C (3:04)

Yes, but they're also anarchists who want a lot of additional spending. Just saying.

A (3:09)

So in any case, these two very odd bedfellows, the anarchistic Five Star Movement and the Northern League, well, they're called the League now. They used to be called the Northern League. They were kind of far right, sort of northern Italian separatists.

B (3:25)

Anti immigrant.

A (3:27)

Very anti immigrant, very unpleasant. These two parties have almost nothing in common with each other except for the fact that they hate the incumbent elite politician class. And they managed to kind of cobble together a coalition against. I mean, it took them months to get there. And then in a fit of complete crazy, because they are completely crazy, they decided that they were going to nominate a die hard, like 81 year old Euro skeptic economist as their finance minister. And that was a step too far for the President of Italy who said you can't do that because that would be the end of the country. And that caused the market turmoil. But now they have actually, now they've bumped Savona off to some, to some other Brussels job. And they are actually going to form a government.

C (4:12)

Yes, they are going to form a government. So we can get into some of the problems with Italy and Spain and Europe in general. But the market panic we saw, especially the panic in the bond market, I would argue is far less about what was actually happening and far more about technical issues in the market.

A (4:30)

Okay, so the to be like, this is a fun story. The market didn't care when these crazies won the election. The crazies win the election. And the thing that everyone is looking at is the Italian two year bond yield. Don't ask me why everyone is looking at the Italian two year bond yield. But that seems to be the thing. It's negative when they win the election. It stays negative for months after they win the election. They announce they're going to form a government, it's negative. And then when it seems that they're not going to form a government, then it spikes up to plus 2.5%.

C (5:03)

Right.

A (5:03)

And now it's back down to like under 1%. But it's still positive.

C (5:07)

Correct.

A (5:07)

So, okay, Anna, first, why are we looking at the Italian two year bond yield?

C (5:12)

So the reason that everyone is talking about the two year Italian bond yield is because we saw the biggest spike that we've seen since I believe 1989. And you saw other anxiety in the market. But, but the two Year was what really moved. And if you. And why the two year really moved appears to be a few things, but the main thing is that there was just a tremendous amount of selling pressure. You had a lot of macro hedge funds that were short selling. You had a lot of domestic investors who were trying to trim their positions. And also you'd had a lot of foreign investment into Italy over the past year because overall in the market you could sometimes get a little bit more yield. And it seemed like it a lot of the crisis had subsided. So consequently you had a tremendous amount of pressure, but then you didn't have any buyers. So essentially we had what is called a buyer strike, which you have a lot of selling pressure, but we don't have a lot of market makers that are there to be the other side of the trade.

A (6:10)

So. Okay, but why are people selling?

C (6:12)

Why were people selling? Part of the reason people are selling is because there was legitimately a concern that the action that the President took could lead to snap elections. The snap elections could have led to even more strength of the Five Star movement in the League, which could have created more volatility in Italy and in the Eurozone. So there was legitimately a concern. But then what happened is that when you have significant selling pressure and you end up in a liquid market and this became a very illiquid market, there was a period of time you couldn't even get prices. What then ends up happening is that that just pushes the price down and pushes the price down and pushes the price down and you see this type of spike.

A (6:56)

Okay, so we had a bunch of very weird price action in the Italian two year bond. I think in terms of the fundamentals, the main thing which I took away from the whole debacle was that when it looked like there might need to be new elections, it wasn't so much that people were worried that there would be new elections, because elections happen every five minutes in Italy. The problem was people were worried in the wake of this nomination of a Eurosceptic finance minister, which apparently was a deal breaker for seven minutes in Italy, that the Five Star Movement and the League would run in these hypothetical future elections on an explicitly anti Euro platform.

B (7:39)

It was basically like Brexit, contagion, fear. What of the Euro? It's all falling apart.

A (7:46)

If Italy leaves the Euro, that is genuinely catastrophic for Italy and for the world. But interestingly, it all seems to have resolved itself with literally with the League whitewashing their anti Euro symbol off their headquarters and the League sort of doing this wonderful Orwellian we have never been against the euro and we are totally pro euro and the five star movement is like, yeah, we hate all of the technocrats, but we love the euro. So effectively the big worry, which was a euro skeptic possible. What are we going to call it?

B (8:22)

Italy. That one. People are saying it'll exit, but it'll.

A (8:27)

Exit is bad, but quittaly is good.

B (8:29)

Quitaly is nice.

C (8:30)

Yeah, but that's not gonna happen.

B (8:32)

It's actually kind of, I mean, as you're following the ups and downs all week, it's first, it's this like utter panic. Like Italy is the next one to go, they got these populists in charge and they want to leave the euro and it's the next Brexit and oh my God, Europe's gonna explode and everyone's freaking out. This is my like high school version of what just happened. And then by midweek they're like, and then it's, you know, the President said, no, we're not gonna do that. And then there's more panic and then blah, blah, blah, blah, blah, it all evens out. And now at the end of the week it's like, no.

A (9:01)

And now everyone's fine and now everyone's looking at Spain instead.

C (9:04)

Yeah, no, but if you. And I don't think we're probably gonna have a huge market reaction to Spain because I think if this had been a more liquid market, you wouldn't have seen this type of reaction. There would have been a little bit of movement. But it was the technical element in the market that created the panic. And then panic begets more panic.

A (9:22)

Right. And if something is falling spectacularly, the last thing you want to do in the, in the market cliche is try to catch a falling knife. So you wait until the panic subsides before you come in and buy. And as you say in Spain, which has always also managed to kick out its sort of gray bearded technocrat, prime minister Rajoy and replace him with a socialist who has 80 seats in a 350 seat parliament. And what could possibly go wrong? Because this new guy has to rely on a ragtag coalition of separatists to try and pass anything. So Spain is also in sort of political chaos right now, but there's no market chaos because I guess you don't have those technical market factors.

C (10:12)

Precisely. But even though I think that no one really thinks that Italy is going to leave the currency union, that doesn't make a lot of sense. But I do think what we are seeing in Italy, what we're Seeing in Spain, what we've seen in essentially every European election is concerning, because what we're seeing is the breakdown of traditional parties, the fracturing of electorates, which is leading to the development of weak coalition governments. And that is not only going to stop any reforms, further integration, but it is likely to create more instability in the countries and then lead to further political problems.

A (10:51)

And I would disagree with that, because I would say that Italy has had weak coalition governments since 1946, that Italy has basically always had weak coalition governments. It has had 65 governments, I think, since 1946, and the markets and everyone else. And the European Union has always been able to deal with weak coalition governments because that's what Italy always has. I think Spain is a little bit different because it's a more. It's a younger democracy, and it still hasn't quite worked out whether it's a union. There's a big, big separatist movement going on in Catalonia right now, and that whole issue has not been resolved to anyone's satisfaction. But there are 28 members of the European Union. It is of its nature, a coalition of a whole bunch of people who don't really agree with each other, but it somehow works.

B (11:49)

There's just a heightened sensitivity right now to things that maybe you would have ignored years ago, but now with Brexit, with Trump, with this disturbing rise in nationalism and populism, I think there's. They're just like a magnifying glass on maybe situations that, like you said, aren't really new but feel scary to people. Because there is this almost like worldwide sort of surge of populism, surge of nationalism, this retreat from globalism that we're seeing everywhere. Any little sign of it has people really paying attention, really freaking out about it in a new way.

C (12:27)

I just want to say that, yes, it is true that in Italy, this isn't abnormal, but in the entire Eurozone, the amount of fracturing we've seen is abnormal. The fact that we have as many AfD members in the Bundestag is abnormal. Where the fact that France, their. Their biggest parties were breaking down, that's abnormal.

A (12:49)

It is abnormal. And certainly, yeah, we have. I mean, Macron, I can't even remember the name of his party, but it didn't exist three years ago and that party swept the elections. It's not just that he became president, but his party then swept the parliamentary elections in March.

C (13:06)

Isn't that it?

A (13:06)

On March? There you go. Well done. We've remembered.

C (13:09)

And I did not Google that.

A (13:13)

If you look at Greece, they elected a bunch of populists. But I feel like what's interesting is that when the populists come into power, and this is what we've seen in Italy in the space of 24 hours, when the populists come into power, they tend not actually to be quite as scary as people thought they were.

C (13:32)

This is certainly true. If you look at what's happening, it's very similar to what happened in Greece, where you had Syriza and the independent Greeks, which are very strange bedfellows, forming a government. It created all this angst and anxiety. We had that referendum that nobody remembers, and then ultimately they did exactly what they were told to do. Now, I think that is probably going to happen in a lot of places. So short term, I'm not saying that I think the Eurozone is going to collapse, but I think this is a.

A (13:57)

Disturbing trend because you like having standard parties who've been around for decades just kind of like doing the same thing they've always done.

C (14:07)

I like having competent governments that can actually enact change.

A (14:15)

Because as a Brit, I can tell you that we have two standard parties who've been around for decades, the Conservatives and Labour, and they are both, at this point, just incomprehensibly incompetent. And I would dearly love some British version of On March to come in and sweep them both away. And I have no reason to want to keep either of them.

B (14:41)

I mean, you could make the same case in the United States, only the problem seems to be that the new blood coming in, these new nationalist populist parties just seem worse than the status quo. I mean, with Trump, we don't have a new party, but we certainly have a new mo and it's not any better.

A (15:02)

Trump is worse. I mean, Trump is definitely worse than anything that we're seeing in Europe. And this is the other thing. This segment is going to run long because we also have to mention the other big international political development of this week, which was the steel and aluminium tariffs actually came in. We have 25% tariffs on Canada, people on Canada. It's completely bonkers. And no one in Europe is doing anything that is that insane. And actually, Justin Trudeau came out and said, I am going to team up with my European friends and we are just going to take Donald Trump to court in the WTO and say, what you are doing is completely illegal. And there's this kind of axis of sane between Canada and European allied against the completely crazy that Trump is doing. Right?

B (15:54)

But then underneath the access of sane is all this other stuff that's bubbling up that seems to align with the insane American situation. And I think that causes like heightened anxiety everywhere on everything, you know.

C (16:08)

Exactly. Part of the reason we've had sanity in Europe is because we've had a long period of a stable, powerful government in Germany. And if throughout Europe we're now going to see more instability at the same time that you have other powerful countries like the United States who are electing crazy people, this is not going to bode well.

A (16:29)

So let's talk about the most technocratic from like the big political to the really gnarly technocratic gory details of not just Dodd Frank but the Volcker Rule, which was this little bit of Dodd Frank which was thrown in at the last minute which people thought would do good somehow. And I am of the opinion that it probably did do a bit of good, but it was never really enforced anyway. The Volcker Rule is being changed and Emily, are you sad about this?

B (17:09)

Look it, I went and read the Federal Reserve's memo about this and I can't pretend to have understood it completely. I'm sure we can have readers email us and explain it to me. I feel like this is just another sign of our federal government's penchant for bank deregulation lately. I mean it was the other rule, the cap rule. Right.

C (17:32)

That they.

A (17:32)

That was the medium sized banks. This is more the big site, the big banks.

B (17:36)

So I mean it looks like these are relatively small tweaks. Banks are still under the Volcker Rule, prohibited from what they call proprietary trading. Just like trading on your own account. The kind of stuff that got them in trouble a decade ago. That's still verboten. But they sort of eased up on some other things. They eased up on the ways banks have to prove intent.

A (17:59)

Yeah. So basically the way I think about it is that the Volcker Rule is basically moving from a rules based system to a principles based system that it used to be, or it still is for the time being that banks had to basically point to every single trade they did and be able to say this trade we're doing as part of our banking activities and for clients and it's not a prop trade.

C (18:23)

Right.

A (18:24)

And especially if it's less than 60 days, we need to really prove that it's not a prop trade. We're not just speculating here.

C (18:30)

There was an assumption of guilt for all short term trading. So then banks had to justify every trade which made no sense because this is a tremendous amount of data that they have to Collect and also the regulators don't have time to actually go through.

A (18:44)

And the reg. So what happened was the regulators more or less ignored this enormous compliance headache that was being put onto the banks. And the banks were furious because they were like, we have 8,000 compliance people crawling over every single trade and you regulators aren't even looking at it. Why are we doing this? And while I am perfectly happy to be very prejudiced against the banks, it does seem clear that this way of organizing it wasn't very useful from a regulatory point of view because the regulators using this information and they weren't trying to enforce anything and it wasn't really working. And so the idea as I understand it, is for the regulators to now come out and say let's enforce this at a much higher level instead of trying to do it on a trade by trade basis. We're going to get the CEOs to sign off personally and say we are not doing prop trading. And then what you can do is you can actually go along to the CEO and you can say, hey, look at all of these trades you're doing. You're doing prop trading. And now we're going to come down and say you're not allowed to do that. Now I'm not saying that the regulators are going to be that active, but under the new rules they have more power to be active and to be active at the CEO level than the old system which was at like the individual trader level. And I could not see how that was really going to be helpful.

B (20:11)

Yeah, I mean it doesn't seem like that big of a deal in the specificity of it, but in the aggregate I just think it points to sort of this like gentle and not so gentle in a lot of cases rolling back of financial regulations that we're seeing right now. I mean especially at the CFPB for example, which is just seems to have been gutted.

A (20:31)

So the CFPB has been gutted. I mean I think this is actually a very good point that the big picture is that we have a bunch of slash and burn deregulators being installed by Trump all over the place. Not so much at the Fed. Jay Powell is not a slash and burn deregulators. A very light, mild man and technocrat. You have Lael Brainard who was a kind of good solid lefty Obama appointee. She's in favor of this. You have Paul Volcker himself coming out in favor of this.

C (21:05)

I just want to point out that I would actually argue that what's happening here isn't even really deregulation, it's just clarifying the rule because now there are risk limits so the regulators can say, are you breaching your risk limits as opposed to give us millions of trades that we're never going to go through. I also want to point out that this is being done for an important reason, which is that the crackdown on proprietary trading has also reduced the ability of banks to engage in market making activities, which is important going back to the last conversation we had. Because market making is what makes markets liquid. And in a crisis you do not want illiquid markets.

B (21:41)

In other words, you would have wanted some bank to swoop in and buy a bunch of Italian bonds when everyone was refusing.

C (21:46)

Exactly. And they are not going to because now A, any type of shorter term trading they're going to do, they're going to have to justify. And B, because of capital requirements, it's much more expensive to do that. And C, because of all of these regulations and trends in the banking industry, you don't have as many people even working in trading desks.

B (22:03)

Right, but, but I mean, and that all seems necessary. Market making seems necessary. It's all necessary stuff. But then when you look at the banks like they're fine, profits are up.

C (22:12)

You know, I'm good. I'm also always going to.

B (22:14)

So like she is freaking out people.

C (22:18)

No, it's just. What? Well, first of all, and we don't have to go into a huge segment on like bond market liquidity, but that actually is, is a major concern in the market. But also when you're talking about profitability of banks, one of the main ways you look at profitability is return on equity. And return on equity isn't even close to where it was pre crisis and it's only very recently even exceeded the bank's cost of capital. So the idea that banks are just insanely profitable is not entirely accurate, but they're pretty profitable.

B (22:44)

Are you saying they're not making profits?

A (22:46)

No, no. You see, what Anna is doing here is she is using this measure called return on equity. When you and I look at profits, we look at dollars or possibly, you know, cents per share or something like that. What Anna is doing is she's looking at a ratio where the denominator is this thing called equity, which we're not going to bother defining. But what happened after the financial crisis was that regulators forced banks to have much more of it. And so your return on equity, if you're going to look at that particular ratio, has gone down just because there's More equity. This is exactly what it should be. If, if return on equity hadn't gone down, that would be very worrying because.

B (23:33)

You want the banks to be holding a lot of equity money.

A (23:36)

Yes.

B (23:36)

So that they loss absorbing capital, rely on big bailouts and freak everyone out. So maybe the return on equity shouldn't be so high.

C (23:44)

I would just say that yes, it is certainly true that part of the reason that ROEs have declined is because obviously you have a larger denominator, but you also have had, you've had lower rates as well, which has hurts banks profitability as well. If you're looking at the numerator and moving forward, return on equity is important in terms of how banks can lend, how banks can stimulate the economy. So I'm not saying why is it important.

A (24:10)

I don't understand that. I don't think that's true. I don't think there's any empirical reason to believe that like bank banks will lend when it's profitable to do that, whether or not, you know, they're doing it at a high ROE or a low roe.

C (24:26)

Right. But the more equity you have, the more capital you have to put aside, the less you can lend.

A (24:32)

And that's again by design.

C (24:34)

Yeah, I understand and I'm not saying that I think that many of the rules that were put in place are a bad thing. I mean, I do think that banks are much safer than they used to be. Now one could argue that a lot of that risk has just been shifted to other parts of the market, which.

A (24:49)

Is again by design.

C (24:50)

Yeah, it's true. All I'm saying is that the idea that banks are incredibly profitable I would.

B (24:58)

Just disagree with not. You're saying they used to be much more incredibly.

A (25:02)

Yeah, they were more profitable.

C (25:04)

Well, no, but we don't have to go into a whole discussion of like why like. No.

B (25:10)

All right, so back to.

A (25:12)

Okay, so I mean, so I will say that we did get a request via email to talk about narrow banking. We are not going to do that this week. But depending on the results of the Swiss referendum, we might conceivably have a segment about narrow banking and what that means and fractional reserve banking. And my brain is melting already. But if you know someone who can talk simply and clearly about the end of fractional reserve banking and narrow banking and what that would mean in practice, please don't recommend Michael Wolfe. Do send in some names, slate money, slate.com. and we will possibly talk about it if we can bring ourselves to. And only if the Swiss referendum goes that way. Let's talk about sandwiches.

B (26:05)

Yes.

A (26:08)

Okay, like enough of the wonky stuff. I think we really need to talk about which is not French for all that it has a French sounding name. It has French words in its name.

B (26:20)

It's an English company.

A (26:21)

It's an English company because no country loves its Sarnis more than England. England is the, is the global capital of sandwiches. And they really. It always used to be Marks and Spencer's, but now it's Pret.

B (26:35)

But we should say why we're talking about Pret.

A (26:37)

Why are we talking about pretty?

B (26:39)

Because they were purchased by JAB holdings, which apparently owns every fast casual coffee sandwich and bagel chain you've maybe ever heard of. Including like Einstein Bagels, Stumptown, Pete's Caribou, Auburn Pain, Panera, Krispy Kreme, like they own basically everything. They're this private.

A (26:59)

If it has a French sounding name, they own it. If it has an American sounding name, they own it. If they, if, if you're getting like intelligentsia or stump down, they own it. They are becoming this huge global snacking conglomerate. And I am all in favor of this because if I was the Riemann family. This is this big billionaire German family. They're like, we are going to make a dynastic bet on snacks. And I feel that's a good bet because everyone snacks.

B (27:29)

Yeah. Although it's not snacks. It's more like fast casual dining. It's like There's Burger King, McDonald's, etc. And then the level, you level up from there and you get your like kind of fancy ish sandwiches from Pret. Right. I mean it's this new segment really that's really hot right now.

C (27:45)

It's also coffee. This is really, this is really where Jab is trying to compete with Nestle for market share in the coffee space. And there is a belief that there's more room to grow at Pret in their supply of hot drinks.

A (28:00)

Pretty coffee is not bad.

B (28:02)

It's not bad. And one thing I thought was really interesting, so Pret has sort of this great like employee vibe. When, when they were bought they, they said all their employees are getting a thousand pound bonuses. There's 12,000 employees and everyone's getting a bonus because they got bought. And they do a lot of like team bonuses and their whole thing is like workers have to be really cheerful and they'll randomly give you free stuff. Like the other day I walked into a Pret and ordered a coffee and they said just take it. And I was like, are you serious? And I was Looking around like, am I being pranked? Like, what's happening? Just take it. And that's policy, apparently. And I was just curious, I wonder if that sort of ethos will stay when they're under this new owner. I don't, I don't know how JAB is sort of more.

A (28:45)

I think they're most. They're pretty hands off probably.

C (28:47)

And I think they'll be fine because they were able to maintain this culture, this focus on consumers and employees while they were owned by private equity. And I think that this was actually an example of really, like a really great example of private equity. Because when bridgepoint Advisors bought them, they were far less, far less profitable and they allowed the company to grow, to maintain their culture. They were able to cut costs in other ways. And now the company has been able to hire many more employees. Management is doing well. The clients of Bridgepoint did very well.

A (29:25)

Because they sold prep for how much? It was like 1.5 billion. Two. Yeah.

C (29:30)

And I think with debt, it's like 2 billion.

A (29:31)

I mean, this is so this is an enormous acquisition. It's a great exit for the private equity owners. And then the one point I wanted to make about this, which is a little bit off sandwiches maybe, is, is about ownership. And it's basically that you can do things if you're a family. Because JAB is not a publicly listed company. It is not a private equity shop which needs to exit within five to 10 years. It has a time horizon of multiple generations. You know, they're investing for their great, great grandkids. And when you're doing that, you can, you're looking, you're valuing companies in different ways. And what you value is something which is going to be a long around for many, many decades and which is going to retain its value for many, many decades. And what you don't need to do is massively increase the value in five years like the private equity people did. And what you also don't need to do is show constant growth like the stock market demands. If pret just stays exactly the size that it is right now and has exactly the profitability that it has right now, or maybe just grows a little bit, but just manages to do that for the next 75 years, probably the Riemann family will be happy with that.

C (30:57)

And why is that good?

A (30:59)

Because it's a different source of patient capital and of being able to have a productive asset which is going to last for decades. That's good, right?

C (31:12)

Correct. But I think that sometimes there's a bit of a Prejudice against the idea of growth. As though pushing companies to grow is a bad thing. Whereas that is how companies are able to employ more people. That is how economies grow. That is how you get bigger companies that actually are better to their workers than small companies.

B (31:34)

I think, though, food is an interesting example where oftentimes bigger in and growing faster turns out to be just like really bad. Like, I'm thinking of, say, Chipotle and you know, McDonald's picked them up for a while and then they went public. Right. And then they tried to grow really, really fast. And I mean, things sort of like took a turn. I just. With food, I think it's. It's different.

A (32:00)

Yeah, I think growth is too.

B (32:01)

Right now is in very kind of like a state of chaos. There was a good piece in the Journal about all these packaged food. Companies are really struggling right now because consumer tastes are tending toward like the slow growth model, essentially. Like, people want smaller companies. They don't want to go to chains anyway. They want, you know, they want to keep it.

A (32:20)

Yeah. And remember that what we're talking about is, is a sector which in the grand scheme of things is not growing. Like, the amount that people eat is not really growing. So a lot of what you're talking about when you talk about growth is like a zero sum game where like, you're growing at the expense of someone else. And that doesn't create employment in aggregate. If you look at what Warren Buffett does. Here's another example. He loves to buy stocks of growing companies, but at the same time, he also loves to buy companies like See's Candy, say, and See's Candy, as far as I can tell, doesn't grow. He isn't trying to open new See's Candy stores every month. He's just perfectly happy for See's Candy to be See's Candy and for it to be the size that it is, it throws off a bunch of profits. And he uses those profits to buy stocks on the stock market. And that's fine. He doesn't need everything to be growing all the time.

C (33:17)

I think he entirely needs everything to be growing. The rate that things are growing is completely different. Of course, when you're valuing a company and you're looking at expected growth rates, of course, if it's a younger company, if it's in certain sectors like tech or something, you're going to expect a much faster growth rate. If it's in other sectors, you're going to. You're going to expect a much lower growth rate. And once it becomes A more mature company, then yes, of course you expect it to grow, but you don't expect it to grow at exponential levels. That's the entire market. So I think that when people talk about growth and they talk about Wall street, there's this idea that everybody in Wall street expects every company to grow at like, you know, incredible multiples. And that just isn't true. It depends on the type of company, depends on the stage of the company.

B (34:00)

Growth is sometimes good.

C (34:02)

I think growth is.

B (34:02)

Yeah, sometimes people expect too much and it's bad.

C (34:05)

Yeah, I agree. There are certainly times where companies try to grow too quickly or they just try to grow in. In a way that doesn't really make any sense. Like when Pret was owned by McDonald's and they did try to expand much too quickly.

A (34:17)

Chipotle rather.

C (34:18)

No, no.

A (34:20)

I forgot the.

B (34:21)

This is also a story about McDonald's not being good at buying other food.

A (34:25)

Companies, but they are good at realizing that they're not good and then selling them.

B (34:29)

That's true. Good on them.

C (34:32)

So I'm just saying that I think that yes, it is true that private companies can sometimes not have quite the short term issues that maybe you would have with larger companies. But I think the idea that growth in itself is bad, I just disagree with.

A (34:51)

I just think that there are different. Different owners look at companies in different ways. Private equity owners look with Nito and exit public company owners, shareholders generally want substantial growth because a lot of what they're doing is they're buying the stocks because they want the stock to go up. Whereas families, there is no stock for them to go up. They don't have an exit strategy. They just want to own this forever. And if you want to own it forever, then your incentives are slightly different.

B (35:30)

It does seem like a nicer, friendlier way maybe. Anna, Business like we see it in media, nice and friendly.

A (35:38)

Why can't you be nice and friendly, Anna?

C (35:41)

I'm the evil one over here.

B (35:43)

It's not true.

A (35:45)

Okay, let's have a numbers round. I think. Yes, why not? I have a good number here. $523 is an all time high for the average monthly car loan payment in the US if you're buying a new car has now hit an all time car of $523. I'm like, wow, that's a lot of money to pay for your car every month. And that's the average.

C (36:16)

That's a mean or the median.

A (36:18)

That's the mean. And it is for new cars. So that doesn't include people financing Used cars. But if you are buying a new car, on average you are paying $523 a month, which is like rent.

C (36:35)

Yeah, that is quite a lot. I would be interested what the median is just because you could be skewed upwards if you have a lot of very expensive car purchases, but a lot.

A (36:42)

Of those are cash.

C (36:44)

I guess that's true. I'd just be curious, isn't there something.

B (36:46)

Going on with auto loan defaults right now too? Aren't defaults high?

A (36:50)

No, defaults have come down. Defaults are almost near all time lows. Weird but true. This is partly a function actually in both of these facts are both a function of a decline in subprime lending in new cars. So people with bad credit find it increasingly difficult to buy cars. People with bad credit also generally often buy cheaper cars. And so you're getting fewer people buying cheaper cars because they have bad credit. And then the rich people who have good credit are not defaulting.

B (37:30)

Fascinating.

C (37:31)

Interesting. Anna, my number is 52%. So in a recent poll, Andres Manuel Lopez Obrador Amelo, yes. Is receiving 52% of the projected vote in the July 1st Mexican elections. And this should be somewhat concerning for most people. He is a very far left candidate.

A (38:04)

Oh my God. That is like everyone your entire life right now is being concerned about like non technocratic candidate. Amlo is a perennial candidate in Mexico. He's not anywhere to the left of say, Alan Garcia in Peru, who turned out to be fine.

C (38:23)

Well, okay, when you're talking about Amlo, we don't know which Amlo we're going to get. We, we could get the Amlo of, you know, a lifetime of rhetoric about nationalization and. Or we could get an expropriation or we could get the Amlo from when he was mayor of Mexico City. That was more pragmatic. We don't know. But whatever we're going to get, it's almost certainly, if we get Amlo, it's not going to help Mexico, I would argue, because he's almost certainly going to, if not retard the reforms that have been pushed through, but he's certainly not going to move forward with them. He's certainly not going to do more to open up the economy and at the same time as you have NAFTA negotiations going on, I think that we're going to only have Justin Trudeau as the only sane person in the room.

A (39:10)

And his chief negotiator, Chris Jeffrey Lind, who we know and love. My former boss, Emily, my number.

B (39:18)

I'm going For A classic is 3.8%, which today is Friday. The jobs numbers came out and the unemployment rate is 3.8%, the lowest it's been since April 2000.

A (39:27)

Today is Saturday.

B (39:29)

No, well, we're recording on Friday, Felix. People know that, right?

A (39:32)

That's a secret.

B (39:33)

No, no.

A (39:34)

We come out live at like 4 o' clock on a Saturday morning. We get up very early on Saturdays.

B (39:39)

All right, so anyway, yesterday, before this number came out, what's interesting is our president, who we've already established is insane at 7am or thereabouts, tweeted something like, looking forward to seeing the employment numbers, essentially hinting that they were gonna be good.

A (39:57)

Which they were.

B (39:58)

Which they were. But the problem is the President gets to see the numbers, which apparently Trump saw them the night before. Larry Kudlow showed him the numbers. And you're not supposed to say anything. You're supposed to keep your trap shut. But Trump obviously is not good at that and broke decades of precedent by hinting that the numbers were going to be strong, which people kind of knew already. But now everyone's freaking out about this. They're like, the president moved markets basically by doing this. Now everyone's going to be looking to his tweets to sort of game the system.

A (40:32)

Yeah. And I mean, it could even be like if you really, you know, follow this to its logical conclusion, you could wind up in this weird world where if the President doesn't tweet about the upcoming drug support, then that's a sign that's gonna be bad.

C (40:47)

Exactly.

B (40:47)

It raises questions. This guy's getting the numbers early. Who else is he telling which ones of his friends are trading on the numbers?

A (40:54)

Exactly. He talks to his billionaire friends every night. And he has no idea that he's not allowed to talk about the jobs report because he's a moron. And so who knows?

B (41:03)

He knows he's not supposed to and he doesn't care. And he's on the horn to Hannity the night before, and God knows what Hannity is doing with the numbers. I mean, it's really.

C (41:10)

Oh, no, I 100% agree with you. But good job numbers were already priced into the market. I'm just saying. I completely agree with you. I'm just saying.

B (41:18)

But I mean, who knows what's down the road, right?

C (41:21)

And what Felix is saying now, every.

B (41:23)

Month we're all going to be looking. What is he saying? What isn't he saying? You know, it's.

C (41:26)

Yeah, completely agree with that.

A (41:27)

I just want to know, can the President be prosecuted for insider Trading.

C (41:34)

Is that a high crime and misdemeanor?

B (41:36)

Maybe. I mean, there's.

A (41:37)

Maybe not. I'm sure. I'm sure there are lawyers who say.

B (41:39)

They'Re saying if someone in the Labor Department did that, they'd be fired. No question.

A (41:44)

100%. Can you imagine that? There's literally no government employee who could tweet that out, who had access to the numbers, who wouldn't be fired on the spot?

C (41:53)

No, completely.

B (41:55)

It's enough to make you want to launch the five star party and maybe.

C (42:00)

Not the five star party. Could we have another party?

A (42:02)

Six star party. We always go one better here in America. Or. Yeah, or 13 stars. How many stars? Wait, 50. 50 stars.

B (42:11)

Here we go.

A (42:11)

50 stars. That's the number.

B (42:12)

The 50 star party.

A (42:13)

The 50 star party. Because we have 50 star.

C (42:15)

A nice, like, centrist, reasonable party.

A (42:18)

Now I'm gonna launch the 50 star party and it's gonna all be. We're just gonna take all of the stripes off the flag and it's just gonna be the 50 stripes.

B (42:26)

And we won't tweet. No one will tweet.

A (42:28)

And no more tweeting. The Never Tweet party.

B (42:32)

Yes, exactly.

A (42:33)

Okay. If you want to join the Never Tweet party, send us an email on slatemoney.com or tweet @ us. Many thanks to everyone who wrote in, having read the papal encyclical, which we are very impressed by, all of you. And well done, all of you. You're amazing. Especially the theologians who managed to explain that this is all written in this kind of weird idiolect which lives only inside the Vatican. And so, yeah, keep the emails coming because we love them. Let us know if you have any guests that you think can explain narrow banking or anything else. Thank you for all of your suggestions for Germany experts. We are going to hopefully have a Germany episode sometime soon. Many thanks to Dan Schrader for producing. Many thanks to you all for listening. And we will talk to you next week on Sleep.