WEBVTT
00:00:25.410 --> 00:00:29.809
Hello everybody and welcome to another edition of Wealth Transparency.
00:00:29.890 --> 00:00:31.009
I'm Ed Dietowski.
00:00:31.169 --> 00:00:31.969
I'm your host.
00:00:32.370 --> 00:00:45.089
I'm honored to have Andrew Tang with Turner Financial Group with us, Lex Nickpoor with Ethos Financial Group, and Michelle Connell with Porsche Asset Management.
00:00:45.409 --> 00:00:59.170
Each week, what we do is we take headlines that aren't necessarily the main headlines, but storylines that impact your financial picture and what you should do as a result of these headlines in your portfolio.
00:00:59.329 --> 00:01:04.530
So to start off with, inflation cooled more than expected in June.
00:01:04.689 --> 00:01:11.969
So, Michelle, why don't you take us through your uh feelings about inflation and where you see them going, the numbers.
00:01:12.210 --> 00:01:24.929
Well, when we talked the last time, there was an opinion, and mine was included that inflation numbers where they were were a little bit more transitory, and that's what we're seeing, at least on the energy side.
00:01:25.170 --> 00:01:36.450
But it may be the case where a lot of the manufacturers and service providers may keep the costs where they are because they've been absorbing a lot of the excess costs.
00:01:36.609 --> 00:01:39.489
So I don't know if we're going to see a reprieve.
00:01:39.650 --> 00:01:51.569
For instance, today United Airlines was on Bloomberg and they said they're going to keep fares high, and they implied that they're going to keep raising them because they can't.
00:01:52.450 --> 00:02:03.890
I know that oil prices are the number one in the Philadelphia.
00:02:13.650 --> 00:02:19.490
But as we've seen some conflict escalation, we've seen that price pick up as well.
00:02:19.650 --> 00:02:30.050
They've moved a little bit closer, but more so I think for the consumer, it's a reminder that this is probably to expect these elevator prices in and around the$4 mark.
00:02:30.209 --> 00:02:39.410
And as things might continue, we'll I think we could see that price of oil, you know, if the escalation continues, we'll see the price of oil continue as well.
00:02:39.569 --> 00:02:43.329
But like Michelle said, that's just being absorbed by the consumer right now.
00:02:43.410 --> 00:02:50.610
And the consumer, while verbally being disgruntled, uh consumers are still spending right now in the summer.
00:02:50.689 --> 00:03:02.129
So, you know, you look at the eye test, which I think sort of fronts the data that we get from uh some of these organizations, and people are still out and about doing things and people are still buying airlines tickets.
00:03:02.370 --> 00:03:10.129
So I'm gonna come back to Lex and Michelle on what industry do you think is gonna benefit the most when oil prices come lower?
00:03:10.290 --> 00:03:12.529
But uh, Andrew, let me ask you that question.
00:03:12.769 --> 00:03:19.089
What industry do you think is gonna be benefit the most from oil prices coming lower?
00:03:19.329 --> 00:03:25.250
Yeah, I think general consumption or retail sales will benefit when oil comes down.
00:03:25.329 --> 00:03:33.730
Uh, there is a little bit of a lag uh from crude oil prices versus gasoline because gasoline is a refined product at the end of the day.
00:03:33.889 --> 00:03:38.529
And we saw a dip in inflation numbers in June, but that was June.
00:03:38.689 --> 00:03:45.250
So that was the time then when the ceasefire for where the Straits of Hormuz was actually running pretty high.
00:03:45.490 --> 00:03:48.610
But we are starting to see price perk up again.
00:03:48.769 --> 00:03:57.250
And like what Lex has uh alluded, that people are still traveling, people are still driving, but we see a divergence in prices.
00:03:57.490 --> 00:04:03.089
National average of gasoline right now for unleaded is about 380 right now, believe it or not.
00:04:03.250 --> 00:04:08.769
But jet fuel is still very high, diesel is quite high, and also marine fuel is very high.
00:04:09.009 --> 00:04:14.449
So you can see the discretionary spending side of fuel, it's still quite high.
00:04:14.610 --> 00:04:22.689
But again, people are still flying, even though domestic ticket runs from anywhere from 400 to 600 for coach, people are still going.
00:04:22.850 --> 00:04:25.250
Uh, and people are still driving to different places.
00:04:25.410 --> 00:04:25.730
Yeah.
00:04:25.889 --> 00:04:27.730
So the economy is still chuckling along.
00:04:27.970 --> 00:04:33.330
So the reason we talk about oil prices and inflation is because of interest rates.
00:04:33.569 --> 00:04:40.770
And when the economy is really strong, then interest rates tend to rise to slow the economy down.
00:04:40.930 --> 00:04:46.610
When inter when the economy is really weak, we lower interest rates to stimulate the economy.
00:04:46.850 --> 00:04:50.290
But the Fed right now is kind of divided on interest rates.
00:04:50.530 --> 00:05:05.009
Uh so Lex, given Kevin Warsh was on the hill testifying in front of Congress this week, what do you think of how he is kind of positioning his Fed chairmanship to interest rates at this time?
00:05:05.330 --> 00:05:05.889
Carefully.
00:05:06.290 --> 00:05:17.490
I don't envy the position that he's in at the moment, given this state of the economy, because you still have a rather fully employed labor force, right?
00:05:17.810 --> 00:05:21.250
You have consumption still at a pretty good clip.
00:05:21.490 --> 00:05:27.330
Yes, you have the prices of that higher, uh, but we haven't seen, I mean, we've seen layoffs, right?
00:05:27.410 --> 00:05:33.170
There was, I think it was Microsoft announcing on Xbox, I can't remember if that was last week or the week before.
00:05:33.330 --> 00:05:50.689
But is that more so just natural uh corporate organization rather than something systemic that you would expect someone like you know, Warsh and the governors to be able to look at interest rates and say, we really need to do something here to help the average individual, which would mean lowering rates, right?
00:05:50.930 --> 00:06:05.730
So I was going through um, you know, the BLS statistics kind of across the PPI and CPI makeups, and I hate to say, but I think no action is better than taking any aggressive action right now because of the way that things are.
00:06:05.889 --> 00:06:07.650
Yeah, I mean, some folks are disgruntled.
00:06:07.810 --> 00:06:15.889
Obviously, the president wants lower rates yesterday just because that's who he is, and that's part and parcel to what he does outside of this from a real estate perspective.
00:06:16.129 --> 00:06:37.090
But I think his job right now on being able to take in information and determine what his core group is going to do, better to take your time on that than just make some sort of hasty action by either raising a rate or lowering a rate and then having, you know, knock-on effects from that negatively one way or the other.
00:06:37.250 --> 00:06:44.050
And it decreases their ability to pull a lever when they really need to, which we've seen that in the past too.
00:06:44.210 --> 00:06:52.530
You know, it's funny, doing what we all do for a living, it's amazing how we have to be economists as well as investment managers.
00:06:52.689 --> 00:07:05.250
And, you know, the economy right now, I would say, is you know, kind of sputtering along, you know, kind of strong, but you're not really sure if it's going to be able to hold it up given the jobs numbers as well.
00:07:05.410 --> 00:07:10.370
Um, Michelle, what's your view on the Fed chairman and his position on the economy?
00:07:10.689 --> 00:07:25.490
I was watching him when he was testifying this week, and he wanted to make it clear uh to the members of Congress, and I think the Senate too, that he is inflation is his number one enemy, more so than job growth.
00:07:25.650 --> 00:07:29.569
That seemed to be the the message that he was trying to deliver.
00:07:29.730 --> 00:07:37.810
And I think that's really hard in terms of battling inflation right now because it's like they're being backed in a corner.
00:07:37.970 --> 00:07:53.650
Like like Lex, I also don't envy him or the Federal Reserve because you they want to lower rates, but you really can't yet because we don't have enough signs in the economy that it wouldn't cause a problem if they were to lower rates.
00:07:53.810 --> 00:08:04.129
But at the same time, rates are so high and corporations keep borrowing more and more, which puts more fire under the rates, it's a really difficult place to to be.
00:08:04.370 --> 00:08:11.090
Yeah, I have a real difficult time jumping on the bandwagon that rates should be lower.
00:08:11.330 --> 00:08:27.250
Although if you're trying to fight off inflation and inflation had cooled more than you had expected right now, it's probably a good time to just let things you know play out and then wait for more economic data to come out when it can or when it does come out.
00:08:27.490 --> 00:08:32.689
Andrew, uh, I want to lead into home prices have reached another record high.
00:08:32.929 --> 00:08:44.129
And that's surprising, you know, given that demand usually is what pushes prices higher, but demand hasn't really picked up that much because the interest rates are so high.
00:08:44.210 --> 00:08:48.129
And very few people are paying cash for houses these days.
00:08:48.370 --> 00:08:50.129
You want to kind of give us your thoughts on that?
00:08:50.370 --> 00:08:52.769
Yeah, because all the cash buyers, they're done.
00:08:52.850 --> 00:08:56.850
You know, they were buying homes, you know, roughly about two quarters ago.
00:08:57.009 --> 00:08:58.210
But they've been doing that.
00:08:58.289 --> 00:09:01.250
And they took the best real estate out of the market.
00:09:01.570 --> 00:09:09.169
And right now, you're still dealing with uh another unexpected ticked up in mortgage rates.
00:09:09.250 --> 00:09:17.250
Uh, and that's relative to the I would say transitory spikes in oil, because now really nobody knows how long this is gonna last.
00:09:17.490 --> 00:09:19.970
We have ceasefires, then we don't have ceasefires.
00:09:20.129 --> 00:09:31.570
So this back and forth and yo-yoing of uh rhetoric between the US and Iran conflict, it's causing a lot more uncertainty than we originally was expecting.
00:09:31.810 --> 00:09:37.250
And so we we can see that reflected in the 30-year mortgage jumbo rates as well.
00:09:37.409 --> 00:09:45.250
So now we're approaching close to six and a half, six point seven five, you know, for 30-year jumbo mortgage rate fixed rate.
00:09:45.490 --> 00:09:49.649
And that is not helping at all because we're close to 7% now, right?
00:09:49.889 --> 00:09:59.570
And uh with rates that high, even if if the homeowners put their house on sale, you're gonna have a harder time for the buyers to do the successful closing.
00:09:59.730 --> 00:10:04.610
And you're gonna see a longer duration of houses uh they're gonna be on the market.
00:10:04.769 --> 00:10:15.090
And of course, with this ongoing continuation of uh price moving to the upside, yeah, we're you know, we're not seeing any relief when it comes to affordability.
00:10:15.250 --> 00:10:24.370
So even remodeling costs more, parts costs more, material costs more, labor continuously costs more, and therefore it pushes up home prices.
00:10:24.610 --> 00:10:34.690
But this is somewhat, it needs to take a break, you know, and I don't expect demand to be strong anytime soon when rates are this high.
00:10:34.850 --> 00:10:35.970
The yields have climbed.
00:10:36.050 --> 00:10:38.210
It's a reflection of the short-term inflation.
00:10:38.529 --> 00:10:50.370
But Lex, in your area of Pennsylvania, are prices continuing to move up, even though mortgage rates have moved up, because usually they counterbalance each other.
00:10:50.529 --> 00:10:52.769
Rates go lower and prices go higher.
00:10:52.930 --> 00:10:57.570
But right now you have rates going higher and the price of houses going higher.
00:10:58.690 --> 00:11:07.570
In my area, yes, there's still again different parts of the country are different, but we are seeing prices of homes increase.
00:11:07.730 --> 00:11:10.930
It's not quite at the level as it was a few years ago.
00:11:11.009 --> 00:11:19.250
I think it's slowing down, but you and houses are staying on the market a little bit longer by about a day compared to last year.
00:11:19.409 --> 00:11:28.850
So houses are the average this is according to the National Association of Realtors, uh average days on the market of a home or 28 compared to 27 last year.
00:11:29.169 --> 00:11:31.810
Not overly meaningful, but it still means something.
00:11:32.050 --> 00:11:39.970
I think what's interesting though is the percentage of sales compared to last year is up by 3% for first-time home buyers.
00:11:40.210 --> 00:11:47.330
So to me, what that says when you have rates that are down from a year ago, the 30-year average a year ago was about 6.6%.
00:11:47.810 --> 00:11:58.610
Obviously, it's climbed back up to that in the last, I think, probably 30 days, but for the year, the average was about 6.28% on the 30 year, according to Freddie Mack.
00:11:58.769 --> 00:12:08.769
It says to me that first-time homebuyers are getting used to rates being at this level and adjusting spending to accommodate the need for first-time home buying.
00:12:09.169 --> 00:12:13.889
And you know, this year compared to last year was one year more of being able to save money.
00:12:14.129 --> 00:12:19.409
So I think consumers are just going to have to get used to rates being where they are.
00:12:19.570 --> 00:12:29.490
And candidly, when you look at where that's been historically, these are you know, these are rates I think important for people to get used to as well.
00:12:29.649 --> 00:12:35.409
You'll start to see home values, I think, start to level off a little bit, but and we've seen it cool.
00:12:35.490 --> 00:12:39.090
It's not last year, just as a home buyer, it was insane.
00:12:39.330 --> 00:12:42.850
I mean, you're bidding up numbers that just didn't make any sense.
00:12:43.009 --> 00:12:44.930
It slowed down a little bit from last year.
00:12:45.090 --> 00:12:59.009
Yeah, if we were to summarize what we've talked about, we're not seeing interest rates move, we're not seeing oil prices really move, we're seeing housing prices go higher, even though interest rates haven't moved up higher.
00:12:59.169 --> 00:13:04.370
And something, Andrew, that we've seen our bank earnings have been very resilient.
00:13:04.529 --> 00:13:15.090
So, you know, let's talk a little bit about that, and then let's focus in on what you would do to what you would recommend people do in their portfolios to, you know, as I summarize things.
00:13:15.409 --> 00:13:25.970
Yeah, we can see financials are going to do well when we uh get a confirmation from the Federal Reserve that the higher rates most likely are going to stay here at these levels.
00:13:26.129 --> 00:13:34.930
Uh, I still don't expect a November rate hike because uh, you know, this uh prices increase are really due to supply, not demand.
00:13:35.169 --> 00:13:42.210
Now, the large banks are generally doing well because of the strength of their balance sheets, you know, from recovery to where we are.
00:13:42.370 --> 00:13:44.289
The banks are really flush with cash.
00:13:44.370 --> 00:13:51.090
Uh there are lots of risk measures in there, no, you know, basically compliance measures in there to reduce risk.
00:13:51.330 --> 00:14:00.930
And investment banking activities have picked up, uh, you know, and we can see that uh go hand in hand with the AI infrastructure build and the tech build out.
00:14:01.090 --> 00:14:05.090
And then trading revenue uh are also very good for the banks.
00:14:05.250 --> 00:14:08.289
And then credit quality among the banks are also very good.
00:14:08.529 --> 00:14:12.529
Losses, we don't really see a whole lot of that since 2022.
00:14:12.690 --> 00:14:16.690
Many of those non-performing loans or bankruptcies, they're already done.
00:14:16.850 --> 00:14:21.570
You know, we haven't really seen any of those uh, you know, come into the spotlight.
00:14:21.810 --> 00:14:30.289
And so when the consumer understands that, hey, the rates are gonna stay higher at these levels for longer, just like what Lex is saying, is that they're gonna get used to this.
00:14:30.450 --> 00:14:33.090
And if they do want to take out a loan, they'll go ahead and do it.
00:14:33.169 --> 00:14:44.289
They're not gonna have this Osborne effect of waiting for the rates to come down before they make a decision on purchasing or take out a loan to do remodeling or uh you know anything as such.
00:14:44.450 --> 00:14:58.289
And so we still think that the consumer market is still gonna be strong going forward, business activity is still gonna be strong, business borrowing is still gonna be strong, and business formation is exceptionally strong, you know, to offset this job loss data.
00:14:58.529 --> 00:15:07.649
And so financials, I believe, is not gonna give you a double anytime soon, but it's going to be a steady, robust sector uh, you know, for the foreseeable future.
00:15:07.970 --> 00:15:18.050
Well, I had a client ask me yesterday about all of the pending uh foreclosures on commercial real estate being a big problem for banks.
00:15:18.210 --> 00:15:21.250
How would you address my client on that?
00:15:21.490 --> 00:15:29.490
Uh yeah, I see that the foreclosure on commercial industry, I think mostly they're done.
00:15:29.649 --> 00:15:37.810
I think your customer is reading on the tail end of that news, meaning that is probably not news news, but a little bit of dated news.
00:15:37.970 --> 00:15:51.970
Most of the developers and operators, they have already secure financing, and I know there are a lot of loans that are still rolling off and that needs to be refinanced, but the decisions can be made, meaning they're not waiting for a rate cut anytime soon.
00:15:52.129 --> 00:15:59.970
And so with this higher for longer environment, uh the businesses either froze or you know, they can continue to operate.
00:16:00.050 --> 00:16:07.090
But most in in that particular area, they are already downsizing and they have already dodged the bullet.
00:16:07.250 --> 00:16:10.129
And if they are in trouble, they would have been in trouble already.
00:16:10.289 --> 00:16:13.009
And so, yeah, Lex, I guess you can follow up on that.
00:16:13.330 --> 00:16:23.409
I think that's relatively trough when you look at it, you know, in whole regionally is is certainly a different picture and should be taken as such.
00:16:23.570 --> 00:16:26.610
You know, I don't know what your client's background is on that.
00:16:26.769 --> 00:16:32.289
If they have some sort of particular insight, maybe they're working in a particular jurisdiction that they're seeing that change.
00:16:32.370 --> 00:16:46.450
And that's very possible when you've had what we had over COVID, and folks either saying we don't need to be in particularly a high-rent district, we can be in a lower rent district with less space, or a high rent district with less space than they had, and change the footprint.
00:16:46.610 --> 00:16:48.450
But I think that that's dropped quite a bit.
00:16:48.529 --> 00:16:56.450
I also see that there's a different, there's a trend going the other way of folks getting back into the office than there was leaving the office.
00:16:56.690 --> 00:17:06.289
Employers recognize the productivity for being in the office and having conversations and the camaraderie that is far greater than working remote.
00:17:06.690 --> 00:17:11.569
That said, there's there's quite a bit of technology out there, which is also helping for those.
00:17:11.730 --> 00:17:30.529
I'm probably speaking more to like the legal industry, which did take up big footprints in major cities and still do, but they're more flexible and they're combating their I think where they were having deficiencies from a work perspective, with technology to be able to help track time and all that stuff.
00:17:30.689 --> 00:17:33.569
So people are just adjusting to a new normal.
00:17:33.649 --> 00:17:40.609
And I think the real estate aspect of that has shifted in such a way where people are gonna be back to work and need to be back to work.
00:17:41.729 --> 00:17:42.289
Yeah, yeah.
00:17:42.369 --> 00:18:02.209
I he's a serial entrepreneur, and he was talking to somebody who was in the loan business, and he said, get out of everything that's commercial, you know, commercial related because this massive storm of unpaid buildings are going to uh hit the market.
00:18:02.449 --> 00:18:07.569
Uh so he was worried about that and then how it was going to impact his portfolio.
00:18:07.809 --> 00:18:10.929
And I told him nothing was gonna impact his portfolio.
00:18:11.169 --> 00:18:12.689
Well, I do think banks too, right?
00:18:12.769 --> 00:18:22.609
Like they've taken their charge off to where they can, and they've been able to like right-size that loan book because they do understand where rates have been in the last four years, right?
00:18:22.769 --> 00:18:24.529
And they can't slow their business down.
00:18:24.609 --> 00:18:41.409
But I think the appetite on corporate America, particularly as we're in this innovation change, industrial change, is banks recognize the need to be able to help fund that and to help right size particular parts of their books of business that maybe would be uh seen as liabilities.
00:18:41.569 --> 00:18:45.649
But I think there's a lot more positives on the bank side, and they're gonna make a ton more money.
00:18:45.729 --> 00:18:50.609
I've actually been was buying financials about, you know, for some clients over the last two months.
00:18:50.769 --> 00:18:53.569
Well, I want to thank all three of you for joining today.
00:18:53.729 --> 00:18:59.169
For those of you watching, please share this with your close friends and business associates.
00:18:59.329 --> 00:19:13.889
And if you have a need, please reach out to Michelle Connell with Porsche Asset Management in Fort Worth, Lex Nickpoor with Ethos Financial Group in King of Prussia, Pennsylvania, and Andrew Tang with Turner Financial Group.
00:19:14.049 --> 00:19:20.369
And Andrew, I never say where you're located because I don't know if I should say New or New York.
00:19:20.849 --> 00:19:21.969
I'm always traveling.
00:19:22.049 --> 00:19:26.049
Right now I'm Northern California, but I'm based in New York, New Jersey.
00:19:26.129 --> 00:19:26.369
Yeah.
00:19:26.609 --> 00:19:33.089
So and we are up to about 4,500 people watching this a week, and we'd like to double that.
00:19:33.250 --> 00:19:39.329
So please share this with everybody you know, and uh we appreciate you joining us with Wealth Transparency.
00:19:39.490 --> 00:19:39.809
Thank you.
00:19:39.969 --> 00:19:41.329
Thanks for having me.
00:00:25.410 --> 00:00:29.809
Hello everybody and welcome to another edition of Wealth Transparency.
00:00:29.890 --> 00:00:31.009
I'm Ed Dietowski.
00:00:31.169 --> 00:00:31.969
I'm your host.
00:00:32.370 --> 00:00:45.089
I'm honored to have Andrew Tang with Turner Financial Group with us, Lex Nickpoor with Ethos Financial Group, and Michelle Connell with Porsche Asset Management.
00:00:45.409 --> 00:00:59.170
Each week, what we do is we take headlines that aren't necessarily the main headlines, but storylines that impact your financial picture and what you should do as a result of these headlines in your portfolio.
00:00:59.329 --> 00:01:04.530
So to start off with, inflation cooled more than expected in June.
00:01:04.689 --> 00:01:11.969
So, Michelle, why don't you take us through your uh feelings about inflation and where you see them going, the numbers.
00:01:12.210 --> 00:01:24.929
Well, when we talked the last time, there was an opinion, and mine was included that inflation numbers where they were were a little bit more transitory, and that's what we're seeing, at least on the energy side.
00:01:25.170 --> 00:01:36.450
But it may be the case where a lot of the manufacturers and service providers may keep the costs where they are because they've been absorbing a lot of the excess costs.
00:01:36.609 --> 00:01:39.489
So I don't know if we're going to see a reprieve.
00:01:39.650 --> 00:01:51.569
For instance, today United Airlines was on Bloomberg and they said they're going to keep fares high, and they implied that they're going to keep raising them because they can't.
00:01:52.450 --> 00:02:03.890
I know that oil prices are the number one in the Philadelphia.
00:02:13.650 --> 00:02:19.490
But as we've seen some conflict escalation, we've seen that price pick up as well.
00:02:19.650 --> 00:02:30.050
They've moved a little bit closer, but more so I think for the consumer, it's a reminder that this is probably to expect these elevator prices in and around the$4 mark.
00:02:30.209 --> 00:02:39.410
And as things might continue, we'll I think we could see that price of oil, you know, if the escalation continues, we'll see the price of oil continue as well.
00:02:39.569 --> 00:02:43.329
But like Michelle said, that's just being absorbed by the consumer right now.
00:02:43.410 --> 00:02:50.610
And the consumer, while verbally being disgruntled, uh consumers are still spending right now in the summer.
00:02:50.689 --> 00:03:02.129
So, you know, you look at the eye test, which I think sort of fronts the data that we get from uh some of these organizations, and people are still out and about doing things and people are still buying airlines tickets.
00:03:02.370 --> 00:03:10.129
So I'm gonna come back to Lex and Michelle on what industry do you think is gonna benefit the most when oil prices come lower?
00:03:10.290 --> 00:03:12.529
But uh, Andrew, let me ask you that question.
00:03:12.769 --> 00:03:19.089
What industry do you think is gonna be benefit the most from oil prices coming lower?
00:03:19.329 --> 00:03:25.250
Yeah, I think general consumption or retail sales will benefit when oil comes down.
00:03:25.329 --> 00:03:33.730
Uh, there is a little bit of a lag uh from crude oil prices versus gasoline because gasoline is a refined product at the end of the day.
00:03:33.889 --> 00:03:38.529
And we saw a dip in inflation numbers in June, but that was June.
00:03:38.689 --> 00:03:45.250
So that was the time then when the ceasefire for where the Straits of Hormuz was actually running pretty high.
00:03:45.490 --> 00:03:48.610
But we are starting to see price perk up again.
00:03:48.769 --> 00:03:57.250
And like what Lex has uh alluded, that people are still traveling, people are still driving, but we see a divergence in prices.
00:03:57.490 --> 00:04:03.089
National average of gasoline right now for unleaded is about 380 right now, believe it or not.
00:04:03.250 --> 00:04:08.769
But jet fuel is still very high, diesel is quite high, and also marine fuel is very high.
00:04:09.009 --> 00:04:14.449
So you can see the discretionary spending side of fuel, it's still quite high.
00:04:14.610 --> 00:04:22.689
But again, people are still flying, even though domestic ticket runs from anywhere from 400 to 600 for coach, people are still going.
00:04:22.850 --> 00:04:25.250
Uh, and people are still driving to different places.
00:04:25.410 --> 00:04:25.730
Yeah.
00:04:25.889 --> 00:04:27.730
So the economy is still chuckling along.
00:04:27.970 --> 00:04:33.330
So the reason we talk about oil prices and inflation is because of interest rates.
00:04:33.569 --> 00:04:40.770
And when the economy is really strong, then interest rates tend to rise to slow the economy down.
00:04:40.930 --> 00:04:46.610
When inter when the economy is really weak, we lower interest rates to stimulate the economy.
00:04:46.850 --> 00:04:50.290
But the Fed right now is kind of divided on interest rates.
00:04:50.530 --> 00:05:05.009
Uh so Lex, given Kevin Warsh was on the hill testifying in front of Congress this week, what do you think of how he is kind of positioning his Fed chairmanship to interest rates at this time?
00:05:05.330 --> 00:05:05.889
Carefully.
00:05:06.290 --> 00:05:17.490
I don't envy the position that he's in at the moment, given this state of the economy, because you still have a rather fully employed labor force, right?
00:05:17.810 --> 00:05:21.250
You have consumption still at a pretty good clip.
00:05:21.490 --> 00:05:27.330
Yes, you have the prices of that higher, uh, but we haven't seen, I mean, we've seen layoffs, right?
00:05:27.410 --> 00:05:33.170
There was, I think it was Microsoft announcing on Xbox, I can't remember if that was last week or the week before.
00:05:33.330 --> 00:05:50.689
But is that more so just natural uh corporate organization rather than something systemic that you would expect someone like you know, Warsh and the governors to be able to look at interest rates and say, we really need to do something here to help the average individual, which would mean lowering rates, right?
00:05:50.930 --> 00:06:05.730
So I was going through um, you know, the BLS statistics kind of across the PPI and CPI makeups, and I hate to say, but I think no action is better than taking any aggressive action right now because of the way that things are.
00:06:05.889 --> 00:06:07.650
Yeah, I mean, some folks are disgruntled.
00:06:07.810 --> 00:06:15.889
Obviously, the president wants lower rates yesterday just because that's who he is, and that's part and parcel to what he does outside of this from a real estate perspective.
00:06:16.129 --> 00:06:37.090
But I think his job right now on being able to take in information and determine what his core group is going to do, better to take your time on that than just make some sort of hasty action by either raising a rate or lowering a rate and then having, you know, knock-on effects from that negatively one way or the other.
00:06:37.250 --> 00:06:44.050
And it decreases their ability to pull a lever when they really need to, which we've seen that in the past too.
00:06:44.210 --> 00:06:52.530
You know, it's funny, doing what we all do for a living, it's amazing how we have to be economists as well as investment managers.
00:06:52.689 --> 00:07:05.250
And, you know, the economy right now, I would say, is you know, kind of sputtering along, you know, kind of strong, but you're not really sure if it's going to be able to hold it up given the jobs numbers as well.
00:07:05.410 --> 00:07:10.370
Um, Michelle, what's your view on the Fed chairman and his position on the economy?
00:07:10.689 --> 00:07:25.490
I was watching him when he was testifying this week, and he wanted to make it clear uh to the members of Congress, and I think the Senate too, that he is inflation is his number one enemy, more so than job growth.
00:07:25.650 --> 00:07:29.569
That seemed to be the the message that he was trying to deliver.
00:07:29.730 --> 00:07:37.810
And I think that's really hard in terms of battling inflation right now because it's like they're being backed in a corner.
00:07:37.970 --> 00:07:53.650
Like like Lex, I also don't envy him or the Federal Reserve because you they want to lower rates, but you really can't yet because we don't have enough signs in the economy that it wouldn't cause a problem if they were to lower rates.
00:07:53.810 --> 00:08:04.129
But at the same time, rates are so high and corporations keep borrowing more and more, which puts more fire under the rates, it's a really difficult place to to be.
00:08:04.370 --> 00:08:11.090
Yeah, I have a real difficult time jumping on the bandwagon that rates should be lower.
00:08:11.330 --> 00:08:27.250
Although if you're trying to fight off inflation and inflation had cooled more than you had expected right now, it's probably a good time to just let things you know play out and then wait for more economic data to come out when it can or when it does come out.
00:08:27.490 --> 00:08:32.689
Andrew, uh, I want to lead into home prices have reached another record high.
00:08:32.929 --> 00:08:44.129
And that's surprising, you know, given that demand usually is what pushes prices higher, but demand hasn't really picked up that much because the interest rates are so high.
00:08:44.210 --> 00:08:48.129
And very few people are paying cash for houses these days.
00:08:48.370 --> 00:08:50.129
You want to kind of give us your thoughts on that?
00:08:50.370 --> 00:08:52.769
Yeah, because all the cash buyers, they're done.
00:08:52.850 --> 00:08:56.850
You know, they were buying homes, you know, roughly about two quarters ago.
00:08:57.009 --> 00:08:58.210
But they've been doing that.
00:08:58.289 --> 00:09:01.250
And they took the best real estate out of the market.
00:09:01.570 --> 00:09:09.169
And right now, you're still dealing with uh another unexpected ticked up in mortgage rates.
00:09:09.250 --> 00:09:17.250
Uh, and that's relative to the I would say transitory spikes in oil, because now really nobody knows how long this is gonna last.
00:09:17.490 --> 00:09:19.970
We have ceasefires, then we don't have ceasefires.
00:09:20.129 --> 00:09:31.570
So this back and forth and yo-yoing of uh rhetoric between the US and Iran conflict, it's causing a lot more uncertainty than we originally was expecting.
00:09:31.810 --> 00:09:37.250
And so we we can see that reflected in the 30-year mortgage jumbo rates as well.
00:09:37.409 --> 00:09:45.250
So now we're approaching close to six and a half, six point seven five, you know, for 30-year jumbo mortgage rate fixed rate.
00:09:45.490 --> 00:09:49.649
And that is not helping at all because we're close to 7% now, right?
00:09:49.889 --> 00:09:59.570
And uh with rates that high, even if if the homeowners put their house on sale, you're gonna have a harder time for the buyers to do the successful closing.
00:09:59.730 --> 00:10:04.610
And you're gonna see a longer duration of houses uh they're gonna be on the market.
00:10:04.769 --> 00:10:15.090
And of course, with this ongoing continuation of uh price moving to the upside, yeah, we're you know, we're not seeing any relief when it comes to affordability.
00:10:15.250 --> 00:10:24.370
So even remodeling costs more, parts costs more, material costs more, labor continuously costs more, and therefore it pushes up home prices.
00:10:24.610 --> 00:10:34.690
But this is somewhat, it needs to take a break, you know, and I don't expect demand to be strong anytime soon when rates are this high.
00:10:34.850 --> 00:10:35.970
The yields have climbed.
00:10:36.050 --> 00:10:38.210
It's a reflection of the short-term inflation.
00:10:38.529 --> 00:10:50.370
But Lex, in your area of Pennsylvania, are prices continuing to move up, even though mortgage rates have moved up, because usually they counterbalance each other.
00:10:50.529 --> 00:10:52.769
Rates go lower and prices go higher.
00:10:52.930 --> 00:10:57.570
But right now you have rates going higher and the price of houses going higher.
00:10:58.690 --> 00:11:07.570
In my area, yes, there's still again different parts of the country are different, but we are seeing prices of homes increase.
00:11:07.730 --> 00:11:10.930
It's not quite at the level as it was a few years ago.
00:11:11.009 --> 00:11:19.250
I think it's slowing down, but you and houses are staying on the market a little bit longer by about a day compared to last year.
00:11:19.409 --> 00:11:28.850
So houses are the average this is according to the National Association of Realtors, uh average days on the market of a home or 28 compared to 27 last year.
00:11:29.169 --> 00:11:31.810
Not overly meaningful, but it still means something.
00:11:32.050 --> 00:11:39.970
I think what's interesting though is the percentage of sales compared to last year is up by 3% for first-time home buyers.
00:11:40.210 --> 00:11:47.330
So to me, what that says when you have rates that are down from a year ago, the 30-year average a year ago was about 6.6%.
00:11:47.810 --> 00:11:58.610
Obviously, it's climbed back up to that in the last, I think, probably 30 days, but for the year, the average was about 6.28% on the 30 year, according to Freddie Mack.
00:11:58.769 --> 00:12:08.769
It says to me that first-time homebuyers are getting used to rates being at this level and adjusting spending to accommodate the need for first-time home buying.
00:12:09.169 --> 00:12:13.889
And you know, this year compared to last year was one year more of being able to save money.
00:12:14.129 --> 00:12:19.409
So I think consumers are just going to have to get used to rates being where they are.
00:12:19.570 --> 00:12:29.490
And candidly, when you look at where that's been historically, these are you know, these are rates I think important for people to get used to as well.
00:12:29.649 --> 00:12:35.409
You'll start to see home values, I think, start to level off a little bit, but and we've seen it cool.
00:12:35.490 --> 00:12:39.090
It's not last year, just as a home buyer, it was insane.
00:12:39.330 --> 00:12:42.850
I mean, you're bidding up numbers that just didn't make any sense.
00:12:43.009 --> 00:12:44.930
It slowed down a little bit from last year.
00:12:45.090 --> 00:12:59.009
Yeah, if we were to summarize what we've talked about, we're not seeing interest rates move, we're not seeing oil prices really move, we're seeing housing prices go higher, even though interest rates haven't moved up higher.
00:12:59.169 --> 00:13:04.370
And something, Andrew, that we've seen our bank earnings have been very resilient.
00:13:04.529 --> 00:13:15.090
So, you know, let's talk a little bit about that, and then let's focus in on what you would do to what you would recommend people do in their portfolios to, you know, as I summarize things.
00:13:15.409 --> 00:13:25.970
Yeah, we can see financials are going to do well when we uh get a confirmation from the Federal Reserve that the higher rates most likely are going to stay here at these levels.
00:13:26.129 --> 00:13:34.930
Uh, I still don't expect a November rate hike because uh, you know, this uh prices increase are really due to supply, not demand.
00:13:35.169 --> 00:13:42.210
Now, the large banks are generally doing well because of the strength of their balance sheets, you know, from recovery to where we are.
00:13:42.370 --> 00:13:44.289
The banks are really flush with cash.
00:13:44.370 --> 00:13:51.090
Uh there are lots of risk measures in there, no, you know, basically compliance measures in there to reduce risk.
00:13:51.330 --> 00:14:00.930
And investment banking activities have picked up, uh, you know, and we can see that uh go hand in hand with the AI infrastructure build and the tech build out.
00:14:01.090 --> 00:14:05.090
And then trading revenue uh are also very good for the banks.
00:14:05.250 --> 00:14:08.289
And then credit quality among the banks are also very good.
00:14:08.529 --> 00:14:12.529
Losses, we don't really see a whole lot of that since 2022.
00:14:12.690 --> 00:14:16.690
Many of those non-performing loans or bankruptcies, they're already done.
00:14:16.850 --> 00:14:21.570
You know, we haven't really seen any of those uh, you know, come into the spotlight.
00:14:21.810 --> 00:14:30.289
And so when the consumer understands that, hey, the rates are gonna stay higher at these levels for longer, just like what Lex is saying, is that they're gonna get used to this.
00:14:30.450 --> 00:14:33.090
And if they do want to take out a loan, they'll go ahead and do it.
00:14:33.169 --> 00:14:44.289
They're not gonna have this Osborne effect of waiting for the rates to come down before they make a decision on purchasing or take out a loan to do remodeling or uh you know anything as such.
00:14:44.450 --> 00:14:58.289
And so we still think that the consumer market is still gonna be strong going forward, business activity is still gonna be strong, business borrowing is still gonna be strong, and business formation is exceptionally strong, you know, to offset this job loss data.
00:14:58.529 --> 00:15:07.649
And so financials, I believe, is not gonna give you a double anytime soon, but it's going to be a steady, robust sector uh, you know, for the foreseeable future.
00:15:07.970 --> 00:15:18.050
Well, I had a client ask me yesterday about all of the pending uh foreclosures on commercial real estate being a big problem for banks.
00:15:18.210 --> 00:15:21.250
How would you address my client on that?
00:15:21.490 --> 00:15:29.490
Uh yeah, I see that the foreclosure on commercial industry, I think mostly they're done.
00:15:29.649 --> 00:15:37.810
I think your customer is reading on the tail end of that news, meaning that is probably not news news, but a little bit of dated news.
00:15:37.970 --> 00:15:51.970
Most of the developers and operators, they have already secure financing, and I know there are a lot of loans that are still rolling off and that needs to be refinanced, but the decisions can be made, meaning they're not waiting for a rate cut anytime soon.
00:15:52.129 --> 00:15:59.970
And so with this higher for longer environment, uh the businesses either froze or you know, they can continue to operate.
00:16:00.050 --> 00:16:07.090
But most in in that particular area, they are already downsizing and they have already dodged the bullet.
00:16:07.250 --> 00:16:10.129
And if they are in trouble, they would have been in trouble already.
00:16:10.289 --> 00:16:13.009
And so, yeah, Lex, I guess you can follow up on that.
00:16:13.330 --> 00:16:23.409
I think that's relatively trough when you look at it, you know, in whole regionally is is certainly a different picture and should be taken as such.
00:16:23.570 --> 00:16:26.610
You know, I don't know what your client's background is on that.
00:16:26.769 --> 00:16:32.289
If they have some sort of particular insight, maybe they're working in a particular jurisdiction that they're seeing that change.
00:16:32.370 --> 00:16:46.450
And that's very possible when you've had what we had over COVID, and folks either saying we don't need to be in particularly a high-rent district, we can be in a lower rent district with less space, or a high rent district with less space than they had, and change the footprint.
00:16:46.610 --> 00:16:48.450
But I think that that's dropped quite a bit.
00:16:48.529 --> 00:16:56.450
I also see that there's a different, there's a trend going the other way of folks getting back into the office than there was leaving the office.
00:16:56.690 --> 00:17:06.289
Employers recognize the productivity for being in the office and having conversations and the camaraderie that is far greater than working remote.
00:17:06.690 --> 00:17:11.569
That said, there's there's quite a bit of technology out there, which is also helping for those.
00:17:11.730 --> 00:17:30.529
I'm probably speaking more to like the legal industry, which did take up big footprints in major cities and still do, but they're more flexible and they're combating their I think where they were having deficiencies from a work perspective, with technology to be able to help track time and all that stuff.
00:17:30.689 --> 00:17:33.569
So people are just adjusting to a new normal.
00:17:33.649 --> 00:17:40.609
And I think the real estate aspect of that has shifted in such a way where people are gonna be back to work and need to be back to work.
00:17:41.729 --> 00:17:42.289
Yeah, yeah.
00:17:42.369 --> 00:18:02.209
I he's a serial entrepreneur, and he was talking to somebody who was in the loan business, and he said, get out of everything that's commercial, you know, commercial related because this massive storm of unpaid buildings are going to uh hit the market.
00:18:02.449 --> 00:18:07.569
Uh so he was worried about that and then how it was going to impact his portfolio.
00:18:07.809 --> 00:18:10.929
And I told him nothing was gonna impact his portfolio.
00:18:11.169 --> 00:18:12.689
Well, I do think banks too, right?
00:18:12.769 --> 00:18:22.609
Like they've taken their charge off to where they can, and they've been able to like right-size that loan book because they do understand where rates have been in the last four years, right?
00:18:22.769 --> 00:18:24.529
And they can't slow their business down.
00:18:24.609 --> 00:18:41.409
But I think the appetite on corporate America, particularly as we're in this innovation change, industrial change, is banks recognize the need to be able to help fund that and to help right size particular parts of their books of business that maybe would be uh seen as liabilities.
00:18:41.569 --> 00:18:45.649
But I think there's a lot more positives on the bank side, and they're gonna make a ton more money.
00:18:45.729 --> 00:18:50.609
I've actually been was buying financials about, you know, for some clients over the last two months.
00:18:50.769 --> 00:18:53.569
Well, I want to thank all three of you for joining today.
00:18:53.729 --> 00:18:59.169
For those of you watching, please share this with your close friends and business associates.
00:18:59.329 --> 00:19:13.889
And if you have a need, please reach out to Michelle Connell with Porsche Asset Management in Fort Worth, Lex Nickpoor with Ethos Financial Group in King of Prussia, Pennsylvania, and Andrew Tang with Turner Financial Group.
00:19:14.049 --> 00:19:20.369
And Andrew, I never say where you're located because I don't know if I should say New or New York.
00:19:20.849 --> 00:19:21.969
I'm always traveling.
00:19:22.049 --> 00:19:26.049
Right now I'm Northern California, but I'm based in New York, New Jersey.
00:19:26.129 --> 00:19:26.369
Yeah.
00:19:26.609 --> 00:19:33.089
So and we are up to about 4,500 people watching this a week, and we'd like to double that.
00:19:33.250 --> 00:19:39.329
So please share this with everybody you know, and uh we appreciate you joining us with Wealth Transparency.
00:19:39.490 --> 00:19:39.809
Thank you.
00:19:39.969 --> 00:19:41.329
Thanks for having me.
