transcript

Speaker 1:
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Speaker 2:
[00:26] One of these days, we will get through this show without using the word uncertainty. Today, however, is not that day. From American Public Media, this is Marketplace. In Los Angeles, I'm Kai Ryssdal. It is Tuesday today, the 21st of April. Good as always to have you along, everybody. The on-again, off-again, on-off, on-off, on-again nature of President Trump's war against Iran seems to be in an off phase. Late this afternoon, after the markets closed, interestingly enough, the president announced on his social media feed that he is extending the ceasefire that had been scheduled to end tomorrow. There are some caveats and conditions, but the net effect does seem to be no more bombing for now. The market response tomorrow? TBD if traders aren't numbed the whole thing already. But as you know, whenever there is as much uncertainty in the air as there is now, investors pile money into the safest assets out there, among them, of course, the US dollar, the value of which jumped when the war started, and over the first month of it or so rose about 3%. Since, though, the greenback has given up nearly all of those gains. Marketplace's Justin Ho has more on what's weighing on the dollar and what it might mean.

Speaker 3:
[01:57] The dollar's value rose early in the war, in large part because the conflict has had an outsized impact on the rest of the world.

Speaker 4:
[02:03] It's bad for the United States. It's just that it's worse for everybody else.

Speaker 3:
[02:08] Ken Rogoff, an economics professor at Harvard, says other countries are much more affected by energy shortages from the Middle East. As a result, investors poured more money into US assets.

Speaker 4:
[02:18] When money flows to the United States, it pushes the dollar up. When there seems to be peace again, some of the money reflows back in the other direction.

Speaker 3:
[02:27] Rogoff says that's partly why the dollar's value started to fall after the ceasefire started a couple of weeks ago. But plenty of other things are dragging down the dollar's value, including the price of oil.

Speaker 5:
[02:37] 80% of oil transactions are conducted in US dollars.

Speaker 3:
[02:41] That's Juan Perez, Director of Trading at Monix USA. Oil prices surged at the outset of the conflict, but in recent weeks, they've fallen some.

Speaker 5:
[02:49] So naturally, with oil prices going down, the need for holding US dollars or that necessity has faded away.

Speaker 3:
[02:55] There's also the president's approach to global trade.

Speaker 6:
[02:58] The dollar is perhaps a victim of the Trump administration's policies trying to extricate the US from its role in the global economy.

Speaker 3:
[03:06] That's Christopher Vecchio, head of futures and FX at the research company Tasty Live. He says many investors have been shying away from the dollar because of how the Trump administration has treated its allies.

Speaker 6:
[03:16] Given how the Trump administration has conducted itself in the lead up to this war, going after European allies for Greenland, how it's conducted itself during the war, chastising NATO.

Speaker 3:
[03:26] And Vecchio says even if the war in Iran were to end, those other concerns aren't going away. I'm Justin Ho for Marketplace.

Speaker 2:
[03:34] Wall Street today down, though not a whole bunch tomorrow. As I said, anybody's guess. We will have the details when we do the number. Nice job, gang. And by gang, I mean you, us, American consumers. War or no war, we kept on spending last month. March retail sales up 1.7% from February, 4% from a year ago. Good? Yes. Mostly? Also yes, as Daniel Ackerman reports.

Speaker 7:
[04:28] There's one thing to keep in mind about the strong sales numbers in March, says Rick Miller of Big Chalk Analytics.

Speaker 8:
[04:34] Retail spending numbers are how much money consumers spent on stuff, not how much stuff they got.

Speaker 7:
[04:43] The more than 15% jump in spending at gas stations isn't because everyone splurged on a weekend road trip. Still, stripping out volatile spending on gas and car parts, retail sales still rose 0.6% from the month before. Jessica Ramirez of the Consumer Collective says some of that is thanks to big tax refunds, but people are also taking on more debt in order to keep spending.

Speaker 5:
[05:07] We've seen buy now, pay later increase.

Speaker 9:
[05:09] We've seen credit card debt increase.

Speaker 7:
[05:12] Taking on debt can mean consumers see better days ahead, but Matt Schultz of LendingTree says there are some red flags.

Speaker 10:
[05:19] About 30% of buy now, pay later users are using those loans for groceries. That certainly doesn't seem like a sign of the healthiest consumer.

Speaker 7:
[05:32] He says just two years ago, buy now, pay later was more often used on discretionary items like handbags and gaming consoles. Perhaps the biggest reason people are still spending, though, is the labor market, says Craig Rowley of Corn Ferry.

Speaker 11:
[05:46] Unemployment is still in the 4% category, which historically is not high.

Speaker 7:
[05:50] Rowley says that's a number to watch if you want to know where consumer spending could go in the future. I'm Daniel Ackerman for Marketplace.

Speaker 2:
[06:22] Justin told us about the dollar. Dan told us about consumers. Now, an industry that ties both of those pieces of this economy together, banks. Lori Stewart is the CEO and president of Sound Community Bank in Seattle, Washington. Lori, welcome back to the program.

Speaker 12:
[06:37] Well, it's a pleasure and an honor to be with you.

Speaker 2:
[06:39] Honor is ours. How are things at Sound Community Bank? Here's the easy first question.

Speaker 12:
[06:46] Well, things at Sound Community Bank are good. You know, in this world we live in that has an awful lot of uncertainty. I would still say that our local bankers are doing well and we're collecting deposits and making loans and supporting our communities.

Speaker 2:
[07:02] Can one assume then that if the banks are doing well, your clients are doing well?

Speaker 12:
[07:07] Well, I think that's true, but increasingly clients are talking to me about concerns of sustained high gas and grocery prices. And the thing we've also noticed, Kai, is that commercial borrowers who have approved loans are kind of sitting on their hands as opposed to come into the closing table and using that hand to sign long docs. I wouldn't call it a big trend, but definitely a trend the last couple of weeks. Again, that signals to me uncertainty.

Speaker 2:
[07:42] Yeah, keep going with that, because it does seem to me that in the last couple of weeks, and we extrapolate that to eight weeks or so, and uncertainty has magnified. Other than uncertainty, what do you make of it?

Speaker 12:
[07:55] Well, I don't think it's overt panic by any means. Please, not by any means. But I do think it's that kind of concern that says, things are changing so fast. Should I just put this off for another week and see what happens? And part of that's hope too, right? Hope that a week from now, things will change.

Speaker 2:
[08:17] Yeah. Yeah. No, I like the hope bit. That's good. Let me ask you to step out of your local community banking mindset and use your decades of experience in this industry at large. I want to ask you a couple of sort of very big picture things.

Speaker 12:
[08:32] Okay.

Speaker 2:
[08:32] Private credit and the challenges that we're seeing in that space. You're worried about that?

Speaker 12:
[08:39] I certainly have it on my list of things that merits watching. It's not keeping me up at night. It's very opaque, Kai. It's really hard to understand what the ramifications could be. So it's on my list of things. I probably read something about it, if not every day, every other day, and try and learn more.

Speaker 2:
[08:59] Yeah, you and me both. Speaking of learning more about something and also something being opaque, talk to me about what you're thinking about crypto and stable coins and that whole new regime of money that seems to be coming.

Speaker 12:
[09:16] Well, let me talk about stable coins, because that's on the mind of every community banker, if you'll indulge me for a minute. I think lots of us see business use cases for stable coin and an accelerated payment system. What's got us all anxious is that basically, our business is not super complicated. We gather deposits and we lend them out. But if I can get some kind of reward, that's like getting the rate on my money market account, I might be incented to park those former bank deposits in stable coin. And if we don't have deposits, we're not going to make any loans. So I think it's a little bit of a complicated issue, but I think we can solve it if we continue working together.

Speaker 2:
[10:03] Stable coin, I should have said, a form of crypto that's tied to the dollar is supposed to be stable, unlike most of the rest of crypto. So that's what Lori's worried about.

Speaker 12:
[10:11] Yes, exactly.

Speaker 2:
[10:13] I look back in our files. Looks like it's about a year since we talked to you last. If that schedule holds, it's not that we've been ignoring you, but there's been a lot of news. If that schedule holds, we're going to talk to you in March or April of 2027. What's the next year looking like for you and for your slice of this economy?

Speaker 12:
[10:32] Well, again, this is something, if you'd asked me that question in February, compared to April, I would have had a much different answer. You know, the year got off to a nice start, but with the conditions we're seeing and the hesitation on the parts of businesses and consumers, I don't think it'll be a bumpy year, but there won't be as much growth as we anticipated. Then again, this too may pass, and I might be saying something different.

Speaker 2:
[10:59] You're the expert. You're the expert. We're going to go with what you say. Laurie Stewart, she's the CEO, also the president of Sound Community Bank up in Seattle. Laurie, thanks a lot. Always good to talk to you.

Speaker 12:
[11:07] Thanks, Kai.

Speaker 2:
[11:30] There are, depending on the sources you use, something like 2,000 ships and as many as 20,000 civilian mariners on those ships stuck in the Persian Gulf. They need, in no particular order, if they are going to keep being stuck, food, fuel, and water. If they're eventually going to get through this charade of Hormuz, they are going to need it to open, yes, first of all, but they're also going to need insurance in the middle of a war. Marketplace is a pre-benet sure is on the things most of us didn't really think about until eight weeks ago desk for us today.

Speaker 13:
[12:06] Ships can technically move without insurance. They just can't go anywhere.

Speaker 14:
[12:11] They will not be accepted at any port.

Speaker 13:
[12:13] Rahul Kapoor is vice president and global head of shipping and metals with S&P Global Energy. Bad things happen to ships like this Carnival Cruise ship that hit another Carnival Cruise ship in Mexico six years ago. No major injuries there. No port in its right mind would let a ship that doesn't have liability insurance pull up. But ships also need to insure themselves.

Speaker 14:
[12:38] What is called hull and machinery, so that covers damage to the vessel itself. These are the two core insurance which a ship needs.

Speaker 13:
[12:46] Small issue, none of them apply in a war.

Speaker 15:
[12:50] And this is typical of insurance policies, right? We cover a range of things except this, and war is excluded.

Speaker 13:
[12:57] Brandon Holmes is VP Senior Credit Officer at Moody's Ratings. So ships have to get war insurance. But one more small issue, the war insurance gets canceled if there's a war. Not immediately, but pretty fast.

Speaker 15:
[13:11] 72 hours, 227 days. But we've heard of cases where it could be done from 24 or 48 hours.

Speaker 13:
[13:18] So there's this organization in London called the Joint War Committee. It's a bunch of insurance companies, and they decide when an area or region is suddenly high-risk. And when they decide that, insurance companies can cancel and reprice their plans, and the clock on those policies starts to run out.

Speaker 15:
[13:33] The intent there is that if a ship is caught up in an unforeseen war, it gives them some time to remove themselves from the situation and get to safety before the insurance is canceled.

Speaker 13:
[13:46] This system lets insurers offer cheap war insurance in case a war breaks out. But then once a war zone is warzoning, they can create special expensive insurance for if you want to go in there on purpose. Of course, in the Iran War, small issue, the ships can't just zip out of the way. They are literally stuck. So they need to get new, much more expensive war insurance. Dylan Saunders Mortimer is the UK war leader at Marsh Risk, an insurance broker and risk advisor.

Speaker 16:
[14:14] Rates were around about 0.25 percent of the value of a ship to transit in and out of Hormuz prior to the events of the 28th of February. Since then, rates have increased to what we've observed as a limit of around about 10 percent.

Speaker 13:
[14:29] That is an increase of almost 4,000 percent. But that was a maximum, he says. Rates have come down recently to just 2 to 6 percent of the value of a ship. Still high and a contributing factor to oil prices. But the rates for a trip through Hormuz can fluctuate on a case-by-case basis. Again, Brandon Holmes at Moody's.

Speaker 15:
[14:47] The insurers basically told us that the ship would need to be sort of pointed at the strait with its engines on and ready to go, and then they'd give them a price then. And then once that price is given, they'd have 48 hours to complete the transit.

Speaker 13:
[15:00] Analysts say insurers are almost always willing to insure a tanker for the right price. But that is being tested right now for US and Israeli flagged ships that want to cross the strait. Dylan Saunders Mortimer with Marsh.

Speaker 16:
[15:12] Underwriters struggle to price risk where there is involvement from the United States or Israel on the basis that it almost removes the fortuity of the risk.

Speaker 13:
[15:22] As in Iran is almost definitely going to attack them outside of a ceasefire. The US is creating guarantees to back up insurers who would insure such ships. Analysts say it's still being worked out but should help. But Rahul Kapoor with S&P Global warns not to get too caught up by the insurance side of things.

Speaker 14:
[15:39] The state of Hormuz is not seeing those transits because of insurance challenges. It's not seeing those transits because of the safety of the crew, safety of the cargo and the vessel.

Speaker 13:
[15:48] Insurance puts a price tag on risk. Insurance doesn't make that risk go away. In New York, I'm Sabri Benishur for Marketplace.

Speaker 2:
[16:16] Coming up.

Speaker 17:
[16:16] I feel like our whole company should just shut down and focus on this for about a month.

Speaker 2:
[16:20] I mean, that'd be a gutsy move, but first, sure, why not? Let's do the numbers. Dow Industrial's down 293 today, 6 tenths of 1% closed at 49,149. The NASDAQ slipped 144 points, 6 tenths percent, 24,259. The S&P 500 down 45 points, also 6 tenths percent, 7,064. Maritime Insurance, you say? One of the biggest companies doing that. Chubb Limited, ticker symbol CB, dipped 2 tenths percent. Other insurers for your big boats, American International Group, AIG. Maybe you heard of them. Flashback to the financial crisis. Anyone? Down 8 tenths of 1%. German Allianz lifted up 1 and 4 tenths of 1% today. Bonds down, yield on the 10-year T-note rose 4.30%. You're listening to Marketplace.

Speaker 1:
[17:21] Thank you. Thank you.

Speaker 2:
[17:38] This is Marketplace. I'm Kai Ryssdal. Here's a news item to set up another news item, which is going to set up a story about a sizable slice of a whole industry. Lufthansa, the German airline, said today that the world needs a new leader. And that's the way it is. The German airline said today it's going to cancel 20,000 flights between now and October, most of them short haul in Europe, because jet fuel has gotten so expensive. That's item one. Item two is that low-cost American carriers were in Washington today meeting with the Secretary of Transportation, asking for help with, can you guess? Marketplace to Samantha Fields has that one.

Speaker 9:
[18:16] In the weeks after the US and Israel attacked Iran, jet fuel prices almost doubled from about $2.50 a gallon to nearly $5. They've come down a little in the last couple of weeks, but are still high.

Speaker 18:
[18:28] This is like genuinely a big deal.

Speaker 9:
[18:31] David Slotnick at The Points Guy says it's an especially big deal for low-cost carriers.

Speaker 18:
[18:36] These airlines typically are lower margin. They have a lot less wiggle room and fewer levers to pull when their costs go up.

Speaker 9:
[18:43] Bigger airlines can more easily raise ticket prices to offset some of these higher jet fuel costs. In a way, Dan Aikens at Flight Path Economics says budget airlines can't.

Speaker 19:
[18:53] Simply because their passenger base is much more price-sensitive.

Speaker 9:
[18:57] That's why this group of low-cost airlines is asking the government for help in the form of tax relief. But Aikens says that ask raises a fundamental question.

Speaker 19:
[19:06] If airlines are going to get relief, especially a category of airlines, why aren't all airlines getting relief?

Speaker 9:
[19:12] And if airlines get relief, why not other industries?

Speaker 19:
[19:15] Trucking companies, taxi companies, Uber, they're all facing enormous increases in cost as well. So is there a call to subsidize all industries that are fuel-sensitive?

Speaker 9:
[19:26] Or consumers? At the same time, Slotkin at the points guy says this is an existential threat for low-cost airlines.

Speaker 18:
[19:33] The argument they're trying to make to the government is that the price of fuel is on its way to putting them out of business. Them continuing to exist is good for the American consumer and in the government's best interest.

Speaker 9:
[19:45] And that it's the government's war in Iran that has put them in this position. I'm Samantha Fields for Marketplace.

Speaker 2:
[20:08] Artificial intelligence is moving fast. Every time you turn around, there is a new, new thing. And in the last six months in particular, there have been big jumps in what are called agentic capabilities for AI. Those are programs that take a large language model out of the chatbots that we're used to, where you just ask it things, and you set it loose to actually do stuff in the world, like book a flight or delete your junk mails. Coding agents like Anthropix Clawd Code or OpenAI's Codex, they focus on building software. OpenClaw lets you run agents by messaging them from your phone. They can work autonomously 24-7 on whatever tasks you give them. Modely terrifying? Yes. And also, caveat emptor, as with most of generative AI, the results can be unpredictable. But still, you would think having an army of AI minions might free up some time, make work more chill. As Marketplace's Megan McCarty Carino reports in Silicon Valley, oh, you'd be thinking wrong.

Speaker 20:
[21:07] At a Menlo Park Starbucks down the road from all the big venture capital firms, John Wong hosts a meetup for the AI agent Curious.

Speaker 21:
[21:17] Welcome. Join us.

Speaker 2:
[21:18] Hello.

Speaker 21:
[21:18] Hey, grab a chair.

Speaker 20:
[21:20] Wong is a tech industry veteran who runs his own startup investment network, and he spent the last few months trying to automate as much busy work as he can.

Speaker 21:
[21:30] So I have right now eight bots running. So, for example, in the morning at 6 a.m., it goes to Reddit, looks at the top threads and the topics I'm interested in. And I told it by 7 a.m. in my inbox, I want a report on the top news items I'm interested in.

Speaker 20:
[21:46] Wong used to pay for a human assistant in the Philippines. Now, he just pays for tokens. That's how AI usage is measured.

Speaker 21:
[21:56] I also asked it to write my resume for me today. I said, here's my LinkedIn profile. I need a professional-looking resume.

Speaker 20:
[22:05] A crowd of about a dozen showed up on this Wednesday night last month, entrepreneurs, big tech workers, and hobbyist tinkerers. Kevin State runs Sales Strategy for an AI startup.

Speaker 17:
[22:17] I feel like our whole company should just shut down and focus on this for about a month.

Speaker 20:
[22:22] Right now, he's mostly using agents to organize his e-mails and write research reports. But he's working on building a custom networking assistant to track who he meets, map connections, and prompt him to follow up.

Speaker 17:
[22:35] If I adopt this now, I probably have a three to four month runway before everyone else catches up. And so I want to be ahead of the curve to be more efficient.

Speaker 20:
[22:43] A sense that you're falling behind if you're not 10Xing productivity, even while you sleep, has taken over the industry, says Nikunj Kotari, a venture capital investor in San Francisco.

Speaker 22:
[22:56] Everybody has this feeling of like, hey, time is the only thing that matters. And in that given unit of time, which we don't get back, how can I have AI do a lot more for me than the next person?

Speaker 20:
[23:09] He calls it token anxiety, people keeping tabs on their agents during parties and bars, even while outside at the park.

Speaker 22:
[23:19] I would see laptops slightly open and the warm glow of the light.

Speaker 20:
[23:23] Kothari himself is running agents for email, market research, data analysis. His evening Netflix time has been replaced with Claude Cote, dreaming up new tasks to automate just for fun.

Speaker 22:
[23:36] I have two young kids at home and I felt guilty because I'd be like, oh, go to bed quickly so I can get back to my computer.

Speaker 20:
[23:42] And it's not just scrappy founder types. Some of the biggest companies in tech are reportedly token maxing, pushing employees to burn through as many AI credits as possible in an effort to churn out new features and products at an ever faster pace. There is genuine excitement, but also fear, according to Eric Weber, who spent years leading data and AI teams, most recently at Grammarly.

Speaker 23:
[24:10] The changes happened so quickly that I think is disorienting for people because we're not used to job families getting disrupted in two or three months.

Speaker 20:
[24:21] AI is automating the very skills that tech workers spent their entire careers developing. Weber says the industry is in a collective identity crisis.

Speaker 23:
[24:31] But I think what is causing a lot of stress for people is that doing more doesn't necessarily create more leverage or impact, right? You're just doing more stuff. And so we don't spend a lot of time on the question, like what should you actually be doing?

Speaker 20:
[24:48] To answer that question, Weber decided he needed to do less. He still uses agents, but about a month ago, he stepped back from his full-time executive role to spend more time thinking, writing, and talking to people. I'm Megan McCarty Carrino for Marketplace.

Speaker 2:
[25:19] This final note on the way out today, Kevin Warsh had his confirmation hearing in front of the Senate Banking Committee today. There was the usual and expected raft of policy questions for President Trump's nominee to chair the Federal Reserve. Also a whole lot of questions about how Warsh is thinking about the independence of the Central Bank. On a very much related note, Warsh refused to answer a question about who won the 2020 election. Jordan Mangy, Zuniyah Maharaj, Janet Nguyen, Olga Oxman, and Virginia Kaye-Smith are the digital team around here. I'm Kai Ryssdal. We will see you tomorrow, everybody. This is APM.

Speaker 24:
[26:09] Headlines shift overnight, and then again in the afternoon, and again in the evening. You see where I'm going with this. Hello, I'm David Brancaccio, a special correspondent from Marketplace, where we deliver economic news designed to keep you both sane and informed. One of my favorite ways to make sense of it all is with the Marketplace newsletter. Every weekday, our team curates, must read stories from the week, and delivers explainers right to your inbox. So if you want the latest from me and our team of award-winning journalists, head over to marketplace.org/newsletters and sign up today.