Oil flow or oil freeze?

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1:25In Los Angeles, I'm Kyle Rizdahl. It is Wednesday, today the 17th of December. Good as it always is to have you along, everybody. We're going to start with a little cause and effect today, or better, actually, intended cause and effect. This time last week, the Federal Reserve, as you know, announced its third interest rate cut of the year. Those cuts, generally speaking, make borrowing money cheaper and at the same time make saving money less lucrative, the intended net effect of which is that people and companies spend money and boost the economy. It is a little strange then that, according to a report from the Federal Deposit Insurance Corporation, while the Fed's been cutting rates, bank deposits have actually been growing.

2:11Marketplace's Justin Ho looked into why that's happening and what banks have been doing with those deposits that they are getting. At Sunrise Banks in Minnesota, deposits started picking up about a year ago. CEO David Reiling says as the year has progressed. We're seeing a more steady increase in terms of both consumer and small business deposits coming back into the bank. Reiling says back when interest rates were rising over the previous few years, many customers moved their money out of their checking and savings accounts and parked it in other investments offering higher yields, including money market accounts and stocks.

2:45But now that rates are falling, those plain old bank accounts are getting more attractive. As rates come down, banks are a little slower to follow. They're grabbing some of those deposits back. They haven't lowered their interest rates as quickly as rates have come down in the market. Reiling says another reason deposits are up at his bank is that his customers want to ensure their cash is safe and that they can get at it easily, especially his small business customers. They're managing their cash flow in a softer environment, and they're keeping their working capital readily available. Many business owners feel like they should have more cash readily available, says David Schiff with FTI Consulting.

3:23Companies that are more focused on the retail and the consumer side are very much looking at still the continued impact of tariffs, uncertainty around consumer demand, what may be happening in the economy in terms of employment. Thing is, banks are looking at all of that too. As a result, Schiff says many of them have been reluctant to use those deposits to make loans. Julie Hill, dean of the University of Wyoming College of Law, says banks have a few other ways to use those deposits. For one, they can park the money in short-term treasury securities. Especially if they think that there's uncertainty, they gravitate to a shorter duration, lower yield investments because that allows them to change course when they think they have a better idea of what might be happening in the marketplace.

4:08Hill says banks can also use those deposits to help them expand, Maybe open up new branches or buy another bank. In fact, bank mergers and acquisitions hit a four-year high in the third quarter, according to S &P Global Market Intelligence. Some of that might be driven by the idea that that's the best place for banks to deploy resources now, that that's better than what they're seeing in the loan market, and that's better than what they're seeing in investment portfolios. Banks are still making plenty of loans. Brad Bolton, CEO of Community Spirit Bank in Red Bay, Alabama, says many of his clients want to borrow more right now to take advantage of lower interest rates.

4:46Commercial customers are more apt to say, OK, we're kind of in a new normal here. Rates are falling, but they're not going to fall quickly. So let's go ahead and let's make this investment. Let's refinance this debt. But many banks are also being picky about the kind of lending they want to do. David Reiling, the banker in Minnesota, says he's being more cautious about lending to any business that's exposed to tariffs. He's also being more careful about consumer lending. We do see, particularly on Main Street, some of the credit quality has slipped some. And as a result, you know, that safety component is very important.

5:21You know, if you run a bank, one bad loan equals 100 good loans in terms of the return. So you've got to be very careful in terms of how you're lending that money out. Rowing says if an application isn't a slam dunk, the bank is going to take its time figuring out whether it's worth it to approve the loan. I'm Justin Ho for Marketplace. The biggest of the big banks today on Wall Street, mostly down, not all that much, though. We will have the details when we do the numbers.

6:05the very serious geopolitical implications aside and there are reports that president trump's going to talk about those in his speech tonight economically the blockade of venezuelan oil tankers that Trump announced yesterday really couldn't come at a better time. Globally, there's a glut of crude, so prices are low. And over the years, the United States has mostly weaned itself off Venezuelan oil because of production decreases and sanctions. But the U.S. oil industry does still have some skin in the Venezuela game, Gulf Coast refiners in particular, as Marketplace's Elizabeth The Troval reports.

6:39Years before fracking, the U.S. looked to Latin America for oil, especially Venezuela and Mexico. The problem was their oil was heavier, syrupy. Debnil Chowdhury is with S &P Global Energy. U.S. refiners invested about$100 billion from 1990 to 2010 to handle heavier crudes because of the additional heavy crude that was coming from Venezuela and Mexico. But that$100 billion bet didn't go as planned. Gregory Brew with Eurasia Group says in Venezuela, Hugo Chavez's government was elected. Which pursued a more aggressive nationalist tone, expropriated assets that belong to U.S. oil companies. And also, there's been years of general mismanagement and technical inefficiencies on the side of Venezuelans.

7:30And the U.S. imposed sanctions. So those Gulf Coast refineries made for Venezuelan oil found themselves largely without. They've pivoted, but Francisco Minaldi with Rice University says it's still not an ideal match. And even though refineries have changed into processing much more light oil, they still are thirsty for heavy. So if there is a regime change after all, and the U.S. lifts sanctions and Venezuelan oil flows more freely to Gulf Coast refiners. The Venezuelan barrels, I think, would slip right into our system very effectively. Dan Pickering is with Pickering Energy Partners. You know, it would be a positive on the margin for, you know, U.S.

8:17gasoline consumers and the U.S. refining system. But regime change is a big if. So there's another scenario to consider. a sustained blockade with large amounts of heavy Venezuelan crude taken out of the global market. In that case, Debnail Chowdhury says, Heavy crude pricing would get more expensive. Refineries would keep operating, he says, but it could hurt their margins. I'm Elizabeth Troval for Marketplace.

9:03We've been talking to some people this week who we met last year while we were reporting our series Breaking Ground about how Biden era infrastructure programs might affect life in this economy. Last May, we went up to the Red Lake Indian Reservation in northern Minnesota, where the tribe was planning to use funding from the Inflation Reduction Act to build a utility-scale solar farm and in the process become energy independent. Bob Blake was the guy in charge. He's a tribal citizen of Red Lake Nation, and he runs a solar company called Solar Bear. We got him on the phone the other day for an update on the project that we talked about and what else has been happening for Solar Bear.

9:41That had to be put on pause because of the cuts that happened from the federal government. Right now, we are reevaluating and reimagining not as big of a project, maybe a smaller project. And so we still plan on wanting to do something there. There was a number of programs that were canceled by this administration. In Solar Bear's case, specifically Solar Bear, I think it was close to like, you know, 45, 50 million is what Solar Bear lost. And so a lot of that work now is not going to happen.

10:26What's the death? A million cuts, you know, or whatever. Um, it, it, it was just, uh, it was devastating because we put so much effort and so much time, um, on the front end, making sure that all of this, you know, funding was going to be allocated properly. You know, people were hired, man. And it's such a hard thing to do, to be able to tell, um, these individuals that we have to let them go. Right. It's just, uh, it's heart wrenching, But some of us that are in the business will call it the solar coaster. You're up and you're down. You're up and you're down. And that's exactly what we're on right now is we're just in the down moment.

11:16There is talk of lawsuits. There's a lot of talk of maybe some of those, some of that money coming back. but as far as I can see right now, none of that has happened. So here we sit, you know, at the mercy of, you know, just trying to hopefully maybe some of this money comes back around and we can continue with our work that we were doing. We do have other projects that are still moving forward that aren't tied to federal funding. There's a museum that we are putting a solar project together that we'll be building next year. We also have another tribal nation that we're working with that we are building solar projects in their community.

12:03So I don't want to make it sound like there's all this doom and gloom, but Solar Bear is continuously moving forward. And that's one of the exciting things happening here.

12:15Bob Blake, Solar Bears, the company Red Lake Nation is the place up in northern Minnesota.

12:39We got retail sales data yesterday for the month of October, and it's a reminder that the retail story cuts two ways. Consumers, of course, are the ones doing the buy-in, And in October, it turns out they weren't doing so much of it. Spending didn't move a whole lot, which is, of course, another sign of unease out there. Retailers, though, are the ones obviously doing the retailing. And one that has been feeling more confident over the past year or so is the Gap. Analysts are upgrading. Its share price is rising. Marketplace's Kristen Schwab looks at what has so far been a successful turnaround.

13:13Back in the 1960s, shopping malls were more like suburban community centers, with department stores, grocers, and a post office. When the first Gap store opened in 1969, it sold mostly jeans and music albums, classic Americana. Gap is probably the original specialty retailer. Jay Soule, an analyst at UBS, says Gap eventually grew out of its niche to sell wardrobe staples. But in the pursuit of growth, its vision got watered down. By the early aughts, Gap and its brands Old Navy and Banana Republic became a sea of discounted sweaters. Sol says Gap needed to regain its sparkle. There's not a playbook.

13:54There's not a textbook. You know, you can't go to college and take Retail Turnaround 101. You actually can take Retail Turnaround 101 or something like it. Catherine Harrigan teaches a class on turnaround management at Columbia. I actually have my students trained so that I can say, what's the first order of a turnaround? They all yell, stop the bleeding. For Gap, Stop the Bleeding meant closing thousands of stores and narrowing its product offerings. No more sea of discounted sweaters. They just decided to be more prudent. Gap also raised its cool factor through collaborations with musical artists Katzai, Tyla, and Troye Sivan.

14:31And it has a buzzy creative director, Zach Posen. He's made it culturally relevant. Sean Grant Carter at the Fashion Institute of Technology says Gap is getting back on track. It beat sales expectations last quarter, which made traders happy. But she doesn't deem Gap a comeback success story yet. The turnaround strategy, yes, you can look at the earnings per share and look at the stock, but you also have to look at, will this customer stay with them? She says Gen Z shoppers just aren't as loyal as the mall rats of yesteryear. I'm Kristen Schwab for Marketplace.

15:23coming up i don't think a robot's ever going to be able to do what we do are you sure about that i don't know first though let's do the numbers Dow Industrials down 228 today, about a half of 1%, closed at 47 ,885. The Nasdaq down 418 points, 1.8%, 22 ,693. The S &P 500 dipped 78 points, 1.2%, ended things at 6721. Oracle dropped today, as the Financial Times reported the company lost some financing for a new data center in Michigan. Oracle shrank 5.4%. Shipmaker Broadcom shrank 4.5%. NVIDIA fell 3.8 % of 1%. Bonds down the yield on the 10-year T-note up 4.15%. You're listening to Marketplace.

16:13Today's number segment is presented by Intuit QuickBooks. When it comes to running your business, the numbers tell the story and cash flow is the headline. It's about where you stand today and how you plan for tomorrow. Intuit QuickBooks has powerful money management solutions that keep your money and books in sync, giving you clarity and control over your cash flow so you can act with confidence. QuickBooks money tools help you get paid faster and pay bills smarter with real-time insights in your business's financial health. Automation reduces errors and laborious work while keeping you organized and tax-ready all year.

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17:26It's enough to make anyone lose their cool. That's where Grainger comes in. With industrial-grade products and dependable fast delivery, Grainger can help with any challenge, from worn-out components to everyday necessities. Call, clickgrainger.com, or just stop by. Grainger, for the ones who get it done. This is Marketplace. I'm Kai Rizdahl. We have done a bunch of reporting over the years about private equity, specifically how it has gotten into all kinds of industries. Skilled trades like plumbing, about which more in a minute, by the way, but also restaurant chains, even youth sports. Now private equity money is moving into someplace new.

18:05Public safety software, specifically software used by local fire departments. Mike Baker wrote about it in The New York Times the other day. Mike, welcome to the program. Good to have you on. Hey, thanks for having me. Do me a favor, would you, just so we all understand what's going on here. What do fire departments use this software for? Yeah, I mean, they have sort of a variety of needs for software, you know, managing their inventory, keeping track of training for their crews, deciding whether they need to do maintenance on their rigs. But at the core of it, a lot of it is just managing incident information.

18:42You know, they go to a scene of a fire, they want to track details of the location and what happened at the fire, whether there were injuries. And all of that is important because they all have some sort of federal reporting obligation to get this data to a national database where we can all analyze it, look for trends, and get important information and insights about what's going on around the country. And now, as you say, a lot of these software companies are being bought up by private equity-backed companies. And as happens with private equity, prices are going up for these mostly volunteer fire departments.

19:14Yeah, that's the kind of thing we were hearing from these fire chiefs around the country. Volunteer fire departments, really kind of a backbone for our fire service around the country. And so, yeah, they were looking around. They had these old software solutions that were pretty bare bones in their mind, but they got the job done. They did everything they needed. They don't need a tons of bells and whistles. And then along come these other companies buying up these smaller software providers. And, you know, I think these companies have bigger ambitions. They want more tools in front of these agencies.

19:47And they also want to, you know, looking at the prices and determining whether they need to charge more for the services that they provide now. Tell me what happened at this fire department you started with in Norfolk, Connecticut. it? Yeah, so Norfolk, kind of a standard volunteer fire department, right? It's got a budget of about $130 ,000 a year, right? So no one's on staff. They're not paying anyone a big salary. They're just using it to maintain their fire engines. They've got to heat the fire station. They've got to send their crews through training. They've got some basic expenses. So to them, they're looking at a software solution.

20:27They're trying to keep it cheap. It's affordable. They said it was$795 a year at the time. What ends up happening, one of these bigger companies comes along, buys up that software provider and plans to shut it down. Says that$795 that you were paying before, now it's more than$5 ,000. So they go looking around for, hey, what other alternative is out there? They want to find someone else to fill the void. They find that alternative. And then that same company, the Backed by Private Equity, comes along and buys up that second software provider. And so they really feel kind of trapped and have eventually now found a solution that wasn't up to$5 ,000 a year, but is still a lot more than they were paying before.

21:07We should be clear here. The challenge is not on the firefighting side of this. It's not a safety concern. It's, as with so many things in this economy, the data stream upstream of that, right, and how that's working out. That's right. Yeah. I wasn't hearing folks saying that this was suddenly a risk to their firefighting response. But in Norfolk, the$5 ,000 a year that they're paying now, I mean, that's the amount that was sort of their surprise maintenance budget. They needed new tires on one of their fire engines this year. That was also$5 ,000. So you start to get to a point where they're making some decisions.

21:37What can they afford here when they have to pay more for software? And they are, not to be cliche about this, but they're literally doing like bake sales and stuff to raise this money. It is, yeah. I mean, that was such a common theme. I mean, you know, these volunteer fire departments have been quite strained the last few years. And yeah, they're out there sort of like doing it all. They're doing karaoke fundraisers and bake sales. They're really desperate for some dollars to help sustain their systems and to help pay for really expensive things. The turnout gear these days, the fire engines, they all seem to be going up in price.

22:10Some of that due to private equity. Also, it's a big concern for them on like how they balance these budgets going forward. Mike Baker at the New York Times talking about fire department and public safety software. Mike, thanks a bunch. I appreciate your time. Interesting piece. Thanks so much.

22:39If you heard the program yesterday, you heard us talking about how artificial intelligence is seeping into just about every kind of white-collar job these days, and that's making blue-collar jobs more appealing. And in fact, vocational schools are seeing big jumps in enrollment, in part because the skilled trades like welding and carpentry and plumbing and auto repair are typically seen as professions that aren't going to be steamrolled by AI. So far, Jeff Young has our story. Is your plumber using AI? What about your car mechanic? If they aren't yet, they could be soon, says Michael Conant, a leader at the Association for Career and Technical Education.

23:19Take a typical plumber's tool. And I get really excited thinking about the old spanner, the old wrench that every plumber in the country has. Well, imagine when you have AI built into that tool that will know how much torque you're actually applying to something. He says these smart wrenches could even connect with AI-infused smart glasses. And the two together are going to tell you, don't honk on that pipe too hard or you're going to break it. That tool exists today. Students at Dakota County Technical College in Rosemount, Minnesota, are being encouraged to experiment with AI as they diagnose the cause of car breakdowns.

23:59Can you hear that kind of knocking sound? Something's loose in there. What is it? That's Jeffrey Copeland, an automotive technology instructor here, who stands under a pickup explaining steering systems. This is what I want to show you. When you check this, these things are going to wear out much quicker than a rack and pinion system. Copeland and Akali built a custom AI tool that can walk students through basic repairs. If the student gets stuck and the teacher is off helping others... They can keep working, and then I can spend my energy just like we did with the pickup, where I'm explaining the stuff that AI can't do.

24:38showing on how to physically check things and what to look for. Most of these students also work part-time in local auto garages. And some of them say they are starting to use AI regularly at work. That's true for student Tyler Bjorkstrand. I'll use the camera feature and you can ask it, oh, what is this part? And it'll tell you. It helps a lot pinpoint different areas of what could possibly be wrong with a car. There are challenges to turning to AI in the trades, though. When the instructors tried having AI generate images for their teaching materials, some were wildly inaccurate. The AI would make things like a warning indicator light appear in the car's rear window instead of on the dash.

25:20The instructors say AI can especially help students learn to communicate with customers. They even made an AI exercise where a chatbot pretends to be an upset customer. Customer storms in. I can't believe I'm back here again. This is absolutely ridiculous. My car still isn't fixed, and I'm furious. What are you going to do about it? Julia Peren, a student here, says talking isn't her strong suit. She took a deep breath and prepared to soothe the simulated customer. I'm so sorry to hear this. I promise we're doing everything we can to fix it. Peren says that she is finding AI especially useful to help write up service reports for customers.