Pod Insights The Moneywise Guys 5/12/26 Inflation, Lending Risks & California's Record Gas Prices About this episode The Moneywise Radio Show and Podcast
Tuesday, May 12th
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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.
0:40 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 are on News Talk 96.1 and 1230 AM, KERN, streaming live 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...
1:05 Speaker 03 Sammy Abiyawie.
1:06 Speaker 02 Sammy, hey, we walked in to prepare for the show, got some really great listener questions and comments. I love the latest interaction that we've had from our Kern Radio family out there. It's been really nice.
1:21 Speaker 03 Definitely, great questions, good interactions. I felt really good yesterday, the show with Chad Hathaway. I felt really, really good. Just the information he was bringing, the quality of the information, and just the conversation overall was amazing, so.
1:37 Speaker 02 Yeah, I'm sad I missed it. I have to go back and listen. Of course, all our listeners should know that they can listen to any of these shows in podcast format, wherever they stream their podcasts. You can find MoneyWise, the MoneyWise Guys podcast there, and so I have to go back and listen to it. We had a listener comment about it. I'll read it and I want to ask you about it, Sammy. It says, "Really great segment with Hathaway. His thoughts on what is going on really is the total opposite of what you hear on local news stations." I'm curious, maybe you kind of share your thoughts about that, like what, you know, what it was different.
2:11 Speaker 03 Just the honesty of the conversation, like no, no holding back from, if you know Chad, Chad is very straightforward. Whatever is in his mind, is in his heart, he's gonna speak about it.
2:21 Speaker 02 Yeah.
2:21 Speaker 03 And, and, and that's why I love Chad, or that's why you don't, you don't like Chad, right? I happen to like Chad for, for, because of that.
2:30 Speaker 02 Yeah.
2:31 Speaker 03 And the conversation I felt was very, very honest, coming from the heart. He's been in this industry for twenty plus years, I know, almost close to thirty years. And he's from a producer to, to just a business owner, to working for companies, to a big, big supporter of the industry itself.
2:49 Speaker 02 Yeah.
2:49 Speaker 03 And, and, and he's very vocal.
2:51 Speaker 02 Mm hmm.
2:52 Speaker 03 You know, about, about that.
2:53 Speaker 02 Yeah.
2:54 Speaker 03 And, and how the industry is very beneficial to Kern County, what it brings to the table for us as a community. And the fact that it got a little bit put on the back burner.
3:03 Speaker 02 Mm hmm.
3:04 Speaker 03 I mean, I have some choice words for that, but I'm, I'm, and he's, he spoke yesterday, I think he spoke about that.
3:11 Speaker 02 Yeah.
3:12 Speaker 03 And some, maybe some solutions that are common sense, that's good to bring, maybe not hundred percent of that industry back, but at least sixty to maybe eighty percent, according to his numbers.
3:22 Speaker 02 That, that's huge. I know Chad has been a big proponent of the people who work for him and the people that work in that industry. Uh, incredibly hardworking, blue collar, the like working class and, and, and well compensated.
3:35 Speaker 03 Correct.
3:35 Speaker 02 But they're, they're compensated well because it is a risky job. There's ups and downs. Anytime you're working in a commodity based business, you're gonna have booms and busts.
3:44 Speaker 03 Yes.
3:45 Speaker 02 And so, you know, just like business owners don't always manage their cash well. Uh, employees do the same thing. And so they're often find themselves going, skipping to different careers and different paths, but, um.
4:00 Speaker 03 Yeah, the major thing I think that Chad brought, brought yesterday was the talent. We used to have a lot of talents in Kern County when it comes to oil.
4:08 Speaker 02 Mm hmm.
4:09 Speaker 03 Unfortunately, that talent left.
4:11 Speaker 02 Right.
4:11 Speaker 03 Right? And now it's difficult to bring it back, given the fact that some of the competing states have no, no income tax.
4:18 Speaker 02 Yeah.
4:19 Speaker 03 Wyoming, Colorado. North Dakota.
4:22 Speaker 02 I'm skeptical of that because what they don't get is they maybe they don't get the income tax in Tennessee or Texas or wherever, but they're getting hit with sales tax and they're getting hit with other taxes. There's other costs that are involved in that. I'm not arguing that it's cheaper, that California is cheaper than Texas. But you earn more in California generally than you do in Texas. But I can see certainly people who feel like they've been burned by the industry because of the political environment that we have in California.
4:52 Speaker 03 The Yorick effect, right?
4:52 Speaker 02 Yeah, like what's going to bring me back there? I'm here, I feel more safe and secure in this state that has a longer track record of taking care of our industry and not just pushing us aside.
5:04 Speaker 03 Correct.
5:04 Speaker 02 And you know, Chad will say this too. Chad and I have many arguments and disagreements about climate change and the causes of climate change and the, and that the, what, what we, how we should be addressing it. But at the end of the day, both he and I are passionately environmentalists. Like we feel very strongly about the importance of keeping our, keeping the environment as clean as possible for our kids, our grandkids. I know Chad, that's where Chad's heart is. And so, you know, in, in the state of California though, there's been such a
5:42 Speaker 02 blatant, it seems like a blatant discounting of this, this sort of fantasy idea by the, the far, far extreme environmentalists that we can somehow just go to clean renewable energy overnight.
6:01 Speaker 03 Yeah, we talked about that yesterday as well. You know, it's like we're waving a magic wand. I watched the series of Harry Potter over the weekend. That's what these environmentalists are expecting. It's just like, hey, abracadabra, buu, and now we're back in, no.
6:17 Speaker 02 Like they don't want to hear the fact that, that there's literally, like the technology is almost there to where we can create 100% renewable energy, the technology. However, the resources are not.
6:31 Speaker 02 There's not enough copper in the world to revamp our grid systems, you know, across the world to be able to update it and move to a battery or a, you know, a different system. It's like, it's just not, it's not going to happen. It is no way that it can happen overnight.
6:48 Speaker 03 And our economic system has been built for the last hundred years around oil.
6:51 Speaker 02 Yes, that's right.
6:53 Speaker 03 The whole economy is really built around that. So we cannot just wean us off that, right? You know, overnight.
7:02 Speaker 02 Yeah.
7:02 Speaker 03 It is gonna take some time to do that. And I think that's what people like Chad understand. It's like, hey, oil is here. Let's use it responsibly, right? Because it has economic ramification, good ones.
7:19 Speaker 02 Yes.
7:19 Speaker 03 On our population, especially here in Kern County.
7:22 Speaker 02 Yes, yes.
7:23 Speaker 03 So some good statistics that we talked about just to support that.
7:27 Speaker 02 Yeah. And I think there, yeah, and the numbers and the statistics that can support continuing to emit carbon into the atmosphere are, there's, there's, there are some strong arguments to continuing to, to, to emit carbon. And, but, that is with the, because it's still so cheap, what are you doing with the, with the, that savings of burning that natural resource and the cost that that has on society? There's a true health and societal cost. And who bears the brunt of that cost? Is it just supposed to be on the individuals? Is it supposed to be on the states? Is it on the countries? Is it on the international
8:12 Speaker 02 coalitions? Like, they're, or, you know, who? Or is it the companies?
8:16 Speaker 03 Mm-hmm.
8:17 Speaker 02 You know, who pays? Somebody has to pay the price. Otherwise,
8:20 Speaker 03 Correct.
8:21 Speaker 02 It's, it's being paid for whether we like it or not.
8:24 Speaker 03 Yes.
8:24 Speaker 02 And so that's what bothers me is like, there's not a real discussion about how are we, how are we paying for the cost of continuing to burn carbon fuels? We know we're gonna have to continue to do that. So let's be smart about it. Like, the state of California, I think, is trying their best. To be smart about it, but now we're faced with essentially, I was looking at the numbers. We're paying the highest gas prices we've pretty much have ever paid.
8:50 Speaker 03 Yes.
8:51 Speaker 02 As a country and as a state. There's, if you account for inflation, the cost of gasoline right now is about as high as it's ever been. And that even takes into account going back to the late seventies and early eighties when we had the Iranian revolution. That was a massive energy shock. And we've probably all, some of our listeners were there or remember the, the.
9:18 Speaker 03 The lines of the gas.
9:19 Speaker 02 The lines at the gas station.
9:20 Speaker 03 Yes.
9:21 Speaker 02 There were, you know, essentially there was just a huge spike in the cost of gasoline. But you know what it peaked at nationally, a gallon of gasoline in 1979 or 1980? A dollar twenty five.
9:35 Speaker 03 Yeah.
9:35 Speaker 02 Adjusted for inflation, it's about five dollars and fifty cents today nationally.
9:41 Speaker 03 The one that Chad brought yesterday was the Arab embargo, nineteen seventy three, nineteen seventy four. That's, he talked about, that had almost a ten year effect. Right? So the Arab embargo took out of the market, according to my memory from yesterday, four and a half million barrels. A day, right? Versus what we're facing today.
10:06 Speaker 02 Yeah.
10:06 Speaker 03 It's a much bigger number, right? Which are much, much better consumption than nineteen seventy three, nineteen seventy four. But what that made us as a country here in the US is we became oil independent and producing country.
10:20 Speaker 02 Right.
10:21 Speaker 03 I mean, let that sink in.
10:23 Speaker 02 The greatest.
10:24 Speaker 03 Energy independent.
10:25 Speaker 02 Yeah.
10:26 Speaker 03 That, not every country, like some countries are stuck.
10:30 Speaker 02 Right.
10:31 Speaker 03 We'll call them third world countries or whatever the term is.
10:34 Speaker 02 Islands.
10:34 Speaker 03 Or islands or whatever.
10:35 Speaker 02 Right.
10:36 Speaker 03 This country is energy independent. We can sustain ourselves.
10:39 Speaker 02 Yeah.
10:40 Speaker 03 That's not the case for France. That's not the case for countries in Europe. They rely on countries like Russia. To keep warm in the winter.
10:48 Speaker 02 Right.
10:49 Speaker 03 We don't.
10:50 Speaker 02 Right.
10:51 Speaker 03 And that that that's huge for us. And that's what sometimes pisses me off as a California resident is that we have this wealth here in the state and but we're still importing 70% of our oil.
11:03 Speaker 02 Yeah, right.
11:05 Speaker 03 And.
11:06 Speaker 02 That's a that's a problem. And that's that is the one of the big drivers as to why we have the highest gas prices in the country. Is because we are an island over here and the the fuel that we we don't have enough. There there will never be enough capacity in California for us to just be self sustaining.
11:24 Speaker 03 Now even less, now even less. The fact that Chad said yesterday is that we lost 20% of our refining capacity.
11:30 Speaker 02 Yeah, and it's still going down.
11:31 Speaker 03 I know. And he's and I told him, well, can can they sell? Can they just? And I said, no, any refinery is not going to do that because now they're going to keep it and assume the cost. So they can, if there's cleanup or liability, it's theirs. They're going to do it over time versus turning it over to somebody else or someone else to operate. And now the liability on them to clean up.
11:51 Speaker 02 Right. What a mess. We got a great listener question. Maybe we can we can address this before the break.
11:57 Speaker 03 Sure. Hey, Money Wise, Money Money Guys. So with everything happening involving Iran and oil prices, could that affect interest rates or make banks cautious about lending these days? Should we hold off until this war is over? Thank you so much.
12:14 Speaker 02 This is great. Sammy, why don't we do this? Actually, we'll take a break and I want to get your opinion on this because your experience in the banking world. This was fascinating to me because I immediately started thinking, what? How do banks? How do banks decide when they are going to lend money out to their customers and their clients? And how do they take into account? Interest their their projections of interest rates of inflation. And this is right on on topic because today we had the new revised Consumer Price Index numbers. So the inflation numbers came out. Guess what? Not good. It's the worst we've seen since 2022. So we've got some inflation numbers there. So
12:57 Speaker 02 we're going to take a break. When we come back, we're going to talk to Sammy more about this, how banks decide to lend out money and whether it's a good time to borrow or not. Well, more Money Wise. We'll be right back.
13:11 Speaker 02 Thanks for tuning into MoneyWise. We're your hosts. I'm Sharad here with Sammy, taking your questions and comments, 661-396-1000. That's the number you can text, send us a message, or call 24 hours a day, 661-396-1000. All right, Sammy, so great question. I'm glad you're on the show here with me.
13:29 Speaker 03 Yeah.
13:29 Speaker 02 With your decades of experience in the banking world, a listener is asking about whether or not, here, I'll just, I'll read the, I'll read the bulk of it. It says, "With everything happening and involving Iran and oil prices, could that affect interest rates or make banks cautious about lending these days? Should we hold off until this war is over?" Thank you so much. So you're in the perfect position because you saw, you were in the inner workings of how banks were making their decisions on what, who they were going to lend to and why and what the costs were going to be.
14:04 Speaker 03 Yeah, we briefly talked about this yesterday. Frank Lee, our own Frank Lee from MoneyWise, asked that question. And, and I used to say this to the people that worked for me at the bank, bankers are not rocket scientists, right? We're not rocket scientists, but we assess risk, business risk and every risk associated with the borrower. And then you try to mitigate those risks. And this is just one of them. So any banker were, you know, it's whatever insult, whatever the saying is, they're going to do some projections based on the data they have today, right? They're going to assess the business, the quality of the business, character, capital, and all that. But then they're going to look
14:46 Speaker 03 at, hey, you're in the oil industry, oil is at $110 a barrel on average with $4 a gallon on average throughout the United States. What does that mean? That means an oil producer is making money, an oil maintenance business is making money because there's money to be had, there's profit. So, and the writer will take a look at that and project.
15:13 Speaker 02 Yeah.
15:13 Speaker 03 Talk to somebody like Chad, who's like, okay, how are we doing on prices for the next two years, right? And then you do your, your analysis and you collect the data and you're like, okay, the outlook for oil is, is, is good. I'm going to make this loan to this borrower based on my outlook of this industry.
15:32 Speaker 02 Right.
15:33 Speaker 03 Right?
15:33 Speaker 02 Right.
15:34 Speaker 03 Now, that's oil industry. Now, if I'm underwriting for a ag company, what does that mean? Higher oil prices, what does that mean? That means that I'm spending more on diesel, on all my equipment, right? I'm spending more on maybe our other inputs that I have in my operations. So my cost of goods sold now might be going up.
15:57 Speaker 02 Right.
15:58 Speaker 03 So I want to understand that because that's going to affect my profitability or bottom line. That means it's going to affect the cash flow, which is the source to repay that credit or that loan.
16:08 Speaker 02 Right.
16:09 Speaker 03 Right. So, yes, this might affect a banker's decision, right?
16:15 Speaker 02 Yep.
16:15 Speaker 03 But a good banker will try to analyze all of that and then make a solid decision based on all the data they have. I don't think banks are going to hold off on lending personally.
16:26 Speaker 02 Right, right.
16:28 Speaker 03 Right?
16:28 Speaker 02 That's how they make their money.
16:29 Speaker 03 Yeah, correct. They might price it to the point where they see that oil prices might result in higher interest prices going forward in the next two years.
16:41 Speaker 02 Right.
16:42 Speaker 03 Or a year. So they're going to price it accordingly. So you might see higher interest rates, in my opinion.
16:47 Speaker 02 Yeah.
16:48 Speaker 03 Given that where we are with with oil prices.
16:51 Speaker 02 Yeah, I mean, if our listener was a owner of a trucking company and they're looking at getting a loan from a bank and the bank is certainly would look at them and go, okay, what are labor costs? Labor costs are going up.
17:08 Speaker 03 Yeah.
17:08 Speaker 02 Fuel prices are going up.
17:10 Speaker 03 Definitely.
17:10 Speaker 02 Everything, all those things are going up, maybe at a disproportionate rate, not just because of oil, but because the impacts of inflation and technology displacement. And so that would be, I think, another further example of a bank would be like,
17:25 Speaker 03 Correct.
17:25 Speaker 02 Well, why would we lend to you? Like, you're you're.
17:28 Speaker 03 Yeah, a trucking company was always a tricky one to lend to. And you, and it's not because of oil prices or gas prices or diesel prices. It was because the industry itself carried a workman's comp risk. Because people will sit.
17:46 Speaker 02 Accidents.
17:47 Speaker 03 Accidents, but also people just sitting and driving for long hours.
17:51 Speaker 02 Yeah.
17:51 Speaker 03 Affected their health.
17:53 Speaker 02 Right.
17:53 Speaker 03 So you you'd be surprised that their mod was higher because of that.
17:59 Speaker 02 Right.
17:59 Speaker 03 Right? And that's what a banker would take into consideration, all of these data to make that loan decision. But I agree with you, definitely their input when it comes to oil and diesel prices will affect their profitability.
18:13 Speaker 02 There is news today, I think, that is making some people even more nervous when it comes to interest rates and inflation. That's because the Consumer Price Index has has been revised and those numbers have come in. And the numbers are not good. It's showing that we have an annualized inflation rate of 3.8%. And that is a pretty, you know, it's still quite a ways away from the 2% that the Fed would like it to be at. And it's the highest that it's been since 2022.
18:53 Speaker 02 This is the highest inflation rate, even when you strip out some of the energy and fuel costs. We're still up above, you know, close to 3%. And so we're not anywhere where the Fed would like it to go. Markets are reacting today. We're seeing a mixed market, actually, with the dumb Dow still up slightly, up 0.15%. But the S and P 500 is down about a third of a percent. The NASDAQ is down almost a full percent. And I'm actually surprised at the market's reaction being pretty tame.
19:27 Speaker 02 Considering now, before this, before this data came out, the C M, the markets were anticipating a, a, the CME Fed watch. Were anticipating nearly a 98% chance that the Fed was going to hold rates steady at its next meeting coming up in June and through most. Of the year, but now with this number coming out, there is now a nearly 30% chance of a rate hike. So we've gone from like, starting the year out to like, okay, rates might go down to, oh, rates might stay the same to, oh, rates are probably going up.
20:06 Speaker 03 Yeah, and, and this conflict is not helping.
20:08 Speaker 02 No.
20:08 Speaker 03 Right? So, so if there is a resolution to the conflict between now and June, and hopefully in the next couple of weeks, that might change things, not maybe drastically, but might affect things positively. Hopefully, oil prices go down a little bit. So you and I and everybody else that's going to the pump, we're not spending three, four, $500, depending on what you're driving, a month extra.
20:32 Speaker 02 Right. I'm sure you talked about this yesterday with Hathaway, the, the, most consumers don't, don't fully comprehend the, the global market that oil is traded on. And how it's, you know, it's traded in dollars, but it is still a, a global commodity that is trade, because it's traded globally, we don't have any say over that price. California and the United States doesn't really have any say in it. Even though we're not even touching Iran's oil.
21:04 Speaker 03 Yeah.
21:04 Speaker 02 It's impacting our prices because we have to buy it and we have to sell it on the global market. So it's all, it's all baked into that price. And so having some resolution in our, in, in Iran and the Persian Gulf will be huge. It'll be huge for that, for just for the market.
21:20 Speaker 03 Yes.
21:21 Speaker 02 Because then now the markets can price it in accordingly.
21:23 Speaker 03 That's correct.
21:23 Speaker 02 But we're still going to be faced with the backlog and now all of the, all of the, ramping up that's going to have to happen across the globe and, and getting the shipments out and all of that. And so it could be a long,
21:38 Speaker 03 That's right.
21:38 Speaker 02 A long, long recovery. We'll talk more about this. Cover your comments and questions, 661-396-1000. We're Money Wise. We'll be right back.
21:56 Speaker 02 Thanks for tuning into Money Wise. We're here for you for the next half hour or so. 661-396-1000 is the number you can text or call. Happy to take your comments or questions. We've got quite a few here. We're going to get right to it. Let's hear it, Sammy.
22:11 Speaker 03 So there's a lot.
22:12 Speaker 02 Yeah.
22:13 Speaker 03 I'm grateful and keep them coming. We love the interaction. I'm going to start with this one. I keep hearing experts say oil could stay above 100 if this war keeps dragging on. For regular people here in Bakersfield, what's the bigger long-term concern? Gas prices, inflation, or the possibility that global instability keeps hitting everything from groceries to power bills? I worked on a rig for 40 years and good to hear from a guy that knows the business.
22:40 Speaker 02 Very cool. I wish Chad was still here to help out with this as he'd have something to say about just the commodity itself and fuel and gas prices. But I interpret this as, you know, how is a household supposed to manage working through the potential inflation problems that we're faced, especially people are seeing inflation mostly at the gas pump? Because it's like, it's just thrown in your face as you drive down the street. You can't help but to look and see the prices.
23:09 Speaker 03 You know, this is funny, but also sad. As soon as the war started, I was filling up at the gas station and everybody had their phone out and just taking pictures of the
23:19 Speaker 02 Of how much it was?
23:20 Speaker 03 Yes.
23:20 Speaker 02 The price.
23:21 Speaker 03 You know, and everybody's like posting probably about it and stuff. So it's hitting everybody.
23:26 Speaker 02 And it really bugs me because when we had the gas prices spike, what was it, three, two or three years ago, there were stickers that you would see that would say, thanks, Biden.
23:38 Speaker 03 Yeah.
23:38 Speaker 02 And now you see stickers that say, thanks, Trump. And I'm like, you people have no idea. Like, you think the president has control? Like, you can argue, okay, well, we didn't have to get involved in Iran, whatever it is, but like... Global oil prices are
23:57 Speaker 03 Yeah, the way they are set to your point from earlier, it's truly, it's the dollar.
24:03 Speaker 02 Right.
24:03 Speaker 03 You know, I mean, when you travel overseas, for people that travel overseas, you'll love that dollar.
24:08 Speaker 02 Oh, yeah.
24:08 Speaker 03 Because it takes you long ways. I mean, it's like you go to Morocco, one dollar gives you 10 deer hams.
24:13 Speaker 02 Right.
24:13 Speaker 03 You're buying a lot of stuff with that dollar, right?
24:15 Speaker 02 That's right.
24:16 Speaker 03 You come back here, it's that same dollar.
24:18 Speaker 02 Right, that's right.
24:19 Speaker 03 Right? It's the same dollar, it just doesn't get you as far.
24:22 Speaker 02 Right.
24:22 Speaker 03 And, and, and, but, you know, even China, when it buys from Saudi Arabia, for instance, it buys in dollars.
24:31 Speaker 02 Yeah.
24:31 Speaker 03 I mean, they only get one from countries like Iran.
24:36 Speaker 02 Right.
24:37 Speaker 03 But the rest of their imports are all in dollars, and that's what dictates the price, and I think is what you're trying to say.
24:43 Speaker 02 Yeah, and
24:44 Speaker 03 One can argue, though, this conflict was not needed. That's what a lot of people are saying.
24:50 Speaker 02 I, I think that, that, yeah, certainly, I mean, they wouldn't want to get into geopolitics, but if the United States didn't get involved, that was that gonna, was that gonna stop Israel from staying involved in Iran? And then what would that mean?
25:03 Speaker 03 Correct.
25:03 Speaker 02 Does that mean we have no say in any of how goods are moved across the globe? Like, I'm not saying what I'm for or against it, but I'm saying it's more complicated than people think.
25:15 Speaker 03 Correct.
25:16 Speaker 02 There is also, I think, I want to be sensitive here, but as I mentioned at the beginning of the show, we have seen worse oil prices in the past on a national basis. We've, we've had worse, we've had worse.
25:32 Speaker 03 Yeah.
25:32 Speaker 02 It's been about what it is today, or a little bit less, but also going back and looking and seeing what the percentage of an average American household spends on gasoline has not really changed at all in the last hundred years, which is shocking. As a percentage of their income. As a percentage of a household income, it has always been between 3 and 5%. Going back to the 30s and 40s, in the 50s, when cars were getting 10 miles a gallon, you know? And yet, here we are. Where households are still paying on average 4% of their household income towards gasoline. Now, I know it stings.
26:14 Speaker 03 It does.
26:14 Speaker 02 Because you're looking at it, you're used to paying $4 a gallon, and now you're paying $6 a gallon. Or in your case, what did you say?
26:21 Speaker 03 Seven for my diesel truck.
26:23 Speaker 02 Diesel, seven bucks a gallon.
26:25 Speaker 03 Yeah.
26:25 Speaker 02 I remember we had, again, going back to Hathaway on the show last year, and we were talking about California doesn't do something where we're heading towards $8 a gallon. And it was like, whoa, then it's all hell's gonna break loose. And here we are knocking on $8 a gallon, you know? And yet, it is still for most households, 4 or 5% of their of their budget. And what households also do is they adjust their, they adjust their way that they.
26:49 Speaker 03 Travel.
26:50 Speaker 02 Travel.
26:50 Speaker 03 Yeah, that's what I was about to say. I mean, is that taking into consideration the adjustments, you know? Instead of, you know, making those four trips or whatever, maybe you condense it to two trips. Maybe you're walking to lunch from your office where you work versus taking the car and going 20 minutes away. Things like that.
27:08 Speaker 02 But that's the same thing that consumers have done back in the 60s or 70s when gas prices spiked. There's the consumer adjusts their behavior and it always stays kind of within that, let's call it 5% range of your house, of your monthly household in income. Which today is about 200 bucks a month. So the average household is spending $200 a month. Now, again, I want to be sensitive. If gas prices continue, if, let's say, gas prices double. So now you're paying $400 a month towards you. Like, that's definitely devastating for a lot of people, but it's not, it's not, you know, it's not, you know, completely devastating. Because what are people going to do? They're gonna say, well, do I pay my Netflix subscription?
27:51 Speaker 02 Or do I keep that extra 30 bucks for fuel, you know, to get somewhere? Or do I need to start taking the bus? Or do I need to start carpooling?
28:00 Speaker 03 You know, like. I need to start eating at home or prepping.
28:02 Speaker 02 Yeah.
28:03 Speaker 03 You know?
28:03 Speaker 02 Right.
28:04 Speaker 03 That, those are some of the, so we're so, we have so much short memory. That these things happen to us over and over and over again. And, and, and the one thing I would love to, for us, as a, you know, as a, as a society even, is to. The word savings is almost taboo.
28:24 Speaker 02 Yeah.
28:25 Speaker 03 Right? Like saving a little bit of money on every month. Because that's where it comes handy during these times.
28:33 Speaker 02 Yes. Yes. And that's the thing that the household, the biggest thing a household could do to prepare themselves for some, some of these economic shocks is having an emergency, having savings.
28:43 Speaker 03 Correct.
28:43 Speaker 02 Just having some cash there to lean on so that you're not forced to make expensive or emotional decisions.
28:49 Speaker 03 We have this mentality of, hey, I make a hundred dollars. Let me find a way how to spend it.
28:54 Speaker 02 Right.
28:55 Speaker 03 Right?
28:55 Speaker 02 Right.
28:56 Speaker 03 There's, we don't think about, and me included, we don't think about, hey, let, let, let me put away that 20% of that.
29:03 Speaker 02 Right. Uh, uh, uh, we're gonna crap on California here a little bit more, but the fact that we're, we're almost 40% higher than the national average. The national average right now for a gas, a gallon of gasoline is $4.11. California, it's $6.60. $6.60. So like, and then you're looking at diesel, which is always like a buck more. So nearly $7 a gallon of diesel.
29:32 Speaker 03 Yeah.
29:33 Speaker 02 It's like, it's crazy.
29:35 Speaker 03 Look, um, yeah, I go to the pump. I'm one of those. I keep looking at that number, you know, it makes that noise like somebody like the, the, uh, it, it's not fun. It's not fun to watch.
29:47 Speaker 02 No.
29:49 Speaker 03 But, you know, can I make adjustments? Can I travel less? Can, yeah. I do love my truck though. I don't, I don't care about the $7 per.
29:59 Speaker 02 You've got a really nice truck and you get better gas mileage with the diesel, right?
30:02 Speaker 03 Definitely.
30:03 Speaker 00 Can you, can you fit my truck in the back of it and I'll save some gas?
30:08 Speaker 02 Yeah. Good stuff. Great comment. Thank you for that. Got another one here. You want to get that Sammy?
30:13 Speaker 03 Um, I'm sorry. I'm, I'm, I'm lost track. There's, we, we have a lot.
30:18 Speaker 02 Yeah, yeah. It says, "When you guys get a chance, can you explain what a CCRC is? And if it should be a part of a retirement plan?" Thank you, Eddie. Great question. CCRC is an acronym that stands for Community...
30:40 Speaker 03 Care Retirement Community.
30:41 Speaker 02 Yeah.
30:41 Speaker 03 Continuing Care Retirement Community.
30:43 Speaker 02 Yeah, that's it. I think our local example is Rosewood.
30:46 Speaker 03 Yes. It's probably the most...
30:48 Speaker 02 Probably the most...
30:49 Speaker 03 Known.
30:50 Speaker 02 Yeah. It's been around the longest, I'm sure. And think of it as a retirement living model that's designed to let somebody age in place so that they don't have to move into the different stages. You have independent living and then assisted living and then skilled nursing. And that in there lies what the attraction is of them is that you can get that sort of all-included stages of healthcare that would be needed. And some of them allow you to partially pre-buy that future care access. So you can pay for that, sort of buy into that ahead of time.
31:35 Speaker 02 So it gives you that assurance that you've got that sort of locked in. And I can see the appeal for a lot of people. In fact, knowing sort of where, what direction they can go in and where they can sort of move once and then not worry about it.
31:51 Speaker 03 Yeah. What I liked about the question is the second half, it says, "Should it be part of a retirement plan?"
31:58 Speaker 02 Yeah. Not necessarily a continuing care retirement center, but what are you, what are you going to do? Like, where are you going to go?
32:08 Speaker 03 Correct.
32:09 Speaker 02 Who's, how are you going to care for yourself? Because we do all, the chances of us all getting to the point where we need assistance is just about half, which is a lot, a lot of people. And I'm talking about where you need skilled nursing care. About half of us are going to need that at some point in our life. It's usually when we're later in life. So you have to, you have to plan for it. You have to prepare for it.
32:32 Speaker 03 And that's why I liked the question because a lot of times we don't think about it, right? But we do have to plan for it, especially where, just how we are today.
32:43 Speaker 02 Yeah.
32:44 Speaker 03 As a society.
32:45 Speaker 02 It's.
32:46 Speaker 03 Independence is very important for both our kids that you give birth to or yourself as a parent.
32:51 Speaker 02 It's one of those things that is so hard to talk about and for people to address because it's it's I reminds me of life insurance. Nobody likes to talk about life insurance. Nobody likes to go through the process. They it's like a necessary evil that you have to get because you know something terrible is gonna happen and then somebody's gonna die and then there's gonna be other terrible things that you have to pay for because they're gone now. It's like.
33:16 Speaker 03 I have a funny story for you about life insurance. When I was consulting, I was a business consultant. A client of mine could not have the conversation with his dad. He asked me to get involved and sit with him and explain the benefits of life insurance.
33:31 Speaker 03 Because he it was very hard for him to just, yeah, because it's kind of like taboo.
33:35 Speaker 02 Yeah.
33:35 Speaker 03 And and he was like, you know, I really need your help on this one. I'm like, what do I need to just have a conversation with my dad? I'm like, sure. So I explained to him, coming from me was a much, you know, better uh understanding and we ended up, yeah, we needed the the life insurance in place because of the size of the business and what have you.
33:57 Speaker 02 Right, right.
33:58 Speaker 03 But it was hard for my client to have that conversation with his dad.
34:01 Speaker 02 Oh, it's like one of the hardest conversations that you could have. And then now you talk about, hey, I'm not gonna die, but you're gonna have to change my diaper and bathe me. You know, good luck having that conversation with mom and dad.
34:14 Speaker 03 Dude, I'll tell you, I took care of my mom for eighteen months when she had heart surgery.
34:19 Speaker 02 Yeah.
34:19 Speaker 03 Eighteen months and and and she was moving and stuff and and it was hard.
34:24 Speaker 02 Oh, yeah.
34:25 Speaker 03 It is not easy.
34:26 Speaker 02 Right, right.
34:27 Speaker 03 You know, and I love my parents and it was still difficult.
34:30 Speaker 02 Oh, yeah. And they still had a home.
34:32 Speaker 03 Yes.
34:33 Speaker 02 And and you know, they were living with you partially.
34:35 Speaker 03 Correct.
34:35 Speaker 02 But yeah, it's it's like it is being a caretaker is incredibly difficult. And that that is why a lot of us are concerned about putting that burden on to our kids. We don't want to put that burden on our family. So then what do you do? You're either gonna have to have, gonna pay somebody else to do. Or you're gonna have to move into a place that can do it for you. And these, these types of, of, of retirement communities where you buy in is, are, are generally very expensive.
35:04 Speaker 03 Yeah.
35:05 Speaker 02 You know, we're, we're talking about six figures, a hundred thousand dollars in some cases plus. Some of these places I've seen down in San Diego and LA, million dollar buy in. Plus, plus you have your monthly twenty thousand dollars that you pay monthly. It's very common. These are, you know, these are, these are places that take care of everything, you know, for you. If you can afford that, that's ideal, right? Ideally, you have, you have a, not for you?
35:34 Speaker 03 No, no, it's not that. I'm, I just, I just feel sad that, that, that. A lot of people work really hard and eventually cannot even afford to retire here. That's, that's like, I've been reading a lot about like people retiring overseas. You know, like people retire in America, but then they go and retire in Mexico.
35:55 Speaker 02 Yeah.
35:56 Speaker 03 And buy a house wherever in Mexico or Chile or.
35:59 Speaker 02 Or Tennessee.
36:03 Speaker 02 Or Texas.
36:07 Speaker 02 Or Idaho.
36:10 Speaker 03 Seriously, seriously, I, I mean, like Europeans do the same, by the way.
36:14 Speaker 02 Yeah.
36:14 Speaker 03 They go to North Africa.
36:15 Speaker 02 Yeah, they go to Morocco, right?
36:17 Speaker 03 Yes, yeah.
36:18 Speaker 02 Yeah, but it, it does, like the bigger question is, what, what do you do with your money? At the end of the day, if you die with a bunch of money, but you were like miserable and stressed and like unhealthy.
36:34 Speaker 03 And that's why I wanted to stress is that is you have to have some type of a financial advisor. And this is not a plugin for MoneyWise. No, this is true. You have to have some type of a professional helping you.
36:45 Speaker 02 Yes.
36:46 Speaker 03 With answering these questions. That's where the financial plan comes in.
36:49 Speaker 02 Yes.
36:50 Speaker 03 Dealing with somebody like Justin or Dustin upstairs that have a CFP. They can build a plan for you and take this into consideration.
36:58 Speaker 02 Right, exactly.
36:59 Speaker 03 And, and, and for, most likely it's gonna be a free consultation. Most of the time. So take, take advantage of the fact that there are financial advisors and professionals around to help you with making some of these decisions.
37:12 Speaker 02 The biggest job that we do as financial advisors and wealth managers is helping people with their, improve their relationship that they have with their savings or their investments. There's so much of us that just put our heads down during our careers. We save, we save, we save, we retire. And then it's like, well, there's not any thought into how we're going to spend that money. In fact, it's always looked down on, you know, I don't want to spend, I'm going to hold it back for my kids and your kids are screaming at you. We don't want it. We don't want or need your money, mom and dad. Like get some help, you know, do some things and like they still don't want to do it because they've lived the first 70 years of their life going, I'm independent. I'm taking care of myself.
37:56 Speaker 03 What's the answer to when you say, mom, I don't want the money, just spend it on yourself. Well, you don't want it, but I want to leave it for my grandkid.
38:03 Speaker 02 Oh, yeah. Okay. Well, little Johnny doesn't need it either, right? We're taking care of our kids, you know?
38:11 Speaker 03 You know, I tell my kid, I tell, hey, Gabe, you won the lottery. You were born in America, bro.
38:16 Speaker 02 Yeah.
38:17 Speaker 03 Figure it out.
38:18 Speaker 02 Yeah. Yeah. There's opportunities.
38:20 Speaker 03 There are opportunities. Take advantage of that. Be a little bit savage and take, take advantage of what's in front of you.
38:26 Speaker 02 Yes. And have a, you know, you can teach this to your kids, but I mean, having these conversations with your parent is I think really important. And a financial advisor can definitely ease that conversation because as a, as a kid, you feel like, I don't want to bring this up to dad. Like, how am I going to tell him? Like, he's going to think I'm just wanting to get my inheritance or whatever. And, and yet you gotta have these tough conversations that can be really managed well when you have a financial advisor that is a fee based. So he's not getting paid by offering product. He's, he's you, he's being paid directly to make your decisions in your best interest along through your life.
39:13 Speaker 02 Stages and that alleviates the hassle of family needing to come in and try to figure out what's going on. How long is this money going to last? Is can we afford a care facility? How much can we afford and what happens if, you know, we run out, you know? What, what, where are our resources? How far can they take us? So you need to like wealth management goes so far beyond just the stock market and those investments. I love Henry David Thoreau's quote, wealth is the ability to fully experience life. Or Warren Buffett's quote, do not save what is left after spending, but spend what is left after saving. And that's an area where a lot of retirees struggle with. They just don't know how to spend it. They're so used to just accumulating that they're not comfortable with dispersing.
39:58 Speaker 03 Yeah, our comfort zone, especially when you're a hardworking person is your work. And if you lose sight of having fun while you're doing that, then you just learn bad habits. And the bad habit here is not having fun.
40:13 Speaker 02 Yeah, exactly. And another quote that I love that's kind of along that line, Sammy is the measure of a life after all is not its duration, but its donation. That's Corey Ten Boom said that. And so, and P T Barnum, one of my favorite P T Barnum's quotes. Money is a terrible master, but an excellent servant.
40:35 Speaker 03 Yep.
40:35 Speaker 02 It can.
40:36 Speaker 03 I like this one.
40:36 Speaker 02 Even with people who have, you've seen this, people with extreme wealth are, are just, are just masters to their, to their wealth. Rather than letting their work, their wealth be a servant to them, they're still enslaved to it.
40:50 Speaker 03 Correct.
40:51 Speaker 02 Like, what, why are you doing this? Like, why are you living a certain way or, or doing a certain thing with your money? And, and letting it control you when there's so much of it.
41:03 Speaker 03 Yes.
41:04 Speaker 02 You know, and the same thing can happen when there's none of it or when you lack it. Now you become a mass, now it becomes a master too. And you're like, now you're just, you're just focused on accumulating wealth. And like, that's wrong too. So, you know, finding that healthy relationship with money is so important. And unfortunately, it's a big. Part of our life and what brings us, you know, satisfaction in life is just about money.
41:30 Speaker 03 Yeah, yeah, it is. It is. A lot of it.
41:33 Speaker 02 Yeah. All right. We got to take our last break. Where am I? No, we don't. No? Okay.
41:37 Speaker 03 Well, we're skipping break.
41:39 Speaker 02 Well, we're skipping break, but if you need to skip.
41:40 Speaker 03 No, no, I'm not. I'm having fun, dude. I don't want to stop. We got more comments coming in.
41:45 Speaker 02 Oh, let's go. Let's go. You got them?
41:47 Speaker 03 Yeah, I have this one. Good afternoon. Love your show. I'm semi-retired. I'm gonna guess that's widow. On a budget, I have few rentals. What is the best investments I can do for my seven and 12-year-old beautiful grandsons? I'm 70 years and pretty healthy, but you never know.
42:06 Speaker 02 I love that we were just talking about this, right? Like, I love when people are already thinking about, how can I, how can I pass this on? You know, and I would recommend talking to your beautiful grandsons about this. And get them involved and engaged in a very easy way that you can. But if you're going to give them some money or investments, get them engaged in it. There's really easy ways to do it. And you don't need, because of their age, and maybe depending on what they're, so if you, if your grandsons are struggling to buy new shoes or buy clothes or feed themselves, obviously, you need to go there first. Don't worry about the stock market. Like, help them out.
42:42 Speaker 03 Yes.
42:43 Speaker 02 Help them out, or education, if that's something. And for a lot of us parents or grandparents, we're thinking about how are they going to get an education? So, so, but they're still would be a ways away from college. We're talking about at least seven, eight years before they go to college. That's a long time to invest. That means you can go into the broad stock market and you're going to be just fine. They're gonna, their money will like, you have a very high likelihood you'll have more money in 10 years than you do now if you just put it in a stock market. The broadly diversified investment strategy, you'll, you'll, you'll do just fine.
43:19 Speaker 03 Yeah, and I love the fact that she has rentals. So I'll, I'll, I'll give her my answer. So I involved my, my kid. I've been saving for him since the day he was born. I take a little bit of my paycheck. I put it aside. Eventually, when I found a good rental, guess what? I took those savings and I put them as a partner with me in that, in that rental. By the time he goes to college. I'm gonna have enough equity to pay for that college.
43:43 Speaker 02 Right.
43:43 Speaker 03 Right? He's gonna have enough, or the income coming from that property will help him go to college.
43:48 Speaker 02 Yes, and you get to get him involved in it, right? He goes with you to help.
43:52 Speaker 03 Yes, he does gardening with me, he will fix the property whenever it needs to be fixed, he's aware of it. I'm teaching him how to run a P and L for it.
44:01 Speaker 02 Yeah.
44:02 Speaker 03 So, so to your point, engaging them is probably as valuable as actually giving the money.
44:08 Speaker 02 Yeah, yeah, and that's a legacy that you can, that will live on in them after you pass, and so good stuff.
44:15 Speaker 03 Um, we have one comment. Gentlemen, please don't fall into the trap that any politician is going to convince the major oil companies to come back into California. That ship has long sailed.
44:26 Speaker 02 Yeah, we fear that, we're not arguing that.
44:29 Speaker 03 Nope, nope, nope.
44:30 Speaker 02 And that makes sense, I mean, it's gonna take years and years for a company to feel like they're safe to come back here.
44:36 Speaker 03 Correct.
44:37 Speaker 02 Fortunately, Kern County at least has taken that first step, you know, we're the first only county in California.
44:41 Speaker 03 Definitely an island within an island.
44:42 Speaker 02 That's right, that's right.
44:44 Speaker 03 Definitely, and we're blessed for that, and I'm very happy.
44:47 Speaker 02 Yes.
44:47 Speaker 03 That's a lot of what I told Chad yesterday, his efforts.
44:50 Speaker 02 Yes.
44:51 Speaker 03 A lot of people like him.
44:52 Speaker 02 Yeah.
44:53 Speaker 03 Fighting for that stuff to come back, that's why I was telling him, thank you.
44:56 Speaker 02 Oh yeah, for sure.
44:57 Speaker 03 Uh, another comment. Do not even bring up the cost of food, it is insane to think a regular hardworking California resident can pay their mortgage, bills on top of these gas prices and feed their family.
45:10 Speaker 02 Uh, guess what? They can't, a lot of them can't, I think the majority of Californians cannot afford. Uh, I, I lived even in my own house for, you know, for after about, I don't know, wasn't long after living in my house when we had, we moved, we bought our first house in, in 2000, and we saw that a big, a big spike in prices, and it got to the point where I was like, I could not afford the house that I was living in. Very quickly, after a few years of buying that home, if I had to buy it again at that new prices, I would not be able to afford it.
45:42 Speaker 03 Yeah.
45:42 Speaker 02 And that trend has happened and continues to happen for most people. It's just continues to get out of our reach and it's a real, it's a real, very complicated problem.
45:53 Speaker 03 It is, it is. Housing in itself is a big problem for the state of California, but not just California, overall in the United States.
45:59 Speaker 02 Nationwide, it's a problem.
46:00 Speaker 03 Nationwide, nationwide is a problem.
46:01 Speaker 02 California is an issue, Kern County, it's less of an issue, but our affordability index in California, I still think, I mean, Bakersfield and Kern County, I still think is like 50%, which is high for the state because I think the state is well below that. But still, like only half of the working people can afford a home, but they're living somewhere.
46:22 Speaker 03 Correct. That's why oil needs to come back.
46:24 Speaker 02 Oil needs to come back.
46:25 Speaker 03 So we need those jobs.
46:26 Speaker 02 That's right. That's right. We need those jobs. We need the economy to turn in favor of the consumer and I'm not giving up hope. I'm very optimistic. I'm very, very optimistic. And like you said, Sammy, hey, we hit the lottery. We all hit the lottery by being able to live here and be here, especially in the Central Valley. Like what a, what a paradise, you know, we live in here. I want to thank all of our listeners and remind them that if they'd like to listen to this show or any of our past programs, go subscribe to the Money Wise Podcast. It's commercial free and on all major podcast platforms like iTunes, Apple Podcasts, or Spotify. And remember these three things. Be smart, be safe, and always be money wise.
47:09 Speaker 01 Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.
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