There's a bunch of things going on as you talk about whistling past the graveyard.
Is a student loan payment hiatus. You know we had paused and people
said you don't have to pay during COVID. That's resuming, right. Why
should anybody have to pay their student loans when they can't even get a job
as a janitor. You're listening to carry Lets's Financial Survival Network, where you
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Financial Survival Network dot com and get your free newsletter and gift. Financial Survival
Network now more than ever. Welcome. You aren't listening to watching the Financial
Survival Network, I'm your host Carry Loves Well. As the consumer finally run
out of red ink, or is there always another jolt just off on the
horizon. So far the death of the consumer, or certainly his or her
or your consumer spending has been greatly exaggerated, as a wise writer once said,
But are we finally at that moment, the Minsky moment where the can
can't be kicked down the road any further? Eddie Unit is with us.
Now, Hey, you've got a question for Eddie or myself kl at Kerry
Lutz dot com is the email address, Eddie. Great to have you back
on. So death of the consumer greatly exaggerated as usual. Yeah, I
think that's right. Where we're not quite there yet doesn't mean that there isn't
a near death experience on the horizon, but you know, so far,
they're trucking along. So the latest data from the government says that in July
that consumers aren't continuing to spend, but perhaps a bit unwisely like you and
I might not advise you know, friends or children to spend this way,
but there they go. So personal consumption expenditures is up point eight two percent
in July, which is the highest it's been in twenty three. However,
disposable personal income is only up point one five percent in July, which is
the lowest it's been in twenty three. So they're spending more, but they
have less discretionary to spend. And you know, you can kind of see
this happening. There's a bunch of things going on as you talk about whistling
past the graveyard. Is the student loan payment hiatus, you know, we
had paused and people said, you don't have to pay during COVID, that's
resuming, right, Why should anybody have to pay their student loans when they
can't even get a job as a janitor? Well, you know all these
depends of thousands, right, It's interesting. I think that all of my
solution to this is that, you know, you got to hold everybody accountable,
certainly you know, the consumer, but also the university. Like I
think that any debts or bankruptcies or loan forgiveness should be tied back to the
university that granted the degree. In the flair, it's a thought because they're
the beneficiary. Really, the student got nothing out of this, right,
the all of the whole kind of you know, pal loans and you know,
the all the loan availability. It really bypassed the consumer and went straight
to the university because they were able to raise prices without any regard to outcomes.
And so you know, basically the consumer, anyone with a loan on
average, is going to have five hundred and three dollars per month less to
spend going forward. So and then you know, you got loan delinguencies carried
approach on Q two of twenty twenty rates per the Saint Louis FED And this
is my favorite stat is you know, the number of twenty five to thirty
four year old adults that are living with their parents is four times higher than
it was back in the sixties. Bite your tongue, man, Well,
thank goodness, that's not something I've had to deal with there, But for
the grace of God. Go on. Hey, you know one thing,
when you're going back to the student loans, not only is it in the
interest have the college has benefited from this, but they benefit more from their
students failure than their success. The more courses you have to take over,
the longer it takes you to get that degree. Used to be when I
went to school four years you got your degree. And now we got these
perennial students and they're just cash registers to the colleges. And then eventually the
student is the bag holder. They get left holding the bag here right totally?
I mean, I think to your point, until the student gets the
job. I mean, number one, you sure your tuition should be capped
at the average salary your graduate gets immediately after your graduate. You know that's
kind of one. Two is like if you. You know, if you
can't pay back your loan, then that should come back in the form of
taxation, because all these schools are tax exempt, right, and so you
know, basically like you you have, I mean, and it's a bit
of a have and have nots. Like my understanding is that Princeton, as
an example, makes enough money off of its endowment, so they're great money
managers, right, so to the point where they could charge nothing for tuition
and the endowment would still grow. They could. Yeah, all of these
schools second five billion last I heard in the Harvard Endowment or maybe that was
Yale. It doesn't matter. You could just substitute a name, right,
you know. And these non profit to you know, these non so called
nonprofit to institutions seem to be doing just fine in a nonprofit environment. You
know. Well, these are all hedge funds disguised as universities. I mean,
that's really what it is. And if you had a hedge fund with
that my amount of assets under management, like would you not tax some?
Of course you attack them. And so yeah, all of this stuff is
like you know it And not only do I think it should be university specific,
I think it should be major specific you know, like if some I
mean, surprise, surprise, I'm guessing there's a flat fewer STEM graduates that
are having trouble finding jobs and paying off their loans then you know, English
degrees or whatever else might be. Like you know, so like I think
accountability needs to happen. Unfortunately, the consumer you know, always buy or
be aware, so they're going to pay the price. But a lot of
these universities, it's not like the professors are making more. It's that they
have bloated middle management and they've hired administrators and people who have nothing to do
with the actual teaching of the students. And that's the problems. How about
if we incentivize the professors, like you know, they need. They keep
a rolling average of what their students pass or fail rate is and when they
graduate, and if they part of a team and they managed to get these
things, get them to perform better, they get a bonus. And if
they perform worse, hey get rid of them or at least pay them less.
Right now, absolutely, I mean, you know, to your point
about a bonus, not only professors, but the college presidents and every middle
manager out there. It should be paid. You should get a bonus that
is a percentage of the average income that your students generate post college, right,
I mean that that would be there's a thought there, very logical way
of doing it. Hand. We'd have a lot of broke college professors work
who worked for crummy or lower tier schools. But let's do it for law
schools too. I don't know if you caught that James Grisham book about for
profit law schools, but it is the biggest scam and the planet. You
know, it was a funny book that they did, but yeah, it's
it's it's uh, it is absolutely there's a glut at the education that some
professional institutions, like as you said, if you're not at a top whatever
law school and that you can lend the corporate job, like you should not
be out there like you're you should not be charging what the big law firms
are law schools charged at least like the idea that you know. I mean,
this is like if this were regulated as a business, it'd be price
collusion. Right. How is it possible that tuition is virtually the same everywhere
you go and yet the outcomes are radically different. Yeah, and it's funny
the way it works, and yet nobody seems to want to do anything.
Do you think they got a big lobbying outfit to all of these colleges because
really, the student loan debt bubble, the only beneficiary of it has been
the colleges because look, let's face it, they didn't increase the number of
students as the loan balances, as the loan thresholds went up. All they
did was charge more money and hire more administrators. And there's no meaningful measure
of the professor or a staff productivity at all. You know, maybe internally
they have something, but it's a good question. I don't know what the
I don't know what the lobbying dynamic is with higher ad in Washington, but
you're right that there's a reluctance to change things, and you know, it
is one of those things. I mean, part of it is what I
feel bad about, is it is a bit of the big lie that has
been sold to the population that you know, education is a silver bullet,
like it is if you come from a family of never gone to college and
you're the first generation to go to college, and it is if you study
the right thing, that's much more of a pre professional degree versus whatever.
But you know at absent that it's really become a sol status club at the
very high end education schools because you know, you're you know, the admissions
rate for a legacy student is so much higher than it is for a regular
student. It's just another way of perpetuating aristocracy. But like, yeah,
it's it's it's a trillion dollars of debt plus that's misallocated capital that could have
been much better used to buy a franchise or start a business of some sort.
And then because like if it's actually higher education, maybe the undoing of
America as a as an economic power, because that debt that hangs over you
is going to prevent you from buying a house, which is going to prevent
you from having kids, which is going to prevent you from having getting married.
And then you know, population implosion, and we look like Japan and
Western Europe which is already starting to go that route, and so the downstream
effects were just starting to see, all right, well, you know it's
a it's a bad situation. They're not doing anything to make it better.
And we've got the three legs of the stool, actually four legs of the
stool consumer credit, debt, credit cards, student loans and auto loans and
home loans right, and it seems to me the legs of that stool are
rott into the core well. And it's interesting in that there's certainly rot in
each of them. I think student loans has the most amount of rot,
for sure, just because the you know, the the roi has always been
dubious from an educational standpoint, at least with the car loan in theory,
the car gets you to and from work so you can be productive and earned
money. The home loan in theory the value your homes post to go up.
Now, there's all a full bunch of changes that are going on in
the housing market that may make things challenging for some time. But now you
know, of all the different types of credit that's out there, I mean,
the credit card one is absolutely you know, I think the consumer is
getting savvier, but and the percentage of people who revolve are that's still going
to be a problem. But you know, frankly, the consumer, as
you said, is doing no different than the government is doing, which is
that's tomorrow from you know, tomorrow to pay for today, and at some
point you do have to pay the piper. I'm not sure when that's going
to be, and I'm not sure if it'll be paid equally. I do
think that it'll be very localized and very specific to categories and geographies. And
I totally agree with you. Yeah, well, you know who's going to
pay it. The taxpayer is going to pay it right some way or another.
These losses are always they always wind up being socialized, whereas the profits
from all these programs which are a total mess, are privatized. Right.
Isn't that the way it works? Yeah, yeah, no, it's it's
absolutely the case. And you know, the smart consumers, I mean,
it's your Your point is well taken about college in general. College enrollment is
down actually from its peaked in twenty ten eleven, and it's down a million
students. And so not only is the bubble is bursting, like there is
meaningfully less enrollment, prices will come down and that you know, call it
a third to half of the universities are going to go out of business,
and so the market will reconcile. It's just taking too long to do so.
And in part, as you said, some of the core assumptions and
the inaction and or lobbying is preventing it from happening in a way that the
market should normally make things happen, and you're seeing this in other legs.
To carry is that you know, in general, my view is that categories
that focused on experience in transformation, meaning you know, like international travel is
at a forty six year old high two percent of you just considering to travel
abroad for the conference board. And then a category that I know well that
I'm operating a business in Jeneo and glow to facial medical aesthetics that's to grow
ten percent a year to forty billion dollars and twenty seven according to BCG SO.
Categories that deliver the goods like you get a great experience, or you
actually become better or different, or a transformation in some way, shape or
form that's going up. Whereas stuff that's just kind of physical goods like I
bought it last yesterday and last week, therefore I buy it again, Like
that's going to be super problematic. Target revenue down five percent in July,
Home depot revenue down two percent in July. And you'll like this one,
Kerry, is that you know, physical goods, the pricing has come down,
So you know you're going to see deflation there because there's just not too
much stuff and too little people want it. But to the point, theft
at retail is going to be a massive even one two worse one two punch.
It was estimated to be one hundred billion dollars and twenty two and Targets
said that merchandise theft will rob shareholders of a half billion dollars in earnings this
year. And so, well, you know, shoplifting has been normalized,
so why should we worry about it? Right? Wow, we're gonna worry
because I mean, we'll see how long the pain kicks in. But some
parts of the country will just not have retail available to them. Why would
they Why would a retailer operate a business there put their people at risk and
their merchandise at risk. And I think it was Chicago. It's got the
Kachamimi idea because of all the shoplifting, the theft, and the danger to
everybody there. Uh, they're going to open up their own supermarkets to make
up for the food desert. Now, didn't I didn't see that one definition
of complete and total utter insanity. Where am I crazy? Well, you
know, it's it would I haven't allowed it, but if they were smart,
they would do it in the new economy, not the old economy.
Right, So delivery would work make a lot of sense, right because like
the three the four horsemen of the apocalypse that's going to hit retail. Physical
goods are One, we've hit peak physical goods. People don't want that stuff
anymore. They want experiences in transformation. Look at China, Look at China,
China absolutely. Two is that you have the theft shoplifting thing, which
is like it's just going to make it less pleasant the shop at these places,
people won't go there. Three, you have e commerce that's continuing the
truck along like Amazon is going to continue to do its thing. And in
the four you're going to have delivery services continue to rise. And that all
of these things make it so that you don't need the retail experience to be
a great one. They should become distribution warehouses where people can just get stuff
shipped to them and showroom looks exactly that you go look at you know,
you go look in the big box store or whatever the retail store for the
product you actually want, and then you go order it online. Right,
I like it. Hey, I do it all the time myself. You
know. Yeah, time is precious. Why would you you know, so
they might as well accept their new newly found role and capitalize on it.
Maybe they'll charge you to walk in the store now you know, well you
know, I mean there are retailers in Japan that do that. And guess
what, when you charge people for the experience, the experience gets better.
You know, That's how club stores work, right you. The reason why
the Costco hot dog is a buck fifty is you pack the pay to enter
the store. So you know, like you maybe think of that, like
maybe I will go to Costco and get a hot dog for lunch today.
You just made me hungry. But even if they said, look it's ten
bucks to come in, but you'll get a credit on your first sale,
right, oh yeah, it wouldest that be a better thing for them.
Absolutely, I mean it. I mean the best thing that retailers could do
would be to follow costical model. And he said, you know, charge
them up front so that you know that it's not going to be you know,
a shoplifter or whatever, someone who actually wants to be there, and
as you said, give them a Scooby snack, whether it's you know,
a block fifty hot dog five dollars or two's ritchickin or whatever, or a
discount on future purchases, Like everybody wins in that scenario. So yeah,
I think it. I think it could work. I think it could work.
I mean there'd be outrage at first. There always is outrage. You
remember when they started charging for credit cards what's upon a time and there was
complete and utter outrage. And now what do you think, like now everybody
just accepts it, right, Well, I think the consumer will avenge figure
out and I think it's probably figure it out sooner rather than later. That
there is no free lunch. That when you pay for something you're going to
get better experience, treatment, service, or whatever else. It is.
So as you said, credit cards went this way, your retail is going
to go this way, and look at social media is going to go this
way too. You know, when you get charged to be part of the
platform, then at least you know you aren't the product that's being monetized and
sold, which is like what Facebook is. So and you know the other
thing is that when you get something for free, it has no value to
you, whereas when you have to actually pay for things. You know that
it's a different things, different thing altogether. Yea, all right, hopefully
we can free up money from paying for things like colleges and unnecessary education.
That free up more money to pay for things that people actually want will actually
help them out. So yeah, well that's the other thing. Like you
and I, you know, can talk about this. We already went to
college, we already had our day. College was a lot more affordable and
cheaper. Now that it's unaffordable, the person is saying, like, og,
you know you're you already got the benefit. Now you're screwing us out
of it effectively. Yes, you know, there's something to be said for
that, you know, I mean, I understand where they're coming from.
But things are definitely different now, aren't they. Oh I, it's it's
incredible, just just the sheer mercenary nature of higher education. Like you know
it. These these educational institutions started out with the missionary purpose and now they're
not. They're all here to suck as much money out of people as possible
without delivering any outcomes. And it should be criminal to do. But it
should be criminal, like basic some schools and some majors should have the same
warning labels as cigarettes. You could lose all your money with this, right,
I mean those trading options, those stock market it's like you might lose
all your money and get nothing out of this. Hey, it's it's they
become basically parasitic entity. Seventh they yes, all right, any organization that
loses its missionary purpose said perfectly becomes a parasite. It's rentier. They're rentier
seeking enterprises that that couldn't care less about who's paying for it. Right,
Yeah, so all right, well, Eddie, tell us again where we
find you at these days. Yeah, you can find me on Twitter at
eddiewood Grow, as well as my substack category pirates dot com. Uh,
if you're a carry a Lens listener, then please send me a note.
I am glad I give you a complimentary subscription to it, all right,
Eddie wood Grow dot com. If I remember the and there it is on
my web site. Hey, if you got a question for Eddie or myself,
shoot me an email, k l at carry Lutz dot com, Twitter
feeds at carry Lutz and while you're at the site, you'll find a direct
link to Eddie's site on Financial Survival Network dot com. Just click it take
you right there, and while you're on the site, sign up for your
free newsletter Eddie. Always a pleasure. Thanks so much for stopping by,
same here, Kerry, Thanks man, thanks for listening to carry Lutz's Financial
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