May 15, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss Jerome Powell cautioning about higher long-term rates as 'supply shocks' provide policy challenges. Is it too late to save the US economy? Does it need saving? Netflix says Ad tier has more than 94M users. Trump says India offered to remove all tariffs on US goods. Ted Rossman, Bankrate, joins the show to chat about the household debt and credit report.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(01:05):
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Speaker 2 (01:09):
We're two on the Financial Exchange, and we got markets
settling off very, very modestly today. The Dow's off eighty points,
the S and P is off five, the Nasdaq is
off eighty nine. Just not too much going on, which
is totally fine after a nice roll. You don't need
stocks to go up, you know, one or two percent
(01:31):
every day. That's not realistic and typically not healthy in
markets if they do that forever as well, because they
can't do that forever, they get tired. Their little stock
legs just run out of energy and they go splat.
So it's nice just to have a day where you
kind of take some take a little pause and calm
down and everything. We've got the ten year treasury moving
(01:54):
down six bases points to four point four to six percent,
so reversing itself after you know, pretty substantial move up
over the last month or so. Remember the ten years
down around four to one at the start of April.
It crossed four or five yesterday. So a little bit
of a relief here in yields moving up. That should
help out the mortgage market a little bit, because yesterday,
(02:16):
according to Mortgage News Daily, we saw the average thirty
year fixed rate mortgage move up to six point nine
to nine percent, so getting you know, right around that
seven percent mark. And again it's it's never great when
you're in the middle of the spring housing season and
rates are moving up as you are going through it. Oil,
we got West Texas Intermediate down a dollar eighty seven
(02:38):
a barrel, this on hopes of some type of deal
between the US and Iran that would end up bringing
some Iranian oil back to the market. And we've got
gold today moving up nineteen dollars and sixty cents an
ounce to thirty two oh seven and ninety cents Mike.
This morning, J Powell had some common so I can't
(03:00):
remember what he was speaking at, but at eight forty
am he started speaking and everyone started paying attention to him,
because when you are the chair of the.
Speaker 3 (03:10):
Federal Reserve, that's what happens.
Speaker 2 (03:13):
Yeah, I mean, look, you're basically, when it comes to
the economy, probably the most powerful person in the world,
if not a close second. I mean, here, here's the thing,
like when you're the FED.
Speaker 3 (03:24):
But it would be first in that scenario.
Speaker 2 (03:26):
The only other person that I would consider is the President.
I mean, as We've seen what the President can do
can move markets pretty substantially in the last you know,
few months. Yep, Powell could do similar things. But you know,
it's again like I think it's basically between the two
of them, is to you know, who has the most
juice when it comes to the economy. So a couple
(03:46):
of things that Powell talked about in his speech. The
first is, and this is not really surprising, talks about, Look,
we're gonna have, you know, potentially a series of supply shocks.
It's not going to allow us to really do a
whole lot as it relates to to managing the economy
because we're kind of going to be perpetually waiting to
see what happens as these supply shocks come up and subside,
(04:08):
and we don't know the path they're going to take,
and so given that uncertainty, we kind of have to
put anything on hold right now because we have to
see how these actually impact the economy.
Speaker 3 (04:19):
The supply shocks term is a term from.
Speaker 4 (04:22):
Those who studied the nineteen seventies period of inflation and
the oil embargo. All of those supply shocks are largely
accredited to the high inflation of the nineteen seventies and
early eighties, combined with Federal Reserve missteps along the way
when it came to addressing inflation.
Speaker 3 (04:40):
I guess, is there anything how similar?
Speaker 4 (04:44):
Can we put these in those same categories of what
we were seeing in the nineteen seventies, because I can
continue to hear that so hotly debated of hey, this
is very different than the nineteen seventies supply shocks, and
we shouldn't, you know, really be paying as much attention
to these supply shocks as the ones that we're back
in the nineteen seventies. And of course they're different. They're
not oil supply shocks. And even if we got an
(05:05):
oil supply shock, I don't think it would have the
same effect that it did in the nineteen seventies.
Speaker 3 (05:09):
Sure, but I'm with J. Powell on this. I don't
think that they can be swept to the side and ignored.
Speaker 1 (05:15):
No.
Speaker 2 (05:15):
I mean, here's the thing is, if you have a
world in which countries and companies are trying to remove
some of the integrations that they've previously had with each other,
or at least manage them differently, you're going to have
some bumps in that process. And you're also moving to
(05:36):
a situation where you're no longer you're no longer selecting
the most economically advantageous choice for producing something. You're selecting
one based on other criteria. Now there's other criteria, maybe valid,
they may be invalid. I'm not saying that this is
(05:59):
good or bad. There's some that you could say, Hey,
it's if if someone wanted to argue, hey, we should
produce all materials for the F thirty five fighter in
the United States because of national security concerns, I can
buy that as a convincing argument. Unfortunately, national security concerns
(06:22):
are not something that's valid when it comes to socks. True,
do we need to produce enough socks for all Americans
here in the United States?
Speaker 5 (06:30):
Not really.
Speaker 2 (06:30):
If if, if worse comes to worse, go without socks,
buy a slipper, you know, like flip flops, flip flops summer.
You know, you'll figure it out. You can't really figure
it out with the F thirty five. But here's the
thing about the F thirty five. It's a big multinational,
you know, manufacturing process. Because we also have you know,
allies who want them to be sold to them, And
(06:51):
part of it is Hey, the manufacturer part of this
in you know, country X, Y and Z, and so
it's this whole joint venture, which is again another good
reason to to do something. Potentially, there are other things
that are like abject bad reasons for you know, wanting
to have something produced in a different way. If if
if I woke up and let's say that I were,
(07:13):
you know, King of chuck Land, and I woke up
and said I would like to reclassify all two by
fours as four by eights in order to make buildings
more sturdy, anyone who builds houses would be like, hey, Chuck,
you don't even know what you're talking about accurate, and
b that's not necessary and it'll cost a whole lot
(07:33):
more without providing an additional benefit. So like, it's not
to say that any of this is good or bad.
It's just that it is. We are making decisions now
that are not because companies are trying to find the
cheapest or most efficient way to do something, but rather
for other reasons, some of which can be good, some
of which can be bad. But ultimately it is probably
gonna drive some additional cost because it's reversing the low
(07:57):
cost push.
Speaker 5 (07:58):
That companies have had for the last forty years.
Speaker 4 (08:00):
If it sticks, and so that's I think a fair
category of a supply shock.
Speaker 5 (08:05):
What do you mean if it sticks?
Speaker 3 (08:08):
I think you could make a compelling argument that nine
months from now, nobody's talking about realigning supply chains, nobody's
talking about tariffs, and it's all been swept to the sideline.
Speaker 5 (08:18):
Talk to me about the compelling case, compel me.
Speaker 4 (08:22):
What we've seen over the last four weeks has been
a very clear path towards de escalation on trade. We
have word this morning that India is considering reducing all
tariffs to zero. European Union has done the same. It
seems unlikely to me that we get back to the
level of low tariffs that we saw on January fourth.
(08:43):
I heard it reported from the Journal or something this
morning that they put out an offer to eliminate all
tariffs on US made products coming into the US are coming.
Speaker 3 (08:51):
Into the EU.
Speaker 4 (08:55):
So could I make a case that nine months from
now tariffs are still higher than they were in January,
but are low enough that we are not talking about
our reshuffling of supply chains. Yeah, I think I could
make that case.
Speaker 2 (09:06):
You do, Yeah, I'm just trying to unpack what that means.
If that's the world we're in there, I don't think
we can.
Speaker 3 (09:18):
Yeah, okay.
Speaker 2 (09:20):
The reason that I don't think we can they need
the revenue. They need the revenue to pass the tax bill.
Speaker 4 (09:26):
I think they need the revenue to pass the tax bill,
but once pasted, I don't think they need the revenue anymore.
Speaker 2 (09:31):
If they get rid of the revenue and pass the
tax bill as it's currently like trending, Oh the.
Speaker 3 (09:36):
Depthsit will blow out.
Speaker 4 (09:37):
If that's somebody else's the ten years going to eight percent,
that's been always been somebody else's problem.
Speaker 5 (09:41):
It won't be. It won't be.
Speaker 4 (09:44):
Yeah, we're getting a bit technical here, like yeah, it
might be the president's problem at that exact time. But
that that's kind of went through my head this morning,
is what if we just need the tax revenue from
tariffs to get the tax bill done, and then you
just say, well, yeah, never mind.
Speaker 2 (09:59):
Then we're head to a very bad place. Actually, and
that place is one where either then you do have
perpetually high inflation or you got the ten year at
eight and what that means for the US economy.
Speaker 3 (10:12):
Yeah, neither whichs are very good.
Speaker 2 (10:16):
So this late leads us to the next piece, is
it too late to save the US economy? We got
to go to a commercial, but we'll fill you in
on that when we come back, and we'll also actually
know yes, we will do that, and we'll also do
some trivia right after this.
Speaker 1 (10:29):
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Speaker 6 (11:04):
Time for trivia here on the Financial Exchange in As
we discussed earlier this morning, Walmart released their quarterly earnings
that showed strong sales, but more than that, price increases
are coming. Walmart has been in business since nineteen sixty four,
when it was founded by Sam and Bud Walton. So
trivia question today, what state is Walmart headquartered in? Once again,
(11:28):
what state is Walmart headquartered?
Speaker 3 (11:30):
In be the.
Speaker 6 (11:31):
Seventh person today to text 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 seventh correct response to text us at six one
seven three six two thirteen eighty five will win that
T shirt. See complete contest rules at Financial Exchange Show
dot com. I can actually tell you the city that
(11:53):
they're headquartered in, don't.
Speaker 5 (11:56):
I won't, but I could. I know you could. I
could just letting you know. Talker isn't too late.
Speaker 2 (12:04):
To save the US economy. That's the headline from the
piece in Bloomberg. So here's the thing. Before we answer
the question of whether it's too late to save the
US economy, we need to actually ask how much damage
has been caused in the US economy and does it
need saving?
Speaker 4 (12:25):
Yeah, that was my first question. Does the economy need
quote saving?
Speaker 2 (12:30):
I don't know, And anyone else professing that they know
exactly what the economy is going to do over the
next six months is lying to you.
Speaker 5 (12:38):
And here's why.
Speaker 2 (12:40):
In a span of forty five days, we have seen
an absolutely ridiculous amount of volatility related to how much
stuff may or may not cost to bring into the
United States.
Speaker 3 (12:56):
Ridiculous is a good description.
Speaker 4 (12:57):
Yeah.
Speaker 2 (12:58):
I have no idea how this is affected what businesses
are planning or we're planning undoing later this year, Nor.
Speaker 4 (13:05):
Do I know how consumers are thinking about their own
personal financial situation today compared to February.
Speaker 2 (13:11):
First, what I can tell you. What I can tell
you is and Mike, can I talk about this a
good amounts. It's really rare to see US households change
their spending in a material way before being forced to write.
(13:33):
And it's not to say that people may not have
like shifted their spending patterns the last couple months, but
it was most likely. Hey, I was gonna buy a
car in September. Okay, I'm buying the car in March instead,
and then September auto sales are weak. Hey, you know what,
I'm a little bit nervous that we're not going to
be able to get all the cat food because it's
(13:54):
made in China. Okay, let's buy six months worth of
cat food right now. Things like that and that, like
people may have pulled forward demand. I don't think in
the aggregate we're seeing any information right now that points
to a conclusive change in spending in either direction. You
might have had some wobbles here and there to the
upside or downside, depending on the category, but by and large,
(14:20):
to quote you know, the late great Charlie Munger, we
ain't seen it, he said that.
Speaker 5 (14:27):
No he didn't.
Speaker 2 (14:27):
I just like making up Charlie Munger quotes right now.
Just it's kind of in a little monger thing, you know. Yeah,
I don't know why.
Speaker 3 (14:36):
Yeah.
Speaker 4 (14:36):
So that really is a precursor to asking about rescuing
or saving the state of the US economy. You have
to prove out that it is in fact headed for
a bad place, which, look, it does not take a
genius to paint that picture. Certainly it could be that
we are heading for a recession. The counterpoint to many
(14:57):
of these things would be we are entering any sort
of financial difficulty and an amazingly strong starting point. Unemployments
at four point two percent, inflations under three, consumer household
debt will totally not great. I mean, if home prices
(15:17):
faill by twenty percent, how many people would be underwater
on their mortgages. Well, it doesn't matter if they're not
forced to sell them it also it doesn't matter. But
I can't imagine there's been many points in time where
that could happen and fewer Americans would be underwater on
their mortgages. So I just go back to these scenarios,
and I am, as you've heard us, quite concerned about
(15:39):
where this all could go.
Speaker 3 (15:41):
But my biggest concerns.
Speaker 4 (15:42):
Are more about, Hey, does this do long lasting damage
to the state of the dollar as a reserve currency?
What does this do to you long lasting relationships that
we frankly will not see play out over the course
of the next six months.
Speaker 5 (15:57):
Let's even because again, like some of that stuff's like.
Speaker 2 (16:00):
Kind of nebulous, like we'll it change the dollars right
currency status?
Speaker 3 (16:04):
Like who knows? That's too nebulous, men, And what will
happen if it does?
Speaker 5 (16:08):
You're sitting there.
Speaker 2 (16:09):
With too much smoke around your head. Instead, I like
to think of it in terms of like get get
more micro than that. And this is the place where
I don't think we know and we just need to
see how it plays out for the next six months,
which is why J. Powell used the term weight like
four hundred times during his press conference a couple of
weeks ago. If you are a business owner, whether your
(16:30):
business has three employees or three hundred thousand, how are
you assessing your ability to take risk right now? Because
the fundamental thing that businesses do in order to expand,
there's a reason why we use the term lever up.
It's because they typically borrow money to do so. They
don't just invest their own they use other people's money.
(16:50):
Tail's old as.
Speaker 3 (16:51):
Time, yep.
Speaker 2 (16:52):
And so the question that's out there is for all
the bean counters with their spreadsheets that went to MBA programs,
who I talk about quite derisively quite often, what numbers
are you plugging into those spreadsheets right now? And how
do they inform how you're making decisions? And it might be, hey,
(17:12):
we have, you know, three different sets of numbers that
we're plugging in, and if two add of the three work,
we go ahead with it. And if two out of
the three don't, then we don't because you don't really know,
like can anyone conclusively say they know what trade policy
is gonna look like January one, twenty twenty six now.
And so this is the piece that I think matters,
(17:33):
which is what are we seeing in terms of companies
and their willingness to spend money to make money?
Speaker 4 (17:42):
Right, this, like every other recession in American history, primarily
will not be a consumer led recession if we get one.
Speaker 3 (17:49):
It's what our business is planning.
Speaker 4 (17:51):
What is going to happen there The last thing to
show up, And I know we keep talking about and
people keep looking at, but I think the very last
thing to show up will be consumer spending dropping.
Speaker 2 (18:03):
I will say, there's also just again the one place
where you're not seeing really any hesitation at least that
has you know, been notable to this point. Anything related
to AI is still moving, you know, at a pretty
good clip. We had a little bit of concern about
that after deep seek and some of the stuff about hey,
is data center growth slowing? Given what we've seen this
(18:23):
week about Hey, like, we're gonna just send a bunch
of chips over to the Middle East and we'll see
what happens. That fear appears to have dissipated in markets
for the time being. We'll see if it comes back.
Speaker 5 (18:33):
I found this.
Speaker 2 (18:34):
This was pointed out by Luke Kwa, who writes for
Sherwood News. Again, this is this is really interesting here.
So the Cisco CEO, Remember Cisco is not you know
what it used to be but they still they still
see everything that's happening in tech. Quote, I think the
AI transition is just so important that they're going to
(18:56):
continue to spin until they just absolutely have to stop.
And he pulled this quote. This is from a city CEO,
Chuck Prince, back in two thousand and seven. It's a
great pol because it is like, it's a quote that
still sticks with me. When the music stops. In terms
of liquidity, things will be complicated, but as long as
the music is playing, you've got to get up and dance.
Speaker 5 (19:16):
We're still dancing.
Speaker 2 (19:18):
And his point wasn't that the AI thing is going
to end the same way as the housing bubble.
Speaker 5 (19:23):
It's much more.
Speaker 2 (19:24):
Hey, when you have these booms going on, there's so
much incentive drawn to executives to just have to participate,
even if they know it's not going to work out.
And that's what's going on right now. We don't know
if it's going to work out or not. With AI,
Quick Break, Trivia Answers.
Speaker 7 (19:37):
Next, bringing the latest financial news straight to your radio.
Every day, it's The Financial Exchange on the Financial Exchange
Radio Network. Find daily interviews and full shows of The
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Speaker 1 (19:54):
Are YouTube page. Get cut up on anything and everything
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Speaker 6 (20:09):
Seeing that Walmart reported earnings this morning, we asked the
trivia question what state is Walmart headquartered in? And that
would be Arkansas. Gene from Sanford, Maine is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to
the Gene and we play trivia every day here on
the Financial Exchange. See complete contest rules at Financial Exchange
(20:29):
Show dot com.
Speaker 2 (20:32):
Mike, we have a couple of pieces that we're gonna
cover on India. Before we do that, though, there's a
piece from the Hollywood Reporter that I just found.
Speaker 3 (20:45):
What I just I don't know that we've ever covered
the Hollywood Reporter on this.
Speaker 2 (20:49):
No, No, it's it's it's about Netflix, and specifically it's
talking about just what they're finding for like usership, usership, usership,
usership ness.
Speaker 5 (21:03):
Right now, I'll quote here from them.
Speaker 2 (21:05):
Since last year's upfront, monthly monthly active users on an
ad supported tier of Netflix jump from four since last
that doesn't make sense.
Speaker 3 (21:15):
Yeah, it's the Holly What did you call it? What?
Speaker 5 (21:18):
The Hollywood Probably?
Speaker 2 (21:19):
Okay, since last year, monthly active users on an ad
supported tier of Netflix jumped from forty million to ninety
million globally, So there's ninety million people that are using
one of the ads supported tiers on Netflix.
Speaker 5 (21:31):
Yep, that was on the stack.
Speaker 6 (21:32):
By the way, that's okay, what's that?
Speaker 5 (21:34):
This was in the stack? Oh I didn't get to
the back of the stack, now I know that.
Speaker 3 (21:37):
Yeah, yeah, yeah, it's fine.
Speaker 2 (21:40):
Members on such plans spent an average of forty one
hours a month viewing Netflix. So that's more than an
hour day. It's like an hour and a half a
day almost viewing Netflix. So here's this people, here's the
piece that's really interesting to me.
Speaker 3 (21:53):
College dude bingers.
Speaker 2 (21:56):
Remember that the average on an average right now, Netflix
is displaying about six minutes an hour of commercials on
those tiers, So it's about four hours of commercials.
Speaker 5 (22:08):
Yeah.
Speaker 2 (22:09):
In order to avoid four hours of commercials, people are
willing to pay like ten dollars less. I value my
time enough that if I watch that much Netflix, it's
gonna take more than two dollars and fifty cents an
hour to get me to watch those commercials. Yeah again,
(22:30):
but that's just me. Yeah, nobody's doing that math first
and foremost, you're spending two days a year watching commercials
that you could otherwise avoid.
Speaker 6 (22:38):
No different than cable if you think about it.
Speaker 2 (22:41):
I guess this is the thing. But my time is
worth more than two dollars and fifty cents.
Speaker 4 (22:46):
There is never a choice with cable, you're right, Tucker,
But there is never a choice. And it's not cable
HBO that that's where they're making a choice. Oh, speaking
of which, did you see Oh you covered it will Yeah,
we cover that. Okay, we covered it.
Speaker 2 (23:02):
But yeah, forty one hours a month watching Netflix has
to be college kids in like twenty three year old.
Speaker 6 (23:07):
Ye, or they just leave it on and it's a
fish tang.
Speaker 2 (23:10):
Well, so this is the other thing is that Netflix
has done a bunch of studies that people just kind
of leave it on like they used to with like
Law and Order SVU. And this is why so many
of the new like produced by Netflix movies are just
so vapid and stupid.
Speaker 5 (23:22):
Is they're just like, hey.
Speaker 2 (23:24):
It's background noise, and so we're gonna have the characters
tell you what's happening because you're not watching, and that's
why you have conversations and all these made for Netflix
movies that are like, what did you do yesterday? I
saw my friend and they were very upset with me.
I can understand why they were upset. You you betrayed
them horribly.
Speaker 3 (23:42):
At soap opera.
Speaker 2 (23:43):
No, it's like an audiobook on TV. Yeah, that's worse,
but a bad audiobook on TV.
Speaker 5 (23:49):
So there's that.
Speaker 6 (23:50):
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Speaker 5 (24:47):
Peace from Bloomberg.
Speaker 2 (24:49):
It's been reported a couple other places that India has
made an offer to drop tariffs on US goods. And
this according to a statement from President Trump saying, quote,
they offered us a deal where basically they're willing to
literally charge us no tariff. We don't have any additional
details on this, but obviously, look, tariffs are you know,
(25:10):
tariff's on US goods being exported are one of the
things that the Trump administration has talked about wanting to reduce,
along with you know, non tariff barriers.
Speaker 5 (25:17):
And this, and that.
Speaker 2 (25:19):
There's been a ton of reporting that a US India
deal you know, could be on the horizon here. And
so I think obviously the you know, skirmishes with Pakistan
in the last week, you know, put a bit of
a hold on that. But I think we'll have to see,
you know, kind of where things go. Because a few
days earlier this week, the Indian government had threatened to
(25:41):
impose retaliatory tariffs in response to the steel and aluminum
tariffs that are still in place. And so again this
is all kind of going back and forth after what's
gone on with China in the last month.
Speaker 5 (25:52):
I don't think we need.
Speaker 2 (25:53):
To rehash like every publicly held negotiating point, no other
than to say the sides are talking, we'll see where
things get to. But this is one of the ones
that you would expect the Trump administration to get across
the finish line, given the size of the Indian economy,
the importance the Trump administration wants to put on it,
and you know, being able to act as a counterbalance
(26:13):
to China.
Speaker 4 (26:14):
Here's what I have a tough time getting over the
hump on. It applies to India, it applies to the
European Union as well. We've talked at length about how
that ten percent baseline tariff seems to be a floor, right.
Speaker 2 (26:27):
If that's the best deal that you can negotiate, which
based on the UK deal, seems to be.
Speaker 4 (26:32):
So if you are the European Union, don't you still
retaliate if the floor is ten percent and you negotiate
the very best deal you can get with the United
States of America, and that means that all of the
imports from the European Unions still face ten percent, other
than some special carve outs on things that we.
Speaker 3 (26:51):
Maybe I think you still retaliate.
Speaker 4 (26:54):
Maybe I think if India is in that same position
that hey, if we can't get this baseline down to zero,
why are we going to offer zero percent tariff for
products coming into our country? And that's and then how
does the United States respond to all of that? How
does present trap respond to that? Because that is by
definition retaliatory. Those are big roadblocks that I don't have
(27:14):
an answer to. India I'm not sure about. But the
European Union, I'm fairly certain they're not going to go
to zero if we stick a ten again.
Speaker 2 (27:24):
Maybe there's some way that there's part of this. There
may be more to give for India than the UK.
I mean, look, let's be on just given the relative
size of the UK and what they have to offer
in terms of like natural resources and like stuff that
the US like might not be able to produce itself
or chooses not to produce itself. Right, the UK is
(27:46):
a heavily service based economy. What can they what can
they give you. You know that that's going to be a
big enough concession. Maybe India has something more that they
can give. I guess that's the only thought that I
would have. There also mentioned in here, and it's also
a separate piece on Bloomberg as well. The President asked
Apple to stop moving iPhone production to India. The quote
(28:08):
here from President Trump had a little problem with Tim
Cook yesterday. He is building all over India. I don't
want you building in India. And as a result, he
says that Apple will be upping their production in the
United States. So, look, here's the deal. Whether you think
this specific thing is good or bad, do we want like? Again,
(28:29):
I always like to think of this in terms of like,
think of the person who you think is like least
qualified to be president it's probably me, And then ask yourself,
would you want that person, whether it's Chuck, whether it's Mike,
whether it's Bernie Sanders, President Trump, whoever it might be,
the person who you think is least qualified to run
the economy. Do you want them to be telling companies
(28:52):
where to produce their goods?
Speaker 3 (28:54):
Yeah?
Speaker 5 (28:55):
I don't.
Speaker 2 (28:56):
And that's the problem is. Look, you might totally agree
that Tim Cook should have Apple building more iPhones here.
But what if the next president is you know, I
don't know, Hank Hankerson who comes in, is like, hey, Tim,
you better move all that production to Fiji, otherwise I'm
gonna tax you out the wazoo.
Speaker 5 (29:19):
Like that's not what I want. Like, that's not a stable.
Speaker 2 (29:25):
Environment for business, which in turn makes it not a
stable environment for other human beings because we ultimately most
of us need to be employed by businesses we do
and so like that. That's my issue on this is
not like with the specifics of any particular thing, but hey,
(29:46):
imagine the person that you think is least qualified having like.
Speaker 3 (29:49):
This degree of power, this degree of power.
Speaker 5 (29:52):
I don't want that. That's all I know. Let's take
a quick break.
Speaker 2 (29:56):
When we come back, we're gonna be joined by Ted
Rossman from Bank Rate talking about not their survey, but
the New York Feds Q one Household Debt and Credit report.
Speaker 5 (30:06):
Right after this.
Speaker 1 (30:08):
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Speaker 6 (30:34):
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Speaker 4 (31:07):
Joining us now is Ted Rossman from Bank Ra talking
to us about the New York Feds quarterly report on
household debt. Ted, thanks for joining us, appreciated my pleasure.
Speaker 8 (31:15):
Good to be here.
Speaker 3 (31:16):
So in the first quarter of the year, it looks
like Americans followed the age old trend of paying off
those end of year presence debt that they incurred. But
what is the status of American balance sheets at the moment?
According to the New York Fed.
Speaker 9 (31:31):
Total consumer dead is at a record eighteen trillion dollars.
Credit Card debt was down a little bit in the
first quarter. That typically happens in Q one. People get
these New Year's resolutions to payoff debt, spend less, save more,
people use tax refund money to pay off dead in
the first quarter.
Speaker 8 (31:51):
The New York Fed has been.
Speaker 9 (31:52):
Doing this particular data study since two thousand and three,
and every single time, except for one year that it
was flat. Every other time balances fell. Credit card balances
fell from Q four to Q one.
Speaker 8 (32:03):
So we kept the street going.
Speaker 9 (32:04):
This year, credit card balances were down two point four
percent quarter over quarter. That could be short lived relief, though,
because balances usually grow in the second, third, and fourth quarters.
And like we said, Americans have a lot of other
debt too. Mortgage, home equity, and student loan balances.
Speaker 8 (32:23):
All grew in the first quarter.
Speaker 9 (32:25):
Credit cards and auto loans were down a little bit,
but that might be a brief pause.
Speaker 4 (32:29):
Now, Ted, can you talk to me a little bit
about those balances, because look, we always expect credit card
balances and other types of balances to go up. Inflation
goes up, home prices go up, and so naturally mortgages,
car loans. All of these things increase over time, but
it's appearing to me now that credit cards in particular
are running away, even compared to where inflation has been
(32:50):
over the last few years.
Speaker 8 (32:52):
It's one of these all news is local kind of things.
Speaker 9 (32:54):
And I don't mean geographically, I mean more at the
household level. Roughly half of credit card holders and fall
every month and avoid interest and benefit from rewards, and
then the other half carry expensive debt. The average credit
card rate is twenty point one to two percent. That's
close to a record high. There is just such a
stark gap there between those who pay in full and
(33:15):
those who don't. When we see these aggregate statistics like
the one point one eight trillion dollars in credit card
debt that Americans have, that reflects balances at a moment
in time. It's what people owe on their statement. Half
of those people pay in full every month. So it
would actually be better if these data sources would go
a little deeper as far as what's true debt and
(33:38):
what's not. Because you're right, I mean, in some cases
this is a proxy for economic activity. People are spending,
they're using less cash, they're using more cards. The population's growing,
we really need to think about the household impacts of
are you in the half that's paying it off right
away or are you in the half that's trapped in
this expensive debt cycle.
Speaker 4 (33:59):
We always see some degree of delinquencies when it comes
to credit cards, and those get worse during recession.
Speaker 3 (34:04):
Obviously.
Speaker 4 (34:05):
I want to talk about another area of the market, though,
which is student loan debt. According to the numbers that
I'm seeing, total student loan debt in the United States
is about one point seven seven trillion dollars, which you know,
is considerably smaller than say the mortgage market, for example,
But the delinquencies and there are ticking up. What can
you tell us definitively about the market for student loans
(34:27):
and what people are facing right now?
Speaker 9 (34:29):
Student loan delinquencies are a problem. This is sort of
a car crash that's been brewing in slow motion. Because
remember there was that long payment pause during the pandemic,
and then there was the one year on ramp. Even
once payments were supposed to resume, there was kind of
this wink and a nod about like, oh, we won't
really report you as late for another year. Well that
expired last fall, it's ninety days after that where you're
(34:52):
considered seriously delinquent. It's two hundred and seventy days until
you're considered in default. So really we're just kind of
in the early stages now of something that's been brewing
for five years. Just this month, the government started collections
activity on student loans for the first time since the pandemic.
July first is right around the date when a lot
(35:13):
of these initial defaults are going to kick in.
Speaker 8 (35:15):
It's believed that about one.
Speaker 9 (35:17):
In four student loan borrowers are behind on their payments.
And this is really a significant issue for the broader
economy too, because there's a spillover effect, Like if you're
struggling with student loans, you might also be struggling with
something like credit card debt, so it is related.
Speaker 4 (35:34):
Ted Maybe you know this, maybe you don't, and sorry
for just posing to you quickly, but do collections on
student loans differ significantly from the way it works for
say a delinquent credit card, given that it's the government?
Speaker 9 (35:46):
Notable there is that student loans are really hard to
discharge in bankruptcy. I mean, not that we necessarily want
to be in bankruptcy. But you know, something like credit
card debt is generally pretty easy to get wiped away.
Of course, there are still consent sequences. You have credit
score damage, you can be sued for non payment. But
Uncle Sam doesn't let people off the hook for student loans.
(36:09):
They can seize some or all of your tax refund
social Security money.
Speaker 8 (36:14):
They can garnish your wages.
Speaker 9 (36:15):
I mean, these are some of the consequences that are
going to start to kick in for people this summer.
So anybody struggling with student loans really needs to make
this a priority. Speak up, contact your servicer, maybe work
with a reputable nonprofit like Money Management International. You can't
hide from federal student loan debt.
Speaker 4 (36:34):
Ted Rossman from bank Rade joining us today talk about
the first quarter New York Fed household debt and credit report.
Ted as always appreciated. Thank you, We'll talk to you soon.
Speaker 8 (36:43):
Sounds good. Thanks.
Speaker 5 (36:45):
What else do we want to cover?
Speaker 3 (36:48):
That's your call, Chuck, it's my call. Yep.
Speaker 2 (36:51):
Barista strikeover dress coded Starbucks, Yep. Not enough flair.
Speaker 4 (36:56):
Not enough flair would be my takeaway. They are acquiring
everyone to wear an all black long sleeve shirt. It
seems like I don't even know if it's long sleep,
but all all solid black tops underneath their green what
is that a smock?
Speaker 8 (37:12):
Apron?
Speaker 3 (37:12):
Apron? Yeah, smock, it's clearly an apron. I forgot the
word for apron.
Speaker 5 (37:18):
Can you give me to Starbucks to do some painting?
Speaker 3 (37:23):
And people are walking off the job for that? I
don't know. It seems seems unnecessary to I.
Speaker 6 (37:32):
Mean, like people at a workers at Chipole are like
where the chippole polo and black pants, like they don't
have problems.
Speaker 2 (37:39):
So like issue here is that the place where they're
doing this is that they are unionized shops. Yeah, and
so even stuff like this gets collectively no. So Tucky,
here's the thing. I know you shrugged at me, But
here's the thing.
Speaker 5 (37:51):
I shrugged pretty hard.
Speaker 2 (37:53):
It was the fu shrug that you gave me. So
here's the thing. If you are in a union, you
can't give an inch because they you give a mile.
Speaker 3 (38:00):
Ye that's fair.
Speaker 2 (38:01):
Like, if you're gonna let management roll you on this,
then you're gonna get rolled on everything.
Speaker 5 (38:05):
So while I may think, hey, you should be.
Speaker 2 (38:07):
Able to wear whatever you want, and you know, or
if the boss says do this, if it's collectively bargained.
You kind of got to stand up otherwise you don't
really have anything collectively bargained.
Speaker 5 (38:18):
Let's take a quick break.
Speaker 2 (38:19):
Tomorrow we will collectively bargain for our entire two hours show,
and we'll wrap up the word looking forward to it.
Speaker 5 (38:25):
Can't wait.
The Financial Exchange is produced by Money Matters Radio and
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(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:09):
We're two on the Financial Exchange, and we got markets
settling off very, very modestly today. The Dow's off eighty points,
the S and P is off five, the Nasdaq is
off eighty nine. Just not too much going on, which
is totally fine after a nice roll. You don't need
stocks to go up, you know, one or two percent
(01:31):
every day. That's not realistic and typically not healthy in
markets if they do that forever as well, because they
can't do that forever, they get tired. Their little stock
legs just run out of energy and they go splat.
So it's nice just to have a day where you
kind of take some take a little pause and calm
down and everything. We've got the ten year treasury moving
(01:54):
down six bases points to four point four to six percent,
so reversing itself after you know, pretty substantial move up
over the last month or so. Remember the ten years
down around four to one at the start of April.
It crossed four or five yesterday. So a little bit
of a relief here in yields moving up. That should
help out the mortgage market a little bit, because yesterday,
(02:16):
according to Mortgage News Daily, we saw the average thirty
year fixed rate mortgage move up to six point nine
to nine percent, so getting you know, right around that
seven percent mark. And again it's it's never great when
you're in the middle of the spring housing season and
rates are moving up as you are going through it. Oil,
we got West Texas Intermediate down a dollar eighty seven
(02:38):
a barrel, this on hopes of some type of deal
between the US and Iran that would end up bringing
some Iranian oil back to the market. And we've got
gold today moving up nineteen dollars and sixty cents an
ounce to thirty two oh seven and ninety cents Mike.
This morning, J Powell had some common so I can't
(03:00):
remember what he was speaking at, but at eight forty
am he started speaking and everyone started paying attention to him,
because when you are the chair of the.
Speaker 3 (03:10):
Federal Reserve, that's what happens.
Speaker 2 (03:13):
Yeah, I mean, look, you're basically, when it comes to
the economy, probably the most powerful person in the world,
if not a close second. I mean, here, here's the thing,
like when you're the FED.
Speaker 3 (03:24):
But it would be first in that scenario.
Speaker 2 (03:26):
The only other person that I would consider is the President.
I mean, as We've seen what the President can do
can move markets pretty substantially in the last you know,
few months. Yep, Powell could do similar things. But you know,
it's again like I think it's basically between the two
of them, is to you know, who has the most
juice when it comes to the economy. So a couple
(03:46):
of things that Powell talked about in his speech. The
first is, and this is not really surprising, talks about, Look,
we're gonna have, you know, potentially a series of supply shocks.
It's not going to allow us to really do a
whole lot as it relates to to managing the economy
because we're kind of going to be perpetually waiting to
see what happens as these supply shocks come up and subside,
(04:08):
and we don't know the path they're going to take,
and so given that uncertainty, we kind of have to
put anything on hold right now because we have to
see how these actually impact the economy.
Speaker 3 (04:19):
The supply shocks term is a term from.
Speaker 4 (04:22):
Those who studied the nineteen seventies period of inflation and
the oil embargo. All of those supply shocks are largely
accredited to the high inflation of the nineteen seventies and
early eighties, combined with Federal Reserve missteps along the way
when it came to addressing inflation.
Speaker 3 (04:40):
I guess, is there anything how similar?
Speaker 4 (04:44):
Can we put these in those same categories of what
we were seeing in the nineteen seventies, because I can
continue to hear that so hotly debated of hey, this
is very different than the nineteen seventies supply shocks, and
we shouldn't, you know, really be paying as much attention
to these supply shocks as the ones that we're back
in the nineteen seventies. And of course they're different. They're
not oil supply shocks. And even if we got an
(05:05):
oil supply shock, I don't think it would have the
same effect that it did in the nineteen seventies.
Speaker 3 (05:09):
Sure, but I'm with J. Powell on this. I don't
think that they can be swept to the side and ignored.
Speaker 1 (05:15):
No.
Speaker 2 (05:15):
I mean, here's the thing is, if you have a
world in which countries and companies are trying to remove
some of the integrations that they've previously had with each other,
or at least manage them differently, you're going to have
some bumps in that process. And you're also moving to
(05:36):
a situation where you're no longer you're no longer selecting
the most economically advantageous choice for producing something. You're selecting
one based on other criteria. Now there's other criteria, maybe valid,
they may be invalid. I'm not saying that this is
(05:59):
good or bad. There's some that you could say, Hey,
it's if if someone wanted to argue, hey, we should
produce all materials for the F thirty five fighter in
the United States because of national security concerns, I can
buy that as a convincing argument. Unfortunately, national security concerns
(06:22):
are not something that's valid when it comes to socks. True,
do we need to produce enough socks for all Americans
here in the United States?
Speaker 5 (06:30):
Not really.
Speaker 2 (06:30):
If if, if worse comes to worse, go without socks,
buy a slipper, you know, like flip flops, flip flops summer.
You know, you'll figure it out. You can't really figure
it out with the F thirty five. But here's the
thing about the F thirty five. It's a big multinational,
you know, manufacturing process. Because we also have you know,
allies who want them to be sold to them, And
(06:51):
part of it is Hey, the manufacturer part of this
in you know, country X, Y and Z, and so
it's this whole joint venture, which is again another good
reason to to do something. Potentially, there are other things
that are like abject bad reasons for you know, wanting
to have something produced in a different way. If if
if I woke up and let's say that I were,
(07:13):
you know, King of chuck Land, and I woke up
and said I would like to reclassify all two by
fours as four by eights in order to make buildings
more sturdy, anyone who builds houses would be like, hey, Chuck,
you don't even know what you're talking about accurate, and
b that's not necessary and it'll cost a whole lot
(07:33):
more without providing an additional benefit. So like, it's not
to say that any of this is good or bad.
It's just that it is. We are making decisions now
that are not because companies are trying to find the
cheapest or most efficient way to do something, but rather
for other reasons, some of which can be good, some
of which can be bad. But ultimately it is probably
gonna drive some additional cost because it's reversing the low
(07:57):
cost push.
Speaker 5 (07:58):
That companies have had for the last forty years.
Speaker 4 (08:00):
If it sticks, and so that's I think a fair
category of a supply shock.
Speaker 5 (08:05):
What do you mean if it sticks?
Speaker 3 (08:08):
I think you could make a compelling argument that nine
months from now, nobody's talking about realigning supply chains, nobody's
talking about tariffs, and it's all been swept to the sideline.
Speaker 5 (08:18):
Talk to me about the compelling case, compel me.
Speaker 4 (08:22):
What we've seen over the last four weeks has been
a very clear path towards de escalation on trade. We
have word this morning that India is considering reducing all
tariffs to zero. European Union has done the same. It
seems unlikely to me that we get back to the
level of low tariffs that we saw on January fourth.
(08:43):
I heard it reported from the Journal or something this
morning that they put out an offer to eliminate all
tariffs on US made products coming into the US are coming.
Speaker 3 (08:51):
Into the EU.
Speaker 4 (08:55):
So could I make a case that nine months from
now tariffs are still higher than they were in January,
but are low enough that we are not talking about
our reshuffling of supply chains. Yeah, I think I could
make that case.
Speaker 2 (09:06):
You do, Yeah, I'm just trying to unpack what that means.
If that's the world we're in there, I don't think
we can.
Speaker 3 (09:18):
Yeah, okay.
Speaker 2 (09:20):
The reason that I don't think we can they need
the revenue. They need the revenue to pass the tax bill.
Speaker 4 (09:26):
I think they need the revenue to pass the tax bill,
but once pasted, I don't think they need the revenue anymore.
Speaker 2 (09:31):
If they get rid of the revenue and pass the
tax bill as it's currently like trending, Oh the.
Speaker 3 (09:36):
Depthsit will blow out.
Speaker 4 (09:37):
If that's somebody else's the ten years going to eight percent,
that's been always been somebody else's problem.
Speaker 5 (09:41):
It won't be. It won't be.
Speaker 4 (09:44):
Yeah, we're getting a bit technical here, like yeah, it
might be the president's problem at that exact time. But
that that's kind of went through my head this morning,
is what if we just need the tax revenue from
tariffs to get the tax bill done, and then you
just say, well, yeah, never mind.
Speaker 2 (09:59):
Then we're head to a very bad place. Actually, and
that place is one where either then you do have
perpetually high inflation or you got the ten year at
eight and what that means for the US economy.
Speaker 3 (10:12):
Yeah, neither whichs are very good.
Speaker 2 (10:16):
So this late leads us to the next piece, is
it too late to save the US economy? We got
to go to a commercial, but we'll fill you in
on that when we come back, and we'll also actually
know yes, we will do that, and we'll also do
some trivia right after this.
Speaker 1 (10:29):
Miss any of the show. Catch up at your convenience
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(10:53):
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Radio Network.
Speaker 6 (11:04):
Time for trivia here on the Financial Exchange in As
we discussed earlier this morning, Walmart released their quarterly earnings
that showed strong sales, but more than that, price increases
are coming. Walmart has been in business since nineteen sixty four,
when it was founded by Sam and Bud Walton. So
trivia question today, what state is Walmart headquartered in? Once again,
(11:28):
what state is Walmart headquartered?
Speaker 3 (11:30):
In be the.
Speaker 6 (11:31):
Seventh person today to text 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 seventh correct response to text us at six one
seven three six two thirteen eighty five will win that
T shirt. See complete contest rules at Financial Exchange Show
dot com. I can actually tell you the city that
(11:53):
they're headquartered in, don't.
Speaker 5 (11:56):
I won't, but I could. I know you could. I
could just letting you know. Talker isn't too late.
Speaker 2 (12:04):
To save the US economy. That's the headline from the
piece in Bloomberg. So here's the thing. Before we answer
the question of whether it's too late to save the
US economy, we need to actually ask how much damage
has been caused in the US economy and does it
need saving?
Speaker 4 (12:25):
Yeah, that was my first question. Does the economy need
quote saving?
Speaker 2 (12:30):
I don't know, And anyone else professing that they know
exactly what the economy is going to do over the
next six months is lying to you.
Speaker 5 (12:38):
And here's why.
Speaker 2 (12:40):
In a span of forty five days, we have seen
an absolutely ridiculous amount of volatility related to how much
stuff may or may not cost to bring into the
United States.
Speaker 3 (12:56):
Ridiculous is a good description.
Speaker 4 (12:57):
Yeah.
Speaker 2 (12:58):
I have no idea how this is affected what businesses
are planning or we're planning undoing later this year, Nor.
Speaker 4 (13:05):
Do I know how consumers are thinking about their own
personal financial situation today compared to February.
Speaker 2 (13:11):
First, what I can tell you. What I can tell
you is and Mike, can I talk about this a
good amounts. It's really rare to see US households change
their spending in a material way before being forced to write.
(13:33):
And it's not to say that people may not have
like shifted their spending patterns the last couple months, but
it was most likely. Hey, I was gonna buy a
car in September. Okay, I'm buying the car in March instead,
and then September auto sales are weak. Hey, you know what,
I'm a little bit nervous that we're not going to
be able to get all the cat food because it's
(13:54):
made in China. Okay, let's buy six months worth of
cat food right now. Things like that and that, like
people may have pulled forward demand. I don't think in
the aggregate we're seeing any information right now that points
to a conclusive change in spending in either direction. You
might have had some wobbles here and there to the
upside or downside, depending on the category, but by and large,
(14:20):
to quote you know, the late great Charlie Munger, we
ain't seen it, he said that.
Speaker 5 (14:27):
No he didn't.
Speaker 2 (14:27):
I just like making up Charlie Munger quotes right now.
Just it's kind of in a little monger thing, you know. Yeah,
I don't know why.
Speaker 3 (14:36):
Yeah.
Speaker 4 (14:36):
So that really is a precursor to asking about rescuing
or saving the state of the US economy. You have
to prove out that it is in fact headed for
a bad place, which, look, it does not take a
genius to paint that picture. Certainly it could be that
we are heading for a recession. The counterpoint to many
(14:57):
of these things would be we are entering any sort
of financial difficulty and an amazingly strong starting point. Unemployments
at four point two percent, inflations under three, consumer household
debt will totally not great. I mean, if home prices
(15:17):
faill by twenty percent, how many people would be underwater
on their mortgages. Well, it doesn't matter if they're not
forced to sell them it also it doesn't matter. But
I can't imagine there's been many points in time where
that could happen and fewer Americans would be underwater on
their mortgages. So I just go back to these scenarios,
and I am, as you've heard us, quite concerned about
(15:39):
where this all could go.
Speaker 3 (15:41):
But my biggest concerns.
Speaker 4 (15:42):
Are more about, Hey, does this do long lasting damage
to the state of the dollar as a reserve currency?
What does this do to you long lasting relationships that
we frankly will not see play out over the course
of the next six months.
Speaker 5 (15:57):
Let's even because again, like some of that stuff's like.
Speaker 2 (16:00):
Kind of nebulous, like we'll it change the dollars right
currency status?
Speaker 3 (16:04):
Like who knows? That's too nebulous, men, And what will
happen if it does?
Speaker 5 (16:08):
You're sitting there.
Speaker 2 (16:09):
With too much smoke around your head. Instead, I like
to think of it in terms of like get get
more micro than that. And this is the place where
I don't think we know and we just need to
see how it plays out for the next six months,
which is why J. Powell used the term weight like
four hundred times during his press conference a couple of
weeks ago. If you are a business owner, whether your
(16:30):
business has three employees or three hundred thousand, how are
you assessing your ability to take risk right now? Because
the fundamental thing that businesses do in order to expand,
there's a reason why we use the term lever up.
It's because they typically borrow money to do so. They
don't just invest their own they use other people's money.
(16:50):
Tail's old as.
Speaker 3 (16:51):
Time, yep.
Speaker 2 (16:52):
And so the question that's out there is for all
the bean counters with their spreadsheets that went to MBA programs,
who I talk about quite derisively quite often, what numbers
are you plugging into those spreadsheets right now? And how
do they inform how you're making decisions? And it might be, hey,
(17:12):
we have, you know, three different sets of numbers that
we're plugging in, and if two add of the three work,
we go ahead with it. And if two out of
the three don't, then we don't because you don't really know,
like can anyone conclusively say they know what trade policy
is gonna look like January one, twenty twenty six now.
And so this is the piece that I think matters,
(17:33):
which is what are we seeing in terms of companies
and their willingness to spend money to make money?
Speaker 4 (17:42):
Right, this, like every other recession in American history, primarily
will not be a consumer led recession if we get one.
Speaker 3 (17:49):
It's what our business is planning.
Speaker 4 (17:51):
What is going to happen there The last thing to
show up, And I know we keep talking about and
people keep looking at, but I think the very last
thing to show up will be consumer spending dropping.
Speaker 2 (18:03):
I will say, there's also just again the one place
where you're not seeing really any hesitation at least that
has you know, been notable to this point. Anything related
to AI is still moving, you know, at a pretty
good clip. We had a little bit of concern about
that after deep seek and some of the stuff about hey,
is data center growth slowing? Given what we've seen this
(18:23):
week about Hey, like, we're gonna just send a bunch
of chips over to the Middle East and we'll see
what happens. That fear appears to have dissipated in markets
for the time being. We'll see if it comes back.
Speaker 5 (18:33):
I found this.
Speaker 2 (18:34):
This was pointed out by Luke Kwa, who writes for
Sherwood News. Again, this is this is really interesting here.
So the Cisco CEO, Remember Cisco is not you know
what it used to be but they still they still
see everything that's happening in tech. Quote, I think the
AI transition is just so important that they're going to
(18:56):
continue to spin until they just absolutely have to stop.
And he pulled this quote. This is from a city CEO,
Chuck Prince, back in two thousand and seven. It's a
great pol because it is like, it's a quote that
still sticks with me. When the music stops. In terms
of liquidity, things will be complicated, but as long as
the music is playing, you've got to get up and dance.
Speaker 5 (19:16):
We're still dancing.
Speaker 2 (19:18):
And his point wasn't that the AI thing is going
to end the same way as the housing bubble.
Speaker 5 (19:23):
It's much more.
Speaker 2 (19:24):
Hey, when you have these booms going on, there's so
much incentive drawn to executives to just have to participate,
even if they know it's not going to work out.
And that's what's going on right now. We don't know
if it's going to work out or not. With AI,
Quick Break, Trivia Answers.
Speaker 7 (19:37):
Next, bringing the latest financial news straight to your radio.
Every day, it's The Financial Exchange on the Financial Exchange
Radio Network. Find daily interviews and full shows of The
Financial Exchange on how.
Speaker 1 (19:54):
Are YouTube page. Get cut up on anything and everything
you might have missed. This is the Financial Exchange Radio Network.
Speaker 6 (20:09):
Seeing that Walmart reported earnings this morning, we asked the
trivia question what state is Walmart headquartered in? And that
would be Arkansas. Gene from Sanford, Maine is our winner today,
taking home a Financial Exchange Show t shirt. Congrats to
the Gene and we play trivia every day here on
the Financial Exchange. See complete contest rules at Financial Exchange
(20:29):
Show dot com.
Speaker 2 (20:32):
Mike, we have a couple of pieces that we're gonna
cover on India. Before we do that, though, there's a
piece from the Hollywood Reporter that I just found.
Speaker 3 (20:45):
What I just I don't know that we've ever covered
the Hollywood Reporter on this.
Speaker 2 (20:49):
No, No, it's it's it's about Netflix, and specifically it's
talking about just what they're finding for like usership, usership, usership,
usership ness.
Speaker 5 (21:03):
Right now, I'll quote here from them.
Speaker 2 (21:05):
Since last year's upfront, monthly monthly active users on an
ad supported tier of Netflix jump from four since last
that doesn't make sense.
Speaker 3 (21:15):
Yeah, it's the Holly What did you call it? What?
Speaker 5 (21:18):
The Hollywood Probably?
Speaker 2 (21:19):
Okay, since last year, monthly active users on an ad
supported tier of Netflix jumped from forty million to ninety
million globally, So there's ninety million people that are using
one of the ads supported tiers on Netflix.
Speaker 5 (21:31):
Yep, that was on the stack.
Speaker 6 (21:32):
By the way, that's okay, what's that?
Speaker 5 (21:34):
This was in the stack? Oh I didn't get to
the back of the stack, now I know that.
Speaker 3 (21:37):
Yeah, yeah, yeah, it's fine.
Speaker 2 (21:40):
Members on such plans spent an average of forty one
hours a month viewing Netflix. So that's more than an
hour day. It's like an hour and a half a
day almost viewing Netflix. So here's this people, here's the
piece that's really interesting to me.
Speaker 3 (21:53):
College dude bingers.
Speaker 2 (21:56):
Remember that the average on an average right now, Netflix
is displaying about six minutes an hour of commercials on
those tiers, So it's about four hours of commercials.
Speaker 5 (22:08):
Yeah.
Speaker 2 (22:09):
In order to avoid four hours of commercials, people are
willing to pay like ten dollars less. I value my
time enough that if I watch that much Netflix, it's
gonna take more than two dollars and fifty cents an
hour to get me to watch those commercials. Yeah again,
(22:30):
but that's just me. Yeah, nobody's doing that math first
and foremost, you're spending two days a year watching commercials
that you could otherwise avoid.
Speaker 6 (22:38):
No different than cable if you think about it.
Speaker 2 (22:41):
I guess this is the thing. But my time is
worth more than two dollars and fifty cents.
Speaker 4 (22:46):
There is never a choice with cable, you're right, Tucker,
But there is never a choice. And it's not cable
HBO that that's where they're making a choice. Oh, speaking
of which, did you see Oh you covered it will Yeah,
we cover that. Okay, we covered it.
Speaker 2 (23:02):
But yeah, forty one hours a month watching Netflix has
to be college kids in like twenty three year old.
Speaker 6 (23:07):
Ye, or they just leave it on and it's a
fish tang.
Speaker 2 (23:10):
Well, so this is the other thing is that Netflix
has done a bunch of studies that people just kind
of leave it on like they used to with like
Law and Order SVU. And this is why so many
of the new like produced by Netflix movies are just
so vapid and stupid.
Speaker 5 (23:22):
Is they're just like, hey.
Speaker 2 (23:24):
It's background noise, and so we're gonna have the characters
tell you what's happening because you're not watching, and that's
why you have conversations and all these made for Netflix
movies that are like, what did you do yesterday? I
saw my friend and they were very upset with me.
I can understand why they were upset. You you betrayed
them horribly.
Speaker 3 (23:42):
At soap opera.
Speaker 2 (23:43):
No, it's like an audiobook on TV. Yeah, that's worse,
but a bad audiobook on TV.
Speaker 5 (23:49):
So there's that.
Speaker 6 (23:50):
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Speaker 5 (24:47):
Peace from Bloomberg.
Speaker 2 (24:49):
It's been reported a couple other places that India has
made an offer to drop tariffs on US goods. And
this according to a statement from President Trump saying, quote,
they offered us a deal where basically they're willing to
literally charge us no tariff. We don't have any additional
details on this, but obviously, look, tariffs are you know,
(25:10):
tariff's on US goods being exported are one of the
things that the Trump administration has talked about wanting to reduce,
along with you know, non tariff barriers.
Speaker 5 (25:17):
And this, and that.
Speaker 2 (25:19):
There's been a ton of reporting that a US India
deal you know, could be on the horizon here. And
so I think obviously the you know, skirmishes with Pakistan
in the last week, you know, put a bit of
a hold on that. But I think we'll have to see,
you know, kind of where things go. Because a few
days earlier this week, the Indian government had threatened to
(25:41):
impose retaliatory tariffs in response to the steel and aluminum
tariffs that are still in place. And so again this
is all kind of going back and forth after what's
gone on with China in the last month.
Speaker 5 (25:52):
I don't think we need.
Speaker 2 (25:53):
To rehash like every publicly held negotiating point, no other
than to say the sides are talking, we'll see where
things get to. But this is one of the ones
that you would expect the Trump administration to get across
the finish line, given the size of the Indian economy,
the importance the Trump administration wants to put on it,
and you know, being able to act as a counterbalance
(26:13):
to China.
Speaker 4 (26:14):
Here's what I have a tough time getting over the
hump on. It applies to India, it applies to the
European Union as well. We've talked at length about how
that ten percent baseline tariff seems to be a floor, right.
Speaker 2 (26:27):
If that's the best deal that you can negotiate, which
based on the UK deal, seems to be.
Speaker 4 (26:32):
So if you are the European Union, don't you still
retaliate if the floor is ten percent and you negotiate
the very best deal you can get with the United
States of America, and that means that all of the
imports from the European Unions still face ten percent, other
than some special carve outs on things that we.
Speaker 3 (26:51):
Maybe I think you still retaliate.
Speaker 4 (26:54):
Maybe I think if India is in that same position
that hey, if we can't get this baseline down to zero,
why are we going to offer zero percent tariff for
products coming into our country? And that's and then how
does the United States respond to all of that? How
does present trap respond to that? Because that is by
definition retaliatory. Those are big roadblocks that I don't have
(27:14):
an answer to. India I'm not sure about. But the
European Union, I'm fairly certain they're not going to go
to zero if we stick a ten again.
Speaker 2 (27:24):
Maybe there's some way that there's part of this. There
may be more to give for India than the UK.
I mean, look, let's be on just given the relative
size of the UK and what they have to offer
in terms of like natural resources and like stuff that
the US like might not be able to produce itself
or chooses not to produce itself. Right, the UK is
(27:46):
a heavily service based economy. What can they what can
they give you. You know that that's going to be a
big enough concession. Maybe India has something more that they
can give. I guess that's the only thought that I
would have. There also mentioned in here, and it's also
a separate piece on Bloomberg as well. The President asked
Apple to stop moving iPhone production to India. The quote
(28:08):
here from President Trump had a little problem with Tim
Cook yesterday. He is building all over India. I don't
want you building in India. And as a result, he
says that Apple will be upping their production in the
United States. So, look, here's the deal. Whether you think
this specific thing is good or bad, do we want like? Again,
(28:29):
I always like to think of this in terms of like,
think of the person who you think is like least
qualified to be president it's probably me, And then ask yourself,
would you want that person, whether it's Chuck, whether it's Mike,
whether it's Bernie Sanders, President Trump, whoever it might be,
the person who you think is least qualified to run
the economy. Do you want them to be telling companies
(28:52):
where to produce their goods?
Speaker 3 (28:54):
Yeah?
Speaker 5 (28:55):
I don't.
Speaker 2 (28:56):
And that's the problem is. Look, you might totally agree
that Tim Cook should have Apple building more iPhones here.
But what if the next president is you know, I
don't know, Hank Hankerson who comes in, is like, hey, Tim,
you better move all that production to Fiji, otherwise I'm
gonna tax you out the wazoo.
Speaker 5 (29:19):
Like that's not what I want. Like, that's not a stable.
Speaker 2 (29:25):
Environment for business, which in turn makes it not a
stable environment for other human beings because we ultimately most
of us need to be employed by businesses we do
and so like that. That's my issue on this is
not like with the specifics of any particular thing, but hey,
(29:46):
imagine the person that you think is least qualified having like.
Speaker 3 (29:49):
This degree of power, this degree of power.
Speaker 5 (29:52):
I don't want that. That's all I know. Let's take
a quick break.
Speaker 2 (29:56):
When we come back, we're gonna be joined by Ted
Rossman from Bank Rate talking about not their survey, but
the New York Feds Q one Household Debt and Credit report.
Speaker 5 (30:06):
Right after this.
Speaker 1 (30:08):
This is your home for the most comprehensive coverage of
the economy and the trends on Wall Street. This is
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. This is the
Financial Exchange Radio Network.
Speaker 6 (30:34):
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Speaker 4 (31:07):
Joining us now is Ted Rossman from Bank Ra talking
to us about the New York Feds quarterly report on
household debt. Ted, thanks for joining us, appreciated my pleasure.
Speaker 8 (31:15):
Good to be here.
Speaker 3 (31:16):
So in the first quarter of the year, it looks
like Americans followed the age old trend of paying off
those end of year presence debt that they incurred. But
what is the status of American balance sheets at the moment?
According to the New York Fed.
Speaker 9 (31:31):
Total consumer dead is at a record eighteen trillion dollars.
Credit Card debt was down a little bit in the
first quarter. That typically happens in Q one. People get
these New Year's resolutions to payoff debt, spend less, save more,
people use tax refund money to pay off dead in
the first quarter.
Speaker 8 (31:51):
The New York Fed has been.
Speaker 9 (31:52):
Doing this particular data study since two thousand and three,
and every single time, except for one year that it
was flat. Every other time balances fell. Credit card balances
fell from Q four to Q one.
Speaker 8 (32:03):
So we kept the street going.
Speaker 9 (32:04):
This year, credit card balances were down two point four
percent quarter over quarter. That could be short lived relief, though,
because balances usually grow in the second, third, and fourth quarters.
And like we said, Americans have a lot of other
debt too. Mortgage, home equity, and student loan balances.
Speaker 8 (32:23):
All grew in the first quarter.
Speaker 9 (32:25):
Credit cards and auto loans were down a little bit,
but that might be a brief pause.
Speaker 4 (32:29):
Now, Ted, can you talk to me a little bit
about those balances, because look, we always expect credit card
balances and other types of balances to go up. Inflation
goes up, home prices go up, and so naturally mortgages,
car loans. All of these things increase over time, but
it's appearing to me now that credit cards in particular
are running away, even compared to where inflation has been
(32:50):
over the last few years.
Speaker 8 (32:52):
It's one of these all news is local kind of things.
Speaker 9 (32:54):
And I don't mean geographically, I mean more at the
household level. Roughly half of credit card holders and fall
every month and avoid interest and benefit from rewards, and
then the other half carry expensive debt. The average credit
card rate is twenty point one to two percent. That's
close to a record high. There is just such a
stark gap there between those who pay in full and
(33:15):
those who don't. When we see these aggregate statistics like
the one point one eight trillion dollars in credit card
debt that Americans have, that reflects balances at a moment
in time. It's what people owe on their statement. Half
of those people pay in full every month. So it
would actually be better if these data sources would go
a little deeper as far as what's true debt and
(33:38):
what's not. Because you're right, I mean, in some cases
this is a proxy for economic activity. People are spending,
they're using less cash, they're using more cards. The population's growing,
we really need to think about the household impacts of
are you in the half that's paying it off right
away or are you in the half that's trapped in
this expensive debt cycle.
Speaker 4 (33:59):
We always see some degree of delinquencies when it comes
to credit cards, and those get worse during recession.
Speaker 3 (34:04):
Obviously.
Speaker 4 (34:05):
I want to talk about another area of the market, though,
which is student loan debt. According to the numbers that
I'm seeing, total student loan debt in the United States
is about one point seven seven trillion dollars, which you know,
is considerably smaller than say the mortgage market, for example,
But the delinquencies and there are ticking up. What can
you tell us definitively about the market for student loans
(34:27):
and what people are facing right now?
Speaker 9 (34:29):
Student loan delinquencies are a problem. This is sort of
a car crash that's been brewing in slow motion. Because
remember there was that long payment pause during the pandemic,
and then there was the one year on ramp. Even
once payments were supposed to resume, there was kind of
this wink and a nod about like, oh, we won't
really report you as late for another year. Well that
expired last fall, it's ninety days after that where you're
(34:52):
considered seriously delinquent. It's two hundred and seventy days until
you're considered in default. So really we're just kind of
in the early stages now of something that's been brewing
for five years. Just this month, the government started collections
activity on student loans for the first time since the pandemic.
July first is right around the date when a lot
(35:13):
of these initial defaults are going to kick in.
Speaker 8 (35:15):
It's believed that about one.
Speaker 9 (35:17):
In four student loan borrowers are behind on their payments.
And this is really a significant issue for the broader
economy too, because there's a spillover effect, Like if you're
struggling with student loans, you might also be struggling with
something like credit card debt, so it is related.
Speaker 4 (35:34):
Ted Maybe you know this, maybe you don't, and sorry
for just posing to you quickly, but do collections on
student loans differ significantly from the way it works for
say a delinquent credit card, given that it's the government?
Speaker 9 (35:46):
Notable there is that student loans are really hard to
discharge in bankruptcy. I mean, not that we necessarily want
to be in bankruptcy. But you know, something like credit
card debt is generally pretty easy to get wiped away.
Of course, there are still consent sequences. You have credit
score damage, you can be sued for non payment. But
Uncle Sam doesn't let people off the hook for student loans.
(36:09):
They can seize some or all of your tax refund
social Security money.
Speaker 8 (36:14):
They can garnish your wages.
Speaker 9 (36:15):
I mean, these are some of the consequences that are
going to start to kick in for people this summer.
So anybody struggling with student loans really needs to make
this a priority. Speak up, contact your servicer, maybe work
with a reputable nonprofit like Money Management International. You can't
hide from federal student loan debt.
Speaker 4 (36:34):
Ted Rossman from bank Rade joining us today talk about
the first quarter New York Fed household debt and credit report.
Ted as always appreciated. Thank you, We'll talk to you soon.
Speaker 8 (36:43):
Sounds good. Thanks.
Speaker 5 (36:45):
What else do we want to cover?
Speaker 3 (36:48):
That's your call, Chuck, it's my call. Yep.
Speaker 2 (36:51):
Barista strikeover dress coded Starbucks, Yep. Not enough flair.
Speaker 4 (36:56):
Not enough flair would be my takeaway. They are acquiring
everyone to wear an all black long sleeve shirt. It
seems like I don't even know if it's long sleep,
but all all solid black tops underneath their green what
is that a smock?
Speaker 8 (37:12):
Apron?
Speaker 3 (37:12):
Apron? Yeah, smock, it's clearly an apron. I forgot the
word for apron.
Speaker 5 (37:18):
Can you give me to Starbucks to do some painting?
Speaker 3 (37:23):
And people are walking off the job for that? I
don't know. It seems seems unnecessary to I.
Speaker 6 (37:32):
Mean, like people at a workers at Chipole are like
where the chippole polo and black pants, like they don't
have problems.
Speaker 2 (37:39):
So like issue here is that the place where they're
doing this is that they are unionized shops. Yeah, and
so even stuff like this gets collectively no. So Tucky,
here's the thing. I know you shrugged at me, But
here's the thing.
Speaker 5 (37:51):
I shrugged pretty hard.
Speaker 2 (37:53):
It was the fu shrug that you gave me. So
here's the thing. If you are in a union, you
can't give an inch because they you give a mile.
Speaker 3 (38:00):
Ye that's fair.
Speaker 2 (38:01):
Like, if you're gonna let management roll you on this,
then you're gonna get rolled on everything.
Speaker 5 (38:05):
So while I may think, hey, you should be.
Speaker 2 (38:07):
Able to wear whatever you want, and you know, or
if the boss says do this, if it's collectively bargained.
You kind of got to stand up otherwise you don't
really have anything collectively bargained.
Speaker 5 (38:18):
Let's take a quick break.
Speaker 2 (38:19):
Tomorrow we will collectively bargain for our entire two hours show,
and we'll wrap up the word looking forward to it.
Speaker 5 (38:25):
Can't wait.
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