Readers are leaders, and leaders are readers! Josh and Austin are back with the 4th episode in their “What We’re Reading” series, which highlights current news, along with some interesting articles they have been reading since last time. In this week’s episode, the guys discuss the model of relationship between Russia and China, President Biden’s thoughts on forgiving student loans, and how McDonald’s is McLovin’ this current inflation! Listen now!

Main Talking Points

[2:02] – Josh’s First Read: Russia Deploys Ukraine’s Trained Dolphins
[6:10] – Austin’s First Read: Elon Musk Sells Tesla Shares
[8:41] – Josh’s Second Read: Banks Don’t Want Your Money
[13:53] – Dad Joke of the Week
[14:28] – Austin’s Second Read: Inflation Is Good for McDonald’s
[17:13] – Josh’s Third Read: President Biden on Student Loan Forgiveness
[19:45] – Josh & Austin’s Thoughts on Cancelling Debt
[23:57] – Austin’s Third Read: Russia and China’s Model of Relationship

Links & Resources

Russia Deploys Trained Dolphins At Black Sea Naval Base- The Guardian

Elon Musk Sells Tesla Shares – CNBC

Sorry Savers, Banks Don’t Want Your Money – Advisor Perspectives

McDonald’s Says Inflation is Good For Business – Business Insider

Biden Says He’s Not Considering 50,000 in Student Loan Forgiveness – CNBC

China Calls Russia Relationship a New Model For The World – Bloomberg

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Full Transcript

Welcome to The Invested Dads Podcast. Simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.

Austin Wilson:
All right. Hey. Hey. Hey, welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. I am Austin Wilson, research analyst at Hixon Zuercher Capital Management.

Josh Robb:
And I am Josh Robb, director of financial planning at Hixon Zuercher Capital Management.

Austin Wilson:
Wow. We work together.

Josh Robb:
That is. Same spot.

Austin Wilson:
Same spot.

Josh Robb:
Same spot. So Austin, how can they help us grow this podcast?

Austin Wilson:
Yeah, we would love it if you would subscribe on whatever podcast player you are listening to us on, which by our research is probably Apple Podcasts.

Josh Robb:
And a couple great people on Google.

Austin Wilson:
Oh no, those are the Spotify people. I don’t know if anyone uses Google except for you.

Josh Robb:
Me.

Austin Wilson:
But yes. Every podcast platform that you can, we would love if you would subscribe and then you’ll get a new episode every single Thursday, when we drop them. Over 120 episodes down, haven’t missed one yet. So, stay tuned every single week and we would love it if you would leave us a review on Apple Podcast, Spotify, Google, whatever you listen to leave us a review if you can, we would love it. And it would help us to be ranked higher to help more people out. So today, Josh…

Josh Robb:
Yes.

Austin Wilson:
We’re going to be talking about things that we’re reading because as they say, leaders are readers and leaders are readers and…

Josh Robb:
Readers are bleeders because paper cuts are no joke.

Austin Wilson:
Oh, they’re not. You’re not even kidding. That’s why you just read on a Kindle.

Josh Robb:
That’s right.

Austin Wilson:
No more paper cuts.

Josh Robb:
Shock yourself.

Austin Wilson:
I bet that Amazon who owns Kindle could do a, they could totally do a funny little advertisement for Kindles on how many paper cuts they’ve saved.

Josh Robb:
Yeah.

Austin Wilson:
Over since Kindles came out and be like…

Josh Robb:
You’re big.

Austin Wilson:
Well, if you multiply $50 per paper cut, we actually saved the word trillions of dollars.

Josh Robb:
$50 for… That’s a steep paper cut. What’s happening, you got an infection in there? What’s going on?

Austin Wilson:
I don’t know. So…

Josh Robb:
I think it’s like a five cent Band-Aid.

 

[2:02] – Josh’s First Read: Russia Deploys Ukraine’s Trained Dolphins

Austin Wilson:
Ah, that’s five cents. I use the off brand they are only three. So today we are going to be going through each of us, three articles or interesting things that we are reading because there’s a lot of stuff going on. So…

Josh Robb:
And we’re going to link the articles in the show notes.

Austin Wilson:
They will be.

Josh Robb:
That way we’re citing them, where we’re getting all this fun stuff from.

Austin Wilson:
Yeah. So, start us off Josh, what is the first thing you’re reading? Because you’re only reading three things, there’s no more.

Josh Robb:
I’ve only read three things since the last time we did this.

Austin Wilson:
Yes.

Josh Robb:
So yes, that is it. So, the first article I’m going to talk about involves the Russia Ukrainian conflict.

Austin Wilson:
Oh, that’s a downer.

Josh Robb:
Yes. But wait till you hear about this. The U.S. Naval Institute or USNI, which is an institute.

Austin Wilson:
It’s a real thing.

Josh Robb:
They were reviewing satellite imagery, because that’s what they do for fun on the weekends and they noticed that a Naval base in Sevastopol, it’s a harbor in what was formally Ukrainians control of Crimea, now under Russian control. (In) their harbor there, they noticed some pens that housed dolphins – had been moved into that arbor.

So, dolphin swim in the water and so if you want to keep them you kind of fence in some water area so they can swim around. Right. And they had moved them into this harbor and the Naval, U.S. Naval Institute are pretty sure they did that for one reason, which is to use those dolphins…

Austin Wilson:
Bomb dolphins.

Josh Robb:
In their military, in their Navy.

Austin Wilson:
Wow.

Josh Robb:
You were very close to actually saying bomb dolphins, because historically speaking not just the U.S., Russia, different countries have used Marine animals for missions.

Austin Wilson:
Why not?

Josh Robb:
And so the reason why that’s important is, there are a lot of Russian ships that are anchored around there because that’s a key port.

Austin Wilson:
Oh yeah.

Josh Robb:
The way that sits, it’s pretty much out of missile range for most ships to get to it, so they’re pretty safe, but it is vulnerable to undersea attacks. You float some mines in there and see what happens. And so, there was actually a program by Ukraine that they had started or resurrected from a former Russian program that they had put away stopped doing. But then Ukraine picked it back up in 2012.

Austin Wilson:
Gotcha.

Josh Robb:
So they started training these dolphins, the Ukrainian Navy.

Austin Wilson:
So Russia is using Ukraine’s trained to dolphin against them.

Josh Robb:
So in 2014 Russia took that area and as a result got these dolphins… Ukraine unsuccessfully demanded the return of the dolphins; they did not get it. And then Russia said, you know what? This is pretty cool we might actually expand this program. So, they went out and started bidding on more dolphins and no one knows if they got them or not, but there are dolphins now in this Harbor that could either be from Ukraine in 2012, 2014, I don’t know how old the dolphins were at that time.

Austin Wilson:
Right.

Josh Robb:
Or new dolphins that they trained. This is not the first time that it’s been suspect that Russia has been using animals. So a beluga whale was spotted off the course of Norway in 2019, so just a couple years ago and that was believed to be trained by the Russian Navy because Fishermen reported that it was wearing strange harnesses and it also could have held cameras on those harnesses.

Austin Wilson:
Oh yeah.

Josh Robb:
It was harassing boats, grabbing straps and pulling them off the boats. I mean it was, this thing, it’s not a normal whale activity. So, I’m going to take…

Austin Wilson:
Interesting read. I’m going to take it one step further.

Josh Robb:
Yes.

Austin Wilson:
Have you seen the documentary Blackfish?

Josh Robb:
I have. Yes.

Austin Wilson:
So captivity…

Josh Robb:
I mean they’re smart.

Austin Wilson:
Captivity killer whales. Right? Orcas going crazy because they’re in captivity and killing people.

Josh Robb:
Because they’re wild animals.

Austin Wilson:
Because they’re wild animals surprise, right? That is the ultimate weapon for a military. Because it’s the smartest thing on the planet and they’re the ocean’s top predator.

Josh Robb:
Yes.

Austin Wilson:
Bigger than great white sharks.

Josh Robb:
Everyone else is scared of them.

Austin Wilson:
No one messes with orcas. So…

Josh Robb:
They actually had a movie about this years ago, I never seen it but in the notes it was reference…

Austin Wilson:
It’s called Free Willy.

Josh Robb:
No, not freeing the whale, but about training dolphins to…

Austin Wilson:
Oh really?

Josh Robb:
Attack but…

Austin Wilson:
No that was called Flipper.

Josh Robb:
Flipper. Yeah. It went crazy.

Austin Wilson:
Yeah. It did. Remember when…

Josh Robb:
Sharknado, that’s what I was thinking.

Austin Wilson:
Sharknado. But remember on Flipper when the dolphin attacks the hammerhead shark.

Josh Robb:
That’s right. They would do that in real life.

Austin Wilson:
So dolphins, whales, that’s top of the food chain right there, get away sharks.

Josh Robb:
Dolphins are strong too. I tell you what.

Austin Wilson:
I don’t necessarily know if I believed everything that was in Blackfish, but it sure made for an entertaining documentary.

Josh Robb:
It was. You do feel bad for them.

Austin Wilson:
You do. Oh. And, but I’ll tell you what I watched it and I was like, I better go to Sea World right now and see my whales while I can because who knows there won’t be any more new whales.

Josh Robb:
Nope. They’re not doing it… Yeah. They’re done with that.

 

[6:10] – Austin’s First Read: Elon Musk Sells Tesla Shares

Austin Wilson:
Exactly. All right. My first article, Elon Musk, CEO of Tesla, sold around 8.4 billion worth of Tesla shares this week as he moved to buy Twitter. Okay. So, a couple points here. Elon Musk sold roughly 8.4 billion worth of Tesla shares in the days following his bid to take Twitter private, according to filings with the SEC.

Josh Robb:
Now, it’s not the first time he sold a big chunk of stock.

Austin Wilson:
Well he had to sell a bunch to pay all his taxes from his stock options.

Josh Robb:
Yep.

Austin Wilson:
So yes, he’s done this before. The bulk of the CEOs re-sales were made on Tuesday, the filing showed Tesla shares fell 12% that day, but did move a little higher the day after that. So still down a good bit on that selling pressure there. Because that’s a chunk.

Josh Robb:
Did his selling move it? Was that part of the insured filing?

Austin Wilson:
Well, I think it was his selling combined with the fact that he may have to sell more, and no one knew exactly how much. So, another 4.4 billion was sold on Thursday. According to filings, published Friday. As the filings became public Thursday evening Musk wrote on Twitter, “no further Tesla sales planned after today”. So that put a little bit of a prop in the stock, and it was up…

Josh Robb:
Was he allowed to do that? Isn’t he like under regulation with the SEC?

Austin Wilson:
He is always in hot water but if he owns Twitter, does it really matter?

Josh Robb:
Yeah, sure.

Austin Wilson:
So he is working on that. So, this is all, as we talked about, as a follow-up to Elon Musk bidding to buy Twitter, to take the social media company private at $54 and 20 cents per share because of Elon Musk’s favorite number 4.20. So that’s around 44 billion in total in order to do so, Musk secured 25.5 billion of fully committed debt, including 12.5 billion on loans taken against his Tesla stock. So using his Tesla stock as collateral, Twitter accepted the offer earlier in the week but the deal still requires shareholder and regulatory approval.

Josh Robb:
So is he buying it all by himself?

Austin Wilson:
Well, I think …

Josh Robb:
Because wasn’t he shopping around for some people to help him?

Austin Wilson:
Technically he is. Technically Twitter is being bought by a group that is fully controlled by Musk.

Josh Robb:
Okay.

Austin Wilson:
So he may have other people in it as well, but is a quote unquote…

Josh Robb:
He’s got it.

Austin Wilson:
He has control over it, but he may have backing financial.

Josh Robb:
Got you. Got you.

Austin Wilson:
Interestingly enough, there are provisions in the plan, if either side backs out or head runs into issues and is at fault, they will have to pay the other side a billion dollars. So, either way, if Musk gets in trouble and can’t make the deal happen or I don’t know what happened, he has to pay Twitter a billion dollars. And if Twitter finds another buyer or if they have an issue on their end that makes it not happen, they have to pay him a billion dollars.

Josh Robb:
Oh man.

Austin Wilson:
Billion.

Josh Robb:
Billion with a B.

Austin Wilson:
Yeah. Usually, these things aren’t quite that big, but I guess when you’re dealing with the richest man in the world, you can have billion dollar fines. So that’s my first article.

 

[8:41] – Josh’s Second Read: Banks Don’t Want Your Money

Josh Robb:
All right. I got another one and it is about rising interest rates.

Austin Wilson:
Mmm.

Josh Robb:
Yeah. So, the Fed is raising interest rates and they’re planning on continuing to do more this year. But what I’m talking about is the impact for savers. So, the hope is, hey, interest rates are going up, I know my lending is going up so if I’m looking for a new mortgage or things like that, those are going up along with the rising interest rates. I can’t wait for my savings accounts to go up in interest.

Austin Wilson:
Exciting.

Josh Robb:
And what this article said, and this article is from Advisor Perspective, which is one of the ones that I get often that I do enjoy their perspective…

Austin Wilson:
As you’re an advisor.

Josh Robb:
Yes. As an advisor. But they were noting that savers are in for a shock because banks don’t want your money right now.

Austin Wilson:
No.

Josh Robb:
Which is interesting, and I’ll explain why. But interest rates are there as incentive for you to leave your money at the bank, that gives them a couple things. That gives them the ability to cover their lending, which then that’s where they make their money. But if they don’t need extra money to cover lending, then they’d have no incentive to offer a compelling rate to compete against other places where you’d store your money.

Austin Wilson:
Right.

Josh Robb:
And this all comes from back in 2009, former Fed chairman Allen Greenspan.

Austin Wilson:
Oh yeah.

Josh Robb:
He told Bloomberg News, this is a quote, “all of the statistical evidence indicates that the level of household wealth is a major factor in consumer expenditures”. And why does that matter? Well, Allen Greenspan’s theory was if you could increase people’s wealth they’re more likely to spend which drives our GDPR growth of our economy.

Austin Wilson:
Yep.

Josh Robb:
And savers are not spenders.

Austin Wilson:
No.

Josh Robb:
And so if we can get people to stop saving and invest their money, even if it’s bonds, you’re going to get more growth than you are in savings. More growth means more household wealth, which means you feel richer, which means you spend.

Austin Wilson:
Yeah.

Josh Robb:
So that was the whole theory there.

Austin Wilson:
Don’t incentivize saving.

Josh Robb:
Right. And out of that came the term, There Is No Alternative or the acronym.

Austin Wilson:
TINA.

Josh Robb:
TINA.

Austin Wilson:
You fat lard.

Josh Robb:
Yes. That’s…

Austin Wilson:
From Napoleon Dynamite.

Josh Robb:
Not Napoleon Dynamite, Tina.

Austin Wilson:
Oh, just Tina.

Josh Robb:
Not the Lama or whatever the alpaca, whatever that thing was. TINA is just an acronym that means if we could eliminate the other choices, they have no choice but to invest their money. And that drives growth long term.

Austin Wilson:
Yeah.

Josh Robb:
So checkable deposits for households and non-profits, so the average checking, savings accounts, rose to 4.06 trillion in December of this last year compared to only 200 billion in 2008. That’s a very big, very big growth.

Austin Wilson:
Yeah. That’s like 20 X.

Josh Robb:
Yes. And so that’s free cash floating around.

Austin Wilson:
Yep.

Josh Robb:
Right. And then also when it comes to just bank liquidity, which is just deposits…

Austin Wilson:
Yep.

Josh Robb:
Over loans. Right. How much you have extra. They had 250 billion in 2008 now it’s over 7 trillion. So banks have money. They do not need other money.

Austin Wilson:
And this is also why banks keep… So because of the global financial crisis in 2008, 2009, a lot of scrutiny was placed on the financial system in general.

Josh Robb:
Yes.

Austin Wilson:
And a lot of additional requirements were then made for banks to comply with in order for them to be able to do things like pay a dividend or do stock buybacks or any of these things for shareholders.

Josh Robb:
So stress test them.

Austin Wilson:
They would have to stress test them. And now we are running into zero issues with stress tests.

Josh Robb:
Banks are like, yeah, no problem.

Austin Wilson:
They are “the most capitalized they have ever been”.

Josh Robb:
Yep.

Austin Wilson:
In just what you’re talking about here, they have more than enough money to cover their obligations.

Josh Robb:
Yep.

Austin Wilson:
And they are just in really good shape. So, they are able to pretty much do whatever they want.

Josh Robb:
They don’t care. So here’s a great example. All right. And so banks offer CDs, right? certificates deposits…

Austin Wilson:
Like the things that my generation used to listen to in the car?

Josh Robb:
Nope. CD, certificate deposits. And so, if we look at a two-year CD on average and this article came out just a little bit ago, but at that point, the rate was 0.39% for a two-year CD.

Austin Wilson:
That’s abysmal.

Josh Robb:

Yes. Horrible. But what’s interesting if you look at a two-year U.S. Treasury note.

Austin Wilson:
Yep.

Josh Robb:
So similar thing, CDs, they have backing, they have some security to them, some insurance, if you will, that they’re protected. U.S. Treasury notes backed by the U.S. Government; I would argue that pretty much the same a lot of security. You’re not worried about default under…

Austin Wilson:
You’re essentially risk free on all of it.

Josh Robb:
Two years. Same timeframe.

Austin Wilson:
Yep.

Josh Robb:
A two-year treasury was 2.7.

Austin Wilson:
Yeah. I mean, yeah.

Josh Robb:
You see the difference there? Banks are not motivated to offer really any savings.

Austin Wilson:
That’s crazy.

Josh Robb:
And so…

Austin Wilson:
That’s such a huge difference.

Josh Robb:
A big difference. And I… The way the article was done, I think there was about the same time period they were looking at because banks, that has risen pretty quickly as well.

Austin Wilson:
Right.

Josh Robb:
What their point is, is just last year that same two year treasury was only 0.15%.

Austin Wilson:
Oh yeah.

Josh Robb:
So it’s gone from 0.15 up to 2.7, a very big rise. Historically, two-year rates for both of those fall hand in hand. This is the widest gap on record between a two-year CD and a two-year Treasury. So savers, don’t expect to get a big bump in your savings anytime soon.

Austin Wilson:
Hey, we just got an email that our online savings account went from 0.5 to 0.6.

Josh Robb:
0.5 to 0.6.

Josh Robb:
And that may be all you’re going to get.

Austin Wilson:
That’s probably about it. They’re not wanting our money.

Josh Robb:
Yeah.

 

[13:53] – Dad Joke of the Week

Austin Wilson:
So Josh, I have a dad joke of the week for you, and I think you’re going to laugh.

Josh Robb:
I’m ready.

Austin Wilson:
It’s a math joke. Okay. Why didn’t four ask out five.

Josh Robb:
Ooh.

Austin Wilson:
Numbers dating here.

Josh Robb:
Okay. I don’t know.

Austin Wilson:
He was two squared.

Josh Robb:
Two squared? I got it. Cause he was… Four is two squared.

Austin Wilson:
Four is two squared. So, that’s my math joke of the week.

Josh Robb:
I like it.

Austin Wilson:
All right.

Josh Robb:
Thought it was something about, they were like, because he couldn’t be…

Austin Wilson:
This is really falling on its face.

Josh Robb:
I was just thinking there’s some sort of way of like…

Austin Wilson:
Divide, divisible?

Josh Robb:
Yeah.

Austin Wilson:
Yeah.

Josh Robb:
Something that along that line, but you’re right.

 

[14:28] – Austin’s Second Read: Inflation Is Good for McDonald’s

Austin Wilson:
So my first article was from CNBC, I didn’t mention that earlier. It is linked in show notes. My second article is from Business Insider and the headline reads, this is a good one, “McDonald’s says sales are up partially because inflation is causing grocery prices to rise faster than fast food”. Okay. So think about this.

Josh Robb:
How does that make sense?

Austin Wilson:
Inflation is pushing up prices across the economy, but that might actually be good news for fast food change.

Josh Robb:
Yep.

Austin Wilson:
McDonald’s menu prices are up over 8% where they were this time last year, the chain told investors in the most recent earnings report, even so it just reported sales that were up 3.5% for the first quarter of 2022 over the previous year, despite data showing that nearly half of consumers plan to reduce spending on dining out because of rising prices. These sales are an increased over 2021 numbers, which surpassed 2019 pre-pandemic levels.

Josh Robb:
Interesting.

Austin Wilson:
CFO, Kevin Ozan, for McDonald’s offered a partial explanation for this trend, “food at home has been increasing even more than food away from home. So, that’s probably been a little bit benefit to us also” he told investors during the conference call. So, think about this consumer price index data CPI from the Bureau of Labor Statistics shows this same sort of thing.

In March 2022, when March, when this McDonald’s quarter ended, all food was up 10% over March 2021. Food prices rose 1% from the previous month, in the breakdown of the data, more of that inflation is impacting food at home, which includes grocery store purchases. So, food at home prices rose 10% in the last 12 months which is the biggest jump since 1981, but food away from home, so that’s restaurants, that rose 6.9. So, its relative inflation. So comparatively speaking, while McDonald’s is passing along 8% price increases or whatever across the board, it’s still less than your grocery bill went up. So you’re more inclined to eat at McDonald’s than you are shop at a grocery store.

Josh Robb:
So this all drives to the point that these large fast food places have really good negotiating power.

Austin Wilson:
Well, they’re huge.

Josh Robb:
Because all the food comes from the same spot, right?

Austin Wilson:
Yeah.

Josh Robb:
Beef comes from a cow either way.

Austin Wilson:
Beef is beef.

Josh Robb:
Whether it goes to the grocery or to McDonald’s it came from that same cow.

Austin Wilson:
Yeah.

Josh Robb:
Well probably not same cow, but in general.

Austin Wilson:
Hopefully not.

Josh Robb:
But the idea there is, it’s starting from the same source but it’s negotiating power, that’s what’s controlling the sales increase.

Austin Wilson:
Because of volume.

Josh Robb:
Right?

Austin Wilson:
Yeah.

Josh Robb:
Yeah. McDonald’s especially is well known to have kind of an upstream and downstream control so that their French fries all come from places where they’re like, this is all my potatoes.

Austin Wilson:
Yes.

Josh Robb:
And so they’re, locking a rate in a sense. Which is great for them.

Austin Wilson:
And when you’re that size, you’re probably doing some hedging.

Josh Robb:
Yes.

Austin Wilson:
You’re probably buying futures contracts and locking in prices for all of your main supplies that you’re going to need.

Josh Robb:
Yes.

Austin Wilson:
So that regardless if it’s more expensive or less expensive, you know what your cost is pretty much going to be at that point. So…

Josh Robb:
That’s right.

Austin Wilson:
Yeah. That’s McDonald’s. I thought that was interesting.

Josh Robb:
That was very interesting.

Austin Wilson:
Josh, what’s your third article?

Josh Robb:
My last article also was CNBC.

Austin Wilson:
I saw this one.

Josh Robb:
Student loan forgiveness.

Austin Wilson:
Yep. Yep.

 

[17:13] – Josh’s Third Read: President Biden on Student Loan Forgiveness

Josh Robb:
It has been on the news; I actually saw it on the TV as well in the last couple days. But there’s been talk about potentially President Joe Biden is going to be doing something with student loan forgiveness. And so president Joe Biden came out on Thursday the 28th and he said he will be making a decision around student loan forgiveness within the next couple of weeks.

Austin Wilson:
That’s pretty vague.

Josh Robb:
Broad, out there.

Austin Wilson:
Yeah.

Josh Robb:
But he followed up with saying, “I am not considering $50,000 in student reductions”, which is what had been floating around out there.

Austin Wilson:
Well, yeah,

Josh Robb:
“But I am in the process of taking a hard look at whether or not there will be additional debt forgiveness”. So currently we’ve had the last couple years a pause in interest rates for federal student loans…

Austin Wilson:
Oh, in interest accrual.

Josh Robb:
Yes. And so they just said, hey, you’re not compounding anymore during the pandemic, you can still make payments if you want…

Austin Wilson:
Right. It goes straight to principal.

Josh Robb:
But it’s not going to be increasing. Yep.

Austin Wilson:
And that is all the way through August, I think of this year.

Josh Robb:
Yes. But that is set to expire potentially unless it’s renewed, but that’s been the main source of student loan impact from COVID is that the pause of interest rate charging onto your growth, your principal. So, couple stats, countries outstanding education debt balance exceeds 1.7 trillion and poses a larger burden to households than credit card or auto debt.

Austin Wilson:
Yep. That makes sense. Yep. Not a surprise there.

Josh Robb:
Roughly a quarter of student loan borrowers or 10 million people, are estimated to be in delinquency or default.

Austin Wilson:
That sounds crazy high.

Josh Robb:
A quarter, so 25% of student loan borrowers.

Austin Wilson:
It’s like you look at a room with a hundred people in it who hold student loans and a quarter of them are literally behind on their student loan payments. That’s crazy now. And that’s now.

Josh Robb:
Are estimated to be in delinquency or default. Yep.

Austin Wilson:
They’ve had two years where they haven’t had to do anything.

Josh Robb:
But I’m wondering if that status has just carried, right?

Austin Wilson:
Like it was…

Josh Robb:
If you’re not obligated to pay anything throughout that whole timeframe then.

Austin Wilson:
So it was probably from…

Josh Robb:
2019.

Austin Wilson:
Yeah, the end of 2019 or whatever. Which is insane.

Josh Robb:
Biden has been careful not to say how much debt he’s considering but when he did run on campaigning, he expressed about a $10,000 level during his campaign.

Austin Wilson:
Yeah.

 

[19:45] – Josh & Austin’s Thoughts on Cancelling Debt

Josh Robb:
So an example, if he was to go that route, canceling $10,000 per borrower would wipe out 321 billion of federal student loans and that would eliminate the entire balance of nearly 12 million people. That’s great until you figure out that around 70% of students would still be left with debt.

Austin Wilson:
Yeah. I just think this is slippery because if the government is willing to cancel debt that people have willingly taken out on their own, it’s a very slippery slope.

Josh Robb:
Yes.

Austin Wilson:
And, suppose that you have been diligent and foregoing life spending things, and you’ve been really important, you thought paying off my student loans is very important, I’ve driven less nice vehicles and lived in less nice of a house and bought less things for years as I paid these things off, very diligently, like I’m supposed to, and then all of a sudden there’s… I’ve paid off my loans and then the loans are canceled or forgiven or whatever and everyone else who’s just been paying the minimum or not even, all of a sudden has this free bunch of cash.

Josh Robb:
Yep.

Austin Wilson:
It just seems, I don’t know.

Josh Robb:
Fair.

Austin Wilson:
No, it seems unfair.

Josh Robb:
Yeah. I was going to say fair, unfair is something that there’s a lot to factor into that, right.

Austin Wilson:
Yeah.

Josh Robb:
Situations, socioeconomic status, your background, family, all that stuff. But I will say this, I would rather see them expand the loan forgiveness program or allow…

Austin Wilson:
The one we’re doing now?

Josh Robb:
Yes. Where you can apply for and if you do certain things, you can get it forgiven. For instance…

Austin Wilson:
Yeah.

Josh Robb:
If you are an educator and you work in certain areas, if you do that for 10 years, you can get all your student loan debt forgiven. I would love to see them expand that to include more options for people to do things.

Austin Wilson:
Yeah.

Josh Robb:
To get debt forgiven. Maybe you have a certain amount of volunteer hours or whatever it is. I would also like to see based on what your degree was, so doctors come out of school with a lot of debt.

Austin Wilson:
Oh yeah.

Josh Robb:
So I think part of this debt, if you… I think the numbers can be misleading, $1.7 trillion, well doctors exit with hundreds of thousands of dollars of debt

Austin Wilson:

And make hundreds of thousands of dollars of income.

Josh Robb:

…And they can have the income to pay that off over time. Now would they love to have it paid off sooner? Sure, who wouldn’t want their debt paid off sooner.

Austin Wilson:
Right.

Josh Robb:
But I guess my thought is, I’m not opposed to it. Now, my wife and I paid off our student loan debt.

Austin Wilson:
Right.

Josh Robb:
And we’re debt free, but I would not be grumpy just because of that. But I would say I’d love to see programs in place instead of just a blanket because that captures a of people that is just…

Austin Wilson:
And the blanket is…

Josh Robb:
It’s easy to do.

Austin Wilson:
Yeah. It is absolutely easy.

Josh Robb:
Same as you look at a Stimulus and everything that happened,

Austin Wilson:
That’s what caused issues though.

Josh Robb:
Yes.

Austin Wilson:
People who didn’t need it got it.

Josh Robb:
Yep.

Austin Wilson:
And it caused inflation.

Josh Robb:
Yep.

Austin Wilson:
That’s what we’re, that’s exactly what happened.

Josh Robb:
Yes.

Austin Wilson:
And that’s exactly what’s going to happen here is that, the people who don’t need it are going to get it and then just go spend it and cause more inflation again.

Josh Robb:
That’s the other piece of… That’s what I was going to get to is, I think we need to be very careful about any additional spending because of the inflation.

Austin Wilson:
I know.

Josh Robb:
If the government is worried about the higher inflation, spending into our economy is a big culprit for this problem.

Austin Wilson:
It’s huge.

Josh Robb:
Fiscal spending. Yes.

Austin Wilson:
Yes.

Josh Robb:
And that’s going to anything that either straight from the government, spending, quantitative easing, or anything like that, or…

Austin Wilson:
Indirect.

Josh Robb:
Relief that causes additional consumer spending is going to continue this inflation pattern. So, I can see where there’s potential to help the overall economy out long term…

Austin Wilson:
Yeah.

Josh Robb:
With some sort of program but I think a blanket approach, just a flat number, things like that are just not the ideal way of doing it.

Austin Wilson:
Or maybe…

Josh Robb:
And there’s really no rush. They’re trying to rush us through before midterms because they think that’s the last chance.

Austin Wilson:
Well that what I was going to bring up. So, think about what timing we’re in, midterms are coming up and based on statistics right now.

Josh Robb:
Yeah.

Austin Wilson:
It’s looking very…

Josh Robb:
You offer some money people are going to like it.

Austin Wilson:
Yeah. It’s looking very unlikely that the, so Democrats maintain control of both the House and the Senate, and this student loan forgiveness was something that Biden ran on also a Democrat. So, if he can push that through then the constituents that are running under the democratic banner are going to have something to hang their hat on.

Josh Robb:
Yep.

Austin Wilson:
And based on where things are looking right now, it looks like Republicans have a big edge in both the House and the Senate so they’re looking for a win.

Josh Robb:
Yep.

Austin Wilson:
And…

Josh Robb:
Do it right instead of rushing it.

Austin Wilson:
It seems like it. Seems like there’s a big risk here.

Josh Robb:
Congress is always on this last minute, ‘got to get it done’ thing.

Austin Wilson:
I know.

Josh Robb:
Their schedule is stressful to me. It’s like when you and I sit down and record and you say, I have 3% of battery left and I’m like, I start sweating and I’m at a hundred and so I’m like, what is happening here?

Austin Wilson:
Hey, guess what? I’m running out right now.

Josh Robb:
What are you at?

Austin Wilson:
61%.

Josh Robb:
Okay. You’re good.

Austin Wilson:
And we are almost done.

Josh Robb:
I’m at a hundred and I reduced my screen just to be safe.

 

[23:57] – Austin’s Third Read: Russia and China’s Model of Relationship

Austin Wilson:
All right. My third article comes from Bloomberg. Surprise, surprise. Because I read a lot of Bloomberg. So, “China calls Russia relationship a new model for the world”, is what the article’s called. So, China stepped up its rhetorical support for Russia defined the U.S. and other nations who want Beijing to condemn Moscow for the war in Ukraine. And here’s a quote, “an important takeaway from the success of China Russia relations is that the two sides rise above the model of military and political alliance in the Cold War era,” foreign ministry spokesman Zhao Lijan said.

“Adding that they commit themselves to developing a new model of international relations that model involved not causing confrontations or targeting other nations,” Zhao said, at a regular briefing Friday in Beijing. He added that “this was different from the Cold War mentality displayed by certain countries, Beijing’s standard criticism for the U.S. cooperation with blocks like the North Atlantic Treaty organization, whose expansion Beijing says led to Russia’s attack.”

“President Joe Biden warned president Xi Jinping, last month of implications and consequences if Beijing backs Moscow over the invasion and that the Chinese leaders said his country didn’t want the war. There’s been no sign that China has reported or has supported Russia, or it helped get around it sanctions but it has offered rhetorical support by repeating Russian conspiracy theories, such as the false claim that the U.S. runs a network of weapons biolabs in Ukraine.” Crazy! Beijing Has also repeatedly indicated that it stood by the no limits friendship that Xi and Russian president Vladimir Putin declared when they met just before the winter Olympics in February in Beijing.”

Josh Robb:
Their friendships a lot like ours, isn’t it? No limits.

Austin Wilson:
Yeah, that’s right.

Josh Robb:
No limits.

Austin Wilson:
No limits, Josh. It’s an interesting relationship that Russia and China have because Russia and China have their own storied history of bloody conflicts and they share a big border, by the way. It’s a very bloody history, lots of conflicts, lots of interesting issues, they never really saw eye to eye on anything, but they have a common enemy now.

And the common enemy is the West, which is anyone that has that sort of pro freedom feeling about them, which in this case right now is U.S. slash Europe, as NATO would say, as we would see in the North Atlantic Treaty Organization. So, it’s not a good thing, I don’t think. Because Russia’s not necessarily enormous as a country and they’re getting shut down in terms of economic power, but China is enormous in terms of size of a country, size of people and… Not size of people, but like number. Not saying they’re giant.

Josh Robb:
Billions of people.

Austin Wilson:
Yeah. They have billions of people and their economy’s large, and their military is quite large and we know for sure that Russia has nuclear weapons. We also know that Russia, China, North Korea, they’re all kind of in a bad spot. It’s not forming a fun side of the aisle over there. Let’s just say that.

Josh Robb:
Yeah. They’re united in their desire to control.

Austin Wilson:
Control. It’s authoritarian.

Josh Robb:
And dictate their own peoples as well as limit the influence of outside countries into their control.

Austin Wilson:
Yep. So, that’s interesting. I don’t like that model of a relationship for the world. And I hope that China sees what Russia is doing as bad as it really is, even though they’re very hesitant to say that. So that’s kind of where we’re at. But those are the three things that we had this week. Josh, how can listeners get a hold of us?

Josh Robb:
Yes. So, if you enjoyed listening to these, you can share this with your friends and family, the things we’ve been reading. If you have any thoughts, suggestions, or an article you read that you thought was interesting, send it over to us hello@theinvesteddads.com.

Austin Wilson:
Otherwise, we will see you next Thursday.

Josh Robb:
Yes.

Austin Wilson:
Or you’ll hear us.

Josh Robb:
See you later.

Austin Wilson:
Have a good week. Bye.

Thank you for listening to The Invested Dads Podcast. This episode has ended but your journey towards a better financial future doesn’t have to. Head over to theonvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe and don’t miss the next episode.

Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions.

Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.