Pod Insights The Moneywise Guys 12/15/25 From Credit Cards to Rate Cuts—Where the Economy Stands About this episode The Moneywise Radio Show and Podcast Monday, December 15th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Radio Show & Podcast" call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management LinkedIn: Moneywise_Wealth_Management Guest: Dr. Richard Gearhart, Professor of Economics at CSU-Bakersfield website: https://www.csub.edu/bpa/economics/department-of-economics.shtml The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Dr. Richard Gearhart and their company are not affiliated with nor endorsed by LPL Financial or Moneywise Wealth Management].
Transcript 0:00 Speaker 00 From the second floor of the historic Woolworths Building in downtown Bakersfield, here is Money Wise. Call or text into the show 661-396-1000.
0:30 Speaker 01 Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.
0:40 Speaker 00 Here is Money Wise.
0:42 Speaker 02 Money, money, money. Welcome to the Money Wise Show. We're live from the second floor of the historic Woolworths Building in downtown Bakersfield for the next hour. You are on KGEO Money Talk, 1230 AM, 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. That is 661-396-1000. Today, we are your hosts. I'm Sammy Abia. We're with...
1:11 Speaker 00 I'm Stephen Nicholas.
1:13 Speaker 02 Stephen, we have not done a show, just you and I, in almost a year. And it's funny that today's the day we do that because Miami is going against the Steelers. I mean, my brothers, Miami the hot dog today, and just be done with it.
1:28 Speaker 00 We could double up if you want. You feeling, you feeling jumpy?
1:31 Speaker 02 I'm not jumpy. I feel good. Not jumpy.
1:35 Speaker 00 You're feeling good as a Steelers fan with Aaron Rodgers and half the AARP team?
1:40 Speaker 02 I have to. I have to. I have no other choice. It's not like I have another quarterback on the bench I could put.
1:45 Speaker 00 I mean, there is a backup quarterback.
1:47 Speaker 02 Yeah.
1:48 Speaker 00 But you might, you might be forced to watch him anyway.
1:52 Speaker 02 Yeah, I'm looking forward to today's game though. I mean, besides you and I's bet. I I just would like to see a good game.
2:00 Speaker 00 Yeah, I mean, if the listeners don't know what we're talking about, the Dolphins.
2:05 Speaker 00 The sad Miami Dolphins. I mean, they they started out real bad this season and you're on a a sports station and Sammy himself is a a Pittsburgh Steelers fan, which I have a lot of respect for a lot of Steelers fans. Just not this Steelers team. I mean, they they aren't the the steel curtain that everyone is worried about. They're they're just a just an alright team.
2:27 Speaker 02 Is that the easy curtain to to put there?
2:30 Speaker 00 And for once, I I can't talk a lot of crap because my Miami Dolphins have been a mediocre team since I was probably six or seven years old, but. I I'm just feeling good tonight. I I just feel like the Dolphins might come.
2:44 Speaker 02 We have a bet for the listeners. Steve and I will have a bet. We typically bet on a Costco hot dog, but now since we moved to the Woolworths, we have hot dogs here at the Woolworths, so we we upgraded. We we're betting on a Woolworths hot with chili or without, Stephen?
2:58 Speaker 00 Uh, I'm a chili guy.
3:00 Speaker 02 Okay, all right. So chili dog at the Woolworths. Whoever wins the game today is gonna get a chili dog at the Woolworths.
3:09 Speaker 00 Are you a onions type guy?
3:12 Speaker 02 Oh, really? And cheese.
3:13 Speaker 00 Yeah, I could do that. I could do that.
3:15 Speaker 02 Yeah.
3:16 Speaker 00 Yeah. So how was your weekend?
3:18 Speaker 02 It was pretty good. Pretty relaxing. I had to drive to LAX to drop off my father-in-law. Um, got stuck in traffic for a lot. I just don't understand how people actually can live in LA. I'm serious. I mean, the weather. I mean, it was sunny and nice, unlike here. But I still, the traffic was just, I'm like, uh-uh. I'd rather have the gray colors here in Bakersfield versus being stuck in traffic in LA. That's just me.
3:42 Speaker 00 I I'm I'm the same way. I I if I go to LA, I I usually try to time it out when I'm not hitting, you know, morning traffic or five o'clock traffic, but I I couldn't do it.
3:52 Speaker 02 That's the smartest thing to do. And just, uh, uh, we're not a weather station, but the weather has been just, just. I mean, I would like some sun. When I saw the sun in LaBec yesterday, it was actually pretty nice. I was like, oh, my God, it exists.
4:07 Speaker 00 We had a listener this morning asking, where did the sun go? I'm like, I'm enjoying it. I'm in LaBec.
4:17 Speaker 00 Is that where it is?
4:19 Speaker 02 I'm telling you, as soon as you hit the grapevine, you started going up and all of a sudden, kind of like a little weird colors and all the sun is out there. It was beautiful, actually. It was nice to see the sun. I miss it.
4:31 Speaker 00 It is a strange year. I mean, I'll, I'll take the, the cold weather any day over the triple digits that we get used to in the summer, but
4:38 Speaker 02 Yes.
4:39 Speaker 00 I, I took my son and my wife out to Morro Bay Thanksgiving weekend, and usually that's the coldest place we go to. And surprisingly, it was 20 degrees hotter than what it was going on in Bakersfield. I said, what in the heck is going on?
4:55 Speaker 02 Yeah, it's, and I don't know, I don't, I don't know if you've seen the satellite pictures of the Central Valley. It's trippy. Like the whole Central Valley is just, you know, white cloud, like the whole thing. You can't see through and, and the surrounding rest of California is all, you know, you, you can see through and not, not the Central Valley, though.
5:15 Speaker 00 They lose a bet?
5:19 Speaker 00 No sun for you.
5:21 Speaker 02 No sun for you. No soup for you. Um, market update, Stephen. The DAX is slightly down today. Uh, S and P 500, uh, 0.2%, down 0.2%. The Dow still above 48,000, but down today 0.1%. NASDAQ, uh, down 0.6%. I think in my opinion, and we can talk a little bit more about this when Dr. Gerhardt joins us in the second segment. I think the market is just digesting what the Fed chairman or the Fed did last week, which cutting rates.
5:58 Speaker 02 And they're, you know, just moving forward with a little bit of caution, guidance, guided caution, I should say. Um, there's a little bit of the tech profit taking a little bit of a toll on the NASDAQ especially. And also just the bond yield volatility that's been happening, influencing a lot of the equity valuation. So that's what I think is, is, is happening. We're also on the last part of the year, in my opinion, and I did not look how we do typically in the month of December, but this, this time of the year, just a bunch of people on vacation, a lot of the consumer spending.
6:34 Speaker 02 Mixed data, in my opinion. Some people are just done with their shopping. Some people are just now starting. So this mixed feelings here and there. I think the market is just pausing, in my opinion, to see what other data we're gonna get, especially this Thursday. There's a bunch of data coming out. I think once Thursday data comes out, we'll see where the things are gonna land. But I'm very, very hopeful, well, not just the rest of the year, but also 2026, especially in light of the Fed rate cut that happened last week.
7:10 Speaker 02 So no panicking, no panicking. It's just pausing, in my opinion. And we can dive a little bit into that with Dr. Gerhardt when he joins us.
7:22 Speaker 00 Have you gotten your Christmas shopping done?
7:25 Speaker 02 Not yet, not yet. So I have a couple of items that I'm trying to get. If you don't know this, but Gabe is streams now. So I bought him that computer for his birthday, and he bought him the mic, and now he's official. But he wants a couple of other upgrades.
7:44 Speaker 00 He wants that monitor you have. Did you get him one of those?
7:48 Speaker 02 He wants it. He wants it.
7:50 Speaker 00 We all do.
7:51 Speaker 02 We might, we might, we might, we might do something there. I don't wanna say it on air. He might be. No, he's not listening. It's cool.
7:59 Speaker 00 I was gonna say, that monitor. So Sammy has, you know, there's, there's big monitors.
8:04 Speaker 02 49-inch monitors.
8:05 Speaker 00 There's big monitors, but this one is like a three-in-one monitor, and it's got the curve like you're in a theater. I mean, that's the real deal.
8:13 Speaker 02 Yes, awesome for Excel spreadsheets. I really, really like it. Right now, I have four screens going. You, the, my agenda, the agenda for Dr. Gerhardt and his background, and another one in the back, just in case. Another second agenda, just in case.
8:34 Speaker 02 So yeah, no, I mean, I think I just need to go pull the trigger.
8:40 Speaker 00 And you said, that's at Wally World, right?
8:44 Speaker 02 What is it?
8:45 Speaker 00 Wally World.
8:47 Speaker 02 What is that?
8:48 Speaker 00 You've never heard of Wally World? Walmart.
8:54 Speaker 00 I I was I was trying to look up the the monitors. I'm like, I don't know, like, I'm
8:59 Speaker 02 I'm myself, Stephen. I'm a Tarjay type of guy.
9:01 Speaker 00 Yeah.
9:03 Speaker 02 But while it were, I go I go there. Right now with online buying, frankly, I I you just use AI to the best deal possible. It gives it to you and then you click on that and it's it's truly amazing.
9:16 Speaker 00 That brings up a good question, because I haven't even started Christmas shopping. I've got a couple of things in my in my cart on Amazon. But is it the best deal to just kind of use AI to find the best deals? Or, I mean, how accurate is it?
9:34 Speaker 02 So far, I mean, I I went to the website one by one, and then I used AI, and I give it the the right specifics. With AI, you just have to be specific. Like, this is what I want. Find me the best deal, and it'll give you all the websites that carry that product, and then it'll tell you the cheapest. Then you can, on your own, you can go to that website directly and find out if it's the cheapest or not.
9:58 Speaker 00 So you can double check it?
10:00 Speaker 02 Double check it. But I find it very, very helpful personally. And I used it. I used it with the stuff I bought for for me and my office. And I'm gonna, I think the best deal for the one I want I want for Gabe is truly at Costco, just because of the return policy. And you know me, I'm a big Costco fan.
10:20 Speaker 00 Me too, me too. And I I rarely go to Walmart. And if I do, it's like on a Sunday at six in the morning, when no one is there, and I could actually walk around and check out things. I just, I don't like being
10:32 Speaker 02 The best time to shop, especially for groceries, and actually other things at Walmart or any other place, to tell the truth. If Costco allows me to go there at 6:00 AM, that's where I'll I'll be there at 6:00 AM. I do have the executive membership, because I feel like it's money well spent. And I have one hour before the general population starts shopping at 10. So I go at 9:00 if I have to.
10:53 Speaker 00 And see, you're the first person that ever told me about that. I did not know that that was even a thing. And about two days later, I was at Costco, and I was checking out, and the young lady came over, and she said, Hey, have you thought about executive membership? And she took me to the side, and I was like, Okay, maybe.
11:10 Speaker 00 I said, is there a real thing that you guys, you know, I get an hour early? She said, of course, you're an executive member.
11:15 Speaker 02 Yep. You get an hour early, you get 2% from Costco on everything that you spend at Costco. And if you do have the credit card, then you get all that cash back too. So it pays for itself for me just because I have a little side business with my wife. So it does pay for us. And I really like the nine to 10, you know, hour that you can shop without a lot of pushing and shoving, especially during Christmas time. People get a little bit crazy in Christmas. I don't know if you've heard or not. I try to avoid the crowd as much as possible. So my best time to go shop at Costco is actually Friday between the hours of 7:00 PM and whatever they close.
11:56 Speaker 00 And see, that that just sounds crazy because you would think Fridays would be the busiest times.
12:01 Speaker 02 That's right. People have are already done by the with their shopping by 7:00 PM. And a lot of people by then are tired from the week. So they're going to say, ah, we'll just go Saturday. At least that's, that's my, my analytics.
12:14 Speaker 00 Now, do you like the, uh, the Panama one? Or do you like the, uh, the Rosedale Highway one?
12:20 Speaker 02 I like the Rosedale is just too far from me now that I moved to the Southwest. So Panama is just around the corner. So I go to Panama.
12:27 Speaker 00 Nice.
12:28 Speaker 02 Yeah, yeah, yeah. Why don't we do this, Stephen? Can we take our first break? When we come back, we have Dr. Gerhardt from CSUV joining us for the, for the second segment. We'll be right back.
12:37 Speaker 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.
13:07 Speaker 02 We're back Money Wise Show. I'm Sami Abiyah, your host with Stephen. Stephen, is Dr. Kierhardt gonna join us?
13:16 Speaker 00 Yeah, 2:30.
13:18 Speaker 02 Ah, 2:30, ah, my bad.
13:19 Speaker 00 He's wrapping up, he's wrapping up classes right now.
13:23 Speaker 02 Oh, that's important, I guess.
13:26 Speaker 00 A little bit, I mean, he's just a professor.
13:29 Speaker 02 It's not like it's finals, finals week.
13:31 Speaker 00 Exactly, right?
13:32 Speaker 02 It's not like it's finals week. I mean, I have to wait for him for 15 minutes.
13:39 Speaker 02 Um, keep, keep, just wanted to keep talking about the Fed decision and its impact. So for our listeners, the Fed decided to reduce the short-term rates by 25 basis points, 0.25%. Um, the impact of that is yet to be seen. However, we saw the market reacting a little bit today with most of the indices closing down, not that much in the 0.201% for, for, for most of them, if not all of them.
14:16 Speaker 02 Uh, I think the market is just digesting what the Fed decision is and it's gonna wait until this Thursday when a lot of the information, a lot of the data comes out, job data and other things. One of the interesting things that I saw while I was prepping for the show, I, I just ran some numbers around credit card debt. Stephen, what do you think the, the credit card debt is today in the United States?
14:44 Speaker 00 Hmm.
14:46 Speaker 02 Just give me a number.
14:48 Speaker 00 I mean, I'm thinking, I don't know, total 600, 600 million.
14:57 Speaker 02 1.2 to 1.3 trillion dollars.
14:59 Speaker 00 Yeah, I was.
15:00 Speaker 02 As of the last.
15:01 Speaker 00 I was gonna say billion and I didn't want to reach that.
15:04 Speaker 02 So, you know, I ran a chart just to see what, what, what the, how the debt did in the last 10 years. The lowest point of our credit card debt. What year was it, Stephen? Just give me another guess. Think COVID.
15:20 Speaker 00 2018.
15:22 Speaker 02 2020, the lowest uh it has been in the last 10 years. And a lot of it probably has to do with, you know, how much stimulus people got. And, and during that year stimulus checks, companies had stimulus, PPP loans. So that's the lowest point in the last 10 years of our credit card debt as a company. Uh, that was, for me, that was interesting. What's interesting is the, the uh rates, the default rate. Now that we have all this spending in the trillions. Is our default rate going up, going down, steady?
16:00 Speaker 02 And it has been going up slightly in the last couple of years since, I would say since 2021, 2022. Since the, all that cash dried up after COVID.
16:14 Speaker 02 Uh, but it's stabilizing at about 4%. The age group that cracks the most when it comes to credit card debt and defaults the most. What is it, Stephen?
16:28 Speaker 00 Uh, I mean, I would think it was, it would be the younger people, right?
16:33 Speaker 02 You're 100% correct. The 20 to 30 cracks uh the most, 30 to 40, slightly higher. The, in the 40s, um, you know, with, with increased responsibilities, kids, school. Hey, those are sports, travels, travel sport, it's not, they're not cheap. So we see, we see an uptick in that. The group that has the lowest default is actually retirees.
17:04 Speaker 00 They've learned.
17:05 Speaker 02 Even though they have fixed income, they still are the group with the lowest default rate when it comes to credit card debt.
17:15 Speaker 02 It was an eye opener for me as far as just the data and I love to read data and what have you. So the average, the average credit card balance as of the third quarter in 2025, $6,500 per cardholder, about $9300 to $9400 per household. And this is something we talked about on the show the last couple of weeks and, and, and what it means for families with their credit card rate, interest rate, you know, above 25%. And in fact, the average is 28 to 32%.
17:59 Speaker 00 My question is, I mean, we, we talked a little bit about it on Friday with Justin and he was talking about a lot of people around this time of the year where they, you know, they are living check to check and they say, you know, I can, I've go, I got goals next year, you know, I'll be able to pay it off. And then they overspend during the holidays.
18:21 Speaker 02 Yeah, that's why we talk a lot about budgeting, especially the month of December and creating a budget for the following year. It's, it's all about day in and day out and being very honest with yourself when creating that budget. We do tend to overspend in the month of December. That's just the reality. Are we spending cash reserves? Are we spending credit card, using credit cards? I think it's the latter. It's credit cards. If, if, if you really look into it, the average American family cannot sustain a surprise expense of just $400. So if that means
19:02 Speaker 02 we don't have, families don't have savings, savings more than $400 or $500. And then the month of December comes and look, as a father, as a family man, I want to make my family happy. I want to buy, I want to expend, I want to do things. And, and that's what, what every father, what every mother wants to do for their kids. And that's what happened in the month of December. It's that immediate.
19:26 Speaker 02 Thing that you get with spending on the credit card, however, if you're not careful and if you're not disciplined, paying that card back in just the first two months, three months of the following year, you're just, you're just now becoming the best, one of the best clients for that credit card company paying on average thirty percent. That's gonna take a long time if your average balance is about ten thousand dollars like, like it is today in the United States. So it's a, it's truly, to me, it's a dangerous combo when you have a higher, high interest rates like we have today and also a surge in credit card debt like we are having.
20:08 Speaker 00 And see, I did that when I was younger and my, my son was, you know, under five years old and I, I, I had to learn from it, but I, I did all the gifts and I overspent and I put it all on my credit card. Oh, you know, I'll, I'll get my bonus. I'll pay this off. I'll pay that off and
20:25 Speaker 02 Yeah.
20:26 Speaker 00 I had to learn the, the wrong way and I had to take a whole year of any money that I would have put back for trips or anything. We didn't, we just stayed home that whole year and I paid that debt off, but I had to learn and, and I'm hoping that I'm teaching my son the same way is like, hey, this credit card isn't for you to just go buy whatever you want.
20:46 Speaker 02 And I think the key word that you said there, Stephen, is young. Okay. So you, some of the things that as a young person, you're not told, especially when you sign up for a credit card, get that little fine print of high interest rate or default rate if you miss a payment or the, or, or the fees associated with the missed payment. And when you, you're young and you have, you know, relatively a lower income than when you're older, a forty-five dollar fee on a late payment, that's a lot of money.
21:22 Speaker 02 So that's, that's, that's, that's the combo that gets a lot of people. That's why it's very, very important. If you are planning on spending and using credit cards, have an exit plan for that. Take it from me as an ex-banker. Have an exit plan for that debt. It, it helps. It helps and it's gonna make you disciplined and it's gonna help you get rid of that debt. And the, the sooner the better. You do not wanna carry that.
21:48 Speaker 02 Dr. Gerhardt is here. We're going to take our next break. When we come back, we'll introduce him and have a bunch of questions for you, Dr. Gerhardt. I cannot wait.
22:03 Speaker 02 Dr. Gerhardt, welcome back to the show.
22:07 Speaker 03 Thank you for having me.
22:08 Speaker 02 Yes, we're the Money Wise Show. I'm Sammy Abiado with Stephen and we have Dr. Gerhardt, Professor of Economics at California State University. It has been a while since I have done a show with you, Dr. Gerhardt, and I'm very excited, especially in light of what's going on in the market, the Fed and which have you. So I cannot wait to have this conversation with you today.
22:28 Speaker 03 Fantastic. And let's go Steelers.
22:30 Speaker 02 That's right. What?
22:34 Speaker 03 I'm never going to get an invite back. Stephen's going to, he might castrate me on live radio.
22:40 Speaker 02 I thought we were friends, man. I thought we were friends.
22:43 Speaker 03 Nah, nah, I hate the Steelers. Like, I just absolutely hate the Steelers.
22:47 Speaker 02 You do?
22:48 Speaker 03 Oh, yeah. The whole city, like, you put french fries on a sandwich and that's your city's, like, famous meal. It's like, it's...
22:56 Speaker 02 Have you tried it, Dr. Gerhardt?
22:57 Speaker 03 I have. I've been, I have been. Pittsburgh is a lovely city. I went to Primanti's and had the sandwich there. It was delicious, but, you know, it's...
23:09 Speaker 02 I grew, I grew up in Morocco. I did not grow up in Pittsburgh. I grew up in Morocco, but we did have french fries in our sandwiches back there. Probably that's the reason why I fell in love with the Steelers.
23:20 Speaker 03 Probably, yeah. And, you know, french fries taste good in burritos, so, you know, I guess it's probably a me thing.
23:28 Speaker 02 That's true. Well, welcome back, Dr. Gerhardt. We're very excited to have you with us today. My first, my first thing was just talking about the Fed and the Fed's decision to lower rates last week. What's, what's your take on that?
23:41 Speaker 03 Yeah, so I think there were basically two major things that I took away from the Fed. One was Jerome Powell basically saying that the jobs numbers are way overestimated. And if you take his statement at face value, it basically means that there have been no jobs added this entire year, 2025, which is worrisome. You know, he's been talking about the softness of the labor market and...
24:10 Speaker 03 How that has kind of incentivized them to place the labor market over inflation? Because that's kind of the dual mandate is do they focus on jobs numbers? Or do they focus on inflation? And the recent rate cuts have been them focusing on the jobs market. Second major thing is, you know, this is one of his last rate cuts. Uh, so I, you know, I, I think the leaders are, uh, Warch and Hassett for the next, uh, Fed Chair. And I think there was a Wall Street Journal article this morning with a lot of anonymous people dumping on Hassett. So, uh, it's going, it's interesting.
24:48 Speaker 02 I think Sherrod was one of those. He read his book from early nineties and he, I don't think Sherrod was very impressed or still very impressed with him.
24:55 Speaker 03 No, um, I, I'm not the biggest fan, but you know, to be fair, I don't have a good track record of, uh, picking Fed Chairs. I was really down on Jerome Powell and for the most part.
25:09 Speaker 02 He did a good job, right?
25:10 Speaker 03 He exceeded my expectations. He got, he, he achieved a soft landing with inflation. Um, he hasn't bowed to.
25:18 Speaker 02 The pressure of the president or the administration.
25:21 Speaker 03 Yeah. And so, you know, for him, I think he will go down as one of the better Fed Chairs in history. And, um, yeah, that was.
25:30 Speaker 02 I mean, he did, he did maneuver through some tricky, uh, times.
25:35 Speaker 03 Yeah, absolutely.
25:36 Speaker 02 Covid was one of them.
25:37 Speaker 03 Post Covid in the inflationary period.
25:39 Speaker 02 Wars happening, um, slowdown, I mean, jobs. Now, another question on just the jobs, because I, I think you answered something here as far as the jobs and the job numbers. During the shutdown, we did not receive any data out of multiple agencies.
25:58 Speaker 02 If, if you, we were to have that data today, in your estimate, what would that job or job numbers look like?
26:05 Speaker 03 Yeah, so funny thing is those job numbers are being reported tomorrow. So we're having October and November, though they weren't able to collect all of the October data, so there's going to be no official unemployment rate. I think you will see mild job losses, probably anywhere from like 40,000 to 50,000 jobs lost in both months. A downward revision to the September numbers because the September numbers when they came out added about 120,000 jobs wildly exceeded estimates. So I think we're going to see a stagnant labor market. And it's a weird labor market because it's a labor market where wages have been growing
26:49 Speaker 03 pretty significantly, but no one feels great about the labor market. No one feels great about the state of their job in 2026. So I think we see some more pressure in the jobs numbers tomorrow. Would will the job? The weird thing is, I know President Trump's been calling for a half percent reduction in the federal funds rate. He better be hoping for really bad jobs numbers because that would actually solidify that position. So it's kind of one of those weird discounts where you want bigger rate cuts, you're almost kind of hoping for a recessionary environment, which which is not great.
27:34 Speaker 02 Yeah. In your mind, Dr. Gerhardt, is the risks that are happening or are there any risks in the market? That's my first half of the question. And are the markets now underestimating those risks? Because today we saw a little down, like the Dow and all the indices went down a little bit, but 0.1%, 0.2%, 0.6%. Nothing really, really major. Are we underestimating the risks?
28:03 Speaker 03 I think so. It's really hard for me to say because a lot of the economic activity in America right now is driven by AI spending.
28:12 Speaker 02 Yeah.
28:12 Speaker 03 Jason Furman, who was chief economist under the Obama administration, basically has found that if you took out AI spending, GDP instead of being about 3.8% would be closer to like 0.5%. It would be anemic. And that's, I think, the biggest risk factor is what happens with all this AI spending because
28:35 Speaker 02 Correct.
28:36 Speaker 03 Is it a bubble? I don't think it's a bubble, but to me, AI is kind of a winner takes all scenario where whoever creates the first kind of AI that people use, all the other companies are going to have these kind of busted investments. And so I do think we are underpricing risk a little bit. You know, I think it's still a coin toss whether or not we end up in a recession in the early part of 2026, but it's just a weird place, you know?
29:09 Speaker 02 Yeah.
29:09 Speaker 03 If you're not invested in the stock market, you're probably thinking that this is one of the worst economies you faced in years. But if you're in the stock market, you're looking at your retirement portfolio and year to date, you're happy.
29:25 Speaker 02 Yeah, I looked at some of the returns, annual returns for the indices, and they are pretty, I mean, they are in the teens. But to your point, if you take the magnificent seven out of the S and P 500, for instance, and you have the S and P 493, it's interesting to look at those, at that data.
29:47 Speaker 03 Yeah, it's, and you know, it's just the bond numbers, you know, the bond numbers are kind of wonky because you would expect, bond yields are still showing signs that investors are a little bit nervous about the US debt and the deficit. And, you know, we've added
30:07 Speaker 03 Even with tariff revenues, even if you think tariffs are these great revenue source, and I don't get that line of argument because taxes don't generate economic growth. So that's, that's one thing for me I don't get. But we're going to add $2 trillion to the debt this year.
30:26 Speaker 02 Yep.
30:27 Speaker 03 In Trump 2.0, he added close to $9 trillion. Basically, out of the $37 trillion worth of debt, Trump has added about $12 trillion and Biden added $10 trillion. It's, that's, I think, the numbers that just scare me is, you know, no one's focusing on it.
30:48 Speaker 02 Yeah, so you bring up a very good point in my mind. With both the Biden bill and the big, beautiful bill from President Trump, we're trying to bring jobs back to America. Are we being successful? Are the tariffs having the result intended?
31:06 Speaker 03 So I hate to, you know, point to another source, but The Wall Street Journal had a pretty good article today about how tariffs aren't what we expected, how we haven't seen a recession from tariffs. The trade deficit hasn't really closed. But one of their main points was tariffs haven't led to a resurgence of American manufacturing or brought back jobs. We've still, we've lost this year close to 60,000 manufacturing jobs. So manufacturing is still getting hit. We're just not bringing the jobs back. And in part, it's because
31:48 Speaker 03 supply chains aren't built to just get up and move to another country pretty instantaneously and...
31:57 Speaker 02 And even, I think, the skill set. To me, it's the skill set. I mean, I look at just my household sometimes, like my 13-year-old.
32:06 Speaker 02 How good is he with just a screwdriver? Just screw that thing in and just make sure it's solid. And oh, does it go this way? Does it go that way? I mean, I, I think I have a smart kid. It's just manual labor or just skill set. It's gonna take some time for us to teach the next generation to bring this manufacturing back. It's just not gonna happen overnight, in my opinion.
32:28 Speaker 03 Absolutely, like, I, I mean, I learned screwdrivers righty tighty, lefty loosey. And I, I, I don't hear that anymore. Like, you hear kids just like talking and it's, you know, six, seven and... Oh gosh. My kids have started doing the six, seven stuff. So, I mean, it's, it's painful. And, and to your point, yeah, it's, the skill sets. We've gone so far away from this, you know, we focused far too much on everyone needs a bachelor's degree. And we've kind of ignored the fact that vocations.
33:04 Speaker 02 Yes.
33:04 Speaker 03 Vocational and training, that, that's vital. Because, again, like, you have idiots like me who can't fix plumbing or do electricity. You know, I've told the story before. You know, I was trying to rewire something and I touched it and I shocked myself. Well, what do you do after that? Well, is it really a live wire? Or maybe it was something, so you, you know, stick your finger back in, see if it shocks you twice? It, it's, you know, proof of content. But you have idiots like me who don't know how to do it. Electricians making a ton of money. And we're just moving away from that. And it really is, it really is bad.
33:43 Speaker 03 And another thing that is worrisome is almost kind of these shadow attacks on the trucking industry. Um, you know, removing a lot. Yeah, I, I get it. We should probably have some standardized English, uh, language knowledge for truckers to be able to read signs. But, you know, just broadly scrapping drivers like, commercial drivers, CDLs is, it doesn't seem smart to me, but...
34:16 Speaker 02 It's to me, it's just gonna affect our ability to just move goods from one place to another. We're already struggling with our infrastructure, in my opinion. Now we add the trucking on the top of that, or and I'm with you. We should have, I'm an immigrant, I learned English, I learned how to read signs. And so should the rest of the population, in my opinion. That with that being said, you know, moving from one side of the pendulum to the other is not the answer. We always have to find somewhere in the middle, in my opinion, to justify. And if we're gonna move into a certain, let's take the time to move there and not just be abrupt. Because the result is just not gonna be appropriate for economy in general.
34:59 Speaker 02 And here in Kern County especially, in my opinion, because we rely a lot on logistics.
35:04 Speaker 03 Oh yeah, the manufacturing sector linking Northern California and Southern California. It's a major missed opportunity to offer English language classes to people with CDLs. You solve the issue, it's low cost, you get and every bit of research suggests that immigrant that immigrants who learn a native language integrate and actually show tremendous economic growth from learning the language. And it just seems like a missed opportunity instead, we're just like, no, you can't do this anymore.
35:36 Speaker 02 Yeah, yeah. Um, we do have a listener question, I would like for your take on this. Should we expect another cut before Powell leaves? And how much did the shutdown affect the surprising numbers?
35:49 Speaker 03 So, um, I, I think right now, um, because you can bet on anything. Um, I think Polly Market has the odds of another rate cut at about 50 50, so a coin flip. I actually don't think, um, we're gonna see another rate. I don't think Powell's gonna do another rate cut. Um, the Fed's really divided right now, which is good. That's a sign of healthy monetary policy because, you know, monetary policy is hard. The economy is hard, so multiple opinions is good. Um, did the shutdown affect the surprising numbers?
36:26 Speaker 03 Only to the extent that it just delayed the collection. Yeah, I know there are conspiracy theories running around that the numbers are now faked or all this other stuff. And no, it's, it's hard because the inflation data is largely collected by having individuals go out to different stores and look at prices. And during the shutdown, those people didn't go anymore, which is why we didn't see the inflation numbers. With the jobs numbers, there's surveys and then a statistical model. And, you know, if you don't have people nudging people to turn in a survey, no one does surveys unless there's some money involved, you're legally obligated, or you get annoyed from
37:09 Speaker 03 someone asking so much, you finally do it. And so we're starting to climb our way back out of that. I don't think the shutdown really impacted the numbers. I just think it delayed it.
37:22 Speaker 02 I would, I would say, I think we had this conversation shared enough as far as numbers. It's just, there's no benefit in masking numbers or coming up. The energy we're going to spend on fabricating numbers, might as well just spend it somewhere else productive, in my opinion.
37:38 Speaker 03 Oh, absolutely.
37:39 Speaker 02 I, I, I, I'm, I'm with you. I don't think the numbers are fabricated. I just think the delay is what's triggering a lot of this reaction. Either from, from economists or people like me, or just general population.
37:53 Speaker 03 Yeah, and you know, if you think about it, there are two major reasons why numbers won't be faked is they produce something, the BLS every month produces something like 4,000 data tables. And so if you fake one data table, you have to fake them because they're all interconnected.
38:10 Speaker 02 That's right.
38:11 Speaker 03 So it's really easy, it's almost more work to fake something. But the second one is you can always double check with the state numbers. A lot of the labor market numbers come from the state, especially unemployment. And so you can just kind of.
38:25 Speaker 02 Go to the state level and just get that data and compile it.
38:28 Speaker 03 Those were produced during the shutdown. So there is, you know. You'd have, it would take a lot, as I tell my students, it takes a lot more effort to fail the class than it does to pass the class. And I think that's kind of the same way with faking numbers. It takes a lot more effort to fake the numbers than just coming up with the real numbers.
38:49 Speaker 02 Now, I want to go into 2026. And I know you don't have a crystal ball, Dr. Gerhard, but I do, I want to lean on that a little bit. What's your outlook for 2026 from an economic output, from economy in general?
39:02 Speaker 03 Yeah, so I think it's mild economic growth. I think it's kind of what we've been seeing here at the end of 2025 just continues for another year because we do have a lot of economic uncertainty. We're still kind of in trade wars. You know, tariffs, we're now threatening tariffs on Canadian farmers. That's not great. The one big beautiful bill is kind of the positive, but that's going to increase to the debt and the deficit. That's going to be about $2 trillion added to the debt and the deficit pretty quickly. It just
39:45 Speaker 03 feels like everyone is just waiting. So I think we're just going to see, it's just going to kind of be like eh.
39:55 Speaker 02 Yeah. On just going back to rates and the Fed decision, if we don't see any rate cut between now and March, I think that's when the chairman is going to leave office. What is that going to have, or the impact that's going to have on just borrowing at the business level, business ownership level, and also individual level, consumer level?
40:19 Speaker 03 Yeah. If you go with the theory that Worsch or Hassett are going to be a little bit more open to political influence.
40:30 Speaker 03 And so, you know, the history of the Fed is complete independence from the executive branch that hasn't been followed in the past. Nixon was a very bad, he interfered a lot, and that led to stagflation, of course. So, I think a lot of people, especially businesses, are going to kind of slow down early 2026 spending and borrowing just to see what happens to rates. Because if you think that there's going to be a little bit of political influence, a half-point rate reduction when Hasset or Worsch takes the Fed chair is not an unreasonable
41:13 Speaker 03 expectation. That's a pretty significant lowering of borrowing costs. So I think you see people be a little bit more hesitant to take out large loans or do large-scale products until we get a little bit more clarity on whether the Fed is going to go back to being truly independent, like it kind of has been around Powell, or if the Fed agrees with the president that rates are too high. So I think you're going to see, just, again, kind of anemic economic growth for the first few months until we kind of see what the new Fed will do.
41:50 Speaker 02 On the consumer level, these interest rate cuts, what's that impact look like on just us as just households?
41:59 Speaker 03 Yeah, so, you know, we've, so the New York Fed has a really good report that they publish quarterly. It's called the Household and Debt Report. And basically, what they found is that auto delinquencies, credit card delinquencies, mortgage delinquencies are all rising because borrowing costs have been too high. A lot of people borrowed during the pandemic with the expectation that they'd be able to lock in lower rates or negotiate lower rates, and they just haven't been because rates have kind of remained relatively stagnant. So I think households...
42:37 Speaker 03 If the Fed cuts rates pretty significantly, I think households are going to be feeling a lot better about their economic position. I think, because I was, I was hearing you guys talk about, you know, banks and credit cards and paying the debt. I, I think that's going to be a big push in 2026 because right now, I think credit card balances for US households are over a trillion dollars.
43:00 Speaker 02 1.2 to 1.3 trillion dollars.
43:03 Speaker 03 It's not.
43:03 Speaker 02 What I read earlier, yeah.
43:04 Speaker 03 Yeah, it's, you know, that's about a thousand dollars per household in credit card debt. And for a lot of low income households, they can't afford that. You know, the minimum monthly payment is still a couple hundred bucks on that. So.
43:19 Speaker 02 Yeah, yeah.
43:20 Speaker 03 What I hope, yeah, what I hope happens is we start to see some rebalancing of household balance sheets. I, I think that's what households need to focus on is debt ratios are pretty bad. And, you know, that was an issue in 2007 to 2009 when housing prices plummeted and everyone got underwater and then they had credit card debt. So I, I hope consumers and households start to look at this as an opportunity to repay or pay down some of these debt balances.
43:52 Speaker 02 And not, and not use that extra cash.
43:54 Speaker 03 No, yeah, and that's the problem is that we know lower income households tend to splurge a little bit, you know, because again, they haven't been able to travel.
44:04 Speaker 02 That's true.
44:05 Speaker 03 Costly, housing is costly, going to Disney is costly, going to the movies is costly. Everything just costs a lot. And so while it would be nice to have a nice Christmas and a nice early year where you can go out to restaurants.
44:24 Speaker 02 Passion.
44:24 Speaker 03 Be the best option.
44:26 Speaker 02 So back in just Kern County, and I know you're, you're the Kern County Economic Journal.
44:34 Speaker 02 Locally here, what's happening with with oil? Any big things happening with oil ag that that are not noting?
44:42 Speaker 03 Yeah, so oil is poised to have a breakout 2026. The state of California finally loosened restrictions on new oil permits. So, yeah, oil, unfortunately, oil's kind of been streamlined. They've kind of really reduced the workforce. I don't think you're going to see major hiring in the oil fields, but stable oilfield incomes is only good for Kern County. With ag, ag's in a weird spot because the immigrant
45:13 Speaker 02 Yeah.
45:13 Speaker 03 The immigrant stuff is not good for them.
45:16 Speaker 02 Yeah.
45:17 Speaker 03 Tariffs are not good for them. Who knows if China's gonna buy the soybeans? So I think, you know, it's just, again, another year of with water in California, even though, you know, I'm sorry to the sun. I know I complained about the sun all summer, but I'm sorry, come back out.
45:40 Speaker 02 Yeah, I don't know if you heard about first segment. I was driving to LA yesterday. I got to Lebec and there's plenty of sun.
45:46 Speaker 03 Yeah, then you see the radioactive fog.
45:50 Speaker 02 How I miss, how I miss you. Please come back. And then on the way back again, going down that that that hill and that thick fog is just unbelievable. It's been like this for three weeks now. If you have not seen the satellite images, it's interesting to see the whole Central Valley just, you know, covered in this, in this, I don't know if it's smog or if it's fog or mix of the two. I really don't know, but it just looks ugly and nasty.
46:20 Speaker 03 It's not fun. It's cold. It's unpleasant. You know, again, you know, it's not helping the farmers because sunlight, you know, sunlight photosynthesis, I failed high school chemistry and biology, but I've learned that enough. So, yeah, it's, there's some areas of opportunity. It's, you know, Kern County could have a breakout year with transportation and logistics, but, um, you know, things need to go right. We need less regulation at the state level and we need the president to stop doing negative supply shocks.
46:55 Speaker 02 Well, I cannot thank you enough for always being here and coming to our show. Always, always enjoy you coming on. So, happy holidays, Merry Christmas, whatever you celebrate, Dr. Gerhardt, you and your family.
47:10 Speaker 02 What do we have tomorrow, Stephen? Or do we have a show tomorrow?
47:13 Speaker 00 We are out tomorrow, but join us back here on Wednesday. And if you have any questions, comments, feel free, you can text them in 24/7 at 842-2000 or 396-1000.
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