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Does this interest rate cut even matter for the longer term? · The Financial Exchange Show

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He's the Financial Exchange with Chuck Zada and Mark Vandetti.
1:20
Speaker 2: Chuck, Mark and Chucker with the as we kick off
1:23
the second hour of the Financial Exchange, and as one
1:27
would expect, it is very boring heading into the Fed
1:31
announcement this afternoon. At the moment, the S and P
1:36
five hundred is up one point, the Dow is off
1:40
seventy three points, the Nasdaq is up thirty four so
1:42
nothing really doing there. We've got bonds moving up just
1:47
a little bit in terms of yields. Tenure Treasury up
1:49
four point seven basis points to three point six eighty
1:52
nine percent, so you got a little bit of a
1:56
sell off in yields happening. You've got oil today, let's
2:02
see down eighteen cents a barrel on West Texas Intermediate
2:05
to seventy one oh one. You've got gold up five
2:09
dollars and eighty cents announced to twenty five ninety eight
2:12
and twenty cents, and the Triple A National Averagur gas
2:15
prices kicking up just a touch about one point two
2:18
cents up to three twenty one and five tenths of
2:22
a cent, and that is again one point two cents
2:25
higher than yesterday, but still about thirty cents below where
2:28
we were in the middle of the summer, around three
2:31
fifty a gallon. So that's what's going on with major
2:35
markets today. Obviously, all eyes are just focused on the
2:39
FED and their two pm announcement. Ray Dalio, who Dahalio?
2:44
Still he doesn't still run Bridgewater? Does he?
2:46
Speaker 1: No?
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Speaker 2: What does he do now?
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Speaker 3: I assume he still owns a big chunk of it,
2:52
if not, well, not all of it, but a big
2:54
chunk of it. It's otherwise employee owned, and he writes manifestos, pontificates, shares.
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Speaker 2: His wisdom, you know, Dahlia.
3:02
Speaker 3: I'm laughing because half the time it makes sense. Half
3:05
the time it's absolutely no flaky.
3:06
Speaker 2: Here's the thing about Dahlia. When I first started in
3:09
this business, I read a lot of the stuff that
3:11
he had written, and I was like, Oh, like this,
3:13
this guy's like so smart like it. This is like
3:15
he's really got it together. And I'm not saying that
3:19
he's dumb, because he's not. Any time that you have
3:21
the kind of returns that he's had and the performance
3:23
he's had, and you know, make the amount of money
3:25
that he's had in business. Like, you're not dumb, so
3:27
I'm not trying to say that.
3:29
Speaker 1: But.
3:31
Speaker 2: Especially like as I've kind of tried to sort out, Hey,
3:35
how have they how did they do what they did?
3:37
BRIDGEWA if you're not familiar with them, they're a hedge
3:39
fund that posted just spectacular returns and consistent resurn returns
3:44
for much of the nineteen eighties, nineties and early two thousands,
3:48
And it really seems to me that the whole big
3:51
thing that they did was they said, hey, interest rates
3:54
are high in the early eighties, we can add some
3:57
leverage to you know, the debt that we're buying, and
4:02
well partner, you know, we basically see this whole emerging
4:06
markets thing taking off over the next twenty thirty years.
4:08
You know, Dollar has been an outspoken proponent of the
4:11
Chinese economy, and it was kind of one big long
4:15
trade for like thirty years or so that just worked
4:18
in their favor more than anything else, it seems.
4:20
Speaker 3: Yeah, this type of thing is valuable for pension fund investors,
4:23
for example, who put their capital to work for very
4:27
long periods. And theory of pension fund are an endowment,
4:29
which is what college is fund their operations with or
4:32
a foundation, which is what nonprofits use their bread and butter.
4:36
Bridgewaters was selling to pension funds. Sure, so big institutional
4:40
they call those institutional investors. Your four to one K
4:43
is also an institutional investors. So again pensions four one
4:46
k's endowment's foundations. That's where Bridgewater made a living for
4:50
many decades and still does. This type of thing that
4:55
they do. We say hedge funds. Very broad term, so
4:58
broad is to be useless. It's like saying, people, well,
5:01
what do you mean who you talking about? They offer
5:05
what they call in correlated returns because they don't just
5:08
own stocks. They provide pension funds and other institutional investors
5:12
with diversification. So if you're wondering, why have I never
5:15
heard of Bridgewarter, why these guys even talking about them,
5:17
it's because they may not be a household name, but
5:19
they manage a whole lot of household assets, particularly if
5:23
you're say a public sector or a multi employer that
5:26
is a union pension fund beneficiary. So that's where they're
5:30
very well known. Just for context.
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Speaker 2: Yeah, and Dalli again, he goes out and he gives
5:36
interviews you know here and there from time to time,
5:39
and just a couple quotes that he has in terms
5:42
of what's going on in the US economy and what
5:44
the Fed's doing right now. He says first that what
5:46
the FED does this week doesn't make a difference for
5:48
the longer term, because policymakers are going to have to
5:50
keep real interest rates low in order to try to
5:54
service the US deficit. So that's, you know, one thing
5:57
that he had to say. Other things that I found
6:03
notable here talking about, you know, the potential for great
6:07
power conflicts, specifically between the US and China, and how
6:12
that's something that could you know, really shape the world
6:14
over the next decade in a way that we haven't
6:17
had to worry about in quite a while, I mean
6:20
thirty years or so you're talking about. And then also,
6:25
you know, talking about the shifts that we're seeing in
6:29
technology here and how the potential productivity improvements there are
6:33
meaningful as well. But again, there's all kind of like
6:36
broad things that he's talking about. He doesn't really give
6:38
a ton of specifics necessary.
6:40
Speaker 3: It's interesting we talk a lot about economic growth, quarter
6:42
to quarter, consumption, investment, government spending, net exports. Those are
6:45
the accounting components of GDP consumption investment. Because I said
6:49
it fast, so I'll say it again. Consumption investment, consumption,
6:52
which're spending, investment, which you're spending by businesses on the
6:54
obvious stuff, government spending, and net exports. Those are in
6:58
an accounting sense WHI drives GDP. But in the long
7:00
run we actually know what drives GDP. The guy who
7:02
died last year, Robert Solo, gave economists the Solo growth model.
7:06
I don't mean to get too much into the weeds here,
7:08
but we're.
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Speaker 2: On the subject.
7:09
Speaker 3: Dad sol Ow Bob Solo talk here at MI t
7:15
TA here in Massachusetts. What it really comes down to,
7:20
there was no economic growth for hundreds of years industrial revolution.
7:23
All of a sudden, per capita growth explodes. What causes it.
7:28
It's not capital per workers, it's not labor, it's not capital.
7:32
Those those things are important. The main engine of economic
7:36
growth is productivity, is technology. So Dalio talks about this
7:41
is where he gets a little flaky to me. Where
7:43
if you just open any macroeconomics, which is the fancy
7:46
we of saying big picture economics textbook, Solo growth model
7:50
is in the first or second chapter because it explained
7:53
you don't have to talk about wars, you don't have
7:56
to talk about debt. Those are all short term factors.
7:58
They too shall pass. Really matters is investing in institutions
8:02
and education to allow people to become more productive. And
8:06
if we're not doing that, we're going to condemn future
8:10
generations to lower rates, if not absolute levels of in
8:14
terms of standard of living, but lower rates of growth
8:17
then than we've enjoyed. We know the secret, we just
8:20
don't know what's in the secret sauce because technology is
8:24
technology is sort of vague, but it's what allows us
8:27
to grow on a per capita basis.
8:29
Speaker 2: It is, and I also think this is why the
8:31
piece closes with typical crap of Dalio concludes that surprises
8:39
that we may see are more likely on the downside
8:41
than the upside. Okay, hey, like what does that even mean?
8:49
Speaker 3: I think I know what he means, but Goad, well,
8:51
I know he's trying.
8:53
Speaker 2: To say, like, well, there's more places that things can
8:56
go wrong that things can go right, and and that
8:59
kind of goes against like all of human history quite honestly,
9:05
Like the human history is the story of humans figuring
9:08
out how to make things go right after they go wrong,
9:11
Like we keep encountering new problems and we go and
9:13
we figure out how to solve them. That's what humans.
9:17
Speaker 3: Has evidence by the fact that we're here talking to
9:19
you via electromagnetic waves.
9:22
Speaker 2: Right like we're through freaking we're talking to you through
9:25
freaking light waves. Man, you know, like come on, and
9:30
you're saying there's more surprises, more on the downside than
9:33
the upside. I don't know. I mean, I look at
9:36
some of the potential for where we might be and
9:38
some of the like the problems that we need to solve,
9:41
and we're pretty good at figuring out how to do
9:44
these things. And it's not to say that it's always
9:46
easy or not. But you know what, I don't know.
9:49
The twentieth century, just as an example, was was it
9:52
if you just look at the downside surprises, It was
9:55
a huge pile of suck. It was a huge pile
9:59
of suck.
10:00
Speaker 3: Not for America, but yeah, much of the rest of
10:02
the world.
10:03
Speaker 2: Even for America, it wasn't very good, you know, Like
10:06
you talk about what we actually went through, Yeah.
10:09
Speaker 3: We got off easy compared to Western Europe. That is
10:11
what I'm saying.
10:12
Speaker 2: I'm gonna give my speech. Mark like, because I've.
10:15
Speaker 3: Done this, I'm gonna butt in.
10:16
Speaker 2: But here's what happened in the United States in the
10:18
twentieth century. Well, things started off badly with a couple
10:22
of different banking panics. Then we went to World War One.
10:26
That was pretty bad. We lost a whole lot of
10:28
really good young men there.
10:29
Speaker 3: But we became I have to if you don't mind,
10:31
I have to.
10:33
Speaker 2: Just no, let me finish first, and then you can
10:35
do this.
10:35
Speaker 3: Okay, fine.
10:37
Speaker 2: Then we said, oh, hey, let's come back and like,
10:39
let's just spend all the money that we can, because hey,
10:42
we were a big lender to European nations in World
10:44
War One. Now we got all this money. Okay, we
10:46
got the excesses of the twenties. Oh, great market crashing.
10:50
We got a great depression. We can't get out of
10:51
it for twelve years. Then World War Two happens. That's
10:54
pretty bad. What happens after that, Oh, look, a whole
10:56
bunch of inflation and unemployment rising at the start of
10:59
the fifties. Then you got the Korean War. Then you
11:01
got one president being assassinated, you got one president who
11:04
is almost impeached and has to leave office. You got
11:08
Vietnam going on during this. Then you get to the seventies,
11:10
you got inflation happening. You got you know, all kinds
11:14
of interest rates and prices rising, everything's falling apart. It's
11:17
just an absolute mess. You finally get to the nineteen
11:20
eighties and you're like, great, we got you know, VHS,
11:22
this is wonderful. Oh, here's Golf War one happening. We
11:26
got a recession in nineteen ninety before that. Then you
11:28
get to the dot com bubble. This seems great. Nope,
11:31
it's not. You got three years washed out September eleventh,
11:34
Golf War two, Afghanistan. Then you get the financial credit
11:37
like the last hundred years, and I didn't even touch
11:39
on some of the smaller stuff. It has been brutal.
11:43
And here's the point that I made.
11:45
Speaker 3: Oh oh god, yeah, come on, Chuck, look.
11:48
Speaker 2: Mark, Mark, Mark, I'm not done. You need to let
11:51
me finish the point.
11:52
Speaker 3: Go ahead.
11:53
Speaker 2: The point is, even with all this crap that happened,
11:57
economic growth was absolutely massive. Standards of living exponentially better.
12:03
There is more wealth and stability and basically anything like
12:08
there is more capacity for doing anything right now than
12:12
any point in human history. And if you had to
12:15
pin me down on a time when you would rather
12:17
have a child in human history. It's right now because
12:20
there's so much less to worry about than we ever
12:22
have had to in human history. So my point is,
12:25
despite all of the crap that does happen, the downside
12:29
surprises humanity consistently surprises to the upside. Is that the
12:34
point that you were gonna make before.
12:36
Speaker 3: I was gonna say the twentieth century was a century
12:39
of economic miracles for the United States because we were
12:43
the only industrial.
12:44
Speaker 2: Not just for the not just for the US. That's
12:47
the thing, Like, you will get standards of living worldwide.
12:50
Speaker 3: Mainly driven by US growth, I would say, as we Sure,
12:53
maybe you could take the Marshall Plan as an example,
12:56
which was self serving but at the same time brilliant
12:58
and far sighted. The twentieth century as a mixed one
13:02
for humanity as a whole, but a one of largely
13:07
one economic miracle after another in the United States, even
13:10
right through the Great Depression. I think it can probably
13:13
get I know this wasn't the point of this segment,
13:15
but it could probably be a lot worse. Where you
13:18
were looking at standard of living as measured by life
13:20
expectancy or per capita GDP, or certainly economic prowess. It
13:25
was a miracle century for the United States in many ways.
13:28
I know that's not inconsistent with but.
13:30
Speaker 2: It's like, I what we're saying, Yeah, I guess I
13:32
see Dolly'll being like, oh, there's more potential for downsides.
13:35
The whole twentieth century was downside surprise, and yet we
13:40
still figured out, Okay, here's what we need to do
13:42
in order to overcome it. So I don't know, Like
13:46
I just when it's easy to sound smart when you're
13:51
constantly negative about things, but humanity is pretty good at
13:56
figuring out these problems. And I'd rather have the problems
13:59
that we have right now than the ones that we
14:01
had one hundred years ago. You know, It's like, you
14:05
think about the stuff that we've solved over the last
14:07
hundred years, it's some pretty big ones, and what are
14:09
we gonna solve over the next hundred. Man, it's gonna
14:11
be wild, and you want to bet against that because
14:14
of the potential for downside surprise. Give me a break.
14:18
Let's take a quick break here. When we come back,
14:22
we'll do a little bit of trivia and then we'll
14:25
talk about Amazon's return to office mandate and dig in
14:30
a little bit more on that.
14:32
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14:42
Speaker 2: Let's talk a little bit about Amazon. They announced, I
14:46
think what was it yesterday or a late Monday, Monday,
14:48
late Monday, that they were gonna be requiring all of
14:51
their office employees to return to office five days a
14:55
week starting in January. I'm sure you guys talked about
14:59
this yesterday, yes, Yes, what was the consensus? What's you
15:03
guys discussed about? Like, what was what was the anyone? Bueller? Mark?
15:09
I'm asking you guys what we talked about?
15:12
Speaker 3: Yeah. I think the take was that it was probably
15:16
inevitable as the abnormally tight labor market normalized, companies would
15:23
begin to exert leverage.
15:26
Speaker 4: That also, like parlayed to do a discussion about congestion
15:29
pretty much.
15:30
Speaker 3: Oh right, we uh we It was part of a
15:34
larger conversation about commuting times.
15:37
Speaker 2: I don't think Amazon wants these employees back.
15:40
Speaker 3: No, they're trying to try management, right, I think.
15:42
Speaker 2: This is layoffs without conducting layoffs.
15:47
Speaker 3: They hinted that in the article.
15:48
Speaker 2: Yeah, that's where this is going. Like they don't care
15:52
about who's actually in the office or not. They want
15:55
to get rid of people, and this is a way
15:58
to get people moving to be out of the organization
16:01
so they don't have to be paying packages.
16:04
Speaker 3: Well, if you're a manager, I mean, I have the
16:06
privilege and the fortune of working for a great company
16:09
that allows me to work remotely. But I'm an individual
16:12
contributor and if I'm doing something solitary it probably doesn't
16:15
make a difference. But if I'm a manager with a
16:16
staff that I should be mentoring and overseeing. That's so
16:20
I think you're you're getting at the management layer that
16:22
they've vowed that they want to trim. You're a manager,
16:25
You've got to be in the office. How is that
16:26
even an option to not be?
16:28
Speaker 2: I don't even this isn't just managers though.
16:31
Speaker 3: Oh so you think there is an ulterior firm like
16:34
they want everyone. Well, yeah, I know, but I think
16:35
that they were That's that's the pretext. But they're really
16:38
getting at a if you're a they're trying to cut
16:40
the management fat, an't they trying to cut Mentali That's
16:43
what you're getting at No.
16:44
Speaker 2: But I think they don't care where the cost savings
16:46
come from. Like it's it's sure, it's more if it's
16:50
a manager who decides to leave. But I think they
16:52
just want cost savings. And the question is who else
16:56
is going to follow them? And I don't know, So
17:00
it's all going to depend on margins. You know, Amazon
17:03
is starting to see some pressure on margins. If Microsoft
17:06
starts to see something similar, if Meta starts to see
17:09
something similar, okay, then maybe they follow. But this is
17:15
layoffs without actually having to conduct layoffs. In my opinion,
17:19
that's why I think they're doing this. I mean I
17:21
I don't think they actually care about having someone back
17:25
in person.
17:26
Speaker 4: I mean, even nowadays, five days is aggressive to be
17:28
back in the office, especially for a company like Amazon.
17:33
Speaker 2: It is, you know, but it's something where yeah, I
17:37
don't think they care about having their people back. It's
17:40
they want to push for a head count reduction and
17:42
this is going to have some of that happen voluntarily.
17:44
Quick break here. When we come back, We've got the
17:47
Trivia Answer.
17:54
Speaker 5: Bringing the latest financial news straight to your radio every day.
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It's the Financial ext Change on the Financial Exchange Radio Network.
18:04
Speaker 1: Breaking business news as it happens only here on the
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Financial Exchange Radio network.
18:11
Speaker 2: Mark. There's a piece in the Wall Street Journal today.
18:14
It's titled a US national debt crisis is coming, and
18:21
it talks about how you know the debt's too high,
18:23
which you and I have agreed on, and how we're
18:25
not doing anything to reign in our deficits, which you
18:28
and I have agreed on, and at some point it's
18:31
going to become problematic, which you and I have agreed on.
18:34
The problem with pieces like this are twofold, in my opinion.
18:36
The first is that these pieces have literally been written
18:44
like every year dating back, and so further than that,
18:47
I've seen some dating back to this thing in my experience.
18:49
I mean, I've seen it like back to the forties
18:51
and fifties, and so it's just not something that I
18:55
think is predictive of anything. And as such, Okay, even
19:02
if you know the exact time and date that the
19:04
US national debt is going to become a problem, what
19:07
do you do about it? From an investment and money
19:11
management perspective.
19:12
Speaker 3: I guess you count on at some point higher interest rates.
19:16
That's the best. That's the essence of what having too
19:19
much debt results.
19:21
Speaker 2: In that's one possibility. But what if the FED decides
19:25
to do what they've done before and they say, hey,
19:26
we're going to buy up the you know, we're going
19:28
to start quantitative easing again in order to keep rates down,
19:30
and we'll become that marginal buyer.
19:31
Speaker 3: Quy is stimulative, So that would result in inflation and
19:34
also higher interest rates. All else equal, and the FED
19:36
keeps buying more and you get more inflation, which in
19:39
turn then ends up Why that's not a good strategy, Well.
19:41
Speaker 2: It depends. I mean, if you look at how a
19:43
lot of economies have handled high levels of debts historically,
19:46
it's been more through allowing inflation to fester, because then
19:50
that deflates the amount of debt in GDP terms.
19:53
Speaker 3: Well, it's what we did after World War Two, certainly
19:55
only historical example that I'm aware of of a big
19:59
reduction in debt. It was about where it was where
20:01
it is today relative to GDP. Of course, that was
20:04
invested in, you know, winning the war. Arguably we haven't
20:07
made any such investment here, so we were set up
20:09
for some pretty sweet growth in the fifties. You allude
20:12
to this in the last segment as I was interrupting
20:15
you when you were pointing out that we had an
20:17
economic miracle despite catastrophe after catastrophe, because we set ourselves
20:23
up for it with the investment of World War Two.
20:24
That's a cold way to think about the loss of
20:27
nearly five hundred thousand Americans. But it is one outcome.
20:31
So higher interest rates as a result of debt at
20:35
some point, there's no evidence of it yet, that'll make
20:38
it harder to me. It's already making it harder to
20:40
meet other goals. We know whether you want to look
20:42
at I'm not going to throw a bunch of figures
20:44
at you. You can look them up, listeners, you can
20:46
look this stuff up. But we know we spent more
20:48
on interest or about the same as on defense in
20:52
the last fiscal year. There's no prospect that that will
20:55
come down. So it is going to start to crowd
20:57
other stuff out. That's one form of crowding out. The
20:59
other comes when higher interest rates start to crowd out
21:02
investment because government competes for savings with the private sector.
21:07
Will there be a so called tipping point when interest rates,
21:10
say on the ten year, go from four ish to
21:13
seven ish. Forget about whether or not part of that
21:16
is just due to inflation. I don't really know. Again,
21:19
the miracle that happened after World War II, the economic
21:22
miracle that allowed us to grow our way effectively. Somewhat
21:26
some of that was inflation, but most of it was growth.
21:27
We grew our way out of debt. We're not really
21:29
set up for a repeat of that. Economic miracle could happen.
21:33
AI could be the impetus for an economic miracles. It
21:37
allows us to grow our way out of debt. But
21:40
you don't want to depend. My miracle should not lot
21:42
of eggs in one basket. Your miracle should not be
21:44
your baseline plan.
21:46
Speaker 2: No, it's hope. Is not a strategy different I think
21:49
is the quote that I like to you.
21:51
Speaker 3: Does anybody care, Chuck? Does anybody really care about this?
21:53
Speaker 2: Here's the thing. I remember last fall, when the tenure
21:56
treasury was on its way to five percent, all of
21:59
the deficit hawks were saying, Oh, this is because there's
22:01
too much supply, and like, this is why rates are
22:03
going up ten years at three point six now. So
22:08
if there was too much supply a year ago, why
22:10
is there not too much supply now? And it's not
22:14
to say that this won't become a problem at some point.
22:17
But trying to build an entire framework for the economy
22:23
and investing in this and that based on the US
22:26
deficit finally becoming a problem hasn't really been a winner
22:31
for the last eighty years that we've been talking about this.
22:35
Speaker 3: And you know, Chuck, it was in a I'm not
22:36
correcting you, I'm just pointing out it. In the early
22:38
nineties we had too and I pointed this out yesterday HW.
22:42
But George HW and Bill Clinton courageously advocated spending cuts
22:46
and tax increases to get the deficit. They both did.
22:48
It probably cost George HW the election. In addition to
22:52
a FED that was too slow to ease, Clinton lucked
22:56
out somewhat with the productivity boom of the nineties that
22:58
helped growth overcome the fiscal lost already, and he also
23:00
had a cooperative partner in Alan Greenspan. But aside from that,
23:04
you're right, it hasn't worked.
23:06
Speaker 2: The issue, by the way, is the spending side tax
23:09
revenue for all to talk about, like tax increases or
23:11
tax cuts or this and that. Federal tax revenue, dating
23:14
back to the post World War two period basically has
23:17
always been between fifteen and seventeen percent of GDP, with
23:20
a couple outliers here and there on either side. Tax
23:24
revenue generally doesn't budge very far. Now. Outlies, on the
23:28
other hand, have gone from about fourteen percent of GDP
23:32
in the post World War Two period in nineteen fifty
23:34
one up to north of twenty two percent today. Like
23:39
there's been one thing that's been moving in the same direction.
23:43
So that again, there are two ways that you can
23:45
solve this. You can cut spending a little bit, you
23:49
can raise tax a little bit, or you can do
23:50
a little bit of both.
23:51
Speaker 3: Yeah, you know, it just occurred to me. This is
23:53
our fiscal habits are like eating like you did in
23:56
your teens and twenties into your forties and fifties, eat
24:00
the way you used to. We all know you this,
24:02
we age. You're just gonna you just go up.
24:04
Speaker 2: You're gonnat a limp up.
24:06
Speaker 3: Yeah, you don't want to do it. You're gonna die young.
24:07
You're gonna be unpleasant to look at. Similarly, we have
24:11
I know this from personal being told this. Uh. Similarly,
24:15
we're in fiscal habits of the sixties and seventies in
24:18
this country. We got our guns everybody learns about guns
24:20
and butter when they take their first economics scores or something.
24:23
You know, there's this trade off. We never accepted the
24:25
trade off in this country. We got a warfare state,
24:27
we got a welfare state. We're running them in parallel.
24:29
Europe's got a welfare state. They don't pay the bills,
24:31
as Donald Trump has correctly pointed out and others. But
24:33
millim uh, they can afford the welfare state because they
24:36
didn't have to provide the world with a defense umbrella
24:38
like we have. We're gonna have to start I guess
24:40
over the next generation and most of most of you,
24:43
some of you listening, I'm sad to say, won't live
24:45
to see it. I hope I do, but they're gonna
24:47
be some tough well. I don't know why I threw
24:49
that in other than to say, I'm not sure if
24:50
I'll live to see it, but they're gonna be juxtaying,
24:53
why did you just tell half our audience they're gonna be.
24:55
They're gonna be, You're gonna die, They're gonna be going
24:57
to their reward before this, I guess I'm saying, hey, guys,
25:00
live it up. You had you lived at a really,
25:02
if you're in your sixties seventies, you may not live
25:04
to see a fiscal catastrophe in thirty years. I hope
25:06
you do. But boy, did you live at a great time.
25:08
Speaker 2: You just keep coming back to death, don't you.
25:10
Speaker 3: I did.
25:10
Speaker 5: Well.
25:11
Speaker 3: You get in your fifties and you start to think
25:12
about this more. You lived at a great time. Going
25:15
to the same, and so did I. The next couple
25:19
generations may have to face some tough choices, retrenching from
25:22
our obligations in the world, which is a prominent theme
25:25
in the presidential election, as it should be, and retrenching
25:29
and pulling back on some of our social safety net obligations. Here.
25:33
There are probably some tough choices to be made. Absent
25:36
and economic miracle, which I'm not ruling out. Again, there's AI,
25:40
but we ain't gonna in the fifties and sixties when
25:42
we were the last man standing. That's not going to
25:46
get out of this period, I think. So that's not
25:48
going to get us out of the debt problem the
25:49
way it did that.
25:50
Speaker 2: Folks want to talk to you about two seminars that
25:53
the Armstrong Advisory Group is going to be hosting this fall.
25:56
The first one so at the MGM Hotel in Springfield.
26:00
It's on Tuesday, October eighth, and we're going to be
26:02
broadcasting from the hotel, which is directly connected to the casino.
26:06
This free parking in the MGM lot. All you do
26:09
is you take the elevator down to the casino flour
26:11
and it's a short walk to the hotel right from there.
26:14
The second one is going to be in at the
26:17
Margaritaville Hotel and Resort in Hyanas and that's on October
26:21
twenty fourth, and there we're going to be joined by
26:24
Ed Lambert, who is the host of the WXTK Morning Show.
26:27
You can join us for a live broadcast of the
26:29
Financial Exchange, followed by an educational lunch with the Armstrong
26:34
Advisory Group. What are we going to be talking about
26:36
there upcoming presidential election, the economic policies that both candidates
26:40
have proposed, what effect they may have on the current
26:44
economic landscape, and how potential market volatility may influence your
26:49
investment decisions. You can sign up for the event nearest
26:52
you by visiting Armstrong Advisory dot com slash events. Just
26:58
fill out the form associated with the event you'd like
27:00
to attend. That's Armstrongadvisory dot com slash events.
27:06
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:08
registered investment advisor. Nothing in the ad or in any
27:11
Armstrong guide a specific financial, legal, or tax advice. Consult
27:14
your own financial tax into state planning advisors before making
27:17
any investment decisions. Armstrong may contact you to offer investment
27:20
advisory services.
27:22
Speaker 2: So yesterday, the Trump campaign floated the idea of reversing
27:28
the state and local tax deduction cap, commonly known as
27:33
the salt cap. This was actually put into place during
27:37
the Trump administration in twenty seventeen, which effectively caps state
27:43
and local taxes that can be deducted at ten thousand
27:46
dollars per year per tax return. So it's set to
27:51
basically sunset as as all provisions of those tax cuts
27:55
are at the end of twenty twenty five, and Trump
28:00
effectively saying here, look, I want to get rid of
28:03
this and have it not be a thing going forward.
28:06
Speaker 3: Your thoughts, Mark, Well, part of me likes it because
28:10
I think it would help me personally. A lot of
28:14
people within the reach of our radio waves would benefit
28:16
from it. Part of me says, are one of these
28:20
candidates going to start talking about ways of cutting spending,
28:25
cutting the deficit, or raising As you pointed out in
28:27
the last segment, there are a couple of different ways
28:29
to do it. One is raising revenue, the other's cutting spending.
28:32
This dis exacerbates the deficit and debt problem. It doesn't.
28:38
It doesn't motivate any desirable supply so called supply side behavior,
28:43
increasing the size of the labor force, increasing the ability
28:46
of businesses to do what they do and grow the economy.
28:49
It seems like a sop to people adversely affected by this.
28:53
Maybe he's making a play for the aggrieved Long Island
28:56
crowd that he's been hoarding because they're affected by the cap. Sure,
29:03
I don't know. It seems like a last minute electoral gambit,
29:06
not part of a larger, coherent strategy. Not that you're
29:09
hearing coherent, all encompassing economic policy from from Harris either.
29:15
Speaker 2: Yeah. I think if you look at where the salt
29:18
cap has the greatest impact, again, just looking at you know,
29:24
where it tends to be. Uh, it's a small number
29:28
of states that are you know, most heavily impacted by it. It
29:31
states with a lots of high income earners and high
29:35
state taxes. So you're pretty much talking New York, California,
29:40
New Jersey, Illinois, Texas, and Pennsylvania. Those are these six
29:45
states that are most heavily impacted by the salt cap
29:48
right now. That's according to an analysis by the Joint
29:51
Committee for Taxation. And they study this and said, look,
29:56
before the changes in the tax law, ninety one percent
29:59
of the benefit fits of the salt deduction were claimed
30:02
by those with incomes above one hundred thousand dollars, most
30:06
of whom were concentrated in those jurisdictions. So that's the
30:10
bulk of them. Now you might say, well, gee, what
30:12
about you know, states like Massachusetts, Rhode Island. Sure you
30:15
might have high income owners there, but the populations of
30:17
those states are tiny compared to Texas, California, and New York.
30:22
So Texas is an example. Hey, large parts of the
30:25
state are really poor. There's not a whole lot of
30:28
money there, and so it's not a huge impact. But
30:31
you talk about Houston, you talk about Dallas and areas
30:34
like that, huge metro areas with high incomes. Those are
30:38
areas that have a big impact.
30:41
Speaker 3: This is gonna cost about one hundred and twenty billion
30:42
dollars a year over ten years, according to an independent
30:45
analysis that Politico reported on recently. For what that is worth,
30:49
I'm just wondering, why do that. He's not gonna win
30:53
those states. This is not my area, But I've got
30:55
to ask, you're not gonna win these areas.
30:58
Speaker 2: The only state there that's actually up for grabs is
31:00
Pennsylvania out of those top six. Yeah, but California's not change,
31:04
So maybe it's a plan changing. Texas isn't changing like
31:07
Pennsylvania made.
31:08
Speaker 3: Maybe it's a Pensylvania play because otherwise there's no economic rationale.
31:10
As I say, you can't argue that this is going
31:12
to induce increased supply, either of labor or something else
31:16
that helps the economy grow. This is probably just a
31:19
crass play for the marginal vote in Pennsylvania, which they're
31:22
both grasping for right now. So okay, that makes sense to.
31:25
Speaker 2: Yeah, maybe that's what.
31:27
Speaker 3: Otherwise, what's the I don't know, what does it do
31:30
for him?
31:30
Speaker 2: Okay, I don't know. Let's take a quick break here.
31:33
When we come back, it's time for stack Roulette.
31:37
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Speaker 4: The Financial Exchange is built is an incredible partnership with
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FIVEK dot Boston. The DAV five K Boston is presented
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by Veterans Development Corporation. All right, there was a pretty
32:26
important poll that dropped yesterday at five seven pm UH
32:31
and this from David Montgomery from you who published the
32:37
piece on this and again at this time of year,
32:41
like polls are kind of a big deal, and this one,
32:43
I think is one of the more important ones that
32:44
I've seen. YouGov asked Americans their favorability rankings of different
32:53
ancient empires and dead serious on this. They like they
32:59
spent a bunch of money doing this, which is wild
33:02
to me, and I think it's just great that they did.
33:05
Speaker 2: Uh. So there are one, two, three, four, five, six, seven, eight, nine,
33:10
ten ancient empires that they pulled Americans.
33:12
Speaker 3: I don't think I could have named three.
33:14
Speaker 2: What ancient empire do you think had the lowest favorability
33:18
ranking from Americans?
33:21
Speaker 3: Persians?
33:22
Speaker 2: Uh? The Persians.
33:24
Speaker 3: They're often cast as the bad guy visa e. Rome.
33:26
Speaker 2: The Persians were eighth out of ten with twenty five
33:29
percent favorable, twenty four percent unfavorable, fifty one percent don't know.
33:34
Speaker 3: Can I guess again?
33:35
Speaker 2: Yes?
33:36
Speaker 3: Just from Biblical history the Babylonians they must hate, right,
33:39
we must hate the Babylonians.
33:40
Speaker 2: The Babylonians were not one of the empires polled.
33:44
Speaker 3: Okay, thanks Tucker.
33:45
Speaker 2: Any guesses not my wheelhouse man? Okay? The in ranking
33:50
from least favorable to most favorable, the Huns came in
33:54
at least favorable, only fourteen percent in favor, forty three
33:57
percent against. I would venture to say that there's no
34:03
way that fifty seven percent of Americans even know where
34:06
the Huns came from, let alone should be able to
34:09
say they have a good or bad opinion on them.
34:12
Speaker 4: I've just heard of it for the first time. Right
34:14
at this moment.
34:14
Speaker 2: You must have heard of Attilla. Nope, Attila, the hunt Nope,
34:19
job of the Hut. Yes, did you know the Joba
34:22
played football?
34:23
Speaker 4: No?
34:24
Speaker 3: No, boy, it was a.
34:25
Speaker 2: Job of the hot hot hike. Oh god.
34:28
Speaker 4: Uh.
34:28
Speaker 2: In any case, so the Huns were worse. The Visigoths
34:32
came in in ninth place, fourteen percent favorable, twenty It's
34:39
probably just an empire.
34:40
Speaker 3: They probably just I'm not qualified.
34:43
Speaker 2: Then the Persian Empire, the Carthaginians an empire.
34:47
Speaker 3: Okay, I guess they covered. They had a trading empire. Okay,
34:52
it's anybody who was opposed to Rome is the bad guy.
34:55
Speaker 2: Well, no versions, There's all kinds of different time periods here.
35:00
The Byzantines, uh, thirty one percent favorable, sixteen percent unfavorable.
35:04
Speaker 3: How could you have an I'm sorry.
35:05
Speaker 2: Then here's where this is where this goes off the rails.
35:08
The Holy Roman Empire, which is neither holy nor Roman
35:10
nor an empire thirty five percent favorable, twenty eight percent unfavorable.
35:15
The Roman Republic. I bet most people don't even know
35:18
that's different from the Roman Empire, but rated forty percent favorable,
35:21
ancient Sparta forty one percent favorable, the Roman Empire forty
35:25
nine percent in ancient Athens, with the highest favorability rankings
35:29
at fifty four percent. Oh, they'll have a great rest
35:33
of the day. Enjoy the FED meeting. Enjoy the FED
35:35
meeting at two PM. We'll talk about that tomorrow