9/2/26 The AI Boom Is Costing HOW MUCH? + The Bond Yield Trap

The Moneywise Radio Show and Podcast Wednesday, September 2nd BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Radio Show & Podcast" call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com https://www.moneywiseguys.com/ facebook: Moneywise_Wealth_Management https://www.facebook.com/moneywiseguys/ LinkedIn: Moneywise_Wealth_Management https://www.linkedin.com/company/moneywise-wealth-management-bakersfield/ Guest: Allyn Medeiros, Sr. Loan Officer for Agape Mortgage website: https://allynmedeiros.com/ The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Allyn Medeiros & Agape Mortgage are not affiliated with nor endorsed by LPL Financial or Moneywise Wealth Management

• 0:00Speaker 00

  Live from the basement inside the historic Woolworths Building in downtown Bakersfield. Call or text in at 661-396-1000.

• 0:29Speaker 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.

• 0:37Speaker 00

  Now, let's start the MoneyWise Show.

• 0:40Speaker 02

  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...

• 1:02Speaker 03

  Seth Perry.

• 1:03Speaker 02

  Seth, always fun, man.

• 1:04Speaker 03

  Always.

• 1:05Speaker 02

  We've got some good listener questions and comments. Let's kick it off.

• 1:11Speaker 03

  Yeah, before we do, though, congratulations, Steven.

• 1:15Speaker 02

  Yeah.

• 1:15Speaker 03

  Sharad, congrats.

• 1:16Speaker 02

  For?

• 1:17Speaker 03

  The US national debt has crossed 40 trillion dollars.

• 1:21Speaker 02

  We're number one.

• 1:23Speaker 03

  Go.

• 1:23Speaker 02

  We're number one.

• 1:26Speaker 02

  No, we're actually not. I mean, we're number one, I guess, in total debt, amount of debt. But we are not number one in the total amount of debt compared to the size of our economy.

• 1:36Speaker 03

  Like the ratio.

• 1:37Speaker 02

  The ratio. And we're in the top 10, but we're not, we're not number one in terms of the ratio. And I think the ratio matters, right? Because somebody could tell you, oh, my gosh, I have so much debt. I mean, the debt would cost me three years of my salary to pay off. Oh, oh, well, well, how much salary do you make? I make $100 a year. Okay.

• 1:57Speaker 03

  Yeah.

• 1:57Speaker 02

  Okay.

• 1:58Speaker 03

  It's a...

• 1:59Speaker 02

  So you have $300 in debt?

• 2:00Speaker 03

  Someone's hovering around 400 pounds and the, hey, I lost five pounds. Well, that's okay, you know?

• 2:06Speaker 02

  Yeah. If somebody's 100 pounds and lose five pounds.

• 2:08Speaker 03

  Yeah.

• 2:09Speaker 02

  Now, okay, that's a big deal.

• 2:10Speaker 03

  Oh, yeah.

• 2:11Speaker 02

  That's 5% of your body weight.

• 2:12Speaker 03

  Very unhealthy.

• 2:15Speaker 03

  Turns appetite.

• 2:17Speaker 02

  I mean, America definitely is not financially, I mean, we're, we're, we're, we're healthy enough to still be the strongest and most stable economy in the world. But, but we're, we're slipping. Well, we're not alone. We're not alone.

• 2:32Speaker 03

  The, it used to be such a huge gap and now it's, yeah, the world is growing up around us and, well, we're still the best.

• 2:38Speaker 02

  Definitely. Definitely. I wouldn't take, I wouldn't take any other country.

• 2:43Speaker 03

  I've heard it said once that if, if the US is just so awful and so much hatred, why aren't people leaving? Why is everyone crashing to get in here? Man, it's still, the American dream is alive and well and...

• 2:56Speaker 02

  Oh, yeah, it's the place to be. Our education is just top notch. You just, higher education, I don't know about elementary and education and that, but higher education, our colleges, I mean, people come from all over the world to come here. And, and so, yeah, we've got a lot of great things going for us, but the debt is certainly, certainly an issue.

• 3:18Speaker 03

  Yeah, way to, way to lead with debt, right, Steve? I think our listenership...

• 3:21Speaker 00

  I thought we did something perfect.

• 3:23Speaker 02

  I know.

• 3:24Speaker 00

  Congratulations.

• 3:24Speaker 03

  You did, brother. You're rocking your, your Miami hat in the sound room.

• 3:29Speaker 00

  One of us has to.

• 3:30Speaker 03

  Proud and bold?

• 3:31Speaker 00

  Yeah. I don't know about that, but...

• 3:33Speaker 02

  You are proud. Maybe not bold.

• 3:36Speaker 03

  Maybe not bold. So Wednesday...

• 3:38Speaker 00

  I'm optimistic.

• 3:39Speaker 03

  Next Wednesday night, I was curious when NFL kicks off, but for those that enjoy sports, we're almost there.

• 3:44Speaker 00

  A week from today.

• 3:45Speaker 03

  A week from today. Yeah.

• 3:47Speaker 00

  We get the Super Bowl rematch.

• 3:49Speaker 03

  Come on. And it'll be, I saw it was on Peacock, but either way.

• 3:53Speaker 02

  Oh, that's San Francisco and Seattle?

• 3:56Speaker 00

  But, no, it's the Patriots and Seahawks is the Wednesday game. And then Thursday, which, where we usually kickoff football, will be, I believe, in Australia with the 49ers and Rams or something like that.

• 4:11Speaker 02

  So they're going to be playing at like 2 o'clock in the morning?

• 4:14Speaker 00

  Uh, I think it's like 4:30 or 5, but they have adjusted to that. During the season, there will be 6:30 in the morning Sunday games.

• 4:23Speaker 02

  Oh, boy.

• 4:25Speaker 03

  I remember that when I did fantasy. Hey, I noticed our fantasy football MoneyWise team didn't materialize. That's probably a good thing because my wife wanted me to quit. I was on a West Side team and I was on this one.

• 4:36Speaker 02

  Steven's on like 10. How many leagues are you in?

• 4:38Speaker 00

  I stop at 7.

• 4:39Speaker 03

  Yeah, it's, it was a little too consuming. I remember, yeah, anyway, guys, let's, let's...

• 4:45Speaker 00

  But I will say the financial side of it, the NFL, which is pretty much, runs the, the sports world, is now pushing to get international teams to expand how far they're going and making money.

• 4:59Speaker 02

  What?

• 5:00Speaker 00

  So in the next two or three years, the NFL, Roger Goodell, is pushing to have two teams that are international teams.

• 5:08Speaker 02

  Canada, Mexico?

• 5:10Speaker 00

  It looks like somewhere in like London and they're fighting over the second one.

• 5:15Speaker 02

  Oh, my gosh.

• 5:16Speaker 03

  Can you imagine a winter game in Alaska?

• 5:17Speaker 00

  Yes.

• 5:18Speaker 03

  That'd be rough, dude.

• 5:19Speaker 02

  Who's, who's in the running besides London? Who the other, who's?

• 5:22Speaker 00

  They haven't released that. They're just trying to get the players to adapt that because they'll have to change how the league is set with divisions and all of that. They're going to probably change into conferences with no divisions. So it would be just the top seven of each conference would make the playoffs. But that is something that they're still trying to figure out.

• 5:42Speaker 02

  Are you a fan of that?

• 5:43Speaker 00

  Um, I mean, if it grows the league and, but as long as they don't touch my team and I, I don't want to have the...

• 5:52Speaker 03

  Steven, I think you're safe. I don't think anyone's going to want to touch you.

• 5:56Speaker 00

  The London Dolphins? I don't know. We'll see.

• 5:58Speaker 03

  No, they could buy it out. Yeah.

• 6:00Speaker 00

  But anywhere, it always ends with money.

• 6:03Speaker 02

  Is there a country that has the most number of NFL fans?

• 6:08Speaker 00

  I believe they were, they were saying it's London, London and France, or London and Australia. They've also talked about Mexico City, so we'll see. It's just the early discussions as the NFL is trying to expand the, the season into a longer one where they add two games, so it'd be 20 games, 20 weeks. And if they're meet in the middle, they're trying to add two international teams to, to expand that.

• 6:36Speaker 02

  Man, that's going to be a long travel time for any team that's going to have to fly to London for the game. Like, you've got to adjust. Yeah, like, it's the time change.

• 6:46Speaker 03

  At least just to acclimate.

• 6:47Speaker 02

  Oh, yeah.

• 6:48Speaker 03

  Estimate, it's estimated NFL has 40 million fans in Mexico. I think that would be the low lying fruit.

• 6:54Speaker 02

  That seems like a lot.

• 6:55Speaker 03

  It's not a crazy flight, time change, any of those things, so...

• 6:58Speaker 02

  Yeah, I hope they keep it in the Western Hemisphere at least so that time...

• 7:01Speaker 00

  Well, they would add an extra bye week if they go to 20 weeks. So some of the teams, they'll try to coordinate it where a team that has to travel to London that weekend would have a bye the following week to catch up.

• 7:13Speaker 02

  I see. But, but the team would be based there. It would be the London whatever and they would...

• 7:19Speaker 03

  The London Broilers.

• 7:20Speaker 02

  Wow.

• 7:21Speaker 03

  Maybe.

• 7:22Speaker 00

  Yeah, who knows?

• 7:22Speaker 02

  How did, do you know how they, how they, how do they form a new team? Do they, like, do they, they bid out? Like, who would own it? How would they, do you know any of that?

• 7:33Speaker 00

  It would be kind of like what they've done, I believe, the last time was 10, 15 years ago with the Jaguars and the Panthers, where they just expand, where they would get a certain amount of players or free agency, but when it comes to ownership, that would be a whole different story.

• 7:48Speaker 02

  Yeah, like, how did, you know how they started the Panthers? This is a brand new team out of nowhere.

• 7:52Speaker 03

  This has been a long time ago because I was still had like a Sega and I'm not kidding. And I would play whatever game it was and it was the first year. So this, dude, they've, they've had to have been around for like 20, 30 years.

• 8:02Speaker 00

  A Bakersfield boy was the first quarterback for, I mean, it was the Texans because they moved over from the Oilers. And there's always movement.

• 8:09Speaker 03

  Big dog David Carr.

• 8:10Speaker 00

  A lot of, a lot of sports teams are trying to get into that expansion to make more money. The NBA is fighting to get a team, they're bringing back the Supersonics and Las Vegas team. But the NFL, they want to take that next step and go international.

• 8:26Speaker 02

  Hold on a minute. They're bringing back the Supersonics?

• 8:29Speaker 00

  Yep.

• 8:30Speaker 02

  Where did the Supersonics go?

• 8:32Speaker 00

  They, they are the Oklahoma City Thunder.

• 8:34Speaker 03

  Ah, that's right.

• 8:34Speaker 02

  I, this is how out of touch I am with the NBA.

• 8:37Speaker 03

  That's right.

• 8:37Speaker 02

  I had no idea the Seattle Supersonics were no, were around.

• 8:41Speaker 00

  They closed up.

• 8:41Speaker 02

  They closed and went to Oklahoma?

• 8:43Speaker 00

  Yep.

• 8:43Speaker 02

  Oh, my gosh.

• 8:44Speaker 03

  A lot of people, the Lakers, come from the Great Lakes, right?

• 8:47Speaker 02

  Yeah, Minnesota.

• 8:48Speaker 03

  Minnesota.

• 8:49Speaker 02

  Uh, yeah, I knew that one and the Dodgers.

• 8:51Speaker 00

  It's like the Baltimore Ravens or the former Cleveland Browns.

• 8:54Speaker 02

  Oh, my gosh.

• 8:56Speaker 00

  And then they brought back the Browns.

• 8:57Speaker 03

  Interesting, but it's not the same original team.

• 8:59Speaker 00

  Nope.

• 9:00Speaker 03

  Interesting.

• 9:01Speaker 02

  That's crazy.

• 9:01Speaker 03

  Dude, your show, I, I...

• 9:03Speaker 02

  I know, I got to tune in. I got to tune into Early Bird Special.

• 9:06Speaker 03

  Getting kids ready and out the door and all this and that, you know, but...

• 9:09Speaker 02

  Yeah.

• 9:10Speaker 03

  Yeah, good stuff, man.

• 9:11Speaker 02

  Yeah.

• 9:12Speaker 00

  It's just the financial side. If it can make more money, they're going to do it.

• 9:16Speaker 02

  Yeah.

• 9:16Speaker 03

  And the WNBA, that is the most profitable still?

• 9:20Speaker 02

  It's highest increasing?

• 9:22Speaker 03

  Un-subsidized?

• 9:24Speaker 02

  No?

• 9:25Speaker 03

  No.

• 9:25Speaker 02

  How about, but isn't it getting better? Like, isn't it...

• 9:27Speaker 00

  They were for a little while.

• 9:29Speaker 02

  Oh, and now they're not?

• 9:30Speaker 00

  Now there's more drama every week, so...

• 9:33Speaker 02

  Uh, people still throwing stuff on the floor?

• 9:35Speaker 00

  Just came back two weeks ago.

• 9:36Speaker 03

  Oh, remember the green? We covered that last year.

• 9:38Speaker 02

  Yeah.

• 9:39Speaker 00

  Well, they're back.

• 9:40Speaker 02

  They're still doing that?

• 9:41Speaker 03

  This is new.

• 9:42Speaker 00

  Yes.

• 9:43Speaker 02

  Wow.

• 9:43Speaker 00

  They took a six, seven month break, but they're back.

• 9:47Speaker 02

  I read something about the ratings with the WNBA, maybe it's the TV ratings are, are doing really well.

• 9:52Speaker 00

  They were for a while, but there's been a lot of drama. I mean, we had a friend that called into the show last week, had ringside or court side tickets for $18.

• 10:03Speaker 03

  Oh.

• 10:04Speaker 02

  18 bucks?

• 10:05Speaker 00

  18 bucks.

• 10:06Speaker 02

  That would make me a fan. I would totally go watch it, WNBA game. Any professional game on the floor would be sweet.

• 10:13Speaker 00

  I mean, the on-court is great, but it's the off-court drama that's kind of dragging them down.

• 10:18Speaker 03

  And truth be told, it is a business and all respect due to the, the hardworking female athletes in the WNBA. But at the end of the day...

• 10:28Speaker 02

  It's a business.

• 10:29Speaker 03

  It's a business and if you can't generate the same revenue, then, you know.

• 10:34Speaker 02

  Well, it's a different kind of revenue. I mean, they're not expected to just, you know, the league hasn't been around. They don't have all of the history that.

• 10:43Speaker 03

  They do operate at a loss every year if it wasn't for the NBA subsidizing them.

• 10:46Speaker 02

  Are you serious?

• 10:47Speaker 03

  Oh, yes. Hundred percent. It's a charity.

• 10:49Speaker 02

  I didn't know that.

• 10:51Speaker 03

  Completely.

• 10:52Speaker 00

  And the players are fighting for more money.

• 10:54Speaker 03

  I want more money. It's like, you gotta get, you know, we gotta get some more seats filled and maybe work. Because if you think about it, there's so much talent and, and the big stars in Caitlin Clark, obviously the biggest name to come through. And instead of riding that together, they've kind of turned and it's just, it's just funky, man.

• 11:13Speaker 02

  Does, does Caitlin Clark have like a signature dunk or that she does?

• 11:18Speaker 00

  She can't dunk, but she has a signature shoes.

• 11:22Speaker 03

  She has more money than me.

• 11:24Speaker 00

  No, no.

• 11:25Speaker 03

  She has a lot of money.

• 11:26Speaker 00

  She's, she's shorter than me.

• 11:28Speaker 02

  Well, so is Spud Webb.

• 11:29Speaker 00

  Yeah, well, he's, she is, she is no Spud Webb or Muggsy.

• 11:33Speaker 03

  Now, one last Caitlin Clark fact, fact. I saw it that she broke, what record was it?

• 11:40Speaker 00

  Her and her, her and her teammate, I believe was the first player earlier in the week to score thirty plus points back to back games.

• 11:50Speaker 03

  And ten assists. Yep.

• 11:51Speaker 00

  Yep.

• 11:52Speaker 03

  Yep. Wow, that's crazy.

• 11:54Speaker 00

  But they just.

• 11:55Speaker 03

  At this point, I love this line. At this point, Caitlin Clark's story isn't about what record she's breaking. It's figuring out which ones she hasn't broken yet.

• 12:02Speaker 00

  Exactly.

• 12:03Speaker 03

  And she hasn't been here that long, man. It's crazy. All right. Where are we at, Steve? Could we jump into some?

• 12:09Speaker 02

  Go for it.

• 12:10Speaker 03

  Chat skis here?

• 12:10Speaker 02

  Let's go right into the chat.

• 12:11Speaker 03

  First and foremost, guys, Keanu Reeves, sixty-two today, and Selma Hayek. Never heard of her. She's sixty.

• 12:18Speaker 02

  I've heard of both of them.

• 12:19Speaker 03

  Yes.

• 12:20Speaker 02

  Um, sixty-two, Keanu, sixty-two?

• 12:23Speaker 03

  Yeah. Point Break.

• 12:24Speaker 02

  Nice.

• 12:25Speaker 03

  It's a great movie if you haven't seen it. Okay, message. Did I already miss the sound bath? Was out of town for work and my wife really wants to try it.

• 12:33Speaker 02

  Yeah, you missed it. The sound bath was on Sunday. It was just a few days ago. It was awesome. It was so great. I, I was sort of just making sure that I was like in charge of the facility. So I was making sure that, because everything was working well. Uh, it's a part of a nonprofit that I'm very proud of, Okehe, Camp Okehe, and all the, all the funds went towards that and it was awesome. We had a great turnout. Sellout crowd. Um, go, go follow okehe.org and there'll be other ones. Stephen Winters is the musician, the artist that does these sound baths. And it's, it's awesome.

• 13:04Speaker 03

  Nice.

• 13:04Speaker 02

  Really, really good.

• 13:05Speaker 03

  So did you get, you needed, because you're out running around doing your business, you needed a bath after the bath.

• 13:09Speaker 02

  I needed a ba, I needed a post sound bath.

• 13:13Speaker 03

  I, I watch Suits. I love Suits and, uh, what's his name? The, the funny guy. Uh, anyway, he does mud baths. They go mudding.

• 13:22Speaker 02

  Is that the law, their attorneys? And oh my gosh, that's super cheese ball, like super cheesy.

• 13:28Speaker 03

  It's wonderful.

• 13:29Speaker 02

  Well, is it kind of like, uh, it's kind of like a soap opera-ish?

• 13:33Speaker 03

  It has a lot of that to it. Yeah.

• 13:35Speaker 02

  Over the top kind of.

• 13:36Speaker 03

  And Meghan Markle, like my mom and my wife, like, oh, I can't stand her. And it's like, hey.

• 13:42Speaker 02

  Meghan Markle?

• 13:43Speaker 03

  She's a good actress.

• 13:44Speaker 02

  She's in that?

• 13:44Speaker 03

  Yes, that's how she got, got her career going, I believe.

• 13:47Speaker 02

  Oh, really?

• 13:48Speaker 03

  Yeah.

• 13:49Speaker 02

  I'm, I'm way out of touch, way out of touch. Uh, next question.

• 13:54Speaker 03

  With all this AI talk, was wondering how much does it help investors? Or is it mostly hype that they are just pumping it up in ads? Great question.

• 14:03Speaker 02

  Uh, I love this question. There's a lot, kind of a lot of different ways to go on this. I, I want to give my answer and then I want to hear your opinion, Seth, on this, on this AI issue. So when I, when I hear this question, it's like, how much is AI impacting investors? I'm thinking it's huge. It's impacting them in multiple ways. And I'm not talking about just the ability that now an average investor has to go to ChatGPT and go, hey, you know, how should I invest? Or here's my statement, what should I do? Those are great. Those are great tools. But there's something much, much bigger that's happening globally with AI that is impacting investors. And one of the biggest areas that I see is how much it's impacting the overall stock market.

• 14:46Speaker 02

  If you look at the S and P five hundred, for example, you take seven companies, the magnificent seven. Everybody should, everybody knows all of these, these household names from the magnificent seven. That would be Nvidia, Microsoft, Alphabet, Amazon, Meta. These companies, these seven companies make up roughly forty percent of the returns of the S and P five hundred.

• 15:10Speaker 03

  Oh, yeah.

• 15:10Speaker 02

  That is out of this world crazy. The only other time you can think of where something like this happened was during the dot com, dot com bubble era.

• 15:21Speaker 03

  Microsoft, Apple, everything back then, probably Intel.

• 15:24Speaker 02

  Yeah. So you had, you take all of those companies, all, you had pets.com, you had all of these companies. Because this was the, this was the birth of the internet, right? This is the new, the new commerce. This is the new, the new global economy when the internet really started to take off. When people realized, oh, we can just sell our stuff through our website.

• 15:42Speaker 03

  Yep.

• 15:42Speaker 02

  You know, and, and, and you saw this huge investment go into the, uh, into anything that was dot com.

• 15:50Speaker 03

  Yeah.

• 15:50Speaker 02

  Or any company that was linked to or invested into the, the, uh, dot com companies. At its peak, at its peak, what do you think the percentage of roughly what it, uh, what it represented of the S and P five hundred? Those tech companies in the S and P five hundred, its peak of the dot com bubble in two thousand?

• 16:12Speaker 03

  I want to say eighty for some reason. I don't know why, but.

• 16:15Speaker 02

  I would, I would think it would be pretty high, too. It's twenty-six percent.

• 16:18Speaker 03

  Hmm.

• 16:19Speaker 02

  We're at forty percent right now for AI companies. And if you, if you ask somebody now who was around during that time, who invested in the markets in, in, in the late nineties, it is still fresh on so many of their minds. Oh, my 401K was cut in half. I lost eighty percent of my, of my account value because they were investing in a half a dozen or a dozen so dot com companies. Because it was, oh, this is the, the new future. This is the, the new economy and all that stuff. At its peak, it was twenty-six percent.

• 16:51Speaker 03

  Wow.

• 16:51Speaker 02

  You know, and then we saw the pullback, of course, that came and there was a revaluation and, I mean, Amazon.

• 16:56Speaker 03

  Enron go down during all of that?

• 16:58Speaker 02

  Enron was just before then. It was kind of, you know, around, around that time. But, but that, in my opinion, is a huge story that is, is hard for most of us to really comprehend. Because essentially what I, what it's saying is we're all invested in the, into AI. Like, because almost everybody has some piece of the S and P five hundred. And 401Ks, especially the, the general default investment for people that are working is going into an index fund of some kind. Or at least a mutual fund or an ETF that is trying to mimic the S and P five hundred. It's like the, it's like the, the, the benchmark for the overall stock market in the United States is the S and P five hundred.

• 17:41Speaker 02

  And so when you have just a small group of companies that are controlling so much of that is, it's, it, it does, it is alarming.

• 17:52Speaker 03

  It's a little unnerving.

• 17:53Speaker 02

  Yeah.

• 17:53Speaker 03

  Yep.

• 17:54Speaker 02

  It's not, we cannot say that this is like the dot com bubble, though. That, that's not, uh, not a fair assessment. This is a different technology. I think there's lessons to be learned from the dot com bubble, which is don't over-concentrate. You know, there are ways now, coming back to AI and let's talk MoneyWise now. There are ways, there are ways for investment advisors to diversify people's strategies so that they're not overweighted in sectors or they're not overly concentrated in certain technologies. So you can be diversified, not just in the, in the number of companies that you have, but in the type of.

• 18:31Speaker 03

  You're still participating, but it's in a much safer way, much less risk.

• 18:36Speaker 02

  It does become a little bit more difficult for the average investor to understand how to do that. Uh, but for, uh, but for, for those who are working with an investment advisor, especially like the relationships that we have at MoneyWise, it's certainly doable. There's a way to, to diversify where you can still participate in some of those gains and, and, and, and upward potential for the AI, but you don't have to be overly exposed because we still have all these other industries that, you know, that you want to make sure that you're exposed to.

• 19:06Speaker 03

  On that note, I think there's such a, uh, misnomer, I don't know if that's the right word, but about financial advisors and in what we do. Because still, a lot of people, they are the advisors, they're just, they're asset gathers, they're collecting money. Come in, their clients come in for a handshake once a year and they're on their way. But like, it's actually, yes, it's an extremely important part of what we do, but there's so much more. For example, a client called in, uh, yesterday and they need a twenty-five thousand dollar distribution because they're turning a property into a rental. And it wasn't, you know, hey, I need this distribution. There's so much more. They have three different accounts that all behave in different ways.

• 19:46Speaker 03

  They're all taxed differently. So we went through a, you know, fifteen or twenty minute discussion, just making sure all the numbers were current so that I could help calculate, hey, this is a rough estimate, you know, of what you're looking at. And then dug into the different products to tell them, hey, it probably should come out of this account. And that's where I think a lot of. That's why we get paid what we do. You get what you pay for and it's comprehensive financial planning. It's estate planning discussions, tax return analysis, all that great stuff. But yeah, one thing that comes to mind in 2001, I was overseas for a summer business program when I was in college. And I didn't know, I didn't know anything about investing and one of the kids, very wealthy kid.

• 20:30Speaker 03

  And he, he was just, because we didn't have cell phones. I mean, he was literally on like the touch dial phone there at that house in London.

• 20:38Speaker 02

  Calling in his trades.

• 20:40Speaker 03

  The house there and we would stay there and then travel on the weekends, but he was talking to his dad. And I mean, he was like, the sky was falling and at the time I didn't get it. I'm like, okay, you know, cool guy. You've got this money and you're losing money, whatever. But that's the difference. The, the, the tech bubble, we didn't even have cell phones, dude, hardly like we were, we weren't even texting as a society yet. With the AI bubble, quote unquote, computers are already in place and AI is supporting its own AI revolution.

• 21:09Speaker 02

  Oh, yeah.

• 21:10Speaker 03

  So I don't, we don't have a crystal ball that we can rub in here, but

• 21:14Speaker 02

  Yeah, that's true.

• 21:15Speaker 03

  Just in the early stages of building this massive infrastructure. I do know data centers are a hot point right now and it's happening here in the US. People are arguing and governments fighting over, you know, property rights and who's going to get to host these big data centers for tax revenue. And it's just a different world we live in.

• 21:33Speaker 02

  The amount of money that's being invested into these data centers and AI technology in general is estimated to be just over $600 billion just this year alone. And that's from the magnificent seven, 600 billion.

• 21:46Speaker 03

  A lot of money.

• 21:46Speaker 02

  I mean, we're talking about, what is that, like, you know, 10, 15% of our national budget would be going towards, you know, that, that type of thing. And, and so the, the other thing is you mentioned is this is, there's a lot of things that we don't have history to, to look to, to determine what could be a potential outcome with AI, because for the first time in our human history, we have an alien intelligence that has infiltrated all of us, all of our systems, all of our technology, that is coming, that is populating its own ideas that don't have to come from a human. Like it, it's coming from a, a software. It's coming from a tech.

• 22:31Speaker 03

  Yeah.

• 22:32Speaker 02

  A, a, a new tech invention. And it's already impacting us in enormous ways. And one of the biggest ways is just our social media and the, and the feed that is sent to people through social media and your news feed. And that algorithm is all based off of AI. So essentially you have AI, you, we have, we have this alien intelligence now that is impacting our human behavior.

• 22:59Speaker 03

  Yes.

• 23:00Speaker 02

  By, by where we're paying our attention to.

• 23:03Speaker 03

  Yeah.

• 23:04Speaker 02

  And if you're on social media or if you have a news feed, you're, you're being manipulated in one way or another, based on whatever the goal is of that AI, which is usually it's to find out what's going to get your attention. And what's going to get, open up your wallet.

• 23:19Speaker 03

  Yeah.

• 23:20Speaker 02

  And that's a scary scenario because in the past you could always trace it back to, you know, a, a, a human, a CEO, an owner that has human, that has real impact. They can really suffer. They can be thrown in prison if they do something unethically. But now if it's a bot.

• 23:36Speaker 03

  And it's, it's not really anywhere. It's just in the grid or whatever. It's crazy.

• 23:40Speaker 02

  It's so crazy.

• 23:41Speaker 03

  One analogy I heard that really flipped the switch in my brain was it, it was a while ago, but it said AI had reached the IQ of like 110 or 120. I don't know what it is now, but it said, imagine, so Einstein, right? Most smartest guys ever is what 200 or 220 IQ? I don't know. Don't quote me, but it said, imagine if, and there was one Einstein. Imagine if there were billions of Einsteins making world's decisions, how wild that's going to get.

• 24:09Speaker 02

  Yeah. Yeah. And, and we don't seem to be together

• 24:16Speaker 02

  as a country or as a world in addressing some of these threats. And, and what it's going to mean to us economically speaking, right? Because I think our listeners question is how is this AI going to impact investors? Well, it's going to impact your job.

• 24:29Speaker 03

  Yeah.

• 24:30Speaker 02

  How's that? You know, like it's going to impact the way that we're all making a living and it's going to happen very, very quickly. And so how do we, how are we going to, you know, maneuver through this and get, get through it is the big, big question. We'll take a quick break. We come back. So much more to talk about. Keep your messages coming our way. We're money wise.

• 24:54Speaker 02

  We're money wise. Thanks so much for tuning in. I'm Sharad, your host here with Seth.

• 24:58Speaker 03

  That's Dolly?

• 24:59Speaker 02

  That's Dolly.

• 25:00Speaker 03

  Dude, she had some pipes.

• 25:03Speaker 03

  Are you kidding?

• 25:03Speaker 02

  All the way, all the way to the end, she had some pipes.

• 25:06Speaker 03

  Yeah.

• 25:06Speaker 02

  She could, she could definitely sing. What'd you say, Stephen, this morning? You told me that it's going to be a Dolly day?

• 25:11Speaker 00

  Yeah. Dolly day is 9:25 and you knew it right off the bat.

• 25:15Speaker 02

  Yeah, baby. You get it? 9:25? Why Seth? Why would 9:25?

• 25:21Speaker 00

  They picked that day?

• 25:21Speaker 03

  From nine to five?

• 25:22Speaker 02

  Nine to five.

• 25:23Speaker 00

  Nine to five.

• 25:25Speaker 02

  I saw nine to five in the T8.

• 25:26Speaker 03

  Took me a second. I was like, I didn't even realize I understood it until I said it.

• 25:31Speaker 02

  It's like May 4th. We should do a list.

• 25:35Speaker 03

  May the 4th be with you.

• 25:35Speaker 02

  Yeah, all these different, there's pie day, there's Star Wars day.

• 25:39Speaker 03

  4:20.

• 25:40Speaker 02

  7/11. 7/11, yeah, slushy day.

• 25:43Speaker 03

  That's right.

• 25:44Speaker 02

  Free slushy day.

• 25:47Speaker 02

  No, it's slurpy. Come on, it's branded. You can't say Kleenex and not, you know, get a piece of tissue.

• 25:52Speaker 00

  You know, I originally got married on May the 4th and I'm not a Star Wars fan and I had no idea. Until our anniversary and everyone was like, why aren't you dressed up?

• 26:01Speaker 03

  How do you explain that Chewbacca tattoo on your lower back, sir?

• 26:04Speaker 00

  That's not Chewbacca. That's actually my ex-wife.

• 26:10Speaker 02

  Man, Casey Kasem's top 40, the hits just keep coming. Shots fired on the air, lives.

• 26:17Speaker 03

  Don't worry. No one's ever going to hear this, Stephen. That's never going to get back to it.

• 26:23Speaker 00

  I'm getting a call. I gotta go.

• 26:25Speaker 03

  Yeah, yeah.

• 26:27Speaker 02

  Hey, Alan Maderos is here. Alan, good seeing you, man.

• 26:30Speaker 03

  Likewise.

• 26:31Speaker 02

  I'm glad you're here because we were going to talk yesterday about the, the, the ever interesting, fascinating world of bond yields. Yesterday and we never got around to it and luckily you're here today. To hopefully simplify this a little bit for our listeners. Seth and I were talking before the show. It is really hard to wrap your head around a bond. It's easy to understand a stock or equity because you're, you're giving money to the company in exchange for a percentage of ownership, which you expect to get back either in dividends or in stock appreciation. You want your money back.

• 27:08Speaker 03

  Your goal is for it to go up and it might kick off some dividend income. It may not, but.

• 27:13Speaker 02

  And so it's volatile, right? And so you see that, you see, you look at your statement, if you've got stock in XYZ company, every, every second during trading, you know what it's worth. It's going up and down. It can go like crazy. Bonds, whole other game. And yet, how does the bond market compared to the stock market? Do you know size, overall size?

• 27:34Speaker 03

  What is it?

• 27:35Speaker 02

  I'll look it up, but it's way bigger.

• 27:38Speaker 03

  And historically and traditionally, they were kind of worked opposite. They were inverse of each other. Stocks are up, bonds are down, bonds are

• 27:45Speaker 02

  Correct.

• 27:45Speaker 03

  Stocks are down, but we've seen different behavior primarily in 2022, which my old buddy upstairs, Dustin Weaver, put it best. He said in 2022, there was nowhere to hide because both of them got hammered.

• 27:58Speaker 02

  Yep.

• 27:59Speaker 03

  Yep.

• 27:59Speaker 02

  That's right. And there, there is a hammering happening right now.

• 28:04Speaker 03

  Big time.

• 28:05Speaker 02

  That is like, if, if, if you follow the news, the financial news, you've been seeing this about the, the alarm bells going off across the world about the yields on bonds, which is how much interest do bonds pay? They're paying a lot more interest, especially in the last few weeks than they were before. And so, well, doesn't that sound great, Seth? Like, isn't that great news? You can now buy a bond today that's going to pay you a higher interest rate than you could have just a few weeks ago.

• 28:37Speaker 03

  Sounds like good news.

• 28:38Speaker 02

  Sounds freaking amazing, right?

• 28:40Speaker 03

  What if you bought a big old pile of bonds two years ago? Or further back?

• 28:46Speaker 02

  Yeah. It's, then you, you, the bond you're holding that you bought a couple of weeks ago. Why would you, why would you hold on to that bond that's paying you, let's say 4%? When now you can have a bond today that's going to pay you five or 6%.

• 29:02Speaker 03

  Yep.

• 29:02Speaker 02

  It immediately devalues the bond that you're holding because somebody can just go on the market and buy another bond that's paying them a couple more percentage. So why wouldn't they do that? And so you have that, that's why you have this inverse relationship with interest rates and bond prices. When, when the interest rate goes up, the value of the bond goes down and vice versa. But here's the other big problem with this is we're sitting at globally, a, in terms of debt, about $300 trillion in global debt. That's, that's government and personal debt. The, the global economy, do you know what the global economy is? Either of you?

• 29:40Speaker 03

  You mean like the GDP of the?

• 29:42Speaker 02

  GDP of the global, but it's about 100 trillion.

• 29:44Speaker 03

  No, I didn't know that.

• 29:45Speaker 02

  It's about 100 trillion. So we're talking about a 300% debt, what would you call it? A debt to, debt to income ratio?

• 29:52Speaker 03

  Yeah, debt's on top, debt to, debt to GDP ratio.

• 29:55Speaker 02

  Yeah. You essentially, if, if, if all of the world's income just went towards paying off its debt, it would take it three and a half years. And no money could go anywhere else.

• 30:07Speaker 03

  Can't go to pay bills, can't do anything else.

• 30:08Speaker 02

  Use the credit card anymore. You're paying the balance down. Now, the first question you should ask, well, what, how does that compare to the past? Cause that's, that's really the important factor. It actually peaked in about 2022. And you take back to 2022, well, we had COVID and we had, we had all kinds of crazy things going on back then. It was about 350%. So we've definitely have seen it come down from its peak in 2022. But we're still, you know, we're up there. And now if, if governments and businesses and individuals have to pay more money to borrow, then it's, that's not good for them.

• 30:49Speaker 02

  It's, it's not good for somebody who's wanting to get a home loan and it's certainly not good for our government, who is now spending more on our interest payments than we are in our military and our defense. It's becoming a huge, huge line item in our, in our, in our national budget.

• 31:06Speaker 03

  When I first started.

• 31:09Speaker 03

  Teaching this, I think it was 26. So this would have been in, I think in COVID, it was only 26 trillion. That's insane. I'm gonna, I'm gonna fact check myself, but yeah, it's just, it's just getting, getting crazy and other thing taking place like Japan, they're, they're usually will be great buyers of our, of our bonds. They like to buy foreign bonds. But now their own bond yields are up around 3% and this hasn't happened. We were looking in 30 years. So a lot of these trends, these are things that haven't happened in, you know, 15 to 35, 40 years. So there's definitely a lot going on behind the scenes.

• 31:48Speaker 02

  Yeah, yeah, for sure. And so this is this perfect time to bring Alan on.

• 31:53Speaker 03

  Yeah.

• 31:53Speaker 02

  Get your opinion because at the, at the end of the day, obviously it's impacting our government. It's impacting our, our corporations and what it's costing them to lend out money. How is this? How, what are you seeing?

• 32:06Speaker 03

  More importantly, how do you bond with the listeners right now?

• 32:10Speaker 04

  Well, let's go ahead and define the bond. Basically it's a promise, right? You're, you're an IOU. I'm going to issue this. I'm going to sell to the share and we're going to guarantee a certain return, right? So right now we're seeing on the 10 year bond,

• 32:24Speaker 04

  basically a ceiling they're trying to hit at 4.8. If they do that, hopefully that'll attract more buyers, but it's going to devalue the ones that were already issued that you just spoke about a little bit ago. But if they do that, that actually may improve mortgage interest rates, surprisingly enough. And the reason why is it will bring that price back down because they have a lot more participation. Going back to Seth's point, we have not had the foreign participation, the mortgage backed securities, meaning they're not buying our mortgages anymore. Right? And China pulled out a huge amount of, and now it's got a lot more volatility because of that. We don't have that kind of support layer of foreign investment. But globally, there's a lot of pain out there.

• 33:07Speaker 04

  And the mortgage market guides that we see are actually pointing towards interest rates not falling anytime soon for mortgages.

• 33:16Speaker 02

  Right.

• 33:16Speaker 04

  And that's because of the global stress we're seeing and inflation fears.

• 33:21Speaker 02

  Yeah.

• 33:21Speaker 04

  Concerns about employment, just issues in general about safety and security emotionally for US citizens, I believe, from a financial standpoint.

• 33:31Speaker 03

  Fascinating how it all works together. It really is fascinating.

• 33:34Speaker 02

  Yeah. I'm glad you mentioned trust because that's what it is. That's what it comes down to.

• 33:38Speaker 04

  Sure.

• 33:38Speaker 02

  Is how much, how much do you trust the government or, or, uh, yeah, the government says the easiest example. How much do you trust them that you're going to give them a thousand dollars? And in 10 years, you want your thousand dollars back and you want that, that, those interest payments. Well, investors now are requiring more. They're wanting more. They're saying, I'm not, it's not worth it. The, the 4% or whatever it is, isn't worth it to us based off of what we're seeing in our trust and our trust and your ability to pay that back. We're going to require a higher interest rate. And they're part, they're seeing that not because they don't, not just because they don't trust the government, but because they're dealing with inflation. And they're dealing with the prospect of how much things are costing them, how much things are costing their companies all over the world.

• 34:22Speaker 02

  How much other countries, um, governments are, their debt is costing them. So you have this, just the, the, the bond market is just absolutely fascinating to me. Uh, the stock market is, is a little bit easier, I think, to follow, but the bond market, by the way, is about $3 trillion more in bond than there are in stock.

• 34:43Speaker 03

  Yeah.

• 34:43Speaker 02

  In the world. So it's, it's a huge, it's a huge, huge market that, that the average individual does, doesn't know how, how to, how to understand, how to participate, how to judge risk. It's, and, and so there in my mind lies when, when or if a bomb does drop, economically speaking, triggered by in, in interest rates or inflation, it's going to take a lot of people off guard.

• 35:11Speaker 03

  Yeah.

• 35:12Speaker 02

  Especially bond investors who have been chasing yield. You know, like an investor, which is very common, especially financial advisors, somebody comes to you and they say, hey, I'm, I, I'd like to invest my money. I just want to, I just want an interest rate. I just want the highest interest rate you can pay me. And, and so you, your advisor just goes, okay, here's these bonds. Look what they're paying.

• 35:34Speaker 03

  Yeah.

• 35:34Speaker 02

  And they're just chasing that highest yield. It's so dangerous.

• 35:38Speaker 03

  What's nice to think about is this is where managed money and institutionally managed money, uh, mutual funds, ETFs, this and that.

• 35:45Speaker 02

  Yeah.

• 35:45Speaker 03

  This is where, you know, please don't panic when you hear us having these conversations. They know that, you know, we have teams of people literally around the world that help manage, uh, our clients' money and they're making a lot of these decisions. Using AI, because that was a question earlier, they're using AI to, to crunch numbers and compile data faster than ever. And so they can react very quickly and you can just rest assured now, as long as your overall portfolio mix is right. You know, it, it would be a little bit scary maybe to have a 75 year old with say 80 or 90% uh, stocks in their portfolio right now.

• 36:24Speaker 02

  Right.

• 36:25Speaker 03

  You know, different things like that. And just the same, what I see actually more are the younger 30s to 50s investors who are way too conservative. They're just, hey, well, I know, you know, people are talking about the crash coming and it's, it's just coming, but it's like, hey, you still have a, you know, 20, 30 year time horizon on when you may potentially, at the earliest, start drawing income from this.

• 36:48Speaker 02

  Yeah.

• 36:49Speaker 03

  Yeah. You're going to see a few more market cycles. So

• 36:52Speaker 02

  Yeah.

• 36:52Speaker 03

  Let's ramp this thing up.

• 36:54Speaker 02

  Yeah.

• 36:54Speaker 03

  Yeah.

• 36:55Speaker 02

  Yeah. It's so Alan, I mean, what, how is this playing out in your, in your world and for borrowers?

• 37:01Speaker 04

  Right now, things have actually been somewhat more stable than expected, considering the amount of movement that the bond market's been doing. So I mentioned this, you know, in the break, but I think lenders right now, in order to continue to have borrowers move forward with borrowing money, are keeping interest rates as stable as they can, despite what is going on in the actual bond market.

• 37:24Speaker 02

  How, how do they do in that?

• 37:25Speaker 04

  Well, basically they're taking less profit, right? They're, they're compressing their margin of profit in order to continue to borrow or lend money. So borrowers can actually borrow. And right now there's a psychological ceiling at 7%.

• 37:38Speaker 04

  For all intents.

• 37:39Speaker 02

  For a 30 year.

• 37:40Speaker 04

  Conventional loan, right? Uh, for all intents and purposes, the number should be seven and an eighth right now, 7.1, maybe seven and a quarter. But we're seeing rates around 6.875. Now, the only reason why I bring that up is we already have historical trends. And if you look at news headlines, you're going to see something that says highest interest rates in over a year.

• 38:05Speaker 02

  Yeah.

• 38:06Speaker 04

  So what we're seeing in that situation is it's not showing up on our rate sheets that way right now. Now, how long they can keep this open? I don't know, because eventually they're going to have to do something to, uh, basically make a profit. Banks are just not doing loans for free, but they also need volume. Activity is what drives that. What happens if you're not selling a product on the shelf? What do you do? You give a sale. You discount it, right? But it's not going to last forever. There will be an expiration on that. But it allows people to continue to move forward. So that's what we're seeing right now. That's what I've experienced. I can't speak globally for all lenders across the United States, but that's what I'm seeing.

• 38:44Speaker 02

  The Fed has already said that they're, at least most of the, the governors, uh, on the, on the Fed board are saying that they want to raise interest rates. That this is, that, that they want to attack inflation, that they want to address inflation. The only way that they can address inflation is to increase interest rates or reduce the money supply.

• 39:04Speaker 04

  But why? This is, I think, uh, let's, let's dumb it down. Very simply put, why do you raise the Fed funds rate?

• 39:10Speaker 02

  Slow the money, slow the money down.

• 39:12Speaker 04

  It's supposed to psychologically tell you, hey, my rate went up. I'm not going to spend as much right now.

• 39:17Speaker 02

  Yeah. Slow down what people are spending and borrowing.

• 39:20Speaker 04

  But the reality is, is that it's become a habit.

• 39:23Speaker 02

  And what's become a habit?

• 39:24Speaker 04

  Whatever their lifestyle is.

• 39:26Speaker 02

  Oh.

• 39:27Speaker 04

  And they're going to continue to use the credit. They're going to continue to put it on that debt load.

• 39:33Speaker 02

  Right.

• 39:33Speaker 04

  They're not slowing their lifestyle.

• 39:36Speaker 02

  Yeah.

• 39:37Speaker 04

  Until it's too late.

• 39:37Speaker 02

  Some people aren't, but it, it certainly has an impact.

• 39:41Speaker 04

  I would say that it's only for my cases.

• 39:45Speaker 02

  Yeah.

• 39:45Speaker 04

  I've just seen that people are at that point where that egg will crack very soon. If they're not careful about the debts that they're adding to their debt load.

• 39:54Speaker 02

  Yes.

• 39:55Speaker 04

  And that's what I'm seeing. But the intention of raising the Fed funds is to slow that burn, like to slow your spending. So that's kind of a distinction. I don't think people really understand what that means. What does a Fed funds rate going up mean to me?

• 40:08Speaker 03

  Can I ask about, let, let's talk about our listeners here in Bakersfield.

• 40:12Speaker 04

  Sure.

• 40:12Speaker 03

  We had a great, we've had a great run, real estate. What, um, what would you tell someone who has, say they have a $500,000 home, they're sitting on a bunch of equity. They bought it, you know, uh, before the pandemic and it just really took off, but they're, uh, then they refinanced into say 2.5% or 3%,

• 40:32Speaker 04

  Mm-hmm.

• 40:32Speaker 03

  but the house is too small.

• 40:34Speaker 04

  Yeah.

• 40:34Speaker 03

  So are you seeing a lot of folks, I mean, because it, when you crunch numbers, it is a very expensive upgrade.

• 40:41Speaker 04

  It is.

• 40:42Speaker 03

  You're moving from a 3% to a six, six and a half percent loan for a little bit more house and it's tough. Or are you seeing them converting those to rental properties and keeping that low rate? What do you see?

• 40:53Speaker 04

  Both.

• 40:53Speaker 03

  Both?

• 40:54Speaker 04

  It really comes down to your comfort zone and what your need is. If you just can't take it, I need another room, you're going to move. If you're relocated for your job, you're going to move, right? These are sometimes non-negotiables for life. So they will move. Now, one thing that is important to consider is those golden handcuffs, which we call those low interest rates. It's debilitating as far as making a decision because you just don't want to give it up. Okay. And I get it. But here's a great example. I had a couple that came in that had very low interest rate. It was around three and a quarter percent on a 30 year fix. They refinanced in 2021.

• 41:34Speaker 04

  And they literally put on their credit card, $80,000 between five credit cards, do their home improvements.

• 41:42Speaker 03

  Youf.

• 41:43Speaker 04

  And I said to him, I was like, what are your interest rates on your credit cards? Do you have some promotional low rates? Oh, no.

• 41:48Speaker 02

  20%.

• 41:49Speaker 03

  17 to 30.

• 41:50Speaker 04

  4% was the average interest rate.

• 41:52Speaker 03

  Middle.

• 41:52Speaker 04

  Here's the thing. They will gladly continue to lend on that as long as you can maintain your payments and you stay below a certain threshold.

• 41:59Speaker 03

  It's a beefy payment.

• 42:00Speaker 04

  80, they are huge.

• 42:01Speaker 03

  Payment dude.

• 42:02Speaker 04

  But then we started going through the math and I said, okay, so here's the challenge with this. Let's do a blended rate analysis. You're three and a half percent and doing a refinance cash out, you're going to be closer to 7%. That's kind of the, the going rate. Cash out's more expensive.

• 42:16Speaker 02

  Yeah. So get rid of your 3% mortgage, go to a 7%.

• 42:21Speaker 04

  But look at your overall payments.

• 42:23Speaker 02

  Yeah, because you're also able to get rid of that debt.

• 42:25Speaker 04

  Correct, because you're paying off all the credit cards.

• 42:27Speaker 03

  Spread over 30.

• 42:28Speaker 02

  Yeah.

• 42:28Speaker 04

  Correct. Now, here's the difference. We employed another strategy, went ahead and did a home equity line of credit. They kept their first trustee, and it's a fixed home equity second. And I put a strategy together to take the same payment that they're making amongst all of those cards towards that payment on that second.

• 42:45Speaker 02

  Yeah.

• 42:45Speaker 04

  Seven and a half years paying it off fully.

• 42:47Speaker 02

  Oh, that's awesome.

• 42:48Speaker 04

  And all it was is a strategy, right? They were paying the money anyways.

• 42:50Speaker 02

  Yeah.

• 42:51Speaker 04

  But here's the warning. Now your credit card balance is zero.

• 42:55Speaker 02

  Yeah, don't go.

• 42:56Speaker 04

  Don't go and use the cards like they're, you know, just an extra form of cash available.

• 43:01Speaker 02

  Yeah. I got a question for you, Alan. We had, I've had in the last few weeks, young, young people, a couple of young people. I'm just going to say young, they're in their, in their mid to early twenties. And they were looking for advice on saving for a home. And they're, they're saying, look, I've, you know, I've saved up money and I'm really proud of these people. These young people have saved 20, $30,000.

• 43:23Speaker 04

  That's great.

• 43:24Speaker 02

  You know, it's like, oh, my gosh, this is awesome. And they're like, they're like, I'm saving up, I'm saving because I want to be able to buy a house. And, and they were looking for my opinion. And I thought, well, first of all, buying a house is a huge, a huge plus financially speaking, because you're going to have to pay for housing somewhere. So if you can, if you're paying for housing and you're paying for your own mortgage rather than rent and paying your landlord's mortgage, you're, you're beating the game. You're like, you know, you're way ahead in that case. However, I cautioned these people to, to not focus so much on the deposit because it's going to, it could potentially take them so many years to build up enough of a deposit

• 44:06Speaker 02

  that, by the way, then, then they're going to take a chunk, call it $50,000 or $80,000 that they're going to put down on a house so that they can afford it. That to me seems futile. To me, that seems like old, old way of thinking that's not necessarily super productive. Instead, what they should be focusing on is their income. Increasing the amount of income that they are making each month, because that's how much you're going to be lent from the, from the mortgage company. That's your limit.

• 44:38Speaker 04

  Yep.

• 44:38Speaker 02

  On how much you can afford, way more important than how much money you can put down. Because unless you just, you know, you're just really a great saver and you can save up enough to pay cash for a home. Okay, great, I guess.

• 44:52Speaker 03

  They have property mortgage insurance, right? If, if they just put 5%, 3% or 5% down for an FHA, they got the property mortgage insurance to worry about.

• 45:00Speaker 02

  So?

• 45:01Speaker 04

  Yeah, so let's go back because there's two things you said that I think I'm, I'm proud of this couple as well. But here's the thing. They've proven to themselves they have the ability to stretch and save.

• 45:11Speaker 02

  Yeah.

• 45:12Speaker 04

  So you look at the difference between what they're paying in rent now and what that stretch payment would be to purchase a house using 5% down on a conventional loan, even with mortgage insurance. That payment will likely be somewhere in the range of what they've been saving every month to put down more money.

• 45:27Speaker 03

  The increase.

• 45:28Speaker 04

  Correct. Here's the benefit. If they stay focused on the budget that they currently are setting money aside at, and if that amount winds up exceeding what the payment on their current mortgages or current rent is, plus what that payment is. So let's just say there's a $300 differential. They've been able to put away $800, okay? And that $500 is now going towards a mortgage payment plus their rent. Does this kind of make sense?

• 45:49Speaker 02

  Yeah.

• 45:50Speaker 03

  Yep.

• 45:50Speaker 04

  Imagine if they took that same $300 and applied it towards the principal. They've already been spending the money and setting aside, but they did it for the same five years that they were going to have to save to get 20%.

• 45:59Speaker 02

  Yeah.

• 45:59Speaker 04

  Do you see my point?

• 46:00Speaker 02

  Yeah.

• 46:01Speaker 04

  That will do principal, buy down through time, right? And they have the value of appreciation.

• 46:07Speaker 03

  I was going to say that the house is going up 4% on average, right?

• 46:10Speaker 04

  Correct. Now, we don't need even that. We can be flat or one to three and still be okay. But here's the benefit of it. It's your home, right? Two, you also have the long-term benefit of wealth creation. Majority of people's overall net worth comes from their home equity.

• 46:29Speaker 02

  Yeah.

• 46:30Speaker 04

  So there was a stat I sent in an email earlier today to you that for seniors, there is a number of over 1.7 trillion, no, $14.5 trillion in home equity.

• 46:43Speaker 02

  Yeah.

• 46:44Speaker 04

  By people 62 years of age and older.

• 46:46Speaker 02

  Oh, yeah.

• 46:47Speaker 04

  That didn't happen by accident.

• 46:48Speaker 02

  It's the piggy bank for most people.

• 46:50Speaker 04

  But see, it's not cash asset in the bank. It's their home.

• 46:53Speaker 02

  Yeah.

• 46:54Speaker 04

  Right? So this only happens through time.

• 46:57Speaker 02

  Yeah.

• 46:58Speaker 04

  But the longer you wait, the harder it is that, you know, we can get to that point.

• 47:02Speaker 02

  In terms of interest rates, I agree that people, people get hyper-focused on their mortgage rate. And what we've said before on this show is you don't marry your mortgage rate. You marry the house. You marry the price that you get into the house. You're dating the rate. You're dating the mortgage.

• 47:18Speaker 03

  I love that.

• 47:19Speaker 02

  And you can always break up with them and get a new, get a new one, you know? So don't, don't get too fixated, you know, about you're going, oh, my gosh, I'm going from 4% to 7%. Yes, that, that, that matters, but it shouldn't be the primary thing. We have a listener question that I want to answer here real quick because the listener is asking about, the question is, who has more debt than the United States? Well, again, you have to look at it not in terms of how much, the amount of debt they have, but how much debt do they have compared to the size of their economy?

• 47:50Speaker 03

  Yep.

• 47:51Speaker 02

  If you're looking at just the total dollar amount, yes, the United States has the most than any other country because we have $40 trillion in debt. That's, that's an enormous amount of money. It's almost twice as much as what China has. China has about 22 million. Japan has about 9 million. The UK has just under, just under 5, 5 trillion. Uh, same thing with France and Italy. So obviously, yes, we have a huge number. But if you look at it compared to the size of the United States, we're nine out of 10. There, that means there are eight other countries in the world that have more government debt per GDP. Top of the list, Japan, 204%. Singapore, Sudan, Bahrain, Italy, Greece, Senegal, Maldives.

• 48:35Speaker 02

  United States followed up by number 10, Ukraine.

• 48:38Speaker 03

  I got to get this listener comment. We love suits. I love suits too, man. Let's do it. Harvey Specter.

• 48:45Speaker 04

  It was Louis Lit.

• 48:46Speaker 03

  It was Louis Lit. Louis Lit. Yep. He's the one that muds. Great show, a little bit of language, but it's, it's, it's not one for the kids, but definitely one for the spouses.

• 48:56Speaker 02

  I'll maybe give it a second.

• 48:57Speaker 03

  Give it a shot. Give it, give it one season.

• 48:59Speaker 02

  Yeah. We want to remind all our listeners that if you'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 podcast platforms like iTunes, iTunes, Apple or Spotify. And also, as we leave today, remember these three things. Be smart, be safe, and always be money wise.