That's our new word of the years. Yeah, heat dome. Remember when his hook echo was the first thing, and then it was direct show or direct show.
Now it's a heat dome. So I feel that heat dome looks like thunderdome. Get our weapons out and start beating the crap out of each other, which certainly could happen anyway. Obviously, we attacked Iran over the weekend. The United States b two bombers dropping the bump bunker busters so we can get to the nuclear centrifuges at Fordham. Clearly on the heels of Israel really having a very successful military effort against the Iranians. Question Mark what happens next?
I know the Iranians are a little miffed. They have threatened to do certain things including shut down the Straight of Horror moves and if you look at a map, boy, they got a lot of square miles along that straight and that that narrow its point, it's only two miles wide.
And it was reported I saw on the Wall Street Journal that it's susceptible to mines, for example, as well as launches from the Iranian soil onto the shipping lanes and Straight of Horror moves, although probably not a really smart idea for them to do that, twenty percent of the global oil supply moves through that strait. That is a substantial amount. Brian, Where are we in terms of futures and how this looks?
Yeah, and you're right, and that's not something I had looked at in a very long time. But you're exactly right about that map. That's Beach territory apparently. Yeah, look on a map that the entire Straight Ohar moves runs along the Iranian border. So where we are right now is the headlines. We got to be careful with these headlines, as always, read the article, not the headliness going to make T shirts to say that.
I know.
So the Straight of Horror Moves as of now, as of this moment right now, has not been closed. They voted to close it, but it still has to go through Iran's Supreme National Security Council. They have different layers of management or different layers of decision making bodies similar to we, and of course everything goes through this Supreme Leader of the I told. But anyway, Parliament voted to
close it. They have not made an official decision. It is impacting transit some tankers are going the other direction or pausing their move been through there were just avoiding it entirely. In merchant shipping is also being advised to avoid those waters. However, the strait of Horn moves is open for now. The reason why haven't they just slammed the door, Well, like you just said, twenty percent of the world's oil moves through that strait. They can't do
that without hurting themselves. So if they just wanted to hurt everybody else, then they'd have done it already and it probably never would have been opened in the first place. But that will have an impact on Iran. They have to be careful what they do to themselves. You know, cut off the nose to spite the face.
Right, and you know, honestly, we have to acknowledge this is all over the backdrop of Iranian oil being subject to sanctions right now and their biggest customer China, and they would be the biggest loser if they shut down the straight to Horn meuse these these these tankers wouldn't be able to get to make their way to provide
China with the oil it needs. And in fact, Secretary of State Mark Rubia made the point over the weekend, they urged China to remind Iran against the problems that they would face by closing the straight And China, of course is a bigger friend of Iran than anybody else is. So that's that's a lot of pressure that could come from China. Yeah, and don't forget India.
India is not not far behind China in terms of buying oil from Iran. So yeah, and this is where one of those things where if you've been frustrated with globalization and disappointed at how that outcome has been, well, globalization could be saving us from larger wars right now because everything being connected to everything else means that nobody can do anything unilaterally. Anything that one one organization or one country does will impact many other countries that maybe
they don't even want to impact. Maybe that's not the country that's particularly in the crosshairs, but there's always going to be a ricochet action. So it's not as easy to disrupt as it used to be.
Oh and then when you look at the map as well, on the other side of the of the strait from Iran, you've got Kuwait, which looks like that's the only avenue to get its oil out the United Arab Emirates as well. And while Saudi Arabia does have a lot of square miles along the straight or Horn moves, I've read that they do have pipelines that should allow them to get their oil out by alternave means they do.
Yeah, and so again, nothing is ever as simple as it seems. Ever, so there's going to be a major impact here, But it's going to be a whole lot of headline, any and article reading this week. We don't know what's going to happen this week, but we have just begun this particular chapter of global history here. Well, yes we have.
And the other thing we benefited from our own fracking, which allowed us to be one of the largest oil producers in the globe. Thankfully we have our own resources here, so maybe we'll have less of a sting. Although it being a global commodity, the price of a barrel of oil don't necessarily go up if it does get shut down. What about inflation, any impact that this conflict's going to have on inflation? I saw the headline from USA today what an attack on Iran can mean for oil prices,
inflation and the US dollar. Your take on inflation in the US dollar. Bryan, Well, it's not gonna help, let's put it that way.
So yes, So these strikes did drive oil prices up briefly. As we're sitting here right now, things aren't too too crazy. A stock market futures are up just a little bit and oil is kind of calm down. So early panic, of course, because whenever we get this initial headline, we just don't know exactly how far this is going to go, how long it's going to last, So of course there's always a shock. Golf and Israeli equity markets moved around, okay,
but oil had a big spike. The infrastructure, however, it still remains intact. Right This was not an attack on oil infrastructure, of course, It was an attack on the nuclear side of things. So this is going to be more about the handshake agreements that are now probably no longer agreements, and seeing how everybody wants to react to it.
But to your question, if oil settles in about the eighty to ninety dollars range right now, it's about seventy seven bucks a barrel, then headline inflation could be looking at it, maybe a bump of point three to point four percent. This summer core inflation, We're not looking for that to move whole lot. And the growth drag from those higher gasoline prices is going to be offset a little bit by more defense spending and stronger shale activity
for those fracking reasons you just mentioned. So at this point, knocking furiously on wood or whatever this desk is made of, uh, we don't. We're not looking for any major impacts. Obviously, Let's check again next week and see how we come out.
Right. I honestly, when I saw the the futures markets and you indicated that are up a little bit, they were only down when I saw them this morning by zero point one point five pretty much across the board. So clearly this has not impacted what people's expectations are about the market oil notwithstanding. Do you find that puzzling or do you think that's like I guess market force has been looking at the at the globe. It's a globe. It's a conflict in one small regional the world airgo.
It's not going to impact my trading. It's not going to impact you know, the companies that I'm invested in. I mean, I guess I really expected it just because of the bleak realities of war, that the futures will be down a lot more.
Yeah, And I think I think some of this has to do with the idea that over the past several decades, the world has just gotten used to chaos. You know, I've mentioned this before, but I believe the eighties and
the nineties where largely nothing thing happened, and I'm speaking comparatively. Certainly, lots of things happened, but comparative to the last couple and a half decades, then the eighties and nin ninety were kind of the anomaly, and I think we all lulled ourselves to sleep thinking that that was normal, that things just just just kind of hummed along and really nothing crazy, super crazy happened. But reality, if you look before that and since then, chaos has been the norm,
and that's kind of where we are. So I do believe that this is another place where the never ending news cycle of headlines has helps a little bit because we're always we are bombarded with yeah, news, good, bad, and different whatever news news news, that's all we hear, so I think it kind of lessens the impact of all of it in the short run. But obviously we do have volatility, as you just mentioned. I think you
just called me out here a little bit. When I first got my cup of coffee, Brian, futures were down. By my second cup of coffee, they were up, and you just pointed out they're down again, not very much, but when we're down a fraction of a percent.
Yeah, tiny little bits. And again I really expected, you know, a couple of single digit numbers and at least some those markets, and I was pleasantly surprised. You know, maybe we can just take away something positive from this. The world isn't in perfect place. There's chaos going on all the time in the world. We just know about it more now because of the Internet. And look, we all managed to live, thrive and survive, notwithstanding in the challenges
here and abroad. So something positive might come from this. Who knows. Anyway, we'll continue with Brian James, Fed keeping rates right where they are. I was reminded to Carter Pay Jimmy Carter and Paul Volker, Brian meane, we'll have a little conversation about that, given Trump and his arguments with the Fed on interest rates. A day fifteen right now, I fifty five gy Zeed Talk station quick mention for Gata Heaven Catholic Cemetery. You know, summer invites reflection and
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Now if you buy KRC the talk station Happy Monday, right Thomas with Money Monday's Brian James talking money issues and of course the ongoing battle between the Trump administration and the FED chair jerown pal rates. I guess it currently are four point two four to four point five percent, and he announced he's planning on leaving them there. I guess there's a lot of question marks floating around labor market.
I guess is growing at what he called a solid pace uncertainty expressed about the impact active US tariff policies on inflation, and Brian, let's start there, because the whole world was going to come to a screeching halt. We're all going to die because of Trump's terariff policies. And I know he's sort of used it as a mechanism to sit down with some of the countries and negotiate
better terms and conditions. But regardless of whether anything's been negotiated or agreed upon, it doesn't seem to have had a profound impact on our day to day lives, has it?
No? Not really. I mean, there are those out there now there. I'm sure there's somebody screaming at their there always advice or windshield or whatever, saying hey, this hit me in the face last week. And I do have personal friends who who have had to deal with the China tariff specifically the own factories and things that bring over raw materials, and this has been an extremely stressful time for those folks, so certainly don't mean to imply
that it's not out there. However, I think what you're saying is this has not changed the daily routine and the lifestyle of the average American and I can and I can vouch for that myself. I sit down with average Americans every single day at this table when we do financial planning, and the only real concerns I hear is just general complaints about the price of things in general, not so much that somebody has had to absolutely change,
you know, what they what they what they're doing. And I think this that's why we're still seeing the you know we were talking about earlier. Even the crazy headlines have not impacted the market. The market is actually almost up to an all time high again. We of course gave back a little bit obviously with when the strikes became news last week, but at this point we're not so much concerned about yet about having to change how
we do things. That would be coming through if if consumers were changing their thinking, then that would be coming through in the markets rather quickly. However, consumer spending came out okay in the most recent report. Remains to be seen, of course, what comes in the following months. But at this point, knock on wood, we're not it's not looking so scary out there.
Well, and you know, I'm old enough to remember how bad things used to be. I mean, four point five percent, it's a lot compared to where it was before. But it isn't eighteen or whatever percent it was back in the Carter days when he was screaming at Paul Volker about, you know, lowering the interest rates. We had stagflation going on. That it was a very complicated situation.
Yeah. Now, now again, I always want to be fair to people who aren't in your and my fortunate situation of having ridiculously low mortgage rates. I would not want to be buying a house right now, not necessarily because of the interest rates. You're right, that's a relatively short term thing. And historically speaking, a six seven percent mortgage is still low over the last century. That is still a low mortgage rate relatively speaking. It's the purchase price, Brian,
that's the part. When you couple that with the interest rate, it just makes it unattainable, and that's what's making it really hard, you know, for our kids, yours and mine or at that age to really pull the trigger there. So people want to see those rates come down. The President certainly does, but Jerome Palell is not convinced yet that if he does that, we won't quickly quickly quickly see inflation.
Any tea leaf reading on the housing market, you're right, houses are outrageously expensive, and of course that came on the heels of COVID nineteen when every man, woman and child would realize they could work remotely and then started buying up properties in the four corners the United States of America as they fled California, New York. But California New York real estates still outrageously high. And I just
don't see an end in sight on this. There's not a big, at least from my impression, a big build up of builders out there in the world that are building what you and I might call affordable homes or more affordable homes. So as long as the market is what it is and they keep building these large, you know, eight nine hundred thousand dollars homes, there's not going to be any way to solve this problem for the younger folks.
Yeah, and it's it's really it's the affordability that you mentioned there that that's really not where the builders are. There's plenty of building going on, that's that's not the you know, that's not the issue. There's I'm up here in Liberty Township and we've lost a few more cornfields here over the last month and a half or so. Sure you had happening, but but yeah, numbers wise, housing starts are down about ten percent, building permits dropped about
two percent. So these are very recent numbers here. So that suggests that the that the market's going to see, you know, not a whole lot of upside in the months ahead, but that does I don't think it's lack of upside we're looking for. I think we're looking for downside for like you said, for affordable housing. Affordable housing doesn't mean that we build a small house and price
it where it is right now, they're currently unaffordable. We need to find a way for younger people to get a foothold so that they can start their lives, start their families, and begin to grow forward. Because that's ultimately what's going to drive the economy over the next several decades, not you and me buying, you know, a nice house to retire into.
Yeah, you know what really bothers me. It's almost like the answer to the problem is some sort of you know, massive recession come depression kind of thing in order to force the prices down would be catastrophic.
Of course. Yeah, and that's you know, we're certainly not rooting for that neither, right, We're rooting for more of this soft landing stuff. Remember in three years ago or so, and when soft landing was kind of the best outcome anybody could ever think of. Yeah, we never had that soft landing. We just kind of stopped talking about it, which I think is what a soft landing is.
I think you're right, we just got used to it. Although the norm is not good for America's younger folks who are looking to start out and you know, invest in a home and at least get some equity build up as opposed to just paying rent the rest of their lives. Rian James. The bad news coming up next, Not that this always rosy news, but yeah, the reports out social Security. The timeline's not looking good. One more with Brian James from all with financially.
Right back fifty five KRC.
Hey, if you're listening to me right now, and we may as well get everybody the cold, hard bad news. The Social Security Administration's got new trust fund depletion dates. I saw the Wall Street Journal article published on the nineteenth of June. Social Security ICEBERG gets closer. Official trustees now estimate the need for a twenty three percent cut and benefits plus eleven percent to Medicare in eight years.
You know, our elected officials can ignore the problems that we're facing all day long, and they have been for years. I mean, you and I have talked about this before as a topic. It's been a generally running topic of conversation for decades in terms of the direction social Security was going. And it seems like the day of wrecking is now coming a lot sooner than anybody really projected. We're looking at insolvency in twenty thirty three.
Yeah, here's the thing. I want to make sure everybody knows that insolvency does not does not And I want to stamp my feet and say this does not mean there will not be a Social Security check right now, there is more money flowing into the Social Security system than flows out. That's the surplus. It's not a pile of money that slowly graining to zero over here of eight years. Next time you get paid, look at the top half of your pay stub. Look at that fight
a line. That is what you are paying for Social Security. The only way that the fund will completely go away is if that fight a line comes off of your pay stub. Now, there's those out there who would very much want the whole system to go away and for taxes to just not be a thing. That isn't realistic. We're going to have an awful lot of people wandering
the streets in their golden years. That ain't happening. So FICA taxes will be there, we will be paying them, and Social Security will be distributing income as it always has. So what does it actually mean though? So this is what what Brian would you just said? So benefits at this point are estimated. If nothing changes, then the inflows that the socicurity system will receive from those pay stubs will only cover about seventy seven percent of the pre
crisis of Social Security benefits. So simply means that you, whatever your report says, if you're trying to do your own financial planning, look at your financial report that you can pull off of SSA dot Gov or my Social Security report. Take that number for full retirement age, which is going to be somewhere between sixty six and sixty seven. That's the dollar amount you're supposed to receive every every year or every month, and knock about twenty to thirty
percent off of it. As we're sitting here right now, that is the direct impact that we will see unless something changes over the next eight years.
Well, do you think this would change the direction of people's behavior in terms of their planning for their own financial future. It certainly sends a warning shot over about folks who are relying on so secure like, oh my god, I'm gonna have to deal with twenty five percent less or whatever. But if you're young enough, we can start planning for your future. You can get around this problem that's looming.
Absolutely. But then, and the answer to that is the same as if there weren't a problem. Save and save a lot of money. You know, you want to be in control of your future anyway, regardless of social securities issues. You still want to be able to call your shot So the answer is, make sure you're saving and saving a good chunk, invest aggressively, don't make a mess of your credit. Do those things for thirty thirty, thirty or so years if when you're just getting started, and you'll
be okay in the long run. Now that said, there's a lot of things that could change. Something has to get We can't simply plow forward here. But as a society, we have been unwilling to elect people and unwilling to listen to those elected about the sacrifices that we will need to make. And it is quite simple. There's a million ways we can do this. But at the end of the day, Brian, we are either lowering benefits or raising taxes. There's a lot of ways that could happen.
We are lowering benefits by simply reducing the dollar amount. We could raise the retirement age, make you have to be older before you receive that money. Could also in terms of raising taxes, it's not necessarily just the percentage that could be raised. They could raise the wage cap. Right now, nobody who makes over one hundred and seventy six thousand dollars. Nobody gets taxed above one hundred and seventy six thousand dollars for Social Security that is capped.
They could remove that, they could raise it, they could increase the payroll tax rate. There's a million ways this can happen. But more needs to flow in, or less needs to come out, or more likely a combination of both.
Yeah, the one hundred and seventy six thousand dollars that's been around a long time, hasn't it.
Oh yeah, it goes up. It goes up, you know, every year a little bit. But the point is there's a lot, a lot of income earned by people that are that is way above that. If we simply removed that cap, which that's a pretty low cap when you think about the three hundred and thirty million people out there and the range of incomes that exist in this country, that cap is really really low. If we remove that cap, that was the one thing that we did, the whole
problem goes away. It goes poof overnight, Brian. But we're not willing to do that. That's a sacrifice. This country, the society is not willing to make sacrifices. Yet. We're going to be forced to a eventually, but we prefer to kick the cant. So far.
Yeah, and maybe there's a bright light in this inability to buy a home reality younger people are facing. You know, I know there's always the problem of rent, but rent's kind of static, Brian. And you don't have to replace the roof when you're paying rent. You don't have to replace the water heater, you don't. I mean, there's a multitude of things that go into home ownership which are very unpleasant from time to time. Maintenance enough keep alone,
plus insurance. Maybe they'll find a better resource in putting their money and socking their money away in an investment plan since not having to deal with the expense of home ownership, it can be Yes.
The thing that scares me though, is now one of your largest expenses is completely subject to inflation. Your and my mortgage payments aren't going to change based on the inflation, but rent absolutely will.
Yeah, and there's always that pesky energy bill which keeps going through the roof as well.
We're all stuck with that.
Lots of layers on this, Brian James, but I certainly appreciate you raising and bringing to everybody's attention each Monday on Money Monday. Have a great week, my friend will do this again next week.
Stay cool. Talk to you next week.
Yeah you too, man, It is hot out there. Five one, three, seven, four, nine fifty five hundred, eight hundred eighty two three talk pound FY fifty on AT and T phones. It's got something you want to talk about. It's a great time to call in. We got a couple more segments to deal with here in the morning show. I hope you can stick around. I'll be right back. This is fifty five krc an iHeartRadio station.