Trumponomics

Lori and Lisa discuss how Trump’s proposals may affect the economy and dig deeper into his pick for Treasury Secretary: the good, the bad, and the ugly. Have a listen!!

Find out more and reach out to us on our blog.

Transcript

[00:00:00] Lisa: Welcome to nest egg podcast. This is Lisa James and I'm here with my partner, Lori Zager. We're a team, uh, called 2x wealth group, and we're a part of Ingalls and Snyder, LLC, an independent registered investment advisor based in New York city.

[00:00:24] We figured it was time to talk about everything that's happening after Trump. Trump was elected and so the topic today will be Trumponomics and we have a lot of things to cover. We're going to try and make it as straightforward as possible, but anything you were wondering about in terms of his objectives and what we think will happen, uh, and how they'll affect the economy, uh, we'll take a swing at.

[00:00:50] Lori: So I heard something that really rang true to me, which is Take Trump seriously, but not literally. So where you would like to start by sort of setting the table or painting the picture of, um, the economic, uh, realities that Trump is inheriting. 

[00:01:11] Lisa: Well, and he's inheriting a pretty good setup, despite, you know, some of the campaign rhetoric today.

[00:01:17] Uh, we've basically gotten, uh, inflation under control. It's sort of ranging 3%, depending on. Uh, which measure you look at, which month you look at it. We have, uh, good employment. Uh, if you look at unemployment rates, they're right around four, still around historical lows. And we also have good GDP growth. Uh, it's been averaging around 3 percent this year.

[00:01:42] And if you look to the more recent past, um, we had been at 2 percent GDP growth rates for quite a while. So to be growing it, 3 percent without much inflation is a pretty good achievement, but there's some negatives. 

[00:01:56] Lori: We have a debt problem. It's not even just how much debt relative to GDP. It's, um, because interest rates have gone up and they're a lot higher than they were during the first Trump administration.

[00:02:09] You've got, uh, about, uh, 13 percent of the budget is being paid. Is that right, Lisa? Was that the right number? 

[00:02:17] Lisa: 13 percent of the budget today goes to paying interest expense on our debt. 

[00:02:22] Lori: And it's growing, you know, he's got a problem. If debt grows and rates go up, both of those are problems. And some of the things that he's proposed are.

[00:02:32] likely to make either or both of those things go against him. 

[00:02:37] Lisa: Right. And actually, you know, if we wanted to just start with the things that we think are most, uh, important are the top priorities for his administration coming in, they would be. Immigration and deportation because he's promised as one is one concept.

[00:02:54] And that was a big campaign promise, uh, deregulation, tax cuts and tariffs. And these things interact with each other pretty significantly, but we can just start with immigration. 

[00:03:08] Lori: I listened, I spent the weekend listening to hours of, um, uh, the new treasury secretary being interviewed, Scott Besant. And he is, uh, a guy with a pedigree.

[00:03:19] He's very smart and he was trained by some of the, uh, best investors in the world. And, uh, He was asked, you know, what did he think about this idea of rounding up all the people that didn't have legal status? By some estimates, there's as many as 13 million people without legal status in this country. And the American Immigration Council has said that if you were to take all those people and throw them out of the country, that that would reduce GDP by 4.

[00:03:53] 2 to 6. 8 percent. And that would 

[00:03:55] Lisa: totally fight his concept of growing the economy. And on top of that, there are other people who separately say, if in fact you did deport anywhere between one and a half and eight and a half million people, that that could cause inflation to go up substantially. 

[00:04:13] Lori: So, Vesson was asked, what did he think about that, and he said that he was going to use J.

[00:04:18] D. Vance's response which when Vance was asked about it, Vance said, I'm going to talk about it like I eat my Subway sandwich, one bite at a time. So, I guess the, what he was suggesting is that, It all isn't going to happen all at once, but there is going to be, uh, this idea that, uh, uh, President Trump may be having to, uh, bust his own tables at Mar a Lago.

[00:04:49] Lisa: Yeah, that's right. Well, you know, the thing is that once you don't have immigrants working, you have to pay U. S. citizens more to do the same job because the reason immigrants are in meat packing, you know, jobs is because. Most U. S. citizens don't want that job. And if they get deported, that means that whoever's packaging your meat isn't going to have enough employees and meat prices will rise.

[00:05:15] Lori: There's no doubt that this is an inflationary concept. Even if he went on a, you know, a massive idea to get everybody pregnant, it takes a certain amount of time to hatch. It's not like a chicken, it takes longer to hatch. 

[00:05:31] Lisa: But this goes back to like, another thing is, take him seriously, but not literally, means that he's obviously not going to deport all these people.

[00:05:38] He's going to deport enough people people that his base feels satisfied that he's taken action, but not enough, so he craters his economic agenda. 

[00:05:49] Lori: So what about deregulation? That's really a big thing and, um, that's a big, uh, a thing for Besant. I mean, he just feels like we've been stifled because of, of regulations and, um, that is something that I think, uh, I think he'll do that.

[00:06:07] Yeah. As quickly as you possibly can. Well, 

[00:06:09] Lisa: that's why bank stocks are, are rallying and, um, people think deregulation will help banks quite a bit. Uh, and you know, oil and gas industry would really like, uh, deregulation so they can burn methane again. Uh, although there are some offsetting issues there, which is some European countries won't want to do.

[00:06:30] Buy gas that have had less than green, you know, like lower than optimal green experiences. 

[00:06:38] Lori: We all talk out of both sides of our mouth. I mean, Germany won't allow fracking yet. They'll buy gas that's fracked elsewhere. I mean, that's crazy, but they don't want it. 

[00:06:47] Lisa: They don't want to burn with method methane gas.

[00:06:52] So 

[00:06:53] Lori: they're burning coal. Okay. They're green. I mean, it's just. It's, it's just crazy how, what, what happens, but, but we anticipate that deregulation will happen. And I gotta tell you, Lisa. And 

[00:07:05] Lisa: that will be a boost for the 

[00:07:07] Lori: economy. It definitely will. I mean, I, I was screaming when I was taking 17 hours of continuing ed the other day, I was screaming.

[00:07:15] Oh my God, I can't take it anymore. So let's talk about tax cuts. This is an interesting one. And many people feel that, that this is in fact. Why, uh, a big reason why Trump was elected. Um, you know, I think that he has to keep corporate taxation kind of in line, because if he doesn't, there's no reason why corporations, and they did, by the way, before he enacted his first tax cuts, corporations did move out of the United States, they still kept business here.

[00:07:52] But their headquarters went elsewhere. So they will do what they can to move away from the U. S. Now, I know Yellen has tried to put some things on there and tax you wherever, wherever you're producing things, but, but just here, right. But you know, people will try and, And move things elsewhere, if it costs them more, uh, to, uh But 

[00:08:15] Lisa: US corporate tax rates now aren't No, it's reasonable.

[00:08:17] Aren't super out, out of line from the rest of the world. So, the question is, does he really need to cut taxes for corporations? I think he needs to cut taxes for individuals a lot more, but Um, the issue in Congress is there are budget rules that say if you're going to cut taxes, you have to pay for them somehow.

[00:08:34] And uh, currently and historically, you can't say, I'm going to raise money on tariffs over here and that's going to pay for my tax cuts. So he's going to have to do some shenanigans to get any kind of tariff revenue into the tax cut. And in addition to that, we have a lot of uncertainty about what those tariff, uh, both rates and revenues might be.

[00:08:57] You know, he's talked about 10 percent across the board tariffs. Oh, he's talked about much higher than that. Well, higher than that in certain countries, but I think that this is why people like Scott Besson, because he has a much more of a reputation of being, uh, measured and is definitely somebody who's aware of how things will affect, um, stock prices.

[00:09:18] And, 

[00:09:19] Lori: and then we know that Donald Trump cares about two things. His golf score and stock prices. 

[00:09:25] Lisa: And you know, you could actually see that last week when he threw out all his cabinet picks and people started freaking out when he was going to take Ludnick as his treasury secretary temporarily. And he is a total tariff hound.

[00:09:40] The stock market really did not like that. And we saw a sell off and there was people didn't like what was going on with Gates. And so, you know, And then all of a sudden, guess what? He regroups. He had a new treasury secretary nominee. He regroups. The stock market tells him, Oh, no, no, no, that's not really working.

[00:09:57] It's kind of what his governor is going to be for his term. And he likes to make deals. And then he picks somebody that the market liked. 

[00:10:05] Lori: And he likes to make deals. You have no idea, you know, what is actually going to be at the end of the day, what the deal looks like. Well, you know, we might know what he go, we don't even know what he's going to go in with.

[00:10:15] But let's say he goes in with 10 or 20%. Who knows what he comes out with. But he's probably going to 

[00:10:19] Lisa: pick and choose. It's going to be the same thing. It's take him seriously, not literally, because he's going to have a million people in his office going, if you raise tariffs on that product, it's going to kill my business.

[00:10:30] And so he's going to be working on exceptions for all different kinds of companies. So it's not going to be as doubtful that it's going to be unilateral. 

[00:10:39] Lori: Right. And as you said, Lisa, I thought it was really interesting that the amount that we import from China has fallen 

[00:10:48] Lisa: in half. It's now only about 12 and a half percent of our imports.

[00:10:52] So we think of them as being the big bogeyman, but like a lot of that has been reduced. It used to be 25. Now it's 12 and a half. 

[00:11:00] Lori: You know, what about this idea that the government isn't efficient and we're going to. 

[00:11:05] Lisa: Well, my favorite thing is that they named it the Department of Government Efficiency, which is DOGE, which is the same as the name of Elon Musk's cryptocurrency.

[00:11:14] And I don't think that's a mistake. And Elon Musk is in charge of it, so we know it was on purpose. So anyway, he wants to cut the government Uh, by 50%. Again, that has a real problem with GDP because all of a sudden those government employees don't have jobs. They're not going to be earning money. They're going to be in the meatpacking industry.

[00:11:33] And they're not going to go to the meatpacking companies. It's, it's again, it's aspirational. And, uh, I guess Trump is trying to get rid of people by making them come back to work, but a lot of them really only work remotely 80 Uh, 20 percent of the time anyway. So, uh, so I mean, I think everybody's all for government efficiency, but you can't get rid of all of the other departments of the government besides Medicare, Medicaid, defense, interest expense.

[00:12:01] So it's only about. 15 percent of the government that is all these other agencies. There's only so much to be cut from them 

[00:12:08] Lori: I heard somebody interviewed today and he had a really interesting point. He said look I'm all for having all of these tech Bros, or you know tech execs come in and and give ideas about how we can be more efficient But really if you actually go to some of the government offices and ask them questions, they will tell you that there are things that they can cut in their budget.

[00:12:32] And he gave examples of a, you know, a defense item that the, that the people in the agency are like, nobody uses this. This is not something that we need. Um, it's costing us a fortune. Why are we doing this? So yeah, there'll be things, they will find, they will find things, but it's really gotta be a partnership between government and the agency.

[00:12:53] And some of the new people, yeah, Elon and, and his Rama Swami. Yeah, really. And then there's this idea that we are going to pay for, or we're going to keep inflation low by, um, drill, baby drill and cutting oil and gas prices by 50%. There's a lot of big numbers being thrown around by Trump. So, so I have a lot of questions about that.

[00:13:19] One of the questions is, and you've. If you've listened to us or read our blogs for a while, you know that we're of the belief that, um, we as a country and really the world, I think they've, they actually found a new gas field in Jordan. But other than that, what's happened is that it takes a lot more money and effort to get the same amount of production out of our fields because they've already passed their peak.

[00:13:48] And, um, so, It's a problem on how he's going to even, how he's going to do that. And his main, his 

[00:13:55] Lisa: main, the federal lands is that, you know, deregulation and, you know, putting an energy, uh, executive in charge of the department of the interior means that you're going to have a lot of drilling on federal land.

[00:14:10] Federal land and that's a way to get access to new wells and an increased production. 

[00:14:16] Lori: So that's possible. I think 50 percent is a lofty goal. I also think. Yeah, very lofty. I also think that what happened a few years ago and the reason that the whole energy companies did relatively well was because They quit just drilling for drilling sake and started to care about their shareholders and returning money to their shareholders.

[00:14:41] And as far as I know, those companies still work for their shareholders. Yes, and 

[00:14:46] Lisa: the executives aren't excited about drill baby drill. So we think there will be some increase, but it's, it's not going to be crazy because otherwise they actually end up hurting their own stock price. 

[00:14:56] Lori: Right, 

[00:14:56] Lisa: but you know it is kind of like the perfect solution.

[00:14:59] You can understand why if somebody's thinking about I can manipulate all these things I'm gonna raise tariffs. I'm going to cut taxes. All of these things are inflationary I'm gonna get rid of immigrants. There'll be fewer workers. So wages will go up for low low income jobs Okay, like all of those things are inflationary.

[00:15:18] What can you do to fight that? Well, you can You Have cheap gas prices because it's almost the only thing that is deflationary. Prices can actually go down. In fact, that's what's happened. Actually, 

[00:15:29] Lori: Lisa, I would argue the reason we haven't had inflation numbers that are worse than they are right now is because you've had Gas prices 

[00:15:36] Lisa: went down.

[00:15:36] Gas, right. Oil and gas prices have gone down. This doesn't happen in the rest of, this doesn't happen in the rest of the economy. Like service prices don't go down. They just go up more slowly. And the same thing with manufactured goods. So, I, I think the grand plan is that you keep inflate, his grand plan is you keep inflation in, in check by having gas prices go down.

[00:15:56] Yeah, and like I said, it has helped us so far. Yeah, but we just don't think there's, his, his level of um, price decline is, is beyond possible. It's not, it's just not even possible. So, it's not going to be enough of an offset. 

[00:16:11] Lori: And then there are other offsetting things to him drilling, one is we are exporting more natural gas, it's still a small number relative to how much we produce, but natural gas prices in Europe are over five times what they are in the U.

[00:16:26] S., this is data as of September of this year. And it could have narrowed a little bit, but, uh, it's, it's still a huge difference in terms of the price you can get for natural gas in Europe versus what you can get in the U. S. So if you are a company that can export natural gas to Europe, you're going to do it.

[00:16:46] Again, we don't have enough facilities to make that happen. More of an issue, um, but at some point it'll be an issue 

[00:16:53] Lisa: when you have some other great ideas like, uh, having a crypto reserve as a way of sort of helping the federal reserve out with balancing the value of the dollar and dollar assets. But yet at the same time, he wants a dollar to be the world reserve currency.

[00:17:12] And Lori will say, 

[00:17:14] Lori: we need that. That's helped our dollar. And so the question is, why would he say two things that are seemingly conflicting? If you have a cryptocurrency reserve, doesn't that take away from the reserve value of the dollar? I think what I've heard is that his idea is that he wants to put it on the Fed's balance sheet.

[00:17:41] And if it's on the balance sheet, it would make, because there's a scarcity to crypto like there is to gold, it would, uh, help back the full faith and credit of the U. S. dollar beyond just, uh, taxing our people. Citizens, 

[00:17:58] Lisa: right? I mean, basically most people think that the backing of the dollar is, is due to our growing economy and strong economy and the government's ability to tax it, combined with the uss ability to say, people need to buy things in dollars.

[00:18:14] And those are two things that really support the dollar. So if you want to shift people to using cryptocurrency or trying to change things so that cryptocurrency can actually be used more as a, um, a currency as opposed to a store of value, or you can buy things. And sell things for cryptocurrency. That would absolutely cut at the dollar's 

[00:18:35] Lori: role.

[00:18:36] And, and, and people are already trying to do that. You've heard about China and Russia and so many other countries trying to buy. Energy for one in their own currencies and they're doing it as a matter of fact and we wrote many year I don't know many blogs ago when Nixon took the u. s. Off the gold standard It used to be that for the dollar was backed by our reserves of gold and when we could no longer do that any longer Um, the, um, and I actually learned this in a Vanity Fair article the other day.

[00:19:15] I believe it was the French. That came to the U S and demanded to get their dollars paid in gold. And that's what prompted the U S Nixon to go off the gold standard. Cause he couldn't produce 

[00:19:31] Lisa: enough gold, enough 

[00:19:32] Lori: gold to satisfy what the French needed, but then he got worried about the dollar plummeting.

[00:19:37] So he sent Kissinger to Saudi Arabia and said, this was after the six day war. The U. S. would back Saudi Arabia if Israel attacked them. In exchange for that, they wanted the Saudis to sell oil only in dollars. And that's when the petrodollar was big. And 

[00:19:58] Lisa: that was a great move by Nixon. It was. It was very helpful for the U.

[00:20:02] S. currency. But it's being undermined. And now it's changing again. And I don't think there's going to be anything to stop that change. I mean, the fact that Russia, China, Saudi Arabia, even India, you know, don't necessarily want to use U. S. dollars for all of their foreign currency transactions. 

[00:20:19] Lori: Um, so. You know, I've, I've been trying to figure out other than just sheer momentum, why, if, what is the value of Bitcoin?

[00:20:26] And we actually wrote a great blog about Bitcoin. 

[00:20:29] Lisa: Yes, we're going to send you to our website to take 

[00:20:32] Lori: a look at it. But, you know, the issue is. Is it a store of value? And that really kind of depends on the demand for it, not the supply like gold. And if you do a crypto reserve in Bitcoin, that is going to increase the demand for Bitcoin.

[00:20:51] We haven't seen other countries. Sort of like you can drive 

[00:20:53] Lisa: it up by your own investment if you're a large government. Pretty much. Right. Because Bitcoin, the thing about Bitcoin that people like is that it has a finite supply. So if you start to have more and more buying, it tends to naturally cause the price to go up.

[00:21:07] Lori: It's a tightrope that he's walking. Yes. Because he's, on the one hand, some of the things aren't broken. 

[00:21:15] Lisa: Yeah. And the other hand, you know, people really care a lot about food and gas prices. So if he, if his immigration policy causes food prices to go up because we don't have people to pick fruit and vegetables and we don't have people to, you know, work in, in sort of unappealing food manufacturing jobs, then those prices will go up and people will be very unhappy.

[00:21:39] And I, I do believe that's why he's focused on, on gas. As the offsetting thing that could go down in price. Because if they both go up in price, then everybody who elected him because of inflation is going to be very unhappy. 

[00:21:55] Lori: I've also looked at inflationary trends over time and I gotta tell you, they go over long periods of time and we are in an inflationary trend.

[00:22:03] And um, it doesn't have to be 9%. But, The chances of it going back to where it was before COVID, I think are, are slim to none. But 

[00:22:15] Lisa: it was funny because before COVID people actually thought inflation was too low because it was below 2 percent and 2 percent was their objective. But 2 percent isn't nirvana or a magic number.

[00:22:25] You could have inflation anywhere between two and three and it would be fine. Fine because you think 

[00:22:31] Lori: the U. S. economy could grow enough to take it. 

[00:22:33] Lisa: Or else it's also not necessarily an impediment to growth in that range. If you look back over history, it averaged 3 percent for a long time. But, you know, in terms of inflation coming in waves, I mean, I think that.

[00:22:47] We have a couple of things that are hard to fight. I mean, we do have some, we have our issues with the government debt and just general, uh, interest rates right now, but sometimes those waves are slow. Like we had a wave and now we're kind of at a normal, normal rate of inflation. And that can go on for a couple of years before you actually see another upswing of inflation.

[00:23:10] And that would be driven exactly by the kind of policies we're talking about here. Which is that you decrease the amount of labor around that causes wages to go up. Um, I, you can't do these things without having sort of a counterbalancing effect. And I think that Trump likes to throw a lot of ideas out there and then, you know, when the rubber meets the road, they're going to try and figure out.

[00:23:37] You know, how much of this versus how much of that so that they don't create too much inflation. And I think Besant along with S& P 500 are the two things that will kind of keep things under control and not get too crazy. He won't move too fast and the S& P 500 is going to respond pretty quickly if there are a lot of companies saying that they don't have enough people to produce their product.

[00:24:03] Lori: And then I guess I'd like to end with, uh, one thing I heard, uh, Vessant say when he was interviewed, I, I listened to three different interviews. He actually ran a hedge fund, and he said that his largest position was gold, that he had a 20 or 25 percent position in gold. And then I heard, uh, In May, he said that he thought that gold could go parabolic, which means go up like crazy.

[00:24:28] Lisa: I agree. That's an inflationary bet. Yeah. Yeah. I agree with him. It's an anti dollar and inflationary bet, both of which are things that He's coming out with a charge of fixing. Yeah, that's right. 

[00:24:43] Lori: That's all for now. We hope you enjoyed this. Um, feel free to contact us. You can contact us at Laurie at 2xwealth.

[00:24:52] ingels. net or Lisa at 2xwealth. ingels. net. You can go to our website, 2xwealthgroup. ingels. net. And 

[00:25:01] Lisa: please do look at our, our blog on gold and Bitcoin. If you're curious about those two things, we have two different blogs and we have a great link in our Bitcoin blog.

[00:25:15] I'm going to go ahead and get started.