From WXXI news.

This is connections.

I'm Evan Dawson.

Our connection this hour was made on a momentous day in the lives of a young couple.

This American couple is 30 years old, and today they are closing on a house, buying their first home together.

Does this sound like a fairy tale?

According to a rough estimate of census data, it used to be quite common.

And maybe you've seen what has become a viral chart in the last week.

In 1960, 52% of Americans were married and owned a home.

By the age of 30 last year, it was about 12%.

One big reason people are waiting until their 40s to buy their first home is you've heard it plenty lately the affordability crisis.

And now, Elon Musk said last week that there's good news.

AI is basically going to obliterate the entire idea of money by the year 2040.

Musk is now advising his followers not to save for retirement thanks to AI.

I'm not sure most economists would endorse this idea, and I certainly can't tell you that that's a good plan for your money.

But for those who are struggling with what they can afford right now, today, this conversation is meant to explore just how severe the crisis is and maybe what's causing it, how to contextualize it.

My guest does a great job of breaking this stuff down into plain English, and he's back to do that.

Doctor Eric Morris Eric is a portfolio manager and staff economist for Invesco Advisors.

Welcome back to the program.

Nice to see you here.

Thanks for having me, Evan.

Always great to be here with you.

And so I want to just start and let's get this out of the way.

I don't think anybody who works for a let's go advisors can endorse the idea that we should not be saving for retirement.

But let's listen to what Elon Musk did say over the past week about saving for retirement.

One side recommendation I have is like, don't worry about like, squirreling money away for retirement in like 10 or 20 years or one matter.

Either we're not going to be here or if you won't need to save for retirement, if and if any of the things that we've said are true, saving for retirement will be irrelevant.

Services will be there to support you.

You'll have the home.

You'll have the health care.

You'll have the entertainment.

Yes, you'll have it all.

You'll have the home, the health care.

Well, what could be so hard about that by 2040?

Elon Musk says you will have all of that.

Money will be obsolete.

Eric Morris, can you endorse this?

No, I'm.

That was easy.

That would be risky.

Interview over.

Risky advice to follow for anyone.

And I think that any financial professional, particularly those of us who have a license to practice in the profession, would not endorse following that advice.

I have to say, I mean, like, we can laugh about this, but number one, I want to I want to say maybe he's right, maybe he is.

And there's no question I could fundamentally change a lot of things pretty fast.

So I'm not going to joke about that.

He could be right.

The danger is that he's wrong and people are going to be in real trouble if they listen, because he has a lot of people who listen to him.

And I suspect a non-zero number will take that invite to go, well, that's a load off my shoulders.

I'm not.

I don't have to save anything now.

You know, smoke him.

If you got him, it's like, wow, that's an amazing set of advice.

Risky advice.

Yeah.

So let's start with that.

Don't do that.

Yeah.

I also think, by the way, just I mean, it's a conversation for another day.

What happens by 2040?

He's positing a world where money is obsolete.

Everyone's got a home, everyone's got health care.

Everyone has abundance because of AI.

I think it's equally likely the AI just concentrates more wealth and it's more important that you're very careful in saving and planning for a world where jobs are harder to get and everything might be.

There may be more scarcity, I don't know, but I mean, it seems possible too, right?

There's a lot of unknowns with it.

You know, there are some things where you look, and, you know, I certainly has the potential to follow the track of other disruptive, majorly disruptive technologies.

Right.

Attributed to Mark Twain.

Right.

History doesn't repeat itself, but it often rhymes often.

So, so, you know, I think there's a great deal of work going into trying to understand the parallels between AI and maybe things like the internet, but maybe more, disruptive.

Say, say like electricity, right?

I mean, that was so disruptive and change really, really, really changed things.

Not just economically, but culturally and socially.

It changed things, geographically.

And I don't mean like maps.

I mean, like the way that resources are distributed across land and space, also across time, you know, but I think that there that the future is obviously yet to be seen, and it would be a really risky proposition just to take this, significant departure of advice and say, yeah, you know what?

I'm good.

You know, I'm good.

Yeah.

So the reason I wanted Doctor Morris to join us is because when we talk about the affordability crisis, there's often context missing.

And, I think it's a great opportunity for us to really kind of pull, pull back a little bit the layers of the onion and try to understand the different aspects of the economy where we are truly struggling to afford things, where prices have gone up and they've stayed up.

You've talked about stickiness, and Eric spent some time over the last, 24 hours breaking stuff down in a way that I, I cannot wait to dig into.

You are such a nerd.

It is such a nerd.

It is.

I am so appreciative of the fact that I could give you this last minute bit of assignment, and you produce a chart for connections, which is great.

We should be able.

We should put this in our show notes.

It's so interesting.

It's not work.

It's fun.

It's just.

Yeah, it's so fun.

I, I look at the chart and I go, I love it.

Not in a million years.

What?

I want a homework assignment like this.

You were like, this is so cool.

So what I asked you to do was to say not just, you know, are we having affordability crisis?

But where are things really, truly hard to afford based on recent history?

Where have prices spiked?

Where are things continuing to get bad, where things are getting a little bit better?

And then how does that relate to especially the wages and how people are doing?

And you go back over the last decade, you took back 2016.

He also did that five years.

You did three years and you did one year, and you found some interesting things in this chart.

You want to take us through some of what we found with affordability.

I well, I want to start with a little level setting because because I think that some of the stuff we're talking about, I think it might say some unpopular things.

Unpopular thing, unpopular things.

Yeah.

I think I think that there are probably some, some, some of what I'm going to say is a classic economist thing.

You know, it's the Harry Truman.

Somebody send me a one armed economist because they're always saying on one hand, and then on the other hand.

Right.

And I think that on the other hand thing can be frustrating to people.

So not unpopular.

Like, I'm not gonna say anything mean or unkind.

That's not my nature.

But like, maybe some things like just calling that context you mentioned like really trying to bring that to the forefront.

That context matters big time.

With affordability, that word, it's different than prices when when you use the word affordability, it's not just talking about price levels.

And you mentioned this, it's talking about incomes, but it's talking about other things that make make prices relative.

Not just income, which is a flow, but also stock variables like wealth.

So like what what is the value of your home doing.

Is that going up and down that can creep into our psychology of how we feel about other prices going up and down, because it makes us feel more or less wealthy.

Right.

Our 41K accounts, our retirement savings, you know, for people who are not retiring yet, they're not dipping into that to spend.

But watching that value change can, you know, creep into people's psychology and change how they feel about prices of things.

So I want to say two things about affordability before we dig into the chart a little bit.

The first thing is that affordability is inherently a relative concept.

So it's prices relative to incomes relative to wealth, right.

And it's relative to individual circumstances, which can really vary in a big way.

And that gets to the second point that affordability is actually can be a bit subjective.

You can be wading into waters where you're kind of thinking about the way individual people feel about it.

And we're going to talk in broad generalizations today, and maybe you'll want to get specific about some things.

But the data that we have on this stuff is broad.

It's general.

It's talking averages.

Right.

Taking millions and millions of people's different individual experiences and averaging them together.

I just think about walking into a room full of people.

You see the average height is five eight.

Well, some people are five three and some people are six one.

Right.

And that creates a different thing than when you talk about the world.

Is everyone being five eight?

We're going to kind of have that conversation about everyone being five eight, but we know that's not the case.

So I just want listeners to be aware of the fact that, you know, as I'm talking about this today, I don't want to be insensitive to anyone's individual circumstances.

I certainly don't want to discount difficult circumstances.

But we are going to talk about it in terms of broad generalizations.

I do think that it's interesting that psychology does play into the question of affordability.

It's not just a ratio of numbers.

You're what you and I might determine.

Affordable might be totally different.

You know, someone's partner might decide we can afford this vacation and their spouse or their the other partner might say, not in a million years.

We're trying to save for a college fund.

We're trying to save for retirement despite what Elon Musk wants us to do.

We can't afford that.

So there's a lot of psychology.

I get that, absolutely.

And I don't want our audience to be annoyed if if it sounds like what Eric Morris is saying is, well, things aren't as bad as you think and suck it up.

I mean, like, I don't hear that from you either.

That's that's not what I'm going to say today.

Right?

I'm just trying to set the context, but I really want to people to understand that.

I'm not trying to tell people how their life is without living in their exact 100%.

So.

All right.

So do you want to take us?

I will I'll do your best to kind of illustrate this for the for the room.

Yeah.

For the audio.

Audio got a little complicated.

Well really it's I, I wound up working on it actually in the very early hours this morning because my, six month old Jack, was up and he was awake, and then I tried to rock him back to sleep and, gone to sleep in his bassinet.

But I have a I had the computer in front of me, after he fell asleep, and I had a couple hours this morning.

So I worked on this.

And what I tried to do, Evan, was, answer this question about, Look, we talk a lot about prices changing, how prices have gone up, and we know that.

And we know that prices going up in the economy is kind of a feature, not a bug.

Right?

We expect prices to go up there.

We know that a Coca Cola doesn't cost $0.05 anymore.

Right.

But we've all seen the old advertisements for like World War two with a sailor giving a thumbs up and Coca Cola $0.05.

That's not notable.

It's not shocking that it doesn't cost $0.05.

Well why not?

Because our incomes have gone up as well.

So I want to kind of look at that and say, okay, prices have gone up, but how do we look at that in terms of our income, which is only one variable?

But when you look across the board, even on the one year column, what I did was I plotted how earnings have changed over that year, average earnings.

So it's impossible to say how everyone's individual earnings have done, but how average earnings have changed over the past year and how the overall price level has changed in different categories.

Yeah.

So average hourly earnings are actually up 3.7% over the past year.

Inflation is not up that much.

So we can expect a lot of those inflation categories to actually be under pacing the average hourly earnings.

And we see that with the chart.

Actually there's several things here that are actually more affordable over the past year on an average basis.

And we look at certain things like, food away from home.

Excuse me, food at home is slightly more affordable.

Those are groceries, groceries.

That's hard.

And I would say unpopular.

Things like people are seeing grocery bills go higher.

But when you look at the average annual earnings, excuse me, average hourly earnings over an annual basis going up, it's actually outpaced grocery prices.

It hasn't outpaced energy services, which would be electricity and natural gas.

I think we're reading about this.

We're hearing about this.

People are seeing it in their bills.

Their electricity bills are higher.

I don't know about you.

Oh, yeah.

I have Renee as a service provider.

Yeah.

And I just got a note from Renee, like a text alert that said, here's an explanation as to why bills are going to be a little higher right now.

It was, it was almost like a we know you might be kind of.

That's so weird.

Tip toe is, you know, I before you call us, this is, like and is like sending out like these.

I'm scared that you're going to be really angry.

Notice this.

I've never seen that.

I've never seen it.

I mean, they have the capability of doing that, right?

But, that's that's certainly it.

And it's context dependent.

It's within this whole affordability, cultural zeitgeist going on right now.

Right.

So is that where things are the least affordable?

Right.

That is right.

That's it.

That that is the least affordable.

So and energy energy.

Yeah.

Yeah.

And so if you look at at energy services though, those actually have gone up 7.2% over the past year.

And wages have only gone up 3.7%.

Right.

So you're like wow, that's that's a lot.

Right.

That's a big difference.

It it it it it is a difference it make.

It matters to people's lives.

Oh yeah.

An area where it has gone has been the most affordable relative to wages is actually in the same category, energy commodities, which is gasoline, the price at the pump.

So the gasoline price at the pump is I haven't seen it in a month.

The last I, a month ago, it was like it was down year over year, like a nickel $0.07 nationally, something like that.

But six months ago, it was actually up nationally and so now it gasoline prices have come down a little bit and they're not down a ton, but they're down.

But but but wages are up.

That's right.

So so gas prices have fallen in the neighborhood of 7%.

Your wages wages on average the average hourly earnings are up three plus percent.

So that's actually more affordable to us.

Now this is really interesting to think about gasoline being sort of like over the course of the past year becoming more affordable than most other goods and electricity and natural gas becoming less affordable.

Yeah.

How do we square that up?

Well, it's interesting because if you actually extend the time period.

So this is super time period dependent.

Right.

So that's just the experience from January 2025 to January 2026.

But if you go back two more years and you're that's including that that experience, the trends reverse.

So you look at a three year trend.

Right.

And I shouldn't say reverse the trends.

The trends change.

And the gas prices are down even further.

More affordable electricity and natural gas become more affordable as well.

If you go back to pre-COVID, actually, now now, it's back to natural gas and electricity becoming less affordable.

So it's very, very time period dependent how we look at this.

So maybe the most relevant thing to do would be to go to the the longest time period that I provided, which is the ten years.

So this is kind of like a half generation, right?

Ten year over the course of ten years, the past ten years.

What's happened?

Well, I can tell you that over the course of the past ten years, average hourly earnings have gone up by almost 50%.

They've gone up by 46.5%.

That's pretty good, right?

Many categories of of goods and services that people spend their money on have actually not gone up that much.

If you look at apparel, people buying their, their clothes, that's only gone up 6% over ten years compared to wages going up by 46.5%.

So clothing is, in the last decade, a lot more affordable, much more affordable new cars, same idea.

They've gone up 21% used cars, 25% compared to average hourly earnings going up by 46.5%.

Now that matters to people, but there's other things that people spend their money on that also matter, particularly shelter.

Right.

And when we look at shelter, that's typically people's number one budget item that they're spending money on.

It's either their rent or it's their their house, which would be most people having a mortgage.

There's something here statistically we use called the owner's equivalent of rent.

Don't need to go down that rabbit hole.

It's actually a really, really complicated and imperfect measure.

But they're trying to sort of like have an apples to apples comparison of renters versus owners and how their what it costs them to have shelter.

And both of those numbers have actually outpaced those prices have outpaced average hourly earnings.

So despite this pretty good decade of earnings.

That's right.

Housing is up up up.

That's right.

Housing is up up up.

Now it's not that dramatic but small.

Outpacing of those prices from earnings can have a big impact on people's budgets and a big impact on the way people feel as well.

Because shelter as you know, is a very, very important thing.

You know, you can look at, an item here, transportation services, which, a lot of the change we see is from airfares.

But that's also had a pretty significant outpacing of, people's incomes, 54% prices have gone up compared to 46% earnings.

But not everyone is flying.

Right.

And people can find substitutes to flying relatively easily.

It's really hard to find substitutes to shelter.

So transportation services.

That's right.

Transportation.

So but but let me get back to housing for sure.

So I'm looking at your chart here.

Yeah.

Yeah.

So it compared to the cost of energy, it's not as extreme in terms of the lack of affordability or being in the red that we don't want to be in.

That's right.

But it's in the red.

And what that says to me is, I mean, that's a price that has to go up quite a bit to keep pace with a good decade of wages for it to still be in the red and for it to be maybe the single most important budget item that people have, that's going to affect everything else, doesn't it?

It does.

Yeah.

I mean, so what happens here is, look, we live in a free enterprise economy where, individuals and businesses have a degree of freedom to be able to behave the way they want to behave.

Obviously, there are guardrails, in society and then specifically in certain industries and things.

But when people are forced to make choices, they can adapt.

And sometimes you're forced to make a choice because the price of something has gone up.

So you adapt by substituting, you know, I'll, I'll, I'll give you an example.

I used a cage to go buy a cup of coffee from Starbucks for, a cup of coffee at Starbucks is like four bucks now for a cup of coffee.

So my wife and I make our coffee at home.

I mean, that's for a cup of coffee.

Not like a latte.

Yeah, not always like I ordered a big one.

Yeah, yeah.

So.

Yeah.

Yeah, but but.

So we've substituted and the substitute wasn't going to a different job for a coffee.

It was actually changing our behavior.

It was.

Now we make a pot of coffee at home.

Right.

Super interesting.

Now that actually reminds me of sort of something I wanted to get to, too, that I hear often from people like, well, there's the reason that prices are going up is because the people that are people in businesses that are charging the prices are pulling one over on consumers.

You've heard this happen, right?

Like this is price gouging.

Sure is.

Right.

And what I want to remind people is that, you know, price gouging can happen maybe in certain circumstances.

And it's it's not great.

But again, we have this system that works out really neatly and nicely.

So if if my Starbucks coffee is $4, I want to pay for it.

There's still a whole bunch of people that are paying $4 for a Starbucks coffee, right?

People like Starbucks can charge whatever it wants for a cup of coffee.

Well, if Starbucks charged $8 for a cup of coffee, they'd go out of business pretty quick because they'd lose a whole bunch of customers.

They wouldn't buy it.

On the flip side of that, people are like, well, Starbucks should lower price its prices.

Well, if Starbucks charges a dollar for a cup of coffee, they go out of business pretty quick because even if they capture the entire coffee market, they're not going be able to cover the cost of their.

But providing the goods right now, Starbucks example's a little tricky here, and it gets into that inequality thing.

We might have talked about where where, you know, the Starbucks CEO has been flying around jet setting around him, setting, you know, setting off some, alarms from people being like, this is not good for a corporation.

You shouldn't have this guy commuting via private jet.

But they also do employ, like, tens and tens and tens of thousands of people.

So if they did go out of business because they charge a dollar for a cup of coffee, the.

But net net, you're actually losing out, right?

So it's not that businesses can just charge whatever they want.

They have.

So yeah, they have a range they can charge for, but they're going to go on a business that they charge too high or too low.

So let me try to sum up some of what I'm seeing from your chart that I hope it's translating well to this, but I really appreciate you doing this.

Yeah.

When there's 11 categories here and in the last.

Decade or so, six are less affordable, five or more affordable.

The biggest one for most people, housing is less affordable.

That's right.

And that's a big problem because we still haven't figured out a way to build enough housing or to provide enough housing to bring prices down.

Supply and demand.

Well, this isn't rocket science, Ivan.

And we've talked about on the show before, you know, I've, I've been in conversations with people who are kind of like, houses are so expensive, and the conversation kind of devolves where it seems like there's like, they want to hint at the fact that there's this big landlord cabal that's just like, you know, gouging people and driving the prices up like crazy.

And it's actually not the case.

What's happened here is that we have a tremendous housing shortage in America.

I've seen estimates between 2 and 8 million units short.

Yeah.

And when there's a shortage of anything, it takes the price of that good or service and drives it up.

And so that's what's happened with housing.

It's just very, very simple.

So to address the the circumstance, it's not to artificially try to lower the price or rent control, which is just there is mountains of research on that being a disastrous policy.

It's it's about housing supply.

It's about getting builders to build.

It's about having policies that encourage building, smart building, affordable building.

You know, that that will really start to make a difference in that, in the housing price.

So if I want to grade policymakers over the last decade or through any time period, Unaffordability, it's not just, well, in six categories or less affordable, five or more affordable.

So it's close.

I mean, to me, you got to get housing better than we've done.

I mean, and this is a big blue state problem.

It's been described in in the book abundance.

But it's also a problem in many, many places.

Policymakers have to figure out a way for to kind of grease the skids to build more.

And people have to be comfortable that they're going to be able to afford to buy or rent and not have the budget destroyed.

So I feel like we'll look at this chart.

But the big one still a problem.

It's in the red.

It's not in the deep, deep red, but it's not good.

And it affects everything else here.

We can talk about energy.

You can talk about food.

You can talk about the price of eggs, which was apparently the whole election was about the price of eggs.

But housing really, really matters, and we're still not doing it well enough.

That's right.

Yeah.

And, and and here's the thing is that, you know, policy can only impact certain of these categories so much.

It's not all a policy problem and it's not all a policy solution.

But I am of the belief that there are smart policy solutions that exist, particularly to address the supply side of housing that would help the problems that we are seeing in the housing market, both locally and nationally.

All right.

I want to actually listen to a sound clip.

We have and we we played it last week for one of Eric's colleagues, economist Kent Gardner.

Hey, Kent was here.

He was hey, Kent.

But, given what one of my one of my, mentors, one of your mentors.

Well, given what we just talked about with all these different categories and how important housing is, I do think it's valuable just to hear what President Trump said about his goals with housing prices.

Let's listen.

I think Scott said, though his, again, existing housing people that own their homes, we're going to keep them wealthy.

We're going to keep those prices up.

We're not going to destroy the value of their homes so that somebody that didn't work very hard can buy a home.

We're going to get we're going to make it easier to buy.

We're going to get interest rates down.

But I want to protect the people that for the first time in their lives, feel good about themselves.

They feel like they've, you know, that they're wealthy people.

And I want them to understand that, you know, there's so much talk about, oh, we're going to drive housing prices down.

I don't want to drive housing prices down.

I want to drive housing prices up for people that own their homes.

And they can be assured that's what's going to happen.

I want to drive housing prices up.

It's the first politician I've ever heard say that.

I will say that Republican or Democrat?

What do you make about the substance of the remarks?

There?

Well, you know, I, I wish I had Kent here with me to kind of kick this one back and forth, but, I will say one, I'm not a political scientist, but this, I think, is an acknowledgment of the fact that there's only so much that policy can do.

I think there are bold policies that could really make a difference here.

I think what's happening here is that the president, has wanted to maybe not have housing prices go down, but slow the growth of housing, like we've talked about here relative to people's incomes.

That would certainly help things.

But the administration's been struggling with that because they haven't had success.

So so the politically convenient and expedient thing to do would be just to change your message, to align with what's going on in markets and society.

Right.

That's what's going on here right now.

It might be an eye clip planted by the Democrats to make Trump look bad, but no, actually was the president saying that.

Yeah.

And I take your point.

There's always sort of a political tinge to it.

Yeah, but but but but but as you and I've talked about, the issue with housing is when the president says people want to feel wealthy.

Well, it's nice to feel wealthy, can't buy a house, you can't spend your house.

And if you don't own more than one house, it doesn't matter.

It it matters, but it doesn't matter in the same way, to have an asset that if you sell it now, you have to go buy one.

Yeah.

I mean, there are ways of tapping out, of tapping into your home equity and things like that.

So like you, there's that.

But you're not going to pay with your your pay for your groceries with a home equity loan.

Right.

So that's just, that's not going to happen.

You know, I, you certainly don't want to see the number one source of wealth for, a good handful of Americans, deteriorate in value because it is an asset to people.

It's an asset that you use.

You live in it.

You get great joy out of it.

I try not to think about my house too much as an asset.

I try and think about.

It is something that my family and I use and we live in and and we love.

On the flip side of that, you don't want that to marginalize, sections of our, our of our democracy from being able to access, that same, asset, have the same level of joy.

Yeah.

So there's a balance there.

And this is the two handed economist sort of thing, right?

It's not all one or all the other.

I mean, I could I could easily score some cheap points with people out there by being like, well, this is totally wrong.

We need to make housing prices lower.

Let's lower everything.

Yeah.

And everyone is a big populist argument like that, right?

But there is another hand to that.

Right?

So there is a balance to be struck.

I bring it back to the relative peace.

We're talking about my chart.

This chart you know, it's about incomes and prices.

So it would be great to see you know, people's incomes sort of outpace the cost of, of, of purchasing a new home because it would make it more affordable, particularly to people at the lower end of the income spectrum.

Yes.

And that would be more of a natural way, right, for for people to be able to experience that wealth that the president is talking about.

And the implication that the president gives is that if you can't afford a house, then you actually aren't just you're just not working very hard.

And I don't think many Americans would agree with that, as is an old trope.

Right.

That that like people who don't have things, it's because they didn't work for them.

So if you just want to have things, you need to work harder.

Yeah.

We, anyone with any degree of common sense knows that that's not always the case, right?

Yeah.

Well, listen, let's close the loop on this, because all of a sudden, the phones have gone nuts, and we're going to take a, when, let's say nothing, I don't think I think you said a lot of important things here.

So let me close before we grab a bunch of phone calls here for Eric Morris.

Steph, it's Steph, economist and portfolio manager at the Let's Go Advisors.

I did think there was something hopeful in the chart that you gave.

It wasn't all in the red.

It wasn't all a chart of affordability is doomed.

We're all doomed.

There is.

There are some cracks of hope here.

What is the most hopeful part of the research you did for this program on affordability?

Well, the hopeful thing is the fact that time periods show that these things change.

And I think if you if you're looking at things like, like food at home being relatively cheaper over the past ten years compared to people's incomes, that's a great trend, right?

That, you know, obviously the price of eggs went way up and way down.

The price of beef went way up and way down.

But food at home, that's a great thing.

Medical care services a little bit cheaper on a ten year period.

I mean, that's a big expense for a lot of people too.

So you're getting access to to medical care, better care, more sophisticated things that that's actually going, it's not outpacing your income.

It's actually incomes outpacing that.

So those are hopeful things.

And I would hope that you can see that things change in time periods.

Maybe owner's equivalent of rent and rent can change as well.

That would be my hope.

Let's grab our only break and then phone calls, emails, feedback for Eric Morris, who we just got a comment on YouTube that says, Evan, this guy's great.

You got to have money every month.

Listen, I'm with you.

He's busy, but we try.

We're going to come right back with your your comments for Eric Morse.

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This is connections.

I'm Evan Dawson, all right.

I think we still have Fred and one.

We still have Fred on one and Brighton.

Is that Fred and Brighton on one.

Hey, Fred, go ahead, if that's you.

Hey.

Hi, Ivan.

Thank you very much for taking my call.

Sure.

A couple points.

I'll keep it, as brief as I can, because I understand you got a lot of callers going, your, your, guest, was talking about, you know, how wages have been rising, over the past decade, I believe he said, what?

That, as far as I can see, that fails to account for what people on fixed incomes have to deal with.

And you were talking about how you got, text message from Margie, and as did I. Yeah.

It is about your bill is going to you know, but, but, you know, brace yourself.

There's, I guess a whole nother story there because I have some code inside contact that RG and, they used to claim that they don't make any money on natural gas.

Years ago, when there was a warm winter, there was panic going on.

So that might be something worth looking into.

Also, gas prices being down.

I have no proof, but I think this is, sort of a, conspiracy thing to buy people off and think, you know, that things are actually better than they actually are.

You know, we're going into an election year here.

Okay.

Close by saying I'm a skeptic.

Okay?

Okay.

Okay.

So thanks for the call.

Yeah.

Fred, thank you very much.

Go ahead.

Eric.

Yeah.

That fixed income piece is really, you know, Fred, hit on a really interesting point there because, you know, as we said at the top, this is super context dependent.

It's very much relative.

And it's very it can be very subjective and personal.

So when we look at these making these generalizations and I say that average hourly earnings are up, they are up.

But that doesn't apply to every person in every case.

And some people are on fixed incomes, you know, and they, they're not seeing the same piece.

Other people are seeing their, their, their income go up ten, 15% a year to, and that's not to discount Fred's situation, or what Fred is talking about.

You know, Social Security is, is one of the primary, forms of income for people who are on a fixed income, which isn't a great situation.

How we got there?

There are cost of living adjustments with that.

They are tied in a way to inflation.

It doesn't always, make up for every category.

So, you know, people are feeling real pain there, and I get that for sure.

Fred, thank you for the phone call.

Mike in Rochester had called in to say that.

He says, Evan, your guest talked about average earnings, but wonders if we should be talking about median earnings.

Yeah.

We got you know, we've got some median earnings data too.

The reason I selected average earnings, Mike, is the fact that when we hear news headlines about like earnings ticked up or earnings are down, not not market earnings but but people's individual earnings, their income, this is typically what they're what's being talked about.

It is not a perfect measure for income at all.

There are different ways to look at it.

In fact, one of my favorite ways to look at it is, there is a median to this as well.

Is the, the Federal Reserve, big institution, has the board of governors in DC, but there are 12 district banks in the Federal Reserve, and each of them conducts a lot of research.

They do great work this their staff with hundreds of economists that are like some of the world's best.

And the Atlanta Federal Reserve Bank has something called their wage tracker.

I would encourage people just to do a quick Google search and play around a little bit.

I love this tool.

The Atlanta Fed's wage tracker.

And it will look at either a three month weighted or a 12 month weighted median level.

And the reason that matters is because with an average, the a very, very high or a very, very low number can drag that average one direction or another.

Whereas with a median it's just saying, hey, 50% of the people are higher, 50% or lower.

So that's a way of looking at it in statistics.

Mike might know this too.

You want to look at both the average and the median.

But, the BLS doesn't publish a median for this measure.

And the, Atlanta Fed is only looking at medians.

So it's kind of interesting.

It's not it's not apples to apples, it's apples to oranges.

But we try and look at all these different data sources.

They're the averages the mean the mean.

And the median is the median.

The median is the median okay.

One thing I can retain Jack in Greece.

Next on the phone.

Hey Jack.

Go ahead.

Oh I have in fact a great show by the way.

So thank you.

Hey, portability.

Eric, I think just mentioned before the break about medical costs, and that's what I was going to bring up.

But, from my I'm wondering if you think about affordability or it's been talked about a lot and, and, but I think of the medical coverage and prescription drugs.

I look at that and, and I'm saying, you know, the insurance that's that market, in my opinion, is just the opposite of a free market.

It's the opposite of transparent, in terms of getting cost of pricing, I should say.

But I see the insurance premiums going up, especially this current year when when I went to sign up for this year, premiums shot up through the roof.

Coverage coverage fell dramatically.

So they're paying for less charging, more co-pays are up, all sorts of stuff.

So I, I would take exception to the comment that it's down, but the other is that, the I, I'm wondering for folks like me that I am also Richard, a fixed income.

The risk and the fear that's involved with, you someone in the family could come up with a serious illness, and maybe it's not covered by the insurance.

We have an insurance industry that is arms itself with people to fight, not to pay for things.

So I wonder how that if that's been dripping along over the years, over my lifetime, my working lifetime that I saw the, at a one point medical cost was not an issue.

It wasn't even my my radar screen as an issue.

But today it is.

And people go bankrupt.

Yeah.

Sure.

For that.

Yeah.

And I and I think I mentioned is that I hear politicians talk about our health insurance industry.

And in my mind, that's not an industry.

It's it's it's something that you got to have health coverage.

You got it.

You got to take care of your health.

It's not optional.

It's like, well, I'm not going to I'm not going to eat or drink.

Well, let me just jump in.

Jack, I appreciate all that.

Let's, let's just start with this.

He's saying in general, he cannot believe that we would be seeing health care costs or medical cost as anything other than moving more, unaffordable.

Yes.

So this measure is going to be looking at the services, the price of the services, the insurance costs, that they are the structure of those things is different.

What hits people and, the insurance industry has been moving.

So I mean, insurance is part of the, the services piece, but it's kind of trying to track two things at once.

The insurance landscape, I'm not an expert on I have personal experience on it.

My understanding is that, in the the Covid in immediately post Covid, there was a of a fall off slightly in in premiums.

And there's just been this massive catching up that has just crushed people for the past 2 or 3 years.

And that has been really, really tough.

And again, you know, that's that's a significant, significant expense for a lot of people, particularly as you get older, maybe you're on a fixed income and then your health bills are going up to, and the insurance market.

I have to agree with, with Jack that it's not a free market.

There's actually a bunch of a whole bunch of market failures within insurance, health insurance in particular.

So there are a lot of structures and regulations and things like that.

And that has side effects, and some of them can be exploited in that great ways.

But I will say you go back to the data on this.

Over the ten year period, medical care services are up, just under 33%, whereas the average hourly earnings are up 46.5%.

So, you know, it's time period dependent, obviously.

But it is something that, that shows up in the data.

Let me also just ask a very, I'm reaching I don't have a lot of education on the subject.

I'm just going to ask here.

We're in a weird place in society when a near household name like James van der Beek dies at age 48 of colorectal cancer.

And there's a go-fund-me for his family.

I mean, he was on national television multiple times.

Movies a star and I don't know his family, personal circumstances, I don't know.

We're all just sort of on the outside looking in, but it is.

It feels jarring to see a GoFundMe pay for that kind of a family.

Well, he's dealt with the last couple of years with cancer and treatments and surgeries and everything related to it.

And he said his family's been before he died.

He said the family's been crippled by the cost of it.

And so it's one thing to look at a chart and say, well, costs are up 33%.

But if they're if most of us aren't seeing hardly any costs, but a few of us see these bankruptcy level spikes, that feels also really imbalanced.

Am I wrong to look at it that way?

I I'm not going to tell you your feelings are wrong.

I have another number, but I see what I could be.

I spent I spent nine years in a classroom teaching and I could be wrong.

And, you know, look, you're getting to a statistical thing here.

We're talking about, like, you know, these these are not anomalies, but these are very, very extreme cases looking at that versus the average, which I think goes back to the previous caller.

I mean, like if most people are paying ten bucks, but but a small group of people are paying a million, right.

They're in trouble.

Right.

That's exactly right.

And I think I think that I don't want to get, in a situation where I'm trying to prescribe whether something should or shouldn't be there.

I'm with you there.

You're just looking at I get it, but I, I, you know, I feel, you know, it makes me feel the same way.

I don't have a base level to be thinking about what that means, but in terms of feeling, let me bring it back to earlier in the hour when you when you look at just the raw numbers, you go, well, that should be more affordable.

But you can understand the psychology of people saying that does not feel more affordable.

Absolutely, absolutely.

Because if you can get crippled by your health care costs, absolutely.

That does not feel affordable.

Absolutely.

Okay.

Fair enough.

And Jack makes a really good point there.

Let's get, Monte in Rochester next.

Hey, Mani.

Go ahead.

Hi.

I don't know if your guests could do this, but of the 11 categories on your chart, is there some way to put our percentage, how much each of those contributes to a household income?

And then, you know, maybe each one has to decide for themselves.

I don't, I don't know, like a weighted importance.

And so all of a sudden your, your ad hoc chart that you just whipped together when you were feeding your six month old this morning, this is going to become a permanent document on connection.

I want you to know this I love maybe it's something I should like.

Maintain an annual basis.

This is great.

You are now invited to bring back the Eric Morris chart.

We will put it on our show notes.

But.

But it's money's got a good question.

I mean, can we over time could you weight the importance of each category?

You probably could.

Not only can we we we be in the profession.

We do, you know, in money, it's in perfect because every household is different.

But what the bureau of Labor Statistics, which is the government agency that is charged with it's a nonpartisan agency.

They are staffed with a bunch of statisticians and economists who are just strictly gathering and collate data for this.

And what they do is that they they assign relative weights, relative important weights.

So these things, it's actually how we get that one inflation number.

Monti, is that they take all the different categories, they gather the data on them and then they weight them and they update those weights about once a year.

Different, different categories have different weights.

Housing is the largest category.

And it takes up a, maybe even an unfairly large amount from things that I've read.

And this isn't to discount people's experiences.

My housing makes up a pretty big portion of my budget, but on average, it might be a little bit lower for people than what the CPI reports.

But those weights are there.

I don't have them in front of me.

I'm familiar generally with them that that housing is, is very, very, Well, this is a piece of homework for you.

Oh, there we go.

Yeah, I mean, I could I could whip it up pretty quick.

So, but Monty's right to, to ask.

And so we'll work on that money and we'll try to get a post in our show notes here.

I'm going to go back to the comments from our YouTube section here.

There's a couple ones that I want to hit here.

Are there any more that say I'm doing a good job or now?

How many of those do you want?

Millennial.

I need a lot.

It says, please give us an overview of what will happen if or when the AI bubble burst.

How will it affect those of us in the 99% who aren't simply selfishly profiting off of it?

And the fallout?

That's might be a whole other conversation.

It's definitely a whole other conversation.

I, you know, I, I think that it there's a lot to be said about AI and the massive amount of spending that's going into it.

I, I'm not necessarily a bubble subscriber, per se.

I don't really abide by that term.

In this case, there is a tremendous, tremendous amount of investment going on.

But it's not being leveraged in a way that would be like super, super scary, like.com bubble type of thing.

That's no, this is not investment advice for anybody.

Right?

That should be clear.

But I just don't necessarily think that it's as bubbly as, as maybe, some of the, cultural coverage of it seems, I, I think we're in the early days, too.

So it's not to say that it couldn't be something that gets overdone.

I think inevitably that that the firms that you see today that are investing in this, they won't be the firms that are in ten years, the leaders of it.

I mean, some of them might be and some won't be if you if you rewind 20 years to think about the, you know, the early say, like smartphone people, I saw a headline from a, like a business week or something in like 2000 or 1989 that said, look, Nokia has got this thing sewed up.

Nokia, right.

Nokia's they got this at Nokia.

Motorola got it locked up.

The internet, hold discussions over because AOL, Netscape have a monopoly on the thing and you can't have any throwback invented the digital camera right there.

If this is just there's a dynamism to the US economy that, you know, these types of capital investments, they're racing each other, but there will be mistakes made and there will be winners and there will be losers.

And, it doesn't mean society loses.

It's just it's just the creative destruction of our dynamic economy.

It's a beautiful thing.

It leads to tremendous innovations.

But there is a rocky ride along the way.

But even if you were betting on AI, you wouldn't want to just say, well, open AI, you know, dairy dominates company.

Now, first of all, I don't bet.

Second of all, I would not I would I would be hesitant to corny the victors of first of all, there will be no end game, right?

Like the victors of something that's oh, it just stops and they're going to win, right.

And and second of all, it's really we we there's so much we don't know where the tip of this iceberg.

I mean, I it's fascinating to me, I mean to say I there could be an end game in, All right.

Another one you to ask Elon, I think this is Elon on YouTube.

He says I keep going back to that BLS data on the difference in wage growth between the bottom 25 and the top 25% earners.

I don't have a good feeling about when this round of musical chairs ends.

All right.

Yeah.

So let's let's clarify what's happened there.

So what Allen is asking about or not asking he's talking about is the fact that there's been a different experience in terms of wage growth between the top 25% of wage earners and the bottom 25% of wage earners.

So if we rewind, I mean, 20 years, right.

Maybe 15 years just out of the, great financial crisis in like 2011, 2012, 2013, the bottom quartile was was not growing as fast as the top quartile.

Top quartile wages were going up faster, wages were going up for both, but they were going up faster for the top and the bottom.

In around 2015, that flipped in the bottom quartile of workers so that the lower income, the lower 25%, their wages started going up faster than the top quartile.

And that lasted believe it or not, for nine years.

It lasted till the end of 2024, and it was really pronounced in 2021.

In 2022, the bottom quartile and particularly the bottom half of earners were seeing wage gains that were far outpacing the top half of wage earners.

That has now flipped.

And those gains are changing pretty significantly.

Now the bottom quartile is that is the lowest, slowest growing wage quartile, and the top quartile is growing faster.

They're all falling in terms of their pace, but wages are still going up for everybody.

You talk about musical chairs.

I think this is really market driven.

I think really what you're seeing here, there's a reason why in 2021 and 2022 that wages for the bottom quartile went up so fast, it was because the labor market was just so gosh darn tight.

Businesses were having a terrible time finding people to fill roles.

And it gave those bottom quartile workers, a bit of market power.

They could say, you know what?

I don't like this job anymore.

I don't like what I'm earning.

I'm going to go look for a job.

And they could quit and they could find a new job relatively quickly and easily if they're finding a new job.

You know, I would say that they were going to find one that's going to pay more.

And so their wages were going up and up and up.

Now the job market has softened again, this is a topic for another day because we can talk about the job market for a whole show, but the job market has softened a little bit.

Unemployment's still at a nice, reasonable place, but really, people aren't quitting as much.

People aren't being hired as much.

Where in the sort of low hire, low fire mode.

And you're not seeing that wage growth anymore.

In fact, cooling way down for that bottom quartile.

So, I don't know if I answered the question of Alan, but just something to consider there.

Down to our last 90s.

I'm not going to get through everything I wanted to.

I'm sorry.

I'm gonna have to come back.

I will.

President Trump recently said that the US would no longer have a deficit if interest rates were dropped by two full points.

He said every point of $600 billion.

Think of that.

All we have to do if we want, if we want to go down, if we went down two points when we don't have a deficit anymore.

So full disclosure, Evan, you texted me this the other day and my response was, it's complicated, right?

Yes.

So it is complicated.

The, interest rates, when we talk about them, we're often talking about the interest rates on Treasury debt.

And that's the cost of capital for the government.

If interest rates go down, that means that the tremendous debt that we that $31 trillion in debt that the government floats, that their interest payments would go down right now, would be going down from a really high place.

The net interest costs right now are hitting records.

It's going to be about $1 trillion.

That's high, historically high, deficit of $1.7 trillion.

You know, that's the net interest makes up a lot of that.

It would certainly be helpful if interest rates came down.

Does that mean that we would eliminate a deficit in debt?

No.

You need a couple other things to kind of line up, right?

Because, you know, just because you refinance your house doesn't mean your debt goes away.

Right?

So, you need to see some significant economic growth.

You'd probably need to see some cutbacks in spending.

I've studied some deficit reduction and debt reduction in the past, and it's not always necessary to have new taxes.

So that's kind of a nice thing for people.

Like, we don't need to have new taxes, but you need a couple other things to line up into place.

And the cost of capital lowering could be one of them.

But it being a panacea, I do not, I don't subscribe.

I mean, if it was that easy, I think we would have done it.

Well, there's a market for interest rates.

It's not just simply click a button or the fed says this and yeah, I know that's a whole nother show.

I, man, that music means I'm done, doesn't it?

Well, that means that in a minute we're going to be done whether we want to be or not.

So it's so much more to talk about.

So come back sometimes.

I'd love to, because, you know, we we scratched the surface.

There's a lot of interest listeners.

We didn't get through all your emails.

I do appreciate that.

And I want to say, I mean, a lot of people very keenly in on the difference between average and median, which again, we covered this hour.

It is important, for sure.

Very, so you can't have this discussion without it.

So thank you listening audience, for really smart, good feedback.

And thank you to Eric Morris, who's portfolio manager and staff economist for Alaska Advisors, for coming in.

Thanks for sharing your time.

Always a pleasure, Ivan.

Thank you.

And we'll share that chart that he put together in our show notes as well.

More connections coming up in a moment.

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