The Long View: Talmon Smith - Assessing the Greatest Wealth Transfer in History

please stay tuned for important disclosure information at the conclusion of this episode hi and welcome to the Long View I'm Christine Benz director of personal finance and retirement planning for Morningstar and I'm Jeff Patak Chief ratings officer for Morningstar Research Services today is New York Times economics reporter Talman Smith before joining the business desk he was a staff editor for the Times opinion section covering public policy economics and culture he began his career as a researcher and visiting scholar at nyu's journalism Institute and was assistant to the editor-in-chief at GQ Magazine he graduated from Tufts University with a major in history tell welcome to the Longview but thank you so much for having me well thanks for being here so we want to start by talking about your work as an economic reporter for the times can you talk about how you define your beat so that you're not bumping into the work that your colleagues who are also working on the economy are doing yeah so I'd say that broadly I cover macro labor markets and financial markets whenever financial markets intersect with those other two topics but what's really nice about our Newsroom both virtually and in person is our collaborative nature you know for example having Ben Castleman by your side on a jobs day NFP release is a cheat code right because that man could probably work for the BLS himself if he wanted to right because it's brilliant with data um Joe renison was a great get for us from the ft and he's been lovely to talk about markets with I've learned a bunch from him I've learned a bunch from Lydia de pillis who has come over from propublica recently and with Joe I just paired on a story rounding up q1 earnings season which you know showed how Corporate profitability continues to hold up at much higher levels than anticipated it may now in fact re-accelerate by some measures which as I'm sure we'll get into it that's really bullish for investors and our 401ks going forward but of course a lack of marketing compression or less profit margin compression than people like little Brainerd at the FED before and now then you see it held for we don't get as much as you know somewhere predicting or hoping there then that could be tough for us as consumers directly and indirectly it could be pretty embarrassed for the macro environment because of course that could keep the FED higher for longer than a Market's even priced in or anticipated and so that's an example of a story where you know sort of my real economy and macro Focus paired very well with Joe's really in and out knowledge of markets and you know what they're expecting and what firms large and small are doing so there's definitely times where I have to respect you know that the DC borough is is going to um you know be chasing a debt selling story and they're going to be best positioned to do that and so there's no need for me to be that extra cook in the kitchen and other times it's like you know the more the merrier because this is an incredibly large country we are the largest economy on earth right we are the center of global financial markets so you know there's 50 states so there's there's plenty of work to go around in another sense so I find that when I do bump into colleagues on stuff it's not typically a problem we're a pretty interactive bunch in your work you often try to bring in the lived economic experiences of real people not just economists and other experts how do you find people interview for your stories especially a diverse group of people you might not naturally run across in your work or within your Social Circles for sure I suppose if I have a certain brand for lack of a better term it's definitely that you know I'm a guy that at least partly tries to put human anecdotes and stories into my features or even some of the shorter run database stories that I do I think the goal there for me is twofold I think that people tend to be visual Learners and so they love visual aids and charts I love charts I'm sure we all spend time on econ Twitter and Finn twit you know it's almost like the very matter of communication there in some sense but also sometimes people need human illustrations to understand what the data is communicating and just to like briefly make that more concrete right we've all been seeing the sort of hockey stick shaped charts for particularly lower income workers right uh you know if you've been paying attention you might see that in some cases in Leisure and Hospitality there's charts flying around showing that people are getting pay raises in excess of 20 percent five percent you know on and on and yet right I might find the person that has experienced 30 maybe even 35 percent in terms of pay raises and percentage terms however peeling apart that chart and those percentage terms and finding that oh this person was making 10 bucks an hour and now they're making 14. that's nothing to sniff at right it's modest but meaningful that could be the difference between this person being able to pay a light bill or you know being able to take their kid out for an extra meal right a little treat like that right but 14 bucks an hour isn't you know going to Rocket somebody into the middle class by any means right so so that's that's sort of the point of it um I also think it's important to do on a secondary level because if I am truly uh you know capital r reporter who you know presumably should be objective going into most issues then it's important for me to be open-minded to have an open notebook and I'll have a hypothesis for a story right often that's how I pitch it and get it green lit and you know either start making phone calls or travel someplace but you know I try to keep my mind open to what exactly I find out and oftentimes I'll have an idea in my head of a certain Trend in how somebody might be experiencing it and it turns out that after doing the work of identifying an actual person right in the midst of that phenomenon that oh well I had this idea of what was going on there and actually it's the opposite or that was partially true but we should be complicating this narrative a bit more when we speak about it so to again ground that in something specific I went to Nebraska in early 2022 and you know I expected that you know bosses there employers there would sort of hate the sub two percent unemployment they had because right if you're hiring in that type of labor market then you're likely having to convince somebody who's already employed that you're offering a better opportunity but turns out you know not really most of the employers and I spoke with a ton there you know found some things to be annoying right there's also a lot of supply chain mess still going on the war in Ukraine you know made transport far more expensive right because we saw a diesel shoot up um and yeah it was a bit of a challenge to find staffing but most business people I spoke to in Nebraska had the attitude of referring to deal with the headaches or side effects that come with the booming local economy over the downsides of a sluggish one right where there's plenty of people that'll take a job but there's not enough work to go around and so in that case being on the ground there for a full week let me suss out the precise Hues of the picture there and so part of my thought going into that was oh man I might end up writing a sort of story that quietly underlines the potentially combative nature that comes into play when labor markets are tight enough to um give workers an unfamiliarly high degree of Leverage over you know Capital holders but instead I wrote a story one of the more rare feel-good stories I think in the industry last year about how actually this community was thriving warts and all with this hot economy and what this hot labor market of course since then I've written you know some sad stories about other subjects related and unrelated but I think that was important and you know in terms of the sausage making In The Raw process yeah I mean sometimes I do classic shoe leather reporting where I kind of just show up and I convince my Editor to like hey just let me go there and I'll figure it out um and you know other times either because of time constraints or because of just Simplicity you know there's plenty of non-profits that Advocate you know for people in a pinch what type of pinches you know there are numerous ways to be challenged right and they are very happy to work with you and see you know which single mother that you know works in the airline industry or which person you know recovering from you know drug use or something that is now trying to get back into the workforce you can actually pretty quickly find those folks through organizations but other times you don't want to do that because you can kind of end up with sort of cookie cutter stories whether those are you know really bad SOB stories is that don't necessarily give people the dignity they deserve or right just like a PR person's dream where it's like the smaller midsize or large corporation that gets to you know brag about how great they are and put it in in the times right you don't want to get people that freebie either so sometimes you know I cold call which makes you feel ridiculous sometimes because people hang up on you more than they pick up but when they do pick up sometimes you just get the best stories like um just very quickly here I remember I think I was doing coverage for non-farm payrolls um a jobs day and you know ahead of time it won't come as a surprise to anybody we do some pre-writing obviously we leave open space where the actual numbers are but generally you have a pretty good sense of where the economy stands that month going in and so to the extent you want to you know illustrate what it feels like in the economy in say may of 2022 you you know have these anecdotes that are going to support and help color the data and I remember I called this gentleman who um was an electrician in Tennessee outside of Nashville and you know he was just the perfect encapsulation of what was going on at the time I mean he was very understandably upset about not having a lot of parts whether it's Replacements or new orders because we all know anything related to electronics was a mess for quite some time and you could argue it was still a bit wonky um he was so busy that he actually had to work more hours and he wasn't super happy about that because he had done already you know well enough to where he didn't exactly need the money he was actually hoping to retire soon business was so good for him that he actually had some of his employees leave some young men that worked for him who are also electricians kind of figured out wait yeah business is so good for us right now I'm gonna go start my own thing because you're paying me a wage but why don't I just do you know my own Independent Business and you know in some ways end up competing for market share with you so I tried to I don't know reach out to electricians of America I don't know some trade group right I wasn't going to get this very colorful sort of crotchety old guy breaking down what the market was like for you know a small business person in the trades in in the south at that time so it's I've gone on about this for a bit because I do think it's really important and I don't know that as journalists we always communicate like how and why stories end up being shaped that way and and how it's done because you know I think it's I think it's pretty interesting and and pretty important that's super super her and I think nicely sets the stage for what we're going to talk about but I wanted to stick with jobs and the economy um we are getting these still strong jobs reports yet we're still hearing that recession is right around the corner so from where you sit can you characterize the state of the economy today yeah I mean the cheesy line I'm using right now when I speak to people about this is an annoying economy is not a Contracting economy there's a lot of good reasons people have to be frustrated all the way up and down in the income Spectrum all sorts of investors have been challenged as well on the sort of financial Market side of things but the economy is growing um sort of unevenly and confusingly but growing nonetheless and I think part of what's going on is that it's very important to inflation-adjust data and there's walks that are far more informed than me that could get even further into the weeds but sometimes I think real GDP right which is our go-to measure for economic growth is imperfect and confusing and so you get things like you know the was it a technical recession was it not in uh the first half of 2022 where yeah I mean if you take this number and make the other number the uh you know uh numerator and this the denominator and deflate things this way then yeah like with an economy as wacky as the one during covid and immediately postcoded you can get things like negative inflation adjusted growth while also millions and millions of jobs being added right and so I think that's a sign that not we should throw away rural GDP as a measure right I mean I wrote a story in the fourth quarter I believe of 2021 when you know nominal GDP was still so strong that it was outpacing and overpowering the inflation adjustment and so I you know I'd be Hypocrites then say that you know well we should only pay attention to real GDP when I think it makes sense but I think it's broadly a sign that we should be humble about all this data and I think there's been a lot of really interesting conversations almost like in the academic space on the left and the right of you know maybe GDP isn't the end-all be-all of what we are aiming for as a society you know with our communities and with our markets um on the basics of it you know a recession could be around the corner and I suppose the nature of business Cycles is that you know recession calls are never wrong they're just early eventually we'll get one but it appears that we are no longer secularly stagnant which was our problem last decade right and I suppose austerity policies or future mismanagement of the economy in general could change that right we you know flirted with a completely voluntary debt crisis that you know could and oddly did not cause a recession but ultimately maybe zoom out it seems like for now between the animal spirits of economic reopening the stimulus that butcherist businesses and household balance sheets before during and after the crisis and the sort of strategic longer term bills that Congress has passed that you know aim to crowd in private investment have all combined to give us some escape velocity from that sluggish 2010s era so that even if we do have a dip in the business cycle that the mber decides to classify as a recession or or maybe we'll just you know keep arguing for eternity about what exactly is a recession or not but it does seem like a different General economic feel um the last thing I'll say there is that people's politics can sometimes lead them astray in their analysis of the business environment or the macroeconomic environment you know I spend a good decent amount of time like many of your listeners I'm sure maybe you all watching you know Bloomberg surveillance in the morning and you know some of the CNBC shows and you know then I get to my own work but I just see a lot of commentary and you know not from you know politicians that are being interviewed or other sort of more naturally politically occurring creatures but you know PM's code for a little managers making calls and positioning portfolios of institutional clients based on this idea that there's a you know a Biblical degree that we must pay for the sins of our you know perceived profligacy in terms of supposed overspending with the massive or even a mild downturn um you know yeah maybe we'll have a massive or a mild downturn but seeing people talk about the business environment and the macro Outlook and these ways where they seem to be frustrated that according to a textbook that they trust or you know a leading Economist that they trust that sort of has a certain ideological color and then when that doesn't play out almost blaming reality and getting upset with reality it that just doesn't uh seem helpful but you know everybody has their biases and it's also frustrating to spend a lot of time you know building a set of knowledge or building an investing strategy and having that not go as planned based on what you might see as mismanagement in terms of public policy the last thing on that that I'll say is that you know the inverted yield curve as a recession indicator I think got bailed out by covid or maybe it predicted covet I don't know but even the father of the yield curve inversion indicator right as like recession indicator says that things are sort of so weird right now that it may have broken you know the just absolute trustiness of the indicator going forward and in a similar sense Claudia Sam a former fed staffer who was my writer and I was her editor when she was a contributing writer at the times has said that her Psalm rule right which is a different recession indicator might also not apply and so I think those two folks are a great example of the really necessary humility that this moment sort of calls for another Oddity about sort of the time that we're in right now is this round of rate hikes it hasn't really knocked down the housing market all that much in part because of low inventories in so many parts of the country do you have any thoughts on why that is and and what would be likely to change it yeah I mean I am sure that you all will eventually have if you've not already had somebody that is a policy expert in the housing space in particular and I'm not that so I I want to preface everything I'm saying by acknowledging that I'm learning about this along with um everyone else but I do think that the sort of natural incumbency of home ownership and the many incentives that homeowners think they have to limit Supply or if they're going to build not build in their backyard right which is the you know root of the not in my backyard NIMBY movement and the counter yes my backyard yummy movement I I think those NIMBY forces are powerful and not in a way I find when I'm reporting that comes across as malicious you know as mahaha let's make Society unaffordable for first-time homebuyers and you know folks trying to get a lug up but ultimately you know the the Fed rate hikes will not build more housing Supply right the thing about problems is usually you have to kind of solve problems and so I do think it was sort of odd at least exceptional right when the Fed was buying you know MBS mortgage-backed Securities like well into I think even early 2022 and to what extent that affected mortgage spreads is something that I know is also debate but directionally it seems pretty aggressive however whatever your take is on QE and all the sort of extraordinary actions that the FED took on before during and after the peak of the covet crisis if you step back you know getting mad at Jerome Powell about it all seems a bit silly because ultimately we have to decide if when and how we expand our housing Supply um for a country that is you know not growing as quickly as it used to but it's still growing and that has Millennials right I just turned 29 and yeah I'm sure that just soon enough I'll be a first time home buyer but you know my generation is nowhere near as much of a baby boom as the Baby Boomers but we are actually now right the largest demographic group Millennials and a lot of folks are you know unavoidably going to be in that stage of life where they need places to live and you know part of the American dream most people's primary investment is their house and so we have to balance you know the sort of vagaries of supply and demand with affordability and with the sort of odd situation we have in this country where we have all agreed that homeowners ship is going to be one of the main vehicles of wealth accrual so it's tough but I think the solution and I'm you know it's not my job to offer prescriptions but whatever the solution people prefer whether it's you know more single-family homes or higher density mixed-use stuff whatever it is folks should work on figuring it out because I think whether it's the fed or some other institution as long as we direct our anger at sort of these secondary functions of trying to manage the larger problem then we're not actually going to focus on that primary problem so I'll leave it at that and I look forward to listening to whoever you all have on that is more expert on housing that maybe can help me learn about some more Creative Solutions in that space yeah that's good food for thought and it's a good segue to the main topic that we wanted to discuss with you today which is this in-depth piece that you wrote for the times in May where you looked at the enormous amount of wealth that will transfer from Baby Boomers to their children and grandchildren over the next couple of decades some of that will be housing wealth so before we get into that story can you just talk about why this is happening why have baby boomers done so well yeah I mean baby boomers just sort of hit the jackpot in terms of timing of when they were born right of the 73 million baby boomers right they were mostly born in the mid-century in the heart of the mid-century as U.S birth rate surged um as there was this huge leap in prosperity after the Depression in World War II Boomers had the great timing of getting into the housing market at the time where the government creation right of the 30-year fixed mortgage you know was really coming into mature form um in part backed by more government maneuvering that helped make 30-year fixed mortgages a lucrative investment once it was secured arised on uh Wall Street right because before it's almost a side point so I won't go that deeply into it but there's nothing inherently attractive right about a boring old you know 30-year fixed right there was a lot of intentional involvement by the government to make this something that was sort of a symbiotic public good and a really really profitable you know investment for the financial services World which helped then spur more crowding in of housing investments and so when you add up the numbers right you know a key reason why there are such large soon to be inherited sums is how I found in the story is that incredible way that Boomers benefited from Price growth in the financial and housing market so just to Rattle off the two main stats that were associated with this passage the average price of a US house is risen by about 500 or so since the early to mid 80s when Boomers run their 20s and 30s and on that's as I just said prime years for household formation and we've all witnessed and have all benefited you know we can get into the major downsides that might have come with this transformation as well U.S corporations becoming just these you know countries unto themselves right these Global behemoths and so if you were invested early on and there are plenty of middle class upper middle class and certainly affluent Boomers that were invested early on in the stock market that you've experienced incredible returns right if you just you know Buy and Hold You Know park it don't think about it which is you know a major investment strategy that many people do quite smartly I'd add then you know the stock market by the S P 500 indexes up by almost three thousand percent since the beginning of the 80s which again is around the time index funds took off as a mainstream investment for you know regular folks not just corporate employees in the c-suite so it's this weird mix of timing the maturation of certain investment vehicles that combine to give Boomers so much wealth key point of your piece is that most baby boomers will not be dying with vast sums of wealth they may leave a few thousand dollars or their homes to their errors instead the wealth is quite concentrated with the wealthiest Boomers can you expand on that yeah so high net worth and ultra high net worth individuals those with at least five million and 20 million in cash or easily cachable assets right make up only 1.5 of households right 1.5 households together High net worth and ultra high net worth individuals constituting 42 of the volume of expected transfers through 2045. so that's 36 trillion dollars of money and it is highly highly concentrated um the sort of tongue-in-cheek passage that I have and part of the story that addresses this is illustrating through succession right the HBO show that yeah that is what that sort of wealth looks like and while absolutely there are sort of more I guess you could say run-of-the-mill wealthy families right you know you know a third generation family of doctors or you know somebody that was involved in you know an IPO in the 90s and you know invested their money well and you know maybe got into investing a little bit of real estate around their you know Midwestern town or city that's absolutely there and that's also trillions and trillions of dollars of wealth and much of it will get passed on though the healthcare expenses will eat up a good bit of it and yet it's not a side story but that wealth that sort of upper middle class and sort of normally affluent wealth still is dwarfed by high net worth and really all try networked individuals so when people get into debates about wealth taxes and you know these sort of things and I assume that might come up now I think it's equally important to note that there are some folks like Morris Pearl who I profiled in the story who you know was a Wall Street money manager for many years got started at Solomon Brothers he says he supports reforming the tax system to avoid jeopardizing social stability and economic growth Freddie thinks that we're in danger of becoming you know secularly stagnant again in a few years if you know this level of wealth inequality continues to go forward because we'll lack dynamism Morris Pearl is also in the camp that you know we don't necessarily need the money of the magnificently wealthy um I guess one way to talk about it my uh pal Nathan tankus made this joke that you know you can't cut up a yacht and eat it right abundance for the the middle class and working class you know isn't necessarily this eye for an eye trade-off but it is true that as people have become magnificently wealthy thanks to the booms especially in Tech Banking and so on that they've also been taxed less than they otherwise would have been with old tax rules so it's it's sort of this winners take all compounded by government you know policies and regulations for sure and then just through the sort of natural physics of how money Works compound interest is of a great help to anybody that already has you know a very large pile of assets which all these people in the ultra high net worth category do great I wonder if you can discuss the role of race and all of this which you did discuss in your pace as well in a graphic you show how wealth in the U.S is disproportionately concentrated in the hands of white families is that getting any better slowly but surely um I think going back to what I just said you know just the very nature of compound interest means that you know there is no and I and I know this is a very sensitive topic I am a black American myself so I don't mean to be dismissive but if you just follow the money and understand the data and understand how money begets money wealth begets wealth then there is no catching up in terms of you know absolute terms between whites and blacks in this country and you know it's not for me to decide what we ultimately do with public policy and and how much we factor and racial wealth inequality to talks about wealth equality and income inequality but I do think there was a very well-intentioned Focus for the last decade on the racial wealth Gap and you know it was really remarkably in a way that I think shows a lot of societal progress it was a very key part of the 2020 Democratic primary uh talking about this and I think directionally that is all positive but I think part of what I tried to do and this article was show that you know this country is still mostly white most people in this country are not wealthy and yet most white people are not necessarily wealthy but most rich people are absolutely White And so there's this weird sort of thing where you know to go back to the ultra high net worth individuals that is a very homogeneous group right you can find literally a couple of black billionaires in that group maybe you know certainly Asian families and Hispanic families and others that have done well but it is very much not a diverse group and a lot of that wealth not all of it but a lot of it if you trace it back far enough is absolutely directly connected to you know an apartheid society that we had for most of this country's history and yet I think if we added let's say right Jay-Z is a billionaire if we created a hundred more Jay-Z's with just as much wealth as Jay-Z and Beyonce have right well then in the data right the racial wealth Gap would shrink substantially right um it would still be huge right so I'm doing a little bit of a bit here but it would shrink a lot and I would just tell people that spend a lot of time focusing and talking about closing the racial wealth Gap is that what you want to see and I think they'd probably say no no no what we want is to have better opportunities and better outcomes for the black community and other you know historically disadvantaged communities and I think that leads you to a suite of solutions that and it was super corny way it could be framed as you know a rising tide lifts all boats but if the goal is to make sure that there's a higher standard of living for the black community and for all communities of color for people of all colors then you might in a way that I think ends up helpful for this conversation have less sort of Pie in the Sky debates about reparations and things of that sort and maybe you know have a broader set of considerations and policy reforms that will help not just black folks who are disproportionately in poverty but everybody who's in poverty or everybody who's struggling to afford a home for the first time and so on and so on you know social media is competitive the Intelligentsia is is a passive aggressive but Rough and Tumble place so you know maybe that's too hopeful of me but I think one thing that this piece might have quietly done though maybe I'm being biased because I'm just hoping that you know my own story has a desired effect I think it hopefully helped push people into that latter set of concerns that I mentioned since once you get into race and things get very personal then I I think we often end up having unproductive conversations even if it's absolutely important to keep our eye on the ball of all the ways that racial inequality is still something of this country deals with and a very ugly sometimes way wanted to shift and talk about one policy consideration which is tax policy in your PC discuss how tax policies contributing to this great wealth transfer specifically the fact that a lot of stock and other assets transfer tax-free due to the Step Up in cost basis that families get when someone leaves them assets can you expand on that yeah so I should be somewhat careful here I don't want to get in trouble with my editors but you know one of the great quotes I think at least I enjoyed it was that this wealth strategies advisor at Bank of America Private Bank noting in this conversation with his colleagues that quote inheritances are income tax free to the children with very few exceptions and you know there are so many ins and outs right when it comes to tax policy concerning wealth um one thing that you know didn't make the final cut in this story is the wild nature of family foundations which technically is a family giving up the money to charity and yet the family can you know run this Family Foundation charity themselves get amazing tax benefits on it you know through the endowment and other means and that didn't even make it in right and you mentioned the state tax and step-up basis um taxes as as well or lack thereof and uh the merits of them you know that's not for me to say but I think the very fact that there are so many different specialized tax attorneys and wealth managers that operate in the space it shows that it's a good business it's increasingly a good business I mean it's it's almost funny in a way I mean both management you know you all are more experienced than me but I certainly don't remember it having the sort of Glamor that it does now I think it was a bit more more of a maybe not sleepy Backwater but maybe not the most exciting or lucrative space and you know now we've seen you know many of the biggest Wall Street Banks really pivot to focus on this because they know there's plenty of opportunities for them to save their clients money and for them to make money by aggressively pursuing these means of preserving as well as creating wealth um it is absolutely true that individuals can transmit up to 12.9 million dollars to their heirs during life or at death without any federal estate tax that's 26 million for married couples and that's a change right it wasn't always that way not as long ago as some folks might think you know we had a top tax rate in terms of income you know even during the early Reagan Era well above 50 percent um I'm not sure whether that's compatible with the modern economy we have but I think it is an important indicator that you know the status quo is never a given you know when people get together and have their elected officials come around to an idea a solution they can do that if we you know want to give a carrot to this sort of investment and uh hit another investment or another area of the economy with a stick then you can hit that with a stick I mean I think we saw that with the IRA that President Biden signed into law that that was a very carrots heavy strategy and we'll see if it works that's Up For Debate but I think the analogy there is just that whether we're talking about crowding in strategies for macroeconomic policy or whether we're talking about fairness and our attack system it's all up for grabs none of this is a coincidence right these changes that were incredibly helpful for high net worth and ultra high net worth individuals were put into place by Congress people um and state level officials that they were very close with and you know some populist movement from the right or the left or somewhere in between could come and modify those changes so it'll be interesting to see I would go back to the idea that through my reporting I've truly come around to which is that we are not so dependent upon the ultra wealthy for making whatever future Investments that we decide to do right whether it's a a more cultural one centered on you know dignity which is definitely you know what I'd consider preserving if we want to preserve them Medicare and Social Security right there's not a lot of bang for the buck in terms of productivity gangs by you know helping the elderly have a respectful end to their Twilight years right but we've considered that important or if it's you know having a military buildup to defend ourselves against you know the Chinese Communist party right Beijing um or that same money that can you know go to adapting or you know fighting against climate change the numbers really start adding up very quickly and I think it's just important for macro Focus reporters like me to warn folks that one you know there's a lot of brilliant lawyers I cite or at least hyperlinked to one Harvard lawyer that points out that a wealth tax May be at risk particularly with the current makeup of the Supreme Court but even putting that aside the legality um there's not enough you know Elon Musk and Jeff Bezos is to pay for all this stuff it's much more likely that some creative vehicle I don't know whether it'll look something like you know some version some democratically approved version of of what the FED did uh with its facilities um during the height of the crisis or not it might be something hybrid or it could just be through the plain old issuance of debt we do a lot of that right now anyway um that will be a part of the mix there is no cheat code where we read articles by Tom and Joseph Smith at the New York Times that lays out how deeply unequal this country is in terms of wealth as well as income and then it's like oh well let's just take their money and you know all of the problems will go away there's one one there will always be problems too despite how much money these individuals and these families these households have it still wouldn't cover it so I think the society that we live in the this incredibly complicated and inspiring global economy that we are in even if it's incredibly scary at times it will require a much more creative sort of Public Finance State I think going into the rest of the 21st century so I just wanted to make that I think very important point that was mostly left subtle in the piece but that I think you know in this audio format is maybe a helpful tidbit to highlight yeah that is helpful you know I wanted to talk about some of the feedback on the article um I was reading through it yesterday and the article was circulating among a bunch of financial people on Twitter as well you had about 1600 reader comments before they closed off the comments was there any feedback first I guess did you read the feedback and second was there any feedback that was surprising to you um so I do read the comments I I can't read all of them definitely not when there's 1600 of them um and you're always some mix of flattered and relieved when you spend months working on a story and then it actually does get you know millions of views based on I don't know our internal data and you know because the fear is always what if I spent all my time on this and it just flops or is like a quiet little dud um so I always have that Baseline level of appreciation at the end of the day I I joke with my girlfriend that uh all journalists are essentially still those little kids you know with the crayon and you know a white piece of uh printer paper making a little drawing and then showing it to Mommy and Daddy and hoping it's good enough for it to be on the fridge right so even if people had problems with the article yeah I'm thankful for their readership I think most of the comments that I wouldn't say surprise me but that let's say that frustrated me were people pointing out right just something that I outlined and saying that there's even more detail behind that or well you mentioned this why didn't you mention that and you know it's like I hear your brother like I hear your sister but you're also going to be upset with the times if we you know took the original length of this which was you know 6 000 and left it there now of course some people would have loved that right I think there's definitely a certain type of reader that this is catnip for I mean breaking down and assessing wealth and income and the various ways it you know moves like this massive sort of River delta with all sorts of tributaries and wines and curves right it's all incredibly interesting it has all these social implications so you know maybe a really lengthy version of the story that touched on every single aspect that people brought up in the broader conversation that followed you know maybe that would have been fine but you know the times has also been reassessing how long we make stories you know it was it was a painful cut for for me as well but you know we had to take it from almost six thousand words down to closer to 3 000 and it meant that it was a quicker read that sort of just you know hit the highlights and and weaved in the personal aspects the sort of human illustrations and then it kind of you know cut to the Chase and then let readers very intentionally stew on it in the comments and on Twitter uh I think now it's sort of understood though I think there will definitely still be a room for long form and hopefully you know I'll be one of the writers still doing long form but I think now that there's so many formats right I'm speaking to you for a podcast and you know I frequently do Twitter threads especially for some of the stuff that gets complicated so that sort of more lay readers can you know interact with you know charts that really break things down and a bit more plain English and not maybe have a meme or true connected to it right um there's all these various ways now for us as journalists to get our message out and so I apologize to those that brought up you know one aspect or two aspects or three aspects of the wealth transfer that I did not note in the Final Cut but I would just encourage people to that I was generally aware of the you know granular specific that you pointed out it's just there was not room for it and the story as constructed by then so that's my I guess one PSA that's a good segue to the next question that we had which is I think you've indicated that your article about the great wealth transfer is kind of an opening Salvo on this topic of how wealth is dispersed in our country what follow-on articles do you expect to pursue yeah um without giving too much away or promising too much right always better to under promise and over deliver right now I'm funnily enough looking at the housing aspect here um so I really meant it when I said that this is something that I'm learning about it's funny I was such a procrastinator in school and now I realize it's my job to go pretend to be an anthropologist and then write essays about that for the public and it's like you couldn't you couldn't pay me to turn in an essay before midnight um when it was due before so that's it's funny how how life Works um on that housing aspect I'm in Colorado right now and Colorado increasingly I mean it's booming here and it's understandable why it's booming um in the 2010s the minute the housing market and um the broader economy recovered Colorado started outperforming you know compared to the rest of the states and I mean why not right I mean you have the entire Rockies in the western half of the state beautiful water um all sorts of you know Recreation for adults and kids um it's it's a beautiful place to to raise a family and to you know move as a young person right but you know the thing about people finding out about something becoming a hot commodity is that you know the price of things uh especially you know assets like housing can go up and you know I'll say that some things are a little bit TBD and so you know I'm sure we'll email or interact about the final form of that story but covid really supercharged the boom here in Colorado because many affluent people have the ability to work hybrid or completely remote and if you can work completely remote or hybrid for part of the month or part of the year then why not have a primary or a secondary home and the Rockies in Colorado and a lot of people did that and you saw in some cases right for example in Steamboat Springs housing prices went from around 400 000 or so on average I think uh though I should double check myself later in you know the mid to late 2010s and now you know a little over five years later the average house there is you know 1.2 and I actually just hung out the other day with a realtor who I you know I just saw a house that was for sale along this Mountainside and I'd open one of the pamphlets and gave her a call and so we ended up hanging out she very nicely gave me a tour of a place I will never be able to afford and she was like oh 1.2 that's that's still what Redfin or Zillow says she's like that's going to be dated soon and I was like even with interest rates and she was like oh interest rates half the people that I'm dealing with are cash buyers so they don't really you know three percent seven percent they are completely rate insensitive and price and insensitive in that sense I mean if that's not an illustration of the sort of knock-on effects the downstream effects of this massive wealth transfer then you know I don't know what it is um so there's a lot of public policy debates here led by the governor about what to do about this so that not just the people that work the lifts or that act as tour guides or white water rafting guides and all those other sorts of things related to the recreation economy here how do we ensure that nurses pharmacists um mailmen line Cooks waitresses and on and on can still live in Colorado because I think again without going too far and to the details of the story you know I've met people that are not Realtors and that are not you know her buyers or sellers that are having to ask themselves and their family members like do we not just have to leave this County I mean do we have to leave the state do we have to move to Kansas or move to Wyoming somewhere to be able to afford life and you know I think one of the interesting questions there and one of the interesting questions that sort of cuts across all my reporting is what is a problem versus what is a problem of expectations right what's the problem versus what is the problem of expectations because in some sense you could argue hey this is free market sorry you know the the working world has changed in a way where now people from California and and Seattle and places like this can now move here and you have now been priced out but there's plenty of other places that would love to have you as a community member and you will go live there now and you know in a sense a lot of our public policy you know in many states communicates that to folks but I guess the question there is I mean are we okay with that as an equilibrium as we continue into this decade again not for me to answer but I think we should just all be aware of what we implicitly communicate about our values or how we want to structure certain markets just by keeping the status quo so really quick is a closing question since you do a lot of reporting in the field I'd like to ask is there an issue that you would say is kind of a canary in the coal mine something that we're not hearing a lot about today but may hear more about in the future ah that is a very good question um I mean I think I'll say two quick things the first one which is the quicker one is that I think people have been far too bearish about the economy and I think that is again in part to the way that ideological positions have maybe filtered into you know opinion surveys right um I don't think any of the the main sort of whether it's PMI or nfib right they as a reporter you know sometimes you know those are great organizations and they absolutely produce a lot of helpful data but a lot of the survey sentiment data just has not been useful because I think there are a lot of business people that are still doing so well that they're struggling to keep up with orders or you know struggling to staff up which is another way of saying business is so good I can't hire enough people to keep up with my my current level of business right there's there's a way to frame that that instead of sounding like labor shortage sounds like oh wow like you know things are so great I you know got a really juggle things in a way I'm not familiar with um so while I don't think that they've been as useful or as reliable as they've been in the past I do think that if people get bearish enough we actually can manifest a recession um and then the second side of that is a lot of debt thank goodness is long-term cheap and fixed whether it's uh you know folks holding mortgages or whether it's businesses that you know took the opportunity to finance themselves at the very very low rates of 2019 2020 2021 and early 2022. so the maturity walls to the extent they're anywhere nearby are far out for many companies that have access to debt Capital markets right but small businesses aren't accessing debt Capital markets right I mean they're not there's you know the business around the corner is not you know selling corporate bonds to get through the year right they operate on cash flow and sort of you know business credit cards and through bank loans and I do think that there is some black pool we don't know how big it is we can't right I mean these these are private firms a lot of the time or almost by definition they're private firms um there's some amount of small businesses that are going to realize oh wait yo well the cash flow is not as good as it was last year I think we might need to lean a bit more into uh debt to you know kind of get through this air pocket and then they'll you know get a quote from their banker and that person will say okay well we know that we were lending to you at four percent and five percent of whatever it is in the 2010s but yeah now I got to give you this long for 10 at best or something like that right and then I think you could see a deluge of business failures but it could be a very small crop of businesses relative to the size of the economy but we don't know so that's something that I don't think we've been talking that much about in part because it's so hard to know uh but public companies are certainly doing well and then the last thing and this is more long-term is uh I think that whether you want to call it mmt or just this growing School of sort of Young Bucks uh in The Economist world that are thinking much more creatively about Public Finance I I think this decade they they will have their moment um they'll be wrong just like the neoconsians before them have been wrong about certain things but I think that will be a really exciting thing for me to cover just the changing way that younger economists and and some of their older mentors who are not considered mainstream too long ago or even now how they'll sort of have their moment in the sun which will also end up being a test on a very public test so I think for macro nerds that's something you know to keep an eye out on well more to come and we will keep an eye out for your work in the times tell thank you so much for taking part in this conversation lots of great food for thought today thanks for being here thank you thanks again [Music] cast on Apple Spotify or wherever you get your podcasts you can follow us on Twitter at Christine underscore Benz and at s youth one which is s-y-o-u-t-h and the number one George Cassidy is our engineer for the podcast and Terry gretchik produces the show notes each week finally we'd love to get your feedback if you have a comment or a guest idea please email us at the Longview at morningstar.com until next time thanks for joining us this recording is for informational purposes only and should not be considered investment advice opinions expressed are as of the date of recording such opinions are subject to change the views and opinions of guests on this program are not necessarily those of Morningstar Inc and its Affiliates while this guest May license or offer products and services of Morningstar and its Affiliates unless otherwise stated he or she is not affiliated with Morningstar and its Affiliates Morningstar does not guarantee the accuracy or the completeness of the data presented herein Jeff batac is an employee of Morningstar Research Services LLC Morningstar Research Services is a subsidiary of Morningstar Inc and is registered with the U.S Securities and Exchange Commission Morningstar Research Services shall not be responsible for any trading decisions damages or other losses resulting from or related to the information data analyzes or opinions or their use past performance is not a guarantee of future results all Investments are subject to investment risk including possible loss of principle individuals should seriously consider if an investment is suitable for them by referencing their own financial position investment objectives and risk profile before making any investment decision [Music]

Channel: Morningstar, Inc.

Views: 2,651

Keywords: morningstar, investing, stocks, funds, etfs

Id: qIwuPw3dsTI

Length: 55min 56sec (3356 seconds)

Published: Wed Jun 21 2023