September 9, 2025 • 49 mins
Brian Wesbury discusses Fed independence, inflationary fears, the growth of government, and whether the broader economic benefits of AI adoption will materialize.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ryan (00:08):
Hi, welcome to the First Trust ROI podcast.
I'm Ryan Esekainen, etfstrategist at First Trust.
Today I'm joined by BrianWestbury, chief Economist at
First Trust.
We are going to discuss the Fedand its independence.
We're going to talk about theUS economy, maybe, where the
equity markets are headedbetween now and the end of the
year.
Thanks for joining us.
Well, we're finishing up thesummer here, heading into the
(00:31):
fall.
There's been a lot that hasgone on this year.
It feels like you know, we'vehad a compressed amount of
activity, everything frommarkets diving because of
uncertainty related to tariffsto the potential for an outbreak
of war, to questions about whatthe Fed's going to do Fed
(00:51):
independence, fed policy there'sa lot of ground to cover today,
so I'm glad you're able to joinme.
Maybe we can start out here.
I don't want to spend all ourtime focused on government
policy, but it seems like it'skind of unavoidable in the
economy because it has such abig impact, especially this year
(01:11):
, and some of the things I like,some of the things I don't like
.
But one of the things that kindof keeps on striking me is sort
of echoes of what Ronald Reagansaid once upon a time with the
nine most terrifying words inthe English language.
You know, I'm here from the,I'm from the government and I'm
here to help.
(01:31):
Yeah, yeah, I don't know ifthat's all the but, but and you
know, I guess I want to startthere what's your take on all of
the intervention that thegovernment has had this year,
and is that going to be good orbad for the long-term health of
the economy?
Brian (01:48):
Yeah, I mean I kind of try to step back from all of
this.
Our government is massive andthe federal budget is $7
trillion a year.
If you include everything,including defense, all of that
stuff, it's 24% of GDP, almostlike it's a quarter of our GDP.
(02:11):
And that's just the federalgovernment.
State and local is another 20%.
And then if you include thecost of regulation, which eats
up about 7% of our resources,just complying with taxes and
compliance and all of that stuff, that's 51% of everything that
(02:31):
we do.
No matter how much I hatetalking about government,
because I don't think that'swhat creates wealth, it's half
of everything of a daily lifeand as a result, everything's
become political, and so I wouldput the blame on that, on just
(02:53):
the size of government.
And then you get in a newelection, a new president comes
in that sort of wants to, atleast on the surface, tear that
down, kind of like Ronald Reagan, when Ronald Reagan beat Jimmy
Carter and then now Trump beatsBiden-Harris.
It's sort of small governmentversus big government in the
(03:16):
philosophy, but Trump is doing alot of things that kind of sort
of go against the grain of freemarkets.
And that is, you know, tariffsare a tax and taking 10% of
Intel if you give them money youknow, 15% of the sales, of any
(03:36):
revenue that comes to NVIDIAfrom Chinese chip sales things
like that, and so people havegone sort of I think a little
bit nuts about that, because Iactually think some of those
things are still the jury'sstill out whether we're going to
do those.
I've heard that the Trump teamis debating this 10% ownership.
They fully realize that's notreally a free market thing to do
(03:58):
.
We have to realize is that atthe same time they're doing that
and people focus on it, and Ijust read a piece, uh, not long
in the wall street journal, notlong ago, that this is the
chinaization of it's the statecapitalism.
Uh, and and trump's bringing itin.
I'm like that's.
I mean, this is forgettinghistory, because back in the 30s
(04:21):
we paid farmers not to growstuff.
In the 30s we paid farmers notto grow stuff.
In the 70s we had wage andprice controls and we set
different price increases forChrysler versus Ford versus ag
versus steel.
Like we have played around withstate capitalism for decades
and decades and decades and atthe same time, trump has done
(04:43):
some of these things.
You know what he's attemptingto do is bring manufacturing,
especially chips, back to the US.
So that's an admirable goal.
And him getting involved in thatis a little state capitalistic,
you know, china-isty.
But on the other side we'vetaken away regulations on light
(05:06):
bulbs, stoves, ovens,dishwashers, you know.
Gas mileage requirements havebeen watered down.
We're not going to subsidizeelectric cars as much anymore.
So it's really kind offascinating because there's two
sides to this and I think if youput it all together, especially
now that we've furloughed orlaid off about 300,000
(05:31):
government workers, I'd say thenet effect of Trump's policies
isn't state capitalism, it'sliterally a smaller government.
But we're going to have to getto this budget process this fall
September and October before wefind out what Congress does,
because they're the ones thathave to pass a budget and then
(05:52):
fund the 13 separate 12, 13separate agencies of the
government.
And if they are able to cutthat spending, then we have a
little bit of a repeat of RonaldReagan and that would be real
positive.
Are you hopeful that they'llcome up with a little bit of a
repeat of Ronald Reagan, andthat would be real positive.
Ryan (06:06):
Are you hopeful that they'll come up with a budget,
because, if I'm not mistaken,that hasn't happened for decades
, 30 years maybe.
Brian (06:13):
Yeah, I mean, I'm hopeful .
Ryan (06:17):
You're an optimist.
Brian (06:18):
naturally I'm an optimist , but I've been an optimist a
number of times, and Republicansare in control.
They're the ones that havecomplained about this the most.
You would think that they wouldbe able to pull it together and
actually pass a true budget inwhat we call regular order, like
the parliamentary order of thebusiness, of government.
(06:41):
But man, maybe they forgot how.
I'm starting to think 30, 35years without a true budget.
Maybe they did forget how, butI would argue that the net
effect of all of this.
So we extended the tax cuts,which is a positive, but at the
same time, I think we offsetthat by taxing through tariffs,
(07:04):
and so the net tax burden onAmericans hasn't well.
First of all, extending the taxcut is not a tax cut like at
all, it's just keeping them thesame, and so that's a positive,
because now we know that that'spermanent.
That's the positive part, not atax cut.
(07:24):
And then we've raised tariffsand I think we still haven't
seen the negative effects ofthat.
Canada is slowing down, europeis slowing down.
I'm certain China is slowingdown, although it's hard to get
data that you trust out of themand I suspect that that slowdown
is going to show up here aswell, and it really is coming
from that tax hike, which is atariff.
Ryan (07:46):
So let's talk a little bit more about tariffs, because I
know there's been some legalchallenges and we're recording
this on September 3rd, so whoknows what happens in the courts
.
But I think most recently whatI read was that some of those
tariffs were ruled to be illegaland now it might go to the
Supreme Court or something likethat.
(08:07):
But it makes me think you know,there's corporations that have
already paid those tariffs.
Oh yeah, so what happens, doesthe?
Treasury have to send them acheck back and refund that.
Brian (08:18):
One of the things that's unbelievable about President
Trump is how twisted he makespeople's brains, but what we're
going to end up with isDemocrats cheering a tax cut if
tariffs are ruled illegal, andthen actually cheering the fact
that we're going to pay UScompanies back money, and so
(08:40):
that to me is like it's justwhat a topsy-turvy world.
So that to me is like it's justa what a topsy-turvy world.
Yeah, but to just, I'm not alawyer, I'm not a constitutional
scholar, but I do understandsome things about the tariff
issue, and one of them is thatwe need an emergency and that's
why, early on, it was fentanyland immigration, and so he was
(09:05):
especially going after canadaand mexico and those are
emergencies and so in a waythat's a declaration of war,
like you could.
You know, that's kind of thethese are the, the area of law
that that goes in.
But then he just called thetrade deficit emergency so so
and the loss of jobs in America.
(09:25):
And that's where the courts aregoing to have a really
difficult time, because thepresident isn't allowed to just
change tax rates on his or herown, and that's why you really
need a legal reason, and it'snot clear that he has one, when
unemployment is as low as it iscurrently, to blame the trade
(09:50):
deficit and taking away jobs orsomething.
Ryan (09:52):
I'm not sure that that is the best argument to make.
Brian (09:54):
Yeah, exactly.
Ryan (09:56):
It doesn't ring too, true so the other thing that I was
then thinking about if these areruled illegal and the Supreme
Court, let's say, says, okay,they are illegal, I suspect that
the Trump administration wouldtry to push Congress to pass
some legislation for tariffs,codify it into law, and that
(10:16):
could get really messy.
Brian (10:17):
It could, and I'm not even sure whether they would
need a supermajor majority toget that done.
You know, tax hikes, I thinkyou need a super majority, but
since it doesn't increase thedeficit, maybe it falls under
the Byrd rule, which says we cando it with a simple majority.
But I'm not sure Congress wantsto vote on that Because that's
(10:43):
raising taxes on corporations intheir districts, and so I mean
it's a question whether any ofthis would get done.
So obviously there is so muchuncertainty because President
Trump is pushing the limits of alot of things really, of
executive power, like how muchpower does the president really
(11:05):
have?
And the reason I think thatwe're here I think that's
important for us to think aboutis because Congress it's failed
at its job.
I mean, it hasn't balanced thebudget, it hasn't passed a
budget.
Spending just keeps going upand up and up and up and up, and
(11:26):
Congress hasn't been able tostop that.
And I mean we could debate whyDo we need term limits or how do
you put an end to it, butthat's why Trump is doing this.
And we've talked about thisbefore.
But just real, quickly, thewhole idea of Keynesianism is
(11:47):
that you tax people with a highmarginal propensity to save and
you give it to people with ahigh marginal propensity to
consume, because Keynesiansbelieve that demand, consumption
is what drives growth, notentrepreneurship and innovation
and invention, but demand andpeople spending money, and it's
(12:10):
worked.
It hasn't worked to lift growthbut it has worked, because
consumption is way up andproduction is not up and so
we're importing more to supportthat consumption that all this
redistribution of money.
I mean think about COVID wehanded out almost $5 trillion
(12:32):
for people to sit at home.
So we weren't producing but wewere consuming, so no wonder the
trade dev.
I mean that's an extremeexample, but we've been doing
this in the US for 40 years andso if you're trying to fix it,
one way to do it is tariffs,although I would argue that's
(12:53):
not the best way.
The best way is to cut taxrates, cut government spending,
stop taxing people and handingit out to others to spend, and
then cut regulation and letpeople actually produce here,
because we make it really hardto produce in the United States
with all the tort law and allthe ways you can get regulated
(13:13):
and fined and taxed if youproduce.
Ryan (13:19):
At least in the news cycle , there hasn't been much talk
about the cutting of regulations.
I think that's kind of early on.
There was that there was goingto be big regulatory cuts, but I
haven't seen a ton of newsarticles that talk about how
regulations have been cut.
So do you think that that isjust something that's being
overlooked?
Brian (13:38):
Yeah, it's being totally overlooked.
It's way more.
I think news is turned into bigtime clickbait and it's also
turned into politically driven.
So you don't want to highlightderegulation.
I mean, I'm sure there arepeople out there that are
highlighting it, but it's not asexciting to write about
(13:59):
deregulation as it is to writeabout the war in Ukraine or
Israel, or tariffs, and a fightwith China and NVIDIA and owning
10% of this.
So that's where we see the news.
There is a lot of deregulationgoing on.
I mean, I mentioned a couple ofthem and there's a line, but
(14:21):
we're not subsidizing electricvehicles.
Soon that will run out.
We lowered gas mileage.
The CAFE rules, caferequirements yeah, rules.
We reduced them, which meansnow you can, you know if you're
ford, you don't have to produceelectric cars, you can make more
f-150s and you know this is theway the us wants to go.
(14:44):
Anyway.
People like the demand forelectric cars is not huge and
it's a lot driven by tax uhreduction.
Um, like I said, stoves,dishwashers, light bulbs, all of
those things.
And then I think this ishappening in a lot of other
areas and we just don't see it,at least it's not reported on
(15:06):
very clearly.
But yeah, they're deregulatingright now and it's getting
easier to do business in theUnited States and that's a real
positive.
Ryan (15:15):
Yeah.
Brian (15:16):
So I guess, to summarize from an economic point of view
and how this is affecting theeconomy, there's some good
things going on and there's somewhat I would I'm not going to
say negative, but things thatmight slow the economy.
They're good intentioned, ifyou will, but a tariff is a tax
(15:39):
and so, if you try to put theseon, one of the things that makes
economic forecasting hard isthat we don't have a period in
time in history where we canlook at what happens.
When you do this, there's notest.
We do know the direction.
This deregulation is positive,where we can look at what
(15:59):
happens when you do this.
There's no test.
We do know the direction.
This deregulation is positive.
The tax hikes from tariffs arenegative, but is the negative
outweigh?
the positive, or is the positiveoutweigh the negative?
We don't know.
And that's why, when I fallback on looking at the money
supply, I think tariffs aretaxes and taxes aren't good.
So I would argue that, yeah,we're benefiting from some of
(16:22):
this stuff, but the costs maykeep those benefits at bay.
And then you come back to thefundamentals and the money
supply is flat for the lastthree years.
We're cutting the deficit,believe it or not.
It's not by a massive amount,but it's not going to be growing
.
And when you have a flat moneysupply and deficits going down,
(16:45):
all that short-term stimulusthat we got used to, the era of
easy everything, is over, andthat means for me, a slowdown in
the economy.
Ryan (16:58):
So then we should talk a little bit about the Fed,
because that is kind of relatedto at least the excuse for not
cutting rates is the uncertaintyrelated to tariffs and whether
or not that's going to causesome level of prices to go up or
inflation.
I think there's some prettywide disagreement about the
inflationary effects of tariffs,but there's certainly the
(17:20):
uncertainty there, and you've, Ithink, argued in the past that
the Fed can cut a couple timesand still be in neutral, and I
think maybe the Fed is comingaround to that opinion.
It seems like they're probablygoing to cut in September.
Is that your expectation?
What do you think happens fromthere?
Brian (17:37):
Yeah, I think the Jackson Hole speech by Jerome Powell
was pretty clear.
Ryan (17:40):
Yeah.
Brian (17:41):
I mean I don't care how he said it, I mean I could tell
you how he said it.
He said, well, inflation'sstill a worry, but employment's
slowing down.
And so I mean, basically he wasgiven an excuse to cut, slowing
down.
And so I mean, basically it wasgiven an excuse to cut and the
market's pricing in a quarterpoint cut September 17.
So it's only two weeks from now, and I think that's exactly
(18:01):
what we're going to get.
Inflation right now.
Look at all the measuresrunning about two and a half
percent.
So with the 1% real yield,that's three and a half.
One and a half percent realyield, that's four.
I would take four as being agood neutral rate, and the Fed
(18:23):
could cut twice.
They probably should cut by two, by 50 basis points in
September, but I think they'reonly going to do one.
And so the now you know, andTrump's leaning on them.
One of the things Trump hassaid, if I'm not mistaken, is he
wants interest rates 300 basispoints lower.
So which would put him at oneand a half percent.
(18:44):
Yeah, that's below inflation.
That's too low and, by the way,that's why the gold market is
going crazy.
We're over $3,500 an ounce.
It's silver's over $40 an ounce.
The precious metals are takingoff and they're worried that a
Fed under Trump will follow apolicy that'll create more
(19:07):
inflation than they think.
I don't think the market shouldbe as worried as it is.
The money supply is flat andinterest rates themselves just
by themselves.
They don't have as much impacton inflation as people think
they do.
I mean, bernanke held thefederal funds rate at zero for
seven years.
(19:28):
We didn't get inflation.
And then Powell held it for twoyears and we did get inflation.
And then Powell held it for twoyears and we did get inflation.
So wait, if seven years didn'tcause inflation but two years
did, what was going on?
And I think the answer isreally easy.
Look at a growth rate chart ofM2.
It's like M2 didn't accelerateunder Bernanke.
(19:49):
It boomed.
It grew 40% under Powell.
That's why we had inflation.
It was M2, not because of thelow interest rates themselves.
So we'll have to watch themoney supply and right now it's
growing less than GDP.
So I don't think it'sinflationary.
Ryan (20:07):
So there's been a lot of concerns expressed about the
independence of the Fed.
Brian (20:12):
you know a lot of news articles and by the very same
people who wanted to firemembers of the Supreme Court.
By the way, yes.
By the way, yes.
Ryan (20:23):
So is that something people should be concerned about
?
Independence of the Fed.
And you know, kind of as asecond part of that question,
any favorites for who mightsucceed Powell?
If you know, assume he's notgoing to be reappointed.
Brian (20:36):
Yeah, he will not be reappointed as chairman.
He, by the way, he still hassome term left.
So, like, the chairman is amember of the board and those
are 14-year terms, and thentheir appointed chairman within
that term, and so if the termruns out before their four-year
(20:57):
chairman term runs out, thenthey got to be reappointed to
keep their presidency, or their,their chairmanship, um and so
so his, but his 14 year yearterm is not over in may he'll,
and he will no longer bechairman.
But he could, could stay on theFed as a vote.
And then now Trump is trying tofigure out whether it's
(21:20):
constitutional to fire thesepeople or not for a cause or
whatever, and so we know allthat's going.
The Fed should be independent,but it's not.
It's never been really trulyindependent, but especially in
2008, that when the Fed startedquantitative easing, they tied
(21:44):
themselves at the hip topoliticians, because what they
did is they bought thequantitative easing means.
I print money to buy governmentbonds.
They funded the governmentduring TARP and President
Obama's shovel ready projectprograms.
They funded all the bonds thatwere used to pay for COVID and
(22:07):
like like five.
That's that's what quantitativeeasing was.
So the Fed is the one that Ithink they violated independence
from that side.
They should have never beenfinancing governments borrowing
and spending and they made it alot easier for the government to
borrow and spend.
And I don't think that itwasn't a war.
(22:30):
I think we overreacted, the Fedoverreacted, and if you're
going to fight a war, you oughtto borrow the money.
That's what we used to do.
I mean England.
You know, before theRevolutionary War, england had
defeated France, defeated Spain,sun never set on the English
Empire, all that stuff.
(22:51):
And every year their intereston their debt was 50% of all the
tax revenues that theycollected.
And the way they got in thatmuch debt is they borrowed all
the money.
So they didn't have a centralbank back then to do
quantitative easing and they hadto work their way out of it and
(23:12):
they taxed their colonies, theyput tariffs in, they did all
kinds of things to get out ofthat debt.
But that's the way we shouldhave financed COVID.
If you want to pay people tostay at home, you ought to ask
the bond market to pay for itand not have the Fed pay for it.
So I think the Fed violatedindependence by doing
(23:33):
quantitative easing in the firstplace.
That's number one.
Number two the Federal Reserve.
It became highly politicalbecause it got involved in
climate change, communityactivism, environmentalism, dei.
The Fed is one of the mostprogressive institutions in
(23:56):
government and I know this byfor a fact.
The institution itself is notindependent.
It's very political and andtherefore Trump attacking it, if
you will, by going after Cookor Powell yeah, he wants lower
interest rates.
That makes him he's a developerwhich you know, a developer who
(24:17):
doesn't want low interest rates,and so I get all of that.
But the Fed is the one thatoverstepped bounds and it's not
talked about enough.
And it should be talked aboutand I'm willing to talk about it
because I don't want to be onthe Fed, and so I have no desire
to be on the Fed.
But most economists I know wantto be on the Fed, but they're
(24:43):
the ones that violated thisindependence, not Trump.
And having said that, I believein an independent Fed and I
think the president's not.
With Lisa Cook, if she lied onher mortgage applications, I
think that is a fireable offense, although we did have a
treasury secretary who didn'tpay his taxes like still got
(25:04):
through confirmation.
So I mean, maybe our standardshave fallen in America, but he
is not trying to threaten theirindependence, in my opinion,
because they don't have any left.
They've already given up theirindependence.
Ryan (25:21):
So, with the mission creep that they've had and they're
already doing things that arepolitical, you think that it's
just a response to thatpoliticization?
Yeah, whatever that you thinkit's a response.
It's not actually Trump beingthe.
I think it's a little bit ofboth but they have earned the
response.
Brian (25:41):
Let's put it that way the Fed and the Treasury should be
separate in a way.
They have to work togetherbecause you know the value of
the dollar, the way the tradeworks, the way money flows.
They have to work together.
But they have now.
For example, the Treasury nowhas an account at the Fed with
(26:04):
hundreds of billions of dollarsin it and, according to stuff
that I've read, they believethat account ought to have $850
billion in it and they hold thatat the Fed.
And, by the way, so when theyraise taxes you write a check to
pay your taxes they put it atthe Fed.
It comes out of them too, soit's actually become part of
(26:26):
monetary policy.
And if you dig kind of deepenough in the dirt a little bit
and look at this the way thesetwo institutions are working
together it looks a lot likemodern monetary theory, and this
is why gold and silver aregoing nuts right now, because
they're scared to death thatwe're going to use the Treasury
(26:48):
and the Fed to finance spendingthat we shouldn't be, and I mean
that's the way I read this thatwe'll end up with more
inflation, and all I'm sayingabout Fed independence is that
they gave it up just as much aspoliticians tried to take it,
and that's what happened.
(27:10):
My biggest concern about ourworld going forward is just the
sheer size of our government,because what happens when
government gets so big?
Not only is it involved inevery walk of life, everything
you do you can't turn aroundwithout having government
(27:30):
involved in some way but it alsoencourages institutions to
become political and to try towin favor with this group or
stop stymie that group, and Ithink the Fed has gone that
direction much more than anybodyis willing to talk about.
(27:52):
I also am completely againstwhat the Fed has done with
quantitative easing.
We're paying private banksright now, private banks $200
billion a year to hold thereserves that the Federal
Reserve created to buy thegovernment debt.
But we just do it a roundaboutway.
The banks hold the reserves,the cash, the Fed owns the bonds
(28:15):
and we pay the banks so thatthe Fed can own the bonds.
And the net result of all thisis government spending went
through the roof and if the Fedhad not have done that, the
markets would have revolted along time ago.
And the end result of this forour sake, for what really
(28:35):
matters to us here is that theFed's about to cut.
We know this.
Well, guess what?
The 10-year treasury yield hasgone up since we found out that
the Fed was going to cut.
And so why is that?
Well, it's because maybe theyshouldn't be, or at least that's
what the market might be saying.
(28:56):
And the reason that's importantto me is the 10-year yield is
what goes in our stock marketmodel, and if you put a four and
a quarter 10-year yield in withcurrent earnings, we're
overvalued by a significantamount, like somewhere around
40%.
And so if interest rates don'tcome down, and there's no
(29:18):
guarantee that Fed's going tocut short-term rates, does that
mean long rates come down?
Well, not, if we're running $2trillion annual deficits and not
doing QE anymore.
So what's fascinating is, Ithink this could undermine the
stock market too.
Ryan (29:35):
So a 10-year yield is basically a combination of all
those short-term yields betweennow and the next 10 years.
So what it implies is thatwe're going to have higher
short-term rates in the future,maybe because inflation comes
back at some point down the road.
Yeah, that's exactly what it is, or just people have less
confidence in US treasuries, orsomething like that.
Brian (29:57):
Right.
So I mean, if you think of a10-year yield as 10 one-year
bonds, right, yeah.
So right now, the one-year wellI don't know it's 4%.
Let's say the 10-year is 4.25%.
So you can figure out the math.
I mean, you can use yourBloomberg, you can use an Excel
spreadsheet to figure out themath.
But like we go from 4 to 3.75to 3.5 to you know, but then the
(30:24):
10-year is saying oh no, it'snot going to stay down there,
it's going to go back up three,seven, five, four, four and a
quarter, four and a half five,and then the average will be
four and a quarter over 10 years.
So what it's saying is you maycut rates in the short term, but
we don't think you can holdthem there for very long right,
okay, so we came into this yearand your team put out a price
target, I think, of $5,200 forthe S&P 500.
Ryan (30:45):
It sounds like you're pretty confident.
You want to keep that for therest of the year.
Brian (30:50):
Yeah, I mean two things are important.
We're not momentum-based at all, we're fundamental-based.
So we run a capitalized profitsmodel.
It's a simple approach profitsdiscounted by the 10-year
treasury compared to the S&Paverage over 70 years.
Boom.
It's a simple mathematical,factual model.
(31:12):
All right, not trying to guessmomentum, not trying to guess
whether NVIDIA has competitionor anything like that, just
looking at the valuation ofmarkets.
So momentum doesn't play a partin it.
And the second thing is is Ibelieve in fundamentals?
(31:32):
I think we I'm not a meanreversion guy in life you think
of, of human life.
What's the mean mode oftransportation?
Probably the horse Like.
Maybe it's walking.
Ryan (31:50):
I don't know.
Brian (31:51):
Yeah, but maybe it's two feet without moccasins, I don't
know.
But I mean it depends on howmany thousand years ago you go
back.
Go back, but let's just sayit's the horse.
Well, we're not going back tothe horse like I don't.
I mean, I guess you could dreamup a scenario, if you're a
prepper, that we do, but but youget my point, so so I'm not a
mean reversion on everything.
(32:12):
There are things that they getbetter.
It could change over time andpermanently, but one of them is
not valuations.
When you have to pay 40 timesearnings a dollar of earnings,
$40 to buy $1 of earnings forone company and you only have to
pay $8 for a dollar of earningsfor another company and they're
(32:34):
both great companies whichone's more likely to have higher
returns over time.
And if you just look at P-Eratios, or price to sales ratios
, and then returns over the next10, 15, 20 years, it is clear
the higher the PE ratio is, thelower the returns are in the
future.
And so I think the market'sovervalued Again.
(33:00):
I'm not a momentum trader, sowhen the model signals
overvalued, it doesn't mean themarket's overvalued Again.
I'm not a momentum trader, sowhen the model signals
overvalued.
It doesn't mean the market'sturning down, and so the reason
I bring all of this up is thatI'm sticking with 5,200.
Does that mean I expected to bethere on December 31st of this
year, because that's technicallywhat we're saying end of the
(33:22):
year target, and that'd be abouta 20% drop.
Yeah, it would be about a 20%drop and I think, by the way, if
the market falls 20%, the10-year yield is probably going
to come down too.
So every time the 10-year falls, that means we're worth a
little bit more in our model.
So that's why I'm not going allthe way.
If you really run the model,it's 40% overvalued, but I think
(33:46):
interest rates are a little bithigher than they should be
today and people are Inflation'sa concern over time, but I
think the market's overlyworried about it today.
But having said that, I can'tstop the market from worrying or
being euphoric.
Having said that, I can't stopthe market from worrying or
being euphoric.
So we got this YOLO trade.
You know you only live once Likebuy it, like hold it, hoddle,
(34:08):
like all these, Like I meanpeople are trading daily options
, like it's huge and I mean, asan investor, this, I mean this
drives me crazy.
I would, you know, thankgoodness my kids aren't doing it
At least I don't think they areor my brothers or, you know, my
family but be an investor andso I still have $5,200.
(34:31):
If you really like push me andsaid, is that your, you are
guaranteeing we're going tofinish the year there?
No, I'm not Well, okay, so overor under on that Today, if I had
to say probably a little over,but that's only because I'm
looking at people just buying,no matter what happens, and
(34:52):
there's not that much timebetween now and then.
Yeah, and it's only threemonths, but do I think we're
going to hit 5,200?
Ryan (34:57):
We already did it once this year we did yeah.
Brian (35:00):
And so do.
I think we're going to do itagain, yeah, yeah, and we might
even go a little bit lower.
But in the next three months dowe hit it?
Probably not.
But having said all of that,there's still sectors and
industries and companies in theS&P 500, in the market as a
whole, that are cheap relativeto these MAG 10 or 7 or whatever
(35:25):
they are.
I mean, the top 10 stocks makeup almost well last I looked,
39.5% of the S&P 500.
And they're expensive.
And there are places.
I mean you can go to Europe,you can go overseas.
International stocks are stillthey've underperformed for 15
years.
And I mean you can go to Europe, you can go overseas.
International stocks are stillthey've underperformed for 15
(35:45):
years.
And I mean there's value in themarket.
And so I'm not telling peopleto get out of the market, I'm
just telling them to broaden out, diversify, and I think that's
going to pay, no pun intended,dividends in the future.
Ryan (36:01):
So I'm hearing you say I'll paraphrase what I'm hearing
you say so maybe it's moreimportant now, because
valuations are elevated, to makesure that you're picking the
right parts of the market.
Maybe individual stock pickingis going to be more important in
this environment than justbuying a market cap weighted S&P
500.
Brian (36:18):
Right.
Ryan (36:19):
And certain sectors maybe have better value certain parts
of the world, and that seemsrational.
Brian (36:26):
Yeah, a fundamentally weighted index.
Heck, I mean equal weight.
Pe is a lot lower than themarket cap weighted and same
with market price to sales.
I mean price to sales ratiostoday 3.2%.
The 25-year average 1.7 on theS&P 500.
(36:48):
I mean, it doesn't matter whatvalue.
Even the Wall Street Journalwrote basically a front page
story online that said themarket's more overvalued since
the dot-com era.
And I've used the dot-com eraas a comparison.
But I always want people torealize that history rhymes, it
(37:12):
doesn't repeat.
So we are not in 1999.
Back then we had companies thatdidn't make any money soaring.
Today these companies aremaking a lot of money.
We were overvalued by 62% Atmost.
Today we're overvalued by 40%at most and I believe it's
really more like 20-ish percent.
(37:32):
So nowhere near 1999.
What's similar is kind of theblind optimism or, as Greenspan
said, a rational exuberance, andpeople were saying things in
1999 like we would never have arecession again.
And you know, others are sayingyou know well, PE ratios are
(37:56):
permanently higher, like NVIDIAis no one's ever, ever going to
catch up to them, et cetera, etcetera.
And spending $200 billion on AIchip data centers is going to
be the biggest return that any.
One of my worries is I thinkwe're just cannibalizing
(38:17):
existing stuff.
So Google is investing, orAlphabet, I guess, is investing
um you know, 50, 80, 100 I don'teven know how much billion in
ai every year, right?
now yeah, and then they're usingthat to make their search
engine better.
(38:37):
Well, it's.
Are more people going to searchbecause it's AI?
I mean, is it driving?
Yes, they don't need as manycoders because AI can write code
.
Ryan (38:50):
Yeah.
Brian (38:50):
So I guess they're saving on employment costs and the
cost of production somewhat, butare they really driving revenue
higher like I?
Like I are people doing moresearches because they're ai
searches now instead of the oldgoogle kind?
yeah and because they use sortof an ai.
(39:12):
Before it was more rudimentary,now it's more official, I guess
.
But that's what I worry is thata lot of this is just
cannibalism.
It's not really creatingsomething new, whereas you go
back to 1999, we were inventing,I mean, remember, the Palm
Pilot you could write on it.
The one had an antenna youcould connect to the internet.
It was the iPhone before theiPhone, and it didn't do
(39:37):
everything.
I'm not trying to equate them,but that company, 3com, went out
of business and so historyrhymes.
It doesn't repeat.
But I'm worried that we'reoverestimating the benefits of
(39:58):
AI.
I'm not saying it's not a hugedeal, that it's going to change
a lot of careers and a lot ofthings, but I haven't seen at
least back then we wereinventing a new thing, a phone,
you know.
Now we're just finding a way torun all these things more
efficiently.
Ryan (40:15):
So I think in your example of the smartphone, maybe what
these companies are thinking isthere was really just a narrow
number of winners.
I mean, the iPhone was thewinner, and so they just don't
want to be the loser.
Google has to make theseinvestments almost as a
defensive move, because if theydon't, they recognize that all
(40:36):
these other companies, thehyperscalers, will.
So they have to also have AI,or someone's just going to go on
Grok or they're going to go onone of the other chat, gpt or
something like that.
So it seems like they feel asthough they have to make these
hundreds of billions of dollarsof CapEx.
Brian (40:57):
Yeah, and what.
I wonder?
I don't know the answer.
I'm not trying to say I knowit's truly unbelievable
technology.
What I wonder?
I just don't know the answer.
I'm not trying to say I knowI'm not trying to.
It's truly unbelievabletechnology.
Nvidia is an unbelievable.
Apple, google, all thesecompanies we've never seen
anything like them.
They've done unbelievablethings in the history of
(41:18):
corporate management, offinancial markets.
I mean, they're amazing.
So I'm not trying to beat themup or find a reason to sell them
.
From an economist point of view,is this actually going to raise
productivity and profits in thelong run?
And what I wonder sometimes isare they just cannibalizing
(41:42):
their own business?
And let me use a quick example.
So back in the late 90s again,history rhymes, it doesn't
repeat Ford made a big dealsplash, press releases, all
kinds of stuff.
We are going to move our supplychain management online.
So that was the big thing to doback then.
This is going to drive abillion dollars to our bottom
(42:05):
line.
So what Ford was saying isclearly that we're going to make
a billion dollars more inprofit because we're going to
become so much more efficientwith our supply chain.
Well, here's the thing Chrysler,gm, mercedes, porsche,
volkswagen, toyota they all puttheir supply chains online, so
they all drove a billion dollarsto the bottom line, whatever
(42:28):
their number was.
Who benefited?
Was it the shareholders or wasit the customers?
And I would argue it was thecustomers, because then they
compete.
So if I get a billion dollarsgoing to my bottom line, that
lets me lower the price to tryto pick up my market share,
which is what I really.
(42:48):
I want to be the number one carseller in the world.
I do want to be the mostprofitable one, but I'm not
going to sell many cars ifeverybody else is cutting by 10%
or adding additional things toit whether it's electronics in
the car or whatever, whateverheated seats and air-conditioned
(43:08):
seats and all the things theydo.
So maybe they actually didn'tcut price, but they improved the
quality of the product, andwhat happened is that supply
chain savings got eaten up inthe process of competition, and
so AI might make you moreefficient, but you're going to
end up having to cut costsbecause everybody's using it.
(43:31):
As you said, it's a race, it'sa space race.
It's like everybody's investing$50, $80, $100 billion here,
there, everywhere, because theyhave to compete.
Well, guess what?
The consumer ends up being thebenefactor of that, not the
shareholder.
Really, when it's a broadtechnology, it's kind of like
(43:54):
inventing the tractor.
So the price of crops, theprice of food, came down because
we were more efficient.
The farmer didn't keep all theprofits, the consumer got them,
and that's.
Ryan (44:06):
That's the way free market capitalism works like the
miracle of free marketcapitalism.
Brian (44:10):
It is at work that's what it is, and and so yes there.
If you're the first mover youcan make the profits, but
eventually everybody moves,every farmer gets a tractor and
the price of corn comes down.
Ryan (44:25):
That's what prices do, right?
Yes, exactly.
Brian (44:29):
And over history.
That's happened for everything,so I think the jury is still
out on whether AI is a truemoneymaker for all these
companies.
They're investing hundreds ofbillions, moneymaker for all
these companies.
Ryan (44:46):
They're investing hundreds of billions and the question is
will they actually reap areward from that?
Okay, All right, Brian, let'send on a optimistic note.
As you kind of look in yourcrystal ball, there's a lot
going on that makes me scratchmy head.
We've talked about a lot ofthose things.
As you kind of look out thenext couple of years, is there
(45:08):
anything that makes youoptimistic about just what will
happen, what's coming down theroad?
Brian (45:18):
Yeah, I think.
I mean I don't want to makethis too political, I don't want
to make this too political, butI think there's been a big
shift, especially in America.
Now it needs to carry on to therest of the world, away from
government management ofeverything.
And a lot of that was aroundclimate change, covid and these
(45:40):
kind of draconian governmentpolicies, all based on the fact
that you were going to die orthe world was going to end if
government didn't do this stuff.
And I think we're questioningthat today and I think somehow
that has to be, you know,cemented into the system.
And so the midterm electionsare going to be really important
(46:02):
.
If, if, if, um, if this is, ifthese are truly 70, 30, 80, 20,
90, 10 issues, like, for example, like the president trump
cracking down on crime in dcit's a apparently that's a 90 10
issue, and there are hisopponents are kind of taking the
(46:22):
wrong side of that and and ifthat, if that keeps happening,
you know, I think republicanswill have a much better chance,
and then you have a chance, atleast I hope, of kind of
shifting.
See, ronald reagan people don'tremember it because it was 44,
45 years ago completely shiftedthe direction of this country.
(46:46):
I mean, we went from stagflation, big government, oil price caps
like regulation, like we wereworried about running out of oil
back then, and he completelychanged the conversation to
smaller government, lower taxes,less regulation.
And today it's way morecomplicated because everything
(47:06):
gets identity, politics andpersonal and I'm trying not to
offend anybody almost in thisanswer, but really what I'm
getting to is that we want lessgovernment involvement in lives
and I think there's a lot thatseems to be a majority point of
view and Trump seems to bepretty good at picking these 70,
(47:28):
30, 80, 20 battles, and somaybe we're seeing that kind of
change.
Reagan was really good at itand I know everybody gets upset.
Ryan (47:38):
Now Somebody's watching this, getting mad at me, but
that's what I hope is reallywhat really happens so it seems
like most of the people on theright side of the political
spectrum would be more for smallgovernment yeah um and less
government power, at least thefederal level especially, uh.
But now that trump is in office, people on the left don't want
(47:59):
the, the, you know at least theexecutive branch right now to
have a lot of power.
So maybe that pushes uh someyou know right, yeah, small
government left side of thepolitical spectrum it may like.
Brian (48:11):
You know we're, we're, we're clearly in a I mean it's,
it's an amazing I've.
You know, I've been reading alot about the revolutionary war
and you go back to the Civil War.
I've read a ton on that.
The divisiveness in thiscountry and you know, at that
time both of those times wasmassive.
(48:31):
I think it was still it's stillgreater than it is today.
But boy do people get worked upabout stuff today.
And my real focus is economics,and I know I started talking
more about politics for a whilethere.
But it's to allow more freemarket competition and we've
(48:55):
drifted away from that.
The bigger the government gets,the smaller markets are, and
then what happens is housesbecome unaffordable, cars become
unaffordable, people have atough time making ends meet, and
it's all because government istoo big.
And that's where I hope we'regoing.
Ryan (49:16):
All right.
Well, that's a good place tofinish things up.
Thanks again for coming on thepodcast.
We'll hopefully have you onsometime very soon, Absolutely
as your schedule allows.
But thank you for joining usand thanks to all of you for
joining us on this episode ofthe First Trust ROI Podcast.
We'll see you next time.
Hi, welcome to the First Trust ROI podcast.
I'm Ryan Esekainen, etfstrategist at First Trust.
Today I'm joined by BrianWestbury, chief Economist at
First Trust.
We are going to discuss the Fedand its independence.
We're going to talk about theUS economy, maybe, where the
equity markets are headedbetween now and the end of the
year.
Thanks for joining us.
Well, we're finishing up thesummer here, heading into the
(00:31):
fall.
There's been a lot that hasgone on this year.
It feels like you know, we'vehad a compressed amount of
activity, everything frommarkets diving because of
uncertainty related to tariffsto the potential for an outbreak
of war, to questions about whatthe Fed's going to do Fed
(00:51):
independence, fed policy there'sa lot of ground to cover today,
so I'm glad you're able to joinme.
Maybe we can start out here.
I don't want to spend all ourtime focused on government
policy, but it seems like it'skind of unavoidable in the
economy because it has such abig impact, especially this year
(01:11):
, and some of the things I like,some of the things I don't like
.
But one of the things that kindof keeps on striking me is sort
of echoes of what Ronald Reagansaid once upon a time with the
nine most terrifying words inthe English language.
You know, I'm here from the,I'm from the government and I'm
here to help.
(01:31):
Yeah, yeah, I don't know ifthat's all the but, but and you
know, I guess I want to startthere what's your take on all of
the intervention that thegovernment has had this year,
and is that going to be good orbad for the long-term health of
the economy?
Brian (01:48):
Yeah, I mean I kind of try to step back from all of
this.
Our government is massive andthe federal budget is $7
trillion a year.
If you include everything,including defense, all of that
stuff, it's 24% of GDP, almostlike it's a quarter of our GDP.
(02:11):
And that's just the federalgovernment.
State and local is another 20%.
And then if you include thecost of regulation, which eats
up about 7% of our resources,just complying with taxes and
compliance and all of that stuff, that's 51% of everything that
(02:31):
we do.
No matter how much I hatetalking about government,
because I don't think that'swhat creates wealth, it's half
of everything of a daily lifeand as a result, everything's
become political, and so I wouldput the blame on that, on just
(02:53):
the size of government.
And then you get in a newelection, a new president comes
in that sort of wants to, atleast on the surface, tear that
down, kind of like Ronald Reagan, when Ronald Reagan beat Jimmy
Carter and then now Trump beatsBiden-Harris.
It's sort of small governmentversus big government in the
(03:16):
philosophy, but Trump is doing alot of things that kind of sort
of go against the grain of freemarkets.
And that is, you know, tariffsare a tax and taking 10% of
Intel if you give them money youknow, 15% of the sales, of any
(03:36):
revenue that comes to NVIDIAfrom Chinese chip sales things
like that, and so people havegone sort of I think a little
bit nuts about that, because Iactually think some of those
things are still the jury'sstill out whether we're going to
do those.
I've heard that the Trump teamis debating this 10% ownership.
They fully realize that's notreally a free market thing to do
(03:58):
.
We have to realize is that atthe same time they're doing that
and people focus on it, and Ijust read a piece, uh, not long
in the wall street journal, notlong ago, that this is the
chinaization of it's the statecapitalism.
Uh, and and trump's bringing itin.
I'm like that's.
I mean, this is forgettinghistory, because back in the 30s
(04:21):
we paid farmers not to growstuff.
In the 30s we paid farmers notto grow stuff.
In the 70s we had wage andprice controls and we set
different price increases forChrysler versus Ford versus ag
versus steel.
Like we have played around withstate capitalism for decades
and decades and decades and atthe same time, trump has done
(04:43):
some of these things.
You know what he's attemptingto do is bring manufacturing,
especially chips, back to the US.
So that's an admirable goal.
And him getting involved in thatis a little state capitalistic,
you know, china-isty.
But on the other side we'vetaken away regulations on light
(05:06):
bulbs, stoves, ovens,dishwashers, you know.
Gas mileage requirements havebeen watered down.
We're not going to subsidizeelectric cars as much anymore.
So it's really kind offascinating because there's two
sides to this and I think if youput it all together, especially
now that we've furloughed orlaid off about 300,000
(05:31):
government workers, I'd say thenet effect of Trump's policies
isn't state capitalism, it'sliterally a smaller government.
But we're going to have to getto this budget process this fall
September and October before wefind out what Congress does,
because they're the ones thathave to pass a budget and then
(05:52):
fund the 13 separate 12, 13separate agencies of the
government.
And if they are able to cutthat spending, then we have a
little bit of a repeat of RonaldReagan and that would be real
positive.
Are you hopeful that they'llcome up with a little bit of a
repeat of Ronald Reagan, andthat would be real positive.
Ryan (06:06):
Are you hopeful that they'll come up with a budget,
because, if I'm not mistaken,that hasn't happened for decades
, 30 years maybe.
Brian (06:13):
Yeah, I mean, I'm hopeful .
Ryan (06:17):
You're an optimist.
Brian (06:18):
naturally I'm an optimist , but I've been an optimist a
number of times, and Republicansare in control.
They're the ones that havecomplained about this the most.
You would think that they wouldbe able to pull it together and
actually pass a true budget inwhat we call regular order, like
the parliamentary order of thebusiness, of government.
(06:41):
But man, maybe they forgot how.
I'm starting to think 30, 35years without a true budget.
Maybe they did forget how, butI would argue that the net
effect of all of this.
So we extended the tax cuts,which is a positive, but at the
same time, I think we offsetthat by taxing through tariffs,
(07:04):
and so the net tax burden onAmericans hasn't well.
First of all, extending the taxcut is not a tax cut like at
all, it's just keeping them thesame, and so that's a positive,
because now we know that that'spermanent.
That's the positive part, not atax cut.
(07:24):
And then we've raised tariffsand I think we still haven't
seen the negative effects ofthat.
Canada is slowing down, europeis slowing down.
I'm certain China is slowingdown, although it's hard to get
data that you trust out of themand I suspect that that slowdown
is going to show up here aswell, and it really is coming
from that tax hike, which is atariff.
Ryan (07:46):
So let's talk a little bit more about tariffs, because I
know there's been some legalchallenges and we're recording
this on September 3rd, so whoknows what happens in the courts
.
But I think most recently whatI read was that some of those
tariffs were ruled to be illegaland now it might go to the
Supreme Court or something likethat.
(08:07):
But it makes me think you know,there's corporations that have
already paid those tariffs.
Oh yeah, so what happens, doesthe?
Treasury have to send them acheck back and refund that.
Brian (08:18):
One of the things that's unbelievable about President
Trump is how twisted he makespeople's brains, but what we're
going to end up with isDemocrats cheering a tax cut if
tariffs are ruled illegal, andthen actually cheering the fact
that we're going to pay UScompanies back money, and so
(08:40):
that to me is like it's justwhat a topsy-turvy world.
So that to me is like it's justa what a topsy-turvy world.
Yeah, but to just, I'm not alawyer, I'm not a constitutional
scholar, but I do understandsome things about the tariff
issue, and one of them is thatwe need an emergency and that's
why, early on, it was fentanyland immigration, and so he was
(09:05):
especially going after canadaand mexico and those are
emergencies and so in a waythat's a declaration of war,
like you could.
You know, that's kind of thethese are the, the area of law
that that goes in.
But then he just called thetrade deficit emergency so so
and the loss of jobs in America.
(09:25):
And that's where the courts aregoing to have a really
difficult time, because thepresident isn't allowed to just
change tax rates on his or herown, and that's why you really
need a legal reason, and it'snot clear that he has one, when
unemployment is as low as it iscurrently, to blame the trade
(09:50):
deficit and taking away jobs orsomething.
Ryan (09:52):
I'm not sure that that is the best argument to make.
Brian (09:54):
Yeah, exactly.
Ryan (09:56):
It doesn't ring too, true so the other thing that I was
then thinking about if these areruled illegal and the Supreme
Court, let's say, says, okay,they are illegal, I suspect that
the Trump administration wouldtry to push Congress to pass
some legislation for tariffs,codify it into law, and that
(10:16):
could get really messy.
Brian (10:17):
It could, and I'm not even sure whether they would
need a supermajor majority toget that done.
You know, tax hikes, I thinkyou need a super majority, but
since it doesn't increase thedeficit, maybe it falls under
the Byrd rule, which says we cando it with a simple majority.
But I'm not sure Congress wantsto vote on that Because that's
(10:43):
raising taxes on corporations intheir districts, and so I mean
it's a question whether any ofthis would get done.
So obviously there is so muchuncertainty because President
Trump is pushing the limits of alot of things really, of
executive power, like how muchpower does the president really
(11:05):
have?
And the reason I think thatwe're here I think that's
important for us to think aboutis because Congress it's failed
at its job.
I mean, it hasn't balanced thebudget, it hasn't passed a
budget.
Spending just keeps going upand up and up and up and up, and
(11:26):
Congress hasn't been able tostop that.
And I mean we could debate whyDo we need term limits or how do
you put an end to it, butthat's why Trump is doing this.
And we've talked about thisbefore.
But just real, quickly, thewhole idea of Keynesianism is
(11:47):
that you tax people with a highmarginal propensity to save and
you give it to people with ahigh marginal propensity to
consume, because Keynesiansbelieve that demand, consumption
is what drives growth, notentrepreneurship and innovation
and invention, but demand andpeople spending money, and it's
(12:10):
worked.
It hasn't worked to lift growthbut it has worked, because
consumption is way up andproduction is not up and so
we're importing more to supportthat consumption that all this
redistribution of money.
I mean think about COVID wehanded out almost $5 trillion
(12:32):
for people to sit at home.
So we weren't producing but wewere consuming, so no wonder the
trade dev.
I mean that's an extremeexample, but we've been doing
this in the US for 40 years andso if you're trying to fix it,
one way to do it is tariffs,although I would argue that's
(12:53):
not the best way.
The best way is to cut taxrates, cut government spending,
stop taxing people and handingit out to others to spend, and
then cut regulation and letpeople actually produce here,
because we make it really hardto produce in the United States
with all the tort law and allthe ways you can get regulated
(13:13):
and fined and taxed if youproduce.
Ryan (13:19):
At least in the news cycle , there hasn't been much talk
about the cutting of regulations.
I think that's kind of early on.
There was that there was goingto be big regulatory cuts, but I
haven't seen a ton of newsarticles that talk about how
regulations have been cut.
So do you think that that isjust something that's being
overlooked?
Brian (13:38):
Yeah, it's being totally overlooked.
It's way more.
I think news is turned into bigtime clickbait and it's also
turned into politically driven.
So you don't want to highlightderegulation.
I mean, I'm sure there arepeople out there that are
highlighting it, but it's not asexciting to write about
(13:59):
deregulation as it is to writeabout the war in Ukraine or
Israel, or tariffs, and a fightwith China and NVIDIA and owning
10% of this.
So that's where we see the news.
There is a lot of deregulationgoing on.
I mean, I mentioned a couple ofthem and there's a line, but
(14:21):
we're not subsidizing electricvehicles.
Soon that will run out.
We lowered gas mileage.
The CAFE rules, caferequirements yeah, rules.
We reduced them, which meansnow you can, you know if you're
ford, you don't have to produceelectric cars, you can make more
f-150s and you know this is theway the us wants to go.
(14:44):
Anyway.
People like the demand forelectric cars is not huge and
it's a lot driven by tax uhreduction.
Um, like I said, stoves,dishwashers, light bulbs, all of
those things.
And then I think this ishappening in a lot of other
areas and we just don't see it,at least it's not reported on
(15:06):
very clearly.
But yeah, they're deregulatingright now and it's getting
easier to do business in theUnited States and that's a real
positive.
Ryan (15:15):
Yeah.
Brian (15:16):
So I guess, to summarize from an economic point of view
and how this is affecting theeconomy, there's some good
things going on and there's somewhat I would I'm not going to
say negative, but things thatmight slow the economy.
They're good intentioned, ifyou will, but a tariff is a tax
(15:39):
and so, if you try to put theseon, one of the things that makes
economic forecasting hard isthat we don't have a period in
time in history where we canlook at what happens.
When you do this, there's notest.
We do know the direction.
This deregulation is positive,where we can look at what
(15:59):
happens when you do this.
There's no test.
We do know the direction.
This deregulation is positive.
The tax hikes from tariffs arenegative, but is the negative
outweigh?
the positive, or is the positiveoutweigh the negative?
We don't know.
And that's why, when I fallback on looking at the money
supply, I think tariffs aretaxes and taxes aren't good.
So I would argue that, yeah,we're benefiting from some of
(16:22):
this stuff, but the costs maykeep those benefits at bay.
And then you come back to thefundamentals and the money
supply is flat for the lastthree years.
We're cutting the deficit,believe it or not.
It's not by a massive amount,but it's not going to be growing
.
And when you have a flat moneysupply and deficits going down,
(16:45):
all that short-term stimulusthat we got used to, the era of
easy everything, is over, andthat means for me, a slowdown in
the economy.
Ryan (16:58):
So then we should talk a little bit about the Fed,
because that is kind of relatedto at least the excuse for not
cutting rates is the uncertaintyrelated to tariffs and whether
or not that's going to causesome level of prices to go up or
inflation.
I think there's some prettywide disagreement about the
inflationary effects of tariffs,but there's certainly the
(17:20):
uncertainty there, and you've, Ithink, argued in the past that
the Fed can cut a couple timesand still be in neutral, and I
think maybe the Fed is comingaround to that opinion.
It seems like they're probablygoing to cut in September.
Is that your expectation?
What do you think happens fromthere?
Brian (17:37):
Yeah, I think the Jackson Hole speech by Jerome Powell
was pretty clear.
Ryan (17:40):
Yeah.
Brian (17:41):
I mean I don't care how he said it, I mean I could tell
you how he said it.
He said, well, inflation'sstill a worry, but employment's
slowing down.
And so I mean, basically he wasgiven an excuse to cut, slowing
down.
And so I mean, basically it wasgiven an excuse to cut and the
market's pricing in a quarterpoint cut September 17.
So it's only two weeks from now, and I think that's exactly
(18:01):
what we're going to get.
Inflation right now.
Look at all the measuresrunning about two and a half
percent.
So with the 1% real yield,that's three and a half.
One and a half percent realyield, that's four.
I would take four as being agood neutral rate, and the Fed
(18:23):
could cut twice.
They probably should cut by two, by 50 basis points in
September, but I think they'reonly going to do one.
And so the now you know, andTrump's leaning on them.
One of the things Trump hassaid, if I'm not mistaken, is he
wants interest rates 300 basispoints lower.
So which would put him at oneand a half percent.
(18:44):
Yeah, that's below inflation.
That's too low and, by the way,that's why the gold market is
going crazy.
We're over $3,500 an ounce.
It's silver's over $40 an ounce.
The precious metals are takingoff and they're worried that a
Fed under Trump will follow apolicy that'll create more
(19:07):
inflation than they think.
I don't think the market shouldbe as worried as it is.
The money supply is flat andinterest rates themselves just
by themselves.
They don't have as much impacton inflation as people think
they do.
I mean, bernanke held thefederal funds rate at zero for
seven years.
(19:28):
We didn't get inflation.
And then Powell held it for twoyears and we did get inflation.
And then Powell held it for twoyears and we did get inflation.
So wait, if seven years didn'tcause inflation but two years
did, what was going on?
And I think the answer isreally easy.
Look at a growth rate chart ofM2.
It's like M2 didn't accelerateunder Bernanke.
(19:49):
It boomed.
It grew 40% under Powell.
That's why we had inflation.
It was M2, not because of thelow interest rates themselves.
So we'll have to watch themoney supply and right now it's
growing less than GDP.
So I don't think it'sinflationary.
Ryan (20:07):
So there's been a lot of concerns expressed about the
independence of the Fed.
Brian (20:12):
you know a lot of news articles and by the very same
people who wanted to firemembers of the Supreme Court.
By the way, yes.
By the way, yes.
Ryan (20:23):
So is that something people should be concerned about
?
Independence of the Fed.
And you know, kind of as asecond part of that question,
any favorites for who mightsucceed Powell?
If you know, assume he's notgoing to be reappointed.
Brian (20:36):
Yeah, he will not be reappointed as chairman.
He, by the way, he still hassome term left.
So, like, the chairman is amember of the board and those
are 14-year terms, and thentheir appointed chairman within
that term, and so if the termruns out before their four-year
(20:57):
chairman term runs out, thenthey got to be reappointed to
keep their presidency, or their,their chairmanship, um and so
so his, but his 14 year yearterm is not over in may he'll,
and he will no longer bechairman.
But he could, could stay on theFed as a vote.
And then now Trump is trying tofigure out whether it's
(21:20):
constitutional to fire thesepeople or not for a cause or
whatever, and so we know allthat's going.
The Fed should be independent,but it's not.
It's never been really trulyindependent, but especially in
2008, that when the Fed startedquantitative easing, they tied
(21:44):
themselves at the hip topoliticians, because what they
did is they bought thequantitative easing means.
I print money to buy governmentbonds.
They funded the governmentduring TARP and President
Obama's shovel ready projectprograms.
They funded all the bonds thatwere used to pay for COVID and
(22:07):
like like five.
That's that's what quantitativeeasing was.
So the Fed is the one that Ithink they violated independence
from that side.
They should have never beenfinancing governments borrowing
and spending and they made it alot easier for the government to
borrow and spend.
And I don't think that itwasn't a war.
(22:30):
I think we overreacted, the Fedoverreacted, and if you're
going to fight a war, you oughtto borrow the money.
That's what we used to do.
I mean England.
You know, before theRevolutionary War, england had
defeated France, defeated Spain,sun never set on the English
Empire, all that stuff.
(22:51):
And every year their intereston their debt was 50% of all the
tax revenues that theycollected.
And the way they got in thatmuch debt is they borrowed all
the money.
So they didn't have a centralbank back then to do
quantitative easing and they hadto work their way out of it and
(23:12):
they taxed their colonies, theyput tariffs in, they did all
kinds of things to get out ofthat debt.
But that's the way we shouldhave financed COVID.
If you want to pay people tostay at home, you ought to ask
the bond market to pay for itand not have the Fed pay for it.
So I think the Fed violatedindependence by doing
(23:33):
quantitative easing in the firstplace.
That's number one.
Number two the Federal Reserve.
It became highly politicalbecause it got involved in
climate change, communityactivism, environmentalism, dei.
The Fed is one of the mostprogressive institutions in
(23:56):
government and I know this byfor a fact.
The institution itself is notindependent.
It's very political and andtherefore Trump attacking it, if
you will, by going after Cookor Powell yeah, he wants lower
interest rates.
That makes him he's a developerwhich you know, a developer who
(24:17):
doesn't want low interest rates,and so I get all of that.
But the Fed is the one thatoverstepped bounds and it's not
talked about enough.
And it should be talked aboutand I'm willing to talk about it
because I don't want to be onthe Fed, and so I have no desire
to be on the Fed.
But most economists I know wantto be on the Fed, but they're
(24:43):
the ones that violated thisindependence, not Trump.
And having said that, I believein an independent Fed and I
think the president's not.
With Lisa Cook, if she lied onher mortgage applications, I
think that is a fireable offense, although we did have a
treasury secretary who didn'tpay his taxes like still got
(25:04):
through confirmation.
So I mean, maybe our standardshave fallen in America, but he
is not trying to threaten theirindependence, in my opinion,
because they don't have any left.
They've already given up theirindependence.
Ryan (25:21):
So, with the mission creep that they've had and they're
already doing things that arepolitical, you think that it's
just a response to thatpoliticization?
Yeah, whatever that you thinkit's a response.
It's not actually Trump beingthe.
I think it's a little bit ofboth but they have earned the
response.
Brian (25:41):
Let's put it that way the Fed and the Treasury should be
separate in a way.
They have to work togetherbecause you know the value of
the dollar, the way the tradeworks, the way money flows.
They have to work together.
But they have now.
For example, the Treasury nowhas an account at the Fed with
(26:04):
hundreds of billions of dollarsin it and, according to stuff
that I've read, they believethat account ought to have $850
billion in it and they hold thatat the Fed.
And, by the way, so when theyraise taxes you write a check to
pay your taxes they put it atthe Fed.
It comes out of them too, soit's actually become part of
(26:26):
monetary policy.
And if you dig kind of deepenough in the dirt a little bit
and look at this the way thesetwo institutions are working
together it looks a lot likemodern monetary theory, and this
is why gold and silver aregoing nuts right now, because
they're scared to death thatwe're going to use the Treasury
(26:48):
and the Fed to finance spendingthat we shouldn't be, and I mean
that's the way I read this thatwe'll end up with more
inflation, and all I'm sayingabout Fed independence is that
they gave it up just as much aspoliticians tried to take it,
and that's what happened.
(27:10):
My biggest concern about ourworld going forward is just the
sheer size of our government,because what happens when
government gets so big?
Not only is it involved inevery walk of life, everything
you do you can't turn aroundwithout having government
(27:30):
involved in some way but it alsoencourages institutions to
become political and to try towin favor with this group or
stop stymie that group, and Ithink the Fed has gone that
direction much more than anybodyis willing to talk about.
(27:52):
I also am completely againstwhat the Fed has done with
quantitative easing.
We're paying private banksright now, private banks $200
billion a year to hold thereserves that the Federal
Reserve created to buy thegovernment debt.
But we just do it a roundaboutway.
The banks hold the reserves,the cash, the Fed owns the bonds
(28:15):
and we pay the banks so thatthe Fed can own the bonds.
And the net result of all thisis government spending went
through the roof and if the Fedhad not have done that, the
markets would have revolted along time ago.
And the end result of this forour sake, for what really
(28:35):
matters to us here is that theFed's about to cut.
We know this.
Well, guess what?
The 10-year treasury yield hasgone up since we found out that
the Fed was going to cut.
And so why is that?
Well, it's because maybe theyshouldn't be, or at least that's
what the market might be saying.
(28:56):
And the reason that's importantto me is the 10-year yield is
what goes in our stock marketmodel, and if you put a four and
a quarter 10-year yield in withcurrent earnings, we're
overvalued by a significantamount, like somewhere around
40%.
And so if interest rates don'tcome down, and there's no
(29:18):
guarantee that Fed's going tocut short-term rates, does that
mean long rates come down?
Well, not, if we're running $2trillion annual deficits and not
doing QE anymore.
So what's fascinating is, Ithink this could undermine the
stock market too.
Ryan (29:35):
So a 10-year yield is basically a combination of all
those short-term yields betweennow and the next 10 years.
So what it implies is thatwe're going to have higher
short-term rates in the future,maybe because inflation comes
back at some point down the road.
Yeah, that's exactly what it is, or just people have less
confidence in US treasuries, orsomething like that.
Brian (29:57):
Right.
So I mean, if you think of a10-year yield as 10 one-year
bonds, right, yeah.
So right now, the one-year wellI don't know it's 4%.
Let's say the 10-year is 4.25%.
So you can figure out the math.
I mean, you can use yourBloomberg, you can use an Excel
spreadsheet to figure out themath.
But like we go from 4 to 3.75to 3.5 to you know, but then the
(30:24):
10-year is saying oh no, it'snot going to stay down there,
it's going to go back up three,seven, five, four, four and a
quarter, four and a half five,and then the average will be
four and a quarter over 10 years.
So what it's saying is you maycut rates in the short term, but
we don't think you can holdthem there for very long right,
okay, so we came into this yearand your team put out a price
target, I think, of $5,200 forthe S&P 500.
Ryan (30:45):
It sounds like you're pretty confident.
You want to keep that for therest of the year.
Brian (30:50):
Yeah, I mean two things are important.
We're not momentum-based at all, we're fundamental-based.
So we run a capitalized profitsmodel.
It's a simple approach profitsdiscounted by the 10-year
treasury compared to the S&Paverage over 70 years.
Boom.
It's a simple mathematical,factual model.
(31:12):
All right, not trying to guessmomentum, not trying to guess
whether NVIDIA has competitionor anything like that, just
looking at the valuation ofmarkets.
So momentum doesn't play a partin it.
And the second thing is is Ibelieve in fundamentals?
(31:32):
I think we I'm not a meanreversion guy in life you think
of, of human life.
What's the mean mode oftransportation?
Probably the horse Like.
Maybe it's walking.
Ryan (31:50):
I don't know.
Brian (31:51):
Yeah, but maybe it's two feet without moccasins, I don't
know.
But I mean it depends on howmany thousand years ago you go
back.
Go back, but let's just sayit's the horse.
Well, we're not going back tothe horse like I don't.
I mean, I guess you could dreamup a scenario, if you're a
prepper, that we do, but but youget my point, so so I'm not a
mean reversion on everything.
(32:12):
There are things that they getbetter.
It could change over time andpermanently, but one of them is
not valuations.
When you have to pay 40 timesearnings a dollar of earnings,
$40 to buy $1 of earnings forone company and you only have to
pay $8 for a dollar of earningsfor another company and they're
(32:34):
both great companies whichone's more likely to have higher
returns over time.
And if you just look at P-Eratios, or price to sales ratios
, and then returns over the next10, 15, 20 years, it is clear
the higher the PE ratio is, thelower the returns are in the
future.
And so I think the market'sovervalued Again.
(33:00):
I'm not a momentum trader, sowhen the model signals
overvalued, it doesn't mean themarket's overvalued Again.
I'm not a momentum trader, sowhen the model signals
overvalued.
It doesn't mean the market'sturning down, and so the reason
I bring all of this up is thatI'm sticking with 5,200.
Does that mean I expected to bethere on December 31st of this
year, because that's technicallywhat we're saying end of the
(33:22):
year target, and that'd be abouta 20% drop.
Yeah, it would be about a 20%drop and I think, by the way, if
the market falls 20%, the10-year yield is probably going
to come down too.
So every time the 10-year falls, that means we're worth a
little bit more in our model.
So that's why I'm not going allthe way.
If you really run the model,it's 40% overvalued, but I think
(33:46):
interest rates are a little bithigher than they should be
today and people are Inflation'sa concern over time, but I
think the market's overlyworried about it today.
But having said that, I can'tstop the market from worrying or
being euphoric.
Having said that, I can't stopthe market from worrying or
being euphoric.
So we got this YOLO trade.
You know you only live once Likebuy it, like hold it, hoddle,
(34:08):
like all these, Like I meanpeople are trading daily options
, like it's huge and I mean, asan investor, this, I mean this
drives me crazy.
I would, you know, thankgoodness my kids aren't doing it
At least I don't think they areor my brothers or, you know, my
family but be an investor andso I still have $5,200.
(34:31):
If you really like push me andsaid, is that your, you are
guaranteeing we're going tofinish the year there?
No, I'm not Well, okay, so overor under on that Today, if I had
to say probably a little over,but that's only because I'm
looking at people just buying,no matter what happens, and
(34:52):
there's not that much timebetween now and then.
Yeah, and it's only threemonths, but do I think we're
going to hit 5,200?
Ryan (34:57):
We already did it once this year we did yeah.
Brian (35:00):
And so do.
I think we're going to do itagain, yeah, yeah, and we might
even go a little bit lower.
But in the next three months dowe hit it?
Probably not.
But having said all of that,there's still sectors and
industries and companies in theS&P 500, in the market as a
whole, that are cheap relativeto these MAG 10 or 7 or whatever
(35:25):
they are.
I mean, the top 10 stocks makeup almost well last I looked,
39.5% of the S&P 500.
And they're expensive.
And there are places.
I mean you can go to Europe,you can go overseas.
International stocks are stillthey've underperformed for 15
years.
And I mean you can go to Europe, you can go overseas.
International stocks are stillthey've underperformed for 15
(35:45):
years.
And I mean there's value in themarket.
And so I'm not telling peopleto get out of the market, I'm
just telling them to broaden out, diversify, and I think that's
going to pay, no pun intended,dividends in the future.
Ryan (36:01):
So I'm hearing you say I'll paraphrase what I'm hearing
you say so maybe it's moreimportant now, because
valuations are elevated, to makesure that you're picking the
right parts of the market.
Maybe individual stock pickingis going to be more important in
this environment than justbuying a market cap weighted S&P
500.
Brian (36:18):
Right.
Ryan (36:19):
And certain sectors maybe have better value certain parts
of the world, and that seemsrational.
Brian (36:26):
Yeah, a fundamentally weighted index.
Heck, I mean equal weight.
Pe is a lot lower than themarket cap weighted and same
with market price to sales.
I mean price to sales ratiostoday 3.2%.
The 25-year average 1.7 on theS&P 500.
(36:48):
I mean, it doesn't matter whatvalue.
Even the Wall Street Journalwrote basically a front page
story online that said themarket's more overvalued since
the dot-com era.
And I've used the dot-com eraas a comparison.
But I always want people torealize that history rhymes, it
(37:12):
doesn't repeat.
So we are not in 1999.
Back then we had companies thatdidn't make any money soaring.
Today these companies aremaking a lot of money.
We were overvalued by 62% Atmost.
Today we're overvalued by 40%at most and I believe it's
really more like 20-ish percent.
(37:32):
So nowhere near 1999.
What's similar is kind of theblind optimism or, as Greenspan
said, a rational exuberance, andpeople were saying things in
1999 like we would never have arecession again.
And you know, others are sayingyou know well, PE ratios are
(37:56):
permanently higher, like NVIDIAis no one's ever, ever going to
catch up to them, et cetera, etcetera.
And spending $200 billion on AIchip data centers is going to
be the biggest return that any.
One of my worries is I thinkwe're just cannibalizing
(38:17):
existing stuff.
So Google is investing, orAlphabet, I guess, is investing
um you know, 50, 80, 100 I don'teven know how much billion in
ai every year, right?
now yeah, and then they're usingthat to make their search
engine better.
(38:37):
Well, it's.
Are more people going to searchbecause it's AI?
I mean, is it driving?
Yes, they don't need as manycoders because AI can write code
.
Ryan (38:50):
Yeah.
Brian (38:50):
So I guess they're saving on employment costs and the
cost of production somewhat, butare they really driving revenue
higher like I?
Like I are people doing moresearches because they're ai
searches now instead of the oldgoogle kind?
yeah and because they use sortof an ai.
(39:12):
Before it was more rudimentary,now it's more official, I guess
.
But that's what I worry is thata lot of this is just
cannibalism.
It's not really creatingsomething new, whereas you go
back to 1999, we were inventing,I mean, remember, the Palm
Pilot you could write on it.
The one had an antenna youcould connect to the internet.
It was the iPhone before theiPhone, and it didn't do
(39:37):
everything.
I'm not trying to equate them,but that company, 3com, went out
of business and so historyrhymes.
It doesn't repeat.
But I'm worried that we'reoverestimating the benefits of
(39:58):
AI.
I'm not saying it's not a hugedeal, that it's going to change
a lot of careers and a lot ofthings, but I haven't seen at
least back then we wereinventing a new thing, a phone,
you know.
Now we're just finding a way torun all these things more
efficiently.
Ryan (40:15):
So I think in your example of the smartphone, maybe what
these companies are thinking isthere was really just a narrow
number of winners.
I mean, the iPhone was thewinner, and so they just don't
want to be the loser.
Google has to make theseinvestments almost as a
defensive move, because if theydon't, they recognize that all
(40:36):
these other companies, thehyperscalers, will.
So they have to also have AI,or someone's just going to go on
Grok or they're going to go onone of the other chat, gpt or
something like that.
So it seems like they feel asthough they have to make these
hundreds of billions of dollarsof CapEx.
Brian (40:57):
Yeah, and what.
I wonder?
I don't know the answer.
I'm not trying to say I knowit's truly unbelievable
technology.
What I wonder?
I just don't know the answer.
I'm not trying to say I knowI'm not trying to.
It's truly unbelievabletechnology.
Nvidia is an unbelievable.
Apple, google, all thesecompanies we've never seen
anything like them.
They've done unbelievablethings in the history of
(41:18):
corporate management, offinancial markets.
I mean, they're amazing.
So I'm not trying to beat themup or find a reason to sell them
.
From an economist point of view,is this actually going to raise
productivity and profits in thelong run?
And what I wonder sometimes isare they just cannibalizing
(41:42):
their own business?
And let me use a quick example.
So back in the late 90s again,history rhymes, it doesn't
repeat Ford made a big dealsplash, press releases, all
kinds of stuff.
We are going to move our supplychain management online.
So that was the big thing to doback then.
This is going to drive abillion dollars to our bottom
(42:05):
line.
So what Ford was saying isclearly that we're going to make
a billion dollars more inprofit because we're going to
become so much more efficientwith our supply chain.
Well, here's the thing Chrysler,gm, mercedes, porsche,
volkswagen, toyota they all puttheir supply chains online, so
they all drove a billion dollarsto the bottom line, whatever
(42:28):
their number was.
Who benefited?
Was it the shareholders or wasit the customers?
And I would argue it was thecustomers, because then they
compete.
So if I get a billion dollarsgoing to my bottom line, that
lets me lower the price to tryto pick up my market share,
which is what I really.
(42:48):
I want to be the number one carseller in the world.
I do want to be the mostprofitable one, but I'm not
going to sell many cars ifeverybody else is cutting by 10%
or adding additional things toit whether it's electronics in
the car or whatever, whateverheated seats and air-conditioned
(43:08):
seats and all the things theydo.
So maybe they actually didn'tcut price, but they improved the
quality of the product, andwhat happened is that supply
chain savings got eaten up inthe process of competition, and
so AI might make you moreefficient, but you're going to
end up having to cut costsbecause everybody's using it.
(43:31):
As you said, it's a race, it'sa space race.
It's like everybody's investing$50, $80, $100 billion here,
there, everywhere, because theyhave to compete.
Well, guess what?
The consumer ends up being thebenefactor of that, not the
shareholder.
Really, when it's a broadtechnology, it's kind of like
(43:54):
inventing the tractor.
So the price of crops, theprice of food, came down because
we were more efficient.
The farmer didn't keep all theprofits, the consumer got them,
and that's.
Ryan (44:06):
That's the way free market capitalism works like the
miracle of free marketcapitalism.
Brian (44:10):
It is at work that's what it is, and and so yes there.
If you're the first mover youcan make the profits, but
eventually everybody moves,every farmer gets a tractor and
the price of corn comes down.
Ryan (44:25):
That's what prices do, right?
Yes, exactly.
Brian (44:29):
And over history.
That's happened for everything,so I think the jury is still
out on whether AI is a truemoneymaker for all these
companies.
They're investing hundreds ofbillions, moneymaker for all
these companies.
Ryan (44:46):
They're investing hundreds of billions and the question is
will they actually reap areward from that?
Okay, All right, Brian, let'send on a optimistic note.
As you kind of look in yourcrystal ball, there's a lot
going on that makes me scratchmy head.
We've talked about a lot ofthose things.
As you kind of look out thenext couple of years, is there
(45:08):
anything that makes youoptimistic about just what will
happen, what's coming down theroad?
Brian (45:18):
Yeah, I think.
I mean I don't want to makethis too political, I don't want
to make this too political, butI think there's been a big
shift, especially in America.
Now it needs to carry on to therest of the world, away from
government management ofeverything.
And a lot of that was aroundclimate change, covid and these
(45:40):
kind of draconian governmentpolicies, all based on the fact
that you were going to die orthe world was going to end if
government didn't do this stuff.
And I think we're questioningthat today and I think somehow
that has to be, you know,cemented into the system.
And so the midterm electionsare going to be really important
(46:02):
.
If, if, if, um, if this is, ifthese are truly 70, 30, 80, 20,
90, 10 issues, like, for example, like the president trump
cracking down on crime in dcit's a apparently that's a 90 10
issue, and there are hisopponents are kind of taking the
(46:22):
wrong side of that and and ifthat, if that keeps happening,
you know, I think republicanswill have a much better chance,
and then you have a chance, atleast I hope, of kind of
shifting.
See, ronald reagan people don'tremember it because it was 44,
45 years ago completely shiftedthe direction of this country.
(46:46):
I mean, we went from stagflation, big government, oil price caps
like regulation, like we wereworried about running out of oil
back then, and he completelychanged the conversation to
smaller government, lower taxes,less regulation.
And today it's way morecomplicated because everything
(47:06):
gets identity, politics andpersonal and I'm trying not to
offend anybody almost in thisanswer, but really what I'm
getting to is that we want lessgovernment involvement in lives
and I think there's a lot thatseems to be a majority point of
view and Trump seems to bepretty good at picking these 70,
(47:28):
30, 80, 20 battles, and somaybe we're seeing that kind of
change.
Reagan was really good at itand I know everybody gets upset.
Ryan (47:38):
Now Somebody's watching this, getting mad at me, but
that's what I hope is reallywhat really happens so it seems
like most of the people on theright side of the political
spectrum would be more for smallgovernment yeah um and less
government power, at least thefederal level especially, uh.
But now that trump is in office, people on the left don't want
(47:59):
the, the, you know at least theexecutive branch right now to
have a lot of power.
So maybe that pushes uh someyou know right, yeah, small
government left side of thepolitical spectrum it may like.
Brian (48:11):
You know we're, we're, we're clearly in a I mean it's,
it's an amazing I've.
You know, I've been reading alot about the revolutionary war
and you go back to the Civil War.
I've read a ton on that.
The divisiveness in thiscountry and you know, at that
time both of those times wasmassive.
(48:31):
I think it was still it's stillgreater than it is today.
But boy do people get worked upabout stuff today.
And my real focus is economics,and I know I started talking
more about politics for a whilethere.
But it's to allow more freemarket competition and we've
(48:55):
drifted away from that.
The bigger the government gets,the smaller markets are, and
then what happens is housesbecome unaffordable, cars become
unaffordable, people have atough time making ends meet, and
it's all because government istoo big.
And that's where I hope we'regoing.
Ryan (49:16):
All right.
Well, that's a good place tofinish things up.
Thanks again for coming on thepodcast.
We'll hopefully have you onsometime very soon, Absolutely
as your schedule allows.
But thank you for joining usand thanks to all of you for
joining us on this episode ofthe First Trust ROI Podcast.
We'll see you next time.
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