MADE, HE SAYS, EARLY NEXT YEAR.
CHARLES?
CHARLES: LUCAS, THANK YOU VERY
MUCH.
JUST HOW BAD WOULD A RAIL STRIKE
BE PERCENT OVERALL ECONOMY AND,
OF COURSE, GETTING THOSE
PRESENTS UNDER THE TREE?
LET’S WATCH HAWAII THAT HITHA
HERZOG, GARY KALTBAUM AND
VICTORIA FERNANDEZ.
HITHA, YOU SAY A STRIKE MAYBE
COULD BE AVERTED.
IF IT’S NOT, HOW SERIOUS WOULD
IT BE?
>> INCREDIBLY SERIOUS.
IF THERE IS A STRIKE IS, I MEAN,
WE’RE TALKING ABOUT THE RAIL
STRIKE, AND THEN THERE’S THIS
OTHER SITUATION HAPPENING WITH
TRUCKERS AND WORKERS THAT ARE
DELIVERING FREIGHT VIA TRUCKS.
HER GETTING FURLOUGHED, THEY ARE
GETTING FIRED IN DROVES.
SO IF YOU HAVE A COMBINATION OF
THOSE TWO, WHAT ENDS UP
HAPPENING IS THERE’S A MASSIVE
IMPACT ON THE PRICE OF GOODS,
ESPECIALLY FOOD AND ESPECIALLY
THE PRODUCTS THAT NEED TO GET
DELIVERED.
SO YOU’RE GOING TO SEE NOT ONLY
ARE WE DEALING WITH INFLATION,
BUT WE’RE GOING TO SEE MORE
PRICE INCREASE ON THE PRODUCTS
OUT THERE BECAUSE THERE IS A
SHORTAGE OF SUPPLY BECAUSE OF
THESE TWO, THE STRIKE AND THIS
FURLOUGHING AND FIRING OF ALL
THE TRUCK DRIVERS.
CHARLES: RIGHT.
VICTORIA, OF COURSE, A LOT OF
FOLKS HAVE TALKED ABOUT HOW
STRONG THE CONSUMER HAS BEEN
THROUGHOUT ALL OF THIS, YOU
KNOW, OF COURSE, RUNAWAY
INFLATION.
BUT WE START TO LOOK AT IT, FOR
INSTANCE, ADJUSTED FOR
INFLATION, AND YOU ARE STARTING
TO SEE SOME CRACKS IN THE RETAIL
CONSUMER, AREN’T WE?
>> YEAH, YOU KNOW, CHARLES, WE
HAVE -- WE ARE A LITTLE BIT.
WE THINK CONSUMER BALANCE SHEETS
ARE STILL PRETTY STRONG, BUT ARE
WE SEEING CREDIT CARD BALANCES
AND REVOLVING CREDIT MOVING
HIGHER?
WE ARE.
IT’S STILL LESS THAN
PRE-PANDEMIC AS A PERCENTAGE OF
DEBT LIMITS, BUT IT IS MOVING
HIGHER.
AND, OBVIOUSLY, IF YOU HAVE A
RAIL STRIKE, IF WE START TO
AFFECT THINGS WHERE 40% OF
PACKAGED GOODS ARE NOW GOING TO
BE AFFECTED, 50% OF COMMUTER
TRAFFIC ON RAILS IS BOEING TO BE
A23EBG9ED CONCERN GOING TO BE
AFFECTED, AGRICULTURE’S GOING TO
BE AFFECTED, OBVIOUSLY, IT IS
GOING TO HAVE AN IMPACT ON THE
CONSUMER AT A TIME WHEN WE’RE
STARTING TO LOOK AT A
RECESSIONING COMING IN 2023.
YOU AND I TALK ABOUT THE YIELD
CURVES AND THE INVERSIONS THAT
WE’RE SEE ISING THERE QUITE
OFTEN. -- SEEING THERE QUITE
OFTEN.
IT’S JUST MORE PRESSURE TO DO
THAT IN AN ENVIRONMENT THAT WE
HAVEN’T HAD IN 30 YEARS.
THERE THERE HASN’T BEEN A RAIL
STRIKE IF SINCE 1992.
THERE COULD BE A LOT OF FOLLOW
THROUGH THAT HITS THE CONSUMER
AT A TIME WHEN THEY’RE ALREADY
STRETCHED.
CHARLES: RIGHT.
AND, OF COURSE, THERE’S THE
DIESEL SHORTAGE AS WELL WHICH
INVARIABLY WILL ADD TO COSTS.
MAYBE NOT IN TIME FOR THE
HOLIDAYS, THANK GOODNESS FOR
THAT, GRU, BUT THERE’S A LOT OF
DARK CROWDS OUT THERE.
>> WELL, I LOOK AT SEVERAL
THINGS.
NUMBER ONE, SAVINGS RATES HAVE
PLUNGED.
CREDIT CARD USAGE HAS
SKYROCKETED.
IN THE MARKET WE HAVE WIDEST
INVERTED YIELD CURVE IN MANY,
MANY YEARS WHICH USUALLY
PRESAGES A RECESSION.
WE’RE NOW GETTING, YOU KNOW, JOB
CUTS ESPECIALLY IN TECHNOLOGY.
WE GOT ’EM IN THE CRYPTO AREA
AND THE MORTGAGE AREA FOR DARN
GOOD REASON.
SO THIS HAD BETTER NOT HAPPEN.
40% OF FREIGHT, AND YOU DON’T
HAVE ENOUGH TRUCKERS TO COVER
IT, AND WE’RE TALKING FOOD,
CHEMICALS, FERTILIZER, RETAIL,
YOU NAME IT.
AND HEN THERE’LL BE JOBS.
SO, HOPEFULLY, WE GET SOMETHING
LIKE ’92 THE WHERE CONGRESS
BLINKED AFTER JUST TWO DAYS OF A
STRIKE AND GOT A BINDING UP
ARBITRATION ON THIS AND
HOPEFULLY GETS DONE SOONER
RATHER HAND LATER BECAUSE I CAN
PROMISE YOU A FRAGILE ECONOMY
WILL NOT BE ABLE TO TAKE
SOMETHING LIKE THIS.
CHARLES: AND, OF COURSE, HITHA,
WE HAVEN’T EVEN TALKED ABOUT THE
FEDERAL RESERVE WHICH IS
DELIBERATELY TRYING TO SLOW THE
ECONOMY AND, OF COURSE, THEY
HAVE THE TOOLS TO MAKE THAT
HAPPEN TOO.
>> YOU’RE ABSOLUTELY RIGHT.
AND VICTORIA MENTIONED THE WAY
THE CONSUMER IS SPENDING, A LOT
ON CREDIT.
AND I DO WANT TO MAKE POINT: IT
IS VERY EASY FOR THE CONSUMER TO
SPEND NOT JUST ON CREDIT, BUT AS
WELL THE WAY THAT THESE PAY NOW
OR BUY NOW, PAY LATER MECHANISMS
THAT CONSUMERS ARE USING.
SO WE ARE SEEING ABOUT 70% OF
CONSUMERS USING THIS AND 25% OF
THOSE CONSUMERS JUST NOW, THIS
IS THE FIRST TIME USING THESE
TYPES OF WAYS TO PAY FOR THINGS.
THAT’S ACCORDING TO AN ORACLE
STUDY.
SO WE WERE, YOU KNOW, WE WERE
LOOKING INTO THIS, AND I THINK
IT COMES BACK DOWN TO THE
CONSUMER PSYCHOLOGY.
THAT CONSUMER FEELS THAT THEY
NEED TO GO OUT AND SHOP, THEY
NEED TO SPEND AS SOME SORT OF
SALVE OF WHAT THEY’VE SEEN IN
PAST YEARS.
CHARLES: RIGHT.
>> FEDERAL RESERVE IMPACTING
THIS.
PRICES CONTINUE TO GO UP WHEN IT
BECOMES VERY EASY FOR THE
CONSUMER TO SPEND ON CREDIT AND
MONEY THAT HAY DON’T HAVE,
THEY’RE GOING TO GO AHEAD AND DO
IT.
CHARLES: YEAH.
THAT’S THE AMERICAN MANTRA THE,
RIGHT?
SHOP TIL YOU DROP.
[LAUGHTER]
I WANT TO PICK THAT UP TOO,
VICTORIA, BECAUSE BUY NOW, PAY
LATER, A BIG COMPANY THAT DOES
IT WAS VALUED AT, LIKE, $80
BILLION COMING INTO THE YEAR,
$20 BILLION NOW.
IT’S SO FUNNY, BECAUSE WHEN I
TOLD MY WIFE ABOUT THE CONCEPT,
SHE WAS, LIKE, I’M FROM THE
BRONX, THAT AIN’T GONNA WORK.
[LAUGHTER]
EVERYONE’S TAKING ON A LOT OF
RISK RIGHT NOW TO TRY TO KEEP
THIS ECONOMY GOING.
WE ARE GOING TO SHOP.
WE DO SEE CREDIT CARD BILLS HAVE
ROCKETED AT THE FASTEST PACE IN
20 THE YEARS.
DON’T WE HIT A CEILING AT SOME
POINT?
>> YEAH, YOU HAVE TO.
REMEMBER BACK IN THE DAY,
CHARLES, IT WAS LAYAWAY --
CHARLES: OH, I REMEMBER.
>> YOU DOESN’T GET YOUR ITEM
UNTIL YOU -- YOU DIDN’T GET YOUR
ITEM UNTIL YOU PAID IT OFF.
AND THAT IS GOING TO CAUSE A
BUILDUP AND SOME ISSUES.
AND WHEN YOU LOOK AT A FEDERAL
RESERVE THAT IS TRYING TO BRING
DOWN INFLATION, THEY’RE TRYING
TO TIGHTEN UP THAT LABOR MARKET,
I THINK THIS IS GOING TO BE A
COMPONENT THAT’S REALLY GOING TO
FILL INTO THAT.
WE’RE LOOKING FOR MORE PEOPLE TO
COME INTO THE WORK FORCE,
LOOKING FOR THAT PARTICIPATION
RATE TO GO HIGHER.
I JUST DON’T SEE THE MENTALITY
OF THE CONSUMER RIGHT NOW
FITTING INTO THAT MOLD WHICH, IN
MY OPINION, MEANS THE FEDERAL
RESERVE IS GOING TO HAVE TO
CONTINUE TO RAISE RATES AND JUST
CONTINUE TO PUSH THESE TYPES OF
BEHAVIOR.
CHARLES: GARY, I JUST GOT 20
SECONDS.
GIVE YOU FINAL WORLD, MY MAN.
>> WELL, YOU SAID IT, I CALL IT
THE POPEYE CREDIT, WIMPY ONE,
I’LL PAY YOU TUESDAY FOR A
HAMBURGER TODAY.
AND THE NUMBERS ON THAT ARE
STUNNING AND STAGGERING.
AND I JUST WONDER, A CONSUMER
THAT’S SPENT UP AND WE’RE GOING
TO KNOW IN 2023.
WE JUST HAVE AN ECONOMY THAT HAS
WORKED OFF OF 0% INTEREST RATES,
$9 TRILLION OF MONEY, SO ’23,
FOR ME, GOING TO BE QUITE
INTERESTING AND RIGHT NOW I’M
NOT FEELING TOO GREAT, AND I
HOPE I’M WRONG.
CHARLES: FEELS LIKE WE’RE LIVING
ON BORROWED TIME, BUT I DO THINK