Money Monday with Brian James

Episode Transcript

Speaker 1 (00:02):
Ato six. I think you about Kara see the talk
station right Tom.

Speaker 2 (00:07):
It's always happy to welcome back to this thinking about Garsey.

Speaker 1 (00:09):
Mornings you every Monday.

Speaker 2 (00:10):
At this time we do Money Monday with Brian James
from all Worth Financial.

Speaker 1 (00:14):
Brian, I hope you had a wonderful weekend. Welcome back
to the show.

Speaker 3 (00:17):
As always, hope you did too, and thank you for
the time to once again hang out with you on Monday.

Speaker 2 (00:22):
Always enjoy it. And of course I've been railing about
this all morning. Moody stripped the US of its top
credit rating, knocked this down a notch, of course, catching
up with the likes of Standard and Poors who did
that back in twenty eleven, INFIT Ratings, which did it
back in August at twenty three. But the markets reacting,
futures are down and of course treasury yields have jumped
because the poorer you're credit rating, the more you have

(00:44):
to pay people to invest in your well. In this
particular case country, I mean, and they spelled it out
in black and white, Moody's pointed it out. It's the
growing burden of the financial and federal government's budget deficit
and the rising cost of debt service on it.

Speaker 3 (01:00):
Duh, Yeah, this isn't too big of a shock, or
is it so? So what the credit rating is, of course,
is a way of comparing one country or really anything.
Just about anything has a credit rating, governments, corporations, frankly,
people do too.

Speaker 1 (01:14):
That's what those credit bureaus are for.

Speaker 3 (01:16):
But the whole point is to compare one entity to
another in terms of how likely are they to pay
their debts. And Moody's is the last of the three
major rating facilities to cut the United States down from
a perfect rating, and that that started in twenty eleven,
so in the aftermath of two thousand and eight. S
and P was the first one to cut us and

(01:36):
kind of say, maybe we're.

Speaker 1 (01:37):
Not so good as good as we used to look.

Speaker 3 (01:40):
So yeah, and this isn't too big of a shock
because we are putting ourselves, we are proactively deciding to
present ourselves to the as a country, to the rest
of the world in a different manner where that necessarily
has an impact on the economic output of the country.
And what are the what's the outlook of how can
we be going forward, you know as we have in

(02:00):
the past. And so for sure, that's now having an
impact on the market. The futures are down one to
two percent, depending on what you're looking at. This is
but again, this can't be too much of a shock.
We've consciously decided to do things differently. We talk all
the time about how we can't afford ourselves, we're living
beyond our means, and it is starting to surface here
just a little bit in terms of the rest of
the world's perception of the United States as a credit

(02:22):
worth the facility.

Speaker 2 (02:23):
Well, I suppose the timing couldn't have been better, considering
they're talking about this reconciliation package, which deals with the
debt and spending, and I know there's some moderate Republicans
who are standing in the way of advancing some steeper
cuts because oh, it's my green energy product, you're not
a project. You're not going to cut it in my state,
or oh it's I'm in New Jersey and I wanted
one hundred and twenty four thousand dollars per couple salt

(02:46):
tax because well, the taxes of my state are outrageous.
I mean, we just subsidize the high tax states, high taxation,
and the people that should be paying that by cutting
their federal income tax. I mean, you know, the point
of capping the salt tax at ten thousand dollars, so
we wouldn't be subsidizing those outrageous states.

Speaker 1 (03:07):
That's right.

Speaker 3 (03:08):
What we're doing is taking active steps to hopefully you
reduce that. But there's no way to do all this
kind of stuff without pain that. That's the one thing
that we have not been able to drag across the
finish line here. Both parties recognize and have for decades
that there is a problem and we are moving in
the wrong direction. However, there has never been an effort

(03:28):
where on one side has successfully reached across the aisle
to actually do something about it. And that's really not
even happening now. We just have a situation in situation
where the Republicans obviously dominate both both parts of Congress,
and that's the closest we're going to get to putting
all this in place to make the fixes, but it's
going to have to survive, Brian the midterm elections. Right So,
right now, Donald Trump effectively has you know, pretty much

(03:51):
cart Blanc to do just about whatever he wants to
do because he's got control of Congress for the most part,
and he's ignoring a lot of the rules and regulations
that were in place anyway. But if a lot of
this stuff doesn't get done before the midterm elections, I
can't think that dependulum is not going to swing back
the other way.

Speaker 2 (04:06):
Well back the other way, toward even more reckless spending.
I mean, I mean, I hate to use the phrase
existential threat again, but we're already paying a trillion dollars
a year in debt service and that's only going to
get worse and worse, and that takes away from literally
anything else. That's I don't care what side of the
political spectrum you're on, if you want the government to
pay for something, the more money we have to allocate

(04:27):
the debt service, which is required, you can't just ignore that.
You're not going to have money left over for expanding
this or funding that, whether it's military or one of
the social welfare safety nets, they're all going to be
deprived extra dollars.

Speaker 3 (04:43):
Yeah, that's absolutely right, And this is that's why it's
been so important that we actually get people in the
same room to talk and agree on something. We haven't
been able to do that because the American people have
not been willing to sacrifice what they need to, because
if your congress person is out there trying to say, hey,
we're living beyond our means, we have to stop doing that,
what they're actually saying, if they're serious, is we need

(05:04):
to give up something. And that has not been a
politically tenable stance to take. If you are somebody whose
career and livelihood depends on getting elected again.

Speaker 1 (05:13):
Well and there lies the problem. As far as I'm concerned.

Speaker 2 (05:16):
You should do what's right, what's fiscally responsible, what is
going to save the country from itself, and not just
to pease people see and get re elected. I could
campaign if I cut back medicaid, well, simply requiring people
that are able bodied without families to engage in some work,
training or work. I mean to the tune of what
twenty hours a week is really a small, small ask.

Speaker 1 (05:40):
I just that's not unfair to say.

Speaker 3 (05:43):
But that has to extend to the person who might
take advantage of the opportunity to take down an incumbent representative.
Because that person told the country the truth, it leaves
them to being a sitting duck. Hey, this person told
you had to sacrifice something, I'm telling you the opposite
we're going to keep giving you money to resist that urge.

Speaker 1 (06:01):
But it's been the American way for several hundred years.

Speaker 2 (06:03):
Well, they need to just hold up the Moody's reports. Say, look,
we've already been downgraded. Why because our national debt is
so big it's sucking up all the life out of
the room. This is what we're talking about. So yeah,
you can tell people there don't have to be any cuts,
but it's just gonna get worse, and our borrowing costs
are just gonna get that much greater, and our debt
service is gonna get that much greater. I mean, explain

(06:24):
to my listeners if you can, Brian James, what would
a default look like? How would that play out? If
we couldn't make the debt service on our national debt?

Speaker 3 (06:34):
Nobody comes out of a US default looking pretty The
entire world will be impacted because, whether they like us
or not, we are by far, far, far, far far
the largest economy on the face of the earth. American
economy is twenty two to twenty three trillion dollars something
like that. China is somewhere around nineteen twenty trillion, and
it goes rapidly down from there. So, if all of

(06:54):
a sudden, the rest of the planet basically being the
entire universe, lose his face in the faith in the
United States ability to pay its debt, then all of
a sudden, all those countries and the rest of the
world is going to lose a substantial customer base from
which to sell, and that's going to have a domino effect.
So nobody, even those who would prefer that we get
knocked off our pedestal, will not benefit from that disruption

(07:16):
to that level.

Speaker 1 (07:16):
Now I'm looking at.

Speaker 3 (07:18):
I think these ratings, it's important to understand what the
ratings actually mean because some people might say, well, we're
still since we're the largest economy, that means the ratings
aren't as important because you know, we're just so gosh
darn big. Well, just to give some comparison, there, there
are nine other countries now that have perfect credit ratings.
You still can buy government debt that has perfect credit rating. Germany, Switzerland, Denmark, Sweden, Norway, Netherlands, Australia, Singapore,

(07:41):
and Luxembourg all have better credit ratings in the United
States and subsequently have lower yields if you want to
buy those countries' treasury bonds. You're going to be getting
about two percent on a ten year bond in compared
to the United States, which is currently.

Speaker 1 (07:54):
About four and a half percent.

Speaker 3 (07:55):
The yield on a bond is directly reflective, Brian of
the country's ability to pay its debts. Are if you
are a dead beat, then you're not getting a credit card.
If you do, you'll be paying thirty percent. The rest
of the world is saying the United States needs to
pay four and a half percent while these other countries
need to pay about two to borrow money.

Speaker 2 (08:13):
Well, it is illustrative of the problem. And I don't know.
I guess at some point we may get junk status.
What is junk considered? What nine percent and above or
something along those lines.

Speaker 3 (08:23):
Well, the junk status has to do with the credit
rating itself. It's not the yield directly, but that's triple B.
Triple B is the last investment grade generally speaking, and
below that you get labeled as junk, which doesn't mean
you can't pay your debts. It just means you've kind
of moved into a territory where it's a little more
likely that anybody who owe that you owe money to
ought to be paying attention to to make sure that

(08:44):
you are good for it fair enough.

Speaker 2 (08:46):
If we're going to find out about starter homes and
Greater Cincinnati, are there any even out there more of
Brian James Wilworth Financial, Hey nineteen if you have fair
CD talk Station Money Monday.

Speaker 1 (08:57):
Brian James Allworth financials.

Speaker 2 (09:00):
Hey real quick here, since you talk about credit rating
and the Moody's downgrading a United States credit rating. I
just checked my credit score the other day. I get
a notice from LifeLock saying, hey, your credit score is changed,
or I check it out. You know, I still have
excellent credit, and at one point I actually had a
perfect credit store. It didn't last very long, so it
dropped two points. And the reason is because I have
excellent in every single category except one. They say I

(09:22):
don't have enough accounts that I should have more available credit.
I'm thinking, how bast awkward is that? That doesn't make
any sense to me. I'm dutifully and timefully paying off
what credit cards I have. I don't need any additional credit.
Why in the hell would I want to go out
and get more. It doesn't make any sense.

Speaker 1 (09:40):
Yeah, it is kind of counterintuitive.

Speaker 3 (09:42):
What they're basically saying is that you're such a good
credit risk that we think you should have more. I
think there's a little bit of an ulterior motive in
there to help you encourage you to do that.

Speaker 1 (09:53):
I've noticed that the biggest spikes I've.

Speaker 3 (09:56):
Gotten in my credit score is when you know, if
we do something the house or whatever, and there's some
kind of promotional zero percent rate. Sure, I'll take that.
I don't really care about the credit, don't really need that.
But all of a sudden, a month later, my credit
score spikes because I have an extra line in place,
off of which I'm not paying anybody any interest.

Speaker 1 (10:11):
It just gave me a better price.

Speaker 3 (10:13):
But yes, they do want you to have more if
you take it, if you want to take advantage of
those things, it will give you a higher score.

Speaker 1 (10:18):
All right.

Speaker 2 (10:18):
I'm not interested in it because I'm still fine. It
just drives me crazy when I read that, I'm like,
damn it, why would I want to go out and get,
you know, a more opportunity to borrow that I wouldn't use.
To your point, I wouldn't need it. I don't need it,
I wouldn't use it. So anyhow, moving back to your
topics that you provided. Sorry for the curve ball there, Brian.
I just found that very frustrating. Starter homes are there

(10:42):
any around Cincinnati. I saw the article from Randy Tucker
and from the Enquirer, and apparently they're in very short supply,
very much.

Speaker 1 (10:49):
So.

Speaker 3 (10:50):
Yeah, so if you look around there, there's still plenty
of building going on. Right, we've been talking about this
housing crash that's supposed to be coming for years now.
Maybe maybe we've given up on talking about it. We
found a new shiny object, but that simply hasn't happened.
But no, there's not many starter type homes being built
in Cincinnati, you know, the kind of homes one or
two maybe three bedrooms with the most but obviously to
allow a young family to kind of get started, really

(11:11):
struggling for buyers to find a home for under three
hundred thousand that doesn't require major work, or isn't a
neighborhood that's not quite ideal. The demand is there. Of course,
there are people in the situation. We probably all know
young people who would prefer to get out of their
apartments and their condos and get into something different. But
the supply is not there, and the reason is it's
just not as attractive for builders. Builders are prefer larger

(11:35):
homes because there's more profit margin, that's more scalable. If
you think about fixed costs like permitting and compliance and
all the stuff that they have to do that has
nothing to do with putting two by fours together, Those
fixed costs are the same no matter the size of
the ultimate home, and their preference, of course, is to
make as much money as they possibly can, so they're
focusing on the larger homes.

Speaker 2 (11:53):
Still in this area, well, it's always puzzled me because
unless I've got the whole concept wrong, it seems me
the trend is for people to pursue a smaller home. Now,
that doesn't mean you have to sacrifice on quality. You
could really build a superior quality with all the amenities
much smaller home. You don't have to build some mega
mansion or mini mansion. And when you do, you've got

(12:17):
so much additional you know, like heating and air conditioning expense,
you got to furnish the rooms. It just it seems
to be stupid to have that much space, most notably
if you don't have a really big family, and with
an aging population, the demand for smaller homes is probably
increased because you don't want as much place to have
to clean, Maybe you don't want to go up and downstairs,
and you're looking for ranchumps. That just sounds to me

(12:38):
like an ideal opportunity for a smart developer to build
small er homes compared to what they've been building, but
make them at higher quality to increase that profit margin.

Speaker 3 (12:49):
Yeah, but I think the higher quality part if you're
if you're increasing the profit margin, you're increasing the price.
And that's one of the non starters for a young
family getting started at And we we have a.

Speaker 1 (12:59):
Dress that too with patio homes.

Speaker 3 (13:01):
Patio homes are popping up everywhere, but a starter family
is not going to want that because they need somewhere
to let the kids run around and storage of all
the old baby stuff and all that other thing. And
those neighborhoods tend to be fifty five and older anyway.
So we just haven't filled that gap here in this area.
Other cities have the cities with real real estate spikes
that are really truly issues, such as Austin, Denver, Portland

(13:23):
to Minneapolis. These are places that have changed how they
do zoning laws. So for example, Minneapolis in twenty nineteen
started to allow duplexus and triplexus city wide to at
least let off some of that some of that demand.
Those kind of steps have not been taken around here
yet because it's still arguably affordable for a you know,
somebody who's looking for a quote unquote starter home to
get into that three hundred, three hundred and fifty thousand.

(13:45):
But we're getting to the point where it's just not
going to be feasible for somebody to take that step.

Speaker 2 (13:49):
Unless you're willing to buy one that needs maybe quite
a bit of work.

Speaker 3 (13:54):
Correct or in a neighborhood that is hopefully going to
turn around in the.

Speaker 1 (13:58):
Next decade or so.

Speaker 3 (14:00):
But yeah, you have to kind of you're taking a
risk there if you really need that house with more bedrooms,
you are looking to again pick up something that's gonna
need a lot of work, or in a neighborhood that
you may not want to be raising your kids in.

Speaker 2 (14:11):
Understand tough challenges out there in the world these days.
Is there do you see anything that might turn this around?

Speaker 3 (14:19):
Honestly, we've been talking about this for years, haven't we
been talking about this?

Speaker 1 (14:24):
Ever?

Speaker 3 (14:24):
Since two thousand and eight? Really, you know, I would
have thought it would have happened by now. When is
the bubble gonna pop where people just say, you know what,
I just can't do it.

Speaker 1 (14:31):
I can't buy these houses.

Speaker 3 (14:33):
I'm talking to my clients who are retiring and some
of them are still buying three and four bedroom houses,
and I scratch my head, Brian, why are we doing this?
It's almost like it's become ingrained that I just have
to live in a house that's just all there is
out there. So I'm gonna have a couple empty rooms
just the.

Speaker 1 (14:46):
Way it is fair enough.

Speaker 2 (14:48):
Brian James will continue one more of that topic, right,
you know, I admit, and you know I'm embarrassed to
admit it, but I've said it so many times. Regular
listeners know that I do watch shows like Wheel, Fortune,
d wind Down before I go to bed at eight, Brian,
and it always blows my mind to see the cost
of some of these vacation trips that they put together.
I'm like, Lord almighty, how does any kind of regular,

(15:10):
average American family spend that kind of money to go
someplace like that? And I was never a big guy
when it came to travel, certainly not global travel. I've
always enjoyed spending time here in the United States of America,
where there see seems to be an endless supply of destinations.
But I understand that the big summer vacation plans of
being put on ice this summer.

Speaker 3 (15:33):
Yeah, that's right. So when I'm doing financial plans for clients,
what we always budget for vacation, and used to be
that we would throw in if somebody didn't talk about travel,
like it wasn't a retirement goal, I'd throw in three
thousand bucks because everybody would go down to Myrtle Beach
or Hilton Had, you know, once or twice, and three
thousand bucks would cover. That minimum has now become five
thousand for my folks who don't bring up travel, for

(15:54):
the ones who say, yes, we've always wanted to travel,
we can't wait to do it now, we're putting in
ten to twelve thousand at absolute minimum. For the ones
who want to hit it hard, we're budgeting twenty thousand
dollars per year, and so there's stories in here about
of course, if you're going to budget out a trip
to Europe, that's going to be in the twenty thousand
dollars range.

Speaker 1 (16:11):
To go.

Speaker 3 (16:12):
Make it worth your while. Nobody goes for a long weekend.
You're going to make it at least ten days.

Speaker 1 (16:15):
Or so twenty thousand dollars.

Speaker 3 (16:18):
Now, we budgeted one for the James family. We didn't
end up going because it was twenty twenty and you
can remember what happened.

Speaker 1 (16:25):
Then. We were very close to swiping the credit card.

Speaker 3 (16:27):
But it was going to bet about thirteen thousand at
that point to get all five of us through Scandinavia,
and that was through cost Co, which is about as
reasonable as you can possibly get. But yeah, So we're
hearing stories about forty one percent of people this year
or planning trips of three nights or fewer, meaning you know,
we're taking long weekends. That that's up from thirty seven percent.
So we've seen a ten percent increase year over year

(16:49):
in the people who are saying we're not going to
take as big of a vacation as we've as we've
done in the past. Americans who are planning vacations period
dropped below forty percent this year.

Speaker 1 (16:59):
That's still lower than twenty twenty four.

Speaker 3 (17:01):
In about twelve percent of travelers say they've changed their
plans because of the tariffs, which have spooked him enough
to say, the heck with it, We'll just we'll stay
in this summer.

Speaker 2 (17:09):
Well, I saw this one guy that's quoted in the article.
He said the tariffs sort of got everybody around the
world mad at us. He was worried about being treated
poorly if he showed up at his original destination because
the locals would frown upon US tourists.

Speaker 1 (17:25):
Is that really a thing?

Speaker 3 (17:28):
Yeah, I think some of that stuff is overblown, as
for sexy headlines. So I have a good friend of
mine who's a federal employee and he was sent to
Europe for about three months during all this stuff. He
just got back and we asked him that question, are
you Are you getting grief from anybody?

Speaker 1 (17:41):
And most of it was good natured ribbing, you.

Speaker 3 (17:43):
Know, just kind of saying, hey, the United States isn't
playing nice in the sandbox anymore. But he had no
point faced any kind of true, you know, adverse consequences
because of those headlines. So I wouldn't worry too much
about that part. People know the reality that the average
person wandering around the streets, you know, from the United
States doesn't have control over this and may may not
agree with Oh, I'm not so worried about that.

Speaker 2 (18:03):
That's the practical bottom line is. Listen, I'm not Trump.
I didn't do it.

Speaker 1 (18:08):
For sure.

Speaker 2 (18:09):
I hurried him to the extent it's going to even
do anything anyhow. Has tourism dropped off from foreigners coming
into the United States? I know Canada had a fairly
sizable double digit drop in Canadians interested in visiting the
United States because of tariffs ligiously generally speaking, But how
about generally the US tourism industry. Has it dropped off
for a similar reasons?

Speaker 1 (18:30):
Absolutely? Yeah, for political purposes. Yeah.

Speaker 3 (18:32):
So international travel the United States is down about five
percent in twenty five compared to twenty four. That's despite
earlier forecasts that were predicting close to nine percent growth. Now,
those forecasts, of course, did not take into account what
the United States was going to be doing politically here
in the first quarter of twenty twenty five.

Speaker 1 (18:48):
So we're now.

Speaker 3 (18:50):
Estimating that visitors spending is going to fall by about
eleven percent, and that's going to cost US about eighteen
billion dollars in money that is no longer coming over
from overseas. In the handbook and the pursase of travelers.

Speaker 1 (19:02):
Well, but how does the dollar fare?

Speaker 2 (19:03):
And so far as you know, one's a spending ability,
I mean, are we is a foreign national in good
shape coming here? Do they get more value, let's say,
for their euro here than they otherwise would. Where's the
currency stand?

Speaker 3 (19:17):
Yeah, so the US dollar is weakening, of course because
and what that means is that it is cheaper for
foreigners to come to the United States.

Speaker 1 (19:25):
In the United States should be.

Speaker 3 (19:26):
Looking like a more attractive, attractive option because mathematically speaking,
it's cheaper for them to come overseas.

Speaker 1 (19:32):
I remember when the opposite was true. This is probably
about twenty years.

Speaker 3 (19:34):
Ago, Brian, Yes, and I remember seeing ads in the
paper of all this is how I'm dating myself now,
but ads in the paper for how cheap it was
to go spend a long weekend shopping in Europe.

Speaker 1 (19:44):
Because the opposite was true.

Speaker 3 (19:45):
The dollar was so strong and the euro was so
weak it would cost next to nothing for you to
fly overseas and do that.

Speaker 1 (19:52):
The opposite is it's not.

Speaker 3 (19:53):
Quite the same here but at the but it hasn't
had the impact in terms of the travel demand because
of all the geopolitical stif going on. So people right now,
are focusing on their passions not the numbers.

Speaker 1 (20:04):
Uh.

Speaker 2 (20:04):
Brian James another edition of Monday Monday. Thanks to all
Worth for leaning out every Monday for a nice chat
and helpful information. Brian, I'll look forward to another edition
next Monday, and I hope you have a wonderful week.

Speaker 1 (20:14):
You too, have a good week. Talk to you Monday.
Thanks brother,