November 12, 2025 • 39 mins
Chuck Zodda and Paul Lane discuss how Americans are anxious over affordability and jobs. The Fed is increasingly torn over a December rate cut. Massachusetts' middle class is unraveling. Boston is one of the most expensive cities in the country to live. Disney's battle with YouTube rages on.
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Speaker 1 (00:00):
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(00:42):
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donation today. This is the Financial Exchange with Chuck Zada
(01:06):
and Paul Lane.
Speaker 2 (01:11):
Chuck Paul and talker with you here today, and it
is the twelfth of November, which does this.
Speaker 3 (01:19):
Day bear any historical significance?
Speaker 4 (01:23):
You're the history major. I have no idea.
Speaker 2 (01:27):
Let me see, I'm just like thinking out loud. I
don't think there's anything major here. We go, okay. In
seven sixty four, I think we all remember this, Tibetan
troops occupied Changan for fifteen days, which was the capital
of the Tang dynasty. I know that we all remember
that very well. Oh, kind of interesting one. Fourteen thirty nine, Plymouth,
(01:50):
England was the first town incorporated by the English Parliament.
That's kind of a big one like that. That's a
pretty big step to getting to where we are today.
Speaker 3 (02:00):
See.
Speaker 2 (02:01):
In eighteen thirteen, Allied troops occupied Zwaal, Netherlands. Probably didn't
pronounce that correctly. What else do we have in? Oh,
this is kind of a good big one. Nineteen eighteen,
Emperor Karl of Austria Hungary abdicates, Austria becomes a republic again,
another thing that, you know, kind of important to getting
(02:22):
us to where we are today.
Speaker 3 (02:23):
What else do we have here? Oh?
Speaker 2 (02:25):
Nineteen twenty five I saw something good there, use an
Italy signed piece of cord about war debts, something else
that got us to where we are today. I mean,
like some of these are pretty important, actually, But in
any case, if you don't want to revisit ancient history,
we can at least talk a little bit about what's
going on right now and what Americans are concerned about today.
(02:45):
And we'll start with this piece from Bloomberg. It's titled
It's not just affordability and Americans are anxious over jobs too,
And really, I think this is two sides of the
same coin in my opinion, Paul in that if go
up but wages rise faster, people don't care. If prices
(03:06):
go up and wages rise more slowly, people care. And
this is what we are seeing for a broader swath
of Americans right now. Bank of America had a piece
on this in the last couple of days, which is,
for the bottom third of Americans, wage growth over the
last year's running at one percent while inflation's running at three. Gosh,
(03:26):
that's kind of the whole thing, encapsulated one. Wages are
trailing price growth, which means affordability is a concern and
wages are trailing price growth because the job market is
not as robust for those groups right now, and so
there's no incentive for companies to pay more to retain labor.
Speaker 4 (03:46):
Yeah, the labor market has been the biggest item of focus,
it feels like, over the last three to six months
or so, and we'll talk about it more here. The
Federal Reserve is really putting a keen focus on it.
But interesting kind of parsing through our stack today. It
seems like inflation is popping up again too as a
potential concern. You know, you mentioned that if wages are
rising and inflation is rising, then people are less concerned.
(04:09):
I would argue that because there's also a significant percentage
of the population that is not collecting wages, that there
is probably a bigger camp that would fall into maybe
wages not keeping up with inflation and that's frustrating them,
or retirees who are living off of a more fixed income.
Or Yes, you could argue social Security has the cost
(04:30):
of living adjustment, but I think many people would argue
that it doesn't fully cover everything that we've seen from
a pricing increase front, so they can feel crunched too. Obviously,
their portfolios have performed well, but for those people in
retirement also a strain on them. Really the biggest takeaway
that I had from twenty twenty two because it was
really the only experience in my career that I've seen
(04:52):
inflation run as rampantly as it had since the seventies,
which I was, and I not alive or working for
It is something that universally everyone can't stand and it
is probably one of the most upsetting economic factors to
individuals on a day to day basis. It really disrupts
their lives tremendously, more so than some labor market's disruption.
(05:15):
It is something that really irritates consumers and still to
this day has ripple effects three years later because of
all the price increases we saw there. So it's it's significant,
but of course the labor market is too.
Speaker 2 (05:27):
So when we look at and look the you and
I also in terms of you know, what we have
and haven't seen. Look, I came into this business in
the aftermath, like right as the Great Financial Crisis was unfolding,
Like I was, I was, you know, watching as that happened,
and so ultimately I think that part of why we
(05:50):
talk about, you know, the concerns about inflation, because.
Speaker 3 (05:52):
That's the last battle that we fought.
Speaker 2 (05:55):
But you know, I remember back in that two thousand
and nine three through twenty fourteen period, just the the
heavy weight that everyone was carrying around, Like even if
you weren't unemployed, it still was companies were laying people
off because sales were really lethargic. It was a really
(06:18):
lackluster recovery. There was consistent concern about is there going
to be a double dip recession? You know, that was
the talk of twenty eleven and twenty twelve, and it
was just something where like the malaise that you had
throughout the economy was palpable. Then this here, what we're
(06:39):
seeing in terms of concerns about the labor market is
people are really nervous about where things are going to
go on that front. But when you actually look at
what has been occurring, it's just not there as far
as the scale of layoffs or workforce reductions. I mean, ultimately,
(07:01):
right now, for the last three to four months, depending
on the metric that you look at, the labor market
is pretty much treading water somewhere around you know, small
numbers of jobs added to no jobs added to maybe
small numbers of jobs lost like that, that's what we're seeing.
And I think it is true that we've seen a
continuous deceleration in the labor market since mid twenty two,
(07:25):
and that it was just coming from a place that
quite honestly was.
Speaker 4 (07:27):
Just too hot, that was not over two hundred and
fifty thousand a month average in two twenty five.
Speaker 3 (07:33):
I can pull it up.
Speaker 2 (07:35):
I don't know exactly where we were, but like, the
labor market's been cooling for about three years.
Speaker 3 (07:39):
And the question that.
Speaker 2 (07:41):
Matters for twenty twenty six is does this continue or
are we finding a bottom?
Speaker 3 (07:48):
Yep, if it.
Speaker 2 (07:49):
Continues, we got some issues because when you start seeing
consistent job losses, consumer spending typically can't be maintained. And
that's where you see kind of things go convexedly bad,
where the pain accelerates because consumer spending, you know, takes
a further leg down. If we bought them out in
this range and companies have you know, all new plans
(08:12):
for expansion next year because of one big beautiful Bill
Act provisions and things like that, then you can say, okay,
like yeah, we've got more room to run. But this
is this is a critical time in the next three
to six months, in my opinion, and I'm hopeful that
we see the same thing that we've seen the last
two years, which is a labor market that has answered
the bell when when it's been rung and says, yep,
(08:33):
we're not done yet. But I don't know what we're
going to see, and I remain open to a wide
range of possibilities here because none of this is set
in stone.
Speaker 4 (08:42):
Last fall was a great example. We had similar conversations
where the unemployment rate had ticked up from the three
and a half percent low that it had reached to
four to two four three, where it sits today, and
here we are a year later, right at the same point.
So the question is where is it a year from now?
Where is it six four months, six months from now?
Speaker 2 (09:01):
Uh piece and CNBC. The shutdown put jobs and inflation
data on hold. Here's when it could be back in
what it might say. The answer is it might be
back soon, but we don't know exactly when, and we
don't know what it's going to say.
Speaker 4 (09:14):
That's definitely true. It seems like the earliest we could
get any information it's Tuesday or Wednesday, the October jobs report.
But in terms of all the other data. It seems
like that is going to take quite a bit of
time before.
Speaker 2 (09:26):
We might get some before Thanksgiving. Sure, now we might
get some other data like CPI PPI. Maybe that starts
trickling in weekly. Jobless claims probably resume next week, they
could resume tomorrow. I don't know how long it takes
that the doll to tabulate that and run it through
their stuff.
Speaker 3 (09:41):
So we'll we'll see, but.
Speaker 2 (09:42):
I expect post Thanksgiving we'll be back to a regular cadence.
But the next week or so is going to be choppy,
especially because have you guys realized Thanksgiving is in two
weeks in a day.
Speaker 4 (09:52):
It's it's incredible how quickly it's it's coming.
Speaker 2 (09:55):
It's it's wild. Like those poor turkeys, I mean.
Speaker 3 (09:59):
They don't know what's coming. Well, I hate to tell
you it's already come for them.
Speaker 2 (10:02):
Yeah, you know, it's like I've seen the butterballs all
through the grocery stores and gotta tell you, there's a
lot of them this year.
Speaker 4 (10:11):
There's a lot of turkeys. Though there's a lot of
them survive Everythanksgiving. They're overpopulated. Well, I mean, look, you
gotta decimating the local population, throw a callback. Yeah.
Speaker 3 (10:23):
In any case, let's take a quick break.
Speaker 2 (10:24):
By the way, on this date in history, in twenty
twenty one, Britney Spears Conservatorship ended, so that's kind of
a big one quick break.
Speaker 3 (10:33):
More after this.
Speaker 1 (10:35):
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Speaker 5 (11:00):
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circle K. Thank you veterans for all you've done.
Speaker 2 (11:17):
Probably got a piece in the Wall Street Journal. The
FED is increasingly torn over a December rate cut. Why
are they getting all, you know, bent out of shape?
Speaker 4 (11:28):
Well, I think certainly one of the issues that you
have to point to is the fact that they've been
walking around in the dark for the last couple of
months and had well turn the lights on Jerome hopefully
by the end of this week that the lights are
back on. That's one of the reasons sort of limited
data there. But also you have these factors that have
persisted for the last few months here with a sluggish
labor market that we've talked about that is nowhere near
(11:50):
growing like it was in twenty twenty four, and you
also have relatively persistent inflation, and it puts the FED
in a difficult position where typically what your view would
be is if you feel that the labor market is slowing,
by taking down interest rates, you would stimulate more activity
and more demand in the labor market, or that's the
(12:11):
best tool that the Fed would have, is to bring
interest rates down to get the economy going. But also
on the other front with inflation, as we saw in
twenty twenty two, the reason that we've reached the rates
that we are at today is to get inflation or control,
typically you have to raise interest rates. So when you're
between those two issues of a weak labor market and
persistent inflation, it can be difficult to know what direction
(12:34):
that they should go to. At this point in time.
According to CEME futures, it looks like where we sit
around a sixty five percent probability that they will move
forward with the rate cut coming for the December tenth meeting,
but still a thirty five percent chance or so that
they stay put.
Speaker 2 (12:52):
So I have two kind of different thoughts in my head,
but they're the ones that get it, like the crux
of the problem. The first is, I don't understand how
they're not still all steam ahead to cut.
Speaker 3 (13:06):
Yeah.
Speaker 2 (13:07):
And here's my thinking on this. It's not that I'm like, yes,
like you have to cut no matter what. It's more, Okay,
you thought the conditions in September warranted a cut. You
then thought that conditions in October continued to warrant an
additional cut, even though we're still not getting you know,
(13:27):
the government data because of the shut of the shutdown,
the supplemental data that's surrounding that. You know again when
you will get the labor market, when you look get
you know, everything else that we're getting is not showing
a deviation from the trend that we were on through
September and early October. And so if you felt that
(13:48):
a cut was warranted during that time, I just don't
know how you get to Well, we did two of
them and now we're fine.
Speaker 3 (13:58):
I struggle there.
Speaker 2 (13:59):
And this is also then when I get to kind
of the the other piece that I I think it
forms the other side of the equation to a certain extent,
which is the FED over the last fourteen months has
now cut the FED funds right by one and a
half percent. Like we forget that. I mean, this is
(14:20):
all one cutting cycle since last September. In my opinion,
the FED did one percentage pointing cuts last year and
half a percent this year. The housing market is objectively
worse now than it was a year ago. Can you
point to anything that shows housing is better today than
(14:41):
it was a year ago? A little bit better for buyers,
But like the actual activity, the activity hasn't budged. No,
Pricing continues to slide in large parts of the country.
Speaker 4 (14:54):
On the mortgages probably haven't moved too much.
Speaker 3 (14:57):
They're about the same.
Speaker 2 (14:58):
Spot is where they were at this time last year.
They they ran up then to around seven percent, but
again you're pretty much in the same spot.
Speaker 3 (15:04):
And so you know, you've.
Speaker 2 (15:06):
Got a glut of completed new homes that are out there.
It's about one hundred and twenty or one hundred and
thirty thousand, which is the highest level that we've had
since twenty ten, and so like, you look at what
builders are telling you, and they're telling you we're gonna
build fewer homes. The margins are gonna be worse. And
so I look at it and I go, if one
(15:26):
hundred and fifty BIPs in cuts didn't move the needle
for housing, I'm not sure anything is going to unless
something really bad happens and you need to cut interest
rates down to like one percent. And even there, I
don't know how much that influences mortgage rates because the
long bond isn't gonna believe that you're gonna keep rates
(15:49):
at one percent forever. Sure in this world, in this environment,
that's not the case. So like, does the ten year
go from four down to three and a quarter and
that gets you to like five and a half on
mortgage rates?
Speaker 4 (16:03):
Not because of anything that's gonna happen with the Fed
founds rates. It would have to be some sort of
dramatic economics slow down.
Speaker 2 (16:10):
The exactly, and so like I kind of look at
it and I go. Part of me is like, Okay,
they should still be cutting in December. The other part
of me goes, they've already cut one hundred and fifty BIPs.
It's not like that extra quarter percent is going to
make a difference. When we talked about monetary policy errors,
we're not talking about being wrong by a quarter percent
because it doesn't matter.
Speaker 3 (16:28):
Right.
Speaker 2 (16:29):
Monetary policy errors are like, hey, we cut by one
hundred and fifty BIPs when we should have been raising
by one fifty the I agree that small the cuts
not going to make or break it right, So just
it doesn't matter. But from a messaging standpoint, I think
it could matter in the sense that, Okay, let's say
they do proceed with this twenty five base point cut
come December, and the thing out there has been that
(16:52):
tariffs have been companies have been withholding increasing prices because
of tariff impact. What if and I'm not saying this
could have this is going to happen, But if in
twenty six you start to see the dam sort of
break and you see price increases coming at a more
substantial level, then the FED is gonna have to pivot
their course if we see it. And then I think
(17:13):
they're worried about just the messaging that they go from
cutting to raising or or staying at the same level.
Perhaps that's the concern there. Yeah, so I hold these
differing views, one of which is, Okay, they probably should
cut in December because they've been cutting. But I'm also
not sure that it matters if they cut in December
(17:36):
because it hasn't mattered what they've done on rates to
this point. Like the problems facing the US economy, I'm
not sure are rate sensitive not at this point, you know, Like,
I'm just not sure that's the case. So, yeah, how
does that change the labor market right like it did
the pass through? Is?
Speaker 4 (17:56):
I mean you could argue, Okay, more more lending and
more economic activity, hire more people, but I don't think
that's going to be the impetus to get companies going.
Speaker 2 (18:05):
It's normally housing is the leading indicator. So you say, okay,
we cut rates, mortgage rates fall, and that juice is
housing and that's you know what pulls us if if
housing is not responding to lower mortgage rates. Guys, quite honestly,
I don't know that the FED has the tools to
fix this thing.
Speaker 4 (18:25):
No, they're gonna need to get out the hammer, and
they're gonna need a big inventory.
Speaker 2 (18:28):
Yeah, they're gonna need a bigger boat.
Speaker 3 (18:31):
So I mean, it's It's just.
Speaker 2 (18:33):
Something where I think the questions that we're facing right
now are different from prior labor market concerns. And it's
also just the fact that, like the timing of this
is weird. Again, normally, consumption leads the labor market. The
labor market is moving while consumption is not. Right now,
(18:53):
consumption is consistently running four to six percent increase in
consumer spending. All the big banks are telling you that,
the credit card process are telling you that, everyone's telling
you this, and yet you still have labor market growth slowing,
which is not what we normally see. It's just different
(19:14):
and added to the pile of things that have been
different this business cycle that you know, haven't existed in
prior ones. Quick break here when we come back, we
got Wall Street Watch, and then we're talking about the
unraveling of Massachusetts middle class.
Speaker 1 (19:39):
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Speaker 5 (19:59):
Right now, markets are mixed territory, with AMD among the
big winners in the chip sector. Right now, the Dow
is up eight tenths of one percent, or three hundred
and eighty six points. SMP five hundred is flat only
one point higher, Nasdaq down about a third of a
percent or seventy five points lower. Russell two thousand is
up four cents of a percent. Tenure Treasure reeled down
(20:22):
three basis points at four point zero seven to three percent.
DAN crude oil is down three percent today, trading a
fifty nine dollars and twenty cents a barrel. AMD surging
ten percent higher after CEO Lisa Sue said during its
investor day that the company anticipates the total market for
AI data center parts and systems will reach one trillion
(20:45):
dollars by twenty thirty. Sue also said that the company
should see revenue growth accelerate in the coming years due
to strong data center demand. Meanwhile, shares in Swiss sneaker
maker on holding or surging twenty percent after the company
raised its guidance for a third time in a row
after a beach street expectations on the top and bottom lines.
(21:07):
This comes after competitors like Nike and Hoka plan for
either as sales decline or slow down in growth elsewhere.
Nuclear energy startup Auclose saw its loss wide in last
quarter as the company spend more on research and development
to advance its plans to launch a commercial plant. However,
shares are up seven percent at the moment. Starbucks up
(21:31):
over two percent after Treasury Secretary Scott Besson told Fox
News this morning that the Trump administration would soon unveil
reductions and impot duties on coffee, bananas, and other foods.
And after today's close, we'll see earnings from Cisco's systems
and gambling operator Flutter Entertainment. I'm Tucker Silva, and that
is Wall Street.
Speaker 2 (21:51):
Watch from Struggling to I'm sorry, from Secure to Struggling
the unraveling of Massachusetts middle class. So this is a
pretty long piece that was put together by the Boston Globe.
I mean, it's I don't know, I'm looking at it.
It's like eight to ten pages printed out, if not more,
(22:13):
and it goes through a pretty comprehensive rundown of why
the things that effectively make the middle class, you know,
kind of what what it's historically been in the United
States are becoming increasingly challenging to afford in Massachusetts and
(22:35):
I think a key part of this, Paul, is first defining,
you know, what middle class means, because I think like,
if you ask people, I bet like ninety percent of
them would say they're middle class, but that that can't
be the case because that's basically all the class, Like,
(22:56):
that's that's everyone. And so when I think of middle
class and kind of how I would define it in
terms of some of the key tenets of it, I
think of a family, like if you think of like
the staples of it, a family that has jobs for
(23:16):
any of the adults in the household that want them,
and on those salaries, can reasonably afford either the rent
or mortgage payment to live in a certain area with
a week or two of vacation time that they can
take to you know, domestic locations with the family when
(23:38):
they want to that are you know, reasonably priced. Is
that kind of a good general area. Is there anything
else that you would add to that?
Speaker 4 (23:45):
No, I think that that summarizes it pretty well. I
was gonna get hard numbers, but that's probably a better
way to contextualize it.
Speaker 2 (23:53):
It's just kind of what do people expect out of
middle classness. I can pay for my house, I can
take the family somewhere a couple time times a year,
you know, not extravagant or anything like that, and I
can afford my basic necessities without a ton of stress
and worry.
Speaker 4 (24:09):
I think that's fair. Yeah, I think that's.
Speaker 3 (24:10):
How I would define it.
Speaker 2 (24:12):
Where are we seeing the biggest problems with that affordability
in the context of this piece on Massachusetts.
Speaker 4 (24:18):
The difficulty with Massachusetts, and again this is going to
vary community by community as to what that middle class
middle income range is that we were just kind of
talking about before the characteristics of it. But if you
look back to two thousand and half of the Boston
area households qualified as middle class. Where you look at
(24:41):
that number today, only forty one percent of them remains.
So some have either you know, promoted up to sort
of upper class or others have fallen by the wayside
on the lower income side of things. And it's a
multitude of different factors. One, we know the housing issues
that this state has. There is just not a tremendous
(25:01):
amount of new homes being built. We did see an
uptick around COVID in twenty one and twenty two of
more permitting for new houses on the market. But in
twenty three and twenty four we saw the two lowest
years of housing permits in the Boston area at least
since twenty twelve, so there hasn't been a tremendous uptick
there on the inventory side of things. The other thing
(25:22):
is childcare is incredibly expensive in this state too. I
was blown away by these numbers, though they make sense,
But twenty six seven hundred dollars is the average median
cost to put an infant through childcare in Massachusetts.
Speaker 3 (25:37):
For a four year.
Speaker 4 (25:38):
Old, it's eighteen thousand a year. And what it is
also helpful is that typically you want to assign in
a budget seven percent of a family's income to childcare.
If you assign that seven percent to the twenty six thousand,
seven hundred costs that I'm alluding to there, that's a
household make in three hundred eighty thousand, Chuck. That's a
huge number. And ultimately it just comes down to you
(26:00):
have to make so much money to live in this state.
And I think back to when I was going through school,
two teachers could comfortably and this is to the middle
class point that you're talking about live in the Greater
Boston area, raise a family and work at the local
high school. But now my sister is a teacher in
(26:20):
the Framham School system, and very candidly, she had the
discussion with us that she would not be able to
do to live around this area if she were to
marry another teacher. It's just I don't know if that
is possible anymore.
Speaker 2 (26:33):
Yeah, And it gets then to the question of well,
what do we do about This's where I wanted to
go next. Yeah, because you know, look, this is clearly
something that is front and center in the minds of
the vast majority of Americans right now. You know, we've
been talking about pricing and affordability and inflation. We've been
(26:56):
talking about this stuff heavy duty, NonStop for the last
four years, going back to twenty twenty two. You can
even make the case five years going back to you know,
a decent chunk of twenty one. And so the question is, like,
what do we do about this? Because the obvious impulse
is to be able to say, well, those prices are
(27:17):
too high, we need to you know, bring those prices down.
But then you get into okay, what's the quote right
price for anything? And should the should the federal, state,
or city government be setting the right price and the
answers no, that generally doesn't work out very well. So like,
we have a system now that is not working for
(27:38):
an increasingly large portion of Americans.
Speaker 3 (27:41):
What what are.
Speaker 2 (27:43):
The issues that have led us to this point and
how do we correct them going forward? And what? We
have to look at this from a few different perspectives.
The first is on a local level in many different communities,
the problem is that for one reason or another on
(28:05):
the housing side, it's become too expensive to build and
too arduous a process. So can we make it easier
and cheaper to expand housing supply?
Speaker 4 (28:13):
Yep?
Speaker 2 (28:14):
And you know people say like, oh, like, can you
build like more low, low cost to low income housing.
Quite honestly, if you build more housing, eventually more and
more of the housing that's out there will become lower cost,
even if it starts out at higher cost because supply
and demand. It's just how it works. Like, think about
apartments that were built twenty years ago that were being
pitched as like luxury apartments. They're the ones that are
(28:38):
now no longer receiving that premium pricing because they're twenty
years old. Like you just it's just kind of how
it works. You build more and pricing comes down as
a result of further new building. So I think that's
one place that I get to on on that side
of things. Other things that I think, quite honestly have
(28:58):
contributed but for which I have no answer. It's the
increasing mbaization of the world, where every asset needs to
have some kind of return on it rather than just oh,
this does the job it's intended to. The example I'm
gonna site is kind of a dumb one, but I
(29:18):
think it gets at this in that because every piece
of real estate now has to be like run through
a cap table, you know, like through a pricing matrix
of okay, like here's the ROI that you can get
on this, and here's you know, the cap rate that
you can get.
Speaker 3 (29:33):
From doing this.
Speaker 2 (29:35):
Like no one is just okay with there being a
piece of real estate in a city that underperforms. Everyone's
always trying to find like the next deal so that
they can make it. And the answer that I give
on like the example, it's kind of done. But the
area outside TD Garden, just as an example where the
Bruins and Celtics play used to be a dump like
(29:57):
it used to be just dive bar after dive bar
after dive bar, and you go through it now and
they're basically all gone. Like there's the only one that's
left at this point is Selly's Tap yep, and everything
else is just the same, you know, kind of well
polished white subway tile, industrial interior. Like you go to
any of the bars there and they're basically all the same. Now,
(30:17):
there's not much differentiation. And it's because when these buildings
change hand now, like everyone out there is competing for
these because again there's not enough other construction. There's not
enough ways just to you know, make money, and so it's, oh, well,
we've got to get the return on this. And so
this is why, you know, the only tenant that can
come in here for the bar has to sell twenty
(30:37):
five dollars nachos because the cost of the real estate
is so expensive.
Speaker 3 (30:42):
Now.
Speaker 4 (30:43):
The same thing on the housing front is the builder
will not look at building the two thousand square foot
home in a nice community like Needum or one of
these other suburban areas. If they're gonna go for it,
you better believe that they're building the five thousand square
foot home so that they can capture you know, greater
margin on that.
Speaker 2 (31:01):
So it's just like I don't know on the childcare side,
like how many of these like large nationwide childcare companies
are run by private equity firms where it's like, sure,
they're providing good childcare.
Speaker 3 (31:14):
I'm not denying that, But.
Speaker 2 (31:16):
The pricing's also because the pe firm needs to hit
its hurdle rate in order to get to where investors
are happy with it, and like that kind of feels
like crap, but I don't have an answer for what
we do about it, Like I don't know how we
get out of this, and I don't know. It's just
(31:37):
everything has to be so measured and so like down
to this and that and optimized. It's like this is
how you get people trying to like measure the quality
of their sleep through a watch, when I can just
wake up and be like, I didn't sleep well. I
know that I don't need my watch to be like, Chuck,
you slept like crap last night.
Speaker 3 (31:53):
Gee, thanks feel like crap today.
Speaker 4 (31:56):
I don't know enough about the universal pre K stuff
that New York City has done, and it comes with
a tax, so that's not so I wouldn't really love
that either. But on the childcare front, there's not an
easy fix. There's no way to optimize or enhance productivity
when it comes to childcare. You know, technology can step
in on a lot of different areas, but one thing
that all three of us know having young kids, that
(32:17):
there's there's no fix for that yet. There's no robot
out there that can take care of the kids. So
it's hard to move the needle there.
Speaker 2 (32:25):
Also, if you want an unpopular opinion on what would
help improve housing affordability for young people, the counter intuitive answer,
and I'm not saying that like this is what you
want to do or what you don't, but the counter
intuitive answer raise property taxes. Young people have a surplus
of income but a lack of assets. The high price
(32:47):
of real estate means that the biggest impediment to them
buying it is typically the lack of a down payment.
If you raise property taxes, there are fewer people that
can afford to pay the current prices at the same
at a higher property tax level, meaning prices have to
come down on housing, which makes it more affordable for
young people who have that surplus income but not the
(33:08):
surplus assets for the down payment. The total monthly payment
remains the same. It's just you're giving more to the
city rather than to the mortgage servicer. I'm just like,
I'm not saying that you should or shouldn't do this,
but like, this is another way that you can think
about this stuff.
Speaker 3 (33:27):
Quick break here.
Speaker 2 (33:28):
When we return, Let's see, we did enough on housing here.
Speaker 3 (33:33):
Now we can talk.
Speaker 2 (33:34):
I got a couple other things to say on housing.
And then uh, let's see do I want to talk Zuck. No, Oh,
let's talk more about this Disney YouTube TV thing because
it's really grinding my gears right now. We'll do that
when we come back.
Speaker 1 (33:46):
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Speaker 2 (34:55):
So, talking just a little bit more about housing quick item.
We've got some additional concerning signs that home builders are
pulling back from new construction, which unfortunately means that you'll
have you know, less new inventory hitting markets in order
to potentially move prices down. But again, the problem that
(35:16):
we come back to on housing is everyone is so
protective of their home values that generally in most communities,
one of the main reasons why people why you don't
have more construction is people vote against it because they're
concerned about their property value, and it ends up getting
us into a place where, like you just don't have
healthy and efficient property markets anymore.
Speaker 3 (35:38):
Well, I understand a rational perspectively property value.
Speaker 4 (35:42):
I think it's just you know, the not in my backyard,
just not not being overly congested. It seems like is
always a pushback from those who are residents, which I
guess can go hand in hand with the property value declining.
But it is something that we've talked about a lot
on the show over the years. But ultimately there's no
(36:02):
easy fix to solving that inventory.
Speaker 2 (36:05):
There is just billmore. We just don't want to do it. Yeah,
like that is the fix. It's just we don't want
to do it. Nope, we're not gonna do that. Okay,
that's fine. Disney and YouTube, let's talk about this. I
will say I did claim my twenty dollars YouTube credit
that they made me go a website to claim, So
I did that apparently. Also, by the way, if you
(36:28):
happen to be a YouTube TV subscriber, one other tip
that a friend of mine gave me is if you again,
you have to go to TV do YouTube dot com.
You gotta do this on the website. You can't do
it just like on your phone or whatever. But go
to the settings menu and then the membership page, and
(36:48):
then near the top it says what your plan is
and then you can click manage if you go there.
Speaker 3 (36:55):
Quite a few people.
Speaker 2 (36:56):
That I know have been getting a ten dollars off
subscription for the next six months in order to bring
your cost down, because apparently if you go there to
that page where you can manage your subscription, it's basically
a retention offer because a lot of people are trying
to cancel, and so they'll give you ten dollars off
in addition to the twenty dollars that you get this month,
but that ten dollars is for the next six months.
(37:18):
So the question is, how much are you know, all
of these companies losing on this. And I guess in
looking at this, so YouTube tv is assumed to have
somewhere around ten million subscribers, is the thinking, and Disney
probably receives somewhere in the ballpark of between all the
(37:38):
different networks, because again it's a per channel fee, probably
somewhere in the ballpark of twelve to eighteen dollars per subscriber,
you know, at this point. And so you do the
math and you're like, okay, that's probably like one hundred
and twenty to one hundred and eighty million dollars a
month in you know, revenue for Disney that they lose
direct from YouTube. But also remember that the ad sales there.
(38:04):
I don't know exactly how it gets broken down between
YouTube and Disney. There's lost revenue on that side as well.
But everyone is, you know, kind of coming out of
this losing something at least because YouTube is losing some
subscribers as a result of this too.
Speaker 4 (38:19):
Yes, and for YouTube, you know, luckily their parent company Google.
You might have heard of them before.
Speaker 2 (38:24):
It's worth three trillion dollars.
Speaker 4 (38:27):
So when it comes to muscling around, you better believe
that Google cares a little bit less about this than
Disney does.
Speaker 2 (38:34):
Does Google have a mascot? Disney's got the mouse. Google
doesn't have one.
Speaker 3 (38:41):
Do they?
Speaker 4 (38:41):
No, just just we should.
Speaker 2 (38:43):
Come up with a mascot for every tech company. Let's
let's do that at some point. Quick breakout or two
coming up in a bit
The Financial Exchange is produced by Money Matters Radio and
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(01:06):
and Paul Lane.
Speaker 2 (01:11):
Chuck Paul and talker with you here today, and it
is the twelfth of November, which does this.
Speaker 3 (01:19):
Day bear any historical significance?
Speaker 4 (01:23):
You're the history major. I have no idea.
Speaker 2 (01:27):
Let me see, I'm just like thinking out loud. I
don't think there's anything major here. We go, okay. In
seven sixty four, I think we all remember this, Tibetan
troops occupied Changan for fifteen days, which was the capital
of the Tang dynasty. I know that we all remember
that very well. Oh, kind of interesting one. Fourteen thirty nine, Plymouth,
(01:50):
England was the first town incorporated by the English Parliament.
That's kind of a big one like that. That's a
pretty big step to getting to where we are today.
Speaker 3 (02:00):
See.
Speaker 2 (02:01):
In eighteen thirteen, Allied troops occupied Zwaal, Netherlands. Probably didn't
pronounce that correctly. What else do we have in? Oh,
this is kind of a good big one. Nineteen eighteen,
Emperor Karl of Austria Hungary abdicates, Austria becomes a republic again,
another thing that, you know, kind of important to getting
(02:22):
us to where we are today.
Speaker 3 (02:23):
What else do we have here? Oh?
Speaker 2 (02:25):
Nineteen twenty five I saw something good there, use an
Italy signed piece of cord about war debts, something else
that got us to where we are today. I mean,
like some of these are pretty important, actually, But in
any case, if you don't want to revisit ancient history,
we can at least talk a little bit about what's
going on right now and what Americans are concerned about today.
(02:45):
And we'll start with this piece from Bloomberg. It's titled
It's not just affordability and Americans are anxious over jobs too,
And really, I think this is two sides of the
same coin in my opinion, Paul in that if go
up but wages rise faster, people don't care. If prices
(03:06):
go up and wages rise more slowly, people care. And
this is what we are seeing for a broader swath
of Americans right now. Bank of America had a piece
on this in the last couple of days, which is,
for the bottom third of Americans, wage growth over the
last year's running at one percent while inflation's running at three. Gosh,
(03:26):
that's kind of the whole thing, encapsulated one. Wages are
trailing price growth, which means affordability is a concern and
wages are trailing price growth because the job market is
not as robust for those groups right now, and so
there's no incentive for companies to pay more to retain labor.
Speaker 4 (03:46):
Yeah, the labor market has been the biggest item of focus,
it feels like, over the last three to six months
or so, and we'll talk about it more here. The
Federal Reserve is really putting a keen focus on it.
But interesting kind of parsing through our stack today. It
seems like inflation is popping up again too as a
potential concern. You know, you mentioned that if wages are
rising and inflation is rising, then people are less concerned.
(04:09):
I would argue that because there's also a significant percentage
of the population that is not collecting wages, that there
is probably a bigger camp that would fall into maybe
wages not keeping up with inflation and that's frustrating them,
or retirees who are living off of a more fixed income.
Or Yes, you could argue social Security has the cost
(04:30):
of living adjustment, but I think many people would argue
that it doesn't fully cover everything that we've seen from
a pricing increase front, so they can feel crunched too. Obviously,
their portfolios have performed well, but for those people in
retirement also a strain on them. Really the biggest takeaway
that I had from twenty twenty two because it was
really the only experience in my career that I've seen
(04:52):
inflation run as rampantly as it had since the seventies,
which I was, and I not alive or working for
It is something that universally everyone can't stand and it
is probably one of the most upsetting economic factors to
individuals on a day to day basis. It really disrupts
their lives tremendously, more so than some labor market's disruption.
(05:15):
It is something that really irritates consumers and still to
this day has ripple effects three years later because of
all the price increases we saw there. So it's it's significant,
but of course the labor market is too.
Speaker 2 (05:27):
So when we look at and look the you and
I also in terms of you know, what we have
and haven't seen. Look, I came into this business in
the aftermath, like right as the Great Financial Crisis was unfolding,
Like I was, I was, you know, watching as that happened,
and so ultimately I think that part of why we
(05:50):
talk about, you know, the concerns about inflation, because.
Speaker 3 (05:52):
That's the last battle that we fought.
Speaker 2 (05:55):
But you know, I remember back in that two thousand
and nine three through twenty fourteen period, just the the
heavy weight that everyone was carrying around, Like even if
you weren't unemployed, it still was companies were laying people
off because sales were really lethargic. It was a really
(06:18):
lackluster recovery. There was consistent concern about is there going
to be a double dip recession? You know, that was
the talk of twenty eleven and twenty twelve, and it
was just something where like the malaise that you had
throughout the economy was palpable. Then this here, what we're
(06:39):
seeing in terms of concerns about the labor market is
people are really nervous about where things are going to
go on that front. But when you actually look at
what has been occurring, it's just not there as far
as the scale of layoffs or workforce reductions. I mean, ultimately,
(07:01):
right now, for the last three to four months, depending
on the metric that you look at, the labor market
is pretty much treading water somewhere around you know, small
numbers of jobs added to no jobs added to maybe
small numbers of jobs lost like that, that's what we're seeing.
And I think it is true that we've seen a
continuous deceleration in the labor market since mid twenty two,
(07:25):
and that it was just coming from a place that
quite honestly was.
Speaker 4 (07:27):
Just too hot, that was not over two hundred and
fifty thousand a month average in two twenty five.
Speaker 3 (07:33):
I can pull it up.
Speaker 2 (07:35):
I don't know exactly where we were, but like, the
labor market's been cooling for about three years.
Speaker 3 (07:39):
And the question that.
Speaker 2 (07:41):
Matters for twenty twenty six is does this continue or
are we finding a bottom?
Speaker 3 (07:48):
Yep, if it.
Speaker 2 (07:49):
Continues, we got some issues because when you start seeing
consistent job losses, consumer spending typically can't be maintained. And
that's where you see kind of things go convexedly bad,
where the pain accelerates because consumer spending, you know, takes
a further leg down. If we bought them out in
this range and companies have you know, all new plans
(08:12):
for expansion next year because of one big beautiful Bill
Act provisions and things like that, then you can say, okay,
like yeah, we've got more room to run. But this
is this is a critical time in the next three
to six months, in my opinion, and I'm hopeful that
we see the same thing that we've seen the last
two years, which is a labor market that has answered
the bell when when it's been rung and says, yep,
(08:33):
we're not done yet. But I don't know what we're
going to see, and I remain open to a wide
range of possibilities here because none of this is set
in stone.
Speaker 4 (08:42):
Last fall was a great example. We had similar conversations
where the unemployment rate had ticked up from the three
and a half percent low that it had reached to
four to two four three, where it sits today, and
here we are a year later, right at the same point.
So the question is where is it a year from now?
Where is it six four months, six months from now?
Speaker 2 (09:01):
Uh piece and CNBC. The shutdown put jobs and inflation
data on hold. Here's when it could be back in
what it might say. The answer is it might be
back soon, but we don't know exactly when, and we
don't know what it's going to say.
Speaker 4 (09:14):
That's definitely true. It seems like the earliest we could
get any information it's Tuesday or Wednesday, the October jobs report.
But in terms of all the other data. It seems
like that is going to take quite a bit of
time before.
Speaker 2 (09:26):
We might get some before Thanksgiving. Sure, now we might
get some other data like CPI PPI. Maybe that starts
trickling in weekly. Jobless claims probably resume next week, they
could resume tomorrow. I don't know how long it takes
that the doll to tabulate that and run it through
their stuff.
Speaker 3 (09:41):
So we'll we'll see, but.
Speaker 2 (09:42):
I expect post Thanksgiving we'll be back to a regular cadence.
But the next week or so is going to be choppy,
especially because have you guys realized Thanksgiving is in two
weeks in a day.
Speaker 4 (09:52):
It's it's incredible how quickly it's it's coming.
Speaker 2 (09:55):
It's it's wild. Like those poor turkeys, I mean.
Speaker 3 (09:59):
They don't know what's coming. Well, I hate to tell
you it's already come for them.
Speaker 2 (10:02):
Yeah, you know, it's like I've seen the butterballs all
through the grocery stores and gotta tell you, there's a
lot of them this year.
Speaker 4 (10:11):
There's a lot of turkeys. Though there's a lot of
them survive Everythanksgiving. They're overpopulated. Well, I mean, look, you
gotta decimating the local population, throw a callback. Yeah.
Speaker 3 (10:23):
In any case, let's take a quick break.
Speaker 2 (10:24):
By the way, on this date in history, in twenty
twenty one, Britney Spears Conservatorship ended, so that's kind of
a big one quick break.
Speaker 3 (10:33):
More after this.
Speaker 1 (10:35):
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Speaker 5 (11:00):
This segment of The Financial Change is powered by circle
K Convenience Stores. Circle K is now the official convenience
store of the dav Department of Massachusetts. On behalf of
circle K. Thank you veterans for all you've done.
Speaker 2 (11:17):
Probably got a piece in the Wall Street Journal. The
FED is increasingly torn over a December rate cut. Why
are they getting all, you know, bent out of shape?
Speaker 4 (11:28):
Well, I think certainly one of the issues that you
have to point to is the fact that they've been
walking around in the dark for the last couple of
months and had well turn the lights on Jerome hopefully
by the end of this week that the lights are
back on. That's one of the reasons sort of limited
data there. But also you have these factors that have
persisted for the last few months here with a sluggish
labor market that we've talked about that is nowhere near
(11:50):
growing like it was in twenty twenty four, and you
also have relatively persistent inflation, and it puts the FED
in a difficult position where typically what your view would
be is if you feel that the labor market is slowing,
by taking down interest rates, you would stimulate more activity
and more demand in the labor market, or that's the
(12:11):
best tool that the Fed would have, is to bring
interest rates down to get the economy going. But also
on the other front with inflation, as we saw in
twenty twenty two, the reason that we've reached the rates
that we are at today is to get inflation or control,
typically you have to raise interest rates. So when you're
between those two issues of a weak labor market and
persistent inflation, it can be difficult to know what direction
(12:34):
that they should go to. At this point in time.
According to CEME futures, it looks like where we sit
around a sixty five percent probability that they will move
forward with the rate cut coming for the December tenth meeting,
but still a thirty five percent chance or so that
they stay put.
Speaker 2 (12:52):
So I have two kind of different thoughts in my head,
but they're the ones that get it, like the crux
of the problem. The first is, I don't understand how
they're not still all steam ahead to cut.
Speaker 3 (13:06):
Yeah.
Speaker 2 (13:07):
And here's my thinking on this. It's not that I'm like, yes,
like you have to cut no matter what. It's more, Okay,
you thought the conditions in September warranted a cut. You
then thought that conditions in October continued to warrant an
additional cut, even though we're still not getting you know,
(13:27):
the government data because of the shut of the shutdown,
the supplemental data that's surrounding that. You know again when
you will get the labor market, when you look get
you know, everything else that we're getting is not showing
a deviation from the trend that we were on through
September and early October. And so if you felt that
(13:48):
a cut was warranted during that time, I just don't
know how you get to Well, we did two of
them and now we're fine.
Speaker 3 (13:58):
I struggle there.
Speaker 2 (13:59):
And this is also then when I get to kind
of the the other piece that I I think it
forms the other side of the equation to a certain extent,
which is the FED over the last fourteen months has
now cut the FED funds right by one and a
half percent. Like we forget that. I mean, this is
(14:20):
all one cutting cycle since last September. In my opinion,
the FED did one percentage pointing cuts last year and
half a percent this year. The housing market is objectively
worse now than it was a year ago. Can you
point to anything that shows housing is better today than
(14:41):
it was a year ago? A little bit better for buyers,
But like the actual activity, the activity hasn't budged. No,
Pricing continues to slide in large parts of the country.
Speaker 4 (14:54):
On the mortgages probably haven't moved too much.
Speaker 3 (14:57):
They're about the same.
Speaker 2 (14:58):
Spot is where they were at this time last year.
They they ran up then to around seven percent, but
again you're pretty much in the same spot.
Speaker 3 (15:04):
And so you know, you've.
Speaker 2 (15:06):
Got a glut of completed new homes that are out there.
It's about one hundred and twenty or one hundred and
thirty thousand, which is the highest level that we've had
since twenty ten, and so like, you look at what
builders are telling you, and they're telling you we're gonna
build fewer homes. The margins are gonna be worse. And
so I look at it and I go, if one
(15:26):
hundred and fifty BIPs in cuts didn't move the needle
for housing, I'm not sure anything is going to unless
something really bad happens and you need to cut interest
rates down to like one percent. And even there, I
don't know how much that influences mortgage rates because the
long bond isn't gonna believe that you're gonna keep rates
(15:49):
at one percent forever. Sure in this world, in this environment,
that's not the case. So like, does the ten year
go from four down to three and a quarter and
that gets you to like five and a half on
mortgage rates?
Speaker 4 (16:03):
Not because of anything that's gonna happen with the Fed
founds rates. It would have to be some sort of
dramatic economics slow down.
Speaker 2 (16:10):
The exactly, and so like I kind of look at
it and I go. Part of me is like, Okay,
they should still be cutting in December. The other part
of me goes, they've already cut one hundred and fifty BIPs.
It's not like that extra quarter percent is going to
make a difference. When we talked about monetary policy errors,
we're not talking about being wrong by a quarter percent
because it doesn't matter.
Speaker 3 (16:28):
Right.
Speaker 2 (16:29):
Monetary policy errors are like, hey, we cut by one
hundred and fifty BIPs when we should have been raising
by one fifty the I agree that small the cuts
not going to make or break it right, So just
it doesn't matter. But from a messaging standpoint, I think
it could matter in the sense that, Okay, let's say
they do proceed with this twenty five base point cut
come December, and the thing out there has been that
(16:52):
tariffs have been companies have been withholding increasing prices because
of tariff impact. What if and I'm not saying this
could have this is going to happen, But if in
twenty six you start to see the dam sort of
break and you see price increases coming at a more
substantial level, then the FED is gonna have to pivot
their course if we see it. And then I think
(17:13):
they're worried about just the messaging that they go from
cutting to raising or or staying at the same level.
Perhaps that's the concern there. Yeah, so I hold these
differing views, one of which is, Okay, they probably should
cut in December because they've been cutting. But I'm also
not sure that it matters if they cut in December
(17:36):
because it hasn't mattered what they've done on rates to
this point. Like the problems facing the US economy, I'm
not sure are rate sensitive not at this point, you know, Like,
I'm just not sure that's the case. So, yeah, how
does that change the labor market right like it did
the pass through? Is?
Speaker 4 (17:56):
I mean you could argue, Okay, more more lending and
more economic activity, hire more people, but I don't think
that's going to be the impetus to get companies going.
Speaker 2 (18:05):
It's normally housing is the leading indicator. So you say, okay,
we cut rates, mortgage rates fall, and that juice is
housing and that's you know what pulls us if if
housing is not responding to lower mortgage rates. Guys, quite honestly,
I don't know that the FED has the tools to
fix this thing.
Speaker 4 (18:25):
No, they're gonna need to get out the hammer, and
they're gonna need a big inventory.
Speaker 2 (18:28):
Yeah, they're gonna need a bigger boat.
Speaker 3 (18:31):
So I mean, it's It's just.
Speaker 2 (18:33):
Something where I think the questions that we're facing right
now are different from prior labor market concerns. And it's
also just the fact that, like the timing of this
is weird. Again, normally, consumption leads the labor market. The
labor market is moving while consumption is not. Right now,
(18:53):
consumption is consistently running four to six percent increase in
consumer spending. All the big banks are telling you that,
the credit card process are telling you that, everyone's telling
you this, and yet you still have labor market growth slowing,
which is not what we normally see. It's just different
(19:14):
and added to the pile of things that have been
different this business cycle that you know, haven't existed in
prior ones. Quick break here when we come back, we
got Wall Street Watch, and then we're talking about the
unraveling of Massachusetts middle class.
Speaker 1 (19:39):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch. A complete look at what's moving markets so
far today, right here on the Financial Exchange Radio Network.
Speaker 5 (19:59):
Right now, markets are mixed territory, with AMD among the
big winners in the chip sector. Right now, the Dow
is up eight tenths of one percent, or three hundred
and eighty six points. SMP five hundred is flat only
one point higher, Nasdaq down about a third of a
percent or seventy five points lower. Russell two thousand is
up four cents of a percent. Tenure Treasure reeled down
(20:22):
three basis points at four point zero seven to three percent.
DAN crude oil is down three percent today, trading a
fifty nine dollars and twenty cents a barrel. AMD surging
ten percent higher after CEO Lisa Sue said during its
investor day that the company anticipates the total market for
AI data center parts and systems will reach one trillion
(20:45):
dollars by twenty thirty. Sue also said that the company
should see revenue growth accelerate in the coming years due
to strong data center demand. Meanwhile, shares in Swiss sneaker
maker on holding or surging twenty percent after the company
raised its guidance for a third time in a row
after a beach street expectations on the top and bottom lines.
(21:07):
This comes after competitors like Nike and Hoka plan for
either as sales decline or slow down in growth elsewhere.
Nuclear energy startup Auclose saw its loss wide in last
quarter as the company spend more on research and development
to advance its plans to launch a commercial plant. However,
shares are up seven percent at the moment. Starbucks up
(21:31):
over two percent after Treasury Secretary Scott Besson told Fox
News this morning that the Trump administration would soon unveil
reductions and impot duties on coffee, bananas, and other foods.
And after today's close, we'll see earnings from Cisco's systems
and gambling operator Flutter Entertainment. I'm Tucker Silva, and that
is Wall Street.
Speaker 2 (21:51):
Watch from Struggling to I'm sorry, from Secure to Struggling
the unraveling of Massachusetts middle class. So this is a
pretty long piece that was put together by the Boston Globe.
I mean, it's I don't know, I'm looking at it.
It's like eight to ten pages printed out, if not more,
(22:13):
and it goes through a pretty comprehensive rundown of why
the things that effectively make the middle class, you know,
kind of what what it's historically been in the United
States are becoming increasingly challenging to afford in Massachusetts and
(22:35):
I think a key part of this, Paul, is first defining,
you know, what middle class means, because I think like,
if you ask people, I bet like ninety percent of
them would say they're middle class, but that that can't
be the case because that's basically all the class, Like,
(22:56):
that's that's everyone. And so when I think of middle
class and kind of how I would define it in
terms of some of the key tenets of it, I
think of a family, like if you think of like
the staples of it, a family that has jobs for
(23:16):
any of the adults in the household that want them,
and on those salaries, can reasonably afford either the rent
or mortgage payment to live in a certain area with
a week or two of vacation time that they can
take to you know, domestic locations with the family when
(23:38):
they want to that are you know, reasonably priced. Is
that kind of a good general area. Is there anything
else that you would add to that?
Speaker 4 (23:45):
No, I think that that summarizes it pretty well. I
was gonna get hard numbers, but that's probably a better
way to contextualize it.
Speaker 2 (23:53):
It's just kind of what do people expect out of
middle classness. I can pay for my house, I can
take the family somewhere a couple time times a year,
you know, not extravagant or anything like that, and I
can afford my basic necessities without a ton of stress
and worry.
Speaker 4 (24:09):
I think that's fair. Yeah, I think that's.
Speaker 3 (24:10):
How I would define it.
Speaker 2 (24:12):
Where are we seeing the biggest problems with that affordability
in the context of this piece on Massachusetts.
Speaker 4 (24:18):
The difficulty with Massachusetts, and again this is going to
vary community by community as to what that middle class
middle income range is that we were just kind of
talking about before the characteristics of it. But if you
look back to two thousand and half of the Boston
area households qualified as middle class. Where you look at
(24:41):
that number today, only forty one percent of them remains.
So some have either you know, promoted up to sort
of upper class or others have fallen by the wayside
on the lower income side of things. And it's a
multitude of different factors. One, we know the housing issues
that this state has. There is just not a tremendous
(25:01):
amount of new homes being built. We did see an
uptick around COVID in twenty one and twenty two of
more permitting for new houses on the market. But in
twenty three and twenty four we saw the two lowest
years of housing permits in the Boston area at least
since twenty twelve, so there hasn't been a tremendous uptick
there on the inventory side of things. The other thing
(25:22):
is childcare is incredibly expensive in this state too. I
was blown away by these numbers, though they make sense,
But twenty six seven hundred dollars is the average median
cost to put an infant through childcare in Massachusetts.
Speaker 3 (25:37):
For a four year.
Speaker 4 (25:38):
Old, it's eighteen thousand a year. And what it is
also helpful is that typically you want to assign in
a budget seven percent of a family's income to childcare.
If you assign that seven percent to the twenty six thousand,
seven hundred costs that I'm alluding to there, that's a
household make in three hundred eighty thousand, Chuck. That's a
huge number. And ultimately it just comes down to you
(26:00):
have to make so much money to live in this state.
And I think back to when I was going through school,
two teachers could comfortably and this is to the middle
class point that you're talking about live in the Greater
Boston area, raise a family and work at the local
high school. But now my sister is a teacher in
(26:20):
the Framham School system, and very candidly, she had the
discussion with us that she would not be able to
do to live around this area if she were to
marry another teacher. It's just I don't know if that
is possible anymore.
Speaker 2 (26:33):
Yeah, And it gets then to the question of well,
what do we do about This's where I wanted to
go next. Yeah, because you know, look, this is clearly
something that is front and center in the minds of
the vast majority of Americans right now. You know, we've
been talking about pricing and affordability and inflation. We've been
(26:56):
talking about this stuff heavy duty, NonStop for the last
four years, going back to twenty twenty two. You can
even make the case five years going back to you know,
a decent chunk of twenty one. And so the question is, like,
what do we do about this? Because the obvious impulse
is to be able to say, well, those prices are
(27:17):
too high, we need to you know, bring those prices down.
But then you get into okay, what's the quote right
price for anything? And should the should the federal, state,
or city government be setting the right price and the
answers no, that generally doesn't work out very well. So like,
we have a system now that is not working for
(27:38):
an increasingly large portion of Americans.
Speaker 3 (27:41):
What what are.
Speaker 2 (27:43):
The issues that have led us to this point and
how do we correct them going forward? And what? We
have to look at this from a few different perspectives.
The first is on a local level in many different communities,
the problem is that for one reason or another on
(28:05):
the housing side, it's become too expensive to build and
too arduous a process. So can we make it easier
and cheaper to expand housing supply?
Speaker 4 (28:13):
Yep?
Speaker 2 (28:14):
And you know people say like, oh, like, can you
build like more low, low cost to low income housing.
Quite honestly, if you build more housing, eventually more and
more of the housing that's out there will become lower cost,
even if it starts out at higher cost because supply
and demand. It's just how it works. Like, think about
apartments that were built twenty years ago that were being
pitched as like luxury apartments. They're the ones that are
(28:38):
now no longer receiving that premium pricing because they're twenty
years old. Like you just it's just kind of how
it works. You build more and pricing comes down as
a result of further new building. So I think that's
one place that I get to on on that side
of things. Other things that I think, quite honestly have
(28:58):
contributed but for which I have no answer. It's the
increasing mbaization of the world, where every asset needs to
have some kind of return on it rather than just oh,
this does the job it's intended to. The example I'm
gonna site is kind of a dumb one, but I
(29:18):
think it gets at this in that because every piece
of real estate now has to be like run through
a cap table, you know, like through a pricing matrix
of okay, like here's the ROI that you can get
on this, and here's you know, the cap rate that
you can get.
Speaker 3 (29:33):
From doing this.
Speaker 2 (29:35):
Like no one is just okay with there being a
piece of real estate in a city that underperforms. Everyone's
always trying to find like the next deal so that
they can make it. And the answer that I give
on like the example, it's kind of done. But the
area outside TD Garden, just as an example where the
Bruins and Celtics play used to be a dump like
(29:57):
it used to be just dive bar after dive bar
after dive bar, and you go through it now and
they're basically all gone. Like there's the only one that's
left at this point is Selly's Tap yep, and everything
else is just the same, you know, kind of well
polished white subway tile, industrial interior. Like you go to
any of the bars there and they're basically all the same. Now,
(30:17):
there's not much differentiation. And it's because when these buildings
change hand now, like everyone out there is competing for
these because again there's not enough other construction. There's not
enough ways just to you know, make money, and so it's, oh, well,
we've got to get the return on this. And so
this is why, you know, the only tenant that can
come in here for the bar has to sell twenty
(30:37):
five dollars nachos because the cost of the real estate
is so expensive.
Speaker 3 (30:42):
Now.
Speaker 4 (30:43):
The same thing on the housing front is the builder
will not look at building the two thousand square foot
home in a nice community like Needum or one of
these other suburban areas. If they're gonna go for it,
you better believe that they're building the five thousand square
foot home so that they can capture you know, greater
margin on that.
Speaker 2 (31:01):
So it's just like I don't know on the childcare side,
like how many of these like large nationwide childcare companies
are run by private equity firms where it's like, sure,
they're providing good childcare.
Speaker 3 (31:14):
I'm not denying that, But.
Speaker 2 (31:16):
The pricing's also because the pe firm needs to hit
its hurdle rate in order to get to where investors
are happy with it, and like that kind of feels
like crap, but I don't have an answer for what
we do about it, Like I don't know how we
get out of this, and I don't know. It's just
(31:37):
everything has to be so measured and so like down
to this and that and optimized. It's like this is
how you get people trying to like measure the quality
of their sleep through a watch, when I can just
wake up and be like, I didn't sleep well. I
know that I don't need my watch to be like, Chuck,
you slept like crap last night.
Speaker 3 (31:53):
Gee, thanks feel like crap today.
Speaker 4 (31:56):
I don't know enough about the universal pre K stuff
that New York City has done, and it comes with
a tax, so that's not so I wouldn't really love
that either. But on the childcare front, there's not an
easy fix. There's no way to optimize or enhance productivity
when it comes to childcare. You know, technology can step
in on a lot of different areas, but one thing
that all three of us know having young kids, that
(32:17):
there's there's no fix for that yet. There's no robot
out there that can take care of the kids. So
it's hard to move the needle there.
Speaker 2 (32:25):
Also, if you want an unpopular opinion on what would
help improve housing affordability for young people, the counter intuitive answer,
and I'm not saying that like this is what you
want to do or what you don't, but the counter
intuitive answer raise property taxes. Young people have a surplus
of income but a lack of assets. The high price
(32:47):
of real estate means that the biggest impediment to them
buying it is typically the lack of a down payment.
If you raise property taxes, there are fewer people that
can afford to pay the current prices at the same
at a higher property tax level, meaning prices have to
come down on housing, which makes it more affordable for
young people who have that surplus income but not the
(33:08):
surplus assets for the down payment. The total monthly payment
remains the same. It's just you're giving more to the
city rather than to the mortgage servicer. I'm just like,
I'm not saying that you should or shouldn't do this,
but like, this is another way that you can think
about this stuff.
Speaker 3 (33:27):
Quick break here.
Speaker 2 (33:28):
When we return, Let's see, we did enough on housing here.
Speaker 3 (33:33):
Now we can talk.
Speaker 2 (33:34):
I got a couple other things to say on housing.
And then uh, let's see do I want to talk Zuck. No, Oh,
let's talk more about this Disney YouTube TV thing because
it's really grinding my gears right now. We'll do that
when we come back.
Speaker 1 (33:46):
Breaking business news as it happens only here on the
Financial Exchange Radio Network.
Speaker 6 (33:52):
We're proud to announce that circle K is now the
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circle K. Supporting those who break served our country isn't
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ensure that veterans receive the care and recognition they deserve.
If you'd like to do your part, please visit DAVMA
(34:14):
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all you've done.
Speaker 1 (34:23):
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Speaker 5 (34:37):
Hey, if you missed any of our shows this week,
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Speaker 3 (34:41):
We stream the show.
Speaker 5 (34:42):
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Speaker 2 (34:55):
So, talking just a little bit more about housing quick item.
We've got some additional concerning signs that home builders are
pulling back from new construction, which unfortunately means that you'll
have you know, less new inventory hitting markets in order
to potentially move prices down. But again, the problem that
(35:16):
we come back to on housing is everyone is so
protective of their home values that generally in most communities,
one of the main reasons why people why you don't
have more construction is people vote against it because they're
concerned about their property value, and it ends up getting
us into a place where, like you just don't have
healthy and efficient property markets anymore.
Speaker 3 (35:38):
Well, I understand a rational perspectively property value.
Speaker 4 (35:42):
I think it's just you know, the not in my backyard,
just not not being overly congested. It seems like is
always a pushback from those who are residents, which I
guess can go hand in hand with the property value declining.
But it is something that we've talked about a lot
on the show over the years. But ultimately there's no
(36:02):
easy fix to solving that inventory.
Speaker 2 (36:05):
There is just billmore. We just don't want to do it. Yeah,
like that is the fix. It's just we don't want
to do it. Nope, we're not gonna do that. Okay,
that's fine. Disney and YouTube, let's talk about this. I
will say I did claim my twenty dollars YouTube credit
that they made me go a website to claim, So
I did that apparently. Also, by the way, if you
(36:28):
happen to be a YouTube TV subscriber, one other tip
that a friend of mine gave me is if you again,
you have to go to TV do YouTube dot com.
You gotta do this on the website. You can't do
it just like on your phone or whatever. But go
to the settings menu and then the membership page, and
(36:48):
then near the top it says what your plan is
and then you can click manage if you go there.
Speaker 3 (36:55):
Quite a few people.
Speaker 2 (36:56):
That I know have been getting a ten dollars off
subscription for the next six months in order to bring
your cost down, because apparently if you go there to
that page where you can manage your subscription, it's basically
a retention offer because a lot of people are trying
to cancel, and so they'll give you ten dollars off
in addition to the twenty dollars that you get this month,
but that ten dollars is for the next six months.
(37:18):
So the question is, how much are you know, all
of these companies losing on this. And I guess in
looking at this, so YouTube tv is assumed to have
somewhere around ten million subscribers, is the thinking, and Disney
probably receives somewhere in the ballpark of between all the
(37:38):
different networks, because again it's a per channel fee, probably
somewhere in the ballpark of twelve to eighteen dollars per subscriber,
you know, at this point. And so you do the
math and you're like, okay, that's probably like one hundred
and twenty to one hundred and eighty million dollars a
month in you know, revenue for Disney that they lose
direct from YouTube. But also remember that the ad sales there.
(38:04):
I don't know exactly how it gets broken down between
YouTube and Disney. There's lost revenue on that side as well.
But everyone is, you know, kind of coming out of
this losing something at least because YouTube is losing some
subscribers as a result of this too.
Speaker 4 (38:19):
Yes, and for YouTube, you know, luckily their parent company Google.
You might have heard of them before.
Speaker 2 (38:24):
It's worth three trillion dollars.
Speaker 4 (38:27):
So when it comes to muscling around, you better believe
that Google cares a little bit less about this than
Disney does.
Speaker 2 (38:34):
Does Google have a mascot? Disney's got the mouse. Google
doesn't have one.
Speaker 3 (38:41):
Do they?
Speaker 4 (38:41):
No, just just we should.
Speaker 2 (38:43):
Come up with a mascot for every tech company. Let's
let's do that at some point. Quick breakout or two
coming up in a bit
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