Younger Generations Lead Consumer Sentiment Shift, 'Given Up' on Institutions

0:00Do you want to shift our consumer, though, bring Sam conversation and welcome in our next guest joining us now, Eddie, you and the co founder of category pirates, Eddie, great to have you on the show. We got week consumer sentiment data this morning, perhaps not quite as weak as expected, but certainly not positive, a four month low. But we have inflation expectations jumping up to 4.6 percent. So as you look at those things too side by side, how are you viewing the consumer and the economy right now? Great question. I think the consumer is throwing in the towel. And what I mean by that is they have given up that our leaders, the big businesses, the institutions can take care of them and take care of inflation. And I think the reason why I say that is that they look at gas prices, tariffs, taxes. These are all things that the consumer cannot control. They've been waiting for, you know, companies, leadership to step up and do something about that and hasn't happened yet. And as a result, the largest institutions is

1:00the lowest it's been in probably the second lowest part, Gallup. And so I think what's going to happen is the consumer is kind of looking at more drastic means to kind of maintain their spending. EG, they're going to do their version of a corporate restructuring, which is called relocation. Oh, interesting. I do want to just pick up, though, it's something our previous guests mentioned and something I think about quite often because I'm sure we all know someone like this, but there's a big gap in how people are going to be able to do something that they're doing because we talk about these companies and the resilience of the consumers to why margins look good, why they're showing good fundamentals. Why is there such a divergence? I think you can explain it through generational cohorts. I mean, you're not seeing this kind of relocation phenomenon that we're going to talk about as much with kind of boomers, exers and some of the over generations. But what you're looking at is kind of the young generation that's likely to own a house, less likely to have children, and more likely to remote work,

2:00guess what? They are more mobile than ever, and they are moving to a place where taxes are less, maybe there's no state income tax or cost of living as far lower than it needs to be, where they are today. And that's what we're seeing the movement is at that younger generation, and that's why you're seeing some divergence in consumers. And so as we look at this relocation theory of how they're dealing with this lack of confidence here, California ranked last in this U-Haul one way moving index. Then we saw some of the Southern states, Texas, Florida that Carolina is up near the top of the list. What is that telling us, Eddie, about how Americans are feeling about where they can get the best combination of affordability and opportunity? Yeah, I think that it means that young people are doing their homework. You've heard about the fire movement, financial independence retire early, and this is a cousin of that, but people are kind of figuring out like, well, if I want a 20% raise, what's the best way that I can do it? I can ask my boss, I can go out and be my own entrepreneur,

3:01or I can move into a place that doesn't have any income tax from a state perspective or a city that has less of that and or a place that has lower housing. Now, here's the part that's kind of interesting about this is Gen Z is the most mobile generation of any cohort. One in three relocations are a Gen Z person. That's really kind of fascinating from a guy that likes weird data, right? And part of what we've written about is that we've written about it category pirates is that I actually think the non-obvious ripple effects is that this stems from things like the proposed California billionaire tax, which you might think, what does that have to do with anybody else in the country? But what you want to do is not follow where the billionaires are moving, you want to follow their money. And there were money meaning data centers, which is a bit controversial. A lot of the news is portraying people as saying, oh, they're up in arms about data centers is not popular. And when you go to the places that actually have them, you see kind of the same thing. And you see kind of the opposite effect in Quincy, Washington, as an example, tax revenue from data centers, which they've had for about 20 years, went from about 6 million to 47 million. They have a new high school, new

4:02police, new fire department as a result of that. And in Richland, Paris, because of the data center that met a put in their teachers got a $50,000 bonus up from 10,000, which is the norm. And so the reality on the ground is that data centers, I predict within a 12 to 18 month period, is going to have a pretty dramatic turnaround in public perception. When the people that are actually experiencing it first time, not the theory of it, but the reality of it, are saying, this is great. I want to move here because in Richland, Harris, Louisiana, the average price of a house went from a lot of 105,000 to 295,000 and two and a half years. And so you want to be early on that trend and not late. Yeah, but what about mortgage rates, Eddie? Because, I mean, we've just seen that tick up over 7%. I mean, if you're in that 2% to 3% bracket, you've got handcuffs on you if you want to move states. So I guess then if AI is creating the opportunities and the jobs here and the Gen Z's, as they called, they're a little bit more foot loose than perhaps their

5:03previous generations, then what does that mean then for who's going to get the jobs? And are they going to buy houses? It's a great point that you make. I believe the data shows that the people with the 2% or 3% mortgages or more people in my cohort, a Gen X or a boomer, people who could have afforded a house back, you know, call it 6, 7 years ago when the interest rates were really low. But Gen Z's weren't able to buy a house then and they're looking at how can I buy a house that's 7% rates now? Well, the answer is don't buy in San Jose, California. Don't even buy it in Austin. Go to Huntsville, Alabama. Go to San Antonio. Go to Omaha, Nebraska. Go to Abilene, Texas. And the real smart ones, I guarantee you they're going to figure this out is that they're going to look for not where the data centers are operating because property values have already escalated. They're going to go where data centers had been announced, but not yet broken ground. And these are places like Knoxville, Tennessee, Monroe, Louisiana. And that this is actually very

6:04noble things. As you can imagine, you got to get a lot of regulation, a lot of approvals. You can't just announce a data center in the middle of the night. These are things that you can forecast and people can move well on ahead of that. And Eddie, how are you looking at the ripple effects of these migration patterns? Because we saw post COVID South Florida become a wall street of the South. And that's only continued as we're seeing more of this migration that you're talking about. So as we look at now, the younger demographic contributing to this as well, not just people who were able to afford to move during COVID, does that then affect where companies invest going forward? Where these jobs are going to be created? Perhaps even more. Perhaps even which cities become the next economic centers? Absolutely. I mean, I think what you see is that people are figuring out the reality of when you change tax policy, it has massive ripple effects. And actually, if you look at Hollywood, what's kind of fast-standing is that they increase the amount of tax

7:04credits for certain types of media, so feature films, TV shows, things of the nature. They did not increase it for reality TV shows. Guess what happened on the list of places that people wanted to shoot that were preferred? Movies, regular TV shows went up, reality TV shows went down in Hollywood, simply as a result of that. And so I think local mayors are going to get religion pretty quickly, figure out that, hey, a lower tax bracket, some tax credits, some breaks will attract investment, that's going to attract jobs, it's going to increase property values, which increases property taxes, and the smart ones are going to make their bones by not only doing that to attract new people and new jobs, but they're going to use it to build up the infrastructure of the city to make it more livable and more exciting. And so I think you're going to see a game of thrones among city mayors to see who can attract the most talent and the most capital. Eddie, thank you so much for being with us, fascinating chat here, which we could keep going, but we sadly have to leave it here. Eddie, you and co-founder of Category Pirates. Thanks for being with us today.

8:12Thanks for being with us today.