12/18/24 Crypto, Inflation & the State of the Economy with Economist Richard Gearhart

The Moneywise Radio Show and Podcast Wednesday, December 18th 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: Dr. Richard Gearhart, Professor of Economics at CSU-Bakersfield

• 0:00Speaker 00

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

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  Now, let's start the Money Wise Show.

• 0:42Speaker 03

  Welcome to the Money Wise Show. We are live from the padded radio room off Stockdale Highway on ESPN Bakersfield, 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. I'm your host today, Sharad Waite, and sitting here with me is...

• 1:03Speaker 04

  Mr. Latroy Dinkins, AKA Mr. Barry White.

• 1:07Speaker 03

  Mr. Barry White.

• 1:08Speaker 04

  I think that, uh...

• 1:09Speaker 03

  Oh, yeah.

• 1:12Speaker 04

  You jinxed me, man.

• 1:13Speaker 03

  Uh, well, I think you got the radio voice.

• 1:17Speaker 00

  I think it's better.

• 1:18Speaker 03

  Yeah.

• 1:19Speaker 04

  So I gotta stay sick all year to satisfy you, Stephen? Stephen, I told him yesterday, or last week when I was on a radio show with Justin, I said, "Man, I feel like you kinda misplaced me on a radio show." He was like, "No, it's because you're always sick, man." And look at me now, I got the Barry White voice back on.

• 1:35Speaker 03

  Yeah.

• 1:35Speaker 00

  I'm cutting promos out of this.

• 1:37Speaker 04

  Oh, okay.

• 1:40Speaker 03

  Hey, Latroy, you brought up... Well, let's go right to our messages, because we've got some here. And encouraging of our listeners right now, listening live, or even if it's not live, send us a message, send us a comment or question. This one says...

• 1:50Speaker 00

  How do they do that?

• 1:51Speaker 03

  661-396-1000. 661-396-1000 is the number you can call or text 24/7. So here's the message, it says, "Hello, guys. How can homeowners or those thinking about refinancing make the most of today's lower mortgage rates and increased housing options?" So, Latroy, you and I were kinda talking about this, and it... We're not completely sure we understand the question because I hear, what I hear in this question is, hey, rates are lower and there is maybe more inventory or more homes available.

• 2:22Speaker 04

  Yeah, that's what I hear too.

• 2:23Speaker 03

  So how do we take advantage of that?

• 2:25Speaker 04

  Well, the prime rate is 7.25, so I'm not sure.

• 2:27Speaker 03

  Is that what it is right now?

• 2:28Speaker 04

  It was like 7, 7.75 or 7.25, it was one of those.

• 2:32Speaker 03

  Yeah.

• 2:33Speaker 04

  And, you know, I'm not sure that that's considered, you know, lower mortgage rates. That's, that wouldn't be considered, considering the fact that, uh, post-COVID, you know, interest rates were, you know, 2, 2.5%, 3%, you know, you, you even lucky if you got 4% on a, on a, on a home.

• 2:52Speaker 03

  Yeah.

• 2:53Speaker 04

  So that, right there, uh, I wouldn't say they are lower mortgage rates, but however, the increased housing options, I know, I knew, I know that in the past, there was a lot of inventory, there was a lot of demand for home purchasing even with higher interest rates. So I'm thinking that's what the question is.

• 3:11Speaker 03

  Yeah. And, and so I think the answer to the question would be, if it, if you can lower your interest rate, there are people right now that could be lowering their interest rate for whatever reason. Maybe they.

• 3:23Speaker 04

  Buying it?

• 3:23Speaker 03

  Yeah, maybe they just got in a year and a half ago. So rates are lower than they were, you know, a year and a half or two years ago. So there could be some refinancing opportunities for somebody. And that's a pretty straightforward equation or mathematical calculation to determine if it makes sense to refi. And of course, if it, if there's increased housing options, that means maybe if you're thinking of buying a home and you're seeing that there's more available homes.

• 3:47Speaker 04

  There's nobody's wanting, not wanting to buy it.

• 3:49Speaker 03

  Yeah. But, but if they are, if that's what you're seeing maybe in the area, in the part of this, of the city or, or country that, where you are looking for homes and they seem to be increasing options. Well, that's a good thing. That's a buyer's market. And so you could take advantage of potentially upgrading your home or moving to, uh, you know, a different, a different place. So I think it's, I think it's always, one of the difficult things about making these home decisions is that you are always trying to, you're always trying to optimize and get the best out of it, especially with the interest rates and that's, and with the pricing of the home. And you're like, you're never gonna, you're never gonna get that, you're never gonna nail it perfectly where you get the homes where they're at the cheapest and the interest rates are at the lowest.

• 4:32Speaker 04

  That's like, that's like catching a bottle.

• 4:34Speaker 03

  Exactly, yeah, like a, like a, like a lightning bug.

• 4:38Speaker 04

  Yeah.

• 4:38Speaker 03

  But the, what you can do is you can buy that home and after five, 10, 15 years, you're not going to go back and think about what interest rates you had at that time, or even what the, what you paid for the home, because now you've had 10 or 15 years of building up equity, prices going up, so you don't even think about it. Similar to if you, how about this with investors, Latroy? You have somebody who says, "Well, I've got, I've got a million dollars in cash and I want to put it into the market. Is now a good time to put it into the market? Because maybe we're going to have a pullback. Maybe we'll be at lows, then I can go into the market at a much better time."

• 5:17Speaker 04

  Well, we don't have a crystal ball.

• 5:18Speaker 03

  We don't have a crystal ball, but what's, what, if you, if you think about it in this term, that if, when you put it into the market and then you wait five, 10, 15 years, how many investors are going to go back and go back to that day that they put it in the market and go, "Man, I could have did it one month earlier, or one month later. The Dow would have been, you know, so much higher at that time. I would have made so much more money compounded over time." Nobody goes back and does that math. Instead, they go, "Man, I'm so glad I did it when I did it."

• 5:48Speaker 04

  Absolutely.

• 5:48Speaker 03

  It's like, again, it's not timing the market's time in the market. And I would say the same is true for buying a home or refinancing, you know, your, your existing home. It's more about having, building up that equity over time, owning, having the benefits of a home ownership over a period of time where it really, that's what really matters.

• 6:10Speaker 04

  I like that analogy. I like that.

• 6:12Speaker 03

  So today, headlines, there's some news, or I think you wanted to talk about it, Latroy. I don't know if you want to talk about it now.

• 6:17Speaker 04

  What's that, what, some transfer portal?

• 6:19Speaker 03

  Transfer portal stuff.

• 6:20Speaker 04

  Oh, man.

• 6:21Speaker 03

  So this is like, the transfer portal is, I don't want to get confused with the fact college players now can get paid for their likeness.

• 6:28Speaker 04

  Oh, it's totally different. It's two different things. You got the transfer portal, even though it ties into NIL. Steven, you know about transfer portal, all the stuff that's going on right now with the college coaches? A little bit.

• 6:36Speaker 00

  Little bit.

• 6:37Speaker 04

  Yeah, so right now we're heading into the bowl season and there's a lot of teams that are still on the docket to to play another team and you got the playoffs, the the first ever 12-team college football playoffs that's going on too.

• 6:48Speaker 00

  And people are still complaining about?

• 6:50Speaker 04

  Yep, people are still, yep, a lot of the crybaby coaches.

• 6:55Speaker 04

  My guy's Nick Saban, that's my my guy, but you know.

• 6:57Speaker 00

  He's unhappy.

• 6:58Speaker 04

  Sometimes, but uh, yeah, so anyways, so you got all this stuff going on, all the postseason stuff and you have influx of of players that are part of programs that are entering to the transfer portal. And that that caused a huge distraction with all the festivities that that are taking place right now.

• 7:15Speaker 00

  Right.

• 7:16Speaker 04

  Within college and it's a lot of frustrated uh, coaches, there's a lot of frustrated fans, myself being one.

• 7:22Speaker 00

  Is it, is it players that don't want to play in the bowl games because they want to get paid and change schools?

• 7:28Speaker 04

  Well, yeah, that and and they just wanted, they don't like the uh, program that they're playing for.

• 7:33Speaker 03

  Yeah, so like, I'm gonna go play for another team, but why am I gonna go play my heart out for this team at the bowl and I'm like, I'm going, I'm gonna go play USC.

• 7:40Speaker 04

  Yeah, and and with with all this stuff that's going on, it's taking place, all the complaints, I'm sure there's gonna be some sort of amendment with this rule.

• 7:47Speaker 03

  Yeah, well, it it, college sports is just changing so quickly, I I'm still having.

• 7:52Speaker 00

  It's all about the money.

• 7:53Speaker 03

  Yeah.

• 7:54Speaker 04

  Yeah, it's it's all about the money.

• 7:56Speaker 03

  Changes to some of the tradition though, right?

• 7:58Speaker 04

  It do, it do, it it like, just, just the NIL in itself, you know, like, like, I always complain, uh, this, this is probably a repeat for me, but like, you don't get to see none of the good stories anymore, or a small school kid like Jerry Rice coming out of um, Mississippi Alcorn or or Mississippi Valley and and and going into the league, being that big story, coming from a real small school and it being a hall of fame, you you're not gonna get that no more. Everybody has to go through this filter of going, going to these big conferences like the SEC and all that stuff and. It's just, it's not the same anymore.

• 8:30Speaker 03

  Nah, it's.

• 8:31Speaker 04

  It's monopolized.

• 8:32Speaker 03

  Yeah. The other thing that, um, they're kind of changing course a little bit. Thanks for bringing that, Latroy. Is there is, time is running out for a class action lawsuit for Californians. And this applies to anybody here that is in Southern California that bought gas, that've got gas in your car. In the year of, uh, 2015. So, uh, from, uh, uh, from February 20th, uh, 2015 to November 10th of 2015. So basically if you had a car in 2015 and you're a part, uh, and you bought gasoline in a list of counties in Southern California, which includes Kern, Ventura County, Santa Barbara County, San Luis Obispo, LA County, San Diego and Orange, Riverside, so on.

• 9:15Speaker 03

  Then there was a class action lawsuit brought against the traders, the oil traders that, uh, were, uh, brought, uh, brought into a lawsuit by the California Department of Justice, alleging that these companies, which is Vitol and SK Energy Americas, essentially worked together to manipulate the stop, the, um, spot price, market prices on gas, on California gasoline, driving up profits. And they did this right in 2015 when there was a, a fire at the gasoline refinery in Torrance. So they essentially took advantage of this headline and artificially jacked up the price of gasoline, which all, it basically all the,

• 9:55Speaker 03

  all the consumers get to now join this. It's really easy. I went through this process myself. There's a website that's set up through the state of California. So if you did a simple Google search, there's a website that's set up where you can go and put in your information. Motors are going to file a claim that has a $50 million fund in it. It's essentially funded from the lawsuit to $50 million. So depending on how many people jump into the settlement, depends on how much you'll receive.

• 10:22Speaker 04

  You better hope it's just 50 million people, right?

• 10:24Speaker 03

  I'm hoping it's just one, I'm hoping it's just two people, right? I'll split 50 million. If it's two people, we both split 25 million. But yeah, I mean, if we have, I don't know how much, you know, these, these lawsuits and these class action lawsuits are so. So common that most of the times people just discount and just discredit them. I've gotten into a habit of actually making sure that, you know, that they're legitimate. But then I'll always do it, even if it's $20 or $15. A few times a year, I'll get a, I'll get a, a check in the mail for, you know, 15 bucks for something and, you know, hey, that'll pay, that'll pay for my lunch.

• 10:59Speaker 04

  There you go.

• 11:00Speaker 03

  Whatever, better than nothing.

• 11:01Speaker 04

  $20 gas stipend.

• 11:03Speaker 03

  Yeah. So if you're, if you, again, if anybody is listening, you bought gasoline in, in Southern California, including Kern County in 2015, go online, fill out the form. The deadline, I believe, is on January 8th is the deadline for, for people to join on to this. We talked about yesterday too, there's also e-bike, an e-bike rebate. I think that ended yesterday, the state of California, e-bike, an electric bike.

• 11:28Speaker 04

  Oh.

• 11:28Speaker 03

  It's like a bicycle that has an electric motor and a battery on it so it can like propel you, right? And get you going. There, if you, if you within federal poverty guideline, so a family of four, less than a hundred, about a hundred thousand dollars a year in income, you qualify for $2,000. Have you heard, I'll tell you, $2,000 that could go towards a, a purchase of a, you know, a bike.

• 11:51Speaker 04

  Wow, so you get to.

• 11:52Speaker 03

  So you can get back and forth. Yeah, get back to work or school, whatever. Isn't that crazy?

• 11:56Speaker 04

  Okay, you're gonna see a lot of bikes.

• 11:57Speaker 03

  Yeah, might be.

• 11:59Speaker 04

  On, on a, on a highway.

• 12:00Speaker 03

  We might, we might be doing that. Now's a perfect time, I think, for us to take a break with Troy, because when we come back, I want to talk about the markets and then Dr. Richard Gearhart from Cal State Bakersfield, the economist is going to join us. It's perfect timing. The Fed told it all, laid it all out what their plan is here in the near future with interest rates. So we're going to iron all of that out with Dr. Gearhart. We're Money Wise. Don't go anywhere.

• 12:22Speaker 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.

• 12:42Speaker 03

  Welcome to the Money Wise Show. I'm Sharad Waite here with Latroy Dinkins. And we are joined today by Richard Gearhart, Dr. Richard Gearhart, Professor of Economics at Cal State Bakersfield. Dr. Gearhart, welcome to the show. Welcome back.

• 12:59Speaker 05

  Thank you for having me again.

• 13:00Speaker 03

  So great having you here. I love, love having an economist's perspective mingled with our financial advisor, investment advisor hat perspective. And maybe you can help us on this message. We've got a listener message here. It says, "I know this is a broad question, but how do you make sure your investments are properly diversified? My buddy told me I need to make sure I'm diversified, and I'm not 100% sure I am, lol." So yeah, this is a common phrase we hear. Everybody says, "Well, I know diversification is important, but nobody really knows why or how and how it is." Here's a problem with diversification is that you can be overly diversified. Like you don't want to... You could be overly concentrated, just like you can be overly diversified.

• 13:45Speaker 03

  So being more and more diversified doesn't necessarily solve the problem that you think you may be solving. Your goal might be growth, for example. And with growth, you are diversified. But your diversification means diversification within asset classes, not just in...

• 14:03Speaker 04

  Like large cap or...

• 14:04Speaker 03

  Yeah, not just in, you know, individual stocks. Like you could be diversified within stocks because you could have companies that are among all different sectors, but maybe you're not diversified geographically.

• 14:18Speaker 04

  Yes.

• 14:18Speaker 03

  Or maybe you're not diversified in terms of other risk profiles.

• 14:23Speaker 04

  Yeah.

• 14:24Speaker 03

  And so, I don't know. Do you have something to add to that?

• 14:28Speaker 05

  You stole the phrase I was going to use. It's what, diversification within assets and diversification between assets? So it depends on like, you can be diversified and only have bonds, but just the type of bonds. You can be diversified and only have stocks. So it just...

• 14:45Speaker 04

  Yeah.

• 14:46Speaker 05

  It's one of those questions where if you're not 100% sure if you're diversified... Probably having a second pair of eyes that does this for a living would be

• 14:55Speaker 03

  Yeah, it's worth it.

• 14:56Speaker 05

  Useful.

• 14:57Speaker 04

  Yeah. And another thing too, um, some people think that diversification is actually having their asset spread amongst amongst different custodians like the Merrill Lynch, Robin Hood, a Charles Schwab and things of that nature. It has nothing to do with diversification. Um, diverse like, like, you know, both of these guys said diversification has everything to do with what type of equity stocks do you own? There's large cap, there's mid cap, there's small cap. Um, there's bonds like municipal bonds, there's government bonds, there's corporate bonds. You could be diversified within the realm of, you know, both equities and bonds and all you can package both of those together and be diversified as well. So.

• 15:40Speaker 03

  There you go. Great question. Thank you for that. Now, today, Dr. Gearhart, the Fed announced their rate cut decision. This just happened just a couple hours ago. Federal Jerome Powell and Jerome Powell announced that it would be a quarter percent rate cut. And which is not a surprise, I think, to anybody, the 25 basis point rate cut. There was some interesting talk about that in terms, it wasn't a unanimous decision and there is some uh, board difference of opinion on the board in terms of how many rate cuts we could see next year. The consensus is two more next year, but but you know, we still don't know. So do you make anything of this today?

• 16:21Speaker 05

  Yeah. Um, so, uh, basically there are 13 or 14, if you count, um, Jerome voting. There are 13 governors that vote on these and they kind of pick where they would like to see interest rates settled next year. A majority, but not all chose 3.75%

• 16:46Speaker 03

  Mm hmm.

• 16:46Speaker 05

  Uh, by this time next year, which would still be a pretty sizable fall, but there were several economists that wanted closer to three, and I think even one was sub below three. Uh, what this means is I think everyone is concerned and uncertain about what the Trump economic policies are going to look like.

• 17:06Speaker 03

  Yeah.

• 17:07Speaker 05

  And that's why I think they are keeping it pretty vague because Depending on whether or not you believe the stuff that comes out of his mouth, depending on whether or not you believe that the Republicans can pass any meaningful policy, given that the House has a one-member majority right now, and someone just came out and said that they're not voting for Speaker Johnson in the Republican side.

• 17:32Speaker 03

  Yeah.

• 17:33Speaker 05

  So I think there's just a lot of uncertainty about what Trump economic policy will actually look like next year.

• 17:39Speaker 03

  I believe, I'm trying to find the quote, but Jerome Powell, in the press conference afterwards, said specifically that the Fed, his words were something to the effect of, "You don't walk, you walk slow into a dark room with full furniture," essentially saying, "You don't, you know, we don't know what we're walking into with President Trump and what some of these policies might mean for inflation, because some of them, some of the policies, it's hard to see how they won't be inflationary." Like the tariff policies, how can they not be, even if it's a temporary inflationary, the Fed has to take that into account.

• 18:17Speaker 05

  Well, the big problem is, is that the three major plans that they have, the three major economic pillars, are all inflationary. The first one is tariffs. Tariffs are just taxes, and as we all know, taxes raise prices, that's inflationary. Mass deportation, because either not a lot of stuff gets produced in construction and ag and landscaping and house cleaning and all those industries, which means that either there's fewer services, so prices rise, or you have to hire natives, you know, domestic workers who are already here legally, but they're not going to get paid under the table or sub-minimum wages.

• 18:59Speaker 05

  And then, since the Tax Cut and Jobs Act is going to sunset...

• 19:06Speaker 05

  Well, the Tax Cut and Jobs Act didn't really stimulate economic growth, but did increase the debt and the deficit tremendously. And we're now sitting at a cool 35 trillion, only 35 trillion, 36?

• 19:20Speaker 03

  Yeah, something like that.

• 19:22Speaker 05

  So, and those are, as we know, government spending is inflationary. So, the three major economic pillars are likely to have some bump on inflation.

• 19:33Speaker 03

  Yeah, Jerome Powell said specifically that because of policy uncertainty, he said, quote, "It's kind of common sense thinking that when the path is uncertain, you go a little bit slower. It's not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down." So it's policy uncertainty, which is fascinating. The Fed openly admitting that, yeah, we're being influenced by, by politics, essentially, and an incoming president and what they're saying. And so, yeah, we're gonna go light, we're gonna tread lightly. If we have to, imagine the last thing they want, you have to start increasing rates, right? If, you know, that's what they would have to do if the tariffs are implemented.

• 20:17Speaker 05

  Absolutely, yeah, they're, they're going to.

• 20:19Speaker 03

  Tax cuts go, yeah.

• 20:20Speaker 05

  But then the worst fear is that stagflation fear.

• 20:23Speaker 03

  Yes.

• 20:24Speaker 05

  That Doji and that everything else, you know, a reduction in federal spending and a reduction in the federal workforce, it's 3% of the American workforce.

• 20:36Speaker 03

  Yeah.

• 20:37Speaker 05

  And what, 6% of American spending? That's a recession. And if you have a recession and high inflation, that's called stagflation. That was the 1980s, and that's when Volcker really had to slow down the economy and basically killed the economy to get us out of it.

• 20:54Speaker 03

  That's right, yeah, which was huge interest rate hikes, right? Was that when we had 18% rate or something?

• 21:00Speaker 05

  Yeah, the mortgage rates were above 15, I know that.

• 21:03Speaker 03

  Yeah, and that's not, I mean, it's, that's not politically acceptable move. You know, even though the president is, keeps their independence from the Fed, it's gonna be a lot of political pressure to figure out some way to keep this party going, right? How do we keep the party going? How do we keep our economy growing and growing?

• 21:24Speaker 05

  One would, well, one would think that domestic manufacturing of shoes is not the way to go, but that appears to be what we want. I mean, I guess we can hire all the Rust Belt and Appalachia children to make the Nikes.

• 21:39Speaker 03

  Well, yeah, the shoes doesn't make any sense. It makes sense, maybe, microchips, you know, or things that are like national security issues. It's not that much.

• 21:48Speaker 05

  Yeah, rare metals, you know, we have to mine it from the ground. That doesn't.

• 21:52Speaker 04

  So, so all arrows are pointing up. And that's, that's from like an economical standpoint, but what, what is, what is the method of, of, like you said, those three pillars? Everything is pointing inflationary. What is his perspective? Like, what do you think he's gonna, or?

• 22:07Speaker 05

  I mean, the Tax Cutting Jobs Act is a nice little tax break for the top 10%, mostly for the top 1%. So, I mean, personally benefits. Tariffs sound good, like build the wall and make Canada our 51st state. You know, those sound fantastic, don't really work. And then, mass deportations, I mean, you know, we have had the, we have, depending on the estimates, 13 to 16 million undocumented immigrants in this country with, you know, recent surges that we haven't seen in a while and.

• 22:45Speaker 04

  So, correlated.

• 22:46Speaker 05

  Yeah, and you know, when people on the lower end have an easy group to blame for why their standards of living haven't gotten appreciably better, that's a group that we can blame. I mean, I'm not too sure we would see a lot of people work in these jobs because they're not necessarily the desirable jobs, but.

• 23:07Speaker 03

  It seems as though if there was mass deportation, that the business sector would get, certain sectors would get hit so hard, so quickly, we would see, take food costs, for example. Ag, ag costs are just, they're already struggling with the, the cost of labor, but now you have an, an added cost of, of labor. It just, you know, it just seems like it would kill the, the fabric of our society and our economic society.

• 23:34Speaker 04

  It would sound like a ready, shoot, aim approach, like.

• 23:37Speaker 03

  Well, that's my guess is because this happened, President Trump's first term, he was very much against NAFTA. And remember how much he just like thought this was the worst thing? And they created the new thing, just called it something else. It was just NAFTA 2.0. But it was a lot of sort of threats, basically, that to be able to posture to get to the negotiation table. And you were seeing it now. I think it's working. And this is the art of the deal. He wrote a book about it, New York Times bestseller about how you go into these negotiations. Of course, you're going in, ah, yeah, big blah, you know, you're gonna do, we're gonna do this, and we're gonna tear you up, and this is awful. And you're, you know, it's the classic, like, if you're gonna buy a car, you point out all the bad things in the car, and then personally decides immediately, go, okay, I'm gonna

• 24:21Speaker 03

  have to back off from my position here a little bit, and maybe we'll lower our tariffs after all, and.

• 24:27Speaker 04

  Playing the economy like a big poker table.

• 24:29Speaker 03

  Yeah, yeah.

• 24:30Speaker 05

  But it's a big poker table with Matt Gaetz is like your policy lead. It's not, you know, the A team was early on, then we moved to the B team, and I, you know, if you went to a strip club with this team.

• 24:45Speaker 03

  Yeah.

• 24:46Speaker 05

  It would be like a Wednesday night.

• 24:49Speaker 03

  The good news is, and I'll always say this, is that the free market economy and the capitalistic system that we have right now is far greater than any political, how, any political position. I still believe that. I mean, the president has a lot of power and can do a lot of really crazy things, but they can't, you know, you can't just overnight change the price that we pay for microwaves at Walmart, you know, by, you know, you know, a magic wand and think that this is gonna work out well.

• 25:22Speaker 05

  Well, that's why it's amazing to see how many people still thought, as of last week, that he was gonna lower grocery prices.

• 25:29Speaker 03

  Yeah, yeah.

• 25:31Speaker 05

  Like, everyone's like, well, price controls, like, okay, well, what do you put, you can't just say, oh, there's a price control in a grocery store. You have to do it on every, every brand and every product in that store, and that negates the purpose.

• 25:43Speaker 03

  Yes, yeah.

• 25:44Speaker 05

  And.

• 25:46Speaker 03

  It's a common misconception by the general public that the president has so much more power than they actually do. And these secret levers that they can go into the basement of the White House, immediately change the price of oil, immediately change the price of groceries, you know?

• 26:00Speaker 04

  It's like Krauss psychology. They call it Krauss psychology.

• 26:02Speaker 03

  Krauss psychology, which is why we saw stickers and you'll see stickers on the gas pump for your favorite politician and the reason why they're at fault for what you're paying at the pump. When it's like, you think they are fault?

• 26:13Speaker 04

  It's kind of like when, you know, Trump got, well, got into presidency and people were like, okay, this is time to be aggressive in the portfolios.

• 26:20Speaker 03

  Right.

• 26:21Speaker 04

  But as soon as they hear about terrorists, then everybody's, okay, it's time to take money out of her for one case.

• 26:25Speaker 03

  Right. Yeah. Yeah. Then now there's the, you know, the skeptics.

• 26:28Speaker 04

  Krauss psychology.

• 26:29Speaker 05

  Yeah. It's just, and again, you know, that means that most of the policy is going to be coming from the House and the Senate and the House can't get its act together.

• 26:41Speaker 03

  Right.

• 26:42Speaker 05

  So what's going to happen to legislation?

• 26:45Speaker 03

  Right.

• 26:46Speaker 05

  We funded the government till next March.

• 26:48Speaker 03

  Yeah.

• 26:49Speaker 05

  And that required Democrat votes and...

• 26:51Speaker 03

  And the stock market has not, the stock, the stock market in terms of performance and who's in charge of the Congress and the White House. So when it's unified Congress and it's the same as the White House, it's, it's one of the worst performers.

• 27:07Speaker 05

  It's bad.

• 27:07Speaker 03

  It's bad. Like you want to kind of a mixed, a mixed house, you know?

• 27:12Speaker 05

  Because you can't get any of the crazy right wing or left wing stuff done.

• 27:16Speaker 03

  Yeah.

• 27:17Speaker 05

  You know, when it's unified, then you can have some of the cuckoo policy where you're like, who thought this was a good idea?

• 27:23Speaker 03

  Yeah. Exactly. It's like the lowest common denominator stuff gets passed. So much here, more to talk about with Richard Gearhart, economist from Cal State Bakersfield. I'm Sharad Waite here with Latroy Dinkins. We're Money Wise and we'll be right back.

• 27:35Speaker 00

  Need to get your financial fix on the go? If so, subscribe to the Money Wise Podcast and catch up on all past shows whenever.

• 27:48Speaker 03

  Welcome to the Money Wise Show. I'm Sharad Waite here with LaToi Dinkins. Our guest today is Richard Gearhart, Dr. Gearhart from Cal State Bakersfield economist. We're talking what's going on in the markets. It's perfect timing as the Fed today announced their final rate cut of the year, talking about what's going to happen going into the new year. First, let's go to our message board. We have a question here. It says, I have heard on big news stations CNBC and CNN saying that people are pulling money out of their 401ks because they're nervous about the tariffs. But is that as foolish as it sounds, LaToi, Richard? This is something that drives me nuts. Not the question, but the fact that every presidential election, I don't care if it's Republican, I don't care who wins, Republican, Democrat.

• 28:32Speaker 03

  I heard this when Obama was elected. I heard it when Trump was elected. I heard it when Biden was elected. Now I hear it again when Trump is elected. It's the same story. People going, oh, no, pull my money out of the bank because the president's going to take my money. The president's going to take everything and it's over, you know, or he's going to do taxes, or he's going to do tariffs, or he's going to do something. And listen, no, take a deep breath. Take a deep breath. We have a long ways to go before the president takes office and before the president enacts any of these rules and before those trickle down into the

• 29:13Speaker 03

  markets and have their say. Now, that being said, there could be something unprecedented happens, I suppose, right, Richard? Like, maybe because the president has had power to do these tariffs, so he could do it and then resist all global pushback, you know, against it and still do it, I suppose. But I don't know.

• 29:34Speaker 05

  But, you know, for me, the only rational reason I could see people pulling money out of their 401ks is this kind of rush of people going out and stockpiling stuff and buying stuff before they know that the price is going to increase. Because if they're taking money out of their 401ks... 1Ks and tariffs are enacted, it's inflationary, which means the value of cash drops dramatically.

• 30:02Speaker 03

  Right.

• 30:02Speaker 05

  It's a terrible idea.

• 30:03Speaker 03

  Right. Yeah, exactly. Because what will happen is the Fed will have to increase interest rates rightly to combat inflation. Guess what? Your savings account and your CD checking account, everything's going to pay higher interest.

• 30:15Speaker 04

  Yeah.

• 30:15Speaker 03

  For sitting in there, you're pulling it out. Not only you pull it out, but you're guaranteed to pay the taxes on the money that you pull out. If you're pulling out of your 401K.

• 30:23Speaker 04

  Penalty too.

• 30:25Speaker 03

  And yeah, it's just not, not a good idea. Stay the course. You want to have a good, solid investment, you know, plan within your 401K. And you know, stick with that. It's usually long term. If you're, if you're within a few years of retirement, then your 401K should be invested accordingly to how, how much income you're going to need to pull from that. So it might mean you'd be more conservative right now.

• 30:48Speaker 04

  And that's why you get a targeted date fund in those 401Ks is something that's, that will automate like just the holdings as, as time has gone by. You get closer to retirement and then it'll scale back on some of the risk. So.

• 31:00Speaker 03

  So, uh, thank you for that question and for that, uh, message. 6613961000. So Dr. Gearhart, the, um, let's talk about, um, again, this is, there's a lot of, I guess, called the Trump trade or the Trump concern and how it will affect not just the stock market, but the, the global markets, the, the global trade markets. Also cryptocurrency. This is a common theme on this show. Get a lot of questions about cryptocurrency. And I like talking to an economist about this.

• 31:33Speaker 04

  Look at Gearhart over here. You're like.

• 31:35Speaker 03

  Because I know, I think I know how you stand on cryptocurrency. Like what is it worth? You know, what is it worth?

• 31:40Speaker 05

  Nothing. And you know, if they establish like a crypto fund or all this other stuff, the benefits of crypto is that there's no government oversight. That's the only benefit of crypto is that you can buy whatever you want.

• 31:53Speaker 03

  Yeah.

• 31:53Speaker 05

  Without the government really knowing like, oh, that's what you're buying.

• 31:57Speaker 03

  Yeah.

• 31:57Speaker 05

  But when the government steps in, now they know, now they have all the information. It's like, wow, wow. Oh, okay.

• 32:03Speaker 03

  Yeah. Where's the, where's the? The anonymity, yeah.

• 32:06Speaker 05

  That's what, that's why Bitcoin has value, that you can eventually do something anonymous with it, or it's protected from government overreach and, you know, government printing too much.

• 32:20Speaker 03

  Yes.

• 32:21Speaker 05

  Once the government gets into it, to me, the value of crypto is zero, because it's, the government's not gonna let the dollar go away.

• 32:29Speaker 03

  They're getting in.

• 32:30Speaker 05

  They're just gonna fold it in.

• 32:30Speaker 03

  They're getting in bed with the, the, the Bitcoin, for example, is getting in bed with the government, for those at least that are buying crypto through an ETF, let's say. There are some crypto, this is a good point, there are some crypto people who are using, are, are using it, I guess, actually using as a currency to buy and, buy and, you know, their, their toilet paper and buy their, their food and that kind of thing, but I think 99% of those people are, are holding on to it and viewing it as an investment.

• 32:59Speaker 05

  Yeah, they're trying to get other people to jack the price up, which increases their value.

• 33:04Speaker 03

  Right, so it's.

• 33:05Speaker 05

  Oh, look, he's gonna, he's gonna legalize it, I don't even know what that means, but everyone who holds Bitcoins is celebrating because you.

• 33:14Speaker 03

  You can legitimately hold it, you know?

• 33:17Speaker 05

  People don't understand the monetary system, people don't understand that if the government takes it over, that it's a monopoly, it's, there's no longer a market in cryptocurrency, it's, the government owns it.

• 33:28Speaker 03

  Right, yeah, literally, right now, the only, the only value that a, that a Bitcoin holder can say they have is the fact that they know that there's some other person out there in the world that is willing to pay at least what they paid for it, but if they hold it long enough, they're gonna pay even more for it than what they paid for it, that's the only value, so then, what is that value that other people have in their heads of what they think that, that coin is that they're potentially gonna buy is? Exactly. Like, they're just like, that's a classic Ponzi scheme.

• 33:58Speaker 05

  It is, it's the tool, it's tulips.

• 34:00Speaker 03

  Tulips, yeah.

• 34:01Speaker 05

  The Dutch tulips where, ah, everyone's gonna buy tulips and, oops, nope.

• 34:06Speaker 03

  Yeah, at least with tulips, at the end of the day, you've got the bulbs, right?

• 34:09Speaker 05

  They look pretty.

• 34:09Speaker 03

  They look pretty and you've got something there, but here, they would literally have nothing if everybody else realizes that, you know, the currency.

• 34:18Speaker 03

  Is no, is not worth anything.

• 34:21Speaker 04

  So it's basically ran by a bunch of retailers. The price is dictated by a bunch of retailers. There's really, there's not that much institutional endorsement on.

• 34:29Speaker 03

  No, I don't see, I don't see, I mean.

• 34:31Speaker 04

  There's no major insurance companies, there's no major endowment funds or anything like that.

• 34:34Speaker 03

  Even if they were, it's a three trillion dollar, it's a three trillion dollar market cap.

• 34:39Speaker 05

  Which is, you know, a rounding error in the US economy.

• 34:42Speaker 03

  Exactly, exactly. It's nothing that you would think that, oh my gosh, crypto is the new thing to get into. And compared to the stock markets, you know, a fraction, a tiny fraction of the, of the global stock market.

• 34:54Speaker 05

  Of even global wealth. How much is global wealth? Couple hundred trillion?

• 34:57Speaker 03

  Right. Just the, just the global equity market is 120 or 130 trillion. And we're talking about three trillion, not just Bitcoin, but Doge and you name whatever kind of coin.

• 35:07Speaker 05

  The, the Hoc Tua coin?

• 35:09Speaker 04

  I know, I saw that, that's crazy. I saw that.

• 35:12Speaker 05

  I mean, that's exactly what I want to invest my money on. Someone who's claim to fame is knowing.

• 35:18Speaker 03

  But like, really, in reality, the Hoc Tua coin versus the Bitcoin.

• 35:23Speaker 04

  Yeah.

• 35:24Speaker 03

  They're both the same. It's what, whatever, somebody thinks the other person is willing to pay for it.

• 35:29Speaker 05

  One's run by an idiot. One's, one's not.

• 35:33Speaker 03

  Oh, wow. I just read that, read this, Dr. Gearhart headline that talks about, from the latest census data, looking at extra bedrooms in the United States. I know we have a housing shortage, but we also went through a period of McManchins.

• 35:48Speaker 05

  Yeah.

• 35:48Speaker 03

  Where up until about a decade ago, the average household, the average size of a home just went up dramatically up and, up until, starting in, in the beginning of the 1980s, until about 10 years ago. And the average bedroom per home over the past 50 years has increased from two and a half bedrooms to 2.8 bedrooms. And so essentially what we're, what we're, what we're seeing is that extra bedrooms reached a peak that, you know, so far. We have a high of of of extra bedrooms. Back in nineteen eighty, we had seven million.

• 36:34Speaker 03

  This year, thirty two million extra bedrooms. A fourfold jump comes as the number of people in any given household has declined from three point one people per household in nineteen seventy to two point five per household last year, which brings up a major, major economic problem that we have, which is just demographics. Our demographics are, we're not having enough babies to resupply ourselves. Right? Because you you have to have three per couple.

• 37:11Speaker 05

  Yeah, I think it's like.

• 37:12Speaker 03

  To replace yourself.

• 37:14Speaker 05

  I think it's like two and then you cut a kid off at the shoulders.

• 37:17Speaker 03

  Two and a half.

• 37:18Speaker 05

  Yeah, two and three quarters.

• 37:18Speaker 04

  Yeah, yeah. We're gonna have AI babies.

• 37:21Speaker 03

  We got.

• 37:21Speaker 04

  Did y'all see that movie with the uh, the artificial?

• 37:24Speaker 05

  Isn't that iRobot?

• 37:26Speaker 04

  Well, that's iRobot, but there's another movie that came out. I I know we going off guard here, but uh, uh, some, it was a lady. She was an AI and she had like skin like a human and everything like that. The husband had a wife and and they had this AI robot. She was real hot. And he was like, he said, I want to divorce you on the married AI.

• 37:43Speaker 03

  This is a movie.

• 37:44Speaker 04

  This is a real movie. Yes, on Netflix.

• 37:46Speaker 03

  Oh, this is a little bit like uh, her was also the, did you see that with Joaquin Phoenix? Where he had the the phone in his, like the AI assistant in his pocket?

• 37:57Speaker 04

  Oh.

• 37:57Speaker 03

  And he fell in love and it was Scarlett Johansson's voice that was that was the actress on it. And then OpenAI, their chat GPT voice when it came out, it was just like her voice in that movie. There was even like a threat of lawsuit and all this. But demographically, back to what you're saying, Latre, we're not making enough babies. And we're seeing countries across the world that are having this worse problem than we have. Uh, I think because we have immigration.

• 38:26Speaker 05

  Yeah, one of the reasons why is the immigrants just tend to have more kids on average, which first stalls it. But you look at some of the bigger countries that are having some of the major issues. They don't have a lot of immigration issues. It's Russia, South Korea.

• 38:41Speaker 03

  Yeah.

• 38:41Speaker 05

  And a lot of

• 38:43Speaker 03

  Japan.

• 38:44Speaker 05

  Yeah, a lot of the Asian countries where there's just not a lot of in migration into those countries. And so they're the ones seeing the first signs of the demographic crisis to the point where I think they're paying people.

• 38:57Speaker 03

  Yes, they're incentivizing it because this is the economic way to solve that social problem.

• 39:02Speaker 05

  Yeah, absolutely.

• 39:02Speaker 03

  Not have enough babies is to

• 39:04Speaker 05

  Substate.

• 39:04Speaker 03

  Tax credits for having babies.

• 39:06Speaker 04

  That is crazy.

• 39:07Speaker 03

  Right? And for childcare and which is the United States is starting to catch on. The States is starting to have more of like pre-K

• 39:18Speaker 03

  education programs like, you know, to help parent, working parents.

• 39:23Speaker 05

  Yeah.

• 39:23Speaker 03

  Uh, it's still kind of a poverty program, but, um, but we have to figure out ways to make it more affordable for families to have kids.

• 39:31Speaker 05

  Well, yeah. And, you know, if you look at it, one of the big issues was the pandemic kind of accelerated this increase in childcare costs because a lot of nannies, babysitters,

• 39:44Speaker 03

  Yeah.

• 39:45Speaker 04

  Yes.

• 39:45Speaker 05

  childcare facilities.

• 39:47Speaker 04

  Yep.

• 39:47Speaker 05

  There's just not a lot of them and it eliminated a lot of the in-home ones that lower income individuals tended to use. And so now you have a lot more unlicensed and there's fewer, so you're willing to pay more. And so I know that's a big impediment in the major cities where I heard in New York City, it's seven grand a month for childcare.

• 40:13Speaker 03

  Wow. Yeah, like a full-time 40 hours a week.

• 40:17Speaker 04

  That's not one child. That's like three.

• 40:19Speaker 05

  No, that's one.

• 40:20Speaker 04

  Oh my God.

• 40:20Speaker 03

  I mean,

• 40:21Speaker 05

  It's like one spot at a childcare facility in New York City.

• 40:25Speaker 03

  You know, it's a full-time job. Like if you were paying a babysitter 20 bucks an hour.

• 40:30Speaker 05

  That's not a fun job. No. You have to deal with kids you don't even like.

• 40:35Speaker 04

  Hey, the rats, the rats out there are big enough to babysit, so.

• 40:38Speaker 03

  Yeah. Well, and not now the robots, bring on the robots, right? Get your Tesla Optimus bot that can watch your kids.

• 40:45Speaker 04

  Everybody will have a robot in the house.

• 40:46Speaker 05

  I would take an AI Samuel L. Jackson. I think he would, I think he would be very good for childcare.

• 40:52Speaker 03

  100% you could program the voice to be your character.

• 40:55Speaker 04

  Fiction version or what?

• 40:58Speaker 05

  Oh, no. Okay. What was the movie where he was the cop?

• 41:05Speaker 04

  Oh, um, um, I don't know this.

• 41:08Speaker 05

  I know.

• 41:08Speaker 04

  Well, he's with, uh, he's playing with, uh, not Bruce Willis, but is it Lethal Weapon?

• 41:14Speaker 05

  No.

• 41:14Speaker 04

  No, that's, that's somebody else.

• 41:15Speaker 05

  It's like, it starts with an S. Someone's gonna have to bail me out on this one.

• 41:20Speaker 03

  Well, we'll, we'll look it up during the break. We're gonna look up what's, what where Samuel Jackson was. We're gonna take a quick, our final break of the day. We'll come back, couple more things to talk about. We're Money Wise. We'll be right back.

• 41:29Speaker 00

  If you're a business owner who provides a retirement plan for your employees, contact Money Wise Wealth Management to see if you're maximizing your options and minimizing your liabilities. Money Wise 401K plans are customized to you and your company's needs. 661-847-1000.

• 41:53Speaker 03

  Welcome to the Money Wise Show. I'm Sharad Wade. I'm here with Latroy Deenkins. We're also joined by our guest, Dr. Richard Gearhart, economist at Cal State Bakersfield. Dr. Gearhart, I believe it was yesterday or day before, the Bitwise founders were sentenced. Did you hear?

• 42:11Speaker 05

  I did.

• 42:13Speaker 03

  20 years between the two of them. I guess, uh, Sobral, who is the Jake Sobral, the 38-year-old former-

• 42:21Speaker 04

  Nice little Q there.

• 42:22Speaker 03

  Yeah, I know. He knew.

• 42:23Speaker 04

  Right on point.

• 42:25Speaker 03

  Best producer in town.

• 42:27Speaker 05

  Shaft. Shaft was the answer.

• 42:29Speaker 03

  That's right.

• 42:30Speaker 05

  Shut your mouth.

• 42:31Speaker 03

  That's right.

• 42:32Speaker 05

  I was sitting there and everyone, people were just staring at me like I was crazy and I kind of am, but-

• 42:37Speaker 03

  No, you weren't crazy. That's Samuel Jackson's role.

• 42:40Speaker 05

  Yeah.

• 42:40Speaker 03

  You nailed it.

• 42:41Speaker 04

  Latroy's perfect. He could do the Isaac Hayes voice.

• 42:43Speaker 03

  Yeah. Oh, there you go. Isaac Hayes. Forget Barry White.

• 42:47Speaker 04

  Yeah.

• 42:48Speaker 05

  Yeah, 20 years.

• 42:49Speaker 03

  20 years. Yeah, Jake Sobral, the, the 38-year-old former IP attorney, who was the CEO, received 11 years. His accomplice, the 44-year-old computer engineer, Irma Olguen, was sentenced to nine years. And both pled guilty to one count of conspiring to commit wire fraud and separate count of actual wire fraud. So they admitted what they did.

• 43:12Speaker 04

  That's sad, man. Like, how do you?

• 43:13Speaker 03

  Yeah.

• 43:14Speaker 04

  How do you know, like, the inception of the activity, like, you know you're doing all this stuff? How do you, like, sleep? Do you just really think you're gonna get away with something like that?

• 43:23Speaker 03

  I'm guessing they didn't sleep well.

• 43:24Speaker 05

  Yeah.

• 43:25Speaker 03

  Towards the end, when things started to implode, because what happened, and this has been reported in the California, John Cox wrote about this, which, yeah, just John yesterday, we should have asked him.

• 43:34Speaker 04

  It's crazy.

• 43:34Speaker 03

  But essentially, what they admitted to was fabricating and doctoring their financial statements to show that they had more cash on hand than they really did to attract more investors to get more money. And not only did they not have the money that they said on hand, but they had very little money. Like, they were barely scraping by in the end. And it didn't all fall apart until this, all of a sudden, the employees' checks weren't clearing, or they, they told their employees, "Hold off on cash in your check, or payroll's gonna be late."

• 44:06Speaker 04

  Oh, wow, yeah.

• 44:06Speaker 03

  That they said, "We gotta do something." They did a furlough. "Okay, we're gonna furlough our employees, but trust us, it's all gonna be okay. We just got some things to figure out." Well, it turns out, they just, it all, it all fell apart. I think they were just hoping, this is a classic Ponzi scheme, again, you're hoping that you're gonna continue to attract some new investors.

• 44:24Speaker 05

  You're gonna get a cash infusion, yeah, and it's gonna, oh, makes everything go away for two more weeks.

• 44:29Speaker 03

  Yeah, it's just really sad. I have no idea what their state of mind is, but I know.

• 44:36Speaker 05

  Well, I know there's no parole in federal prison.

• 44:39Speaker 03

  Yeah, that's right.

• 44:40Speaker 04

  Oh, my God, that's crazy.

• 44:41Speaker 05

  They're going for the full time.

• 44:42Speaker 03

  There's no time off for good behavior.

• 44:45Speaker 05

  I just learned that yesterday, I was like, oh.

• 44:49Speaker 03

  Well, that's gonna be a long nine or 10 years there. Yeah, it's just really crazy. This is, overall, at the end of the day, it was, total money lost through Bitwise, $115 million.

• 45:02Speaker 04

  Oh, my Lord.

• 45:03Speaker 03

  115, that's a big chunk. I mean, it's not Bernie Madoff, you know, we're not talking about billions.

• 45:09Speaker 05

  But as like an incubator in the Central Valley, you know, with Fresno and Bakersfield as kind of, you know, the, the area where it started and then the proof of concept.

• 45:21Speaker 03

  Yeah. And taking advantage of what they were really promoting, the underdog cities, us, you know, taking advantage of people like us. They're like, yeah, we love this town. We, we want to do better. And we believe in ourselves and we're better than that.

• 45:35Speaker 04

  They had different subsidiaries too, right?

• 45:37Speaker 03

  Yeah. They kind of evolved and got into real estate.

• 45:40Speaker 04

  Sria or something like that was?

• 45:41Speaker 03

  Well, they bought Sria, which, you know, that, that's, that, that, that was in the, in the court papers too. Um, you know, that, um, the complaint, uh, anyways, it's, it's, uh, it really a sad chapter and hopefully, hopefully things can, uh, can move on. Hey, thank you so much for coming on the show.

• 45:58Speaker 05

  Thank you for having me.

• 45:59Speaker 03

  It's always great to have a real expert on the show, real economists, rather than us just playing one on the radio. Want to remind all our listeners, if you missed any of these shows, you can go to moneywiseguys.com, wherever you stream your podcasts. Remember these three things, be smart, be safe, and always be money wise.

• 46:16Speaker 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.