2/26/25 The Changing Economy: Business Moves, Green Investments, and Insurance Trends

The Moneywise Radio Show and Podcast Wednesday, February 26th 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, Ph. D., Professor of Economics at CSU-Bakersfield website: https://rgearhart1.wixsite.com/csubeconomist/about-me-and-cv

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

• 0:39Speaker 00

  Now, let's start the Money Wise Show.

• 0:42Speaker 01

  Welcome to the Money Wise Show. We are live from the Gero Ellis padded radio room off Stockdale Highway on ESPN Bakersfield, 12:30 a.m., 101.1 FM, and always streaming at MoneyWiseGuys.com. You can text into the show 24 hours a day at 661-396-1000. Today, we're your hosts. I'm Sharad Waite and?

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  Latroy Dinkins.

• 1:05Speaker 01

  Latroy Dinkins, welcome.

• 1:06Speaker 03

  How you doing, sir?

• 1:07Speaker 01

  I'm doing great. We had a really good show yesterday. We had a listener comment. I'm going to read it right now. It says, "I really enjoyed hearing about Time for Change on the show yesterday, and we will be reaching out to see if we can line up someone to talk to our students later this school year. Love the show and your commitment to our town." Thank you, listener, for that. We had Jovan on yesterday. It was super, super good. I was kind of fanning out, though, because I'm a fan of his music. I knew him about his music before. I kind of knew what he did with the community and that before. And he, like, downplays his talent, I think, a little bit.

• 1:44Speaker 03

  That's what the best do, you know? They downplay. He shot me his album. It's pretty neat.

• 1:49Speaker 01

  It's, yeah, super good. So, thank you to our listeners. We love hearing feedback. 661-396-1000 is the number that you can text. Got another message here I want to answer. It says, "Any updates on Gero? Haven't heard much around town and figured I'd check on him. Our family has kept him in our prayers, and God bless." So that's super nice and we really appreciate that. So many people keeping Gero and the Ellis family in their prayers. I know it's very much appreciated, not only by us, his work family, but by his, his real family at home. So, you know, as, as many know, Gero, one of the co-founders here at Money Wise, and we've actually named the, our studio after

• 2:34Speaker 01

  him. He'll always be a part of our Money Wise DNA. He's contributed not only to Money Wise, but was, it was a community leader. It was very involved in Rotary, involved in much of the, of their fundraising over the years, served as president at the Downtown Rotary. Just very much involved and engaged with the community. Last year, in fact, it's been almost a year to, to the month that Gero had a massive stroke. And it was a, a, a large enough event that it has set him back physically quite a bit. And he has been in,

• 3:12Speaker 01

  still is in, in therapy, physical and occupational therapy, speech therapy, and, and still has a ways to go. Has made an incredible recovery. If you consider, he was on the brink of death and in the

• 3:27Speaker 03

  It's a miracle.

• 3:28Speaker 01

  Yes, absolute miracle. He was in the intensive care unit for months, and then in the hospital for several months, and of course intense therapy. And so we're just, we feel very fortunate that Gero, Gero is actually still alive. But there's, there's some challenges. And anybody who's familiar with strokes know that the path to recovery is not certain, and it's not even. It can come in fits and spurts. So, you know, Gero is making some progress in terms of being able to sort of stand somewhat on his own with some brace, braces and, and, and a walker. And that's great. That's fantastic news. There's still some, some struggles with speech. And the, the part of the brain that was affected, has

• 4:12Speaker 01

  certainly affected his speech. But anytime, and we still see Gero occasionally, he does get out occasionally in, in, in town. And if you do see him or run into him, you'll notice right away. He's got a big smile on his face. He's, he's just, he's still very much there. And for that, we're, we're, we're super grateful and, and grateful for your prayers and, and thoughts. So, thank you for, for thinking of Gero. Got another message here. Latroy, I want to get your opinion and help with this question. And it's regarding Elon Musk. It says Elon Musk's lawsuits against OpenAI raises concerns about competition in the AI space. How might this case affect regulatory scrutiny of AI companies

• 4:56Speaker 01

  and their business models in the coming years? Can you also throw in oil prices? So this guy, two questions here.

• 5:02Speaker 03

  Man, I didn't even know this was going. I didn't know Elon is always up to something.

• 5:06Speaker 01

  Gosh, yeah. You know, yeah. So I'd heard about this. Elon Musk has a lawsuit against OpenAI. He's essentially alleging that the company is deviating from its original nonprofit mission because it's, he claims that they're prioritizing profits over public good because of the partnership that OpenAI has with Microsoft and now their shift towards a for-profit model. He thinks Elon Musk and his attorneys believe that this raises some ethical concerns and some concerns within the AI industry. And so that's where this legal battle comes from. Now, whether or not this brings increased regulatory scrutiny is yet to be seen because

• 5:48Speaker 01

  this now just speaking us on our opinion. Elon Musk has made a shift over the last couple of years to really doing and saying a lot of things that contradict themselves and that you don't know if you can take it serious or not.

• 6:03Speaker 03

  Yeah, no credence behind what he says.

• 6:05Speaker 01

  Yeah, it's almost like since he bought Twitter and turned it into.

• 6:09Speaker 03

  Which he tried to balk on, by the way.

• 6:11Speaker 01

  Yeah, exactly. Yeah, he did. Once he realized he was holding the turd and started losing billions of dollars and still Twitter or Axe is, you know, not anywhere the value that it was before. In fact, we're even seeing it now with Tesla. I think Tesla is down about 25% from its peak, its share price. So it's lost, you know, 25% in market capitalization and just in the last, you know, within the last year. A lot of it because people are sort of looking at the CEO of the company and going, what is going on? You know, what, what is he doing and saying? And I'm not even talking about his political leanings. I'm talking about.

• 6:48Speaker 03

  Which is even worse.

• 6:49Speaker 01

  Which, well, depending on where you are, but I'm, I'm looking at it in terms of his integrity. Like, how do you, how do you know if what he's saying is actually true? He's been, he's been sued, he's been slapped on the hand several times. And if you remember when he was talking about taking Tesla, was it Tesla taking private? Or talking about the share price going to 420? And he did this like on April 20th, you know, as a, as a nod to the cannabis, you know, community. And at the same time, it was right around when he smoked a joint on Joe Rogan's show. And, and got in trouble for that by the board.

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  Yeah.

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  You know, it's like.

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  And then, and then his, uh, what is it? Saturday Night Live stunt with the Doge coin?

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  Yeah.

• 7:33Speaker 03

  It's just, yeah.

• 7:34Speaker 01

  It's this, and now Doge, you know, the Department of Government Efficiency is not making a lot of people happy. It's making some people happy, but others, it's really ticking them off. So the broader though, AI sector is much bigger than just OpenAI. OpenAI, I think, is one of the leaders and it's kind of been the first one to really get out there with this ChatGPT software. But you were talking about.

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  Grok 2?

• 8:02Speaker 01

  Grok 2, this is.

• 8:04Speaker 03

  All of them nonprofit, like, like.

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  No.

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  All of them have that same model?

• 8:08Speaker 01

  No, that's the other thing.

• 8:10Speaker 03

  But you pay a prescription, you, you, you gotta pay a subscription to OpenAI to use certain features.

• 8:15Speaker 01

  Yeah, yeah, yeah. So it's, but they're, OpenAI is moving towards a for-profit model. But the other ones like Grok and what was the one that we, we talked about?

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  It was DeepSeek.

• 8:27Speaker 01

  Yeah, DeepSeek, like, these are, these are, these are companies that are ultimately looking to make some money.

• 8:33Speaker 03

  And a competition too, you know, and so, yeah.

• 8:36Speaker 01

  Yeah, so, you know, hopefully that, that clarifies a little bit of at least what we think about the OpenAI.

• 8:41Speaker 03

  Oil prices are too.

• 8:42Speaker 01

  Oil prices are interesting. So as of, let's see, yeah, just, it's just today, Brent crude closed at about $72 a barrel. West Texas Intermediate fell to about $68 a barrel, so below $70 a barrel for WTI.

• 9:02Speaker 03

  Ukraine or what?

• 9:03Speaker 01

  I think

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  The handshake thing or?

• 9:05Speaker 01

  Yeah, I, I, well, actually, this is a great question for our economists that we'll have on the, on the show because the way that oil, global oil prices go up or down generally are linked to economic factors. There's geopolitical factors, but that's usually temporary.

• 9:22Speaker 03

  Yeah.

• 9:22Speaker 01

  You have these larger macroeconomic factors that essentially if you are expecting a global rise in GDP, you'll see a rise in the price of oil because the expectation is that there'll be a higher demand.

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  Yeah.

• 9:36Speaker 01

  And so the hi- the higher demand of oil will, especially if we don't have a, a large increase or the, or production. Production or supply takes a while to ramp up.

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  Yeah.

• 9:46Speaker 01

  And so if you see a high, a higher economic outlook, you generally see a higher price in oil. And so that's, that's essentially how oil prices come and go. But there, there's been a lot of geopolitical factors right now, especially because of what's going on in Russia.

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  Yeah.

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  And Ukraine.

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  Yeah.

• 10:07Speaker 01

  Which again, we'll save this for our economists, but very fascinating what's happening with the agreement. Apparently there's an agreement between the United States and Ukraine.

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  Yeah.

• 10:15Speaker 01

  To, to get paid back for the military support, the cost of the military support by getting some of their natural resources. Ukraine produces a huge percentage of the rare earth minerals and those important strategic minerals that are needed to like make electronic vehicles, semiconductors, lithium, those, those types of things. And so this is really a fascinating like

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  Yeah.

• 10:45Speaker 01

  thing that's happening with, with, in terms of the United States and its agreement with, with Ukraine.

• 10:52Speaker 03

  Yeah.

• 10:53Speaker 01

  So there you go. There's our, we got one more listener question. This was actually was emailed by a longtime listener, David. And I want to go ahead and, um, go ahead and read the question here from our listener. And it, the question is regarding registration costs in California, car registration.

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  Oh, Lord.

• 11:14Speaker 01

  Yeah. So how does California calculate vehicle registration? The registration on an older vehicle continues to go up even though the value of the vehicle depreciates. What's going on? And is there a way to change the DMV's calculation on vehicle registration?

• 11:29Speaker 03

  Call Doge.

• 11:31Speaker 01

  That's what you were saying, right? Like, we gotta, we gotta cut out the California DMV.

• 11:36Speaker 03

  Yeah, it's crazy.

• 11:37Speaker 01

  It has gotten really insane, the cost to register a car in California. And only part of the calculation for the vehicle license fee is based off of the value of the car. And so the, what happens is you could have a car that is becoming less and less valuable. So it should be getting less and less of a vehicle license fee, which is true. But the other part of the fees are the transportation improvement fees and California Highway Patrol fee. You also have some counties and districts have fees. So those fees tend to go up.

• 12:17Speaker 03

  Yeah.

• 12:17Speaker 01

  And have gone up, especially over the last few years. And so that's why somebody's old car that continues to get older could see a registration fee continue to go up.

• 12:27Speaker 03

  So it's all area based?

• 12:28Speaker 01

  Yeah, it's not all area based, but it is, you know, depending on which county you're in. But also depending on what the state calculates their transportation improvement fee to be.

• 12:37Speaker 03

  It's almost like an escrow.

• 12:39Speaker 01

  Yeah. And so you can actually challenge the DMV's calculation. You can contact the DMV and you can ask them about clarification. And if you have specific information regarding your vehicle, you can provide those insights. And you can even request a refund. So if you've overpaid due to an error, you can request a refund by completing an application for refund. There's actually a form number with the DMV and submitting that will give you a refund. You gotta do it within three years of the payment date.

• 13:18Speaker 01

  So if you've got an older car that you feel like they weren't calculating it right, there is a process that you can take through the DMV to get some of that money back. You can go, even go back a couple of years. So, and then you mentioned smog, I didn't even mention smog fees, but.

• 13:36Speaker 03

  Yeah, smog checks and stuff like that.

• 13:38Speaker 01

  Yeah, if you've got an older car.

• 13:39Speaker 03

  Yeah.

• 13:40Speaker 01

  Then you've got these smog fees, which are never fun.

• 13:44Speaker 03

  Yeah.

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  Cause if you don't pass.

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  You should check engine light off.

• 13:46Speaker 01

  Yeah, right. Or your, or your gas cap needs a new gas cap. Yeah, so great questions from our listeners. Keep them coming our way. Yeah. 661-396-1000. We're going to take a real quick break and we come back, we're Money Wise.

• 14:02Speaker 00

  Have you been putting off your finances? Seize the day. Call the Money Wise office at 661-847-1000 or email [email protected] for more information.

• 14:21Speaker 01

  Thanks for tuning in with the Money Wise Show, live on ESPN, 8:12 AM, 101.1 FM. Latroy Dinkins is here with myself, I'm Sharad Waite. Now we have our guest, a real economist, not armchair economists like us. Dr. Gearhart, welcome to the show, welcome back to the show.

• 14:39Speaker 04

  I like my armchair, though.

• 14:41Speaker 01

  Yeah, you don't need it. I mean, you're a legit economist and economists have got to be scratching their heads because, you know, here now it's been four or five years since COVID and we started to see inflation hit. And I thought for sure that I didn't, I couldn't think of a case study where inflation would come down as quickly as it has. But inflation has like dropped and we're like normal inflation right now.

• 15:11Speaker 04

  Yeah, it was, it was astonishing. I thoroughly disliked Jerome Powell. I made it known. For several years, I considered him highly unqualified and he beat my expectations. He proved me wrong and he really tackled inflation because that's what you saw in the late 70s and 80s when they were trying to tackle inflation where Paul Volcker basically had to just kill the economy. You saw 18% mortgage rates, 45, 50% credit card interest rates and, you know, we're high.

• 15:45Speaker 01

  Carter out of the, out of the White House, right?

• 15:47Speaker 04

  Yeah, we're high. Mortgages are six and seven.

• 15:50Speaker 01

  But not historically high.

• 15:51Speaker 04

  But not historically high. We've gotten back to normal, but I think the new normal is going to be inflation.

• 15:59Speaker 01

  Yeah, so that leads me to that, you know, where, where. Where do you where do you sit? What's your opinion on the impact of the recent tariffs that are being implemented?

• 16:08Speaker 04

  I mean, it's a sales tax. You saw what happened in the city of Bakersfield when we implemented the Measure N funding that didn't go to first responders, even though that's how it was billed.

• 16:23Speaker 01

  Yeah, it is now.

• 16:25Speaker 04

  Kind of. I think it's like one of those slush funds that they just use for anything and everything, but prices rose. And we're gonna see prices rise, especially, you know, with Canada and Mexico. And the thing that really confuses me is in 2018, we scrapped NAFTA. We Trump said NAFTA was the worst thing that ever happened. And he did the US Mexico, Canada agreement, or US.

• 16:51Speaker 01

  Just changed the name of it.

• 16:52Speaker 04

  And called it the best and biggest, most beautiful trade bill, unparalleled prosperity. And so why are we putting tariffs on them?

• 17:00Speaker 01

  Right.

• 17:01Speaker 04

  It's every, every piece of economic evidence suggests that tariffs are completely passed through to domestic consumers. So expect to see prices on your everyday goods jump by 15 to 20%. And that doesn't even account for the retaliatory tariffs.

• 17:18Speaker 01

  Right.

• 17:18Speaker 04

  And they're gonna put retaliatory tariffs on lumber potash, which is pretty much only available in Russia and Canada, but I guess we're making friends with Russia now. So

• 17:30Speaker 01

  Yeah.

• 17:30Speaker 04

  Maybe that's a new viable source.

• 17:32Speaker 01

  And Ukraine, which is, I was just talking.

• 17:34Speaker 04

  We've already just exploited them for the rare earth metals, as you were mentioning.

• 17:37Speaker 01

  Yeah, isn't that crazy?

• 17:39Speaker 04

  It's like international diplomacy. Yeah, occasionally you need to carry a stick, but you just can't carry the stick and just start beating the crap out of people.

• 17:48Speaker 01

  So the other, this happened, Apple, was it yesterday or the day before yesterday, announced a $500 billion investment, which all was already taking place before Trump took office. Like, Apple was already planning on, you know, constructing their, their, their, some factory, not even factories, they're just like AI data centers here in the US.

• 18:08Speaker 01

  But I was curious to ask you about using, if the president uses tariffs to encourage domestic manufacturing, could, how, could that be beneficial? Like, how could that play out? Like, I could see initially, we would have a, an inflationary, you know, effect from, from it. But what if we can have more domestic manufacturing?

• 18:35Speaker 04

  Well, I think the big issue, and you know, we've had now, we have now six, seven years of data to analyze the impacts of the initial round of the Trump tariffs that Biden increased in 2018. And all the economic evidence suggests that any sector we levied tariffs on didn't stimulate domestic production in the US. It didn't lead to job increases, in part because what we're manufacturing is incredibly low skill and it's automated, given how much we have to pay, how much we would have to pay American workers for that.

• 19:16Speaker 01

  So like saying, another way to say that is if America, if, if America is going to bring more manufacturing domestically, it's likely not going to be a high job.

• 19:27Speaker 04

  It's going to be a very low skill, low paid environment, if there is even much of an employment bump at all.

• 19:38Speaker 01

  Yeah, that's, that was my, yeah, that was my theory.

• 19:41Speaker 03

  Sounds counterproductive.

• 19:42Speaker 01

  Yeah, because you have like, you know, you have India or China that their labor costs are so much less, like, what, how, how can it find, how can the free market sustain that? If we're going to have it now, you know, we're going to be making shirts here in the US when it can be done at a fraction of the cost because of labor in China? Like, it just doesn't compute to me.

• 20:04Speaker 04

  No, and that's why I say there's nearly full price pass through to consumers, because what happens is... We have to pay these higher wages and these higher costs, you know. Yeah, there are some downsides to globalization and all the, all these other things. But the li- the standards of living we've seen in this country over the past 25 years. In the early 2000s, we were worried about our computers not being able to read the year 2000. And us, you know, I, I remember Y2K, like you counted down to midnight and you're like, should we cross our fingers? Like, is this gonna be Terminator? You know, the cellphone you have in your pocket is more powerful than the computers you had in the 2010s.

• 20:49Speaker 01

  Right.

• 20:49Speaker 04

  It, it, just the standards of living we've seen is in part due to this increase in globalization. The fact that you can go to Walmart and buy 50 white t-shirts for like three bucks.

• 21:02Speaker 01

  Yeah, yeah.

• 21:03Speaker 04

  It, it, it's, I, I just don't understand the economic rationale for tariffs. I, I, I just really, really don't. They don't work. They haven't worked.

• 21:15Speaker 01

  But they don't work economically, but they, there could be some effect politically. You can have some, you know, you can have some, you can convince a country to do something if you're threatening them with a tariff.

• 21:30Speaker 04

  Yes, uh, you can, but to me that's a short-term gain because we're gonna have, we're gonna have to collaborate with Canada and Mexico, you know. I, again, and not talking about Canada as the 51st state because Canada is really highly liberal. So, you know, I'm not, I'm not too sure the Electoral College would like to invite Canada as a 51st state. But, um, you know, we're gonna have to work with them. You know, creating this regional powerhouse of a developing country that can benefit in terms of Mexico. Canada with its abundance of natural resources and fresh water and land and ability to grow crops.

• 22:12Speaker 04

  And then the United States, which is the world's scientific and economic hub. And instead, we're just running around, we're spanking them. I don't, I don't. Understand why we are spanking.

• 22:23Speaker 01

  It just, it just, to me, it just reeks of politics and, you know, politics is war without bloodshed and war is politics with bloodshed, a famous quote by somebody. And that's what I think this is. It's essentially, you know, it's declaring war without bloodshed by just doing this. However, if we do see inflation, I think we're going to see some blood. People are not going to be happy.

• 22:49Speaker 04

  No, I mean, people freaked out and rightly so. People freaked out at the height of COVID, where it was seven and eight percent. And that was pretty unsustainable. And that was met with considerable fiscal stimulus on the part of President Biden. And that contributed to inflation and it led to this economic outcome, or led to the political outcome we saw in 2024. And we're going down the same road. If we see inflation under eight percent next year, I consider it a miracle.

• 23:26Speaker 01

  Really?

• 23:26Speaker 04

  Yeah.

• 23:27Speaker 01

  How do you, how do you calculate the impact of infla? So it seems, can you calculate the impact that inflation, that the tariffs can have?

• 23:37Speaker 04

  Yeah, so there's, the Tax Foundation has a pretty good modeling system and they model tax plans, they model tariff plans, they model a bunch of these things. And they estimated that tariffs would add anywhere from 1.3 to 2 percentage points to inflation. Now, that would mean inflation would be four and a half to five percent. And that's before migration issues and, you know, taking seasonal and migratory workers out of the farms, which is going to increase food inflation. That's before, you know, firing.

• 24:18Speaker 04

  Federal workers and sending them emails on a Sunday.

• 24:21Speaker 01

  How much, do you have an idea of how much of an impact that is going to have on the economy? Firing all these federal workers?

• 24:28Speaker 04

  Well, so, you know, federal workers, the funny thing is, is if you actually look at federal workers per capita as a share of the population, it's some of the lowest it's ever been in historically.

• 24:42Speaker 01

  Yeah, I've seen that chart.

• 24:44Speaker 04

  And so, you know, yes, we have a large absolute number of federal workers, but, you know, when we had a country of 50 million people compared to now 350 million people, we have a lot more people per federal worker. So, federal workers are a small fraction of the workforce, but they're still 4% of the federal budget. And it's not a large amount, but imagine 4% of GDP just cut out instantly because they can't buy stuff and I don't know where these public sector, or these private sector jobs are to absorb all of these probationary workers who largely take federal jobs, not for the

• 25:26Speaker 04

  pay, but for the job stability that they have. So, you know, you're, you're looking at a couple of points shaved off of GDP, which, and that's why I think a lot of economists are talking about the potential return of stagflation, which we haven't seen in close to 50 years, which is high inflation, no economic growth.

• 25:50Speaker 04

  That, that means that the Fed has nothing to do, the Fed can't solve the issue.

• 25:54Speaker 01

  That's what got us through this, this last inflationary period is the fact we had pretty strong economic growth.

• 26:00Speaker 04

  We, we could absorb some reduction in economic growth and not go into a recession and not see mass unemployment. It's something called the Phillips curve in economics, is this trade off between, do you want high inflation or low employment, or low inflation and high unemployment?

• 26:16Speaker 01

  Ah, I remember the little bit about the Phillips curve in my economics course. Uh, I remember not getting those answers right on the exam.

• 26:25Speaker 04

  So, the- The best part about that is what you probably learned is probably wrong because we've altered the Phillips curve since then.

• 26:34Speaker 01

  Well, so much has been altered in the field of economics. I think I've talked to you before about the fact that economics does seem like it's still in its infancy. There's so much in terms of a science. It has a lot to learn because you can't test these theories in a lab like you can with other sciences. You kind of got to like observe.

• 26:55Speaker 04

  You've got to look for basically what us economists calls plausibly unanticipated shocks. So that like that rules out a lot of legislation, that rules out a lot of fundamental market changes because people price it in. So yeah, it's really hard. And so a lot of economics is looking at historical data to guide us in the future, but there are always caveats with that.

• 27:21Speaker 01

  Yeah, we're joined by Dr. Richard Gearhart, economist at Cal State Bakersfield. We're going to take a break. When we come back, I want to get your opinion on the latest Republican vote in the House, the new budget that's coming up. The deficit's going to change a little bit here. Love to get your take on this. We're Money Wise. We'll be right back after this break.

• 27:41Speaker 00

  Money Wise Wealth Management is the only locally owned independent firm that uses a comprehensive wealth, tax, and estate approach, working closely with a highly trusted CPA and attorney. For information on how Money Wise can help you invest and plan for your future, call 661-847-1000.

• 28:05Speaker 01

  Thanks for tuning in. We're Money Wise. I'm Jared Waite here with Latroy Dinkins. Our guest is Richard Gearhart, Dr. Professor of Economics. One of our favorite guests for sure. We actually get to ask a real economist some of these questions. We have a couple listener questions. Love to get your input here, Dr. Gearhart. First one is, what's your take on how climate events are driving financial decisions in renewable energy investments and climate-specific insurance products? So this is a hot topic. We've had some climate events. Including the fires down in LA that just happened, there's flooding happening in Kentucky right now. These are massive events. The biggest, you know, I see the biggest sort of financial

• 28:49Speaker 01

  decision that comes from this is, is the impact that it's having on homeowners insurance. That's how it affects most of the modern day, like the, the normal people. Because the investments, that, that's an investment that people are making is into their homeowners insurance. And we are in a mess in California.

• 29:08Speaker 03

  Oh, those gonna go up.

• 29:09Speaker 01

  It's gotta go up.

• 29:10Speaker 03

  It's gotta go up.

• 29:11Speaker 01

  And, and the backstop for homeowners insurance is the fare plan, which fare plan is, is paid for, is subsidized by private insurance companies that have to feed into it to pay, to help pay for that. And now these companies are leaving California and the ones that are left are now going to be squeezed even more because they're, because of, of the, the, the, what's going to be needed for the California fare plan. So that, you know, it's, it's a huge, huge issue. Now, you know, driving financial investments into energy investments into climate-specific products, that's another, another area that I'm very skeptical of.

• 29:55Speaker 01

  Take carbon capture. The, the math doesn't, from what I can tell, doesn't work out to make financial sense, right now at least. It's so expensive to bring in, you know, a ton of carbon out of the atmosphere and put it somewhere in the ground or do something with it. That money could be spent, I think, in other places right now. And I, that would be much more effective. But that's a tricky position to be in because we would have never gone into wind or solar if that was the case. It, it took enough investment into wind and solar to get the point where it is now, where it's like, oh yeah, now that people aren't doing it to save the planet. They're doing it because they're going to make them money. And, you know, until, and that's why the California is changing some of our rooftop solar rules and that kind of thing. But do you have an opinion, Dr. Gearhart?

• 30:40Speaker 04

  Yeah, I, I'm, you know...

• 30:43Speaker 04

  It's really hard to predict the future and what technologies are going to come out. I was reading last week how there's this one company that can make like five gallons of water in the morning in desert areas per day just out of mist. It's something ridiculously innovative. And so I think the problem with kind of subsidizing renewable energies is you're going to subsidize a lot of losers along with the eventual winner. And you never know what it's going to look like. You know, think of the growth in technology. So for me, it's one of those where I really hesitate to kind of wholeheartedly adopt these

• 31:26Speaker 04

  subsidized renewable technologies or endorse them or say it's a great idea because I don't know. I mean, sure, it sounds great, but there's lots of dead technologies out there that got subsidized and that never ended up working.

• 31:41Speaker 01

  Yeah, exactly. It's going to be interesting to see what happens with that. Another listener question here, it says, "As business owners, what do you think of the trends of major companies leaving California?" Another one, In-N-Out, announced this week that they are leaving California for Tennessee. You're shaking your head.

• 32:00Speaker 04

  So they're actually not leaving California. They had two headquarters in California, one in Orange County, one in Baldwin Park. They're consolidating to the Baldwin Park location. And then they're also moving operations to Tennessee because it doesn't make sense to have two headquarters in California when you're no longer just a California-specific franchise, you're opening up a lot of business on the East Coast. So it's actually not leaving California.

• 32:30Speaker 01

  Yeah.

• 32:30Speaker 04

  It's just, it's relocating some of its employees to better meet the needs of its East Coast business model.

• 32:38Speaker 01

  Yeah.

• 32:38Speaker 03

  So the long lines will still be here in California.

• 32:41Speaker 01

  The what?

• 32:42Speaker 03

  Long lines.

• 32:42Speaker 01

  Long lines. That's what baffles me.

• 32:44Speaker 04

  I was there at like 8:30 last Wednesday and I was like, "There's going to be no one here." And I was like, "Order number 59."

• 32:51Speaker 00

  What's funny is I tell my son the same thing because once a month or so, we'll go to In-N-Out and you see, "Oh, it's going to be packed." And all you got to do is park and go inside and there is pretty much nobody in there. It's all these lazy people that just sit there in the drive-thru for 30 minutes. I'm like, "It's not that bad."

• 33:08Speaker 03

  But this is Bakersfield.

• 33:09Speaker 00

  Just get out your damn car. And go inside and get it.

• 33:12Speaker 04

  To be fair, you don't have to put on underwear when you're in the drive thru.

• 33:16Speaker 03

  That's true.

• 33:18Speaker 01

  True.

• 33:20Speaker 03

  I said, this is Bakersfield though.

• 33:23Speaker 01

  Yeah.

• 33:23Speaker 03

  Bakersfield, like Taco Bell has a line, a long line.

• 33:26Speaker 04

  Well, it takes time to get the scooter out of the truck.

• 33:28Speaker 01

  Yeah.

• 33:29Speaker 00

  And we put it right by that, that chicken place. It's gonna be, it's gonna be insane.

• 33:34Speaker 01

  I like, I like the rivalries, the economic rivalries between states, you know, that every state likes to point out when a company headquarters goes to another state, like Kentucky Fried Chicken, leaving Kentucky. And it's like, well, Kentucky Fried Chicken was like, it's such a, like a multinational corporation that's owned by, you know, owns a lots of companies. They're just like moving.

• 33:55Speaker 04

  Yeah. And it's Tennessee. It's not like Tennessee has, you know, is the driver of economic growth in the United States.

• 34:03Speaker 01

  Exactly.

• 34:04Speaker 04

  It's the deep south.

• 34:05Speaker 01

  When people crap on California, I, I just like you, yeah, California's not perfect. And definitely there are, there are cities, I mean, San Francisco, I think is, is, has a lot of issues and it's just definitely changed a lot.

• 34:22Speaker 03

  Look at the poop map.

• 34:22Speaker 01

  Look at the poop map. Even parts of LA, I think. No, no offense to you, Latoya, LA's got some major, I could never live down there. Central Valley though, now we're talking. Like, we've got some, we've got some good things going on here. But I want to remind people, we're the largest economy in the United States. California still has over a $4 trillion economy, makes it the fifth largest in the world. Russia, by the way, is not even the top 10. If Russia, you know, Russia is a country.

• 34:54Speaker 03

  Yeah.

• 34:55Speaker 01

  And if California was a country, it'd be number five.

• 34:57Speaker 03

  Wow.

• 34:58Speaker 01

  It's an enormous economy and the, the people have to remember that other states like Texas has a heavy reliance on a single industry, oil, for example, whereas California has so many different sectors, including technology, entertainment, agriculture, biotech, finance. We have by far the world's leading tech and innovation.

• 35:20Speaker 01

  Station hub up in Silicon Valley, just right up the road. The, some of the largest companies in the world located, Apple, Google, Meta, Nvidia. We have massive R and D spending that continues to happen through our venture capital funding that attracts billions of dollars of early stage investments for AI and biotech. We're also university driven innovation. We have the top university, research universities in the world through Caltech, Stanford, UC Berkeley. These all feed into the state's startup ecosystem and produce top tier talent and recruit top tier talent from across the world, young people from across the world.

• 36:01Speaker 01

  Entertainment media industry is another one of those areas that people don't realize how much money it brings in. It's not just Hollywood's dominance, but it's the fact that it's a, it's a cultural export. So people come to California from all over the world to go to Disneyland, go to, you know, to see the Hollywood sign. Renew, we also have agriculture right here in the Central Valley, for example, is it? I can't remember the percentage, is it half of the, half of the country's food is grown here?

• 36:29Speaker 03

  Yeah, I'm gonna get you a California bandana for representing like this.

• 36:32Speaker 01

  Twenty-five percent, twenty-five percent.

• 36:34Speaker 04

  But that's still astonishingly large.

• 36:38Speaker 01

  The, the port of Los Angeles and the port of, of Long Beach handles forty percent of the US imports. So almost half of the, the country's imports come through those two ports. And we have a huge defense and aerospace presence here. And, and so who's going to compete with, nobody competes with us. We are, we are the best, we're the best.

• 37:05Speaker 03

  Well said. You gotta put them black shades on now.

• 37:08Speaker 01

  Right, drop that mic. I am biased, born and raised here, but I think California has so much going for it. I might feel differently if I was living in LA or if I was living in the Bay Area, but we, what we have here in the Central Valley though is like.

• 37:23Speaker 03

  Unemployment is pretty up here though. It's like, it's like eight percent, I think, like somewhere around there.

• 37:27Speaker 01

  In Kern County.

• 37:29Speaker 03

  Yeah, Kern County.

• 37:30Speaker 01

  California is, is better, is, is fine, but yeah, the Central Valley has its, has its issues, but. But we also have these, we also have people that the people are just good here. Yeah. Um, Dr. Gearhart, the Republican-led Congress, or rather, just the House, just passed, completely down bipartisan lines, an enormous spending bill, budget. And it appears that it's, uh, it's going to decrease spending by over $2 trillion. Um, but we also, it's coming with some tax, extension of the Trump tax, uh, bill.

• 38:12Speaker 01

  That's gonna, that's going to decrease revenues by over $4 trillion. So, this, how is this, how is this fiscally conservative at all?

• 38:21Speaker 04

  It's not. Uh-huh. Maybe it's, it adds to the debt and the deficit, and which apparently doesn't, no longer matters after the election.

• 38:29Speaker 01

  I, here's my argument to that. People, the general public doesn't know the difference between the deficit and, and the debt.

• 38:36Speaker 04

  Yeah, I, I, I could, um, I could absolutely see that, that they just see spending reduction and tax cuts.

• 38:42Speaker 01

  Yeah.

• 38:42Speaker 04

  And they're like, ah, it's a win.

• 38:43Speaker 01

  There we go, we did it.

• 38:44Speaker 04

  But I think, um, what was it? 95% of the benefits of the tax cut are gonna go to anyone making above $300,000. Um, a lot of people are gonna see slight tax increases. And the only way you can cut $2 trillion from spending is defense. Um, let's see if we have the stomach for that. And Medicare, Social Security, and Medicaid. And, uh...

• 39:11Speaker 01

  It looks like Medicaid is on the block, is, could be on the chopping block.

• 39:14Speaker 04

  Yeah, and so, you know, one way that they are contemplating saving, uh, the $2 trillion is the federal government spends about $880 billion on grants, uh, Medicaid grants to the individual states to allow the states to run their own programs and, um... Yeah, so.

• 39:35Speaker 01

  That's a lot of cutting.

• 39:37Speaker 04

  It's, you know, it's only 70 million Americans' health insurance that we're talking about. So it's a small fraction of people. I, I just, I have no idea how they're gonna do this. And I, I, I'd like to think that, um, our local leaders are just doing more of the performative vote. But. Cutting Medicaid in Kern County and Hanford and Tullari and all those other places. Well, that's.

• 40:06Speaker 01

  See how that plays. The, the third, the political third rail is social security. You know, they start touching social security benefits.

• 40:13Speaker 04

  Well, uh, if you actually look, anyone under the age of 59, their retirement age is proposed to go up to 69.

• 40:23Speaker 01

  Oh, man.

• 40:24Speaker 04

  For social security receipt, benefits receipts.

• 40:27Speaker 01

  That, that is going to affect a lot of people, but that cannot, like financially, it kind of makes sense.

• 40:32Speaker 04

  And financially, it makes sense, but no one's saving for retirement, especially if you're at 59 and you're like, you know what? It's 67, I can retire on social security. I don't know how they're lasting those extra two years because 55% of Americans over the age of 50 have no private retirement savings and are gonna rely solely on social security and Medicare. So, um.

• 40:56Speaker 01

  Gosh, it seems like just politically death, death politically.

• 40:59Speaker 04

  You would think, but apparently it no longer matters or people are getting more of their news from TikTok or Facebook or.

• 41:07Speaker 01

  Oh, my gosh.

• 41:08Speaker 04

  Whatever fake news is being shown on X.

• 41:11Speaker 01

  Yeah.

• 41:11Speaker 04

  Or Rumble or.

• 41:12Speaker 01

  Hmm, yeah. What, as, as a professor at Cal State, most of your students are in the younger demographic, right?

• 41:20Speaker 04

  Yes.

• 41:20Speaker 01

  What, what do, what do you sense from them that they, how they feel about?

• 41:27Speaker 01

  The economy.

• 41:29Speaker 04

  Well, they're not feeling that great. We're going through our own budget difficulties with the state of California.

• 41:34Speaker 01

  Yeah.

• 41:35Speaker 04

  Um, so, you know, we can't offer as many classes for students, which, you know, could potentially delay time to graduation. All these other great things.

• 41:47Speaker 01

  Yeah.

• 41:48Speaker 04

  I don't see anyone that can look at this economy and go, you know what? I see the two-year plan. Because I don't see a plan. I would just like to know what's gonna happen. Like, what is the end goal? Because Doji has saved 65 billion based on that public auditing report. It turns out that they can't read numbers, which is a little problematic. And so then they took it down.

• 42:15Speaker 01

  Yeah.

• 42:15Speaker 04

  And so, no one has, they're just claiming, I, you know, I, I have no idea what's going on. And so...

• 42:23Speaker 01

  Even if it does, even if it could save, let's say, 65 billion, that's nothing. That's nothing compared to a trillion.

• 42:32Speaker 04

  He pledged 2 trillion in a year. 2 trillion in a year, and it's been a couple of months, and efficiency has reduced it by less than a percent.

• 42:42Speaker 01

  Yeah, way less than a percent. Like, less than a half a percent.

• 42:45Speaker 04

  And, and so, and the worst thing, and this is, you know, kind of my overarching thing, is no one wants to operate in an era of economic uncertainty. Businesses won't invest. Businesses won't build. There will be no new homes built. There will be no new shopping centers built. Because you have no idea what the next five years is gonna look like. And all we're seeing is economic uncertainty. And, um...

• 43:11Speaker 01

  Yeah. Take away the uncertainty, though. Can you give the current economy a grade? You know, like, where, I've got, I've got an opinion on it, but I'm curious what your opinion is. I mean, take away the political noise and the headlines, just like where we sit right now today.

• 43:27Speaker 04

  Well, um, I'm gonna go based on what voters said in November. The economy hasn't improved, and voters gave it a D or an F. And it's gotten worse. I'd give the economy right now a failing grade. We haven't solved any of the distribution issues. We haven't solved any of the jobs issues, the housing issues. You know, we're...

• 43:50Speaker 01

  But we have good unemployment, phenomenal unemployment. The labor market is very strong. Inflation is good and we have, of course, the stock market is very well. Earnings are very good. And so those are some pretty major factors in terms of the economy.

• 44:14Speaker 03

  But yeah, we're still at.

• 44:15Speaker 01

  We're still at an F.

• 44:16Speaker 03

  Yeah.

• 44:17Speaker 04

  Well, so the Consumer Board and the University of Michigan do consumer and business.

• 44:25Speaker 01

  Confidence.

• 44:26Speaker 04

  Confidence indices and basically every early presidential administration, the first few months in there get bumps.

• 44:33Speaker 01

  Yeah.

• 44:33Speaker 04

  Except for this one where this was one of the biggest post-great recession drops in consumer, month to month drops in consumer confidence. And basically they're all saying, inflation, what the jobs are going to be like, and we can't afford stuff anymore. And to me, that's, that's why I think the unemployment numbers, all of these macroeconomic indicators that do suggest a pretty good economy. And I was making the case that, hey, these macroeconomic indicators under the Biden administration, we were the envy of the developed and developing world doing what we were doing. And people obviously disagreed

• 45:18Speaker 04

  in November. And I just haven't seen any improvements and I see a lot more warning signs.

• 45:25Speaker 03

  So we, so we like that running back that just has 20 touchdowns on the stat line, but those 20 touchdowns came at one yard line.

• 45:34Speaker 01

  Or he also has 40 fumbles.

• 45:36Speaker 04

  So Jalen Hurts.

• 45:36Speaker 03

  Yeah, Tish Bush. Yeah, there you go. That's a good analogy.

• 45:40Speaker 01

  Yeah.

• 45:40Speaker 04

  I'm still bitter over that, by the way.

• 45:42Speaker 03

  They're gonna ban it. They're gonna ban it.

• 45:44Speaker 04

  Good.

• 45:45Speaker 03

  Yeah.

• 45:46Speaker 01

  Not gonna happen. I don't know.

• 45:47Speaker 03

  I think so.

• 45:48Speaker 01

  I like the direction that the NFL could go, being more like rugby style, you know, like to see more laterals and that kind of stuff. It'd make it fun.

• 45:56Speaker 00

  I know they, they are pushing the AI.

• 46:01Speaker 00

  Um, first down meter.

• 46:02Speaker 01

  Oh, that's good.

• 46:03Speaker 00

  To start that next season.

• 46:05Speaker 01

  Oh, good.

• 46:05Speaker 03

  We need to get it in baseball.

• 46:07Speaker 00

  Yeah, I've seen that too. They're doing a, just in spring training, they're practicing it with the, uh, the robot umpire.

• 46:13Speaker 01

  Good.

• 46:13Speaker 04

  Yeah, it makes sense.

• 46:15Speaker 01

  Yeah.

• 46:16Speaker 04

  I mean, like, when you see, like, referees running, holding their arm up and kind of weaving like a drunk little toddler. You're like, there is no way you're marking this spot correctly.

• 46:26Speaker 01

  No kidding.

• 46:26Speaker 04

  Like.

• 46:27Speaker 01

  So arbitrary.

• 46:28Speaker 04

  Yeah, I've seen people on, like, cops doing the DUI tests and, like, even sober people can't do the DUI. But these 80-year-old referees, you know, waddling onto the field, yeah.

• 46:39Speaker 03

  Since we're on football, do, uh, do I have a football question for you?

• 46:42Speaker 04

  Yeah, Clemson's gonna win again.

• 46:44Speaker 03

  Well, you're a Giants fan. Who do you, Shador or Cam Ward?

• 46:48Speaker 04

  I like Cam Ward. Um, I, I, I think he's basic. I think his comps are Matthew Stafford. Um, Shador is, uh... I, I, I can't get it, I can't get a sense of him because he did, him and Prime did turn around Colorado. And Colorado's just an awfully crappy football team.

• 47:10Speaker 01

  Yeah, yeah.

• 47:11Speaker 04

  But he was also throwing to Travis Hunter, but he also didn't have an offensive line and...

• 47:16Speaker 03

  Yeah.

• 47:16Speaker 04

  I, I just can't get a read on him. I, basically, at this point, we can't suck anymore.

• 47:21Speaker 03

  Yeah.

• 47:22Speaker 04

  So I'm kind of fine with whatever we're doing.

• 47:24Speaker 03

  Or you're gonna take Stafford too, right?

• 47:25Speaker 04

  I, I, yeah, Stafford's a good quarterback.

• 47:28Speaker 01

  Bring back Carr. He bring back Carr. I got a message from a listener that says, "Right, some of us like to go through the drive-through so we don't have to get dressed."

• 47:37Speaker 04

  Absolutely.

• 47:38Speaker 01

  "I moved here from the south. I really wish Bakersfield would get a Waffle House." We were just talking about Waffle House. So you're from the east coast.

• 47:43Speaker 04

  Absolutely. Waffle House just smacks anyone, any other breakfast place out of the water.

• 47:50Speaker 03

  I agree.

• 47:50Speaker 04

  I mean, it's just a phenomenal, you get to probably watch a fight, watch... Drunk strippers come in.

• 47:57Speaker 01

  Is it always open like Denny's?

• 47:59Speaker 04

  Yeah, it's 24 hours. Oh, yeah, you can do anything.

• 48:02Speaker 03

  I went to Waffle House. First time going to Waffle House, I was in Miami, Florida.

• 48:04Speaker 01

  Uh huh.

• 48:05Speaker 03

  Yeah, me and my wife was kind of looking at each other like, the food is good, but let's get it to go.

• 48:09Speaker 04

  Yeah. Yeah, it's one of those where you might be stabbed, might not be ketchup on the floor, might be blood, but the food is so worth it that.

• 48:18Speaker 01

  Oh, yeah. And it's inexpensive. I'm a huge fan of diners. Denny's is one of my favorite restaurants. It's just like, just good old classic American and breakfast, you know, 24/7.

• 48:29Speaker 03

  Hangover spot, Denny's.

• 48:30Speaker 01

  Good, yeah. 2 o'clock in the morning. It's just always there, that greasy, greasy food. Well, Dr. Gearhart, thank you so much for taking the time, coming on the show again. We really appreciate it.

• 48:41Speaker 04

  Thank you for having me.

• 48:42Speaker 01

  That was a great discussion. Want to remind any of our listeners, if you missed any of this or previous shows, you can find us at moneywiseguys.com or wherever you stream your podcasts, there you will find us. Tomorrow, don't want to miss the show, we're going to have, actually, if you want to tune into Kern Radio with Scott Cox, JR is hosting there tomorrow morning. Emily Waite will be giving an update on the Woolworths. So turn in tomorrow morning at 7:30 on KERN, our sister station, and you can learn more about what's going on with the Woolworths. Want to remind all our listeners again, these three things, be smart, be safe, and always be money wise.

• 49:26Speaker 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.