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Speaker 1: Welcome to How the Money. I'm Joel, I'm Matt, and today we're talking deadly debt, housing, crash hopes, and the expensive American dream.
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Speaker 2: Yeah, you know, give an inflation, everything costs more than it used to, Joel, but the American dream and your dreams, it kind of feels like something that shouldn't shouldn't cost more. But we will talk about that.
00:00:36
Speaker 1: This is if I start actually getting charged for dreaming, I'm gonna have to talk to somebody about that.
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Speaker 2: That's silly. This is our Friday Light though. We're gonna talk about the stories that A are either the most interesting stories to us or be the ones that also apply to your finances the most the ones that we think you need to be paying attention to. A. Did you want to talk about Shohi Watani? Yeah, and I'll get a baseball note here.
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Speaker 1: We're not turning into the sports podcast, I promise, but the the sho Hey Otani contract. Even if you don't care about baseball. I think I said show hey.
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Speaker 2: I That's what I'm saying. I don't watch baseball, so I just read it and I see show he Yeah, I think show Hey, but show hey Otani Japanese player plays two ways, pitches and hits.
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Speaker 1: I mean, he's a phenom. Nobody does that in baseball, like a modern day bab Ruth pretty much. Yeah, yeah, and so and people specialize in baseball. Now, so this guy, because he does both, and he does them both incredibly well, it's just massively impressive. And he just got met the biggest contract in baseball history, seven hundred million million dollars. But and here's why we're talking about it. The way he constructed this contract is fascinating. He's only getting paid two million dollars a year for the next ten years.
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Speaker 2: Much less than seven hundred million headline.
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Speaker 1: Now, yeah, he's deferring a huge chart of that sixty eight million dollar payments for basically the decade after that. So I thought this was just interesting from a couple of perspectives. One, the Dodgers are kind of participating and by now pay later. They're saying, like, we want the Otani now, but we'll pay the price down the road. And this is going to allow them to amass a better team, I think, be able to pay other players and bring in and have just they've already got an incredible team. But what are your thoughts on shohes kind of way of thinking about this that he's saying, Hey, listen, yeah, I want the big contract, but I don't mind getting paid.
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Speaker 2: The baby till till later. Yeah. So, I mean there is a lot of focus on the numbers, right, They're like, oh, well, he grew up in Japan's zero percent inflation over there, so for him, the money ten twenty years down the line, it's gonna be worth to him the same amount. But then you've got the future value of money coming into play, and it's just like, well, what if you have that money, you would be able to invest it. I don't at the end of the day, I don't think he really cares about the money, because I think I've read somewhere he's making like forty million a year in endorsement deal, and so for him, it's like it doesn't really matter. And so what I truly think is that he's doing it for speaking of baseball, for the love of the game, Like he literally the ability for the Dog to free up more of their payroll to bring in other players, because like, when you're at the top of the game like that, what you want to do is freaking win and for him to be able to Like, he's the one that suggested this contract to the Dodgers. This wasn't the first time he shopped this idea around. The Dodgers were the first one to take it. But this allows him to have a better chance at winning. And I think that's all that really matters to him. Money.
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Speaker 1: He's fine with the money. He doesn't really care about the money. He just wants to stink and win. Once you get to a certain point, do you really need more?
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Speaker 2: Right? Exactly? Yeah, yeah, exactly. And so I think for him it's a massive win, I asked, dude. I also think it's a win for the Dodgers as well, because, like you mentioned, the buy now, pay later sort of standpoint, and I view it less through a consumption lens and more through a like an investment lens. And here, and I know you might push back on that a little bit because you're like, what is an investment or not? Well, they've already sad a ton of jerseys, I'll tell you that, So you've got that going on. But it makes me think about what's something that we financed today a house, right, like, and we use mortgages in order to do that. The Dodgers are essentially like many There haven't been a ton of deals to this magnitude that have taken place like this. Yeah, and so by the Dodgers doing this, they've kind of got that first mover's advantage. So it makes me think of So let's go back to housing. Imagine we lived in the world where everybody bought their homes with via cash paying cash right, prices of homes would be a lot less. Now, imagine you were the first person ever to get approved for a thirty year mortgage. You would have the pick of the litter. You would literally be able to buy any house you wanted, power and a much nicer house. And that's going to be true. And so everybody else also has thirty of your mortgages as well, and then you revert back to some sort of normalcy. Well, I say so for the Dodgers, I think this is a killer smart move in a way for them to totally crush it.
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Speaker 1: Yeah, the next decade. I think somebody asked me, Hey, do you think that these kinds of contracts are going to become the norm moving forward? I think the answer is actually probably not. And why Well, it depends on the success well, it depends on that, but it also depends on the player because the player has to have enough financial acumen to realize and the ability to f their lifestyle on a greatly diminished salary in the here and now, and all players are going to be superstars exactly. Well, and even that, like, it's a lot of people want their money. They want their money now, right, It's like that show me the money Jerry McGuire mentality. So are there going to be enough players who have this kind of long term perspective that show Hayes got. I don't know, but the contract's fascinating. It's going to be interesting to see how the Dodgers do. And yeah, they're going to be.
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Speaker 2: See how they're not going to do great because they really are going to be able to put together an incredible squad. They're going to be reckoned. More teams will start to take sort of this this approach to it where they're saying, hey, we got to do this in order to compete, and all of a sudden becomes the new norm.
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Speaker 1: I will say, ten, twelve, fifteen years from now, though, when they're paying show hey sixty eight million a year and they don't have them on the field and they still got to field the team it could get.
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Speaker 2: It could get tough to do. Yeah, tough times to do Dodgers. Then yeah, it's like what's his name, Bobby, It's like this but on like to the stero eightieth degree.
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Speaker 1: Yes, wire levels. So all right, enough baseball talk. Just thought you guys might find that interesting. Let's move on to the Friday flight. Let's start off by talking about credit card debt for a second. There was a new poll It found that credit cards are the biggest obstacle to building wealth. Thirty nine percent of adults said that credit card debt is their biggest threat to building wealth, which, Matt, I think they're probably spot on, And actually I'm surprised that the numbers are that low. What else is your biggest threat to building wealth besides your credit card debt?
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Speaker 2: I don't know.
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Speaker 1: Maybe yourself, a lack of education, Yeah, your own consumption, Yeah, your own habits, Perhaps that could be part of it. But recurring credit card debt is it really is one of the biggest hurdles to making progress with your finances. And something like fifty percent of Americans are not following the number one rule of plastic which is paying the bill on time and in full. And so as a nation, we owe more than a trillion dollars overall in credit card debt, which is a big scary number, and we dug into the numbers recently mount and it's not quite as bad as it steams, although it's still bad. The average balance is something like six thousand dollars. And let's say you only pay the minimum amount each month at a twenty percent interest rate, which is I would say generous given this current environment. Twenty two is about the average. Sure, it would take you more than seventeen years to pay off that debt, and it would cost you more than nine thousand dollars in interest. It's just hard to make progress if you've got that millsdown around your neck. I get why people say that credit cards are such an obstacle for them.
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Speaker 2: Totally agree. Yeah, if you find yourself in credit card debt and you're listening to this, we're not trying to shame you necessarily, but we do want you to know though, that this is a big deal. It's worse than basically every other kind of debt out there, because like student loans have gotten a lot of attention recently, right, But at least in that case, you're getting a degree that will earn you more money, more income, more lifetime earnings. Or with mortgage debt, we're buying an appreciating asset that puts a roof over our head. It's you know, what's the hierarchy of needs that are out there, Shelter it's important. Maslow thinks that one's important. But credit cards can be a great tool if you're using them right. But we want you to experience compounding interest in the positive direction. We want you to be investing your money. We don't want you forking over thousands of dollars to the credit card company. Is where that interest is working against you. That's not the situation we want to want you to find yourself. So if you are in credit card debt, we recommend the tool ondebt dot it. You in debt dot it, check out that website. We'll link to it in the show notes as well. But come up with a plan to get rid of that debt, because, yeah, credit card debt hanging over your head is a problem. It's going to prevent you from being able to achieve the financial goals that you've set out for yourself. It's time to get rid of it, and get rid of it quickly. Yep, all right, mat While we're talking about poles, another one came out at the end of last week, and it found that young folks want the housing market to crash real bad. Fifty three percent of Gen z ers and forty six percent of millennials, So basically, fifty percent of people forty two and younger or whatever want the market to tank. That's according to a Lending Tree pole. Even many current homeowners want to see declines in prices. So it's not just people who are like, I don't own a home yet, I really want one, and dang it, if the housing market would just crash thirty percent, I could afford to buy one. Even people who already own own a home kind of want the housing market to take a dip. And it's because they said they want their property tax bill to go down, which I can understand. Like, if prices go down, property taxes go down. And a lot of people were shocked last year when property tax notices were sent out. But are we going to see price declines? Are these hopes likely to become a reality. It's hard to forecast the housing market. You know, we talked about that with Lance Lambert this this week, but I would say increasingly the answer is looking like, no, I don't. We've kind of said that the whole time, that we don't think that there's some sort of massive correction in store. Minor corrections maybe, but massive ones probably not. Yeah, I think if you've got to be careful what you wish for as well, like for all the aspiring homeowners out there, and you're thinking, oh, if only the market would the housing market would crash, then I could afford a home. Okay, let's roll back the clock a little bit fifteen years. Let's get back in the way back machine and look back to the Great Recession story time with Matt when we saw a housing bubble pop, when we saw housing affordability drop. Well, what happened Like the world, our country was in a massive amount of hurt, dire straits, and what also happened to a lot of jobs during that period of time, They were eliminated. Millions of people lost their jobs, which that actually makes it less feasible to purchase a home. So all of a sudden, not only do you can you not buy that nice little bungalow, or that ranch that you've den iying. You don't even have a job anymore, and so to think the job is a crucial part of being able to afford the home, it's so important. And the housing market is such a big industry that man to actually hope that the housing market crashes it feels a bit myopic. Yeah, little little short sided sided in my opinion.
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Speaker 1: Took ownership of home back in and eight two thousand and nine, like they couldn't give them away, almost like think about how that's how I mean housing prices cratered. But it was also there weren't many buyers out there either, So I you're right, the housing market crash often comes with other side effects that you don't want.
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Speaker 2: Yeah, and for those who are current homeowners too, and you're upset about the fact that you're seenior property bill on the rise, well A, well, you're either the one who purchased that home and caused that price to be to be what it is. But let's just assume you've been there for ten to twenty years. You can always appeal your tax bill, and that's something that we've talked about on the show before as well. That's a legitimate way for you to try to for you to try to get your tax bill down.
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Speaker 1: Yeah, and there's you can diy that thing, don't have to pay anybody a dime, and you can potentially save thousands. You can hire somebody. I've hired somebody in the past couple hundred bucks and it's saved me thousands. So just because battling city hall is not fun. Also, and the truth is, I don't know that record levels of un affordability can last forever. But the only thing that you and I can control are our actions and our savings, right, and so holding off and renting given the current market conditions, that continues to make sense for a whole lot of folks.
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Speaker 2: Matt.
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Speaker 1: I mean, I get the desire to become homeowner, but sometimes it's best just to kind of hold back and wait and keep preparing so that you're even more prepared once the opportunity comes along, instead of trying to force it. It's right, Okay.
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Speaker 2: So at least one of the things that is possibly contributing to higher home prices, albeit in a very small way, across most of the country, is all street ownership of single family homes. You often see that in headlines it's never fun to start bidding against let's say, a hedge fund who's got vastly deeper pockets. There are at least a couple members of Congress who are trying to do something about that. There's a bill that's been introduced to force these hedge funds to liquidate all of their properties over the next decade and then to never actually be able to buy single family homes in the future. These investors cumulatively own more than half a million homes across the US, which I will say, on his face, it sounds like a lot of homes until are single family hams, until you take anto account the fact that there's eighty two million single family homes out there, so that's actually it's less than one percent. It's truly just a drop on the bucket. And so when it's hard for me to not be cynical when I see legislation like this being floated around that it just seems like virtue signaling. It looks like a way to get in front of your electorate and say I'm fighting for the for the little man, I'm trying to stick it to the big bang, to the big hedge funds, when in reality, A, they know it's not going to pass. But B even if it were in a pass, I think it would have a pretty small impact on the actual affordability of films.
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Speaker 1: Yeah, I hear what you're saying. I also don't think it would have zero effect, right, So I kind of I kind of feel two ways about this.
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Speaker 2: I tend to agree with you, at least to a.
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Speaker 1: Certain degree, but I also think that the Wall Street's encroachment into single family homes has harmed first time home buyers, especially because they're buying up some of the cheapest, cheapest housing stock in the country in various cities around the country, and in particular, like we talked about with Lance this week Atlanta, it's.
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Speaker 2: Like sures though, I mean like across the country, it's it really is such a small, small portion. And I also can't get past the idea of, like, uh, we're encouraging folks to do something similar as mom and pop investors, like it's were materially not all that different than the institutional I don't know that I agree with that.
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Speaker 1: We could talk about that and more in depth, I guess, But the I think there's a difference between hedge funds coming in and because there's a need for rental real estate, but when and hedge funds coming buy up by the thousands, that we're kind of creating a nation of renter sort of scenario instead of just kind of providing rental housing stock that's necessary for people who aren't ready to buy a home yet or are in a city for a limited period of time. But I guess we're also making something out to be like one of the biggest problems that's not actually the biggest problem. Right, So Wall Street buying homes or you know, Airbnb short term rentals, like in the case of New York City where they just put the kibosh on that those have often been made out to be the scapegoat, and this is Hey, this is why housing prices are so high. It's Airbnb, and it's Wall Street coming in. And in my opinion, it's local housing laws, it's regulation, it's zoning ordinances that make it onerous to build that are really creating the biggest problem. That don't completely agree that's the real tragedy here, right, And we're not addressing we're not addressing the biggest thing, the elephant in the room. And so case in point, there was this Wall Street Journal article this week Matt about why it took seventeen years to build a forty nine unit building in Los Angeles. So the hoops the builders have to jump through in order to get something built, a lot of the nimbiism where people don't want anything built near them. There was like one whole county in Los Angeles at one point that tried to make the whole county a wildlife refuge or something like that to prevent any sort of building. It's that kind of stuff that has a massive impact on our ability to create new supply. And guess what, no new supply means higher prices. Right, limited supply, higher demand means prices are going to go up, and so that is the biggest problem. Maybe this would help a little bit, this law right now, but it's not going to have nearly as big of an impact as the things that can be done locally to kind of reduce the red tape and add density to a lot of the most popular urban areas.
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Speaker 2: I think Kate is actually in the process of getting our yard registered as a pollinator national autobonnd pollinator site. There you go as well. The way nobody can build an apartment building in our front yard. It's right, well, it's pretty small front yards. I don't think anyone's nice that anyway, catch it loves gardening.
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Speaker 1: But this one will be an interesting one to follow. This bill see if it goes anywhere. My guess is it won't. But I'll be watching. I'll be watching. And on the note of local laws, by the way, Matt, new York might do something that the FTC, the Federal Trade Commission, has been trying but unable to do, and that is ban non competes. They would join I think, like four other states in doing this. And this bill in New York might come with like a salary cap, right, so non competes would be allowed for jobs that pay less than two hundred fifty thousand dollars, but not for kind of the higher flutant folks. And I think you and I probably still disagree on this one. Yeah, you're not a fan of non competes. I'll take the libertarian approach. Yeah, so I am a fan of non competes, at least with a salary cap. I think actually makes sense to me, because, yeah, those folks who get paid big bucks, they can often look after themselves. They can refuse to sign it and just be like, now, way, if you want to hire me, I'm not signing the non compete, or they can deal with the consequences of signing it because guess what, they're making enough money they have enough wherewithal to figure it out. But in my estimation, the biggest problem with non competes is that, like in the fast food or service industry, right like, non competes end up taking advantage of folks at that end of the wage spectrum. They end up depressing wages, increasing prices, and they kind of prohibit economic growth.
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Speaker 2: So I'm with New York on this. If I could, if you could like wave a magic wand and say, hey, let's have non competes not be a thing, and with there being no other consequences of those actions, I'm all for that. But how it is that we arrive to that point it matters a ton And I again, I would be all about folks having the freedom to be able to go and work for a different employer, But how we get there, and government action and legislation and bureaucracy, in my opinion, isn't the answer. Like even the article you mentioned the apartment building out in LA. I feel like that's a perfect example of government involvement and the hoopes that you have to actually jump through and how that actually stemy's growth in creating a hoop though. No, but even still, like it's a rule, it's something that is put in place that in this case, employers have to abide by, and people, especially profit seeking companies employers, they respond to incentives and a big like that's why we're seeing I mean, there are so many companies that are moving to states that have less restraints when it comes to how it is that they're able to run their companies. So you see all these companies moving to Texas, to Florida, to Tennessee and away from states unfortunately like California, who have imposed a ton of laws, whether it's in the form of housing or again even in the in the case of non competes, California is one of the one of the states that that has that in place. And so again it's not that I disagree that non competes kind of suck, It's just that how we arrive there and how it, in my opinion, should be more left more up to the individual.
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Speaker 1: Yeah, So I guess that being the case, depending on where you live, non competes might be well and good and completely lawful. So for you as an individual, you have to think long enough, got to know what's up about whether or not you want to sign that non compete. And absolutely, but I think there it just I've read too many stories about people making suband subway sandwiches or working kind of like a minimum wage security job, and then it turns out they've signed something that kind of unwitn that doesn't allow them to do work in that same similar work in that same vicinity. And yeah, that's just tough to stomach.
00:19:06
Speaker 2: It's a tough Yeah, it's a tough consequence. But I mean, but the unintended consequences, I think are what we have to watch out for. Anytime there's any sort of like wide scale general policy that gets placed. There are consequences of those actions that policymakers don't take into account, and oftentimes they're hard to see. Yes, absolutely, and that's not to say they're guaranteed, but man, they oftentimes happen more than we think, and it does prevent, for instance, something like housing for that market to open up and for the ability for folks to have access to affordable housing.
00:19:36
Speaker 1: Yeah, all right, We've got more to get to on this one, Matt, besides just debating the merits of non heats.
00:19:41
Speaker 2: So more stories.
00:19:42
Speaker 1: Yeah, we'll get some more, including we'll talk about stock market predictions. They're kind of scattershot going into next year.
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Speaker 2: What are our thoughts? We'll give them right after this. We're back from the break, and is now time for Joel to give his prediction as to what the stock market is going to gonna do next year. I just shrugged my shoulders. That's my prediction. That's my emoji, the yellow guy with the blue shirt, both arms up. That's right. But the actual year in wraps like those are fun. But when it comes to the actual twenty twenty four predictions, those are less fun and it makes me like a Spotify rap. That's that's fine. Yeah, you're trying to predict one. I'm going to listen to next year. Leave me alone. But a Business Insider article titled Prepare for the S and P five hundred to plunge twenty four percent by mid twenty twenty four and the US economy to sink into a recession, JP Morgan's top chart Guru says, which of course he does. I wonder if he man. We're basically in like the stupid stock market prediction season here at the end of the year, especially too after we've seen surprising gains this year.
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Speaker 1: This year, Yeah, I mean like literally as its episode airs, we might be getting close to all time highs again in the stock market.
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Speaker 2: Yeah, the Dow hit all time highs a couple of days ago. Yeah, and yeah, possibly the S and P. And some folks might be thinking, well, I'm on a guru, like I don't keep up with what the market's doing. Maybe maybe we should be deferring to the expert here. Well, except if we actually looked back to the end of last year, most of the predictions were completely wrong by a significant amount. We were coming off of a down year, and most of these quote unquote experts, they predicted more doldrums for the market. They're expecting a recession, and that did not turn out to be the case.
00:21:29
Speaker 1: At all, or at least if they were like, oh, yeah, no, the stock market's going to go up, they're like very very ginger, tepid predictions. Right, nobody was Like, nobody was out there saying I'm pretty sure the market is gonna go up by twenty four percent.
00:21:39
Speaker 2: They weren't being you know, they weren't bold about it. Yeah, sure, yeah, yeah, nobody. Nobody was saying that it's the psychological loss of version, yeah, which is like, that's the turn that describes the fact that, like, for instance, if we experienced a twenty percent decline, that's going to feel much much more painful for whatever reason than a twenty percent increase. And so anytime folks are making these these dour predictions, they all always seem wise and prudent as opposed to somebody who's more of an optimist. Yea, And by definition, I guess we are because we tend to base our well, I'm hesitant to say predictions, but what we think that the market's going to do just based on history, right, yeah, exactly, it's not based on like more likely to go up with something that we pulled out of our butt or anything like that. Right.
00:22:19
Speaker 1: So, from where we're staying, we say that predictions are a lot like opinions. Right, everyone's got one, but most of them have really no pertinence on your life whatsoever, especially when they're just making headlines around the internet. And it's not that we don't think that the market's going to have a tough year next year. The market's crushed it this year. It could it could take year, It could certainly yet take a swound. We don't know, or it's not that we're we're sensing a boom either, Like it's really that we don't know, and honestly, we really don't care. We're investing for the long term. So these predictions that come out every December, they feel completely unnecessary.
00:22:50
Speaker 2: They're a distraction from what we truly need to be dealing with our money, which is spending less of it and investing more right, And I feel like we don't necessarily have to talk about this, but but we just know that a lot of folks out there are swayed by at least some of these predictions, like exactly the headlines come out and they're like, oh, they see dollar signs in their own eyeballs, and of course they want to take advantage of or avoid a potential bust. But I would say this one stat worth sharing. It comes from our friend friend of the show, Ben Carlson. He ran the numbers and he found.
00:23:18
Speaker 1: That the stock market was up twenty two out of the thirty four years following a twenty percent gain in the market, and the average size of the gain the year after we saw that massive stock market rally was eight point nine percent. So that just yeah, so max two out of three years data, the market's going to go up again.
00:23:37
Speaker 2: Sixty six percent chance of you being right. That's right, that's right.
00:23:41
Speaker 1: So I'm just going to, you know, go with history, go with the numbers, not sort of go with the predictions that people are making. Our suggestion is to look at history, tune the plethora of predictions out, and keep doing what you're doing, stashing away money for your future.
00:23:54
Speaker 2: I guess another way to look at it is that that jpm morgan chart guru has a thirty three percent chance of actually being correct. True.
00:24:01
Speaker 1: But even even then, maybe we get like a four percent decline and he still looks like an idiot. Exactly.
00:24:05
Speaker 2: All right, man, let's talk about the American dream because a listener, Gary, he sent us something from Investipedia about the cost of the American dream and apparently it's gonna cost you three point four million dollars now over your lifetime on that white pick offense has gotten expensive, hunt has Yeah, So this term was actually Investipedia's number one search for term of the year. We've got a couple thoughts from the numbers that they pulled together. First of all, it is a lot more expensive to live in America these days. We're not gonna deny that. It's not sure you're going, especially for the bigger ticket items like cars, like homes. But on the other hand, some of the items listed you don't necessarily need to spend nearly as much on in order to live a happy life. They had listed things like weddings and cars, pets. Well, they're all based on averages, but you don't have to be average. You don't. It makes me think of the standard American diet, which I always laugh at because it's the acronym is sad. You don't have to be an American. You don't have to lead that kind of life. We're all about being maybe a little better than average here, and especially when it comes to our money. And the average needed to retire that they calculated was seven hundred and fifty thousand dollars three quarters of a million dollars. And the thing about that number is that it can seem so stinking overwhelming, right like you're thinking, how am I supposed to get close to a million dollars, But if you save diligently over the years, you can achieve a balance that's going to be that high or even higher without actually having to invest that much money. And that's because of compounding returns on the way that it works when you invest that money. You don't have to come to the table with seven hundred and fifty thousand dollars. You just have to start investing at an early age. Let that money do the work for you set up to you necessarily to do that work.
00:25:43
Speaker 1: It's not that there's like no basis of truth in kind of what Investipedia is spending here. They gathered the data and they're not completely wrong, but I guess it just leads to a lot of pestimism. When we were like cool three point four mili, Yeah, how am iver going to do that? Well, this is across the entire course of your life, and we need to question the assumptions of how much these things cost, including like you were just talking about retirements, like, yeah, a nest egg of seven hundred and fifty k in your tax advantaged retirement accounts would be awesome. And I think for a lot of how to money listeners. It's achievable. It's just that you don't have to fork over seven hundred and fifty k all in one fell swoop. It's a function of time and growth in the market that your dollars are going to experience.
00:26:19
Speaker 2: Right. Going back to shohe Otani, right, future value money right there, man, what it's all about. We learn a lot from that guy. And a recent Wall Street Journal poll found that the majority of young Americans think that the American dream is dead. People are pessimistic about our country in general and the economic opportunities that they have available to them here. And I'm not going to deny the challenges that we face. Our political climate, the polarization is depressing. Right.
00:26:45
Speaker 1: Inequality is also a real problem. But Matt, it kind of makes me think about that recent combo we had with doctor gen Twangy about narrative versus reality. Right, Millennials as a cohort are doing far better than predicted, and even better than they feel. It's like the headlines don't quite match the facts on the ground.
00:27:02
Speaker 2: Yes, and so it goes by. It's like this loss of version again. It's the fact that any small negative thing we experienced is just magnified not only by media but also for whatever reason just the way we think about it.
00:27:13
Speaker 1: Well, I think it's also comparison, right, I think the more that we're a lot more of that today than there was in the past as well. And it's you used to be able to just look at your neighbor. Now you can look at all sorts of people. I mean, I think we feel that maybe at times, as podcasters are like, we're doing good, but man or to Joe Rogan, you know, and like there's times where I'm like.
00:27:30
Speaker 2: Well, what what Huberman's really blowing it up? Right? Why can't we have growth? Like count We're not nearly as interesting or as long winded as he is. I guess, but you don't like listening to three hour long podcast episodes about how alcohol is bad for it.
00:27:43
Speaker 1: It gets a little tedous. It gives a little teddos after a while. But I get why he's popular, to get why people like him. But I guess there's just there's more opportunity for us to compare than ever before. But when you look at the data over the past few years, Americans are doing better financially and inequality has actually decreased along some metrics, so we definitely face headwinds, but we still live in a country I would say that offers more opportunity for advancement and wealth building than basically any other in existence. And I know, I know I'm basically like one hundred percent optimist, but I hope I'm not being like unrealistic in my optimism here.
00:28:13
Speaker 2: No. Yeah, I think how we interpret data and view things it matters a ton. And what you said too about over the course of your entire lifetime is what these numbers are are are taken into account and when you look at a massive number, that big of like what life is gonna cost, Like, we don't look at anything on that type of scale. The context matters so much, like it makes me think of when like there it's fun with numbers, Joel's fun with statistics. It's something like the average human is going to sleep something like twenty five years of their entire life. It's ridiculous, And you think, oh my gosh, what in my evampire, I don't have that much time on hand to sleep. Yeah, that's because you're looking at it like all in one fell swoop, like in a single snapshot. But guess what when it comes to the day to day, like, ay, do need that much sleep? And b it's actually a lot more doable than you think. And so the difference between sleep and money, however, though, is that sleep is something for the most part, you can't really change, Like humans need just about the same amount of sleep everybody does. But when it comes to how much money we actually need to have in I.
00:29:17
Speaker 1: Found a new hack, Matt I'm gonna share with Andrew Hubman. You listen to Uma show. But when it comes to what it is that we consume, we do have control over those things. And just because, like you said, the whole world or your neighbors, your quote unquote neighbors on social media are living in a certain way, that doesn't mean that you have to live that way. It's actually something that we have more control over than something like something more biological like sleep. And the context matters so much. Yeah, And I think one of the things that well, how do you define American dream? And I think some people define it as the nice house with the white pick of fence, two car garage, two point five kids, and the ability to take to two week vacations a year or whatever. Like how you define it really matters. And so I guess maybe the Stockham area and lifestyle that's not what you and I are after either, and that's not what we think are you know how the money listeners need to be about unless that's really what they want, right, But so rethinking kind.
00:30:08
Speaker 2: Of take way more vacations exactly what I do? I really do?
00:30:12
Speaker 1: Yeah, And so yeah, rethinking kind of what you're aiming for matters in this too, I think. But the Wall Street Journal they boiled the question down to, like, will hard work offer you the opportunity to get ahead? And even that, like getting ahead is in the eye of the beholder, and so much of it comes getting ahead is a is a warped term because it makes people think of, well, am I going to do better than my peers? Am I going to do better than the folks around me? Am I going to supersede them? And so yeah, even the way the questions worded, it comes with a lot of like perception, right. And so I really do think that hard work and smart work in this country for a whole lot of people will pay dividends, right, And that there's a lot more in your control than you think. It doesn't mean there aren't things out of your control. And it doesn't mean that there aren't headwinds. But I do think that the pessimism in and of itself actually breeds in results. We've talked about that before on the show too, mat how optimism is such an important part of building that financial future you want.
00:31:06
Speaker 2: It's true, all right. So a way that you can get ahead is through entrepreneurship man working for yourself. A recent poll found that one in three gen zs they want to do that. They want to be their own boss, and the reason for that is because they think it's the best way to build wealth. And I don't think they're wrong. We've seen a ton of small business formation, like the numbers of I think new business applications skyrocket since COVID, and that's good for our country, and it's also great for many of those individual business owners. It's certainly not going to be for everyone out there. Now. What you do for work, your personality, that matters a whole lot. There are a lot of folks listening and they're you know, you're like, guess no, guys, I'm just always going to be Yeah, Like I don't want to own, I don't want to have the responsibility because there is a lot of additional responsibilities when you own your own business. There's nothing wrong with traditional employment, but I think for a good swath of people starting a side hustle, ramping it up so that you can eventually leave your main gig, I think that can be a great way to work towards being your own boss, getting ahead, fulfilling the American dream, and investing in yourself and you know, at least considering what it might look like to do your own thing is something that we would recommend. And it's also something that you can do on the cheap. It does not have to be something that you have to take out a small business loan for. You don't have to hit up all of your relatives at Christmas and say, hey, need you all to bankroll me? Is this something you can ramp up slowly on the side.
00:32:29
Speaker 1: And it's it's certainly not possible to avoid debt completely get for every business you want to start totally. But I think you think outside the box. You We'll go back and listen to and we'll link to this in the show notes. Our episode that we did with with Alan donnegan, and he was talking about even with like physical products and stuff like that, how you can get proof of concept, how you can start the business without taking on any debt. Mat of thinking of a friend right now who wants to start a dessert business, and he could go out there and he could like rent one of those ghost kitchen sort of things and dessert starts slinging dissert Banana pudding is what he's best at.
00:32:57
Speaker 2: I know you're daring about. Yeah, and it is good banda putting. We'll say it's maybe the best you've ever had. It's delicious, And so I think he's going to do well if he goes down this path. But it's also there's a way to start smaller, get the proof out there, start making money actually before you go hook line and sinker and start taking on debt to kind of get.
00:33:15
Speaker 1: The ball rolling right. So totally, But yeah, no, I love this, this mindset of wanting to work for yourself. I think that small business mindset, that appreciation of what small businesses can provide, that's one of the greatest things about this country. Heck, yeah, all right, well, Matt, that's going to do it for this episode. We hope that's all. Hope our listeners out there get eight hours of sleep, plenty of water. Now you don't have to listen to Andrew Hureman because you just heard me say.
00:33:37
Speaker 2: It's true and you just saved yourself three hours. That's right, all right. We hope everyone has a fantastic weekend and we'll see back here on Monday. So until next time, best friends autum, best friends Out.
Speaker 1: Welcome to How the Money. I'm Joel, I'm Matt, and today we're talking deadly debt, housing, crash hopes, and the expensive American dream.
00:00:27
Speaker 2: Yeah, you know, give an inflation, everything costs more than it used to, Joel, but the American dream and your dreams, it kind of feels like something that shouldn't shouldn't cost more. But we will talk about that.
00:00:36
Speaker 1: This is if I start actually getting charged for dreaming, I'm gonna have to talk to somebody about that.
00:00:40
Speaker 2: That's silly. This is our Friday Light though. We're gonna talk about the stories that A are either the most interesting stories to us or be the ones that also apply to your finances the most the ones that we think you need to be paying attention to. A. Did you want to talk about Shohi Watani? Yeah, and I'll get a baseball note here.
00:00:59
Speaker 1: We're not turning into the sports podcast, I promise, but the the sho Hey Otani contract. Even if you don't care about baseball. I think I said show hey.
00:01:06
Speaker 2: I That's what I'm saying. I don't watch baseball, so I just read it and I see show he Yeah, I think show Hey, but show hey Otani Japanese player plays two ways, pitches and hits.
00:01:17
Speaker 1: I mean, he's a phenom. Nobody does that in baseball, like a modern day bab Ruth pretty much. Yeah, yeah, and so and people specialize in baseball. Now, so this guy, because he does both, and he does them both incredibly well, it's just massively impressive. And he just got met the biggest contract in baseball history, seven hundred million million dollars. But and here's why we're talking about it. The way he constructed this contract is fascinating. He's only getting paid two million dollars a year for the next ten years.
00:01:44
Speaker 2: Much less than seven hundred million headline.
00:01:48
Speaker 1: Now, yeah, he's deferring a huge chart of that sixty eight million dollar payments for basically the decade after that. So I thought this was just interesting from a couple of perspectives. One, the Dodgers are kind of participating and by now pay later. They're saying, like, we want the Otani now, but we'll pay the price down the road. And this is going to allow them to amass a better team, I think, be able to pay other players and bring in and have just they've already got an incredible team. But what are your thoughts on shohes kind of way of thinking about this that he's saying, Hey, listen, yeah, I want the big contract, but I don't mind getting paid.
00:02:21
Speaker 2: The baby till till later. Yeah. So, I mean there is a lot of focus on the numbers, right, They're like, oh, well, he grew up in Japan's zero percent inflation over there, so for him, the money ten twenty years down the line, it's gonna be worth to him the same amount. But then you've got the future value of money coming into play, and it's just like, well, what if you have that money, you would be able to invest it. I don't at the end of the day, I don't think he really cares about the money, because I think I've read somewhere he's making like forty million a year in endorsement deal, and so for him, it's like it doesn't really matter. And so what I truly think is that he's doing it for speaking of baseball, for the love of the game, Like he literally the ability for the Dog to free up more of their payroll to bring in other players, because like, when you're at the top of the game like that, what you want to do is freaking win and for him to be able to Like, he's the one that suggested this contract to the Dodgers. This wasn't the first time he shopped this idea around. The Dodgers were the first one to take it. But this allows him to have a better chance at winning. And I think that's all that really matters to him. Money.
00:03:23
Speaker 1: He's fine with the money. He doesn't really care about the money. He just wants to stink and win. Once you get to a certain point, do you really need more?
00:03:28
Speaker 2: Right? Exactly? Yeah, yeah, exactly. And so I think for him it's a massive win, I asked, dude. I also think it's a win for the Dodgers as well, because, like you mentioned, the buy now, pay later sort of standpoint, and I view it less through a consumption lens and more through a like an investment lens. And here, and I know you might push back on that a little bit because you're like, what is an investment or not? Well, they've already sad a ton of jerseys, I'll tell you that, So you've got that going on. But it makes me think about what's something that we financed today a house, right, like, and we use mortgages in order to do that. The Dodgers are essentially like many There haven't been a ton of deals to this magnitude that have taken place like this. Yeah, and so by the Dodgers doing this, they've kind of got that first mover's advantage. So it makes me think of So let's go back to housing. Imagine we lived in the world where everybody bought their homes with via cash paying cash right, prices of homes would be a lot less. Now, imagine you were the first person ever to get approved for a thirty year mortgage. You would have the pick of the litter. You would literally be able to buy any house you wanted, power and a much nicer house. And that's going to be true. And so everybody else also has thirty of your mortgages as well, and then you revert back to some sort of normalcy. Well, I say so for the Dodgers, I think this is a killer smart move in a way for them to totally crush it.
00:04:41
Speaker 1: Yeah, the next decade. I think somebody asked me, Hey, do you think that these kinds of contracts are going to become the norm moving forward? I think the answer is actually probably not. And why Well, it depends on the success well, it depends on that, but it also depends on the player because the player has to have enough financial acumen to realize and the ability to f their lifestyle on a greatly diminished salary in the here and now, and all players are going to be superstars exactly. Well, and even that, like, it's a lot of people want their money. They want their money now, right, It's like that show me the money Jerry McGuire mentality. So are there going to be enough players who have this kind of long term perspective that show Hayes got. I don't know, but the contract's fascinating. It's going to be interesting to see how the Dodgers do. And yeah, they're going to be.
00:05:22
Speaker 2: See how they're not going to do great because they really are going to be able to put together an incredible squad. They're going to be reckoned. More teams will start to take sort of this this approach to it where they're saying, hey, we got to do this in order to compete, and all of a sudden becomes the new norm.
00:05:36
Speaker 1: I will say, ten, twelve, fifteen years from now, though, when they're paying show hey sixty eight million a year and they don't have them on the field and they still got to field the team it could get.
00:05:45
Speaker 2: It could get tough to do. Yeah, tough times to do Dodgers. Then yeah, it's like what's his name, Bobby, It's like this but on like to the stero eightieth degree.
00:05:54
Speaker 1: Yes, wire levels. So all right, enough baseball talk. Just thought you guys might find that interesting. Let's move on to the Friday flight. Let's start off by talking about credit card debt for a second. There was a new poll It found that credit cards are the biggest obstacle to building wealth. Thirty nine percent of adults said that credit card debt is their biggest threat to building wealth, which, Matt, I think they're probably spot on, And actually I'm surprised that the numbers are that low. What else is your biggest threat to building wealth besides your credit card debt?
00:06:20
Speaker 2: I don't know.
00:06:21
Speaker 1: Maybe yourself, a lack of education, Yeah, your own consumption, Yeah, your own habits, Perhaps that could be part of it. But recurring credit card debt is it really is one of the biggest hurdles to making progress with your finances. And something like fifty percent of Americans are not following the number one rule of plastic which is paying the bill on time and in full. And so as a nation, we owe more than a trillion dollars overall in credit card debt, which is a big scary number, and we dug into the numbers recently mount and it's not quite as bad as it steams, although it's still bad. The average balance is something like six thousand dollars. And let's say you only pay the minimum amount each month at a twenty percent interest rate, which is I would say generous given this current environment. Twenty two is about the average. Sure, it would take you more than seventeen years to pay off that debt, and it would cost you more than nine thousand dollars in interest. It's just hard to make progress if you've got that millsdown around your neck. I get why people say that credit cards are such an obstacle for them.
00:07:15
Speaker 2: Totally agree. Yeah, if you find yourself in credit card debt and you're listening to this, we're not trying to shame you necessarily, but we do want you to know though, that this is a big deal. It's worse than basically every other kind of debt out there, because like student loans have gotten a lot of attention recently, right, But at least in that case, you're getting a degree that will earn you more money, more income, more lifetime earnings. Or with mortgage debt, we're buying an appreciating asset that puts a roof over our head. It's you know, what's the hierarchy of needs that are out there, Shelter it's important. Maslow thinks that one's important. But credit cards can be a great tool if you're using them right. But we want you to experience compounding interest in the positive direction. We want you to be investing your money. We don't want you forking over thousands of dollars to the credit card company. Is where that interest is working against you. That's not the situation we want to want you to find yourself. So if you are in credit card debt, we recommend the tool ondebt dot it. You in debt dot it, check out that website. We'll link to it in the show notes as well. But come up with a plan to get rid of that debt, because, yeah, credit card debt hanging over your head is a problem. It's going to prevent you from being able to achieve the financial goals that you've set out for yourself. It's time to get rid of it, and get rid of it quickly. Yep, all right, mat While we're talking about poles, another one came out at the end of last week, and it found that young folks want the housing market to crash real bad. Fifty three percent of Gen z ers and forty six percent of millennials, So basically, fifty percent of people forty two and younger or whatever want the market to tank. That's according to a Lending Tree pole. Even many current homeowners want to see declines in prices. So it's not just people who are like, I don't own a home yet, I really want one, and dang it, if the housing market would just crash thirty percent, I could afford to buy one. Even people who already own own a home kind of want the housing market to take a dip. And it's because they said they want their property tax bill to go down, which I can understand. Like, if prices go down, property taxes go down. And a lot of people were shocked last year when property tax notices were sent out. But are we going to see price declines? Are these hopes likely to become a reality. It's hard to forecast the housing market. You know, we talked about that with Lance Lambert this this week, but I would say increasingly the answer is looking like, no, I don't. We've kind of said that the whole time, that we don't think that there's some sort of massive correction in store. Minor corrections maybe, but massive ones probably not. Yeah, I think if you've got to be careful what you wish for as well, like for all the aspiring homeowners out there, and you're thinking, oh, if only the market would the housing market would crash, then I could afford a home. Okay, let's roll back the clock a little bit fifteen years. Let's get back in the way back machine and look back to the Great Recession story time with Matt when we saw a housing bubble pop, when we saw housing affordability drop. Well, what happened Like the world, our country was in a massive amount of hurt, dire straits, and what also happened to a lot of jobs during that period of time, They were eliminated. Millions of people lost their jobs, which that actually makes it less feasible to purchase a home. So all of a sudden, not only do you can you not buy that nice little bungalow, or that ranch that you've den iying. You don't even have a job anymore, and so to think the job is a crucial part of being able to afford the home, it's so important. And the housing market is such a big industry that man to actually hope that the housing market crashes it feels a bit myopic. Yeah, little little short sided sided in my opinion.
00:10:32
Speaker 1: Took ownership of home back in and eight two thousand and nine, like they couldn't give them away, almost like think about how that's how I mean housing prices cratered. But it was also there weren't many buyers out there either, So I you're right, the housing market crash often comes with other side effects that you don't want.
00:10:49
Speaker 2: Yeah, and for those who are current homeowners too, and you're upset about the fact that you're seenior property bill on the rise, well A, well, you're either the one who purchased that home and caused that price to be to be what it is. But let's just assume you've been there for ten to twenty years. You can always appeal your tax bill, and that's something that we've talked about on the show before as well. That's a legitimate way for you to try to for you to try to get your tax bill down.
00:11:11
Speaker 1: Yeah, and there's you can diy that thing, don't have to pay anybody a dime, and you can potentially save thousands. You can hire somebody. I've hired somebody in the past couple hundred bucks and it's saved me thousands. So just because battling city hall is not fun. Also, and the truth is, I don't know that record levels of un affordability can last forever. But the only thing that you and I can control are our actions and our savings, right, and so holding off and renting given the current market conditions, that continues to make sense for a whole lot of folks.
00:11:39
Speaker 2: Matt.
00:11:39
Speaker 1: I mean, I get the desire to become homeowner, but sometimes it's best just to kind of hold back and wait and keep preparing so that you're even more prepared once the opportunity comes along, instead of trying to force it. It's right, Okay.
00:11:52
Speaker 2: So at least one of the things that is possibly contributing to higher home prices, albeit in a very small way, across most of the country, is all street ownership of single family homes. You often see that in headlines it's never fun to start bidding against let's say, a hedge fund who's got vastly deeper pockets. There are at least a couple members of Congress who are trying to do something about that. There's a bill that's been introduced to force these hedge funds to liquidate all of their properties over the next decade and then to never actually be able to buy single family homes in the future. These investors cumulatively own more than half a million homes across the US, which I will say, on his face, it sounds like a lot of homes until are single family hams, until you take anto account the fact that there's eighty two million single family homes out there, so that's actually it's less than one percent. It's truly just a drop on the bucket. And so when it's hard for me to not be cynical when I see legislation like this being floated around that it just seems like virtue signaling. It looks like a way to get in front of your electorate and say I'm fighting for the for the little man, I'm trying to stick it to the big bang, to the big hedge funds, when in reality, A, they know it's not going to pass. But B even if it were in a pass, I think it would have a pretty small impact on the actual affordability of films.
00:13:06
Speaker 1: Yeah, I hear what you're saying. I also don't think it would have zero effect, right, So I kind of I kind of feel two ways about this.
00:13:11
Speaker 2: I tend to agree with you, at least to a.
00:13:14
Speaker 1: Certain degree, but I also think that the Wall Street's encroachment into single family homes has harmed first time home buyers, especially because they're buying up some of the cheapest, cheapest housing stock in the country in various cities around the country, and in particular, like we talked about with Lance this week Atlanta, it's.
00:13:30
Speaker 2: Like sures though, I mean like across the country, it's it really is such a small, small portion. And I also can't get past the idea of, like, uh, we're encouraging folks to do something similar as mom and pop investors, like it's were materially not all that different than the institutional I don't know that I agree with that.
00:13:50
Speaker 1: We could talk about that and more in depth, I guess, But the I think there's a difference between hedge funds coming in and because there's a need for rental real estate, but when and hedge funds coming buy up by the thousands, that we're kind of creating a nation of renter sort of scenario instead of just kind of providing rental housing stock that's necessary for people who aren't ready to buy a home yet or are in a city for a limited period of time. But I guess we're also making something out to be like one of the biggest problems that's not actually the biggest problem. Right, So Wall Street buying homes or you know, Airbnb short term rentals, like in the case of New York City where they just put the kibosh on that those have often been made out to be the scapegoat, and this is Hey, this is why housing prices are so high. It's Airbnb, and it's Wall Street coming in. And in my opinion, it's local housing laws, it's regulation, it's zoning ordinances that make it onerous to build that are really creating the biggest problem. That don't completely agree that's the real tragedy here, right, And we're not addressing we're not addressing the biggest thing, the elephant in the room. And so case in point, there was this Wall Street Journal article this week Matt about why it took seventeen years to build a forty nine unit building in Los Angeles. So the hoops the builders have to jump through in order to get something built, a lot of the nimbiism where people don't want anything built near them. There was like one whole county in Los Angeles at one point that tried to make the whole county a wildlife refuge or something like that to prevent any sort of building. It's that kind of stuff that has a massive impact on our ability to create new supply. And guess what, no new supply means higher prices. Right, limited supply, higher demand means prices are going to go up, and so that is the biggest problem. Maybe this would help a little bit, this law right now, but it's not going to have nearly as big of an impact as the things that can be done locally to kind of reduce the red tape and add density to a lot of the most popular urban areas.
00:15:41
Speaker 2: I think Kate is actually in the process of getting our yard registered as a pollinator national autobonnd pollinator site. There you go as well. The way nobody can build an apartment building in our front yard. It's right, well, it's pretty small front yards. I don't think anyone's nice that anyway, catch it loves gardening.
00:15:57
Speaker 1: But this one will be an interesting one to follow. This bill see if it goes anywhere. My guess is it won't. But I'll be watching. I'll be watching. And on the note of local laws, by the way, Matt, new York might do something that the FTC, the Federal Trade Commission, has been trying but unable to do, and that is ban non competes. They would join I think, like four other states in doing this. And this bill in New York might come with like a salary cap, right, so non competes would be allowed for jobs that pay less than two hundred fifty thousand dollars, but not for kind of the higher flutant folks. And I think you and I probably still disagree on this one. Yeah, you're not a fan of non competes. I'll take the libertarian approach. Yeah, so I am a fan of non competes, at least with a salary cap. I think actually makes sense to me, because, yeah, those folks who get paid big bucks, they can often look after themselves. They can refuse to sign it and just be like, now, way, if you want to hire me, I'm not signing the non compete, or they can deal with the consequences of signing it because guess what, they're making enough money they have enough wherewithal to figure it out. But in my estimation, the biggest problem with non competes is that, like in the fast food or service industry, right like, non competes end up taking advantage of folks at that end of the wage spectrum. They end up depressing wages, increasing prices, and they kind of prohibit economic growth.
00:17:10
Speaker 2: So I'm with New York on this. If I could, if you could like wave a magic wand and say, hey, let's have non competes not be a thing, and with there being no other consequences of those actions, I'm all for that. But how it is that we arrive to that point it matters a ton And I again, I would be all about folks having the freedom to be able to go and work for a different employer, But how we get there, and government action and legislation and bureaucracy, in my opinion, isn't the answer. Like even the article you mentioned the apartment building out in LA. I feel like that's a perfect example of government involvement and the hoopes that you have to actually jump through and how that actually stemy's growth in creating a hoop though. No, but even still, like it's a rule, it's something that is put in place that in this case, employers have to abide by, and people, especially profit seeking companies employers, they respond to incentives and a big like that's why we're seeing I mean, there are so many companies that are moving to states that have less restraints when it comes to how it is that they're able to run their companies. So you see all these companies moving to Texas, to Florida, to Tennessee and away from states unfortunately like California, who have imposed a ton of laws, whether it's in the form of housing or again even in the in the case of non competes, California is one of the one of the states that that has that in place. And so again it's not that I disagree that non competes kind of suck, It's just that how we arrive there and how it, in my opinion, should be more left more up to the individual.
00:18:35
Speaker 1: Yeah, So I guess that being the case, depending on where you live, non competes might be well and good and completely lawful. So for you as an individual, you have to think long enough, got to know what's up about whether or not you want to sign that non compete. And absolutely, but I think there it just I've read too many stories about people making suband subway sandwiches or working kind of like a minimum wage security job, and then it turns out they've signed something that kind of unwitn that doesn't allow them to do work in that same similar work in that same vicinity. And yeah, that's just tough to stomach.
00:19:06
Speaker 2: It's a tough Yeah, it's a tough consequence. But I mean, but the unintended consequences, I think are what we have to watch out for. Anytime there's any sort of like wide scale general policy that gets placed. There are consequences of those actions that policymakers don't take into account, and oftentimes they're hard to see. Yes, absolutely, and that's not to say they're guaranteed, but man, they oftentimes happen more than we think, and it does prevent, for instance, something like housing for that market to open up and for the ability for folks to have access to affordable housing.
00:19:36
Speaker 1: Yeah, all right, We've got more to get to on this one, Matt, besides just debating the merits of non heats.
00:19:41
Speaker 2: So more stories.
00:19:42
Speaker 1: Yeah, we'll get some more, including we'll talk about stock market predictions. They're kind of scattershot going into next year.
00:19:49
Speaker 2: What are our thoughts? We'll give them right after this. We're back from the break, and is now time for Joel to give his prediction as to what the stock market is going to gonna do next year. I just shrugged my shoulders. That's my prediction. That's my emoji, the yellow guy with the blue shirt, both arms up. That's right. But the actual year in wraps like those are fun. But when it comes to the actual twenty twenty four predictions, those are less fun and it makes me like a Spotify rap. That's that's fine. Yeah, you're trying to predict one. I'm going to listen to next year. Leave me alone. But a Business Insider article titled Prepare for the S and P five hundred to plunge twenty four percent by mid twenty twenty four and the US economy to sink into a recession, JP Morgan's top chart Guru says, which of course he does. I wonder if he man. We're basically in like the stupid stock market prediction season here at the end of the year, especially too after we've seen surprising gains this year.
00:20:49
Speaker 1: This year, Yeah, I mean like literally as its episode airs, we might be getting close to all time highs again in the stock market.
00:20:55
Speaker 2: Yeah, the Dow hit all time highs a couple of days ago. Yeah, and yeah, possibly the S and P. And some folks might be thinking, well, I'm on a guru, like I don't keep up with what the market's doing. Maybe maybe we should be deferring to the expert here. Well, except if we actually looked back to the end of last year, most of the predictions were completely wrong by a significant amount. We were coming off of a down year, and most of these quote unquote experts, they predicted more doldrums for the market. They're expecting a recession, and that did not turn out to be the case.
00:21:29
Speaker 1: At all, or at least if they were like, oh, yeah, no, the stock market's going to go up, they're like very very ginger, tepid predictions. Right, nobody was Like, nobody was out there saying I'm pretty sure the market is gonna go up by twenty four percent.
00:21:39
Speaker 2: They weren't being you know, they weren't bold about it. Yeah, sure, yeah, yeah, nobody. Nobody was saying that it's the psychological loss of version, yeah, which is like, that's the turn that describes the fact that, like, for instance, if we experienced a twenty percent decline, that's going to feel much much more painful for whatever reason than a twenty percent increase. And so anytime folks are making these these dour predictions, they all always seem wise and prudent as opposed to somebody who's more of an optimist. Yea, And by definition, I guess we are because we tend to base our well, I'm hesitant to say predictions, but what we think that the market's going to do just based on history, right, yeah, exactly, it's not based on like more likely to go up with something that we pulled out of our butt or anything like that. Right.
00:22:19
Speaker 1: So, from where we're staying, we say that predictions are a lot like opinions. Right, everyone's got one, but most of them have really no pertinence on your life whatsoever, especially when they're just making headlines around the internet. And it's not that we don't think that the market's going to have a tough year next year. The market's crushed it this year. It could it could take year, It could certainly yet take a swound. We don't know, or it's not that we're we're sensing a boom either, Like it's really that we don't know, and honestly, we really don't care. We're investing for the long term. So these predictions that come out every December, they feel completely unnecessary.
00:22:50
Speaker 2: They're a distraction from what we truly need to be dealing with our money, which is spending less of it and investing more right, And I feel like we don't necessarily have to talk about this, but but we just know that a lot of folks out there are swayed by at least some of these predictions, like exactly the headlines come out and they're like, oh, they see dollar signs in their own eyeballs, and of course they want to take advantage of or avoid a potential bust. But I would say this one stat worth sharing. It comes from our friend friend of the show, Ben Carlson. He ran the numbers and he found.
00:23:18
Speaker 1: That the stock market was up twenty two out of the thirty four years following a twenty percent gain in the market, and the average size of the gain the year after we saw that massive stock market rally was eight point nine percent. So that just yeah, so max two out of three years data, the market's going to go up again.
00:23:37
Speaker 2: Sixty six percent chance of you being right. That's right, that's right.
00:23:41
Speaker 1: So I'm just going to, you know, go with history, go with the numbers, not sort of go with the predictions that people are making. Our suggestion is to look at history, tune the plethora of predictions out, and keep doing what you're doing, stashing away money for your future.
00:23:54
Speaker 2: I guess another way to look at it is that that jpm morgan chart guru has a thirty three percent chance of actually being correct. True.
00:24:01
Speaker 1: But even even then, maybe we get like a four percent decline and he still looks like an idiot. Exactly.
00:24:05
Speaker 2: All right, man, let's talk about the American dream because a listener, Gary, he sent us something from Investipedia about the cost of the American dream and apparently it's gonna cost you three point four million dollars now over your lifetime on that white pick offense has gotten expensive, hunt has Yeah, So this term was actually Investipedia's number one search for term of the year. We've got a couple thoughts from the numbers that they pulled together. First of all, it is a lot more expensive to live in America these days. We're not gonna deny that. It's not sure you're going, especially for the bigger ticket items like cars, like homes. But on the other hand, some of the items listed you don't necessarily need to spend nearly as much on in order to live a happy life. They had listed things like weddings and cars, pets. Well, they're all based on averages, but you don't have to be average. You don't. It makes me think of the standard American diet, which I always laugh at because it's the acronym is sad. You don't have to be an American. You don't have to lead that kind of life. We're all about being maybe a little better than average here, and especially when it comes to our money. And the average needed to retire that they calculated was seven hundred and fifty thousand dollars three quarters of a million dollars. And the thing about that number is that it can seem so stinking overwhelming, right like you're thinking, how am I supposed to get close to a million dollars, But if you save diligently over the years, you can achieve a balance that's going to be that high or even higher without actually having to invest that much money. And that's because of compounding returns on the way that it works when you invest that money. You don't have to come to the table with seven hundred and fifty thousand dollars. You just have to start investing at an early age. Let that money do the work for you set up to you necessarily to do that work.
00:25:43
Speaker 1: It's not that there's like no basis of truth in kind of what Investipedia is spending here. They gathered the data and they're not completely wrong, but I guess it just leads to a lot of pestimism. When we were like cool three point four mili, Yeah, how am iver going to do that? Well, this is across the entire course of your life, and we need to question the assumptions of how much these things cost, including like you were just talking about retirements, like, yeah, a nest egg of seven hundred and fifty k in your tax advantaged retirement accounts would be awesome. And I think for a lot of how to money listeners. It's achievable. It's just that you don't have to fork over seven hundred and fifty k all in one fell swoop. It's a function of time and growth in the market that your dollars are going to experience.
00:26:19
Speaker 2: Right. Going back to shohe Otani, right, future value money right there, man, what it's all about. We learn a lot from that guy. And a recent Wall Street Journal poll found that the majority of young Americans think that the American dream is dead. People are pessimistic about our country in general and the economic opportunities that they have available to them here. And I'm not going to deny the challenges that we face. Our political climate, the polarization is depressing. Right.
00:26:45
Speaker 1: Inequality is also a real problem. But Matt, it kind of makes me think about that recent combo we had with doctor gen Twangy about narrative versus reality. Right, Millennials as a cohort are doing far better than predicted, and even better than they feel. It's like the headlines don't quite match the facts on the ground.
00:27:02
Speaker 2: Yes, and so it goes by. It's like this loss of version again. It's the fact that any small negative thing we experienced is just magnified not only by media but also for whatever reason just the way we think about it.
00:27:13
Speaker 1: Well, I think it's also comparison, right, I think the more that we're a lot more of that today than there was in the past as well. And it's you used to be able to just look at your neighbor. Now you can look at all sorts of people. I mean, I think we feel that maybe at times, as podcasters are like, we're doing good, but man or to Joe Rogan, you know, and like there's times where I'm like.
00:27:30
Speaker 2: Well, what what Huberman's really blowing it up? Right? Why can't we have growth? Like count We're not nearly as interesting or as long winded as he is. I guess, but you don't like listening to three hour long podcast episodes about how alcohol is bad for it.
00:27:43
Speaker 1: It gets a little tedous. It gives a little teddos after a while. But I get why he's popular, to get why people like him. But I guess there's just there's more opportunity for us to compare than ever before. But when you look at the data over the past few years, Americans are doing better financially and inequality has actually decreased along some metrics, so we definitely face headwinds, but we still live in a country I would say that offers more opportunity for advancement and wealth building than basically any other in existence. And I know, I know I'm basically like one hundred percent optimist, but I hope I'm not being like unrealistic in my optimism here.
00:28:13
Speaker 2: No. Yeah, I think how we interpret data and view things it matters a ton. And what you said too about over the course of your entire lifetime is what these numbers are are are taken into account and when you look at a massive number, that big of like what life is gonna cost, Like, we don't look at anything on that type of scale. The context matters so much, like it makes me think of when like there it's fun with numbers, Joel's fun with statistics. It's something like the average human is going to sleep something like twenty five years of their entire life. It's ridiculous, And you think, oh my gosh, what in my evampire, I don't have that much time on hand to sleep. Yeah, that's because you're looking at it like all in one fell swoop, like in a single snapshot. But guess what when it comes to the day to day, like, ay, do need that much sleep? And b it's actually a lot more doable than you think. And so the difference between sleep and money, however, though, is that sleep is something for the most part, you can't really change, Like humans need just about the same amount of sleep everybody does. But when it comes to how much money we actually need to have in I.
00:29:17
Speaker 1: Found a new hack, Matt I'm gonna share with Andrew Hubman. You listen to Uma show. But when it comes to what it is that we consume, we do have control over those things. And just because, like you said, the whole world or your neighbors, your quote unquote neighbors on social media are living in a certain way, that doesn't mean that you have to live that way. It's actually something that we have more control over than something like something more biological like sleep. And the context matters so much. Yeah, And I think one of the things that well, how do you define American dream? And I think some people define it as the nice house with the white pick of fence, two car garage, two point five kids, and the ability to take to two week vacations a year or whatever. Like how you define it really matters. And so I guess maybe the Stockham area and lifestyle that's not what you and I are after either, and that's not what we think are you know how the money listeners need to be about unless that's really what they want, right, But so rethinking kind.
00:30:08
Speaker 2: Of take way more vacations exactly what I do? I really do?
00:30:12
Speaker 1: Yeah, And so yeah, rethinking kind of what you're aiming for matters in this too, I think. But the Wall Street Journal they boiled the question down to, like, will hard work offer you the opportunity to get ahead? And even that, like getting ahead is in the eye of the beholder, and so much of it comes getting ahead is a is a warped term because it makes people think of, well, am I going to do better than my peers? Am I going to do better than the folks around me? Am I going to supersede them? And so yeah, even the way the questions worded, it comes with a lot of like perception, right. And so I really do think that hard work and smart work in this country for a whole lot of people will pay dividends, right, And that there's a lot more in your control than you think. It doesn't mean there aren't things out of your control. And it doesn't mean that there aren't headwinds. But I do think that the pessimism in and of itself actually breeds in results. We've talked about that before on the show too, mat how optimism is such an important part of building that financial future you want.
00:31:06
Speaker 2: It's true, all right. So a way that you can get ahead is through entrepreneurship man working for yourself. A recent poll found that one in three gen zs they want to do that. They want to be their own boss, and the reason for that is because they think it's the best way to build wealth. And I don't think they're wrong. We've seen a ton of small business formation, like the numbers of I think new business applications skyrocket since COVID, and that's good for our country, and it's also great for many of those individual business owners. It's certainly not going to be for everyone out there. Now. What you do for work, your personality, that matters a whole lot. There are a lot of folks listening and they're you know, you're like, guess no, guys, I'm just always going to be Yeah, Like I don't want to own, I don't want to have the responsibility because there is a lot of additional responsibilities when you own your own business. There's nothing wrong with traditional employment, but I think for a good swath of people starting a side hustle, ramping it up so that you can eventually leave your main gig, I think that can be a great way to work towards being your own boss, getting ahead, fulfilling the American dream, and investing in yourself and you know, at least considering what it might look like to do your own thing is something that we would recommend. And it's also something that you can do on the cheap. It does not have to be something that you have to take out a small business loan for. You don't have to hit up all of your relatives at Christmas and say, hey, need you all to bankroll me? Is this something you can ramp up slowly on the side.
00:32:29
Speaker 1: And it's it's certainly not possible to avoid debt completely get for every business you want to start totally. But I think you think outside the box. You We'll go back and listen to and we'll link to this in the show notes. Our episode that we did with with Alan donnegan, and he was talking about even with like physical products and stuff like that, how you can get proof of concept, how you can start the business without taking on any debt. Mat of thinking of a friend right now who wants to start a dessert business, and he could go out there and he could like rent one of those ghost kitchen sort of things and dessert starts slinging dissert Banana pudding is what he's best at.
00:32:57
Speaker 2: I know you're daring about. Yeah, and it is good banda putting. We'll say it's maybe the best you've ever had. It's delicious, And so I think he's going to do well if he goes down this path. But it's also there's a way to start smaller, get the proof out there, start making money actually before you go hook line and sinker and start taking on debt to kind of get.
00:33:15
Speaker 1: The ball rolling right. So totally, But yeah, no, I love this, this mindset of wanting to work for yourself. I think that small business mindset, that appreciation of what small businesses can provide, that's one of the greatest things about this country. Heck, yeah, all right, well, Matt, that's going to do it for this episode. We hope that's all. Hope our listeners out there get eight hours of sleep, plenty of water. Now you don't have to listen to Andrew Hureman because you just heard me say.
00:33:37
Speaker 2: It's true and you just saved yourself three hours. That's right, all right. We hope everyone has a fantastic weekend and we'll see back here on Monday. So until next time, best friends autum, best friends Out.
