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Problems to Profit
Trump’s Next Moves, Market Shifts, and AI’s Disruptive Wave – What It Means for You
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John Doe
Welcome back to Problems to Profit. We've got your economic update for early March. We've had about a month and a half of Donald Trump, which compared to what we were expecting during the Biden administration to be the status quo and kind of the social contract for what was gonna happen, has been a bipolar shift. I mean, 100% different way of looking at things, doing things, government shifts, making appointments. I mean, most if not of Trump's appointments have been pushed through. There were delays, but it looks like now everybody's in and they are getting to work. We're seeing a lot of shift, people being penalized for leaking information. We're seeing stress on government employees, which I think I predicted in our last economic update when we did our two weeks of Trump. I said we're going to see a late cycle indicator in government layoffs. We, from what I saw in the news, saw 70,000 plus people take the severance package where they're getting paid through September, October, and they're going to get some money for, you know, effectively just leaving their jobs. Now we're seeing Elon Musk and Doge sending out emails and saying, respond to this or else. We're seeing the media trying to paint a story that there's divide, that there's issues between appointees and Musk, there's issues between Musk and the president. Every time we go to vet and verify that, it does not seem to be accurate. It seems to be that everybody is getting along, at least whenever they come in front of the camera and talk to us about it. So what are we seeing? We are seeing now because of some of the shifts, some positives and some negatives, we're seeing that America is still expected to grow this year. But we've seen GDP predicted to fall as much as one and a half percent. Guys, this is huge. What I believe this is, this is an indicator that government spending was an enormous part of gdp. Like government capital would go into crony companies where those companies would take government investment and contribute to gdp. And a lot of that is falling off, whether you're going to look at that as USAID or whatever other department. But we're seeing a significant drop in gdp. And that's a pie with a lot of different ingredients. There's not one, but a big one is going to be a reduction in government spending. We're seeing new tax codes being proposed, and part of those tax codes is a $2 trillion reduction in spending. So we're seeing arguments in Congress right now they haven't passed it through There is some momentum though, so it looks like they might get it. But I'm curious to see where is Congress going to agree on spending less money? Congress has never successfully agreed on where to spend less. They've always agreed on where to spend more, where to put pork in, where to fight more about different things. In addition to looking at GDP potentially falling while we're still growing, so we're not necessarily going towards a recess, we are seeing that the ten year treasury has dropped. We were at a peak of 4.7 recently in the last few months and we've dropped all the way down to 4.1. That's a huge savings on mortgage rates. It's brought it down to just above the 6% range, from close to the 7% range. So that is a huge win. That will increase affordability, especially in real estate and anything subject to longer term financing. So on financing, because we're a debt driven economy, let me, let me talk about, you know, financing a little bit. There's short term financing, there's long term financing. I hear a lot of economists talking about what the Fed is going to do. The Fed basically controls bank rates. Bank rates are generally short term financing. Okay. The 10 year treasury is a much better measure of long term financing. It is not controlled by the Fed. It's affected by the Fed, but not controlled by the Fed. The 10 year treasury yield is where you can go and you can get 10 year treasury bonds. So there's a bond market that could be influenced by the Fed buying or selling bonds, but it's mostly influenced by what bond traders think inflation is going to do to the value of their dollar. The ten year treasury has some competitive long term products, I.e. money market accounts, which are basically a bank account which is incredibly liquid. And a lot of people are in money market accounts right now because they can get high yields. And so they'll put that in there instead of a bond where you're tied up. Also the other competitor is mortgage backed securities. A lot of mortgage traders will talk about, oh, what mortgage backed securities securities are doing and they'll talk about the 10 year treasury as well. If the 10 year treasury is falling, mortgages are going to become cheaper. Okay? They have a relationship like that. If the Fed does drop rates, you might see money market accounts being less valuable and that would significantly improve what's going on with both the Federal Reserve and mortgage backed securities because you'd have bond traders and people that can no longer go to that money market option having to put their money in the long term options of the 10 year treasury or mortgage backed securities. So let's what what affects long term versus what affects short term? Short term, The Federal Reserve is affected mostly by, you know, jobs and inflation data. So we've seen inflation come up a little this year, then be relatively flat in recent readings, but it's still high. There are fears of stagflation. Stagflation is basically everything is just continuing to go up. It's kind of a cycle you can't get out of it. Jobs and inflation numbers being the two main things that the Fed is looking at, actually give us what I think is some significant upside. Even though this is not on the news, government is doing layoffs. I mean, we just saw Trump drop 6,000 IRS employees. They're talking about anybody who doesn't respond to an email could have their job threatened. I mean, that's 2 million government workers. If you saw a million more layoffs, that would be crazy. In addition to that, we did see that a stock market dip happened in the recent weeks. And one of the reasons for the stock market going down significantly was the Bureau of Labor Statistics came out and said, oh wait, jobs aren't as good as we thought. We have a lot more revisions coming. There's a lot less jobs than we thought there were. They revised away over a million jobs late last year, which means the Biden administration BLS data was complete bs. They could just take the L out. It was probably Bureau of Labor Statistics. Could be just the bullshit, okay, Statistics, at least in the last administration. So what we're gonna see from the Fed on jobs, while I don't think they're gonna necessarily drop rates on the short term immediately, could be something where they have to drop in June, July, August based on government, which is a late stage actor. Okay? Real estate is always early stage. What you see happening in real estate is generally an indication of where the economy's gonna go. And I'm talking single family here. Late stage is when it's hitting government. That's normally when you're at the end of a cycle, it's hitting government. So when the government is doing layoffs and you have a lot of the corporate big public companies doing layoffs because that's the only way for them to cut costs, you can see late stages jobs could be the key to the Fed lowering short term rates, which would lower bank rates, which would be good for commercial real estate. The ten year treasury is what's really going to benefit residential real estate. And that's more driven by bond traders and Quantitative easing or tightening, which right now, the Fed's in a tightening cycle. So hopefully that made sense. If that didn't make sense, please post comments and questions in the comments section of this podcast, and I will have my team and I go through and answer them to the best of our ability to make sure that you guys understand what's going on. Stock market dropping. We saw a stock market drop initially because, you know, the BLS came out and said we're gonna lose more jobs on revisions. We saw the stock market continue to drop because there's uncertainty around tariffs. Guys, the way I'm looking at tariffs right now, while I do think there will be some tariffs, the big ones are coming reciprocal in April. The ones on Canada and Mexico, they're. They're saying, oh, we're going to do it, but maybe it won't be as much. And what we saw last time was Canada and Mexico came and negotiated. We haven't seen what's going to happen yet. We're expecting it this week. That will definitely be on our next economic update with the results. But the way I look at it is, like, you got to look at, like, presidents almost as realtors, right? Like, they're like the realtor for our economy. Like, Trump is our Realtor. And yes, maybe he's an asshole, but he's negotiating on our behalf. He doesn't live with us. He's not in our house. We don't have to sleep with the guy. Like, he's gonna be here for a while negotiating for us, and then he's gone. But he's negotiating well, and he's leveraged tariffs as a negotiation to try to benefit the economy. Okay? Now, do I personally think he's an asshole? No. I've heard he's a great guy, but I know some people have some issues with him. If you look at, like, Biden or Kamala, like the previous administration, as a realtor, they were like, hey, man, why don't we pay double for the House? Hey, let's give the seller more free shit. Like, they weren't a good realtor. They weren't negotiating for us. So I feel like tariffs, at least thus far, are a negotiating tool to wake back up the American economy. And I know everybody's talking about trade deficits and this, that and the other. And trade deficits can be something in, you know, while there is a large trade deficit, that's actually not bad for the consumer. Okay. Because we're getting cheaper products from other places, but it is bad for the producer. So, like, trade Deficits are not good for American jobs, but they're really good for American consumption. So it's not, it's not like a one sided thing. It's not like, hey, we want even trade all over. Like we may want really even trade on things where we have the same amount of resources as somebody else, but if we don't have copper, but we do have steel, then we're gonna have a deficit in one but not the other. Does that make sense? So, like trade deficits are only good where we need things cheaper. And if it's a reverse trade deficit where the other person's in deficit, then we're a producer. Okay. So it seems to me that Trump is balancing trade deficits with producer and consumer nations to try to get us as much as we can get to benefit our economy. Right. The other thing that I think that Trump is doing, and this is just very interesting with his, his alliance with Musk is he appears to be upsizing American manufacturing, upsizing American lumber and mineral and natural resource production, which requires hands on labor and real labor based jobs. Why would anyone do that? And if you go back and watch some of the different episodes, you'll see, actually this came from a prediction from one of my guests named Zach Abrams. And it was amazing. He said Musk is Trump's tech department. Musk is one of the foremost experts on this thing called AI, this thing called quantum computing, this thing called robotics, and even, even like putting chips inside of human brains, like so he's creating cyborgs effectively. This is fascinating if you think about what's coming in the economy. AI, quantum computing and robotics are going to be the single largest disruptor to our economy in a very short term in the next two to 10 years. That has happened historically ever in human experience. That shit's going to hit the fan. And it's going to hit the fan for every single country on this rock called Earth. If we're the only country that has an umbrella standing in the same room where the shit hits the fan, less shit's going to get on us, guys. Why? Because we'll have more labor, we'll have more workers, we'll bring back more manufacturing, it will disproportionately hit others harder than us. AI is going to replace a lot of jobs. It's not going to immediately replace manufacturing or labor based jobs. So that's a fascinating approach to get ahead of what we know will be the largest black swan event. Next topic I want to hit on kind of the market update is now a buying Opportunity, I don't know. There still seems to be room to go down. I'm holding off. I don't want to give you advice on whether to hold off or not. I think there's probably some buying opportunities starting in some of the small caps. I think some of the larger stocks that have just been perpetually going up for the last four years, even though the American consumer has been suffering for the last four years, may still be overvalued in my opinion. But it's something to start watching. So wars, war in Gaza, war in Ukraine. I'm watching effectively. Hamas is antagonizing the Jewish people. Like returning a bunch of deceased hostages is not a good look. Laughing as you're turning dead babies over to their mother is not a good look. This could become another instigated crisis that we need to be hedged for and wary for because right now there's a lot of anger in that area of the world and that crisis reignite. I'm not trying to say, oh, Israel's a good guy, Hamas is a bad guy. I mean frankly war is bad on all parties. But what is going on in this hostage exchange is disgusting and we need to look to see what that's going to cause in the future. Cuz there could be some supply chain disruptions there. The war in Ukraine. We had a huge blowup in the White House, in the Oval Office between Zelensky and Trump and Vice President Vance. I watched the full 50 minutes. It looked to me like Zelensky was trying to leverage the media to get people on his side. It looked to me like Zelenskyy does not want a ceasefire immediately. Zelenskyy's willing to sign the minerals deal, which would get American boots on the ground, but American boots aren't gonna get on the ground there to start mining, drilling and getting minerals until a ceasefire actually happens. Like there's no way our government is going to send non soldiers into harm's way to get shot at by Russians. So Trump wants the minerals deal. Trump wants American boots on the ground. Trump is not running this situation like a president. He's running the situation like a CEO. He's making an economic deal to get America's money back. Zelensky does not want a ceasefire. Zelensky wants more money, more weapons, more fighting to improve his position to negotiate a better deal. Trump wants an immediate cease fire and an immediate wealth generation. These two people are 100% on opposite sides of the equation and it's not gonna happen quickly. So Trump now, I predict, is gonna Work on a win win situation for himself, not for Ukraine. I believe Trump is going to withdraw all aid and Trump is going to put Europe in a complete. You're on your own position. If Europe continues to fund this war, which there's questions on whether that's even possible, then Trump will probably back out of NATO. Money was not made in World War II. I've heard a lot of people say war is really profitable for America. No, it's not. After war is profitable. Why? Because when people bomb the shit out of each other, they don't have the means of production. We sell them all the shit they need. So. So Trump's either gonna create a win win and a political win by ending the war right fucking now and looking like a hero that stopped the shooting. Okay. Or Trump's going to completely back us out, allow Europe to fight this war, Ukraine probably to get conquered, and Europe to restructure itself both politically and economically, to kind of create an overhaul of their systems and arm themselves to the teeth to create fear from Russia. Trump's gonna make Russia and Europe trading partners and sell them both shit and do an economic win. Why? Because that's what a CEO of a company would do. And Trump is more of a CEO than a president. So let's look at that now. Tariffs and tax cuts. On the tax cuts, we talked a little bit about tariffs already. I see them coming, but I don't see them being as dynamic as we all think. I think Trump's just negotiating on our behalf and he's going to do whatever's best for the economy. We have seen Trump and Musk and cabinet officials during what now hundreds of hours of media time. So while they have made mistakes, they laid off the wrong people, they rehired them back. Like they said the wrong thing. They came and admitted it. I think they're going very quickly. There will be mistakes. They'll probably make some mistakes on tariffs. They're overhauling things. But since Trump is an economically driven guy, he'll watch the markets, he'll watch the 10 year treasury, he'll watch everything. And if something's going wrong for America, I think he'll come back. So I'm not too worried about the tariffs. I do think some will stick. I think the reciprocal tariffs will be very good for our manufacturers and create jobs where we can sell products to other countries. I think the tax cuts that it's announcing that are not even here yet, they haven't even been approved, they're just in Congress are going to bring an enormous amount of investment to America. I think the new Gold card that he's announcing could bring an enormous amount of talent to America. I mean, you want to talk about the right kind of immigration. If they get a $5 million investment into America to get a gold card to immediately get citizenship and you can vet them and they come out and they create jobs and they create opportunities, and they create situations like that, not only is that going to benefit our country, it's going to reduce our deficit significantly. It's going to create lots of jobs, lots of opportunity, further us in the tech development that we're already in. And we've already seen this. We've seen chip developers come in. I mean, you know, Taiwan's largest company just came and invested, what, $100 billion after a $70 billion investment during the Biden administration. That had to be propelled from a $6 billion, effectively gift that we gave them to incentivize them, and they just invested another hundred billion. This is huge, guys. So the tax cuts are already working without even being put in place. If we see these tax cuts, the question's not going to be whether it will benefit Americans economically. That's a shoe in. The question's going to be how much will it benefit the government? Lower taxes will increase productivity, increases in productivity will increase people's willingness to pay taxes, and it will increase overall revenue that can be taxed. The question's going to be, which, it's always a big question, is there going to be as much revenue going to the government coffers as it would have been with the higher tax rate that we currently have today? And so that's always the. Some people are going to say yes, some people are going to say no. But really, this is a test, guys. It's a wait and see. Either way, it's going to be better for the American people, okay? There will be more tax cuts, There will be more opportunities. You might even get some money back with Doge. Like, we should probably talk about Doge. Doge is a big thing. You know, there's people that hate Musk. There's people that love Musk. I'm not on either side of the equation at this point in time. I love what Musk is doing. I don't love how Musk is doing it. But there is obviously so much fraud and abuse and waste in our government and in the way that things are spent. Like, I have more accounting metrics and we code every check than it sounds like our Treasury Department does. I want my government running at least with the same level of efficiency and technology and how they process money, our money, our tax dollars, as a simple business would run. Adding some of those things and creating simple things like that is a win. Reducing waste is a win. Anybody who's against that, you can be against how it's done, but you shouldn't be against it being done. I mean, Bill Clinton did it. He was on the other side of the equation. So you can say, hey, I don't like Musk's style or his approach, but saying I don't like taxpayers saving money is really a stupid comment. So at least the media outlets that are saying that are just stupid, they'll probably shut down at some point because they're just trying to create hatred and anger. America's an interesting place. You have one dynamic way of doing things under one administration, then you switch to another dynamic way of doing things under another administration. It's almost this bipolar effect, and it's fascinating. European countries, where they have a dozen political parties, they don't switch from one side to the other so quickly. They kind of go left to left, center to center to right, center to right, and then they tick back and forth all the way. We just go extreme, extreme. So we're this crazy extreme shift process right now. And arguably the American consumer was hurting under the previous administration, so the shift is probably a good thing. However, in situations where there's dynamic change, there's also situations and circumstances where you can have more Black Swan events. What is a Black Swan event? It's an unexpected economic circumstance that causes dynamic pain and generally creates a domino effect, crashing multiple submarkets and generally the entire market if it's not managed or monitored or caught in some way. That's why they call it the Black Swan event is you just didn't see it coming and it hit you. And are we in a situation where we're guaranteed a recession? No. Are we in a situation where the Fed has to pivot now? No. Should we look at the significant triggers that are going to cause the Fed to pivot? Yeah, I think they're going to have to pivot this year. I think we'll probably see a 75 to 100 basis point pivot this year if there's not a Black swan event. But the likelihood of a black swan event during dynamic change is much higher, especially when you're talking geopolitical risk, especially when you're talking, like, supply chain impacts, especially when you're talking wars going on. There's just so many things that could happen when we're restructuring millions of jobs in our government and you're taking people who might not have done a lot, who might have had an easy paycheck, and you're forcing them into the private sector where they're going to be managed, hyper managed by their new organization that's employing them, or they're not going to be able to get a job and they're going to be living on the streets. I mean, these are dynamic shifts in what's going on in our world right now. So with that advice and predictions, if we don't have a Black Swan event, I think you're going to see Fed pivots this year, 75 to 100 basis points, at least 50 basis points because we are still highly restrictive. I think that will impact money market accounts and you'll see mortgage rates continuing to go down. I think we'll be in the low to mid fives by the end of this year. If we do have a Black Swan event, that will happen much, much quicker. I think the 10 year treasury is going to continue sliding down, I think with government layoffs happening. And we got to think, Trump's a CEO. What's the CEO going to do? He's going to increase productivity, we're going to see employment suffering. That's going to trigger both the 10 year, that's going to trigger the Fed and it's just how long is this going to take to happen? And with what's going on with Doge, you know, there's a lot of lawsuits happening, but they're winning those lawsuits and the judges that are generally stalling them. It's funny, one judge stalled Doge, but his wife owned an ngo, like that was called out so quickly, like that's going to get restarted overnight and that's going to continue and we're going to see more shift, more change, less waste, but it's going to be a stressful process. So with all of these things happening, what do we do with our money right now? Guys, my recommendation, start hoarding cash. You need to focus on increasing your cash flow. Cash flow is, was and always will be king in an arbitrage economy. But right now, because of an elevated risk of Black Swan events, cash is also king. Because there could potentially be buying opportunities. There could be opportunities for you to take over companies, there could be opportunities for you to buy distressed assets. What is the best asset you can get right now? Hard assets. Assets that in my opinion are inflation hedges, are tax hedges and generate cash flow. I mean, there's not going to be a ton of those. I Mean, real estate is one of those. But I don't know if right now is the buying time. So I think right now it's like, like as an investor, like if you're a homeowner, yes, it's probably the best time to buy. Why? Because guys, you date the rate, you marry the house, like homeowners who are dealing with retail products. We're likely, as soon as that Fed pivot starts happening more aggressively and the 10 year treasury continues to come down, we're going to see single family boom. So home buyers buy now, investors hoard cash hold hedge. Cash flow is king. But cash is also king. Cash flow was totally king. In a rising environment, which we had over the last four years, which was good for the rich. This market's gonna come back to good for the middle class. It's always gonna be good for the rich. That'll never change because the rich are who funds the politicians. But we're gonna come back to good for the middle class. Why? Because unlike the Biden administration, I think the Trump administration is smart enough to know that to get reelected, the normal, average, everyday American needs to rush out to vote and they voted to get out of pain. So the middle class has to win over the next 24 months. If they don't, Trump doesn't get reelected. And he's smart enough to know that. And when I say Trump doesn't get reelected, he's going to lose Congress and the Senate. If he loses that, he loses his power base and then there's no way to get a Republican in four years. Right. So, advice and predictions. I predict that you're going to see one of two things. You're either going to see steady lowering of the ten year treasury throughout the year and a few Fed drops throughout the year that are going to total 50 to 100 basis points, which will make the money system a little easier. You're going to see stock market volatility and you're going to see the stock market less stressed about the Fed and much more stressed about all data. I'm talking inflation data, I'm talking jobs data, I'm talking all of the data that comes out. You're going to see a lot more trading based on data, a lot more algorithmic trading based on data, which is going to get probably ahead of investors and everything's going to be more subject to that. If we have a black swan event, I think there's going to be great buying opportunities that will come. We can't predict when or whether it will come or not, but but it'll come on us like a bandit if it comes. And we will, you know, know the epicenter after it's happened. Okay. I think if we're gonna have a recession, it's going to be a jobs recession. I think that's the black swan event that they're trying to admit right now happened, but they're gonna try to blame it on Trump. I think that could cause a rate pivot, but, you know, remains to be seen. I've been saying that since late 2023, when I thought the BLS data first started being bullshit. But right now, guys, hoard cash. Wait. If we do have a jobs recession, you're going to see a lot of opportunities. You're going to see a reduction in inflation, you're going to see a lot of things going in your way, and there's going to be buying opportunities for you to buy and hold, guys. Hopefully this adds value. Hopefully this helps. I hope you all have an amazing day on purpose and go out and become successful in this market. Remember, markets where there is dynamic change, which we are in one right now, is where entrepreneurs, especially those that listen, learn and are not fearful, do the best. This is one of those times where those who are stuck in their ways lose a lot and those who are open to change win hand over fist. But you have to be constantly vigilant. Have an amazing day on purpose, guys.