Do you want a wealthy retirement without worrying about money? Welcome to “Retire in Texas”, where you will discover how to enjoy your faith, your family, and your freedom in the State of Texas—and, now, here's your host, financial advisor, author, and all-around good Texan, Darryl Lyons.
Darryl: Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group, and you're listening to Retire in Texas. Thanks for tuning in.
I want to make sure I provide the legal disclosures for you. This information is general in nature only. It's not intended to provide specific tax or legal advice. Visit PAXFinancialGroup.com for more information.
Then, I also want to remind you that you should send a text to 74868 and put in the word “Texas”, and you can speak with a financial advisor with a heart of a teacher. That's 74868. Just put in “Texas”. [00:58.5]
This show, I'm going to recap 2022, so if you're listening in the future, then you're listening to recap at 2022, 10 salient topics, headlines, really, that impacted the economic environment of many Americans, and so I want to cover the money topics and money headlines of 2022 in a top-10 countdown format.
Let's just jump right into it. At No. 10, a lot of people didn't know this, but you may have heard that Disney got a new CEO. Bob Iger came in and he took over from a regime that was really destroying Disney, and, obviously, you guys, we've all had a love for Disney growing up from Mickey Mouse Clubhouse to even before that, and the black and white and some of the movies that have come out more recently. But the problem with Disney is that they have, and you have all seen it, we've all seen it, they've made a material misstep in underestimating the moral compass of the country and they decided to put politics way above product. [02:00.8]
The reason this makes my top-10 countdown is I think that people voted with their wallets and they unsubscribe from Disney, Disney+, and they stopped going to amusement parks, and I think it just sent a statement to corporate America that people are serious about what they deem to be right and wrong, and you can disagree about that, but for a corporation to believe that they're going to enforce their values through their programming to children, I think that many people refused to participate. So, Bob Iger has now come in and he's decided, no, we're going to focus on profitability, we're not going to focus on politics. So, that was a very interesting case, if we look at it and dissect it, but I think that makes the top-10 list. [02:49.3]
No. 9, really, the semiconductor issues. Now, semiconductors are the little paper-thin things that they put in computers that they either conduct or suppress electricity to make computers work. I think semiconductors was an understated issue, because when we saw the threats to Taiwan and the fact that China is such a prolific manufacturer of semiconductors, and the United States took inventory and said, with the Taiwan thing going on and our relationship with China, if we can't get access to semiconductors through the manufacturing process and we're relying on Intel, we're stuck. We can't develop the technology we need to be competitive in the global marketplace.
I think there was a huge wakeup call and Ohio was a benefactor of that, they got a chip plan in Ohio, and I think that if we continue to see that movement of semiconductors back to the United States, I think we're going to see wonderful job opportunities for many people, so a lot of cities will be competing for the semiconductors over the next five years as we move from dependence upon Taiwan, China, and other places. That's my No. 9. [03:58.7]
My No. 8 is Elon Musk buying Twitter for $44 billion. This was fascinating in so many different ways. First of all, the negotiations were hilarious in a lot of regards and him saying, “I'm going to buy it. I'm not buying it. There's bots, so the bots don't count.” In fact, the bots, it was kind of crazy because, for a long time, the number of bots apparently was a violation of the agreement that he had signed.
As a result, because so many users were considered bots, he thought he had an out on the agreement, and the reason he wanted out was because the price he offered had gone down based on the public markets. The market had gone down at the time, so he was going to overpay for Twitter, and so he was kind of looking for some ways out. He didn't say that, but he was having a lot of rhetoric saying, Hey, I wasn't told everything about Twitter that I should have been told up front, specifically, about the number of bots that are involved that are not real active users, and so I was misled. [04:55.8]
That could have been a negotiation tactic. At the end of the day, he owns Twitter, and the fact that he's uncovering the way Twitter had engaged in their distribution of media I think is really interesting, and really regardless of what side of the aisle you are on, I think it's very important to pay attention to the manipulation of media.
I absolutely appreciate media that come at me with a bias, and that way, I'm good with them. But when media says, “We're not biased,” that's when I have a problem, and Twitter obviously had some bias, and that's being uprooted. So, we’ve got to pay attention to that going forward so we can get good information and make better decisions. Curious to see where this goes. It may just fall on deaf ears and only the people that are paying attention to Twitter will really wake up, but the reality is that the manipulation of the information through Twitter was really, really concerning, and so that was a wakeup call. We'll see where it goes from there. That's No. 8. [05:54.5]
No. 7, a hybrid work from home. I think this is amazing that this world that we live in now, through what's happened in Covid, that people are able to work from home and accomplish a lot. A lot of companies are trying to figure out what's productive or not. Certain roles, you can't work from home, right? A Starbucks barista can't work from home. Certain personalities can't work from home. You just don't work well from home, you don't have the discipline and self-control. Then, of course, certain companies just can't work from home.
But when somebody has kind of the right company, right, personality profile and right job, working from home is pretty awesome because it gives people the opportunity to manage their family, and I think this is just going to be the next proliferation for a lot of people to be able to work from wherever they want to live.
It'd be interesting to see, because if I wanted to work, let's say I wanted to work for Goldman Sachs, and Goldman Sachs is in New York, I could stay in San Antonio and work for Goldman Sachs and maybe I’d have to fly up there every now and again for a board meeting. [07:01.6]
But this is an amazing new way for organizations to be able to access talent, and I know that at PAX, we're typically looking for people that can be in the office here in the San Antonio office, but we've got an employee in Germany now. We have an employee in North Carolina, and we're very open to the idea of having employees across the country. That's exciting, and I think it's going to be great for the economy, so looking forward to seeing where that goes.
No. 6, Federal Reserve rate hikes. This could obviously be a bigger one and further up the list. There's been six rate hikes so far. The Federal Chairman Jerome Powell went from basically zero interest rates to up to 3.75. It's really, really an attempt to slow down the economy, and so the idea is that, more than anything, a big part of our economic engine in the world, in the United States, in particular, is the housing market. If somebody buys a house, then they go to Home Depot and get a few things, and then they go to Walmart and Target and get all this stuff, so it's kind of an economic engine, this housing market. [08:07.3]
So, the Federal Reserve has identified that to slow down the market, you've got to slow down the housing market to some degree. Raising interest rates causes buyers to pause, because, all of a sudden, they look at their monthly payment and it's gone up materially and they can't afford that payment. Once they get to a certain point where those payments are putting too much pressure on a family's income, what will happen is the housing market will begin to slow and people, to get houses, moved and sold, and bought and sold, the sellers will have to lower their price. Once there's been a trend towards lowering those prices and the houses aren't selling as much, then they've typically accomplished what they wanted and stabilized the economy.
Otherwise, the Federal Reserve would just sit back and just watch those prices continue to go up, create a massive bubble and imbalances in our system, so the Federal Reserve is certainly a big part of what we've seen this year—which leads me to No. 5, which is inflation, and the Federal Reserve's responsibility is primarily or they have two responsibilities: full employment and optimal inflation. [09:14.8]
Their target inflation is 2%. In September, it hit 8.2%. That's the largest since 1982, and so inflation would hit No. 5 on my list. It's stabilized a little bit because parts of that inflation were what they call transitory, so the whole thing wasn't transitory. There's portions of it transitory, but the majority of it was a byproduct of irrational exuberance, which was a lot of money that was put in our system through the federal government and a lot of the programs that they’ve put out over the last several years. Both administrations were flying a helicopter over the country and dropping dollar bills. When you do that, you have too many dollars chasing too few goods, and you get inflation. [09:54.7]
In fact, I'd also suggest that inflation happened in 2019 when Amazon said, “We're raising our wages,” and everyone followed suit, because if you want to compete for talent, if Amazon is raising their minimum rate, Walmart has to do the same, Facebook has to do the same, and so we saw just the helicopter of money hit Amazon. Then everyone else followed suit. It's just a domino effect and, as a result, we're here with 8.2% inflation. It has come down to 6%, but the Federal Reserve, speaking of Jerome Powell, they're very, very hyper-focused on getting that down to the 2% target and it'll take a while to get there.
No. 4, Sam Bankman-Fried. If y'all haven't heard of him, he's a scam artist. It makes me sick to my stomach. FTX Crypto. Here's the thing about him. My biggest concern is that there's a transition of leadership in our country. A lot of the people are aging that have really run our country well. You can see them in politics. For example, you've got Trump. How old is Trump? Seventy, 80, 70 something. Biden is 80. Pelosi. All of these people. I guess Trump is never going to quit, but a lot of these people are starting to age out and there's a new generation coming up. [11:04.4]
They're stepping in this leadership role, and I'm really nervous about the moral compass of these leaders, because, to me, everything rises and falls on leadership, and so I really am hyper-focused on the next generation, which could be Gen X. I'm really hyper-focused on those people that step into the leadership roles. I'm looking at their moral compass, the decisions they make, the filter in which they make decisions, and trying to align myself with leaders that are making right decisions, not just out rooted in selfish ambition.
I say all that because, look, regardless of somebody's theological point of view, if you look at Sam Bankman-Fried, the leader of this FTX organization, if you looked at the fruit of his behavior, he was a sick puppy and it should be very clear to anyone. They just looked away from his personal life and his behavior, and they were just working in alignment of making money. I think that that chapter, this is a clue to everyone that values matter, and otherwise, people like this that step into this new role of leadership in this new economy are going to take advantage of many of us. [12:11.2]
Fortunately, our clients who own crypto weren't exposed to any of this stuff. We preferred something called cold storage, so it really protects our clients from this. But this was the third largest crypto exchange, and to me, the reason it makes it high on my list is because it's a litmus test for future leadership, something we all have to pay attention to in our country going forward.
No. 3, the China lockdown was huge. I think it was a real problem on our economy. They had a zero Covid policy, which is really ridiculous. You're never going to hit zero Covid. I feel bad for everyone who was in China that had to deal with these lockdowns. It was horrible. I mean, the overflow of depression, anxiety, fear, it’s really ridiculous.
Fortunately, some people were brave enough to protest, and China wants to have a good reputation, so they opened up the economy a little bit more. But this is really interesting because if China eventually does ever reopen, we haven't seen their stock market perform in the last year or so, namely because of the way they've behaved, but we could see it become a very attractive investment if they can open up fully. [13:14.0]
It's pretty cool to see that reputation still matters in China as much as you want to believe it's totally communist, which we know, the Chinese Communist Party, by definition. But there's that degree of capitalism that still exists there and it's based because, at one time, 200 years ago, if you had protests, your dictator could just go out and shoot them all and kill them all; but now that everyone has cell phones, you can't play that card. So, this idea of the Communist Party is slightly different in today's modern economy.
China on lockdown certainly had its problems. It really slowed down world and global economic growth. It'll be really interesting to see when they reopen fully, how that might open up the world economy, and those that have international investments in their portfolio, how they might do. [14:00.8]
At No. 2, midterm elections. Obviously, everyone had this. They had this high on their radar. The Republicans took the House, and in the Senate, it looks like it's 50-50 or 51-49. It depends on how that settles out. But even then, we see people abandoning the Democratic Party. We'll see if that continues to where now we have independents in there, and the theme among Democrats has been “I'm not leaving the Democrat party. They left me.”
So, there's some interesting trends happening in-- Certainly, the Republican Party has their challenges, don't get me wrong, but in the Democrat Party, because of the extreme views, there have been several people across the country that have left the party. It'll be very interesting to see how this plays out in the votes right around the corner. I still believe some of these independents will still vote the way they've always voted, maybe just not on those extreme issues, so 90% of the votes will still be a Democratic vote. [14:58.3]
But here's the reality. Historically, when you have a Republican House and a Democratic president, basically anytime that there's gridlock in Washington, the market does well. Over the next two years, our hope is that there's so much gridlock that the government can't do anything and can't mess things up, and so, as a result, we have an economic system that can actually work.
Okay, so that leads me … is that …? Man, we've already blown through this? Okay, so that leads me into No. 1, and No. 1 took place on February 24 of this year and this was Russia's invasion of Ukraine, and this is clearly No. 1 to me. I have good friends in Ukraine, in the Moldova area. If you don't know, we started a ministry over there to get kids off the streets and onto the basketball court, teach them about leadership, life in Jesus. It's called the Admirals Basketball Academy.
So, I've been watching them closely. I've been to Ukraine. I love the people there. I'm very sad for them, but, boy, are they fighters? I'm really proud. Obviously, I don't know all the ins and outs. I know there's corruption everywhere, but the reality is this war really was a wakeup call for Europe, specifically, on their energy-dependence of Russia, and their overreach for green energy is catching up to them and so they're reassessing that, and I think that we've certainly kind of reassessed our green initiative. [16:15.7]
I still know they have the initiatives of 2030. I think all the cards were kind of thrown up in the air, because if you go to clean energy and you still need oil, you're going to have to get it from somewhere and you're going to end up getting it from Russia. What was interesting about this situation in Russia was certainly the chaos that happened in Ukraine and the families there. From a United States perspective, it made us all reset our green initiatives, and that is extremely healthy because we were going down the wrong path.
Really pray for my friends over Ukraine and Moldova. I pray that we'll get resolved here and I pray that we'll get on the other side of it soon, and I pray that many people, good people of Russia get through this time and find some better leadership, people that actually care about them. [17:00.0]
So, there's your top-10 list. Let me recount it for you. Man, I didn't know I'd take all this time. I meant to do this briefly, but let's run it down again.
No. 10, Disney’s new CEO, Bob Iger.
No. 9, the semiconductor issues.
At No. 8, Elon Musk buying Twitter.
No. 7, hybrid work from home.
At No. 6, Federal Reserve rate hikes.
No. 5, inflation.
No. 4, cryptocurrency fraud.
No. 3, the China lockdown.
No. 2, midterm elections.
And No. 1, Russia's invasion of Ukraine.
Look, thanks for hanging with me. I hope that was helpful to give you a little summary of 2022. Really excited about 2023, getting my goals all set up, doing what I can control, spending time with family, making memories, and working hard. [17:45.8]
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