The Turning Point Edition

Summary

Slate Money – The Turning Point Edition

Date: September 17, 2016
Host: Felix Salmon (with guests Jordan Weissman and Lynette Lopez)

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Episode Overview

This episode, dubbed “The Turning Point Edition,” dives into three central stories from the week in business and finance:

• The controversy and mechanics behind Silicon Valley startup Point, which enables homeowners to sell “equity” in their homes;
• The release of a “blockbuster” US Census report signaling strong income growth for the American middle class;
• The massive proposed merger between Bayer and Monsanto, its industry implications, and broader trends in corporate mergers.

Throughout the episode, hosts dissect complex financial products, scrutinize economic data, and question the motives and impacts of both fintech disruption and mega-mergers, all in Slate Money's signature irreverent yet incisive style.

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1. The Point Startup: Selling Shares of Your Home Equity

[02:02–15:31]

What Is Point?

• Trigger for Discussion: Andreessen Horowitz’s investment in Point snags finance Twitter’s attention, leading to confusion about its business model ([02:02]).
• Jordan Weissman: “So instead of taking out a home equity loan, you can sell a share of your equity to Point and then 10 years later... you pay them back plus a percentage of whatever your house appreciated.” ([03:43])
• Felix Salmon: Points out it's only available to current homeowners, not for new home purchases ([05:24]).
• Mechanics:
  • Homeowner sells a chunk of home equity (e.g., 10% for $100,000 on a $1 million house).
  • No monthly payments; after 10 years (or at sale), homeowner pays back original amount plus a percentage of home appreciation.
  • If the home’s value falls, Point shares some downside risk, but only if losses are substantial ([07:54]).

Critiques and Concerns

• Lynette Lopez: “There's just a lot of ifs going on here... How are we going to get screwed doing this?” ([04:34])
• Felix Salmon: Argues it’s akin to a “gussied-up second mortgage,” and risks are similar to pre-crisis practices ([05:44]).
• The downside risk Point shares is minimal; the major burden for homeowners remains ([10:12]).
• Jordan Weissman: Defends limited social utility; it's a liquidity option for the “paycheck-to-paycheck rich”—the asset-rich, cash-poor suburbanites ([11:00]).

Memorable Quotes

• Lynette: “How are we gonna chop this up nasty? What's happening?” ([04:34])
• Felix: “The only way you can pay them back is by refinancing in some way.” ([12:55])
• Lynette: “If you two clowns can sit in here and come up with that stuff and all the downside... they definitely thought about it.” ([13:10])
• Felix: “This whole Silicon Valley thing of ‘finance is broken and we can fix it’...” ([13:41])

Context and Trend

• Growth of fintech startups aiming to “disrupt” conventional lending.
• The pervasiveness of lightly regulated lending options fueled by global pools of cash ([15:15]).

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2. A Turning Point Report: Middle Class Income Surges

[15:31–23:52]

Census Bureau’s Big News

• Headlines: Median US household income rose 5.2%—the fastest since records began in 1967 ([16:27]).
• Jordan: “...the median household income went up 5.2%. That's the fastest growth on record... It is just, I mean, it's sort of a remarkable spurt after just waiting and waiting and waiting.” ([16:27])
• Added context: Decreases in unemployment, low inflation, and minimum wage hikes may have all contributed.

Are We Better Off Than in the 1990s?

• Caveats:
  • Depending on inflation measures, median income is now either “2% below where we were in 1999 or maybe 3% above” ([18:22]).
  • Rising income is not evenly felt—youth unemployment, stagnant wages for some, and “angst” remain ([18:50]).

Sociological and Generational Perspectives

• Lynette Lopez: “We are still not where we were when Bill Clinton was president in the 90s.” ([17:39])
• Millennials’ anxiety around job stability and the tendency for more young adults to live at home ([20:11]), referencing the “quit rate” as a societal optimism indicator ([21:43]).

Key Insight

• Felix Salmon: “For all that ... 2008 vintage millennials might have a lower quit rate ... even your quit rate is going up. Statistically speaking, among y’ all, we're starting to feel ourselves.” ([22:28])

Memorable Moment

• Lynette (on Millennial attitudes): “Old millennials, we don't do Kanye. We're tired of his bullshit.” ([23:10])

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3. The Bayer-Monsanto Mega Merger: Antitrust and Agriculture

[24:04–34:41]

The Deal

• Bayer, best known for pharmaceuticals, offers $56 billion to buy Monsanto, a lightning rod for controversy over GMOs and monoculture ([02:23], [24:04]).
• Lynette: “When you have to get 30 different governments to agree on something, it's like, oh, well, we might as well not even try.” ([24:09])
• $2 billion breakup fee if the merger falls through ([24:28]).

Why the Fears?

• Felix: “Among a certain class of urban liberal, it is hard to come up with two companies which are more hated than Monsanto on the one hand... and Bayer [for its historic links to IG Farben].” ([25:01])
• Lynette: Ponders if the name Monsanto will disappear in a rebrand ([26:13]).

Industry and Regulatory Implications

• The merger combines Bayer’s strength in pesticides and Monsanto’s dominance in GM seeds ([28:06]).
• Felix: “Pesticides and seeds are two sides of exactly the same coin... if you have the same company making the pesticides and making the seeds... you can charge much more for the seeds...” ([28:54])
• The ag industry is in a persistent bear market; this merger is partly defensive ([29:41]).
• Lynette (on the structure): "This is an all cash deal... companies can borrow for almost nothing at this point" ([30:42], [31:06]).

Political and Antitrust Barriers

• Jordan: “The guy who runs the Judiciary Committee in the Senate... Chuck Grassley [Iowa]... if he thinks that this merger is going to create problems for his constituents... he's going to make hell.” ([33:50])
• Widespread skepticism on whether it will clear regulatory hurdles, not just with Justice Department, but politically ([34:21]).

Key Quotes

• Felix: “It’s really hard to find anyone who’s going to come out and say, yay, what a great idea.” ([34:26])
• Lynette: “This is just such a sexy thing for people to hate. Like, this is just too easy.” ([34:21])

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4. The Numbers Round

[34:45–40:19]

• Jordan: 3.5 — The percentage of Americans pushed into poverty by medical expenses, a figure unchanged by Obamacare, reflecting lingering issues with high-deductible health plans ([36:21]).
• Lynette: $2.69 — Price of Burger King’s Cheeto-dusted chicken fries; commentary on America’s health and diet ([36:44]).
  • “Now, you know, $2.69. But think of how high deductibles are right now.” ([37:40])
• Felix: 3 — “Three decades of intellectual regress” in macroeconomic theory, as per Paul Romer’s paper “The Trouble With Macroeconomics,” signaling growing academic skepticism toward macroeconomic models ([38:45]).

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5. Notable Quotes and Moments

• Lynette, on fintech startup Point: “How are we going to get screwed doing this?” ([04:34])
• Felix, on Silicon Valley finance disruptors: “There’s a bunch of Silicon Valley companies which have taken it upon themselves to decide that finance is broken and we are Silicon Valley and we can fix it.” ([13:41])
• Jordan, on economic growth: “The economic recovery that for so long didn’t feel like it was filtering down to the middle class now is… not just in the unemployment numbers but in terms of people’s bank accounts, in terms of their earnings.” ([19:18])
• Lynette, on generational divides: “Old millennials, we don't do Kanye. We're tired of his bullshit.” ([23:10])
• Felix, wrapping up the themes: “The thing which is genuinely tying all three of our disparate segments together is monetary policy and just these oceans of cash which are sloshing around the world looking for somewhere to go.” ([32:31])

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6. Episode Structure

• [00:08] Introduction, guest-host banter, and topic preview
• [02:02]–[15:31] Fintech’s Point: Home equity for cash
• [15:31]–[23:52] Income growth and the 2015 Census data
• [24:04]–[34:41] Bayer-Monsanto merger analysis
• [34:45]–[40:19] Numbers round: Poverty, cheese, and economic theory
• [40:19] Credits and sign-off

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Final Thoughts

The episode blends skepticism, humor, and sharp financial analysis while examining how the current flood of cheap money shapes startups, personal finance, and mega-mergers. Of particular note is the questioning of whether new fintech really serves consumers, if recent economic gains are sustainable or evenly spread, and whether historic corporate mergers can (or should) survive political and regulatory scrutiny—all reflecting a moment of inflection for both policy and markets.

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Transcript

[A]

The following podcast contains explicit language.

[B]

Hello, and welcome to the Turning Point edition of Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Fusion. I'm joined by Slate moneybox columnist Jordan Weissman.

[A]

Hello.

[B]

And because Kathy o' Neill is on book tour by Popular Demand, we feature the return of.

[C]

Hi, it's Lynette. Hi. I'm very excited to be here and to hear that I had a popular demand. Thank you.

[B]

Lynette Lopez, ladies and gentlemen.

[C]

Hi.

[B]

The senior finance correspondent at Business Insider, the host of what's your podcast?

[C]

It's called Hard Pass.

[B]

It's called Hard Pass and it's much shorter than Slate Money, so you can squeeze it in between episodes of Slate Money.

[C]

Right. Like, just in case you only want six minutes of me screaming in your ear, this is perfect for you. And the tagline is rejecting the business of everyday life. So, you know, there's gonna be a lot of shade involved.

[B]

We are going to be talking about the big macro news of the week. We try. I try and avoid macro, but this one you can't really avoid because there was this massive census report and. Hey, guys, you're really. You're rich. Your wealth went up. You're amazing. Well done. Congratulations. Well done, you for being so awesome and getting richer. We are also going to talk about a mega merger. There's a huge acquisition of Monsanto. You probably hate Monsanto. It seems to be the very sort of bienponson thing to do is to hate Monsanto. They are being bought for like $56 billion by Bayer. But first we are going to talk about point.

[A]

This was the hot topic on econ and finance Twitter.

[C]

This was like. And I am not the best econ finance Twitter person, so you guys had to inform me that this was going on. And then I was like, oh, this has gone too far for me to jump in right now.

[A]

There were like, a lot of reasons, I think, that this blew up. But Felix, tell us what point is.

[B]

So it all began. So pointers existed for a while, but of course no one noticed it because there have been a million different corporations and companies trying to do this kind of thing for a while and they all fail. And it's no big deal. Until one day Andreessen Horowitz comes along and there's this weird.

[A]

There's this weird.

[B]

What do you call it, sort of knee jerk ripple effect which happens every time Andreessen Horowitz announces an investment in a new company that suddenly everyone is talking about that company just by In Andreessen Horowitz blog post.

[A]

Well, it's like the finance equivalent of if like Pharrell says, hey, this artist is great, all of a sudden, ever.

[C]

It's like Kanye cussing at you or Rihanna giving you the side eye.

[A]

Exactly.

[C]

You are important.

[A]

So if Andreessen Horowitz says, yo, check this out, everyone says, okay, let's check this out. And then, so that's what basically.

[B]

So then finance Twitter spent basically two or three days looking at the Andreessen Horowitz blog post, combing the points.com website, trying to work out what on earth is it preferred stock? Is it like a zero coupon loan with one.

[C]

Wait, wait. You've got to explain what actually does.

[B]

But let's try and, let's try and explain it first of all in the terms which Anderson Horowitz uses to explain it, which is basically, you get to sell equity in your house.

[A]

Yeah. So instead of taking out a home equity loan, you can sell a share of your equity to point and then 10 years later, you pay them back what they gave you or that you pay them back plus a percentage or, sorry, one, two, three, ten years later, you pay them back a percentage of whatever your house appreciated. And that's where they make their money.

[B]

And so this is the first weird thing is that normally when you sell equity, you get a bunch of money and there's no obligation for you to pay back anything to anyone ever. Equity by its nature is a permanent thing, whereas this is not a permanent thing. This is a very finite thing. It ends after a 10 year. And after 10 years, you need to pay the money back. And not only do you need to pay the money back, you need to pay back the money plus a whole bunch of extra money according to how much your home has increased in value.

[C]

There's just a lot of ifs going on here. And when I read things like this, I'm like, okay, how are we going to get screwed doing this? Like how? How? I mean, when Lou Ranieri created the mortgage bond, he didn't know that we were gonna chop it up all nasty and fly it around the world. What are we gonna. How are we gonna chop this up nasty? What's happening?

[B]

It's already chopped up n the. Okay, so there's this two sided market. The reason why Point looks like it might be a successful investment from the point of view of Andreessen Horowitz is that you have demand on both sides. On the one hand, you have people mostly trying to buy houses. And as we New Yorkers know, and as people in Silicon Valley know, and as other people know, buying houses, houses are expensive and you don't get a lot of money.

[A]

Well, so wait, I clarify this. And they're not doing, they're only doing current homeowners right now. They are not doing any home sales. I asked them about this because this was one of the things the Andreessen Horowitz post made it sound like they might be doing new purchases. And right now that's not their goal at all. It's only taking equity out of a house you currently own.

[B]

And so that's one of the weird things, because cash out refi is what could possibly go wrong if anyone lived through the financial crisis.

[C]

Why does this keep happening?

[B]

But yeah, the idea of doing something with your house which puts a financial obligation on you, but you get a bunch of cash upfront. The kind of people who take that offer weirdly tend to find themselves in sort of hot water down the road.

[A]

So the reason this caught my mind.

[B]

But let's, before we analyze it, let's just finish explaining what the hell this thing is first.

[C]

Because it's complicated, because I am still only 80% sure.

[B]

Well, so it's, so it's designed to like, let's take a million dollar house. And I'm not picking that just because it's a round number. I'm also picking that because it's what's known as super prime. The people who buy million dollar houses tend to be quite rich and Point doesn't like taking credit risk. And it reckons that if it's essentially lending money to someone who can afford a million dollar house and they're much more likely to get their money back after the end of 10 years unless they're 50 cents. So unless they're 50 cents. So you, you have your million dollar house and you sell 10% of it to point for $100,000. So you get $100,000 in cash minus like their 3% fee and all the rest of it. But you get 100,000 in cash and then you don't need to pay any kind of interest payments on that $100,000. It's not a loan in that sense. If you sell your house, then 20% of the price appreciation of your house goes to Point plus the original $100,000. So the example they give on their blog is that if you sell it for 1.2 million, then the appreciation is $200,000. 20% of that is $40,000. So you pay back 40,000 plus 100,000 is 140,000. What they don't do is say, well, like, what happens if it goes up to $2 million? In that case, 20% of the appreciation is $200,000. You have to pay back $300,000, which is three times the cash you got out.

[A]

So there's a flip side to this too, which is that if your house loses value, you still need to pay back $100,000. Well, no. So point actually takes some of the loss. They will take some. If your house depreciates, point will take some of those losses eventually after certain.

[C]

Kind of degenerate gambler.

[A]

But then after that, if you and I asked them about this, it seems like if your house goes totally underwater, their. Their investment zeros out. So they're not going to try and ring you for money. If Your house is 100% underwater, that's kind. That is, that, that's.

[B]

I mean, if the value of your.

[A]

House is zero, if your equity is zero, essentially, like, so if you're more. Your first mortgage on the house is zero is more than whatever equity you have left. Right.

[B]

Because basically they're a second mortgage.

[A]

Yeah, in a lot of ways. So they are.

[B]

They're a gussied up second mortgage.

[C]

Yeah. Well, I don't understand why anyone would want this.

[B]

Well, okay, so wait, wait, wait. So stop, stop. Verlin wants to say something.

[A]

Yeah.

[C]

Are they a bank? Like this, I just need a word. Like, what are they?

[B]

Okay, all right. Point is essentially a lender. They are essentially a mortgage company. They are lending money to you, but they're doing it on weird terms which we're not used to yet.

[A]

Yeah, I do think that, or hopefully ever, maybe never to give them like some credit as, like why this might be socially useful. I do think the fact that they are willing to accept some losses in the case that your house declines in value, it does distinguish it somewhat from an ordinarily ordinary loan. Because again, like the thing, the defining thing about debt is you pay the interest and you pay eventually the principal, no matter what, or you're supposed to, or you default. Whereas this, they share some of the downside.

[B]

And the reason why this is a very bad way of implementing that is twofold. Number one is simply that it's a second mortgage which gets layered on top of the main mortgage, which is the main obligation which people are worried about and which caused the financial crisis. And the way to fix this problem is to change mortgages and to do like, you know, shared of depreciation mortgages or something like that. Not to faff around with second mortgages. I love the faffing number two. And this is equally important. The amount of downside that point shares in is tiny. If your house goes down a little bit, you still need to pay them back everything you paid them. The only thing you don't have to do is pay them back any interest on top.

[A]

So I think if it goes down enough, eventually you're not going to be paying back. But I think I will say I want to talk less about whether or not this is awful and a little bit about why I think there might be a market for it.

[B]

Well, the reason there's a market for it and this is clearly, this is something which I've noticed a lot with a lot of these kind of bank replacement startups which you find in California is that they're coming from the demand side. That what they do is they. There's a bunch of hedge funds out there and they're like, we want to invest in this, we want a way to get exposure to that. And there is definitely demand out there to get exposure to prime expensive real estate. Well, there's not something you can easily get exposure to if you say a hedge fund. And this is a way of doing that.

[A]

I think there's some. They might also be zeroing or zeroing in on a specific kind of consumer demand, which is there's this little known population in the US that economists kind of call the paycheck to paycheck rich. It's essentially people who live in expensive suburbs, prime real estate area for the school district, but they can't quite afford. They don't have much liquid assets, they can't quite afford their lifestyle. Typically their house is where all their wealth is stored. But they have a hard time going. They are essentially living month to month. Often this is a way for people in that position who are a surprisingly large demographic and may not have great credit scores to get cash without having to worry about monthly payments. And it gives them 10 years during which their house can appreciate, maybe their kids go to get out of high school, who knows that they can then, you know, just basically have some liquidity. So I actually, I can see who this might be developed for. And frankly also it's for people who just happen to have an expensive house and a low credit score. So maybe they moved there before it gentrified or something along those lines.

[B]

But the, the other thing that happens is that it's based on this idea. It's sold on this idea.

[A]

Yeah.

[B]

That if your house has doubled in value you're not really going to mind paying back a lot more than you borrowed because your house has doubled in value and you just made a million dollars. And in fact, come the day, it doesn't work like that because almost certainly any house which you're going to want to move into will have gone up in value as well. And you're going to want. You need to be on that property ladder with enough cash to be able to move into a new place. And the idea that you wind up having to have to pay this like really large check to essentially your second mortgage provider at exactly the same time that you're paying all of your brokerage fees to sell the old place and buy a new place and all the rest of it. That's actually when you need like the liquidity which you're losing.

[A]

Yeah, I mean, I can almost imagine. I can also just sort of imagine a situation where someone takes out a second regular mortgage to pay off their point that sounds.

[B]

That's clearly the design.

[A]

Yeah.

[B]

I mean, is that like, if you haven't sold your house after 10 years, the only way that you are realistically going to be able to pay point back. And by the way, they are the people telling you how much your house is worth. The only way that you can pay them back is by refinancing in some way.

[C]

And this is the thing. If you two clowns can sit in here and come up with that stuff and all the downside of this, they definitely thought about it.

[A]

But no, it's true.

[C]

You don't think that Marc Andreessen has already thought this through? Or maybe he's just really high off the Kool Aid and he really thinks this is great. I don't know.

[B]

Remember that Marc Andreessen is also really high on Bitcoin Kool Aid.

[C]

Yeah, that is. Well, that then yeah, okay. Totally.

[B]

And this is this whole thing, Silicon Valley. And he's also so annoying. He also invested in stripe. Like there's a bunch of Silicon Valley companies which have taken it upon themselves to decide that finance is broken and we are Silicon Valley and we can fix it.

[C]

I think they just hate bankers.

[A]

No, I mean, they definitely do see an opportunity. There is a sense there, I think that, you know, banking is somehow broken and it needs to be disrupted. Sorry, I want to make. I have the scarecrow. And so that they're going to look at stuff. It just that sometimes the products that come up, they're going to come up with products that have their own downsides. Like every, every consumer product is that.

[C]

Seems like a lot of downsides though we just talked about.

[A]

And they're going to look for, I think inherently they're going to look for parts of the market that are not extremely well regulated. You know, so that's, this is, and.

[B]

This is also why so many of these Silicon Valley companies like the, the student loan refinancers, the, and the, all the people trying to like a firm who's trying to do other kind of like point of purchase lending and these guys that all in some way or another doing in the lending business. And the reason is that number one, there's a lot of spare money sloshing around which people are happy to lend out for any kind of positive interest rate. And number two, lending by its nature is not particularly regulated, especially if you're doing it at sort of single digit.

[A]

Interest rates, unless it's a traditional mortgage, in which case you run into all sorts of things. This is a way around that.

[B]

And if you're lending money to someone, you're providing them the money. And basically regulators are better than that than if you're borrowing money from someone, which is what you're doing. If you have a deposit account, there are very few fintech startups which take deposits. There are lots which will lend you money. Let's go macro, Jordan.

[A]

All right, fun time. I never get to go macro.

[C]

Let's go macro.

[A]

It's sort of macro. So, yeah, you know, I don't want to oversell it, but some people were talking about how this week the Census Bureau released what may have been the best economic news of the decade. Maybe so one of the best economic reports of the decade. Every year they come out with this thing about income and poverty and health insurance in the US and for a long time middle class incomes have sort of just been stagnating. The key figure everyone looks for is like kind of median household income. Right. Like what the absolute middle income distribution makes this year after, after all this post recession stagnation, the median household income went up 5.2%. That's the fastest growth on record since they started collecting this data in 1967. It is just, I mean, it's sort of a remarkable spurt after just waiting and waiting and waiting.

[B]

And it's a real result. It's not just some weird statistical glitch.

[A]

Yeah. So the reason why this, that's a healthy. So we got some questions, I think on Twitter that, you know, I think they were good questions, which is, how do you know this? We talk about random variability all the time on this show and in statistics, like how do we know this isn't just like, you know, some glitch of the survey? And there's one of the reasons, I mean, a, you know, they have standard errors, things like that. But also there's just like, there's a, there's a strong narrative for what happened here, which is we've, we've. Last year 2015, you know, unemployment was continued to drop at the same time we had this incredibly low inflation environment and wages picked up the same that you also had minimum wage increases across a lot of the country, which believe it or not, actually filter up to the middle class. They're a surprising amount of the middle wage workers are just like median, near the median in the income distribution. And so there are a lot of reasons to think something like this might have happened. It's just the strength of the results is, okay, finally, finally, the middle class is recovering close to. Or is, you know, it's the first time that we've seen any kind of increase since 2007. And depending how you measure things, it's. We were kind of almost getting around or slightly above or slightly below where we were even in the late 90s, early 2000s.

[B]

So we're rich.

[A]

Yeah.

[C]

No, I mean, I am a glass half empty kind of girl and I just. We are, we're still not where we were when Bill Clinton was president in the 90s were green.

[A]

So I have.

[B]

Do we have iPhones?

[A]

Yeah.

[C]

Ugh, whatever.

[A]

Well, so this is also. So my Moneybox predecessor, Matt Iglesias has been harping on this, this question of are we better off than where we were in the late 90s. And I think in some ways it's a little bit of a thicket. It's almost not worth getting into because you can literally change that result depending on what kind of inflation measure you use. And I don't think we're going to do a whole show devoted to the chained CPI index and I believe has.

[B]

Already done that show. And if you want to go to the weeds, you listen to it.

[A]

So, but I will say the headline here is that depending on which type of inflation measure you can do, it's like we're either 2% below where we were in 1999 or maybe 3% above. We're kind of in the same ballpark though. And so I think, yeah, there is this active question is like, have. That we really need to focus on is like, have living standards for the middle class gotten better or worse since that time? Kind of generally.

[B]

But what I Mean, there's two questions here, right?

[A]

Yeah.

[B]

One is like, are we at an all time high for middle class living standards? And a lot of it certainly doesn't feel like it, depending on where you live and what color your skin is and various other things like that. There are different answers to that question. There's another question, though, which I think is equally germane, which is, have middle class living standards improved a lot over the past 12 months? And the answer is clearly, yes, they have.

[A]

Well, yeah, I think that you're starting to see, regardless. Yeah. You're seeing, you know, a turning point is that the economic recovery that for so long didn't feel like it was filtering down to the middle class now is, you know, not just in the unemployment numbers, but in bank, in terms of like people's bank accounts, in terms of their earnings. And that's. That that's so important to just the way we kind of feel about ourselves. Right. As a country about the direction of things and people's positivity and it just. And, you know, speed on universal.

[B]

Like, it was every single income decile. It was like the 20th percentile, the 30th percentile, the 40th, the 60th, the 70th. It was white people, black people.

[C]

Do we have to have the why do we feel so crappy then Talk?

[B]

Well, I mean, you feel crappy, Lynette, because you're a glass half empty kind of girl.

[C]

Well, I'm also wearing all black today.

[A]

Well, I think, you know, I think.

[B]

I don't feel crappy.

[C]

You don't feel crappy, is it? I mean, I just feel so much angst as a millennial, you know, I'm worried about my Social Security. Am I even gonna get it? All my brothers and sisters living in their parents basement, when are they gonna get out of it? There's a lot of angst.

[B]

Right. But that's the kind of angst which doesn't go away even with a 20% increase in money.

[A]

Yeah. I think though, you're right. There are ways in which, you know, this is one measure, right. Like it's median income. It's. It doesn't tell you about everything about kids living in basements. I mean, that is a change since late 2000. You just have more people, like you said, you know, millennials living in their parents basements. That is, that is, that's almost like a secular change at this point. Just more young adults don't move out of their homes. And for a variety of reasons, we're still figuring out a Lot of which are just their sense of financial stability.

[B]

And also that changes this wonderful thing called household size. Measuring household income, and you have a minimum wage millennial as part of the household, then that makes. Then the income. The minimum wage income of that millennial only serves to provide an extra boost to the household income.

[A]

And then there, you know, maybe it's.

[C]

Just, you know, we're all just sharing more. Maybe that's what it is.

[A]

I think that's why we're getting rich to some extent. Yeah. I mean, like, you have to take that into account. You have to take into account, you know, the variability in people's incomes. How do people. Are people being fired more often? Are they keeping their jobs longer? I mean, they're just. Are people. You know, what are people's feelings about the future? Does it seem like. In 1999, it seemed like there was sort of like, an unlimited horizon. Now it still feels like we're recovering, although went wrong.

[B]

One of the great. I mean, there are time series for a lot of these things, and one of my favorite time series is this thing called the quit rate. Yeah. And it's a great indicator of optimism across the country, rather than just among your friends. And what you do is you measure how many people feel so confident in themselves and in the economy and in their ability to get a job that they feel free to just quit.

[C]

Oh, my God. Never. That would never happen to me.

[A]

Yeah.

[C]

The anxiety that I would feel.

[A]

I forget. What year did you graduate? I was 2008.

[C]

So I was 2008.

[A]

Yeah, exactly. People who graduate that year are never gonna be okay with that.

[C]

I'm never quitting a job. I've had the same job for five years, and I'm a millennial. Like, quitting terrifies me.

[A]

Graduating into Lehman did that to a lot of people, but I forget where I actually haven't looked.

[B]

But the quit rate has gone up. And what that means is that, you know, for all that you like, you know, 2008 vintage millennials might have a lower quit rate than some of the rest of the population. Even your quit rate is going up. Statistically speaking, among y', all, we're starting to feel ourselves. Yeah.

[A]

I mean, so you can't take, like, one. I'm trying not to laugh at feel of ourselves. You can't take one.

[B]

I thought that was one of the phrases that made you feel squeamish.

[C]

No, I never mentioned that. But can I share something? I actually have a theory that I'm just gonna put out there.

[A]

Yeah, sure.

[C]

I think that the divide between the young millennials and the old millennials, you can tell. But one thing.

[A]

Yeah.

[C]

Patience for Kanye West. Speaking of feeling yourself.

[A]

Yeah.

[C]

Old millennials. We don't do Kanye. We're tired of his bullshit.

[A]

Oh, I still do Kanye.

[C]

Oh, get out of here.

[A]

Anyway, so speaking of confidence. But wait, so, yeah, I think the idea is, like, you can't look at one measure and say everything's great or everything is roses or not. But I think you're right. There is this kind of collection of indicators that we have that things really are moving in the right direction. And there's a lot of reason to think that these data were for 2015. There's a lot of reason to think that there will be a similar story in 2016, which is nice just because you've had the same kind of environment with extremely low inflation, wages still rising. So I think there's a sense that, yeah, we could have more good news next year.

[C]

I don't know, guys.

[B]

It's just. Lynette, enough pessimism. We're gonna move on to Lynette Lopez pessimism in a completely different arena.

[C]

We are.

[B]

Lynette, what is the mega merger, which you're pessimistic about this week?

[C]

I'm not pessimistic about it, though. I'm not sure it's gonna actually happen. When you have to get things. 30 different governments to agree on something. It's like, oh, well, we might as well not even try. But apparently, Monsanto and Bear are really, really jazzed about the idea of getting together and making the world see Daddy.

[B]

And they have. And they have a $2 billion breakup fee if they don't get together. Bayer needs to pay Monsanto $2 billion.

[C]

Yes, yes, that is a point.

[A]

So we could talk about, like, how I think, when do most people realize what Bayer is? Right? Because most people think Bayer or apparently Aspirin. Yeah, they think aspirin. They think. But, like, they think Bayer apparently pronounced Bayer correctly in German. I just learned that. But they've been saying that their executives have been saying Bayer in America, so they don't make us feel dumb.

[B]

So the thing which strikes me about this merger and the reason why I wanted to talk about it.

[A]

Yeah.

[B]

On. On Slate money. Is that among, as I say, the. You know, a certain class of urban liberal, it is hard to come up with to companies which are more hated than Monsanto on the one hand.

[C]

And any pharmaceutical company. Right.

[B]

Which. Well, Monsanto in particular, because people have this obsession. Irrational obsession, but obsession with genetically Modified food. And they think that it's a horrible thing and they, they don't want it. And. And they quite rightly associate Monsanto very closely with genetically modified.

[A]

Sure. Absolutely.

[C]

Sure.

[B]

And then the other, the other thing, of course, if you're, if you're a good urban liberal, is that you associate Bayer with the company it used to be part of, which is called Igay Farben, which created the Zyklon B gas which killed all of the Jews in the Holocaust.

[C]

I didn't know that.

[A]

I don't think that's what urban liberals are really hung up on these days.

[C]

And I'm an urban liberal. Wait, wait, wait.

[A]

Let me talk about that. They produce now than it is Zyklon B.

[C]

But guys, what's really important here is that we don't know what this company is going to be called. And that is really fun. Like, what are we gonna. Are we gonna.

[A]

Well, it could be a rebranding.

[C]

See, Jammers Incorporated.

[A]

Are they going to basically do away with the toxic name Monsanto? That.

[C]

Yeah, you've got to do away with that. But this is. Now, this is like a big scary company. And that's why it is going to require so much approval. And they're talking about potentially selling off assets for major commodities like soybeans, etc. Because, like, they got to bring this down.

[B]

One of my favorite, like, utter failures to communicate was in Davos one year. The Monsanto people were surprisingly talkative. Mostly the Monsanto people are not very talkative and they don't do themselves any favors, by the way. They're constantly very defensive and on the.

[C]

Back foot and they shouldn't wear cloaks to meetings. That's also like a big tell.

[B]

I work.

[C]

I'm kidding.

[B]

I was hanging out with Dan Barber, who is the chef at Blue Hill and who is a big. Who is a big, like anti Monsanto. He believes that you don't want monocultures and you want to have lots of tasty locally grown food and this kind of thing. And he's kind of the opposite to what they think, but he is very rational and he doesn't scream at people and it's possible to have a sensible debate with him. And so I spent most of the week just trying to sit down either on or off the record with the Monsanto person and Dan Barber, who was perfectly willing to do this and just have a conversation. And it was impossible. And there's like, da na na na.

[C]

Na na da na na na.

[B]

They were both. They would both talk to me individually but not. But Monsanto refused to be in the same room.

[C]

And even someone just a metaphor for our world.

[A]

Can I talk about the antitrust concerns? Because I want to about those are real. Yeah. So here's what's interesting about this deal is you have these, you know, Bayer buyer, whatever you want to call it, is huge when it comes to pesticides. That's where they really have a stronghold in farming.

[B]

Although Monsanto makes Roundup, it's not the big one.

[A]

But that's not as big a part of Monsanto's business, which is really seeds. Like we're talking about GMOs, genetically modified seeds. And that's their strong suit. And so these two companies want to come together and create this farming biotech monster. The interesting thing about it is that they don't actually have that much in common in their businesses. So theoretically they shouldn't pose that many obvious antitrust concerns. The thing is people freaking out. It's just that you're creating a monster in the end, you're creating this giant company at the same time that other companies in this field are starting to merge. For instance, dupont and Dow merged and spun off their seeds. You know, part of a lot of.

[C]

Consolidation in the industry all around the world.

[B]

I want to jump in here and say that pesticides and seeds are two sides of exactly the same coin. The reason you buy a genetically modified seed, which is much, much, much more expensive than a normal seed, is there's only one reason why you do that and that is because you can, it works well with pesticides, basically that you can spray a bunch of very effective pesticides all over your crop and, and the seeds are genetically modified so that they just, they just shrug and say pesticide, domesticide, I'm going to grow.

[C]

We got it. We got it there.

[B]

We got it. So if you have the same company making the pesticides and making the seeds, then that allows you to charge much more for the seeds but because you wind up having to spend much less on, you know.

[A]

Well, exactly.

[B]

So that's the kind of farming. But the thing which has happened, and this is the reason why, the deep reason why there's so much consolidation in the industry is that we are in a deep and long bear market when it comes to agricultural commodities. Oh yeah, things like soybeans and corn are multi decade lows. And so people are much less inclined to pay through the nose to genetically modified seeds anymore because they're just not making money. Right.

[C]

And you know, according to the deal, according to the deal, they're Going to save about billion and a half dollars over the next three years on synergies and all that stuff that bankers love to talk about with their charts and stuff. And this is a great deal for the bankers. They're gonna make hundreds of millions of dollars, including this small boutique bank that somehow made it onto the deal. Way to go, guys. Way to do it upright. And what's also impressive is this is an all cash deal. When do we see that on Wall Street?

[A]

Well, when you have extremely low interest rates and companies can't think of anything that you want to invest in. Cash means borrowed money.

[B]

Big syndicated loans.

[A]

Yeah. Which I mean, I think, you know, you can.

[C]

Syndicated loans.

[B]

Oh, yeah. This is going to be like we're going to have AB loans, we're going to have bonds. There's going to be so much Bayer debt out there, you have no idea.

[A]

Which I mean, given that companies in Germany right now are basically borrowing for nothing or less than nothing is not. You know, I mean, I don't know if Bayer's on the list of German companies that are selling negative yields on their bond. Selling bonds at negative yields. But there are German companies that are putting.

[B]

I'm just going to totally change the subject here and mention that the bank of England as part of its qe is not just buying gilts, you know, British government debt, it's also buying bonds issued by corporations. Among those corporations are Apple and Verizon. And Apple and Verizon are now basically selling bonds straight to the bank of England.

[C]

This is going to get so weird.

[A]

I mean, the thing is like corporations can borrow. So actually this is directly. Which is corporations can borrow for almost nothing at this point. Major corporations, big conglomerates especially. And what do they do? The idea is that hopefully they're going to take that and invest. But these companies like Bayer are saying, we're not going to invest, we're just going to use this to do giant mergers. And so this is actually kind of a result of our monetary policy in some ways too. And it kind of shows why our monetary policies around the world don't always work the way it's intended.

[C]

No. And that's one of the. This goes back to what I said earlier. It's like, what is the unintended consequence of this? Can we look a few years down the road and think the most awful thing that could possibly happen from this?

[A]

Well, I can't, but I do, because.

[C]

That'S what I like.

[B]

I feel like it's Godzilla. But I think Jordan has a really good point that the thing which is genuinely tying all three of our disparate segments together is monetary policy. And like just this, these oceans of cash which are sloshing around the world, they're looking for somewhere to go. So they go into, you know, random. First they go into Andreessen Horowitz, then they get invested into Point. Point wants to find a place to invest cash in an alternate asset class, which is housing. Bayer needs reason to borrow billions of dollars because it can do it for free. And even some of it, finally, a little bit is trickling down into the pockets of the middle class.

[A]

That's a way to tie all this together.

[C]

Good for you, Felix.

[A]

I want to just put kind of a coda on the Bayer Monsanto merger, though, and your skepticism about whether or not it'll happen. The main reason why I think this deal is going to have a really hard time coming to fruition isn't even the Justice Department, which has been pretty skeptical about big mega mergers lately. It's the guy who runs the Judiciary Committee in the Senate. That is Chuck Grassley. Chuck Grassley is an ornery old senator.

[C]

Texas or Nebraska?

[A]

Iowa.

[C]

Iowa.

[A]

He cares a lot about farmers. And he is a very smart, very aggressive guy who, if he thinks that this merger is going to create problems for his constituents, who are basically farmers, he is going to make. Hell, he is going to make a lot of noise. And already you're seeing guys like Mike Lee from Utah also sound off on this. I don't know. I mean, technically, the Senate isn't supposed to be able to stop these kinds of things, but they can really ramp up political pressure, and I wouldn't. And also create space for the Justice Department to say, fuck no.

[C]

And this is just such a sexy thing for people to hate. Like, this is just too easy.

[B]

It's like, it's really hard to find anyone who's going to come out and say, yay. What a great idea.

[A]

I mean, you would hope the one group that you think. Because maybe Senate Republicans would be in favor, but obviously because of what it touches on already, they're kind of coming out. So it's.

[C]

They are so busy right now.

[A]

Anyway, anyway.

[B]

And finally we have a numbers round.

[A]

As ever, we've stumbled our way to it.

[B]

We've stumbled our way into the numbers round.

[C]

I messed up the numbers round again, guys.

[A]

What did you.

[C]

I brought a number. You're just not gonna like where it's from.

[B]

Okay. What?

[A]

Oh, no. Is it involving he who shall not be named?

[C]

He who shall not be named.

[A]

Can we just Refer to he who?

[B]

So Jordan's gonna do his number, I'm gonna do my number, and then you're gonna come up with a number which does not involve Voldemort.

[C]

Okay, fine, I'll do it. I'm gonna find it.

[A]

Okay, so my number's a little bit of a downer from that census report we were talking about before. It was sort of hidden. My number is 3.5, and that's the percentage of Americans who were pushed into poverty by medical expenses last year. And that's according to sort of alternative measure called the supplemental poverty measure that takes into account things like also your post tax and transfer income, yada yada, and certain expenses. But the main thing to Remember is about 3.5% of Americans who are pushing to poverty because of things like doctors, co pays, drug costs, et cetera. What's a little bit disturbing to me about this number is that it hasn't really been getting better in the Obamacare era. If you look back to a few years back before 2013, 2012, it's about the same. It's not budgeting. So even though more people are getting insured and they're getting on things like Medicaid, you still have this population that is getting literally pushed into impoverishment because of their health. And I don't know if Obamacare is not fixing that, I don't know what will at this point. It's a little bit, you know, it's a little bit disturbing to me.

[C]

I think one thing that's really interesting about what you're saying is that deductibles have gotten really, really high.

[A]

They have, yeah.

[C]

Under Obamacare, and I think that that has really exacerbated this problem.

[A]

Yes, yeah, absolutely. High deductible plans are probably one of the things. Although, you know, a lot of these people are sort of gonna be on Medicaid.

[B]

Lightning round.

[A]

All right, all right. Lightning round. I'm giving her time to come up with something that's not Voldemort.

[C]

I have one now.

[B]

Okay, okay. What's the number?

[C]

It's $2.69, which is how much it costs to get a Burger King, the new Mac and Cheetos. Or. No, these are Cheeto chicken fries.

[A]

Oh, God.

[C]

Which are good. Intrepid reporter Hollis Johnson wrote about with lots of pictures. These cartons look like Angry Birds.

[B]

Wait, wait, so this is.

[C]

And they go in your mouth, but.

[A]

They'Re made with Cheetos.

[C]

They're chicken fries, and they're dusty.

[B]

Wait, what is a chicken fry? I Don't understand any of these words.

[A]

Shh.

[B]

Stop.

[C]

You can't. I can't hear myself think over your Britishness. Okay, so it is. They've been. They've been called dangerously cheesy.

[B]

What's they made of?

[A]

It's a chicken. It's a piece of chicken shaped like a French fry that's been fried in Cheetos dust, basically.

[C]

Okay, yeah.

[B]

The expression on Felix's face, you're just going to have to imagine, okay, $2.69. If you.

[C]

Now, you know, $2.69. But think of how high deductibles are right now.

[B]

And also for the record, because this is Slate money, we do need to mention that according to Jordan Weissman, McDonald's is one of the greatest things that has happened to American capitalism in.

[A]

I never said Burger King was.

[B]

Oh, wait, is that Burger King?

[A]

That's Burger King. That's Burger King. McDonald's, not Burger King.

[B]

All right, okay. My number is three. While the economic data people were caveling over the census data, the academy, all of the economists out there were really only talking about one thing, which was this paper which Paul Romer wrote called the Trouble With Macroeconomics. And I can highly recommend, if you like reading, you know, fun economics polemics. There are not very many of them, and this is a good one. And three is, quote, the number of decades of intellectual regress that he says that he has seen in the macroeconomic world. And he basically.

[C]

Damn.

[B]

He basically takes the entire macroeconomic world, every single macroeconomist out there, and says, you are talking complete and utterly bullshit. And it came out just after Narayana KochiLakota, who's Slate Money's official favorite macroeconomist.

[C]

Good to know.

[B]

Said something very similar. He had a piece called the Puzzling Prevalence of Puzzles where he said something very similar. And so we are finally seeing a backlash against the economists. And there was this famous question from the Queen of England when she came up to, like, a bunch of economists, and she said, why did none of you see this happening? And. And now, finally, the economists are going, yeah, we have no idea.

[A]

Can we please have an episode where we just talk about DSGE models? No, no, please shut up.

[B]

But I think. I think we have now officially. We have now officially reached the point at which there is a kind of consensus, a weird consensus among what you might call meta economists, the people who think about economics as a profession, that DSGE models and all of these other things that happen in universities are completely useless when it comes to actually describing Planet Earth.

[A]

One day we will try to have an episode where we talk about. No, we will. We will have an episode where we talk about what real business cycle theory actually says. And you're not. You're gonna think we're smoking weed. Like you're in the box.

[B]

This is not an economics podcast.

[A]

No, we're not.

[B]

You're gonna have to have your own podcast, Jordan, for that one. Or maybe you could can join Magic Lasius on the Weeds and talk about it.

[A]

I'll put in a request anyway.

[B]

Okay, that is it. That is it for us this week. Thank you for listening to Slate Money. Do leave us reviews on the iTunes Store if you can send us an email. Our email address, as ever, is slatemoneylate.com Many thanks to Viralyn Williams, who produced, and to the executive producers Steve Lichti and Andy Bowers. Many, many particular thanks to Lynette Lopez for coming on and doing her awesome Lynette Ness.

[C]

Thank you.

[B]

And go check out all of the rest of the Panoply [e-mail] Panoply and the subset There's a particular subset of Panoply podcasts which includes Slate Money, which are the Slate podcasts and they are all free ad free. If you listen to Slate plus, if you subscribe to Slate Plus. So for Slate's 20th anniversary, you can get 30% off an annual membership. That's $35 for a year of Slate Plus. You get, you get to listen to Slate Money without having to listen to me talk about beds and mattresses and things. If you, if you feel like that's an advantage. On the other hand, keep on listening to Slate Money. Do subscribe to us and enjoy the ads if you like them. That will talk to you next week on Slate Money.