Rising Unemployment and Real Estate Concerns Ep. 259

Join hosts Derek, Tony, and Luke on this insightful episode of the Capitalist Investor as they delve into the misconceptions surrounding the stock market's current highs and the underlying economic factors at play. From rising unemployment rates and the fluctuating housing market to the alarming trends in ACT scores and credit card debt, the trio explores how these variables impact both current and future economic landscapes. Tony discusses the potential pitfalls of materialism fueled by social media, while Luke and Derek dissect the role of baby boomers in today's economy. Don't miss their intriguing analysis and predictions for what's ahead.

Transcript

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Hello, and welcome to this week's episode of the Capitalist Investor. As always, you have me, diamond hands D, and we got the whole crew here together. Tony the tiger, cool hand Luke. What's going on, guys? Yo, what's happening? All right. Well, you know, this week, it, it always seems to be a constant reminder, even though we do touch on it, you know, not weekly, but quite often there is the perception, because the stock market is at an all time high, that the economy is humming along and perfect and going to continue the way it is for a long time. But when you dig in deeper, you know, that that's probably not the case. So, you know, whether it is debt, you know, in the public sector, whether it's inflation or inflation data or the jobs report, which kind of caught my eye this week, lots of things to be at least have your antennas up about to make sure you understand where we are in the bigger picture. So where do you guys want to start? Oh, gosh. Well, I think that the job market is kind of interesting. You can kind of hit on that. And I think it's important to kind of look at couple different things there. Unemployment's ticking up. Like, we went from like 3.8 just a couple months ago to now it's 4.1. There's a couple reasons for that. I don't want to dig too deep into why that's happening, but the fact that's going up is a cause for concern. But it's also cause for concern that unemployment's rising at the same point that your supply of housing is coming onto the market. You look at the southern, Texas, Florida, all these other houses that are coming up for sale. You have now potentially a drawdown on the real estate sector, which is going to impact people's work worth and their ability to borrow against their income if they were to lose their job. So I think there's a lot of things kind of happening at the same time that's somewhat alarming. This is kind of off topic. I looked at, for some reason, I don't know what pulled me to do this, but I looked at young people's act scores, like how well they're testing and things like that. Their act scores are like the lowest they've ever been in history. So people that are graduating college, too, are the most uneducated, apparently, like we've had in a long time. So the new people entering the labor market aren't productive either. People that are getting laid off from their jobs. And these companies need to lean up. But then the future outlook for the next 1015 years could be concerning because these young people don't actually know what they're doing when they come into the workplace. The implementation of common core math and Covid did not help us become brighter people, in my opinion. And that's very big concern. Interesting. You checked the ATC scores. I was like, how smart was I compared to current students? I'm like, wow, genius. I gotta beep that one out. What was your. Yeah, Luke, you're 29. I never broke 30. Never broke 30. Between that, Luke's the Einstein of the office. No, I'm not. Little above average in every way. Here we go. What do you think? D. Well, yeah, you know, it's the article that I was looking at. It seems that some of the big cities are now just completely unaffordable. So the article I was looking at was talking about, you know, credit card debt accelerating, especially in California. It was the one I looked at. I don't care about California. They are an anomaly that no one should pay attention to nor pull statistics from. But go ahead. But, I mean, so many people live there. How do they afford it? You know, it's like, if you're making$150,000 a year in LA, you're. You're destitute. Yeah, I mean, I looked at that, that article, too. And, you know, basically it's just young people that were. The spike in the delinquencies are, and I think it's pretty simple. They, you know, the mentality of keeping up with the Joneses, watching Instagram, you know, b's like, I'm driving this car and I'm wearing this and I'm going here, like, yeah, I can understand why credit card is just flying. You know, I can understand because everyone's like, I want to do that. I want to do that. And I will always say that the pedigree of, you know, we. I see it all the time. The pedigree of a successful financial plan is that you're a good saver, you're bad at spending your money. And that is the two key ingredients of having a successful plan. And when you have a successful plan, I'm like, hey, you're, you did such a good job. You can go and spend more money, like, in retirement. They can't because they're wired to save and not spend. That's the social media. Well, it's a bunch of 2030 year olds, up to 40 probably, that I've seen social media that are trying to be materialistic. And what you start to realize is the more things you buy, and the bigger house you get, the nicer car you get, the less happy you actually get because you're strained for payments. So it's like people don't realize what's important in life. And I think that pendulum's starting to swing. The more worse off people get, the more it wakes you up, I think, to the fact that there's more important things in life than spending your money, spend time with family, getting married, like, all that stuff. Yeah. I mean, I think they're finally landing on, you know, inflation as a whole. Number since January of 2021 is up 20%. I still call it bullshit on that, because if you go. Go to fast food, go to McDonald's. Like, fast food is up 50% to 100%. Housing. I'm pretty sure, like, again, I go off of zillow, and I don't know how accurate that is. I mean, just because they say my house is worth something, can I sell it? Well, my house has been on the market for 20 days, and that's not good. I mean, but I would say that my house has appreciated, you know, 30% to 50% in the last four years. Like, so there are a lot of things that have accelerated that can be causing this credit card. But now we take a look at job numbers. You said job numbers are an issue. Four of the last five months have been revised down. You don't really hear about that. For example, January said we. We gained 353,000 jobs, revised down to 256,000. I mean, it's. They were off by 30%. What the hell is that happening? Beep almost. And then for 2024, as a collective, it's, you know, you start adding up all the months together, and they've revised down 250,000 jobs in the last two months. Part time has picked up 300,000 jobs, but full time employment is down. Overdose, 600. But here. Here's my. Here's my spin on that. Okay? So I'm starting to think a little bit. I'm like, okay, people, so let's factor in the baby boomers here. The statistic is that roughly 350,000 baby boomers are exiting the workforce on a monthly basis. So 4 million people a year. How does that factor in? It factors in a ton. How, like, so is the economy even worse because 350,000 people are leaving and we're only adding 250,000? Yes. Is that what's happening? Yes. Okay, then this is bad. And a good. And a good chunk of them are government jobs. You know that that was. Yeah, I know. We. I know we've talked about this before, but adding a government job is not adding production into the economy. It's essentially, and I'm not saying this across the board, but the amount of jobs that we've seen in the past twelve months added by the government, that is a redistribution of wealth type thing and is not adding to the overall economy. Well, let's talk about boomers real quick. All right, let's do it. Let's talk about them with the housing market. All right? They've owned their houses for 40 years and their 300, $200,000 house they bought 40 years ago is now a million, $5 million house. So they're selling their houses and they're downgrading to a smaller ranch, whatever it be, which is one of the reasons why I priced my home a little higher than what probably the market price said, because I was hoping to attract that boomer that was retiring that could pay cash downgrading their house. But what I think is going to happen is, let's talk about this with the housing market. A lot of those big houses that are million dollar houses now, at this point, those are done for. Like the younger generation doesn't want a big house. They don't want a big house and they can't afford a big house. They can't afford it. So what's going to happen is all these two bedroom, three bedroom are going to continue to get bit up by these boomers. So you're going to see like two bedroom, three bedroom continue to rise, but these like million dollar houses crash. And then you're going to see a lot of people that still are holding the bag on that lose their kind of net worth on that, that kind of overleverage themselves. So that's going to be another way that unemployment could spike or that, you know, delinquencies could spike, whatever it be from that standpoint. Also, location matters. Like the sunbelt is in a really bad spot. The south isn't really a bad spot. Midwest and northeast are not in a bad spot because supply is not ticking up there. So it's just these places where people flooded to is somewhat concerning. And the boomers have created that too, because a lot of these boomers are retiring in Florida and Texas and all these states. So it's created this like demand spike. A lot of these building, these people are building these houses and now there's too much supply out there and it's gonna screw the younger. But I've said this before, is that when, when mortgage rates were 8%, nobody's going to give up their three, four, or 5% mortgage now that interest rates are closer to like six, six and a half. Now you're starting to get the people to move, you know, and now they're like, okay, if this is the trend, it's finally, the mortgage rates are finally creeping over and getting lower. Okay, I'm going to go buy a house, you know, get my mortgage and refinance in a few years. When it gets down to four, three and a half, whatever, it lands again. Right. So I've said this in the past. Housing house will come down when interest rates for mortgages to 30 year mortgage comes down. I figured it'd be closer to five, but it's already starting to creep now that we're at like six, six and a half because there's demand to just move, you know, just bigger houses, smaller houses. But no one wanted to release that two and a half to 4% mortgage. That's, that was. I've been saying that for a while and it's starting to maybe come to fruition. So we'll see. Yep. All right. All right. Well, where do we go from here, though, I guess, is the question, guys, like, before we end on this, where do we go in the next year? Is more cracks gonna form? It seems like a lot of bad things are lining up together, like unemployment, delinquencies on top of potentially housing market starting to turn around a little bit in different locations. Like, what's. Where do we go from here? Is this just a temporary blip and we get back on track? Is this the start of Domino's falling? And, you know, I think. I think. I think things have been really good for a long period of time. I think it's okay for a breather. Is. Does anybody want that? No. Because with that comes some pain for, you know, selectival people. But what's the solution going to be from the government? Well, all right, well, we were going to talk about, like, in our next episode, the election update stuff. I think I'm going to. I'm going to hold it off for that one. I like it. I love it. So tune in next week and we'll give more hot takes on kind of where we see all this stuff headed. But thank you for listening to this episode. If you guys have any questions or comments, hit us up at info connect.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.