August 21, 2024 • 36 mins
Chuck Zodda and Marc Fandetti discuss the surge in inflation and what are the likely causes. Why did Walmart sell-off its stake in JD.com? Should the next President raise the federal minimum wage? As Gen X starts to reach retirement age, reality still bites. Is there any solution to the tipping problem here in the US? Happy Anniversary to sliced bread.
Mark as Played
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Episode Transcript
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Speaker 1 (00:00):
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Corporation face. He's the Financial Exchange with Chuck Zada and
Mark Vandetti.
Speaker 2 (01:14):
A little bit after eleven here, and markets are somewhat
stuck in neutral, just not really any convincing moves in
neither direction. The Dow is currently off about forty points,
the S and P is up nine, the Nasdaq up
thirty nine, so mixed throughout the first hour and a
half trading. We were up a little bit more about
a half hour ago, but have since given back a
decent chunk of those games. Ten year Treasury is down
(01:36):
three basis points to three point seven eight eight percent.
We've got Oil West Texas Intermediate up twenty five cents
a barrel to seventy three forty two the TRIPA national
average for gas prices following another six tenths of ascent
down to three point thirty nine and eight tenths of
a cent. Haven't seen a three thirty number in probably
(01:57):
a few months now, and based on aasoline futures, we
do still have a little bit of room to move
down further, so we might nationally get down into that
three thirty five range over the next week or two.
Before you know, we get some clarity on what the
next moves look like on that front. And we've got
gold today down nine dollars and ninety cents an ounce
(02:19):
to twenty five forty and seventy cents mark. There is
a piece in Barons Today and it is titled what
caused the Surge in Inflation? Inside one of the election's
biggest debates.
Speaker 3 (02:34):
What does the piece.
Speaker 2 (02:35):
Talk about before we try to actually answer the questions
posed by it?
Speaker 4 (02:40):
Oh, I was just ready to give my take, Chuck,
you can give yours age. Well, look, I think researchers
and the piece does cover some of these things, but
I've got to admit I only skimmed it because the
story's pretty well worn at this point. Depending on your
preference as a researcher, you might put emphasis on more
emphasis on some of the factors on men than others.
(03:00):
And I'll be really brief. I'll say only that this
inflation started in late twenty twenty early twenty twenty one,
after trillions of dollars in stimulus had been pumped into
the economy. We all remember, under both Trump and Biden,
several stimulus packages. Some of them went to consumers, some
of them went to business owners, effectively putting a lot
(03:23):
of money into people's pockets. At the same time, COVID
had wrought havoc with supply chains. Goods were piling up.
We all remember this, Goods piling up in ports, empty shelves.
We had a lot of money to spend, and supply
was diminished due to COVID. Naturally, that caused demand to
(03:44):
grow much faster than the economy's capacity to meet that demand.
Demand exceeded supply in terms of growth rates. That pushed
up inflation again.
Speaker 3 (03:53):
This started.
Speaker 4 (03:53):
We know, I started on a month over a month basis.
Some of you might be thinking, no, no, inflation didn't start
under Trump, that started under Biden. It actually didn't. In
point in fact, month over month inflation started increasing in
early late twenty twenty, early twenty twenty one. That's very
easy to verify, and the reasons why make sense.
Speaker 3 (04:10):
And then we had another.
Speaker 4 (04:10):
Shock about a year after that, Russia invaded Ukraine, pushing
up energy prices. And in the meantime there were little
blips and intermittent shocks pushing up prices. Subsequent rounds of
stimulus spiking food prices somewhat related to that. The end
result was very high inflation, the high since the early
nineteen eighties as we remember, and it's since Ebbed. I
(04:34):
guess if you would expect given supply chain normalization, the
reduction and energy prices and perhaps FED rate increases which
helped to keep expectations in check. So it's not a
it's not an entirely straightforward story, but it's not an
overly complicated one either.
Speaker 2 (04:52):
Mark When we look at the landscape today, two questions
that people want to ask are actually actually let me
let me hone in on one of them, because this
is kind of central to a whole discussion that that
seems to be happening right now on this, which is, hey,
why are we not seeing prices coming back down? Why
(05:15):
are they only moving up just at a slower rate.
Can you give just some some input as to why
that tends to be the case?
Speaker 4 (05:25):
Look, In the long run, inflation is a result of
too much money, as Milton Freeman once said, chasing too
few goods. Inflation is explainable by increases in the supply
of money, which the Federal Reserve controls, which is why
everybody points the finger at them. And the short run
inflation can happen because say energy price is spike, or
some other outside shock hits the economy, or the FED,
(05:50):
the federal the federal government over stimulates the economy, puts
too much stimulus into it through in the form of
tax cuts, for example. So what was the exact question
you asked, Chuck? I got off on my usual.
Speaker 3 (06:02):
Why don't prices move down?
Speaker 4 (06:04):
Oh, prices, they've never moved down in the post war
era because money growth can always combat that. There was
mild disinflation. I shouldn't say they've never moved down in
the nineteen fifty to fifty one or forty nine to
fifty I forget which, but that was very brief. So
outside of that, and in two thousand and eight there
was a twelve month period I forget which when prices
(06:25):
actually came down. So outside of severe economic contractions like
the Great Recession, you don't see prices coming down in
the modern area. It just doesn't happen. You don't want
to wish for it, because that would probably require a
deep economic contraction.
Speaker 2 (06:40):
I think sometimes people, you know, think about the idea
of deflation as something that they'd like to see, where
it's like, oh, like I'd love to see prices coming down,
but some do.
Speaker 4 (06:49):
By the way, I'm sorry, can I interrupt just to say, yeah,
relative prices. Everybody knows gas prices can come down. Well,
commodity price prices can come down.
Speaker 2 (06:56):
Moodity prices always come down during a recession or a slowdown.
And the big reason why, in my opinion, Mark, is
because commodities don't have brains.
Speaker 3 (07:09):
I know that.
Speaker 2 (07:10):
That's like, you're like, what what did you just say?
The reason why other prices are stickier is that the
single biggest input cost to most businesses is what Mark, labor.
Labor is a huge cost. And Mark, let's say that
you are working at Let's say you're working at a
car wash and I'm paying you fifteen dollars an hour
(07:31):
to wash cars this year. If I come back to
you next year and I say, Mark, you did a
great job, but we're trying to cut costs and I
gotta pay you fourteen bucks an hour, now you're gonna
be like, no, get get out of here, like I'm
not working. You paid me fifteen last year, you paid
me fifteen this year. To be honest, I'd like a raise,
So no, like that that doesn't work. Humans have egos,
(07:54):
and so it's like the the labor cost does not
move down because we say, no, I got paid X
before for I need to get paid why next year.
A piece of wood that gets sold doesn't care how
much it gets sold for. And so commodity prices move
very differently. You do see them come down after the
big spikes. Look at lumber as an example, lumber prices
(08:17):
which spiked back in twenty twenty one, the back down
even below where they were pre pandemic. And if you're
looking at certain types of products, and it's because labor
costs just isn't as high. And again they're called commodities
for a reason. They're they're interchangeable. They're like it's you
can fully just say, okay, I'm not gonna buy nails
from you, I'm gonna buy nails from you. I'm gonna,
(08:37):
you know, buy oil from you instead of from you.
Speaker 3 (08:40):
Like that. These are things that you can do.
Speaker 2 (08:41):
Whereas with people, as much as we talk about you know,
people being replaceable, it still takes a lot of work
to brain up new employees in this and that, and
so those those wages, which are a huge portion of
most other products that are not commodities most of their
cost they're sticky, and so you don't see those prices move.
Speaker 4 (08:59):
Some economists would agree with that, others would I don't
think it's not just labor that might be part of it.
It's more that firms care about relative prices, and shocks
to relative prices have to be really big before firms
find it worthwhile to change their prices. This is an
area that's ben hotly debated, probably will continue to be
(09:20):
why don't why when, for example, the FED pumps money
into the economy, Why don't all prices just go up?
Why does that affect employment? Prices are, after all, just
a form of record keeping, And the answer is what
researchers called nominal rigidities, which is a fancy way of
saying prices don't move in the short term outside of
big shocks. And commodities are a good example of completely
(09:44):
flexible prices because of their nature. Other goods don't change.
Other firms, I should say, don't change relative prices absent
a big incentive to do so, a big, obvious, say,
boost to their profits. It gets a little hairy. But
the upshot, as you said at the beginning, is that
(10:04):
prices generally on on average, I'm not talking relative prices here.
On average prices don't go down, and you don't want
them to because that doesn't happen in a modern economy
outside of deep economic distress.
Speaker 2 (10:18):
Now, the thing that people don't realize about deflationary periods,
they're not typically accompanied historically by wages staying the same.
If you look back at most of the data that
we have on deflationary periods in the US, which is
not good data. It's like, again, mostly from the eighteen hundred,
so it's not high quality. It's generally accompanied by wages falling,
(10:40):
and so living standards fall as well. What people talk
about when they talk about, hey, I want to see deflation.
Hey I want to see the purchasing power of my
money go further. Well, the way that we've historically seen
that over the last one hundred or so years is
through increases in productivity. Great, we can make more stuff
with fewer inputs, and so it costs less to make it,
(11:01):
and as a percentage of your income, it costs less
to buy it. Then that's how we've seen you know,
cases where you're seeing living standards increase throughout the last
hundred years it's not because prices went down. It's because
efficiency effectively went up, and so you said, okay, we
can still make this for the same cost, and yeah, great,
(11:22):
we can do that. Even as incomes are rising, you're
able to buy more. That way, it's not so much
that costs are you know, being driven down, except for
you know, TVs, which now you get like an eighty
eight inch TV for like three dollars, now right.
Speaker 4 (11:36):
Yeah, sounds about right.
Speaker 2 (11:38):
So I still remember back in college, I was like
shopping around for a TV and it was again, this
was twenty years ago, somewhere in that ballpark, and it was, hey,
you know, like the TV that you can afford is
you know, twenty seven inches or something like that, and
you know, it was like a couple hundred bucks at
(11:58):
the time. And now I think, literally you can get
like sixty five seventy inch TVs for like two hundred dollars.
And it's because, you know, it's just the technology has
gotten that much better. But again, it's not like they're
still making the twenty seven inch TV and selling it
for three dollars. It's now here's the price point. It's
just you get more for it, I guess so that's uh.
(12:19):
I guess another way that you can look at it
in terms of why prices don't go down is hey,
the old stuff is you know, rendered obsolete, and you
just you can't buy it anymore.
Speaker 3 (12:28):
Let's take a quick break here.
Speaker 2 (12:29):
When we come back, we have let's talk a little
bit about Walmart. They are making a sale of an
investment they made a few years back. We'll talk about
what it is and what it means for the company.
Speaker 1 (12:38):
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Speaker 2 (13:09):
Mark We've got a story here that Walmart, who had
eight years ago invested in Chinese e commerce firm JD
dot Com, sold its stake in them earlier in the week,
raising about three point six billion dollars In doing so.
Two different ways that I interpret this. I don't know
(13:30):
which one is writing, and I don't really follow JD
very closely here, but the stock is down about seventy
five percent from its twenty twenty one peak. So on
one hand, Walmart might look at this and just say, hey,
this has been kind of a bad investment for us
over the last three years. We could redeploy that and
get better return on our capital by you know, opening
(13:51):
more stores or investing in some other kind of company,
some new technology, whatever it might be.
Speaker 3 (13:56):
That's one part of it.
Speaker 2 (13:57):
The other is, hey, maybe we're concerned about geopolitical tensions
and we want to remove that risk as well, and
so that could be playing into this when you look
at the decision, anything else that you think could be
a potential cause, because obviously the two of us don't know.
Speaker 4 (14:12):
No, I'm obviously clueless, But I do like your first explanation.
That's a good generic explanation for anything you see. Affirm
do they have an average cost of capital and a
return target internally? And if a business line is not
meeting it either now nor expected to meet it, you
shed that business line. And Walmart does that pretty ruthlessly
(14:34):
and effectively. I think This is one of the hallmarks
of a good, efficiently run business and shareholders. I assume
not being privet any special knowledge here, but I assume
shareholders would like something like this.
Speaker 2 (14:45):
Let's talk a little bit about minimum wage. There's an
opinion piece in the Wall Street Journal calling for a
bump to the federal minimum wage from the current level
that it currently sits at at seven dollars and twenty
five cents an hour.
Speaker 3 (15:00):
Mark your thoughts on this.
Speaker 4 (15:02):
Well, minimum wage is not a great way to pull
people out of poverty. Economists know this, but it may
not be the worst thing in the world to do
optically or politically. It may do actual it may not
do much real harm, is what I should say. It
may not price too many people out of the labor market.
(15:22):
Let me explain what I mean by that real briefly.
When you make someone's wages too high relative to their productivity.
And this is true if you think about it of
new entrance to the labor force or younger people, they
ain't going to get hired. Firms don't find it profitable
to do so. I think this is at the risk
of using a dangerous term, that's common sense. So you
(15:44):
price certain people out of the labor market when you
make the wage too high relative to their contributions to
the firm on the margin. Economists have always known this,
but there was a lot of research in the early
nineties that said it was done specifically on in a
New Jersey Pennsylvania comparison, because they're so close to agressly,
Jersey raised its wage, Pennsylvania didn't, So you had pretty
homogenous labor markets with different wages. What happened when Jersey
(16:07):
raised its minimum wage and what is now a famous
study in many follow on studies replicated these results. There
wasn't a detrimental impact to employment. So economists for a
long time and maybe we all those of us that
went to college and say the nineties, probably came away
with this as dogma. Raising the minimum wage is bad,
it causes unemployment. Many micro so called microeconomists, those that
(16:29):
study labor markets, would say, no, that's not necessarily the case.
It depends on other things, So chuck. If they if
they want to do this for optical or political reasons,
raise it to ten or twelve bucks an hour or
whatever they're considering, that may not be a binding so
to speak. It may not cause havoc in the lower
end of the lower skilled end of the labor market.
Speaker 2 (16:48):
One other piece that I think filters into this, and
I don't have the most recent data just because we
likely don't have any more recent data, but this is
from the Bureau of Labor Statistics in twenty twenty looking
back at twenty twenty one, and according to their data,
the percentage of hourly paid workers earning the prevailing federal
(17:08):
minimum wage or less was one point four percent in
twenty twenty one, So only one in one hundred hourly
workers makes near that wage.
Speaker 3 (17:20):
And so part of it.
Speaker 2 (17:21):
Look, if you're raising the minimum wage and only one
percent of workers are making that much, workers that are
already making above that minimum wage are not necessarily going
to see their incomes change disrupted or you know, otherwise impacted,
unless firms are forced to reset their entire pay scale. Now,
most of this is done regionally. When you look at
you know why this is the case. Hey, someone in Massachusetts,
(17:46):
an example, can't make federal minimum wage because it's a
state minimum wage is hired to begin with, So this
wouldn't even affect someone in Massachusetts as an example.
Speaker 3 (17:56):
Most states scuse.
Speaker 4 (17:57):
Maybe it doesn't does South and maybe to am sure,
pardon me to am sure if I'm offending anybody, but
mostly in the South they tie it to the federal
minimum wage.
Speaker 2 (18:06):
So we'll take a look at exactly where that is later.
Speaker 3 (18:10):
Let's take a quick break.
Speaker 5 (18:11):
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(18:31):
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Speaker 2 (18:36):
So when we talk about generations on the Financial Exchange,
we usually mentioned too. We talk about the boomers, we
complain about them, We talk about the millennials, we complain
about them. We don't really touch on Generation X a
whole lot, which is pretty familiar ground to gen X.
They're used to being sandwiched between you know, to me
(19:00):
first generations, one of which I am part of. So
again I'm eating my own cooking on this one. When
we look at gen X, they are now about to
start hitting retirement age. At least the first of the
Gen xers are getting into that ballpark. Gen X is
defined as being born between nineteen sixty five and nineteen eighty.
Speaker 3 (19:23):
Mark.
Speaker 2 (19:23):
My first question on this is these generations are just
too big, aren't they? Like, what is someone born in
nineteen sixty five have in common with someone born in
nineteen eighty Oh.
Speaker 4 (19:34):
I was thinking the opposite. That does not constitute a generation.
It's like half a generation. But really, well, interesting is
it to Because how am I born in nineteen seventy two?
How am I a different generation? You were born sometime
in the nineteen eighties? Yeah, I have of the nineteen eighties,
So we're clearly more than a decade apart, but culturally
(19:58):
not that far apart. I have far more in common
with somebody, say, your age, than I do my own parents,
who were obviously a generation before me. I don't know.
I just think that we use the word generation a
little too loosely. Sorry, go ahead, maybe you maybe you're right.
Speaker 2 (20:13):
I guess I'm thinking of it from the perspective of, like,
I don't know, you remember stuff from the eighties that
I only read about.
Speaker 3 (20:23):
Mm hm, you know, like get around children we do.
Speaker 4 (20:27):
Let me tell you about Ronald Reagan.
Speaker 3 (20:30):
Exactly. But it's exactly what I'm talking about.
Speaker 4 (20:35):
Wrong to love a man when it's Ronald Reagan anyways,
or under any circumstances these days, but particularly when it's
Ronald Reagan. Sorry, Chuck, go ahead.
Speaker 3 (20:44):
No, no, no, you're you're all good. It was really good.
Actually I enjoyed that. In any case, Well, we talked
about episode.
Speaker 1 (20:53):
Did I.
Speaker 3 (20:55):
Go ahead to finish the segment?
Speaker 2 (20:56):
No, No, it's it's fine when we talk about gen X,
So they are hitting retirement age right now. Because again,
if you're born in sixty five, you do the math out,
you say, Okay, I'm turning sixty next year, and full
retirement age or medicare age there within reach over.
Speaker 3 (21:14):
The next few years.
Speaker 2 (21:15):
In some cases, look, depending on the profession that you chose,
you might be getting into forced retirement at age sixty
if you're in something that's physically demanding, or you know,
whatever it might be. But the question that you have
that is out there is hey, is gen X prepared
for retirement compared to the generations surrounding them, And the
(21:38):
data that we have is suggesting that, Yeah. The overall
picture has improved over the last ten years, mostly because
markets have been very good, and so the gen xers
that have had money invested in financial markets have done well.
But a key difference from gen X and the previous
generations is that's really when the massive drop off in
(21:58):
defined benefit plans pench plans started and defined contribution plans
started becoming the norm for workers.
Speaker 4 (22:06):
Your thoughts mark, that's part of it lower returns because
we've been contributing most aggressively up to and through deep
down turns a few now if you count COVID, So
I think of people that came into the workforce like
I did in the mid nineteen nineties, put a lot
of money into our four h one case relative to
(22:26):
salary or early on saw more than half of it wiped
out at one point. We also had the opportunity to
buy in at lower prices, but not that much lower
than we'd started with. Ye, the same happened again. It
was seemingly right on the heels of that only several
years later in the Great Recession. Took several years, as
you know, for stock prices to recover and chuck, as
you point out. On top of that, there are other
(22:47):
structural headwinds like changes in the complexion of corporate benefits,
elimination of dB defined benefit that is, pension plans, houses
getting a lot more expensive relative to median income. That
happened when we were first buying in in the very
late nineteen nineties for those on the those at least
in my subset of Gen X, into the mid two thousands,
(23:07):
homes were selling it two, three, four, five times median income,
much like they are today. So younger generations like to
lament how much they've got to pay relative to median income.
Speaker 3 (23:17):
So did we.
Speaker 4 (23:18):
So houses has been obscenely expensive, I guess, is my point,
relative to past generations experience for roughly the past twenty
five years, so we have more expensive houses. We also
were the first generation to come out with a lot
of student debt, So any number of factors that you
might call headwinds that make it more difficult to accumulate wealth. O.
(23:39):
I think it's somewhat overstated in that you've seen the stats, Chuck.
We've had the opportunity to build wealth comparable to prior
generations at this point in our lives too.
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Speaker 3 (24:52):
Mark.
Speaker 2 (24:52):
Do you think that we've reached the tipping point on
tipping in the United States?
Speaker 3 (24:57):
It seems like a lot.
Speaker 4 (24:58):
Of people are talking about it in the not Happy
So if that defines tipping point then perhaps.
Speaker 2 (25:05):
And and there's a piece in the Financial Times which
I always love when British publications talk about what's going
on in the US, because even in here, like they
explicitly like note, they're like, we don't quite understand what
you're you're doing.
Speaker 3 (25:18):
It's it's kind of weird.
Speaker 2 (25:20):
And what they're talking about is the idea of this
proliferation of tipping, which we we've covered quite a bit
on our show over the last year or two, where
it used to be expected that there were, you know,
standard places where you tip, but it's still something where
you have to like learn the right way to tip sure,
(25:42):
and and and there are some things that I still
have questions about. Mark just as an example, like I
remember when I was a kid, and when when I
flew on a plane the first time, and you know,
you get to where you're going and okay, you know
someone's helping you with your bags, Okay it was you know,
you tip a dollar a bag to the bell hop. Well,
(26:03):
if inflation was twenty percent in the last two years
or three years, do I have to do is it
a dollar twenty five? And I'm not saying I was
a kid like three years ago. But you know, like,
how do these things evolve over time that aren't even
percentages but fixed dollar amounts, And how do you learn
what you're supposed to tip? Where what's the index that
you should use to track how much you should tip
(26:25):
for different jobs? And it it just becomes challenging in
my opinion, because.
Speaker 3 (26:31):
You just sit there and you're like.
Speaker 2 (26:33):
I don't know if this person is expecting a tip
just because they turned around. You know a machine that
has a tip you know line for it. I don't
know if I shouldn't be tipping because they like they
don't actually want it. It just is getting to the
point where I think it's confusing for a lot of people.
And I think the problem then, as a worker who
(26:55):
may rely on tips is, look, when when people get
fatigued with tipping, the actual money that you bring home
goes down. And if you're a worker that relies on
tips as a big part of your wages, then it
makes it harder for employers to actually get you know,
employees in those roles, which means maybe they shouldn't be tipped. Anyways,
this is all very confusing to me.
Speaker 4 (27:15):
Mark, Yeah, I'm totally lost all I can say is
we have no transparency. If you rely on rules that
employers suggest you follow, their suspect because they're biased. They
want you to tip more so they can pay less.
So of course they want you to, you know, tip
our employees generously. Yeah, why why don't you charge me less?
Speaker 3 (27:34):
So there's this.
Speaker 4 (27:37):
Opaqueness, this lack of transparency, same thing that makes me
any way suspicious of people's motives. I don't mean that
I think anybody's got sinister motives. I just think employers,
like we said, have an incentive to get you to
overtip so that they can underpourse. So everybody's sort of
suspect of everybody else's motives, and everybody, as a consequence,
like you said, is confused. I don't know if we
(27:59):
need a universe set of rules. And I'm certainly not
suggesting the government step in and do something. Oh no,
I don't know what, because this is based on culture
and norms.
Speaker 3 (28:08):
It was the government problem to begin with.
Speaker 4 (28:10):
No, no, no, Yeah. So when I say rules, I
just mean norms, widely accepted practices that we all just
kind of agree to follow.
Speaker 3 (28:17):
But we don't even have those with anything.
Speaker 4 (28:18):
That's broken down. I guess is my I don't know
what the norms are anymore. I never I never really did,
so I'm not a good example. But someone like you,
more more culture, who actually leaves the house, you probably do.
I don't know. Maybe we need a coffee table book
that explains it to right.
Speaker 2 (28:35):
I do leave the house, but I'm not sure I
would be referred to as normal by a lot of
like I don't think I should be the standard bearer
for normal. I think that'd be a tough putt for
a lot of people to swallow. I just I don't
think it would go well. So I don't know what
to do on this. And and the problem is that
(28:56):
there are a lot of people that still work in
jobs that aretionally, you know, tipped as a portion of
their wages. And the thing that you worry about on
those is, hey, because people are fatigued being asked for tips,
you know, by everyone. When you do go out to
eat at a restaurant with a weight staff who comes
around to you, are you not tipping that person as
well because you're frustrated that you've already been asked for
(29:18):
eighteen other tips that day, And then that person isn't
making the wages that they needed to make right. It's
it's tough, and I just we're asking for tips in
too many places, and I don't know what I'm supposed
to pay people anymore. And it honestly, in most jobs,
it shouldn't be my problem. Tell me how much it
costs for your good or service, and then pay your
(29:40):
people appropriately. I'm fine tipping in restaurants. I'm fine, you know,
tipping hotel staff to clean rooms. I'm fine doing these things.
But I can't keep adding new stuff to the pile
because I just don't know what is going I don't
know why I need to tip everyone then, and why.
Speaker 3 (30:01):
Is no one tipping me? I want tips, you know, Like,
so what's the deal with the tips?
Speaker 6 (30:09):
I'll put a tip jar right next to my producers
board right here.
Speaker 3 (30:13):
Does that mean you do?
Speaker 2 (30:14):
I mean I have to tip you. I gotta tip
you every day when you're in the studio. Yeah, it's true,
otherwise I get my mic turned off.
Speaker 3 (30:21):
You're welcome.
Speaker 2 (30:22):
Yeah, A tip tucker one cent a word. It adds
up over time. We talk a lot. Let's take a
quick break here when we come back. We got stack
roulette after This.
Speaker 1 (30:33):
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Speaker 6 (31:00):
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Speaker 3 (31:40):
Mark. What do you have for stack Roulette, Chuck?
Speaker 4 (31:42):
I'll elaborate real quick here on a point I tried
to make in the last segment about more favorable returns occurring,
and I'm gonna arbitrarily cut off the periods here pre
two thousand versus post two thousand, and I do that
because baby boomers had a lot of working years under
their belt before two thousand, and gen X has had
most of their working tenure under its belt, has gotten
(32:04):
most of its working tenure behind it since two thousand.
Large company stocks and I'm using a morning Star index here,
but just think of it as the S and P
five hundred large company stock returns since two thousand had
been about eight percent. That's average annual in the twenty
five years before, and that's roughly a twenty five year period.
Twenty five years before that they were twice as high,
(32:25):
sixteen percent. Now, some of that's inflation, particularly before nineteen
eighty five. Shave off a couple percentage points for that.
The difference, if you compounded over a twenty five year
period is for every dollar invested, say in the first period,
you ended up with twenty dollars at the end of
the period for every dollar invested in the second period.
(32:47):
The one that is consistent with gen X's The bulk
of gen X's working years is five dollars. So said differently,
if you had been working in the twenty five years
up to nineteen seven, average returns would have been twice
as high. And the compound result, now this is growth
of a dollar at the beginning of the period, so
(33:07):
it doesn't capture the effect or out was four times
as high. This makes an enormous difference in terms of
ability to generate a wealth that provides for retirement security.
That's the point I was trying to make.
Speaker 3 (33:22):
I appreciate you bringing that to the table.
Speaker 4 (33:26):
It's a little bit too much detail now, no healtha
need to elaborate, and it's good.
Speaker 3 (33:31):
Mine isn't nearly as as useful. Useful.
Speaker 2 (33:37):
Did you know that in nineteen forty three Mark the
United United States banned slice bread?
Speaker 4 (33:45):
No, I didn't know that.
Speaker 2 (33:46):
So, first of all, do you know what year sliced
bread was invented? Nineteen eighty seven nineteen twenty eight, So
we're coming up on one hundredth anniversary of sliced bread.
I just want to let everyone know it's going to
be a big one in twenty twenty eight. But in
nineteen forty three, the Secretary of Agriculture caued Wickered, banned
(34:07):
the preslicing of bread in an attempt to help the
war effort that was going on. Now it's unclear exactly why.
It speculated that this was because the steel that was
used in bread slices at the time was a specifically
hardened steel that perhaps could be used for military purposes.
It's kind of unclear, but they abandoned the bread slicing
(34:31):
ban two months later simply because they basically said, look,
it doesn't actually work. It's you know, like this isn't
actually working, and people were getting really upset. In fact,
the New York Times, just after this went into effect,
published a letter from a distraught housewife, and I quote,
I should like to let you know how important slice
bread is to the morale and saneness of my household.
(34:53):
My husband and four children are all in a rush
during and after breakfast without their ready sliced bread. I
must do the slicing for toa two pieces for each
one that's ten, and then for their lunches, I must
cut my hand at least twenty slices for two sandwiches
a piece, and afterward I make my own toast twenty
two slices of bread to be cut in a hurry.
Imagine a world without sliced bread. That's what we had
(35:16):
for two months in nineteen forty three. Okay, that's what
I have. Where did that come from? I'm just curious,
that's all someone.
Speaker 3 (35:28):
Nope, I saw a meme on Twitter.
Speaker 2 (35:30):
It was too like it was a loaf of bread
just cut in half with like all the meat in between,
and it was like life before sliced bread. And so
I was like, oh, when was sliced bread invented? And
I started digging around, and this is what I came
up with. But the bread slicing machine was invented by
otto Frederick Raueer of Davenport, Iowa.
Speaker 4 (35:50):
That can also be why it was banned for a bit.
It sounds a little Germanish.
Speaker 3 (35:57):
Uh, I'll just kidding. He was probably dead by the time.
Now he wasn't.
Speaker 2 (36:02):
But in any case, slice bread banned for two months
in the US and nineteen forty three. We're done for
the day. We'll see you tomorrow. Have a great sandwich
on your slice bread, and we'll see you then.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
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(00:20):
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(01:06):
Corporation face. He's the Financial Exchange with Chuck Zada and
Mark Vandetti.
Speaker 2 (01:14):
A little bit after eleven here, and markets are somewhat
stuck in neutral, just not really any convincing moves in
neither direction. The Dow is currently off about forty points,
the S and P is up nine, the Nasdaq up
thirty nine, so mixed throughout the first hour and a
half trading. We were up a little bit more about
a half hour ago, but have since given back a
decent chunk of those games. Ten year Treasury is down
(01:36):
three basis points to three point seven eight eight percent.
We've got Oil West Texas Intermediate up twenty five cents
a barrel to seventy three forty two the TRIPA national
average for gas prices following another six tenths of ascent
down to three point thirty nine and eight tenths of
a cent. Haven't seen a three thirty number in probably
(01:57):
a few months now, and based on aasoline futures, we
do still have a little bit of room to move
down further, so we might nationally get down into that
three thirty five range over the next week or two.
Before you know, we get some clarity on what the
next moves look like on that front. And we've got
gold today down nine dollars and ninety cents an ounce
(02:19):
to twenty five forty and seventy cents mark. There is
a piece in Barons Today and it is titled what
caused the Surge in Inflation? Inside one of the election's
biggest debates.
Speaker 3 (02:34):
What does the piece.
Speaker 2 (02:35):
Talk about before we try to actually answer the questions
posed by it?
Speaker 4 (02:40):
Oh, I was just ready to give my take, Chuck,
you can give yours age. Well, look, I think researchers
and the piece does cover some of these things, but
I've got to admit I only skimmed it because the
story's pretty well worn at this point. Depending on your
preference as a researcher, you might put emphasis on more
emphasis on some of the factors on men than others.
(03:00):
And I'll be really brief. I'll say only that this
inflation started in late twenty twenty early twenty twenty one,
after trillions of dollars in stimulus had been pumped into
the economy. We all remember, under both Trump and Biden,
several stimulus packages. Some of them went to consumers, some
of them went to business owners, effectively putting a lot
(03:23):
of money into people's pockets. At the same time, COVID
had wrought havoc with supply chains. Goods were piling up.
We all remember this, Goods piling up in ports, empty shelves.
We had a lot of money to spend, and supply
was diminished due to COVID. Naturally, that caused demand to
(03:44):
grow much faster than the economy's capacity to meet that demand.
Demand exceeded supply in terms of growth rates. That pushed
up inflation again.
Speaker 3 (03:53):
This started.
Speaker 4 (03:53):
We know, I started on a month over a month basis.
Some of you might be thinking, no, no, inflation didn't start
under Trump, that started under Biden. It actually didn't. In
point in fact, month over month inflation started increasing in
early late twenty twenty, early twenty twenty one. That's very
easy to verify, and the reasons why make sense.
Speaker 3 (04:10):
And then we had another.
Speaker 4 (04:10):
Shock about a year after that, Russia invaded Ukraine, pushing
up energy prices. And in the meantime there were little
blips and intermittent shocks pushing up prices. Subsequent rounds of
stimulus spiking food prices somewhat related to that. The end
result was very high inflation, the high since the early
nineteen eighties as we remember, and it's since Ebbed. I
(04:34):
guess if you would expect given supply chain normalization, the
reduction and energy prices and perhaps FED rate increases which
helped to keep expectations in check. So it's not a
it's not an entirely straightforward story, but it's not an
overly complicated one either.
Speaker 2 (04:52):
Mark When we look at the landscape today, two questions
that people want to ask are actually actually let me
let me hone in on one of them, because this
is kind of central to a whole discussion that that
seems to be happening right now on this, which is, hey,
why are we not seeing prices coming back down? Why
(05:15):
are they only moving up just at a slower rate.
Can you give just some some input as to why
that tends to be the case?
Speaker 4 (05:25):
Look, In the long run, inflation is a result of
too much money, as Milton Freeman once said, chasing too
few goods. Inflation is explainable by increases in the supply
of money, which the Federal Reserve controls, which is why
everybody points the finger at them. And the short run
inflation can happen because say energy price is spike, or
some other outside shock hits the economy, or the FED,
(05:50):
the federal the federal government over stimulates the economy, puts
too much stimulus into it through in the form of
tax cuts, for example. So what was the exact question
you asked, Chuck? I got off on my usual.
Speaker 3 (06:02):
Why don't prices move down?
Speaker 4 (06:04):
Oh, prices, they've never moved down in the post war
era because money growth can always combat that. There was
mild disinflation. I shouldn't say they've never moved down in
the nineteen fifty to fifty one or forty nine to
fifty I forget which, but that was very brief. So
outside of that, and in two thousand and eight there
was a twelve month period I forget which when prices
(06:25):
actually came down. So outside of severe economic contractions like
the Great Recession, you don't see prices coming down in
the modern area. It just doesn't happen. You don't want
to wish for it, because that would probably require a
deep economic contraction.
Speaker 2 (06:40):
I think sometimes people, you know, think about the idea
of deflation as something that they'd like to see, where
it's like, oh, like I'd love to see prices coming down,
but some do.
Speaker 4 (06:49):
By the way, I'm sorry, can I interrupt just to say, yeah,
relative prices. Everybody knows gas prices can come down. Well,
commodity price prices can come down.
Speaker 2 (06:56):
Moodity prices always come down during a recession or a slowdown.
And the big reason why, in my opinion, Mark, is
because commodities don't have brains.
Speaker 3 (07:09):
I know that.
Speaker 2 (07:10):
That's like, you're like, what what did you just say?
The reason why other prices are stickier is that the
single biggest input cost to most businesses is what Mark, labor.
Labor is a huge cost. And Mark, let's say that
you are working at Let's say you're working at a
car wash and I'm paying you fifteen dollars an hour
(07:31):
to wash cars this year. If I come back to
you next year and I say, Mark, you did a
great job, but we're trying to cut costs and I
gotta pay you fourteen bucks an hour, now you're gonna
be like, no, get get out of here, like I'm
not working. You paid me fifteen last year, you paid
me fifteen this year. To be honest, I'd like a raise,
So no, like that that doesn't work. Humans have egos,
(07:54):
and so it's like the the labor cost does not
move down because we say, no, I got paid X
before for I need to get paid why next year.
A piece of wood that gets sold doesn't care how
much it gets sold for. And so commodity prices move
very differently. You do see them come down after the
big spikes. Look at lumber as an example, lumber prices
(08:17):
which spiked back in twenty twenty one, the back down
even below where they were pre pandemic. And if you're
looking at certain types of products, and it's because labor
costs just isn't as high. And again they're called commodities
for a reason. They're they're interchangeable. They're like it's you
can fully just say, okay, I'm not gonna buy nails
from you, I'm gonna buy nails from you. I'm gonna,
(08:37):
you know, buy oil from you instead of from you.
Speaker 3 (08:40):
Like that. These are things that you can do.
Speaker 2 (08:41):
Whereas with people, as much as we talk about you know,
people being replaceable, it still takes a lot of work
to brain up new employees in this and that, and
so those those wages, which are a huge portion of
most other products that are not commodities most of their
cost they're sticky, and so you don't see those prices move.
Speaker 4 (08:59):
Some economists would agree with that, others would I don't
think it's not just labor that might be part of it.
It's more that firms care about relative prices, and shocks
to relative prices have to be really big before firms
find it worthwhile to change their prices. This is an
area that's ben hotly debated, probably will continue to be
(09:20):
why don't why when, for example, the FED pumps money
into the economy, Why don't all prices just go up?
Why does that affect employment? Prices are, after all, just
a form of record keeping, And the answer is what
researchers called nominal rigidities, which is a fancy way of
saying prices don't move in the short term outside of
big shocks. And commodities are a good example of completely
(09:44):
flexible prices because of their nature. Other goods don't change.
Other firms, I should say, don't change relative prices absent
a big incentive to do so, a big, obvious, say,
boost to their profits. It gets a little hairy. But
the upshot, as you said at the beginning, is that
(10:04):
prices generally on on average, I'm not talking relative prices here.
On average prices don't go down, and you don't want
them to because that doesn't happen in a modern economy
outside of deep economic distress.
Speaker 2 (10:18):
Now, the thing that people don't realize about deflationary periods,
they're not typically accompanied historically by wages staying the same.
If you look back at most of the data that
we have on deflationary periods in the US, which is
not good data. It's like, again, mostly from the eighteen hundred,
so it's not high quality. It's generally accompanied by wages falling,
(10:40):
and so living standards fall as well. What people talk
about when they talk about, hey, I want to see deflation.
Hey I want to see the purchasing power of my
money go further. Well, the way that we've historically seen
that over the last one hundred or so years is
through increases in productivity. Great, we can make more stuff
with fewer inputs, and so it costs less to make it,
(11:01):
and as a percentage of your income, it costs less
to buy it. Then that's how we've seen you know,
cases where you're seeing living standards increase throughout the last
hundred years it's not because prices went down. It's because
efficiency effectively went up, and so you said, okay, we
can still make this for the same cost, and yeah, great,
(11:22):
we can do that. Even as incomes are rising, you're
able to buy more. That way, it's not so much
that costs are you know, being driven down, except for
you know, TVs, which now you get like an eighty
eight inch TV for like three dollars, now right.
Speaker 4 (11:36):
Yeah, sounds about right.
Speaker 2 (11:38):
So I still remember back in college, I was like
shopping around for a TV and it was again, this
was twenty years ago, somewhere in that ballpark, and it was, hey,
you know, like the TV that you can afford is
you know, twenty seven inches or something like that, and
you know, it was like a couple hundred bucks at
(11:58):
the time. And now I think, literally you can get
like sixty five seventy inch TVs for like two hundred dollars.
And it's because, you know, it's just the technology has
gotten that much better. But again, it's not like they're
still making the twenty seven inch TV and selling it
for three dollars. It's now here's the price point. It's
just you get more for it, I guess so that's uh.
(12:19):
I guess another way that you can look at it
in terms of why prices don't go down is hey,
the old stuff is you know, rendered obsolete, and you
just you can't buy it anymore.
Speaker 3 (12:28):
Let's take a quick break here.
Speaker 2 (12:29):
When we come back, we have let's talk a little
bit about Walmart. They are making a sale of an
investment they made a few years back. We'll talk about
what it is and what it means for the company.
Speaker 1 (12:38):
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(13:00):
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Speaker 2 (13:09):
Mark We've got a story here that Walmart, who had
eight years ago invested in Chinese e commerce firm JD
dot Com, sold its stake in them earlier in the week,
raising about three point six billion dollars In doing so.
Two different ways that I interpret this. I don't know
(13:30):
which one is writing, and I don't really follow JD
very closely here, but the stock is down about seventy
five percent from its twenty twenty one peak. So on
one hand, Walmart might look at this and just say, hey,
this has been kind of a bad investment for us
over the last three years. We could redeploy that and
get better return on our capital by you know, opening
(13:51):
more stores or investing in some other kind of company,
some new technology, whatever it might be.
Speaker 3 (13:56):
That's one part of it.
Speaker 2 (13:57):
The other is, hey, maybe we're concerned about geopolitical tensions
and we want to remove that risk as well, and
so that could be playing into this when you look
at the decision, anything else that you think could be
a potential cause, because obviously the two of us don't know.
Speaker 4 (14:12):
No, I'm obviously clueless, But I do like your first explanation.
That's a good generic explanation for anything you see. Affirm
do they have an average cost of capital and a
return target internally? And if a business line is not
meeting it either now nor expected to meet it, you
shed that business line. And Walmart does that pretty ruthlessly
(14:34):
and effectively. I think This is one of the hallmarks
of a good, efficiently run business and shareholders. I assume
not being privet any special knowledge here, but I assume
shareholders would like something like this.
Speaker 2 (14:45):
Let's talk a little bit about minimum wage. There's an
opinion piece in the Wall Street Journal calling for a
bump to the federal minimum wage from the current level
that it currently sits at at seven dollars and twenty
five cents an hour.
Speaker 3 (15:00):
Mark your thoughts on this.
Speaker 4 (15:02):
Well, minimum wage is not a great way to pull
people out of poverty. Economists know this, but it may
not be the worst thing in the world to do
optically or politically. It may do actual it may not
do much real harm, is what I should say. It
may not price too many people out of the labor market.
(15:22):
Let me explain what I mean by that real briefly.
When you make someone's wages too high relative to their productivity.
And this is true if you think about it of
new entrance to the labor force or younger people, they
ain't going to get hired. Firms don't find it profitable
to do so. I think this is at the risk
of using a dangerous term, that's common sense. So you
(15:44):
price certain people out of the labor market when you
make the wage too high relative to their contributions to
the firm on the margin. Economists have always known this,
but there was a lot of research in the early
nineties that said it was done specifically on in a
New Jersey Pennsylvania comparison, because they're so close to agressly,
Jersey raised its wage, Pennsylvania didn't, So you had pretty
homogenous labor markets with different wages. What happened when Jersey
(16:07):
raised its minimum wage and what is now a famous
study in many follow on studies replicated these results. There
wasn't a detrimental impact to employment. So economists for a
long time and maybe we all those of us that
went to college and say the nineties, probably came away
with this as dogma. Raising the minimum wage is bad,
it causes unemployment. Many micro so called microeconomists, those that
(16:29):
study labor markets, would say, no, that's not necessarily the case.
It depends on other things, So chuck. If they if
they want to do this for optical or political reasons,
raise it to ten or twelve bucks an hour or
whatever they're considering, that may not be a binding so
to speak. It may not cause havoc in the lower
end of the lower skilled end of the labor market.
Speaker 2 (16:48):
One other piece that I think filters into this, and
I don't have the most recent data just because we
likely don't have any more recent data, but this is
from the Bureau of Labor Statistics in twenty twenty looking
back at twenty twenty one, and according to their data,
the percentage of hourly paid workers earning the prevailing federal
(17:08):
minimum wage or less was one point four percent in
twenty twenty one, So only one in one hundred hourly
workers makes near that wage.
Speaker 3 (17:20):
And so part of it.
Speaker 2 (17:21):
Look, if you're raising the minimum wage and only one
percent of workers are making that much, workers that are
already making above that minimum wage are not necessarily going
to see their incomes change disrupted or you know, otherwise impacted,
unless firms are forced to reset their entire pay scale. Now,
most of this is done regionally. When you look at
you know why this is the case. Hey, someone in Massachusetts,
(17:46):
an example, can't make federal minimum wage because it's a
state minimum wage is hired to begin with, So this
wouldn't even affect someone in Massachusetts as an example.
Speaker 3 (17:56):
Most states scuse.
Speaker 4 (17:57):
Maybe it doesn't does South and maybe to am sure,
pardon me to am sure if I'm offending anybody, but
mostly in the South they tie it to the federal
minimum wage.
Speaker 2 (18:06):
So we'll take a look at exactly where that is later.
Speaker 3 (18:10):
Let's take a quick break.
Speaker 5 (18:11):
Trivia Answers next, bringing the latest financial news straight to
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(18:31):
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Speaker 2 (18:36):
So when we talk about generations on the Financial Exchange,
we usually mentioned too. We talk about the boomers, we
complain about them, We talk about the millennials, we complain
about them. We don't really touch on Generation X a
whole lot, which is pretty familiar ground to gen X.
They're used to being sandwiched between you know, to me
(19:00):
first generations, one of which I am part of. So
again I'm eating my own cooking on this one. When
we look at gen X, they are now about to
start hitting retirement age. At least the first of the
Gen xers are getting into that ballpark. Gen X is
defined as being born between nineteen sixty five and nineteen eighty.
Speaker 3 (19:23):
Mark.
Speaker 2 (19:23):
My first question on this is these generations are just
too big, aren't they? Like, what is someone born in
nineteen sixty five have in common with someone born in
nineteen eighty Oh.
Speaker 4 (19:34):
I was thinking the opposite. That does not constitute a generation.
It's like half a generation. But really, well, interesting is
it to Because how am I born in nineteen seventy two?
How am I a different generation? You were born sometime
in the nineteen eighties? Yeah, I have of the nineteen eighties,
So we're clearly more than a decade apart, but culturally
(19:58):
not that far apart. I have far more in common
with somebody, say, your age, than I do my own parents,
who were obviously a generation before me. I don't know.
I just think that we use the word generation a
little too loosely. Sorry, go ahead, maybe you maybe you're right.
Speaker 2 (20:13):
I guess I'm thinking of it from the perspective of, like,
I don't know, you remember stuff from the eighties that
I only read about.
Speaker 3 (20:23):
Mm hm, you know, like get around children we do.
Speaker 4 (20:27):
Let me tell you about Ronald Reagan.
Speaker 3 (20:30):
Exactly. But it's exactly what I'm talking about.
Speaker 4 (20:35):
Wrong to love a man when it's Ronald Reagan anyways,
or under any circumstances these days, but particularly when it's
Ronald Reagan. Sorry, Chuck, go ahead.
Speaker 3 (20:44):
No, no, no, you're you're all good. It was really good.
Actually I enjoyed that. In any case, Well, we talked
about episode.
Speaker 1 (20:53):
Did I.
Speaker 3 (20:55):
Go ahead to finish the segment?
Speaker 2 (20:56):
No, No, it's it's fine when we talk about gen X,
So they are hitting retirement age right now. Because again,
if you're born in sixty five, you do the math out,
you say, Okay, I'm turning sixty next year, and full
retirement age or medicare age there within reach over.
Speaker 3 (21:14):
The next few years.
Speaker 2 (21:15):
In some cases, look, depending on the profession that you chose,
you might be getting into forced retirement at age sixty
if you're in something that's physically demanding, or you know,
whatever it might be. But the question that you have
that is out there is hey, is gen X prepared
for retirement compared to the generations surrounding them, And the
(21:38):
data that we have is suggesting that, Yeah. The overall
picture has improved over the last ten years, mostly because
markets have been very good, and so the gen xers
that have had money invested in financial markets have done well.
But a key difference from gen X and the previous
generations is that's really when the massive drop off in
(21:58):
defined benefit plans pench plans started and defined contribution plans
started becoming the norm for workers.
Speaker 4 (22:06):
Your thoughts mark, that's part of it lower returns because
we've been contributing most aggressively up to and through deep
down turns a few now if you count COVID, So
I think of people that came into the workforce like
I did in the mid nineteen nineties, put a lot
of money into our four h one case relative to
(22:26):
salary or early on saw more than half of it wiped
out at one point. We also had the opportunity to
buy in at lower prices, but not that much lower
than we'd started with. Ye, the same happened again. It
was seemingly right on the heels of that only several
years later in the Great Recession. Took several years, as
you know, for stock prices to recover and chuck, as
you point out. On top of that, there are other
(22:47):
structural headwinds like changes in the complexion of corporate benefits,
elimination of dB defined benefit that is, pension plans, houses
getting a lot more expensive relative to median income. That
happened when we were first buying in in the very
late nineteen nineties for those on the those at least
in my subset of Gen X, into the mid two thousands,
(23:07):
homes were selling it two, three, four, five times median income,
much like they are today. So younger generations like to
lament how much they've got to pay relative to median income.
Speaker 3 (23:17):
So did we.
Speaker 4 (23:18):
So houses has been obscenely expensive, I guess, is my point,
relative to past generations experience for roughly the past twenty
five years, so we have more expensive houses. We also
were the first generation to come out with a lot
of student debt, So any number of factors that you
might call headwinds that make it more difficult to accumulate wealth. O.
(23:39):
I think it's somewhat overstated in that you've seen the stats, Chuck.
We've had the opportunity to build wealth comparable to prior
generations at this point in our lives too.
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Speaker 3 (24:52):
Mark.
Speaker 2 (24:52):
Do you think that we've reached the tipping point on
tipping in the United States?
Speaker 3 (24:57):
It seems like a lot.
Speaker 4 (24:58):
Of people are talking about it in the not Happy
So if that defines tipping point then perhaps.
Speaker 2 (25:05):
And and there's a piece in the Financial Times which
I always love when British publications talk about what's going
on in the US, because even in here, like they
explicitly like note, they're like, we don't quite understand what
you're you're doing.
Speaker 3 (25:18):
It's it's kind of weird.
Speaker 2 (25:20):
And what they're talking about is the idea of this
proliferation of tipping, which we we've covered quite a bit
on our show over the last year or two, where
it used to be expected that there were, you know,
standard places where you tip, but it's still something where
you have to like learn the right way to tip sure,
(25:42):
and and and there are some things that I still
have questions about. Mark just as an example, like I
remember when I was a kid, and when when I
flew on a plane the first time, and you know,
you get to where you're going and okay, you know
someone's helping you with your bags, Okay it was you know,
you tip a dollar a bag to the bell hop. Well,
(26:03):
if inflation was twenty percent in the last two years
or three years, do I have to do is it
a dollar twenty five? And I'm not saying I was
a kid like three years ago. But you know, like,
how do these things evolve over time that aren't even
percentages but fixed dollar amounts, And how do you learn
what you're supposed to tip? Where what's the index that
you should use to track how much you should tip
(26:25):
for different jobs? And it it just becomes challenging in
my opinion, because.
Speaker 3 (26:31):
You just sit there and you're like.
Speaker 2 (26:33):
I don't know if this person is expecting a tip
just because they turned around. You know a machine that
has a tip you know line for it. I don't
know if I shouldn't be tipping because they like they
don't actually want it. It just is getting to the
point where I think it's confusing for a lot of people.
And I think the problem then, as a worker who
(26:55):
may rely on tips is, look, when when people get
fatigued with tipping, the actual money that you bring home
goes down. And if you're a worker that relies on
tips as a big part of your wages, then it
makes it harder for employers to actually get you know,
employees in those roles, which means maybe they shouldn't be tipped. Anyways,
this is all very confusing to me.
Speaker 4 (27:15):
Mark, Yeah, I'm totally lost all I can say is
we have no transparency. If you rely on rules that
employers suggest you follow, their suspect because they're biased. They
want you to tip more so they can pay less.
So of course they want you to, you know, tip
our employees generously. Yeah, why why don't you charge me less?
Speaker 3 (27:34):
So there's this.
Speaker 4 (27:37):
Opaqueness, this lack of transparency, same thing that makes me
any way suspicious of people's motives. I don't mean that
I think anybody's got sinister motives. I just think employers,
like we said, have an incentive to get you to
overtip so that they can underpourse. So everybody's sort of
suspect of everybody else's motives, and everybody, as a consequence,
like you said, is confused. I don't know if we
(27:59):
need a universe set of rules. And I'm certainly not
suggesting the government step in and do something. Oh no,
I don't know what, because this is based on culture
and norms.
Speaker 3 (28:08):
It was the government problem to begin with.
Speaker 4 (28:10):
No, no, no, Yeah. So when I say rules, I
just mean norms, widely accepted practices that we all just
kind of agree to follow.
Speaker 3 (28:17):
But we don't even have those with anything.
Speaker 4 (28:18):
That's broken down. I guess is my I don't know
what the norms are anymore. I never I never really did,
so I'm not a good example. But someone like you,
more more culture, who actually leaves the house, you probably do.
I don't know. Maybe we need a coffee table book
that explains it to right.
Speaker 2 (28:35):
I do leave the house, but I'm not sure I
would be referred to as normal by a lot of
like I don't think I should be the standard bearer
for normal. I think that'd be a tough putt for
a lot of people to swallow. I just I don't
think it would go well. So I don't know what
to do on this. And and the problem is that
(28:56):
there are a lot of people that still work in
jobs that aretionally, you know, tipped as a portion of
their wages. And the thing that you worry about on
those is, hey, because people are fatigued being asked for tips,
you know, by everyone. When you do go out to
eat at a restaurant with a weight staff who comes
around to you, are you not tipping that person as
well because you're frustrated that you've already been asked for
(29:18):
eighteen other tips that day, And then that person isn't
making the wages that they needed to make right. It's
it's tough, and I just we're asking for tips in
too many places, and I don't know what I'm supposed
to pay people anymore. And it honestly, in most jobs,
it shouldn't be my problem. Tell me how much it
costs for your good or service, and then pay your
(29:40):
people appropriately. I'm fine tipping in restaurants. I'm fine, you know,
tipping hotel staff to clean rooms. I'm fine doing these things.
But I can't keep adding new stuff to the pile
because I just don't know what is going I don't
know why I need to tip everyone then, and why.
Speaker 3 (30:01):
Is no one tipping me? I want tips, you know, Like,
so what's the deal with the tips?
Speaker 6 (30:09):
I'll put a tip jar right next to my producers
board right here.
Speaker 3 (30:13):
Does that mean you do?
Speaker 2 (30:14):
I mean I have to tip you. I gotta tip
you every day when you're in the studio. Yeah, it's true,
otherwise I get my mic turned off.
Speaker 3 (30:21):
You're welcome.
Speaker 2 (30:22):
Yeah, A tip tucker one cent a word. It adds
up over time. We talk a lot. Let's take a
quick break here when we come back. We got stack
roulette after This.
Speaker 1 (30:33):
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.
Find daily interviews and full shows of the Financial Exchange
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(30:55):
This is the Financial Exchange Radio Network.
Speaker 6 (31:00):
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November ninth, a Fort Independence on Castle Island. The registrations
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(31:22):
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Speaker 3 (31:40):
Mark. What do you have for stack Roulette, Chuck?
Speaker 4 (31:42):
I'll elaborate real quick here on a point I tried
to make in the last segment about more favorable returns occurring,
and I'm gonna arbitrarily cut off the periods here pre
two thousand versus post two thousand, and I do that
because baby boomers had a lot of working years under
their belt before two thousand, and gen X has had
most of their working tenure under its belt, has gotten
(32:04):
most of its working tenure behind it since two thousand.
Large company stocks and I'm using a morning Star index here,
but just think of it as the S and P
five hundred large company stock returns since two thousand had
been about eight percent. That's average annual in the twenty
five years before, and that's roughly a twenty five year period.
Twenty five years before that they were twice as high,
(32:25):
sixteen percent. Now, some of that's inflation, particularly before nineteen
eighty five. Shave off a couple percentage points for that.
The difference, if you compounded over a twenty five year
period is for every dollar invested, say in the first period,
you ended up with twenty dollars at the end of
the period for every dollar invested in the second period.
(32:47):
The one that is consistent with gen X's The bulk
of gen X's working years is five dollars. So said differently,
if you had been working in the twenty five years
up to nineteen seven, average returns would have been twice
as high. And the compound result, now this is growth
of a dollar at the beginning of the period, so
(33:07):
it doesn't capture the effect or out was four times
as high. This makes an enormous difference in terms of
ability to generate a wealth that provides for retirement security.
That's the point I was trying to make.
Speaker 3 (33:22):
I appreciate you bringing that to the table.
Speaker 4 (33:26):
It's a little bit too much detail now, no healtha
need to elaborate, and it's good.
Speaker 3 (33:31):
Mine isn't nearly as as useful. Useful.
Speaker 2 (33:37):
Did you know that in nineteen forty three Mark the
United United States banned slice bread?
Speaker 4 (33:45):
No, I didn't know that.
Speaker 2 (33:46):
So, first of all, do you know what year sliced
bread was invented? Nineteen eighty seven nineteen twenty eight, So
we're coming up on one hundredth anniversary of sliced bread.
I just want to let everyone know it's going to
be a big one in twenty twenty eight. But in
nineteen forty three, the Secretary of Agriculture caued Wickered, banned
(34:07):
the preslicing of bread in an attempt to help the
war effort that was going on. Now it's unclear exactly why.
It speculated that this was because the steel that was
used in bread slices at the time was a specifically
hardened steel that perhaps could be used for military purposes.
It's kind of unclear, but they abandoned the bread slicing
(34:31):
ban two months later simply because they basically said, look,
it doesn't actually work. It's you know, like this isn't
actually working, and people were getting really upset. In fact,
the New York Times, just after this went into effect,
published a letter from a distraught housewife, and I quote,
I should like to let you know how important slice
bread is to the morale and saneness of my household.
(34:53):
My husband and four children are all in a rush
during and after breakfast without their ready sliced bread. I
must do the slicing for toa two pieces for each
one that's ten, and then for their lunches, I must
cut my hand at least twenty slices for two sandwiches
a piece, and afterward I make my own toast twenty
two slices of bread to be cut in a hurry.
Imagine a world without sliced bread. That's what we had
(35:16):
for two months in nineteen forty three. Okay, that's what
I have. Where did that come from? I'm just curious,
that's all someone.
Speaker 3 (35:28):
Nope, I saw a meme on Twitter.
Speaker 2 (35:30):
It was too like it was a loaf of bread
just cut in half with like all the meat in between,
and it was like life before sliced bread. And so
I was like, oh, when was sliced bread invented? And
I started digging around, and this is what I came
up with. But the bread slicing machine was invented by
otto Frederick Raueer of Davenport, Iowa.
Speaker 4 (35:50):
That can also be why it was banned for a bit.
It sounds a little Germanish.
Speaker 3 (35:57):
Uh, I'll just kidding. He was probably dead by the time.
Now he wasn't.
Speaker 2 (36:02):
But in any case, slice bread banned for two months
in the US and nineteen forty three. We're done for
the day. We'll see you tomorrow. Have a great sandwich
on your slice bread, and we'll see you then.
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