Biggest Headlines on Wall Street: Good News in Real Estate and Why the U.S. Steel Acquisition Matters

Speaker 1 I live in LA now, but lately I have been craving the seasons. Snow, hot cocoa, the whole thing.

Speaker 1 I don't even ski, but I have been daydreaming about working remotely from somewhere really cozy on the East Coast, like a cute little ski town for a little bit.

Speaker 1 And whenever I know I'm going to be gone for a while, I always remind myself that my home can actually be working for me while I'm away because I host my space on Airbnb.

Speaker 1 It is one of the easiest ways to earn passive income from something you already have, and that extra income feels particularly helpful this time of year as we approach the holidays. holidays.

Speaker 1 A lot of my friends say that sounds amazing, but where do you find the time to manage guests and bookings? And that's when I tell them about Airbnb's co-host network.

Speaker 1 Through Airbnb, you can find a local co-host who can help you set up your listing, handle reservations, communicate with guests, provide on-site support, even help with design and styling.

Speaker 1 I like to give a personal touch when I'm hosting on Airbnb. So I make a list of my favorite restaurants in the area and I hand write a note welcoming my guests to the property.

Speaker 1 My guests love it, but I also know that some of those little personal touches can take a lot of extra time. So this is the exact kind of thing that you would want your co-host to help you with.

Speaker 1 Whether you're traveling for work or chasing the snow or escaping it, or you've got a second place that just sits there empty more often than you'd like, your home doesn't have to just sit there.

Speaker 1 You can make extra money from it without taking on extra work. Find a co-host at airbnb.com slash host.

Speaker 2 Here's one piece of advice that I've given for years. Build an emergency fund.
Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 2 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

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Speaker 2 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com/slash MNN. Chime feels like progress.

Speaker 3 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bank Bank NA or Stripe Bank NA.
Members of DIC.

Speaker 3 Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 3 Fees apply at out-of-network ATMs, bank ranking, and number of ATMs, according to US News and World Report 2023. Chime, checking account required.

Speaker 2 Here's one piece of advice that I've given for years: build an emergency fund. Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 2 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

Speaker 2 That's why it's so important to choose one that makes savings easy and doesn't nibble away at your hard-earned money with ridiculous fees. QIIME understands that every dollar counts.

Speaker 2 That's why when you set up direct deposit through QIIME, you get access to fee-free features like free overdraft coverage, getting paid up to two days early with direct deposit, and more.

Speaker 2 With qualifying direct deposits, you're eligible for free overdraft up to $200 on debit card purchases and cash withdrawals. To date, QIIME has spotted members over $30 billion.

Speaker 2 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com slash MNN.
That's chime.com slash MNN. Chime feels like progress.

Speaker 3 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bankor Bank NA or Stripe Bank NA.
Members, FDIC.

Speaker 3 Spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 3 Fees apply at out-of-network network ATMs, bank ranking, and number of ATMs, according to US News and World Report 2023. Chime checking account required.

Speaker 1 Okay, money rehabbers, I want to hook you up with some swag. If you're a fan of the pod, now is your chance to spread the love and get something for it.

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Honestly, I think they are hilarious and so, so cute.

Speaker 1 We have a bullish sweatshirt, we have, and I told you so, crypto pro sweatshirt, a money school sweatshirt, an EBITDA sweatshirt. That's EBITDA.

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Step one, rate and review the show wherever you're listening.

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Speaker 1 And this is my little way of saying thank you for listening, sharing, and being part of the Money Rehab community. You truly make this show what it is, and I so appreciate you.
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Speaker 4 I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab.

Speaker 1 Last week, I revived one of my old segments, a news roundup of the most important stories for your wallet that are happening right now.

Speaker 1 I asked you to DM me whether or not I should bring this back for good, and I got some really, really lovely messages.

Speaker 1 So, thank you, you know who you are, about how a mix of news and evergreen financial tips is useful. Ask and you shall receive.
So, keep slipping into my DMs.

Speaker 1 I will keep doing these weekly roundups until you tell me to stop. You guys make the rules.
The show is for you. All right, so let's get into it.

Speaker 1 Financial headlines, like any news genre, can sometimes go viral for all the wrong reasons. So, my first story today actually takes one of those hot headlines and kills the buzz.

Speaker 1 This week's headline that went crazy was: Jerome Powell warns that there will be places where you can't get a mortgage.

Speaker 1 It hit Reddit's front page, it sparked a few dramatic YouTube essays, but as it turns out, it was mostly smoke. Let's set the record straight.
Jerome O'Powell is the chair of the Federal Reserve.

Speaker 1 That's the group responsible for setting interest rates that trickle down to the rates that we get on things like our credit cards and yes, mortgages.

Speaker 1 So seeing this headline out of context, people assume that Powell was hinting at a mortgage affordability crisis and that interest rates wouldn't go down this year like we're all expecting.

Speaker 1 Well, Good news, that actually wasn't what he was talking about. He was talking about insurance companies pulling out of high-risk markets like Florida and California.

Speaker 1 And if you can't get insurance, you can't get a mortgage. And listen, that is still a big deal, especially when coming from a big player in our financial system like J-Powell.

Speaker 1 But if you saw this headline and now you're bracing for interest rates to go up, you're bracing for the wrong impact here. And here's another weird thing about this story.
The timing.

Speaker 1 This story hit my feed last week. Maybe it hit yours too.
But the quote this story was pulling from was referencing Powell's testimony before the Senate Banking Committee in February.

Speaker 1 So why the heck is this going viral now? Well, one reason could simply be that Powell is back in the headlines because the Fed just met last week and decided not to raise rates.

Speaker 1 And so outlets are maybe just resurfacing old quotes because J-PAO is trending. Super weird.

Speaker 1 So while the Fed didn't cut rates, J-PAO said that he's hoping to do two rate cuts this year. But this was not what President Trump wanted to hear.

Speaker 1 Trump really, really wants J-PAO to lower interest rates. I did an entire episode about the beef between Trump and Powell, so I'll link that in the show notes.

Speaker 1 But when I taped that episode, the dominant narrative was that Trump wanted lower rates so that the interest rates would go down on bonds that the U.S. government sells.

Speaker 1 This is a tricky one because when we talk about this, we flip the script on how we usually talk about government bonds. Government bonds, U.S.

Speaker 1 treasuries are something that we earn money from as investors. But paying back the treasuries plus interest is the debt for the U.S.
government.

Speaker 1 The more interest they have to pay on those treasuries, the more expensive that debt becomes. So think about it this way, and this is kind of crazy.
The U.S.

Speaker 1 Treasury bond rate is the interest rate on the government's loans. That's how much they have to pay back.
One way to make interest payments for the government debt lower, lower the Fed rate.

Speaker 1 And now we're back to why Trump is mad at J-PAO. Trump really, really wants to chip away at the national debt.
I explained this in my last episode on this drama, and it is still true.

Speaker 1 It is just more urgent now because of the big, beautiful bill. Not only is the bill big, but it is also expensive.

Speaker 1 According to the Congressional Budget Office, that big, beautiful bill adds $2.4 trillion to the government's debt.

Speaker 1 President Trump clearly believes that the easiest way to make that happen is to bully J-Powell into doing it. But he can't really do anything other than that.
He cannot fire him.

Speaker 1 So he's trying other kinds of public pressure. And so far, Jay-Pow

Speaker 1 is not showing any signs of caving

Speaker 1 at all. It's pretty remarkable.
I am dying to know what he actually thinks in private about all of this.

Speaker 1 But this actually ties into our second big story because this debate over interest rates isn't just about government debt.

Speaker 1 It is also about our debt, like personal loan rates, credit card rates, and critically, mortgages. The housing market is frankly ridiculous right now.
Sorry, not a technical term, but pretty accurate.

Speaker 1 As of last month, inventory is up 20% compared to last year, but prices still creeping up. Prices are on average 1.3% higher, even with similar mortgage rates.

Speaker 1 This defies the laws of financial gravity because when housing inventory is up, meaning there's more supply, prices should be going down.

Speaker 1 But let's double-click on the inventory question here because homeowners have been in a tough spot.

Speaker 1 Right now, there's a whole class of homeowners who were able to lock in a sweet, low interest rate during COVID, and now they feel handcuffed to that property, which would normally trigger some homeowners to sell so they could pocket a nice profit.

Speaker 1 But if you're planning on buying another home, I mean, you have to live somewhere, with profit from that sale, a 7% mortgage on a new home might stop you in your tracks, especially if you have an amazing 3% rate.

Speaker 1 Because homeowners might want to upsize their real estate, but you'd think no one wants to upsize their debt and their interest rate. I know this might sound like champagne problems.

Speaker 1 If you've been priced out of the home market, you might be hearing this, quote, problem, a low interest rate, and thinking to yourself, wow, that must be so nice.

Speaker 1 But remember, some people bought homes they couldn't afford because they thought it would be a good investment. If they can't turn a profit, they might be worse off than they were before.

Speaker 1 So let's have some empathy. For renters who want to be owners, I don't need to tell you how insane prices are right now.
And it is not just you. It is harder than ever before to afford a home.

Speaker 1 In 1970, the median family made $9,867 and could buy a house for $23,000 after 4.7 years of saving.

Speaker 1 In 2023, the median income was about $100,000 and a house cost about $400,000, meaning you would need to save for 7.8 years.

Speaker 1 The good news if you're looking to buy a home is that most real estate experts are now anticipating a correction.

Speaker 1 This pricing situation that's defying the laws of financial gravity, it looks like that's not going to hold on for much longer.

Speaker 1 Redfin, for example, expects home prices to drop 1% by the end of the year. The reason is homeowners are now listing their homes despite this mortgage rate conundrum.

Speaker 1 There are 34% more sellers in the market than buyers. At no other point in records dating back to 2013 have sellers outnumbered buyers this much.
In other words, we are entering a buyer's market.

Speaker 1 Yay for buyers. The third story is one that few people have had their eye on.
The Nippon Steel purchase of U.S. Steel.
But it's a big deal.

Speaker 1 Retail investors haven't been giving this story a lot of love because it's honestly not as sexy as NVIDIA. But U.S.

Speaker 1 steel has played a much bigger role in our economy, in politics, and the history of this country as a whole. This story isn't just about steel.

Speaker 1 It's about how geopolitical risk, government intervention, and corporate governance can directly affect the value of publicly traded companies, or in the case of U.S.

Speaker 1 Steel, eliminate investing opportunities for us altogether.

Speaker 1 I'll explain, but first let me tell you why this company has been such a big deal literally since day one. This is the craziest story.

Speaker 1 So in the early 1900s, Charles Schwab spoke at a dinner about the company he was the president of, the Carnegie Steel Corporation.

Speaker 1 Oddly, this Charles Schwab has no relation to the investment banker that was another Charles Schwab, Charles R. Schwab.
True story. Charles M.

Speaker 1 Schwab spoke at length at this dinner about how American steel companies should lead the world in steel production. Another guest at the dinner, J.P.

Speaker 1 Morgan, very related to the investment bank, agreed.

Speaker 1 Together, they hatched a plan to buy the Carnegie Steel Corporation, which was owned by Andrew Carnegie, one of the monarchs of the proverbial American royal families.

Speaker 1 But they knew it would not be easy, so they reached out to Carnegie's wife.

Speaker 1 She told them that if Schwab just played a game of golf with Carnegie and lost on purpose, Carnegie would be in a good mood and be more likely to say yes to the sale. And it worked.

Speaker 1 Schwab threw the game and closed the deal. I don't know what is crazier, Carnegie being suckered so hard or his wife giving the secret out to playing him.

Speaker 1 Either way, it is a pretty insane story, especially because of what happened next. Under the leadership of J.P.

Speaker 1 Morgan and Charles Schwab, not that Charles Schwab, the company merged with nine other American steel companies to form the largest corporation in the world, U.S. Steel.

Speaker 1 At the time, it was valued at $1.4 billion.

Speaker 1 To put that number into perspective, at the time, the U.S. government spent $517 million, not billion dollars a year total.

Speaker 1 So pretty much since its founding to now, the company has historically had an uncomfortable relationship with the U.S. government.

Speaker 1 Steel plays an outsized role in manufacturing buildings, bridges, war machines. With something that vital to infrastructure, the government can't really leave it alone.

Speaker 1 For the last few years, what the U.S. government has really wanted from U.S.

Speaker 1 Steel was for the company to not sell itself to a foreign company, specifically Nippon Steel, Japan's largest steel producer and one of the largest in the world. If U.S.

Speaker 1 steel was sold to Japan's Nippon Steel, it would no longer be publicly traded on the New York Stock Exchange. It would be privately held.
While U.S.

Speaker 1 steel is publicly traded, any American can invest and benefit from it. If U.S.
steel was privately held, especially by a foreign company, it stops becoming a part of the American dream.

Speaker 1 So the Biden administration blocked the deal, and Trump wasn't crazy about it either. After all, he had raised tariffs on imported steel to protect the U.S.
steel industry.

Speaker 1 But he changed his mind after winning a major, major concession from Nippon Steel in the form of a golden share. Golden shares are rare in U.S.

Speaker 1 businesses, but they've been used in other countries, especially when governments want to keep a seat at the table after privatizing a critical industry.

Speaker 1 Actual legal binding details of this deal have been pretty light, but the general sense is that the U.S. government and specifically the U.S.
president will act as a super voter.

Speaker 1 The share comes with no cash value, but the president can veto any decision the new owners make, like moving parts of the company overseas or raising prices.

Speaker 1 Truman and Kennedy both tried to control steel with speeches and executive orders. President Trump just wrote himself into the shareholder agreement.

Speaker 1 It also brings the story full circle because Carnegie insisted upon being paid in part by gold bonds because he was worried about the company's financial stability.

Speaker 1 So we can no longer buy shares of U.S. steel because, well, it doesn't even exist anymore.
It's just now part of Nippon Steel. But this is about more than just one company.

Speaker 1 Economists have long considered steel a strategic commodity, which basically means it's not just another raw material.

Speaker 1 Steel is the backbone of the national infrastructure, of manufacturing, of defense. You can't build highways or skyscrapers or tanks or warships without it.
That is why historically, U.S.

Speaker 1 presidents from FDR to Reagan have treated the steel industry as a matter of national security.

Speaker 1 Foreign ownership raises red flags because it could mean foreign influence over domestic supply chains in a time of crisis or war or economic stability.

Speaker 1 For investors, this story matters because it shows how political power can directly impact shareholder value and how government intervention in private companies isn't just possible, it's happening now.

Speaker 1 The Nippon Steel Deal is a reminder that in certain sectors, especially with defense and infrastructure ties, the invisible hand of the market doesn't always get the final say.

Speaker 1 For today's tip, you can take straight to the bank. If you're planning on buying a home in the next year, your biggest financial edge might not be saving more, it might be negotiating better.

Speaker 1 We're heading into a buyer's market, but sellers haven't fully accepted that yet.

Speaker 1 So instead of only focusing on the price, savvy buyers should negotiate the terms like seller-paid closing costs, mortgage rate buy downs, or contingencies that protect your cash flow.

Speaker 1 In a softening market, it's not just about what you pay, it's about what you don't pay.

Speaker 1 Smart negotiation could save you thousands more than waiting for a 1% price drop.

Speaker 4 Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some money rehab?

Speaker 4 And let's be honest, we all do.

Speaker 4 So email us your money questions, moneyrehab at moneynewsnetwork.com, to potentially have your questions answered on the show or even have a one-on-one intervention with me.

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No, seriously, thank you.

Speaker 4 Thank you for listening and for investing in yourself, which is the most important investment you can make.