238
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[00:00:00] Welcome back to what's your one more podcast. I'm your host, Quentin Harris, you're dialed in for episode 238. And [00:00:05] hey, I kind of want to title and talk about this episode is Scott Besson may be the unsung hero for real [00:00:10] estate. And what I mean by that is, to me, it's apparent that the economic position of this [00:00:15] administration is to drive down the cost of the 10 year treasury, amongst other things, you know, they got a target on [00:00:20] oil.
[00:00:20] And, you know, if you listen to an energy, if you listen to Trump's speech to, you know, Congress last Tuesday, his [00:00:25] congressional address, you know, that they're, they're harping on making the economy and their opinion [00:00:30] better by lowering or keeping inflation tempered by lowering the cost of oil and energy.
[00:00:34] But there is [00:00:35] this, there's this beat of the drum of we got to get the housing affordable and we got to get the 10 year down. And so I want to [00:00:40] talk about what they're doing. I want to show some of the things that are happening in the credit market that I think are really interesting. [00:00:45] Uh, it's a trend that we've been discussing on this show since the start and also talk about what may be [00:00:50] the canary in the coal mine.
[00:00:51] That and more in this episode at what's your one more. Transcript [00:00:55] by https: otter. ai
[00:00:58] treasury secretary, Scott Besant [00:01:00] recently spoke on CNBC last Friday, and he said some stuff to me that I was [00:01:05] like, man, I think this guy, he gets it more than anyone in the entire administration [00:01:10] because he gave us thoughts on the economy.
[00:01:12] And so I'm going to use some quotes here that he said. And I think it was [00:01:15] to me, like I said, he's put on, he explained the, he explained that the market and the economy. [00:01:20] Has recently become hooked on an addicted to government spending, and there's going to be a [00:01:25] detox period to get away from that. That's going to impact the economy and impact the businesses.
[00:01:29] He [00:01:30] also said that this economy that they inherited is really going to start to roll a little bit. [00:01:35] And meaning that he's expecting a little bit of a slowdown and because of what they're doing [00:01:40] and kind of this detox period, he said, at least temporarily, there's going to be some slowdowns. And he made it [00:01:45] clear that this is not going to be their economy until month six, all the way through month 12, meaning [00:01:50] that, hey, I kind of look at it like this, like, and it makes a lot of sense to me.
[00:01:54] We always [00:01:55] talk about the windfalls of an administration when they first come in, that they may be riding the coattails of a previous [00:02:00] administration. Well, it could also be said that if there's. Things that were negative coming out of the previous administration, you're [00:02:05] going to ride the negative coattails of that for the first six or 12 months in this case.
[00:02:09] But I look at like [00:02:10] a football analogy, like if you have a college team that you like and they get a [00:02:15] new coach, um, that new coach is going to come into a program where he [00:02:20] has. Potentially other coaches, but definitely players that he didn't [00:02:25] recruit. They're not quote unquote his people and it takes time to get your people into [00:02:30] your system to see the product of your system.
[00:02:32] Otherwise you're trying to just convert people into your [00:02:35] system and sometimes there's some resistance to that and there's an adaptation period that just doesn't always [00:02:40] translate to success on the field. And I feel like that's the same thing Scott Besson saying about the [00:02:45] economy is that, Hey, listen, there's some things that.
[00:02:46] Um, I put in a place that we didn't do and we've got [00:02:50] to get to our policies and see them take effect. And as we've talked about on the show, anytime there's an [00:02:55] economic policy, it's traditionally not a direct impact. There's a slow roll in there. There's a, [00:03:00] there's a, a time in which it takes to facilitate that policy through the system.
[00:03:04] And in this [00:03:05] case, he's saying, Hey, give us six to 12 months, then judge us on this economy. Because between now and then [00:03:10] we're cutting off some things as he called it a detox period. That's going to call some temporary slowdowns. And I'm [00:03:15] like, Yeah, this guy gets it. And I mean, he's actually talking in manners that make sense.[00:03:20]
[00:03:20] And so when I take a look at some of the things he said that could be temporary, slowing down. Two episodes [00:03:25] ago, we talked about Some delinquencies we saw in the recent report from the New York Fed, [00:03:30] and the reason this is important is because when we talked about those delinquencies, there were concerns in the credit card and the auto [00:03:35] sectors that we specifically pointed out, and as of last week, Fitch Ratings came out and said, hey, the [00:03:40] highest level of delinquencies is Basically, automobile loans, and [00:03:45] they've seen since 1995 and, um, you know, auto loan delinquencies in this [00:03:50] chart.
[00:03:50] And again, if you're listening to this, go to our YouTube channel at what's your one more with the number one, um, this is a [00:03:55] really cool chart here because they break the auto loans down. Uh, and again, subscribe to the channel, leave us some [00:04:00] comments, always appreciate what you guys have to say, but there's two different types of loans.
[00:04:04] prime [00:04:05] auto loans and subprime auto loans. And, you know, in case you're not aware, subprime are people that are a little bit more credit [00:04:10] challenged than the prime auto loans. The prime auto loans are performing. However, the subprime are at [00:04:15] the highest levels they've seen since 1995 of delinquencies. And that's kind of alarming because that's [00:04:20] higher than obviously what we saw during the quote unquote.
[00:04:23] Greatest real estate [00:04:25] depression time that happened there and everyone kind of resorts back to that is oh This is a warning sign that [00:04:30] the the credit market's gonna crash. I don't think the credit market is going to crash I think that it was we [00:04:35] divulged in that report the bulk of these delinquencies are between the ages of 18 and 39 Same with the [00:04:40] credit card debt, but there's some key factors on the auto side that are applying pressure just like on the [00:04:45] housing side in Those key factors are going to be the cost of insurance and the higher interest rates [00:04:50] because you know in this same report the reporting that That car insurance [00:04:55] rates are up 19 percent year over year, and that's a big deal because that's up [00:05:00] 33 percent from 2020 when a lot of these cars were bought and purchased and that the higher than [00:05:05] normal interest rates are at 9 percent for new cars and 14 percent for use.
[00:05:09] Now, [00:05:10] Again, I think the difference between the car market and the housing market here is that, you know, you can turn your [00:05:15] car back in and you could be a one car household if you're two. You can't really turn your house in [00:05:20] and, you know, cause you don't have two houses and become a one household family.
[00:05:22] Also, these cars don't have [00:05:25] equity positions in them like the housings do. And we've talked about this over and over again. And also, if the bulk of the [00:05:30] delinquencies are coming between the ages of 18 and 39, you could also very easily [00:05:35] draw a conclusion. Most of those are not homeowners, and I continue to bring this up [00:05:40] because the more I continue to do research, I keep seeing a lot of the same people online talking [00:05:45] about the doom and gloom.
[00:05:46] You know, the crash is coming. You hear me say this almost every [00:05:50] episode now because I'm going to continue to debunk it with facts as to why that's not happening. [00:05:55] And, uh, a meltdown in the consumer credit market is not going to [00:06:00] directly mean a meltdown in the housing market. Matter of fact, I look at that as an opportunity in the [00:06:05] housing market and let me kind of tell you why.
[00:06:06] Because people that have credit card debt that own a home, they also have [00:06:10] equity. They can absorb that credit card debt through a refinance and get their payments down much lower even in today's [00:06:15] rate environment and be unscathed if you may. During this credit potential [00:06:20] issue in the credit card market, but I keep going back to the bulk of those defaults are 18 to 39 years [00:06:25] old between auto and credit card.
[00:06:26] That's a big difference. When you take a look at the homeowner's market where [00:06:30] you don't necessarily see those same default rates. And so in the third quarter of [00:06:35] 2024, the number of 30 day delinquencies rose almost 4%, which [00:06:40] essentially marked. The highest rate we've seen since 2021 and again, I keep [00:06:45] going back to that because there's some issues here.
[00:06:47] The number of credit card holders, uh, that are making [00:06:50] minimum payments right now versus paying the credit card off is up 12 percent or excuse me, is up and up [00:06:55] to a 12 year high from the Philadelphia Federal Reserve's numbers. So we're seeing people making their own payments and I go back to the job [00:07:00] market on the last episode we had about, Hey, people are hurting.
[00:07:02] They've got. Part time jobs to go along with full time jobs just to make [00:07:05] payments. This also shows up in these retail sales that we talked about that, Hey, the sales are down because the consumer is [00:07:10] tapping out. They're making minimum payments and those minimum payments can be pretty pricey. So your household budget, [00:07:15] it's only so much, you can only expand it to the point to where it kind of busts and you can't do anymore, which [00:07:20] may be why you're seeing some of these defaults happening in the credit card, even in the auto side of [00:07:25] things.
[00:07:25] So in the final part of that interview, Besson also reiterated that the tariffs were just a one time [00:07:30] thing and that you'll see the price adjustment at one time. But he also pointed out the fact that oil [00:07:35] prices and mortgage rates were coming down.
[00:07:36] And I think that's important because it's like, ah. There it is. The [00:07:40] one thing that could help lower monthly payments is rates coming down, because if mortgage rates come [00:07:45] down, going back to what I just said, those homeowners now can unlock that lock in effect, absorb some of this [00:07:50] credit card debt, get a lower payment, even at the current rates of what they're currently seeing out there on the [00:07:55] market.
[00:07:55] Because why? They'll probably refinance again when they drop down in the fives in the second quarter and the third quarter, like we've [00:08:00] talked about here. It's just a great opportunity. But the recent highs in delinquencies in the auto and credit [00:08:05] card market are being referred to by quite a few economists now as the canary in the coal mine.[00:08:10]
[00:08:10] Um, and I think that's interesting. Now, uh, just a quick lesson for those that don't know what [00:08:15] that means. I told that to someone the other day and they said, I'm willing to bet most people don't even know what canary [00:08:20] the coal mine means. Um, and, uh, I don't know, I don't know. I don't know, Charlie, do you know what that means by chance?[00:08:25]
[00:08:26] So this is real quickly here. So in the oil industries, [00:08:30] the canaries were used, um, essentially to help [00:08:35] forecast and get a better range of carbon dioxide and, [00:08:40] and levels of it that could be harmful to the coal miners. So the canary in the coal mine story, when we say something [00:08:45] like that, it means that it's an early warning sign of danger.
[00:08:48] So not surprising the origin [00:08:50] of that expression is actually literal, but. It canaries were hysterically used to test for carbon dioxide [00:08:55] and other toxic gases underground in the mines. And, you know, canaries are a good [00:09:00] early detector of carbon dioxide because they need immense quantities of oxygen to fly.
[00:09:04] And so [00:09:05] their anatomy allows them to get a dose of oxygen when they inhale. and another when they exhale. [00:09:10] And so by holding air into their, their body as quickly as they do, they get that double [00:09:15] dose of air and any type of like contamination in the air could cause them to pass out. Right. And [00:09:20] so in the coal mines all day and all the way back to like the late 1800s, all the way to 1987, these [00:09:25] canaries were used.
[00:09:26] Um, but it was in a humane feature that I thought was pretty interesting. So, you know, despite [00:09:30] like this dangerous role they had in the coal mines, these birds were not like sacrificed by the [00:09:35] sake of the miners. That's not how it worked. A gentleman by the name of John Scott. Uh, haldane excuse me, I'll look [00:09:40] it up here.
[00:09:40] He designed a special cage. And I actually thought was kind of cool because this canary in the coal mine story drove me to find this and look [00:09:45] it up here, but I put a copy of what it looks like in here and pictured below that actually protected these canaries in the [00:09:50] circular door would actually open when they would have a down in the coal mile coal mine, excuse me.[00:09:55]
[00:09:55] And it had a grill to prevent the canaries from escaping. Once the canary showed signs of carbon. Minoxide poisoning, the [00:10:00] door be closed and the oxygen valve would open thus resuscitating the canary and bringing them back to life. [00:10:05] And it was pretty cool because these miners became so attached to these canaries that they wanted to make sure they were protected and that [00:10:10] they too didn't suffer from this, this carbon monoxide that was down there.
[00:10:13] And it's kind of a neat thing to think about how [00:10:15] that technology at that early age was made and we use it all the way up to 1987 until we had better detections of that. [00:10:20] But that's the story of the canary in the coal mine. So when you hear someone say, ah, that could be the canary in the coal mine. It's the danger [00:10:25] warning sign that something's imminent and could be harmful to the economy in this case.
[00:10:29] So, [00:10:30] um, just thought I'd share that. But to me, it's pretty clear the administration's turning its attention to this 10 year treasury. [00:10:35] I mean, they're saying things like, Hey, we've got to get the 10 year down. The investor spreads are going to get [00:10:40] better and closer to 200 and this will drive down mortgage rate.
[00:10:43] I'm like, hello. Someone [00:10:45] gets it like my goodness how many times we've been saying that on the podcast there We haven't heard anyone in the last three [00:10:50] administrations talk to the public like this I mean to the point scott best said earlier last week He believes the [00:10:55] mortgage market will unlock in the next few weeks and that he believes spreads will be closer to 200 [00:11:00] My goodness, I think we all look forward to that and I would appreciate that that be the case and [00:11:05] welcome that very soon as I know you guys would too as potential homeowners and current homeowners out there.
[00:11:09] So guys, if you like [00:11:10] what you're hearing, please share this podcast, five star review it. Check us out on YouTube at What's Your One More with number one. And [00:11:15] until the next time, we'll see you at What's Your One More.
[00:11:17] I got one more shot. I'm gonna make it [00:11:20] one more chance. I'm gonna take it a minute. When I said it, now [00:11:25] it's time for me to do it. I got one life to live. So I put them all into it. [00:11:30] [00:11:35] Yeah.
