Ato six. I think you about Kara see the talk station right Tom.
It's always happy to welcome back to this thinking about Garsey.
Mornings you every Monday.
At this time we do Money Monday with Brian James from all Worth Financial.
Brian, I hope you had a wonderful weekend. Welcome back to the show.
As always, hope you did too, and thank you for the time to once again hang out with you on Monday.
Always enjoy it. And of course I've been railing about this all morning. Moody stripped the US of its top credit rating, knocked this down a notch, of course, catching up with the likes of Standard and Poors who did that back in twenty eleven, INFIT Ratings, which did it back in August at twenty three. But the markets reacting, futures are down and of course treasury yields have jumped because the poorer you're credit rating, the more you have
to pay people to invest in your well. In this particular case country, I mean, and they spelled it out in black and white, Moody's pointed it out. It's the growing burden of the financial and federal government's budget deficit and the rising cost of debt service on it.
Duh, Yeah, this isn't too big of a shock, or is it so? So what the credit rating is, of course, is a way of comparing one country or really anything. Just about anything has a credit rating, governments, corporations, frankly, people do too.
That's what those credit bureaus are for.
But the whole point is to compare one entity to another in terms of how likely are they to pay their debts. And Moody's is the last of the three major rating facilities to cut the United States down from a perfect rating, and that that started in twenty eleven, so in the aftermath of two thousand and eight. S and P was the first one to cut us and kind of say, maybe we're.
Not so good as good as we used to look.
So yeah, and this isn't too big of a shock because we are putting ourselves, we are proactively deciding to present ourselves to the as a country, to the rest of the world in a different manner where that necessarily has an impact on the economic output of the country. And what are the what's the outlook of how can we be going forward, you know as we have in the past. And so for sure, that's now having an impact on the market. The futures are down one to
two percent, depending on what you're looking at. This is but again, this can't be too much of a shock. We've consciously decided to do things differently. We talk all the time about how we can't afford ourselves, we're living beyond our means, and it is starting to surface here just a little bit in terms of the rest of the world's perception of the United States as a credit worth the facility.
Well, I suppose the timing couldn't have been better, considering they're talking about this reconciliation package, which deals with the debt and spending, and I know there's some moderate Republicans who are standing in the way of advancing some steeper cuts because oh, it's my green energy product, you're not
a project. You're not going to cut it in my state, or oh it's I'm in New Jersey and I wanted one hundred and twenty four thousand dollars per couple salt tax because well, the taxes of my state are outrageous. I mean, we just subsidize the high tax states, high taxation, and the people that should be paying that by cutting their federal income tax. I mean, you know, the point of capping the salt tax at ten thousand dollars, so we wouldn't be subsidizing those outrageous states.
That's right.
What we're doing is taking active steps to hopefully you reduce that. But there's no way to do all this kind of stuff without pain that. That's the one thing that we have not been able to drag across the finish line here. Both parties recognize and have for decades that there is a problem and we are moving in the wrong direction. However, there has never been an effort where on one side has successfully reached across the aisle to actually do something about it. And that's really not
even happening now. We just have a situation in situation where the Republicans obviously dominate both both parts of Congress, and that's the closest we're going to get to putting all this in place to make the fixes, but it's
going to have to survive, Brian the midterm elections. Right So, right now, Donald Trump effectively has you know, pretty much cart Blanc to do just about whatever he wants to do because he's got control of Congress for the most part, and he's ignoring a lot of the rules and regulations that were in place anyway. But if a lot of this stuff doesn't get done before the midterm elections, I can't think that dependulum is not going to swing back the other way.
Well back the other way, toward even more reckless spending. I mean, I mean, I hate to use the phrase existential threat again, but we're already paying a trillion dollars a year in debt service and that's only going to get worse and worse, and that takes away from literally
anything else. That's I don't care what side of the political spectrum you're on, if you want the government to pay for something, the more money we have to allocate the debt service, which is required, you can't just ignore that. You're not going to have money left over for expanding this or funding that, whether it's military or one of the social welfare safety nets, they're all going to be deprived extra dollars.
Yeah, that's absolutely right, And this is that's why it's been so important that we actually get people in the same room to talk and agree on something. We haven't been able to do that because the American people have not been willing to sacrifice what they need to, because if your congress person is out there trying to say, hey, we're living beyond our means, we have to stop doing that, what they're actually saying, if they're serious, is we need to give up something. And that has not been a
politically tenable stance to take. If you are somebody whose career and livelihood depends on getting elected again.
Well and there lies the problem. As far as I'm concerned.
You should do what's right, what's fiscally responsible, what is going to save the country from itself, and not just to pease people see and get re elected. I could campaign if I cut back medicaid, well, simply requiring people that are able bodied without families to engage in some work, training or work. I mean to the tune of what twenty hours a week is really a small, small ask.
I just that's not unfair to say.
But that has to extend to the person who might take advantage of the opportunity to take down an incumbent representative. Because that person told the country the truth, it leaves them to being a sitting duck. Hey, this person told you had to sacrifice something, I'm telling you the opposite we're going to keep giving you money to resist that urge.
But it's been the American way for several hundred years.
Well, they need to just hold up the Moody's reports. Say, look, we've already been downgraded. Why because our national debt is so big it's sucking up all the life out of the room. This is what we're talking about. So yeah, you can tell people there don't have to be any cuts, but it's just gonna get worse, and our borrowing costs are just gonna get that much greater, and our debt service is gonna get that much greater. I mean, explain to my listeners if you can, Brian James, what would
a default look like? How would that play out? If we couldn't make the debt service on our national debt?
Nobody comes out of a US default looking pretty The entire world will be impacted because, whether they like us or not, we are by far, far, far, far far the largest economy on the face of the earth. American economy is twenty two to twenty three trillion dollars something like that. China is somewhere around nineteen twenty trillion, and
it goes rapidly down from there. So, if all of a sudden, the rest of the planet basically being the entire universe, lose his face in the faith in the United States ability to pay its debt, then all of a sudden, all those countries and the rest of the world is going to lose a substantial customer base from which to sell, and that's going to have a domino effect. So nobody, even those who would prefer that we get knocked off our pedestal, will not benefit from that disruption to that level.
Now I'm looking at.
I think these ratings, it's important to understand what the ratings actually mean because some people might say, well, we're still since we're the largest economy, that means the ratings aren't as important because you know, we're just so gosh darn big. Well, just to give some comparison, there, there are nine other countries now that have perfect credit ratings.
You still can buy government debt that has perfect credit rating. Germany, Switzerland, Denmark, Sweden, Norway, Netherlands, Australia, Singapore, and Luxembourg all have better credit ratings in the United States and subsequently have lower yields if you want to buy those countries' treasury bonds. You're going to be getting about two percent on a ten year bond in compared to the United States, which is currently.
About four and a half percent.
The yield on a bond is directly reflective, Brian of the country's ability to pay its debts. Are if you are a dead beat, then you're not getting a credit card. If you do, you'll be paying thirty percent. The rest of the world is saying the United States needs to pay four and a half percent while these other countries need to pay about two to borrow money.
Well, it is illustrative of the problem. And I don't know. I guess at some point we may get junk status. What is junk considered? What nine percent and above or something along those lines.
Well, the junk status has to do with the credit rating itself. It's not the yield directly, but that's triple B. Triple B is the last investment grade generally speaking, and below that you get labeled as junk, which doesn't mean you can't pay your debts. It just means you've kind of moved into a territory where it's a little more likely that anybody who owe that you owe money to ought to be paying attention to to make sure that you are good for it fair enough.
If we're going to find out about starter homes and Greater Cincinnati, are there any even out there more of Brian James Wilworth Financial, Hey nineteen if you have fair CD talk Station Money Monday.
Brian James Allworth financials.
Hey real quick here, since you talk about credit rating and the Moody's downgrading a United States credit rating. I just checked my credit score the other day. I get a notice from LifeLock saying, hey, your credit score is changed, or I check it out. You know, I still have excellent credit, and at one point I actually had a perfect credit store. It didn't last very long, so it dropped two points. And the reason is because I have
excellent in every single category except one. They say I don't have enough accounts that I should have more available credit. I'm thinking, how bast awkward is that? That doesn't make any sense to me. I'm dutifully and timefully paying off what credit cards I have. I don't need any additional credit. Why in the hell would I want to go out and get more. It doesn't make any sense.
Yeah, it is kind of counterintuitive.
What they're basically saying is that you're such a good credit risk that we think you should have more. I think there's a little bit of an ulterior motive in there to help you encourage you to do that.
I've noticed that the biggest spikes I've.
Gotten in my credit score is when you know, if we do something the house or whatever, and there's some kind of promotional zero percent rate. Sure, I'll take that. I don't really care about the credit, don't really need that. But all of a sudden, a month later, my credit score spikes because I have an extra line in place, off of which I'm not paying anybody any interest.
It just gave me a better price.
But yes, they do want you to have more if you take it, if you want to take advantage of those things, it will give you a higher score.
All right.
I'm not interested in it because I'm still fine. It just drives me crazy when I read that, I'm like, damn it, why would I want to go out and get, you know, a more opportunity to borrow that I wouldn't use. To your point, I wouldn't need it. I don't need it, I wouldn't use it. So anyhow, moving back to your topics that you provided. Sorry for the curve ball there, Brian. I just found that very frustrating. Starter homes are there
any around Cincinnati. I saw the article from Randy Tucker and from the Enquirer, and apparently they're in very short supply, very much.
So.
Yeah, so if you look around there, there's still plenty of building going on. Right, we've been talking about this housing crash that's supposed to be coming for years now. Maybe maybe we've given up on talking about it. We found a new shiny object, but that simply hasn't happened.
But no, there's not many starter type homes being built in Cincinnati, you know, the kind of homes one or two maybe three bedrooms with the most but obviously to allow a young family to kind of get started, really struggling for buyers to find a home for under three hundred thousand that doesn't require major work, or isn't a neighborhood that's not quite ideal. The demand is there. Of course,
there are people in the situation. We probably all know young people who would prefer to get out of their apartments and their condos and get into something different. But the supply is not there, and the reason is it's just not as attractive for builders. Builders are prefer larger
homes because there's more profit margin, that's more scalable. If you think about fixed costs like permitting and compliance and all the stuff that they have to do that has nothing to do with putting two by fours together, Those fixed costs are the same no matter the size of the ultimate home, and their preference, of course, is to make as much money as they possibly can, so they're focusing on the larger homes.
Still in this area, well, it's always puzzled me because unless I've got the whole concept wrong, it seems me the trend is for people to pursue a smaller home. Now, that doesn't mean you have to sacrifice on quality. You could really build a superior quality with all the amenities much smaller home. You don't have to build some mega mansion or mini mansion. And when you do, you've got so much additional you know, like heating and air conditioning expense,
you got to furnish the rooms. It just it seems to be stupid to have that much space, most notably if you don't have a really big family, and with an aging population, the demand for smaller homes is probably increased because you don't want as much place to have to clean, Maybe you don't want to go up and downstairs,
and you're looking for ranchumps. That just sounds to me like an ideal opportunity for a smart developer to build small er homes compared to what they've been building, but make them at higher quality to increase that profit margin.
Yeah, but I think the higher quality part if you're if you're increasing the profit margin, you're increasing the price. And that's one of the non starters for a young family getting started at And we we have a.
Dress that too with patio homes.
Patio homes are popping up everywhere, but a starter family is not going to want that because they need somewhere to let the kids run around and storage of all the old baby stuff and all that other thing. And those neighborhoods tend to be fifty five and older anyway. So we just haven't filled that gap here in this area. Other cities have the cities with real real estate spikes that are really truly issues, such as Austin, Denver, Portland
to Minneapolis. These are places that have changed how they do zoning laws. So for example, Minneapolis in twenty nineteen started to allow duplexus and triplexus city wide to at least let off some of that some of that demand. Those kind of steps have not been taken around here yet because it's still arguably affordable for a you know, somebody who's looking for a quote unquote starter home to get into that three hundred, three hundred and fifty thousand.
But we're getting to the point where it's just not going to be feasible for somebody to take that step.
Unless you're willing to buy one that needs maybe quite a bit of work.
Correct or in a neighborhood that is hopefully going to turn around in the.
Next decade or so.
But yeah, you have to kind of you're taking a risk there if you really need that house with more bedrooms, you are looking to again pick up something that's gonna need a lot of work, or in a neighborhood that you may not want to be raising your kids in.
Understand tough challenges out there in the world these days. Is there do you see anything that might turn this around?
Honestly, we've been talking about this for years, haven't we been talking about this?
Ever?
Since two thousand and eight? Really, you know, I would have thought it would have happened by now. When is the bubble gonna pop where people just say, you know what, I just can't do it.
I can't buy these houses.
I'm talking to my clients who are retiring and some of them are still buying three and four bedroom houses, and I scratch my head, Brian, why are we doing this? It's almost like it's become ingrained that I just have to live in a house that's just all there is out there. So I'm gonna have a couple empty rooms just the.
Way it is fair enough.
Brian James will continue one more of that topic, right, you know, I admit, and you know I'm embarrassed to admit it, but I've said it so many times. Regular listeners know that I do watch shows like Wheel, Fortune, d wind Down before I go to bed at eight, Brian, and it always blows my mind to see the cost of some of these vacation trips that they put together. I'm like, Lord almighty, how does any kind of regular, average American family spend that kind of money to go
someplace like that? And I was never a big guy when it came to travel, certainly not global travel. I've always enjoyed spending time here in the United States of America, where there see seems to be an endless supply of destinations. But I understand that the big summer vacation plans of being put on ice this summer.
Yeah, that's right. So when I'm doing financial plans for clients, what we always budget for vacation, and used to be that we would throw in if somebody didn't talk about travel, like it wasn't a retirement goal, I'd throw in three thousand bucks because everybody would go down to Myrtle Beach or Hilton Had, you know, once or twice, and three
thousand bucks would cover. That minimum has now become five thousand for my folks who don't bring up travel, for the ones who say, yes, we've always wanted to travel, we can't wait to do it now, we're putting in ten to twelve thousand at absolute minimum. For the ones who want to hit it hard, we're budgeting twenty thousand dollars per year, and so there's stories in here about of course, if you're going to budget out a trip to Europe, that's going to be in the twenty thousand dollars range.
To go.
Make it worth your while. Nobody goes for a long weekend. You're going to make it at least ten days.
Or so twenty thousand dollars.
Now, we budgeted one for the James family. We didn't end up going because it was twenty twenty and you can remember what happened.
Then. We were very close to swiping the credit card.
But it was going to bet about thirteen thousand at that point to get all five of us through Scandinavia, and that was through cost Co, which is about as reasonable as you can possibly get. But yeah, So we're hearing stories about forty one percent of people this year or planning trips of three nights or fewer, meaning you know, we're taking long weekends. That that's up from thirty seven percent.
So we've seen a ten percent increase year over year in the people who are saying we're not going to take as big of a vacation as we've as we've done in the past. Americans who are planning vacations period dropped below forty percent this year.
That's still lower than twenty twenty four.
In about twelve percent of travelers say they've changed their plans because of the tariffs, which have spooked him enough to say, the heck with it, We'll just we'll stay in this summer.
Well, I saw this one guy that's quoted in the article. He said the tariffs sort of got everybody around the world mad at us. He was worried about being treated poorly if he showed up at his original destination because the locals would frown upon US tourists.
Is that really a thing?
Yeah, I think some of that stuff is overblown, as for sexy headlines. So I have a good friend of mine who's a federal employee and he was sent to Europe for about three months during all this stuff. He just got back and we asked him that question, are you Are you getting grief from anybody?
And most of it was good natured ribbing, you.
Know, just kind of saying, hey, the United States isn't playing nice in the sandbox anymore. But he had no point faced any kind of true, you know, adverse consequences because of those headlines. So I wouldn't worry too much about that part. People know the reality that the average person wandering around the streets, you know, from the United States doesn't have control over this and may may not agree with Oh, I'm not so worried about that.
That's the practical bottom line is. Listen, I'm not Trump. I didn't do it.
For sure.
I hurried him to the extent it's going to even do anything anyhow. Has tourism dropped off from foreigners coming into the United States? I know Canada had a fairly sizable double digit drop in Canadians interested in visiting the United States because of tariffs ligiously generally speaking, But how about generally the US tourism industry. Has it dropped off for a similar reasons?
Absolutely? Yeah, for political purposes. Yeah.
So international travel the United States is down about five percent in twenty five compared to twenty four. That's despite earlier forecasts that were predicting close to nine percent growth. Now, those forecasts, of course, did not take into account what the United States was going to be doing politically here in the first quarter of twenty twenty five.
So we're now.
Estimating that visitors spending is going to fall by about eleven percent, and that's going to cost US about eighteen billion dollars in money that is no longer coming over from overseas. In the handbook and the pursase of travelers.
Well, but how does the dollar fare?
And so far as you know, one's a spending ability, I mean, are we is a foreign national in good shape coming here? Do they get more value, let's say, for their euro here than they otherwise would. Where's the currency stand?
Yeah, so the US dollar is weakening, of course because and what that means is that it is cheaper for foreigners to come to the United States.
In the United States should be.
Looking like a more attractive, attractive option because mathematically speaking, it's cheaper for them to come overseas.
I remember when the opposite was true. This is probably about twenty years.
Ago, Brian, Yes, and I remember seeing ads in the paper of all this is how I'm dating myself now, but ads in the paper for how cheap it was to go spend a long weekend shopping in Europe.
Because the opposite was true.
The dollar was so strong and the euro was so weak it would cost next to nothing for you to fly overseas and do that.
The opposite is it's not.
Quite the same here but at the but it hasn't had the impact in terms of the travel demand because of all the geopolitical stif going on. So people right now, are focusing on their passions not the numbers.
Uh.
Brian James another edition of Monday Monday. Thanks to all Worth for leaning out every Monday for a nice chat and helpful information. Brian, I'll look forward to another edition next Monday, and I hope you have a wonderful week.
You too, have a good week. Talk to you Monday. Thanks brother,