and I find it particularly interesting that we are calling
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  Speaker 2: this job market stagnant at the same time that we
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  Speaker 2: have investors talking about the most innovative and groundbreaking piece
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  Speaker 2: of technology that's ever you know, that that's hit markets
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  Speaker 2: in decades, which would be artificial in tell. Because of that,
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  Speaker 2: I guess that's where I'm kind of leading into and
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  Speaker 2: maybe maybe leaning into a little bit too much. But
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  Speaker 2: I guess, where does it stack up for you in
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  Speaker 2: terms of the state of this labor market. And you
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  Speaker 2: always have to graide this thing on in the context
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  Speaker 2: of just recently.
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  Speaker 3: I'm just a generalist, not a labor economist. I know
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  Speaker 3: I always say that, but it's it's I think it's
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  Speaker 3: important because there may be subtle points that I'm missing.
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  Speaker 3: The way a generalist like me would look at the
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  Speaker 3: labor market is to look at things like unemployment, payroll growth,
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  Speaker 3: and as you said at the beginning of this segment,
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  Speaker 3: you put those into your little model. Now, it depends
• 3:43
  Speaker 3: on what you're trying to do with your model. You're
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  Speaker 3: trying to forecast inflation, You're trying to forecast GDP growth,
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  Speaker 3: You're trying to forecast like the stock market, which is impossible.
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  Speaker 3: But suppose it weren't. What are you doing with the data?
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  Speaker 3: What do you want it to tell you? All I
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  Speaker 3: can tell you based on the way you frame the question,
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  Speaker 3: and you already really answered this, but it's worth understan going.
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  Speaker 3: Is that unemployment at four point two percent, the rate
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  Speaker 3: of unemployment, which is the number of unemployed people divided
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  Speaker 3: by the size of the labor force, very simple to
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  Speaker 3: get there, is historically speaking, very low wage growth, which
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  Speaker 3: is also in the employment report we got the other day,
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  Speaker 3: is historically speaking respectable. Is pretty strong payroll growth. The
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  Speaker 3: business reported side of the state of the labor market
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  Speaker 3: is more than enough. It was about two undred thirty
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  Speaker 3: thousand jobs last month, higher than the past six month average.
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  Speaker 3: For what that's worth is more than enough to create
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  Speaker 3: new jobs for people entering the labor force. That's what
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  Speaker 3: labor market economists would tell you. So by all surface measures,
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  Speaker 3: the economy as measured by the state of the labor market,
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  Speaker 3: or more precisely, the labor market, for good about the
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  Speaker 3: economy for a second, though they're closely related. The economy
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  Speaker 3: the labor market is excuse me, strong. There's no denying that.
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  Speaker 3: I mean, if you think otherwise, give me an objective
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  Speaker 3: measure that we can agree upon and identify in advance,
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  Speaker 3: and we can go with that. But by conventional measures, Mike,
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  Speaker 3: the labor market, as you said, is strong. The idea
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  Speaker 3: that it's stagnant, I guess comes from the declining so
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  Speaker 3: called quits rate, which comes out of that Jolts report
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  Speaker 3: that we talk about from from month to month, when
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  Speaker 3: it comes out fewer people are quitting is a percentage
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  Speaker 3: of the total number of people employed than say, earlier
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  Speaker 3: in COVID. But we know that that was a frenetic, unstable, unstably,
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  Speaker 3: unsustainably excuse me, a hot labor market. So I don't
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  Speaker 3: think that's much of a benchmark.
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  Speaker 2: I will I'll talk to that separations piece a little bit,
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  Speaker 2: and again, I think all of this has to be
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  Speaker 2: taken in the context of what you've experienced most recently
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  Speaker 2: and what you've experienced most recently in terms of the
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  Speaker 2: labor market. The total separations rate, which you know, Saint
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  Speaker 2: Louis FED has an excellent, you know, data series on this.
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  Speaker 2: In say, November of twenty twenty one, the rate of separations,
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  Speaker 2: which would mean quits firings, as a percentage of the two.
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  Speaker 3: So is that different in quits what you're looking at there.
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  Speaker 2: Yeah, it's total separations would be quits and layoffs I believe. Okay,
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  Speaker 2: So voluntary and involuntary was sitting around four point two
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  Speaker 2: percent in November of twenty twenty one, and generally was
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  Speaker 2: above four percent or close to it for most of
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  Speaker 2: twenty twenty two as well. We've now for the last
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  Speaker 2: two months come down to a rate of three point
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  Speaker 2: three percent. By the way, that stuff going on in
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  Speaker 2: twenty twenty one and twenty twenty two was largely not layoffs.
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  Speaker 2: It was quits. But I'm looking at total separations here
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  Speaker 2: just as a different way of looking at it today.
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  Speaker 2: Three point three percent is that way different from four percent? No,
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  Speaker 2: but it's it's enough to be noticed. For the twenty
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  Speaker 2: ten decade. You have to go all the way back
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  Speaker 2: to November of twenty fourteen to get down to a
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  Speaker 2: three point three percent total separations rate. So okay, I
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  Speaker 2: can see how some people might define this labor market
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  Speaker 2: as stagnant to your point earlier, though from most other measures,
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  Speaker 2: it's a really strong labor market. The total employment to
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  Speaker 2: population ratio right now eighty point four percent. We only
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  Speaker 2: got above that level pre COVID in December of twenty nineteen.
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  Speaker 2: That was the only time in the entire twenty ten
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  Speaker 2: decade that we approached eighty point four percent of the
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  Speaker 2: population of twenty five to fifty four year olds working.
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  Speaker 2: So are we on a decline from where we were
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  Speaker 2: of the last few years? Yes? Are we just coming
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  Speaker 2: in line with where we were pre COVID. Also yes,
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  Speaker 2: the unemployment rate we've talked about this one at length,
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  Speaker 2: four point two percent, generally healthy, lower than it was
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  Speaker 2: for most of the twenty ten decade. Once again, the
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  Speaker 2: you talked about payrolls. Chuck always likes to talk about
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  Speaker 2: those aggregate weekly payrolls and looking at those year over year,
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  Speaker 2: this combines both raises plus new workers into the labor
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  Speaker 2: market once again flatlining, but at five percent, that's better
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  Speaker 2: than it was for most of the twenty ten decade.
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  Speaker 2: And so I do land at this position where I
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  Speaker 2: certainly can understand some of the frustrations that I'm hearing
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  Speaker 2: from some workers of being dissatisfied in their existing role,
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  Speaker 2: unable to move up, and unable to find a new
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  Speaker 2: job elsewhere. But that sure sounds a lot better to
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  Speaker 2: me than the economy of twenty eleven, when you couldn't
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  Speaker 2: move up and you couldn't find any job, and you
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  Speaker 2: were sitting unemployed for a year and a half. And
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  Speaker 2: so again, it all comes down to grading this stuff
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  Speaker 2: with a scale. I think the other piece of this, though,
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  Speaker 2: that I find compelling and interesting, is is some of
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  Speaker 2: this stagnation occurring because of artificial intelligence. And I don't
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  Speaker 2: think we have any way of measuring that, and probably
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  Speaker 2: won't for years. But that's the promise of AI is, Hey,
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  Speaker 2: you worker are supposed to be more effective in your
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  Speaker 2: existing job because of artificial intelligence, and therefore I don't
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  Speaker 2: need that new employee, and I don't need to pay
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  Speaker 2: you quite as much because you can do more with
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  Speaker 2: the same number of hours.
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  Speaker 3: Uh yeah, that's the definition of productivity. Then higher productivity
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  Speaker 3: is not necessarily good for unemployment. In fact, you could
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  Speaker 3: there are situations where productive product productivity grow. There's always
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  Speaker 3: high during recessions, for example. Yeah, not always, but that
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  Speaker 3: sort of perverse result prevails. I just I want to
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  Speaker 3: step back make a larger point about economic data. First
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  Speaker 3: of all, these are estimates. We call them statistics, not
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  Speaker 3: because we like fancy words for numbers, but because.
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  Speaker 2: Well, we also like fancy words.
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  Speaker 3: We also are are highly pretentious.
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  Speaker 2: But it can be both.
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  Speaker 3: It means you're right, it means it's an estimate. We
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  Speaker 3: don't know the true value. The Department of Labor doesn't
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  Speaker 3: talk to everybody. It only talks to one hundred whatever
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  Speaker 3: it is, twenty thousand households and sixty thousand businesses. I
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  Speaker 3: always forget and reverse those two things. But the point
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  Speaker 3: is these are estimates, which is why they get revised.
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  Speaker 3: They weren't meant when created, and even today they're not
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  Speaker 3: meant to be perfect measures of the health of the
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  Speaker 3: economy or reflective of your lived experience. But that all
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  Speaker 3: that said, you can look at them relative to past values,
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  Speaker 3: which is I think the safest way for people like
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  Speaker 3: us non labor econ to use them. Just look at
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  Speaker 3: unemployment today relative to where it's been historically, and it's low.
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  Speaker 3: Take that for what it's worth. If you don't like
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  Speaker 3: that measure, come up with your own. And I know
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  Speaker 3: a lot of you don't. I get that it's not
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  Speaker 3: reflective again of everybody's experience.
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  Speaker 2: And I came up with four of them, and three
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  Speaker 2: out of four of them are indicating. Look, this is
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  Speaker 2: a heck of a struggle.
• 10:18
  Speaker 3: They're all the same. They're all they're all statistics prone
• 10:20
  Speaker 3: to sampling and other errors. Nor are they meant to
• 10:24
  Speaker 3: capture again, what's most important to everybody. They all suffer
• 10:28
  Speaker 3: from the same.
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  Speaker 2: True, But it's all we got.
• 10:31
  Speaker 3: It is all we got, Or find your own is
• 10:33
  Speaker 3: I mentioned? But when you look back in two years
• 10:35
  Speaker 3: and ask the question, you're better off now than you
• 10:37
  Speaker 3: were two years ago. Remember the numbers. I like to say,
• 10:40
  Speaker 3: remember for what it's worth. That also sounds pretentious, but
• 10:43
  Speaker 3: for what it's worth, remember the norm is two three
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  Speaker 3: and four. Two is roughly where core inflation is today,
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  Speaker 3: is measured by the Fed's choice measure. It's a little
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  Speaker 3: bit higher than that. I'm rounded down. Three is roughly
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  Speaker 3: what GDP after inflation has done over the past twelve months,
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  Speaker 3: several quarters actually, And four is where unemployment is today.
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  Speaker 3: If you're keeping score at home, judging the new administration
• 11:05
  Speaker 3: or whatever, remember those numbers and compare them to those,
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  Speaker 3: or suggest something else as a yard stick by which
• 11:13
  Speaker 3: we're going to keep score. I don't know what else
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  Speaker 3: to use. Or there's a stock mark.
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  Speaker 2: We're notoriously pretty bad at that. But yeah, it's easy
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  Speaker 2: for me to understand how twenty twenty one would stick
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  Speaker 2: in people's minds and be the benchmark that they're using,
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  Speaker 2: because in twenty twenty one, a lot of people got
• 11:26
  Speaker 2: new jobs, a lot of people got raises, a lot
• 11:28
  Speaker 2: of people got money from the US government in the
• 11:31
  Speaker 2: stock market crushed it, and inflation hadn't really taken off yet.
• 11:35
  Speaker 2: So yeah, it's easy for me to say, oh, yeah,
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  Speaker 2: I get why people are dissatisfied with this market if
• 11:40
  Speaker 2: they're comparing it to a narrow span of time when
• 11:44
  Speaker 2: they might have gotten a new job or might have
• 11:45
  Speaker 2: gotten a big raise, and things that are just not
• 11:47
  Speaker 2: happening in twenty twenty four. Let's take a quick break.
• 11:50
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• 11:53
  Speaker 2: up next, and then I want to talk about my
• 11:55
  Speaker 2: dumb stock market story of the day. That's next on
• 11:57
  Speaker 2: the Financial Exchange.
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• 13:16
  Speaker 2: If you're browsing the typical financial news publications today, Mark,
• 13:20
  Speaker 2: you may have come across this one of a rough
• 13:24
  Speaker 2: day in some momentum stocks. So yesterday on Monday, the
• 13:28
  Speaker 2: SMP sold off by six tens of a percent, which
• 13:32
  Speaker 2: I know that's a lot of points, but is not
• 13:34
  Speaker 2: all that impactful and is not all that outrageous. I'm
• 13:37
  Speaker 2: sure that we have lots of days where equity markets
• 13:39
  Speaker 2: sell off by more than half a percent.
• 13:41
  Speaker 3: We should mention that during the break, Mike, I could
• 13:43
  Speaker 3: have given you a FIR.
• 13:43
  Speaker 2: I'm sure you could have. Nonetheless, we had that yesterday.
• 13:47
  Speaker 2: The piece then points out that momentum plays of late
• 13:52
  Speaker 2: fared a lot worse. So micro Strategy off set seven
• 13:54
  Speaker 2: and a half percent, app love and down fourteen point
• 13:57
  Speaker 2: seven percent, Palentteer down five percent, down two and a
• 14:00
  Speaker 2: half percent, Goldman Sachs has what it calls this high
• 14:04
  Speaker 2: momentum long short index, and on Monday that group tumbled
• 14:07
  Speaker 2: six point one percent, and so they're concluding that, Hey,
• 14:10
  Speaker 2: you know, historically, when you've had a tumble like this
• 14:13
  Speaker 2: of our big momentum stocks, this is what's happened with
• 14:16
  Speaker 2: equity markets, and a lot of the times it's resulted
• 14:18
  Speaker 2: in some pretty big draw downs on equities. And I'm
• 14:21
  Speaker 2: left sitting here saying, what in God's name am I
• 14:24
  Speaker 2: actually supposed to do with this? Because I, as someone
• 14:29
  Speaker 2: who reads these types of stories every day, I don't
• 14:32
  Speaker 2: know what they're telling me to do, and I don't
• 14:34
  Speaker 2: have any idea have the average investors to read anything
• 14:37
  Speaker 2: into this other than og if I just piled into
• 14:41
  Speaker 2: like Nvidia and every other high flying tech stock this
• 14:43
  Speaker 2: year last week, then I might be I might have
• 14:46
  Speaker 2: just been in for some trouble because it just sold
• 14:48
  Speaker 2: off by six percent. I don't know that there's anything
• 14:51
  Speaker 2: that this can tell you about markets at large, or
• 14:55
  Speaker 2: more broadly speaking. I mean, you know, Monday, let's face
• 14:58
  Speaker 2: the fact that you know, it may have just had
• 15:00
  Speaker 2: a lot to do with the fact that China trade
• 15:02
  Speaker 2: tensions were heating up and then Video sold off substantially.
• 15:05
  Speaker 2: I don't know that there's a lot more to read
• 15:07
  Speaker 2: into all of this, and just taking a momentum stock
• 15:11
  Speaker 2: index that you just created and saying that it's sold
• 15:14
  Speaker 2: off a bunch. Again, I'm just unsure of what I'm
• 15:17
  Speaker 2: supposed to do with that mark. What do you have
• 15:18
  Speaker 2: for me?
• 15:19
  Speaker 3: Let's see, so the fraction of days, Mike, that the
• 15:23
  Speaker 3: we've had losses greater than in an absolute sense, so
• 15:27
  Speaker 3: less than if you want to be technically right, Yeah,
• 15:31
  Speaker 3: it happens on one in every five days point six,
• 15:34
  Speaker 3: a loss of point six.
• 15:35
  Speaker 2: I had it. I had to look so over a
• 15:38
  Speaker 2: certain time period that you.
• 15:39
  Speaker 3: Just ran nineteen twenty subib When did this data set start?
• 15:43
  Speaker 3: I pulled it off a Yahoo twelve thirty nineteen twenty
• 15:46
  Speaker 3: seven was the first date for the s. You can
• 15:48
  Speaker 3: get this on Yahoo and then you just have to
• 15:50
  Speaker 3: import it into your favorite statistical program and then you
• 15:52
  Speaker 3: can filter by you know, loss size. So yeah, it
• 15:57
  Speaker 3: is not it is not unusual, as you pointed out,
• 15:59
  Speaker 3: it's prey normal occurrence. So no news there. Look these
• 16:03
  Speaker 3: momentum stocks. There is an S and P five hundred
• 16:05
  Speaker 3: momentum index. It invests in stocks that I'm oversimplifying here,
• 16:09
  Speaker 3: But if you're interested, google it. You can go to
• 16:10
  Speaker 3: S and P S Methodology on their website. You can
• 16:13
  Speaker 3: get their real fast It's very comprehensible. It filters for
• 16:17
  Speaker 3: companies that have gone up lately. That's all momentum is.
• 16:20
  Speaker 3: It's exactly what it sounds like, Believe it or not.
• 16:22
  Speaker 3: It's a source. It's a it's one of the fundamental
• 16:25
  Speaker 3: ingredients of investment returns. You can you can break returns
• 16:29
  Speaker 3: up into their constituents, like underneath underneath the S and
• 16:32
  Speaker 3: P return there returns to factors' finance researchers call them that.
• 16:36
  Speaker 3: That comprise or explain that returns on the S and
• 16:39
  Speaker 3: P there's quality, there's there's momentum, there's value, there's size,
• 16:44
  Speaker 3: there are others. Momentum is a legit basis for an
• 16:47
  Speaker 3: investment strategy. It's an actual long term source of returns. So,
• 16:52
  Speaker 3: but it's up fifty percent this year, some retracing of
• 16:55
  Speaker 3: that would be pretty normal. I don't know how much
• 16:58
  Speaker 3: of a prelude. Look, if this happens a lot, this
• 16:59
  Speaker 3: means the momentum trade, which has been driving the overall market.
• 17:03
  Speaker 3: That's the larger point here. If that's sold, maybe we're
• 17:06
  Speaker 3: in trouble. But don't forget there are other factors that
• 17:08
  Speaker 3: constitute investment returns. Maybe they take the lead mic.
• 17:11
  Speaker 2: The important fact and I think the important piece that
• 17:13
  Speaker 2: we try and drive home on all this is if
• 17:15
  Speaker 2: you read an article like the one that I'm talking about,
• 17:17
  Speaker 2: and I'll give you the headline beneath the hood, stocks
• 17:20
  Speaker 2: just suffered their worst day of the year. Some are
• 17:22
  Speaker 2: worried if you read something like this and it completely
• 17:25
  Speaker 2: changes your perspective on markets, and you're suddenly thinking that, hey,
• 17:29
  Speaker 2: momentum is going to be the thing that drags the
• 17:31
  Speaker 2: market down or pulls it up. I just asked you
• 17:34
  Speaker 2: to take a step back and say, did you have
• 17:36
  Speaker 2: any of that perspective prior to reading this article or
• 17:39
  Speaker 2: is this the one thing that completely changed your mind
• 17:42
  Speaker 2: on markets? And if it's the latter, where's this from
• 17:45
  Speaker 2: market Watch? Nobody don't worry. Nobody read it. In any case,
• 17:51
  Speaker 2: these articles appear everywhere all the time, whether it's Yahoo Finance,
• 17:54
  Speaker 2: a lot of free publications that you can get into.
• 17:56
  Speaker 2: And again, if any of them make you completely change
• 17:59
  Speaker 2: your view or outlook or trading strategy based on them,
• 18:02
  Speaker 2: then check your feelings that the door get hit.
• 18:06
  Speaker 3: Don't worry about it.
• 18:07
  Speaker 2: They should not be going anywhere. Colleges are nervous across
• 18:12
  Speaker 2: the country because enrollments falling at quote concerning rates. To
• 18:15
  Speaker 2: give you some stats on this decline is most significant
• 18:18
  Speaker 2: significant at both public and private universities. Nonprofit four year
• 18:23
  Speaker 2: colleges have seen a more than six percent decline in enrollment.
• 18:28
  Speaker 2: The average drop was almost seven percent for forty six states.
• 18:33
  Speaker 2: And you're seeing an interesting thing here where applications aren't down,
• 18:38
  Speaker 2: enrollment is. So I don't know exactly what to blame
• 18:41
  Speaker 2: that on. There were problems with the FAFSA, obviously there
• 18:44
  Speaker 2: are affordability issues with higher education. But I find it
• 18:47
  Speaker 2: very interesting that enrollments down, applications are up. What might
• 18:52
  Speaker 2: that mean for the next few years. I don't have
• 18:53
  Speaker 2: any answering to trade school.
• 18:55
  Speaker 3: They're getting into colleges as a fallback position but then
• 18:58
  Speaker 3: doing something else, or.
• 18:59
  Speaker 2: They're going later. The state of the labor market, like
• 19:01
  Speaker 2: we've talked about this.
• 19:02
  Speaker 3: You know, sample the labor market, sample trade school. It's
• 19:06
  Speaker 3: probably not a terrible sign.
• 19:07
  Speaker 2: Mike, No, I don't think it is. I mean, it's
• 19:09
  Speaker 2: probably a terrible sign for a whole bunch of unprofitable universities.
• 19:13
  Speaker 2: But for the average American, I don't know. I know
• 19:15
  Speaker 2: they describe this as concerning My point would be concerning
• 19:19
  Speaker 2: for whom exactly. Demographics I'm sure play a role into
• 19:23
  Speaker 2: this too, that that would be interesting, But overall, I'm
• 19:26
  Speaker 2: not sure this is a bad sign. Quick break, we'll
• 19:28
  Speaker 2: have the trivia winner, and then we're going to tax
• 19:30
  Speaker 2: prom when we come back.
• 19:41
  Speaker 5: Bringing the latest financial news straight to your radio. Every day,
• 19:45
  Speaker 5: it's the Financial Exchange on the Financial Exchange Radio Network.
• 19:51
  Speaker 5: Find daily interviews and full shows of the Financial Exchange
• 19:54
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• 19:57
  Speaker 5: caught up on anything and everything you might have missed.
• 20:00
  Speaker 5: This is the Financial Exchange Radio Network.
• 20:06
  Speaker 4: Trivia question today was what country does the Christmas tree
• 20:09
  Speaker 4: tradition supposedly come from?
• 20:12
  Speaker 2: Germany?
• 20:12
  Speaker 4: German immigrants brought the Christmas tree tradition to the US
• 20:16
  Speaker 4: and the eighteenth and nineteenth centuries Queen Victoria and her
• 20:20
  Speaker 4: German born husband Prince Albert also popularized popularize the tradition
• 20:26
  Speaker 4: in Britain. Winner today of the Financial Exchange Show teachers
• 20:29
  Speaker 4: Kathy from Burlington, mass Congrats to Kathy, and we play
• 20:34
  Speaker 4: trivia every day here on the Financial Exchange. See complete
• 20:38
  Speaker 4: contest rules at Financial Exchange Show dot com.
• 20:41
  Speaker 2: I'm happy to say that I did not know until
• 20:44
  Speaker 2: recently that something called tax prom actually exists. It's a
• 20:49
  Speaker 2: black tied dinner in DC for a whole bunch of
• 20:52
  Speaker 2: lobbyists and business executives to attend. And I cannot think
• 20:55
  Speaker 2: of a more boring group of old white men to
• 20:58
  Speaker 2: it to get together than than this group.
• 21:03
  Speaker 3: Mark was joking maybe afternoons of the villages.
• 21:05
  Speaker 2: Yeah, yeah, find we will not find a more concentrated.
• 21:09
  Speaker 3: Chumps and tuxedos.
• 21:11
  Speaker 2: Uh. Nonetheless, it did occur in DC over I think
• 21:14
  Speaker 2: the weekend, and a lot of excitement of Uh, it's
• 21:19
  Speaker 2: just basically it's basically a black tie event to uh
• 21:23
  Speaker 2: lobby lobby lawmakers to lower lower.
• 21:27
  Speaker 3: The last because it's like the most pollutocratic thing.
• 21:31
  Speaker 2: Really, Uh, you know, bad pun jokes about depreciation schedules
• 21:37
  Speaker 2: probably and yeah, that that's what you get at tax prom,
• 21:42
  Speaker 2: which at least is a little bit self deprecating calling
• 21:45
  Speaker 2: it tax prom. But to the serious side of this,
• 21:50
  Speaker 2: there's a lot of conjecture about what tax reform is
• 21:52
  Speaker 2: going to look like in twenty twenty five. I think
• 21:54
  Speaker 2: it's likely to be one of the first items taken
• 21:57
  Speaker 2: up by the new Congress in January, and I'm really
• 22:02
  Speaker 2: unsure of which direction it's going to go, because you're
• 22:04
  Speaker 2: going to need to do it without probably a single
• 22:08
  Speaker 2: Democrat support, would be my guess. So there's some things
• 22:12
  Speaker 2: that seem like a sure thing, which would be corporate
• 22:17
  Speaker 2: tax rates staying where they are. I don't know that
• 22:19
  Speaker 2: they're going a lot lower, and then the locking in
• 22:21
  Speaker 2: of all of the previous Trump tax cuts from twenty
• 22:26
  Speaker 2: seventeen is when the first tax proposal was done. But
• 22:29
  Speaker 2: beyond that, I just have absolutely no idea what the
• 22:33
  Speaker 2: actual priorities are going to be. We've had so many
• 22:36
  Speaker 2: different tax pledges and promises. There have been Republican lawmakers
• 22:42
  Speaker 2: from New York, for instance, who said they will not
• 22:44
  Speaker 2: support any tax bill unless there's a repeal of the
• 22:47
  Speaker 2: salt cap. For anyone unfamiliar that's listening to New England,
• 22:51
  Speaker 2: you shouldn't be, but you know there's a ten thousand
• 22:52
  Speaker 2: dollars current cap on state and local taxes. Some New
• 22:55
  Speaker 2: York lawmakers said, nope, not get my vote unless you
• 22:58
  Speaker 2: repeal that. Obviously, there's the Trump campaign pledges on taxes,
• 23:01
  Speaker 2: on tips, over time, social security. You know, all of
• 23:06
  Speaker 2: these things were pledges during the military and trail.
• 23:09
  Speaker 3: Exacting every group he was in front of in the
• 23:11
  Speaker 3: last six weeks from income taxes.
• 23:13
  Speaker 2: He wants to exempt a military payroll from taxes. Believe
• 23:15
  Speaker 2: he did.
• 23:16
  Speaker 3: Didn't he say that, public safety, law enforcement, military Again,
• 23:20
  Speaker 3: just look at who he was speaking in front of,
• 23:21
  Speaker 3: and you can assume he promised them a tax cut
• 23:23
  Speaker 3: in the last several weeks of the campaign.
• 23:25
  Speaker 2: So evidently it worked again. All of these things are
• 23:28
  Speaker 2: I think, legitimately on the table. I think some are
• 23:30
  Speaker 2: more likely than others and other Some would leave bigger
• 23:33
  Speaker 2: holes than others in the overall budget. But I have
• 23:36
  Speaker 2: no idea what the priorities are. I can't even begin
• 23:38
  Speaker 2: to tell you. I don't think they know which ones
• 23:40
  Speaker 2: are going to get prioritized, and it's going to be
• 23:41
  Speaker 2: a messy period time. I think it's safe to say
• 23:44
  Speaker 2: that corporate taxes aren't going up because the Trump tax
• 23:48
  Speaker 2: cut first time pretty much promised that. I think it's
• 23:51
  Speaker 2: pretty safe to say that individual tax rates are going
• 23:54
  Speaker 2: to stay flat. They were supposed to go up in
• 23:56
  Speaker 2: twenty twenty six beyond that, I've got no idea. And importantly,
• 24:02
  Speaker 2: if you actually want to affect the economy in some
• 24:06
  Speaker 2: meaningful way, you have to go beyond just those two things, right,
• 24:11
  Speaker 2: Just keep.
• 24:11
  Speaker 3: Your subjective is I don't know there was never a
• 24:13
  Speaker 3: philosophy behind these promises articulated.
• 24:17
  Speaker 2: Well, I think the objective is plain and simple, lower
• 24:20
  Speaker 2: tax rates. I don't think that conclude anything. Yeah, I
• 24:26
  Speaker 2: don't think there's anything you can conclude about which direction
• 24:28
  Speaker 2: they're going to go. But that's where we're setting up.
• 24:31
  Speaker 2: And you know, I was looking through this to say, hey,
• 24:34
  Speaker 2: is there are there any trends coming out of all
• 24:36
  Speaker 2: of this in terms of what's going to get prioritized?
• 24:38
  Speaker 2: And I got nothing. I have no idea what is
• 24:41
  Speaker 2: going to be the priority when Congress comes in in January.
• 24:45
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• 24:48
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• 25:39
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• 25:41
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• 25:50
  Speaker 2: Well, it's another week and there's another piece being written
• 25:52
  Speaker 2: about how the Department of Government Efficiency is going to
• 25:56
  Speaker 2: inevitably fail. One quote here from the author. It's focusing
• 26:00
  Speaker 2: on the wrong targets, with the wrong approach and the
• 26:02
  Speaker 2: wrong leadership. So harsh words for the Department of Government Efficiency.
• 26:07
  Speaker 2: Initially committing to cut two trillion dollars from the government budget,
• 26:13
  Speaker 2: Elon Musk has now paired that back by a full
• 26:16
  Speaker 2: seventy five percent to targeting five hundred billion dollars in
• 26:19
  Speaker 2: spending cuts that they're trying to target here, and the
• 26:22
  Speaker 2: author concluding here that even that is woefully over promised.
• 26:27
  Speaker 3: Yeah, this piece is from sorry Market having a hard
• 26:32
  Speaker 3: time identify market once again, Market. Laura Tyson is an economist.
• 26:36
  Speaker 3: I recognize the name. She used to go by Laura
• 26:38
  Speaker 3: DeAndrea Tyson. Some of you may recognize the name.
• 26:40
  Speaker 2: Or probably not.
• 26:41
  Speaker 3: She was head of Bill Clinton's first CEA. So she's
• 26:45
  Speaker 3: she's biased. That's okay, she's analytical, but she's she's biased.
• 26:48
  Speaker 2: Yep.
• 26:49
  Speaker 3: I didn't have to read this, Mike, because I know
• 26:51
  Speaker 3: how these commissions go. Commissions are where you put and
• 26:53
  Speaker 3: I know Laurie from Laurie from Rhode Island is going
• 26:55
  Speaker 3: to hate what I'm about to say. Sorry, Laurie, this
• 26:58
  Speaker 3: commission is shaping. It's all ready a joke. It's Elon
• 27:01
  Speaker 3: and Ramaswami taking tweets off there whatever they call the
• 27:06
  Speaker 3: truths or tweets or those utterances on his social media bullhorn,
• 27:11
  Speaker 3: and then we're like retweeting it, saying, oh, this would
• 27:13
  Speaker 3: be a good thing to cut that would be a
• 27:14
  Speaker 3: good thing to cut. There's no systematic approach, there's no
• 27:18
  Speaker 3: involved there's there's a there was a week attempt at
• 27:21
  Speaker 3: involving Congress, but no structure. How do we make these
• 27:26
  Speaker 3: suggestions into something coherent and something which legislators can act on.
• 27:32
  Speaker 3: And then there's the absurdity of cutting a third of
• 27:37
  Speaker 3: the federal budget all in one fell swoop. You could
• 27:41
  Speaker 3: fire every federal employee. That saves you three hundred billion.
• 27:44
  Speaker 3: That's fifteen percent of their promised cuts.
• 27:47
  Speaker 2: So let's let's take their revised half a half a
• 27:50
  Speaker 2: trillion dollar number that they are now talking about.
• 27:52
  Speaker 3: So they've they've ratcheted down the lowering expectations.
• 27:56
  Speaker 2: A full seventy percent from their initial target.
• 27:58
  Speaker 3: So it's been three weeks, they've nothing yet President the
• 28:01
  Speaker 3: president Elec's not even an office yet, and they've already
• 28:04
  Speaker 3: lowered the bar by seventy five percent. That gives you
• 28:06
  Speaker 3: an indication of where this sucker's going.
• 28:07
  Speaker 2: So when you say it's fundamentally un serious, let me
• 28:10
  Speaker 2: let me give you some of the reasons why they
• 28:11
  Speaker 2: have indicated that they are looking at specific cuts Planned
• 28:16
  Speaker 2: Parenthood and other progressive groups. They're looking at three hundred
• 28:19
  Speaker 2: million dollars a year there the Corporation for Public Broadcasting
• 28:24
  Speaker 2: would get you half a billion dollars there, one.
• 28:27
  Speaker 3: And a half eliminating PBS.
• 28:30
  Speaker 2: Maybe that goes to NPR. I'm not sure it is.
• 28:33
  Speaker 3: And so we're going to take those things off the air, yes, or.
• 28:36
  Speaker 2: At least stop funding them so they'll have to fund themselves.
• 28:38
  Speaker 2: I don't know. One and a half billion dollars a
• 28:41
  Speaker 2: year goes to various international organizations that have been identified.
• 28:45
  Speaker 2: Six point six billion dollars a year goes to the
• 28:47
  Speaker 2: National Oceanic and Atmospheric Administration. Again, I'm not sure why
• 28:51
  Speaker 2: you would want to kill.
• 28:52
  Speaker 3: Yeah, why would we want to track climate change.
• 28:54
  Speaker 2: Or just generally weather forecasts? But neither here nor there.
• 28:59
  Speaker 2: The State Department thirty eight billion dollars, Education Department twenty
• 29:03
  Speaker 2: nine billion dollars. There is talk about going after NASA,
• 29:06
  Speaker 2: but for obvious self interested reasons. Elon Musk's not about
• 29:09
  Speaker 2: to cut NASA's budget because that's what you know, butters
• 29:13
  Speaker 2: his bread for a moment here. So this is say that.
• 29:15
  Speaker 3: It's honestly unbelievable.
• 29:17
  Speaker 2: But if you included all of those and it just
• 29:18
  Speaker 2: said you're going to kill all of it. I think
• 29:22
  Speaker 2: we've come up with maybe thirty or forty billion, No,
• 29:26
  Speaker 2: forty or fifty billion dollars, which is one tenth of
• 29:31
  Speaker 2: the lower committed number. And again I'm not saying that
• 29:33
  Speaker 2: this isn't a good exercise. Maybe you should cut all
• 29:36
  Speaker 2: of those.
• 29:36
  Speaker 3: You know, then Congress goes through this every year. You
• 29:38
  Speaker 3: don't think there are people that push back on what
• 29:39
  Speaker 3: they view as frivilous spending, Like no one's ever thought
• 29:42
  Speaker 3: of any of this before. Like Elon's the first guy
• 29:44
  Speaker 3: to have this pop into is his his fertile brain.
• 29:48
  Speaker 2: The critical piece here is that seventy four percent of
• 29:53
  Speaker 2: the federal spending goes to defense, Social Security, Medicare, Medicaid, Obamacare,
• 29:59
  Speaker 2: and interest. I'm not debating you can't try and cut
• 30:03
  Speaker 2: Medicaid and Obamacare. Uh, those are the only ones that
• 30:06
  Speaker 2: I think, generally speaking, people would look at in favor.
• 30:08
  Speaker 2: But you've tried to do it every year for the
• 30:10
  Speaker 2: last decade and it just hasn't happened.
• 30:12
  Speaker 3: The fear. Look, there are plenty of good plans out
• 30:14
  Speaker 3: there to cut spending. For what it's worthful disclosure, I
• 30:17
  Speaker 3: am an I am a cut spend I am the
• 30:19
  Speaker 3: iatola of cutting spending. Personally, I would slice it all,
• 30:23
  Speaker 3: including Social Security, not particularly popular. I wouldn't get elected,
• 30:26
  Speaker 3: but it needs to be done, so I take this
• 30:28
  Speaker 3: stuff deadly seriously, as we should. I think there have
• 30:32
  Speaker 3: been plans over my lifetime of paying attention to this.
• 30:37
  Speaker 3: Over thirty years now, every year Heritage and CATO and
• 30:40
  Speaker 3: others come out with a very detailed, principled plan for
• 30:43
  Speaker 3: gradually cutting spending. They're aggressive, but they're also realistic. These
• 30:48
  Speaker 3: plans are not, as you said, serious. They're scattershot, and
• 30:53
  Speaker 3: they seem frivolous to me. And it doesn't charge. It
• 30:56
  Speaker 3: sets the cause back, Mike. It doesn't help the cause.
• 30:58
  Speaker 2: It's turning into what I suspect it would, which circus.
• 31:02
  Speaker 2: Let's create a bunch of headlines of going after areas
• 31:05
  Speaker 2: that people generally object to, or a large portion of
• 31:08
  Speaker 2: Americans object to. I'm sure there's you know, if you
• 31:09
  Speaker 2: pull the Americans, how many of them think that no
• 31:13
  Speaker 2: money should be going to Planned parenthood or corporation for
• 31:15
  Speaker 2: public broadcasting. I'm guessing it's more than half or close
• 31:18
  Speaker 2: to half of Americans who were at polled say pull
• 31:20
  Speaker 2: the funding. The problem is it doesn't do anything, So
• 31:24
  Speaker 2: you know, take that for what it will like. Yeah,
• 31:26
  Speaker 2: and I'm not saying it's meaningless. I'm just merely saying
• 31:29
  Speaker 2: that if you cut those two sources, you're making up
• 31:32
  Speaker 2: a fraction of the total government spending and not actually
• 31:34
  Speaker 2: fixing any the problems.
• 31:36
  Speaker 3: Yeah. If these guys came in to take over your
• 31:38
  Speaker 3: company and they took this approach tweeting out people's names
• 31:43
  Speaker 3: that they're gonna fire, Honest to god, this is happening,
• 31:46
  Speaker 3: you'd be out of there quicker than you'd you would
• 31:51
  Speaker 3: have ever thought possible. It just seems like a joke.
• 31:54
  Speaker 1: Mike.
• 31:54
  Speaker 2: Let's take a quick break when we come back. Bit
• 31:56
  Speaker 2: of stack Roulette next. On the Financial Exchange.
• 31:59
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• 32:58
  Speaker 2: We've got a few texts after the segment, and I
• 33:01
  Speaker 2: want to clarify at least my own position on why
• 33:04
  Speaker 2: I'm so negative on this Department of Government efficiency. It
• 33:08
  Speaker 2: is not because I think that we should just spend
• 33:11
  Speaker 2: money carelessly and continue to see deficits ballooed. I think
• 33:15
  Speaker 2: quite the opposite. My problem is that this department seems
• 33:21
  Speaker 2: completely disingenuine. The consistent problem that I see on spending
• 33:26
  Speaker 2: is that lawmakers are completely unwilling to do the work
• 33:30
  Speaker 2: that would actually be impactful on our massive deficits because
• 33:33
  Speaker 2: it gets them voted out of office. Until we have
• 33:36
  Speaker 2: a real reckoning with that, then it's just not going
• 33:38
  Speaker 2: to get fixed. If you want to impact thing, there
• 33:42
  Speaker 2: is only really a few things that you can do
• 33:44
  Speaker 2: that will actually move the needle. At this stage, you
• 33:46
  Speaker 2: have to go after Social Security, Medicare, and Defense and Medicaid.
• 33:52
  Speaker 2: If you're unwilling to touch those or Obamacare, if you're
• 33:54
  Speaker 2: unwilling to touch those items, then you can't fundamentally get
• 33:57
  Speaker 2: anything done. And so while it might be entertaining to
• 34:00
  Speaker 2: talk about planned parenthood and all these other things, you
• 34:03
  Speaker 2: are being fundamentally unseerious in addressing the issue if you're
• 34:06
  Speaker 2: not going to be willing to address those items.
• 34:08
  Speaker 3: Republicans have been trying to, rightfully, in my view, eliminate
• 34:11
  Speaker 3: the Department of Education for philosophical reasons. Libertarians like me
• 34:15
  Speaker 3: and others oppose federal involvement in education. They've been trying
• 34:18
  Speaker 3: to eliminate it my whole life. The fact, it's not
• 34:21
  Speaker 3: because New Gingrich wasn't competent. It's not because John Bahner
• 34:23
  Speaker 3: and Paul Ryan weren't competent. It's because of the inertia
• 34:27
  Speaker 3: that is so different, the inertia in the spending, in
• 34:30
  Speaker 3: the inertia in the created by special interest activity. It
• 34:35
  Speaker 3: just really really hard to do. I don't think you're
• 34:37
  Speaker 3: going to get it done with a bunch of tweets
• 34:39
  Speaker 3: that are that are disjointed and aren't built into some
• 34:43
  Speaker 3: sort of legislative proposal. I hope I'm wrong. I hope
• 34:46
  Speaker 3: it happens. It just doesn't seem like a serious way
• 34:50
  Speaker 3: to do it.
• 34:51
  Speaker 2: So anyway, just thought that was worth clarifying. What do
• 34:53
  Speaker 2: you have for us for stack re let Mark.
• 34:55
  Speaker 3: Mike A reminder from CNBC that all interest rates are
• 34:58
  Speaker 3: not equal. We all know the Fed started lowering its
• 35:01
  Speaker 3: short term target in March of twenty twenty two, so
• 35:04
  Speaker 3: almost three years ago now, but over the same period
• 35:07
  Speaker 3: of time, the typical interest rate, the average charged by
• 35:11
  Speaker 3: big commercial banks on credit cards, has actually gone up
• 35:15
  Speaker 3: from fifteen overfit little over fifteen percent to currently just
• 35:19
  Speaker 3: under twenty two percent.
• 35:20
  Speaker 2: Which is a short term rate, right. This is not
• 35:23
  Speaker 2: a mortgage rate where it's thirty years. It is typically
• 35:26
  Speaker 2: moves lock and step with shorter term rates. How the
• 35:30
  Speaker 2: article explains this in terms of new potential legislation.
• 35:33
  Speaker 3: Terms of the two you are, it's why are credit
• 35:35
  Speaker 3: card companies charging more? Well, they're making offers to less
• 35:40
  Speaker 3: credit worthy people. It's easier than it was a few
• 35:44
  Speaker 3: years ago to get a credit card. They're practically forcing
• 35:47
  Speaker 3: them on people. We all get the solicitations. So there's risk,
• 35:50
  Speaker 3: broadly speaking, i'd call that risk, and there's regulation the
• 35:54
  Speaker 3: consumer credit protection beyond.
• 35:56
  Speaker 2: Consumer financial CFPV consumer financial protection areer.
• 35:59
  Speaker 3: I want to eliminate that one too. By the way,
• 36:02
  Speaker 3: I think Republicans do good luck. I hope they do.
• 36:04
  Speaker 3: But good luck is imposing regulations on limits on fees.
• 36:09
  Speaker 3: So credit card companies have to make up the difference somewhere.
• 36:11
  Speaker 3: They're making it up in the APR.
• 36:13
  Speaker 2: Yeah, And frankly, I think it a lot a lot
• 36:16
  Speaker 2: of it comes down to because they can you know,
• 36:20
  Speaker 2: there's just not a whole lot of it that there's
• 36:22
  Speaker 2: just not a whole lot of attention paid to the
• 36:25
  Speaker 2: APR on credit cards, not every account holder actually pays
• 36:28
  Speaker 2: the interest, and there's just not a lot of willingness
• 36:31
  Speaker 2: from the credit card companies to lower the rates that
• 36:33
  Speaker 2: you know, do they actually think these new rules around
• 36:38
  Speaker 2: you know, late fees are going to go into place.
• 36:40
  Speaker 2: I think they probably recognize that with an incoming Trump
• 36:42
  Speaker 2: administration that's not going to happen. But any scapegoat they
• 36:45
  Speaker 2: can use to keep interest rates higher on credit cards
• 36:47
  Speaker 2: they're going to take. And by the way, that's why
• 36:50
  Speaker 2: some of these proposals from the CFPB are so stupid
• 36:53
  Speaker 2: because guess what happened the moment the CFPB proposed imposing
• 36:58
  Speaker 2: proposed imposing yes, eight fees on credit cards? What did
• 37:01
  Speaker 2: those credit card companies do? They raised interest rates on
• 37:04
  Speaker 2: credit cards. You're gonna pay it somewhere else. They're not
• 37:06
  Speaker 2: going to just say, yeah, that's fine, We're gonna take
• 37:09
  Speaker 2: that lower profit margin and we'll be okay with that
• 37:12
  Speaker 2: going forward, will be just fine.
• 37:14
  Speaker 3: We tried.
• 37:14
  Speaker 2: Yeah, No, you're going to make it up elsewhere. And
• 37:17
  Speaker 2: that's what these companies are talking about doing. Is it disingenuous? Yeah?
• 37:22
  Speaker 2: Are consumers going to push back on it all that strongly?
• 37:26
  Speaker 2: Apparently not? I mean, you know where you're gonna go?
• 37:28
  Speaker 2: A loan shark. Yeah, maybe that's kind of your other
• 37:33
  Speaker 2: options here if you are one of the low credit
• 37:35
  Speaker 2: consumers that are stuck on one of these credit cards
• 37:37
  Speaker 2: with an outstanding balance. Taking a look around at markets
• 37:40
  Speaker 2: that earlier upswing has dissipated quite a bit. Dow now
• 37:45
  Speaker 2: up twenty eight points, a little bit more than five
• 37:49
  Speaker 2: one hundreds of a percent, SMP down to basically flat
• 37:53
  Speaker 2: for the day, Nasdaq slightly up, still ten points. Similar
• 37:57
  Speaker 2: to the Dow. In terms of percentage terms, yield on
• 37:59
  Speaker 2: the ten year treasure sitting at four point two three
• 38:02
  Speaker 2: eight percent. In the price of a barrel of oil
• 38:05
  Speaker 2: as we close out the show, still sitting at sixty
• 38:07
  Speaker 2: nine dollars a barrel. That's up about one percent on
• 38:10
  Speaker 2: some Seria concerns. Quick break for the next twenty two hours.
• 38:13
  Speaker 2: We'll be right back at it tomorrow. Have a great
• 38:15
  Speaker 2: rest of your day, folks. Inflation tomorrow, CPI at a
• 38:18
  Speaker 2: thirty