Pod Insights The Moneywise Guys 1/26/26 Credit, Banking Shifts, and Kern County Headlines About this episode The Moneywise Radio Show and Podcast Monday, January 26th 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: John Cox, Business Editor for The Bakersfield Californian website: www. Bakersfield.com 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. John Cox and their company are not affiliated with nor endorsed by LPL Financial or Moneywise Wealth Management].
Transcript 0:00 Speaker 00 Live from the basement inside the historic Woolworths Building in downtown Bakersfield. Call or text in at 661-396-1000.
0:29 Speaker 01 Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through LPL Financial. LPL Financial and MoneyWise Wealth Management are independently owned and operated.
0:37 Speaker 00 Now, let's start the MoneyWise Show.
0:41 Speaker 02 And welcome to the MoneyWise Show. We are live from the basement of the historic Woolworths Building in downtown Bakersfield. For the next hour, you're on KGO Money Talk, 1230 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. We are your hosts, I'm Sharad Waite and...
1:03 Speaker 00 Sammy Abiyawi.
1:04 Speaker 02 Hey Sammy, good seeing you, man.
1:06 Speaker 00 Good seeing you too.
1:07 Speaker 02 Happy Monday. Got quite a bit to cover today, then we'll have John Cox join us from the Bakersfield Californian. Before we do that, we have a few listener questions. Want to remind our listeners again, at any time, it can be 24 hours a day, you can text or call 661-396-1000, and that's the number that we will answer. And please, keep the comments and questions coming our way, we love it. Let's get right to it, Sammy.
1:39 Speaker 00 Yeah, the first question, if I close my Home Depot card because I don't need it and have zero credit debt, but would like to get a different card, should I wait until the Home Depot card closes before getting the other card?
1:51 Speaker 02 Don't close the Home Depot card. That's my recommendation. That's the quick, that's the quick answer, right? Because what this is, this is, this is important factor of your, of your credit score is how much credit you have available to you, but you're not using. And that sound, may sound a little counter, counterintuitive, but essentially what the lenders are, are, are scoring you on is your ability to manage the access to credit. And so if you have, if you, if you have your Home Depot card still activated and open, but you're not using it, that's the best case, that's the best case scenario. Now, I don't, I'm not familiar now with the Home Depot card to know whether or not there's
2:36 Speaker 02 an annual fee. If there's an annual fee, that might be a game changer. Because there's no reason for you to be paying a fee every year just for the extra bonus that it might add to your credit score. But if it doesn't cost you anything to keep the card, just rip up the card. Just throw it away and, and, and don't use it. Right?
3:00 Speaker 03 I, I would agree with you a hundred percent. That's exactly what I was gonna recommend to you. Do not close it. Do not get rid of it. Just, just don't use it. Keep it at zero bounds to share its point. And if, unless you have some type of an annual fee, the chances are very small that Home Depot will carry an annual fee for their, for his credit card. But just in case they do, that's probably what you need to take into consideration to make in the decision. However, you can always go and, and, and apply for another credit card while the Home Depot is open. In fact, it shows your ability to make payment. And that's what the creditors want to see.
3:45 Speaker 02 Yeah.
3:46 Speaker 03 Is your utilization rate on your credit card.
3:49 Speaker 02 Yes. Well, the utilization rate is that a credit agency is going to score you. The biggest factor is your payment history. So obviously, you never want to be late on any payments. That's 35% of the score.
4:07 Speaker 03 Correct.
4:08 Speaker 02 30% is how much you owe, or another way of saying that is utilization. How much of the credit that you have available to you are you actually utilizing? It's almost, it's almost as important as the number one factor, which is, are you making your payments on time?
4:22 Speaker 03 Mm-hmm.
4:23 Speaker 02 And so, having credit available to you that you are not using is a good thing.
4:29 Speaker 03 Yep.
4:30 Speaker 02 So you want to do that. Well, now, I'll play devil's advocate here, Sammy, and I'll say, well, then, why don't you just go get a bunch of credit cards?
4:38 Speaker 03 You can.
4:39 Speaker 02 You can.
4:39 Speaker 03 Yeah, you can. But, so, so, so here's the thing about discipline. If having a bunch of credit cards, God forbid something happens, then you have multiple credit cards that a lot of people will lean on, and all of a sudden, if you're not careful, you will not be able to manage them all.
4:56 Speaker 02 Right.
4:57 Speaker 03 Basically, making the, the payments, or the minimum payments, which card carries higher interest rate than the other. Those are things that come into play for a lot of indisciplined people, and that's what credit cards want.
5:08 Speaker 02 Yeah.
5:09 Speaker 03 They want indisciplined people.
5:10 Speaker 02 Yeah, they're looking for people that are carrying a balance on your credit card, or that you're paying an annual fee to keep that credit card. So that, don't, don't keep the card for, if there's a fee, or if you, you end up using it and not paying it off each month, then you may have an issue with being able to manage credit in general.
5:31 Speaker 03 That's right.
5:31 Speaker 02 So you need to just be disciplined. It's like, if, you know, if you're, if you know you're an alcoholic, you just don't walk into the bar.
5:36 Speaker 03 Yep.
5:37 Speaker 02 If you know you've got a problem with credit cards, don't apply for the credit card, don't use credit cards, because you just know that there's a problem with it. And, but there is also another factor that every time you apply for credit, it does ding your credit score a little bit.
5:51 Speaker 03 Yeah, the inquiry affects your credit score, not by a lot, but it does.
5:56 Speaker 02 Yes.
5:57 Speaker 03 Especially if you have multiple. Now, if you have multiple, again, that's something that the credit bureaus look at.
6:02 Speaker 02 Yeah.
6:02 Speaker 03 Why are you, why are you applying for so many credit cards?
6:05 Speaker 02 All at once.
6:06 Speaker 03 All at once.
6:07 Speaker 02 Right.
6:07 Speaker 03 So that's what dings your credit, credit score, it goes, it goes down. But all of a sudden, you know, you have multiple inquiries. And you go and apply for an American Express on the top of the five you just applied for, even though you don't have an answer yet, or maybe you're still waiting for an answer or whatever.
6:23 Speaker 02 Yeah.
6:24 Speaker 03 The sixth one is gonna say, well, you have five inquiries. How about, how about if all of them give you access to credit? Now, your available credit is gonna be a lot higher. Your risk is gonna be a lot higher. Maybe I'm gonna decline you on the sixth one.
6:40 Speaker 02 Yeah, right. Cause they're, yeah, I guess it could be viewed as uh, something's going on. There may be some financial troubles on the horizon.
6:48 Speaker 03 Yes.
6:49 Speaker 02 Or you're planning something.
6:50 Speaker 03 Correct.
6:50 Speaker 02 You're planning to throw a big party and then ditch, ditch town.
6:54 Speaker 03 Yes. Yes. And, and, and, and it's not unfortunate, like it's happened. It happened.
7:00 Speaker 02 Oh, yeah. Oh, sure. Yeah. No, there's a reason. There's a reason behind the, the, the credit scoring process.
7:06 Speaker 03 Yes.
7:07 Speaker 02 Um, but you, if you have the, you've already, you've already got the credit card, so don't.
7:13 Speaker 03 Yeah, I wouldn't, I wouldn't close it. If I'm me, I wouldn't close it. I've had a credit card since uh, a Macy's credit card that I had for almost 20 some years. Since I had, I put my, my first credit card ever that I had to put like cash in order for me to get one. I still have it. And guess what? When I run my credit report, I can still see the green check, meaning that I'm making payments. I'm making payments. I'm making payments. It goes into my credit history as I am a good payer.
7:37 Speaker 02 Yeah. Yeah.
7:38 Speaker 03 But it's a zero balance.
7:39 Speaker 02 And you never use it. And you never even use it. Yeah. Yeah. And that, and then it's showing.
7:44 Speaker 03 Unless, unless there's a huge sale. And you go to Macy's and say, hey, sir, do you have a credit card? You have an extra 20%? Yes, I'll use it. And then guess what? I'll turn around and I'll pay it right there and then.
7:53 Speaker 02 Oh, yeah. Yeah.
7:55 Speaker 03 That's the only time.
7:56 Speaker 02 If you put it on the card, then you get a discount.
7:58 Speaker 03 I'll turn around and I'll just like, yeah, can I just make a payment?
8:00 Speaker 02 Yeah. And then you just go right out in the parking lot and pay off.
8:02 Speaker 03 I got 20%, 30% off.
8:04 Speaker 02 Yeah.
8:05 Speaker 03 That's just me, sure.
8:06 Speaker 02 That, it, which, that, it annoys me that this happens now at cash registers at the point of purchase that you can, that they're hitting you up for, hey, if you want to save 15%, you can apply for a credit card right now. We'll take 15% off of it. So you can save a hundred bucks if you want to do that right now. Which, you know, normally would be fine, but there'll be others that will, will not understand what they're doing.
8:29 Speaker 03 That's right.
8:30 Speaker 02 And now they've got another credit card. It's got a little balance on it and then it becomes late or they forget about it.
8:36 Speaker 03 Young people. That's the young people. They're like, hey, I have multiple credit cards. And all of a sudden, I have a lot of access to to capital. And then they get in trouble.
8:47 Speaker 02 Yeah, yeah, I usually learn these lessons early on in life. Usually anyway, some one way or another. If your parents aren't teaching how to use a credit card, you're going to learn eventually.
8:55 Speaker 03 You're gonna learn.
8:56 Speaker 02 Happens when you're young, usually.
8:57 Speaker 03 You're gonna learn.
8:58 Speaker 02 Learn real quick. Good stuff. Let's go to the next question.
9:02 Speaker 03 Hey, guys, this is Phil. I text in with a lot of things that I don't understand, or I read on news sites and like to hear from real financial guys that some reporter.
9:13 Speaker 02 Uh oh.
9:14 Speaker 03 Yeah.
9:15 Speaker 02 Those reporters.
9:16 Speaker 03 He's not talking about John.
9:16 Speaker 02 No.
9:17 Speaker 03 That is a reading off a script. But if you have time, can you explain what is going on with the sixty three bank story and FDIC problem bank list?
9:27 Speaker 02 Oh, gosh. I couldn't find anything current about the sixty three banks. I think last year.
9:33 Speaker 03 Sixty eight.
9:34 Speaker 02 Was it sixty eight? There were sixty eight banks that were on FDIC list?
9:38 Speaker 03 Yes. So first, the list is an internal document. Okay, so when it makes it to be a public list, then the bank is truly, truly in trouble. I think there is, I think what the listener is talking about is that problem, potential problem, bank list that FDIC manages. And and I think you asked me this question before we got on air. What what constitute a problem bank? And it could be multiple things, Sherid. First, all banks are subjected to annual, sometimes multi exams a year, not just by the FDIC. It depends on the FDIC.
10:21 Speaker 03 It could be the SEC, state regulators as well. But the number one examiner is the FDIC. And the FDIC mandate is to protect depositors' cash, your mine, all the small depositors. That's what banks use to lend money and do their activities and run their activities. A bank can get in trouble with the FDIC, not because it makes bad loans only. It could be some multiple things. It could be mismanagement of their CRA program. It could be mismanagement of their suspicious activity report program. Or there are people that have cash businesses and they come and deposit a lot of cash.
11:03 Speaker 03 And if you don't monitor that well and you don't have systems in place that can tell you which one is money laundering and which one is actually truly running a business, then FDIC comes in and starts digging into this stuff. Management, who's in charge of the management? Your asset liability management, how are you managing your balance sheet, your liabilities and your assets? And if they feel that there is lack of integrity in your processes, then they put you under what they call a memorandum of understanding. That's the first step. They give you a chance to go and rectify whatever findings they find or they have, you have.
11:47 Speaker 03 And you have an amount of time that you can go back and fix things and then they come back and redo the exam. And if they feel good about it, they'll lift the MOU or the memorandum of understanding. If you don't, then you get into more trouble. Now they live with you. That's not what you want as a banker. It's for the FDIC to just have a permanent office in your building.
12:09 Speaker 02 It would be like in the restaurant world where you've got the letters outside, you know, A, you're good. B, it's like, C, okay, now the health department's gonna be coming around more regularly. You don't want a bank that's got that.
12:23 Speaker 03 No.
12:23 Speaker 02 However, Sammy, do you know how many depositors have lost money due to a bank failing?
12:30 Speaker 03 Since 2008 or in general?
12:31 Speaker 02 Ever. Actually, since the FDIC, since the FDIC was created.
12:37 Speaker 03 I don't know.
12:37 Speaker 02 Just roughly, what would you guess?
12:40 Speaker 03 What, 2%?
12:41 Speaker 02 Zero. Nobody. Nobody's ever lost a dime. No depositor's ever lost a dime because a bank failed.
12:48 Speaker 03 And their deposits.
12:49 Speaker 02 Deposits. We're talking about depositors.
12:51 Speaker 03 They own stock in that bank.
12:52 Speaker 02 That's a different story.
12:53 Speaker 03 That's a different story.
12:54 Speaker 02 And I think maybe that's where this listener's coming from, because we had the Silicon Valley Bank.
12:58 Speaker 03 Correct.
12:58 Speaker 02 Which was the one you were talking about earlier in the show, or before the show about basically mismanagement of the bank's investments and how they were handling that. The shareholders lost money there.
13:12 Speaker 03 Correct.
13:12 Speaker 02 But everybody who had money deposited there didn't lose a dime. Even if, even if they were above the limits. Because you would think, well, they have the $250,000 limit, so some people are going to be out. The FDIC, for better for worse, has established a precedent of not letting anybody lose a dime ever because the bank fails.
13:35 Speaker 03 You know why?
13:35 Speaker 02 Well, because it would be, it would be catastrophic.
13:37 Speaker 03 It would be catastrophic, because that's just, you're talking about a forest fire?
13:41 Speaker 02 Right.
13:42 Speaker 03 That's exactly what that is.
13:43 Speaker 02 Yeah.
13:44 Speaker 03 Like, if you, if you, if you let somebody lose their depo, or their cash. Now, all of a sudden, you, I, millions of Americans are like, well, my cash is not secure in the bank. I'm going to go and get it out.
13:55 Speaker 02 Right.
13:55 Speaker 03 And all of a sudden, the economy dries out of liquidity.
13:58 Speaker 02 You get a run on the bank, and this is, we don't experience this in, well, we haven't, since the Great Depression. That's, you know, that's happened during the Great Depression. That's what caused what was one of the, the, the, the big problems with the Great Depression. But this still happens in, in less developed countries. You still see this all the time.
14:16 Speaker 03 Lebanon.
14:17 Speaker 02 Argentina.
14:18 Speaker 03 As recent as, as, as last year, I think, or the year before, Lebanon.
14:22 Speaker 02 Yeah.
14:23 Speaker 03 Many people have
14:24 Speaker 02 Yes.
14:25 Speaker 03 thousands of dollars in their banks, but it's.
14:27 Speaker 02 It's, it's almost like a, sadly, it's almost a way of life in some of these other countries.
14:31 Speaker 03 Yes.
14:32 Speaker 02 And where, you know, there's these runs on the bank, and then, and then that just spurs all kinds of problems. You see just economic meltdown when there's no trust in the banking system.
14:43 Speaker 03 That, and that's our, I think, what we have as the strength of the American economy is our banking system, in my opinion.
14:51 Speaker 02 Yeah.
14:51 Speaker 03 So when, when you go overseas and you look at other economies, including some European countries, I always say this. To me, the American banking system is so advanced compared to the rest of the world, almost 30, 50 years ahead of Europe. Multi years ahead of African and maybe some Asian countries are close. But I think our credit system, our banking system is way, way ahead of its counterparts in other parts of the world. Now, here's a statistic, just problem banks in general. In 2000, or prior to 2008, we had more than 8,000 banks in the US. Right now, we have approximately between 4,300 to 4,500 banks.
15:34 Speaker 03 A lot of people will automatically say, well, yeah, that's because of the financial crisis and a lot of banks were closed down. 450 banks since 2008 to 2025, 450 banks were absorbed somehow and failed. The rest of the banks were absorbed through mergers and acquisitions. Some smaller banks, which in the Midwest mainly of the United States, we have a lot smaller banks, there's no, banks just closed because they could not compete anymore. The cost of compliance was so high, they just couldn't compete. So they just decided to close, to close doors. That's what the absorption of these banks, I think, came from.
16:19 Speaker 03 Failures is a percentage, a small percentage of the larger amount of banks that disappeared in the last 15 years or 17 years.
16:28 Speaker 02 Right. It's mostly been through mergers.
16:30 Speaker 03 Mergers, acquisitions.
16:31 Speaker 02 They've been acquired.
16:32 Speaker 03 Correct.
16:33 Speaker 02 Yeah, I was looking up the history of how many banks have actually failed. And relatively few banks fail each year. And we're talking about less than 10, at least in modern times, less than 10 banks a year fail. But if you look between 1941 to 1979, it was about five a year. Between 1996 and 2006 is about four a year. And then between 2015 and 2022 is about three and a half a year. So really, it's, it's pretty rare that a bank fails when there's about 4,000 banks now.
17:11 Speaker 03 Because other banks don't want even their competitors to fail. That just takes trust away from the consumers in general, and that's not what bankers want. Because eventually, if, we experienced that here in this community.
17:25 Speaker 03 Right, when San Joaquin Bank failed, right?
17:29 Speaker 02 Right.
17:30 Speaker 03 Other smaller banks, they, some of them got some extra business. But for the most part, the ones that benefited is bigger banks, Bank of America, Wells Fargo and Chase. Because those were too big to fail, a lot of people trusted them with their deposits versus smaller banks.
17:47 Speaker 02 Mm hmm. Yeah.
17:49 Speaker 03 Right?
17:50 Speaker 02 Right.
17:50 Speaker 03 So for a community bank, when I was a bank, we did not want another community bank to fail because it just sends the wrong message to the community about how smaller banks function, how smaller banks are managed. So we tried to like help each other. I remember I used to work for Bank of the Sierra and the presidents of Bank of the Sierra and other local banks reached out to San Joaquin Bank and tried to lend, hey, what can we do? To help out in order for this not to happen.
18:17 Speaker 02 Right, because they didn't want the black, the black mark on their industry. Yeah, but it's for the consumer, it's just really, it shouldn't be a concern. You shouldn't be concerned whether or not a bank is going to fail. It might be inconvenient for you, but you're not going to lose some money. Yeah, unless you're, yeah.
18:37 Speaker 03 If you're a shareholder, yes. But if you're a depositor within the bank, to your point, Jared, it's a zero loss.
18:45 Speaker 02 Yeah, yeah. And, and FDIC has just continued to show, up until recently in 2023, when the FDIC jumped in even before there was any like speculation of what was going to happen with Silicon Valley Bank, they came out and said, we're going to, we're going to make sure that everybody's, like, everything's going to be fine.
19:02 Speaker 03 Yep.
19:03 Speaker 02 Just to try to calm people's nerves. Good question, though. Good stuff. We have another one?
19:08 Speaker 03 Yeah.
19:08 Speaker 02 Let's go.
19:09 Speaker 03 I think this is for you. I'm going to skip this one. Hey, guys, my name is Frank. Love the show. I'm in my late twenties, just getting settled into my career. I don't make a ton yet, but I want to start doing the right thing. Should I be focusing more on a Roth IRA or my work 401K first? I have been sending a lot of messages and I want to say thanks for covering them.
19:31 Speaker 02 Good, good stuff. Good question. So I'll, I'll restate the question, which is, do you, where do you start first? Do you contribute to your, your company's 401K or to, in this case, a Roth IRA?
19:45 Speaker 02 There's no straightforward answer here. However, generally speaking, you have some slight benefits to using your company's, your employer's 401k versus you just doing your own savings on your own, like through a Roth IRA or a traditional IRA. And the reason why, some of the reasons why you have added benefits to using your company's 401k is because oftentimes your company will give you a match. That's free money that they're willing to, you know, matched up to a certain percentage of every dollar that you deposit into your 401k.
20:29 Speaker 02 And you also have the convenience of it being automatically deducted from your paycheck. So you can automate your savings in a way that's a lot easier to do than if you doing it on your own and just, you know, setting up your own IRA or Roth IRA and having it, you know, contributing it that way. You can also contribute more to your 401k than you can to your individual retirement account or your Roth. And so there can be some, and you can borrow against your 401k. You can't borrow against your IRA. And so there's a few benefits to using your company-sponsored retirement plan. Now, I noticed that listeners are saying Roth versus a 401k.
21:14 Speaker 02 You need to, you need to understand that in your 401k, you can contribute to a Roth 401k. That's something that now all 401ks, I believe, generally, they all offer that. So you can choose whether or not you want the money to go in after tax or pre-tax. And so you can do that whether it's in a 401k or you're just doing it on your own. So really, the question comes down to whether or not you want to contribute to your, to your own retirement on your own, or whether it's useful using your company, your employer's sponsored retirement. In that case, it's almost always advantageous for somebody to use their company.
21:55 Speaker 02 401k. And if you want to put it into the Roth 401k, that's okay, too. That it's a little bit more complicated when determining whether or not you contribute to a Roth 401k or traditional 401k, or if you're not working, whether you contribute to your own traditional IRA or your own Roth IRA. Basically, it comes down to how much you are, how much of a benefit you get today for the tax deduction. And let's say, for example, you maybe have low earnings this year. So you don't really get a tax benefit for being able to deduct that from your income because you don't pay much in income taxes anyway.
22:36 Speaker 02 If you're in that position, you'd be far more advantageous for you to contribute to the Roth. Go Roth because you don't care about the deduction, but now you get tax-free growth. And so it's going to grow tax-free and then you can pull it out tax-free. So that's a much greater benefit to somebody who doesn't get the deduction now. If you're a high earner and you're a high tax bracket, then generally speaking, you want to consider going the traditional 401k or your traditional IRA. Because now you get, let's say you're in the, let's say you're in a 25% tax, marginal tax rate.
23:17 Speaker 02 That means that you're saving, you're getting a 25% return on every dollar that goes right into that account because you're not paying any taxes on that. So imagine that, Sammy. It's like, I'll give you 25%, 25% right off the, right from the get-go, day one that that dollar hits the account, and then it grows and it compounds. Yep. That's huge. That's a big, big benefit. Now, yeah, you then you say, well, yeah, but then when I pull it out, I'm going to have to pay taxes on it. Yes, that's true. You want to calculate that. But the idea is you're pulling it out in a year when you don't have high income or you're pulling it out when you're retired, so you're not earning income. So you're in a lower tax bracket.
23:58 Speaker 02 So you can, you got to take advantage of all of that, that deduction and all of that tax deferral, all the growth. And the deferral of paying taxes on it until you get to a point where you can. So I'm still a big advocate of the traditional way of contributing to your retirement, especially if you are in a higher, your household has high income or you're in a high tax bracket, then it's sometimes really hard to overcome that benefit of getting that tax deduction versus, you know, just having something that's going to grow tax free. So there you go. Good stuff. Good question.
24:36 Speaker 03 Very good question.
24:37 Speaker 02 We're going to take our break now. First break of the day. We come back, we're going to be joined by John Cox from the Bakersfield Californian. Got a lot to talk to John about. Don't go anywhere.
24:45 Speaker 00 Are you an employee with a company-sponsored retirement plan? Do you fully understand how you're invested and whether or not you are maximizing your retirement plan's options? For more information on a free assessment, contact MoneyWise's 401(k) Specialist, Justin Leland, at 661-847-1000. That's 661-847-1000.
25:08 Speaker 04 John Cox. He's a man of a million words. John Cox. He's the king of the business nerds. Looks like Jimmy Elson from Superman, but a little bit taller and a bit of a tan. John Cox. He's from Bakersfield Californian. John Cox. Makes stories in credit unions. It's a good thing that he's only on the radio air, or else you'd be distracted by his dark flowing hair. John Cox.
25:36 Speaker 02 As John Cox's theme song still makes us laugh every time.
25:41 Speaker 03 I forget, I forget how good that song is until John comes.
25:44 Speaker 02 It's just too good. John, thanks for coming back on the show.
25:47 Speaker 05 Thank you for having me. Always great to be here. Love the studio.
25:49 Speaker 02 Thank you. In person, huh?
25:52 Speaker 05 Yeah, it looks great. And it feels like the sound quality and everything's just a higher grade.
25:56 Speaker 02 Everything, everything is higher grade in here. It is, except for the chairs that Sammy is, Sammy hates the chairs in here. I don't know what's wrong with them. We've only had them for 15 years and they're fake leather.
26:09 Speaker 03 We're getting new chairs, John.
26:10 Speaker 02 Okay, all right. All right, little quiz. The world's largest aircraft.
26:17 Speaker 02 You know where the world's largest aircraft is from or located?
26:21 Speaker 03 Ukraine? Is that the Ukrainian one that got bombed?
26:23 Speaker 05 It's the rock.
26:25 Speaker 02 It's the rock, right?
26:27 Speaker 05 ROC.
26:27 Speaker 02 ROC, right down here in our backyard. Strato Launch, huh?
26:32 Speaker 03 East Kern?
26:32 Speaker 02 East Kern, yeah. There's a company, Strato Launch, that has a 385-foot wingspan. I know what you're thinking of, the Ukrainian Antonov AN225, which the Russians ended up bombing. That was the bigger one, but this one's even bigger. It's far bigger than the Spruce Goose. And it's a Kern County company. And you have written a story about this company actually getting an injection of capital from a private equity firm. This is, I guess, could be viewed as good news for Strato Launch?
27:13 Speaker 05 Oh, for sure, for sure. A big boost in recognition, credibility at the least. But multiple hundreds of millions of dollars is what they'll say about the size of it, from the Elliott Investment Fund, joining Cerebus? I forget, I'm not sure how you pronounce the other one. So two very large private equity funds that put a lot of money into it. And it's about increasing, I mean, several things, but really it's about increasing how frequently they can perform these tests. They're not going to be selling either vehicle. So that large one that you mentioned is actually just a carrier craft. And they also use 747s, by the way.
27:55 Speaker 05 And they might just buy a new 747 instead of buying another rock or making another one.
28:01 Speaker 02 But they use these big aircraft and they attach another aircraft, like a rocket aircraft to it.
28:06 Speaker 05 Much smaller, autonomous, and that is the one that goes at least five times the speed of sound. I don't really know how quick it actually runs, but that's as much as they're willing to say. And again, they're not selling these for development and sale. This is for serving as a test bed as the United States tries to do more and more with hypersonic. Excuse me. Yeah, no, hyper is the right term.
28:29 Speaker 02 That's right.
28:29 Speaker 05 Hypersonic flight. And so the administration wants to do an average of one of these flights per year. And so this company wants to be on that market, wants to serve that niche for other companies that hope to offer products to the hypersonic industry. So they, you know, this one will never do anything more than test.
28:51 Speaker 02 Yeah, which is really fascinating business model. Enough private equity is dumping millions of dollars into it, and it's a company that's going to help, because there aren't many other companies that are doing hypersonic testing. This is also a answer to the increase in some of these types of weapons that we're seeing in Russia and Ukraine, right? Where you're getting these super hypersonic missiles. And so United States has seen the writing on the wall and go, well, you better make sure that we're supporting the investments into researching some of these things. Am I correct in that?
29:33 Speaker 05 Yes, that is absolutely correct. And so this several hundred million dollars is going to be supplemented by, what was it, a hundred and how many million dollars? No, thirty million dollars, wasn't it? That Congress last week approved for the next budget. I can't remember. It's something like thirty million or fifteen million. I can't, you know, much smaller amount. But the fact that the federal government is giving, wants to give money directly to straddle launch is a very positive thing. And you see a lot of focus on East Kern's aerospace slash defense industry, and our local congressmen are pushing that forward. So this is a huge one, really, for Kern County. Now, is this going to mean
30:17 Speaker 05 jobs, new jobs? Not necessarily. It's going to be invested in buying some things and increasing the frequency, maybe adding another test site, but really to do more and more frequent hypersonic flights as a test bed for essentially the federal government working with privately contracting with private companies.
30:37 Speaker 02 This is, you started the article by saying this is one of Eastern Kern's most promising aerospace operations.
30:46 Speaker 02 I'm trying to think of what other, I know there's a lot of other aerospace because it's a big thing out there.
30:50 Speaker 05 You hesitate to say the most promising, you know, I just might be, you know, mistaken about, you know, is it the most promising, you know, I believe that they operate out of the Mojave Air and Space Port and, you know, they do pretty well over there. I don't know that it's at capacity, but you know, that's where the place goes. It's been described as this place where, you know, if you're, if you're short on propellant, you can knock over to your neighbors and say, hey, you got, can I get a cup of propellant?
31:15 Speaker 02 Borrow some rocket fuel. I need a cup of rocket fuel.
31:19 Speaker 05 That's what you want, right? These accelerators try to recreate that same sort of feeling where everyone's sort of working together and, hey, I need, I need a rocket scientist. I'm trying to hire one. Do you guys know anybody? Oh, yeah, we're, we were just talking to this guy and he's available. So Kern County has a lot, a lot of opportunity. And as the, you know, Trump administration places, renews focus and investment on aerospace and defense, East Kern is poised to benefit from a lot of that.
31:46 Speaker 02 That's great. So we're getting some love from the federal government for aerospace, but we're also getting, it sounds like some private investment into some of our aerospace companies. What about, what is, what are they, what's happening in terms for the farmers? Because I know the farmers are a lot, under a lot of pressure. You wrote an article last week about the USDA planning to invest, or not invest, but I guess purchase $80 million in specialty crops?
32:19 Speaker 05 Indeed. So the interpretation of that was, is more interesting than the act itself because this is what the USDA does. It, you know, it buys crops and it puts it into like safety net kind of programs, you know, food banks and nutrition programs. It's an annual thing, but attention was called to this particular purchase of, what was it, $80 million in specialty crops, which are, you know, not what are called program or row crops. These are basically stone fruit and nuts and, and table grapes and citrus, the kind of things we grow a lot of here in Kern County in California. The bulk of specialty crops are grown here in California.
32:59 Speaker 05 But when the Trump administration in December unveiled a subsidy package, kind of a lifeline for the nation's farmers, it was $12 billion. And only 1 billion, or about 8% of that total, went to specialty crops. And it was viewed as disrespectful to California. Not the only place you can buy these things. You know, Kansas grows, I forget what specialty crops, you know, it could be pumpkins, for example. But it was seen as a slap at California. And, you know, these are Trump supporters here. There is farming community, and so they have, you know, his ear to a degree.
33:40 Speaker 05 Maybe, by the way, that's why we don't see as much immigration enforcement happening in the Central Valley than we did, you know, in the waning days of the Biden administration. But, you know, they like to think that they're, you know, being helped out, especially with the very tough times that we're seeing in agriculture right now. In fact, I'll be writing a story for tomorrow's paper about farmland values, reflecting the same realities of very, well, above all, sigma, the sustainable groundwater management. Water scarcity and restrictions are very damaging to the industry right now. But also, high input cost commodity prices, not necessarily for almonds, which are doing OK lately, you know, the last 18 months. I was reminded today, they've really rebounded.
34:22 Speaker 05 But specialty crops in general, and really many crops, are also hurting from the trade policies of the administration.
34:30 Speaker 02 Tariffs.
34:31 Speaker 05 Right, tariffs and counter tariffs. And so the $12 billion was an answer to that. And that the fact that only 1 billion went to specialty crops led the Kern County Farm Bureau and the California Farm Bureau to say, wait a minute here, this is not fair, and you need to do better than that. And so then we hear this announcement, oh, look, you know, and then a literal announcement, look, we're going to buy $80 million worth of specialty crops. And the reaction was, that is not nearly enough.
35:04 Speaker 02 Yeah, I'm guessing the reaction should have been, did you say million or billion? Because now millions like nothing.
35:13 Speaker 02 Million like a million. Come on, a farmer's gonna, yeah.
35:16 Speaker 05 Dr. Evil could do better.
35:18 Speaker 03 I'm gonna guess too that we still have leftover almond crops from years past because the lack of demand from overseas and the tariffs and what have you.
35:27 Speaker 05 It's been lessening though, as I understand it, the the carryover crop has been less than it was. And then, you know, the prices have improved. So that has been a big problem. And I think we're still, you know, nervous about the supply of almonds. Is a lot of trees have been taken out of production, but there's still a lot of production compared with demand overseas and domestically. But I understand that situation is improving. Otherwise, we wouldn't have the the pricing that has.
35:59 Speaker 02 What's almond pricing? Yeah, what is, what has happened?
36:02 Speaker 05 Well, it has improved. You know, in 2014 or so, you were, you were getting about $4 a pound, right? For for almonds. Right now, it's, you know, maybe two, which is better than a buck, buck 25 from, you know, a couple of years ago. So there's been improvements, I'm told. I don't, I'm not looking at the prices and I don't have them on top of my head, but it has surpassed $2 a pound, I believe.
36:25 Speaker 03 At $2, $2, I'm just, I'm just gonna guess here. I have not underwrote any ag loans in the last five years since I left banking. The, the, the cost of planting, capital, equipment, loans for the land. I'm gonna, I'm gonna guess at $2 is probably breaking even.
36:46 Speaker 05 Right, yeah. But for a lot of time, it was not breaking even.
36:50 Speaker 03 I agree.
36:51 Speaker 05 Below that.
36:51 Speaker 03 Yeah, I agree. A lot of people were, I mean, that's, I think what, there's two things historically that happened. Before 2014.
36:59 Speaker 03 Prices were three dollars, four dollars. And what we saw is a lot of people moved from some row crops into permanent crop, which was mainly almonds. And all of a sudden, by 2017, 2018, all these trees came to fruition. They come third leaf, fourth leaf, and they like full production. And we have a lot more, had a lot more pounds, you know, harvested versus prior to 2014, which in my opinion affected prices. Fast forward to 2016, the first tariffs, the first Trump admin, and then the lack of exports.
37:36 Speaker 05 Right. So they're working on this, though. The exports, I think domestic is what it is. You know, you can, you can put it in different sorts of foods and you can market it. But really, the growth potential is mostly overseas. You've got China, you've got India, and, and it, the tariffs and counter tariffs have not been helpful to that. But it's, but I'm told that the situation is better. On the other hand, gonna switch on over to pistachios. Not a great situation. There is a, again, a concern that there's been overplanting, over supply. And I just looked today at these, these charts of farmland values. And what was among the, the steepest declines in farmland valuations? Pistachios.
38:20 Speaker 02 Really?
38:20 Speaker 05 Yeah.
38:21 Speaker 02 You were a big, you were a big pistachio advocate. I remember you writing a story.
38:25 Speaker 05 They're tasty. I take them in anything. I put it in my ice cream.
38:27 Speaker 02 Now they're putting it in chocolate? Have you had, what did they, Dubai chocolate?
38:31 Speaker 03 Hey, man, that's just the most overrated thing ever.
38:34 Speaker 02 Oh, come on.
38:35 Speaker 03 See, I'm telling you, man. I was, I was, I was leaving, I was leaving a store and they were like, hey, you wanna try the Dubai chocolate? And I'm like, sure. I added it to my list. I got, I get outside, I get into the car, I look at the receipt. It was $20 for a bar of chocolate.
38:50 Speaker 02 Yeah, cuz it's so good.
38:52 Speaker 05 Overrated, maybe, because those prices are crazy, but still good.
38:55 Speaker 02 It's so good. It's good. And maybe not worth that much, but that, so.
39:00 Speaker 03 Pistachios, but going back to prices, I'm, I'm curious to hear you, what you have to say about pistachios. Because again, five years ago, when I was in banking, the acre was about $60,000 of full grown pistachio trees that's producing at, at, you know, at maturity. And now. It's a lot less.
39:21 Speaker 05 Take a look at tomorrow's paper. We'll try to include some, some numbers comparing the, the value of pistachio orchards on an acreage basis now versus, let's say, you know, a few years ago. But I can tell you that the, the decrease has, has accelerated.
39:38 Speaker 02 This like recently, this like the last year?
39:40 Speaker 05 Yeah, the 2024, I'm looking at the fourth, not at this moment, the fourth quarter numbers from Alliance Ag, I believe it is. And that is one of the more noticeable things. Because you know, institutional investors have jumped in.
39:54 Speaker 03 Yes.
39:54 Speaker 05 You know, so they're thinking, this is where things are at. Because pistachios a lot going for them. And they are very popular. And unlike, you know, almonds, they don't, you know, age out after 20, 25 years. And you gotta pull them out and replant them.
40:07 Speaker 02 Yeah, they last longer, right? And then they, they can take more brackish water.
40:11 Speaker 05 Right, yeah.
40:12 Speaker 02 And they're a little bit more drought tolerant.
40:15 Speaker 05 Yeah, resilient. Yes, they are.
40:16 Speaker 02 And I don't know about the pest, maybe there's not.
40:19 Speaker 03 You have to have a certain cold level or coldness level.
40:23 Speaker 05 Right.
40:23 Speaker 03 In order for, for them to, to fruit.
40:26 Speaker 05 I think that's more, more important with pistachios than with almonds.
40:29 Speaker 03 That's right. Yeah. It has to have a chill factor. Pistachios need that, that those cold nights that we have, you have to have a certain amount of cold nights, like successive even, in order for, for the crop to be successful.
40:43 Speaker 02 I think you wrote about, did you write about that too, John?
40:45 Speaker 05 I did. But there was years ago when we saw an example of exactly what Sammy's talking about. And I saw the picture. Someone, someone showed me a normal one that didn't have the problem. And one that because of the lack of chill hours, the pollination was off. It did not align. And so there were blanks. You open up these things and they were not even nuts. And it was olive waste. That is a worthless crop.
41:09 Speaker 02 When you don't get to chill enough, that's exactly what happens to me too.
41:13 Speaker 05 Right.
41:13 Speaker 02 I just feel like this empty, empty vessel. You got to have those chill out, right Sammy?
41:18 Speaker 03 You have to have chill hours.
41:20 Speaker 02 You got to have chill hours.
41:21 Speaker 05 You can't reproduce otherwise.
41:23 Speaker 02 That's what the weekends are for.
41:25 Speaker 03 Yeah. That's what you got to block time on the calendar for chill hours.
41:28 Speaker 02 Chill out after work, we got our chill hours.
41:30 Speaker 03 Yes, you know, I get my chill hours at the counter upstairs.
41:33 Speaker 02 You got to have them. There's a, there's a medical reason why we need chill hours, but so do, so do pistachios.
41:40 Speaker 03 It's gonna be an empty shell, Sharon.
41:41 Speaker 02 No, we got, we gotta have them. The, uh, it seems, so why, why are pistachios being hurt so much more than almonds? Do you know?
41:51 Speaker 05 It's a production problem. Yeah. Again, so almonds have taken steps to reduce and nowhere more than in Kern County has there been a removal of orchards. And, you know, almond, excuse me, wonderful, a few years ago, took out 10,000 acres in one.
42:07 Speaker 02 Of almonds?
42:08 Speaker 05 Belt swoop. Yeah, almonds. And, you know, why, you know, they weren't exactly talking about it. I think they confirmed it, but why? Well, it's the oversupply. They were, you know, taking steps. Is it a little painful in the near term? Sure. But you're, at least you're not adding to the oversupply. So pistachios, you know, there's some question about how, how we're going to be able to overseas create demand. You know, things are looking good. However, it appears that, or it has appeared for a little while that maybe there's going to be an oversupply and more and more coming on to, coming into production because they take like seven years. Almonds take like less than five years before they start producing. So you don't see the effects of what you've done until afterward.
42:52 Speaker 05 And if everyone around you is doing the same thing, suddenly you've got a lot more than you planned for.
42:57 Speaker 02 Well, thank goodness for the USDA and this $80 million.
43:01 Speaker 03 And also the USDA, just to mention, when, when, when, um, as, when I used to work for Mission Bank, when we saw the board has had this, this, for, for, they saw this coming and they saw that a bunch of planting is happening. So they relied on the USDA guarantees to lend, to lend. Money to growers. They use the guarantee programs through the USDA to try to manage the risk of all this extra planting that was happening because they had the forecast of seeing prices crashing. If all these trees, all these trees come on at the same time, production is going to go up, what happens to prices?
43:42 Speaker 03 We have a lot of production, maybe the demand is going to be less or even the same, then prices are going to crash. So they, they just, just like, hey, look, we're going to use this government programs, lending programs in order for us to manage our risk, our lending risk. And, and, and kudos to, to them because there's some board members that are in ag that saw this coming.
44:03 Speaker 02 Well, now we'll find out in tomorrow's paper with John's story about what's going on with ag land prices. Apparently it's not good.
44:12 Speaker 05 Yeah, I didn't see any increases, but in the higher land, the higher end of the pricing and certain crops, they kind of held steady and, and different really water sources, extremely important, where are you getting your water is from the Central Valley Project, from the state water project, that, that has affected the pricing of agriculture. And so at the high end, you're seeing some of them actually, you know, bottom out, level off, which is great, but at the bottom end, almost across the board, you're seeing decreases. You know, if you're looking for the cheapest thing, you can get it even cheaper than you used to.
44:47 Speaker 02 Yeah, it's a, it's a buyer's, well, I think it's, it's a buyer's market.
44:50 Speaker 03 I'll be honest with you, I still look, I mean, the almonds, the pistachios were a great appeal for high earners, like, you know, multimillion dollar a year type of earners, because they saw that as a tax outlet. When you're a grower, you can harvest this year, but you don't collect the payments of the following year. So you're always deferring your, your, your income, meaning that you subject yourself to the tax expense this year, but the revenue is not realized in the following year. So there's always a deferral of your income affecting your tax bracket.
45:30 Speaker 03 You know, positively. But now, these high earners that were investing in pistachios and almond trees and small ranches, there, some of them that invested in this, they just want to get out because they're losing money. And even, you know, as a tax deduction or tax liability process, they don't want it anymore. And we saw, we see a lot of these properties on the market. I talked to Mike Berger, the appraiser, the other day. And I told him, hey, what's going on? I was like, Sammy, I was, I was, I personally was thinking like, hey, is this, you know, these good prices? Maybe I'll jump on a 20 acre pistachio or 20 acre almond.
46:12 Speaker 05 He was like, hold on.
46:13 Speaker 03 Sammy.
46:14 Speaker 05 Just wait.
46:15 Speaker 03 Just, just, just said.
46:16 Speaker 05 Is that what he said? He was like, this is gonna get worse.
46:18 Speaker 03 If you see the prices today, then I would not guarantee it for, for next week. Because the water situation, the, the, the, the demand from overseas, how it's, how it's going to be said. I'm, I cannot guarantee the price of this land or this, this property, you know, going forward. Until some, some things become more of a reality versus now, it's, a lot of things are in flux.
46:42 Speaker 02 We've been talking about Sigma and the impact of the sustainable, the Water Sustainability Act here in California for a long time. The numbers that I've always thrown out there is roughly a fifth of farmland is going to be fallowed or unusable because of now the, the state's regulation of groundwater. So, and I don't know where we are though in that. Like where, if, if we look at Sigma and the impacts of, of, of farming on a scale of one to 10, one being, okay, there's no impact and 10 being, okay, it's all, it's all that. We've seen all the, all the damage of what's happening with regulators. Where do you think we are?
47:27 Speaker 05 Gosh, I would say that's a question for Lois Henry, much more than me. But it. I think we have a pretty good handle. My sense is we have a pretty good handle on just how bad this is going to be. And one of the interesting thing that's happening is as it becomes clear that a lot of farmland is going to come out of production, what's it going to be replaced by? And the answer appears to be, you know, hopefully solar development. I mean, Kern County at Bakersfield, we're going to see residential. We're already are seeing residential take some of that land. Remember the Williamson Act where you get benefits for leaving farmland as such and not developing it. But if you do want
48:08 Speaker 05 to take it out of production and you want to develop it into even solar residential, you got to pay like a fee because you were getting benefits and now you got to pay for it. And so there was a bill in the legislature that did not pass, but folks are trying to continue to bring it forward that would ease up on the Williamson Act restrictions. And so you don't have to pay. But it did not pass. And yet still, what is billed as the biggest solar farm in California is taking shape. It's gone before the Board of Supes. I don't know if they pass it or not, but two gigawatts of energy out of, I forget
48:49 Speaker 05 how many thousands of acres we're talking about, but solar and storage, so big batteries, and many different families and properties who all have been joined together by San Diego based Avantis to take what is now farmland, level it, and put in solar arrays. And that is what a lot of folks hope to see happen with that. You know, California needs a lot of electricity.
49:14 Speaker 02 It doesn't need solar, though.
49:17 Speaker 05 Well, it needs storage, yeah.
49:19 Speaker 02 Yeah, it needs storage. Like solar now, there were, I know there were several times last year where we were just basically overproducing and couldn't do anything with the overproduction of solar during the peak.
49:30 Speaker 03 I wonder if that's going to remain true with all these AI centers, though.
49:34 Speaker 02 Well, it's a matter of, solar's only good, you know, for those, when the sun, yeah, for that time. And so, you know,
49:44 Speaker 03 Then the storage comes in.
49:46 Speaker 02 Yeah, then that's where the storage comes in. But there are other some, you know, cool projects going on. Is there any update stats with the projects that are going on in Kern County that are like, that were funded with millions of dollars and then Trump pulled it?
50:00 Speaker 05 So the funding has been pulled for a steel plant proposed in Eastern Kern, which I am told is still going to go forward, just not without the subsidy. The cement plant also had that grant pulled by the administration. However, Hydra Store, Canadian company hoping to do compressed air energy storage, very exciting.
50:23 Speaker 02 Yeah.
50:24 Speaker 05 This is like their flagship project. That one relies or was given a $1.6 billion loan guarantee. And I think it was in the waning day or I think that was under Biden. And now there's some question about it. We don't know whether it's going to move forward or not. Apparently it is under review. A number of exciting projects in Kern have sort of ended up on the editing room floor.
50:52 Speaker 02 Right.
50:53 Speaker 05 Including a lot of carbon projects and the other two I mentioned, but this one just might make it. It just recently was approved by the California Energy Commission. It's a very exciting project. I mean, the technology is really cool on this and it, you know, it seems appropriate for the air. Yes, it's going to need a lot of water, but it's not going to need constant flows of water. Once you've got the water, you more or less have what you need. So that, you know, there's a lot of hope that's going to happen.
51:18 Speaker 02 Closed-loop hydro is, I think, an amazing technology. We have some of it here in Kern County. You wrote a story years ago about a proposed project up there.
51:28 Speaker 05 A couple of proposals. Now, whether they're going to move forward, I don't know, but certainly, I mean, they could. Closed-loop hydro is very exciting. There's some downsides to it, but there's a lot of upside.
51:38 Speaker 02 Yeah, no, it's super cool. Well, John, thank you so much for taking the time to come on the show. Want to remind our listeners, it is our only local newspaper, Bakersfield Californian. It does still deliver the newspaper. It just comes in your mailbox, so it's still around. Go subscribe to the Bakersfield Californian. It's where you can learn about what's going on here locally. Of course, we want to remind all of our listeners that if you've missed this show or any of our past shows, you can go subscribe to the Money Wise Podcast. It's commercial free and it's on all major podcast platforms like iTunes, Apple Podcasts, or Spotify. We will be back tomorrow, but before we leave, remember these three things. Be smart, be safe, and always be money wise.
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