Not a whole lot of people have been impacted by interest rates, and those
people eighty nine percent, they have very little incentive to move and give up
their great mortgage for a bad mortgage now and also per Redfin, the median
price of a starter home is forty six percent higher than it was in twenty
nineteen. You are listening to Kerry Letts's Financial Survival Network where you get valuable
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I'm your host, Kerry lets Well. Hey, consumer spending on a
rollercoaster ride. Continuing, let's take a look at what's going on here.
Eddie Unit is with us now. Eddie, always great to have you on
the show. So what do you make of the PC numbers that got released
today? Yeah, you know it. I think there's a good news bad
news thing, which is why the roller coaster thing is. Disposable income did
go up slightly point four percent in May of twenty twenty three revisions, and
that's after four months of steady declines, and so that's a good bit.
So people have more disposable income. However, what they're spending is still doing
the roller coaster thing it only it was basically flat at point one percent in
May. Previous month was point six month before that was point one. So
that's kind of the macro view is that consumers have more money to spend as
wages have gone up, but they're being judicious about how they spend it.
And in particular, I see some trends, you know. So it's just
because consumer spending is flat doesn't mean that it's flat for everybody. But it
usually means is somebody's getting more money and somebody's losing money, right, And
so what you see is there's a little bit of the out with the old,
right. And so I don't know if you saw the wait times at
Disney World are down thirty minutes July of twenty three versus forty one minutes a
year ago, lois since jan twenty two. So people aren't spending at disney
World, which I would classify as kind of the old, right, they
haven't had Yeah, you know, a Grand Slam Pixar hit or the Marvel
franchise is kind of stalled, like nothing really new has come out since then,
and so there's maybe not a whole lot of new news to go see.
And then, Carrie, I don't know if you saw. I wrote
an article in the Harvard Business Review about Netflix and there's a serial churner problem.
And I partnered with a firm called Antenna Buddy of mine. Jonathan Carson
runs it, and they're a data provider for the streaming world and subscription services.
And what they found was that there's a consumer type called serial churners.
They're the anti super consumer, which is the book that I wrote, and
meaning that these are people who binge and then they quit a streaming service shortly
thereafter, right, And that percentage of their sobs for Netflix was three percent
in twenty nineteen and they're now sixteen percent of their subscriptscribers in twenty two just
in three years. I've done it myself, you know. I want to
see like Yellowstone or some series that only they have. I'm willing to pay
for a month of it whatever twelve bucks, and then I finish it and
I turn it off and because now they're making it harder for families to share
subscriptions. So they've done this to themselves on it's you know, it's it's
what I always have a saying, yesterday's solutions become today's problems. Right,
is that you make it easy to sign up, that's fantastic. You make
it also easy to quit. That's going to be hard for you, And
yeah, it's it's the right thing to do for them. What they need
to do is change the way they think about content and not just you know,
shows like Yellowstone are great. Stranger Things was their top stream thing on
Netflix, but like you know, once it's done, there's no reason to
stick around unless you get more content, or unless you get different content which
is not binge able. And that's kind of the premise of the article.
But like, basically, a lot of the what I would call out with
the old legacy categories consumer loyalty is declining because people are becoming more price sensitive.
It's like, look, I got more money, but I want to
be mindful of isserve recession going to happen and how do I spend it?
But commensurate with that, out with the old is in with the new.
That people are willing to spend, but on what I'm calling new and different
experiences. And so I don't know if you saw the Taylor Swift phenomenon,
right, So she's going to make about a billion dollars on her person.
But what is even more amazing is that everywhere she goes, hotel prices spike,
airline affair spike, restaurant spending spikes, merch spending spikes, and so
Cincinnat Eddie, their tourism agency, said a Jason related spending to Taylor Swift
for her concert went up by forty eight million dollars per their tourism department.
So wherever she goes spending her carson, that's a new experience, right,
And it's not just I sit at home at Netflix. I'm going to be
out with other Taylor super fans and super consumers and all of that. Bureau
Labor Statistics is saying that the number of US workers that are taking vacation from
jan the June was higher than two and a half million folks, which is
highest since twenty seventeen. So people are taking trips, which is good,
and then you know you've got other new stuff that's kind of polarizing. The
cybertruck is. You know, people are waiting on Data and Brown to contest
to release this. I'm excited to see it. Yeah, and you know
people are either thrilled or they hate it, right, And that's the kind
of new and different thing that is getting attention and what people care about.
The same old, same old is not getting a lot of spending. Hey,
well, hey, can we can do me a favor? Can we
keep Taylor Swift out of Florida? Because we have enough inflation and hotel prices
are already through the roof, so we really don't need her here the center
to someplace like like Chicago that needs her more than we do. Okay,
hey, but you know, look, interest rates are still staying high,
going higher. We just got twenty five basis points increase on the Fed funds
rate, which filters down into everything, and yet the economy keeps trugging along.
Yeah, yeah, you know, it's it's it's the same thing that
what I think is the irony of the higher interest rates. I don't think
this was the intended effect. Is that what it has caused people to do
is hold off on big ticket purchase items like a home and all the associated
things that come with a new home, you know, furniture, moving,
etcetera, etcetera. Right, and that has actually allowed people to shift their's
discretionary expanding to what I'm calling you smaller, immediate and different experiences. Right,
So permuting. What's really interesting is that only eleven percent of homeowners have
an adjustable rate mortgage. Yeah, so I was actually excised by that.
Yeah, not a whole lot of people have been impacted by interest rates.
And those people, the eighty nine percent, they have very little incentive to
move and give up their rate mortgage for a bad mortgage now. And also,
per Redfin, the median price of a starter home is forty six percent
higher than it was in twenty nineteen. So not only can you not get
a good rate, the price of the home is higher. So and then
you know, all the trickle down effects carries what you said if you don't,
you know, really what's interesting is first time homeowners are going to delay
buying their starter home. And you do that, you delay having kids,
which is already happening with birth rates at the extreme low, and then you're
going to have these dual income you know, no kid families who are renting
that are going to have this discretionary spending for all of these smaller immediate and
different experiences and stuff. And so one of the buses that I'm part of
is Jeneo. It's a ex genematical facial uh and to kind of have your
your your face and your pores exfoliate and open up like that. Business is
on fire. I can imagine. Yeah, fastest scrub business. And because
of this, it's smaller, immediate and a different experience. That's amazing.
Huh. Yeah. Yeah. People are definitely spending money on experiences on which
is what Taylor Swift is about. Traditional vacations. Disney World kind of out
for right now. But they've gotten so expensive at Disney World. You know,
a family of four, it's been ten grand in a week and on
the hog right yeah, nuts, it's nuts. And and then with all
their um all of their misst epps as far as wokeism and you know,
societal trends, they're getting what they deserve. Well, you know, it's
I think it goes to show you that we've hit the limits of what you
can charge. Everybody's been raising price and if you don't offer anything that's different.
If you've been there, done that before. I just think that there's
not a lot of tolerance for price increases for like, you know, charge
me more for something I've never had before, Okay, charge me more for
the same thing that I've seen before or I've been to before, you know.
So, you know, the people who love Disney, those Disney crazy
super concerned they're going to keep going and that the lower white times work out
well for them. But it's all the people who are like, eh,
but look, I can leave the country and have a better vacation than go
to Disney and be treated better and not stand on lines in And the heat
too, that's one of the reasons why people are not there. We had
ninety five plus degree days and constant thunderstorms every single day. Don't think that's
not impacting the traffic numbers as well. But I think I think that the
Disney or you know, maybe they can get bud Light to sponsor them hopping
right. Yeah. The funny thing about the bud Light thing is that that
brand has been in decline for many, many years actually, and that's lousy
beer in my opinion. Well, yeah, I mean that that's been the
trend has been um Light beer had its heyday, and that bud Light largely
grew in the back of Budweiser. And you know now that that's all changed
and different, and that you have, you know, added on top of
that a set of executives who did not grow up in the industry and did
not grow up. Um, you know, the twenty years ago, the
people who marketed and led bud Light drank bud Light. The people who run
the company now do not drink their own beer, as my syste they probably
drink their own kool aid though. Yeah, but hey, one thing about
housing prices and mortgage rates. You know, I've got a you know,
three percent mortgage where I am, and I think, hey, maybe i'll
downsize, got a lot more room, slowing down a little bit, like
to take some equity off the table. The only thing is, you know,
I get a mortgage for if I get a mortgage for half of what
I have now, and I'm paying the same amount in the new place,
Granted, the taxes will be a little bit less, the utilities will be
a little less, maybe the HOA fees will be less because I'll be in
a different hoa. But you know, it's it makes absolutely no sense economic
sense for me to even consider giving up my mortgage. Here it turns out
a low sub three three or lower rate, it's like free money given if
inflation is going to be where it is. It's basically an industry loan.
That's an incredible asset to have, and the mortgage may be more valuable than
the home for a lot a lot of people out there, and that's the
reason why there's not going to be a lot of moving, which will lead
to more discretionary spending, which will lead to more the new new wins the
old Eddie. Think about it like a house. Really your mortgage, and
when things weren't so crazy, your mortgage was a liability, a long term
liability, and it was a good thing because you had forced appreciation because you
were paying down the debt. And if you could get somebody else to chip
in and pay the debt down with you, you know, you could really
build equity. Minus the times when the real estate market flipped, people were
underwater, but it's been relatively rare. But now, if you've got a
low interest rate mortgage, it's an asset and it's actually on the on the
books of the bank. Your asset what was an asset on the books.
Really is now a liability, isn't it. I mean consumers if the little
guy has finally gotten one over the big guy, right, I mean,
they're going to hold on to these lower interest rate mortgages for as long as
they possibly can, and that'll have a major impact on the housing market.
And so like, I suspect that will be in this kind of until the
end of twenty five when actually coming down, or maybe even longer if they
calm down. If yeah, yeah, big ticket items will continue to be
delayed, and again all the ramifications like this is not good for population growth
because you know, you need these larger homes or starter homes for people to
want to have kids and raise their families that way. And we need kids,
but the population to grow because otherwise we end up like Japan or Western
Europe where the population is shrinking and you know all the negative stuff that comes
with it. So I anticipate deflation to happen on the old old stuff that
people have realized that they hard for that, and you know, inflation to
continue on new stuff that is exciting. And it'll be a tale of two
cities. Hey, And like in Florida, here, real estate prices have
gone up five percent over the past year in the face of mortgage rates doubling.
Partly it's due to a lot of cash buyers here, more than in
most places. I think forty percent cash buyers. But it's also people would
rather pay higher rates than stay in failing cities and states and the migration here.
You know, like I said, we don't need tell or Swift.
We got plenty going on without her, and maybe that's the lesson here.
Yeah, absolutely, all right, Eddie, tell us where do we find
you these days? Yeah, you can find me. Actually, we have
a new book out, the twenty two Laws of Category Design. You can
go get it on Amazon and if you sign up and you know mentioned,
or if you get the book and you know, find your way to me
on Twitter at Eddie would Grow and mentioned you heard about this on your show,
Kerry, then there's a free Companion AI workbook that will absolutely give it
to you complimentary as a get to the show. So at the book,
ping me on Twitter or my email Eddie at eddiwood Grow dot com and I
will get you the AI Companion. It's great. Like the book, Kerry,
you don't read the book the book reads you. If you do the
AI worksheet, and the workbook, you know teach you all the things you
need to know to how to design a category of your own or create your
own category personally. All right, we love it, so you can be
found. We'll have all those links social media and as well as your email
address and your website on Financial Survival Network dot com in the show notes.
You can click any of them and just go right to it. While you're
there, sign up for your free newsletter. If you've got a question for
Eddie or myself, you can also send me an email k l at Kerry
Lutz dot com. Eddie love having you on, Have a great weekend and
we'll talk to you again soon. Thanks Carry, Thanks for listening to Carry
Lenz's Financial Survival Network, your solution to today's trying times. For the latest,
go to Financial Survival Network dot com. Financial Survival Network now more than ever,