Episode Transcript
[00:00:02] Speaker A: I've tried to use AI a few times. I told somebody the other day, it's AI. Sometimes it's like you ask it where the nearest grocery store is and it shows up at your doorstep with a bag of, you know, 10 bags of groceries you didn't order. It doesn't necessarily. Sometimes does more than I wanted it to.
[00:00:16] Speaker B: Right. A little scary. Yeah.
And I figured out I don't have enough natural intelligence to figure out how to use the artificial.
So that's my big struggle with that stuff. Right. Amen. Amen. There you go.
[00:00:33] Speaker A: So welcome to Lancapedia Episode nine. I'm Garrett Lail here with Lance Browning Tyler, Texas Income Wealth Solutions. Lance, pleasure to see you. As always. Today we're going to talk about. We've. We've had some changes in the political economic landscape. We've got some new names and new faces, as always.
[00:00:50] Speaker B: So as always, we're going to talk
[00:00:53] Speaker A: about that a little bit today and what it means. So take it away, what we got.
[00:00:57] Speaker B: Yeah, absolutely. And sort of a Garrett, sort of a friendly, I guess, friendly, ish reminder, you know, this geopolitical stuff is normal.
I would fully expect the market, at least for a little while short term, to sort of go from headline to headline to headline. And when you start talking about bombs exploding and things like that, people dying, the market's sort of immediate knee jerk overreaction is going to be generally to the downside. And I think we've seen that a little bit with the market. It hasn't been catastrophic, but it's been down a little bit. And oil obviously has spiked up as you would expect in these times. So just understand everything's going on right now is very, very normal. This is how the market reacts to big headlines like this. So I don't think there's anything going on. The market will get sort of emotionally dysregulated from for just a short period of time, but then we kind of generally, historically will return back to normal. By the way, my brother's a counselor and I've always wanted to say that.
So emotionally dysregulated. There's your term of the day right there. Google that. Google that. So, yeah, Garrett. So a lot of changes happening. We have what we hope, keyword hope will be a new and improved Federal Reserve chairman. If you grew up in Texas with a Texas grandmother, she would always have a saying. They all did that. Both of them did that. Everything will always come out in the wash. Not wash, wash. Right. Because again, Texas. Right. And so Donald Trump, President Trump has nominated a gentleman by the name of Kevin Warsh to be the new Fed chair.
And so what we're kind of hoping and thinking here is that often Garrett teams will take on the personality of their coach.
And we're hoping that we see a pretty seismic shift in the dynamic within the Federal Reserve. And that's certainly my hope at this point.
Have not been a fan of Jerome Powell. I call him Darth Powell. Not a fan of the Fed in general. I call them the Sanhedrin, if that tells you how I really feel about him. But here's some things we'll talk about, some things you maybe think we maybe need to know. Kind of compare contrast and Kevin Warsh, which is Trump's new pick to lead the Federal Reserve. And so to kind of give you some key points, Warsh is President Donald Trump's pick as the next Fed chair. All of that's going to be going through Senate confirmation hearing. And we know what a circus the Senate Congress in general could be. But he's a central bank veteran. He served during the 2006, 2011 period when he did serve last on Federal Reserve board nationally in 2008. That was, you know, just a master class in crisis management back then. So he's seen a few things. He's seen some storms here. And ultimately he kind of saw through that process, through the global financial crisis and the central bank's effort to kind of stabilize and resuscitate the economy.
Trump cited Warsh's extensive background in announcing his appointment to the top Fed post a couple of weeks ago. On top of everything else, Kevin Wash is sort of out of central casting, and he won't let you down. And that's according to the president. We'll see how that works out, but we're going to see what that looks like because Donald Trump has been very, very pointed and very critical of Jerome Powell's handling of the interest rate environment going, you know, going back a little bit ways. And they're sort of kind of what I would call frenemies. Okay. They're cordial and polite. And Trump, by the way, Trump, Donald Trump nominated Jerome Powell back in the day. So Trump gave him that job. Trump doesn't want him to have the job anymore. That's kind of how that's going to work.
[00:04:48] Speaker A: So is it Washington? Aren't all relationships in Washington frenemy? And on some level or another.
[00:04:56] Speaker B: At best.
At best. At best, yeah. At best, yep. Kevin Warsh is committed to reigning the Fed. So this was a note from back early February this is from Dr. Jeff Roach, the chief economist here at LPL Financial. Brilliant guy, and I'll give you some points here. And he talked about this. So in April 2025, Kevin Warsh was doing a speech and he laid out a few important concepts that will likely define his leadership goals at the Federal Reserve Fed. If he is confirmed, as we expect he will be by the Senate. According to Walsh, the Fed has expanded. Here you go. Preach, brother. The Fed has expanded far beyond its statutory remit, from fiscal interventions, that is Persistent quantitative easing, money printing, da da, da, da, da, to political and cultural issues, climate, inclusion, dei, weakening its credibility and its independence. You know, from your time in the business, Fed independence is sort of like a running joke. We all chuckle when we hear that term. That's kind of a oxymoron a little bit. But I think what really was talking about is what we maybe would call mission creep. So the Fed and the mission creep and their failure to retrace emergency actions back in 2008 kind of awarded and created some economic, kind of what we call maybe some economic imprinting, making the economy more fragile, increasing debt. Lord knows we've done that. And encouraging policymakers to rely on the Fed inappropriately. We're going to talk a lot more about that in just a second. So Wash heavily kind of criticized the Fed's 2022 policy framework and all its misdiagnosis of inflation, arguing these intellectual errors preceded significant economic damage, that is inflation, especially to vulnerable economic groups, the lower end of that K in the K recovery we talked about. And so Warsh has called for a strategic institutional reset, big reset, dynamite, blow it up and start again. Emphasizing a return to the Fed's narrow. And we're going to talk about this in a second narrow congressional mandate to restore legitimacy and safeguard independence. So that seems to be going in. That's going to be, we believe, Warsh's mission statement. We're going to see how that turns out. Obviously, things happen fast in the land of Oz and in Washington, D.C. this is from Lance Roberts.
Brilliant guy. I read his commentaries every morning. Really sharp guy. Another Texan, Garrett. Okay.
And he's going to talk about, you know, the wait is over. President Trump nominated Kevin Washed at the Federal Reserve and all these things. And we're just kind of lay out some bullets here on the right as to sort of what, again, to reiterate kind of what Warsh believes. And so Warsh believes, this is interesting, this is pertinent, that AI will unleash a productivity boom leading to higher Real wages. We'll see on that one. Debt, lower debt, lower debt to GDP ratio. That would be good and quote, be a significant disinflationary force increasing productivity and bolstering American competitiveness. And I think that may prove true to a great extent. I think it already is. But when you talk about lower labor costs in places like China, good example.
When you look at these types of things, AI could be a very, very powerful equalizer in the cost of doing business and the cost of getting things done. That might can make places like Western Europe or Europe in general, places like the United States, more competitive with lower wage places like India and China.
And Warsh believes that changing banking regulations to level the playing field between small and large banks. A lot of small community banks, got a lot of them around here. We've got friends that run and they talk about, you know, everything is geared to help the large banks, not so much the small independent banks, what we might call community bank. And the Fed's rules, here's a quote. The Fed's rules and regulations have systematically disadvantaged small and medium sized banks, which has slowed the flow of credit to the real economy. Real economy. And this is, this is key to me. And we'll see if his rhetoric, if his actions follow his rhetoric here. But Wash wants to redirect lending from speculative, what we would call speculative, more risk taking uses to more productive ones investing in the economy, jobs, economic expansion, whatnot. And so here's the quote. Money on Wall street is too easy and credit on Main street is too tight. The Fed's bloated balance sheet, oh lord. Designed to support the biggest firms in a bygone crisis era, can be reduced significantly, sort of as you read this on the surface, Garrett, we're going to look at this and think, okay, this guy may be a little bit more or a lot more focused on Main street vis a vis Wall Street. And those don't have to be independent. But I think the focus has been to help Wall street investment firms the top of that K we talked about last time, to be more speculative and take on more risk. Okay. And if you're in the top of that K, you've done well with that strategy. But bottom of the case, struggle like we talked about it in episode eight. So it looks like his mission, at least his stated objectives are going to be to maybe narrow that gap a little bit. And we would hope that some in the Senate would take him at his word here and might make that confirmation hearing go a little bit more smoothly. We'll see.
So we talked about this and our fun with the Fed episode. Okay. And that was a few podcasts ago. But encourage you to go online, our YouTube channel, on our website, on Garrett's site, and go back through some of these. I think they're helpful. I think they'd be really instructive and hopefully somewhat entertaining. But the Fed has mandates from the Fed charter, from Congress. The Fed has two primary mandates. Number one, full employment. Okay, I want to park there for a second. So one of my many correct criticisms of Jerome Powell was he was so obsessed with reigning in post epidemic inflation that he helped cause. Okay. He's ignored the job market. And this is one of Trump's gripes as well, that we're so focused on price stability, getting inflation under control, getting inflation under control, that we've ignored the other part of the mandate, which is full employment. And we've talked about that, particularly in the K shaped recovery. We talked about last episode, that you're not seeing job growth. You're not. You're not seeing hiring. Layoffs are starting to tick up a little bit. You're not seeing the hiring that a growing economy, that a thriving economy should be doing. Part of that's AI, but not all of that is AI. And that's one of the reasons I feel like, and I agree with the President, and again, not political commentary here. Okay? So I'm not telling you, sitting here telling you, orange man good, orange man bad. You figure that out on your own. We're all adults here, but I think Trump's right about that criticism. Okay? So we talk about what the Fed's job is. Here's your job. Full employment, price stability, great. What their job is not, but what it's had to become is figuring out a way to fund this astronomical national debt that policymakers in the great city of Washington D.C. have piled up on us and our great, great, great, great, great, great grandchildren. And the Feds had to come up with a way financially to engineer and walk us through that minefield, to keep. To keep the thing going while the government adds more and more and more and more debt that the Fed has to find a way to finance. That's not their job, but they've kind of been forced into that role by just, you know, incompetence and everything else coming out of Washington D.C. and this is not a new phenomenon, Garrett. This has been going on for at least most of our lives. Okay?
One of the things we talk about regularly, and those of you that have watched a lot of our stuff know this. So one of our big four economic indicators is the Fed's balance sheet. So one of the things that you've heard talk about something called quantitative easing is where the Fed issues debt, prints money, takes the printed money, buys that debt and parks that debt, those treasury bonds, mortgage back, whatever on their balance sheet at the Fed on the asset side of that balance sheet. And one of the things you've seen though, as this has kind of gone on QE quantitative easing and all that from post crisis 0809, you'll see that as the Fed adds more and more assets to its balance sheet, the market, if you use the S and P goes higher and higher and higher and higher. Well, there's a lot of cor. There's a lot, a lot of correlation there. But one of Warsh's sort of thoughts, feelings, objectives that he mentioned was reducing the Fed's balance sheet.
Can that be done without causing a disruption in the market?
We'll see. I think that Garrett and employment are going to be wash his greatest challenge as he gets into office and as he gets up and running. So we're going to see that. But you've seen this big massive mountain chart rise in debt on the Fed's balance sheet. Very common. We see that, we know that. We'll see if reducing this has any inflationary implications or any, any implications in the market. We'll see what that looks like.
[00:14:43] Speaker A: That would be a change up or a change.
[00:14:45] Speaker B: That would be a big one. That would be a big one. That would be a big one. And like I say, we just need to see what effect that has. Okay, last slide. And we're going to be kind of short this morning with everything going on. I want to talk about spending on technology and an investment and how there's kind of a difference between software, information processing, basically what we would call AI, what I would call the AI effect here, that as spending on technology, AI and all these things have ramped up, your kind of bluish line there going up. What's happened to labor demand? That kind of mustard colored brown gold line. Look at what's happened to labor demand. And I mean we're going back 25 plus years. Labor demand has essentially been flat. Obviously you had the big, the big volatility 2008 crisis COVID pandemic, yada yada. But you've seen as technology investment, AI is ramped up, labor demand has gone down big fears about AI is it's going to take away jobs. Okay, this looks like that might be the case.
And so that's Something the Fed, with its mandate of full employment, really needs to be cognizant of. Okay. And so that's one of the things we believe. I think Trump believes. I believe that as the Fed cuts interest rates, if they're able to do that without respiking inflation, then that should help the labor market. And I think that's the big canary in the coal mine right now to me, economically, is the job market, is the labor market.
[00:16:23] Speaker A: Yeah, it's really interesting with AI I was just thinking about as you were talking there in the last major boom or wave that we had with the tech bubble. To some extent, the. The addition of technology or the growth of technology, it replaced some jobs. But at the same time, you needed people to run those computers. It was creating a new skill set. It brought in a new type of demand for the labor market to demand. And AI is just straight up doing it for you.
[00:16:54] Speaker B: Exactly, exactly.
[00:16:57] Speaker A: In some ways, it does it well, and then in others, it's.
I've tried to use AI a few times, and I usually have to correct it. I told somebody the other day, it's AI Sometimes it's like you. You ask it where the nearest grocery store is, and it shows up at your doorstep with a bag of, you know, 10 bags of groceries you didn't order. It doesn't necessarily. Sometimes does more than I wanted it to.
[00:17:17] Speaker B: Right. A little scary. Yeah.
And I figured out I don't have enough natural intelligence to figure out how to use the artificial.
So that's my big struggle with that stuff. Right.
[00:17:29] Speaker A: Amen.
[00:17:29] Speaker B: Amen. There you go. There you go.
[00:17:31] Speaker A: Well, Lance, always pleasure, man. Enjoy talking with you. For listeners, viewers, wherever you are, enjoying our beautiful faces. How can they reach you and. And if they want to learn more? Because we're not here for. To give financial advice. We're here for entertainment, education purposes. But you do give financial advice, I believe, for a living. So if somebody.
[00:17:52] Speaker B: As far as I know. Yes, yes. As far as I know. Unless it's all been a bad dream. Yeah. Absolute. Yeah. Yeah. But. So, yeah, come see us here. Troop calm. That's 3200 Troop highway in the beautiful city of Tyler, Texas. You can reach us at 903-312-1585. That's my cell. 9037-8789-1690-3787-8916. Main phone here on my desk in the office. My direct line or www.lancebrowning.www.lancebrowning.com. our website.
[00:18:27] Speaker A: Awesome stuff. Check us out good deal. Well, good to see you, man. We'll see you next time. Thank you.
[00:18:32] Speaker B: God bless, man. Thank you.
[00:18:33] Speaker A: You, too.
[00:18:34] Speaker B: Bye.
[00:18:37] Speaker C: Lancet PD is for entertainment and educational purposes only. The views and opinions expressed in the show are that of Lance Browning and are not guaranteed to come to fruition. If you have questions about your investments or your financial plans, you should seek a financial professional or give Lance a call at 903-787-8916. We thank you again for watching or listening to the podcast, and we'll see you next time.
