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I think a lot of people know you as the dictatorship guy. Uh, and nowadays we hear about this from from everyone, whether we're talking to executives or executives, we're talking about earnings calls, um, or we're talking to to analysts or investors here on our program. It's not getting any better. In fact, it's getting worse. Yeah.
And in fact, it's no longer a straight line. K the the arm of the K looks almost parabolic and the leg is turning almost straight down into despair. And so the divide between those at the top and bottom isn't just economic at this point. It's almost become two life experiences that bear nothing in common. And I, and I worry that those at the top are doing all they can not to see those at the bottom. But in a world of social media, those at the bottom can't help but see this enormous overabundance that exists above them.
I want to get more into that. There was a great piece in the Atlantic this weekend. The vibe session is over. The perma session is here. It spoke about how households are feeling worse, about their finances and the economy than they did back in 1970 during great inflation. So you talk also a lot about the confidence gap. How much does the pull back from lower end consumers have to do with the fact that they just don't see any upward mobility?
It's not only that they don't see any upward mobility. The AI boom has now put a target on their back. They believe that it's a zero sum game. And they're looking at all of these gains being made in eye stocks and believing that ultimately it will come at their expense. And so a lot of this has to do with how both groups imagine the future. And the imagination of the future could not be more divided in terms of extraordinary optimism at the top and this dire level of despair at the bottom. And it's the despair that troubles me, because I know that ultimately that is what sets people into the streets.
Are you seeing I want to talk about those people in the repercussions of this or the ramifications of this in a minute. But before we do that, just the way we hear so much about the resilience of the American consumer, and I hear what you're saying about despair in that bottom rung of the K, but are we are we seeing, uh, an uptick in people missing car payments? Are we seeing people, uh, spend a certain demographic put a different type of payment on their credit card. We talk to the folks that buy now, pay later from a firm, and they and they have, you know, their client is the average American, and they say the average American is doing so well right now. Yeah.
So if I look at credit card, uh, delinquencies this month look like they're going to come in at about 13%. What is so striking to me is if you if you look at it mathematically, that level is historically high, but it comes at a time when within the card portfolio, you have enormous convenience balances that are absolutely riskless for the card issuer. And so on their own. I suspect that the the quality that the card issuers are seeing among their lowest tier is Just stressful. And the challenge right now, Tim, is that we have this, this bifurcation where not only are businesses like the airlines dependent on the top, but I see so many derivatives of wealth, including our banking system, that require, at this point, those at the top to continue to do extraordinarily well. It's fascinating to me that a bank like JPMorgan, at the bottom of the financial crisis, there were about $3 worth of credit card balances to private banking balances. Today, the lines have crossed. They have more credit outstanding to private clients than they do to Main Street credit card holders. So there's been an enormous wave of credit extended to those at the top with the belief that. That they will never default. I think that when you see so much of our. Economic system now dependent on those at the top, it begins to beg that question.
This bifurcation has been a problem for years now and seems to only be getting worse, as you just mentioned. What can policymakers due to remedy this? And if they don't step in? What is the worst case scenario? I think policymakers need to be thinking about the needs at the bottom of the hierarchy. We know that food insecurity is an issue that leads people to protest and riot. We know that basic health care is financially debilitating to those at the bottom. And so I think we need to be thinking about the basic needs and ensuring that there is a safety net. And I think of it as a social safety net. that prevents despair from setting in. And I think that we need to be cognizant of the fact that there is a growing population that feel hopeless, and that hopelessness ultimately leads to action.
Well, what what kind of action? I think a lot of people watching this, especially on primary day and in Texas, and as we do get into the midterms, would think that there are electoral consequences. And certainly that was a lot of the navel gazing that we saw post 2016 election. But but what are ramifications of this? So the ramifications if you go back to the fall, to me, it was no coincidence that in the midst of this affordability crisis that everybody was talking about. You saw a more populist mayor elected here in New York, okay, who resonated both left and right. One of the things that is so telling about this latest consumer sentiment data is that for the first time, we have a meaningful drop in confidence among Republicans. And so the bottom is purple. It's not red or blue. And so that purple wants change. And candidly, neither party has done anything to suggest that they have action in place to to serve those at the bottom.
So do do do the people at the bottom have to be served through political action, or is there a way for this to be solved without Washington's help? I think you're seeing it on a local level first. Okay. As I would expect. And ultimately those changes are on a local level, lead to national. So local, like New York City and Zahran Mamdani that our newish mayor. Yeah. Where else? So I think we're going to see examples of that this fall, where you have incumbents on both the left and right who are voted out. And I think it's quite interesting in some of the political ads, incumbents aren't even talking about the fact that they're incumbents, like they know that it's governor of California, someone like Steve Hilton coming in, or mayor of Los Angeles, someone like Spencer Pratt coming in, for example. Is that what you're talking about? It'll start at the local level. Okay, interesting. And part of that is every crisis is local. And politics are incredibly local when confidence is low. And so that's where people it's tangible. It's immediate. It's proximate. And so those are where people demand change first.
I'm really interested, Peter, in this idea that you mention of America becoming more of an ownership economy, where more and more goes to the people who already own homes, who already own financial assets. Can you talk a little bit more about how this, uh, incredible run in AI companies is worsening that? Yeah. So you have beneficiaries of asset inflation and it's hard not to see it. And it driving everything from Knicks tickets to airline seats. Owners of assets today have choices and opportunities that those below don't. And I think that for every owner there is a renter. There is, you know, somebody with a car payment, somebody with a credit card payment. So so you have those that are in essence extending credit, extending opportunity, and those who are on the other side of it. And the gap to move from one to the other is. It's. It's too wide and it's too costly. You look at, you know, the average rate on a credit card, you know, 20 some percent. Well, to pay that off first to to begin that upward migration is all but impossible.
We're speaking with Peter Atwater, president of Financial Insights. He's a lecturer of economics at William and Mary. He's also the author of The Confidence Map Charting a Path from Chaos to Clarity. Peter, let's let's end with the investment thesis. And in an environment in a world where the cars are sort of going parabolic in the other directions, we're speaking to you on a day where the S&P 500 could finish again at a new record. It doesn't seem like this idea of a weakening bottom rung of decay is holding back investment in AI, as Alex mentioned. What's the what are the investment ramifications of society like this?
The investment ramifications are that there is an over investment in this abstract technology that we crave when confidence is extremely high. We imagined this unlimited opportunity in futuristic technology at every peak in confidence. And then there comes the backlash. And in this case, I expect the backlash to AI to only grow. Mhm. And I think those at the top, particularly the proponents of I fail to appreciate the zero sum that is seen by those at the bottom. And the higher the market goes, the more those at the bottom feel that ultimately they will pay the price. Because to sustain that earnings growth it has to come somewhere. And the most obvious target is labor.