Speaker 1: The economy.
Speaker 2: You know, our United States economy is driven by GDP,
it's by spending money on goods and services. Seventy percent
of our economy is GDP driven. So as goes the consumer,
as goes the economy.
Speaker 3: You're listening to Carrie Lutz's Financial Survival Network, where you
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Speaker 4: And welcome you are listening to and watching the Financial
Survival Network. I'm your host, Carrie Lutz with US economic
expert fellow attorney Anthony Sakaro's with us.
Speaker 1: Anthony, great to have you back on.
Speaker 4: We're getting some economic numbers coming out of the Do
You Think Tank here the VIEWERU of Labor Statistics and
Commerce Department. All that consumer confidence what does it mean? Yeah, Hi, Kerry,
thanks for having me back.
Speaker 1: For sure.
Speaker 2: The Consumer Confidence Index report really talks about how consumers
are feeling about what's going on today in the economic environment.
It looks at what's going on today, how are they
feeling today?
Speaker 1: And then.
Speaker 2: A different index, the expectations index built into that report,
has them looking at what they think is going to
happen in the next six months, and it's ticked down
since August by a couple of points. I wouldn't say
it's necessarily meaningful, but it seems that confidence has dwined,
and you then really have to ask yourself, like, why
has it you know, why has it gone down? Why
is consumer confidence declining? Because the stock market is at
all time record highs, and I think it ties back
to the labor market, and I think the housing market
have something to do with it as well too.
Speaker 1: Inflation is you know, stuck around.
Speaker 2: Three right, just depending on the measure that you look at,
and the Federal Reserve is kind of, you know, in
a little bit of a quandary because their target is
too so we're fifty percent above their target, and yet
they can't wait till it gets to two to start
making action. They want to see it come down, but
it actually actually come down, it's actually ticked up a
little bit. The labor market, though, is where I think
a lot of the issues are, both with the reason
that inflation is sticky and also with regards to what
the Federal Reserve has to do, because unemployment is starting
to tick up at this point, I think the latter
is reading on employment is four point three percent, So
it's not out of the range by any any means.
We're not, you know, heading towards a catastrophe at this
point with four point three there's nothing wrong with that,
but it is.
Speaker 1: Starting to tick up.
Speaker 2: And under the Federal Reserve mandates, right, it's it's you know,
keep inflation reasons, will keep employment reasonable. So with the
labor market a year and a half or two years ago,
there were something like two jobs available for every one worker.
Now that number is normalized now it's like a one
to one ratio and people are having a harder time
finding jobs. But I had to give raises to my
employees within the last couple of years, raises I normally
wouldn't have given because they could go out and find
another job because it was a very strong market. Well,
that has to be passed on to the consumers, and
if it's passed on to the consumers, that is a
part of inflation that's sticky. You know. Grocery stores can
adjust their prices based on commodity prices at any given
point in time. But you know, imagine what would happen, Kerry,
if I tried to go back to one of my
employees and say, hey, guys, sorry, I gave you a raise.
You know, that was when the labor market was tight.
Now I get to take it back with everything's loosened up.
It just doesn't work that way. So that's a part
of why it's sticky. So the Federal Reserve has competing
interest at this point. They've got unemployment taking up a
little bit, which they got to keep an eye on,
and they have inflation that's sticky, and so what do
they do? So they decided the lower quart of a point.
It's expected that there'll be another quarter of a point
or maybe half a point by the end of the year,
but they will be data dependent, as their favorite term is.
Speaker 1: Okay, So.
Speaker 4: But when all this is happening, you know, the Federal
Reserve has another mandate. It's a stealth mandate, and that
is to never let the stock market go down, right,
I mean, isn't that what it's all about? Because it's
the stock market's going up, then you can always say, well,
the economy is doing great, because the stock market's doing
great and you have the wealth effect.
Speaker 2: Well, that's right, that's the Trump mandate part of the
Federal reserve, right, And it's interesting how he's trying to
manipulate with Lisa, I think, and you know, get the
you know votes that he needs to have interest rates
go in the direction that he wants.
Speaker 1: So you're absolutely right.
Speaker 2: It's it's not a mandate, and there really is a
legitimate question as to whether Jerome pal is buckling under pressure,
whether the Federal Reserve really does buckle and it I
think there's lots of different opinions across the board. I
don't think they do, but I will say it's just
an opinion. The wealth effect is interesting too. The wealth
effect is simply saying that when people feel good about things,
then they spend money, and the negative wealth effects says
when people don't feel good about things, they don't spend
a lot of money, and consumers have still been resilient
the economy.
Speaker 1: You know, our United States economy is.
Speaker 2: Driven by GDP. It's by spending money on goods and services.
Seventy percent of our economy is GDP driven. So as
goes the consumer, as goes the economy and throughout COVID
that time period, consumer saved a lot of money. There
was a lot of free money given to them, and
so they still have money to spend still, but the
savings rates are going down, debt rates are starting to climb,
and so the consumer is starting to crack, and you know,
that then causes the wonder as to whether or not there,
you know, are they going to crack so much at
some point to where we are going to tip into
a recession.
Speaker 1: They're not out of the recession woods yet, but there's
also nothing there that tells us that we're going into
one for sure.
Speaker 4: All right, So you know, if you're a betting man
like me to some extent certainly that went through our
portfolios and our personal wealth, what are the odds we're
going into a recession here? Stock market crash give me
a percentage?
Speaker 2: Well, from research that I've done in looking at even
though where there's just the course of the last few days,
economists and professionals are putting the odds of a recession
that somewhere between twenty and twenty five percent in the
next twelve to eighteen months.
Speaker 1: So that's what they're saying.
Speaker 2: So it's not it's not a small chance, but it's
also not a large chance as well too. One thing
I think that people have to consider those that recession
is not bad. It's it's almost like this our word
and the media makes it like we don't want a recession. Well,
the reality is that it's not true. It's there are
booms and bus there are good times in bad times
in life. There are good times in bad times in business,
good times and bad times in economics, and it's not
bad when we go through a time where it's just
takes us a little bit of time to reset. Businesses
going to reset, you get us at your personal expenses.
Things can't go up.
Speaker 1: All the time. This is not the way life works.
Speaker 2: But we try to do everything we can to avoid
a recession, and that falls back into the mandate of
what the federal Reserve doesn't want. They don't want a recession,
and Trump doesn't want a session because then it happens
to fall on that president and you know he would
not get his third term right if there's a recession.
So the reality is is that it's not bad, but
no one wants it.
Speaker 1: Everyone seems to be running.
Speaker 4: Away from it, right, So it's just that old saying.
You know, difference between a recession and a depression, recessions
when you're out of work, depressions when I'm out of work.
Difference between minor surgery and major surgery. Minor surgery surgery
that you have, major surgery surgery that I have.
Speaker 1: But I do agree with you that.
Speaker 4: Recessions are there to clear out the excessive speculation and
to basically forced liquidation of bad business decisions. Because but
look good at two percent interest rates or no percent,
doesn't look so good at five percent, And all of
a sudden you have this come to Jesus moment where
the debt just isn't sustainable. But speaking of debt, what
about the national debt here shows no signs of abating.
Although maybe if we have a government shutdown and it
lasts for quite a while, we can reduce the debt
that way. The president's threatening to eliminate whole departments and
basically get rid of hundreds of thousands of people, fire
them what he evidently under the shutdown legislation, he's got
that right to do it.
Speaker 2: Yeah, it's interesting, let's defund the police while we're at it.
Speaker 1: To go back to that movement, that. I don't even
know if that's still around.
Speaker 2: But you know, the reality is it's it's a silly thought,
right to just go fire everybody. You have to do it,
you know, systematically if you want to not with that that.
Don't get me wrong, I think there was a huge
amount of government waste.
Speaker 1: You know, doge getting rid of all that government waste?
I think it is.
Speaker 2: I think it's a good move, but in a you know,
you don't just go fire everybody. But we also know
that Trump is a lot of I don't want to
say talk, I don't want to say hot air, because
he's shown it, right, he's done.
Speaker 1: But he's just he's bombastic, Yeah he is.
Speaker 2: And that's a great way of saying it. He is
a negotiator, right, and and that's a good startup negotiation.
I mean, you know, there were what one hundred and
fifty company our countries that we're going to have tariffs
on and they were all going to be this massive things,
and you know, the stock market dropped three thousand points
in a day or you know whatever that was that
happened back on Liberation Day and then it just you know,
I was interviewed on that day by some network I
don't remember, and I basically said, it's going to smooth
all out. It's just a negotiation tactic, and that's exactly
what it is. And now Trump area is he's kind
of gotten his way and I feel like things are
a little more on a level playing field. And he
does talk a lot. But you and I both those
attorneys at a part of negotiation is talking and how
you say something right. You know, you can say something
in a believable manner or not, and you know he
tends to be believable. So of course we do have
a lot of trillions of dollars of debts. That's one
of the arguments for why he wants the Federal Reserve
the lower rates. For every quarter point that they lower rates,
there are still hundreds of millions of dollars an interest
that are being safe, you know, in that federal debt.
So that's part of his argument. What I think maybe
a lot of people don't understand, though I get this
question a lot from consumers, even clients, and that is
that you know, by not having that, by not having
the taxes where they are, you know, keeping them suppressed,
which is I mean, obviously individuals want that but then
it increases the national debt. Right, The reality is that
that the explanation I seem to have had to have
a lot is explaining to people that look, when when
you're productive and when you have a economy that's running
strong and you have a lower tax rate, the dollar
amount of taxes is actually higher because you've got a
strong economy. So a lower percentage of tax on a
higher dollar amount equals a higher dollar amount. And I
almost feel like sometimes people don't understand that I'm in California.
You know that is left as you can get, and
so people tend to let their ideology and their their
their political points of view, I think kind of cloud
their judgment is to realism. And you know the reality
is that as we grow, you can still keep taxes low.
You can still have a healthy, threave, thriving economy, people
working inflation intact low tax rates and still be doing
very well and eventually lower that debt.
Speaker 1: But it also takes time.
Speaker 2: I talk to people all the time that we put
their money in certain investments, and three months later they're
asking me how my investments are doing.
Speaker 1: It doesn't work like that. It's this is the lug
run and it's the same thing here. It's the long
and the challenges.
Speaker 2: Then one term expires, and now you get into another
president with a different philosophy, and by the time they're
just getting rolling, their term expires and you don't seem
to go anywhere. But you know, the stock markets that
record highs as a result of that, and we do
seem to.
Speaker 1: Be doing okay. So I'm not going to argue, but
you know, I'm glad taxes are lower and staying low. Sure.
Speaker 4: So, well, we had a couple of tax cuts that
appeared in that bill. Number one was maintaining the tax
cuts and the bonus depreciation from Trump's first tax bill,
no tip on taxes somewhat, no tip on, no tax
on Social Security somewhat. And then I think, I don't
remember if they got it together or not. Did they
raise the state and local tax exemption.
Speaker 2: That twenty If I'm not mistaken orty, I believe it was. Yeah,
was a health prey. Yeah, So it was a healthy
raise that they did throughout that bill, and I was
excited about that personally.
Speaker 1: Yeah. So, but you know that.
Speaker 2: Did And the other thing that they did too, is
they got rid of the windfall elimination provision in the
government offset provision in Social Security. And you know, if
you're a teacher or government worker, you know exactly what
that means, because they really were penalizing you on your
Social security if you had work sometime in a private
sector or the corporate sector where you paid into Social Security,
but then you became a teacher and you were paying
into cal PERSA, you became a government worker, you were
paying into cal stirs the retirement systems for those different entities.
And what would happen is if you made, if you
got such a good pension from sturs or pers, then
they would ding you on the Social Security which never
really made sense to me, because why should you be
why should you be rewarded over here and then penalized
over here if the numbers work and something got rid
of all that. That was under the tax one of
the tax bills that came out, I think it was
January fifth of this year that went into play. And
the nice thing too is it wasn't an opt in
or opt out. It happened automatically, you know, so that
they regroated it back to twenty twenty four, and so
you know, the teachers and government workers got up checked
for the previous year and then you know, will not
be being going forward. So I think it makes a
lot of sense. And yeah, but add tax bill capt
rates lower. But they also added these other benefits as
well too, so.
Speaker 4: That's going to add to the debt, no doubt. But
on the other hand, we got these tariffs and they
are offsetting and effectively the tariff regardless who pays it,
it doesn't matter in the end if it's not being
paid by the consumer because the exporter ate it. Basically,
then theoretically the price could have been lower on those goods,
so the consumer's paying it, and if they raise the price,
then the consumer's paying it. Effectively, it's almost a vat
tax or an import duty tax without having to try
to get it passed through Congress.
Speaker 1: Yeah, I agree.
Speaker 2: I mean that you know, tariff tax gets passed down
to the consumer, you know, one way or another, especially
when you positioned it kind of the way that you've
positioned it. I don't know that you know, if there's
a ten percent tariff that you know, the product's prices
go up ten percent for the consumers overnight because it
might be eaten, you know, in in that that that
export process by the manufacturers and and ultimately not come
down to the consumer.
Speaker 1: But when you when you look at it from the.
Speaker 2: Other angle, that this means they could have had blower
prices all along, you know, then yeah, I guess that
you could look at it as the consumer is overpaying
at the end of the day, though it does get
passed on to the consumer, and it certainly, you know,
it certainly could help offset the tax loss deficit that
has been been increased or or that potentially will increase
as a result of the tax bill.
Speaker 1: So I haven't studied those numbers.
Speaker 2: To see, you know, what offsets the other, whether it's
an equal reduction.
Speaker 1: But I do know the general underlying foundation that if
you're growth oriented, you grow the economy, you incentivize companies to.
Speaker 2: Grow it, then it works out really well as opposed
to government spending. You know, even within my own business
is the fact that taxes are lower. I have employees,
and I've had to make decisions in the past years
of you know, do I pay the tax or do
I hire another employee. It literally comes down to a decision.
And I'm a small business. When when those decisions go
up to fortune five hundred companies. You know, really that
that tax has the ability to urge companies to hire
more people, which is great for the economy, more people
spending more GDP and so on.
Speaker 1: Or those tax increases can cause layops.
Speaker 4: You know, it's the same thing like the Social Security tax.
You see it as an employee and your paycheck, but
your employer is matching it, and then it's like you're
paying both sides of it. It's just you're not seeing
the other side because if you weren't paying, if your
employer wasn't paying it, that money could be available for
your paycheck and you'd be getting higher earnings as a result.
So the tariffs are kind of the same way. One
other thing, Doge, the Trump administration announced that by January twentieth,
twenty twenty six, that's the anniversary of Trump's inauguration for
his second term here, that they're going to be cutting
one hundred thousand rules and regulations from the Federal Register.
I guess, effectively the CFR Code federal regulations, assuming they
can do it, which I have no doubt they can,
if the desires. They're using an AI tool to go
through every single rule and regulation all the outdated. What
effect do you think that's going to have on the economy.
Speaker 2: Yeah, so when you know mentioned one hundred thousand, I'm
thinking that's it, that's that's all fifty percent.
Speaker 4: There's two hundred thousand REGs. Fifty percent of the rigs
go out the window. We've already seen with mining, highway projects,
infrastructure projects. Streamlining has you know, taken projects take ten
sometimes twenty years and move them up to two, three,
four years. So we got rid of half all the
regulations and ignored the rest. Where does that leave us?
Speaker 1: Yeah?
Speaker 2: The problem is that you know these regulations exist because
you know and I know as attorneys that it's the
letter of the law all the time.
Speaker 1: Right. You can't have a subjective rule because then companies
are going to try to bend the rule. At least
that's what that's the idea behind having.
Speaker 2: And that's why when you look at a contract that
basically says you and I are going to do business
and I'm going to pay you this and you're going
to do this work, you know it has to be
a fifteen page contract that identifies everything. So the reality
is that if they're going to cut these regulations, I
mean Trump's done that before and it's worked out well.
Speaker 1: It hasn't been a problem.
Speaker 2: I don't think it's almost one of those trust but
verify things. I think it does need to be well
rounded so that there are guidelines. You know, as a
financial advisor with Providence Financial Company I started twenty six
years ago, the SEC has some rules and regulations in there,
but it's subjective.
Speaker 1: There are windows.
Speaker 2: So if you can't do anything deceitful, right, but the
seitful is a subjective word, what's that mean?
Speaker 1: Right?
Speaker 2: So it has to be within boundaries, and I think
if the rules of regulations had more boundaries around them,
I think that companies will abide with those boundaries, just
like most financial advisors abide within the boundaries that they
are given.
Speaker 1: And ultimately it's great for the economy. Let us do
our job right, let us get out there and serve
the consumer.
Speaker 2: Let us get out there and help people. Are there
going to be mistakes that we make?
Speaker 1: Yes? There are.
Speaker 2: You know. In California where I'm at, the employment laws
are absolutely ridiculous. If I do one if I do
one thing wrong, literally, the employment laws can put me
out of business just for a mistake.
Speaker 1: It's like the vehicle code.
Speaker 2: I was talking with the police officer the other day
and he threw out that there's like fifteen thousand codes
in the vehicle code and he basically said, oh yeah,
I know, right, and he said, you can't follow them all.
It is impossible to follow them all. It's the same
thing with employment law. It's impossible to follow them off
with the new PAGA rules and oh my gosh, it's
just it's ridiculous and the same thing.
Speaker 1: You hinder us from doing business. So many people are leaving, right.
Speaker 2: I think Elon Muskt left California if I because of
the rules and regulations. Let us do our job, Let
us go serve people. We're not out trying to screw everybody. Guys,
you know, and I understand that there has to be
some rules of regulations and that that are the one offs.
There are the Bernie madeoffs out there, right, But the
reality is those guys go to jail, and when you
calculate the percentage of one Bernie madeoff or however many
of those individuals are relative to the several hundred thousand
advisors out there, what you're really doing is regulating everybody.
Speaker 1: Because I'm the one person.
Speaker 2: Right, It's like the whole you know, one sailor is
drunk on the corner and the whole navy's drunk, right,
and let us do what.
Speaker 1: We got to do.
Speaker 2: So cutting the regulations, I think is a healthy step
for growth. If I know that, I can go and
hire someone, just realistic example. If I know and I go,
I can hire someone, and if they don't work out,
I can fire someone.
Speaker 1: I will take a more chance on more people.
Speaker 2: But the fact is firing someone in the state of
California takes work, and there's a lot of liability there.
So it comes back to hiring. I have a gal
right now, I'm thinking about hiring that that is potentially
a liability. If I have to fire her, I may
never hire her in the first place.
Speaker 4: Just look at Europe. You can't fire anybody in Europe
and e youth. It's all but impossible. What Volkswagen's going
through now getting rid of one hundred thousand employees is
you know, the stuff of nervous breakdowns.
Speaker 1: So getting rid of these regulations.
Speaker 4: A lot of them are out of date, a lot
of them are obsolete. They serve the contrary purpose to
why they were passed, and a lot of them are
illegal now under the the repeal of the Chevron doctrine
of basically giving deference to regulations that are passed by agencies,
and kind of the court's looking the other way. Well
that's no longer the case. So we got really interesting
things because I think it's plausible that it could happen,
and that could unleash a tidal wave of growth in
the economy. Couldn't it just compliance? Let's forget about not
being able to do what you want to do, but
just trying to comply with one hundred thousand regulations is
billions upon billions of dollars, isn't it.
Speaker 2: Oh my gosh, it's just it's ridiculous. It's silly. And
I think they should. I mean, I think they could,
and I don't think a lot of I don't think
a lot of people would notice. I mean, I think
the employees will notice, the people that had affect. But
I don't think there's going to be a negative. The
positive is that economy is going to grow. We you know,
get out of our way, let us go round our businesses,
and the economy is going to grow, that's for sure.
That's going to be felt, but I don't think that
it would be felt on the back end as any
type of negative. What negative is going to come of that?
You know, I had to I had to terminate a
high level employee multiple months ago, and once we had
let this individual go, the rest of my leadership team
was looking around, going what did he do?
Speaker 1: There was no hole. Normally, when you let someone go,
there's a hole right has to be filled. I don't
think there's going to be a hole.
Speaker 2: I think there's going to be billions that allars saved
by companies like mine and you know on other companies
out there. I think there's going to be a net positive,
But I don't think there's going to be a whole.
I don't think anyone's going to be looking around going go,
oh my gosh.
Speaker 1: We built that regulation win so now we can't know
it's not going to work like that.
Speaker 2: I think it's just going to happen. The economy is
going to grow as a result of it, and let's
move forward.
Speaker 1: I love it.
Speaker 4: Well, Hey, from your mouth to God's ears, Anthony, just
tell us where do we find you?
Speaker 1: How do we connect with you on the web? Yeah?
Speaker 2: Absolutely, A couple of ways you go right to my website,
Anthony Sikard. You go to Providence Financial ink dot com
or just search for Providence Financial Woodland Hills, California, Los Angeles, California.
Speaker 1: We come up all over the place, so thank you
Carrie excellent.
Speaker 4: Hey, any questions comments, shoot me an email kl at
Carrie Let's Anthony will give you an answer, I promise,
And while you're at it, go to Financial Survival Network
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appreciate you coming on. We'll talk to you again soon.
Speaker 2: Thank you, Gerry, glad to be here.
Speaker 3: Thanks for listening to Carrie Letz's Financial Survival Network, your
solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network now more than
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