Marketplace - Evaluating the damage

Episode Date: October 9, 2024

As the Southeast assesses Hurricane Helene’s damage, Milton barrels toward Florida’s west coast. The proximity of the storms will make it harder for homeowners and insurers to estimate each one’s impact — and likely drive up recovery costs. Also in this episode: Corporate bonds shine after the Fed’s rate cut, the mortgage rate honeymoon is over and Nebraska’s elections attract major campaign spending — along with some odd yard signs.

Hi, I'm Kyle Rizdal, the host of How We Survive. It's a podcast from Marketplace. In 1986, before I was a journalist, I was flying for the Navy. Mr. Gorbachev, tear down this wall. It was the Cold War and my first deployments were intercepting Russian bombers. Today though, there's another threat out there, climate change. This could be the warmest year on record. Climate change is here.

Temperatures here are warming faster than anywhere on earth. And while the threat seems new, the Pentagon's been funding studies on climate change since the 1950s. I think we will put our troops and our forces at higher risk if we don't recognize the impact of climate change. This season, we go to the front lines of the climate crisis to see how the military is preparing for the threat. Listen to how we survive wherever you get your podcasts.

It's a really big storm and figuring out how much damage it's going to do is really hard. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdall. It is Wednesday today, October the 9th. Good as always to have you along, everybody. Hurricane Milton is on track to hit the west coast of Florida late tonight or early tomorrow morning south of Tampa Bay, probably near Sarasota, maybe, bringing with it a life-threatening storm surge and staying at hurricane strength until it moves across the peninsula into the Atlantic on Thursday.

The Tampa Bay area, though, is still recovering from Helene, which is challenging both efforts to prepare for this new storm and to estimate the damage it is going to bring. Marketplace's Amy Scott gets us going. When we talked Tuesday evening, Corey George was ticking through his hurricane preparation checklist, refined by 20 years of practice. We keep water and basically canned food on hand. We have a whole house generator that we put in after Hurricane Ian a couple of years ago.

Later that night, he would put away the trash cans and secure anything that could be blown around the yard. We'll park one car in the garage and park another one in the yard so that they're not both taken out. I guess that's the best way to think about it. George lives in Plant City, Florida, just east of Tampa. He's a lecturer in art at the University of Tampa, which evacuated and is closed through Friday. George and his wife, who actually works

in disaster management, plan to ride out the storm at home. One of the reasons we live where we live is that we are further inland and about 100 some odd feet above sea level. Our biggest issue here is just wind. While George was hunkering down near Tampa, John Schneer was in Boston trying to estimate the potential damage to homes like George's, he's director of catastrophe response at CoreLogic. His team uses computer modeling to simulate potential losses for insurance companies based on a storm's track and intensity and the structures in its path.

What is the structure primarily made out of? It's a wood frame home, it's a masonry construction. These are the things that really influence wind and flood losses. This kind of modeling has become more essential as extreme events pile up and more accurate as technology and climate science have evolved. But Schneer says predicting the damage from Milton is more complicated because Florida's Gulf Coast is still reeling from Hurricane Helene. There's a risk of double counting properties already destroyed. In that same vein, there were a lot of properties that were not completely damaged but compromised.

So another hit could be devastating. Plus, all the debris crews haven't had time to clean up yet could become projectiles that cause further damage. Back-to-back storms could also add to a post-hurricane phenomenon called demand surge. Lumber, roofers, glazers, the fact that there's going to be so many people across Florida all demanding for this stuff, it's going to increase the costs. The economic toll from last month's Hurricane Helene is just starting to become clear. Jay Gwynn is chief research officer at the catastrophe modeling firm Verisk. He estimates Helene's total damage at more than $30 billion, much of it not covered by insurance because so many people in the storm's path didn't think they needed flood insurance.

These disasters are waiting to happen in many areas. So I think these risks and hazards need to be modeled accurately, and both insurers and insurance buyers need to make informed choices. The models learn from every storm and with more frequent severe weather there are unfortunately more opportunities to learn. I'm Amy Scott for Marketplace. Wall Street today was a strange blend of storm watching, overseas markets, Fed minutes and who knows what else. More record highs is what came out the other end though. We'll have the details when we do the numbers. We enjoy from time to time on this program a dip into the bond market. Sometimes it's government bonds, today it's corporate bonds, debt that companies sell to finance whatever it is

that they choose to spend money on. As Marketplace's Justin Ho reports, demand for corporate bonds has been skyrocketing of late. Back when the Federal Reserve was raising interest rates, demand for corporate bonds was pretty weak. Winnie Caesar, head of strategy at Credit Sites, says that's because the Fed's rate hikes made government bonds look a lot more attractive. For an investor, it's all about where you can get the most bang for your buck or the highest return on investment with

relatively similar risk. But now that the Fed is starting to lower interest rates and government bond yields have been falling, those corporate bonds are looking a lot better by comparison, especially because the labor market's been resilient. Cesar says that's a sign that investors can feel more comfortable buying corporate bonds. Companies are not needing to do layoffs or stop hiring and that indicates that the fundamental health of corporate America is still in good shape. As a result, companies have been issuing a lot of new debt. This is the right opportunity to take advantage of the increased appetite from investors.

That's John Bai, a finance professor at Northeastern University. He says all that demand for corporate bonds is giving companies an excuse to hoard some extra cash, either to just hold onto it in case the economy turns south or to invest it back into the company. You can use it for R&D purposes or you want to grow through either building a new factory yourself, a manufacturing facility or acquiring another company.

Some of those choices are more helpful for the company itself than for the broader economy. But Kathy Baszczynski, chief economist at Nationwide, says more corporate borrowing can have some positive ripple effects. If companies are optimistic in their investing, they also tend to be hiring workers as well. So that could be a very positive sign. Plus corporate bond yields have been falling too. Bosjancic says if more vulnerable companies can issue new debt at cheaper rates, they can avoid having to make more painful decisions.

If those high interest costs were not lowered, then they'd have to cut expenses in other ways. Could be pulling back on investment, but it could also be reducing payroll costs. In other words, an increase in cheaper corporate bonds can help ensure that the labor market stays resilient. I'm Justin Ho for Marketplace. can help ensure that the labor market stays resilient. I'm Justin Ho for Marketplace. Hey, you listen to podcasts, right? Come on, I know you do. Well, if you miss something that we do on the actual radio,

we do have a podcast you can get to if you need it. Marketplace.org or of course, the platform of your choice. Just subscribe there. of your choice, just subscribe there. There I was listening to the Marketplace Morning Report this morning when I heard David Brancaccio saying something about mortgage rates going up. It was really early, so I didn't catch the actual number, but when I went to look it up later, I confess I was a little taken aback. According to bankrate.com, as of today, the national average for a 30-year fixed mortgage

is 6.5%. I was surprised because, as you know, it's been a good three weeks since the Federal Reserve cut its key rate and mortgage rates had been dropping. So Marketplace's Samantha Fields spent some time today finding out what is going on. Just two weeks ago on this show, I did a story about how mortgage rates were dropping. Mortgage rates came down quite a bit in July and August in anticipation that the Federal Reserve was going to start cutting rates. Lisa Sturtevant is chief economist at Bright MLS.

And when she and I talked then about where mortgage rates were likely to go next. There was really no expectation that they would continue to fall, right? That all of the falling had sort of been baked in. There was also no expectation that mortgage rates would rise again. But Mike Fratton-Tony, chief economist at the Mortgage Bankers Association, says then came the September jobs report,

which was unexpectedly strong. Another piece of evidence that the job market is staying stronger than many had anticipated. Maybe the Fed's not going to have to cut as far or as fast as previously thought. A strong job market is a good thing for the economy, but it's not so good for mortgage rates, at least not if you're a prospective buyer hoping for them to go down. When the economy is looking a little stronger, prospects a little brighter, rates might move up.

When people are more worried about the state of the job market and the broader economy, rates may trend down a bit. Mortgages are long-term loans, 15 years or 30. So Darryl Fairweather, chief economist at Redfin, says what happens with mortgage rates has a lot to do with expectations about the long-term trajectory of the economy.

Sensing a theme? Expectations, expectations about the long-term trajectory of the economy. Sensing a theme? Expectations. Expectations about what interest rates will be 10, 20, even 30 years from now, go into what mortgage rates are today. If you want to know where mortgage rates might be headed, Logan Motashami, lead analyst at HousingWire, says keep an eye on the yield on 10-year Treasury bonds. It's just borrowing costs on the longer end. That's why the 10-year yield matters more than the Fed funds rate. So follow the economic data and it'll guide you to where mortgage rates will go. When the economy looks strong, like it does now, the yield on those 10-year treasuries

tends to rise. So you can expect mortgage rates might too. I'm Samantha Fields for Marketplace. Coming up... You don't have to hit a home run every day to be proud of what you accomplished. You totally don't. But first, let's do the numbers. Dow Industrial is up 431 points today, 1% 42,000 to 512 for the blue chips. The NASDAQ increased 108 points, that is 6 tenths percent, 18,291.

The S&P 500 up 40, that is 7 tenths percent, 5792. We just heard from Samantha Fields about why mortgage rates are going up, so let's look at some mortgage companies then. Rocket companies sank 1.5% today. Lone Depot built up two and four tenths percent UWM holdings which used to be United Shore Financial Corporation I don't know how they got the UWM out of that. They were flat Penny Mac financial services dipped six tenths percent Helen of Troy limited which is in case you didn't know the company behind brands is varied as hot tools curling irons

Osprey backpacks also OXO kitchen kitchenware, perhaps it's OXO, I don't really know, but I use their products because they're good. Reported better than expected earnings today, that is not a plug, it's just a statement of fact. Posted third quarter better than expected revenue, which was, however, declined from the previous quarter. The company said the decline was primarily driven by dropping sales of hair appliances, air purifiers, and humidifiers.

They sell everything Helen of Troy surged 17 and nine tenths percent today. Bond prices, Sam Fields was just talking about this. The yield on the 10-year T-note was up 4.07%, hence mortgage rates, right? Oil, by the way, down three tenths percent, 73.33 a barrel. You're listening to Marketplace. This podcast is supported by Fundrise. Buy low, sell high. It's a simple concept, but not necessarily an easy concept.

Right now, high interest rates have crushed the real estate market. Prices are falling and properties are available at a discount, which means Fundrise believes now is the time to expand the Fundrise Flagship Fund's billion-dollar real estate portfolio. You can add the Fundrise Flagship Fund to your portfolio in minutes by visiting fundrise.com slash marketplace. That's F-U-N-D-R-I-S-E dot com slash marketplace. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing.

This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. From all of us at Marketplace, we want to say thank you to those who contributed during our fall fundraiser. We made good progress toward our goal to hear from 2,500 Marketplace investors, but we didn't quite cross the finish line. If you've thought about investing in Marketplace, make today the day you do it. Help us get back on track. Go to marketplace.org slash donate.

And thank you. This is Marketplace, I'm Kyle Rizdal. We're almost four weeks into the big machinists' strike at Boeing if you're keeping track, and there are no signs of a deal in the offing. Last offer on the table was a 30% pay increase over four years. The union said no. The major sticking point here is pensions. Boeing workers stopped getting what are known as defined benefit pensions about a decade ago, and they want them back. In

these times of heftier organized labor influence though, Marketplace's Kelly Wells explains why pensions are in the labor conversation once again, even as they have become less common overall. Kelly Wells 50 years ago, most full-time workers had a pension. Once they retired, their employers sent them a check every month, until they died. But in the 1980s, pensions started to disappear. Lynn Vincent is a management professor at Syracuse University. Organizations don't like pensions because of the cost and uncertainty.

Costly because typically every full-time employee gets a pension without opting in, unlike a 401k. And uncertain because employers don't know how long retirees will live and keep getting benefits. But that's also why workers like pensions. Last year just 15% of workers had access to pension plans. Now unionized workers like the ones at Boeing are negotiating to get them back. Whether they're likely to succeed depends on who you ask. I'd be very, very Now, unionized workers like the ones at Boeing are negotiating to get them back. Whether they're likely to succeed depends on who you ask. I'd be very, very surprised if it ended up as part of any agreement. Alicia Menell directs the Center for Retirement Research at Boston College.

She says pensions were designed in a time when employees stayed at the same giant company. They don't work so well when you have smaller companies, more mobile workforce, and people are living longer. But they do work well in a high interest rate environment like right now. If an employer promises a pension, they have to invest that money up front. The higher the interest rate, the smaller that initial investment can be because it'll grow. Labor economist Teresa Gelarducci specializes in retirement.

She says pension plans are potentially a better deal for employers than they were, say, 10 years ago. Because it comes in a macro environment where it may be cheaper and more attractive for the employers to reinstate them. Gelarducci says workers are seeing their parents retiring and want the financial security they got with their pensions.

And if unionized workers succeed in securing pensions with some of the bigger employers, it could start a trend. It's often the big employers that lead the way because they're setting corporate norms. Boeing's offers have gotten more generous as the strikes have gone on, but the company says it can't accept the union's demands and remain competitive. I'm Kaylee Wells for Marketplace. The people who keep track of this stuff, that would be the staff at Open Secrets, which tracks political spending. They say campaigns, parties, and political action committees are on track to spend almost

$16 billion on this year's election. That's everything. Ads, organizers on the ground, political consultants. But as the casual observer would expect, a big slice of that big pile of money is flowing into the key swing states for ads that could push the electoral college vote one way or the other. Pennsylvania, Michigan, and Georgia are the top three. But purple states like that aren't the only ones getting bombarded with ad spending. Marketplace at Kimberly Adams explains why bright red Nebraska is seeing a deluge of political money too.

The hottest bit of campaign swag this cycle in Omaha, Nebraska is a yard sign, not a Trump or Harris for president sign, but a simple blue dot on a white background. The Democrats are clamoring for these yard signs to put in their yard. Randall Adkins teaches political science at the University of Nebraska Omaha. Because they like being the blue dot in the middle of the red Republican state, in the middle of all of the red Republican states that are in the middle of the country. All those blue dots are dotting lawns across the city because unlike every other state but Maine, Nebraska doesn't automatically allocate all of its electoral college votes

to the statewide winner in the presidential race. Instead, that candidate gets two of the state's five votes. The other three go to the winner in each of its three congressional districts. So while the state may vote Republican and two of the congressional districts may vote Republican, it's entirely possible that the Nebraska second congressional district could vote Democratic like it did in 2008 and 2020. That second district includes the city of Omaha. There was a recent attempt to eliminate that blue Democratic dot in the sea of Omaha. There was a recent attempt to eliminate that blue democratic dot in the

sea of red. It failed, so both sides have to spend in Nebraska in case that one electoral college vote turns out to make a difference. I think it's great because we aren't a flyover state right now. We are getting a lot of attention. Teresa Thibodeau is co-chair of the Red State Nebraska PAC. A lot of people are wondering, hey, who can we trust on the advertising that we're seeing on the ads that go up on TV? And there has been a lot of dark money coming in. Thibodeau's group has been distributing its own yard signs with a bright red image of the state to counter all those blue dot lawn signs in Omaha. On top of the electoral college fight, there are competitive House and Senate races in the state this cycle as well. And with control

of Congress and the balance, the national parties and PACs are pouring money in. Even some state-level issues are getting funding from outside, says Gavin Geiss, executive director of the pro-democracy group Common Cause Nebraska. We've also seen more money because of many of the ballot measures that are on our ballot issue, which have received a lot of funding from outside interests. Sharing the ballot with the federal election are ballot initiatives on marijuana, paid sick leave, using public funds to subsidize private school tuition, and abortion. Both on the protecting abortion access side and on the pro-life side. Both of them have seen a tremendous amount of federal lending coming from national interests. Geist

says all this extra cash flowing into Nebraska means this election looks very different compared to previous cycles. Way more TV ads, mailboxes stuffed with flyers, and more robust door knocking operations for the ballot initiatives and the federal candidates. I myself have seen just far more activity in my neighborhood with organizers from campaigns going door-to-door and talking with people about the candidates that are going to be on the ballot. Which has residents in at least some parts of Nebraska getting a taste of the swing state experience. In Washington, I'm Kimberly Adams for Marketplace. We try as best we can to show you the sometimes invisible parts of this economy.

The truckers who are getting things from point A to point B in the middle of the night. The customs brokers and programmers and grocery store stockers who work behind the scenes or the equipment that so many people in industries need that you might just never think about. Here's today's installment of our series, My Economy. My name is Mike Woglam. I'm owner-operator of cargo trailer sales and Lances trailer sales located in Lansdale, Pennsylvania and

Athens, Ohio. My parents started the business in 1987 and I was born in 1988. You know, being around heavy equipment and trucks as a young boy is exciting, but you know, I didn't consider it my chosen career path and actually went to school to be an English teacher originally. But during the downturn, 07-08, the business was struggling. I was at school for a couple years and decided I'd come back and help out

in the family business. And, you know, it it's a big decision but I figured I could always go back to school if I wanted to and I haven't really felt the need. You know we've really built a successful business here, we've just expanded in a second location, I have no regrets, I love it, I love coming to work every day so it was the right choice for me for sure. day. So it was the right choice for me for sure. Business over the past decade has overall been really great. Business over the last few months has been much more difficult. This past quarter is probably the first quarter since forced closures during COVID where we'll post a small loss.

We're seeing a lot of our recreational customers hold off. A trailer is a significant purchase. It's not as much as a car in most cases, but we have small trailers for a homeowner to use to move mulch around starting at $1,500 and then we'll sell like a two-car stacker for motorsports and that could be a six-figure purchase. I think whenever there's any type of an uncertainty whether it's economic or political some people just choose to wait until things settle before making a

large investment. Running a business has its moments, for sure, of frustration and fetal position moments, but ultimately I find it very rewarding. I enjoy the instant gratification that I get from completing a task or just moving something forward an inch or a foot. You don't have to hit a home run every day to be proud of what you accomplished. Mike Woglam, second generation owner of Cargo Trailer Sales and Lance's Trailer Sales. Two locations for your convenience, Lansdale, Pennsylvania and Athens, Ohio, should you be in need.

You know, this economy is made up of a zillion different moving parts. Take a minute, let us know where you fit in with your marketplace.org slash my economy. This final note on the way out today, a quick peek inside the Federal Reserve and then a calendar update. The minutes of the most recent meeting of the central bank came out today. That would, of course, be the meeting where the Fed cut its key interest rate a half a percentage point. The news item is that while there was only one public dissenting vote that day, Governor Michelle Bowman would have preferred a quarter point cut.

Inside the room, as it were, there was sentiment among, and this is a quote, a few participants that smaller would have been better. Told you that, so I could tell you this, the September consumer price index comes out tomorrow. That is, of course, inflation at the consumer level. Our media production team includes Brian Allison, Jake Cherry, Jessen Dooler, Drew Josdan, Gary O'Keefe, Charlton Thorpe, Juan Carlos Torrado, and Becca Weinman. Jeff Peters is the manager of media production and I'm Kyle Rizdal. We will see you tomorrow everybody. This is APM. Some of the toughest moments we'll experience in life often come with the hardest financial

decisions. Like how much to spend when your pet is dying. Or what to do if you uncover a loved one's financial secrets after they've passed. It's like having this albatross, this monkey on your back that you don't want amongst everything else. I'm Rima Grace, host of This Is Uncomfortable, a podcast from Marketplace. This season, we've got a wide range of stories about life and how money messes with it, including the unexpected ways money can shape our journeys through loss and grief.

Listen to This Is Uncomfortable wherever you get your podcasts.