May 15, 2024 • 36 mins
Chuck Zodda and Marc Fandetti share a list of the best and worst price changes over the previous year. Is Jamie Dimon correct in urging the government to address the current deficit? Americans bills are mounting up and more people are missing their payments. Is Google making a major mistake with their new vision for their search engine?
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Episode Transcript
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five K Boston is presented by VeteransDevelopment Corporation FACE is the financial exchange with
Chuck Zada and Mark Vandetti. Alittle bit after eleven here and US equity
markets are moving higher. I'm notready to say rip and higher, rip
and higher. You need to beup more than one percent. But we
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got a pretty nice broad based moveup with the Dow up two hundred and
four points about half percent. Sand P of thirty seven points seven tenths
of a percent, and the NasdaqG up one hundred and thirty six points
are about eight tenths of a percent. So the S and P right now
had a new all time intra dayhigh. That's always exciting. I love
all new highs. It is Itry. You'll be shocked to hear that.
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I restrain myself and try not knowMark, and I mean I trying
to be contrary. A good analystshould be contrarian. If we get excited
about you, any idiot could bea cheerleader, so inst off of the
cheerleaders are right. I'm not suggestingthat that's necessarily a bad way, but
I think if you're managing other people'smoney, or I have input in that
process, you have to push backagainst the consensus and against conventional wisdom.
(02:08):
That doesn't mean mindlessly. That doesn'tmean mindless contrarianism, always doing the opposite
of the crowd, because you getburned a lot. But level headedness,
I guess equanimity, if that's theright word. I do think it's important
just to celebrate when things go right, because so often we just end up
with not a Jehovah. Even Ibelieve financial news media, it's just no
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offense. It's just this is wrong. That's wrong, this is wrong.
Sometimes you have to just be like, hey, this is a good thing,
and it's fine. It might notstay this way, but it's fine.
Yes, it is a good thing. Like economic data, we talk
a lot about the difference between theaverage experience, which is what's reflected in
things like GDP and unemployment. GDPvery strong, sagged a little bit in
(02:53):
the first quarter, but year overyear, well above potential, well above
what anybody thought was possible given thestructural headwinds facing the economy. Unemployment very
very low in historical terms, beststreak of below four per CENTSUS the late
nineteen sixties, and yet dissatisfaction isat near record highs. How do you
(03:15):
reconcile those two things? And whydid I get into this point? I
forget other than to point out thatthe prevailing consensus on something like the economy
can be there could be some dissonancebetween that and the way people are registering
their perception of it, and economistsare scratching their head a lot over people's
(03:36):
dissatisfaction with the economy. Again,I don't know quite where I'm going with
this, other than to point outthat economic data, even their level of
the stock market, might not getpeople excited to the degree that they once
did. Maybe it's the uneven distributed, more uneven distribution of wealth than historically.
I don't know what the heck theexplanation is. I think that,
you know, to channel my innerJames Carville to guys, you know,
(04:02):
it's the inflation. Stupid, what, Doug, you just realized I have
no hair. No, it's justthat's how you're relating to James carl Holes.
Well, I mean, he's fromLouisiana. Like, we don't really
rage rageing cajun. You know,we don't really have a common background.
We're a little bit different. He'stall, also, isn't he. I
don't know. I've never never methim. He looks like he's like six
(04:23):
foot four. He looks small tome because he's he was in a mood.
It was in old school that helooked tall standing next to someone.
He's six two yeah, six willdebating there you go, six two,
Yeah, he's seven inches taller thanme. Yeah, that's on a good
day. You're a right. Itdoes come down to inflation people. Really,
I didn't realize how much people hated. This is another thing economys scratch
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their heads over. Why are youso upset about inflation? Wages get index
social slowly, but wages do ultimateand wages are keeping up. But it
took a while, and by thetime wages do real wages, that is
after inflation wages, people are alreadymad as hornets. So I think if
there's one area where economists written policymakers, especially at the FED, really
miscalculated in this cycle, it's howmuch people hate inflation the other piece.
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And I don't know if there's anygood way to measure this beyond what we
already do. We talk about theinflation inflation rate a lot. That's what
we're trained to do. The pricelevel matters to households as much as the
inflation rate and I think this isthe thing that frustrates a lot of people
that I talk to it because theydon't look at it and say, well,
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the price of you know, mygrocery bill only went up two dollars
this year, and so you know, that's fine. They look at and
they're like, it's still eighteen dollarsmore than it was three years ago.
And that's frustrating to people. AndI don't have a good answer for them,
because the answer is, guys,those prices are not coming back because
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most of it is due to wagesgoing up and the cost of labor,
and those costs are not going backto where they get deflation outside of deep
economic downturns, but the modern area. But this is when when I talk
to people about their frustration with inflation, it's not the pace of it at
this point, it's just, hey, it hasn't gone back down. What
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gives. Yeah, it's funny thatwe don't know by now, those of
us who are adults and have hadsome experienced decades worth of experience in the
real economy that prices don't actually godown because some do fluctuate a lot individual
prices, which is why they excludethem from core. They're very volatile.
Other prices, including our wages.All include wages in the definition of prices
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here, don't, thank god,go down. They're fairly sticky if you
like. It's just funny that people, and I'll include myself, have a
problem with the notion that prices aren'tgoing back down. It's weird, but
they're not so prices on average.Do you want some prices that have come
down in the last year, justto make you feel better, I'll give
some of the best and worst pricechanges in the last year, just because
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I don't know. I'm looking throughit right now and it's okay, it's
it's here. Uh. Fresh biscuitsand muffins prices are down one point seven
percent in the last year. Ohgood, Yeah, you can put the
biscuit in the basket. It's notbad. Other prices that have come down
in the last year ham but notcanned ham down one point five percent in
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the last year. Big deal,we should be celebrating the ham is cheap
eggs down another three point nine percentin the last year. Cluck cluck,
huh. How about that? Otherthings that have come down? Tomatoes down
two point eight percent in the lastyear, it's got to make you feel
good. You can make a nicelittle pizza sauce, pasta sauce, maybe
a little salad with them. Nobig deal. Freeze dried prepared foods down
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one point four percent in the lastyear. You got your your Betty Crocker.
No, Betty Crocker's not free.You got your Marie calendar, you
got you know, all that stuffin the frozen food aisle. It's good.
It's down more than one percent.I'm just in the food section right
now. But let's let's skip somewhereelse. Let's go down to here we
go. Motor vehicle maintenance and servicingcan't be accurate, says it's down point
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two percent in the last year.Doesn't feel like it's based on the cost
of service. Uh, let's seewhat else do we have here? Pet
services down point one percent in thelast year. Admission to movies, theaters
and concerts probably excluding Taylor Swift downpoint one percent in the last year.
So you do have some things thathave moved down. The problem is that
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you have more that's moved up.In the magnitude up has been higher.
Yeah, so those aren't weighted heavily. Many of those category. I don't
have the weights. Maybe in thetable you're looking at over on the left
hand side. I think they usuallyput in the first column. But anyway,
Oh sorry, I was in thewrong colm. I was looking at
the wrong one here. So there'sactually stuff that's down more than that.
Start over now at biscuits, butlike telephone hardware and calculators down ten point
five percent in the last year.Well yeah, because you had a calculator
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on your face. Calculators do youthink when you take more than civil engineers?
No, honestly, here's what itis. I believe that for if
you're taking like AP math exams,I think you still need to have the
TI eighty three graph and calculator.I think they still make you use that
and like get rid of your phoneduring the examine stuff. I hope so
high school, Oh I hated thatthing. I would hope. So let's
(09:15):
see, guys said graphic calculators.I am I am old, had no
idea how to use this slide rule, just asking for a friend. No,
no, I still have my firstscientific calculator. It's still my favorite
part of any movie about NASA inthe sixties is just seeing all the slide
rules. It's it just it reallygives me just a little bit of excitement.
(09:37):
Toys down six point eight percent inthe last year, So this is
some of the good news. Thebad news is that, look, auto
insurance, it's it's the one thateveryone's talking about. Up twenty two point
six percent in the last year.Just doesn't feel good, you know,
it's just like it's it's just bad. Garbage and trash collection of five point
three percent. Why. Probably becauseyou have to pay garbage menmore, because
all the wages are going up andsome municipalities are have to pay them more.
(10:00):
It's it's not that the garbage gotmore expensive, it's that it's entirely
driven by wages. So yeah,five point three percent kind of makes sense.
There other things that have gone upin the last year. Let's see,
what's this seven point four cigarettes ofseven point four percent in the last
year. We've got photographic equipment.Who's buying cameras these days? Photographers?
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I don't even know how how isthis weighted photographic equipment and supplies is weighed
to zero point zero two percent inthe CPI. When's the last time fact
that that's even measured in the CPI, when's the last time anyone you know
bought a camera? My dad,who is an avid photographer, has bought
a camera in like ten years,because it's like the technology isn't that different
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from ten years ago. More typically, if you're into photography, you buy
one and you're good for life.Right. You might get like a few
new lenses, but once you havethem, you're like, okay, I'm
kind of good. Here. Theseare survey based. Wait, so somebody
answered, yes, no, Ido buy that, And here's how much
I spent on it relative to everythingI spent money on last year or so
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other interesting things. Women's outer weardown five point four percent in the last
year, but women's dresses up twopoint nine percent. Not as many jackets,
more dresses. I don't know.It doesn't necessarily mean that. It
could mean well, probably, Imean supply and demand, right is it?
Or it could just be something unique. They probably have a triket.
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I don't want to I'm guessing there'stoo many jackets. I going to be
talking about women's clothes. This isthe extent of it, but too many
jackets to sell because it was awarm winter. Depends on where their source
from. I don't know. Well, I'm just I'm giving my story here
and everyone's excited about summer. Sodress prices are up, I don't know.
Let's see men's suits and sport coachesprices down eight point four percent in
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the last year. Tell that's theJoseph A. Bank. Let's take a
quick break here. When we comeback, we'll finally get to what was
supposed to be our top topic forthe hour, which is Jamie Diamond's discussion
of the deficit. Text US sixone seven three six two thirteen eighty five
with your comments and questions about today'sshow, and let us know what you
think about the stories we are covering. This is the Financial Exchange Radio Network.
(12:15):
Miss any of the show. TheFinancial Exchange Show podcast is available on
Apple, Spotify, and iHeartRadio.Hit the subscribe button and leave us a
five star review. This is theFinancial Exchange Radio Network. Jamie Diamond had
some thoughts about the US deficit.I'll read his quotes and then we can
(12:35):
discuss quote. America has spent alot of money during COVID and after COVID,
our deficit is at six percent annually. Now that's a lot, but
obviously that drives growth. Any countrycan borrow money and drive some growth,
but that might not always lead togood growth. So I think America should
be quite aware that we've got tofocus on our fiscal deficit issues a little
bit more, and that is importantfor the world. I think if you
(12:56):
want to do a great job inyour country and you have a six percent
deficit one hundred percent debt to GDP, this can go on for a while,
but the sooner we focus on it, the better. I don't think
there's a big come up. It'scoming, and I don't think it's in
the next couple of years, butI do think it's why we have higher
inflation. Your thoughts, Mark,Yeah, he's he makes a good point.
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It's very vague as last point aboutwhen are the chickens gonna come home
to roost? Debt is a percentagethe federal debt is a percentage of GDP,
and I'll include that owned by theFed here. So all debt outstanding
is about one hundred and the ratioof those two things is about one point
two one or hundred and twenty onepercent. I e. The debt is
(13:39):
bigger than the nation's output. Nowyou're comparing a stock there with a GDP
is a flow, it's what getsproduced every year. So to compare that
to the amount of debt outstanding,which is a stock, it's a stack
of stuff. Doesn't always make sense, but it's the settled upon measure.
This is higher than it's ever been. We own more relative to GDP than
we ever have. The deficit,which is different. Deficit is the is
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the flow in the debt how muchgets added to it or in theory taken
away from it. That hasn't happenedfor twenty five years with the Clinton Gingrich
credit Gingridge and say Clinton ging Gridgesurpluses, but deficit now six point negative
six point two percent of GDP.So there are a couple different ways to
look at in historical terms, howmuch we're spending relative to how much we're
(14:22):
taking in. The concern is,of course, when the government issues debt
to pay for spending that it doesn'traise their taxes. It soaks up capital,
either savings here or savings abroad.This pushes up world interest rates,
so it crowds out, in theoryother forms of investment, and at some
point, if the economy doesn't growfaster than the rate of interest, the
(14:43):
average rate of interest on federal debt. I'm gonna call that three percent,
and we're borderline right now. We'reon a knife's edge because growth has been
about three sure, average interest rateon debts about three and rising with interest
rates, then debt will grow explosively. Is a percentage of the economy,
And so what Diamond is getting outthere, and what most economists I think
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would agree with is that at somepoint a you're going to be paying more
in interest than almost anything else.I think interest is what the third interest
expense is, like the third biggestfederal expense after Social Security and Medicare.
It's bigger than defense now, andthat will only grow if interest rates don't
come down, and they probably won't, or if the deficit doesn't come down
and nobody expects it to. Thiswill make other programs we'll have to cut
(15:28):
spending elsewhere. So that's one concern. The other concern, of course,
is the upward pressure on interest rates, which of course feeds back into the
first concern. So this is somethingyou and I have talked about a lot,
and it's something where the piece thatI struggle with and that I come
back to not because I think thateverything's fine. But just because it's something
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that I think is interesting is yougo back and you pull you know,
Barrens and Time magazine covers from thelast hundred years, and like cockwork,
basically every five to ten years thereare people freaking out about the deficit,
even when it was at much low. We're both nominal levels and as a
percentage of GDP, you know,you can go back through the two thousands,
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the nineties, the eighty seventies,sixties, like basically any time that
the US has had any kind ofdebt outstanding, people have been saying,
hey, this is this is toomuch, and the chickens are gonna come
home to roost. So the questionthat I do think we need to ask
specifically because the US occupies a veryunique place in being again that the US
(16:32):
dollar being used as more or lessthe dominant reserve currency around the world,
the dominant form for international settlement settlementaround the world. And despite all you
know the hype about well, youknow, China is trying to take over
you know, this role, andthere's you know, the bricks are doing
their thing, trying to you know, align them, the US dollar continues
(16:53):
to actually occupy a larger and largerchunk of a lot of these metrics in
recent years. And so the questionthat I think that I struggle with is,
Okay, this is a problem potentially, but what do I do with
it? Because it hasn't caused anyissues yet. And it's kind of binary.
(17:14):
It's either a problem or it's not. It's there's no real middle ground
when it comes to this. Bigdeficits and debt aren't necessarily a bad thing
for the dollar. Think about thenineteen eighties. The dollar strengthened right through
the mid nineteen eighties and the coincident, by the way, the deficit is
a percentage of GDP in the eightieswent from thirty one to fifty six debt
to GDP, debt to GDP ratio. Yes, yeah, it was the
(17:34):
Reagan defense build up. We alsocut taxes without cutting spending. But that
doesn't necessarily mean the dollar will weaken. In fact, it could mean the
opposite. People don't buy dollars necessarily. They buy things denominated in dollars,
like treasuries, and they need thedollars in order to buy them. Yeah,
and when interest rates go up,it makes dollar denominated assets like treasuries
(17:56):
more attractive, so I don't worryabout its effect on the dollar in the
short term. Bringing the latest financialnews straight to your radio every day.
It's the Financial Exchange on the FinancialExchange Radio Network. Missed one of our
(18:17):
shows. Catch up anytime by askingyour Alexis Smart speaker to play the Financial
Exchange. This is the Financial ExchangeRadio Network. Americans, overdue bills are
mounting up. More people are missingpayments. So according to the New York
Federal Reserve's latest quarterly report on HouseholdDebt and Credit, America's Americans collective debt
(18:38):
rose to seventeen point sixty nine trilliondollars, up one point one percent.
Should we care, Mark, Idon't know. I'm looking at a series.
It's called household debt. Service paymentsis a percentage of disposable personal income.
So slightly different survey here. Thisone's conducted by the Board of Governors
of the Federal Reserve System, theFederal Reserve. The percentage of household debt
(19:02):
this is mortgage in consumer as againas a percentage of what you have after
taxes, is about nine point eightpercent. That's lower than pre COVID,
lower in fact than throughout the twentyteens when we didn't have any recessions.
As you may recall, we didn'thave one up until COVID. It's much
lower than it was throughout the twothousands, and there was a big recession
(19:22):
of course, to end the twothousands. That but for several years the
economy, probably several years prior tothat, the economy expanded, and household
debt is a percentage of disposable personalincome was like fifty percent higher than it
is today. Part of that isslightly higher interest rates then is compared to
now. Part of it is thebig write off in debts that happened during
the Great Recession that improved consumer socalled balance sheets quite a bit. So
(19:45):
Chuck short answer is, I don'tknow. There are some recessions that are
preceded by a big run up indebt. It's not surprising. Though the
economy expands, things get more expensive, like homes, people have to incur
more debt to afford them. So, based on my casual examination of this
series and trying to line it upwith recessions, it's not obvious that it's
(20:06):
It makes me uncomfortable when I seea headline like this, but it's not
obvious that it should make anybody worry. At this point we have a recession.
Of course, it's a big concernbecause we're starting from a higher,
relatively high delinquency rate. So Ithink that when we look at this,
and I pulled the report just bycategory, so credit card loans, just
(20:29):
as an example, ten point sevenpercent of the balances that are outstanding on
credit card loans are ninety plus daysdelinquent. During the period from twenty thirteen
through twenty nineteen, you generally wererunning like seven and a half to eight
percent. So I do want tobe clear, like, even during times
when there is no recession, delinquenciesexist, and on something like credit cards,
(20:55):
which are unsecured, they're not low. Again, if you're running like
seven to eight percent, at thelow end, you're up to ten.
Now, okay, that's something.The peak, by the way, during
twenty ten Q one, according tothis report from the FED, it was
about thirteen point seven percent. Sothat's that's how bad it got during the
Great Recession. So look, isit concerning, Yes, But here's the
(21:17):
thing about credit card debt. It'snot big enough to cause an economic problem
on its own. It's just notthe US mortgage market back in two thousand
and six, two thousand and seven, Mark, do you remember how big
it was back then? No,it was about seven or eight trillion dollars.
It was like it was big.It was about half a GDP.
(21:40):
It's pretty similar now. I thinkit's like forty percent of GDP now,
just because not as many households havemortgages outstanding. And at that point you
said, Okay, there's like areal problem if something goes wrong here because
it's it's huge and so many barrowersdefaulting is a real thing. You're not
gonna get a repeat of two thousandand eight based on credit card debt because
there's one point two of it outstanding. It's just not big enough to cause
(22:02):
that kind of recession. Now,could households pull back and their spending causes
some yes, obviously, but creditcards are not going to be the thing.
Let's talk a little bit about autoloans. Auto loane delinquencies right now
running at four point four percent.Again, the bottom that we saw in
the last the last economic cycle wasit three percent back in Q two of
(22:25):
twenty thirteen, and generally in thetwenty tens, we were running anywhere between
about three percent. You know,most of the time we were between like
three and a half and four anda quarter. So we're towards the high
end of that right now, likewe're at the high end there. But
again, it's it's not something whereyou look at it and you say,
yeah, this is out of linewith historical norms. You kind of where
(22:47):
you've been for the last ten tofifteen years. Mortgages according and again this
is their reporting here, and they'rethey're all a little bit all these sources
are a little bit different. Butmortgages right now coming in at points six
percent are delinquent by ninety days ormore according to the New York Fed.
That's really nothing would cause things tobreak down. In seven eighth nine,
(23:11):
you started seeing one, two,three, four percent of mortgages delinquent in
a very short period of time.And they became delinquent not because their income
suddenly fell apart in two thousand andseven or two thousand and eight, but
because the mortgage rates adjusted up andmost people at adjustable rate mortgages, not
most, but about forty percent ofpeople at adjustable rate mortgages, and they
just couldn't make the payments on thembecause they were over levered in properties that
(23:33):
a lot of cases they weren't evenliving at or using. You don't have
that problem now because there aren't asmany adjustable rate mortgages. There's far more
equity in homes anyway, so youwouldn't even have to have short sales and
distressed sales and things like that,and so it's it's not coming from mortgages.
What I'm getting at in all ofthis is consumers can be feeling and
households can be feeling it in termsof their monthly budget. But there's nothing
(23:57):
in this data that suggests that thenext leg to fall, the next domino
to fall here is going to bebecause a large portion of people aren't paying
a debt that people expect him tocredit card debt. As I noted,
you basically always have at least onein fifteen people who can't pay it.
Now it's up to one and ten. Okay, I'm not really sure that's
(24:21):
a thing. Where the problem isgoing to come from is very rarely the
same place it came from previously.So yes, this is something where I
say, yeah, it bears watchingand is probably going to create some drag
because anytime you lever up, deleveraging can create some slow down in the
economy, but the scale of theslowdown is not, you know, the
two thousand and eight scale that everyonegets nervous about. I think, I
(24:45):
think Mark, that we might alsohave just a little bit of PTSD,
maybe a lot, quite honestly,because the last two recessions that we've gone
through have been weird and horrible.You know, two thousand and eight obviously
was sure just an awful experience,were a ton of people. And then
the COVID recession, which was yeah, very sharp, and then on the
back of it, you know,you had this high inflation. The last
(25:07):
two have felt really bad. AndI'm not saying that any recession ever feels
good, but we've kind of hadtwo of the worst in the last one
hundred years back to back, andthat feels bad. If you experienced significant
pains, psychological or otherwise after aparticular stimulus, you're walking down the street,
guy coming the other way, redjacket punches you for the rest of
your life. You're gonna jump acrossthe street when you see somebody in a
(25:30):
red jacket. We can't help that. Similarly, when you see delinquency rates
on credit cards. I'll just usethat of the many data points as an
example here. They've doubled since earlyin the COVID ex but I keep calling
the COVID expansion the period after whichthey after which we removed the lockdowns and
people started spending stimulus money like crazy. It's doubled since the COVID recovery began,
(25:53):
but that one point five percent delinquencyrate to start to keep throwing numbers
out at you here, but that'sthe value in the series I'm looking at
has more than doubled in the pastfew years. But the base was very
low. The starting point was verylow. The ascent looks alarming. It's
a dramatic upward sloping curve. Youcan't see it, but you could picture
that. But we're at levels thatare a little bit elevated. Now I'm
(26:17):
talking only about credit cards that heldissued by commercial banks, a little bit
elevated relative to the twenty teens inthe case of this series, not so
much elevated relative to history. What'sthe right reference point? I don't know.
I'm disappointed in pieces like this becausewe've got like a generation of college
students now that are taught data analyticshow to make a chart in something as
simple as Excel. You don't haveto do sophisticated econometrics. It's nice if
(26:41):
you can, but you don't haveto. These things don't have enough visuals
to give people perspective. All thisverbiage. We're just looking. We're looking
at a three page article here,and Tucker prints a stack of this crap.
Forgive me. Every day it's likea phone book's worth thanks to article
after article. They just plod onin this leaden prose. I put that
(27:02):
crap right on your desk, likeone short Yeah, here's your hot morning
crap for you. You bulla crapsucker. I know what I mean is
chucker, you have to dance,monkey dance. You have to plow through
this stuff. This is the pointcould be made in like one or two
charts, and it would give youa better perspective too. I have a
hard time making heads or tails outof articles like this. I imagine most
of you do too. Take aquick break here. When we come back,
(27:25):
we'll do a little bit of stackroulette. The Financial Exchange Show podcast
drops every day on Apple, Spotify, and iHeartRadio. Hit that subscribe button
and leave us a five star review. You're listening to the Financial Exchange Radio
Network, breaking business news as ithappens only here on the Financial Exchange Radio
(27:45):
Network. All Right, I sawthis story from I'm about Google yesterday.
They were doing a whole bunch ofAI presentations and this and that, and
(28:07):
they said that by the end ofthis year their search engine is going to
be showing AI powered summaries for searchresults when you Google stuff. And a
few things about this. The firstis if I am someone who relies on
(28:29):
Google to drive traffic to my website, which is, Oh, I don't
know everybody everyone. This is goingto freak me the heck out because we
know that people are lazy, andwe know that they're lazy when they search,
because generally the vast majority of actionson any search are taken to the
top three items that appear on asearch page. Like people don't go down
(28:52):
the search page being like, oh, I wonder if there's something better further
down. They just click on thefirst two or three things that pop up.
That's how everyone now laziness or isthat an assumption that it's most likely
to be appropriate because other people havefound it appropriate, or are those two
things lazy the same thing? Ialways it's you know, you know the
saying. I think it's was ahand one's razor. Never attribute to malice
what can be explained by incompetence.Never heard it, but I like it.
(29:15):
You've never heard that one. No, Oh, it's one of my
favorites. This is never a tributeto a better view of human nature.
What can be explained by laziness.Laziness is the mother of inventions. It
is the mother of invention. Theremote control exists because we're lazy, door
(29:37):
dash exists because we're lazy. Cruisecontrol we're too lazy to even use our
feet on the pedals. It's allbecause we're lazy. This show is because
we get bored, and we like, we get bored and we need to
listen to something. We're like,it's it's because we're lazy, which we
don't want to discourage. Of course, No, I wouldn't say listening is
(30:00):
lazy. Okay, maybe listening isentertained. Listening's passive, But I think
listening to a show like this isless passive because you're either agreeing to okay,
this show is a bad example.The Internet lazy. Hey, you
don't have to go to the library. And like, I'm not saying this
is a bad thing. I'm sayingthe constant desire for things to be easier
laziness is the mother of invention.Yeah, I guess that's one way to
(30:26):
think about it. You know thatthere are some things that were really like
reaching forth, Like okay, ifyou're trying to go to the moon,
not lazy, you know, theApollo program not lazy. But basically anything
that we use on a daily basisthat wasn't used fifty years ago lazy.
Electric toothbrush. I don't want tomove my little hand and I want the
brush to do it for me.But as you get older, especially electric
(30:48):
does a better job. You can't. I'm not yours as fast as it
might be better. But it's alsolazy. So where I'm going with this
sounds very judgmental based on my likeunfound, like unwavering belief in human laziness.
Humans are just gonna read these AIpowered summaries and they're not gonna go
(31:10):
to the actual web pages. Andall the people are doing that, Yeah,
and all the people who get theirinformation who you know, get their
web traffic from Google. It's gonnadisappear. I mean people do that now.
Just read headlines and assume they knowthe news item. People listen to
one word I say and just say, Okay, that's the rest of the
sentence. They know we're good.So there's that. The US Virgin Islands
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just to add to my pile oflate like data on this smartphone. Lazy.
I don't want to carry around,you know, a rollodex anymore.
I don't want to carry my CDsaround. Oh I I'd rather, you
(32:42):
know, use the Internet here insteadof having to go to a separate room.
Printers, lazy, you know,no, Wait, what do you
want to You're cranking out a mimeographmachine? What do you use? Would
you put the stack together? I'mnot leading print. All I'm saying is
that making exactly you wouldn't want todo it the other way. Someone used
(33:04):
to do that. Someone used todo that. Out of the problem here
is that you never had to pusha push mower. You never had to
use a dot matrix printer. Thatstuff untrue, untrue. I had to
do both. I had to doboth when I was growing up. The
first printer that I had in myhouse was a dot matrix matrix printer,
and I remember tearing off the edgesof it and everything, you know,
(33:28):
part of your job, VP Sports. You know it was not part of
my job. But when I saylaziness, I'm saying what makes people want
to invent stuff? Most of thelike at least four day to day stuff,
not rockets and things like that,which is unlazy to go to the
moon day stuff. Mark this.It's someone looks at a problem says you,
(33:49):
I don't want to get up andturn the channel on a television set.
Did you have you have you evertouched a button on a TV?
Would you even know how to turnit off? Yes? When the batteries
are out in the remote only thentrue. But this someone looks at the
problem and says, I don't wantto do that anymore. Yeah. And
then they say, like, I'mattributing that to laziness, and I know
that that's not really what it is. Now you're using as a shorthand for
(34:09):
innovation. Americans, not Americans.Laziness is the mother of invention. We
are you know the rule in physicsthat all things tend towards entropy, All
humans tend towards blobbiness. Our naturalstate is sitting and doing as little as
(34:30):
possible. And we only do theseother things because we have to. In
many we don't want to expend energy, which is a related concept. We
can serve energy as much as possible, the only reason why we like run
and do like. Okay, weget other like benefits out of it now,
but in general human beings want todo as little as possible. They
want to be freed up to dowhat we enjoy. They were talking about
(34:51):
them like we're observing them in azoo. We want to be freed up
to do what we enjoy. Andeven the stuff that we enjoy, it's
even if it's active, it's activewith the premise of hey, this isn't
life or death. You know,if you play a soccer game, you're
not running from a lion, fromyour survival if it would make it a
lot more watching. You know,if you are hunting today, you're not
doing it because I really need thefood. You're doing it because yeah,
(35:15):
I can get the food from it. But ultimately it's not life or death
for me. If you're playing golf, it's not because you need to make
that. You know, if youare on a boat, it's not because
well I need to fish otherwise thisis what I'm getting at. We strive
to make our lives easier, andI shorthand that as laziness. We want
(35:35):
to be lazier. If we can, we might work harder in order to
be lazy later, which is theinteresting juxtaposition. It's kind of catch twenty
two. But sure it's called workingthen retirement. Yeah, but laziness is
the mother of invention and in lookingat human beings through that lens. I
look at Google saying, hey,we're gonna provide AI summaries. No one's
(35:58):
gonna click a link. Ever,again is where I land. It's where
my brain takes it. I hopethat's true. I'd love to be saved
the step Hi welcome that day.See thank you Mark for proving my point.
Quick break for the rest of theday. We'll see you tomorrow on
the Financial Exchange
The Financial Exchanges produced by Money MattersRadio and is hosted by employees of the
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(01:03):
five K Boston is presented by VeteransDevelopment Corporation FACE is the financial exchange with
Chuck Zada and Mark Vandetti. Alittle bit after eleven here and US equity
markets are moving higher. I'm notready to say rip and higher, rip
and higher. You need to beup more than one percent. But we
(01:23):
got a pretty nice broad based moveup with the Dow up two hundred and
four points about half percent. Sand P of thirty seven points seven tenths
of a percent, and the NasdaqG up one hundred and thirty six points
are about eight tenths of a percent. So the S and P right now
had a new all time intra dayhigh. That's always exciting. I love
all new highs. It is Itry. You'll be shocked to hear that.
(01:46):
I restrain myself and try not knowMark, and I mean I trying
to be contrary. A good analystshould be contrarian. If we get excited
about you, any idiot could bea cheerleader, so inst off of the
cheerleaders are right. I'm not suggestingthat that's necessarily a bad way, but
I think if you're managing other people'smoney, or I have input in that
process, you have to push backagainst the consensus and against conventional wisdom.
(02:08):
That doesn't mean mindlessly. That doesn'tmean mindless contrarianism, always doing the opposite
of the crowd, because you getburned a lot. But level headedness,
I guess equanimity, if that's theright word. I do think it's important
just to celebrate when things go right, because so often we just end up
with not a Jehovah. Even Ibelieve financial news media, it's just no
(02:30):
offense. It's just this is wrong. That's wrong, this is wrong.
Sometimes you have to just be like, hey, this is a good thing,
and it's fine. It might notstay this way, but it's fine.
Yes, it is a good thing. Like economic data, we talk
a lot about the difference between theaverage experience, which is what's reflected in
things like GDP and unemployment. GDPvery strong, sagged a little bit in
(02:53):
the first quarter, but year overyear, well above potential, well above
what anybody thought was possible given thestructural headwinds facing the economy. Unemployment very
very low in historical terms, beststreak of below four per CENTSUS the late
nineteen sixties, and yet dissatisfaction isat near record highs. How do you
(03:15):
reconcile those two things? And whydid I get into this point? I
forget other than to point out thatthe prevailing consensus on something like the economy
can be there could be some dissonancebetween that and the way people are registering
their perception of it, and economistsare scratching their head a lot over people's
(03:36):
dissatisfaction with the economy. Again,I don't know quite where I'm going with
this, other than to point outthat economic data, even their level of
the stock market, might not getpeople excited to the degree that they once
did. Maybe it's the uneven distributed, more uneven distribution of wealth than historically.
I don't know what the heck theexplanation is. I think that,
you know, to channel my innerJames Carville to guys, you know,
(04:02):
it's the inflation. Stupid, what, Doug, you just realized I have
no hair. No, it's justthat's how you're relating to James carl Holes.
Well, I mean, he's fromLouisiana. Like, we don't really
rage rageing cajun. You know,we don't really have a common background.
We're a little bit different. He'stall, also, isn't he. I
don't know. I've never never methim. He looks like he's like six
(04:23):
foot four. He looks small tome because he's he was in a mood.
It was in old school that helooked tall standing next to someone.
He's six two yeah, six willdebating there you go, six two,
Yeah, he's seven inches taller thanme. Yeah, that's on a good
day. You're a right. Itdoes come down to inflation people. Really,
I didn't realize how much people hated. This is another thing economys scratch
(04:46):
their heads over. Why are youso upset about inflation? Wages get index
social slowly, but wages do ultimateand wages are keeping up. But it
took a while, and by thetime wages do real wages, that is
after inflation wages, people are alreadymad as hornets. So I think if
there's one area where economists written policymakers, especially at the FED, really
miscalculated in this cycle, it's howmuch people hate inflation the other piece.
(05:12):
And I don't know if there's anygood way to measure this beyond what we
already do. We talk about theinflation inflation rate a lot. That's what
we're trained to do. The pricelevel matters to households as much as the
inflation rate and I think this isthe thing that frustrates a lot of people
that I talk to it because theydon't look at it and say, well,
(05:35):
the price of you know, mygrocery bill only went up two dollars
this year, and so you know, that's fine. They look at and
they're like, it's still eighteen dollarsmore than it was three years ago.
And that's frustrating to people. AndI don't have a good answer for them,
because the answer is, guys,those prices are not coming back because
(05:58):
most of it is due to wagesgoing up and the cost of labor,
and those costs are not going backto where they get deflation outside of deep
economic downturns, but the modern area. But this is when when I talk
to people about their frustration with inflation, it's not the pace of it at
this point, it's just, hey, it hasn't gone back down. What
(06:19):
gives. Yeah, it's funny thatwe don't know by now, those of
us who are adults and have hadsome experienced decades worth of experience in the
real economy that prices don't actually godown because some do fluctuate a lot individual
prices, which is why they excludethem from core. They're very volatile.
Other prices, including our wages.All include wages in the definition of prices
(06:41):
here, don't, thank god,go down. They're fairly sticky if you
like. It's just funny that people, and I'll include myself, have a
problem with the notion that prices aren'tgoing back down. It's weird, but
they're not so prices on average.Do you want some prices that have come
down in the last year, justto make you feel better, I'll give
some of the best and worst pricechanges in the last year, just because
(07:02):
I don't know. I'm looking throughit right now and it's okay, it's
it's here. Uh. Fresh biscuitsand muffins prices are down one point seven
percent in the last year. Ohgood, Yeah, you can put the
biscuit in the basket. It's notbad. Other prices that have come down
in the last year ham but notcanned ham down one point five percent in
(07:24):
the last year. Big deal,we should be celebrating the ham is cheap
eggs down another three point nine percentin the last year. Cluck cluck,
huh. How about that? Otherthings that have come down? Tomatoes down
two point eight percent in the lastyear, it's got to make you feel
good. You can make a nicelittle pizza sauce, pasta sauce, maybe
a little salad with them. Nobig deal. Freeze dried prepared foods down
(07:47):
one point four percent in the lastyear. You got your your Betty Crocker.
No, Betty Crocker's not free.You got your Marie calendar, you
got you know, all that stuffin the frozen food aisle. It's good.
It's down more than one percent.I'm just in the food section right
now. But let's let's skip somewhereelse. Let's go down to here we
go. Motor vehicle maintenance and servicingcan't be accurate, says it's down point
(08:09):
two percent in the last year.Doesn't feel like it's based on the cost
of service. Uh, let's seewhat else do we have here? Pet
services down point one percent in thelast year. Admission to movies, theaters
and concerts probably excluding Taylor Swift downpoint one percent in the last year.
So you do have some things thathave moved down. The problem is that
(08:30):
you have more that's moved up.In the magnitude up has been higher.
Yeah, so those aren't weighted heavily. Many of those category. I don't
have the weights. Maybe in thetable you're looking at over on the left
hand side. I think they usuallyput in the first column. But anyway,
Oh sorry, I was in thewrong colm. I was looking at
the wrong one here. So there'sactually stuff that's down more than that.
Start over now at biscuits, butlike telephone hardware and calculators down ten point
five percent in the last year.Well yeah, because you had a calculator
(08:54):
on your face. Calculators do youthink when you take more than civil engineers?
No, honestly, here's what itis. I believe that for if
you're taking like AP math exams,I think you still need to have the
TI eighty three graph and calculator.I think they still make you use that
and like get rid of your phoneduring the examine stuff. I hope so
high school, Oh I hated thatthing. I would hope. So let's
(09:15):
see, guys said graphic calculators.I am I am old, had no
idea how to use this slide rule, just asking for a friend. No,
no, I still have my firstscientific calculator. It's still my favorite
part of any movie about NASA inthe sixties is just seeing all the slide
rules. It's it just it reallygives me just a little bit of excitement.
(09:37):
Toys down six point eight percent inthe last year, So this is
some of the good news. Thebad news is that, look, auto
insurance, it's it's the one thateveryone's talking about. Up twenty two point
six percent in the last year.Just doesn't feel good, you know,
it's just like it's it's just bad. Garbage and trash collection of five point
three percent. Why. Probably becauseyou have to pay garbage menmore, because
all the wages are going up andsome municipalities are have to pay them more.
(10:00):
It's it's not that the garbage gotmore expensive, it's that it's entirely
driven by wages. So yeah,five point three percent kind of makes sense.
There other things that have gone upin the last year. Let's see,
what's this seven point four cigarettes ofseven point four percent in the last
year. We've got photographic equipment.Who's buying cameras these days? Photographers?
(10:26):
I don't even know how how isthis weighted photographic equipment and supplies is weighed
to zero point zero two percent inthe CPI. When's the last time fact
that that's even measured in the CPI, when's the last time anyone you know
bought a camera? My dad,who is an avid photographer, has bought
a camera in like ten years,because it's like the technology isn't that different
(10:46):
from ten years ago. More typically, if you're into photography, you buy
one and you're good for life.Right. You might get like a few
new lenses, but once you havethem, you're like, okay, I'm
kind of good. Here. Theseare survey based. Wait, so somebody
answered, yes, no, Ido buy that, And here's how much
I spent on it relative to everythingI spent money on last year or so
(11:07):
other interesting things. Women's outer weardown five point four percent in the last
year, but women's dresses up twopoint nine percent. Not as many jackets,
more dresses. I don't know.It doesn't necessarily mean that. It
could mean well, probably, Imean supply and demand, right is it?
Or it could just be something unique. They probably have a triket.
(11:28):
I don't want to I'm guessing there'stoo many jackets. I going to be
talking about women's clothes. This isthe extent of it, but too many
jackets to sell because it was awarm winter. Depends on where their source
from. I don't know. Well, I'm just I'm giving my story here
and everyone's excited about summer. Sodress prices are up, I don't know.
Let's see men's suits and sport coachesprices down eight point four percent in
(11:50):
the last year. Tell that's theJoseph A. Bank. Let's take a
quick break here. When we comeback, we'll finally get to what was
supposed to be our top topic forthe hour, which is Jamie Diamond's discussion
of the deficit. Text US sixone seven three six two thirteen eighty five
with your comments and questions about today'sshow, and let us know what you
think about the stories we are covering. This is the Financial Exchange Radio Network.
(12:15):
Miss any of the show. TheFinancial Exchange Show podcast is available on
Apple, Spotify, and iHeartRadio.Hit the subscribe button and leave us a
five star review. This is theFinancial Exchange Radio Network. Jamie Diamond had
some thoughts about the US deficit.I'll read his quotes and then we can
(12:35):
discuss quote. America has spent alot of money during COVID and after COVID,
our deficit is at six percent annually. Now that's a lot, but
obviously that drives growth. Any countrycan borrow money and drive some growth,
but that might not always lead togood growth. So I think America should
be quite aware that we've got tofocus on our fiscal deficit issues a little
bit more, and that is importantfor the world. I think if you
(12:56):
want to do a great job inyour country and you have a six percent
deficit one hundred percent debt to GDP, this can go on for a while,
but the sooner we focus on it, the better. I don't think
there's a big come up. It'scoming, and I don't think it's in
the next couple of years, butI do think it's why we have higher
inflation. Your thoughts, Mark,Yeah, he's he makes a good point.
(13:18):
It's very vague as last point aboutwhen are the chickens gonna come home
to roost? Debt is a percentagethe federal debt is a percentage of GDP,
and I'll include that owned by theFed here. So all debt outstanding
is about one hundred and the ratioof those two things is about one point
two one or hundred and twenty onepercent. I e. The debt is
(13:39):
bigger than the nation's output. Nowyou're comparing a stock there with a GDP
is a flow, it's what getsproduced every year. So to compare that
to the amount of debt outstanding,which is a stock, it's a stack
of stuff. Doesn't always make sense, but it's the settled upon measure.
This is higher than it's ever been. We own more relative to GDP than
we ever have. The deficit,which is different. Deficit is the is
(14:01):
the flow in the debt how muchgets added to it or in theory taken
away from it. That hasn't happenedfor twenty five years with the Clinton Gingrich
credit Gingridge and say Clinton ging Gridgesurpluses, but deficit now six point negative
six point two percent of GDP.So there are a couple different ways to
look at in historical terms, howmuch we're spending relative to how much we're
(14:22):
taking in. The concern is,of course, when the government issues debt
to pay for spending that it doesn'traise their taxes. It soaks up capital,
either savings here or savings abroad.This pushes up world interest rates,
so it crowds out, in theoryother forms of investment, and at some
point, if the economy doesn't growfaster than the rate of interest, the
(14:43):
average rate of interest on federal debt. I'm gonna call that three percent,
and we're borderline right now. We'reon a knife's edge because growth has been
about three sure, average interest rateon debts about three and rising with interest
rates, then debt will grow explosively. Is a percentage of the economy,
And so what Diamond is getting outthere, and what most economists I think
(15:05):
would agree with is that at somepoint a you're going to be paying more
in interest than almost anything else.I think interest is what the third interest
expense is, like the third biggestfederal expense after Social Security and Medicare.
It's bigger than defense now, andthat will only grow if interest rates don't
come down, and they probably won't, or if the deficit doesn't come down
and nobody expects it to. Thiswill make other programs we'll have to cut
(15:28):
spending elsewhere. So that's one concern. The other concern, of course,
is the upward pressure on interest rates, which of course feeds back into the
first concern. So this is somethingyou and I have talked about a lot,
and it's something where the piece thatI struggle with and that I come
back to not because I think thateverything's fine. But just because it's something
(15:50):
that I think is interesting is yougo back and you pull you know,
Barrens and Time magazine covers from thelast hundred years, and like cockwork,
basically every five to ten years thereare people freaking out about the deficit,
even when it was at much low. We're both nominal levels and as a
percentage of GDP, you know,you can go back through the two thousands,
(16:11):
the nineties, the eighty seventies,sixties, like basically any time that
the US has had any kind ofdebt outstanding, people have been saying,
hey, this is this is toomuch, and the chickens are gonna come
home to roost. So the questionthat I do think we need to ask
specifically because the US occupies a veryunique place in being again that the US
(16:32):
dollar being used as more or lessthe dominant reserve currency around the world,
the dominant form for international settlement settlementaround the world. And despite all you
know the hype about well, youknow, China is trying to take over
you know, this role, andthere's you know, the bricks are doing
their thing, trying to you know, align them, the US dollar continues
(16:53):
to actually occupy a larger and largerchunk of a lot of these metrics in
recent years. And so the questionthat I think that I struggle with is,
Okay, this is a problem potentially, but what do I do with
it? Because it hasn't caused anyissues yet. And it's kind of binary.
(17:14):
It's either a problem or it's not. It's there's no real middle ground
when it comes to this. Bigdeficits and debt aren't necessarily a bad thing
for the dollar. Think about thenineteen eighties. The dollar strengthened right through
the mid nineteen eighties and the coincident, by the way, the deficit is
a percentage of GDP in the eightieswent from thirty one to fifty six debt
to GDP, debt to GDP ratio. Yes, yeah, it was the
(17:34):
Reagan defense build up. We alsocut taxes without cutting spending. But that
doesn't necessarily mean the dollar will weaken. In fact, it could mean the
opposite. People don't buy dollars necessarily. They buy things denominated in dollars,
like treasuries, and they need thedollars in order to buy them. Yeah,
and when interest rates go up,it makes dollar denominated assets like treasuries
(17:56):
more attractive, so I don't worryabout its effect on the dollar in the
short term. Bringing the latest financialnews straight to your radio every day.
It's the Financial Exchange on the FinancialExchange Radio Network. Missed one of our
(18:17):
shows. Catch up anytime by askingyour Alexis Smart speaker to play the Financial
Exchange. This is the Financial ExchangeRadio Network. Americans, overdue bills are
mounting up. More people are missingpayments. So according to the New York
Federal Reserve's latest quarterly report on HouseholdDebt and Credit, America's Americans collective debt
(18:38):
rose to seventeen point sixty nine trilliondollars, up one point one percent.
Should we care, Mark, Idon't know. I'm looking at a series.
It's called household debt. Service paymentsis a percentage of disposable personal income.
So slightly different survey here. Thisone's conducted by the Board of Governors
of the Federal Reserve System, theFederal Reserve. The percentage of household debt
(19:02):
this is mortgage in consumer as againas a percentage of what you have after
taxes, is about nine point eightpercent. That's lower than pre COVID,
lower in fact than throughout the twentyteens when we didn't have any recessions.
As you may recall, we didn'thave one up until COVID. It's much
lower than it was throughout the twothousands, and there was a big recession
(19:22):
of course, to end the twothousands. That but for several years the
economy, probably several years prior tothat, the economy expanded, and household
debt is a percentage of disposable personalincome was like fifty percent higher than it
is today. Part of that isslightly higher interest rates then is compared to
now. Part of it is thebig write off in debts that happened during
the Great Recession that improved consumer socalled balance sheets quite a bit. So
(19:45):
Chuck short answer is, I don'tknow. There are some recessions that are
preceded by a big run up indebt. It's not surprising. Though the
economy expands, things get more expensive, like homes, people have to incur
more debt to afford them. So, based on my casual examination of this
series and trying to line it upwith recessions, it's not obvious that it's
(20:06):
It makes me uncomfortable when I seea headline like this, but it's not
obvious that it should make anybody worry. At this point we have a recession.
Of course, it's a big concernbecause we're starting from a higher,
relatively high delinquency rate. So Ithink that when we look at this,
and I pulled the report just bycategory, so credit card loans, just
(20:29):
as an example, ten point sevenpercent of the balances that are outstanding on
credit card loans are ninety plus daysdelinquent. During the period from twenty thirteen
through twenty nineteen, you generally wererunning like seven and a half to eight
percent. So I do want tobe clear, like, even during times
when there is no recession, delinquenciesexist, and on something like credit cards,
(20:55):
which are unsecured, they're not low. Again, if you're running like
seven to eight percent, at thelow end, you're up to ten.
Now, okay, that's something.The peak, by the way, during
twenty ten Q one, according tothis report from the FED, it was
about thirteen point seven percent. Sothat's that's how bad it got during the
Great Recession. So look, isit concerning, Yes, But here's the
(21:17):
thing about credit card debt. It'snot big enough to cause an economic problem
on its own. It's just notthe US mortgage market back in two thousand
and six, two thousand and seven, Mark, do you remember how big
it was back then? No,it was about seven or eight trillion dollars.
It was like it was big.It was about half a GDP.
(21:40):
It's pretty similar now. I thinkit's like forty percent of GDP now,
just because not as many households havemortgages outstanding. And at that point you
said, Okay, there's like areal problem if something goes wrong here because
it's it's huge and so many barrowersdefaulting is a real thing. You're not
gonna get a repeat of two thousandand eight based on credit card debt because
there's one point two of it outstanding. It's just not big enough to cause
(22:02):
that kind of recession. Now,could households pull back and their spending causes
some yes, obviously, but creditcards are not going to be the thing.
Let's talk a little bit about autoloans. Auto loane delinquencies right now
running at four point four percent.Again, the bottom that we saw in
the last the last economic cycle wasit three percent back in Q two of
(22:25):
twenty thirteen, and generally in thetwenty tens, we were running anywhere between
about three percent. You know,most of the time we were between like
three and a half and four anda quarter. So we're towards the high
end of that right now, likewe're at the high end there. But
again, it's it's not something whereyou look at it and you say,
yeah, this is out of linewith historical norms. You kind of where
(22:47):
you've been for the last ten tofifteen years. Mortgages according and again this
is their reporting here, and they'rethey're all a little bit all these sources
are a little bit different. Butmortgages right now coming in at points six
percent are delinquent by ninety days ormore according to the New York Fed.
That's really nothing would cause things tobreak down. In seven eighth nine,
(23:11):
you started seeing one, two,three, four percent of mortgages delinquent in
a very short period of time.And they became delinquent not because their income
suddenly fell apart in two thousand andseven or two thousand and eight, but
because the mortgage rates adjusted up andmost people at adjustable rate mortgages, not
most, but about forty percent ofpeople at adjustable rate mortgages, and they
just couldn't make the payments on thembecause they were over levered in properties that
(23:33):
a lot of cases they weren't evenliving at or using. You don't have
that problem now because there aren't asmany adjustable rate mortgages. There's far more
equity in homes anyway, so youwouldn't even have to have short sales and
distressed sales and things like that,and so it's it's not coming from mortgages.
What I'm getting at in all ofthis is consumers can be feeling and
households can be feeling it in termsof their monthly budget. But there's nothing
(23:57):
in this data that suggests that thenext leg to fall, the next domino
to fall here is going to bebecause a large portion of people aren't paying
a debt that people expect him tocredit card debt. As I noted,
you basically always have at least onein fifteen people who can't pay it.
Now it's up to one and ten. Okay, I'm not really sure that's
(24:21):
a thing. Where the problem isgoing to come from is very rarely the
same place it came from previously.So yes, this is something where I
say, yeah, it bears watchingand is probably going to create some drag
because anytime you lever up, deleveraging can create some slow down in the
economy, but the scale of theslowdown is not, you know, the
two thousand and eight scale that everyonegets nervous about. I think, I
(24:45):
think Mark, that we might alsohave just a little bit of PTSD,
maybe a lot, quite honestly,because the last two recessions that we've gone
through have been weird and horrible.You know, two thousand and eight obviously
was sure just an awful experience,were a ton of people. And then
the COVID recession, which was yeah, very sharp, and then on the
back of it, you know,you had this high inflation. The last
(25:07):
two have felt really bad. AndI'm not saying that any recession ever feels
good, but we've kind of hadtwo of the worst in the last one
hundred years back to back, andthat feels bad. If you experienced significant
pains, psychological or otherwise after aparticular stimulus, you're walking down the street,
guy coming the other way, redjacket punches you for the rest of
your life. You're gonna jump acrossthe street when you see somebody in a
(25:30):
red jacket. We can't help that. Similarly, when you see delinquency rates
on credit cards. I'll just usethat of the many data points as an
example here. They've doubled since earlyin the COVID ex but I keep calling
the COVID expansion the period after whichthey after which we removed the lockdowns and
people started spending stimulus money like crazy. It's doubled since the COVID recovery began,
(25:53):
but that one point five percent delinquencyrate to start to keep throwing numbers
out at you here, but that'sthe value in the series I'm looking at
has more than doubled in the pastfew years. But the base was very
low. The starting point was verylow. The ascent looks alarming. It's
a dramatic upward sloping curve. Youcan't see it, but you could picture
that. But we're at levels thatare a little bit elevated. Now I'm
(26:17):
talking only about credit cards that heldissued by commercial banks, a little bit
elevated relative to the twenty teens inthe case of this series, not so
much elevated relative to history. What'sthe right reference point? I don't know.
I'm disappointed in pieces like this becausewe've got like a generation of college
students now that are taught data analyticshow to make a chart in something as
simple as Excel. You don't haveto do sophisticated econometrics. It's nice if
(26:41):
you can, but you don't haveto. These things don't have enough visuals
to give people perspective. All thisverbiage. We're just looking. We're looking
at a three page article here,and Tucker prints a stack of this crap.
Forgive me. Every day it's likea phone book's worth thanks to article
after article. They just plod onin this leaden prose. I put that
(27:02):
crap right on your desk, likeone short Yeah, here's your hot morning
crap for you. You bulla crapsucker. I know what I mean is
chucker, you have to dance,monkey dance. You have to plow through
this stuff. This is the pointcould be made in like one or two
charts, and it would give youa better perspective too. I have a
hard time making heads or tails outof articles like this. I imagine most
of you do too. Take aquick break here. When we come back,
(27:25):
we'll do a little bit of stackroulette. The Financial Exchange Show podcast
drops every day on Apple, Spotify, and iHeartRadio. Hit that subscribe button
and leave us a five star review. You're listening to the Financial Exchange Radio
Network, breaking business news as ithappens only here on the Financial Exchange Radio
(27:45):
Network. All Right, I sawthis story from I'm about Google yesterday.
They were doing a whole bunch ofAI presentations and this and that, and
(28:07):
they said that by the end ofthis year their search engine is going to
be showing AI powered summaries for searchresults when you Google stuff. And a
few things about this. The firstis if I am someone who relies on
(28:29):
Google to drive traffic to my website, which is, Oh, I don't
know everybody everyone. This is goingto freak me the heck out because we
know that people are lazy, andwe know that they're lazy when they search,
because generally the vast majority of actionson any search are taken to the
top three items that appear on asearch page. Like people don't go down
(28:52):
the search page being like, oh, I wonder if there's something better further
down. They just click on thefirst two or three things that pop up.
That's how everyone now laziness or isthat an assumption that it's most likely
to be appropriate because other people havefound it appropriate, or are those two
things lazy the same thing? Ialways it's you know, you know the
saying. I think it's was ahand one's razor. Never attribute to malice
what can be explained by incompetence.Never heard it, but I like it.
(29:15):
You've never heard that one. No, Oh, it's one of my
favorites. This is never a tributeto a better view of human nature.
What can be explained by laziness.Laziness is the mother of inventions. It
is the mother of invention. Theremote control exists because we're lazy, door
(29:37):
dash exists because we're lazy. Cruisecontrol we're too lazy to even use our
feet on the pedals. It's allbecause we're lazy. This show is because
we get bored, and we like, we get bored and we need to
listen to something. We're like,it's it's because we're lazy, which we
don't want to discourage. Of course, No, I wouldn't say listening is
(30:00):
lazy. Okay, maybe listening isentertained. Listening's passive, But I think
listening to a show like this isless passive because you're either agreeing to okay,
this show is a bad example.The Internet lazy. Hey, you
don't have to go to the library. And like, I'm not saying this
is a bad thing. I'm sayingthe constant desire for things to be easier
laziness is the mother of invention.Yeah, I guess that's one way to
(30:26):
think about it. You know thatthere are some things that were really like
reaching forth, Like okay, ifyou're trying to go to the moon,
not lazy, you know, theApollo program not lazy. But basically anything
that we use on a daily basisthat wasn't used fifty years ago lazy.
Electric toothbrush. I don't want tomove my little hand and I want the
brush to do it for me.But as you get older, especially electric
(30:48):
does a better job. You can't. I'm not yours as fast as it
might be better. But it's alsolazy. So where I'm going with this
sounds very judgmental based on my likeunfound, like unwavering belief in human laziness.
Humans are just gonna read these AIpowered summaries and they're not gonna go
(31:10):
to the actual web pages. Andall the people are doing that, Yeah,
and all the people who get theirinformation who you know, get their
web traffic from Google. It's gonnadisappear. I mean people do that now.
Just read headlines and assume they knowthe news item. People listen to
one word I say and just say, Okay, that's the rest of the
sentence. They know we're good.So there's that. The US Virgin Islands
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and to reserve your trip today.That's visit USVII dot com. Other things
just to add to my pile oflate like data on this smartphone. Lazy.
I don't want to carry around,you know, a rollodex anymore.
I don't want to carry my CDsaround. Oh I I'd rather, you
(32:42):
know, use the Internet here insteadof having to go to a separate room.
Printers, lazy, you know,no, Wait, what do you
want to You're cranking out a mimeographmachine? What do you use? Would
you put the stack together? I'mnot leading print. All I'm saying is
that making exactly you wouldn't want todo it the other way. Someone used
(33:04):
to do that. Someone used todo that. Out of the problem here
is that you never had to pusha push mower. You never had to
use a dot matrix printer. Thatstuff untrue, untrue. I had to
do both. I had to doboth when I was growing up. The
first printer that I had in myhouse was a dot matrix matrix printer,
and I remember tearing off the edgesof it and everything, you know,
(33:28):
part of your job, VP Sports. You know it was not part of
my job. But when I saylaziness, I'm saying what makes people want
to invent stuff? Most of thelike at least four day to day stuff,
not rockets and things like that,which is unlazy to go to the
moon day stuff. Mark this.It's someone looks at a problem says you,
(33:49):
I don't want to get up andturn the channel on a television set.
Did you have you have you evertouched a button on a TV?
Would you even know how to turnit off? Yes? When the batteries
are out in the remote only thentrue. But this someone looks at the
problem and says, I don't wantto do that anymore. Yeah. And
then they say, like, I'mattributing that to laziness, and I know
that that's not really what it is. Now you're using as a shorthand for
(34:09):
innovation. Americans, not Americans.Laziness is the mother of invention. We
are you know the rule in physicsthat all things tend towards entropy, All
humans tend towards blobbiness. Our naturalstate is sitting and doing as little as
(34:30):
possible. And we only do theseother things because we have to. In
many we don't want to expend energy, which is a related concept. We
can serve energy as much as possible, the only reason why we like run
and do like. Okay, weget other like benefits out of it now,
but in general human beings want todo as little as possible. They
want to be freed up to dowhat we enjoy. They were talking about
(34:51):
them like we're observing them in azoo. We want to be freed up
to do what we enjoy. Andeven the stuff that we enjoy, it's
even if it's active, it's activewith the premise of hey, this isn't
life or death. You know,if you play a soccer game, you're
not running from a lion, fromyour survival if it would make it a
lot more watching. You know,if you are hunting today, you're not
doing it because I really need thefood. You're doing it because yeah,
(35:15):
I can get the food from it. But ultimately it's not life or death
for me. If you're playing golf, it's not because you need to make
that. You know, if youare on a boat, it's not because
well I need to fish otherwise thisis what I'm getting at. We strive
to make our lives easier, andI shorthand that as laziness. We want
(35:35):
to be lazier. If we can, we might work harder in order to
be lazy later, which is theinteresting juxtaposition. It's kind of catch twenty
two. But sure it's called workingthen retirement. Yeah, but laziness is
the mother of invention and in lookingat human beings through that lens. I
look at Google saying, hey,we're gonna provide AI summaries. No one's
(35:58):
gonna click a link. Ever,again is where I land. It's where
my brain takes it. I hopethat's true. I'd love to be saved
the step Hi welcome that day.See thank you Mark for proving my point.
Quick break for the rest of theday. We'll see you tomorrow on
the Financial Exchange
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