Speaker 1: Right now, let's talk about money, because I need to
Speaker 1: learn a little bit more about how the money with
Speaker 1: Joel Larsgard, friend, I haven't talked to you in such
Speaker 1: a long time.
Speaker 2: How you been, Joel?
Speaker 3: It's been too long.
Speaker 2: Bo I miss you. You complete me.
Speaker 3: I feel the same brothers with you. I know.
Speaker 1: I have been thinking about the economic uncertainty for quite
Speaker 1: some time, and I wonder what's going to happen to
Speaker 1: my four one K my pension. And there are people
Speaker 1: out there with three fifty sevens all sorts of retirement accounts.
Speaker 2: In me, I'm just speaking for me.
Speaker 1: I was moving stuff around because I was concerned about
Speaker 1: the stock volatility. We see what has happened in the
Speaker 1: past couple of months. We've gone from about forty five
Speaker 1: thousand Dow Jones down to forty one thousand.
Speaker 2: I move stocks to bonds. Am I alone in the concern?
Speaker 2: And also my.
Speaker 3: Response, no, no, you're not at all.
Speaker 4: And the Wall Street Journal had an article this week
Speaker 4: is specifically highlighting people who are kind of changing up
Speaker 4: their portfolio similar to what you're doing, in light of
Speaker 4: kind of the economic uncertainty and the volatility in the
Speaker 4: stock market. And it's interesting I think people are saying,
Speaker 4: I feel like I'm a little too exposed to stocks
Speaker 4: in particular, and so they're opting to, you know, instead,
Speaker 4: sell a little bit of their stockholdings, migrate a little
Speaker 4: bit towards gold and cash. And it just takes me
Speaker 4: back though to two thousand and eight when I first
Speaker 4: started working in radio, and I remember talking to a
Speaker 4: co worker who was and I was like, literally just
Speaker 4: in the beginning days of investing. I think it was
Speaker 4: like my second year on the job, and one of
Speaker 4: my cocores was saying, oh my gosh, the stock market
Speaker 4: is in free fall, Like what what do I do?
Speaker 4: And I basically my advice to him was stay the course,
Speaker 4: Like if you sell, how will you know when to
Speaker 4: buy back. Think even of the recent twenty twenty COVID
Speaker 4: downturn of the stock market, there were predictions, dismal predictions
Speaker 4: from really smart people that the stock market was going
Speaker 4: to keep cratering. Think about how long it lasted ultimately
Speaker 4: and how quick the recovery was. I'm worried that friend
Speaker 4: that I talked to back in the day, he did
Speaker 4: make significant changes, and it's just once you start selling,
Speaker 4: once you start tinkering just because the emotions are running hot.
Speaker 4: It's really hard to know when you go back in
Speaker 4: and take on more stock exposure, if you ever do.
Speaker 4: And I think for most people making those changes, it's
Speaker 4: more emotion than it is science.
Speaker 3: And I don't think that's a smart response.
Speaker 2: You make a great point.
Speaker 1: Emotion is inextricably linked to our money. And when you
Speaker 1: mentioned two thousand and eight, that strikes a chord with me,
Speaker 1: because in two thousand and eight was the beginning, obviously
Speaker 1: of the Great Recession. I remember I had just purchased
Speaker 1: a townhouse in two thousand and six for three hundred
Speaker 1: and forty thousand.
Speaker 2: By two thousand and.
Speaker 1: Eight it was worth like one hundred and twelve thousand,
Speaker 1: and I was going through foreclosure.
Speaker 2: It was the worst economic time of my life.
Speaker 1: I say all that to say, for a lot of people,
Speaker 1: this is a time in which they don't want to
Speaker 1: go through what they went through in two thousand and eight.
Speaker 1: I don't have the time to start over eighty more.
Speaker 1: I'm too old in that regard. What other types of
Speaker 1: considerations do you think people are making right about now,
Speaker 1: beyond just this particular moment.
Speaker 3: I think it's important to note two things here.
Speaker 4: One, you know, we've experienced what's called a correction in
Speaker 4: the stock market, so where the S and P is
Speaker 4: down ten percent essentially from its height, and there was
Speaker 4: already a lot of talk about over valued stocks, and
Speaker 4: so I think there was room for correction anyway. And
Speaker 4: then when you talk about the tariffs, the kind of
Speaker 4: whiplash the tariffs that were and then that weren't and
Speaker 4: then that are going to be, that is causing a
Speaker 4: lot of uncertainty for businesses, and so it makes sense
Speaker 4: that we've seen a ten percent correction in stocks. Where
Speaker 4: do things go from here? I don't have a crystal ball.
Speaker 4: I don't know, but it doesn't feel like from everything
Speaker 4: else that we're seeing when it comes to economic readings, unemployment,
Speaker 4: kind of where things stand, consumer spending, that we're headed
Speaker 4: for some sort of dramatic recession or anything like that.
Speaker 3: We could be right, it's hard to predict.
Speaker 4: I think the most important thing for people who are
Speaker 4: out there investing right now and they're close to retirement,
Speaker 4: you have to have a portfolio construction that allows you
Speaker 4: to sleep at night. And if you are, if you're
Speaker 4: freaking out over a ten percent drop in stocks, well
Speaker 4: then you're probably too stock heavy. If you are, if
Speaker 4: you're worried, right, if you're not sleeping a night, if
Speaker 4: you're checking your portfolio constantly, well, one piece of advice
Speaker 4: I have for folks is to check your portfolio less.
Speaker 4: And that sounds maybe like sticking your head in the sand,
Speaker 4: but I think it's I think it's the opposite. I
Speaker 4: think when you're constantly paying attention, when you're vigilant to
Speaker 4: every move you're over, you're more likely to freak out
Speaker 4: over the little machinations that really have very little outcome
Speaker 4: on your ultimate ability to live a good life. So,
Speaker 4: if you have stayed the course and you've been a
Speaker 4: good investor for a long time, just make sure that
Speaker 4: your portfolio is aligned with your ability to sleep and
Speaker 4: and so for some people that that might mean think
Speaker 4: about in twenty twenty, think back what you did five
Speaker 4: years ago. If you were making significant changes, then it means, yeah,
Speaker 4: your portfolio wasn't constructed for potential significant losses. You need
Speaker 4: to have a balance in your portfolio that allows you
Speaker 4: to have some more diversification so that you're not over
Speaker 4: indexed towards stocks, so that you're freaking out when the
Speaker 4: stock market does see declined, because that's the great I
Speaker 4: think people have gotten used to, except for with the
Speaker 4: exception of that twenty twenty COVID dip in twenty twenty two,
Speaker 4: the stock market essentially being kind of like a high
Speaker 4: old savings account that.
Speaker 3: Just returns a lot more.
Speaker 4: And that feels good, right, It feels good to see
Speaker 4: your networth shoot up.
Speaker 3: But the truth is correction that the stock market are normal.
Speaker 4: Something like this is like completely normal in a given year,
Speaker 4: And so I do think that that the handwringing is
Speaker 4: probably overwrought.
Speaker 1: You said the R word as in recession. There have
Speaker 1: been more and more discussions about whether we are on
Speaker 1: the path to a recession or not. Definitionally, you already
Speaker 1: know this recession means two quarters of consecutive quarters of
Speaker 1: negative GDP growth. I'm asking you, Joel Larsgard, Obviously, if
Speaker 1: we're in a recession, that means we've already been sliding
Speaker 1: down that hill for a while to get those two
Speaker 1: consecutive quarters of negative growth. So there are indicators prior
Speaker 1: to that. What are you looking for to say, hey,
Speaker 1: we are on our path to something economically disastrous.
Speaker 4: Yeah, I think right now, all eyes are on policy
Speaker 4: coming out of Washington, DC. And it's interesting. One economist
Speaker 4: was recently quoted. He said something like this could be
Speaker 4: the only recession that was completely avoidable and essential, like
Speaker 4: it could have been changed at any moment in time.
Speaker 4: And it feels like tariff policy and some of the
Speaker 4: economic just decisions coming out of the White House, those
Speaker 4: are the things that could kind of push us towards
Speaker 4: a recession that wasn't likely in the first place. Man,
Speaker 4: it makes me think just a couple of years ago,
Speaker 4: though I think this is probably a year and a
Speaker 4: half ago, Bloomberg had an article and they said all
Speaker 4: signs point one hundred percent likelihood of recession coming. They
Speaker 4: literally said, one hundred percent. Our indicators are lighting red,
Speaker 4: a recession is on the way. And that recession didn't materialize.
Speaker 4: So there's another saying that economists have predicted nine out
Speaker 4: of the last four recessions. There's always talk of recession, right,
Speaker 4: It's like this is something that's what else do economists
Speaker 4: do except for talk about the recession that's coming that
Speaker 4: doesn't end up materializing. There's always reason to be fearful,
Speaker 4: But what we don't think about typically is the hope
Speaker 4: and how resilient companies are even in the face of
Speaker 4: uncertainty and new policy coming out of Washington, d C.
Speaker 4: These are new hurdles to jump, but the American economy
Speaker 4: is nothing if not resilient. And I think especially especially
Speaker 4: for younger listeners out there who are tuning in and they're.
Speaker 3: Like, I'm kind of worried.
Speaker 4: Well, the cool thing about a drop in stock prices
Speaker 4: is that you're able to buy stocks on sale. I'm
Speaker 4: a big fan of dollar cost averaging, So if you're
Speaker 4: in your twenties, thirties, forties, you should just just keep buying,
Speaker 4: as my friend Nick says, and just kind of every
Speaker 4: two weeks with your paycheck just keep scooping up more
Speaker 4: and more. And if prices go down, that shouldn't worry you.
Speaker 4: That should excite you that you're buying on sale.
Speaker 2: That is great, great advice. And I guess right now
Speaker 2: is Joel Larsgard.
Speaker 1: He's the host of How to Money, which is airing
Speaker 1: on here on CAFI Sundays from twelve to two pm. Joel,
Speaker 1: the supposed possible connection between federal land and the housing market.
Speaker 1: Is there a way in which we could use federal
Speaker 1: land to make more housing type landscape available for just
Speaker 1: housing in general. Is there a way that we can
Speaker 1: combine the two.
Speaker 4: Yeah, there is, And there's been this proposal from the
Speaker 4: Interior Department and HUD to basically say, hey, we as
Speaker 4: the federal government, we have hundreds of millions of acres
Speaker 4: of federal land and we're kind of sitting on it,
Speaker 4: and some of it really could be built on to
Speaker 4: ease the housing crisis. And if you've been following what's
Speaker 4: going on with kind of the lack of construction, of
Speaker 4: the lack of new units being built, that has created
Speaker 4: a real problem in this country of affordability. Yeah, it's
Speaker 4: higher interest rates, but it's also just a lack of supply,
Speaker 4: and some estimates say that we're three or four million
Speaker 4: home shy of what we need to kind of fix
Speaker 4: the problem. And so this is one of the things
Speaker 4: I've kind of been harsh on the Trump administration when
Speaker 4: it comes to some of their economic policies. This is
Speaker 4: one of those things, though, that I can get behind
Speaker 4: to say, hey, we're going to open up some of
Speaker 4: these some of these acres of federal land. We're going
Speaker 4: to streamline the process and make it easier for affordable
Speaker 4: units to be built to be built, and I think
Speaker 4: that could over time. This is one of those things
Speaker 4: you don't write the ship in mere weeks or months.
Speaker 4: This is going to take time because the housing market,
Speaker 4: it doesn't turn on a dime. But I think it's
Speaker 4: just great news, and I think it's kind of where
Speaker 4: we need to be headed, at least at least it's
Speaker 4: part of the solution.
Speaker 1: Just to be clear, it's federal land, but would it
Speaker 1: be loaned or made available to private developers or with
Speaker 1: the federal government still be in charge of creating these
Speaker 1: housing developments or units.
Speaker 4: They've talked about like transferring or leasing the land to
Speaker 4: public housing authorities, different nonprofits and local governments. So it's
Speaker 4: it's not going to be the federal government itself building
Speaker 4: these units. They're going to find partners who are kind
Speaker 4: of closer to the ground, who are who they're going
Speaker 4: to vet in order to build these units. Interesting thing too,
Speaker 4: is like how close are these units to the most
Speaker 4: expensive places?
Speaker 2: Where?
Speaker 4: Where are you know which lands are going to get
Speaker 4: built on? And it seems like some of this land
Speaker 4: is going to be more rural right in nature, So
Speaker 4: I guess in places like California in southern California. That
Speaker 4: might not be a you might not see a relief
Speaker 4: in home prices really soon because of this, but it
Speaker 4: does make me think like they're if you've been following
Speaker 4: kind of what's happening in Austin. Austin has rolled back
Speaker 4: the red tape when it comes to the how much,
Speaker 4: you know, how much it takes to get done, to
Speaker 4: get some things built. They've basically made it easier to
Speaker 4: build multi family units on single family residential lots that
Speaker 4: were formally formally sowed for single family and it's been amazing.
Speaker 3: Austin's been a boom town.
Speaker 4: I was just their last week and they're putting up
Speaker 4: apartments right and left, and already rents have declined twenty
Speaker 4: two percent from like what I'm calling peak Austin just
Speaker 4: over a year ago.
Speaker 3: So this boom and building when we really do.
Speaker 4: Kind of cut back and roll back some of this
Speaker 4: red tape, when we increase supply, it's amazing how incredibly
Speaker 4: expensive Austin was becoming. But when we just make it
Speaker 4: easier for people to build units, which is far from
Speaker 4: the case here in the state of California. When we
Speaker 4: make it easier for people to build for builders to
Speaker 4: get in there. They you know, it might be the
Speaker 4: person in the single family home next door might say,
Speaker 4: I don't really want a quadplex next door to me,
Speaker 4: because that's that's the NIMBI movement, right not in my backyard.
Speaker 4: I don't want that thing next door. But ultimately it's
Speaker 4: it's best for all of us, and it might not
Speaker 4: be as productionary to your home price, but it's going
Speaker 4: to be better for young people who are trying to
Speaker 4: their first home.
Speaker 1: Let's go back to what we were talking about last segment,
Speaker 1: about this idea of an approaching recession. How much of
Speaker 1: the pie is the housing market in the assessment in
Speaker 1: the health of our economy.
Speaker 4: Yeah, I mean the housing market matters a lot. And
Speaker 4: what happens with the housing market is also anybody's guess.
Speaker 4: It's because we have that lack of supply just overall,
Speaker 4: but then a lack of people putting their homes on
Speaker 4: the market because when you have a two point eight
Speaker 4: to seventy five percent mortgage, even if you want to move,
Speaker 4: you don't because you don't want to buy something else
Speaker 4: with a seven percent rate. And so the real estate
Speaker 4: market's kind of been on lockdown in some ways, and
Speaker 4: it's kind of kept prices high. But at some point
Speaker 4: people are going to get used to these seven percent
Speaker 4: rates because I think the I think the three percent
Speaker 4: rates were essentially a vanishing thing, Like I don't think
Speaker 4: we're going back to that era. A lot of real
Speaker 4: estate agents have been telling people buy the house, date
Speaker 4: the rate, that kind of thing, and it's like, well.
Speaker 3: I don't know.
Speaker 4: You don't want to land on or bank on the
Speaker 4: fact that you're going to be able to refinance next
Speaker 4: year at a five percent rate, because that hasn't materialized,
Speaker 4: And I'm worried about people planning in that way and
Speaker 4: not being able to and being stuck with a higher
Speaker 4: than the mortgage than they can actually afford.
Speaker 3: So be careful on that front.
Speaker 4: But yeah, what happens with the housing market, I could
Speaker 4: see a slide in prices, especially the longer we're in
Speaker 4: this era of seven percent rates, the stickier that is.
Speaker 4: At some point people just say, I have to move,
Speaker 4: I've got to go somewhere. More people are listing their
Speaker 4: homes and we could see I think the predictions for
Speaker 4: housing price increases this year are essentially non existent. And
Speaker 4: if you think just a few years ago, when how
Speaker 4: home prices were rising like wildfire like that era is.
Speaker 1: Over last question, Joel, and I think you kind of
Speaker 1: tipped off where I was going with this. I wonder,
Speaker 1: given that interest rates for real estate purchasing real estate
Speaker 1: will probably never go back to the three percent as
Speaker 1: you see, I thought it was artificially deflated because of
Speaker 1: COVID and other issues.
Speaker 2: Those days are gone.
Speaker 1: When I bought my first place back in I don't know,
Speaker 1: two thousand and three was like a seven percent interest rate,
Speaker 1: so that.
Speaker 2: Is normal for me.
Speaker 1: But having said that, have we also changed in the
Speaker 1: sense that the idea of the American dream and using
Speaker 1: homes purchase of real estate as a way of generating
Speaker 1: wealth in a generational sense?
Speaker 2: Is that time also gone?
Speaker 3: I kind of hope so.
Speaker 4: And it's not that I'm against people having value creation
Speaker 4: in their home. It's kind of a force method of savings.
Speaker 4: And you know, when you think about the average Americans networth,
Speaker 4: the substantial amount of it is tied up if they're
Speaker 4: a homeowner in the value of that home.
Speaker 3: Especially if they bought a decade ago.
Speaker 4: But I think, especially now, when you look at the
Speaker 4: discrepancy between what you're going to pay taking out a
Speaker 4: mortgage on that new house versus the rent you would
Speaker 4: pay for something similar. The GAP's never been wider. And
Speaker 4: so I get the desire to own your own place.
Speaker 4: And I don't want to tell people who want to
Speaker 4: do that that it's a bad idea, because I don't
Speaker 4: think it's a bad idea. I just think you have
Speaker 4: to be aware. You've been taught for so long, we've
Speaker 4: kind of been brainwashed that buying the home that's the
Speaker 4: next step to adulthood, that's the next step to wealth building.
Speaker 4: And I think for a lot of people, renting can
Speaker 4: be a great step to wealth building because you're really
Speaker 4: minimizing your monthly outflow and renting for longer can make
Speaker 4: a whole lot of sense, especially if it allows you
Speaker 4: to invest more of those dollars. Think about what you
Speaker 4: would have spent on the mortgage. Just price it out.
Speaker 4: I was looking at a house in this price range
Speaker 4: at this interest rate, what would I be working over?
Speaker 4: And think about what you're working over in rent right now.
Speaker 4: See what the gap is. If you can invest that money,
Speaker 4: you're going to come out ahead over time. And so
Speaker 4: I do think, yeah, renting is kind of undervalued. It's
Speaker 4: and I hope that kind of the discussion around renting
Speaker 4: versus home buying is changing, because I think it's not
Speaker 4: only possible, but it might be easier to build wealth
Speaker 4: as a renter these days.
Speaker 1: Real quickly, we didn't have time to get to it,
Speaker 1: but we also had the opportunity to possibly talk about
Speaker 1: how Harvard had just announced that tuition will be free
Speaker 1: for families making less than two hundred thousand dollars a year.
Speaker 1: I only bring that up because that's usually a consideration
Speaker 1: for families usually taking out a second mortgage or pulling
Speaker 1: out equity of their house to send.
Speaker 2: People to college. What about that? Then you lose that
Speaker 2: option as a renter, don't you.
Speaker 3: Well that's yeah, you lose that.
Speaker 4: But you got to then funnel some of those money,
Speaker 4: those investment dollars into like a five to twenty nine.
Speaker 3: Account plan ahead for your kids' school.
Speaker 4: But the thing is, I think five to twenty nine
Speaker 4: accounts can be great, but I think they also might
Speaker 4: be They might be over considered too if you're not
Speaker 4: saving enough and investing enough for your own retirement. The
Speaker 4: five twenty nine is a great plan. It's gotten more flexible.
Speaker 4: Just don't prioritize that above your own saving for your
Speaker 4: own future because they're scholarships available. And look at what
Speaker 4: Harvard just did, and look what other schools are doing.
Speaker 4: It's actually the sticker price of college has gone up,
Speaker 4: the actual price people are paying has gone down. That's
Speaker 4: something that hasn't been talked about very much. There's kind
Speaker 4: of data about the post discount rate, and so it's
Speaker 4: actually getting less expensive to go to college these days.
Speaker 4: So the first time in a long time. Part of
Speaker 4: that's the COVID factor, right, that people are just not
Speaker 4: going to college in the same numbers as they were,
Speaker 4: and so it is putting downward price pressure on a
Speaker 4: higher education. I think that's a good thing, and I
Speaker 4: think it's good that people these colleges are prioritizing free
Speaker 4: education for people who don't make ridiculous sums of money.
Speaker 1: How to Money with Joel Larsguard airs every Sunday from
Speaker 1: twelve to two pm. You can find Joel Larsguard at
Speaker 1: how to Money Joel. Joel has been way too long.
Speaker 1: Hopefully we get to do it again sometime soon.
Speaker 3: For sure, let's do it mo