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Trading Secrets
281. Austan Goolsbee: Chicago Fed President on Inflation, Interest Rates & the Real State of the U.S. Economy!
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A
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B
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A
Welcome back to another episode of Trading Secrets. This one is unbelievable. We have the CEO of the Chicago Federal Reserve bank coming on all things finance, everything happening in the economy right now. In fact, this was such a time sensitive episode that the Fed required us to get this episode out this week before their next Fed meeting. Otherwise we could not release the episode. That's how timely this is. But before we get into that, a little update for our listeners. First and foremost, I got a gift card to give away. Give us five stars. Let us know what your biggest takeaway of the most recent episode you listened to or this episode was. Next week in the recap, I'll give that gift card away. The other thing we keep saying David jta, jta jta. Well the time has come. This week, Thursday I am flying to Buffalo, New York. David and I are doing a jta. I will be asking you guys for what questions you want David to ask me. We're recording it live this Thursday. I also have a special for you David. We're going 7:30 to 8:30 in Buffalo. At 8:30 I have a Buffalo born US women's gold medal champion from the women's hockey team coming on to join us. So a lot going on this week. How you feeling? What are you thinking about jta?
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C
I'm excited. It's booked. I mean I feel bad for the people out there. We are not ones that to like to lead the people on. I feel like that that's what we've been doing but schedules we didn't want to do it virtual. We didn't want to settle for that. We did it in studio. We're doing it at the studio as last year. Good vibes in that studio. It's been a good year since the day we recorded that episode in that studio. I feel like life's been on the up and up and I'm looking forward to hitting on a few of those points in the old JTA. So we were recording that Thursday March 5th.
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A
I love it. Thursday March 5th is coming before we ringing the bell. David, how you feeling? What's, what's the biggest challenge in your life right now?
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C
Biggest challenge of my life is you know we got these fancy cameras here. I'm now in 4K. I got a little ring light on me. I have. It's been a good year since JTA but I still can't get over those clips from JTA because I just as Justin Bieber said love yourself. I just don't love myself in those clips. So the way that I looked and appear and now I'm back in that hot seat. So with two kids end of the hockey season I'm just trying to navigate. I'm just trying to do my best. That's my biggest challenge. Jay, what about you?
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A
Well let me ask you this. This past weekend did you have any good meals? Good cheat meals?
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C
Did you go ahead and I got. You know what, I wasn't bad this weekend but then on the bus ride home from Toronto on my hockey trip I had a pizza to myself. Just, just a post game road pizza
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A
and then cheese, pepperoni, sausage would we
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C
put in there half pepperoni and then half of it was cheese. So the our travel lady takes care of us for both. And then I was on a three hour bus ride and I got completely influenced on tick tock to try the new big arch sandwich from McDonald's. So I hit McDonald's on the drive thru home. Just what I didn't need it's not what I needed right now, so I got to stop complaining about it.
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A
What's the big arch, Sam? What is it?
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C
It's new. It's double patties. And they're like big patties, like the biggest patties McDonald's ever came out with. Raw onions and crispy onions, pickles on it, white cheese, new little sesame seed, double types of sesame. Got the black sesame seeds, white sesame seeds on the bun, and a little arch sauce.
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A
It was good.
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C
It was meaty. It was, it was good. $12, but it was good one through 10. It was probably, it's probably like a 7.8. It needed more sauce, but it was $9. Just the sandwich.
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A
Wow. A lot of action. Prices are going up when you're paying 12 bucks for a McDonald's burger, David, you might have to get a spray tan. I don't know what you need. I think you look good, but we got jta, you're on the camera. It's this Thursday. Anything else before we ring in the bell with Austin?
- [05:51]
C
If you aren't comfortable with the guests that we have on because it's not your niche, so was I, and it's worth a listen. It was very interesting. I was totally out of my comfort zone, but I locked in and I learned. And I really appreciated all the insights and, and ins and outs that you and Austin talked about. So stay tuned. Good episode.
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A
And the big thing I'll tell you is he was a professor. He also worked in the White House, but he was a professor. And I think what makes it really special is he takes very complicated matters and boils them down to easy, digestible discussions. So let's ring in the bell with the one and only Austin. Welcome back to another episode of Trading Secrets. Today we're sitting down with one of the most influential voices in American economics, Austan Goolsbee, president and CEO of the Federal Reserve bank of Chicago. In this role, he serves on the Federal Open Market Committee, the group responsible for setting the nation's monetary policy. And he leads the Chicago Fed's work in economic research, bank supervision, and financial services to institutions across the country. Before taking on this role in 2023, Austin was a longtime professor at the University of Chicago Booth School of Business, where he became widely known for his research on industries, innovation and economic policy, from inflation and interest rates to what everyday American should understand about the economy. We are going straight to the source today. Let's get into it with Trading Secrets. Austin, thank you so much for being with us.
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B
Hey, Jason, what a treat. Thanks. It's kind of you to have me on.
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A
Now listen, let's get into it. So you look at the role you have today. It's a massive role. You know, everything you've done in your career is so material and the highest levels I. You had to go back to your 21 year old self and you had to talk to that version of Austin. What's one thing you would tell him to do differently and what's one thing you would tell him? Austin, you nailed this. This was the best move you made.
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B
If you look back at our 21 year old selves, I was probably insufferable, you know what I mean? I feel like don't be near as loud. I would have been way too loud. What I wanted then was I loved economic research when I was a kid. I liked math and science, but I like debate and I liked public affairs kind of things. And economics seemed like a combination and that wasn't wrong. I would say if that's where your head is, it can be exciting. Numbers and economics, not for everybody, but it's going to be for you. Like you're going to have a good time. I probably was overly specialized. I guess I'd give my advice back when I was 21 years old. Go, go travel around, go see stuff, go do some things that are not economics.
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A
Interesting. It feels like the people that have had so much success in their career go back to their younger version themselves and say, have a little more fun.
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B
The thing is, when I was a freshman in college, I started working for a guy named James Tobin and he was a great economist and he had won the Nobel Prize. And I took the last class that he was ever going to teach before he retired. And he hired me as a research assistant. And my first job, it was his 50th or 60th or something, reunion. He had gone to Harvard and they made him in charge of the survey of all the graduates for the reunion. And so my job was to type in all the survey results. And I still remember one of the questions was, looking back on your life, what is your biggest regret? What would you do differently? And the number one answer was, do less, aim lower. You know, take it easier, have more fun. But the number two answer was, work harder, aim higher. I was like, wow, these guys, they seemed ancient, they haven't got it figured out.
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A
You have definitely aimed higher. And one of the questions I had is, before the Fed you served as the chairman of Council Economic Advisors. That was under President Obama. And so I'm just curious, like when you Hear some of these roles. How do those opportunities come about and what do you think surprised you most about stepping into the White House?
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B
Oh man, there's a lot in that question. I was a just a hard charging academic doing a lot of research at the University of Chicago. And Barack Obama was a law professor at the University of Chicago. And I started working with him, helping him. He decided he was going to run for the U.S. senate. This was like 2003, 2004. Mostly. I knew him. He has two daughters and our oldest kid is a daughter and went to the same school. The University of Chicago runs a school and our daughter was in between his two daughters. So I kind of knew him as like the guy from the birthday parties. He wasn't famous. Michelle was way more famous than he was. And when he started running for the US Senate, his people called around to me and they were like, oh, would you be willing to, to help? This guy's name is Barack Obama. I was like, that's Michelle Obama's husband. I go like, who cares what his name is? Of course. And so much of how I ended up in the White House was I randomly taught at a university and was friends with a guy who became the president. You'll remember it was a horrible moment in the economy, worst moment in a century kind of thing. As the financial crisis burst out, we go into recession. So the when, when I was there was the very beginning, the first two, two and a half, three years of the term, getting through the financial crisis and on. I worked closely at that time with Paul Volcker, who was viewed as the greatest Fed chair of all times. And I went through the financial crisis kind of working at his. Well, I must have been annoying. Just as annoying as when I was 21. I was constantly asking Volcker, well, you know, what was it like at 1980, you know, when you had to fight inflation? What happened with this and that? And the thing about working in the White House, A, I used to say, I come back, you know, went to vacations or something, and I'd see my colleagues and they'd be, they'd be like, well, you know, is it fun? And I would say, you know, I didn't go for the fun. And I haven't been disappointed. It was, it was a, it was a very intense time. And it's almost exactly the opposite of academics in the sense that in academics the standard of evidence is this high and the time pressure is this low. And in Washington, it's completely the opposite. The standard of evidence, the time pressure is like this we have to make a decision by Friday using only what we know right now or what we can gather in the next two days.
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A
I think a lot of people listening to the show struggle with everyday decision making, especially career and finance decision making at the level that you guys were making, it impacts millions or potentially the entire world. When you're going through decision making processes under quick time frames. Of course there's things like game theory or predictability of outcome, but what are some things that you guys do to make those tough decisions with limited information? And I think some of the things you do maybe are some things that we could think about doing in our everyday life. Lives.
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B
Yeah, look, that's the, that's the hardest thing. You really, with that question, you go at the heart of the matter, how are we going to do this if we just really don't know? I mean, the risk of making a mistake goes way up when you, when you don't have the information. I would say step one was always gather whatever we know, whatever we can find. And I've, I felt like it was a super secret, you know, it was a trading secret equivalent for policy making that I knew a whole bunch of economists that were not on Washington's radar screen. But that said, sometimes getting them in the mindset of, of the time pressure. We go back into details, it was, it was a argument about housing finance and Fannie and Freddie and the people are getting foreclosed on. We got all of these problems. And so I'm calling a leading academic because Rahm Emanuel is the chief of staff and Rahm's, Rahm's management style at that time was kind of like half screaming, half like, patty, you get that? And you're going to give that to me by Friday. And so it was like, we're going, oh man, we got to do this by Friday. So I call this world expert and he's not there and I leave a message and I'm like, I need you to call me back. I need to talk about your paper and we need to talk about this evidence that was on a Tuesday, Wednesday, nothing. Thursday, nothing. I'm like, well, we just don't have that. We're going to have to go with something else. The next week he calls back, oh, you're thinking about housing finance. I'm like, that was last week. We don't have time for that. So gather all the information. I'm a little bit of a history buff and at one point I was read a bunch about these polar explorers and there was an English model and There was a Nordic model of these explorations and the English model was very command and control and somebody's in charge and orders everyone around. And the Norwegians or the Swedes or whoever, there was a much flatter model. And so they would, when things would go wrong, they bring everybody together. Okay, let's think through this together, regardless of your rank and those flatter organizations, they lived, and a lot of those hierarchical ones, they died. I find that for decision making and policy to also be important. The Fed system itself, interestingly, was designed pretty unlike most other central banks around the world, that it has regional representation. Because in 1913, when they made it just like today, people were deeply uncomfortable that Washington D.C. alone, or Washington D.C. just Wall street, would control the entire financial system of the United States with no input from the rest of the country. So they made it a committee. And in that committee there's a lot of discussion and debate and for anything that requires judgment, that having a bunch of people of different backgrounds I think is pretty important. So if you're thinking of your own personal finances or business decisions, career decisions, anything of that nature, bringing in your own personal board of directors, if you want to call it or something, just getting different viewpoints because you might make a mistake. And if everybody's coming from the same background, the chance that you're making a mistake that's in everyone's blind spot goes way up.
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A
I mean, just the power of all verse, the power of one to see that, you know, at the level that you guys were making decisions that seemed to be consistent with success rate. It's pretty fascinating.
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B
I don't want to make it sound like I was some super genius. This moment with Obama was personally extremely difficult for me financially as well, which was we had a house, we had bought a house and we were renovating the house and then the renovation starts spiraling out of control. They open up the walls and the joists have been cut. So it's like, oh geez, we had our first house. And then I was like, we, we got to sell this house and we'll, we'll rent, you know, for a period if we have to. Then the housing collapse, the bubble pops so no one can get a mortgage, so we can't sell the house. And then I'm going to Washington and we're renting a house in Washington. So as somebody described, they were like, cool, but you're a one man walking housing crisis. And I was like, oh my God, what am I going to do? And very stressful, very stressful. That Was that was one episode where I could totally sympathize. This is not just numbers on a page. I told you I had worked for that guy, Jim Tobin. He had served on the Council of Economic Advisors for John F. Kennedy. And his thing that he would always tell all the people work for him was economics is not a game. Yes, it's intellectually interesting, but this affects people's real lives. And when I'd go to Washington at The end of 2008, the financial crisis is affecting millions of people and it's not just affecting banks, it's affecting people are getting foreclosed on their houses and the unemployment rate is soaring and is really, really stressful environment. But in a way we should, at the policy making level, it can be a little too abstract, you know what I mean? And we should be stapled to the humanity and the human implications of what the decisions are. So that didn't make it any easier in that moment. But, but it was a, it was a stunning kind of episode for, for the economy.
- [19:43]
A
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- [20:44]
B
Do you ever meet my wife? She's like so sensible and everybody, she's the person who everybody's like call, call Robin and ask her advice. So at one point Robin says to me, she's like, you're working on housing and preventing foreclosure. And I said yeah. She's like, what was the number that you, that you said you're quoting? What's the danger that it's a danger of foreclosure if your housing expense exceeds x percent of income? That was kind of like the basis of the policy. And the answer was 31%. If the housing expense is more than 31% of your income, then you're at risk. They think of foreclosure. And she came in and she was like, okay, our housing expense is 105% of your new government salary. She's like, well, can. Can we talk about this? I was like, oh, man.
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A
Well, that's part of your advice there, right?
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B
Like, have a board with your company.
- [21:43]
A
Also, when you pick up a partner, pick.
- [21:45]
B
Somebody sends them all that. That's in that same campaign in the primary, I had been helping out, and it was a long, extended primary between Hillary Clinton and Barack Obama. And when the primary was over, they had a big party event and it was sponsored by the. By the political people. And there was a guy. There was a guy who was the head of all direct mail for the. For the Obama campaign. And he had been drinking a little too much. And he came up at this big party, guys, that he said, goes me. We took a poll in this entire campaign whose wife is the most out of his league. And you won. I was like, thank you. I don't know what to say.
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A
Stories like that are just unbelievable. And well done, Austin. All right, I got a question for you. You touched on a lot. I'm going to get to a lot of what? The Federal Reserve.
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B
Yeah.
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A
And all that. One that came to mind is I just find it so interesting. You're telling the story of President Barack Obama, that you guys are friends, but when you got the phone call, you're like, oh, my God, that's Michelle Obama's husband. I'm in. And what I find interesting about that is I always like to study the launch pad of individuals, professionals, celebrity.
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B
Oh, interesting. Yeah, yeah, yeah.
- [23:06]
A
That creates the launch pad. And so observing President Barack Obama and then working with him and everything that you've seen from his career of knowing him as Michelle Obama's husband to of course, being one of the best presidents we've ever seen. What was it that actually allowed him to launch that way? What skill set did he magnify? What did he do that allowed him to go from where he was to where he is now?
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B
From a legacy perspective, I don't totally know. And now this feels like so long ago, you know what I mean? And in my new world, I'm kind of out of the elections business. And the Fed is. Is explicitly non partisan in. In that way. He did the. The popular perception of President Obama. He was even keel and he wouldn't fly off the handle in anger. He didn't get way up, he didn't get way down. That was felt accurate to me in kind of my experience. And he had a really superb skill in policymaking that even if he wasn't an expert on things, he would start asking questions and then he'd be like, wait a minute, you just told me this thing, that thing I read at one point I brought in a couple of economists to talk about the labor market and what was happening. And I don't know if it's because he was a law professor or what, but he would kind of be like, wait, but you know, Professor Krueger just said this and doesn't that imply this other thing? And then when it was done, I asked the, the, the one economist who's very distinguished economist and I said, well, what did you think? Because that was the first time he met him. The guy said, I think I should have prepared more. You know, that was his, that was his thing. So I don't know exactly the answer to your question, but I observed this. He was even keel and he was very thoughtful and, and he had, he had something about him that could inspire people in that way.
- [25:09]
A
Yeah, I guess. Here's the takeaway I'm going to take. Tell me if you think this is fair, that maybe your superpowers. So let's just call his superpowers calm, cool and collected and learning from others, prepared and intelligent and inspiring. Those superpowers might always be there with you, but it also could connect to the time period that maybe your company.
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B
Yeah, to the times. That's a great point. That's a great point.
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A
That time frame, everything we needed right was cool, calm, collective inspiring. So maybe it was that his superpowers excelled in a time that was needed most.
- [25:39]
B
Lehman had fallen the financial crisis blowing through the system. During the campaign, you, you'll remember and after the victory, we had a, there was the first meeting of the, of the economists really what took place in Chicago and Volker came in and the Secretary of the treasury and the head of the nec, everybody comes in and it was a brutal briefing. It was, it was, each person had one that my. Was to talk about housing. And it was like we could have 2 million people foreclosed on. There's $800 billion of negative equity. People are underwater on their mortgages. There might be 800 billion more. The Tim Geithner says, you know, half the biggest banks in this country may be insolvent. We may need to ask for another 800 billion of tarp. And it's just like horrible Demoralizing thing finishes, I'm walking out. I say to the President elect, I gotta tell you, that's the worst briefing that the incoming president's had since Franklin Roosevelt in 1932, maybe since Abraham Lincoln in 1860. And he says, in all seriousness, he's like, he's not even kidding. He says, that's not my worst briefing this week. And I was like, oh, geez. Oh, geez. You do. You did it. You do not want that job. You did not want that job.
- [27:06]
A
I mean, that's storytelling. It's unbelievable. I appreciate you sharing that stuff, but that's why we got you. We also got what I know.
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B
Yeah, let's think about Fed, let's think about finance, but let's go.
- [27:17]
A
I'm gonna have you bring this to like 101 right now. So if I had some. There's that like, yeah, they hear, let's say on the media or they read a newspaper and they see Federal Reserve. I think now more than ever, continued clarity with the role of the Federal Reserve needs to kind of be discussed. And so for my 101 listeners, let's just say, like, tell us about what the role of the Fed Reserve is and the role of Chicago Fed CEO.
- [27:42]
B
Yeah, right. Like, what even is it? And why does Chicago have a Fed? You know what, like what? Okay, so if you back up, the Federal Reserve act is in 1913. We set up a system because there was a panic of 1907, which was kind of like the great financial crisis of its day. And it's only saved when JP Morgan himself decides to. Basically, there is no central bank in the United States. It was abolished back in the. By Andrew Jackson back in the 1830s. And one big banker saves the pre. Prevents a total collapse of financial crisis. And A, we're like, as a matter of risk management, is that a good idea? And B, when he does that, he favors his friends. So he's kind of like, yes, I'm going to save the banks, but I'm going to start with my buddies and I'm going to let the people I don't like go under. So we kind of are dissatisfied with that system and create a new system which morphs over what we have now, which is we set monetary policy. And monetary policy means kind of the interest rate. It's narrowly one overnight interest rate, but it's a very influential rate. And the Fed's job is economic stabilization. And the Federal Reserve act by law says the Fed is supposed to do two things and two things only stabilize prices and maximize employment. And as I like to say, there's nothing in that that says make sure the stock market is happy and there's nothing in that that says make sure that the, the administration agrees with what you're doing. The Fed's job is that what we call the dual mandate. And so we meet every six weeks and we think about the state of the economy and we think about the outlook. And the most cyclical parts of the economy tend also to be the most interest rate sensitive parts of the economy. So people buying cars, people buying houses, businesses making big investments, those are the kinds of things that are sensitive to rates. And when we're booming, they boom. And when we're in recession, they go way down. So if the economy is overheating, the Fed will raise rates and try to cool it off. If it looks like things are getting worse, they'll lower the rates and try to induce more consumer spending and stuff like that. So that's basically what the Fed is doing in monetary policy. The 12 Reserve Banks sprinkled around the country are supposed to come with a perspective of the regions, not just Washington D.C. and not just Wall Street. And we're more operational, so we have little under 2000 people work at the Chicago Fed. We cover a district that's sort of the heart of the Midwest. It's the most manufacturing oriented of all the districts. And we do a bunch of operational things. We're sort of a bank to the member banks. They have an account here. We got a basement with tens of billions of dollars of cash. All the cash in the economy is printed by the Bureau of Engraving and Printing, but is sent out through the Federal Reserve banks. And so every day we've got, you know, Brinks trucks coming in and going out and it's quite, it's fabulous actually. Jason, if you're in Chicago, you come in, I'm gonna give you a tour of our, of our vault and our cash operation. You'll love it.
- [31:31]
A
It.
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B
And we run a large fraction of the payment system of the US So like if you ever do a wire transfer, you know, of a down payment or something, you're buying a house or you do ach, direct deposit. A lot of those are going over the Fed, the Fed wires. So. So we kind of have a op. We operate the plumbing of the financial system. In a way, if I come to
- [31:57]
A
Chicago, I gotta see that vault. It's not.
- [32:00]
B
You got to. It's really fun.
- [32:03]
A
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- [33:01]
B
It's really CEO right?
- [33:03]
A
Everything you just mentioned there, there's so much to it and so many follow up questions I have. But there's a lot on the operational day to day to do. There's probably a lot on I mean not probably a material amount on compliance auditing and making sure there's security protection. But then there's also a massive burden of putting policy forth and or discussing with your other peers in their regions of making sure the policy put forth is the best for the company's prices and employment. When you look at your work as a CEO of the Chicago Fed Reserve at the end of the year, what are the biggest pillars that determine if it was a successful year?
- [33:41]
B
It depends on the year. And you know, as with any corporate context, part of this job is policymaking and going to Washington every six weeks and voting on the interest rates. But a bigger part of the job is the operational. You're the CEO of this, you know, 17002000 person organization and we lay out goals at the beginning of each year and we and we try to fulfill them. I've tried to make Chicago Fed to be a. I used to say V but then other people got mad at me. So I just say a model bank. I just want us to be a model bank within the system. And the really the people is the. As with a lot of organizations it is the management of the talent and the the people who work at the Fed. They are absolutely believers in the mission of the organization. And as I say part of what I wanted to do coming in here was demystify the Fed. There are a lot of suspicion and I understand why in the public of elites, nameless, faceless non human entities, secrecy, big banks, all of those. And the Fed is kind of in the Venn diagram of all of those things. So explaining here's what the Fed does and we're not the bad guys. We are the guardians of the galaxy. That's really important not just for the operating of the financial system, but the, when we do monetary policy because when things go wrong and the inflation rate gets way too high, people want accountability. They're like wait a minute, did the Fed do this? Why is this happening? And there's perfectly justified to ask questions like that. And the demystification project I think is a, is an important component. That said, like I say, the employees here are, are believers in their mission and I think that's the most important thing to see. Has it been a good year or not a good year? Is, are we taking care of our people and are we executing on the, on the mission of, of the Fed of protecting the financial system, Demystifying the Fed.
- [36:01]
A
It's such an interesting predicament. If you had to pull every citizen in the United States, what would you say? The number one misconception is of As
- [36:09]
B
I came in, I looked at the polling, I was like what do people think of the Federal Reserve? 80 something percent of people said they were did not know what the Federal Reserve.
- [36:18]
A
That's why I asked the question.
- [36:21]
B
But 2/3 of people thought that they were doing a bad job. So they didn't know what it is, but they're screwing it up. I think there's some people who hear Federal Reserve and they think it's something about land management. Okay. But it has nothing to do with land management. The misconception. The biggest misconceptions are probably rooted in thinking that the Fed has more power than it has. Most of the interest rates, the mortgage rate, a bunch of the things that people care the most about. Those rates are determined in the marketplace. The Fed doesn't control that. That said, the Fed is quite influential and it is the natural tip of the spear, something for economic stabilization and the business cycle. So the challenge that faces central bankers are when moments occur that are unlike the past. And for a long time the job of the central bank, the way the business cycle worked, it was a cycle and you'd go through periods where there was high unemployment and low hiring and low investment. And then they cut the rate and try to increase the amount of investment and increase the purchases of cars and stuff like that. And then we go into weird business cycles. Some of them caused by bubbles popping, some of them caused by stagflation where both sides start getting worse at the same time. Inflation's going up and the economy's go, going into recession. Any moments like that are really tough moments for a central bank because there's not an automatic playbook. And so that's another, I don't know misconception is that it's. Why doesn't the Fed just go fix it? It's not, it's sometimes not that easy to fix.
- [38:24]
A
I can say this, I know you're bipartisan everything you do but my opinion is when you have 87 of people saying they don't know what the Fed does but then more than half for saying they aren't doing the job correctly. To me that's a form of marketing skewing perception, maybe politics politic thing. But hey, that's a conversation.
- [38:41]
B
Yeah. Look it might be my they got to get you over there to help them figure out how to explain it, but that's why I'm you Look, you know, I love Chicago Bears and and I've come to also love the Detroit Lions. The Chicago Fed has a branch in Detroit and we have bomb dogs that sniff the the armored cars when they come in. And our bomb dogs in Detroit actually moonlight on the side as the bomb dogs at the Lions game. So so we have some connection. I think the regional connections of the Federal Reserve banks is really important. It's really important that we show up that we're with fourth of July parade. We're out walking in the parade. We got an iconic building that's 110 years old right in downtown Chicago and just showing that we have a community development function and we're interested in that and helping ordinary folks find affordable housing and mortgage rates. We've, we've done events we, we had one on elder financial exploitation and abuse which is a rising problem in the as the information economy has grown. We've looked at the financing of replacing lead service lines series of things that are on the edges of of the Fed but they are in the dual mandate as you call it. They are about how do you maximize employment, how do you stabilize prices, how do you build out the workforce. All of those are how do you find affordable mortgages and housing. All of those are topics that are central to to the Fed's mission.
- [40:37]
A
I think I also love the parallel to the Detroit Lions. My girlfriend's from Detroit. She's a huge lion fan should Johnson. So there's got to be some and
- [40:45]
B
we got Ben Johnson.
- [40:46]
A
Let's get to maybe we'll call it like 201 drilling down a little right now.
- [40:50]
B
Yeah.
- [40:50]
A
We got stock markets at all time highs right now. You have economic indicators that are let's say questionable and based on kind of what you described, you have to maximize employment, stabilize prices. This is a little bit of an interesting predicament because usually those two things are kind of connected. At least that's my consensus. Love to hear from you on that. But when you're getting prepared for a Federal Open Market Committee meeting and you're preparing for your vote and influence, what are some of the things that are playing into your research that you're looking at? And just what's your overall take on this scenario that we're in with stock market at all time highs, economic indicators moving in different directions and then a lot of pressure to potentially continue to reduce interest rates given that scenario. Talk to me about it.
- [41:35]
B
Yeah, well, look, this is the day to day job of the, of the central bankers when we're going to this meeting. Now I don't have to do it alone. We have one of the greatest of all the research departments within the Fed here at Chicago, very distinguished economic researchers. And so we will prepare for the, each FOMC meeting for a couple of weeks in advance will come in. We'll have these top economists give briefings on the state of the economy or sometimes it'll be on topics that nobody's talking about that they should be talking about. And that leads me in this moment as I came into the Fed. I've been, I've been here for a little over three years now. In Fed world, nobody ever leaves. So they, they're like reverse dog years. You could be here seven years and they're like, oh, you're the rookie. So to have been here three years, I'm, I'm still the outsider and new guy. And they asked me as I came in, are you a hawk or a dove? Okay. And the hawks are people that favor high interest rates and the doves are people that favor low interest rates. And I said, I don't even know if I like birds. I don't aspire to be a bird. All I've ever wanted to be is one of the data dogs. And so my thing, that's what I was as an, as a research economist, I was a data guy and I've tried to bring that sensibility to it here. Now your intuition is right. Normally the business cycle, the inflation side and the employment side are kind of tied together in opposite ways. So the, the silver lining to a, to a downturn is at least you don't have to worry as much about the inflation side or when inflation is high it is. Usually it's because the economy's booming and overheating so you at least don't suffer as much when when you type. One thing that's happened in the last one to two years is the kind of both sides started getting worse at the same time. And as we described, that's the toughest circumstance because it's not obvious what to do. And then you piled on top of it because they had the government shutdown. They literally turned off the spigot of the data so you couldn't even see what the numbers were. That makes me, that puts me on edge. I still think overall that the unsung hero of the US economy is not AI data centers, is not the stuff that, that everyone's talking about. It's the bread and butter US consumer whose income has still remained pretty solid growth and they continue to spend and they key they keep getting told, oh, it's about to fall apart. Ah, there's about to be a recession. Everybody's in a panic. And I know that the vibe in the vibes there is a funk. But I'm telling you, if you look at why growth has remained surprisingly strong, it's powered heavily by US consumers and people going out and still buying cars and still was shifting back to the services that they weren't able to consume during COVID and they're going to football games and they're going on vacation and they're going to restaurants. And that has maintained a steadiness in the economy. And as long as that remains steady and we if we could get back to clear evidence that inflation is headed back to 2% which is what we've kind of identified as our goal, I think rates can still go down a fair bit more from where they are today. That's somewhat what controversial. There are some people who say no, no, we, we need to stop. But my unease is only about front loading rate cuts in an environment where prices have been going up. And whenever I go around this district it's still the case that it feels like the first thing that's on people's mind or on their lips that they want to talk about is affordability and prices and they can't afford it. That's businesses talking about their costs and that's individuals talking about prices at the grocery store. So I don't think we can ignore inflation by any means. I think there's still a danger.
- [46:23]
A
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- [47:31]
B
But. But I respond to that. Right?
- [47:33]
A
So you have a lot of people out there, at least, at least in my circles or the people listen to podcasts I connect with. The common theme I'm hearing is like, sure, inflation's cooling, but it doesn't feel like it. So what is your response to that?
- [47:45]
B
Yeah, and look, and I'm going to make those people madder now if it makes my mom mad when I say the Fed, when it looks at inflation, usually excludes energy and food from the calculation. And we mostly look at what we call core inflation. And my mom is like, what do you mean? You don't look at the price of energy and the price of food. That's exactly what you should look at. But the reason that we mostly don't is because those two price of gasoline and price of food are extremely variable. So they're up, they're down. There's this eggs. If you wait, if you backed up 12 months, eggs were $6 a dozen. And now we have the CEO of a major grocery chain is. Is the chair of our board in Detroit. He said that the dozen eggs is $1.99. Okay, so whoa, that's massive deflation. Because those things are so variable, they don't give you as good an indicator as what's the underlying trend. The Fed can't get into the vibes business too deep because the law tells us we're supposed to look at the actual numbers. We're supposed to look at actual employment and the stabilization of prices. We have always paid attention to consumer confidence and to the vibes because they were an indicator, a leading indicator of how people were going to behave. So if consumer confidence went way down, that usually prefaced or came before a drop in consumer spending. But somehow over the last five to 10 years, the relationship of consumer sentiment to actual consumer spending behavior has largely broken down. So it's not my, I mean, who am I to lecture people on their own financial situation or how they feel it? They're not wrong. Prices are definitely higher than they were before. If incomes are growing faster than prices, that's what we want. And in the last couple of years that has been true. And so we've got to get a handle. We at the Fed have to get a handle on getting inflation back down to the 2%. And then we have to count on the economy generating jobs and generating income growth to be faster than that, than that 2%.
- [50:22]
A
Think about it. If wage growth is staying stagnant, consumer sentiment is down, but consumer spending is consistent or increasing. I mean, I have to make one assumption, which is there's just material overspending and we need more financial education. I mean,
- [50:39]
B
we need more. Look, you've for a long time identified financial literacy and financial education as an important component of economic life. And I do agree with that. Now the one thing to note though is the savings rate has been for, in American terms, relatively high. So that we've reduced the savings rate a bit from not record levels, but higher than recent norms can sustain. The income growth has been better than stagnant. It was stagnant for a bit, but in the last couple of years at least it's been making progress and has been faster than prices were rising. So that's at least good. But that dance between when you get in environments, if you, if you look at the, at the agriculture economy, for example, farmers, farm income is really getting squeezed. Everything that I've said about the economy overall has mostly not been true. For, for farm income, their incomes are stagnant, flat. The sales price of their product has not gone up. The cost of all their inputs are way up. So they're, they're getting squeezed. And that's kind of the dance that you're describing. I agree with you got to compare incomes to prices. And there have been times in the last five years where that hasn't been favorable. Right now that's a little more favorable. But I think we're still living with people feel, not incorrectly, like, whoa, the prices are way up. And the relative price, what the economists would call the Relative price, they've changed even more than the overall prices. And by that I mean if you look over 20 years at the price of housing compared to say, the price of TVs or stuff that you buy in Costco, just goods, it's been growing house prices. It's been an extreme in the last two to three years that people are complaining about housing unaffordability. And they're saying, like my dad, you know, our family had one salary and he was able to afford a big house and I can't even buy a condo. The relative price of housing has been going up compared to goods, 5% a year for 20 years. And in at the 101 level, if something compounds for 5% a year for 20 years, it's going to be really different. So housing is very expensive. But TVs, you could buy the biggest TV you've ever seen in your life for like 500 bucks. And if I had seen that when I was 11 years old, if I could see the TVs that, that you can buy, I would be thrilled. You know what I mean? So we got to think about that too.
- [53:40]
A
Okay. Real estate is one area that I got to talk about. I know people are going to ask if you got the crystal ball and you had to predict what do you think it does look like with real estate housing pricing. Please, you know, give us some type of insight, at least guide it to you think. And then the last thing I'll ask you is you talked about your affordability percentage when it came to a huge percentage of maybe increase in foreclosure at the 31% mark, I believe is what you said for housing cost and income. That was then. What do you think that percentage looks like?
- [54:10]
B
Oh, those are both fascinating. Look, I'm not a, I'm not a crystal ball reader on prices. I think it's really hard to do that. I will observe this fact though, that house prices have been rising faster than other inflation pretty significantly. Not just in the last couple of years. It's been extreme in the last couple of years, but that's been happening for decades. So it feels like housing as a product category is just getting more and more expensive over time. Part of that I think as an economist is because we have not supplied, we haven't been building houses. If you made it easier to build more housing and in a couple of cities they have done that and you've seen affordability metrics improve dramatically. If you just have more housing, it's a supply and demand. The prices don't grow as fast if, if there are a lot of choices. But given that it's been extended for this long period of time, I do think housing is gonna, is gonna be costly in, in that way.
- [55:29]
A
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- [56:56]
B
Yeah, that I was still kind of grappling with that one in my head. Given that housing costs are going up like that on an extended basis, the percentage is probably higher. If you just say what share of our incomes are we going to spend on housing is probably higher. At that moment, foreclosure was a danger partly because the market was bottoming out. And when the market bottoms out, you can't just. Normally if you get into trouble, you can sell your house and downsize. You kind of couldn't then because people were underwater and, and, and stuff like that. So we're in a better circumstance. My fears, my, my worries are more, they might be rooted in my own kids. You know, now they're getting to an age where in earlier generations they could be buying a starter house or they could be buying a condo. And I don't think that's realistically in the cards right now. For, for most young people, it's that that part of the market. People's just starting out in the job market. The hiring rate is the lowest in a long time for at the entry level in the job market and in housing, it's the starter home that has become the most, the most problematic. So it's less about foreclosure and it's more about that. Did the door just get slammed in the face of the. Of the next generation? That's this guy has me so fascinating.
- [58:32]
A
Austin Goolsbee. I could talk to you all day.
- [58:35]
B
Said I could talk to you forever. Thank you for having me on and what a treat to get to know.
- [58:40]
A
Likewise. We're gonna have to do a part two when I come to the vault. So.
- [58:44]
B
Yeah, no, you come down here. We're not allowed to take any pictures though. But you're still gonna watch my head.
- [58:51]
A
We'll bring it to the here on Trading Secrets. Austin, you gotta leave us though with one trading secret. So something. Yeah, I was gonna say you can't learn from a professor, but you can because you were one. But you can't learn from professor a textbook or like a TikTok tutorial or anything. You can only learn through your experience. What's one trading secret? You can leave us.
- [59:08]
B
What's a trading secret? Okay, now look, the I'm going to tell you the secret of economists is our thing is you can never beat the market. Just, just try not to look at it. Just if you have money, invest it and don't get stressed out about it. And it leads to the, to the true secret. Way back when I got to know Warren Buffett a little bit. He was Obama supporter and we did some events in 2008. And he always has these quizzes if he's really funny. But he's also acquisitive. So he asked me what do I think the dow was in 1900. And I was like, there was a Dow in 1900? Like, yes, there was. And it was at 50. The Dow was at 50 in 1900. And he said, ask yourself in 1899 if you had you've been given a list of everything that was going to go wrong from 1900 to today. First just note what would be on the list. You got pandemics and world wars, you know, and as I joke, Justin Bieber and like every other thing that's going to go wrong. And if you ask them in 1900, what do you think the Dow is going to be in 2026? They'd be like 75. You know this. So we're we're pushing 50,000. How does that happen? The answer is the ultimate secret, the ultimate trading secret is that the human ingenuity has proved unbounded. And American innovation, that is what made us rich. And we're going to look back 50 years. Yes, there are many things that people feel uncomfortable with, but we're gonna keep getting richer and we're gonna look back and be like, oh yeah, you know, the 2000s, that was nerve wracking. But look at how things have gone. And so in the end, it's going to be fine. You want to attach yourself as a trader, not to the business of trading. And it's not gambling, just be in it for the long term because the American economy is, is still proved unpacked.
- [61:30]
A
I mean, one of the coolest trading secrets we've had is just like the confidence in human ingenuity thinking all the way back to 1899 and market efficiency and all that stuff. This is awesome. Awesome. This has been such a pleasure to have you on. Where can everyone find, you know, if they want to follow you or every all the information you have on the Chicago Fed? Where can everyone find all things you?
- [61:49]
B
If you just go to the Chicago Fed website, we got a lot of great materials. We got some financial education materials as well as describes what's going on at the Fed or I'm on Twitter, but I'll probably get myself in trouble after a while. I had that before I got to the Fed and they're deeply uneasy with it. But you can, you can follow.
- [62:11]
A
I love it. Awesome. Well, everyone, hope you found this beneficial. Another episode of Training Secrets you can afford to miss. Austin, thank you so much for being with us.
- [62:18]
B
You bet. Have a great one.
- [62:20]
A
Ding, ding, ding. We are closing the bell with Austin. Great to have you on the intro, David. Excited for JTA this Thursday. What did you think of that episode?
- [62:30]
C
I thought the episode was, was great. Like I said, it teased it a little bit. Totally out of my comfort zone. Used to the pop culture, used to more of the celebrity aspect. Used to maybe the reality tv. But I've always said I've been on, I've been part of this podcast for almost five years now and I do love these episodes. I love actually digging in and learning something as an adult. Sometimes we lose that ability or that desire to learn. I learned something. I got a really good perspective because I truly, I'd heard what I've heard the term Fed. I had no clue what the Fed was. So I learned a little bit about what it does. What it controls. It doesn't sound like it has as much influence as people may think, which I thought was really interesting. So I learned a lot. I learned a lot. I thought it was a great episode.
- [63:10]
A
Yeah. I mean, I thought it was great breakdown of, you know, what does the Fed actually do? Because there's a lot of uncertainty with that in news and headlines right now and what they have done and what he expects. It's interesting to hear how they make decision making. I thought one of the most fascinating things when I said is like, you know, what is one big takeaway you have about working in the White House? It was interesting for him to compare like the world of a professor to the world of the White House, right. With the professional professor world. We have all this information and we are giving you evidence because we have tons and tons of information to educate you. He's like, in the White House, we have like next to no information, but we have a timeline and we have to make a very hard decision that's going to impact millions of people with very little evidence, but just our brain power and gut instincts, which is crazy. So to see all that insight was. Was pretty cool. What was like, what is one thing you learned? What's one thing you didn't know going into this episode that you now do know?
- [64:05]
C
Well, I also want to touch on that. He talked about decision making for yourself and said, if you can gather all the information, do homework, be a researcher. And I loved what he said about put your own version of your board of directors together. It's perspectives from other people, not just the same person in the same interest, working the same job in the same maybe demographic situation. Put your own board of directors together, that has different perspectives. So I thought that that was really interesting.
- [64:30]
A
That was kind of. I don't. We can't pass over that because he kind of touched on. And that was like, what I love about this guy is he's. He's a. He's a history buff, right? So you can tell he has studied all different countries and hundreds and hundreds of years of, of rulers and, and societies and communities, things that work, haven't worked. And he compared the English model to the Nordic model and talked about how in the English model it was very hierarchical. But you have like a king, right? You have like someone at the top who's making all the decisions. And then the Nordic model, which is all flatter. And he talked about the success rate of flatter, where you're getting all perspectives from all people with different, you know, different thoughts and opinions. And how they found more success. And that exactly what he's talking about with this board of directors. Like, you know, we learned this in our MBA program, and it was, like, one of the things that we talked often about is, like, in leadership groups and in very strong business circles, homogeneity is not good. You don't want to have the same type of people with the same skill sets, with the same personalities. You want to have people with all different backgrounds, all different skill sets, all different personalities, because you could bring so many different perspectives to help growth and help someone's, you know, weaknesses or your strengths, and vice versa. So I thought that was kind of sweet.
- [65:42]
C
It was awesome. And a really good, interesting relatability story that you just connected as well. But one thing that I did learn that you asked, that I didn't know, he kind of humanized the Fed to me. Like, I just thought of the Fed as this massive department in the White House or in the government, but he really humanized it. 2, 000 people work at the Chicago Fed. I thought that number was insane. I really liked how he talked about, like, how he still looks to have community involvement, like, be in parades and show that they care about the local community at the local level, and they're not just a government. And I can't believe that there is just $10 billion in cash just sitting in the basement of the Fed on pallets. And I was like, that's a real thing. Like, that's, like, in the vault.
- [66:22]
A
Like, yeah, we gotta go to the vault, right? We have to go. We gotta go walk that vault.
- [66:26]
C
And he's like, no pictures. It's like, okay, I don't need a picture. I just need to be like, who's that Daffy Duck who just gets to, like, jump in there and roll around in the. Oh, Scrooge McDuck and the gift that I always send.
- [66:35]
A
Imagine, like, the Joker from Batman who's like, yeah, lights it all on fire. The biggest big mounds. Like, the fact that that's real is absolutely insane.
- [66:42]
B
It's.
- [66:42]
C
It's insane. So he humanized it, though, which was really interesting, because, again, like, just even. Even little examples, like, everyone thinks we set the rates. Like, we don't set the interest rates by any means. Like, how he talked about how he's like, the. What did he say here? Guardians of the Galaxy, like, they're not the bad guys. They try and stabilize prices, maximize employment. Like, I thought there's some misconceptions, and. And the humanization factor of the Fed really was My biggest takeaway, I think, overall.
- [67:07]
A
Yeah, I mean, one of the, the challenges that you're seeing now is with the current administration and the Fed. There seems to be a lot of disagreement as to what they want. Right. Like Trump's administration really wants them to reduce interest rates. Now Trump uses the market as a scorecard. So when the market is doing well, in his eyes, that's like a scorecard for him. And when interest rates go down, typically the market will react positively to that. But one of the tough positions to be in which you heard us talk about, and he gave so much more color to it. But the idea of having markets at all time high but then reducing your overall interest rates, it's very, it's usually an inverse relationship. There's usually correlation and causation, that those would move together. But to see markets at all time high and then reduce interest rates is not the norm. And then one of the issues, like he said, would become potential massive increase in inflation. But yeah, I don't know, it's just, it's good to talk about this stuff because there's so many things floating around of like, what actually is the truth. To hear it someone from his perspective
- [68:19]
C
is kind of two examples he gave. And I loved how he said this. He goes, you know, we at the Fed, we can't get into the vibes business. Like, we can't just buy into like eggs being like $6 a dozen and like think that that is the law. And then, then, you know, 18 months later, they're 1.99. How he, when he was 11 years old, he looked at TVs and he's like, if you would have told me I could have bought an 80 inch TV that's this thin, it would be that cheap. He's like, I would have thought there was no such thing as inflation. Like, it's the reverse inflation. So I loved how he talked about, you know, not being able to get in the vibes business. Like the Fed, they got to really look at numbers and the data and not freak out at the first, you know, phrase or clickbait that they see about inflation.
- [68:55]
A
It's, it's. That also connects to one of the more memorable moments and trading secrets for me was when he talked about investing, right? And he's like, if I told you in 1899, all the things that would happen in this world, right, World War I, World War II, the Black Plague, the Great Depression, the dot com bubble, the mortgage crisis, all the things you'd be like, I'm not investing in that, like, I'm not touching that. And you look at where it opened versus where it is today. Like when you heard that as someone who's, you know, you know, more of like a one on one, 101 finance guy, like what you think?
- [69:33]
C
Yeah, it makes sense. I mean, again, I bring his name up on the pod too much, but Dave Portnoy always say, he's coined the, the phrase stocks always go up. And he gets crucified from that by people in the finance and in the trade industry that, you know, stocks don't always go up. It's not that easy. But over time, history say, yes, they do. They always go up. So from 1899 when it was at $50 to 2026, which I don't even know what it is, I, I, I couldn't like, if I were to guess and close my eyes because I haven't looked at the dow in probably four and a half years that I would guess that it's like 3-800-question mark.
- [70:04]
A
So we got Dow Jones.
- [70:06]
C
Yes.
- [70:06]
A
Was above 50,000 points. It's not, oh, 977.
- [70:12]
C
But I missed a zero.
- [70:14]
A
Yes.
- [70:14]
C
Yeah, I missed a zero on that. So classic. Stick to the pop culture guy.
- [70:18]
A
Okay, okay, here's, here's a, okay, here's a finance question for you. How many companies are in the Dow Jones?
- [70:26]
C
Not 500. That would be the S P 500. The Dow Jones. I have no clue. I'm gonna say it's a small number. Smaller than the 500. Am I, am I warm there?
- [70:36]
A
You're warm.
- [70:37]
C
Okay, I'm gonna say it's even smaller. I'm gonna say Dow Jones is like double digits, not even triple digits.
- [70:43]
A
Okay, how many?
- [70:44]
C
Okay, I'm gonna go 30.
- [70:48]
A
Did you just look that up?
- [70:50]
C
You, My hands are right here.
- [70:52]
A
That is insane.
- [70:53]
C
What is it?
- [70:54]
A
It's 30.
- [70:55]
B
Oh, wow.
- [70:57]
C
I was gonna say 29. I don't know why, but I just say pick a round number, idiot.
- [71:00]
A
It's a price weighted measure of the 30.
- [71:03]
B
Wow.
- [71:03]
A
Blue chip companies, like very, very large blue chip companies. And I think that's a good, like not all stocks go up. That's not true. But indexes or you know, things like the Dow Jones, which are made up of, of 30 of the biggest companies in the United States. You know that those typically move up. Historically they move up. I mean, S P500 on average moves up around 9 to 10% per year. So there you go. Hopefully you learned something there. I also thought was really interesting is like the aspect of humanity There, like when he talks about, like, humans have, you know, for. For so many years have experienced things like world. You know, think about World War II. Think about what was happening in the world. Right? Like, you know, I mean, think of
- [71:50]
C
what's happening in the world right now.
- [71:51]
A
Yeah, but think about what's happening in the world right now. Like, all the craziness that is happening, the grotesque, disgusting, despicable, inhumane, like the deaths, everything but the macro. The world always, through all that, finds a way to connect in some way, way, shape or form with humanity, to evolve to. Of some way find a way forward. Which is, like, when you look at that, like you zoom all the way out and you're looking at, like planet Earth. It's kind of crazy.
- [72:25]
C
Yeah, you just got real deep there. I liked it. But it goes in hand. But it goes in hand with this trading secret. He says the Fed will never beat the market, so invest and don't stress, like, of all the ways that humanity and society may be going backwards on the, on the macro scale, we do have, like, the markets and investments and the growth of the Dow and those things to show that actually there is an element where we can still say where we're moving forward. Now. Our country's still in trillions of dollars in debt, which. That's just a whole nother thing. I don't even get how you can do that. Like, I don't. I don't.
- [72:57]
A
I don't.
- [72:57]
C
I don't really get that part of life. But that's not for me to really understand, I guess. Tens of trillions. Like, aren't we losing like a trip like a billion dollars a second? Like, by this time this podcast hits, we're like 10 more billion in. In debt.
- [73:09]
A
Okay. If we want to, like, do a deep dive.
- [73:12]
C
No, I don't know if we can do a deep dive.
- [73:14]
A
I mean, I think we should at some point.
- [73:16]
C
Okay.
- [73:16]
A
Maybe we carve out a time to do like a full deep dive, or I'll do like a kind of like a master class on the.
- [73:21]
C
Yeah.
- [73:22]
A
How debt works and, and what. And what the United States debt burden looks like and how we potentially get out of it, et cetera, et cetera. But yeah, it's. That's a lot to. That's a lot to take in.
- [73:33]
C
Yeah, that is. It is, but that's for another time. We're not. We're not going to solve that problem right now.
- [73:38]
A
Oh, God. Well, we'll do that. I mean, we're already like 15 minutes into this, so US debt burden. That will be a topic of discussion. We will get in the weeds and I will make it make sense for you. Anything else you want to cover on this recap?
- [73:50]
C
I'll say one more thing. I think it relates to your life, my life, a lot of our listeners lives. He said that entry to the job market is harder than ever, harder than all time right now. And he said housing prices have risen over all different aspects of inflation. And he says more people, and I've talked about this before our age, because it is our generation, are skipping the starter home phase. We're more into renting, we're more into apartments. You see more high rises come up, more condo living. What's your take on that? Because again, I drive around suburbia Rochester all the time and I have always felt this because I didn't want to invest in the starter home phase and fix it up and sell it like I wanted to save until I could buy a home that I'll be in to raise a family in. I drive past all these quote unquote starter homes and I'm like, who is gonna be buying those? Like, I'm thinking, I'm feeling like suburbs are gonna like parts of Rochester and I'm sure all of you know, small town and middle class America, you can drive into these neighborhoods with starter homes that were built in the 30s, 40s, 50s, 60s, 70s, 80s that our generation just doesn't look to move into. I'm feeling like they're going to be like Will Smith, like I am legend. Like those are just going to be overgrown and like, like extinct. Am I nuts?
- [74:57]
A
I have no, like no one has the crystal ball when it comes to housing. What we know is like housing prices have gotten out of control. People are starting to buy their first home 10 years later than they did, you know, 20, 30 years ago. And, but also people are starting to live longer. So, you know, maybe that plays into this, right? I just read an article from redfin that there's 44% more home sellers than there are buyers, which is one of the largest gaps we've seen since 2013. I could tell you in Nashville, prices are not flattening, they're not softening and homes are going fast. In the big number category, the multimillion dollar homes are going very fast. So I don't know, man, I don't know. I think you obviously heard us talk a little bit about wage growth today too. So if homes are going to move at that price, wage growth is going to have to move at that price. But now you're starting to see, see. Oh, man, I could just. There's so many conversations in this recap I want to have like six episodes about. But like the CEO of Tommy John who's coming on the podcast, like, we had dinner with him and he was talking about AI and he was like, one of the things I think about, he's like, I haven't done this, but one of the things I think about is like a dad. If I teach my kids how to do laundry or if I teach my kids how to like empty a dishwasher, am I teaching my kids something that within a very short period of time is going to be completely obsolete, Like a waste of their brain power? Because so quickly we are going to be having robots do that for us. Like that very, very quick. And when he said that, I was like, whoa, whoa. But like, I think if we optimize efficiency to that level, we're going to have to have wage growth, stocks are going to have to keep going. Oh, something ability will be greater and greater. And like, I mean, then you get into like a very deep conversation. But like, I don't know, that's just once you factor in AI, what does it all look like?
- [76:52]
C
Yeah.
- [76:53]
A
Or even just like, you think about all the games. Like, I'm in the, I'm buying a home right now. Like, there's so many games of like, oh, there's another, there's another offer coming in. Like when we have AI robot, I'm just gonna have like my robot do this for me and tell me every little thing that's wrong with it.
- [77:07]
C
Well, the thing about the home tour in general, the home buying process in general is I've tried pairs of shoes on for longer than I tour the house that I bought, I put on the shoe, I do the walk around the store, I look in the mirror, I, I had checked, I, I, I, I look, I feel them. You know, as this is, I go half a size up. That's a 15 minute process. When you go and tour house, sometimes you've like, this, this. Yeah, okay. Oh, you want how much money? Oh, more than I've like ever saved in my entire life for anything. And now I just gotta buy it. Like, it's insane. The home buying process is insane.
- [77:37]
A
It's crazy. Actually, Catherine and I got in this conversation because, like, I've seen now like 50 homes and now I went back to one home for the third time.
- [77:45]
B
She's like, you're, you're, you're really like,
- [77:47]
A
I don't think most people spend this much time at home, I was like, you think about that. The car I just bought. I just bought a Cadillac escalade. I went back to the dealership three times and drove it four times. You know, okay, I like it. Let's get it. The house I'm buying is going to be 20 to 30 times. To be 30 of those cars. I should go back to the house 650 times before I make the decision.
- [78:11]
C
You know what's crazy about that is, is at least when you open the glove box in the Escalade, there's a manual. At least you know how to, like, open the things. So manual for a house? I don't know.
- [78:21]
B
I bought off the guy. There's a.
- [78:23]
C
We have, like, a tankless hot water tank. I don't know. It needs to be serviced. My garage door stopped working. He's like, you gotta. It's like, I don't. I don't know how to do any of this stuff. There's no manual. I just spent $500,000 on a house that I don't even know how to use.
- [78:37]
A
Oh, we're getting in the weeds here, you know?
- [78:39]
C
No.
- [78:39]
A
So little time, but so much to cover. We got the u. S. Debt ceiling. We got. AI Is doing laundry. We got, you know, homeownership. And what the hell is gonna happen? Who knows? But we can say with certainty is Austin. Professor Austin definitely gave us a lot to think about today. Anything else you want to throw out there, Mr. Curious?
- [79:01]
C
Well, we can also say with certainty that this hue of the ring light is a much better hue than the one that made me look like Casper the ghost. So we're fig triggering. We're working out that. We're working out the kinks here. Okay.
- [79:12]
A
Throw your hat backwards for a second because we got a little shadow. I'll see. See the difference there? The shadow from the brim. Now you really see your face. Wow.
- [79:20]
C
Maybe I'll just do the hair next time.
- [79:22]
A
Maybe do the hair next time.
- [79:23]
C
You know, I'm growing it out a little bit, trying to let it flow. That's it. That stinks.
- [79:27]
B
It stinks.
- [79:28]
A
I love it.
- [79:29]
B
Yeah.
- [79:29]
C
Hey, JTA Thursday. It's gonna be great. Well, that scarred me for life.
- [79:34]
A
He goes, I've never seen more colics. Like, he was working every angle.
- [79:40]
C
This guy's gone on tour. He's cutting hair for rascal flats. I should have, like, the most typical hair. It took, like, an hour and a half in. In the. In the foyer of your. Of your home. And we're, like, late to dinner. And he just looked. He goes, hey, this is the best I can do. I've never. It's the hardest hair I've ever had to cut. I'm like, mine, my hair. I've got the same haircut since I was 12. So wow.
- [80:00]
A
Look great.
- [80:00]
C
I know, but that was the longest I've grown it now. I'm trying every time. Every time in this winter, I'm like, this is the time to grow. And Ashley really wants me to grow it because she can't stand my hair.
- [80:08]
A
So it's.
- [80:08]
C
It is what it is.
- [80:09]
A
Let it flow, baby.
- [80:10]
C
That's what we're trying to do.
- [80:12]
A
All right, well, everyone, next week we got a big one. We got Amanda Batula. Amanda Batula next week in JTA after that. That's a good back to back. March 9, March 16. Make sure to give us five stars. What an episode. Really love that one. Thank you for tuning in to Trading Secrets. Hopefully another episode you couldn't afford to miss. This message is brought to you by the Capital One Venture X Card. Venture X offers the premium benefits you expect, like a $300 annual Capital One travel credit for less than you expect. Elevate your earn with unlimited double miles on every purchase, bringing you one step closer to your next dream destination. Plus, enjoy access to over 1,000 airport lounges worldwide. The Capital One Venture X Card. What's in your wallet? Terms apply. Lounge access is subject to change. See capitalone.com for details.