Life Happens

April 12th, 2025

Episode Transcript

Speaker 1 (00:00):
Good morning everyone, Welcome to life happens and as they say,
may you live in interesting times an ancient Chinese proverb,
and there's also a Chinese character that symbolizes two different things.
One is chaos, and I think if you've been following
the news and following the economic markets, chaos has reigned

(00:21):
over the last two weeks. But the other interpretation of
that symbol is opportunity. So when you have chaos, is
their opportunity and that is often the case. And today
we're going to explore all the things happening in the markets,
the economy, tariffs, taxes, and to do that, we are

(00:42):
fortunate to have back with us for a repeat performance
this year, none other than Hugh Johnson, our noted economist
here from the Capital region.

Speaker 2 (00:50):
Good morning, Hugh, Good morning, And Hugh.

Speaker 3 (00:53):
Appears all in the media.

Speaker 1 (00:56):
He's appeared on Bloomberg's the NBC bringing economic analysis, and
I think in today's world you almost have to be
an economist to try to make sense of all the
factors and all of the events that have happened rapid
fire over the last several weeks.

Speaker 2 (01:13):
It's it's been incredible. You know, lou I was around
during the nineteen eighty seven stock market crash, where we
had in one day the stock market declined twenty two percent.
Hard to believe, but twenty two percent in one day,
and a lot of that was in one hour. And
I never thought I would see anything as quite as

(01:34):
volatile or as dramatic as that. Again, we'd said in
place a lot of things that were intended to try
to prevent that from reoccurring, and I never thought i'd
see it again. But now I'm seeing something, and it's
happening over a period of days, but I'm seeing the
level of volatility equals that and exceeds it. And I'd

(01:55):
say the level of uncertainty, which really is it comes
along with it. Has been a big part of what's
what's happened, and that's of course led to some some
real problems guessing UH as to where we're going, where
the financial markets are going, where the economy is going.
And it is a difficult period and it probably does
require economists, especially because some of the work that we

(02:17):
do see coming out of Washington that's been sort of mathematic.
Quantifying the tariffs, for example, has been nothing but absurd.

Speaker 1 (02:27):
And this is no longer just a USA issue. This
is a worldwide issue, and one hundred and thirty five
countries were tagged with tariffs and that just put the
world markets in a panic. So it isn't just our markets,
it's it's global. And I want to come back to
something you mentioned volatility. And there's something out there called
the VICS index, and the VIX is something that measures

(02:48):
that volatility, and it's been off the charts for the
last two weeks.

Speaker 2 (02:53):
Yeah, it's it's a measure of volatility, and we all
we all watch it. We watch it carefully, and some
people even obviously invest in it as a hedge against
the volatility that they're experiencing, trying to reduce what might
turn out to be some fairly substantial losses. As everybody
that knows everybody, just about everybody has experienced some losses
in their four oh one ks their portfolios, and so

(03:16):
they're finding trying to find ways to hedge against any
future losses. Yes, the VIX has been dramatic, and it
certainly tells us just how volatile things have been. Things
have never been really as volatile as measured by the VICS.

Speaker 1 (03:31):
So let's start with tariffs, and that's kind of been
the trigger for a lot of the volatility that we've
had and tariff policy which has evolved. Peter Navarro, who
is the President's economic advisor, has been one of the
proponents of the tariffs, and so we had this massive

(03:51):
imposition of tariffs. You then had backlash from a number
of countries, and then you had a pause day pause,
which was a good time to invest, as we read
on truth Social it was a good time to invest
right before that announcement. So if you're looking at this
from a tariff perspective, unravel for our listeners, because there's

(04:14):
so much disinformation out there and misinformation about tariffs. Unraveled
tariffs and how they were imposed and what's left of
them with China and how this next ninety days may
play out.

Speaker 2 (04:26):
That's a big subject. And let me just say that
tariffs are effectively a tax on generally speaking, not all
not just consumers, but also on businesses in different countries.
If the goods that they import have a tax added
to them, somebody's got to pay it somewhere, and usually
that turns out to be consumers, and it turns out

(04:48):
to be businesses in the country that's importing whatever it
might be that they're importing. There are two implications of tariffs.
They get worse obviously if the tariffs get bigger. But
nevertheless there's two significant implications. The first implication, which you
can pretty much count on obviously, as inflation. I would

(05:11):
invite everybody to take a look at the twenty eighteen
twenty nineteen first teriffs or first trade war and terraffs
as to what happened to things like inflation, and what
happened to things like the economy, the US economy, and
not only the US economy, as you mentioned, Lou. The
important thing is to recognize it wasn't just the US
economy in twenty eighteen twenty nineteen. It was the global economy.

(05:36):
And we can look at global gross domestic product or
a measure of economic activity in the globe, or we
can look at the US, or we can look at exports,
or we can look at imports, and the stories the same.
We had inflation rise, and that was in the first year.
I like to separate trade wars into two stages, And
in the first stage we had terroriffs go higher, and

(05:58):
in the second stage, which was nearly twenty nineteen, we
had the US economy slow. We had a very significant
decline in exports, very significant decline in imports. We had
on a global basis, a very significant decline in economic
activity in exports and in imports. In other words, the

(06:19):
terriffs have a very serious effect on inflation. Prices rise
puts all sorts of pressure on the Federal Reserve. But
prices rise, and the second thing that happens is economic
activity declines. One of the things I'd like to just
point out, if you just give me one second on
this is it's a sort of an elaborage. It's kind

(06:42):
of interesting. I've noted that we've seen the sort of
baseline forecast revised by the Federal Reserve. They call it
the Summary of Economic Projections SEP came out with the
when they had their meeting in March. Then we've also
seen the consensus forecast based on eighty five economists that's

(07:05):
conducted by Bloomberg. We've seen their forecasts, the consensus forecast change,
and also, interestingly enough, the Hugh Johnson Economics forecast has
also changed, and they all changed in the same way,
and they've changed by the forecast for economic activity is
measured by real GDP. In twenty twenty five has been

(07:26):
revised downward. The forecast for the unemployment rate has been
revised higher, not by much, but higher, from say four
point one to four point two percent. And then the
forecast for inflation. Interestingly enough, forecasts for inflation, whether we
talk about headline inflation and we talk about core inflation

(07:48):
been revised by all three higher. That's in response to
some of the numbers we've been seeing lately, but it's
also in response to everybody looking at twenty eighteen and
nineteen and saying, this is the way the tariffs generally
play out. Higher inflation and lower economic activity was the
way it played out in twenty eighteen and nineteen, and

(08:09):
it's the way that things are starting to play out
right now. So the first thing we look at is inflation.
The second thing we look at is economic activity. And
I just say look at seventeen eighteen and nineteen and
you can count at it, and just.

Speaker 1 (08:23):
Put in perspective for our listeners the size and scope
of the tariffs in twenty twenty five versus those tariffs
you're talking about that had all that negative impact in
twenty eighteen nineteen.

Speaker 2 (08:36):
The magnitude is significantly higher now. We're talking about two things.
We're talking about ten percent teriffs across the board for
all countries. They call it a universal tariff of ten percent,
and that's a pretty significant number by itself. Lots of
other numbers that have already been imposed or tariffs that
have been already imposed. And the second one is called
reciprocal tariffs. And the reciprocal tariffs are what we've come

(08:59):
up with more reasons, which is essentially a tit for
tat is the way it's been described, and the arithmetic
that was used to calculate or quantify the level of
tariffs reciprocal tariffs was something to behold.

Speaker 1 (09:15):
It was put up on a board and the numbers
were put up on a board and you can I'm
sure you studied the board some Yes, and it was
and you were They were asking questions about what is
it based on and a lot of it was based
on trade imbalance.

Speaker 2 (09:30):
Yeah, it's crazy when you think about it. Well, you
know that the trade imbalance or the deficits, let's called
make it easy. Trade deficits in one country might be
different from the trade deficit in another country. And it's
certainly easy to understand because some countries are very small
and they don't do a lot of trading, and some
countries are very large and they do a lot of trading.

(09:51):
And the difference between the two is substantial. If you
base the change or the rate at which you're going
to change or you're going to impose tariffs on that difference,
it's going to be all over the map, and it's
going to be it's going to be hard to really
make a rational sense out of. This came out of
I don't want to say Peter Navarro, but I understand

(10:11):
he had a little bit to do with it, and
it's it's hard to understand because it's just simply irrational.
And I think it's the objection that the widespread worldwide
objection to the tariffs, the level of the tariffs, the
reciprocal tariffs, that led to the so called ninety day pause.

(10:33):
I'm a little bit I'm not really surprised that Trump
decided on a ninety day pause. Remember, I want to
say one thing is important. We had the same kind
of on again, off again phenomena in the twenty eighteen
nineteen terriffs, and we actually called the terriff war trade
war of twenty eighteen nineteen off and it started in

(10:55):
March of twenty eighteen. You know, it was called off
in a of two thousand. It didn't last long, yeah,
And I think that's what the impact did. Oh, the
impact it impacted and and and the terriffts went on
and the terrafts still go on with China. And the
point is is simply this is that it's it leads

(11:18):
to it is this time and it certainly was then
leads to a level of uncertainty, and uncertainty is one
of the things that businesses have a difficult time dealing with,
as do investors. And so it creates what you mentioned
the word chaos.

Speaker 1 (11:34):
It creates chaos, and that's again the Chinese proverb. We're
going to come back to China in a minute. I
want to go back to the analyzes that you mentioned
in the eighty five economists that.

Speaker 3 (11:45):
Agree on a number of things.

Speaker 1 (11:47):
There's one number that we'll come back to because you
and I have talked about it when you've given your
economic forecast, and that is interest rates in the FED,
and and what does the FED do now in.

Speaker 2 (11:58):
Light that's it's such a good question, and I'll tell
you why it's such a good question. First of all,
we know and the forecast, the baseline forecasts. The changes
that were made were reducing the level of economic activity
and raising forecasts for what inflation would do. Now, you know,
the Federal Reserve is very concerned about inflation. They're concerned

(12:20):
both about labor market conditions and they're very concerned about inflation,
very concerned about inflation. At the same time that they
made that forecast, they forecast that they would be reducing
interest rates. Now, you reduce interest rates in theory, just
in theory, that should lead to maybe a little bit
of a nudge higher in the rate of inflation. So

(12:42):
if they're focused on they care so much about inflation,
why are they talking about reducing short term interest rates,
especially when you take a look back at twenty eighteen nineteen.
I want to say something that's a little controversial, and
that is this, I told you twenty eighteen, we saw
inflation start to rise, and we did for the first
six to eight months, And in response to the rise

(13:03):
and inflation in twenty eighteen, which you're going to see
this time, the Federal Reserve did exactly what you'd expect.
They raised interest rates. So this time everybody's saying that
the Federal Reserve is likely to lower interest rates. It's
hard to put those two things together. They're inconsistent. And
so there's a real chance, despite the fact everybody thinks

(13:24):
that the Federal Reserve is going to reduce short term
interest rates, maybe if we get higher inflation as a
result of the imposition or the start of the tariffs,
that inflation goes high and the Federal Reserve raises interest rates,
doesn't reduce interestrates. I wouldn't make that forecast. I'm not
making that forecast. I don't like to go against the
crowd too much, but I'm telling you it is a

(13:46):
little bit puzzling that everybody's talking about maybe the Federal
Reserve will reduce interestrates. Maybe just they may surprise us
and they may leave them unchanged, or they may raise
interest rates. So forecasting Federal Reserve policy, lo as he knows.

Speaker 3 (14:00):
Is difficult.

Speaker 1 (14:01):
You try it every year, every week, every week, and
it's not easy.

Speaker 3 (14:05):
We have to take a short break.

Speaker 1 (14:06):
When we come back, we're gonna go back to China
and the tariffs now, where the trade war is kind
of between the two major powers economic powers.

Speaker 3 (14:15):
For ninety days anyway, and we're.

Speaker 1 (14:16):
Gonna go back and try to sort out what effect
that's gonna have on you on the listeners. What is
your portfolio going to look like, What are your tax
rates gonna look like? How much are you gonna have
to pay for your iPhone coming out? Apple is one
of the companies in the crosshairs of this. Stay tuned.
We're here live in studio with Hugh Johnson. I'm Lupiro,

(14:37):
your host for this morning. We'll be right back after
the short break. Welcome back.

Speaker 3 (14:51):
This is an interesting show for me, folks, I hope
it is for you as well. I have Hugh Johnson
live in studio with me.

Speaker 1 (14:56):
We're trying to unravel all of the economic factors that
have been through grown at US over the last six, seven,
eight weeks and trying to figure out what is going
to be the impact on me, because after all, it's
all about me and you, my listeners. So for you,
how does it impact your pocketbook? How does it impact
your taxes? Are your taxes going to go down? How

(15:18):
does it impact your four oh one k? Is your
four oh one k going to continue to grow as
it has at record numbers over the last several years.
Are you going to be impacted in terms of your
ability to work and hold jobs? Is the economy, the
GDP going to continue with job growth and are we
going to keep the same employment rate that we've had
for the.

Speaker 3 (15:37):
Last several years.

Speaker 1 (15:38):
And for that, I'm going to start back up with
Hugh and talk about the Fed, which is where we
left off. The most recent inflation number, I believe was
two point four percent, which was a good number, and
maybe that's something leading people to say, well, you know,
if inflation is under control, maybe we lower interest rates.

Speaker 2 (16:01):
Yes, that's a good point. That's a really excellent point
because for a while now, since really June, through the
numbers that we saw for February, the declines that we've
seen in inflation, the Federal Reserve was doing a great job.
The declines that we saw and the rate of the
year over year rate of inflation had simply stalled out.

(16:21):
And that really said to me and said to a
lot of people that gee, they don't have much room
to lower interest rates further because that might make it
difficult for the continuation of a decline in inflation. So
when we saw the numbers for the month of March,
really good numbers, not only the consumer price index, but
producer price index was very encouraging. It said that inflation

(16:45):
may just be continuing to decline at a time when
the economy is slowing. So economy slowing, inflation continuing to decline.
That's a combination that gives the Federal deserves the sort
of leeway to reduce interest rates. We can reduce interest

(17:06):
rates without interrupting the progress we're making on inflation. And
in response to the slowdown that we're seeing in the economy,
and possible further slowed down that we might see rising
unemployment rate that we might see in response to the tariffs.
So that's why that was such a good number.

Speaker 1 (17:25):
It's a big event because mortgages, the housing market, lending,
all of those things, new construction. It all comes back
to those numbers.

Speaker 2 (17:35):
And I might add, and this is important. If you
look at stage two or the second year of the
twenty eighteen twenty nineteen trade war, what happened to us?
Guess what? Inflation stopped going up and it started coming down.
The economy slowed and slowed dramatically. The Federal Reserve reduced

(17:58):
interest rates. Longer term interest rates declined, and I don't
want to tell you the numbers, but the stock market
went up and went up a lot, and in other words,
first stage, when we had higher inflation, the Federal Reserve
raising interest rates, long rates going up, stock prices going
down was tough. That's what we're in now. We're in

(18:21):
that stage. Now. I don't know how long it's gonna last.
I wish I knew, but we're in that stage. But
the next stage, which is the stage you're starting to
start to see some hint of, is that declining inflation,
the Federal Reserve to reducing interest rates, long rates coming down,
stock price is going up. That lies ahead. So I

(18:43):
think that helps in some ways anybody that's listening to
understand one of my basic tenets or theses in this
is one thing that's true about every trade war or
every collapse such as nineteen eighty seven. They all end,
and they all end usually by a reversal of the
bad fortune that we have at the initial stages. I think,

(19:06):
I think that's going to be the outcome. So if
you're patient and you you wait, you're probably gonna be
just fine. I wish I knew how long you're gonna
have to wait. I don't.

Speaker 3 (19:17):
There's the crystal ball.

Speaker 2 (19:18):
There is a crystal ball.

Speaker 1 (19:19):
And that always the question that looms out there. But
you're right, and that's that's where chaos an opportunity meet.
And if you go back to two thousand and eight, nine, ten,
and you know, I was at that point looking at
my retirement account saying, holy cow, it got decimated in

(19:40):
two thousand and nine. But I'm looking around. I had
a little bit of cash left, and I'm looking at
stocks like Ford and Bank of America that was selling
for a dollar And how do you not buy at
that point? What opportunities existed then? So it's a matter
of having the guts to get back in.

Speaker 2 (19:59):
Yeah, And and that's a good point. Having the guts
is the way you put it, and that's a pretty
good way of putting it. We have ways of quantifying
or measuring all that, and we measure investor sentiment whether
it gets too bullish and we get to an emotional
extreme on the upside, which we were at before all
this broke out.

Speaker 3 (20:17):
I think had the irrational exuberance. Yeah, and that was.

Speaker 1 (20:21):
When the people as a water cooler, that are they're
working in your office, you know, cleaning up are talking
about their stock portfolio.

Speaker 3 (20:28):
You got a problem, you sure do.

Speaker 2 (20:30):
And and and then there's the other extreme, which is
the emotional extreme on the downside, where it's start. Now
everybody's saying, well, look at everybody's getting bearished. Now, everybody's
getting pessimistic, everybody's getting gloomy. Uh. But I measure, I
look at the stuff pretty carefully, and although it's it
is clearly the pessimism is on the increase, and that's

(20:51):
very good news. Actually it's not at an emotional extreme yet,
which suggests to me that we have further to go
on the downside. So I think we have further to
go on the downside. But again, and go back to
what I said before, is that they all end. And
when we get to an emotional extreme, as you as
you mentioned, it's going to be chaos. That's one thing.
Lots of pessimism, lots of bearishness. But at the same

(21:13):
time it'll represent some opportunity and then we'll start to
see the light at the end of the tunnel. But
it's a little bit too in my judgment. Everybody knows.
Everybody says differently, But.

Speaker 1 (21:23):
Well, the next ninety days I think are going to
give us that guidance as they start to negotiate the
one on one deals with the EU, with Japan, with
other countries and let's talk. Let's flip from China. We'll
come back to China in the second half of the
show because it is important and it is really where
the game is being played in terms of the trade
war right now. But the Japanese invest heavily in our

(21:45):
bond market, and when the government looks at raising revenue,
they sell bombs. That's how the government debt finances and
the bond market was rattling. And I think that more
than the stock market declines, is what brought about the
ninety day pause.

Speaker 3 (22:02):
What are your thoughts.

Speaker 2 (22:03):
We're getting two different messages from the financial markets collectively,
and we're getting periodically. We get a time when we're
having it now, well, you get a time when the
stock market actually goes up and we have interest rates
go up. And that sounds like it's inconsistent, but it's
not inconsistent because the markets are investors collectively are telling

(22:24):
you that they think we're going to come out of
this and the economy is going to expand, and Federal
Reserve is going to raise interest rates. Some interest rates
go up and stock prices go up, people are feeling
a little bit better now. It's a little bit on
the gloomier side of things. And what's really trouble it's
difficult to understand, is we've got stock prices really going
down and it's almost hitting of a recession, a pair

(22:45):
market and a recession. And then you've got interest rates
going up. Why aren't interest rates, you know, basically going down,
suggesting that the Federal Reserve reduce interest rates. And I
think that the federal well that you'll see longer term
interest rates come back down and get in touch with
the stock market. Stock market will be coming down, interest
rates will be coming down, but interestrates will be coming
down largely in the expectation that the Federal Reserve is

(23:08):
going to take the lead and reduce short term interest rates,
just as is the consience this forecast. That's the forecast now.
And it's a little bit unusual that interest rates have
gotten up to the level and the dollar quite frankly,
and interestrates have gotten up to the to the to
the level that they have. It's a little bit difficult
to put that all together, but I think everybody should
sort of hang their hat on. Stock prices are coming

(23:30):
down now, interest rates in time, Federal Reserve will reduce
interst rates and longer term interestrates will come back down
towards the four percent level, and that should hopefully slow
the decline in stock market. It won't end the decline,
but it will slow the decline until we see that
veritiable light at the end of the tunnel.

Speaker 1 (23:52):
Sure, And we're going to take a short break for
the news coming up. We're in liven studio with you, Johnson,
and we're unraveling the around us. And if you're following this, folks,
it's a roller coaster volatility and that VIX index. If
it keeps you up at night, you got to put
it out of your mind. Unplug listen to some music,
maybe a nice soft sound, get some sleep, come back

(24:13):
at it. But for the next half hour, we're going
to try to give you the information you need to
plan for your future.

Speaker 3 (24:20):
Stay with us.

Speaker 1 (24:27):
Hey, I'm Lukera, your host this morning listening to Life
Happens Radio Live every Saturday morning at nine am on WGY.

Speaker 3 (24:34):
I'm live in studio with you Johnson.

Speaker 1 (24:36):
Before we get back into our conversation about the economy.
I want to take a moment to talk about a
very important topic and something that we talk about a
lot on this show, and that is planning for your
future in terms of how do you get care, if
and when you need it, And that's part of our
aging process. Today we're going to talk a little bit

(24:57):
about taxes and the budget and the budget reconciliation and
the bill it passed two days ago in the House
of Representatives. But part of that is Medicaid, Medicare, social Security,
the entitlements that make up such a large part of
our country, the safety net, and the expenditures of the
federal government. And we're gonna do a seminar and we
hope you can all join us this coming Wednesday, Thursday,

(25:19):
the seventeenth of April. It's at one pm at the
Colony Town Library. That's six twenty nine Albany Shaker Road,
one o'clock Albany Town, Colonytown Library. Nursing home or your home,
Which do you want and how do you plan? How
do you plan to age in place to make sure
that you have the right legal planning. If you want

(25:40):
to look at ensuring options long term care insurance, if
you want to look at accessing Medicaid if and when
that ever becomes necessary. We're going to talk about all
that and what you can do today to prepare yourself.
It's going to be myself, my partner Frank Heming, and
our special guest Diane Mikkel Gottabiowski from ever Home Care Advisors,
to talk about the care side of this. How can

(26:01):
you prepare yourself and how can your family be prepared?
As our loved ones age and we have the ongoing
duty of being a caregiver, how do you manage that?

Speaker 3 (26:12):
Stay with us?

Speaker 1 (26:13):
Join us one o'clock Thursday, April seventeenth, coming right up
Colony Town Library and you can register by calling our
office and leaving a message at five Pine eight four
or five nine twenty one hundred and as always, you
can log onto our website at pyrolaw dot com. That's
p I E R R O l a w dot com.

(26:33):
Go on, go to the events tab and sign up
for Thursday's one pm seminar. Your home or the nursing
home be prepared. So that's the topic Q that will
morph into the taxes, the tax bill, the legislation that
has just passed, the entitlements and the budget cuts. The
budget becomes centerpiece here as we have this economic volatility.

(26:56):
If GDP is going down, if inflation is up, how
does that impact our tax revenue? How do these tariffs
impact our tax revenue? Because there's a lot of talk
out there that tariff revenue is going to help balance
the budget.

Speaker 2 (27:08):
That's that's exactly what the talk is. That's exactly if
you're looking for sort of the purpose of imposing the tariffs,
it's to generate generate revenues for the federal government, and
those revenues for the federal government will offset the loss
of revenues which will resolved from any tax cuts. So

(27:30):
right now, as you know, at the forefront of the
Trump plan is simply to have the twenty seventeen Tax
Cut and Jobs Act extended past its sunset at the
end and amplified and amplified if possible beyond the sunset
at the end of twenty twenty five. Hopefully the tax

(27:55):
the tariff revenues will offset any loss of tax revenues.
You can look at the numbers back to twenty eighteen nineteen.
You see that's not really possible. It's not going to happen.
The Congressional Budget Office estimates that if we extend the
twenty seventeen tax cuts, that will add three trillion dollars

(28:17):
to the deficit for the next ten years. That money's
got to come from somewhere. The three trillion dollars, It's
not going to come entirely from tariff revenues period. If
you look at the last experience we had, So where's
it going to come from. We're going to have to
borrow the money. We're going to do the good old
fashioned way, the way we've been doing it for a

(28:37):
number of years, and half of that's going to come
from US investors, public and private investors, and half of that,
if the experience continues, is going to come from foreign investors. Now,
I ask you a question, if those foreign investors are
facing substantial tariffs, how interested enthusiastic are they going to

(28:59):
be about stepping up to the plate and buying US
treasuries over the next ten years or financing the deficits
that were created by the extension of the twenty seventeen
tax cuts.

Speaker 1 (29:11):
That's a great question and not a question with a
real answer. And there are other factors that play into this.
The instability in our country. And one of the reasons
that foreign investors look at US markets and why they've
been so stable for the last ten years twelve years
is the rule of law and the ability of our

(29:32):
country to iron out issues in the courts where you
get a fair playing field and you have an ability
to have companies have confidence that they're not going to
be ridden over rough shot. And there are battles going
on in the courts right now challenging the authority of
Congress and the authority of the President and the executive

(29:55):
bridge and what do they have the ability to do.
You see law firms my profession, being targeted because they
have taken on people that had positions contrary to the
current administration. And I just read last night that five
of them settled and they're doing nine hundred and twenty
million dollars worth of pro bono work just to be

(30:18):
able to have federal contracts. And if you're a business
coming into the United States and your business is dependent
upon this type of I don't even know what you
call it, servitude, are you going to want to invest
or bring your business into the United States?

Speaker 2 (30:37):
And the answer to that question is you're not. Some
of you may have seen the consumer confidence, and the
consumer could be either businesses or individuals, mostly individuals. Confidence
numbers the most recent ones, which I just I use
the word plummeted, but plummeted is really an understatements, really
the second lowest ever. So confidence in the US is

(30:58):
certainly a deterior confidence from other countries around the world.
One of the big questions right now as we see
something that's we would not have expected, and that is
the decline in the dollar.

Speaker 1 (31:11):
I was just gonna mention that because I'm going on
a trip with my family and eight of us are
going away, I just got a twenty premium on everything
that we're going to do.

Speaker 2 (31:21):
That's right, And the confidence in the US is now.
Some people say, and they're right to some extent, that
foreign countries Japan being one, China being another, Europe being
of course substantial buyers the US treasuries. The reason the
dollar's going down is that they've backed away from our
markets because of the loss of confidence in the US system.
And I think that's probably pretty accurate. It's not accurate

(31:44):
to say that they're going to abandon our markets altogether,
because keep in mind, one thing of the treasuries that
are outstanding of the US securities that are outstanding in general,
but certainly treasuries. They own a ton, They own a
lot of the treasuries of the United States. And so
if they back away from the markets and interest rates

(32:04):
for some reason or other because they're backing away go up,
because we're gonna have to have fine buyer somewhere. If
interest rates go up and bond prices go down, then
the value of their portfolios that they've built over so
many years, foreign po portfolios built over so many years,
is going to go down. And they don't want that.

(32:25):
So they can't they can't abandon the markets, but they
can certainly reduce what they're doing in the markets. And
they're doing that, and it shows up in the dollar.

Speaker 1 (32:33):
And the cost of borrowing is something that you and
I have talked about, and for me, it's a major issue.
If you look at the federal budget and you look
at what we have now, folks, and this is a
number that you couldn't even write on a piece of paper,
thirty six trillion dollar debt and each year we're adding
one to two trillion to that in deficit and deficit spending.

(32:56):
And that's exactly what you're talking about. Where does the
United States borrow money. They don't go to a bank
to borrow the money. They go to investors and they
sell treasuries in bonds, and that is the market for
US borrowing. Right now, the interest on the US debt
is over a trillion dollars, and it's more money being
paid in interest on those bonds then we spend in defense.

(33:21):
It just crossed the line, more in interest than we
spend in defense. The only things that we spend more
money on are Medicare and Social Security, which are entitlement
programs and not truly expenditures, but money that's the governments
supposed to have collected to pay for those things. So
this is the budget dilemma that we have. You mentioned

(33:41):
that the only way that these cuts can be made
without draconian cuts to programs like Medicare and Social Security,
which is where seventy percent of the budget goes Medicare
and Medicaid social Security. How do we do that with
borrowing when we have a thirty six trillion dollar debt,
God bless us. If interest rates go up in the
cost of that debt continues to go up, and I

(34:03):
think there's a big trunch of bonds coming due, maybe
in June, six trillion dollars coming due in June. They
have to refinance. The government has to refinance their debt.

Speaker 3 (34:12):
What if interest rates go up, our borrowing costs go up,
where do we raise the revenues.

Speaker 2 (34:16):
You're gonna be able to raise the revenues, but unfortunately,
you're going to raise the revenues at a higher level
of interest. Keep in mind one thing, just one number,
which is another Congressional Budget Office number. It's not only
that we're going to have to borrow three trillion dollars
if we extend the tax cuts of twenty seventeen, but
also the debt service or the interest payments for the

(34:38):
next ten years are going to go up by four
hundred and sixty seven billion dollars over the next ten years.
So it's not just three trillion, it's four hundred and
sixty seven billion. There's a lot of money that's going
to have to be raised in order to extend those
tax cuts. Look I like tax cuts. I think we
all kind of like tax cuts in a way. But
remember there's tradeoffs, and in this case, there's a clear

(35:00):
trade off, and the trade off is going to be
higher deficits and higher debt service payments, and the money's
got to come from somewhere, and then we could be
talking about higher interest rates. And if we're talking about
higher interest rates, what does that do for the US economy?

Speaker 1 (35:15):
And the legislation that just passed in the House, And
if you follow the political side of this, you know,
Mike Johnson has I think the hardest job in the
country trying to balance out all of the interests, the
ultra conservative movement and all. And it's it's not like
he's rebattling Democrats. He's battling his other Republicans. And the
President weighed in and one on one lobbied legislators to

(35:38):
get the votes, and it was a close vote, two
sixteen to two fourteen to pass this budget resolution. Now
it's not the final budget. They still have to hammer
out details. But you have the Senate bill on one side,
which had I think four billion dollars of cuts and
the tax cut which resulted in a five point eight
trillion dollar increase over ten years to the deficit. And

(35:59):
then you have the House built, which had I think
two point eight billion dollars of cuts. But those cuts
are cutting meat down to the bone in some of
these programs. And I had Greg Olsen here from a
New York state office for aging. And one of the
casualties of that budget would be the Older Americans Act,
which provides things like meals on wheels and transportation to seniors.

(36:20):
And those are the programs that are going to be
debated over the next three four months. And those are
the things that are on the table in terms of
how does our government design this budget, who benefits, and
how do we keep that safety net.

Speaker 2 (36:34):
It's a matter of principles and priorities for each and
the Democrats may come out on one side, the Republicans
on another side. Individuals may be come out online.

Speaker 3 (36:44):
I wish there were more people in the middle view.

Speaker 2 (36:45):
Yeah, I certainly do. That's where I am and I look,
I feel like I could use the crowd.

Speaker 3 (36:51):
Yeah, I'm with you. I'm with you.

Speaker 2 (36:52):
And there are lots of things, and so that's going
on right now. A lot of things are being cut
right now. We see the and we see what Muscu's doing.
We see that's all at the direction of the president.
It's a reflection of the political philosophy or the philosophy
remember drain the swamp back in two thousand and sixty,
and all of that's not particularly good. It's training programs

(37:15):
that we that a lot of us really not only
to put on.

Speaker 1 (37:19):
Let's go back in time, because what they're doing is
not wrong. Cutting waste, cutting spending. The government has to
cut spending. It can't continue. It's like a drunken sailor.
Let's just write another check, let's sell another bond. But
go back to Bill Clinton and Nuke Gingridge, where they
had a bipartisan plan and David Walker, who was on
the show three times, who was the Controller General, who

(37:42):
was helping to balance the budget. They cut programs, They
cut nine billion out of Medicare, They balanced the buddy,
and they balanced the budget. It can be done, but
it has to be done on a bipartisan basis.

Speaker 2 (37:53):
It has to be done on a bipartisan basis. And
let's not forget that the Clinton administration had the benefit
of some real good economic activity, strange but good economic activity,
and it generated a lot of revenues. And so I'm
not saying they got away with murder. They didn't get
away with murder. They were really dedicated, you know, fiscal conceratives.
They did a really good job. It really helped and

(38:14):
they got a lot of good luck, a lot of
good luck quite frankly from the generation of revenues during
the late nineties and early.

Speaker 3 (38:21):
He was a consummate politician.

Speaker 1 (38:23):
I think he was able to take Republican ideas and
make them his own, and he and Knuke Gingrich passed
legislations they did that cut real programs, but they sold it,
and they sold it in a way that the people
didn't really feel the pain like they do today.

Speaker 2 (38:40):
I think it can be done, but it has to
be done intelligently over time, and it can't. You cannot,
you know, baby with a bathwater issue, throw out some
of the programs which we all depend on. Of course, medicare, medicate,
social Security. I mean, we used to use the expression
third rail and it still applies.

Speaker 1 (39:00):
But it is economic reality that America is aging and
baby boomers are aging out, turning sixty five seventy five.

Speaker 3 (39:08):
Now the front edge is in their eighties of baby boomers.

Speaker 1 (39:12):
And I have clients you that are I'm a baby boomer,
but I have clients that are seventy years old, still
caring for their aging parents, and they come to me
and they say, when you know, I didn't plan for this.
You know, Mom's ninety eight and I'm still taking care
of mom at age seventy. And so that's something that
caregiver challenge and the responsibility that goes along with that,

(39:35):
and that's what our seminars all about on.

Speaker 2 (39:36):
This is very important. Yeah, that seminar is really going
to be important. People should should should attend and should
should listen and learn.

Speaker 3 (39:43):
Yeah, should, And being a caregiver.

Speaker 1 (39:44):
I've been a caregiver four times within my family, my parents,
my aunt, my uncle, and being a caregiver just opened
your eyes to how And I was just talking to
a CPA who you know, and I won't mention his name,
but he's going through this with his mother. And he
called me up and say, Lou, I now understand what
you do because he's living it, and he's living in
and finding out how hard the healthcare system is today,

(40:04):
how broken the healthcare system is today, and with these
budget cuts and with all of this chaos that just
gets pushed to the side.

Speaker 2 (40:11):
That's right, and I think it's great what you're doing.
So I applaud you for moving this along and educating
us all on some of the most important things. We'll
love our face in our lives.

Speaker 3 (40:21):
Well, I thank you for being here.

Speaker 1 (40:22):
We have another segment that we're going to come back to.
We're going to take a brief break. You're listening to
Life Happens Radio. Be prepared. We have Hugh Johnson live
in studio. I'm Lupiro, your host for this morning.

Speaker 3 (40:32):
Stay with us.

Speaker 1 (40:32):
We'll be back after this short message.

Speaker 3 (40:41):
Welcome back.

Speaker 1 (40:42):
We're gonna jump right back in with Hugh Johnson, the
local economist who's a national economist who has brought us
a lot of information over the last several years and
blesses us each year with his economic forecast. And no
one predicted this. I thank you in January when you
were on. This was not anything that anyone predicted, not
in January.

Speaker 2 (41:01):
But you'll remember we had some meetings we had and
I think it was October November, and we had the
kind of the outline of the Trump agenda at that time,
and we are of course trying to guess as to
whether he is what he was going to actually do
and what would be the implications. And I think that
at that time, I remember reading The Economist, and I

(41:22):
don't know if you remember this. But the economists said
there were a lot of similarities between the current period
or what Trump is proposing, and what we saw on
the Hoover administration in nineteen thirty. And I said at
the time, and I still would say that there are
enough similarities that you have to take those similarities seriously

(41:43):
and recognize that the combination of tariffs backing away from
you from foreign entanglements, and also the adversity of the
Hoover administration to immigration. If you take those three similarities,
you have to say, you've got to take seriously the
possibility that we're going to have a repeat of what
we saw in nineteen thirty. But I think, quite frankly,
having looked very carefully at it, and obviously Idea have

(42:07):
looked carefully at it, there are also important differences between
now and the nineteen thirties, which, yes, suggest to me
that yes, we're likely to have the inflation impact that
we saw in twenty eighteen nineteen or higher inflation. Yes,
we're likely to see an impact on the economy generally,
but it's certainly exports and imports, not just for the

(42:27):
US but for the globe. But the differences are such
that we're not going to be involved in I don't
believe I crossed my fingers when I say this something
as serious as we saw in nineteen thirties.

Speaker 1 (42:38):
Yeah, that's that's a you know, one hundred years ago.
We were in the Gilded Age, right, Yeah, and you
had families that had enormous wealth and you had other
families that had nothing. That's right, and it was very
much a rich man poor man phenomenon. Nineteen twenty nine
is the crash, and then you had policies going into effect,
which opened the door to Franklin Dell No Roosevelt and

(43:01):
his policies, and he was the president that kind of
pulled us out of the Great Depression. Nobody don't have
to talk about the Great Depression. The R word is
the only one I've heard bandied about, which is a recession.
And now a lot of economists are saying, well, you know,
I had a twenty percent chance on it. Now it's
fifty percent, maybe better than fifty percent.

Speaker 2 (43:22):
Yeah, for a recession, not a depression. And I'd say
that the case for well a case. I think the case,
the stronger case, is still that we're going to have
positive economic growth in twenty twenty five, that we're not
going to have a negative economic growth, which would help
define a recession. There's no question in my mind, Lou
that this is going to be a close call. The

(43:44):
economy is in the process is slowing. We're going to
see slower economic activity in twenty five, higher unemployment rates
in twenty twenty foe not significantly higher, but somewhat higher,
and that we're going to have a close call with
a recession. When you take a look at that, an
inflation which yeah, while and inflation stagflation, but and and
if you take a look at the the for example,

(44:06):
the consumer confidence numbers were released at the end of
last week, that's a leading indicator of economic activity. They
were dismal, and they raised the chance that we're going
to have a recession. And this is we're not going
to have simply a soft landing.

Speaker 1 (44:22):
Yeah, but to just don't jump off the building. Nineteen
twenty nine, you had all the scenes of people jumping
off a building, and.

Speaker 3 (44:29):
We don't want to panic.

Speaker 1 (44:30):
We don't need to panic because you have a good
month of job growth, which was surprising. You have inflation
numbers the two point four percent, getting close to what
the Fed target was of two percent, which we talked
about that on your forecast. The FED getting driving it
down to two percent. It's getting closer, and it just
went in the right direction toward that. So there are

(44:52):
some positives.

Speaker 2 (44:52):
There's some There are clearly some positives that tell you
this is going to be a soft landing, not a
hard landing. Soft landing, not a I think that case
is a good case, but I can't get away from
the fact that the economy is in the process is slowing. Look,
the first quarter is going to be about two point
eight two point six percent. That's going to be a

(45:13):
good number. But there's no question in my mind. Well
I shouldn't say no question in my mind, but I
would say the economy is going to slow as we
move through twenty twenty five. But I don't think it's
going to slow so much that we're going to have
an economic recession. But I would say that that it's
going to be a close call. I don't think this
is a worst of all possible worlds. Remember when we

(45:33):
have inflation rise, when we have high interest rates as
we might have right now in time, what's going to
happen is the economy will be affected I mentioned that
as the economy is affected in time, maybe it's sooner
than later. Federals is going to reduce short term interestates,
longer term rates will come down, and the outlook for
stock prices will get better. In other words, we're going

(45:55):
to simply go through a tough time in stage one.
Stage two will be just will be fine, and that's
when we're going to see the light at the end
of the tunnel. That's my judgment.

Speaker 1 (46:04):
So for those of you that are squeamish, don't panic,
don't be smart, stay the course. But what the government
does over the next three to six months will have
a lot to say, is to what that landing looks like.

Speaker 2 (46:17):
Yeah, it certainly will you, no question about it. And
you don't want to have Yeah, you don't want to
have You want to have balanced but I you'd like to,
but you've got to go at it very much, very slowly.
You can't have draconian cuts in spending, particularly in those
vital programs. You can't have draconian cuts and expect that
the economy is going to stay positive. It's just not
gonna Fiscal policy is important, It's I think monetary policy

(46:41):
is much more important because it's run by intelligent people,
but I think fiscal policy has got to be also
contributing or helping as we go through a very difficult
twenty twenty five and I think you're going to have
I think you're going to have that outcome. But obviously
we have to be watching Washington very very carefully because
we're likely to anything.

Speaker 3 (47:01):
It's I call it an own goal.

Speaker 1 (47:04):
You know, we were chugging along pretty healthy, sure, and
when you spoke at our conference back in November, it
was like, oh, and the S and P is only
up forty one percent for the last two years.

Speaker 3 (47:13):
It's it's okay.

Speaker 1 (47:14):
We just were in a in a world where hey,
this is what it should be. Steady growth, good job numbers.
You know, inflation had ticked down, things were kind of
under control, and economic policy could be tweaked. There were
things that needed to be improved upon. But it just
was such radical change so quickly, that's right, that it

(47:38):
threw not just this country but the world into that chaos.
So I do think there are going to be opportunities.
Let's go back to China.

Speaker 2 (47:45):
Radical and I might say extreme.

Speaker 1 (47:47):
Yes, Let's go back to China, because China is now
you know, on par economically worldwide, at least the closest
to us. We had the moral high ground, we had
the economic high ground. We were in the country looked
to by most of the world as the iconic country.

(48:09):
And now China has imposed i think it's one hundred
and twenty five percent tariff on our goods and we've
imposed one hundred and forty five percent tariff on their goods.
What does that do to the consumer into the market.

Speaker 2 (48:23):
It raised it's obviously going to slow economic activity, both
in China and the US. The second thing is going
to slow activity, at least in part because it's going
to raise prices there and it's going to raise prices here.
It's going to raise prices on some important things. You
mentioned cell phones before. I'm sure that Tim Cook is
probably squirming and would like to see a resolution. One

(48:45):
thing that was clear that happened in twenty eighteen in
twenty nineteen is that the focus was in twenty eighteen
nineteen on China. It's just as it is on China today,
and it has been. They're tariff's on China continued through
twenty eighteen nineteen and beyond. So let's keep that in mind.
The second thing is what was very characteristic about what

(49:08):
happened in twenty eighteen nineteen was negotiations. Negotiations are current.
They called off the essentially the trade war for a while.
They had very intensive negotiations and it led to some
resolution of some difficult things, particularly between Canada and Mexico
and the US. So there are negotiations. We're talking about
a ninety day pause. You're not gonna have a lot

(49:29):
of really successful negotiations in ninety days, but you'll have
the framework memos of understanding between countries, the countries and
the US on what the tariffs are going to be
or how they're going to work the problems out. You're
gonna have that in the next ninety days. You're not
going to have the final resolution of the tariffs, but
you're gonna have some memos of understanding and things will
be understood. In other words, and I can't begin to Oh,

(49:52):
I can't overemphasize this. There's gonna be a negotiation. This
is all a part in the You wonder why teriffs
are so high, Well, if you've been in negotiations before,
you know you start high. And that's exactly what's happening.
They're starting high. Plus the fact there are a lot
of other things such as currency manipulations such as vat

(50:13):
taxes which have been added which people weren't thinking about
before and made the tariffs so much higher. But the
most important thing is just start high. They're starting high.
We're going to ninety days. We're gonna have negotiations in
the ninety days, and then we're gonna get down to
some really, really tough negotiations to get the terriff resilus.
In other words, negotiations are a part of this trade war.

(50:35):
And that's so important that that's a part of it,
because that tells me the war's going to.

Speaker 3 (50:40):
End, and we just would like to know when, Hugh.

Speaker 1 (50:44):
So stay tuned, folks, we'll come back and hopefully we
can have Huback once this all settles out and the
dust settles. The negotiations are ongoing. Thanks for listening this
morning to Life Happens Radio. We hope you can join
us every week here on WGYA at nine am. I'm
Luke Pierro, your host. Join us this Thursday for our
seminar at one pm at the Colonytown Library, and as always,
check out our website at purolaw dot com For more resources,