Afford Anything - First Friday: The Government Shuts Down -- But Bitcoin is at an All-Time High?!?

Episode Date: October 3, 2025

#648: The U.S. government is shutting down. Bitcoin just hit a record high. Inflation whispers are back. And Wall Street is buzzing with speculation. What does this all mean for your money, your portfolio, and your long-term financial freedom? On this First Friday episode, we unpack the economic headlines you can’t ignore — and help you separate signal from noise. In this episode, we cover: Government Shutdown: What happens when Washington goes dark, and how it could ripple into the markets, interest rates, and your daily life Bitcoin at Record Highs: Why crypto is rallying, what history tells us about speculative manias, and whether this time might be different Jobs Report and Inflation Watch: The latest labor market data, its implications for the Fed, and how it could shape borrowing costs Investor Behavior in Uncertainty: Why volatility can make us overreact, and how to stay grounded in your long-term strategy Key Takeaways Government shutdowns create noise, but historically their long-term market impact is minimal Bitcoin’s surge reflects both speculation and broader demand for decentralized assets — but extreme volatility remains The labor market remains resilient, keeping inflation risks on the radar and Fed policy in focus Emotional investing is costly: staying calm during uncertainty is one of the best ways to protect your wealth. This month’s headlines feel dramatic — shutdowns, soaring crypto, inflation fears. But the timeless principles of money management still apply: diversify, stay disciplined, and don’t let headlines dictate your portfolio. Key moments: (00:00) Jobs Reporting from ADP (08:28) Interest Rates and Mortgages (18:07) Social Security Age (25:36) Consumer Spending and Inflation (31:56) Bitcoin and Gold reach new highs (34:31) Quarterly Reporting for Publicly Traded Companies may go to twice-a-year Share this episode with a friend, colleagues, your veterinarian: https://affordanything.com/episode648 Learn more about your ad choices. Visit podcastchoices.com/adchoices

There is no jobs report today. This is the first time I have ever opened a First Friday episode with those words. But not to worry because we have jobs predictions. We have inflation data. We have private payroll data. We have a Fed rate cut plus a strong potential for two more on the way. We have Bitcoin and gold both hitting new highs. And on the topic of new highs, we also have the distinct possibility that the full retirement age of Social Security might be going up. There's a ton to talk about today. Welcome to the first Friday episode of the Afford Anything Podcast. This is a show that knows you can afford anything, not everything. We cover five pillars. Financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double-eye fire. Normally, on our Tuesday episodes, we typically answer questions from you. And on our Friday episodes, we typically interview a guest.

But there's one exception, and that's the first Friday of every month, in which we zoom out and take a macro look at the economy. So welcome to the October 2025 first Friday economic update. As of 10.45 a.m. Eastern, the government is still shut down. This means that the jobs report, which is typically published by the Bureau of Labor Statistics, at 8.30 a.m. on the first Friday of every month, is not out yet, which is, well, I hate to use the word unprecedented, but at least as long as I, I've been doing this, it is. But we do have data from the ADP report, which is a private payroll processor,

and they reported that we lost 32,000 jobs in September. Now, I'm going to take a moment to describe the difference between the BLS report and the ADP report, and after that we'll go into some of the details of the ADP report and what implications this might carry. The Bureau of Labor Statistics, the BLS, which is part of the Labor Department, they survey a representative. sample of a variety of industries. And when I say representative sample, I'm talking about a data set that is compiled based on geography, industry, and size of company. So they assemble a data set that looks across a deliberately compiled representative sample representing over 600,000 individual work sites. They ask those businesses to report monthly data on the number of employees on their

payroll as of the 12th of the month. And based on that, they compile their jobs report. Now, they revised this jobs report three times. There are two monthly revisions, one that occurs one month later, the next that occurs two months later, and then there's also an annual benchmark revision. The reason for this revisions is because there is some amount of guesswork in how the BLS puts together its data. The initial numbers are preliminary. For example, they don't have any ability to account for brand new businesses that have just formed, nor can they account for businesses that close in real time. So they use a mathematical model to estimate those types of monthly payroll changes. They also have to seasonally adjust their estimates in order to remove

naturally occurring variations based on holidays, weather, school calendars, things like that. And of course, the BLS looks at both private and public employers. Now, the reason I'm going through this is because I want to draw a comparison to how ADP puts together its report. And the reason for that is because we know the ADP numbers, which is ADP reports that we lost 32,000 jobs in the month of September. But I want to contextualize the data set through which that determination was made. So ADP is a private payroll processor. They do not have public sector data. They only have information from private employers. Now, because they have such a big data set,

they cover about 26 million U.S. workers across 460,000 private sector clients or companies. Because of the size of that data set, they necessarily do have a lot of different industries and geographies and sizes. However, unlike the BLS, they don't necessarily have a deliberately constructed representative sample. They are simply surveying their,

clients because they're a private company. With that in mind, let's take a look at how jobs shook out in the month of September. Big companies, meaning more than 500 employees, actually did really well. Big companies grew by 33,000 net jobs. Mid-sized companies did worse. And smaller mid-sized companies did even worse than bigger mid-sized companies. Companies between 250 to 499 employees lost 9,000 jobs, companies between 50 to 249 employees lost 11,000 jobs, and then small companies did the worst of all. Companies that had between 20 to 49 employees lost 21,000 jobs, and companies between 1 to 19 employees lost 19,000 jobs. So what we see here in the ADP data is a clear, clear pattern of the smaller the company, the harder it got hit, and the bigger the company,

the better it did. And that pattern played out at every tier of company size, from the smallest of small, all the way up to large. Now let's take a look at industry. Natural resources and mining grew. They gained 4,000 jobs in the month of September, but construction lost 5,000 jobs, manufacturing, lost 2,000. Trade transportation and utilities lost 7,000. Information actually grew by 3,000 additional jobs. Financial services lost 9,000 and professional and business services lost 13,000. The biggest growth, and this is consistent with what we've seen in the last many, many months of data, the biggest growth came from education and health services. That grew by 33,000 jobs in the month of September, according to the ADP report. We've seen that in the last many,

many, many months of BLS reports as well that has consistently shown that health services, healthcare and health services, is consistently the biggest winner when it comes to job growth. The biggest loser last month, the only industry that did even worse than professional and business services, was leisure and hospitality. That lost 19,000 jobs. One of the questions that someone recently asked me on the Twitter X social media platform was, is this slowdown in jobs related to tariffs? The data in the September ADP report does not provide evidence of that. We see that the sectors that have suffered the greatest number of job losses are predominantly service sectors rather than goods sectors.

Now, another question that I've received is, what would this data look like if we included government jobs? Obviously, in the absence of the BLS report, the only answers could be speculative. But here is what we know. Federal employees who resigned from their positions and are still receiving severance are formally counted as employed

until that severance package runs out. And a large number of federal employees who in February, March, April, agreed to resign from their positions, those employees received severance package that expire at the end of September. This means October will be the first month in which they do not have severance

and therefore will be counted as unemployed. And what that means is that the October data will show us how much of a reduction we have had in our federal workforce. So even if the BLS, if and when the BLS does put out its September report, we will see some show shift in public sector jobs, but the big shift that we are expecting to see will come in the

October report, which is published in November. So tune in to the November 1st Friday episode for what's sure to be one of the most fascinating reports that the BLS will put out. It's certainly one of the most anticipated BLS reports. That's coming up in the November 1st Friday episode. Until then, we can only speculate. Let's turn our attention to interest rates. The Fed met on September 16 and 17, and at the end of that meeting, they announced a quarter point rate cut. This was so widely expected that the markets, the futures markets, had already priced in a 100% probability of a rate cut. In fact, the markets were betting a 91% probability that it would be a quarter point cut, and then the other 9% they were betting that it might be a half point cut. Now much has been made online of the fact that the day after the rate cut, mortgage rates ticked up just slightly.

And so I want to explain why and what happened. For a deep dive into this, listen to our episode that we recently published with Karsten Yeska, who was a former Fed economist. We published that episode right before the Fed met in mid-September. One of the points that Karsten made was the slogan that I really like. like, buy the rumor, sell the news. Buy the rumor, sell the news. What does that mean? In the context of Fed rate cuts, it means that when the markets are anticipating something

happening in the future, they already priced that in and they already adjust accordingly. So in this case, because the markets so overwhelmingly priced in the probability of the September rate cut, the 10-year treasury, which is what mortgage rates are based on, had already adjusted to reflect that anticipation. And so then when the Fed rate cut actually happened, there was no real market movement because the Fed did what everybody had already expected and had already priced in anyway. The bigger thing that people were paying attention to is whether or not the Fed would signal a likelihood of cutting rates at its October and December meetings. And they did signal that. So the overwhelming consensus right now is that in both October and December, the Fed is likely going to make two more rate cuts, probably a quarter point each.

What does that mean for the mortgage market? Well, it means that the 30-year fixed-rate mortgage is pretty close to its 52-week low right now. So according to Freddie Mac, as of yesterday, Thursday, October 2nd, the national average for the 30-year fixed-rate mortgage was 6.34 percent. To put that into context, the 52-week range is between 6.26% and 7.04%. So we're pretty close to the bottom of the 52-week range. What does that mean for the housing market? Things still aren't moving. There's very much a stagnant market, as evidenced by high inventory and high-average days on market.

And why is that? Well, largely it's because existing homeowners have lower interest rates, and most existing homeowners don't want to trade their lower interest rate for a higher interest rate. So to put some numbers on this, according to national mortgage professional, 80.3% of homeowners have a mortgage rate that's below 6%, so four out of every five have a mortgage interest rate that's below 6%. 70.4% have a mortgage interest rate that's below 5%. And more than half, 52.5% of a mortgage interest rate, of a mortgage interest rate, a low 5%.

of existing homeowners have a mortgage interest rate that is below 4%. In fact, and I'm not trying to throw too many numbers at you, but let me just offer one more. One in five homeowners, 20%, have an interest rate that's below 3%. This means that the lock-in effect has a long, long way to go before it completely dissipates. There are some positive signs. For example, between July and August, contract signings in the U.S. rose by 4%. that's according to data from the National Association of Realtors. Pending home sales as of August reached a five-month high and home sales rose 3.8% from the same month one year ago. But data

from Redfin suggests that the pending home sales reading as of September showed a slightly weakening demand. And home prices in around 30 of the 50 biggest cities have actually softened by a hair. This is predominantly in the south. and in the West. So Austin, Tampa, Dallas, Miami, San Francisco, Phoenix, and Denver have all seen declines in the value of single-family homes, ranging from half a percent in Denver and San Diego to 2.8 percent in Tampa. That said, nationally, home values are up 1.7 percent year over year. This is according to data from the S&P cotality K. Schiller Index. What we're seeing overall is that markets that are in the Midwest, which still have some degree of affordability, are the markets

that are seeing the most movement. So as of August, pending home sales in the Midwest were up 8.7% from the previous month. And that's the highest among all regions across the U.S. That's according to data from the National Association of Realtors, as reported to MarketWatch. You know, coming out of all of this data and zooming out a little bit, what are the big picture trends that we're seeing? If you remember during the pandemic when we saw this huge housing boom, particularly in the sunbelt. We saw real estate prices skyrocket overall nationwide, but the south and the west, the sunbelt, really led that.

And meanwhile, at the time, the rust belt kind of lagged. What we're seeing right now is an inversion of that. We're seeing that the south and the west, which may have gotten too hot during the pandemic era, are now cooling off. And meanwhile, the Midwest and the rust belt, particularly in cities that still has good affordability, relatively speaking, and that's supported by strong, steady local economies that have a diversity of industries. You know, think about

Indianapolis, think about Columbus, think Cincinnati. These are all places with very strong economic fundamentals. And that's where we're seeing more transaction volume, lower days on market, overall more buyer demand, which results in the Midwest leading the pack when it comes to home price appreciation. You know, one of the questions that I've long grappled with when it comes to where should you buy rental properties is the question of do you consolidate all of your rental properties into one location or do you spread them out and have some geographic diversity? There are pros and cons to doing both. Certainly the benefit to geographic concentration is that that initial workload of identifying your team, finding your property manager, your

electrician, your plumber, your HVAC technician, learning how to navigate the permitting system, or heck, even the county website, which is not necessarily user-friendly, right? That initial getting to know a place only has to happen once if you have geographic concentration. And so that is certainly an argument in favor of that. But the argument in favor of diversification is that when you have rental properties in a variety of different regions, then that diversification can buffer some of these regional variations when it comes to the housing market. I myself have properties in Georgia, Indiana, and Nevada. And I chose that in part because I wanted exposure to the South, the Midwest, and the West. And honestly, the place I'm missing, I was talking to Joe about this the other day, I'm missing Arkansas.

If I were to go into a fourth place, it would be there. Regardless, the overall state of the housing market is such that it is a fantastic time to be a buyer. It is a stressful time to be a seller. If you can hold off on selling, I would recommend that you do so, provided that your budget allows for that. Again, all normal disclaimers apply. All real estate is local, as we've just been discussing. So what I'm stating right now are broad aggregate statements and your local conditions. conditions may vary. But nationwide, this is a time when as a buyer you will be facing almost

no competition, perhaps zero competition. You might be the only offer that a seller gets. After that seller's home has been languishing on the market for two months, three months, four months. So as a buyer right now, you have a great deal of power. And you can use that not just to see if you can lower the price, but also importantly to score concessions. on everything from repairs to closing costs. So if it's financially viable for you to do so, then I would take advantage of the buyer's market while we have it. I'll be writing quite a bit more about this in my newsletter,

afford anything.com slash newsletter. Again, that's afford anything.com slash newsletter. And that's completely free. The age at which you can claim Social Security might go all the way up to 70. If it did, it would actually only solve a half, of the social security shortage problem. We're going to talk about that topic, the future of social security

and what it might mean for your retirement. We're also going to talk about Bitcoin and gold hitting new highs. We'll discuss the latest inflation data. We'll talk about consumer sentiment. All of that is coming up next. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient.

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when Barteromo asked if he would look at raising the retirement age. Later, a spokesperson for the Social Security Administration, clarified his remarks, stating that Bisignano, quote, outlined that there are a whole host of items being considered, and that eight years is a long way away. End quote. The reason that that spokesperson brings up eight years is because that is the amount of time it will take before Social Security becomes insolvent. Now, to clarify what that means, there are two trust funds inside of Social Security. There's OASI, old age and survivors' insurance, and there's DI, disability insurance. So there are two trust funds inside of Social Security.

Currently, OASI, the old age and survivors insurance trust fund, which is the trust fund that pays the majority of Social Security's beneficiaries, that fund is projected to become insolvent in the year 233. Now, if you were to combine the two trust funds, funds, if you were to combine OASI and DI, that would buy an extra year. If we were to combine them, then the combined reserves of the two trust funds together would have enough revenue to be able to pay all scheduled benefits and cover its associated administrative costs until 2034. What would happen in 2034? Well, when the funds become insolvent, that doesn't mean the payments

go to zero. It means that beneficiaries get a reduced version of those payments. If the two trust funds were to be combined, then according to a report on ssa.gov, published in June, if the two trust funds are combined, then starting in 2034, beneficiaries will receive 81% of benefits payable. So for every dollar that you are owed from Social Security, you'll get 81 cents on the dollar. What would happen if the two trust funds are not combined, if they continue to be held separately and administered separately? If that were to be the case, OASI would be depleted by 2033, and 77% of benefits would be payable from that point forward. So for every dollar that you expect to collect from Social Security, you'd get 77 cents on that dollar. Neither of those options sound palatable. Receiving 77% of your benefit or receiving 81% of your benefit, starting in either 2030 or 2033 or 2034,

Neither of those sound great. The question then becomes, what can we do to save Social Security from its impending insolvency? Well, the Social Security Commissioner, in addition to floating the idea of raising the age at which you can collect benefits, also pointed to a variety of other options. So one option is increasing the maximum amount of taxable earnings that are subject to Social Security tax. Right now, the first $176,100 of your income is subject to Social Security tax. Any amount that you make above that is not. So increasing that maximum amount of taxable earnings is one of many options. There's also the option of permanently raising payroll taxes for all income groups across the board by 3.65 percentage points. That's another option that the commissioner discussed. And then there is the option of, in the words of the commissioner, Bizzignano, the option that future generations, quote, will probably have a different set of rules, end quote.

What he's referring to by that is that the different set of rules would be the rules around when you can claim full retirement age. Now, the last time that full retirement age was increased was back in 1983, when Congress passed legislation to gradually increase full retirement age, from 65 to 67. And this was a gradual process, beginning with people who were born in 1938. And it was phased in over the next 33 years in order to improve the financial stability of Social Security

and in order to reflect increased life expect. And so Congress decided to implement this increase in two-month increments for each successive birth year, finally reaching the age of 67 for people who were born in 1960 and later. So the legislation that Congress passed back in 1983 implemented a slow two-month-per-birth year increase in the four-retirement age. That way, retirees were not caught off guard, and people had decades to be able to plan accordingly. This same legislation also increased the financial bonus for delaying benefits, voluntarily delaying benefits beyond the four retirement age. So it is already the case that if you voluntarily delay taking your retirement benefits up to the age of 70, you receive an increased benefit amount. This is a system known as delayed retirement credits or DRCs.

How it works is that the Social Security Administration will add an 8% delayed retirement credit to your benefit for each year that you delay past your four retirement age up to a maximum of age 70. I should note for anybody who's thinking about doing this, and this is very, very important, regardless of when you claim Social Security, you should absolutely apply for Medicare benefits within three months of your 65th birthday. If you do not do that, you could potentially face higher premiums for life. The penalties for delaying Medicare are permanent and unforgiving. So remember, apply for Medicare benefits within three months of turning 65, regardless of when you choose to claim Social Security.

Okay, now going back to this conversation around increasing full retirement age, last year in December 2024, Kentucky Senator Rand Paul introduced an amendment to the Social Security Fairness Act proposing to raise the four retirement age to 70, and that would be implemented in three-month annual increases until that threshold is reached. However, that amendment was not adopted. The conversation and the debate around it, though, has remained in the zeitgeist and became the subject of a study by the Congressional Budget Office, or CBO, which estimated that increasing four retirement age to 70 would address roughly half of the system's shortfall. Half. So even if Social Security were to raise the full of retirement age, we would still likely need other measures, including a potential payroll tax increase.

to be able to cover the gap. And this, if you will allow me to editorialize for a moment, this is one of the major reasons why I love Roth accounts, because Roth accounts allow you to lock in today's tax rate, even with the looming threat that tax rates might be higher in the future. And so that is the latest update regarding the debate around how to solve the social security insolvency problem. Consumer spending is up even though consumer sentiment is down. In fact, we have rarely had this big of a disconnect.

between what consumers say they feel versus how consumers behave with their wallets. According to data from the BEA, the Bureau of Economic Analysis, consumer spending in August rose by six-tenths of a percentage point, and that came on the heels of increases in July and June of half a percentage point each. August is the latest month for which they have published a consumer spending report. The next report is due out on Halloween. Once again, watch for the first Friday episode of November, in which we will have the latest sets of numbers from them as well.

But what we've seen across the June, July, and August report is that consumer spending is growing at a rapid rate. And that actually flies in the face of what consumers say they feel, because according to the University of Michigan, which publishes a Consumer Sentiment Index, consumer sentiment in September fell significantly. It's now at its lowest level since May, and it fell broadly across all age, income, and education groups. So we have an economic situation right now in which consumers consistently report that they are pessimistic, chiefly citing concerns centered around high prices, weak labor markets, and soft personal finance outlooks. 44% of surveyed consumers cite price pressures related to their day-to-day cost of living.

And according to the University of Michigan, surveyed consumers expect that inflation will rise at a rate of 4.7%, which is a full two percentage points higher than how inflation is actually trending. We'll get to that in just a moment. And what we've seen throughout the year, it's consistent that people's perceptions of inflation tend to be higher than the inflation rate. Often our experience of inflation is cumulative. So we see the cumulative consequences of inflation while the inflation rate as a measure

simply measures the rate, the current pace. To clarify that a bit, since those concepts often get conflated with one another, imagine that you're driving a car from Maine to Florida and you start the drive at 60 miles per hour and then you slow down to 50 miles per hour, then to 40, then to 30, then to 20. Eventually, the rate at which you are approaching Florida is 20 miles per hour, but you're still approaching Florida.

You still are nowhere near Maine, and you're definitely not going in reverse. What you see, what you experience in the moment is that accumulated distance because you're a lot further away from Maine than you used to be, even though the rate at which you're traveling is slower. That's what our experience of inflation is like. We feel the cumulative effects of inflation. We feel that the price that we pay in the checkout line at the grocery store is cumulatively a heck of a lot higher than it was five years ago. And as a result, we perceive the rate of inflation to be high, even though the current rate is not as high as we think it is. So all of that said, the Michigan Consumer Sentiment Survey shows that consumers

in September believe that inflation is at 4.7 percent, and the prior month, they believed it was at 4.8 percent. And overall consumers are very pessimistic. And yet what the personal consumption expenditures index shows us is that consumers are spending at increasing levels, that consumer spending has grown by half a percentage point or more per month over the last three months of data that we've collected. And so that disconnect between how people feel and how people act, that is one of the more interesting economic stories of our time and something to continue to watch. On the topic of inflation, I realize there's one question that I did not address, and it's the question of, is the Fed going to meet even if the government is shut down. The answer is yes. The reason is

that the Fed is not funded by congressional appropriations, the Fed is an independent entity. And as an independent agency, the Fed receives its funding from sources outside of the congressional appropriations process, which means that it can continue to operate and continue to pay its employees during a shutdown. However, the Fed will not have the latest data. So it's not going to have the CPI report. It's not going to have the PCE report. It won't have the latest GDP figures. It won't have the jobs report from the BLS, so it will likely be relying pretty heavily on private sector data, private sector surveys, surveys that are conducted by regional Fed banks, and other types of

alternative data sources. According to a report by J.P. Morgan, each week of shutdown will subtract about one-tenth of one percent of annualized GDP growth by virtue of a reduction in government activity. Overall, from a macroeconomic lens, the shutdown impacts a relatively speaking small portion of the government, and many of the furloughed employees will receive back pay. So the long-term consequences on GDP, according to this report by J.P. Morgan Chase, are unlikely to be severe. The same J.P. Morgan report also notes that because this shutdown is not related to the debt ceiling, there is no impact on the Treasury Department's functioning. which means the Treasury Department can continue to issue debt in the way that it normally does.

The report states that it's possible we might see slightly lower T-bill issuance, meaning fewer Treasury bills will be created, but the report notes that the effect would likely be slight. So I did want to take a moment to clarify that, to make sure that those questions got answered. The next time that the Fed is scheduled to meet will be October 28th and 29th, which means that their next interest rate announcement is scheduled for October 29. And that will go on, regardless of whether or not there is a shutdown at that time. Bitcoin and gold have both reached new highs. Bitcoin in particular added more than 10% in just a week.

It reached an all-time high last month of $124,000 per Bitcoin. To put that in perspective, on January 1st, 20203, Bitcoin started the year at a value of $16,613. per Bitcoin. So between 23 and today, it has achieved a year-over-year gain of approximately 156%. Gold is also up, but not as dramatically. Gold rose by 13% in the year 2023 and rose by another 26 to 27% in 2024. It is now, as of the time of this recording, at or very near its all-time high, with prices fluctuating around $3,900 per ounce.

This is due to a variety of factors, including the shutdown, people betting that the Fed is going to continue to cut interest rates, which pumps more money into the system, which decreases the value of fiat currency, persistent fears of inflation, persistent fears of a weaker dollar, of a debased currency. Gold is very much seen as a hedge against these factors, and cryptocurrencies and cryptocurrencies and Bitcoin in particular is also viewed very much in the same way as a hedge against concerns related to fiat currency, which is why I note the fact that both of them are reaching all-time highs right around the same time. Remember also that in any period of high inflation, tangible assets

are where investors flock, because if you are in a period of high inflation, the value of your currency weakens and weakens, but tangible assets, real estate, commodities, art, precious metals, these tangible assets are a good store of value. And that's why people tend to flock to gold when they're worried about inflation. It's also in this case why people flock to crypto in general and Bitcoin in particular, because Bitcoin has inflationary protections built into the way that it's designed. This is not an endorsement or a recommendation. It is simply an explanation of how those two asset classes work. I should note that the run-up in gold in 2025 has been particularly significant. The spot price is up by

more than 40% year-to-date. Gold is now on track for the biggest annual gain since 1979. Finally, the head of the Securities and Exchange Commission, Paul Atkins, signaled that regulators are, quote, prioritizing, end quote, a plan to let publicly traded companies report earnings twice a year rather than quarterly. Let's explain how the system works and then we'll look at the pros and cons. Right now, the current reporting requirements for publicly traded companies in the U.S. is that companies are required to file financial reports with regulators both quarterly and annually, and that has been the system since 1970. That's the year that the SEC first mandated quarterly reporting. Now, these quarterly reports carry information on the companies.

financial performance. They talk about risks that the company faces, legal risks, regulatory risks, market-based risks. The reports talk about changes to internal controls, and they present an analysis of the risks that the company faces as well as the opportunities that the company can see. Now, there are some other companies, including Canada and Japan, that also require their companies to publish quarterly financial reports. But the European Union only requires two reports per year and the UK eliminated quarterly reporting back in 2014. So the UK now only requires a semi-annual reporting. Now, even though the EU as an aggregate only requires semi-annual reporting, there are individual countries inside of the EU that still require quarterly reporting. In other words,

there is variation inside of the EU as to what the requirements are. Australia only requires semi-annual reporting. South Africa requires semi-annual reporting. And fun fact, Mongolia only requires annual reporting. Now, the main criticism of quarterly reporting requirements is that they're expensive, they're onerous, they cause companies to organize their businesses around hitting quarterly targets in order to satisfy their shareholders. And that results in short-termism, short-term thinking.

Companies have a harder time forming big, audacious 10-year, 50-year, 100-year plans because they're so focused on hitting their quarterly targets. It also requires a lot of time and money to compile these formal quarterly financial reports because companies are on the hook, if anything in there is wrong. So those reports have to be very carefully constructed. And the moment that the books close for one quarter, they immediately have to turn their attention to the next one. There are also heavy auditor review costs that are associated with quarterly reporting. And a stat published by Bloomberg notes that the number of publicly traded firms inside of the U.S. has fallen by around 40% in recent years.

and some people believe that the costs, the reporting requirements associated with being a public company deters many successful privately held businesses from going public. So those are the arguments that are in favor of switching from quarterly reporting to semiannual reporting. That said, a handful of prominent CEOs, including Jamie Diamond, Warren Buffett, and Larry Fink, have come out in support of the quarterly reporting. requirement. Some of the arguments that support this requirement include greater transparency, decreased risk of insider trading, the thinking being that if reports are less frequent, that might increase the risk of insider trading, and it would lengthen the amount of time

the insiders would be able to hold on to that confidential information. And in a dynamic market where business moves quickly, waiting six months between reports, is too long of a time frame. So those are the arguments both against and in favor of this proposal. I should note for clarification that the proposed change would allow companies to choose between quarterly or semi-annual reporting, so it would not eliminate quarterly reports. It would simply make them voluntary. The SEC will unveil a formal proposal by either the end of 2025 or early 2026, and that will be followed by a period of public comment. Those are the major economic updates of the past month and of the current moment.

Thank you so much for being an afforder. If you enjoyed today's episode, please subscribe to our newsletter, afford anything.com slash newsletter. I'm going to be publishing quite a bit about the real estate space, the housing market in the coming weeks. We also have a course on real estate investing called Your First Rental Property. It is meant for anyone who's interested in entering the rental property market. it's also great for anyone who is a quote unquote accidental landlord. So if you are holding onto a home, you've decided to move out, but you're holding onto it and using it as a rental. It's great for teaching you how to properly manage that home, properly screen tenants, manage

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