Latest / Financial Survival Network / Economic Turmoil: CPI and Reform - Ed Siddell #6201

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Economic Turmoil: CPI and Reform - Ed Siddell #6201 · Financial Survival Network

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Speaker 1: I was asked this question yesterday by a client.
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Speaker 2: You know our raid is going to start going down
0:05
Speaker 2: in January because you hear all the punt saying, oh, yeah,
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Speaker 2: they're going down right away, and I don't think they are.
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Speaker 2: Eventually they will, but in the near term I don't
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Speaker 2: think that they will because the market is saying inflation
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Speaker 2: is still here. How we saw with the CPI report.
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Speaker 2: I think it's actually higher than that. But eventually it
0:24
Speaker 2: will go down. But we do actually have to affect
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Speaker 2: change in order for rates to go down and make
0:31
Speaker 2: it more advantageous for businesses to do things.
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Speaker 4: Than ever, and welcome you are listening to and watching
1:04
Speaker 4: the Financial Survival Network. I'm your host, Kerrie lutt Well.
1:08
Speaker 4: We got the TPI number out today, two point seven percent.
1:12
Speaker 4: We can all celebrate between that and DOGE and tariff
1:17
Speaker 4: and all these good things happening. Happy days are here
1:20
Speaker 4: again or maybe they're not. And lower interest rate not
1:24
Speaker 4: the boot it ideal is with us now. Ed, great
1:28
Speaker 4: to have you back on the show. So we should
1:31
Speaker 4: be celebrating in the streets now. Trump won and he's
1:36
Speaker 4: actually going to address little minor problems like the deficit,
1:41
Speaker 4: like government spending, like all these good things. So why worry?
1:46
Speaker 1: Yeah, exactly, Well, thanks for having me back.
1:49
Speaker 2: You know, to two point seven percent CPI a little bit.
1:54
Speaker 2: I hate the term. Oh, it's you know, it's hotter.
1:57
Speaker 2: The inflation is a little bit hotter than what we're expecting.
2:00
Speaker 2: Inflation is not two point seven percent. We all know
2:03
Speaker 2: it's it's it's higher than that. Jannet Yellen's interview. I
2:07
Speaker 2: mean she she regrets, uh, as she said it last night.
2:12
Speaker 2: You know, she regrets the fact that she said inflation
2:14
Speaker 2: is transitory and and uh, you know, it's it's.
2:17
Speaker 1: Higher than expected.
2:19
Speaker 2: We all know that it's here, and I think it's
2:22
Speaker 2: it's gonna actually get a little bit higher going into
2:25
Speaker 2: into next year. I don't think it's going away anytime soon.
2:30
Speaker 2: But you know, these policies going forward, I do believe
2:33
Speaker 2: long term, you know, we will be able to get
2:35
Speaker 2: it under control if we actually follow through on the
2:39
Speaker 2: on the policies of the new administration. But it's uh,
2:42
Speaker 2: we'll have to wait and see and it's not going
2:44
Speaker 2: to be out without some pain.
2:46
Speaker 4: Yeah, well, no pain, no gain. But you know, when
2:50
Speaker 4: you look at it, if we got rid of the
2:52
Speaker 4: corporate welfare, that's like the lap time I heard about it,
2:56
Speaker 4: we're both quing one. It was three hundred and fifty
3:00
Speaker 4: billion a year, all right, So we get rid of that,
3:04
Speaker 4: we get rid of the improper payment. Elon Musk, the
3:08
Speaker 4: head of DOGE in the vech Ramaswami, said that they
3:13
Speaker 4: want to reduce the number of government agencies from something
3:17
Speaker 4: like ploth the five hundred and ninety nine agencies. And
3:23
Speaker 4: you know there are agencies you don't even know about,
3:26
Speaker 4: Like I just did a search on chat gipp a
3:28
Speaker 4: while ago and I said, give me one hundred agencies
3:32
Speaker 4: I can get rid of. Then nobody will ever know
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Speaker 4: the difference. And some of them are minor, relatively minor.
3:38
Speaker 4: But it's a culture of waste, corruption and inefficiency. One
3:44
Speaker 4: thing that's been advertising is the president Impoundent Authority, which
3:51
Speaker 4: was dramatically scaled back during the Nickton era congrect path
3:55
Speaker 4: the law saying if we call you have to spend money,
3:58
Speaker 4: you have to spend it. You can unimpounded unless we
4:02
Speaker 4: agree if you can impound it, and this had kept
4:04
Speaker 4: back on a presidential power that went back to George
4:07
Speaker 4: Washingship or at least Jeffers maybe Washington. I think that
4:12
Speaker 4: Trump is going to make liberal use of it and
4:15
Speaker 4: tell Congress sue me, and Congress the controlled by the Republicans,
4:19
Speaker 4: I don't think they're going to sue. So that means
4:21
Speaker 4: the minority party is going to sue the president. It's
4:26
Speaker 4: not going to happen. I think there's limits impoundment where
4:31
Speaker 4: effectively will gut a program. But it's going to be
4:34
Speaker 4: really interesting because I've read a number of articles. I
4:36
Speaker 4: talked to Bill Walton, who is on Trump's transition team,
4:40
Speaker 4: and he says, they're going to use it. This is
4:43
Speaker 4: going to be Bloody Hill in Washington. Can you picture
4:47
Speaker 4: if it starts happening?
4:48
Speaker 1: Yeah, and you know.
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Speaker 2: It's it's so so let's look at it from the
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Speaker 2: market side, the economic side, and then the.
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Speaker 1: Public perception side.
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Speaker 2: So the market hates uncertainty, So I I think is
5:03
Speaker 2: the we have this infighting, We're going to see a
5:05
Speaker 2: lot of volatility, you know, as they try to you know,
5:09
Speaker 2: implement some of these new policy changes and eliminate some
5:13
Speaker 2: of these agencies and jobs.
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Speaker 1: Uh And as a result.
5:17
Speaker 2: Of that, you know, the the government, what's been propping
5:20
Speaker 2: up the economy is government spending.
5:23
Speaker 1: Uh and and so you know that that's going to
5:26
Speaker 1: stifle the economy for a short period.
5:28
Speaker 2: I really believe, you know, if you just look at
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Speaker 2: the math, you know, we're the market's gonna go down.
5:34
Speaker 2: We could see correction territory. We may even see bear
5:36
Speaker 2: territory for a little while. But like you said earlier,
5:39
Speaker 2: you know, no pain, no gain, right, We're in order
5:42
Speaker 2: for this to take hold, we have to realize some
5:45
Speaker 2: short term pain in order to justify and and enjoy
5:49
Speaker 2: the long term gain down the road.
5:52
Speaker 1: So right, so not only are are.
5:54
Speaker 2: We going to see uh an impact on the markets,
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Speaker 2: but you know also the the economy. Now, the public
6:01
Speaker 2: perception is they really want this, but are they willing
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Speaker 2: to accept that short term pain? You know, let's face it,
6:10
Speaker 2: we are a nation of consumption. We consume, We don't
6:14
Speaker 2: really produce a whole lot of anything. We just consume.
6:17
Speaker 2: So really we're trying to change these habits, you know,
6:20
Speaker 2: and probably one of the biggest habits is government waste.
6:25
Speaker 2: You know, I heard on the report. I can't remember
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Speaker 2: what channel was, but it was saying one percent, one
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Speaker 2: percent of government workers of all employees work nine to
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Speaker 2: five Monday through Friday.
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Speaker 1: One percent, you know, So that's yeah, that actually what?
6:42
Speaker 4: Right?
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Speaker 1: So what is that going to look like? What is
6:45
Speaker 1: the lowest hanging fruit?
6:47
Speaker 2: How are they going to resolve some of these spending issues?
6:50
Speaker 2: And like you were talking about this this use it
6:53
Speaker 2: or lose it mentality? You know, well, it's it's November,
6:56
Speaker 2: it's October, we're in the third quarter. You know, we
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Speaker 2: have all we have hundreds of millions, millions of dollars
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Speaker 2: left in our budget.
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Speaker 1: Let's just spend it.
7:05
Speaker 2: We've got to spend it otherwise we're not going to
7:07
Speaker 2: get that same amount next year. So, you know, how
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Speaker 2: can we change that culture going forward? And I think
7:14
Speaker 2: that's going to be the hardest hurdle to overcome, and
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Speaker 2: I don't know how they're going to do it, and
7:21
Speaker 2: I'm excited to see that they're even going to try it.
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Speaker 4: You know, they could you know, that number one percent.
7:26
Speaker 4: The buildings are empty all over DC. You know, the
7:31
Speaker 4: one of the biggest benefit of the Obama administration was
7:37
Speaker 4: the expansion of the federal government, which led to this
7:41
Speaker 4: huge expansion in norder Virginia. And you know, if you
7:45
Speaker 4: drive through DC and then Virginia to the top of
7:49
Speaker 4: it used to be you know, the traffic left at
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Speaker 4: like thirty minutes, you know, fifteen twenty miles. Now it's
7:56
Speaker 4: seventy miles down there. It's all suburb at BP of
8:01
Speaker 4: all the government workers, and now they don't even go
8:04
Speaker 4: to the office anymore. I only said that the way
8:08
Speaker 4: to cut back on government was to tell tell the
8:12
Speaker 4: worker next time of the note storm, only essential government
8:17
Speaker 4: workers go to work, and everybody who doesn't show up,
8:20
Speaker 4: you fire them because you only want essential people. You
8:24
Speaker 4: don't want any non essential workers. Right, but maybe they'll
8:28
Speaker 4: borrow a borrow a chapter from my book on how
8:31
Speaker 4: to cut government weight carey.
8:34
Speaker 2: Based on that, I think you should be part of
8:36
Speaker 2: DOSE because I think that's brilliant.
8:37
Speaker 1: Well no, I mean, you.
8:38
Speaker 2: Already tapped yourself as being non essential, so you know,
8:41
Speaker 2: why why should we continue that salary and benefits and
8:44
Speaker 2: everything so goes along with it, and you think about
8:46
Speaker 2: the number of jobs just just you know, during this administration,
8:50
Speaker 2: just in the last year, half of the jobs created
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Speaker 2: were government jobs.
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Speaker 1: And to do what I mean, that's you know, it's.
9:00
Speaker 2: A form of nepotism, is really all it is. Right,
9:03
Speaker 2: It's like, oh wait, I can get you in here,
9:04
Speaker 2: come on in, come on in. And that's really all
9:06
Speaker 2: it is. So, you know, are they going to be
9:09
Speaker 2: able to eliminate agencies and their totality? You know, how
9:12
Speaker 2: are they going to start? What's that going to look like?
9:15
Speaker 2: And you know, like it is going to have a
9:17
Speaker 2: negative impact short term, but I think long term, you know,
9:20
Speaker 2: it's going to be good. But it has to be permanent.
9:22
Speaker 2: It can't all be executive order because then the next
9:25
Speaker 2: administration is going to come in and wash it all away.
9:28
Speaker 2: We already saw that, you know, from the this this
9:32
Speaker 2: current administration, from the previous administration, Trump's first administration. So
9:36
Speaker 2: it's executive orders are great for that time period, but
9:39
Speaker 2: then they.
9:40
Speaker 1: All go away.
9:41
Speaker 4: Yeah, and so therefore got to be done by consensus.
9:45
Speaker 4: Maybe that will happen that ADLOP three branches are in control.
9:49
Speaker 4: And beauty is that they ever read by Milton Friedman.
9:54
Speaker 4: He said, the first hundred days of an administration are
9:58
Speaker 4: the most important. That's the only time you can get
10:01
Speaker 4: something done because all the forces that are marginaling against
10:05
Speaker 4: you are in dis array. And that's when you get
10:08
Speaker 4: a career. And Reagan did that at some expense. Trump
10:12
Speaker 4: did it, but not enough. Now you see that the
10:16
Speaker 4: day he walked into the Oval office, there's going to
10:20
Speaker 4: be a stack of executive orders that he signed without
10:25
Speaker 4: second thought, and all of his nominees they're going to
10:30
Speaker 4: go through quickly. Are he going to do a not
10:34
Speaker 4: a reset appointment, but a vacancy appointment? It is different
10:38
Speaker 4: than a resets appointment. It's the resetch point that I
10:42
Speaker 4: think it's good for a year with salary and then
10:45
Speaker 4: another year without salary. A vacancy one is good for
10:49
Speaker 4: two hundred and ten days. So you could be the
10:51
Speaker 4: acting director. And you know they're going to use every
10:56
Speaker 4: trick in the book here that's been used against the
10:58
Speaker 4: American public. But let's go back to uh. You know,
11:03
Speaker 4: you get rid of half the government workers, a million
11:07
Speaker 4: of them, you just dump them, and then another half
11:10
Speaker 4: a million uh or a million contractors, way more contractors
11:14
Speaker 4: than there are employeed. Uh, they can't just fire these
11:19
Speaker 4: people at Kurtie Days, not that that's not out of
11:21
Speaker 4: the government work. They're going to give them a severance package,
11:24
Speaker 4: so the actual benefit probably isn't going to kick in
11:27
Speaker 4: for two years, you know.
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Speaker 1: H Yeah, And I do like that idea.
11:33
Speaker 2: And I can't remember if it was Musk or maybe
11:36
Speaker 2: it was our laugher. I can't remember who had the
11:39
Speaker 2: idea of saying, you know, we we've got to incentivize
11:42
Speaker 2: you know, their their their ability and desire.
11:46
Speaker 1: To get a new job. So you know, if if in.
11:50
Speaker 2: That two year period, if you get a new job,
11:53
Speaker 2: you still continue to get that severance on top of
11:56
Speaker 2: the new job, instead of waiting until the end and
11:59
Speaker 2: then all of a sudden, well, you know what, I
12:01
Speaker 2: don't have a job now, I'm going to still be
12:03
Speaker 2: on the government doll. It's just going to be unemployment,
12:07
Speaker 2: you know. So we there has to be a way
12:09
Speaker 2: to get incentivize people to say, you know what, let's
12:14
Speaker 2: find another career, because we still have people from COVID
12:18
Speaker 2: that that are you know, underemployed because they choose to be,
12:22
Speaker 2: or unemployed because they choose to be. They just don't
12:24
Speaker 2: want to go back to work. So you know that
12:26
Speaker 2: again that that goes back to the culture issue. You know,
12:29
Speaker 2: how can we get people to say, you know what
12:32
Speaker 2: I actually do want to do the American dream. I
12:34
Speaker 2: want to work and you know better my life, in
12:37
Speaker 2: my family's life.
12:38
Speaker 4: So if they actually make all these cuts, that should
12:41
Speaker 4: have a beneficial effect on interesties.
12:44
Speaker 2: Right, yes, absolutely, And you know I so I asked.
12:51
Speaker 2: I was asked this question yesterday by a client. You know,
12:54
Speaker 2: are our raid is going to start going down in January?
12:57
Speaker 1: Because you hear all.
12:58
Speaker 2: The punt in saying, oh, yeah, they they're going down
13:00
Speaker 2: right away, and I don't think they are. Eventually they will,
13:04
Speaker 2: but in the near term I don't think that they
13:07
Speaker 2: will because the market is saying inflation is still here
13:11
Speaker 2: we saw with the CPI report. I think it's actually
13:13
Speaker 2: higher than that. But eventually it will go down. But
13:16
Speaker 2: we do actually have to affect change in order for
13:20
Speaker 2: rates to go down and make it more advantageous for
13:23
Speaker 2: businesses to do things. We have to be able to
13:25
Speaker 2: loosen up the lending so that banks will lend and businesses,
13:30
Speaker 2: small businesses especially can grow. But we're seeing a still
13:34
Speaker 2: a uphour excent of positivity even passed the first ten
13:41
Speaker 2: to fifteen days since the election. We're seeing it in
13:44
Speaker 2: the Russell two thousand. We're still seeing in the markets.
13:47
Speaker 2: You know, we saw the CPI the hotter quote unquote
13:50
Speaker 2: hotter than expected. But the markets really don't care. I mean,
13:53
Speaker 2: they're looking at it longer term, and I hope it
13:56
Speaker 2: just continues going forward.
13:58
Speaker 4: That's really a good question, is how long can the
14:01
Speaker 4: trumporia continue to run?
14:04
Speaker 2: Yeah, And you know, like you said, it's it's that
14:07
Speaker 2: first hundred days that is so important.
14:09
Speaker 1: And I agree completely.
14:12
Speaker 2: You know, Larry Cudlow said this, and I think I
14:14
Speaker 2: heard our laugh for talk about it too, and and
14:16
Speaker 2: I agree, uh completely. Is that My fear is that
14:21
Speaker 2: the talk the scuttle but if you will, is that
14:24
Speaker 2: they're going to push that the the continuation of the
14:27
Speaker 2: current tax code to the second half of the year.
14:29
Speaker 2: And I think that that's a mistake, you know, to
14:32
Speaker 2: your point exactly, we've got to get it done, you know,
14:34
Speaker 2: in that first hundred days while we can and and
14:37
Speaker 2: make it permanent. You know, especially if we're talking about
14:39
Speaker 2: lower corporate tax rates and lower in the you know,
14:42
Speaker 2: long term capital gains, you know, those are the things
14:45
Speaker 2: that are So that's going to create the certainty that
14:48
Speaker 2: we need for the markets to to continue being happy.
14:51
Speaker 1: And and uh uh you know.
14:54
Speaker 2: Continue the upward swing and and it's going to temper
14:57
Speaker 2: you know, any any correction in the market, you know,
15:00
Speaker 2: if if not completely for a shorter period of time.
15:03
Speaker 4: What about the con that the Trump threw out there,
15:06
Speaker 4: actually eliminating the I R S doesn't sound like it
15:10
Speaker 4: could probably happen, but it beings like the situation of the
15:15
Speaker 4: country in everything is on the table.
15:19
Speaker 2: You know, for the first time ever, everything is on
15:21
Speaker 2: the table. You know, if we go back to Reagan's comments,
15:24
Speaker 2: you know, this is this is what the administrative state,
15:28
Speaker 2: you know, the fourth branch to Vive's comment, the fourth
15:30
Speaker 2: branch of the government, right, the administrative branch is the
15:34
Speaker 2: I R S.
15:35
Speaker 1: What they would like is you know, a.
15:37
Speaker 2: Two line tax return. You know, how much do you
15:39
Speaker 2: make and send it in? Is the second line. And
15:43
Speaker 2: if we go back to everyone's so afraid of tariffs,
15:46
Speaker 2: I big tariffs. That that was the only tax for Americans,
15:51
Speaker 2: uh for the longest time. And so we needed to
15:54
Speaker 2: raise more money, you know, after World War one and two,
15:58
Speaker 2: and so we imposed the you know, the peral income tax.
16:01
Speaker 1: So you know, the now is.
16:04
Speaker 2: The time to make the changes. That's where we can
16:07
Speaker 2: really affect change and make it permanent to benefit Americans
16:12
Speaker 2: and have America become you know, a manufacturing powerhouse.
16:17
Speaker 1: We need to bring that.
16:18
Speaker 2: Manufacturing back and we have to make it more tax advantaged.
16:22
Speaker 4: Yeah. No, I couldn't agree with you more. And uh hey,
16:25
Speaker 4: getting rid of the I R that paint. I could
16:28
Speaker 4: believe that too.
16:30
Speaker 2: I don't think it's going to happen, but boy, I'll
16:33
Speaker 2: tell you what I sure would like it. You know,
16:35
Speaker 2: if if I didn't have to stroke a tech check
16:37
Speaker 2: on a quarterly basis.
16:39
Speaker 1: That that would be that would be great.
16:42
Speaker 2: And imagine the positive impact that that would have on
16:46
Speaker 2: the economy, I mean more disposable income. And people forget,
16:51
Speaker 2: they get it's counterintuitive, right, Folks are so focused on well,
16:56
Speaker 2: you know what if we eliminate taxes where we're not
16:58
Speaker 2: going to have revenue, Well, if we're creating more of
17:01
Speaker 2: a tax base through production and manufacturing and we're growing
17:07
Speaker 2: the economy, you know, that's where that the tax is
17:11
Speaker 2: going to come from. That's going to be more than
17:14
Speaker 2: what we can spend. Once we get rid of the
17:17
Speaker 2: government waste and hopefully actually start spending down the deficit.
17:21
Speaker 2: Getting rid of the deficit.
17:22
Speaker 4: I can't wait, so I hope I only live to
17:25
Speaker 4: see it. Eventually. It have to happen, because if just
17:28
Speaker 4: makes subtle sense, it always prepeats coming on. When we
17:33
Speaker 4: talk next December eleventh, twenty twenty five, where's the market
17:38
Speaker 4: going to be at? Then?
17:39
Speaker 1: You know, you know, I think we're going to see
17:42
Speaker 1: I'm going to be conservative here. I know people are
17:44
Speaker 1: being way way way.
17:46
Speaker 2: Over U four work in the growth, but I think
17:50
Speaker 2: we're going to see, you know, an eight to twelve
17:52
Speaker 2: percent growth by the end of next year. I think
17:54
Speaker 2: it's going to be unbelievably volatile in the second going
17:58
Speaker 2: into the third quarter, but I think going to come
18:00
Speaker 2: out on top by the end.
18:01
Speaker 1: Of the year.
18:02
Speaker 4: Well, we'll see if the January effect is alive and well.
18:06
Speaker 4: In the meantime, make sure you go over to edsite
18:08
Speaker 4: e g SI Financial dot com. The link is in
18:12
Speaker 4: the show notes this interview on Financial Survival Network dot com.
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Speaker 4: And I would just ask you, when you did the bite,
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Speaker 4: a pleasure. Thanks for stopping by.
18:34
Speaker 1: Carrie, I appreciate it.
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