1/14/25 Home Insurance on the Rise: Fires, Utilities, and Insights from John Cox

The Moneywise Radio Show and Podcast Tuesday, January 14th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement Guest: John Cox, Business Editor for the Bakersfield Californian website: www. Bakersfield.com

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

• 0:09Speaker 01

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• 0:30Speaker 02

  Securities offered through SEF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SEF Investment Advisors, Inc. SEF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:40Speaker 00

  Now, let's start the Money Wise Show.

• 0:42Speaker 03

  Welcome to the Money Wise Show. We are live from the Gero Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. Today, we're your hosts, Sharad Waite and...

• 1:04Speaker 04

  Dustin Weaver.

• 1:04Speaker 03

  Dustin, welcome.

• 1:06Speaker 04

  Yeah, thank you for having me. It's good to be here. Man, you said the Gero Ellis room. Did we officially rename it?

• 1:10Speaker 03

  Yeah, we officially renamed it, yeah, last year. You know, we need to get a plaque at the new place, at the basement of the Woolworths, where our new padded radio room will be in this summer.

• 1:24Speaker 03

  We're gonna have a nice plaque.

• 1:25Speaker 04

  That'll be nice.

• 1:26Speaker 03

  Right there for...

• 1:27Speaker 04

  Will it be the Rocky Horror Picture Show outfit he wore?

• 1:29Speaker 03

  Man, the legend that is Gero Ellis. You know, one of these days, Stephen, we just need to dedicate a whole show...

• 1:36Speaker 04

  I could do that.

• 1:37Speaker 03

  ...to Mr. Ellis. Gero, and we still get constant outreaches from the public, Gero. For those who don't know, Gero is one of the founders here at Money Wise. Last May, or March, or May? March of last year, Gero suffered a massive stroke, which still to this day is in recovery mode. He does still continue to make some progress, however, it's slow and there's still some significant challenges there with Gero, but he will always be a part of this family. And so, thanks. Thanks for all of the constant reach outs for Mr. Ellis and Gero.

• 2:22Speaker 03

  We appreciate it. But let's get to the show today. We've got so many questions and comments that our listeners have sent in that I want to get right to them because then we have one of our favorite guests coming up. John Cox is the king of the business nerds, a man of a million words. He's going to be joining us here shortly after we answer these questions. But let's get right to it, Dustin.

• 2:46Speaker 04

  Sounds good.

• 2:48Speaker 03

  You have that first question?

• 2:50Speaker 00

  I can, I can get it.

• 2:52Speaker 03

  Oh, go.

• 2:52Speaker 00

  Uh, do you happen to know what NZAM is?

• 2:57Speaker 03

  Yeah, it's NZAM. It's called NZAM. You know, I actually had to look this up. The question is NZAM. Do we know what NZAM is? I had not heard of NZAM. And so we looked into it a little bit. Dustin, what is NZAM?

• 3:10Speaker 04

  So it's an acronym for Net Zero Asset Managers Initiative, those four letters, NZAM. And what it is, is a group of 330 or so asset managers that manage around $58 trillion that came together and said they are going to commit to investing more and more dollars over time to environmental, social, and corporate governance, also known as ESG-type investment approaches.

• 3:40Speaker 03

  So this is a really interesting subject because while I haven't heard of NZAM, I've definitely heard of ESG and that type of investment. So ESG is environmental sustainability and governance. It's another acronym in the investment world that talks about investing in, in, in products or, or investment products that steer clear of certain areas like, for example, gambling, or tobacco, or

• 4:14Speaker 03

  Gosh, I don't know what, what, I'm trying to think of other examples.

• 4:17Speaker 04

  The S, I think, is social and they're talking about like work, workforce, how you treat employees, human rights, diversity type topics.

• 4:26Speaker 03

  Yeah.

• 4:27Speaker 04

  And then under the governance, it's, you know, looking at the board, they're looking at shareholder rights, those kind of things. And then the environmental is what's your waste and pollution management look like? Resource management, you know, greenhouse gas emissions, that kind of thing.

• 4:43Speaker 03

  This is a way for investors to have sort of some, some, to, to hold companies responsible, and corporations responsible for the impact that they have on society. This has been a, this was a very hot topic a few years ago.

• 4:58Speaker 04

  Oh, yeah.

• 4:59Speaker 03

  It became very popular in terms of it was getting a lot of attention. It was getting a lot of attention at the same time that DEI and those, those diversity, equity, inclusion programs were starting to build up a lot right around the time of the Black Lives Matter movement with, with, with George Floyd. And we saw a big societal shift towards these types of initiatives. But since then, it's sort of taken a step the other way. There's been, not just with DEI, there's been a big pushback against those DEI type programs, but we're also seeing some pushback against some of these other investment styles like this NZAM. As you've mentioned, didn't you mention just yesterday that BlackRock dropped this as

• 5:44Speaker 03

  a, as a program?

• 5:45Speaker 04

  Yeah, and I think that's probably where the listener question comes from is BlackRock pulled out from this initiative. And BlackRock, as you know, is one of the largest investment management companies in the world.

• 5:54Speaker 03

  Yeah.

• 5:55Speaker 04

  And so it's getting some attention for them pulling out.

• 5:58Speaker 03

  So there you go. That's what NZAM is. You know, the MoneyWise take on these, these types of investment strategies is a little nuanced. We, I have, I always have trouble when anybody is mixing their political beliefs or their religious beliefs in with their investment strategies. Not because you might be wrong in what you believe, or that it might not be a good or good thing for society or for the world, but because those inherent biases that that come with you, feeling like you want to satisfy some sort of emotional need.

• 6:35Speaker 04

  Right.

• 6:35Speaker 03

  Will generally lead you away from having a optimized investment strategy that is going to give you, how do I say this, the most bang for your buck, the biggest return for the amount of risk that you're taking.

• 6:47Speaker 04

  Right.

• 6:48Speaker 03

  So if you're willing to sort of put your, and a lot of people are, generally, they're very wealthy people that, you know, they can, they can afford to receive, you know, a one or 2% less annual return because they're willing to cut out certain products or investments, then okay, great.

• 7:06Speaker 04

  I've heard, I feel like there's a lot of acronyms in the financial world, but SRI is another one that's thrown around, socially responsible investment.

• 7:15Speaker 03

  Oh, yeah.

• 7:16Speaker 04

  And what it is, is some of these folks are just trying to match values with their investments, or where the dollars are. And like you said, it's tough, because the filter can be on any number of levels, right?

• 7:30Speaker 03

  Yeah.

• 7:31Speaker 04

  If some of the employees of the company are not doing something that you like, you don't go with it?

• 7:35Speaker 03

  Yeah.

• 7:36Speaker 04

  Or?

• 7:36Speaker 03

  Or the CEO says something you don't like, and all of a sudden you want to, you know, cut them off. It's really tough. It's really tough to do that. We have this availability at Money Wise within our investment solutions. We can filter, if we have a client, if we have a client that comes and says, "Look, I, I just really can't hold any alcohol stocks. It's against my religion. It's against my, my, my political beliefs. I can't invest in any company that sells alcohol." We can actually filter out so that, you know, their funds don't have any of that. Or guns. Maybe you've got something against gun manufacturers, you know, whatever it is. However, I, I can count on one hand over the last 25 years, how many people have actually done that. It might be different in a, in a different

• 8:21Speaker 03

  city. Or a different area, but it's not, not super common here in Bakersfield.

• 8:26Speaker 04

  Certainly.

• 8:27Speaker 03

  We've got another great question here from a listener. I'll go ahead and read it. It says, is there going to be any penalties towards SoCal Edison? If there are any truth to them starting this fire, Dustin?

• 8:37Speaker 04

  Gosh, what'd you find out on that one?

• 8:39Speaker 03

  So this is, this is really interesting because just yesterday, which was Monday, there were three or four lawsuits that were filed against Southern California Edison claiming that there was evidence that they had one of their, one of their towers or one of their power lines had, had started at least one of those fires down there. And I don't know if there's any truth to that. Anybody can sue for anything and, you know, until it plays out, you don't know what happens. And I think there's still a lot of, a lot to be found about what happened with these fires. How did they start? And all of that, but we do have some examples of what happened to other utilities in the state of California.

• 9:20Speaker 03

  For example, PG&E, it wasn't that long ago that PG&E was forced to think, to, to, forced to face bankruptcy. After the fire that was, the campfire in 2018, there was, they actually pled guilty to 84 counts of involuntary manslaughter. The, uh, the, uh, the California Public Utilities Commission can impose substantial penalties as they did to PG&E. 1.9 billion dollar penalty for the wildfires they caused in 2017 and 2018. That was the largest penalty the agency's ever imposed at that time. I don't, I don't know if this penalty will get, you know, near that, that range or more.

• 10:05Speaker 03

  We'll have to see. The investor impact obviously is enormous for, for, for, uh, people who are investors in the, in the companies, but.

• 10:15Speaker 03

  More importantly, as I mentioned, PG&E was, had such huge liabilities because of these fires, the liabilities exceeded over $30 billion and that was, of course, what forced PG&E to file Chapter 11 bankruptcy protection in January of 2019.

• 10:40Speaker 04

  Yeah, so like you said, further down the road here, we'll learn more about that. And if in fact, they are found liable, you know, that gives you an idea of what could be coming down the pike for them, huh?

• 10:51Speaker 03

  Yeah, it's not going to be pretty for SoCal Edison. I wouldn't want to be a utility in California.

• 10:57Speaker 04

  No, or an insurance company, right?

• 11:00Speaker 03

  Oh, man. Speaking of insurance companies, let's go to the next question. Says, are homeowners going to be bent over with home insurance after these fires?

• 11:08Speaker 04

  That's how they wrote that?

• 11:09Speaker 03

  That's how it said. I could have edited a little bit for the listeners, but basically the question is, what's going to happen to homeowners in California because of this problem that we have? So, this is, I want to spend a little bit of time on this. California has been, it's been an absolute disaster, what has been happening in California. And you don't have to go back too far to realize why. In 1998, Proposition 103 was passed by the great citizens of California and this ballot initiative process that we have. And they essentially approved, the voters approved that the California Department

• 11:54Speaker 03

  of Insurance has to approve rate increases. And now insurers could argue that they needed to be at a certain rate, but it was ultimately up to the Department of Insurance to determine what the cost was, how much they could increase those rates. Well, what we fast forward to now 30 years plus, and what we've had is, year after year, insurance companies saying, we've got to increase our premiums way, way more. You know, this is not going to be sustainable for us because of the... The droughts and the fires and so and the liabilities that they were facing. And so insurance companies were, you know, asking for more, more premium.

• 12:35Speaker 03

  And the insurance, Department of Insurance, of course, very hesitant to do that because people just get ticked off when rates go up and they, they didn't do it. They didn't allow it. They, they over and over again, companies like State Farm and Allstate were, were trying to increase their premiums, trying to make it feasible. Ultimately, they had to leave the state. They were stopped issuing new policies in the state of California because it just wasn't financially sustainable for them.

• 13:03Speaker 04

  Yeah, I saw that on my own personal situation. I mean, gosh, the, two years ago, it went up a thousand dollars and then this past year went, it doubled again. So.

• 13:12Speaker 03

  Yes, well.

• 13:13Speaker 04

  We've seen some increases, but like you're saying, they haven't allowed all the increases, right? That the companies wanted.

• 13:19Speaker 03

  They haven't allowed all of the increases and then it gets even worse because in California, we have an insurer of last resort. It's called the Fair Plan, California Fair Plan. This is where Californians can go to if they don't have any other option because the Fair Plan has to issue, they're, they're guaranteed issue, basically. But the Fair Plan itself has been under enormous financial pressures and the Fair Plan has not increased its premiums as much as it had hoped.

• 13:54Speaker 04

  They started high though, for sure.

• 13:56Speaker 03

  Yeah, well, they tried.

• 13:58Speaker 04

  Examples I've, I've seen, it seems like if somebody has a cabin, even a small cabin outside of the area, if it's in an area that maybe is higher risk for fire, you know, you're talking a little two bedroom cabin, it could be three, four, or $5,000 a year premium.

• 14:14Speaker 03

  Yeah.

• 14:14Speaker 04

  For insurance.

• 14:15Speaker 03

  Yeah.

• 14:16Speaker 04

  Which is a lot more than it'd be if it was here in the city.

• 14:18Speaker 03

  Well, and, and it would be a lot more too if Fair was actually charging what they should charge if they were a normal insurance company. The CEO or Director of Fair recently in a hearing in, in Sacramento, actually in 2021, mentioned.

• 14:35Speaker 03

  And that they needed to increase rates by 70% to in anticipation of the of the needs that were going to happen. It also, we saw a huge increase in 2023, the number of people on the fair plan doubled in the state of California. So they doubled the number of people that are in their plan. The increase that was that the fair plan wanted 70%. Actually, they they they didn't present that number. They actually presented 48% to to the politicians. And insurance commissioner, and ultimately, the insurance commissioner allowed an increase of just 15%.

• 15:14Speaker 03

  So they needed 70%, they increased it 15%, which brings us to our cabin example that you just said, where you're seeing. You know, the small cabin go from, you know, $3,000 a year to $6,000 a year. I know that's a real number because I have a cabin and that's exactly how much my homeowner's insurance went up on the fair plan. I had I have no other option but to be on the fair plan for my cabin that's up in Alta Sierra. And so, but, you know, if I really, I what am I going to do? I have no other option at this point.

• 15:46Speaker 04

  And you have two options, take it or leave it.

• 15:48Speaker 03

  Well, here's here's the other big problem with this. Estimates into what this is going to cost for the fires so far. And that we've seen in losses in LA are hovering right now. Again, these are just initial estimates, somewhere around 30 billion.

• 16:07Speaker 04

  Wow.

• 16:08Speaker 03

  That's with a B. What would you guess the fair plan has available in cash to pay claims?

• 16:16Speaker 04

  Something tells me it's less.

• 16:17Speaker 03

  It's a lot less. It may sound like a lot, but it's a lot less than 30 billion. It's 377 million.

• 16:26Speaker 03

  You know how what percentage that is of 30 billion?

• 16:30Speaker 04

  Yeah, closer to one.

• 16:31Speaker 03

  Less than 1%, right? Or just just 1%? This is ridiculous.

• 16:36Speaker 04

  Yeah.

• 16:36Speaker 03

  And so then what do insurers do when they only have so much money to pay out their policyholders? What do they do, Dustin?

• 16:43Speaker 04

  Well, I do know that there's reinsurance.

• 16:46Speaker 03

  Right.

• 16:46Speaker 04

  Or the option of going bankrupt and selling to another insurance company that can absorb some of those liabilities.

• 16:52Speaker 03

  Right. So good news. The fair has reinsurance. The fair plan has reinsurance. Uh, that's the good news. The bad news, how much do you think they have in reinsurance coverage?

• 17:01Speaker 04

  Something tells me it's not enough.

• 17:03Speaker 03

  It's not enough. It's 5.7 billion out of the estimated 30 billion, which might be a low number of of the of what's needed in the in the LA fires. So it, you know?

• 17:14Speaker 04

  Well, this isn't, we're not even talking about the folks that just weren't insured at all, right? I mean,

• 17:19Speaker 03

  Right.

• 17:20Speaker 04

  There were some that had their policies canceled um in light of the insurance companies pulling out of the area.

• 17:27Speaker 03

  This is

• 17:28Speaker 04

  What's gonna happen there?

• 17:29Speaker 03

  This is awful because I just read this on CNN this morning. Between 2020 and 2022, insurance companies declined 2.8 million homeowner policies in California. In Los Angeles alone, 531,000 policies were declined between 2020 and 2022.

• 17:50Speaker 04

  Wow.

• 17:50Speaker 03

  I mean, what what do you do? Uh, that's, I, I, you know, I don't know how many, uh, maybe there's 100,000 that that are affected by the fires in that part of LA, but in just LA, there's a half a million people.

• 18:03Speaker 04

  Right.

• 18:04Speaker 03

  Who basically didn't have any other option for insurance coverage. So this is, this is a problem because what happens when the fair plan doesn't have enough money? And then their reinsurance, so their insurance cover, their their insurance company that's covering them and covering the fair plan doesn't have enough money. Then the next option, and according to the state of California, the fair can do an assessment on the other privately held or publicly traded insurance.

• 18:36Speaker 03

  Companies that are out there that are still in the state. They they they basically send them a bill. And they say, here's your portion that you need to contribute to the fair plan to make sure that we can cover these bills. What do you think that's going to do?

• 18:48Speaker 04

  Where are they going to get the money? Where are they going to get the money?

• 18:50Speaker 03

  Right, they're already leaving. They're already, this is not a sustainable business environment for homeowner insurance in California. And now they're going to potentially get this assessment to help. It's just.

• 19:01Speaker 04

  Which means we're likely to get an assessment, right?

• 19:03Speaker 03

  Right, which means even if you are not on the fair plan, if you're just a homeowner, you're likely going to get an assessment. You're likely going to see a much bigger increase, even if you don't live anywhere near LA. Just because that's just how California manages its insurance.

• 19:17Speaker 04

  Yeah.

• 19:18Speaker 03

  And I don't know what the answer is to this, but it should have been resolved 30 years ago. They should have started figuring out a way to deal with this. I don't know if 30 years ago, they anticipated the amount of forest fire we were going to have. But this is.

• 19:33Speaker 04

  Be interesting to see how it plays out.

• 19:35Speaker 03

  Yeah.

• 19:35Speaker 04

  Be interesting, maybe uncomfortable.

• 19:37Speaker 03

  Yeah, exactly.

• 19:38Speaker 04

  We should probably take a break and then we've got John coming up next.

• 19:40Speaker 03

  That's right, we're going to take a quick break. Please stick around as we take a quick break.

• 19:44Speaker 00

  Are you nearing retirement and currently working with a financial advisor? Are you not sure if you're invested appropriately? Call our offices at 661-847-1000 to sit down with a Money Wise financial advisor for a no obligation assessment.

• 20:01Speaker 05

  John Cox.

• 20:04Speaker 05

  John Cox. He's the king of the business nerds. Looks like Jimmy Uso from Superman, but a little bit taller and a bit of a tan. John Cox. He's from Bakersfield, California. John Cox. Makes stories on credit unions. It's a good thing that he's only on the radio air, or else you'd be distracted by his dark flowing hair. John Cox.

• 20:29Speaker 03

  John Cox, man of a million words, king of the business nerds.

• 20:33Speaker 06

  Do you not laugh at that?

• 20:34Speaker 03

  I laugh every time. It's so good. How you doing, John?

• 20:38Speaker 06

  I'm doing good, thank you very much. Nice to be outside of the newsroom and not as busy and harried and desperate for a news that I normally am.

• 20:47Speaker 03

  Yeah, you were with the Bakersfield Californian, delivering now papers through the US Postal Service. I haven't gotten my Sunday paper in like months now. What's going on?

• 20:55Speaker 06

  Oh, we stopped at October 1st.

• 20:57Speaker 03

  What?

• 20:58Speaker 06

  As of October 1st, only five days a week, only US Postal Service. And another thing you'll notice with that is if the post office is not working, you're not getting it that day. So there was no paper that we prepared, you know, Christmas Day, didn't go out, same with New Year's Day.

• 21:16Speaker 03

  Because the post office doesn't deliver that day? So you basically, you're on bank hours now, huh?

• 21:22Speaker 06

  Well, there was...

• 21:23Speaker 03

  Almost.

• 21:24Speaker 06

  It's starting to feel a little bit that way, and it's complicated because we're not used to this. We are used to every day of every year. And then when, you know, there was the service for former President Carter, the paper that we prepared that day didn't go out. It's like we had a day off. It was weird because we're all working that day.

• 21:40Speaker 03

  Oh, my gosh.

• 21:41Speaker 06

  But we weren't trying to put together paper by the end of the day. In fact, there was a story I wrote that I put a lot of work into. By the time it hit print, it was like two days late.

• 21:49Speaker 03

  Oh, my gosh.

• 21:50Speaker 06

  But, you know, it was still a lot of good information there, but...

• 21:52Speaker 03

  Has the hate mail slowed down?

• 21:54Speaker 06

  Uh, yes, it has.

• 21:56Speaker 03

  People are adjusting. People are getting used...

• 21:58Speaker 06

  Still love you guys.

• 21:59Speaker 03

  Yeah.

• 22:00Speaker 06

  Yes, people, either they just resign themselves or they've, you know, cut their subscription. Don't do that.

• 22:05Speaker 03

  Yeah, no, no. I mean, we need local journalism. You've been doing this for so many years. And it brought, again, about 29 different stories that you've written on in the last month.

• 22:16Speaker 06

  Wow.

• 22:17Speaker 03

  Uh, not 29, but you've written on quite a few stories. So I want to start first with the, I guess, let's get this out of the way, that the, been a lot of news about the immigration crackdown. And so have you witnessed any of this or seen any of this happening?

• 22:33Speaker 06

  Well, yeah. I mean, I've talked to people who've witnessed it and talked to people who are at a high level and an immediate sort of supervisory level, for example, farm workers who didn't show up. Just before I came in here today, I heard back from a guy who had told me last week that about 30% of his workers stayed home. Of the 600 or so workers, close to a third of them didn't, didn't go to work because they're afraid that they might get caught up in the sweeps. And he told me that as of Monday, they're back to 98%. So this operation appears to have receded. ICE took the 2%. Sorry, the what? ICE got 2%. Right. But it was, it was not ICE. You know, that was another thing. BPD had told us that

• 23:18Speaker 06

  Border Patrol, Customs and Border Protection, as well as ICE were in town. But apparently ICE was never in town. It was Border Patrol. And you think, well, what are they doing in Kern County? The border is like many hours south of here. And they said that their jurisdiction extends all the way to Oregon border. Whoa. Yeah.

• 23:37Speaker 03

  That's a long ways.

• 23:38Speaker 06

  I didn't know that.

• 23:39Speaker 03

  You know, construction costs are going to be a concern with the, with the fires that are down in LA. They're concerned for us here in Bakersfield. But future construction costs is a major concern because 18% of the US labor force, at least in 2023, were foreign born. So nearly 20% of our workforce is foreign born, according to the Bureau of Labor Statistics. And about a quarter of construction industry are immigrant workers. So, you know, you do the math, you lose, you lose a chunk of your workforce, you have a limited workforce that's already expensive. That's not going to, that doesn't bode well. Is this, has this been impacting businesses? Or how much?

• 24:23Speaker 06

  Yes, it has. We have a report. A gentleman who, I guess a manager with K. Hovnanian Home Builders, went to the city council meeting last Wednesday and was speaking with our reporter there, Peter. And he said he showed up to find out what was going on here, hoping that the council had some answers. And his report was that he had a crew of 10 framers that were working, you know, building on attractive homes. 10 people.

• 24:51Speaker 06

  And only, I think the report was that two or three of them showed up. The rest were there because the numbers that you cited, right, those are, I think, national figures. California, much more so.

• 25:03Speaker 03

  Oh, right.

• 25:03Speaker 06

  We've got, you know, such a larger immigrant population in California. So if it's, you know, a fifth, a third, a fourth nationally, it's probably higher here. And that would be what I would think would be the issue here. If, you know, if this is any indication of what we can expect when Mr. Trump takes office and carries through on his promise to do, you know, large deportations. What is that going to mean for the costs and really our ability to move forward to address the housing shortage in California, which is already hard to get, you know, our arms around. If we take away a significant share of the workers, how is that gonna?

• 25:45Speaker 03

  It's just, it's an inflationary move, meaning that we're just, you're going to have to pay a lot more for your food, for your workers, for your gardeners, for everything. You're going to have to pay a lot more for that. We did get some positive news today out of the Trump administration in terms of the tariffs, where they're kind of backing off a little bit from their, their, their, their statements in the past about, you know, these draconian tariffs, high tariffs on everybody across the board. And now they're talking about more of incrementally implementing these tariffs to see how it, how it will impact inflation. So we may see, we might see something similar in terms of the immigration policies. I wish that, you know, California is, California especially needs to figure out a way to, to

• 26:29Speaker 03

  have a, a work, a work visa relationship because they're right there. They're literally just a few hours down the road from us and they're all overworking everywhere, you know? We can't, we can't afford to, to lose them. We just can't afford to, to lose them. Now, I guess, to be fair, we don't know. I don't think anybody wants criminals or people here that are doing things that they shouldn't be doing. So I guess in this raid, from what I read, they were catching people who had felonies or had prison.

• 27:08Speaker 06

  So was it more about that? That's who they were going after?

• 27:10Speaker 03

  That's my understanding.

• 27:12Speaker 06

  Trying to pull everybody over.

• 27:13Speaker 03

  Right.

• 27:14Speaker 06

  This is the word that we've continued to receive from the Border Protection Agency, that they were going after a list of people, very specific, looking for people accused of certain crimes. Now, the way that they did it, my understanding is they didn't go workplace to workplace. They didn't go onto people's farms and things. They went throughout the community, to public places, kind of sweeping up as many people as they could, and trying to find people who were on the list. Did they let go those who were not sort of on the list, who they found out were not documented, but weren't on the list? Well, what do you do with them?

• 27:52Speaker 03

  Right.

• 27:53Speaker 06

  You know, if you're going wide like that, but you're looking for specific people, what happens? Well, I don't know. We haven't really gotten that level of detail. But certainly, you know, reports have come that they've just sort of scattershot, we're looking for people, and then maybe honing in on just certain people. Were they letting other people go? I don't know. Also, just to address the thing about, you know, workers, we've had a worker shortage in Kern County farming for a long time. Some of the older people are looking to, you know, get out or to retire or anything. So there's talk of, you know, what does immigration reform look like? There's broad consensus that we have a broken system here. What does the solution look like? The question really comes down to, do we want

• 28:37Speaker 06

  comprehensive immigration reform or piecemeal immigration reform?

• 28:41Speaker 06

  What we're seeing a push for lately is more of these worker visas, you know, and this is the, one of the big issues with the tech industry, you know, Silicon Valley, they want more of these things that would also help, you know, the farming, but the thing is, you've got to have support for that. Each party has its own stake in this thing. And how do, you know, how do you get a compromise when you're only doing one small part of it? It's hard to get a compromise. You do a large one, you get a compromise, but then if you have holdouts who won't support it, nothing moves forward, and that's been the situation for many years now.

• 29:12Speaker 03

  This could be real scary for farmers, where farmers are already under so much pressure because of CQ and, and the water issues. And so this is, this is really scary. California is just in such a precarious position financially, economically. Let's move-

• 29:28Speaker 06

  It's pretty though, right?

• 29:29Speaker 03

  It's so gorgeous. I agree. I love this place. I love California. Let's, let's move on to another story that you wrote about. This was, this caught my eye, a 220 million state of the art recycling facility out in Lost Hills. They're building it, they're, they're breaking ground already and they're doing this. What, why are they building a recycling facility way out there?

• 29:49Speaker 06

  Right. Well, there's a, there's a landfill out there.

• 29:51Speaker 03

  Okay.

• 29:52Speaker 06

  So for decades, waste has been dumped out there. And the reason is geologically, it's a good place for it. There's, there's kind of the clay, cap rock. So you can't, you know, the, the waste isn't going to get down. And even if the, the waste did leach down into the groundwater, it's virtually useless groundwater anyway. It's so salty that it's probably not ever going to be a source of water. But they do have the, you know, the clay on top. So it's a good place for a landfill. Apparently, a lot of the waste has gone into there are recycled cars. It get ground up and you put it in there. Well, a company has come along seizing a few different opportunity here. California wants to see more recycling of all kind, giving away carbon credits. You can reduce greenhouse gas.

• 30:37Speaker 06

  Well, this company comes in and said, that's us. We can do all those things. They, they approached Holloway Group that, you know, the old operator of the gypsum mine out there, said, you've got a landfill, we have the technology to recycle- Everything that's in there, not everything, like apparently 60% of everything that's in there, not the glass, not the foam, not the rubber, but all the metal, all the plastics.

• 31:01Speaker 03

  So dig, they're saying dig out the, dig out the stuff that's in the landfill and recycle it?

• 31:07Speaker 06

  Put it through our process, we'll put 40% of that volume back in because it's unrecyclable, but meanwhile, we will start taking your, your, you know, the, the stuff

• 31:16Speaker 03

  The metals.

• 31:17Speaker 06

  Well, okay, the, the blue container, you're, you're recycling, the, you know, the plastics, the milk jugs and the detergent bottles and everything, stuff that's really hard to recycle that the state has accused ExxonMobil, you lied to us about plastics recycling, well, apparently, these guys have come up with a way to recycle all of it by density, specific gravity, and so they throw it all in and one big cake, one thing, and they put it through their process where they separate out, separate out metals, they separate out plastics, and what do you do with the plastics, right? That's kind of one of the questions, what do you want to do? Well, what we need in international shipping and domestic shipping, we need more pallets.

• 31:59Speaker 06

  Wood pallets are not necessarily the way to go, plastic pallets are very popular.

• 32:04Speaker 03

  Really? That's what they're gonna make? They're gonna recycle the plastic and turn them into pallets?

• 32:09Speaker 06

  Turn them into pallets, maybe that'll happen, where, the question right now is where are they gonna put that plastic manufacturing plant? Maybe Lost Hills, you know, it would seem good, but they haven't committed to that. So that could be, that's gonna be the next phase of this, plus, they're gonna open up, and permitting is taking a long time on this, but they're gonna open up a organics waste plant, so a lot of the things that we threw out here in the city, go out to Lost Hills, it is a long time, boy, it took a long time to get home from that event, but all of it can be recycled, well, virtually all of it, not 40% of what's already there, but this is, you know, this is, China, when they backed off, what are we gonna do with it? This is a solution.

• 32:48Speaker 03

  I'm so skeptical of this, I didn't have time to research it, maybe you know, but of course, you can recycle probably almost anything, the question is, is it financially feasible? Glass, for example, it's almost, doesn't make, it doesn't make any sense to recycle glass, and in paper, in many ways, it's not worth the energy and, and the, and the carbon output and the cost.

• 33:12Speaker 06

  Be curious.

• 33:12Speaker 03

  Versus what you give out. So like, how are they doing this? Yeah. Like, how are they making this economic? This is a for-profit company, right? They're anticipating...

• 33:20Speaker 06

  Yes. Well, okay, carbon credits is one.

• 33:22Speaker 03

  Okay.

• 33:22Speaker 06

  That's one thing.

• 33:23Speaker 03

  They're getting subsidized by...

• 33:24Speaker 06

  They're getting, yeah, they happen trade. They're getting a little bump off that. How would this have happened otherwise? Now, this is being backed by a very large fund. So, the investors have no operational stake in this, is I understand. But they're paying for it. So, they believe very strongly in this. I think the question is, maybe at some point, we're gonna have to raise the price on those Costco hot dogs. A buck fifty, because everything, everything goes into those.

• 33:50Speaker 03

  You know how much plastic are in those hot dogs? Try recycling that. Speaking of landfill. Two thousand tons a day is what the, of waste material the facility is hoping to recycle out there in Lost Hills. I also, like, so it's so interesting. Like, this stuff has already been buried. It's kind of out there and it's been done with. Like, isn't there already, we're already producing enough waste that couldn't we just recycle the stuff we're already producing? Why dig it up out of the ground?

• 34:16Speaker 06

  Apparently not. They want, they think that there's a lot of value in what's already there. And then you're not paying to bring the stuff in, too. I mean, it's right there. It's your captive supply. Let's go process that. When we run out, and they said about six years or so, they expect to be done processing all of that and putting back what they couldn't use. Bring in more, you know, which would likely come from Metropolitan Bakersfield.

• 34:39Speaker 03

  Right.

• 34:40Speaker 06

  Where else is generating that amount of waste? So, yeah, that's the plan, just to work through that and then get a sustainable feed.

• 34:51Speaker 03

  My understa-, do you know how much, you know, the city of Bakersfield has its recycling program through, you know, the blue canisters and the green cans that we have? My understanding is a very small percentage of that is actually getting recycled.

• 35:04Speaker 06

  Yeah, yeah. And people don't quite understand that either. I wrote a story that was very unpopular about, really, the more, the more stuff you throw in that cannot be recycled, the higher the cost goes. Because you've got to separate all the junk out that you really shouldn't be. And people think, oh, yeah, my, you know, laundry detergent with that thick colored plastic, that that's... No, that's recyclable. The best thing to do as a consumer is to throw that in the trash.

• 35:29Speaker 03

  Throw in the trash. But it doesn't feel good, right? You don't feel like you're helping.

• 35:33Speaker 06

  But hopefully, when this new technology comes along, that this...

• 35:38Speaker 06

  You know, put it back in, put it back into your recycling stream. Not yet, apparently, because this thing is not built. But yeah, a lot of, it does more harm than good to do what's called aspirational recycling.

• 35:50Speaker 03

  Yeah, recycling is like, I don't want to get into it. It bugs me. I'm all for recycling if it makes environmental and financial sense, but don't just tell us you're recycling to make us feel better and then throw it in the dump.

• 36:02Speaker 06

  Right.

• 36:03Speaker 03

  It's frustrating. We're joined by John Cox from Bakersfield, California. He's the business editor and journalist. John, did you meet Governor Newsom out there at the ceremony at the high-speed rail?

• 36:13Speaker 06

  I met him before. I did ask a question of him and, you know, I mean, meet him. I was there. He and I were there.

• 36:19Speaker 03

  Yeah, hung out.

• 36:20Speaker 06

  He had a few beers.

• 36:21Speaker 03

  Yeah.

• 36:22Speaker 06

  No, not really. Did not have any beer. I was working.

• 36:24Speaker 03

  I was just telling Dustin yesterday, I was in a waiting room and overheard a couple next to me just ripping Governor Newsom, you know, just ripping him apart. I couldn't believe the hatred and vitriol that were coming out of their mouths about the governor blaming him for the fires and the mismanagement. He was out here last week or week before touting the high-speed rail advancements. You were there?

• 36:54Speaker 06

  Yeah.

• 36:54Speaker 03

  How was that?

• 36:55Speaker 06

  Well, you know, the question that I asked was, when's it going to be ready? Because I've covered this project for so long, I've really sort of fallen away.

• 37:03Speaker 03

  From the beginning, literally, you've covered this from the beginning?

• 37:04Speaker 06

  Well, not from the very 2008, but starting around 2010 or so.

• 37:09Speaker 03

  Pretty close.

• 37:10Speaker 06

  And I've watched the whole thing, and I've stopped being all excited about it because I just don't really have a lot of hope that...

• 37:18Speaker 03

  It's going to happen. You don't think, so then if you don't think it's going to happen, then what will happen? So, for example, those that are against it, what did they say would happen to what already is there? Like, the land they bought, the rails that's in, the bridges they build?

• 37:32Speaker 06

  The train to nowhere is what they're worried about. So, I asked two questions at the end of the event where they opened it up to press. And thank you for doing that, Governor, by the way, because in Bakersfield, they don't do that. They say, okay, we're done. You can go conduct your own interviews if you want. We're not going to allow questions, which...

• 37:49Speaker 03

  That's annoying.

• 37:50Speaker 06

  Anyway, so when I asked the question, I happened to be the first guy they picked. And I said, when is the system going to start running?

• 37:58Speaker 06

  And so the governor stepped back and brought in the CEO, the real authority said, "Well, you know, the valley portion of it is going to start 2032 to 33, somewhere in there." Okay, that's a lot later than what we were originally told. And I said, "Well, what about LA to San Francisco?" "Oh, well, I don't know." And they said, "We're restructuring the whole thing." But basically, it sounds like they've thrown in the towel on really this being anything more than a Central Valley project. They're not saying never, but it's no longer really something that they're actively planning for. They've permitted much of the project. They could do it, but is the money going to be there?

• 38:39Speaker 06

  I mean, every time they try to do something, there's a new proposal to cut off all the funding. So I guess eventually, probably, we will be able to go up to Merced from Bakersfield, which would be great.

• 38:51Speaker 03

  So you think that maybe the whole thing won't happen, but is it funded enough from Bakersfield to Merced?

• 38:57Speaker 06

  They still need some more money before that. They still need in the billions.

• 39:02Speaker 03

  Just a few billion?

• 39:03Speaker 06

  Yeah. But they've still got enough construction. And really, what you find out when you start asking about these things is it's now it's an economic development project more than anything, and a workforce development project. All the investment, it's worth it because we're teaching people to build high-speed rail. No, we might not ever finish this thing, but we've taught people.

• 39:22Speaker 03

  Oh, boy.

• 39:23Speaker 06

  And so that's what you hear. They're touting the number of jobs that's come out in this. All this, "Well, that's great, but I want to take the train."

• 39:31Speaker 03

  Right. Give me the train. I want to take the train, too. I want to go have lunch in Merced and come back home.

• 39:36Speaker 06

  Not really the goal anymore.

• 39:37Speaker 03

  Ah, this is so frustrating. I hate this. I wish there was more. I wish we had more here in California. John, we got a message from a listener that says, "I'm old school and love having my newspaper in my hand and thankful for all of John's hard work."

• 39:53Speaker 06

  Yay!

• 39:54Speaker 03

  Got a fan out there.

• 39:55Speaker 06

  Thank you.

• 39:56Speaker 03

  All right, we're going to take our final break of the day. When we come back, we've got a few listener questions and comments. We're going to get to those, so don't go anywhere. We'll be right back.

• 40:02Speaker 00

  Don't forget, Money Wise is more than a radio show. We're an independently owned, local wealth management firm with 60-plus years of collective experience. Our financial advisors are here to help you, Kern County. Together, let's be smart, be safe, be money wise.

• 40:26Speaker 03

  Thanks so much for tuning in. We're the Money Wise Show. I'm Jared Waite. I'm here with Dustin Weaver.

• 40:31Speaker 04

  Welcome back.

• 40:32Speaker 03

  We've got some great comments and questions, so let's get to this Dustin, see if we can finish the show here.

• 40:40Speaker 04

  Yeah, I saw one in there that says, "Who gets increased social security benefits?"

• 40:45Speaker 03

  This is a good question, because you and I were talking about this, and I interpreted this question to be, you know, who gets benefits from a recent headlines, a recent story that we've talked about on this show, which is something to the effect of the IRS sending out stimulus payments. You might see this come up in the news, and you might be a little skeptical. Well, it turns out this is a real thing. I don't know if this is what our listeners are asking about, but IRS is going to distribute about $2.4 billion to taxpayers who did not receive their COVID stimulus payments. And this is going to happen by the end of this month, end of January.

• 41:25Speaker 03

  Approximately a million taxpayers are going to receive up to $1,400 from the IRS. And this is, this is a process, I guess, that the IRS has gone through. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more economic impact payments, also known as stimulus payments. So if you didn't get that credit and you were, you earned that credit, then you might get 1,400 bucks here in the next couple of weeks.

• 41:57Speaker 04

  Well, it's a million happy people, I'm sure.

• 41:59Speaker 03

  A million happy people. That's right.

• 42:02Speaker 04

  I was wondering, when I saw this comment, if they were referring to another headline. Within recent days, they were talking about the Social Security Fairness Act. I think you may have talked about it on the show already, but... What that is, is certain employees out there fell under this, what they call a windfall elimination provision, or a government pension offset, which was a program that reduced your social security benefits if you were getting other sources of income from certain types of pensions. And so, that was actually recently repealed, and the IRS, you look at their website, they're talking about figuring out how to implement that, but the act was signed January 5th,

• 42:45Speaker 04

  repealing both of those provisions. So, I didn't know if that's what they were referring to or not.

• 42:50Speaker 03

  It could be that, too. It's likely it's that. And so, therefore, those who are receiving an increase in their social security might be those who worked in the public sector, basically. If you worked in the public sector, or your spouse worked in the public sector, you could potentially, there could be that windfall, or that provision where you get an increase. That's pretty easy for you to figure out, though, because you generally know if you worked as a teacher, or a bus driver, or whatever, whatever public service that you might have been doing. And that's quite a few people. I don't remember the numbers that it's going to affect, but it's substantial.

• 43:24Speaker 04

  It's a lot.

• 43:25Speaker 03

  It's a few million, I want to say, that that's going to affect. Got another message here, I'll read it. It says, "Great job on the news this morning." And they're talking about myself. I was on KGT, Channel 17, this morning.

• 43:36Speaker 04

  Yeah, that's right.

• 43:37Speaker 03

  They said, "What is the 50-30-20 plan called again? Thank you, and it was great to put a face to the voice. I listen every day. Love the show and didn't know it was local till last year, and now I see you guys everywhere."

• 43:50Speaker 04

  Oh, nice.

• 43:51Speaker 03

  So, and then it goes on to say, "And what is the smarter way with snowball or avalanche if I'm paying off credit cards this year? Is it smarter to go after the bigger debt or higher interest run?" So, we've got two questions in one. The 50-30-20 is a budgeting strategy that's called just that, 50-30-20. 50% of your income goes towards things you have to have, 30% goes towards things you want to have, 20% goes towards savings or debt. Pretty simple. It's a really, just a- Rule of thumb again, and it can help people come up with a very simple budget. Because otherwise, you're kind of left going, well, I don't know if I should, you know, go to the movies, or go out to eat with my family. And how much should I be spending on my,

• 44:36Speaker 03

  you know, my have to have things, you know, like your housing, food, utilities, insurance, transportation. There's certain things that you have to have, and there's certain things you just want to have. And then, of course, don't forget those things that, you know, are for longer term, like paying down debt or saving for the future. So that's what I talked about this morning. Fifty, thirty, twenty, it's a great shortcut.

• 45:00Speaker 04

  Yeah, it's a guideline, it's a rule of thumb, right? Like you said, to be reminded of just refocusing and making sure you're getting that savings and debt repayment.

• 45:09Speaker 03

  Yeah, and, you know, it's a, you've got three basic categories in your budget. So that can help people. The other part of this question is the difference between a snowball approach on your debt versus the avalanche approach. Fascinating, we talked about this, I don't know if you and I have talked about this on the show. But, you know, Dave Ramsey, for example, is a big advocate of the snowball effect.

• 45:30Speaker 04

  Who is that?

• 45:31Speaker 03

  Dave Ramsey.

• 45:32Speaker 04

  Never heard of him.

• 45:32Speaker 03

  You know, he's got, he's got a great, great points. He's got a lot of great strategies. Investment strategies is not one of his strong points. And also, he can be a little black and white in terms of debt, and how you can manage and use debt.

• 45:48Speaker 04

  But he's got the snowball approach, right?

• 45:50Speaker 03

  Yeah, which is, you know, you attack the smallest debt first. And the idea is then it accumulates because you get that, you get that dopamine hit of, oh, I got rid of that credit card debt. Now I'm going on to the next credit card debt, and it kind of builds on itself, and it gets bigger and bigger. And that works for some people. But for other people, myself included, I'm more of an avalanche kind of guy. I like to go after the debt that's costing me the most first. It may not be the biggest debt, it's just the most expensive debt. And so mathematically, I just want to get rid of the debt that's costing me the most, rather than the small amount there. Because I think mathematically, that works out best in my favor. So I think I mentioned this on Seventeen this morning, but- It depends on your own personality type.

• 46:35Speaker 04

  That's true.

• 46:36Speaker 03

  You're the type of person that is incentivized and can be incentivized, or have a hard time sticking with your strategy. Go with the snowball. If you feel like you can kind of put in a plan, put it in a spreadsheet and do it, go with the avalanche. Avalanche approach.

• 46:52Speaker 04

  You know what the key to both of those two are?

• 46:54Speaker 03

  Just doing it.

• 46:55Speaker 04

  Taking action and doing that.

• 46:57Speaker 03

  Yeah.

• 46:57Speaker 04

  That's right.

• 46:58Speaker 03

  Because most, not most people, but a lot of people want to bury their head in the sand. Especially you take like student loan debt. You graduate and you've just got this pit in your stomach. Oh, my gosh, I've got all this debt. It's going to be here forever. And it's so easy. I guess just like with diet. You know, if you want to lose weight, it's so easy. Oh, I don't want to. You know, when am I going to start that? I'll start next week. I'm going to ignore it. You know, just eat that donut.

• 47:19Speaker 04

  Oh, yeah.

• 47:19Speaker 03

  It's nice to be able to just kind of get some.

• 47:23Speaker 04

  I just heard Homer Simpson's voice in my head. Me, too. Donuts are so good.

• 47:31Speaker 03

  So, there you go. Those are great questions and we really appreciate all of the participation we've had today. Quite a bit of participation from our listeners. If you missed an opportunity to ask us something. In fact, we had another question from DJ Mike. It didn't come on this, but I've got it here.

• 47:50Speaker 04

  I was saving it for tomorrow. We've got about 40 seconds.

• 47:53Speaker 03

  Oh, perfect. Hey, Mike, thanks for tuning in and welcome back to the show. We're going to cover that question tomorrow as well as anybody else's questions that might come in overnight. Send them our way, 661-396-1000, 24 hours a day. If you'd like to listen to this show or any of our past programs, subscribe to the Money Wise Guys podcast, commercial free, and all on podcast formats like iTunes, Apple products, or Spotify. And yes, we are local. We're here in Bakersfield, right across the street from Cal State Bakersfield on Stockdale Highway. And Dustin, thanks so much.

• 48:30Speaker 04

  Oh, thanks so much for having me.

• 48:32Speaker 03

  You want to leave? Well, never mind, we don't have time. We'll do it some other time. Thank you again. Remember these three things. Be smart, be safe, and always be money wise.

• 48:46Speaker 02

  Securities offered through SCF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors, Inc. SCF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.