SKEPTIC’S GUIDE TO INVESTING
Straight Talk for All, Nonsense for None
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Your Hosts - Meet Steve Davenport, CFA and Clem Miller, CFA as they discus the latest in news, markets and investments. They each bring over 25 years in the investment industry to their discussions. Steve brings a domestic stock and quantitative emphasis, Clem has a more fundamental and international perspective. They hope to bring experience, honesty and humility to these podcasts. There are a lot of acronyms and financial terms which confuse more than they help. There are many entertainers versus analysts promoting get rich quick ideas. Let’s cut through the nonsense with straight talk!
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SKEPTIC’S GUIDE TO INVESTING
America in Chaos: Tariffs and Taxes
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The extension of Trump-era tax cuts presents critical planning decisions as exemption amounts could drop from $14 million to $7 million per person without congressional action.
• Estate tax exemption likely to receive a four-year extension rather than permanent status
• Trump administration characterized by chaos and short-term thinking rather than coherent strategy
• Stephen Miller identified as Trump's most influential advisor and policy gatekeeper
• Elon Musk serves as a "heat sink" absorbing criticism while implementing controversial policies
• Government agency staff reductions create long-term damage to institutional knowledge
• International allies may pursue independent security measures if US support seems unreliable
• American civic education crisis leaves citizens unable to understand how government functions
• Energy sector potentially most resilient to upcoming political and economic turbulence
• Immigration restrictions risk undermining America's technological leadership
• Political divisiveness threatens productive dialogue on critical national issues
Straight Talk for All - Nonsense for None
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Got to do it.
Speaker 2:Hello everyone and welcome to Skeptic's Guide to Investing. Today, glenn Miller and I, steve Davenport, have a special guest, mr Fraser Rice the author of Wealth, actually and we're looking forward to talking about what's happening in Washington regarding the tax bill and the extension of the tax cuts from Trump and trying to determine if the chaos of tariffs will become the chaos of taxes. I believe that we're not seeing a government that really has a very coherent plan that jumps from 25 to 50 percent tariffs overnight, depending upon which side of the bed you wake up on, and it feels to me as if we're thinking that this is going to be the way that they attack and approach tax extensions.
Speaker 1:This is going to be quite a year and I'd like to start with Fraser and ask and I'd like to start with Fraser- and ask, fraser, do you see the chaos continuing or do you see the chaos getting a lot more serious when it comes to people's dollars and taxes? I think the chaos is going to continue. I think Trump equals chaos and his way of doing things Just that's just the lingua franca of our existence these days. My day job really is to sort of think about it from a multi-generational and estate tax perspective. So, to the extent I have any knowledge of that for your listeners who are vaguely aware of that part of the law, essentially at the federal level, the estate tax exemption is currently at about $14 million per person, which is generationally really high and a very generous set of circumstances that we're in the way the previous law was set up was that in the TCJA back in 2016,. It had a runoff of eight years and that was done through the reconciliation process. So we're coming up on eight years and, in order to make the numbers work, that 14 million is supposed to get down to about 7 million per person at the end of this year. So the sort of wagging tongues around all of this are sort of saying, okay, you know Trump's in place. He wants to theoretically either extend this generosity or even just get rid of estate taxes in general. What do we do to plan for this? Because if nothing happens, then we get this, this exemption, cut in half and you know we lose some of the generosity in terms of the planning that we do on this front. So, uh, so people like me try to go around and understand not only what clients want but also what the tea leaves say in terms of what these taxes are going to do. So that's sort of the background as the sort of oh, we're going to, we're really interested in removing estate taxes entirely. We're thinking about extending things. Where does that sit these days?
Speaker 1:In talking to a lot of different people, both Washington and otherwise, the conventional wisdom is that the extension of the estate tax portion anyway it looks like around four years, and so the idea would be that the cutting in half wouldn't take place at the end of this year but it would be four years from now. That gives us a little bit of certainty. It gives us some tools and things like that. Now, if I try to sort of transpose that to other parts of the tax code ie, you know, income taxes and capital gains taxes and carried interest and things like that we get all sorts of mixed signals and that ultimately leads to the chaos. You have so many different proposals on things and in order for these tax situations to happen, the reconciliation process requires essentially that any tax cuts are paid for or else the tax law has to sunset.
Speaker 1:And that's where we are right now. And, given the way things operate vis-a-vis Trump and his administration, the narrow edges in the Senate and House and a somewhat weakened response from the Democratic side of things, I don't see certainty coming around the corner anytime soon. So I advise clients, generally speaking, that when you've got things in front of you that you can take advantage of, especially on the estate tax side of things, wouldn't be the worst thing in the world to get that in. Get some moss growing underneath the transaction such that if anyone were to reverse things or to try to claw that in, get some moss growing underneath the transaction such that if anyone were to reverse things or to try to claw it back, it just would be extremely unlikely going forward.
Speaker 2:What do you think, clem? Does the idea of more chaos seem palatable to you, or do you think it's? Uh? I think it could be worse than the current chaos, because foreign taxes on imports really don't affect people a heck of a lot.
Speaker 3:If aluminum goes up, I'm not sure I'm I'm a big buyer of aluminum, but when you talk about my, uh, when you talk about my income tax rates, my ears kind of perk up so, in order order to deal with anything having to do with taxes you know, putting the tariffs aside for a moment, but anything having to do with a state income tax and other taxes there has to be a laser-like focus in Congress on how to deal with that, and I don't think we're going to see a laser-like focus in Congress on how to deal with that, and I don't think we're going to see a laser-like focus.
Speaker 3:I think there's going to be a lot of attention paid to things that really aren't that important, such as trying to ratify a lot of these doge cuts. You know, the doge cuts that are being, you know, blocked by, and not just doge cuts, but also some of the stuff related to immigration that's being blocked by courts. I think that, you know, inevitably, you know, Trump is going to have to go to Congress and get that stuff sort of reverse engineered, so to speak, put in behind him, make sure that it sticks, and that's going to take up a lot of energy in Congress that could otherwise be used for, I think, more productive purposes like looking at taxes, for example.
Speaker 2:Yeah, I mean I look at things in terms of the narrowness in the Senate and the House. It feels to me like a lot of people are just kind of waiting and I like to think that this has all been thought out by the strategists on the Democratic side and Republican side. But when I see the days when we have a 25 percent tariff in the morning and a 50 percent tariff in the afternoon, it feels to me like this is definitely a you know kind of figure it out as we go along. And I agree with you, you need a laser-like focus in order to do things. To the tax code. And when I look at the tax code, I think here's an area where it gets more and more difficult as we go along, because so many of the rules and so many of the experiences in the past are really like third rail moments.
Speaker 2:When you think about I think about Ryan pushing the wheelchair over the cliff and how his career basically ended on that one item, and I think there's a lot of questions about what becomes of this bill and what becomes of this administration, in my mind it's a two and done and they're going to lose the House when we go to the midterms and at that point we have a lame duck.
Speaker 2:So I'm looking at this as if I were the strategist on the one side, the Democrats I'd say let's just play and delay. We delayed until that midterm action, any real action. I think they can say we didn't cause the taxes to go up. Trump put in a temporary tax raise cut and it's now expired because he wasn't thoughtful enough and he didn't have enough influence to really put in a permanent. I mean the fact that he picked business to get the permanency and left the individuals to sunset, I think is appreciated by all the business leaders who were supposedly being helped by the Trump administration. So it feels to me like we're in a short-term game here and I put the American people as the ones who end up losing. What do you think, frazier?
Speaker 1:I don't have much there to disagree with, aside from the mixed signals that get sent out.
Speaker 1:I think the you know sort of this real estate dealmaking ethos where you sort of get things done and then renegotiate later and sort of hope everything happens.
Speaker 1:It's not a great way to run things in terms of long-term planning, so I'm not happy about that and somewhat scared on that front from that perspective. But I completely agree with you that you know, for those folks who are terrified of sort of a Republican regime, my comment and it goes back to even before the election was that even if Trump wins, you know you really might only have a year and a half to deal with sort of this quote unquote Republican ethos in terms of governing and tax planning and so on, and that in the midterm election if one of the houses or one of the branches of government Senator House flips, then you get into a real lame duck scenario and then you set yourself up for an interesting scenario afterwards where you know you figure out what the president looks like, whether that's a Republican or a Democrat, and Trump is constitutionally bound not to run. And you know at that point we really are back again in sort of in the mix of sort of a general level of chaos and lack of certainty in terms of tax planning.
Speaker 2:Mix of sort of a general level of chaos and lack of certainty in terms of tax planning, and do you have any opinions about what might happen if Trump were a lame duck, and how does it relate to the future of the party? It seems like, when I look at this, it feels like the vice president. Well, he gets a lot of praise from Trump. Now, as we go along, just as we go along with the Musk relationship, I have a probability of both of those relationships blowing up, you know, in a year, somewhere around 70 or 80 percent. Do you think those relationships last?
Speaker 1:No, I don't. I think that you know there is a you go back to. You know how many Scaramucci's do you last in terms of your tenure under a Trump administration and you know that's I don't know two or three weeks be. There will undoubtedly be turnover within the cabinet. It depends on who runs afoul of whom. You know the Musk part. He provides a very useful function for Trump at this point, which is he's the the bad cop in terms of blowing up the government and using doge tactics and things like that when Trump doesn't feel like he needs him anymore. That's it. I think Vance is the same way.
Speaker 1:One of my pet things, as far as you know I take on a bet with other people on this is that I think Trump is I don't know if I think or you know I think it's sort of an interesting thought project, but I think that Trump could resign after his last State of the Union. And I think this accomplishes three things. If I'm being really magnanimous. It sets up Vance or whomever on the Republican side, to have some incumbency before going into an election. Number two it takes away Article 25 and sort of comparison to Biden issues as far as capacity. It takes away Article 25 and sort of comparison to Biden issues as far as capacity.
Speaker 1:But I think from an ego standpoint, I think Trump would, I think is interested in, from an ego perspective, tidying up his legacy and by sort of willfully abdicating power, he can say he did something that Biden didn't willingly do. He, I think, washes away the January 6th stain that he currently quote unquote enjoys and ultimately, I think he tries to position himself as George Washington for the new generation and that he deserves a spot on Mount Rushmore with the other four. All of which is, you know, I'm sure it's extremely unlikely, but I don't put it past him to try to make some sort of grand theatrical gesture like that, and then you have real chaos, because then that's not something that this country is used to seeing in a meaningful way, and I certainly in recent and even non-recent memory.
Speaker 2:I think you may have something there, Frederick.
Speaker 1:I'll take the other side of that bet if anybody wants to do it.
Speaker 2:Yeah, I mean, I don't want to. I don't want to contest you on that bet, but, um, I'm still saving my uh quotas for retirement. But it's uh, I, I think the uh. The question that is in most people's mind is how do all the legal issues and how do these, you know, I mean they've? It seems as though the uh, the, the need for uh pardons has probably gone down, but I'm not sure by the end of this um, in three years, where we'll be in terms of the apartment nature of the government and is what do you think, clem?
Speaker 3:well, uh, you, I've got this. I'm trying to think through this whole idea of the early departure of Trump that Fraser just raised. I think there's something to that, but I think that it would have to be under a condition where Trump is not feeling pressure. In other words, if he's under a real attack, like an impeachment process or something like that, I don't see him resigning in the middle of that. He's going to fight in the middle of that. So there would have to be an absence of, there would have to be an absence of pressures for him to to go along with that. But I think if there were an absence of such pressures, yeah, I mean, I think it makes some sense that he decides to do that.
Speaker 3:Of course, it's really hard to give up power. I mean, look at Trump 1. Look at Biden. Obviously it's very difficult to give up power. So would that be the same case with Trump too? I don't know, it depends on how much he's achieved and how much pressure there is so possible, but I think the conditions would have to be right for that to happen.
Speaker 2:In my opinion it does seem to be very magnanimous to the Republican Party to try to establish a smoother transition and a higher probability that the Republicans remain in power, which I think that Trump's only been interested in Trump being in power, not Republicans.
Speaker 1:Make no mistake that that's way down the list on reasons he'd do it. It, the main reason, would be purely ego driven and some sort of if he saw a pathway toward political immortality. In some ways, I think back to you, clem. I think it's an interesting point in terms of the absence of pressures. On one hand, I think having a democratic house would, in theory, be very frustrating frustrating and he would have trouble doing anything. On the other hand, they would also have the ability to have hearings, and that would make life miserable for him, and so on and so forth. Uh, I, uh, to be determined. It's. It's one of the, it's one of those half developed thoughts that I wanted to get out there, just in case no one else. You know, I can put my stake in the ground, just in case.
Speaker 3:So there's another um, another thought that I've had recently, uh, as I've learned more and more about um, Vance, uh, and Teal and Musk and Curtis Yarvin.
Speaker 3:And Curtis Yarvin and I don't know if you've read about all that stuff you know Musk going into meetings with his dark MAGA hat, and you know there's this sort of you know, regardless of whether Trump is involved in this or not or adheres to this theory, there is this sort of strain of authoritarian thinking, that sort of techno-authoritarian thinking that is espoused by this Curtis Yarvin and kind of adopted by Musk and Peter Thiel and to some extent influencing Vance, may have led to Vance making comments about ignoring the courts, which they're not doing right now and it doesn't sound like they will. It sounds like they're very frustrated with courts but at the end of the day, they're they're, you know, adhering to the court rulings at the moment, right, uh, but you know Vance has made comments that would suggest that down the road, maybe, uh, they would not, um, adhere to the courts. But anyway, I think you know Vance probably has more of an authoritarian streak in him than Trump does, and so I think that's something to be watching out for.
Speaker 1:I agree with that and, by the same token, I think we have to remember that Trump in many ways is a generational talent in terms of understanding ratings and how the media works and that sort of framework, much more so than in terms of getting votes and much more so in many ways than his business acumen. He is a once in a once in a multi lifetime. I put him up there with PT Barnum in terms of understanding how to get attention and ratings. Uh, I don't think Vance is anywhere near that. Uh, I think he, like Obama, in many ways caught fire with a book, uh and uh, has been able to sort of stitch together his background into something that's very interesting. But at the same time, I think to think that he's going to take up Trump's mantle and be able to have the same sort of resolve slash, understanding of how the media works and so on, I don't see that at all.
Speaker 2:Yeah, there's been a strategy that's come out lately that Trump is creating this chaos purposely with the tariffs so that the economic conditions in America will get bad enough that he would be able to make the case that we are heading to a recession and the Fed needs to cut rates and that he really wants a few things in this administration lower oil, lower interest rates and lower taxes.
Speaker 2:And I look at this as a chess game and I'm not sure if he's better at checkers, but could it possibly be that his bumbling and his incoherence around tariffs is just a way to create this kind of chaos and that chaos leads to the Fed needing to do something? It would seem like a pretty sly way to do it, but I'm not sure if it's sly or if it's just accidental that we're seeing the Fed now in a position that they have to talk about two cuts. And once they start talking about two cuts, it's just a question of how do we get there sooner in terms of Trump? And maybe when all of this stuff is over and some of these countries give up on trying to fight the tariffs, they negotiate and he he says look, I shook this, these countries down and I did what I could do. And now America is a better place because we have less tariffs with our trading partners. I mean, is it possible that there is some, you know, evil genius there behind any of these ideas?
Speaker 1:Clem, I'll let you start with that one, because I have to think about that one for a minute.
Speaker 3:So, while you're thinking about it, steve, I think there's an attempt to, there is a strategy, and there is some talk out there about something that's referred to as the Mar-a-Lago Accord. There is a call to create sort of a new world. I don't mean this in the dark sense, right, but sort of a new world or sort of along the lines of a new plaza accord. I don't know if you might remember back in the 1970s Some of us were little kids back then, or not born yet, right but there was this thing called the Plaza Accord, named after the hotel where the major powers got together and decided on how to arrange or manipulate, I should say, exchange rates so that the US would not be disadvantaged as the world's reserve currency.
Speaker 3:And I think Trump feels that the dollar is overvalued and that's causing some of our trade imbalances, and so he would love to get the dollar undervalued, which of course means that other countries have to have their currencies rise in value, and by creating chaos around the world, perhaps he can get everybody into the ballroom at Mar-a-Lago and work out a new deal that would be sort of akin to the old Plaza Accord, which is ironic because he used to own the Plaza, but I don't know if he owned it at the same time as the plaza accord, but um or own some highly leveraged portion of it.
Speaker 3:Oh, yeah, exactly, but yeah, I mean the whole idea would be create a uh, you know trump, creating a new, uh, global order of exchange rates where the dollar would be undervalued to the extent that we would all of a sudden see surpluses and something of a manufacturing boom, or at least incentives for a manufacturing boom in the US.
Speaker 1:I think too, just just from a political lesson perspective, I think every modern politician sort of looks back at Bush one and sees that high popularity early in a one-term situation ended up really poorly for him, as he ended up with his you know, read my lips no new taxes.
Speaker 1:And so I think there's a calculus going on saying look, if I'm going to create pain in order to get to an outcome later on in the term, I'm willing to accept it now, because memories are so short and the political narrative and sort of recasting of this is all going to be forgotten in six months.
Speaker 1:And so if you're willing to create short-term economic pain for the American public or companies or anything like that, and you think you've got some sort of pathway into something that's better, you've got to do it now and in the conjunction with you know sort of the flood, the zone, types of executive actions that have happened across all sorts of different areas, so that everyone, you know, depending on their personal issue, uh, du jour, you know they've got something to sort of think about and be frustrated with or be happy about, and you know sort of using all of these different modes of chaos on the economic side of things.
Speaker 1:If you think you've got some sort of angle to uh, you know, create a different equilibrium, that where the U? S comes out slightly ahead uh, slightly ahead, you've got to get the pain points done in the first year while you have the ability to do it, and then you have some time for that narrative to build back in. If unemployment rises early or if interest rates pop for a second or whatever happens on that front, if you've got pain to take, or if the stock market drops or it's volatile like we've been seeing, if you've got pain to take, you want to take it early so that people only remember the most recent thing that's happened.
Speaker 2:Yeah, yeah, I looked at what he tried to do in the first administration with Obamacare blowing up Obamacare and that was his only item. He could have done infrastructure. He could have done things that had enough agreement to cross the aisle, but he just refused to do it because he said this is my first and most important goal and he wanted to show people he was serious. And in my mind he just burned up his goodwill and then that really kind of made it much more difficult to do things later.
Speaker 1:That really kind of made it much more difficult to do things later.
Speaker 1:That happened to Clinton too, and, and so you know that that's one of those gigantic problems that you know spills over to other things.
Speaker 1:And so you, you know if you've got, if you know how much political capital you have in the bank and you're trying to allocate resources towards different things, you know that that's where you know, I think Trump has sort of looked at it and said, okay, you know, I've got, I, I, I truly believe he, he sort of looked at and said okay, I've got a year, and, and if I'm going to make a dent, I've got to do it all right now and use the executive branch to do it. Uh, because it's, you know, the, the, the Leviathan of uh sort of checks and balances will discover, uh, how to slow me down and and if I don't get this stuff done, it's not going to happen. All of which is to that's what sort of feeds my point that by the end of three years, uh, he may, he may have finally said okay, I've, I've had it and, um, you know, not now it's time to tidy things up for the future, for, you know, capital T Trump.
Speaker 2:Do you think there's anybody who's who's got that kind of strategic perspective in his administration, that like if you were to say, well, the real ideas, the real, the real vision is coming from this member of his, you know. Is it his chief of staff? Is it like I? I don't think I can figure out what Trump is thinking, cause I'm not sure I have the similar state of mind. Glenn may have a similar state of mind, but I don't. And and so I'm just a logical kind of engineer and I'm looking for where is, where is the logic in his administration? Is it dissent? Is it, you know, the Secretary of State? I mean, where do you think the strength? If there is a strength and I'm not saying there has to be, but if you look at the people, I like to try to figure out what are the people saying to him, and then what is he saying? And then, is there any influence? And how do? Because once you know where his influence comes, then you have a good idea of where his trail is going to lead.
Speaker 1:Right do you see any?
Speaker 3:influence on him yeah, climb, you go first. Steven miller is his biggest influence. Okay, I, I agree with that. Yeah, I, I he's been with him the longest, I believe, of all these advisors he is. You know, he's right there near the Oval Office. Apparently he has a very forceful ideology which goes way, it's like trumpism times five or six, right, um, he's not like, uh, you know, yeah, he, he pretends to well, not pretends he's a. He's very, um, uh, loyal, ultra loyal to trump, but not in the, in the kind of um, almost um, toadying way that you know these cabinet secretaries are, um, I don't think trump listens to his cabinet secretaries. I think the cabinet secretaries listen to him. Uh, I totally agree, yeah, but stephen, stephen Miller, I think, is a very powerful influence in the, you know, in his staff, and so that's where you know if there's any.
Speaker 3:I mean, I'd say Stephen Miller is more important than Vance and I think I think he's more important than Musk. I think he's more important than Musk, I think he's, you know, musk is going to be there, for Musk is important. I think Trump is relying on Musk because he doesn't have the energy at his age to do this all by himself. So that's why Trump is energy or competence. Not that Musk is terribly competent, but Trump feels that he's not. I think Trump rightly believes he's not competent enough to do what Musk is doing. But Musk is not ideological or as ideological as Stephen Miller is.
Speaker 1:Yeah, I was going to say, I think, totally agree, that Musk serves a couple of purposes. Number one is he ends up being sort of a driving factor in all of these doge cuts, but he also acts as a lightning rod so that Trump does not have to receive all of the criticism directly on that front and he almost acts like a like a heat sink in many ways. I think, too, one thing to think about is that you know around Trump I think there are. You have this very complicated Venn diagram of different interests that need you know sort of a voice in front of the president. You have sort of the teal technocrats. You've got sort of let's call it Wall Street. You've got the Christian right, you've got it. All goes down the list. There's all sorts of different subsets that all link up and I agree I think Stephen Miller is in many ways one of the gatekeepers of all that to try to keep things organized and cohesive, and so to the extent there's a logic, it's really more of a funnel to then go into the Trump computer, into how he thinks of things and how he then uses what he has to bear as far as messaging and getting from here to there on certain packs Additionally, things like Stephen Witkoff as far as sort of Mideast policy and trying to engineer that You've got kind of that function over here and trying to engineer that You've got kind of that function over here.
Speaker 1:All of that is to say that you know to call it evil genius or genius or whatever. I think sort of over, sort of overplays the idea that there's some sort of grand scheme going on here. I think Trump does have a system in place to process the various inputs that he's getting and the various demands on the power that he has in place, and he has a real set of ideas and concepts as to how to reward or punish. But I don't think he necessarily knows what he's up to from week to week and that ultimately falls to someone like a Stephen Miller or maybe someone else that we haven't mentioned. That helps to keep that organized and take it from pure short-term thinking to something that's a little more medium-term thinking.
Speaker 2:I would love to think that there's something beyond short-term thinking. So, whether it's Miller or others, I think then we can start to try to understand why things might be going the way they're going, and I don't, you know, whether it's to talk about fentanyl coming in from Canada or some of these other ideas. I find that whoever is driving this discussion hasn't really thought it through quite to the end in terms of you know, if fentanyl is a problem, then you know the amount coming through Canada isn't, you know, changing anyone's world. So it was kind of a. Do you think that, when we're in this situation, that there will be damage to America as a result of some of these actions, or are they more likely, just like the executive actions of Biden, going to be turned over by the next person who comes in?
Speaker 1:You start first. You've got good foreign expertise on this. Well, I think domestic as well.
Speaker 3:Steve, when you're talking about damage to America, you're talking about domestic, foreign or overall?
Speaker 2:I'm talking overall because I think that you know when we cut back on the IRS.
Speaker 3:You know, I know, having worked in government for a long time, albeit in a small agency, the export import bank. Uh, that government uh is something that doesn't move. That is it like an immovable object. Right, it's very difficult to make changes and to the extent changes are made, it's very hard to undo them. So you know, if you lay off a whole bunch of people, it's going to take decades to replace that level of experience.
Speaker 3:And indeed, in government, you know people may not recognize this, but in government there are a lot of people with a lot of particular expertise in certain areas. And I remember I'm going to talk about a previous episode, minor episode of cutting, but I think it's illustrative I remember when there was something called the Bureau of Mines and you know they eliminated that, I don't know, 20 years ago, 15 years ago, something like that and in the Bureau of Mines there used to be an expert, like a real super engineering engineering trained expert on each particular mineral engineering trained expert on each particular mineral and industry, private industry relied on the expertise of that, of that person, uh, in order to make decisions about you know where to mine uh, how to mine uh, you know that expert would have. Uh, I remember myself there was some reason I had to go over to their offices and there were maps all over the place of where the deposits were. I mean, that was a huge loss of expertise for private industry in this country that they got rid of the Bureau of Mines and right now there's a lot of expertise that's being lost across a whole series of agencies and, yeah, some of it will be picked up by the private sector. Some of it will just be lost as people retire early Because, remember, government has a good retirement and a lot of people will take advantage of that retirement. If they're laid off or if they're, even if they're just unhappy with what's going on, they'll take advantage of it and and and take off. So you know, domestically I think you know a lot this could, this current episode could cause a lot of damage. That's irreversible. So, yeah, they could remove the executive, direct executive orders in the future, but the damage is done. So I think that's that's terrible.
Speaker 3:Now, in terms of international um, I think that you know we haven't seen yet all the damage that could happen and you know we've seen threats about Canada, we've seen threats about Panama and Greenland and you know we've already seen some progress, I'd say, with Panama, in the sense that there was a sale of some of the port facilities to a US, to BlackRock, actually from CK Hutchinson. But if you look around, there's a lot of, there are a lot of threats, you know NATO, ukraine, korea. You know these are things that if they get carried out, are going to be extremely damaging to US foreign policy and but they haven't been really carried out that much yet. But they haven't been really carried out that much yet and it's all sort of in the realm of potential threats and you can kind of chalk that up to. You know, you put out a position, you can kind of chalk it up to negotiations to a certain degree right now to try to advantage US positions.
Speaker 3:But you know, if any of these things really get carried out to any great extent, I think that, uh, it could cause a tremendous amount of damage. Any one of these things. The U? S were to invade Greenland, uh, that would bring NATO down on us, right? I mean, even something as simple as Greenland would bring NATO down on us. So that would be terrible. Ending all support to Ukraine from the US and not being willing to back up Europeans if the Europeans go in there with support, I think would be terrible for us. So there are a lot of things that could go wrong on the international front and we just haven't seen it yet, but it could very well happen.
Speaker 1:On the domestic front. I'm going to take a counterpoint to Glenn there. I definitely understand the idea that if you've got good expertise that goes away, it's going to take a long time to recover. I worked for a state agency way back in time and I seem to recall I came out of that experience before I went to law school and said if you fired 400 of those people you wouldn't notice. And then if you fired another 200 people six months later you still wouldn't notice. And so on the one hand, I agree that there are pockets of the government that you absolutely need and you need expertise, you need data collection.
Speaker 1:Cutting the IRS is just mindless to me, because that is a revenue collector and, yeah, it may not be the most efficient one, but it's. You know, I did a podcast with a former IRS commissioner. They get a big job and you know it's not easy and it's underfunded and you know you set them up for failure anyway with the way you sort of cast them publicly. But to blow that up makes just it's just shooting yourself in the foot in many ways. But that said, I think that the government, the administrative state, is very crafty and very resilient, and so I think a lot of these efforts, you know, doge or otherwise will either get reversed maybe with a lot of pain in reversing it or I think the benefit from something like this is that it is going to force Congress to do its job in crafting appropriations in a much more strategic and specific way, which I think they got into a really bad habit over the last 40 to 50 years, saying here's a check, go do it. And then the administrative state was in charge of sort of dealing with that. And you know, I think the good, unintended consequence of what's going on here is that it is putting some responsibility back into Congress, who I really think is at fault principally for a lot of the chaos, in many ways because they've passed the buck on everything and I think, hopefully, assuming we get to a postmodern world in terms of congressional legislation and so on, between that and Loper Bright, which is sort of taking away administrative reliance on the administrative interpretation of law, it's going to force Congress to do work in terms of crafting legislation going forward. Now that might be wishful thinking.
Speaker 1:On the international side, clem, I pretty much agree with you on that front. I worry that, as the US has gone from being sort of the polite statesman and the adult in the group. We now have taken on sort of this adolescent posture in terms of increasing our negotiating stakes, etc. And popularity is important in many ways. That is a soft power, and if you spend that in sort of dubious ways, that sets yourself up to collapse in other ways.
Speaker 1:And what's going to end up happening too, I think, is that the US is going to get caught at cross purposes with some different types of gestures. So, for instance, launching an attack on the Houthis is, you know, a different approach than it is to sort of potentially leaving the Ukrainians in the lurch as far as support's concerned. And so what that tells people like Taiwan, for instance, as far as what support they can rely on or not rely on from the US, that's unclear. And you know, I think, that sort of the schizophrenic nature of what we're looking at from an international perspective. It doesn't augur well. And you know, I hope, you hope in many ways that there's some thought or some vision as to what sort of a realignment of priorities is going forward. But to sort of spend friendships like we seem to be doing at this point, I think could be expensive later on so, fraser, if I might, uh carry a little bit further on your points there.
Speaker 3:so you brought up taiwan, uh and uh, I think if you think about taiwan, you think about, about germany, uh, you think about, potentially, you think about, potentially, south Korea, you think about even Ukraine, and you have to wonder, you know, if these countries feel threatened by the absence of US support, or even by US antagonism, will these countries move along with their nuclear weapons programs? I don't think that's. Some people might say, well, that's not something that's likely to happen. But there have been periods there have been at least two periods in the history of modern Taiwan where they had been working on nuclear weapons programs. I doubt very much that all of that stuff, all the paperwork, has been burned.
Speaker 1:I agree.
Speaker 3:That paperwork is somewhere. And if I were them, you know, with the Chinese doing exercises to surround them, I would be working on a, on a nuclear weapon right now, or several nuclear weapons. Uh, germany could develop one very quickly. They've got the industrial base. Uh, they could develop one um very quickly.
Speaker 3:And besides, you know, france has talked about extending its nuclear umbrella uh over um, talked about extending its nuclear umbrella over, you know, over the rest of the EU. So there's that possibility too. And then I wouldn't even put. I mean, I know, you know Ukraine doesn't sound like the kind of country that would be able to develop a nuclear weapon. But you know they had nuclear weapons there, albeit under Soviet army control. But a lot of the folks in the soviet um, in the soviet military, were actually ukrainian, some of the smarter ones even, and uh. And so there's expertise around within ukraine to do and not to mention that, but also nuclear power facilities in the ukraine. So they could um, you know, potentially uh be looking uh at nuclear as a long-term military deterrent if they can't rely on the US or Western Europe for that.
Speaker 2:Yeah, I just came back from a meeting with the local CFA society and I sat next to a Chinese national. Next to it a Chinese national and her comment when I mentioned Taiwan was China is having so many problems they can't handle. Taiwan now added to the list that there's so many worries and so many concerns about the economy and the real estate and all of the other things going on with China economy-wise that they're just so focused on trying to up or trying to right this ship and get it moving and the economy moving again in a way that they think will be, you know, in line with Xi's goals. So her comment was they can't handle Taiwan, they can barely handle the mainland.
Speaker 2:So I've been one to think that, you know, chaos is the time to operate. Sometimes is when things are difficult and things are confused in a domestic sense, that having an international goal or an international opposition, you know, is a way for you to focus your people back away from their current troubles and to something on the outside, and I think that in my mind it's still a possibility that Xi would want to, you know, take advantage of the US. I look at what happened with, you know, netanyahu and his recent actions again in Gaza, and I said you know, trump wanted this problem to go away, he wanted it to be solved. He wanted it to be. You know, trump wanted this problem to go away, he wanted it to be solved. He wanted it to be, you know, so we could focus on the Ukraine, and it's not going away. And so, in my mind, the more energy and effort we keep putting towards, you know, europe and the Ukraine and the Middle East, I think is all going to make it very hard for us to respond or consider what's the right way to approach Taiwan, and to me it's just too big. After seeing what happened with Hong Kong and reincorporating Hong Kong, I feel that Xi has that on his radar and if things get more volatile in China, I think it makes for a more volatile situation in Taiwan.
Speaker 2:But my biggest concern about the future is really what happens to the US in terms of how we continue to operate as a society.
Speaker 2:It feels to me like we're two different countries and two different people are just gleeful if you're on the Trump side and people are depressed on the Democratic side and the people in the middle who are independent, they don't know what to think of where we're going, because I don't think there's been a clear direction from the Democrats and I think there's.
Speaker 2:So, when I look at Trump, I think of somebody who is able to through media, really, you know send messages and get things, get the discussion turned around to what he wants to talk about, and in doing that, I think a lot of other voices aren't being heard in the country right now, and in that way, I think his legacy will be one of division, and I think it'll, you know, it could lead to, as we've talked about, or I've talked about, the idea of a third or fourth party, because it feels to me as if I keep seeing the Netanyahu and the far right party that he's got his government with, and I don't think anybody has 50%, and so, therefore, I think that eventually, people are going to get tired of having a group lead that has 35% of people backing them.
Speaker 2:The Democrats and the Republicans really don't ever look like they're going to get close to a majority, so I think we're going to see the party system break down, which, just like this, doge activity in the government. It has some pluses, it has some minuses, but I think it's one of those things in the future that nobody's talking about, and therefore it's likely to be much more disruptive than it could be.
Speaker 1:I think this country is paying a huge civics bill right now, where I just had a podcast with an author who has a book called how to Raise a Citizen, which I think is really good, and the amount of money spent on teaching civics to kids is, you know, if there's a dollar spent on STEM education, which is good, a nickel is spent on teaching civics. And I think now we have a populace that just doesn't understand how this country works. And so when you have people who are extremely good at manipulating the media, controlling narratives and so on, there is really no good North Star at the moment for people to understand what the content of that information is in the context of how things actually operate. And so you end up people who become virus experts and then move over to becoming Ukraine experts and then become constitutional lawyers all within the span of a week, and have no idea what any of these things mean or do. And then, in the context of the political framework, you have people yelling oh, constitutional crisis, blah, blah, blah, blah, blah.
Speaker 1:Wait a minute, let's ease back here. Let's see why, let's see how these different parts of the different branches of government operate. Let's see how the different branches of government operate within themselves and how this all works. Lot of the country, especially even amongst let's call it successful, intelligent people, they don't really know either. They see president, they don't know who their congressperson is, they don't go to jury duty, they probably didn't vote. They don't understand the concepts of federalism, et cetera, et cetera, or the idea that states don't print money I can go down the list of different things that sort of evaporate in people's consciousness that I think are important. And then add on to that innumeracy and not understanding the power of compounding and you end up with a very uneducated populace. And that's where we are today, where you've got, even on both sides of the aisle you've got people who just don't understand how things work, and we're paying for it.
Speaker 2:Yeah, I mean I. I've been working the last 10 years in financial literacy and it's you know. Now we've gotten 27 States to have a one semester class required for financial literacy. So that means that 22 do not have any requirement. And if you think about that over the course of your life, you know your 12 years of education. Two semesters the course of your life. You know your 12 years of education. Two semesters, 24 times five classes, 120. If one out of your 120 educational opportunities is in financial literacy, is it really going to change? Or you know impact how individuals understand finance.
Speaker 3:And then, hey, steve, yep, is there a pattern among the states as to which states have financial literacy and which don't, or is it across?
Speaker 2:It's just a it's a random walk really, and it has to do with the state government and how willing they are to take it up. And some people have very good programs for children on the lower end of the spectrum, but not necessarily. The concern about money is viewed as something that is in the home and not like religion. They believe that money should be discussed at home versus in the classroom. One of those sensitive issues that as a society, like civics, we don't, we don't teach, we don't talk about, because it usually ends in an argument right, and I think that, as a society, as we keep getting more and more volatile and more and more with shut shutdown of conversations, which I went home and this weekend and talked to people and sure, sure enough, you know, there was a breakdown in terms of how you talk about this.
Speaker 2:I think that's the legacy of Trump is the divisiveness where you look at your opponent and, instead of thinking about someone who you think could see a few of your points, what we're seeing is it's not worth even talking about now, and so I think we've got this whole underground information kind of. I was talking to somebody and this is what they said, and I think that's not really the American dream where we thought we would all come together in a common place and figure out how to operate the government and the industry together. So it feels like the idyllic view in the American exceptionalism in my mind is not about AI, but it's about how we relate to other people.
Speaker 1:I always mark intelligence by someone who's able to have at least two, and sometimes even more, thoughts in their head around a topic at the same time and not to be able to, you know, being able to understand and respect other people's views, uh, and. And to be able to be strident in one's own, uh, but accepting of other viewpoints, uh. Without that, I don't know where we go.
Speaker 2:Okay, I got to wrap it up here. What I'd like to end this with one um question and and try to be you know give me your thoughts in terms of if you were to pick an idea today that you think will survive through this next few years, of whatever is going to happen with government and our country, what industry or area do you think is most equipped to get through this tariff slash, tax cut, slash, AI world over the next two to three years? If you were to pick one industry to buy or to be invested in, what would it be?
Speaker 1:I'll go first because I am uniquely unqualified to talk about this stuff. So I'll put out the posit that, no, this is not investment advice, don't listen to me. Blah, blah, blah. But I think the most resilient thing is energy. I think, as a general matter, whether you're AI or you're bringing manufacturing jobs home or you're exporting or doing anything like that bringing manufacturing jobs home or you're exporting or doing anything like that the ability to power these things is only going to go up and to make things more efficient and diversified.
Speaker 1:You know, whether you go oil or nuclear or natural gas or electricity, anything in that space having to do with sort of, you know, to sort of bring things back to an American viewpoint, I think is going to be insulated, certainly over the next few years, because it's just a necessary quality and I think over the long haul, if I really wanted to build sort of the concept of American exceptionalism, I'd want to think of America as being the world's battery and to be able to be an energy exporter that other people are reliant on as a subcategory. I mean, we talked a little bit about Germany and you know what it decides it wants to do going forward. I think one reason why it's so hamstrung at this point is because it's so dependent on Russia for its energy. I think the US, if it tries to be isolationist and more independent as far as that's concerned, the development and continued focus on its energy capability and transmission and means to keep things more efficient and powered within its own control. I think that's an interesting theme.
Speaker 2:I agree with you, professor. I think that the East Coast could supply Western Europe with LNG, and the West Coast could focus on supplying, you know, via Cushing and otherwise Japan. They both need natural gas, they both want to get it from a reliable source. They both want to get their energy from a place that they feel is more stable. So I think we should be looking at the energy outlet as a good way for us to build for the future. It doesn't necessarily have to be a carbon-based energy. As you mentioned, the batteries and the solar are both areas that we could become exceptional at. What about you, clem?
Speaker 3:I still think that technology, information technology, is the place to be over the long run, and I think there are a lot of different companies involved in that space and some are doing very well, others are doing less well.
Speaker 3:So it's a question of being able to pick and choose among those companies that are doing well or less well. I think that I think that some of them, uh, some of the tech companies, uh are, you know, a little bit too exposed to you know, economic uh variation, uh, but they have less beta to the economy than uh than does you know some of the energy companies. Now, admittedly, the you have a movement in energy towards sort of more stable companies, right, but a lot of the energy industry, especially around oil and gas, is still cyclical in terms of prices, and I tend to look more for stable growth in my portfolio than cyclical growth. I recognize the energy theme. I think it's an important theme than cyclical growth. I recognize the energy theme. I think it's an important theme, uh, and actually there's an overlap between energy and technology, in the sense that some of the, some of the energy is there to support the technology.
Speaker 1:You know the cloud computing and so on. Uh, but I uh.
Speaker 3:I do have energy in my portfolio, uh, but I think over the longer term, I think technology is the right place to be. And just to be clear to everybody, that's not me advocating MagSven, right, I mean there are MagSven stocks that I don't hold and there are a lot of stocks that aren't MagSven in the tech area that I do hold.
Speaker 2:Yeah, one of the things that I'm concerned about with technology is the immigration and the holding on to intellectual capital. The American institutions educate a lot of foreign students and we don't have a way for those students to stay in this country and continue to help it grow. So when you say technology, I see immigration and the US reputation being hurt in the next two or three years, and so people might not come here to be educated anymore, and I think that will because we don't offer the continuation or some type of a job or some kind of a visa qualification for masters of PhD. I think we're in some ways hurting that industry and I don't know if we'll be enough hurt to change it. We'll still be a technology leader, but I think it's doing something to take the shine off coming to America for your future, and I think that that is something that we are a country built on immigrants, and so if that building or that source starts to be compromised, I think some of the future in technology is compromised, and I may be extreme in that view, but I've really felt like the biggest lack we've had in the last few years has been a coherent policy, and if we had a more coherent policy towards these skilled workers. I think we would be putting down insurance that we are going to still always be on the cutting edge of technology. So I see Trump kind of breaking that contract a little bit, but it could be that, you know, they will smarten up on how they handle immigration so that it's not going to affect any of those students or graduate students who are here.
Speaker 2:So anyway, I think it's been a great call. Thank you for all your insights, fraser. It's a pleasure to be with you again. It's a pleasure to be on. It's a lot of fun and Tom and I really enjoy the conversations and we hope you get to tax day and we all survive and make it to the 16th and can continue to talk and work in these areas. So thanks everyone and I appreciate you listening. Please like and share with your friends.
