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John Norris (00:30):
Well, hello again everybody. This is John Norris at Trading Perspectives. As always, we have our good friend, Sam Clement. Sam, say hello.
Sam Clement (00:36):
John. How are you doing?
John Norris (00:37):
Sam, I’m doing fantastically and according to the Census Bureau and all kinds of other economic releases that we’ve had recently, seems as though Americans are doing pretty well as well.
Sam Clement (00:47):
That’s kind of what the majority of the data says, and we’ve talked about, there’s always this Rorschach test element to it where you can get out of the data what you want, but by and large stuff is kind of alright. Things are alright right now.
John Norris (01:01):
Well, it’s kind of crazy because obviously we are in the middle of a presidential election campaign. Obviously House and Senate and local elections as well, but everyone’s focused on the big cheese, the 1600 Pennsylvania Avenue, and it doesn’t matter what the presidential election issues are, the economy is always going to be one of them. And to hear people talk about pundits and what have you, they would leave you to believe that perhaps the economy’s not doing all that great. At least that’s what the perception from Joe six-pack, man on the street, John Doe. However, the data that the government keeps releasing is pretty decent. For instance, yesterday the Census Bureau put out poverty and insurance in the United States for 2023 and it fell to 11.4%, which is a pretty decent decline from the previous year. So only 11.1% of people in the United States or households in the United States are living in poverty. And what’s more than that? The highest percentage of Americans of all time has some form of health insurance. So what’s that like?
Sam Clement (02:02):
And gas prices are, I saw last week, $2.99 was the most common gas price across the country.
John Norris (02:08):
I’ll tell you I love it.
Sam Clement (02:10):
And the percent that people of their budget,
John Norris (02:12):
Well, not my premium, but that doesn’t count at all.
Sam Clement (02:13):
So not $2.99 for you?
John Norris (02:15):
No.
Sam Clement (02:17):
The stock market is close to all time highs , and depending on the week is at all time highs. And for so long it felt like the stock market and gas prices determined a lot of how the consumer felt.
John Norris (02:30):
Well, it does and or didn’t. I mean, historically …
Sam Clement (02:34):
And the data, it showed up. If those two things, if gas prices were low and the stock market was high, consumers tended to feel pretty good about it.
John Norris (02:41):
Well, and why wouldn’t they? And so stock market’s, high gas is low, chicken in every pot. People are going to feel pretty good about that type of stuff. But then some sort of disconnect happened probably about 24 months ago when people just really didn’t buy into the story that the government was telling us.
(02:59):
The government tells us yesterday that poverty is down to 11.1% of households across the country. Health insurance is up. However, what it doesn’t say is private health insurance is actually down and public health insurance is actually up a sharp increase in Medicaid last year. And then also a decently sharp increase in Medicare. I don’t know. Does that seem to be really what you would suggest? Is that suggestive of a healthy economy where more people are on Medicare and Medicaid? I don’t know about that. Then last week the government announced we created how many? A hundred and something thousand- 127,000 I think?
Sam Clement (03:38):
Which this number will get revised two more times.
John Norris (03:41):
Well, it will get revised. And a huge chunk of that were people that are social workers, social assistants, people that work in restaurants and bars. And when you really kind of add those up, that made up a predominance of the report. So the headline numbers are saying one thing, and you really delve into the data… I’m wondering whether or not the story is as good as we are being led to believe. And then maybe that’s the reason why the economy, it’s the economy is stupid. That’s the reason why it’s a good political topic despite the fact that what the BLS is telling us, the BEA is telling us, the Census Bureau is telling us, it’s all telling us that we should be happy and we shouldn’t be looking at the man behind the green curtain.
Sam Clement (04:25):
Well, there’s two kind of main points I think with this. The first is data is hard.
John Norris (04:33):
I’s almost impossible.
Sam Clement (04:34):
Almost impossible. I mean, I said it slightly about the jobs number. Don’t even look at this first jobs number. It’s useless. It will get revised two more times. I mean, ADP has jobs numbers, they are the payroll company and still can’t get these numbers right. I mean, it’s very difficult. They’re constantly revised. Everything is revised for months and months and months on end. And also, no matter what you’re looking at , with the lens, we look through things, we’re looking bigger picture. Even when you look in the income decile, there’s people in that income group that this doesn’t apply to. I know people who have the lowest quintile of earners have actually had pretty decent wage growth, real wage growth, but I know others who have had zero wage growth for years. So that category may be doing well. But there are plenty of individuals in that category, and this is more on the lower end than the higher end – aren’t part of that. They’re not feeling that. Prices may be slowing for how much they’re going up, still going up, and people’s wages are continuing… Some people are just getting decimated.
John Norris (05:43):
Well, I’m kind of depressed now, Sam.
Sam Clement (05:46):
Well, that’s just the first part. The second thing is just that people are humans and there’s human error and human emotion that goes into it. And social media and what have you and people telling you things are worse than maybe they are for political reasons.
John Norris (06:04):
Because I mean, you sell more umbrellas when it’s raining, bad news sells. And so well, you’re going to sit there and say, Hey firefighter, you rescue the kitty up a tree and though the daffodils are out early this year, no one’s going to buy that up. No one’s going to buy that.
Sam Clement (06:20):
So you have those two forces. Some people actually getting kind of screwed over with the last few years’ economy, other people just hearing how bad things are. I mean on the other end…
John Norris (06:31):
So you’re saying it’s kind of almost a self-fulfilling prophecy or mean at least in terms of, psychology?
Sam Clement (06:36):
I know people who are in much better spots than they were four years ago and are still complaining about the economy. They have higher real wages. I mean the percentage of disposable income they have has soared through the roof over the last few years for a lot of people. And those people are complaining as well. So it’s hard to dissect what is …
John Norris (06:57):
Those type of people make me sick.
Sam Clement (07:00):
Yeah, it’s hard to dissect who is actually getting the short end of the stick and who is actually just complaining about it and not really seeing the full picture.
John Norris (07:10):
And we’ve talked about it before and I’ve talked about it. There’s some video clips out there on our website. And then also a little video clip that I did for the Charlotte Business Journal where I’m talking about grocery prices. It’s when the prices for those inelastic goods, those things that you need to purchase when those go up more rapidly than the elastic goods, you feel like you’re getting screwed a lot more.
(07:32):
(07:32):
And food prices have gone up, they’ve stayed elevated any given month, maybe you’ll see a little bit of an increase in the BOGOs at the grocery store or something’s on special. It’s not as bad as it was, but still, I mean, grocery prices are a lot more than they were. I’ve got four cars I’ve got to insure. So when car insurance goes up 20%, that hits me a hell of a lot harder than it hits you.
(07:52):
And so that type of stuff is kind of tough. So really, I mean, inflation’s going to be where you can find it or you just have to look for it. I mean, the government today said that the 12 month inflation CPI is up 2.5% over the last 12 months. I want to tell you, Sam, mine’s higher than that. I mean, I haven’t put pen to paper on all of it, but I know what my monthly expenditures are and I know they’re higher than two and a half percent over the last 12 months. So I think you’re right on the fact that this economy might be a little bit more disjointed, if that’s the right word, than previous economies, where some people are doing really well and a lot of people aren’t doing well at all. But when you take a look at the data, job growth, fewer people living in poverty, I mean recently the government said that media and a household income has reached an all time high.
(08:43):
And it really does come down to it. It’s like, well who’s right? Is the government telling us the truth? And I’m not a conspiracy theorist person. I’m not sure if you ever saw that movie Conspiracy Theory with Mel Gibson. He comes across like a real whack job, Mel Gibson. Well, I know that’s hard to believe, but I’ll tell you this, that previously, and a lot of people, and I’ve been doing this a long time as my hair is evidence… I never questioned the data. Never questioned the methodology. You know I always thought maybe they might monkey you with it a little bit, but you never were reading data going, come on, quit screwing with me. And really this in 2024 for the first time in my 30 plus year career and going through the monthly employment situation report, I’m getting the report going, come on, quit screwing with me. There shouldn’t be that much of a difference between the household data and the establishment data. And you know what? There shouldn’t have been. And that’s the reason why they’ve revised everything down dramatically. The second highest of all times since 2009 when the economy’s coming out of the worst downturn since the Great Depression, why are we having this type of problem in
(10:02):
economic peace time? I can’t understand it.
Sam Clement (10:03):
It’s amazing that how they calculate data is still the way they actually do it. I mean, it seems so archaic to go to these companies and ask, Hey, how many people are you hiring?
John Norris (10:14):
They call 119,000 companies.
Sam Clement (10:16):
And you know what? The participation rate used to be in the seventies? I think the eighties at time?
John Norris (10:21):
Actually It all depends on the age demographic, the all time high got around just under 68.
Sam Clement (10:29):
It’s in the twenties now.
John Norris (10:32):
Labor force participation rate??
Sam Clement (10:33):
No, the survey.
John Norris (10:36):
I’m going, Sam… no, no no.
Sam Clement (10:38):
No, the survey participation rate. So you have a third of the participation rate that you previously had the household survey. You have either people calling your landline, I don’t know about you, but I don’t have a landline, they’re coming by my house. And if I check my Ring doorbell and I don’t know the person? I’m not answering it.
(10:57):
So who is answering these surveys? And the government knows how much tax receipts are coming in, withholdings from paychecks. The fact that these are the two ways we’re still calculating data is wild.
John Norris (11:13):
You bring up a great point. That doesn’t make any sense, does it?
Sam Clement (11:16):
I mentioned it with ADP too. They are the payroll company and they’re still making predictions on this stuff.
John Norris (11:22):
We’re making predictions on the first two weeks of the month job growth, calling the HR department and then extrapolating out the half the year back half of the month.
Sam Clement (11:32):
And then we get state data later and that’s where we get these revisions. But we are a 21st century economy calculating data using…
John Norris (11:46):
Using 20th century models and methodology.
Sam Clement (11:47):
Yes.
John Norris (11:49):
So why wouldn’t it be faulty?
Sam Clement (11:51):
Of course it’s going to be faulty. You have a 28% participation rate on a survey and then you extrapolate that out four times.
John Norris (12:02):
Do
Sam Clement (12:02):
You think you’re going to be good about
John Norris (12:03):
That? You’re absolutely right about that. But this has been the first year where I’ve sitting with the vague reason, the two data sets and everything that’s coming across seemed to me to be so ridiculous. That doesn’t make any sense. The household survey saying this, the establishment survey, and those are all part of the employment situation report is saying something completely different. Then I take a look at the N-F-I-B-N-F-I-B, national Federation of Independent Business, it’s employment index. Take a look at the ISM report on business manufacturing. It’s employment gauge. And the same thing with the ISM services. It’s employment gauge. And they’re all saying the same thing. These are private businesses saying, eh, we’re adding people but not as much as we were. And then all of a sudden, at some points in some months, we’re getting a 300,000 person payroll. Didn’t make any sense. And so when you see that massive 818,000 revision, and it’s been another 253 already with the monthly, just sort of the normal monthly revisions since then, we’re looking at 1.1, close to 1.1 million jobs, which they have taken off the system since April of last year. And so that’s kind of a little bit more telling. Why don’t I believe the economy’s as great as it is? Why doesn’t Joe six pack believe the economy’s as great as it is the data is telling us because the data’s not right.
Sam Clement (13:30):
Yeah, and the immigration question, I mean, all the banks have talked about their revision on that 800,000 of what it would actually be. I think
John Norris (13:39):
Goldman is going to be a million,
Sam Clement (13:41):
But they’re not reporting hiring of people that are illegal immigrants either though. And we seen
John Norris (13:50):
That They’re not supposed to be hiring those people. Of course.
Sam Clement (13:52):
They’re not going to approve that. Correct. Of course. So then that revises it downwards. If that’s the case, if you net those out or put those into the actual calculation. So we’re doing a terrible job at calculating data. It’s already hard to do, and we’re shooting ourselves in the foot and how we
John Norris (14:12):
Calculate it. And I would tell you in terms of the poverty report that the Census Bureau does, and I wish I had memorized the number that a family of four, what’s the poverty threshold for it? It’s nothing would, that’s poverty, all right? Yeah. Don’t poverty. I mean, that’s eating sugar sandwiches. You don’t have one landline and you’re not watching cable. I mean, it is about as poor as you can get. And so when you have that, you see 11.1% of people are still below that poverty threshold, which I mean, that’s poor by Alabama standards. You’re kind of going, my goodness, and even 200% of this number and some calculated number that they’ve come up with based on blah, blah, blah. But when you take a look at it going, it doesn’t take too much. I mean, to be in poverty in the United States, whereas I can sit there and go, Hey, family of four Sam, what do you think a family of four should live off of in order to leave? Not necessarily a Beverly Hills or Bel Air sort of type lifestyle, but just, Hey, a couple cars in the driveway.
Sam Clement (15:26):
Yeah, the old idea of the
John Norris (15:27):
Old idea may a steak every now and again on the grill and you get to go to the beach for a week. How
Sam Clement (15:32):
Much? I would guess it would be, I don’t know, 80,000.
John Norris (15:36):
I mean, I would say that would be sort of probably about right. That’s median household income. They just released that poverty’s about maybe a quarter of that. What a third or a third of
Sam Clement (15:46):
That? Yeah. It goes back to inflation though. I mean, it goes back to this haves and have not, I mean 60 ish percent of Americans own stock. So when you see these people talking, and we’ve said it before, the market’s had all time highs.
John Norris (16:02):
Yes,
Sam Clement (16:03):
Things are okay, well, for 40% of people that has zero impact. And for a large majority, on top of that, people that are just own stocks through their four one k or what have you, not really impacting their livelihood on a day-to-day basis.
John Norris (16:19):
No.
Sam Clement (16:19):
And
John Norris (16:19):
That’s before they’re pulling it out. That’s truth.
Sam Clement (16:21):
So this inflation is great for stocks.
John Norris (16:26):
Yes.
Sam Clement (16:26):
I mean because earnings go up.
John Norris (16:28):
Oh, it’s great for state and federal budgets.
Sam Clement (16:31):
Yeah, it’s great for asset holders. I mean, that’s the whole thing with land or real estate, it tends to go back towards what the inflation rate has
John Norris (16:40):
Been.
Sam Clement (16:41):
So if inflation’s 10%, my house starts going up 10%. Well, if I don’t own a house and I don’t own a stock, I don’t own stocks. I mean things have gotten more expensive. Owning a house has gotten more expensive, much. I’m not participating in the rally of assets and all I’m doing is that expensive or liability side of my budget is going up. It’s awful for liabilities or I guess depending on which side of the liability you’re
John Norris (17:03):
On.
Sam Clement (17:04):
And it’s great for assets.
John Norris (17:06):
Well, I mean at that point, you’re sitting there taking a look at the majority of Americans, or at least about 40% of Americans. I think it’s about 40% now rent might be a little bit less than that,
Sam Clement (17:16):
Which is about what don’t own stocks as
John Norris (17:18):
Well. Yeah, we don’t own stock. So those people who are renting either apartment or what have you, they’re taking a look at things, seeing their rent go up much more rapidly than cost of a, I mean a bottle of water. I mean just whatnot. I mean, currently taking a look at the last consumer price index report, the rental equivalency to the primary residence was up another five tons. Housing prices, as you said, have gone up with interest rates ordinarily or historically. You think when mortgage rates go up as they have over the last couple of years, housing prices would moderate or come down just due to the higher cost of buying and borrowing. And that’s almost the opposite has
Speaker 3 (18:01):
Happened.
John Norris (18:02):
Everything’s gone up. So people have been forced to rent. They’re not building that equity any longer. They’re not participating in the American dream in that home ownership, the little white house with the white picket fence, all that stuff. And by the way, they’re not going up when they see the Dow Dow’s up another 125, what
Sam Clement (18:18):
Do I care?
John Norris (18:19):
What do I care? And so it’s very easy for them to sit there and going, I’m getting screwed here.
Sam Clement (18:24):
And once you’re out of that, it just gets harder to get into it. Most people buy that, buy a house, buy that starter house, are there for probably at least five years, what have you, build equity in that sell it. And they have that equity that is much bigger than the amount they put in typically to roll into a bigger house, nicer
John Norris (18:43):
House. So you have inflation with the market value, the forced savings aspect,
Sam Clement (18:47):
Paying your mortgage is going down. So almost a lot of people end up putting one down payment in on their first house and kind rolling that into their,
John Norris (18:57):
Are you staring at me? What are you talking
Sam Clement (18:58):
About? It’s almost everybody. I mean, nobody typically just buys their first house and then rents it out and has a big down payment for their next bigger house that they need. So if you’re not even getting that first step in, and then eventually by the time you need a bigger house, well then you definitely can. And
John Norris (19:15):
If you have kids, that G costs a lot of money. And the next thing you know, they’ve got to go to college and you’ve spent your entire life and you don’t really have any wealth to show for it.
(19:24):
So then you’re going to tell me that the unemployment rate is 4.2%. Percentage should be happy. The CPIs 2.5% should be happy. Median household income is the highest it’s ever been, and that should be happy. And that in poverty in the United States is lowest mean as lowest. It’s been years at 11.4%. And that more people than ever have health insurance. And yet you have such a huge swath of the population that’s not participating in this. The roughly 40 percent’s a little bit less than that, that are renters, the roughly 40% that don’t have direct participation in the stock market. Maybe they have a pension plan or federal government and all that stuff. They have that, all of a sudden they’re not feeling all that. They’re not necessarily feeling the love. And then on top of that, the data in any event, may or may not be right. They’re using the same methodology that they’re using in 20, 30 years ago before
Sam Clement (20:24):
Pre-internet
John Norris (20:26):
In terms of calculate the labor markets, the census bureau’s definition of poverty’s, laughable, median, household income, okay, whatever.
Sam Clement (20:36):
Yeah. Imagine being a few thousand dollars over the poverty level.
John Norris (20:39):
Hey, you’re doing great. Don’t worry buddy. Hey buddy, you get to eat peanut butter this week. And we take a look at all of it. I really do think more out there that maybe meets the eye with the overall American experience in this economy, that upper quartile that you’re talking about, that upper 10%, the people that have the homes, maybe the nicer homes that are going up more rapidly in price that might have an investment account
Sam Clement (21:09):
Heavily, heavily participating,
John Norris (21:11):
Might have an investment account outside of their 401k. But even if they don’t, their 401k is relatively sizable. So they do fuel that wealth effect
(21:20):
When that happens. People that have some measure of assets, this inflation’s been great for them. They’ve seen their balance sheet go up, and so they’re going, okay, yeah, it’s really not all that bad, but it’s still a hard story to sell the population as a whole. And that’s the reason why you see all these polls. You can go to real clear politics. You can go to any website and they’ll tell you that the majority of Americans feel the country’s moving in the wrong direction. Yeah, majority of Americans will put the economy somewhere near the top of their primary concerns. They’ll put inflation up there. So what citizens, average Americans telling us and what Washington is telling us really doesn’t job wonderful.
Sam Clement (22:06):
Yeah. Well, I know we need to wrap it up, but it makes you wonder why neither political party is actually has a plan for lowering inflation, lowering the deficit,
John Norris (22:17):
Or even
Sam Clement (22:20):
Addressing this topic. They’re all making it worse. Every plan, I look at it, and I can only imagine it getting worse, whether it’s
John Norris (22:30):
The tariffs, whether it’s taxes, whether it’s any
Sam Clement (22:33):
Whatever you want to do,
John Norris (22:34):
It’s additional regulations on top of business. All of it pretends slower economic growth and reduction in supply,
Sam Clement (22:44):
Increased spending from either party.
John Norris (22:45):
Yeah, that’s increased amount of cash, a decrease amount of supply and goods and services. As a result, things are going to cost more money.
Sam Clement (22:53):
And frankly, I probably think it’s because the loud voices in either party or in politics in general are the ones that benefit.
John Norris (23:01):
I tell you what, we’re going to get down a slippery slip. If I don’t cut this off right now. I know we’re both getting kind of passionate about it. So gang, thank you all so much for listening. We always love to hear from you. So if you have any comments or questions, please by all means, let us know. You can always reach us at Trading or you can leave us a review on the podcast out of your choice. As always, if you’re interested in reading more or hearing more of what we got to say or how we think, you can always go to oak worth.com, oh eight K-W-O-R-T h.com. Take a look underneath the thought leadership tab for all kinds of exciting information, including previous links. Were links to previous training perspectives, podcast links to our weekly blog slash newsletter, common Sense links to our quarterly analysis, macro and market, and all the various breakdowns there. And then our advisory services team, Mack Frazier and his gang, put some good stuff out there as well as a lot of our wealth client advisors. So going out there, take a look. I think you’ll like it. Alright, with that, Sam, anything else on this hot topic before? We might even have to finish this up next week.
Sam Clement (24:06):
That’s all I got.
John Norris (24:07):
That’s all I’ve got today too. Y’all take care.