November 13, 2024 • 38 mins
Paul Lane and Marc Fandetti discuss Trump inheriting a good economy and when Americans will start to realize the economy is good. Can Musk really make the government more efficient? Cars were once a financial engine of America’s middle class. Now they’re a ‘wealth killer.’ Mortgage demand stalls as financial markets digest Trump presidency. Major airlines will soon use Apple feature to help travelers track down lost luggage.
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Episode Transcript
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Speaker 1 (00:00):
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Paul Lane and Mark Fandetti.
Speaker 2 (01:14):
Kicking off the second hour of the Financial Exchange here.
As I mentioned, markets in relatively mixed territory no longer
as much enthusiasm from the post election rally, but certainly
we had quite a run up in the last week
or so. We did have a CPI inflation report come
out this morning at eight thirty an am. And what
we saw from the October CPI is that the consumer
(01:36):
Price Index increase point two percent month over month for
the month of October. The twelve month inflation rate hit
two point six percent. If you look at core CPI,
which strips out the impacts of food and energy costs,
that figure increased point three percent month over month and
is now running at a three point three percent rate annually.
(01:59):
In general, the markets seem to be relatively mixed in
terms of their reaction to this October CPI report. I
would point out that for the Federal Reserve and future
interest rate cuts, heading into this morning, there was about
a sixty percent probability according to CEME Futures Group, that
the Federal Reserve would cut interest rates on their December
(02:20):
eighteenth meeting coming up, that probability now stands at eighty
two percent that they will cut interest rates by a
quarter of a percent. So this report that we saw
on the CPI front likely reinforcing this idea that we
will continue to see another quarter basis point cut come
the December meeting. Here mark anything else that you'd like
(02:40):
to add on the inflation report front that I didn't.
Speaker 3 (02:42):
Hit all pour some cold water on as I like
to do. You referenced core inflation, which is one way
of getting at the trend in inflation. What the Fed
needs to know is what is the state of underlying
price pressures in the economy, which is in turn a function,
as we talked about on the last hour, of how
fast the economy is growing relative to its potential. The
(03:04):
economy has grown, and we'll get into this, I think
in the next couple of stories in a more political context.
The economy has been growing above what most researchers think
is its potential growth rate. It's speed limit if you like.
It's in the red zone, a bit that puts upward
pressure on prices. So it's not surprising that core inflation
and another measure of the trend in inflation an alternative
(03:25):
core measure if you like the median, just the one
in the middle. Same concept does it work here as
when you look at the median home price or the
median salary, the median doesn't get doesn't get headfaked by
the big observations on the negative or the positive side.
Median inflation also came in at point three percent. So
(03:46):
if you annualize recent month over month changes in core
and by that I mean just extrapolate out what they
would be over a twelve month period in traditional core
and in median, you get inflation somewhere in the three
and a half percent range. That is consistent with an
economy that's a little bit frenetic, little bit overheated relative
to its potential. FED may have more work to do here.
Speaker 2 (04:08):
You mentioned, you know, it is a healthy economy. And
there's a piece here in the Boston Globe this morning
that goes over Trump and what he's inheriting from an
economy perspective. And there's really there's two camps. There's the
camp that we track pretty closely because of our job
the economists and looking at metrics like unemployment, GDP, growth
(04:30):
and other measures of that nature. That points to the
fact that the United States has had a pretty healthy
economy and just backed up by what Mark said on
the GDP front, the economy has been growing at a
good pace. However, there are other camps of people out
there on the ground who just feel the impacts of inflation,
which are detrimental to your take home pay. And there's
(04:53):
a lot of Americans out there that lament the fact
that we've seen prices increase anywhere from twenty five to
thirty percent, depending on what basket of goods you're looking at,
over the course of the last three or four years. However,
in this piece, they make the point in the globe
that Trump is taking over an economy besides the impacts
of inflation that we've seen over the last several years,
(05:14):
that is in a pretty good place. We have unemployments
sitting at four point one percent, GDP growth remains relatively strong,
and there could be a situation where, if inflation is
able to stay at this pretty static level relative to
what we saw in twenty twenty two, that he could
be stepping into a reasonably strong economy.
Speaker 3 (05:34):
Just remember these numbers a year or two years from now,
and it's really easy. Two three and four. Headline inflation
over the past year is a little over two percent,
but I'm gonna round down and call it two. As
we was just affirmed this morning. Two ish three is
where real gross domestic product GDP is running right now.
(05:55):
That's about the year over year change. I'm rounding up
just a little bit. Don't panel me too much for that.
It just makes it an easier mnemonic, an easier thing
to remember. Four is where the unemployment rate is today,
two three and four. A year from now, two years
from now, voters will again be asking the question and
be better off now than when this guy, whoever it
(06:15):
happens to in this case is Trump, But could ask
it relative to when Biden's tenure began or ended? Are
we better off now than we were then? Now you
could say, I don't believe those numbers. I think the
government's fudging them. That's fine, but you've got to submit
ahead of time evaluation criteria for the person assuming office.
Speaker 1 (06:35):
Now.
Speaker 3 (06:35):
If you don't like those, pick another one, but pick
it ahead of time and then stick with it. Two
three and four are a tough triplet to beat for
that holy for that trinity. If you like of economic statistics.
As you said, Paul, the three most important things is
we all learn in our first economics class GDP, unemployment, inflation.
(06:57):
There are many other measures, but those sum up on
a very high level the health of the economy. You
could say you don't agree, and by the way the
vote went a couple of weeks ago, a lot of
people don't agree. But you have to pick a measure
of keeping score ahead of time and then stick with
it again. I think two three and four for inflation,
for GDP and unemployment is going to be a very
(07:18):
hard triplet to beat.
Speaker 2 (07:20):
And it's interesting parallels they make in this piece. The
Boston Globe mentions that when Clinton took over the White
House in nineteen ninety two, it was coming off a
somewhat similar period of time where the US economy had
been in a recession for about a year and a
half prior to that, and George Bush was blamed for
that recession. As a result, Clinton took over and the
(07:41):
impact of the recession subsided over his tenure, not due
to anything that Bill Clinton necessarily did, but just due
to how the economy ebbs and flows.
Speaker 3 (07:50):
The crazy thing about that one is that that recession
went from the end of ninety to March of ninety one.
It had been over a year and a half before
that election took place. In that final quarter of HW's term,
George HW. Bush's term was something like two and a
half percent. Don't quote me exactly on that, but when
the number came out, it was like a blockbuster, so
much so that people thought that it was fudged, at
(08:11):
least people on the left did. The Fed kept rates
too high for too long. George H. W. Bush knew it.
He had too much class to browbeat the Fed publicly,
but it cost him that election and Clinton inherited. We
now know a relatively strong economy, with the exception of unemployment,
which was somewhere I think in the sevens at the time.
And then Clinton made the right choices too, to his credit,
(08:32):
but to the larger point I think is the one
you're making, Paul, which is a lot of this is luck.
Speaker 2 (08:37):
And another area that we need to examine is some
news that came out I believe either this morning or
late last night was Trump picking Musk and Vivic vivek
Remeaswami for a government efficiency effort. And so we'll touch
upon this a little bit now, and perhaps you will
even bleed in and we'll cover it after the break.
But their focus is going to be on developing governmental
(09:02):
efficiencies and perhaps trying to it seems cut wasteful expenditures
and restructure federal agencies. That's a direct snippet of That
is a direct quote from President elect Donald Trump that
was mentioned on Tuesday. And the area that I want
to start with this conversation is on the wasteful expenditure
(09:23):
side of things. If you take a look at our
federal budget, it's about six point seventy five trillion, and
if you scrutinize what we spend that money on, a
huge percentage is based on spending in social security, Medicare, defense,
and vet and benefits for vets. If you look at
(09:43):
the pie, it's anywhere from two thirds to almost seventy
percent plus in terms of what we spend as a country.
And those are areas that no politician wants to touch
with a ten foot poll. So this idea that they're
going to create this government efficiency effort, it's going to
be very hard to make much of a budgetary impact
when two thirds plus of your budget is off the table.
Speaker 3 (10:06):
Here, something's got to be done. Do we now spend
more on interest on the debt than we do on defense.
We've said that before, it's been that, that's been widely reported.
You've probably heard it, but that should stop you in
your tracks. That's thirteen percent of the federal budget.
Speaker 2 (10:21):
Elaborate on that a little bit more. Are just to
simplify for listeners out there, the interest that we have
to pay on US treasury debt that we have lent
out to a lot of us. We're the ones holding
it foreign to the public. I think I looked at
the stat today, it's we have three quarters of it.
And when I say we, Mark and I just you know,
all of us in this country are are big holders
(10:42):
of US debt the interest assessed with those payments. So
if you're buying US treasuries, any of the listeners out there,
you're investor buying a four percent or five percent treasury
the cost of servicing that interest over the course of
the year, we spend more money on that than we
do for our defense department. That is staggering, and it's
worth reinforce and.
Speaker 3 (11:00):
It's growing faster than the economy as a result, and
that's where it starts to get a little scary. So
something has to be done. Republicans, I'll depart from my
usual sort of analyst mindset here and just make up
sort of political statement. They have to do something, and
they seem determined to the president, though I'm not sure
he's never shown an interest in reducing the debt. His
(11:22):
first term record is to put it mildly terrible. Even
before COVID, before you jump in and say COVID, COVID, No,
before COVID, the deficit doubled and he added three and
a half trillion, So it's not really his thing. And
naming a commission feels like a cop out, pall. It
feels like a way to say, ope, commission's looking at it. Yeah,
it's theater.
Speaker 1 (11:42):
Uh.
Speaker 3 (11:42):
He wouldn't say it's theater, but it is. He can say,
go talk to Elon. He doesn't have to make any decisions.
Congress doesn't even have to act that. We're waiting for Elon.
It's gonna take We all know where commissions go. We
all know where we what we do with something. When
we want to kill it, you assign it to a committee.
Speaker 2 (11:57):
Yeah, that's an interesting position to put them and I'm
glad you you let it out that way. So it
remains to be seen what the impacts will be from
this alleged committee. It's supposed to their work is supposed
to conclude by July fourth of twenty twenty six. They're
supposed to give us.
Speaker 3 (12:14):
You've gotta be kid made, Paul.
Speaker 2 (12:15):
If so, we will see what efforts made there. It's
just I just don't know what you cut? What? What?
Speaker 1 (12:27):
What?
Speaker 3 (12:27):
Are they going to find a cut but putting it
giving them a twenty twenty suit that is two years
almost two years from now. Then it goes to the president.
He's got to consider it, build it into a budget
for that year, for the next year, He'll be out
of office before even if they accepted it all, he'd
be out of office before they were able to implement it. Moreover,
can Congress do anything in the meantime or are they
(12:47):
gonna feel handcuffed by what Elon's doing? What if they
want to? Senate Republicans appear to be quite committed to
cutting spending. Are they hamp are they hamstrung now by
this effort? I think it's good political theater for him,
but I don't know if it's good given the process
that normally has to be followed.
Speaker 2 (13:03):
It's what can be so problematic about four your terms
is that you can try to just drag your feet
and ultimately no politician wants to make spending cuts because
those are not popular at all. And from a commerce perspective,
you're in the same boat. You just want to get
re elected to the next term. But it just makes
me upset oftentimes that no one has the fiscal discipline
(13:24):
to step in and make painful decisions.
Speaker 3 (13:26):
I hate this commission. We just elected these people because
they told us they would take action. Now they tell
us they're punting it to a committee that'll come back
in two years. Unacceptable.
Speaker 2 (13:35):
Don't you think we're going to take a break here
on the Financial Exchange, But when we come back, or
when we talking a little bit more about inflation and
particularly the impact on the vehicle on a loan market
right after this break.
Speaker 1 (13:49):
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Speaker 2 (14:15):
All right time for trivia.
Speaker 4 (14:16):
Here on the Financial Exchange we we're giving away a
Financial Exchange Show T shirt on this day. In nineteen
ninety five, the seventeenth James Bond film, GoldenEye, premiered in
theaters across the country. GoldenEye was the first James Bond
film to feature Pierce Brosnan as the famed secret agent.
Trivy questions today, how many actors have Portrade James Bond
(14:40):
in a movie? Once again, how many actors have Portrade
James Bond in a movie? Be the third person today
to texts us at six one seven three six two
thirteen eighty five with the correct answer, and you'll win
a Financial Exchange Show T shirt once again. The third
correct response will be our winner by texting six one
seven three six two three teen eighty five. See complete
(15:01):
contest rules at Financial Exchange Show dot com.
Speaker 2 (15:05):
Title of a piece here from market Watch cars We're
once a financial engine of America's middle class. Now they
are quote unquote a wealth killer. What we've seen over
the course of the last couple years with all the
inflation impacts. Is the average cost for a new vehicle
as of September sits around forty seven thousand or forty
eight thousand dollars, depending on where you look. Now, used cars,
(15:29):
according to Edmunds, are coming in around twenty seven thousand
to purchase them, and now the average car monthly payment
sits at about seven hundred bucks, and one in five
car payments are over one thousand dollars. This is a
commentary on the fact that, hey, cars are a pretty
significant portion of American's budget. I was actually surprised it
(15:51):
was quote to here that seventeen percent of household spending
goes towards cars. Obviously, the biggest expense is housing coming
in third, but second two housing was vehicle spending at
seventeen percent. That should come down a little bit mark here,
as it seems as if the inventories for vehicles are
at a much better level than they were in twenty
(16:14):
twenty two, where they're forty percent off inventory levels. But
certainly it is an area between interest rates going up
and the increase in car prices that that monthly payment's
a lot higher for folks out there.
Speaker 3 (16:26):
Yeah, the interest payments so it's prices have actually moderated
price increases on new I just looked this up. I'm
not an expert, but a CPI Consumer Price IndX, which
we talked about earlier today a couple of times they
have a sub index. It measures new car prices, and
new car prices after skyrocketing. You all know this year
(16:49):
over year ten twelve percent for a couple of years there,
they've finally started to disinflate, which is interesting. I did
not know that. But year over year, as of the
most recent read today, new car prices are down a
little over a percent, but rates are much higher than
they were in say, twenty twenty two. So interest the
interest portion of your typical payment. And I'm just gonna
oversimplify here and use a very generic example of a
(17:12):
sixty month loan, using again the Federal Reserve Database information
on loan rates. Interest payments could be sixty percent, sixty
percentage points, but sixty percent higher. So for every dollar
in interest a month you're paying, it's now a dollar
sixty So I guess the killer is the massive jump
that we experience, like with many items post COVID, plus
the financing rates. I'm not telling you anything you don't
(17:33):
already know, but that that is quite a steep increase
and has pushed new cars even for the relatively wealthy.
There's been a lot of story I have you noticed that,
a lot of stories over the past week about people
who would we would consider wealthy, who buy high end cars,
who can't afford you anymore or refuse to pay the
thousands of dollars in interest payments a year that would
be required to afford No.
Speaker 2 (17:54):
No, I'm in a market for a new vehicle and
looking at some of the new vehicle costs. I mean, granted,
I'm looking at minivan. My wife vetoed the minivan, but
the Chevy, the Chevy Suburban is what I've been scrutinizing,
and a new one of those, and granted, I get it,
the thing's an absolute bus, but there's they're so staggering
(18:16):
that I just really can't justify the monthly spend that
goes with purchasing a new vehicle for what is a
depreciating asset. Yeah. I just feel like there should be
a swell of demand towards used car prices, and perhaps
that's reflected a little bit from some of the CPI
data that we had. It's just it's hard to stomach
looking at new cars that in this case for the suburbans,
(18:39):
it's you know, seventy five eighty K you're talking for
a new one of those, So it's it's staggering here.
I want to touch on something real quick. Actually, maybe
we'll we'll cover this a little bit after the break.
We had a listener Texan who was stating that Mark
and I are missing the point regarding the Government Efficiency
(19:00):
Committee that we spoke about before in terms of its
impact and what its focus is. So what we're gonna
do here is we're gonna come up here on a
quick break. But when we do come back, Mark and
I will respond to that text from the listener and
dive in a little bit more on the Government Efficiency
Committee that was put together with Elon la Musk and
(19:21):
Vivek Raswami. That was announced yesterday, So we're gonna cover
that right after this break.
Speaker 5 (19:40):
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Speaker 1 (19:58):
This is the Financial Exchange Radio Network.
Speaker 4 (20:07):
All Right, trivia question today was how many actors have
portray James Bond in a movie? That would be seven,
starting with Sean Connery nineteen sixty two. Seven actors have
portray James Bond, including the often forgotten Casino Royale in
nineteen sixty seven, which starred David David Nevin Nivin. I
(20:28):
don't know, never heard of him. Wayne from West Haven,
Connecticut is our winner today, taking home a Financial Exchange
Show T shirt. Congrats there, and we played trivia every
day here on the Financial Exchange See complete contest rules
at Financial Exchange Show dot com.
Speaker 3 (20:45):
Ever heard of David nine Nivinvin? I think it is
actually mispronounced.
Speaker 1 (20:50):
Yeah, yeah, no, I never heard of them.
Speaker 3 (20:52):
Hey guys, yeah, Paul's no way you have either, right,
no chance?
Speaker 2 (20:55):
Zero chance? Okay, no chance. So, as I mentioned before
the break, we had a listener email into us pushing
back on some commentary that Mark and I had surrounding
the Government Efficiency Committee that was put together yesterday by
President Trump appointing or I don't know if it's there's
a formal appointment, but tagging let's waited it at a
(21:17):
job done. Elon Musk and Vivek, I'm spending as part
of this committee to focus on cutting back some government inefficiencies.
And so the listener here says that we are way
off the point that the commission is to expose and
cut government waste within the government, getting rid of programs, earmarks,
(21:37):
and employees, fattening government spending. It is intended to is
not intended to address cutting social promans and budgets that
must still go through Congress fully in agreement there of course,
we agree that it has to go through Congress. That's
the way things work. The point that I was making
before is that if we're looking at cutting in efficiencies
and things like that, the federal spend was six point
(22:00):
seventy five trillion over the last fiscal year. We are
running at a deficit currently that sits close to two
trillion dollars in terms of our country, what we take
in revenue versus what is spent, there's a deficit about
two trillion.
Speaker 3 (22:14):
There.
Speaker 2 (22:15):
I made the point about social programs because if you
look at that six point seventy five trillion of spending,
five point three trillion of it, according to a piece
done in Bloomberg today, covers social security, Medicare and military
expenses and coverage for vets. So five point three trillion
of the six point seventy five is spoken for pretty much.
(22:36):
You're not gonna see cuts to that, So that leaves
about a trillion and a half of other expenses out there,
spread across other departments. The idea that substantial cuts are
going to be made from this initiative, to me, is
extremely unlikely. And that's the point I was making.
Speaker 3 (22:52):
That's one angle the point I was making. And Laurie,
thank you for the text. And she's right. There's a
broad mandate associated with this what is it commission? He's
calling himself a department. This is all out there in cyberspace.
None of this actually exists. Presumably Congress would have to
create it. The President can't just conjure up.
Speaker 2 (23:12):
It's like a special task force that Dwight has from
the office.
Speaker 3 (23:16):
That's what it feels like to me. So, Laurie, my
point here is that part of their remit is to
cut spending. He is going to use this. Paul made
the point in the last hour, in the last segment
that spending cuts are tough. Nobody wants to do them.
Not since Gingrich Clinton have. We had a coherent, determined
effort to cut spending and it ended in surpluses in
(23:38):
the two thousands, and we're starting from a much bigger
hole now. My point on this, Laurie, is that they
will use this politician's will to punt on this issue.
When Trump is pressed for where are you going to
cut spending, mister President, just say we're going to wait
for the commission. We're going to wait for Elon. Elon's
gonna do it. He thinks he solved. It's just his
nature as a showman. He snapped his fingers, tweeted it.
Elon retweeted it, and they think the problem is or
(24:00):
a solution is underweight. It's not to your point and
your text, Lori, Congress has to act. By the time
they get a hold of this, it's going to be
twenty twenty seven. They're not going to do anything before
then because they've got a wait for Elon's commission. I
think this does exactly the opposite of holding Congress's feet
to the fire. I think it makes them hesitant, possibly
to offer their own suggestions out of fear of subverting
(24:24):
what the president of what the president elects seems to
be putting into place muddies the waters and is effectively
a cop out.
Speaker 2 (24:32):
Another separating from that piece there regarding the Efficiency Committee,
another thing that we haven't covered in this show in
regards to tariff which tariffs, which has been a really
popular subject of discussion, is potentially retaliatory efforts from a
lot of these other countries here. And there's a piece
in the New York Times where Mexico signals that it
(24:53):
could hit back at the United States with terrafts of
its own. If I quote here from Marcelo E. Brad,
the Mexico's economy minister, in a radio interview from Monday,
if you put twenty five percent tariffs on me, I
have to react with tariffs. Structurally, we have the conditions
to play in Mexican's favor, he added. So that's something
that does need to be considered here as well, that
(25:14):
often there can be retaliatory tariffs when you start these initiatives,
and it's just something to think about when we have
these discussions.
Speaker 3 (25:21):
Yeah, it's called a trade war. It's the international economists
who study this. Economists who specialize international economics, I should say,
they're sort of playful phrase for this is tit for tat.
You don't the knock on effects of tariffs. We talked
(25:41):
about the domestic effects in the last hour, higher prices,
inferior quality over time because you're coddling certain industries, and
the fact that these tariffs are supposed to be temporary,
at least in theory, they never actually go away. Because
now the private sector reorients itself. It starts to another
economics term for you, rent to seek, which means devote
(26:02):
resources not to growing the economic pie, but to getting
a bigger share of it. It's called rent seeking. It's
a kind of useful term. Everybody's going to be rent
seeking now. Oh, mister president, please give give us an exception.
Mister President, here's a campaign contribution. Oh, I'll buy some
of your DJT stock. Please give us an exception. Not
alleging illegal activity, but there's the temptation to do that.
You almost have to as a business person. So you
(26:23):
get all this rent seeking domestically, which weighs on growth,
and then the retaliatory tariffs, which further pushes up prices
and has a knock on effects of its own. It
doesn't end in a good way. They never have trade wars.
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Speaker 2 (27:42):
One of the areas that has been relatively sluggish is
the housing market across the United States, and what we've
seen recently here is the average thirty year fixed rate
mortgage on conforming loan balances of seven hundred and sixty
six k or less had inc slightly to six point
eight percent eighty six percent from six point eight one percent.
(28:05):
I think I'm looking at a chart the other day.
It hit its recent low in September around six point
one percent, but now those thirty year fixed mortgage rates
still sit at close to seven percent. Application demand for
mortgages out there over the course of the last week
was relatively flat. A lot of people are presumed to
(28:26):
be sort of waiting out what the new presidency will
look like and its impact on rates going forward. The
US ten year treasury had spiked quite a bit after
the news of President Trunk winning the election, where it
had increased about sixteen or seventeen basis points and now
sits at about four point four one percent. So be
(28:47):
interesting to see what type of impact it has here
on mortgage applications, But for right now, not a tremendous
amount of growth.
Speaker 3 (28:54):
So in year one, if they cut we have to
break or anything here. Could you go radio amateur? Sorry?
If they cut taxes but not spending in year one,
If they impost tariffs in year one. I hate to
keep coming back to this, but it's all that's on
anybody's mind for the next several months. I would assume interesting,
oh SSEQUL rates probably go up unless the economy really slows.
It's always an all else equal proposition, and you always
(29:15):
run into trouble when you say, well, this is going
to cause that because you're not You're not accounting for
other variables which can change. But all those equal rates
should go up, making housing and cars more expensive. In
addition to the knock on effects of tariffs that we
talked about, which would presumably affect things like washing machines,
as they did in twenty seventeen, huge tariffs on washing
machines in twenty seventy to.
Speaker 2 (29:35):
The place right, right and good, and the impact of
that was higher prices actually for domestic washing machines. In
a study that they found similar to what you mentioned
before is you can kind of be more aggressive from
a pricing perspective when you're the only game in town.
Speaker 3 (29:48):
Domestically, you gotta wonder do people take action in anticipation
of these tariffs? Do they? I know some companies are
already saying we are stocking up on parts. I'll just
call them parts and anticipation. How widespread is that? Does
that boost Chucksada ask this question. I thought it was
a good ones that boost economic activity in the short term,
but you're just pulling it forward. These big policy changes
(30:11):
have all kinds of direct and foreseeable and less direct
and more subtle effects, which is why forecasting is. It's
always tricky. But it's really hard right now.
Speaker 2 (30:22):
Particularly just to close out the mortgage piece here. That
is an area where on interest rates, it is just
an impossible game to play to project you know where
long term interest rates are going to go. And in particular,
I do want to highlight longer term ones here. When
you're looking at the thirty year fixed mortgage that is
pretty well tethered to the US tenure Treasury will Mark
and I speak about the Federal Reserve and cutting interest rates,
(30:45):
that's on the shorter end of the curve. Many people
in this country have thirty year fixed mortgages. There are
fewer that operate under variable rates which are more heavily
tied to what you see from the Federal Reserve and
it's overnight lending rate there. So we're going to take
a quick break here on the Financial Exchange, but when
we come back, we'll be doing a little bit of
stock roulette. That's right after this.
Speaker 1 (31:07):
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Speaker 4 (31:43):
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Speaker 2 (32:24):
All right, it's time for a little bit of stock
thro roulette. Mark. I'll let you bat lead off here.
Speaker 3 (32:30):
If you've ever lost luggage, you know that can be
mind numbingly frustrating and perplexing, like where did it go?
Why did I tag it? How in the world did
it end up on another flight? There's a possible solution,
and you probably would have thought of this. It's amazing
that airlines took so long to catch on Apple air
(32:51):
tag data. Currently, it's unique to your tag in your phone,
but they will allow you to share it, and they
will allow you to share it, more importantly with airlines,
which could solve the problem of down what sort of
magic hole did your luggage go?
Speaker 2 (33:10):
So you could tag this air You gotta have the
air tag, you stick it on your your phone.
Speaker 4 (33:16):
How do you share it with the airline? Though that
doesn't make sense.
Speaker 3 (33:20):
Apparently you can share the location just like you can
your own party. You can share the air tag data.
I'm sorry didn't explain that way.
Speaker 2 (33:26):
You got it? Got it?
Speaker 3 (33:27):
You could share the airline or you will be able
to when things get up and running and when they
update their software to accommodate this.
Speaker 2 (33:34):
I think that frequent travelers were doing this practice on
their own, but the sharing piece is probably the new
wrinkle here.
Speaker 3 (33:41):
That's the missing link of airlines.
Speaker 2 (33:43):
Let us it's you know you and you and I
put the air tag on it. We can see where
it's going. But the airline being able to have that
data be shared with them seamlessly is not something.
Speaker 3 (33:53):
Don't they know the plane is heavier than it should be?
I mean they weigh everything, they know what the plane ways.
They I guess where the variable. They don't how much
we weigh. Maybe they're more sophisticated ways of determining whether
something is or is not on a plane that should be.
But you would think they would have come up with this.
Speaker 4 (34:07):
According to a twenty twenty three at air Travel consumer
report by the Department of Transportation, more than two point
six million pieces of luggage were mishandled by airlines two
point six million.
Speaker 2 (34:21):
I wonder how much luggage moves through on a yearly basis, though,
to give them, to give them a fair shake, because
I mean at TSA checkpoints, I think the record is
a couple million, three million? Maybe might be the record
a day you have movement of people moving. I'm I
may need to be fact check Tucker on that, you know,
just from the Department of Transportation. No, No, what the
(34:42):
hell do you want for me? No, I'm one. I'm
just saying, is two point six million a lot? We
don't know relative to the size?
Speaker 4 (34:49):
Is what is mishandled? Does that just mean lost or
does that mean you messed up my luggage and it's destroyed.
I don't know what that means.
Speaker 2 (34:56):
Yeah, that those are two very different consequence.
Speaker 3 (35:00):
Either way, Presumably the incidence of permanently lost luggage will
shrink providing you have air tags or something like it.
Speaker 2 (35:07):
The resolution you think would be found a lot quicker
with the.
Speaker 3 (35:11):
Share the air tech technology is hardly new.
Speaker 2 (35:14):
Right right, similar along the lines of airlines. And I
do want to give a quick shout out to a
listener who had texted in regarding my car problem, mentioning
the Hyundai Palisade instead of the Chevy Suburban. Unfortunately, I
have three kids that are under the age of four,
so I'm stuck getting the biggest car in the market,
and the Hyundai Palacid Palisade is a mid size suv.
Speaker 4 (35:37):
Unfortunately I got to go a third row seat though, yeah,
like that's too small.
Speaker 2 (35:43):
We have the Chevy Traverse right now. But you basically
eliminate all of your trunk space when you put up
that third row, and when you have strollers and stuff.
That's where you get into like the minivan and like
suburban ranges because we have a third row right now,
but it just eliminates all your trunk space. Anyway, that's
enough about Paul's car troubles. Speaking of airlines, though, mark
(36:04):
Spirit Airline moves towards bankruptcy after it's filing recent most
recent filing where it looks like this is going to
occur within the next week or two. Famously, they had
a merger schedule with Frontier. This was back in twenty
twenty two. I forgot that it's been this long since
they were set to merge. But then what happened. Jet
Blue jumped in with a higher offer they won Spirit
(36:27):
investors over. However, in January, a federal judge barred Jet
Blue from acquiring Spirit, ruling that the deal would be
detrimental to competition. So this now means that, let's.
Speaker 3 (36:37):
Just said put everybody out of work. That's brilliant, that's
not Actually this is going to happen.
Speaker 2 (36:41):
This now means that Spirit is going to have to
go through some form of restructuring. Like I said, they
haven't formally announced the bankruptcy yet. However, their stock is
down to it was a dollar share in after hours
trading and down substantially of course as of open market today.
But they had reflected about sixty one million dollars lower
(37:03):
in revenue on their recent quarter report. So it'll be
interesting to see what happens on the restructuring front. And
I'd be a little bit concerned with any Spirit Airlines
flights that I had over the course of the next
couple of months. I don't have any personally, but you
might be a little bit wary of booking any flights
on Spirit just yet until.
Speaker 3 (37:19):
Because the services potentially.
Speaker 2 (37:21):
Yes, as they shake through all this. But you know,
I don't think that Jet Blue merger would have made
the most sense. The airline game is, man, that's a
brutal business, just an absolutely brutal business. So it'll be
interesting to see who steps in to bail Spirit out,
because I would imagine that they will operate in some way,
shape or form. Taking a look around at markets, we've
(37:41):
got the Dow Jones up about one hundred eighty points
are close to a half percent, the S and P
five hundred almost up about a quarter of a percent,
and the Russell two thousand up about two thirds of
a percent. The US ten year Treasury sits pretty flat
at four point four to two percent, and we've got
West Texas Intermediate it's sitting around sixty eight dollars a barrel.
(38:04):
It's all the time that we have for today's episode
of the Financial Exchange, but we'll be back at it
tomorrow morning at ten am. Thanks so much for joining us,
and have a great rest of day.
The Financial Exchange is produced by Money Matters Radio and
is hosted by employees of the Armstrong Advisory Group, a
registered investment advisor. All opinions expressed are solely those of
the hosts. Do not reflect the opinions of Armstrong Advisory
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(00:21):
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(01:04):
by Veterans Development Corporation Face is the Financial Exchange, with
Paul Lane and Mark Fandetti.
Speaker 2 (01:14):
Kicking off the second hour of the Financial Exchange here.
As I mentioned, markets in relatively mixed territory no longer
as much enthusiasm from the post election rally, but certainly
we had quite a run up in the last week
or so. We did have a CPI inflation report come
out this morning at eight thirty an am. And what
we saw from the October CPI is that the consumer
(01:36):
Price Index increase point two percent month over month for
the month of October. The twelve month inflation rate hit
two point six percent. If you look at core CPI,
which strips out the impacts of food and energy costs,
that figure increased point three percent month over month and
is now running at a three point three percent rate annually.
(01:59):
In general, the markets seem to be relatively mixed in
terms of their reaction to this October CPI report. I
would point out that for the Federal Reserve and future
interest rate cuts, heading into this morning, there was about
a sixty percent probability according to CEME Futures Group, that
the Federal Reserve would cut interest rates on their December
(02:20):
eighteenth meeting coming up, that probability now stands at eighty
two percent that they will cut interest rates by a
quarter of a percent. So this report that we saw
on the CPI front likely reinforcing this idea that we
will continue to see another quarter basis point cut come
the December meeting. Here mark anything else that you'd like
(02:40):
to add on the inflation report front that I didn't.
Speaker 3 (02:42):
Hit all pour some cold water on as I like
to do. You referenced core inflation, which is one way
of getting at the trend in inflation. What the Fed
needs to know is what is the state of underlying
price pressures in the economy, which is in turn a function,
as we talked about on the last hour, of how
fast the economy is growing relative to its potential. The
(03:04):
economy has grown, and we'll get into this, I think
in the next couple of stories in a more political context.
The economy has been growing above what most researchers think
is its potential growth rate. It's speed limit if you like.
It's in the red zone, a bit that puts upward
pressure on prices. So it's not surprising that core inflation
and another measure of the trend in inflation an alternative
(03:25):
core measure if you like the median, just the one
in the middle. Same concept does it work here as
when you look at the median home price or the
median salary, the median doesn't get doesn't get headfaked by
the big observations on the negative or the positive side.
Median inflation also came in at point three percent. So
(03:46):
if you annualize recent month over month changes in core
and by that I mean just extrapolate out what they
would be over a twelve month period in traditional core
and in median, you get inflation somewhere in the three
and a half percent range. That is consistent with an
economy that's a little bit frenetic, little bit overheated relative
to its potential. FED may have more work to do here.
Speaker 2 (04:08):
You mentioned, you know, it is a healthy economy. And
there's a piece here in the Boston Globe this morning
that goes over Trump and what he's inheriting from an
economy perspective. And there's really there's two camps. There's the
camp that we track pretty closely because of our job
the economists and looking at metrics like unemployment, GDP, growth
(04:30):
and other measures of that nature. That points to the
fact that the United States has had a pretty healthy
economy and just backed up by what Mark said on
the GDP front, the economy has been growing at a
good pace. However, there are other camps of people out
there on the ground who just feel the impacts of inflation,
which are detrimental to your take home pay. And there's
(04:53):
a lot of Americans out there that lament the fact
that we've seen prices increase anywhere from twenty five to
thirty percent, depending on what basket of goods you're looking at,
over the course of the last three or four years. However,
in this piece, they make the point in the globe
that Trump is taking over an economy besides the impacts
of inflation that we've seen over the last several years,
(05:14):
that is in a pretty good place. We have unemployments
sitting at four point one percent, GDP growth remains relatively strong,
and there could be a situation where, if inflation is
able to stay at this pretty static level relative to
what we saw in twenty twenty two, that he could
be stepping into a reasonably strong economy.
Speaker 3 (05:34):
Just remember these numbers a year or two years from now,
and it's really easy. Two three and four. Headline inflation
over the past year is a little over two percent,
but I'm gonna round down and call it two. As
we was just affirmed this morning. Two ish three is
where real gross domestic product GDP is running right now.
(05:55):
That's about the year over year change. I'm rounding up
just a little bit. Don't panel me too much for that.
It just makes it an easier mnemonic, an easier thing
to remember. Four is where the unemployment rate is today,
two three and four. A year from now, two years
from now, voters will again be asking the question and
be better off now than when this guy, whoever it
(06:15):
happens to in this case is Trump, But could ask
it relative to when Biden's tenure began or ended? Are
we better off now than we were then? Now you
could say, I don't believe those numbers. I think the
government's fudging them. That's fine, but you've got to submit
ahead of time evaluation criteria for the person assuming office.
Speaker 1 (06:35):
Now.
Speaker 3 (06:35):
If you don't like those, pick another one, but pick
it ahead of time and then stick with it. Two
three and four are a tough triplet to beat for
that holy for that trinity. If you like of economic statistics.
As you said, Paul, the three most important things is
we all learn in our first economics class GDP, unemployment, inflation.
(06:57):
There are many other measures, but those sum up on
a very high level the health of the economy. You
could say you don't agree, and by the way the
vote went a couple of weeks ago, a lot of
people don't agree. But you have to pick a measure
of keeping score ahead of time and then stick with
it again. I think two three and four for inflation,
for GDP and unemployment is going to be a very
(07:18):
hard triplet to beat.
Speaker 2 (07:20):
And it's interesting parallels they make in this piece. The
Boston Globe mentions that when Clinton took over the White
House in nineteen ninety two, it was coming off a
somewhat similar period of time where the US economy had
been in a recession for about a year and a
half prior to that, and George Bush was blamed for
that recession. As a result, Clinton took over and the
(07:41):
impact of the recession subsided over his tenure, not due
to anything that Bill Clinton necessarily did, but just due
to how the economy ebbs and flows.
Speaker 3 (07:50):
The crazy thing about that one is that that recession
went from the end of ninety to March of ninety one.
It had been over a year and a half before
that election took place. In that final quarter of HW's term,
George HW. Bush's term was something like two and a
half percent. Don't quote me exactly on that, but when
the number came out, it was like a blockbuster, so
much so that people thought that it was fudged, at
(08:11):
least people on the left did. The Fed kept rates
too high for too long. George H. W. Bush knew it.
He had too much class to browbeat the Fed publicly,
but it cost him that election and Clinton inherited. We
now know a relatively strong economy, with the exception of unemployment,
which was somewhere I think in the sevens at the time.
And then Clinton made the right choices too, to his credit,
(08:32):
but to the larger point I think is the one
you're making, Paul, which is a lot of this is luck.
Speaker 2 (08:37):
And another area that we need to examine is some
news that came out I believe either this morning or
late last night was Trump picking Musk and Vivic vivek
Remeaswami for a government efficiency effort. And so we'll touch
upon this a little bit now, and perhaps you will
even bleed in and we'll cover it after the break.
But their focus is going to be on developing governmental
(09:02):
efficiencies and perhaps trying to it seems cut wasteful expenditures
and restructure federal agencies. That's a direct snippet of That
is a direct quote from President elect Donald Trump that
was mentioned on Tuesday. And the area that I want
to start with this conversation is on the wasteful expenditure
(09:23):
side of things. If you take a look at our
federal budget, it's about six point seventy five trillion, and
if you scrutinize what we spend that money on, a
huge percentage is based on spending in social security, Medicare, defense,
and vet and benefits for vets. If you look at
(09:43):
the pie, it's anywhere from two thirds to almost seventy
percent plus in terms of what we spend as a country.
And those are areas that no politician wants to touch
with a ten foot poll. So this idea that they're
going to create this government efficiency effort, it's going to
be very hard to make much of a budgetary impact
when two thirds plus of your budget is off the table.
Speaker 3 (10:06):
Here, something's got to be done. Do we now spend
more on interest on the debt than we do on defense.
We've said that before, it's been that, that's been widely reported.
You've probably heard it, but that should stop you in
your tracks. That's thirteen percent of the federal budget.
Speaker 2 (10:21):
Elaborate on that a little bit more. Are just to
simplify for listeners out there, the interest that we have
to pay on US treasury debt that we have lent
out to a lot of us. We're the ones holding
it foreign to the public. I think I looked at
the stat today, it's we have three quarters of it.
And when I say we, Mark and I just you know,
all of us in this country are are big holders
(10:42):
of US debt the interest assessed with those payments. So
if you're buying US treasuries, any of the listeners out there,
you're investor buying a four percent or five percent treasury
the cost of servicing that interest over the course of
the year, we spend more money on that than we
do for our defense department. That is staggering, and it's
worth reinforce and.
Speaker 3 (11:00):
It's growing faster than the economy as a result, and
that's where it starts to get a little scary. So
something has to be done. Republicans, I'll depart from my
usual sort of analyst mindset here and just make up
sort of political statement. They have to do something, and
they seem determined to the president, though I'm not sure
he's never shown an interest in reducing the debt. His
(11:22):
first term record is to put it mildly terrible. Even
before COVID, before you jump in and say COVID, COVID, No,
before COVID, the deficit doubled and he added three and
a half trillion, So it's not really his thing. And
naming a commission feels like a cop out, pall. It
feels like a way to say, ope, commission's looking at it. Yeah,
it's theater.
Speaker 1 (11:42):
Uh.
Speaker 3 (11:42):
He wouldn't say it's theater, but it is. He can say,
go talk to Elon. He doesn't have to make any decisions.
Congress doesn't even have to act that. We're waiting for Elon.
It's gonna take We all know where commissions go. We
all know where we what we do with something. When
we want to kill it, you assign it to a committee.
Speaker 2 (11:57):
Yeah, that's an interesting position to put them and I'm
glad you you let it out that way. So it
remains to be seen what the impacts will be from
this alleged committee. It's supposed to their work is supposed
to conclude by July fourth of twenty twenty six. They're
supposed to give us.
Speaker 3 (12:14):
You've gotta be kid made, Paul.
Speaker 2 (12:15):
If so, we will see what efforts made there. It's
just I just don't know what you cut? What? What?
Speaker 1 (12:27):
What?
Speaker 3 (12:27):
Are they going to find a cut but putting it
giving them a twenty twenty suit that is two years
almost two years from now. Then it goes to the president.
He's got to consider it, build it into a budget
for that year, for the next year, He'll be out
of office before even if they accepted it all, he'd
be out of office before they were able to implement it. Moreover,
can Congress do anything in the meantime or are they
(12:47):
gonna feel handcuffed by what Elon's doing? What if they
want to? Senate Republicans appear to be quite committed to
cutting spending. Are they hamp are they hamstrung now by
this effort? I think it's good political theater for him,
but I don't know if it's good given the process
that normally has to be followed.
Speaker 2 (13:03):
It's what can be so problematic about four your terms
is that you can try to just drag your feet
and ultimately no politician wants to make spending cuts because
those are not popular at all. And from a commerce perspective,
you're in the same boat. You just want to get
re elected to the next term. But it just makes
me upset oftentimes that no one has the fiscal discipline
(13:24):
to step in and make painful decisions.
Speaker 3 (13:26):
I hate this commission. We just elected these people because
they told us they would take action. Now they tell
us they're punting it to a committee that'll come back
in two years. Unacceptable.
Speaker 2 (13:35):
Don't you think we're going to take a break here
on the Financial Exchange, But when we come back, or
when we talking a little bit more about inflation and
particularly the impact on the vehicle on a loan market
right after this break.
Speaker 1 (13:49):
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Speaker 2 (14:15):
All right time for trivia.
Speaker 4 (14:16):
Here on the Financial Exchange we we're giving away a
Financial Exchange Show T shirt on this day. In nineteen
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theaters across the country. GoldenEye was the first James Bond
film to feature Pierce Brosnan as the famed secret agent.
Trivy questions today, how many actors have Portrade James Bond
(14:40):
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(15:01):
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Speaker 2 (15:05):
Title of a piece here from market Watch cars We're
once a financial engine of America's middle class. Now they
are quote unquote a wealth killer. What we've seen over
the course of the last couple years with all the
inflation impacts. Is the average cost for a new vehicle
as of September sits around forty seven thousand or forty
eight thousand dollars, depending on where you look. Now, used cars,
(15:29):
according to Edmunds, are coming in around twenty seven thousand
to purchase them, and now the average car monthly payment
sits at about seven hundred bucks, and one in five
car payments are over one thousand dollars. This is a
commentary on the fact that, hey, cars are a pretty
significant portion of American's budget. I was actually surprised it
(15:51):
was quote to here that seventeen percent of household spending
goes towards cars. Obviously, the biggest expense is housing coming
in third, but second two housing was vehicle spending at
seventeen percent. That should come down a little bit mark here,
as it seems as if the inventories for vehicles are
at a much better level than they were in twenty
(16:14):
twenty two, where they're forty percent off inventory levels. But
certainly it is an area between interest rates going up
and the increase in car prices that that monthly payment's
a lot higher for folks out there.
Speaker 3 (16:26):
Yeah, the interest payments so it's prices have actually moderated
price increases on new I just looked this up. I'm
not an expert, but a CPI Consumer Price IndX, which
we talked about earlier today a couple of times they
have a sub index. It measures new car prices, and
new car prices after skyrocketing. You all know this year
(16:49):
over year ten twelve percent for a couple of years there,
they've finally started to disinflate, which is interesting. I did
not know that. But year over year, as of the
most recent read today, new car prices are down a
little over a percent, but rates are much higher than
they were in say, twenty twenty two. So interest the
interest portion of your typical payment. And I'm just gonna
oversimplify here and use a very generic example of a
(17:12):
sixty month loan, using again the Federal Reserve Database information
on loan rates. Interest payments could be sixty percent, sixty
percentage points, but sixty percent higher. So for every dollar
in interest a month you're paying, it's now a dollar
sixty So I guess the killer is the massive jump
that we experience, like with many items post COVID, plus
the financing rates. I'm not telling you anything you don't
(17:33):
already know, but that that is quite a steep increase
and has pushed new cars even for the relatively wealthy.
There's been a lot of story I have you noticed that,
a lot of stories over the past week about people
who would we would consider wealthy, who buy high end cars,
who can't afford you anymore or refuse to pay the
thousands of dollars in interest payments a year that would
be required to afford No.
Speaker 2 (17:54):
No, I'm in a market for a new vehicle and
looking at some of the new vehicle costs. I mean, granted,
I'm looking at minivan. My wife vetoed the minivan, but
the Chevy, the Chevy Suburban is what I've been scrutinizing,
and a new one of those, and granted, I get it,
the thing's an absolute bus, but there's they're so staggering
(18:16):
that I just really can't justify the monthly spend that
goes with purchasing a new vehicle for what is a
depreciating asset. Yeah. I just feel like there should be
a swell of demand towards used car prices, and perhaps
that's reflected a little bit from some of the CPI
data that we had. It's just it's hard to stomach
looking at new cars that in this case for the suburbans,
(18:39):
it's you know, seventy five eighty K you're talking for
a new one of those, So it's it's staggering here.
I want to touch on something real quick. Actually, maybe
we'll we'll cover this a little bit after the break.
We had a listener Texan who was stating that Mark
and I are missing the point regarding the Government Efficiency
(19:00):
Committee that we spoke about before in terms of its
impact and what its focus is. So what we're gonna
do here is we're gonna come up here on a
quick break. But when we do come back, Mark and
I will respond to that text from the listener and
dive in a little bit more on the Government Efficiency
Committee that was put together with Elon la Musk and
(19:21):
Vivek Raswami. That was announced yesterday, So we're gonna cover
that right after this break.
Speaker 5 (19:40):
Bringing the latest financial news straight to your radio. Every day,
it's the Financial Exchange on the Financial Exchange Radio Network.
The Financial Exchange streams live on YouTube. Like our page
and stay up to date on breaking business news all
morning long.
Speaker 1 (19:58):
This is the Financial Exchange Radio Network.
Speaker 4 (20:07):
All Right, trivia question today was how many actors have
portray James Bond in a movie? That would be seven,
starting with Sean Connery nineteen sixty two. Seven actors have
portray James Bond, including the often forgotten Casino Royale in
nineteen sixty seven, which starred David David Nevin Nivin. I
(20:28):
don't know, never heard of him. Wayne from West Haven,
Connecticut is our winner today, taking home a Financial Exchange
Show T shirt. Congrats there, and we played trivia every
day here on the Financial Exchange See complete contest rules
at Financial Exchange Show dot com.
Speaker 3 (20:45):
Ever heard of David nine Nivinvin? I think it is
actually mispronounced.
Speaker 1 (20:50):
Yeah, yeah, no, I never heard of them.
Speaker 3 (20:52):
Hey guys, yeah, Paul's no way you have either, right,
no chance?
Speaker 2 (20:55):
Zero chance? Okay, no chance. So, as I mentioned before
the break, we had a listener email into us pushing
back on some commentary that Mark and I had surrounding
the Government Efficiency Committee that was put together yesterday by
President Trump appointing or I don't know if it's there's
a formal appointment, but tagging let's waited it at a
(21:17):
job done. Elon Musk and Vivek, I'm spending as part
of this committee to focus on cutting back some government inefficiencies.
And so the listener here says that we are way
off the point that the commission is to expose and
cut government waste within the government, getting rid of programs, earmarks,
(21:37):
and employees, fattening government spending. It is intended to is
not intended to address cutting social promans and budgets that
must still go through Congress fully in agreement there of course,
we agree that it has to go through Congress. That's
the way things work. The point that I was making
before is that if we're looking at cutting in efficiencies
and things like that, the federal spend was six point
(22:00):
seventy five trillion over the last fiscal year. We are
running at a deficit currently that sits close to two
trillion dollars in terms of our country, what we take
in revenue versus what is spent, there's a deficit about
two trillion.
Speaker 3 (22:14):
There.
Speaker 2 (22:15):
I made the point about social programs because if you
look at that six point seventy five trillion of spending,
five point three trillion of it, according to a piece
done in Bloomberg today, covers social security, Medicare and military
expenses and coverage for vets. So five point three trillion
of the six point seventy five is spoken for pretty much.
(22:36):
You're not gonna see cuts to that, So that leaves
about a trillion and a half of other expenses out there,
spread across other departments. The idea that substantial cuts are
going to be made from this initiative, to me, is
extremely unlikely. And that's the point I was making.
Speaker 3 (22:52):
That's one angle the point I was making. And Laurie,
thank you for the text. And she's right. There's a
broad mandate associated with this what is it commission? He's
calling himself a department. This is all out there in cyberspace.
None of this actually exists. Presumably Congress would have to
create it. The President can't just conjure up.
Speaker 2 (23:12):
It's like a special task force that Dwight has from
the office.
Speaker 3 (23:16):
That's what it feels like to me. So, Laurie, my
point here is that part of their remit is to
cut spending. He is going to use this. Paul made
the point in the last hour, in the last segment
that spending cuts are tough. Nobody wants to do them.
Not since Gingrich Clinton have. We had a coherent, determined
effort to cut spending and it ended in surpluses in
(23:38):
the two thousands, and we're starting from a much bigger
hole now. My point on this, Laurie, is that they
will use this politician's will to punt on this issue.
When Trump is pressed for where are you going to
cut spending, mister President, just say we're going to wait
for the commission. We're going to wait for Elon. Elon's
gonna do it. He thinks he solved. It's just his
nature as a showman. He snapped his fingers, tweeted it.
Elon retweeted it, and they think the problem is or
(24:00):
a solution is underweight. It's not to your point and
your text, Lori, Congress has to act. By the time
they get a hold of this, it's going to be
twenty twenty seven. They're not going to do anything before
then because they've got a wait for Elon's commission. I
think this does exactly the opposite of holding Congress's feet
to the fire. I think it makes them hesitant, possibly
to offer their own suggestions out of fear of subverting
(24:24):
what the president of what the president elects seems to
be putting into place muddies the waters and is effectively
a cop out.
Speaker 2 (24:32):
Another separating from that piece there regarding the Efficiency Committee,
another thing that we haven't covered in this show in
regards to tariff which tariffs, which has been a really
popular subject of discussion, is potentially retaliatory efforts from a
lot of these other countries here. And there's a piece
in the New York Times where Mexico signals that it
(24:53):
could hit back at the United States with terrafts of
its own. If I quote here from Marcelo E. Brad,
the Mexico's economy minister, in a radio interview from Monday,
if you put twenty five percent tariffs on me, I
have to react with tariffs. Structurally, we have the conditions
to play in Mexican's favor, he added. So that's something
that does need to be considered here as well, that
(25:14):
often there can be retaliatory tariffs when you start these initiatives,
and it's just something to think about when we have
these discussions.
Speaker 3 (25:21):
Yeah, it's called a trade war. It's the international economists
who study this. Economists who specialize international economics, I should say,
they're sort of playful phrase for this is tit for tat.
You don't the knock on effects of tariffs. We talked
(25:41):
about the domestic effects in the last hour, higher prices,
inferior quality over time because you're coddling certain industries, and
the fact that these tariffs are supposed to be temporary,
at least in theory, they never actually go away. Because
now the private sector reorients itself. It starts to another
economics term for you, rent to seek, which means devote
(26:02):
resources not to growing the economic pie, but to getting
a bigger share of it. It's called rent seeking. It's
a kind of useful term. Everybody's going to be rent
seeking now. Oh, mister president, please give give us an exception.
Mister President, here's a campaign contribution. Oh, I'll buy some
of your DJT stock. Please give us an exception. Not
alleging illegal activity, but there's the temptation to do that.
You almost have to as a business person. So you
(26:23):
get all this rent seeking domestically, which weighs on growth,
and then the retaliatory tariffs, which further pushes up prices
and has a knock on effects of its own. It
doesn't end in a good way. They never have trade wars.
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Speaker 2 (27:42):
One of the areas that has been relatively sluggish is
the housing market across the United States, and what we've
seen recently here is the average thirty year fixed rate
mortgage on conforming loan balances of seven hundred and sixty
six k or less had inc slightly to six point
eight percent eighty six percent from six point eight one percent.
(28:05):
I think I'm looking at a chart the other day.
It hit its recent low in September around six point
one percent, but now those thirty year fixed mortgage rates
still sit at close to seven percent. Application demand for
mortgages out there over the course of the last week
was relatively flat. A lot of people are presumed to
(28:26):
be sort of waiting out what the new presidency will
look like and its impact on rates going forward. The
US ten year treasury had spiked quite a bit after
the news of President Trunk winning the election, where it
had increased about sixteen or seventeen basis points and now
sits at about four point four one percent. So be
(28:47):
interesting to see what type of impact it has here
on mortgage applications, But for right now, not a tremendous
amount of growth.
Speaker 3 (28:54):
So in year one, if they cut we have to
break or anything here. Could you go radio amateur? Sorry?
If they cut taxes but not spending in year one,
If they impost tariffs in year one. I hate to
keep coming back to this, but it's all that's on
anybody's mind for the next several months. I would assume interesting,
oh SSEQUL rates probably go up unless the economy really slows.
It's always an all else equal proposition, and you always
(29:15):
run into trouble when you say, well, this is going
to cause that because you're not You're not accounting for
other variables which can change. But all those equal rates
should go up, making housing and cars more expensive. In
addition to the knock on effects of tariffs that we
talked about, which would presumably affect things like washing machines,
as they did in twenty seventeen, huge tariffs on washing
machines in twenty seventy to.
Speaker 2 (29:35):
The place right, right and good, and the impact of
that was higher prices actually for domestic washing machines. In
a study that they found similar to what you mentioned
before is you can kind of be more aggressive from
a pricing perspective when you're the only game in town.
Speaker 3 (29:48):
Domestically, you gotta wonder do people take action in anticipation
of these tariffs? Do they? I know some companies are
already saying we are stocking up on parts. I'll just
call them parts and anticipation. How widespread is that? Does
that boost Chucksada ask this question. I thought it was
a good ones that boost economic activity in the short term,
but you're just pulling it forward. These big policy changes
(30:11):
have all kinds of direct and foreseeable and less direct
and more subtle effects, which is why forecasting is. It's
always tricky. But it's really hard right now.
Speaker 2 (30:22):
Particularly just to close out the mortgage piece here. That
is an area where on interest rates, it is just
an impossible game to play to project you know where
long term interest rates are going to go. And in particular,
I do want to highlight longer term ones here. When
you're looking at the thirty year fixed mortgage that is
pretty well tethered to the US tenure Treasury will Mark
and I speak about the Federal Reserve and cutting interest rates,
(30:45):
that's on the shorter end of the curve. Many people
in this country have thirty year fixed mortgages. There are
fewer that operate under variable rates which are more heavily
tied to what you see from the Federal Reserve and
it's overnight lending rate there. So we're going to take
a quick break here on the Financial Exchange, but when
we come back, we'll be doing a little bit of
stock roulette. That's right after this.
Speaker 1 (31:07):
Fine daily interviews and full shows of the Financial Exchange
on how are YouTube page? Get caught up on anything
and everything you might have missed. This is the Financial
Exchange Radio Network. Text us six one seven three six
two one three eight five with your comments and questions
about today's show. This is the Financial Exchange Radio Network.
Speaker 4 (31:43):
The Financial Exchange wants to thank all of you took
part in this year's DAV five k. The event sold
out earlier than ever before and was another tremendous success.
If you weren't able to attend but would still like
to make a donation to support our great American hero,
visit davfivek dot Boston. Make your gift today. Every dollar
(32:04):
raised will support a wide variety of initiatives, like the
DAV Transportation Program, which takes disabled vets to important medical
appointments that supply both the physical and mental care they
need thank you again for your support. The dav five
K Boston is presented by Veterans Development Corporation.
Speaker 2 (32:24):
All right, it's time for a little bit of stock
thro roulette. Mark. I'll let you bat lead off here.
Speaker 3 (32:30):
If you've ever lost luggage, you know that can be
mind numbingly frustrating and perplexing, like where did it go?
Why did I tag it? How in the world did
it end up on another flight? There's a possible solution,
and you probably would have thought of this. It's amazing
that airlines took so long to catch on Apple air
(32:51):
tag data. Currently, it's unique to your tag in your phone,
but they will allow you to share it, and they
will allow you to share it, more importantly with airlines,
which could solve the problem of down what sort of
magic hole did your luggage go?
Speaker 2 (33:10):
So you could tag this air You gotta have the
air tag, you stick it on your your phone.
Speaker 4 (33:16):
How do you share it with the airline? Though that
doesn't make sense.
Speaker 3 (33:20):
Apparently you can share the location just like you can
your own party. You can share the air tag data.
I'm sorry didn't explain that way.
Speaker 2 (33:26):
You got it? Got it?
Speaker 3 (33:27):
You could share the airline or you will be able
to when things get up and running and when they
update their software to accommodate this.
Speaker 2 (33:34):
I think that frequent travelers were doing this practice on
their own, but the sharing piece is probably the new
wrinkle here.
Speaker 3 (33:41):
That's the missing link of airlines.
Speaker 2 (33:43):
Let us it's you know you and you and I
put the air tag on it. We can see where
it's going. But the airline being able to have that
data be shared with them seamlessly is not something.
Speaker 3 (33:53):
Don't they know the plane is heavier than it should be?
I mean they weigh everything, they know what the plane ways.
They I guess where the variable. They don't how much
we weigh. Maybe they're more sophisticated ways of determining whether
something is or is not on a plane that should be.
But you would think they would have come up with this.
Speaker 4 (34:07):
According to a twenty twenty three at air Travel consumer
report by the Department of Transportation, more than two point
six million pieces of luggage were mishandled by airlines two
point six million.
Speaker 2 (34:21):
I wonder how much luggage moves through on a yearly basis, though,
to give them, to give them a fair shake, because
I mean at TSA checkpoints, I think the record is
a couple million, three million? Maybe might be the record
a day you have movement of people moving. I'm I
may need to be fact check Tucker on that, you know,
just from the Department of Transportation. No, No, what the
(34:42):
hell do you want for me? No, I'm one. I'm
just saying, is two point six million a lot? We
don't know relative to the size?
Speaker 4 (34:49):
Is what is mishandled? Does that just mean lost or
does that mean you messed up my luggage and it's destroyed.
I don't know what that means.
Speaker 2 (34:56):
Yeah, that those are two very different consequence.
Speaker 3 (35:00):
Either way, Presumably the incidence of permanently lost luggage will
shrink providing you have air tags or something like it.
Speaker 2 (35:07):
The resolution you think would be found a lot quicker
with the.
Speaker 3 (35:11):
Share the air tech technology is hardly new.
Speaker 2 (35:14):
Right right, similar along the lines of airlines. And I
do want to give a quick shout out to a
listener who had texted in regarding my car problem, mentioning
the Hyundai Palisade instead of the Chevy Suburban. Unfortunately, I
have three kids that are under the age of four,
so I'm stuck getting the biggest car in the market,
and the Hyundai Palacid Palisade is a mid size suv.
Speaker 4 (35:37):
Unfortunately I got to go a third row seat though, yeah,
like that's too small.
Speaker 2 (35:43):
We have the Chevy Traverse right now. But you basically
eliminate all of your trunk space when you put up
that third row, and when you have strollers and stuff.
That's where you get into like the minivan and like
suburban ranges because we have a third row right now,
but it just eliminates all your trunk space. Anyway, that's
enough about Paul's car troubles. Speaking of airlines, though, mark
(36:04):
Spirit Airline moves towards bankruptcy after it's filing recent most
recent filing where it looks like this is going to
occur within the next week or two. Famously, they had
a merger schedule with Frontier. This was back in twenty
twenty two. I forgot that it's been this long since
they were set to merge. But then what happened. Jet
Blue jumped in with a higher offer they won Spirit
(36:27):
investors over. However, in January, a federal judge barred Jet
Blue from acquiring Spirit, ruling that the deal would be
detrimental to competition. So this now means that, let's.
Speaker 3 (36:37):
Just said put everybody out of work. That's brilliant, that's
not Actually this is going to happen.
Speaker 2 (36:41):
This now means that Spirit is going to have to
go through some form of restructuring. Like I said, they
haven't formally announced the bankruptcy yet. However, their stock is
down to it was a dollar share in after hours
trading and down substantially of course as of open market today.
But they had reflected about sixty one million dollars lower
(37:03):
in revenue on their recent quarter report. So it'll be
interesting to see what happens on the restructuring front. And
I'd be a little bit concerned with any Spirit Airlines
flights that I had over the course of the next
couple of months. I don't have any personally, but you
might be a little bit wary of booking any flights
on Spirit just yet until.
Speaker 3 (37:19):
Because the services potentially.
Speaker 2 (37:21):
Yes, as they shake through all this. But you know,
I don't think that Jet Blue merger would have made
the most sense. The airline game is, man, that's a
brutal business, just an absolutely brutal business. So it'll be
interesting to see who steps in to bail Spirit out,
because I would imagine that they will operate in some way,
shape or form. Taking a look around at markets, we've
(37:41):
got the Dow Jones up about one hundred eighty points
are close to a half percent, the S and P
five hundred almost up about a quarter of a percent,
and the Russell two thousand up about two thirds of
a percent. The US ten year Treasury sits pretty flat
at four point four to two percent, and we've got
West Texas Intermediate it's sitting around sixty eight dollars a barrel.
(38:04):
It's all the time that we have for today's episode
of the Financial Exchange, but we'll be back at it
tomorrow morning at ten am. Thanks so much for joining us,
and have a great rest of day.
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