COT 148 === Jeff Kikel: [00:00:00] Hello, everybody.  Welcome to The Cents of Things. Welcome  

to another week with Jeff and Ron. We are  getting started on another week. We’re past  

the Memorial Day weekend. We are into official  summer, and here in Austin, we have the air you   can wear plus. It is humid beyond belief. We  actually have got rain, which is a good thing.

This time we’re gonna talk a little bit about…  ron’s got some stuff on an interesting stat about  

how fast companies went from $500 million starting  off- Oh, yeah … trading to a billion. He’s got  

stuff on the savings rate, the core PCE, and gas  prices. I’m gonna cover some really interesting   stuff on some some of the Econoday stuff that I  usually cover, and I think some intriguing trends.

So stay tuned. We’ll be right  back on in just one second.

[00:01:00]

Jeff Kikel:   Hello, everybody. Welcome to the  show. Ron, how are you, my friend?

Ron Lang: Doing well. You were talking  about the weather. We’ve had terrific   weather here in the morning. Yeah. By the  afternoon it feels like summer weather,   but we don’t have the humidity, thank God.

Yeah. But it’s definitely summertime,   but it’s not Austin or Philadelphia  or New Jersey- Perfect … humidity.

Jeff Kikel: Yes. I… After after our little   jaunt up to Philadelphia I’m  like, “I know why Ron left.”

Ron Lang: Listen, I didn’t wanna do… Actually,   it was more about the winters than the  summers. Yeah. I’ll be very blunt with you.

You can deal with the summers, ’cause,   at some point in the winters you can only put  on so many clothes and you get cabin fever. Jeff Kikel: Yep.

Ron Lang: Yep. So- All right.  Let’s- Yep … let’s get going Jeff Kikel: here. What do  we got going on in history?

Ron Lang: All right. So this week  in history it’s not as many items   that I thought were interesting, but  there were some good [00:02:00] ones.

1896 Henry Ford test drives-  Interesting … his first quadricycle,   the first automobile he designed- … and drove.

Jeff Kikel: Okay.

Ron Lang: 1926, just had her 100th   year anniver- birthday- Yeah …  Marilyn Monroe was born Norma Jeane.

Jeff Kikel: Yes. And I watched something. They had  some big event out in California where they had,   in, in Palm Springs, they had I think  1,800 people dressed like Marilyn.

Yeah. And there were some ugly dudes wearing  Marilyn costumes, is all I can say, … Ron Lang: Yeah. I’m not sure  why they allow that, but okay. Jeff Kikel: I really don’t know. Yeah.

Ron Lang: 1933, first  drive-in movie theater opens. Jeff Kikel: Interesting.

Ron Lang: You gotta love  that. As a matter of fact,   there is a subculture today of  people that go around the country.

There’s only, I don’t know, less than  a two dozen drive-in- … theaters,   and it’s like a Grateful Dead concert. People  just come and it’s like a weekend thing,  

and they show a bunch of movies,  and [00:03:00] they’re good to go.   Obviously a lot of these things all  got sold because they put up- Yeah high-rises, houses or commercial buildings,  but for the property. But here we go.

Jeff Kikel: We did a chamber of, or a a,  the, one of the nonprofits I worked with,   we did a charity event at one of these  in way South Austin. And this one’ll   never get sold ’cause it was out  in the middle of freaking nowhere.

But we did that during the pandemic  ’cause we couldn’t do our usual gala.

Ron Lang: Yeah. 1956, rock and roll was banned  in Santa Cruz, California Santa Cruz. Of … I  

would’ve figured it would’ve been somewhere in the  Bible Belt first before Santa Cruz, California Not Jeff Kikel: Santa Cruz, California.  Santa Cruz was, or California was  

a lot more conservative in  the ’50s than it is today, Ron Lang: isn’t that the feature in  Pulp Fiction when he wore the the shirt,   the Santa Cruz bananas something or other?

Jeff Kikel: Yeah. Yeah. Ron Lang: Yeah. Jeff Kikel: Plus Santa Cruz  where Lost Boys was filmed. Ron Lang: Oh. Oh, that’s right. Jeff Kikel: Yeah.

Ron Lang: So next one, 1965, first American  astronaut walks [00:04:00] in space- Jeff Kikel: Space …

Ron Lang: as they kept building up until  they go- obviously went on the moon, 19- Jeff Kikel: And do you know Jeff Kikel: who that was?

Ron Lang: 67, The Beatles release their  game-changing music, Sergeant Pepper’s   Lonely Hearts Club Band. I like the album. Wasn’t  my favorite. Abbey Road by far is my favorite,  

especially the back the back the B side.  But White Album and Rubber Soul, yep. Can’t- Jeff Kikel: Awesomeness …

Ron Lang: those are the best, but Sergeant  Pepper definitely changed things for everybody. Jeff Kikel: We all live in a  yellow submarine, that’s for sure.

Ron Lang: I hated that album. I hated  that song. I hated that, I hate that song,   Get Back. Yeah, just- Yeah … I don’t know.  Though those weren’t, to me, those weren’t  

great Beatles songs. Anyway. Yeah. 1968- Yeah …  RFK is fatally shot in LA. 1980, he just died.

Jeff Kikel: CNN. Ron Lang: Yeah. CNN launches. Yep, changed everything there. 1989, Dead Poet’s  Society releases- Wow … in theaters. Now,  

look, over time you’re probably saying, “Ron, you  could’ve put in, some of the [00:05:00] releases   of some of the greatest movies of  all time.” This was, if you remember,  

Robin Williams’ first serious movie. Yeah. I  don’t include The World According to Garp, right?

No, that one’s just weird. I think  Dead Poet- Yeah … and this changed   a lot of thinking about movies and  his role. And I was 21 at the time-

Jeff Kikel: Well- … and Ron Lang: I just thought Jeff Kikel: it was a great movie  … and, just absolute, yeah,   absolute genius. It was such a good movie. And- Ron Lang: I gotta tell you, I  haven’t watched it in a while.

Jeff Kikel: Yeah. But- We we watched it I think  about six months ago, and I just- Oh … I’m like,   I’d forgotten how much I love that movie. It’s  just- Wow … he’s, he was a r- yeah, yes,  

he was funny. He was hilarious, and he was nuts,  but he was actually a really good dramatic actor.

Ron Lang: Yeah, but the problem is he  struggled with depression his whole life. Yeah. So when he had to turn on the  serious switch, that was his true self.

Jeff Kikel: Yeah. Yeah. Ron Lang: All right. What was  the famous line from the movie?

Jeff Kikel: Carpe diem Ron Lang: And… [00:06:00] Seize the Jeff Kikel: day. What else? I don’t remember. Ron Lang: My captain…

Jeff Kikel: Oh, captain,  “O Captain, my captain.” ” Ron Lang: O Captain, my captain.” Jeff Kikel: Walt Whitman. Ron Lang: There you go. Jeff Kikel: Walt Whitman. Ron Lang: All right, so gas  prices, so still elevated.

I could tell you California and Arizona, we  have the highest gas prices in the nation.   This is AAA data. The average right now is 4.42.  I didn’t realize that gas was so high in 2022.

Jeff Kikel: Oh, heck yeah. Ron Lang: I know with inflation, it, things  were up, but I don’t remember gas being so high.

No, it was- But here we are, we’re going Jeff Kikel: into the summer-  Yeah … months. It w- yeah, Ron Lang: it was- I would have doubted  that if gas, prices stay where they are,   we will go elevated in late June and  July just because of summer travel.

Jeff Kikel: Yeah. Yeah. I think…  y- the, it’s the production though.

I, I think our production is offsetting some  of this I… this is an artificial- Not enough.   Yeah. This is… y- actually it is, just  it’s affecting mainly the Asian countries.  

We are [00:07:00] producing way more than  we need here. We’re net exporters here, but Ron Lang: it- if that’s the case,  our gas prices should be a lot lower.

Jeff Kikel: No, because it’s glo- European has  always been high and going higher- Yeah … ’cause   they can’t get it. It’s globally… Yeah, it’s  globally traded, and European is largely because  

they have to import everything, and two, they  have ridiculous taxes that they slam on it,   on gas over there, just like California,  who shoots themselves in their own foot.

They cut down- Yeah … production and  raise the prices with gas taxes. I don’t   feel sorry for them. But yeah, I once again  we’ll… once the Straits of Hormuz open up,  

this’ll come cratering back down, and  it’ll be back in that 3.50 or below range, Ron Lang: yeah. I hear you. All  right. So the trillion dollar club.

This shows how fast it went from 500  billion- 500 billion … not million,   500 billion- Okay … to a trillion. So  let’s just stick in the middle here. Nvidia,  

which we all saw what happened in the last  three or four years. This took [00:08:00] almost   500 trading days. Now let’s think about  what- Yeah … trading days are, right?

So if you take out weekends and everything else,  there’s roughly 20 trading days in a month,   give or take. Yep. Probably really 21,  22. Yep. 20 trading days in a month.

Jeff Kikel: 240 a year.

Ron Lang: Yeah. That’s 240. This took two years.   Nvidia took- … two years.  Micron took a less than a month Jeff Kikel: Yeah. And the funny thing, if you  look at Nvidia though, it took, I think…

nvidia came out in the early 2000s-  Yeah, 2004, 5 or 6 … and it di- it   didn’t get above $20 a share until  two years ago. Two or three years ago.

Ron Lang: No. It was, i- it started  to go up about, I’m gonna tell you,   10 years ago- Okay … because they  were very involved in gaming chips. Yes. That was their niche.

Jeff Kikel: Yep, that was their big thing. Yep.

Ron Lang: Then they started going up, and they  were very volatile. Once they got involved in AI,   that’s when it- Yeah … tripled, and they  did the split and everything else. Yeah. So  

it’s been the last four years that’s [00:09:00]  probably gained about 70 or 80% of its market cap. Jeff Kikel: Yeah. Ron Lang: It’s amazing. But even look at Walmart.

Jeff Kikel: Yeah, I know. Surprisingly, and  then look at Apple versus Walmart. That’s crazy.

Ron Lang: Yeah. And Apple’s been struggling, but,   I don’t think we need- … to worry about them.  So Microsoft’s- Yeah … been struggling, too.

Jeff Kikel: Yeah But, But even  Meta and Alphabet, Walmart,   that’s amaz- and Walmart’s been a just an  amazing thing watching over the last few  

years especially. It just languished along,  and then they figured out the whole, hey,   we can take on Amazon with our own online thing,  and that’s just been the rocket ship for them.

Ron Lang: I think just to prove the  point of Buffett, slow and steady, baby. Oh, it’s slow.

Jeff Kikel: Slow Ron Lang: and steady all the way up there. Oh,  it’s slow. It works. It works. Okay. So here,  

savings rate. I like to look at this every now  and then. I probably haven’t- Yeah … covered it   minimum a year, maybe longer, too. Yeah. I love  to look at the savings rate because [00:10:00]  

historically, and I don’t have a chart to compare  it, we are one of the lowest in the world. Jeff Kikel: Yep.

Ron Lang: You go to European countries,  India, they’re 6, 7, 8 to 10% of their  

income. Yeah. So at 2.5%, that’s, what does  that mean? We’re just spending money. Yeah. Or,   and/or we’re spending money we don’t  have. I don’t know what your thoughts  

are. This is not good. But again- it’s in-  … when it’s a high savings rate in the US,   that typically means things  aren’t great in the economy.

Jeff Kikel: Yeah. And it, interestingly  enough I think we, we did some kind of a   piece on this or I brought it up during the year.  Highest savings rate in the world is Ireland,  

and it’s 60% or something like that. It’s  something weird and off the charts high. But yeah,   there are some countries in the world where  it’s 30 or 40% versus our little meager 6%.

Yeah. Ron Lang: Yeah. Yeah, so yeah.

Jeff Kikel: And I think it’s, I think it’s a  challenge, if we could just go back to 2020 and,   just have the government dumping a  whole bunch of money on people, then,   we’d have a tons of a save-  [00:11:00] a savings rate.

Ron Lang: No, they spent the money.  Ideally, I think 6 to 8% is the right   way to go. Yeah. And I don’t think we  would have the retirement crisis we would.

Jeff Kikel: Absolutely not. How many people do  you and I, have you and I worked with over the   years where, they come to us at early 60s and  they’ve got maybe 60, 70 grand? And it’s y- the Ron Lang: p- I was on the  phone with somebody last night.

She’s going through a divorce. She doesn’t  have much, and she’s worried. I’m like,   “Look, you know what? What’s the  old expression? The best time to  

plant a tree was 20 years ago.  The second-best time is today.” Jeff Kikel: Yeah.

Ron Lang: And she’s- Yeah … young enough,   I’m like, “Now you gotta do  it yourself.” You gotta get Jeff Kikel: started. Yeah, you gotta get started.  That’s all you can do. Ron Lang: Yeah.

Jeff Kikel: And you’ve gotta figure  out other ways to… Yeah, you’ve gotta   figure out ways to generate income ’cause  it’s not an asset problem in retirement,  

it’s an income problem. I know. I know.  So figure out ways to generate income Ron Lang: Yep.

And then the core PCE I kinda get why it’s,   the Fed likes it. Yeah. I’m not a big fan  of the [00:12:00] CPI, never really have. Jeff Kikel: Yeah.

Ron Lang: But there’s so many things that you  can extract out to see where things are. Some   things are doing well, other things are not doing  well. But inflation is definitely ticking up.

And I don’t know I gotta look again, but the  chances of a rate hike, which by the way,  

the new Fed chairman Warsh could- … nix and  on his own, I don’t know how that is. I thought  

it was just pure consensus. But I don’t know  how they could potentially do a rate decline,  

a cut, because even though it would help out  in other ways with our debt and whatever,   but if we’re trying to curb inflation we  gotta get, we gotta get out of these wars.

Jeff Kikel: Yeah. I, once again I’m not gonna get  on my soapbox again of how I don’t necessarily   believe in the Fed in a lot of these cases  and their logic when it comes to- You don’t Ron Lang: want the politicians to control it.

Jeff Kikel: Yeah. I don’t want them to  control it either because they’re…

it’s how much time did they  spend monkeying around keeping,   inflation rates so [00:13:00]  insanely low and just literally  

created a, an asset inflation bubble so  I don’t like anybody manipulating and   monkeying around and stuff. And tell me Jay  Powell wasn’t massively freaking political.

Ron Lang: All right, let me ask you this. Who then   should control and decide on  interest, Fed interest rates?

Jeff Kikel: If you want me to be truly honest,   I don’t think they should be involved at  all. I think they should be- No, but- No … Ron Lang: no, but who should make the decision?

Jeff Kikel: Yeah. Once again, we’re gonna  have to, ’cause that’s the way things work.

But I- honestly, I think the market  set interest rates much better. And- Ron Lang: Wait, you’re gonna have traders  involved- Yeah … in doing interest rates?

Jeff Kikel: But they already do. Ron Lang: Oh my.

Jeff Kikel: All right. The Fed doesn’t…  Yeah, the Fed doesn’t… fed controls   open market actions. They don’t  control long-term interest rates. That’s all controlled by the bond market.

Ron Lang: I… no, I know that. I  know that. All right. We can have   a separate podcast on that.  All right, what do you got?

Jeff Kikel: All right, let’s go here real  [00:14:00] quick. All right. Get back to  

the beginning here. Once again interesting  things going on in the economy with all,  

the complaints of, “Oh my God,  everything’s bad in the economy.” Eh, it’s really not. Yes, gas prices  suck. Yes, inflation is out there,  

but when we’re starting to look at  some of the behind-the-scenes stuff,   the actual companies it’s actually  pretty intriguing. So this week,  

ISM Services Index and an- manufacturing  index both kind of were in the same situation.

They came in way above or right at the  top-end range of consensus. And anything   over 50 is ex- expansionary. Anything below 50 is,  

basically we’re declining. So this has been  consistent all year long and really for about   the last year and a half we’ve had ISM  both both of them just cranking along.

So [00:15:00] that’s good. It means  we’re in an expansion mode there.   Here was the interesting thing. So let  me start with this, ’cause this was the  

headline number that I heard this morning.  Oh, jobless claims. My God, they were way up,   225,000 versus, the consensus of  212, and the prior one was 212.

Oh, my God, the world is bad. People  are getting laid off. Don’t get so   crazy because one of our old friends, JOLTS,  which is the job openings basically for the  

world for here in the United States it’s  been ambling along. It’s been slowly kinda   creeping down over the last several years,  getting back into this kind of 6.8 range.

That’s where we’ve traditionally  been. All of a sudden, it spiked   up quite a bit to 7.6 for this last  month, which is big. That’s a lot of  

job openings. So that could easily absorb  this 225,000. The interesting thing is the   ongoing claims have actually continued to  go [00:16:00] down. So that’s a good sign.

People are getting absorbed  back into the workforce,   and I would say with this JOLTS number,  that’s gonna absorb a lot more people   into the index. What… Or in, into the  job world. What’s your thoughts, Ron?

Ron Lang: The fact that there are more  job openings is not a good sign. That   means people- Yeah … are laying off.  Does that mean people are laying off,   or does that mean that they can’t fill  them with the skills that they need?

Jeff Kikel: No, I think it’s…  I think there’s a lot of, I,   I think a lot of job creation is going on.

As I read through the stats a lot of job creation  is going on. Now, can those people that were laid  

off get those jobs? I don’t know. It is, it’s a  skill level, that they don’t have the skillsets,  

i… Anybody I would say that doesn’t have  a job right now, spend some time learning  

AI because that’s what’s gonna, that’s what’s  gonna help you to get a job, because that’s   where the jobs are going, [00:17:00] is people  that really understand and can leverage that.

It was funny, I was listening to a I think it  was on financial or it was on, like local news,  

but they were they were interviewing  this company president, and he’s he goes,   we use AI. It’s something that’s extremely  important to us. And, right now, if we got  

people on staff that are just not on board,  they’re probably not gonna be around any longer.” He’s “I want them to be around, and  I want us to be highly efficient.  

But if you’re just s- digging your  heels in and saying no- I’m sorry,   I don’t… I’m, I can find somebody  else who is willing to- Yeah … at that Ron Lang: point.

Jeff Kikel: Yeah. I just think that’s the  reality. All right, so last couple things.

ADP employment report, once again, that kinda  came off the, way above where we had been. It’s  

been going up every single month. So this c- is  what I would say supports that trend in the JOLTS,  

is there’s just a lot more [00:18:00] openings.  And where ADP I don’t think was a really good  

indicator over the last let’s say six years I  think it’s starting to become a better indicator  

because we’re getting more job creation in the  small companies, the people that ADP deals with.

They’re actually really starting to create  jobs, and it’s not the manufactured jobs that   we were kinda seeing from the federal  numbers over the last several years,  

where they were just manufacturing government  jobs to make the numbers look good. Government   numbers have been going down over this last, let’s  say, 18 months with the change in administration.

But private jobs have been actually going up,  which is a much better sign. These are actually  

productive companies hiring more people. And last  but not least, and this was an interesting one.   It’s one that I don’t usually look at, but I just  kinda glanced across it. Productivity and cost.

So [00:19:00] nonfa- or non-farm productivity  actually was down a little bit, so we’re at the  

bottom of the consensus range, but this was  a really interesting thing. Unit labor cost,  

so this is for Q1, unit labor costs were actually  below consensus. It was expected to be up 2.3%,  

it was actually 1.8 which  is really intriguing that,   one, it’s probably not good from the  perspective of somebody who’s actually  

working and has now inflation and gas  prices up, but labor costs are down.

It’s intriguing, and it’s something we  just need to keep an eye on. But yeah,   it was a weird… it just stuck out to me this  time. And it’s one of those areas that it,   it’s it’s the major effect for most  businesses is the cost of labor.

Ron Lang: Yeah. That’s, No, that’s part of  the problem, is, I mean- with efficiencies,   you don’t need as many people, obviously. T-  you know- … technology’ll do that. But people  

are still hiring. But that JOLTS number bothers  me, because [00:20:00] I’m thinking to myself,   if these are more job openings, is that  true expansion? Or are they weeding out   people to bring in better skilled  people, and they can’t find them?

Jeff Kikel: Yeah. But JOLTS is always new  job openings. It’s not you know- I- it’s  

not okay just aggregate job o- it’s actually  new job openings is what it measures. So I Ron Lang: think, you know- Jeff Kikel: we’ll find out tomorrow with the, Ron Lang: Yeah … with the employment number.

Jeff Kikel: Yeah the government employment  report, which, God knows what…

If it’s current or if it’s three sem- yeah, or  three months behind or whatever. It’s amazing  

to me why they can’t catch . But we’ve had  that conversation about how they do some   of these things and, it’s so antiquated  at this point. You would think that they

Ron Lang: would use AI- Unless  the government’s involved and   the data’s really bad, it makes no sense.

Jeff Kikel: Yeah. Yeah. So like I said I’m  starting to look at ADP as a little bit  

better measure of what’s the real health of the  economy from a company standpoint. Because if  

we keep [00:21:00] seeing ADP jobs going up,  that means companies are comfortable with,   “Okay, yeah, we know our costs are a little bit  higher, but we think we’ve got that handled,  

and we can afford to hire more  people and, grow our companies.” And, yeah, I think a big part of this is the  new tax regulations. That stuff really didn’t  

start to kick in until January, and I think it’s  really starting to kick in massively now as these  

companies can get their hands around, “Okay if we  make this investment, we know we’re gonna get this  

ginormous tax break at the end of the year, so  we can afford to hire the people to do this too.” Ron Lang: Yeah. All right.  We’ll keep an eye on it.

Jeff Kikel: One big beautiful bill, baby.  All right, folks. Thank you for joining   us. We do this for you guys, so make sure  you subscribe to the channel. And we’ll  

be back here next week to cover what’s  going on. So we’ll see you then. Bye-bye.

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