Shrinking Population = Shrinking Economy & The End of Bank Overdraft Fees?

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0:27Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, China's baby bust is only accelerating. Is it time to declare a population emergency? Then electric vehicles have run into another unexpected hurdle that's killing their vibe. Cold weather. It's Thursday, January 18th. Let's ride.

0:52All right, good luck finding a table at the No Name Saloon this weekend because the Sundance Film Festival kicks off to date in Park City, Utah. Since its beginning in 1985, this festival has screened some of the most iconic movies in modern cinema, from Boyhood to Queens Boulevard. But what were the best Sundance movies of all time? After polling 500 filmmakers, critics, and industry members, the Sundance Institute released this list. I'll go from five down. Toby, I want your thoughts on this, okay? Five is Memento from Christopher Nolan, the one that goes backwards to forwards. Four is Little Miss Sunshine, a classic.

1:29Three, I'm already saying my opinions. Three is Get Out. Two is Quentin Tarantino's Reservoir Dogs. And number one, very quotable, Whiplash. I think there's a little recency bias in there, first of all, because I liked Whiplash a lot, but best movie ever at Sundance. What I'm learning from this, though, is I'm not a cinephile because I've only seen two out of the five there. I've seen Get Out. Little Miss Sunshine I saw a long time ago, so I'm not going to say that I've seen that. So this is just telling me that I have homework to do, and it's cold out. Let's go to Sundance next year. It seems like an absolute blast.

2:09My roommate is there, and I was very jealous he's buying tickets. You get to see 10 movies while you're there, which is, that's a lot of movies. Before we jump into the show today, we have a quick word from our sponsor, Veeam. One thing we haven't hit on recently in these ads is just how many companies use Veeam. Yeah, Veeam is trusted by more than 80 % of the Fortune 500 to protect and restore their data. It's why they are the global market leader in data protection and ransomware recovery. 80 % sounds like my sophomore year biology exam scores. So you were good at biology? Well, not really. See, 80 % is good when we're talking about the entirety of the Fortune 500, but pretty bad when you're talking about the Krebs cycle.

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3:26Let's talk about China's birth rate. Remember, India passed China last year to become the most populous country on earth, and it doesn't look like China will be taking that crown back anytime soon. China revealed yesterday that just over 9 million babies were born in 2023, down from 9.56 million in 2022, which led to its population falling by 2.1 million to 1.4 billion last year. That puts China's fertility rate, which is the number of children a woman has over a lifetime, at just about 1.0, which is considered by demographers to be ultra low. This is leading to various economic effects that are weighing down the world's second largest economic superpower.

4:07China's economy only grew 5.2 % last year compared to pre-pandemic levels of over six. Youth unemployment is also on the rise, with 21 % of young people unable to find a job. Plus, its sputtering real estate sector has led officials to try to convince businesses to invest in the silver-haired economy instead, which has anything to do with elderly people like healthcare and food service. Since dropping its decades-long one-child rule in 2016, the country has done a hard 180 on its messaging, and now the government is urging women to have babies, but it hasn't been working so far. What are some of the repercussions of this declining population in China?

4:47It's a very scary thing to have a declining working-age population specifically because those are the people that power the economy. If there's fewer babies, then you look decades down the line and there's fewer people working. There's a lot of older people who aren't working because the retirement age in China is one of the lowest around the world. It's 60. So people stop working at 60 and they need to be cared for. And there's going to be future. There's going to be a lot of people. There's going to be much fewer people in the future able to care for them. The problem here is that China has identified this as a problem and they've done several things.

5:21They've built cheaper housing. They've given parents tax benefits. They've literally handed people cash to have babies. And it doesn't seem to be working. So the problem here is that they've identified this problem. They've made it a central part of their policies. And it has not reversed the decline at all. In fact, it's only getting worse. What's interesting is that China's birth rate is declining much earlier when you look at the scope of when developed nations typically see a little drop off in birth rate. Their population first started shrinking when the per capita gross domestic product was around$12 ,000.

5:56That's just around a third of Japan's was, for instance, when it started seeing population decline. So the country didn't see the economic upswelling that other developed nations did. And it's already seeing kind of this downturn much earlier than others. Also, some key differences between other developed nations and China is the lack of immigration that China has. The U.S. also has been struggling with declining birth rates, but luckily there's this influx of a young working immigrant population. China has much lower levels, so that's another thing that's kind of holding them back. Experts say that in all of these policies, these initiatives that China has done to address the problem, they're not really getting at the root of what's going on here.

6:37It is an economic issue, but also women just feel like when they enter into these marriages, they are trapped and there's just widespread gender inequality. I mean, just look at the divorce cases. So this guy at Indiana University did an analysis of about 150 ,000 court rulings on divorce cases. He found that in around 80 percent of the petitions filed by women for a divorce, they were denied by a judge on the first try. So there's this widespread gender inequality going on. And women are just like, I'm not entering into this partnership right now where I can't get out. And basically the entire administrative state is balanced against me.

7:14Right. There's also just not much countries can do once a birth rate starts to fall. If you look back at Australia back in the early 2000s, they had this baby bonus program, which at its peak was giving$6 ,000 per child. So it was a very, very high economic incentive. But all it did was raise the fertility rate from around 1.8 to around the high of 2. And then after the program ended, it was all the way back down to 1.6. So if you look at kind of the history of trying to raise birth rates, it's not easy. And so this is not a problem that they're going to U-turn out of very quickly. No, the governments cited that are doing that have reversed it a little bit.

7:51And again, it's very hard to turn this ship completely around. But it looked like the Nordic countries in Norway and Sweden, what they do is they give monumental amounts of parental leave. I think Sweden or Norway is up to like 19 months of parental leave right now. And also government funded child care is one of the bigger is one of those levers that you can pull besides just handing cash for people to have babies. So this is a huge problem that we'll definitely keep track of. Let's move on. First, it was airlines. Then it was Ticketmaster. Now, the Biden administration's war on junk fees is coming for banks, setting up a Pennsylvania Avenue Wall Street showdown we haven't seen since Hamilton.

8:29The Consumer Financial Protection Bureau released a proposal yesterday that would cap overdraft fees charged by banks to potentially as little as$3. For those of you who keep your checking account flush, overdraft fees are what banks charge you if you make a transaction where your account balance goes below zero. Last year, the average overdraft fee was about$26, while some banks can charge as much as$39. And it's become a big moneymaker for them, bringing in about$8 billion a year in revenue for the largest banks. Biden thinks these big fees represent consumer abuse by profit-hungry banks, amounting to predatory short-term loans, particularly for low-income people and racial minorities.

9:09So the administration released a rule that will significantly lower the amount the 175 biggest banks in the country can charge on overdraft fees. You know what I'm about to say next. Banks are hopping mad, calling this regulatory overreach on what is actually a helpful policy for customers. And you can bet they're going to sue the government into oblivion. as this thing gets closer to reality. Yeah, the CFPB thinks that overdraft coverage is in essence a loan to the customer, and then therefore it should be subject to the Truth in Lending Act, which is the thing that governs credit cards. And that's important because the Truth in Lending Act requires lenders to clearly disclose to the borrower how much a loan or a credit will cost them.

9:51So I think what is at the root of this problem too is just some of the opaqueness around overdraft fees. They just want it to be clear when and how much you will be charged for these things. Also, obviously bringing that number lower as well, because it's just such a burden to the people who tend to overdraft. It's just this additional charge on top of that. Right. The history of overdraft is actually pretty interesting because banks offered it as a service about 30 years ago when we all used checks. Remember what those are, Toby? I literally do not. Yeah, you don't know what those are. So people used to write checks to pay people, by the way.

10:27So instead of having a check bounce because your account was so low, banks were like, listen, we'll let you do this. We're going to charge you a fee, but you can actually tap into a negative account balance. And we just won't tell anyone. You won't have the embarrassment of a bounce check. And so that's the way it started to certain customers. Then it became, hey, we can make a lot of money on this. And the CFPB says, over the past few decades, banks have made$280 billion in overdraft fees. It accounted for a significant chunk of revenue for some of these banks. So that's where this has come to and kind of where we've come full circle in that banks are starting to retreat on the overdraft fees because they know the regulatory pressure is coming.

11:11Yeah, banking trade groups are not happy with this, obviously. They feel like they've already been innovating and that this is an important service that they're providing to customers. And then two, they hate this kind of like one-size-fits-all approach from Washington. So it is just a classic where the private banking sector thinks that they are doing enough innovation and the government thinks that they should be kind of being less predatory when it comes to these loans. All right, let's move on. Something I'm sure a lot of iPhone users can relate to is stepping outside in the cold weather and being annoyed as your battery plummets towards zero.

11:46Well, the same goes for much bigger batteries, too. Tesla owners in Chicago are finding out the hard way that their cars are essentially really big iPhones and that they also have trouble performing when temps sink below zero. Some drivers have recounted horror stories of setting out to a charging station with over 30 miles of charge left, only to have their batteries hit zero within minutes of turning the car on. One owner said it took him five hours to recharge his battery compared to the one hour it usually takes. Now, to be fair, these were low, low temperatures they're dealing with. minus 20 to minus 30 degrees when you factor in wind chill.

12:22But still, not a great look for the EV revolution if these batteries can't handle a little cold weather. No, these scenes came out of Chicago this week where the temperatures dropped way below zero and there's just not enough charging stations to go around. So there were these long lines of Tesla owners waiting for a charge. Meanwhile, all of their batteries were getting depleted and running out while in line. You have these eyewitness accounts of people in line for getting charged saying, I literally saw 10 Teslas towed over the last two days. They're all getting angry. They're all maybe having a little buyer's remorse as they watch their batteries getting depleted.

12:58But I will say, I don't think this is a massive problem long-term. It does seem like this is a thing that's happening because people are just adapting to this new technology of EV batteries. I mean, we know that combustion engines also perform worse in the cold. Everything just performs worse in the cold when it's a car. And I think we just don't have the infrastructure built in place right now for P or the understanding or like the consumer understanding of maybe this is the first winter that someone has their Tesla. They don't know exactly how it performs. And I think in the future, they've gone through this, whatever they're calling Tesla graveyards.

13:35And I think they'll learn in the future that there are particular steps you can take to make your EV work just OK in the winter. Yeah, it is just a brutal flywheel, though, because your car sits in your driveway and the battery drains because just batteries are less efficient at holding onto energy in the cold weather. Then you have to brave the weather to go charge. But then the longer the lines become, and then the crankier people become who are already cranky because it's freaking cold out. So you can see how this is a vicious flywheel. Here's another thing. I don't want to pick on Tesla specifically, but some people were telling stories about how their handles, you know how the Tesla handles are embedded in the car.

14:10I do not know how to open them. I know. So they were literally chiseling them out because they were frozen solid. So there's all these just unexpected consequences. Again, I don't want to pick too much on electric vehicles because you're right. All cars perform pretty badly in really, really cold weather. But this was kind of this come to Jesus moment for a lot of these owners going like, whoa, it's a lot harder to maintain these cars in the wintertime. And just to put a point on it, electric vehicles in the cold, it takes longer for them to charge up. And then when they're running, the charge depletes faster.

14:43That's because this battery has to power the car and it also has to heat the interior of the car. So it's basically asked to work to work overtime. Internal combustion engines, gas powered cars can tap into the heat of the motor that helps heat the interior of the car. So one tip that experts say is turn down the heat on your car, on your electric vehicle and use alternative sources of heat like the steering wheel heat or the seat warmer. Those are ways to, those draw less charge than just cranking the heat up when it's negative 30. News you can use. Okay, before our batteries run too low because of the freezing weather, let's take a quick break.

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16:24Welcome to Neil's Numbers, our Thursday segment where I share three stats from the week's news that will leave you crying tears of wisdom. First, there's a new king on the smartphone throne, and you might have heard of this company before. For the first time in history, Apple is the largest seller of smartphones in the world, ending Samsung's 12-year run at the top of the leaderboard. Last year, iPhone shipments were up 3.7 % compared to a 13.6 % plunge for Samsung, giving Apple the biggest market share around at 20%, according to IDC. Look, Apple hasn't had the best start to 2024. It got banned from selling its new watches in the US, faces growing competition in China, got lapped by Microsoft and market cap.

17:06But the fact that it grew iPhone shipments in a year where Samsung and the rest of the industry saw a downturn shows that its products are still very, very popular. Yeah, it feels like a narrative violation if you allow me to use your phrase, Neil. All we've heard about is iPhone sales are flagging. Apple's been projecting some weak sales figures, but I think we just hyper-fixate on Apple and we don't pay as much attention to Samsung. And so even though it feels like Apple is falling off its throne, It actually took the throne. So a little bit of a narrative. I want to go back to when Samsung first got number one back 13 years ago.

17:40Let's check out the leaderboard there. And this kind of shows how fast the smartphone market goes quickly. Who do you think it dethroned as number one? The only phone I remember from the early smartphone days is the Palm Pre from Sprint. But I know that didn't do well. Number one is Nokia. It was Nokia. Then Samsung in second. We have LG Electronics in third, ZTE, the Chinese company, in fourth. And then Research in Motion came in five. You don't know them, but you know them because they made the BlackBerry. All right. Next, imagine you've become the CEO of a company that's had sluggish sales for years, moving at the pace of a snail, hemorrhaging market share to competitors, and is trying to clean up an embarrassing scandal.

18:20What do you do to turn things around? If you're Bjorn Golden at Adidas, the first step is to give out your cell phone number to 60 ,000 people. A Wall Street Journal report explained how in his first town hall meeting as CEO last year, Golden gave out his number to everyone who worked at the company, 60 ,000 of them, to show he was open to feedback. And that feedback came hot and heavy. For a period, he was being contacted about 200 times every week by employees who urged him to reform the company's culture. And so far, so good. adidas which lost nearly 800 million in the final quarter of 2022 is back on track to being profitable this year its shares have doubled since golden was announced as ceo demolishing the performance of rival nike which has lost value over that time period i think this is a veteran move because it signals that you're open for business and that you're willing to talk to everyone but i also think that the bystander effect i don't know if i'm using that correctly eventually comes into play where everyone thinks that everyone else is texting and calling this guy so no one ends up doing it.

19:21So I think it sends a good message, even though maybe he's not getting as many messages a little further down the line. What's also intriguing about him is he came over from Puma, which is Adidas' biggest rival in Germany. He did a great job there, and then he went to Adidas, which had been struggling to offload billions of dollars in inventory from its Yeezy partnership. He figured out a plan there. He's rolling in the Samba. The Sambas are back. I see you have a pair right now. I'm wearing them right now, yeah. So Adidas is definitely on the up. Thanks to Golden. Finally, here's a stat about the housing market that I think explains a lot about the crunch we're finding ourselves in.

19:56The biggest cohort of people who own large U.S. homes are empty nest baby boomers. They own nearly 30 percent of large U.S. homes defined as three or more bedrooms, which is twice as many as millennials with kids who own just 14 percent of the country's large homes, according to a new report from Redfin. So just to put a point on it, the country's houses with three bedrooms are dominated by baby boomer couples without kids. And they're probably not going anywhere anytime soon. 54 % of boomers who own homes have no mortgage. It's completely paid off. And if they still have a mortgage, nearly all of them have a much lower interest rate than if they were to sell and buy a different home in today's environment.

20:36So there's very little incentive to move and downsize. Speaking of aging populations, though, the boomer population is getting up there in age. And right around 80 years old is when you usually kind of offload your houses, your big houses that you own. And people are forecasting potentially a, quote, silver tsunami of aging Americans leaving those homes up for grabs, which actually Gen Z would profit from because it kind of skips. Millennials get screwed again, unfortunately, because millennials already probably have their homes. But as boomers move out of their homes, Gen Z might be picking up a scrap.

21:11So there could be this generational shift in wealth that, of course, skips over millennials. It's one of the biggest questions in real estate right now is what is going to happen to these homes? Is it going to be a flood? Is it going to be a massive sell-off that leads to this huge glut of supply in the market? Is it going to be more gradual? Like what happens when boomers sell their homes is going to be the biggest question in real estate for the next decade or two. I like the term silver tsunami. So I'm sticking with that one. I think we're living in a silver age. Yeah. Someone's going to brand this the sober age.

21:38There's a lot of elderly people walking around, and we love them. Seriously. Last week, a video went viral of a 27-year-old account manager from Cloudfair filming herself getting laid off. It's blown up for a variety of reasons. The drama from seeing someone at a vulnerable moment, the catharsis of seeing her fight back against the HR people laying her off, and the awkwardness as Cloudfair rep struggled to give her a good reason why she was being let go or why her manager wasn't present. It's all combined to create this flurry of discourse around this new trend of filming yourself getting laid off.

22:13On the one hand, these videos can shed some light on the scary and opaque layoff process, which can be helpful if you're a younger person in the workforce. On the other, some things are perhaps better left off in the drafts folder, especially because future employers might not take too kindly to someone who posts sensitive meetings online. What do we make of this new trend of filming yourself at this really, really kind of scary and vulnerable moment? Yeah, it is absolutely dividing the internet. I want to say that this particular instance of this woman getting laid off by Cloudflare was not handled well by the company.

22:48Even the CEO watched the video. He said, like all of us, I mean, so awkward. He said, this video is painful for me to watch. Managers should always be involved. And I think that was one of the big criticisms of what happened in this particular instance. There was no manager involved. And this woman was like, my manager, the problem here was when you get laid off, you should at least have a signal that you're not performing well. Or it shouldn't necessarily be a surprise. Like, that's what I was always told. And I think this came as a massive surprise because she said the feedback she'd been getting was always positive from her manager.

23:20And then this happened, so it's going to be a surprise. She turns the camera on her because she wants to send it to her friends and family. She doesn't know what's about to happen. And it goes viral because this obviously touched a nerve. I think there are all of these videos that have been going around day in the life. Look at my cushy job. That has been the massive trend over the last couple of years on TikTok. I get up at nine. I'm going to my awesome tech job. I have a lot of security. My company provides me meals. It's so great. And then all of a sudden, the tables have turned here. We see a layoff.

23:50It's way more jarring. It's very mysterious and awkward thing. And I think people are resonating with a lot, especially as many people have been laid off over the past year. Yeah, I saw a tweet on X that was saying that we moved from kind of the great resignation, which was a very big worker empowerment when they had a lot of power in the workplace, to now we're in this great documentation where companies now should plan and expect a certain amount of their employees when they get laid off to post their experiences on social media. which, again, it can be a good thing because more accountability around these processes is good, especially if they are relatively inhumane like we saw in this video.