What will Fox really pay Dominion?
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After Fox Corp. agreed to a jaw-dropping $787 million payout to settle a defamation case brought by Dominion Voting Systems, one listener thought to ask: Can insurance cover that? We’ll get into it and answer more of your questions about how resuming student loan payments might affect the economy and the complicated bond market. Plus, what’s up with all the matte, earth-tone car colors?
Here’s everything we talked about today:
- “How does one pay a $787 million settlement?” from Marketplace
- “Fox’s settlement with Dominion unlikely to cost it $787.5M” from AP News
- “Biden’s Education Department is planning for student-loan borrowers to resume payments in October — and companies would begin charging interest a month before” from Business Insider
- “What will the end of the pause on student loan payments mean for retailers?” from Marketplace
- “Will student loan forgiveness make inflation worse?” from Vox
- “Biden White House Keeps Student Loan Payments at Bay Amid Inflation” from The New York Times
- “What’s happening to the color of L.A. cars? Inside the obsession with muted earth tones” from the Los Angeles Times
- “Why Do Bond Prices and Yields Move in Opposite Directions?” from The Balance Money
Got a question for our hosts? Leave us a voicemail at 508-U-B-SMART or email us at firstname.lastname@example.org.
Make Me Smart April 26, 2023 Transcript
Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.
Hey everybody I’m Kai Ryssdal. Welcome back to make me smart where we make today make sense.
And I’m Amy Scott, in for Kimberly Adams today. And it’s what do you want to know Wednesday, which means we get to answer your questions. If you have a question you’d like us to answer in the future, you can leave us a voicemail at 508-UB-SMART or you can email us at email@example.com. All right, the first question is in the form of an email. Creedmoor, North Carolina wants to know: does Fox News pay all of the settlement or do they have insurance?
You taking this one? I think you’re taking this one?
No I think you are
All right. I will take this one. That’s fine. Fine. I will take it.
I mean, if you want me to
The answer is yes and no. So the settlement, of course, was 787.5 million American dollars in the Dominion voting systems case. The answer is that they’re not going to pay the full sticker price. We don’t know exactly how they’re going to pay. But here are some options, right? First of all, they could. They’ve got the cash, it would be about 20% give or take of the $4 billion they have on hand. But number one, as happens in most cases of this nature, where there is a judicial ruling against them, Fox can deduct it, sorry, it’s not a judicial ruling. In most cases like this, where there’s a settlement, Fox can deduct it from their taxes, right? It’s a business related expense. So part of that comes off their taxes, number one. If they are insured, which of course they are, because Fox is a big giant company, an insurance company will pay some part of that. A partner at a media liability insurance firm said anywhere from 100 million to $500 million of that could conceivably be covered depending on what their challenges are. But here’s this thing about Fox. This was one of many, many cases, both from individuals and against individuals and shareholders. And there’s another one from another voting machine company that’s a $2.7 billion case. So this is not done yet by a longshot for Fox. It’s gonna cost Rupert Murdoch some money, but it’s not going to be the whole 787 out of his pocket. That’s the deal. Yeah.
You know, I saw today, a story that basically, Fox Corporation lost the equivalent of the settlement in its share price after the Tucker Carlson announcement. Just to put that in perspective.
Yeah, yeah, there’s Tucker. There’s there it is. Okay, next question. Another email. Here’s what Bill in New Lebanon New York wants to know: “when college loan payments are eventually restarted, will that serve as a disinflationary pressure upon the economy?” It’s good question.
Yeah, it is. Good question. So a little reminder of federal student loan payments have been paused for more than three years now. It started at the beginning of the pandemic under the Trump administration. The Biden administration has kept extending that pause. But those payments are set to resume later this year and this is where it gets a little confusing. Either they will start 60 days after June 30, which is late August by my count, or 60 days after lawsuits blocking Biden’s student loan forgiveness plan are resolved in court. Depending which happens first. As you know, there’s a larger plan to extend up to $20,000 in debt for folks who earn I believe it’s less than $125,000 a year and that has been held up in court. In terms of the inflation question, when the Biden administration extended the pause last year, critics said that move would make inflation worse by basically putting more money in people’s pockets which add stimulus to the economy, adds demand, which is, you know, part of what’s been pushing up prices. And some economists were concerned about that. Others less so. You know, I think there’s a an ongoing debate about how much helping people afford their debts contributes to inflation. But the idea is that if borrowers don’t have to make monthly student loan payments, they have more in their wallets to spend. So when those payments resume in theory, they will well, they will have less money in their wallets. But last year economist at Goldman Sachs estimated the impact of the moratorium would be pretty small on inflation. So on the flip side, resuming payments will probably have a pretty small effect too.
Yeah, yes. Stephanie Hughes did a good piece for us the other day on what happens to companies, right what it’s going to do for retail sales. Because as you people might remember, retail sales were down last month by like nine tenths of 1%. Not great in a consumer driven economy. And so these consumers are now going to have to re-up on their student loans. Will, as Amy said, have less money to spend that will be, you know, marginally good for inflation, but it’s gonna be marginally bad for companies. So yeah, you know. Put that in your recession pipe and smoke it. Okay, that’s a technical economical term. Next question. Here we go.
I’m wondering if there’s an economic story, and what my wife and I have referred to as pandemic gray, which is this new battleship gray, that almost all of the car companies have universally been painting some of their cars. That sort of battleship, sometimes it’s green, or sometimes it’s bluer, but I’m curious if you guys know more. Thanks for making me smart. Steve from Philadelphia.
Steve! All right, I guess I’ll get this one started. And maybe we can talk about it. I think this is so fascinating, because for a long time, if you look around, there are no cars of color other than like beige, white, grey, silver, super boring, right? But at least they were sparkly. I think what you’re referring to Steve is, is these matte grays and blues and greens that don’t have the like metallic sparkle in them. And the LA Times wrote a really interesting article about this recent trend with muted earth tones. Apparently, it started with Audi back in 2013. And was popular and led other pricey companies to do the same. Sometimes people pay a premium for these matte colors, which I think is interesting. But it’s also trickled down into more affordable cars and so you’re seeing what people call sort of natural tones or even combat, you know, tactical looking colors, which is, I think, pretty interesting. I’m curious, though, about the safety issue. I mean, one of them refer to these colors as stealth. And I have this memory of going to a car lot with my dad when he was shopping for a new car and he said “close your eyes and then open them and tell me which cars you see.” And of course I saw the yellow car, the red car. They really stand out, you know. And so you almost never see those colors anymore.
No, and you can go long stretches with only seeing like, like the whites and the grays and I… My theory is that it just goes in trends and streaks and car companies follow each other. Edmunds, the car people, they say cover cars painted various shades of white, gray, black and silver accounted for 75% of new car sales in the United States last year. I totally buy that. Absolutely 100 percent buy that.
There you go. All right, time for our last question of the day. And this one is for Kai.
Hi, I’m Billy from Austin, Texas. Kai every day, when you do the numbers, you always end it by saying “and bond prices are down and yield on the 10 year notes are up” or vice versa. Bond prices are up and yields on a 10 year are down. Does that ever change? Is there ever a case where you’ve had to say you know, bond prices are up and somehow interest rates are up?
Good question. The short answer is no. And here’s why. So first of all, we have to caveat this by saying the bond market is amazingly complicated. There is about 1000 different ways you can slice and dice the yield question right? The interest rate question. You can talk about holding bonds to maturity, you can talk about the coupon yield, you can talk about all different kinds of things, but we’ll answer this for the generic bond, the US tenure. Generally speaking, this is a question of supply and demand. When demand for bonds goes down, right? And let’s think about when that might be. If people are feeling good about the American economy, things are great, and they have excess money, where do they put it? They put it in the stock market, because that’s the opportunity for their money to grow. They do not buy bonds because bonds, government bonds, are the safe haven. They are the place you go if you think that the economy is going to be shaky, things might go downhill, and you are going to need to hang on to your money and have it be safe and American debt, until the Congress gets done with it. The Republicans guards get done with it. American debt is the safest thing on the planet, right. So when demand for bonds goes down, issuers of new bonds whether it’s companies or the government, or what have you, they have to offer higher yields, higher interest rates, to make those bonds attractive over the bonds that are already out there. Right? And if the value of lower yielding bonds already on the market goes down well, then the opposite happens. There you go.
I’m so glad you got that one. Twenty years in this business and the bond market still has a way of twisting my brain around.
Bonds are immensely complicated. And that was a really simple answer to a truly complicated question. But you know, as… I haven’t said much because we haven’t talked about bonds much but if you want to know which way the economy is going look at bonds right? They are the flight to safe…. they’re the flight to safety, they are the thing that people lean on in times of economic stress, which we are arguably entering upon. Keep an eye on bond yields. That’s all I’m saying. Alright, we’re done for today. If you’ve got a question you’d like us to answer leave us a voicemail 508-UB-SMART. You can email us and firstname.lastname@example.org. You can do the voice memo thing as well. We will take it any way we can get it.
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