Discover how the latest economic twists could pinch your wallet as we examine the Federal Reserve's reluctance to slash interest rates amidst persistent inflation. Get ready to unwrap the not-so-sweet details behind the global chocolate crisis and how it's more than just your cravings at stake—it's a clear sign of the economic challenges we're all facing. This week, we're bringing you the inside scoop on these stories, plus a deep dive into how the legal woes of former President Donald Trump are shaking up the business world even further.
As your guide through the complexities of our economy, I'll break down Goldman Sachs' revised predictions on interest rate cuts and what that means for your finances, especially with a looming Fed meeting that could set the course for the year. And for those with a sweet tooth, I'll explain why your favorite chocolate treats are about to become a luxury as we face a cocoa bean shortage that's hitting Africa's top producers hard. It's an episode packed with insights on inflation, the housing market crunch, and the policy decisions that could shape our economic landscape in an election year—critical conversations that you won't want to miss.
This episode is brought to you by Premier Ridge Capital.
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Fed rate cuts to be on hold. Snickers scarcity, brace yourself for global chocolate crisis. And no one is helping former President Donald Trump as he battles his civil broad case. These are the top three headlines in this week's weekly business brief, first up. So there's.
Speaker 1:
Here's what's going on with the supposed rate cuts. Inflation has been stubbornly higher than expected for the past two months. This has spooked Goldman Sachs and they now think the Fed will only cut rates three times in 2024 instead of four that they originally predicted. This is a bummer for people hoping for cheaper loans and mortgages. Remember, lower interest rates make borrowing money easier. Why the change of heart? Inflation is a big culprit. If the feds want to give us a break with lower rates, but they're worried about keeping prices under control, they might prioritize fighting inflation over giving us those rate cuts. Goldman Sachs thinks the Fed might still make its first rate cut in June, but we'll know more after their meeting this week. So stay tuned to that. I'll be reporting on that on Friday. In the meantime, they keep an eye on inflation and the Fed's decisions. They can have a bigger impact on the economy and your wallet.
Speaker 1:
Look, man, all of this stuff that's going on. Right now the economy seems to be doing very well. The stock market is booming. Ai is killing it. Google, apple, tesla all the big tech companies are absolutely killing it and they're holding the market together. Unemployment rate is still pretty low. I don't think these guys are so excited to bring down interest rates right now, as much as I would love for them to do it. I don't see the feds bringing down interest rates that much.
Speaker 1:
I kind of agree with Goldman Sachs here on only three rate cuts this year. Let's see what happens with inflation, because these guys Jerome Powell changes his mind as the wind changes direction every day, depending on what data shows. Jerome Powell and his crew change what they tell us and how they deliver their language and their messaging to the American people. So we'll have to wait and see. I believe that we'll see a three rate cuts 75 basis points cut this year. Rates are insane right now. By the way, as I record this, the freaking 10-year treasury is 4.3, which is very high. You add another 200 to 300 basis points, depending on the lenders, and that's your interest rate. So a 4.3 10-year treasury and you got another three points to that, that's 7.3. Guys, at these prices it makes it really unaffordable for the average American to afford a mortgage. So they got to do something. Even though it's an election year, they will do something. I believe they have to do something. They will get pressure. The American people will continue to pressure and Congress will continue to pressure Jay Powell, but something's got to give, because the people are not able to afford housing right now.
Speaker 1:
Next up, chocolate lovers, brace yourself. A cocoa crisis is brewing in Africa and it's about to hit your wallet hard. For the past few years, harvest and Ivory Coast and Ghana, the world's biggest cocoa producer, have been this appointing. This means there aren't enough cocoa beans around, the magic ingredient that turns into your favorite chocolate bars and treats. The problem is getting worse because the companies that take those beans and turn them into chocolate can't keep up. These factories are having to grind to a halt or slow way down because the price of cocoa beans has skyrocketed. Basically, they can afford the raw materials they need to keep making chocolate.
Speaker 1:
This shortage means you can expect chocolate prices to jump significantly. Candy bars and all of your favorite chocolate treats are about to get more expensive. So, hey guys, this will contribute to inflation, right, I mean, it's chocolate. It's not a necessity. But you know you'll start going to Walmart or their store or the candy store or wherever you buy your favorite chocolate, and you're going to feel the pinch. Things are even messier because the way cocoa normally gets from farms to factory is all messed up. Farmers are selling their beans from much more than usual and the factories can't keep up with these inflated prices. Again there is that ugly i-word inflated prices. Inflation again creeping, rearing its ugly head. Experts are worried that this shortage could be a long-term problem lasting for a few years. So if you have a sweet tooth and can't imagine your life without chocolate, you might want to stock up now, before prices go bananas.
Speaker 1:
And in this week on Trump Watch. Imagine you borrowed a bunch of money from a bank to buy a house, but you lied about how much the house would work so you could get more money than you deserve. Now a judge is saying you have to pay the bank back all the extra money you took, plus a penalty. But before you can appeal the judge's decision, you got to put up some cash as a guarantee that you'll follow through with the appeal, no matter what. Here's the thing about this guy Same scenario, but no one got hurt. Banks got their money, everyone got paid. Appraisals were done by the bank to justify the amount of money that was loaned out. No one lost anything. This is kind of what's going on with Donald Trump right now. A judge ruled that he has to pay $454 million for lying about how valuable his properties are. Trump wants to fight the decision in court, but he can't unless he pays a giant bond first. He's tried to get 30 different companies to loan him the money for the bond, but so far no one is trusting him enough to give it to him. This could mean Trump will be forced to sell some of his assets to come up with the cash.
Speaker 1:
Okay, guys, let me just give you guys a little quick crash course on how this real estate thing works Okay, and how bank works, as I'm an investor. So I go to the bank, right, I own a hundred unit apartment building. The bank says, when you fill out the application, what do you think it's worth? And I say, okay, here's the math, here's my rent, here's my expenses, here's my net operating income at the trading cap rate. Which a trading cap rate? The capitalization rate is the rate that commercial properties trade at. It's a formula that we use as investors to determine the value. I go and look online and I see what properties are trading at what's the cap rate. I divide my cash flow by that cap rate and that gives me a value.
Speaker 1:
The bank says this is on the application, guys. The bank says okay, great, we're going to send an appraiser to verify the income, the expenses, and then to see if your number aligns with our numbers. Ultimately, the appraiser's number is the number that matters. Mine is just my suggestion. I'm already paying for an appraiser to go and give the bank the right number. So now the appraiser goes out. The appraiser does his thing, appraises the property and determines what the value is. And whatever I put on the application more or less doesn't matter. It's what the appraiser will say, says that the property is worth, is what they're going to lend on.
Speaker 1:
So the way that this whole thing is going down is ludicrous to me. I mean, every investor, all of us that invest in real estate, know that this is the way business is done. So it's just crazy the way this whole thing has gone down and the way they've made him look as he's this really bad guy. And this is, by the way, guys, the way every developer, the way every investor, the way this business is done. So those are my thoughts on that. I screwed up what they're doing and now he can't even get a bond. He won't find an insurance company to bond them.
Speaker 1:
Here's what I will say, my message to those insurance companies. If you're an insurance company, there's a very high likelihood that he will be the president of the United States again and if he gets into office, you know Donald Trump has a memory that he doesn't tend to forget who's there for him and who's not there for him. I would be thinking strategically if I own an insurance company and Trump approaches me to bond his things and guys, you know you know those of us in this business. You guys are in the business. You know he did nothing wrong. You know this is the way this game is played. It is the way real estate developers and real estate syndicators, real estate investors. This is how this, this is the process and this has been your weekly business brief. I'll see you guys next week. Thanks.