Latest / Brian Thomas / Money Monday with Brian James

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Money Monday with Brian James · Brian Thomas

0:01
Speaker 1: It's eight oh five right now, fifty five care c
0:03
Speaker 1: DE talk station by the Times, wishing everyone a very
0:05
Speaker 1: happy Monday. Try to make it so anyway, now's the
0:08
Speaker 1: time they get to learn about money managers all where financials.
0:11
Speaker 1: Brian James joins the program every Monday at this time,
0:13
Speaker 1: talk about well money Monday and Brian James, welcome back
0:17
Speaker 1: to my friend. I hope you had a wonderful weekend.
0:19
Speaker 1: And I was just pondering what was going on in
0:21
Speaker 1: this Wall Street bulls bet US stocks rallible to five
0:25
Speaker 1: Bubble fears. Everybody's concerned about a bubble because the markets
0:27
Speaker 1: keep going up. I noted that the SMP had eleven
0:30
Speaker 1: highs in the month of May alone. It's up eleven
0:33
Speaker 1: percent for the year. Tech stocks apparently doing really well,
0:36
Speaker 1: up sixteen percent O with the NANSDAC. And this is
0:40
Speaker 1: all and correct me if I'm wrong. I'm boiling it
0:42
Speaker 1: down to a finer point, which is this is all
0:44
Speaker 1: AI driven trades and increases. It's one and I said
0:50
Speaker 1: Nick niche sector, it's but all AI related gains. But
0:56
Speaker 1: these analysts in the article are suggesting it's going to
0:59
Speaker 1: continue for some time. I'm into the future. I struggle
1:02
Speaker 1: to deal with that, and I keep thinking about the
1:03
Speaker 1: bubble bursting, which I think is the concern people have.
1:07
Speaker 1: Welcome back, my friend, break this down for novices like me, please.
1:11
Speaker 2: Well, thank you again for the opportunity to talk with
1:14
Speaker 2: you and your listeners. And the first thing I'd point
1:16
Speaker 2: out is, I mean, first of all, let's all let
1:18
Speaker 2: go of the notion that we're ever going to time
1:19
Speaker 2: the market, and that's really not what we're talking about here.
1:22
Speaker 2: We're just kind of looking for the what should we expect?
1:24
Speaker 2: How do I brace myself if something does happen? And
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Speaker 2: the thing I'd throw out there, Brian, as you and
1:28
Speaker 2: I talked about a bubble a year ago, we talked
1:30
Speaker 2: about it two years ago. This is what it feels
1:32
Speaker 2: like when the market does go on a run, and
1:36
Speaker 2: in which we have been on basically since twenty twenty two.
1:39
Speaker 2: We've had our hiccups. The past two aprils have been
1:41
Speaker 2: bumpy with we first learned what tariffs were like again,
1:45
Speaker 2: we all started talking about the holly smooth tariff and
1:48
Speaker 2: remembering the Ferris Bueller movie back a couple of aprils ago,
1:51
Speaker 2: and then this past April it was the Iran war
1:54
Speaker 2: that rattled the market pretty significantly. But yes, so we
1:58
Speaker 2: are seeing this, this type of this. I don't want
2:01
Speaker 2: to call it a bubble, because you know, it's not
2:02
Speaker 2: a bubble until it is. Just because there is an
2:05
Speaker 2: industry out there that is that is driving things doesn't
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Speaker 2: necessarily mean that the end is near. Are we going
2:12
Speaker 2: to run on this forever? Of course, not everybody knows that,
2:14
Speaker 2: So it's not really about the is this an accident?
2:16
Speaker 2: Is this not profitable? Is this some kind of a
2:18
Speaker 2: some kind of a scam. Though, it's more about how
2:21
Speaker 2: long can it last before people take a breath. So
2:24
Speaker 2: the S and P five hundred has repeatedly hit record
2:26
Speaker 2: highs in twenty twenty six, the Nasdaq has still significantly
2:29
Speaker 2: outperformed thanks to AI related stock. Now, let's remember, as
2:32
Speaker 2: we always talk about, the S and P five hundred
2:34
Speaker 2: is consistent or does consist of a lot of major
2:38
Speaker 2: technology companies. You name a big tech company, it's in
2:40
Speaker 2: the S and P five hundred. But that's not all
2:42
Speaker 2: it is. So if we were saying only the Nasdaq
2:45
Speaker 2: was outperforming, the S and P five hundred is kind
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Speaker 2: of petering along and not really doing very much, that
2:49
Speaker 2: would be a different situation. But the S and P
2:52
Speaker 2: five hundred, while it is driven very much so by
2:54
Speaker 2: technology stocks, that's not the only thing that's happening out
2:57
Speaker 2: there very much. You know, the semiconductor companies are at
3:00
Speaker 2: the middle of all this. You know, even the for example,
3:02
Speaker 2: the Philadelphia Semiconductor Index has served more than eighty percent
3:05
Speaker 2: this year, and you've got several chip makers of course
3:08
Speaker 2: posting these enormous gains. But you know, so we're still
3:11
Speaker 2: seeing good things from the big brains out there. Goldman Sachs,
3:14
Speaker 2: Morgan Stanley, other major firms like this have raised their
3:17
Speaker 2: year end S and P five hundred targets, and they're
3:20
Speaker 2: simply saying that earnings growth does justify these higher valuations.
3:24
Speaker 2: Those are just opinions as much as anybody else's, but
3:27
Speaker 2: there's still some pretty significant opinions of it. Now.
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Speaker 1: Quick question I get too, Actually two questions for your
3:31
Speaker 1: first off in connections with the S and P.
3:32
Speaker 2: Let's look at that.
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Speaker 1: Just for example, if you took out the AI related
3:38
Speaker 1: businesses and looked at what's left within the S and
3:41
Speaker 1: P five hundred, would it still be up I mean,
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Speaker 1: maybe not as much of course, with all these records
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Speaker 1: driven by AI, But would it still be up in
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Speaker 1: other sectors? Because really, when you're talking AI, while you
3:50
Speaker 1: are talking about different components within AI, it's still a sector.
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Speaker 1: So what about all the other sectors involved in our economy.
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Speaker 2: Generally up not nearly as much, right, because we're a
4:00
Speaker 2: technology country, we're a technology world nowadays. But of course
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Speaker 2: there are other industries out there doing well. And remember
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Speaker 2: what AI is. This is not AI for the sake
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Speaker 2: of AI, right, I'm thinking back to the original Internet
4:12
Speaker 2: boom when a lot of those companies were kind of
4:15
Speaker 2: for the sake of themselves, you know, we companies that
4:18
Speaker 2: kind of came into existence out of nowhere and just
4:20
Speaker 2: we're We're the Internet. This is a little bit different.
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Speaker 2: AI is a tool that any industry can use to
4:26
Speaker 2: make itself more efficient. And that's the reason for this.
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Speaker 2: That's really driving two things. It's driving the performance out
4:32
Speaker 2: of the semiconductor industry. Who we are the people of
4:34
Speaker 2: the organizations that can deliver this type of technology in
4:36
Speaker 2: the first place. It's also driving efficiencies in just about
4:39
Speaker 2: any industry you can name that if we're with companies
4:42
Speaker 2: that have been willing to explore so that this is
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Speaker 2: more of an infrastructural kind of a broad based opportunity
4:48
Speaker 2: for lots of industries to benefit from it. So it'skin
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Speaker 2: what we're seeing the S and P five.
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Speaker 1: Hundred kind of like the highway system we all benefit
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Speaker 1: from because there's off ramps and on rms, we can
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Speaker 1: get goods and services efficiently back and forth. AI Mason
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Speaker 1: the streamlines business models that allows them to accomplish more
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Speaker 1: with fewer dollars.
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Speaker 2: That's exactly right. That's the point, right this is, you know,
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Speaker 2: this is the infrastructure of what business will be like
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Speaker 2: over the next you know, however, many decades until we
5:12
Speaker 2: come up a better idea.
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Speaker 1: Right now that that's a good pivot point for my
5:15
Speaker 1: next question, which is, Okay, looking at AI investment and
5:18
Speaker 1: all the wonderful you know, huge increases in the various
5:21
Speaker 1: AI related stocks, I get it when it comes to
5:24
Speaker 1: you mentioned chip makers. That's the hardware of course, and
5:27
Speaker 1: I'm sure manufacturing gets a boost because they're building AI
5:29
Speaker 1: centers all over the place. But ultimately, what is the
5:33
Speaker 1: business model once you have a data center, once you
5:36
Speaker 1: have AI? Generally speaking, how does AI generate revenue beyond
5:41
Speaker 1: the revenue benefits that businesses get from the streamline effect.
5:44
Speaker 1: But a company that runs one of these centers, how
5:47
Speaker 1: is it profitable for them just to have that tool
5:49
Speaker 1: there available for the rest of the world to use.
5:52
Speaker 2: Well, it depends on depends on your role in all
5:54
Speaker 2: of this. I would say the first thing isn't necessarily
5:56
Speaker 2: that it's that it's going to drive more revenue. It's
6:00
Speaker 2: going to reduce expense, that's the first thing. So we're
6:02
Speaker 2: widening profit margins. That's why for those of you know,
6:05
Speaker 2: those out there on the bull side of this, in
6:07
Speaker 2: other words, thinking that the market can continue to run,
6:10
Speaker 2: what they're saying is, yes, we have the ability to
6:12
Speaker 2: be more efficient. And that's similar to what the Internet
6:14
Speaker 2: was originally, you know, thirty years ago. It's a way
6:17
Speaker 2: to communicate more quickly. It's a way to find markets
6:19
Speaker 2: more quickly. You know. Think of some simple things that
6:22
Speaker 2: we take for granted now, like eBay, for example, thirty
6:24
Speaker 2: years ago, eBay was kind of the original somebody wants
6:28
Speaker 2: to buy a widget and somebody wants to sell that.
6:30
Speaker 2: How do you connect those two? And Amazon built on
6:33
Speaker 2: that model and so forth. That didn't exist at all,
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Speaker 2: So those were new sources of revenue nowadays, it's more
6:38
Speaker 2: about there's a lot of companies that already exist doing
6:40
Speaker 2: these things and taking advantage of these opportunities. How can
6:43
Speaker 2: they do it in a more efficient, more profit margin
6:45
Speaker 2: oriented type of way. And that's where this is coming from.
6:48
Speaker 2: And your question before about the S and P five hundred,
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Speaker 2: It is largely technology driven. But if we equal weight
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Speaker 2: the S and P five hundred, meaning take the technology
6:57
Speaker 2: companies and give them, you know, just every company's with
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Speaker 2: one five hundreds of the S and P five hundred
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Speaker 2: versus the capital weight which it normally is the equal
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Speaker 2: weight at S and P five hundred. Bryant is up
7:07
Speaker 2: about eight point seven percent versus the S and P
7:11
Speaker 2: right now, which is about ten point seven percent. So
7:14
Speaker 2: still up. But so so that's that's what I was
7:17
Speaker 2: getting at before. Everything is still up, because you know,
7:19
Speaker 2: it's not just technology running away like it has been refor.
7:22
Speaker 1: All right, and I suppose we all still have this
7:25
Speaker 1: looming concern over all right. The efficiencies in business are
7:29
Speaker 1: increasing with AI, and we can all point to a
7:31
Speaker 1: million reasons for that. But does that not necessary or
7:34
Speaker 1: doesn't that translate into fewer jobs needed or fewer employees
7:38
Speaker 1: needed to perform what that business does generally speaking, and
7:41
Speaker 1: I think that's the biggest concern we have out here
7:42
Speaker 1: in the world.
7:44
Speaker 2: For sure. I think that's absolutely true. There were there
7:47
Speaker 2: were talk, though, you know, thirty years ago, that the
7:49
Speaker 2: internet was going to replace a lot of jobs too,
7:51
Speaker 2: and there was definitely a pivot. The internet does things
7:53
Speaker 2: that human beings did thirty years ago, and I don't
7:55
Speaker 2: think that has permanently. You know, unemployed a class of
7:59
Speaker 2: people that have not been able to find work ever since.
8:01
Speaker 2: So it's it's easy to think about that, but I
8:05
Speaker 2: don't think we know enough yet to truly say that
8:07
Speaker 2: this is really just going that we're all going to
8:09
Speaker 2: be responding only to robots and computers do telling us
8:13
Speaker 2: what to do. I don't think that's coming anytime soon.
8:15
Speaker 2: Maybe that's in the future, but with the general public
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Speaker 2: being as resistant as it usually is, you know, I
8:21
Speaker 2: bring up the example I have a lot of clients
8:22
Speaker 2: who still insist on paper statements. So I don't know
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Speaker 2: that all the human beings in the world are ready
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Speaker 2: to simply wait for it to be told what to
8:29
Speaker 2: do by a computer.
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Speaker 1: Well, and then there's all that. There's also you know
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Speaker 1: that resilience that we have to change is as profound
8:35
Speaker 1: as they may seem when you're dealing with it and
8:38
Speaker 1: trying to contemplate what it's going to mean. Technology and
8:41
Speaker 1: other areas tend to develop along with it, so there
8:44
Speaker 1: will be roles for folks to play. Even in a
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Speaker 1: post AI world or a full AI world, there is.
8:49
Speaker 2: Still a bridge to be built between the human being
8:52
Speaker 2: and the computer, and the job opportunities out there will
8:54
Speaker 2: be for those who know how to build that.
8:56
Speaker 1: Bridge, get a job in the trades. It doesn't impact
9:00
Speaker 1: by AI to a certain extent. Brian James from all
9:02
Speaker 1: the Way Financial, don't go away because the next subject
9:04
Speaker 1: has me very frightened. It has since I was a
9:05
Speaker 1: young man. The cost of servicing our national debt and
9:09
Speaker 1: inflation stretching people to the breaking points sort of related
9:11
Speaker 1: to many respects. More with Brian James after I mentioned
9:14
Speaker 1: Father's Day coming up. Me being a dad, you know,
9:16
Speaker 1: I'm looking forward to Father's Day like all dads are.
9:18
Speaker 1: It's the twenty five pair c you talk station from
9:20
Speaker 1: all Worth Financial, Brian James talking through some of the issues.
9:23
Speaker 1: I tell you what, since it is a corollary of
9:26
Speaker 1: the AI issue, we were just talking. Let's pause on
9:29
Speaker 1: the insane national debt and how much it's eating up
9:32
Speaker 1: of the federal revenue and talk about this robin hood
9:35
Speaker 1: stock as an illustration of artificial intelligence stock apps. This
9:39
Speaker 1: is one of those. It's like the peace of God,
9:42
Speaker 1: Brian James. It passes Brian Thomas's understanding, not all human understanding.
9:45
Speaker 1: I'm sure you've got a good handle on robin hood
9:47
Speaker 1: and these other apps, but can you break this one
9:50
Speaker 1: down for us all please?
9:51
Speaker 2: Well, yeah, the headline here is that robin hood stock
9:53
Speaker 2: is surging. Right. This is the Erstwhild brokerage firm that
9:57
Speaker 2: came to came to the forefront during the pandemic, and
10:01
Speaker 2: that's why we keep hearing about it. It's very popular
10:04
Speaker 2: with the younger generations. In the past, it's been much
10:06
Speaker 2: more about cryptocurrency, but robin Hoods is trying to expand
10:09
Speaker 2: and become a full financial ecosystem. They've always been a
10:12
Speaker 2: broker's at the very least crypto platform. More recently now
10:15
Speaker 2: they're getting into credit card issuance prediction markets operator right,
10:19
Speaker 2: those are the markets where we're betting on, you know,
10:22
Speaker 2: whether a one athlete's going to punch another in the
10:24
Speaker 2: mouth at the tip off or something like that. AI
10:28
Speaker 2: powered financial assistant assistance as well, and then also retirement
10:32
Speaker 2: cash management platform. So assets here have grown to apparently
10:36
Speaker 2: about three hundred and fifty billion dollars. So whatever they're
10:39
Speaker 2: doing is working among somebody. I don't know anybody that's
10:41
Speaker 2: opening account recently, but customer engagement does remain strong despite
10:45
Speaker 2: the weaker crypto markets, so they are apparently are succeeding
10:49
Speaker 2: and getting into some of these markets again, moving beyond crypto.
10:53
Speaker 1: Walk me through sort of an illustration of what this does.
10:55
Speaker 1: I mean, I hear you you say, you know they're
10:57
Speaker 1: in credit cards and bitcoin, and why would young people
11:02
Speaker 1: get gravitating to it? What what would they do by
11:05
Speaker 1: way of day in and day out transactions? Because I
11:08
Speaker 1: get a feeling this thing as an all encompassing sort
11:10
Speaker 1: of phenomenon.
11:11
Speaker 2: Here. It's easy to use, and you use it on
11:13
Speaker 2: your phone. Quite frankly, I mean, that's that's it's much
11:15
Speaker 2: more complicated than that. There are some pretty big, big
11:18
Speaker 2: brains behind this. But what they're looking to do is
11:21
Speaker 2: make this very approachable and make all these kinds of things,
11:24
Speaker 2: you know, you know a little different than your major
11:26
Speaker 2: financial institutions, which can seem somewhat intimidating to people. And
11:30
Speaker 2: there's definitely an edge, you know, the think of the
11:32
Speaker 2: name Robin Hood. Robin Hood was the guy who stole
11:34
Speaker 2: from rich to give to the poor. They've definitely found
11:36
Speaker 2: sort of a marketing edge, you know, to break away
11:39
Speaker 2: from the established financial institutions and an attractive following that way.
11:43
Speaker 2: But it's not just about making the you know, being
11:47
Speaker 2: able to provide the transactions. It's about doing it away
11:49
Speaker 2: in a way that feels more comfortable to the generations
11:53
Speaker 2: that are going up with TikTok and Instagram and all
11:55
Speaker 2: those kinds of things. So it's just an evolution of
11:57
Speaker 2: how human beings think about invest and the Robin Hood
12:01
Speaker 2: is taking advantage of that and apparently doing an okay
12:03
Speaker 2: job at it.
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Speaker 1: Well, okay, the stock represents the popularity of what the
12:07
Speaker 1: app does, and I guess I'm really struggling with what
12:10
Speaker 1: the app does. What am I doing on that particular
12:12
Speaker 1: app that makes it popular? Am my trading stocks? Am
12:14
Speaker 1: I engaging in banking? Am I you know, sending videos
12:18
Speaker 1: to my friends?
12:18
Speaker 2: And what does it do all of those things? So
12:21
Speaker 2: remember where this came from. Originally, Robinhood was the original.
12:24
Speaker 2: You and I have talked about the meme stock so
12:25
Speaker 2: game Stop and AMC and all that stuff over the
12:27
Speaker 2: past couple of years. Robin Hood's where a lot of
12:29
Speaker 2: that activity occurs. So you've always been able to buy
12:32
Speaker 2: to buy shares there. They found some creative ways to
12:34
Speaker 2: allow people to invest very small amounts of money. You know,
12:37
Speaker 2: maybe I've only got twenty bucks, but I want to
12:39
Speaker 2: buy a stock that's worth one hundred dollars when now
12:41
Speaker 2: I can buy a fifth of a share because Robinhood
12:43
Speaker 2: has put the technology in place to be able to
12:45
Speaker 2: buy fractional shares. And does this help the average retiree
12:48
Speaker 2: with a couple million dollars, Not really, it doesn't change anything.
12:50
Speaker 2: But for the person who otherwise would not be engaging
12:52
Speaker 2: with the financial markets at all, which is the vast
12:56
Speaker 2: majority of the population of this country, if not the world,
12:59
Speaker 2: that's who they come up with ways to be able
13:02
Speaker 2: to serve. And those are the kind of folks that
13:04
Speaker 2: you know, the fidelities and the schwabs and all that
13:06
Speaker 2: aren't really looking at So there's a market there for again,
13:09
Speaker 2: these these making a huge volume of these very small transactions.
13:14
Speaker 2: But that's the beginning of it. And then of course
13:15
Speaker 2: it was since it was already you know, something that
13:18
Speaker 2: people were willing to engage with and became used to.
13:20
Speaker 2: When crypto hit the mainstream a few years back, it
13:23
Speaker 2: was already in position. Robinhood was ready to be able
13:27
Speaker 2: to place those trades for people. And so that's how
13:29
Speaker 2: people are already on those platforms. So it's not like
13:31
Speaker 2: they're starting from scratch to see all these new products.
13:34
Speaker 2: They're already there and they're being enticed now with credit
13:37
Speaker 2: cards and again these prediction markets. The big headline most
13:40
Speaker 2: recently here is Robin Hood's new AI agent strategy, and
13:44
Speaker 2: that's going to allow AI tools to help users manage investments,
13:47
Speaker 2: actual spending, and financial decisions. I'm not sold on this.
13:50
Speaker 2: I still want, you know, a human brain thinking about
13:54
Speaker 2: these kinds of things. It's an interesting story to watch.
13:57
Speaker 2: Somebody out there is going to pull the trigger and
13:58
Speaker 2: give it a try. But yes, Robin Hood is out there.
14:00
Speaker 2: Whenever you hear the word agent, that's not that is
14:02
Speaker 2: no longer you know, AI simply being Google on steroids.
14:06
Speaker 2: That's AI actually performing transactions for you. I'm not ready
14:10
Speaker 2: to buy into any of that yet, and we're certainly
14:11
Speaker 2: not anywhere close to that here at all, worth uh,
14:14
Speaker 2: in terms of trading and all those kinds of things.
14:17
Speaker 2: But there's a market out there for it. And again
14:18
Speaker 2: that's why Robin Hood's in the headlines this morn.
14:20
Speaker 1: Is Robinhood overseen by some federal agency like the Securities
14:24
Speaker 1: in Exchange Commission or something like that. Are they are
14:26
Speaker 1: they regulated along those.
14:28
Speaker 2: Lines as much as anybody else is, because at the
14:31
Speaker 2: end of the day, they are in exchange, so they're
14:33
Speaker 2: they're they're monitored by by the same organizations that monitor
14:37
Speaker 2: you know, stock trading and all that kind of thing.
14:38
Speaker 2: The it's the crypto side and these prediction markets that
14:42
Speaker 2: right now there's really that it's just not as well
14:45
Speaker 2: thought out by our you know, by our leadership in
14:48
Speaker 2: terms of how that's going to be. There's a lot
14:50
Speaker 2: of fights going on right now, you know, big new
14:52
Speaker 2: and I talked recently about big debates over whether it
14:54
Speaker 2: would be the Securities and Exchange Commission or the commodities organizations,
14:59
Speaker 2: government mental organizations that are going to monitor these these
15:02
Speaker 2: types of markets. And somewhat good sized victory was won
15:06
Speaker 2: by the financial industry when it was decided that the
15:09
Speaker 2: commodities overseers are going to be in charge there because
15:13
Speaker 2: they are less strenuous than the SEC. So it's not
15:15
Speaker 2: so much about Robinhood being on its own. It's about
15:18
Speaker 2: these markets in general. Again, crypto and predictive markets and
15:21
Speaker 2: all those are not really they're they're just in general
15:24
Speaker 2: not monitors as well and as established as the overall
15:27
Speaker 2: stock work well.
15:28
Speaker 1: And I always like to know I point out that
15:31
Speaker 1: I'm ignorant a lot of topics. This is one that
15:32
Speaker 1: I obviously am the way I brought in this subject matter.
15:35
Speaker 1: But then again, do you think anybody in Washington, d C.
15:37
Speaker 1: In elected capacity has any concept of how this stuff works?
15:40
Speaker 1: Which ultimately leads me to conclude that no wonder the
15:42
Speaker 1: financial institutions end up winning on this because they have money,
15:46
Speaker 1: they have power, they have lobbyists, and they can sway
15:48
Speaker 1: the narrative in any direction they want to a bunch
15:50
Speaker 1: of people who really don't quite get it.
15:53
Speaker 2: That's very fair statement. And remember remember what talks it's money, right,
15:56
Speaker 2: So yeah, I can't imagine that these these these some
16:00
Speaker 2: and what geriatric leaders of our country aren't focused more
16:03
Speaker 2: on what the industry can provide to their next election
16:06
Speaker 2: coffers than what the impact over the next several decades
16:09
Speaker 2: will be of these tools that are kind of being
16:11
Speaker 2: in some cases rubber stamp. I'm worried about that too.
16:13
Speaker 2: I don't think that I'll fix itself anytime soon. But
16:16
Speaker 2: you know, I don't know what we do differently other
16:18
Speaker 2: than elect different people.
16:20
Speaker 1: Wow, there's an ask Brian James speaking of needing to
16:24
Speaker 1: elect different people. The writing's on the wall in terms
16:27
Speaker 1: of our national debt, and it is scary stuff. We're
16:30
Speaker 1: going to talk about that coming up next with Brian James.
16:32
Speaker 1: Don't go away.
16:33
Speaker 2: Fifty five KRC the Simply Money Man. It is sponsored
16:36
Speaker 2: by share Fax Credit Union. Visit share facts dot org.
16:40
Speaker 1: This is this a twenty seven I fifty got KRC
16:42
Speaker 1: detalk station. I want to say Happy Monday, but as
16:45
Speaker 1: we enter the next subject matter with money Monday's Brian James,
16:48
Speaker 1: I'm not quite sure I can make it a happy
16:49
Speaker 1: Monday in Spotify where I'm looking Brian James. Federal government
16:52
Speaker 1: spending more on debt interest than medicaid, national offense, and
16:57
Speaker 1: all non defense discretionary program combined. And if that isn't
17:02
Speaker 1: bad enough, they're saying it's going to get worse and
17:03
Speaker 1: could turn into something far worse. We've been on a spending,
17:08
Speaker 1: reckless spending trajectory forever. And I'm actually surprised because the
17:12
Speaker 1: information that you relied upon or you provided me in
17:14
Speaker 1: this particular article. The source of the information the Congressional
17:18
Speaker 1: Budget Office Committee for a Responsible Federal Budget. We have
17:22
Speaker 1: something called that I know they misname things all the time, Brian,
17:26
Speaker 1: but that sounds like a good a good organization. But
17:28
Speaker 1: we don't have a responsible federal budget.
17:31
Speaker 2: We do not. We haven't had one in decades. You
17:33
Speaker 2: got to get back to the Clinton administration to find
17:35
Speaker 2: the last balanced budget, and we won't relieve it. We
17:38
Speaker 2: don't even talk about balanced budgets. That's campaign promises anymore.
17:41
Speaker 2: We really don't talk about the budget at all because
17:43
Speaker 2: really our leadership has no intention of doing anything about
17:46
Speaker 2: it anytime soon. So the debt interest bill is becoming
17:49
Speaker 2: its own budget category at this point, right. So it's
17:52
Speaker 2: not something that you know, we have to pay for
17:54
Speaker 2: all the government employees. We've got to pay for all
17:56
Speaker 2: the government services, the military and all those other things.
17:59
Speaker 2: Debt was always something and that kind of happened in
18:00
Speaker 2: the background, of course, but of course it's not now,
18:03
Speaker 2: and it is getting to the point where we need
18:05
Speaker 2: to just treat it like a line item like everything else.
18:07
Speaker 2: The federal government now spends more on interest payments than medicaid,
18:11
Speaker 2: national defense, or all non defense discretionary spending individually. And
18:16
Speaker 2: in fiscal twenty twenty five, interest costs reached about three
18:19
Speaker 2: and a quarter percent worth of the GDP. That's the
18:21
Speaker 2: highest level we've seen on record. That means about nineteen
18:24
Speaker 2: cents of every federal dollar Brian Thomas now goes toward
18:27
Speaker 2: paying interest on the national debt. That committee you mentioned,
18:30
Speaker 2: the Committee for a Responsible Federal Budget, well, they estimate
18:33
Speaker 2: that if treasury yields stay where they are today, then
18:35
Speaker 2: annual interest costs are going to rise from eight hundred
18:37
Speaker 2: and eighty billion to two and a half trillion by
18:40
Speaker 2: twenty thirty six. So under that scenario, if that comes
18:43
Speaker 2: to pass, about thirty percent of all federal revenue was
18:45
Speaker 2: going to go toward interest payments alone. That's not a
18:48
Speaker 2: happy thought.
18:49
Speaker 1: No, I do you think that they're just they just
18:51
Speaker 1: realize that it is going to be this insane amount
18:55
Speaker 1: of debt service. Like our credit card interest rate that
18:58
Speaker 1: will force them into draconian cutting measures. I mean, listen,
19:01
Speaker 1: we wanted, we didn't want to cut, but guess what
19:03
Speaker 1: we have to spend so much on the interest payment,
19:05
Speaker 1: to service the debt, all these programs, your favorite, my favorite,
19:09
Speaker 1: his favorite, They're all going to have to be cut.
19:10
Speaker 1: That seems the only answer to this, to the problem,
19:13
Speaker 1: because no one wants to present a responsible budget that's
19:16
Speaker 1: going to start whittling this away.
19:19
Speaker 2: Well, and ostensibly that's what this current administration kind of
19:22
Speaker 2: ran on. Remember those that's ancient history and really didn't
19:24
Speaker 2: have any impact whatsoever, and all the different things that
19:27
Speaker 2: we were going to do there, Well, we supposedly cut
19:29
Speaker 2: a lot, and we cut out us aid, We've killed
19:31
Speaker 2: we're killing the Department of Education. I don't remember hearing
19:34
Speaker 2: where those savings have actually gone, and I'm not real
19:37
Speaker 2: thrilled about where I think they went. But so it
19:39
Speaker 2: seems like there are efforts afoot to at least reduce
19:42
Speaker 2: the size of government, but we're redirecting those those savings
19:46
Speaker 2: into other things that are you know, that are not
19:48
Speaker 2: exactly along the same line. Now, there's there there are
19:50
Speaker 2: some people out there that don't believe that we're at
19:52
Speaker 2: you know, or at the moment of a fiscal crisis.
19:55
Speaker 2: Right there's lots of people listening right now who don't
19:57
Speaker 2: who don't have to think about this stuff on a
19:59
Speaker 2: daily basis. So everything you and I have said in
20:00
Speaker 2: the last five minutes maybe prompting people to be concerned
20:03
Speaker 2: all of a sudden when before they weren't. But there
20:05
Speaker 2: are people who think about this stuff all the time.
20:08
Speaker 2: And there are some economists out there who take, from
20:11
Speaker 2: from a modern monetary theory point of view, the fact
20:14
Speaker 2: that the US issues debt and its own currency, and
20:17
Speaker 2: so unlike Greece or maybe Argentina, that means we can't
20:19
Speaker 2: be deforced into default inflation, and their major concern is inflation,
20:24
Speaker 2: not insolvency. Is the real constraint here, and some other
20:27
Speaker 2: thoughts are in the past. The US has been in
20:29
Speaker 2: this position before. We had debt over one hundred percent
20:31
Speaker 2: of GDP that right after World War Two, but eventually
20:34
Speaker 2: strong growth reduced that debt burden. So the thought here
20:37
Speaker 2: for the people who believe that this isn't that big
20:40
Speaker 2: of a deal is that AI productivity gains and innovation
20:43
Speaker 2: could potentially increase growth enough to offset some of that
20:46
Speaker 2: fiscal pressure. And that's what you and I just got
20:48
Speaker 2: done talking about. At the moment, that is what is happening.
20:50
Speaker 2: We may not like it, we may not be comfortable
20:52
Speaker 2: with the fact that this country swipes its credit card
20:54
Speaker 2: every chance it gets, but at the moment, it's still
20:56
Speaker 2: working and it has been for decades, so we still
20:59
Speaker 2: have some room to run here, believe it or not.
21:01
Speaker 1: Well, what about the reserve currency? I mean, I'm concerned
21:04
Speaker 1: that the globe is going to give up on the
21:06
Speaker 1: United States as a as a reliable currency based upon
21:09
Speaker 1: this scenario that we're looking at right now. If we
21:12
Speaker 1: don't get people to loan US money, then we can't
21:15
Speaker 1: continue to service the debt. Brian, as I understand things.
21:18
Speaker 2: Yeah, but but the thought I go back to there
21:21
Speaker 2: is okay, then who steps in? What country is it
21:23
Speaker 2: that's going to be and take take the place of
21:25
Speaker 2: the economic might that the United States has. Now, we've
21:28
Speaker 2: made a lot of changes over the last couple of
21:29
Speaker 2: years as to how we present ourselves to the rest
21:31
Speaker 2: of the of the world, and we've gotten away with
21:34
Speaker 2: a lot of it. Right the markets are still at
21:35
Speaker 2: all time highs because in general the globe. The globes
21:38
Speaker 2: investors still think that US stocks are the place to be.
21:42
Speaker 2: The treasury hasn't collapsed. None of this has actually happened yet,
21:45
Speaker 2: so could it in the future. Sure, But then that
21:47
Speaker 2: means where are we going? Is it going to be China?
21:49
Speaker 2: Is the world going to line up behind China? I
21:51
Speaker 2: can't envision that happening. That's the second largest economy in
21:54
Speaker 2: the world. There's still a good amount of distance between
21:56
Speaker 2: the US and China. And then after that you get
21:59
Speaker 2: into Germany and and I just don't see somebody stepping
22:02
Speaker 2: into the role the US plays. And I don't think
22:05
Speaker 2: there's enough faith in cryptocurrency. Cryptocurrency is way too much
22:07
Speaker 2: of a speculative asset for that to average.
22:09
Speaker 1: Yeah, I wrote down crypto because you know the old
22:12
Speaker 1: adage don't let a good crisis go to right waits.
22:14
Speaker 1: Guess what, we are facing a crisis right now that's
22:17
Speaker 1: only going to get worse. And at some point someone's
22:18
Speaker 1: going to stand up and say, screw the dollar crypto.
22:21
Speaker 1: And I wrote that down, and I thought, wait a second,
22:23
Speaker 1: crypto is expressed in the form of a dollar valuation.
22:26
Speaker 1: It's got to be expressed in the form of something
22:28
Speaker 1: people can get their head around right exactly.
22:31
Speaker 2: And that's kind of exactly the point. I mean, when
22:32
Speaker 2: we think of crypto, we don't know. People don't generally
22:34
Speaker 2: think of what crypto itself is worth. We still translate
22:37
Speaker 2: in our heads to how does that mean if I
22:38
Speaker 2: dumped it into my checking account and converted it to
22:41
Speaker 2: regular US dollars? What would that look like? And the
22:43
Speaker 2: fact that you thought of it that way, that's the
22:44
Speaker 2: point that's howsconced in the world economy the US dollar
22:48
Speaker 2: is and that's not going to change tomorrow. So the
22:51
Speaker 2: world's primary conscurrency remains the US dollars. So it's fifty
22:55
Speaker 2: eight percent of global foreign exchange reserves. It's still the
22:58
Speaker 2: dominant currency for international t They may not like US,
23:01
Speaker 2: but it's still the most reliable currency. Think of it
23:03
Speaker 2: this way. There were companies out there, maybe what's five
23:06
Speaker 2: six years ago, that were briefly accepting payment in the
23:09
Speaker 2: form of cryptocurrency in bitcoin. Tesla was one of them.
23:13
Speaker 2: I believe Microsoft did it for a little while and
23:15
Speaker 2: they decided not to do that anymore because all of
23:17
Speaker 2: a sudden their accounts receivable were bouncing wildly. When what
23:22
Speaker 2: you just said happened. Somebody had to translate that cryptocurrency
23:25
Speaker 2: eighty US dollars to put it on the quarterly report.
23:28
Speaker 2: And it's just bouncing wildly, not because of the products
23:31
Speaker 2: they've sold, but because of the crypto. Well, and that's
23:33
Speaker 2: been that's been the weird thing for me.
23:35
Speaker 1: This is one of the reasons why I struly struggle
23:37
Speaker 1: to get my head around it, because crypto varies wildly.
23:39
Speaker 1: One day it's worth you know, ten thousand dollars per coin,
23:42
Speaker 1: and the next day it's worth fifteen. It's like, oh
23:44
Speaker 1: my god, crypto is worth over How do you buy
23:46
Speaker 1: something with something that moves so dramatically in price from
23:49
Speaker 1: moment to moment, let alone day to day. At least
23:52
Speaker 1: with the dollar, you got to wait for inflation to
23:54
Speaker 1: kick in. Okay, dollar's worth less this quarter than it
23:57
Speaker 1: was last, and we can always see that the price
24:00
Speaker 1: of goods going up. But the other article about inflation,
24:04
Speaker 1: it's twenty five percent up for everyday goods and services
24:06
Speaker 1: since twenty twenty one. That's really hitting people hard. But
24:09
Speaker 1: when you go to this store and you want to
24:11
Speaker 1: buy something, and you want to pay for it in crypto,
24:13
Speaker 1: it could cost you this fraction of a crypto coin
24:17
Speaker 1: today and something less tomorrow. I maybe AI can figure
24:21
Speaker 1: all that crap out down the road, Brian, but in
24:23
Speaker 1: real time calculations it seems to be virtually impossible.
24:26
Speaker 2: You know. I think we're just moving into an era
24:28
Speaker 2: where basically everything is treated as a speculative asset. We
24:32
Speaker 2: don't use it to store value anymore. We don't use
24:34
Speaker 2: things to, you know, as a currency of exchange. We
24:37
Speaker 2: simply want to own something and hope it goes to
24:39
Speaker 2: the moon. That's really what all this stuff is. And
24:41
Speaker 2: I really wish we'd dropped, you know, the last half
24:43
Speaker 2: of that word currency off of cryptocurrency, because it's not
24:47
Speaker 2: currency is something that has exchanged. Crypto is getting hoarded
24:50
Speaker 2: because people are thinking it's going to be worth a
24:52
Speaker 2: bazillion dollars later. When was the last time you heard
24:54
Speaker 2: about somebody selling their entire horde of bitcoin? That doesn't
24:57
Speaker 2: ever happen. People sit on it and ride the waves
24:59
Speaker 2: while the new people jump in and out because they
25:01
Speaker 2: don't know what they're doing.
25:02
Speaker 1: True, which makes me kind of want to ask a
25:04
Speaker 1: question about gold. Gold keeps going up in price too people.
25:08
Speaker 1: Is that revealing of something broader? In terms of people's
25:10
Speaker 1: concerns about the status of the world.
25:12
Speaker 2: Brian James, I think gold is really just a measure
25:15
Speaker 2: of how nervous are we today because if you and
25:17
Speaker 2: that's gold is is gets brought up by people who
25:20
Speaker 2: really want to do what I think society is letting
25:23
Speaker 2: go of. Right. Gold gets brought up by people who
25:25
Speaker 2: want to put their money in something and sit on
25:27
Speaker 2: it and be confident that it's going to somehow go up.
25:30
Speaker 2: But gold is treated anymore. It's it's just as violent
25:33
Speaker 2: as anything else when when the when the waves change
25:36
Speaker 2: direction on us. So it's just not if you look
25:39
Speaker 2: over history a gold position. People start looking at gold
25:42
Speaker 2: when they want to try to time everything else. I'm
25:44
Speaker 2: worried about the markets right now, so therefore I want
25:47
Speaker 2: to put it in gold because I've perceived that that'll
25:48
Speaker 2: be a safer place. Well, as we know about timing anything,
25:51
Speaker 2: you're never going to get it right. You can get
25:52
Speaker 2: it right nine times in a row, and that tenth
25:54
Speaker 2: time comes along and put you right back where you were.
25:56
Speaker 2: Gold does the same thing, just in the opposite. It's
25:59
Speaker 2: it's just the receiving point of where people are trying
26:02
Speaker 2: to shelter from something else for a brief period of time,
26:04
Speaker 2: and nobody has proven throughout history that there's a way
26:08
Speaker 2: to do this correctly multiple times in a row.
26:10
Speaker 1: And it's just a commodity like everything else. I think
26:12
Speaker 1: people are fascinated with gold just because it's had this
26:14
Speaker 1: long term, you know, multi multimillennial generational perception of just
26:19
Speaker 1: actual value. If I have gold, it is going to
26:22
Speaker 1: be worth something. But you can say the same thing
26:24
Speaker 1: about platinum or copper or anything else. It has a
26:27
Speaker 1: value in society,