#2 – Tiger Woods, Nick Saban, Bitcoin ETFs, and a Half-Billion-Dollar Pizza

Wes Moss [00:01:16]:
SEC making it readily available in etfs. A whole bunch of them were launched this week. And then, of course, this is a crisis update or a world crisis update from bank of America, which some of these are so scary, they’re almost slightly laughable. Bank of America talking about living in a world of perma crises or polycriises. Essentially, there’s something bad happening all the time, all at the same time. Multiple bad things happening at the same time. But not here on money matters because we’re here in studio along with Jeff Lloyd. Thank you for being here, Jeff Lloyd.

Wes Moss [00:01:56]:
And we’re rocking and rolling in the new year. Where do we start? Do we go golf, football, inflation, world crises, or.

Jeff Lloyd [00:02:08]:
I kind of know where I want to start.

Wes Moss [00:02:10]:
Where do you want to start?

Jeff Lloyd [00:02:10]:
Can we talk about Nick Saban retiring sooner?

Wes Moss [00:02:13]:
That makes me feel better after going over this poly crises list. The print is so small I can barely read it. But we’re going to get to some of these. Well, here’s a quick preview on this. We are overdue for a what? A large volcanic event. By how much?

Jeff Lloyd [00:02:29]:
No, a mega earthquake. We are overdue for a mega earthquake by over 10,000 years.

Wes Moss [00:02:35]:
All right. Well, that’s just a preview to our list from bank of America, looking at what could go wrong in the world, as though they needed to remind us, if you’re an Alabama fan, maybe something did go wrong because Nick Saban, here’s my thought around this. He retires sooner. Nick Saban retires sooner. Now, for the record, I’m not an Alabama fan. I’ve never lived in Alabama. Didn’t go to Alabama, but I don’t mind Alabama. I know that Georgia fans probably hate Alabama, but to me they’re just a good football team.

Wes Moss [00:03:08]:
The guy’s one of the best coaches of all time, but he is retiring way sooner than his contract. So he’s 17 seasons at Bama, won, what, 201 games. And if I get any of these wrong, I’m sure I’ll get hate mail from Alabama, from the Crimson Tide. Folks, he tied with Vince Dooley, tied for second with the most wins in SEC school history, trailing only bear Bryant from Alabama with 232 wins. Nine SEC championships, six national championships at Bama, one at LSU, coach at Toledo, then Michigan State, then LSU, then the Dolphins, then the Miami Dolphins, and then to Alabama for the amazing run that he went on there. 28 years as a head coach, never had a losing season. Now in 22, Saban signed a contract, of course, with the Crimson Tide, worth $93.6 million. That was the total deal scheduled run over eight years through 2030, meaning he had another approximate $72 million left on that contract.

Wes Moss [00:04:19]:
What is he doing? Jeff Lloyd, talk about retire sooner. He’s got $72 million on the table and he’s just walking away from it. I guess he just doesn’t need it.

Jeff Lloyd [00:04:27]:
Well, he’s made over 120,000,000 at Alabama already, so what’s an additional 72 million?

Wes Moss [00:04:34]:
And that’s just at Bama. So who knows exactly what he has squirreled away. Clearly. So is he going to be a happy retiree? That’s the question.

Jeff Lloyd [00:04:43]:
I think he is. I think he’s going to find some core pursuits, and I did a little thinking of what are, what’s he going to be doing? He’s going to spend some time at the lake. He’s going to spend some time with the family. I hear he loves pulling his players and stuff in a tube. Yeah.

Wes Moss [00:05:00]:
Really?

Jeff Lloyd [00:05:00]:
That’s his is.

Wes Moss [00:05:03]:
I’ve heard he has a place on Lake Burton. Have you heard that?

Jeff Lloyd [00:05:05]:
That’s what I’ve heard, too. And apparently he bought a house down next to Justin Thomas somewhere in Florida.

Wes Moss [00:05:12]:
So he’s got a Florida. He’s got Lake Burton, I’m sure. Obviously Alabama place. So the one thing I do say again, so he has all the money in the world, right? Plenty of money. He’s way over the happy retiree. Median amount for the United States of America. I’m sure he has more than three income streams, three to four. He’s got, arguably the state pension.

Wes Moss [00:05:32]:
Will he get a state pension?

Jeff Lloyd [00:05:34]:
I think he’ll get a pension. Obviously, he has like endorsement deals. He’s had his contract. He owns some.

Wes Moss [00:05:43]:
Nice.

Jeff Lloyd [00:05:44]:
That’s a great income streams for him.

Wes Moss [00:05:48]:
So I think the question, and this just goes for anybody that has a job or a business that is so all encompassing and I think with college football, and this is probably why he’s stepping away, it’s such a full time job. And now you’ve got the nil deals, which make it, I think, a lot more difficult for coaches. Now you have the transfer portal, makes it a lot more difficult for coaches. So you’re recruiting all the time, all year round. You’re worried about losing players to go into the portal at some point. It seems like one of the. And then again, unless you’re a national champion or a top, top team, then you’re always on the hot seat. I think it’s just a really tough job.

Wes Moss [00:06:30]:
Most coaches are always under the spotlight in not a great way.

Jeff Lloyd [00:06:34]:
Yeah. I mean, normally they’re under the spotlight and under the heat to perform 365 days a year. Actually, this year it’s 366 days.

Wes Moss [00:06:43]:
You do know that because you must have a leap year birthday. Is it?

Jeff Lloyd [00:06:47]:
My daughter is close. She’s February 27.

Wes Moss [00:06:50]:
Well, he’s got plenty of money. I think that he certainly will. I’m sure he’ll get some core pursuits. If he doesn’t. I think he still does the afflac commercials. Those are awesome. Him and Dion.

Jeff Lloyd [00:07:01]:
Him and Dion prime and the duck and the Buffalo.

Wes Moss [00:07:06]:
This is also, and again, you’re Auburn fan. Do you guys have this super rivalry with Bama?

Jeff Lloyd [00:07:17]:
Yeah. I mean, it is. They talk about Auburn and Alabama. 365, 66 days a year in the state of Alabama.

Wes Moss [00:07:26]:
All right, here’s what was left on Saban’s. Is it a statue?

Jeff Lloyd [00:07:32]:
Yeah, there’s a statue of Nick Saban right outside the stadium, and I saw an article of all the different items that people were placing at the foot of the statue.

Wes Moss [00:07:43]:
Some of these are crazy. Some of these make some sense. Little Debbie oatmeal cream pies. Who doesn’t love those? Boxes of individually wrapped cookies? We get some bouquet of roses. I like this. Bottles of soda, including Coca Cola bottles you’d see on his press conference. He’d put those on the podium. Cans of kors light.

Wes Moss [00:08:02]:
I don’t know what. Four loco. A can of four loco.

Jeff Lloyd [00:08:06]:
It’s an energy alcohol drink.

Wes Moss [00:08:09]:
Energy alcohol drink sounds safe. I don’t know what yellow hammer cups are either.

Jeff Lloyd [00:08:14]:
Yellow hammer a, that’s a popular drink in Tuscaloosa.

Wes Moss [00:08:19]:
A bag of ice, a slice of pizza, candles. A coffee mug that says world’s best boss, identical to Michael Scott’s on the office. A small pumpkin that makes a small pumpkin. A can of Arizona sweet tea, a bottle of smearnoff ice. I love this. A target gift card and a plastic gold crown because he is the goat great of all time. And this, a bucket of pickles. Is that an Alabama.

Wes Moss [00:08:49]:
What’s that about?

Jeff Lloyd [00:08:50]:
I have no idea what the pickle thing is.

Wes Moss [00:08:52]:
Bucket.

Jeff Lloyd [00:08:52]:
No clue.

Wes Moss [00:08:53]:
It’s a bucket of pickles. Saban retires sooner. I think he’s going to be okay and I think he’s going to be a happy retiree.

Jeff Lloyd [00:09:00]:
Oh, I know what the pickles are.

Wes Moss [00:09:02]:
Yeah.

Jeff Lloyd [00:09:03]:
I think it’s a metaphor for the state of Alabama. Football and fans. They’re in a pickle. They don’t have a coach. That’s what it is.

Wes Moss [00:09:13]:
You would only pickle figure that out. Speaking of sports and the business of sports and money, which, again, I guess we’re on this track here. We would be remiss if we don’t talk about Tiger. Tiger and Nike split. This is a really interesting history. Tiger woods producer, Mallory, her eyes are what? And she doesn’t even follow what she calls the sports. That’s how much she’s into this. But even she knows Tiger.

Wes Moss [00:09:39]:
They were together for 27 years. They first sponsored him back when he was still, I guess he was an amateur. But when they first gave him, or he was 20, when they first signed, it was only a $40 million deal. But then in 2000, he got a deal with Nike that was worth over 100 million. That was the richest sponsorship deal for an athlete at the time. And over his tenure, made over a half a billion dollars, $500 million with Nike. Nike has been in the golf business, but not really. I guess they’ve never really been.

Wes Moss [00:10:16]:
Well, they don’t make golf clubs anymore. So I went back and looked at that timeline. They’ve been in apparel for a long time. So since the, in 86, they sponsored the UGA women’s golf team. I think that was the first college team to do a deal with Nike. 93, they made their first golf shoe, 96. That’s when they first signed a young Tiger for 40 billion, then 98, their first golf balls. Then they signed Tiger to the big time contract in 2000.

Wes Moss [00:10:44]:
And then in 2002 is when they started making Nike golf clubs. In six, Nike apparel became the number one brand in golf. And then in 2016, they stopped making golf clubs altogether because they weren’t selling. So I’ve never had a pair of. I’ve never used Nike golf clubs. Could they really be that bad?

Jeff Lloyd [00:11:07]:
I don’t know. But you’re a golfer. Yeah, I’ve never played with golf. I’ve never played with Nike clubs, but I have lost a bunch of Nike golf balls.

Wes Moss [00:11:17]:
To this day. As for golf, they’re really just a golf apparel business, and they still sponsor mean Scotty Scheffler, Tony Phenow. They sponsor Rory. The question that I’ve been getting this week is, what’s Tiger going to do next? What’s he going to do next? And obviously, nobody knows, but he just has such a big brand, a guy like that, that’s gone through so much in the press, and he is so scrutinized that for him, I would think he’d probably just want to have his own brand, his own company, as opposed to being part of some other giant sports brand. It seems like that would make sense to me. My bet is that he’s going out on his own.

Jeff Lloyd [00:11:58]:
Yeah, I mean, Tiger is his own brand.

Wes Moss [00:12:02]:
Speaking of a slice of pizza and a bag of ice left for Nick Saban, along with the jar or the bucket of pickles, the announcement this week by the SEC to approve bitcoin etfs is a really big deal. This is ten years in the making. This has been something that Wall street has been knocking on the door to get. They want regulation so they can have these products out there. But there was a little bit of a saga this week, whether it was approved, not approved. Ultimately, the SEC approved bitcoin ETF. So now the accessibility to be able to participate in bitcoin just went up dramatically. It’s much easier today to be able to just go buy an ETF, like a stock ETF or a bond ETF or gold ETF.

Wes Moss [00:12:49]:
Very easy to do at this point after this past week. Back in the day, as my kids would say, when bitcoin was first around, it was, of course, not nearly as easy. 94% of cryptocurrency buyers are Gen Z and millennials, so it’s a much younger audience that’s 18 to 40 year olds. If you’re a gen Xer, you may have some cryptocurrency, but if you’re a baby boomer, you probably don’t have a whole lot. Back when bitcoin was still. This was brand new. This was back in 2010. And if you go, there are some charts.

Wes Moss [00:13:27]:
You can find what it was trading at. But a couple of cents per bitcoin. Two cent. Three. $0.05. Let’s say there was a guy named Laszlo Hannicheck who used bitcoin to buy two papa John’s pizzas. I found an interview, I think Anderson Cooper did an interview with him many years later when it was obviously worth a lot more money than two pizzas. But he used 10,000 bitcoin to do it.

Wes Moss [00:13:56]:
He used 10,000 bitcoin to buy two pizzas. Back then he said it was worth 30 or $40. But today, of course, with the price of bitcoin, let’s call it hovering around $45,000, how much would that be? Jeff Lloyd? 10,000 bitcoin today would be worth how much? It’d be about in us dollars. American dollars.

Jeff Lloyd [00:14:17]:
About 500 million.

Wes Moss [00:14:18]:
About almost half a billion dollars. $450,000,000. That’s how much. The price has changed from 2010, when it was brand new, till essentially today. Really? And that’s why it’s caught our attention, because it’s such an astronomical rise. I almost broke my hP. Twelve C financial calculator doing the math here. But you go from five cents to forty five thousand.

Wes Moss [00:14:45]:
What’s the math on that? It’s something like, and this is just rounding because these numbers, it’s hard to even comprehend. It’s something like a 90 million% return. 90 million%. But since 2011, and really I just looked at it from when it hit a dollar, which looks like in 2011, it hit a dollar for the first time. From a dollar to 45,000 is a four and a half million percent rate of return. 4.5 million% rate of return. And of course, the first question Anderson Cooper asked him, aren’t you mad at yourself that you spent that much? It could be worth so much money at the time of the interview was something like it was still worth 80 million, tastes worth a half a billion. What’s the reality of somebody that stumbled across or maybe accidentally mined the first handful of bitcoin? It’s digital, so you can’t actually hold it in your hand.

Wes Moss [00:15:33]:
It’s a digital currency. You can’t see it, can’t hold it, can’t put it in your wallet. It’s not physical. It’s digital. What are the chances that if he had held it and it climbed to a million and 5 million and 10,000,081 hundred, that he wouldn’t have sold it? That’s the question, is that it’s not even a fair story. Don’t you wish you would have held on to it. And of course, you’re getting the answer of hindsight. You’re getting the benefit of hindsight, of course.

Wes Moss [00:16:01]:
Wait a minute. Why’d you waste it on a pizza? It could be worth so much money today, but you’ve got to look at the drawdowns and the volatility, and this has been such an amazingly volatile asset. Again, think of it as a currency. It’s hard to really look at it as a currency because the price swings so wildly. There were some years it was $16 and then went back to $2. I mean, imagine how much volatility there is. We’ve seen it at 40, go down back to 20, then back to 40,000. Even though this has been around for, call it over well over a decade now, about a decade and a half almost.

Wes Moss [00:16:42]:
It’s still hyper volatile, so it’s still hard to think of it as a currency. It’s really used as an investment or an asset class. But if you were holding this and it was up 2000, 5000, 100,000% at one point, the question is, what would you have sold it or not when it went down? And this is for the year in 2014, down 58%. Jeff Lo, you would have sold it then. Wait a minute, I made so much, and then it was down almost 60%. 2018, it was down 73%. In 2022, it was down 65%. So it’s been.

Wes Moss [00:17:16]:
An indigestion is the wrong word. It’s hyper volatile. And that’s why it would be unrealistic for someone to just have ridden this thing out from $0.05 or $30 essentially, to 450,000,000.

Jeff Lloyd [00:17:32]:
Yeah, I think the chances of someone holding bitcoin throughout all that volatility is pretty low.

Wes Moss [00:17:41]:
Pretty darn low.

Jeff Lloyd [00:17:42]:
I don’t think going from $0.05 even to a dollar to $10 to 45,000, I don’t think our buddy the pizza guy would have held onto it that whole time.

Wes Moss [00:17:52]:
And again, this is newer for our show, because really, this has just happened this week. Now, I guess we’re going to have to look at this as an asset class, a little bit like a stock. So just like we’re not recommending individual stocks or etfs, we’re not recommending buying or selling bitcoin. We shouldn’t be really careful about that. But I do want to answer the question, because I’ve had lots of folks already asking, well, shouldn’t we own some bitcoin, or should we own some bitcoin? A couple of things. Let’s just go through for those who don’t know the ins and the outs of bitcoin. And I’m not going to pretend to be an expert about this, but I’ve studied this and read this for many years. Here’s how I would explain it pretty simply.

Wes Moss [00:18:35]:
One, it is supposed to be digital money. Really, it’s a digital asset. But because you can transact in it, there are places you can pay. Then you’ve got to call it a currency or you have to call it money. So, first of all, it’s digital money. And yes, you can still buy pizzas with it if you can find a place that’ll take it. And there should only be 21 million total bitcoins ever produced or ever mined. So it does have a finite supply.

Wes Moss [00:19:03]:
You do the math. 21 million times the price, let’s call it around number $45,000 per bitcoin. It’s about a trillion dollars right now. That’s the marketplace. So it’s massive. Two, what’s really behind it are the infrastructure, the scaffolding, if you will, of how it works. It’s built on what, again, most people have heard of at this point, blockchain. Blockchain technology, which is this special ledger that records every single transaction.

Wes Moss [00:19:31]:
When I was first trying to learn about bitcoin, my best analogy to think of this was that it’s an exacting version of the game, whisper down the lane. So every single transaction gets recorded, and then the next bitcoin is used, if you will, and then that new transaction gets tacked on to the existing ledger of all the transactions that it’s already been through. So it’s this exacting game, whisper down the lane. You kind of tend to lose the message from person to person eventually. Hey, Jill ran to the farm. Ten people later said Jill bought a tractor on the farm near the geese. Eventually, things get changed, but not with the bitcoin ledger, not with their immutable ledger that is blockchain. So that’s how this work.

Wes Moss [00:20:23]:
Every time somebody uses bitcoin, it gets written down in this giant digital notebook. Everyone can see it, and it’s supposed to make it so that everyone can see where they’re used. Three, how do you get bitcoin? This is harder for me to even wrap my head around, because I’ve never done this. But to get more bitcoin, you can mine for bitcoin, which is solving these algorithms, which also takes a lot of computing power. If you look at Barron’s did a great article just this past week about their forecast. For utility, for electricity use. And it wasn’t Barron’s, but it was in the article. Around the forecast.

Wes Moss [00:20:59]:
Over the past decade, electricity use has only gone up by about. It’s actually a little less than a half a percent a year over the last decade. So we’re using a little bit more electricity year after year after year. The forecast by the energy department is for 2% growth per year for the use of electricity. Immediately you think, well, where’s all the new demand? That’s triple, quadruple the demand growth over the next, call it decade or so, where’s it coming from? Immediately you think, oh, it’s got to be cars, it’s got to be electric vehicles. And of course, that is part of it. But what perhaps is an even bigger part of it is all the computing power that we need, the data centers that need electricity to run for artificial intelligence. And you’ve seen, or we’ve heard of stories of these giant bitcoin mining farms that take massive amount of energy or electricity to run computers to do bitcoin mining to create more bitcoin.

Wes Moss [00:21:56]:
So part of the energy use is that the world think about a currency now transferring to a digital currency. How do you get it? You mine it takes a lot of electricity to do it. So thank bitcoin for at least part of that. And then it’s decentralized, which is maybe the most interesting thing about it. There is no bank, or there’s no government in charge of it. It is decentralized. That means everyone participates in it, and everyone that has it is an owner of that particular piece. But there’s no one person or entity that’s in control of it.

Wes Moss [00:22:30]:
So there’s no boss, it’s decentralized. And again, we’ve talked about the ultra volatility, I think is a really big part of this. It’s still a highly volatile asset. So if you think of this as a currency, the advent of now that it’s much easier to buy in an investment account, who knows if this will be offered in 401 ks? I bet you it probably will. At some point, little ETF options will enter into 401K plans. So you have this multitrillion dollar market. That’s the retirement market in the United States. You could see a big rush of money go into bitcoin, but it may actually dampen some of the volatility now that you’ve got many more buyers and sellers.

Wes Moss [00:23:15]:
And we could see over time, it gets less and less volatile and eventually gets stable enough to be used as a currency. Which it was to some extent originally intended to do. And that’s kind of the way I would think about what bitcoin really is in the world we live in.

Jeff Lloyd [00:23:33]:
That’s a good point you bring up about stability. And one thing I’ve kind of always asked myself, or people I’ve talked to about cryptocurrency, if you’re selling your house, are you going to accept bitcoin as a form of payment for your house?

Wes Moss [00:23:48]:
A great way to look at it. And the answer is no way. I would never in a million years, because you’ve got this big amount of money, then it could move by 10% in a day or a week. It’s not even close to being able to be a real currency, particularly for big purchases. That’s a great way to look at it. More money matters, straight ahead. Thinking about retirement in 2024? Well, you’re not alone, and I’ve got just the thing to help guide you on your journey. What the happiest retirees know, my most recent book that shares the ten habits of the happiest retirees, meant to help you land at a place where work becomes optional for a limited time.

Wes Moss [00:24:29]:
Get 25% off@westmossbooks.com. Simply use the promo code. Our treat. All one word at checkout. That’s westmossbooks.com. Interesting note about Vanguard. We were just reading through the break. Jeff Lloyd what are they doing when it comes to they are banning all.

Jeff Lloyd [00:24:51]:
Bitcoin etfs from their platform?

Wes Moss [00:24:55]:
Makes sense. I totally get that from coming from Vanguard. And the other big question, this affects us all in the outlook last week for 2024. We really kind of centered around our themes for this coming year really have to do with hedging against inflation, protecting ourselves against inflation. That’s a perennial thing for investors to do. We’re always talking about protecting our purchasing power. Every year we’re thinking about that, but it’s gotten some short shrift until the last two and a half years because inflation went semi dormant for over a decade. Now it’s back went to over 9%.

Wes Moss [00:25:38]:
And we have been watching that moderate. And that is the big economic story of the last couple of years. Huge inflation meant the Fed would raise interest rates. And think about what that has done. It is, to the surprise of most economists, not really put us in recession. We had two quarters there where we were essentially just ever so slightly down. We never entered into an official recession, but here we are going from ultra low rates. You could refinance your mortgage at one point for under 3% to hitting 8%.

Wes Moss [00:26:11]:
It’s had a giant impact on the housing market in more ways than we would have even thought you would think right out of the gate. Higher rates means, well, housing prices could come down. Less people buying, reduce demand. The value of homes is going to have to fall dramatically. Ironically, that didn’t happen at all because of this very unique scenario where we had this period of time where everyone could refinance. So the vast, vast majority of Americans that do own a home have low mortgage rates, and they don’t want to let that low rate go. So what happened? The Federal Reserve knocked down demand because we had higher rates. I can’t afford that payment.

Wes Moss [00:26:52]:
I could have afforded that house with $1,500 payment, but not a $2,500 payment. That’s how dramatic payments change due to interest rates or mortgage rates. But at the same time, the supply of homes going on the market dropped just as dramatically because people looked around and said, well, hey, honey, we can’t sell. I don’t want to get A-6-7-8 mortgage. So ironically, you had a giant drop in demand, but you also had a giant drop in supply of things going to the market. So hence here we’ve seen housing prices continue to tick higher. Now, arguably, the surge seems well behind us. We had a massive surge.

Wes Moss [00:27:33]:
Clark Howard has been doing some great informational spots around the price of housing Atlanta over the last four years or so, up over 50%. It’s one of the most expensive increases we’ve seen in the housing market in the entire United States. Clark says it’s not hard for first time home buyers today, in wonderful Clark Howard Fashion, says it’s impossible for first time home buyers to buy a home. There’s no way you can do it. And essentially, if you’ve heard what he’s saying here on the air, is that maybe you should just wait until interest rates come down, mortgage rates get a little bit better, and then the housing market might start to move a little bit. Maybe there’s a few more things on the market, and your mortgage payment will be better if you’re getting a place at five and a half or six versus seven and a half or eight. So the dynamics have all been around. How do we cure inflation? Fed raises rates has some really big impacts.

Wes Moss [00:28:27]:
It’s also calmed down inflation Thursday morning. JEFF LLOYD, inflation print consumer price index.

Jeff Lloyd [00:28:35]:
CPI was, it was up 3.4% on a year over year basis.

Wes Moss [00:28:39]:
3.4. Go back to the summer of 22. It was over nine. So we’ve had a ton of progress from nine steadily coming down month after month, quarter after quarter. Not in a perfectly straight line, but it’s come down. At last month’s report, we were annualizing at three two, it jumped to three four. But it’s still much better than it’s been. And if you really look at where we’re headed, likely this year and again, who knows if this will play out.

Wes Moss [00:29:10]:
But we had a pretty darn good idea that we thought inflation would come down, and that has played out. We thought, hey, supply chains get fixed, the excess monetary stimulus gets worked through the system. We should see inflation come down. And that’s exactly what’s happened. We should also see inflation come down this year for one major reason, and that’s housing, what we just talked about, what we have been able to see is that if you look at the housing market, remember, within the CPI report, which is the Fed looks at, they look at two inflation measures, they look at PCE and they look at the CPI, the consumer price index within the CPI, a third of it, or a little bit more of a third of that calculation comes from shelter your home. But guess what? It doesn’t count home prices. What, how could that be? Well, they measure something they call owners equivalent rent. So what could you rent your home for? And then they also look at some actual rental prices, and that goes all into the calculation.

Wes Moss [00:30:16]:
What we’re seeing is a massive drop in where we see rental inflation. We’ve seen market rents come down dramatically. A, it’s because people are buying less houses and saying, I’ve got to rent. So we’ve seen an acceleration in places getting built, so there’s no more supply. So that’s helped calm down rental prices. If you go back to April of 2022, rental price increases were 15 20%. I was hearing some stories of 50% landlords saying, you’re at $1,000, I want you to be at 1500. That’s a 50% increase.

Wes Moss [00:30:56]:
So that’s come back down, not back to zero, but the year over year change. What we’re seeing, and there’s a couple of different measures on this, one is zillow that I liked, observe rents. And you look at that relative to where the rest of inflation is, we should continue to see arguably a third of the CPI number actually go down over the course of the next year. So when you hear the inflation number, that was at nine, that was at six, that was at 3.4, as it is today, how does that drop below two? A lot of that could be housing. Of course, we could see a moderation in energy prices still, but a lot of that is probably already baked into the cake to some extent. Now, that could change. But if things continue on from here, that in itself is going to really bring down that CPI number. And what does that do? That gets the Fed to their target.

Wes Moss [00:31:48]:
And if you get the Fed to their target, they’ve already said, we don’t think we need to raise rates anymore. They could actually start cutting rates at least a little bit. So that’s where we are today. If we were to take a look at what the inflation numbers really look like over the past year, where have we seen deflation? Well, we’ve seen, we, again, still sticky. When you hear sticky, these are prices that haven’t quite come down yet. Housing is the best example of that. The OEr number, the owner equivalent, rent, still hasn’t come down. Still pretty darn expensive to buy and to rent.

Wes Moss [00:32:20]:
But we know that’s moderating. But we’ve seen some places where prices have actually dropped. That would be deflation. And if you look at the cost of food, that’s one area we’ve really seen some real moderation. One, the price of eggs. CNBC had a whole tab for eggs.

Jeff Lloyd [00:32:39]:
Yeah, they had like the little egg price ticker at the bottom, on the bottom line, tracking egg prices, the articles.

Wes Moss [00:32:47]:
About why are egg prices so high? Eggs, apples, lettuce, these are staples, particularly for the new year’s diet. Eat eggs. Eat apples, eat lettuce. You’re in pretty good. That’s 2024, New Year’s resolution.

Jeff Lloyd [00:33:00]:
That’s eating healthy in the new year.

Wes Moss [00:33:02]:
Fuel oil, down pretty dramatically over the past year. Utility, gas, gasoline, these are numbers that have come down dramatically. How about some of these other service areas? Airline tickets, down pretty dramatically. Car rental prices. And that one does make some sense. I remember two or three years ago when it was hard to even get a rental car. Remember that? So just think about how bunt. It’s a great example of a.

Wes Moss [00:33:32]:
I don’t know if you call it, that’s a supply chain issue. You just couldn’t get enough cars into the fleet to get them onto the lot, to be able to be rented. And because you had a big slowdown in travel. Wait, we don’t need any cars. So you had this giant grenade went off in every single little industry and just disrupted it. So you had this six month period of time where it was hard to get a rental car. So when you could, it was super expensive. That’s way moderated.

Wes Moss [00:33:56]:
I rented a car over the holidays. There were five to pick from. And this was one of these little Michigan car rental places. It wasn’t like a big. I wasn’t even in an airport. Plenty of supply. The price was actually pretty reasonable. But it’s supply chains to some extent, normalizing it doesn’t take five months like it used to to get goods from one country to the other.

Wes Moss [00:34:19]:
That’s gotten better because of the impacts of COVID and the pandemic have gotten better. So you’ve seen some moderation. We’ve seen, though, a decrease in tvs, a decrease in prices for computers. So there are a lot of these pretty big categories that have been going down and getting cheaper, not just not getting more expensive, and that’s why we’re just waiting for that to happen when it comes to shelter.

Jeff Lloyd [00:34:45]:
Yeah, I got to tell you, one of the things that feels pretty good is pulling up to a gas station now and filling up for even sub $3. If you think about the summer of 2022, we saw, according to AAA, the highest price for gas ever in entire history.

Wes Moss [00:35:02]:
If you go back, if I look at a peak here, and this is from the Bureau of Labor Statistics, you can look at different charts of kind of the main core areas. So think food at home and then food away from home. Those are two huge categories for americans. Energy giant category. Then you have core goods, think retail, apparel, think cars, et cetera. In fact, used cars have declined significantly. Housing, which obviously is still an issue. And then looking at services, some of these categories have gotten back to kind of close to the flatline, very little inflation year over year.

Wes Moss [00:35:40]:
But I would say that the other big decline that we’ve seen, if you go back to somewhere in the spring, summer of 2022, oil was at $120 a barrel, and gasoline hit.

Jeff Lloyd [00:35:55]:
Yeah, gasoline hit over $5 for the average price of a gallon of gas in the US.

Wes Moss [00:36:01]:
That’s come all the way back from 120 all the way down to around the 70 range today. So that’s why in these inflation calculations, a big reason. We’ve seen it come back down closer to the Fed’s 2% target. Has to do with many of the big categories getting back closer to zero or one and something like energy really net negative. Along with that list we just talked about apples, lettuce, airline tickets. Apples, lettuce, and airline tickets and eggs. And eggs actually declining. Wes, what are you talking about? We just spent the last five minutes talking about how inflation was coming down.

Wes Moss [00:36:41]:
I thought you said inflation was going up. Where are we, here’s what we’re saying. And I think that this is where the media gets it wrong and it’s not really their fault because they’re not saying it incorrectly. But when they say the inflation rate has come down and it gets to, let’s say it gets down to two, is that cause for celebration? Well, that’s just the amount that it’s increasing over the past year. It doesn’t do anything to help with all the inflation we’ve already had. And even though I do think we’re getting back to, we could see 2% inflation this year, but it’s still 2% on top of the pile of inflation that we’ve already had. And we think the headwinds, well, they’re tailwinds for higher inflation because we still have deglobalization, which is a big change that we’ve had over the last several decades. We have reshoring onshoring.

Wes Moss [00:37:38]:
We have a sentiment in the United States and really around the world of, hey, let’s bring things back to the United States, let’s choose security over lower costs, let’s bring things back here and back home. And that in itself should keep inflation higher over the next, call it decade, than we experience from the seven to 2022. So even though we’re debating why we think inflation is going to return back to 2%, that’s just for this year. And that doesn’t help all the inflation that we’ve seen over the last, call it three years. Remember, I think the chart that we need to look at as investors and remember, we talked about this last week, we had a twelve year span where inflation was only up 18% cumulatively, total over twelve years. That was from eight to 2022 or 2020. Then the pandemic hit. Supply chain disruptions, a wash and tsunami of money from the Federal Reserve and the government, which then rocketed inflation up over 20% in just three years.

Wes Moss [00:38:42]:
So, yes, we think we’re going to get back to a more, we’re not going to be in that seven, eight, 9% level, but could we get back to two and then hover in the two to three, maybe 4% over the next several years? That’s what we’re thinking, and that’s why I think it’s so important to continue to hedge ourselves against inflation. Speaking of inflation baskets, Jeff Lloyd, I know you do. These custom baskets that are so great. This is your new year’s. Well, not new year. This is your January resolution basket.

Jeff Lloyd [00:39:14]:
This is our resolution basket here on money matters. We love a little thematic basket. Right. We took the inflation numbers that came out this past week, and we made a little just basket of resolutions. Basket of inflation. So we got food at home.

Wes Moss [00:39:29]:
Yeah.

Jeff Lloyd [00:39:29]:
Okay. New Year’s resolution. We’re going to eat more at home. Up 1.3%.

Wes Moss [00:39:33]:
It’s on my list.

Jeff Lloyd [00:39:34]:
Hey. Nonalcoholic beverages.

Wes Moss [00:39:36]:
You’ve heard of dry, dry January?

Jeff Lloyd [00:39:38]:
Taking a break.

Wes Moss [00:39:39]:
Yeah.

Jeff Lloyd [00:39:39]:
Up 2.6%. Housekeeping supplies do a little deep clean in the house. Up 2.8%.

Wes Moss [00:39:46]:
I don’t know if that’s a new year thing, but I’ll give it to you.

Jeff Lloyd [00:39:50]:
What was one of your resolutions? To read more.

Wes Moss [00:39:52]:
To read a lot more this year. And not just financial news, but other content besides financial.

Jeff Lloyd [00:39:58]:
Recreational books. Down 1.1%. Okay. All right.

Wes Moss [00:40:02]:
How about get in shape?

Jeff Lloyd [00:40:03]:
Get in shape. Okay. New year, new me, I’m going to exercise more sporting goods. Down two and a half percent. So the total basket, 1.7%. That’s actually half the rate of inflation we just saw.

Wes Moss [00:40:18]:
Just worked out magically for you. I love that New Year’s resolution. And it’s an inflation proof list. Love it. Jeff. Lloyd, more money matters, straight ahead. We’re going to have to talk about this bank of America report that you found this week that I guess it’s really not that scary, because a lot of these things we either know about, we live with, or Hollywood’s already made a movie about. And these are essentially looking at the fragility of the world.

Wes Moss [00:40:48]:
And the theme around. Our theme for the year, of course, is a whole new world. Genie’s out of the bottle with inflation, interest rates are higher, we have artificial intelligence. None of these things are going back in the bottle. So it is a whole new world we need to navigate. From the b of a report, they didn’title it this, but I would call it a whole new scary world according to b of a. And what struck me is the thought around that we are living in a period of permacrices or polycriises, where there’s just continuous instability, insecurity, permacris, and polycrisis. The 2022 word of the year for a particular dictionary was permacrisis.

Wes Moss [00:41:37]:
And then we’re living in these together. So you think of Brexit and Covid and climate disasters and inflation and the rising cost of living all at the same time. We’re living with concurrent issues. So the question then is acknowledging them and understanding that, of course, there are always risks to the world that we live in. And that, of course, that impacts markets, it impacts our 401 ks. And this is also why we invest, not just for the future, for growth, but we invest for stability as well. One of the themes for this year is that even though it’s been not necessarily good for consumers and terrible for homeowners or those who are looking to purchase a home, higher interest rates also means higher interest rates on the bonds that we’re able to own. So fixed income for safety and stability that you’re going to want.

Wes Moss [00:42:33]:
So for investors that aren’t willing to have 100% in equities or in stocks because they don’t like that much volatility, pairing that with something more stable can keep the entire portfolio the volatility dampened. So we go through what bank of America goes through. Here are two kinds of risks. You’ve got the gray swan, I guess they call them gray swans or gray rhinos, which are pretty rare. These are known unknowns, unlikely, but they do have a major impact, and we’ve seen them and we know that they happen. So in this category, these are the gray swans. They call them extreme weather, cyber Geddon, super bug resilience, wildfires, and job automation. Those are all things that kind of happen all the time.

Wes Moss [00:43:23]:
They’re all terrible. But when you get a hurricane that hits an island or a coast, it’s devastating. We’ve seen some periods where we have maybe not cybergetdon, but we have big outages when it comes to the Internet or particular companies get hacked and they don’t work for a period of time. We’ve already read and heard about bug resilience or antibiotics not working. And every year it seems as though the west is plagued by wildfires and then, of course, automation. So we’re nervous. There’s a lot of nerves around artificial intelligence. One of the things that we can’t put back in the genie’s bottle is potentially going to accelerate job automation.

Wes Moss [00:44:07]:
It used to be worried about robots taking my job. Now it’s not just robots, but robots, plus artificial generative intelligence taking a job at the same time. Now the scarier list, and these by bank of American are considered black swans, are unknown unknowns, extremely rare. Massive impact, not just big impact. And that would be things like. And again, some of these are really for the movies and not something that we’ve experienced, but bioweapons, solar flare. Solar flare, I think we’ve mentioned. This is something we’ve talked about last year on one Sunday morning, where a solar flare could actually knock out communications and electricity.

Wes Moss [00:44:48]:
So that’s a huge deal. Imagine the west coast, or all of the US didn’t have electricity for x a period of time. Mega quakes. So you’ve got mega earthquake, mega volcanoes. I think you have a correction, please, here on money matters.

Jeff Lloyd [00:45:04]:
Yeah, we’re here for the facts on money matters. We fact check. And I misspoke. And I may have actually scared some of our listeners because I said that we were 10,000 years overdue for a mega earthquake.

Wes Moss [00:45:19]:
That’s scary.

Jeff Lloyd [00:45:20]:
What I meant to say is that we are 10,000 years overdue for a mega volcanic eruption.

Wes Moss [00:45:27]:
Got it. Thank you for that.

Jeff Lloyd [00:45:28]:
So, just wanted to put our listeners at ease. It’s not an earthquake. It’s a volcano.

Wes Moss [00:45:33]:
Okay, thank you for the clarification. Again, movies have been made or documentaries about all of these.

Jeff Lloyd [00:45:39]:
Yeah. No, literally, Hollywood has made a movie on all these black swan events.

Wes Moss [00:45:45]:
Here’s number four. Number four is asteroids, number five on this is a Bank of America report around global threats, threats to the world, instability. This is not us. And this is not a fly by night company. This is b of a, number four of the list, asteroids, number five, aliens on their list. And six, AI singularity, which is a more advanced form of automation. Well, actually, no. AI singularity really means it’s AI growing so much that then it becomes uncontrolled, and it essentially takes over for humans.

Wes Moss [00:46:23]:
Elon Musk has been worrying about that. There’s a growing body of folks within technology that worry the generative AI could just not just take our jobs, but take over. So, again, this is not our list, but these are all things that could happen. And Hollywood’s made a movie about all of them. Of course, we have alien movies, asteroid movies, Independence Day, one of the best asteroid movies of all time. Bruce Willis and Steve Buscemi, Liv Tyler. It’s not Independence Day. It’s actually the movie’s Armageddon.

Wes Moss [00:46:55]:
Wonderful film. Now, in the end, we figured out a way to not have the asteroid hit.

Jeff Lloyd [00:47:01]:
Yeah. Hollywood even made an AI movie. Do you remember that one? It was literally called artificial intelligence.

Wes Moss [00:47:07]:
Was that with Scarlett Johansson?

Jeff Lloyd [00:47:09]:
I can’t remember. Haley Joel Osmond was in it. Remember that.

Wes Moss [00:47:15]:
Are all. We can visualize all of this because we’ve seen it in the movies. Here’s maybe a more realistic fear. This is a more realistic enemy that we’re going to have to overcome. This is something that we really should be worried about. But we also can, to some extent, combat, and that’s inflation. And it’s been target economic target number one for the last two and a half years now, we’ve seen some improvement in the rate of inflation, but certainly not the pile of inflation that has happened already. That’s not going away.

Wes Moss [00:47:56]:
The good news is, if you look at financial assets, so if you’ve been an investor, if you’ve been putting money into your 401K, you’ve been investing in a brokerage account in some way, it’s very likely that over the past three years, when we have seen that crazy 20% inflation, most equity asset classes, whether you look at energy pipeline companies, even real estate, that hasn’t done all that well, publicly traded real estate has matched that, largely matched that amount of inflation. And then markets, whether you look at growth stocks or value stocks, the S and P 500, they’ve outpaced that inflation rate pretty sizably. So that’s what we know we’re going to be faced with. Yes, you can stay up all night and worry about black swans and gray swans, but the reality here is that the target that we know is coming for us is inflation, and we can do something about that. If it comes to some of these really scary Hollywood type events that could hit the world in some respects, there’s not a whole lot we can do. If this asteroid one comes true. A 1 km wide asteroid. I mean, I don’t know.

Wes Moss [00:49:08]:
Good luck. I don’t know what’s working in that scenario. I don’t know.

Jeff Lloyd [00:49:12]:
They have a show for that called is it doomsday? Preppers, like, preparing for invasions and volcanoes. The end of times, you’d be wanting.

Wes Moss [00:49:20]:
To live in a bunker. So inflation is target number one. It’s moderating, but we still need to hedge against it. There’s new developments this week with improved regulatory approvals for another really hot topic in the headlines over the last several years, and that’s been cryptocurrency, specifically bitcoin, which has now been approved to be in exchange traded funds. As of this past Thursday, eleven of them were ready to go, and in the marketplace, and I’m sure we’ll see more. That’s just the beginning. That was on the first day, so we’re going to see more of that. We don’t know the dynamics of cryptocurrency.

Wes Moss [00:50:02]:
It’s supposed to be a currency, but it’s really been utilized as a financial asset to invest in, and it’s not something that I feel comfortable with. I think that there is great fomo around. Hey, I don’t want to miss out, though. It went from five cents to one thousand and then went from 1000 to ten, then went from ten to 45,000. My goodness. I feel like I missed out. And then I hear predictions that it could go to a million, and then you hear predictions it could go to zero. There’s just this tug of war that does with your psyche.

Wes Moss [00:50:34]:
That’s just not a tug of war I want to be a part of. It also excludes the thought that there are lots of other places to invest. When you’re looking at a particular asset and it gets lots of press and there’s lots of shiny lights on it, you start asking yourself, well, should I own it? Should I, yes or no? Should I have it or not? That’s just only part of the answer. What else should I have instead of it? And that, I think, can put people to ease. And that’s how I look at it. Is that, yes, it’s tempting. You hear forecast that it’s going to go to the moon, and you think, well, there’s no real backing to this. There’s no fundamental value to this.

Wes Moss [00:51:14]:
Warren Buffett says that he would never invest in it, ever. No, I’m okay not owning it because I’ve got what I think are other hedges against inflation. Dividend paying stocks. Jeff Lloyd, you pulled a phenomenal chart this week.

Jeff Lloyd [00:51:31]:
Yeah. So the chart goes back 150 years, and it measures annualized dividend growth starting in 1870 and compares that against what the average inflation has been during that same time period. Okay, so you got inflation averaging 2% per year over the course of the last 150 years. You had dividend growth.

Wes Moss [00:51:53]:
The growth of the dividend growth, not.

Jeff Lloyd [00:51:55]:
Just dividend, at 3.7%. So that’s almost double the rate of inflation over 150 year time period.

Wes Moss [00:52:05]:
So just the cash flow that gets paid out from individual companies within the S and P 500, cumulatively, together, it’s ratcheted higher. You don’t hear about it a lot. It’s not a fancy news story. When was the last time you heard anchor say, what’s your forecast for dividend growth in 2023? In 2024 and 2025? Well, Joe, I’m thinking it could be as high as four and a half percent. Yeah, that’s not a news story.

Jeff Lloyd [00:52:35]:
I don’t think I’ve ever seen a headline that says dividends grew last year. Dividends set to grow in 2024.

Wes Moss [00:52:40]:
Not a forecast you’re going to hear, but it’s a very important one for your four hundred and one k. And that’s what we’re here to continue to wrangle. What could be a very spread out herd of cattle all over the place. We want to corral that. Let’s make smart decisions, fundamental decisions, over long periods of time, and I think that gives us a great shot. Jeff Floyd, at outpacing target number one. It’s not a solar flare. It’s inflation.

Wes Moss [00:53:09]:
That is a perennial issue for investors protecting purchasing power. We want to do it in a lot of different ways. Income investing, what is that? It’s putting together a retirement plan and portfolio that generates income from lots of different sources. Dividends, interest distributions, those all add up to what we call portfolio yield. It’s a cash flow. And although that’s only part of the equation, the full equations, total return equals growth plus income, we can get pretty close to what our income is going to be. A lot of that is dictated by where interest rates are. We know with bonds, quote, yield is destiny to some extent.

Wes Moss [00:53:52]:
We also know that dividends, Jeff Lloyd, you pointed out, have, over time, tended to rise almost at double the rate of inflation. So we’ve got some income from stock dividends, bond interest distributions from other areas, and then couple that with some appreciation over time. We don’t know when that’s happening at any given point. That’s how we get our total return. But income investing is at least controlling the income part or the cash flow part when it comes to investing, which is particularly important when you are in retirement and you need to start living on the money that you’ve saved when you’re younger, if you’re in the crowd, that is, 94% of folks that own cryptocurrency are Gen Z and millennials, you still, in my opinion, you still want to be an investor and own stocks, but you don’t need the income. You reinvest and you reinvest and you reinvest with that. Again, you can find our team@yourwealth.com. That’s your yourwealth.com.

Wes Moss [00:54:51]:
Have a wonderful rest of your day.

Mallory Boggs [00:54:58]:
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Mallory Boggs [00:55:46]:
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