Capitalist Investor

A Boost for the Economy or a Strategic Move?, Ep. 311

• Strategic Wealth Partners

Share episode

In this episode of Capitalist Investor, hosts Tony, Derek, and Luke discuss some of the hottest topics impacting the financial world today. They discuss Apple's massive $500 billion investment into the Trump economy and what it means for corporate America while examining a narrowly passed Republican-backed spending bill and its potential implications. The conversation then shifts to renowned investor Warren Buffett, who is sitting on a significant cash reserve, sparking a debate on value investing versus current market valuations. Lastly, they explore Elon Musk's shakeup with DOGE and its broader implications for government efficiency. Tune in for a spirited discussion on corporate strategy, market dynamics, and economic policies shaping the future. If you have questions or show ideas, reach out to us at info@swpconnect.com.

Hello and welcome to this week's episode of the Capitalist Investor. As always, you got me. Diamond Hands D. We got the whole crew here. Cool Hand Luke, Tony the Tiger. What's going on, guys? What's up, man? Yo, yo. So we got some hot topics today. Tony's hot to talk about him. Always, always. So we'll talk about Apple and their $500 billion investment into the Trump economy. The House narrowly passes a Republican backed spending bill. Talk about that. We'll talk about Warren Buffett sitting on some cash. Is that a telltale sign of things to come or is he just old and delusional? Well, he's definitely old. He's definitely old, right? And then Doge, our Doge corner for the day. All right, guys, Apple going to put some money in there. Luke, this is, this seems to be your wheelhouse right now. I wouldn't say it's my wheelhouse, but I'm just, it's interesting that like all these big tech firms are pumping like 1.5 like trillion dollars combined into the economy over like a five year period. You had like two days after the inauguration open AI Oracle, do the 500 billion dollar infrastructure, whatever you want to call it, Bill, or you know, that whole ordeal. Then you have Apple doing $500 billion. Now you're hearing all these other small corporations talking about their millions or billions of dollars being pumped in. So it's like in the trillion dollars range of an infrastructure kind of investment from private corporations into data centers and manufacturing here. And specifically when you talk about infrastructure with, when it comes like to data centers and this whole kind of AI metaverse, whatever you want to call it, world that we're entering into. You know, it was kind of the, you know, government always talking about, you know, the building, the, you know, obviously they build the road, they help invest in infrastructure, physical infrastructure here in the United States. But as we enter into this virtual world, I was always concerned that we were going to have public sector essentially go in building these data centers or investing the money and they basically would own it. So the fact that private corporations are putting their own money on the line I think shows a lot of optimism in the economy. So what do you, what do you think about this? What if this is a check, you know, checkers versus chess match? And what I mean by that is you said all these companies are coming to the table saying I got 500 billion, I want to invest and I want to do this, stimulating the economy. That's a lot of money, right? Trump's tax laws sunset at the end of this year. And if they do sunset and we revert back to the Obama tax, you know, tax laws, the corporate tax goes up a lot. So is this the olive branch for Congress to, you know, for them to extend and maybe permanently put into Trump's tax laws the lower tax, the lower tax for corporations and us, actually the taxpayers ourselves, just. I don't know. I mean, I think, hey, I'm offer it now, but like, hey, I know what's happening in about 12 months, I don't think. Well, sunset. I mean, why would we sunset? We have Republicans controlling everything. I don't know. This bill barely passed. Yeah, every Democrat, we'll get into it. Well, yeah, the spending bill coming in. But here's the other thing with, with the Apple and I was talking to this before, like, I find it just so ironic how every corporation and the two that come to mind are Apple and Meta, come in and kiss the ring of Donald Trump as, as he becomes president. And you know, like, and like, look at Zuckerberg. He was just like, oh, my God, man. You know, free speech. Let's do it. You know, they made me do it. You know, I was getting nasty emails saying I better do X, Y or Z or they're going to shut me down from the Biden administration. Right. Like, I mean, all this stuff quote unquote comes out. And then you still have Apple. The shareholders are continuing to keep their DEI initiatives and the company's contribution to progressive groups. So they're still on the left, even though they just know how to play in the sandbox. Right. They're quote, unquote, bipartisan and it's about money, you know, and again, that's where I said, this is a chess versus checkers. This is a chess match. Yeah. I'm going to offer this and you better extend these tax laws or I'm going to actually rip this $500 billion. Yeah, it goes both ways. Yeah, it goes both ways. That's how I. Maybe that's a view. That's a good point, actually. Yeah, it's, that's how it's supposed to be. You're supposed to work. I mean, to some extent, you're not supposed to be like crony capitalists where you're all like, you're trying to negotiate with the policies and government to dictate, you know, your future as a company. Because that's not how capitalism is really supposed to work. But what is supposed to happen is the government is supposed to work with private corporations to incentivize them to Hire people to grow. And you know, it should, it shouldn't have to come down to negotiation that we have to get this deal to lower taxes or to deregulate the private enterprise. This should happen already at the federal government because doing so is going to boost the economy which is going to help their ratings anyway to get reelected. So that's a good segue into the next topic. What about you? The Apple. Any thoughts? Just going to go buy a new Apple watch and just call it a day. I will not wear an Apple watch. I had one of those, I had one of those before. Yeah. Yeah. I mean, I think you guys pretty much, pretty much said it all. You know, it's, I think the goal at the top level, you know, the only way out of this and the only way out of this debt is to, you know, basically produce our way out of it. You know, so we have to produce stuff here domestically. True. And I think that's, I think that's what this is really all about is kind of on shoring some, some stuff a little bit. That's definitely, it's definitely like helping with the economy and paying down the debt, but it's also about self reliance. Like we can't be relying from other countries across the seas. Right. So, but anyway, the House narrowly passes a Republican backed spending bill so to kind of break it down. And here's the big thing, it's a headline but man, there's still a lot of steps because you know, it, it's, it's, it's a separate voting and then it'll go under consideration through the Senate called like a reconciliation where they're going to like fine tune everything and then it needs to get back to Trump's result. This is the first step of probably sounds like 2 or 3 or 10 to fine tune what they're trying to accomplish. But what they're trying to accomplish is a $4.5 trillion in tax cuts. That's a lot of money. Yep. It's not enough money. But with some of the, some of the headline items in this, in this bill are eliminating taxes on tips, Social Security and overtime wages. No taxes on any of those. How, and with lower taxes, I mean, so if you're a server, you know, or even in retirement and collecting Social Security, you don't have to pay taxes. That's additional money in your, in your pocket. That should a stimulate the economy because they're gonna go and buy stuff. And when you go buy stuff, what does that do? It generates tax revenue because you're paying sales Tax and all these different things. Right. It's, it's a, it's an economy stimulation. It's the whole Reagan kind of concept. And actually JFK said it first. And it's where Art Laffer, who's always on Fox News and Fox Biz, talks about, it's called the Laffer curve. Exactly what you hit on there if you want to research anything like that. Yeah. And then, you know, the Dems didn't. Not one single Democrat voted for this because it is, in their view is going to end up cutting into Medicaid. You know, you know, it starts, it's starting to piss me off every time. It's, it's not. The Democrats don't even take a look at whether or not policies are going to be beneficial or not. They just automatically say that Republicans are coming after your Social Security and Medicare. Like that's what they always go back to when you talk about tax cuts or less revenue to the government. But then people don't understand like that the system doesn't need to be the way it's always been because it's changed throughout the past couple of centuries. We can change it again to make it more efficient. If we optimize the efficiency of the government, we actually lower taxes, incentivize people to have more money in their pockets, then they maybe can afford health care to spend by themselves rather than, you know, private, maybe not fully private health care, but you know, if we put more money in the whole economy, middle class America benefits from that. Then they have more discretionary income. They don't have to worry about a couple thousand dollars medical bill at that point because they have not taxed to death. They don't have$30,000 of their money going to the damn state or federal government. They can use that $30,000 to fund their own Social Security or fund their own Medicare. Right. Well, I keep on seeing this thing on Twitter. It's hilarious. If you max out paying into Social Security every year through payroll tax as a, as an employee, you know, as a worker. Right. In the working class. Right. The max is like something like 10 grand a year. And if they're saying if you take 10 grand, invest it into the S&P 500 and in 30 years you're going to be able to pay yourself like four grand a month. Taking that same money and giving it to the government, you get two grand a month. Yep. And how broken that is. Right. So, you know, lower taxes on this, I mean, it's probably going to help, you know, as you retired, you're kind of, you know, they always say fixed income. I love the no tax on tip stuff, though. And I love the no tax and overtime. I love anything that has no tax attached because that means it forces the government to become more efficient. As long as you restrict the debt ceiling. Like every time that, you know they're at a deficit, they keep on raising the debt ceiling. Just allows them to borrow, borrow, borrow more money. What you need to do is lower tax, force the government to become more efficient and stop realism raising the ceiling so that we can actually restrict the borrowing of money so that way you don't run into bad debt issues. It's very simple. It's not that complicated. They talk about it all the time, you know, on TV and stuff. It's another 80, 20 issue. Like 80% of the people essentially agree that the government wastes their money. Yeah. And still the Democrats will go on TV and basically cry poor every time anyone tries to cut anything. It's like the system is completely broken, but we're also running such ridiculous debt levels. It's not going to last. Like, I don't understand the argument on, on the opposition saying, yes, we should tax more because the government is doing such a great job with the money. Like, who says that? Well, since we're talking that, we'll skip one step and we'll go right to Doge. Because that's what they're supposed to be doing around here, right. Is finding efficiencies or inefficiencies and eliminating them. The big headline was Elon, you know, Elon's team sent an email saying, hey, guys, checking in. How you doing? What'd you do last week? Well, first Trump, Trump sent a tweet out to Musk, basically saying, step up your game. Yeah. What you're doing is these are rookie numbers. We gotta get these rookie numbers like that. But he's like, yes, Mr. President responds to that. I don't know. So my take on that is good. I'm glad you sent the email. Did you clarify what the email was? They sent an email saying that please list your five items that you did last week. Let me know what you did last week. Five things. Like one time they asked it one time. Right. I'm sure they haven't checked in in the last four years. Right. Or ten years, who knows? Right. That's what Elon said. It was basically like, hey, can you respond to this email is basically the only hurdle you have to clear here. Right. So. And I find that maybe that's a. It's Just like walking into the Social Security department and saying, holy cow, you're, you're paying people that are 150 years old. Yeah, maybe we should, like, we should make. Yeah. How many, how government employees, quote unquote employees are we paying that don't exist? Yeah. Who's getting $120,000 a year Phantom money for not, you know, if you don't respond to the email, I'm assuming you don't exist. Who's vacationing all around the world on their salary, not doing a single ounce of work? Maybe there's, I'm just saying there's all there has to be out of all the federal employees. You know, look, there's got to be. A job that has no oversight. Do you guys know. Wait, wait. Okay, let's look at a corporation standpoint. Like, what's, what do you think? Private corporation? Largest private corporation in the world? Would that be Apple? I don't know. How many employees do you think the largest corporation in the world has? Let's Google that right now. I'm curious because my point with all that, Tony, if you don't mind looking. That up real quick, what am I looking at? The private corporations, you know, how many people out there, how many. The biggest private corporation in the world, how many employees does it have? Because I'm curious because I think the Federal government, there's 20 million, I know federal employees. I think 2 million are direct federal. I'm sorry, 20 million public sector employees. 2 million are direct federal employees. I think, you know, the apples of the world, Amazon. So I think they're like 200,000 or 300,000 employees or something. So you're like 10 times above like the public sector if you treat the corporate or government as a corporation. So imagine how much inefficiencies probably in Apple, Amazon, Google, all these large corporations with 200,000 employees. Like imagine 10 times that. One of my, one of my clients asked me me this week, you know, because they're very worried about, you know, this administration and how aggressive Trump is on a day to day basis with his, you know, communication. But he's like, hey, you know, like tariffs, inflation, like, but like, what about all the employees that are going, you know, the public employees that are going to lose their job. And I'm like, well, I look at that as just efficiency. You're paying for somebody else to be lazy or not do their job or be 20% efficient. And I talked to the investment team shortly after that conversation and I'm like, help me understand what the economic impact would be. And the simple kind of direction I got was, there's 3 million public employees. There's 150 private, you know, private employees, you know, by corporation, 150 million. That's. That's approximately the ratio. And if you were to eliminate aggressively a third of the, you know, the public employees, that's a million people now on the unemployment line, that would still. That would take your unemployment to just around four to four and a half percent, which are still in line of historic averages. Yep. Even though you're eliminating that many jobs. And, you know, unfortunately, we pay our public employees a lot of money. The average salary is like 120 grand. So. Pension. Yeah. Plus the pension, all that. Again, I'm not out here to, you know, talk bad and get people fired and see them lose their jobs and things like that, but I am, honestly, if you're sitting. If you go to work, if you quote, unquote, go to work and don't work, should you have a job? No. I don't know. I guess. I mean, that's not my job to go find out if there's nothing to. Do with the employee. Has nothing to do with employees. Has to do with the inefficiency of the whole entire corporation. So, I mean, if you lose your job, it's not. There's gonna be people that lose their job that probably were pretty damn good at their job. Okay. But it's not your fault. It's the government's fault for getting too big in the first place. So, like, I don't know why everyone's taking everything so personally. And I will tweet this. I tweeted this out yesterday. Emotional distress because they've been asked what they did for lmao. This can't be the real world. We have to be living in a simulation, talking about conspiracies. But, like, look, I. I had. My father even commented back at me. Like. Like, called me after texting me after. He's like, hey, I actually kind of disagree. Like, I had an employer that, you know, checked in with me every single week. It took me two hours of my time to write up a whole report. And it was just so inefficient. I'm like, dad, there's a difference between every single week writing up a report for two hours and one time in, like, a decade, like, we talked about, of them reaching out, asking what you did and if you're even there. Like, there's a whole. People don't understand. Like, everyone just flocks to, oh, if I did this, I would have emotional distress because it just would be every single week micromanaging me. I, my cousin text me like, hey, like I disagree with you. I have a CEO that's micromanaging me. Like, this is completely different. Yeah, well, I would say like this, I mean like five things. I need 20 more lines. And then I'm going to take my 25 things I did last week and I'm going to go put it on the fridge in the, in our kitchen and say, this is the standard. Yep. What did you guys do? Yep. That's how I would look at it. It's a competition to me, like not how much, how hard you can work in, but like what are you actually doing to be a productive person for your enterprise? Whether you're the government or private, it's. All tied to revenue. If you don't produce a dollar revenue, you're overhead at that point and you should, if you're negative overhead, then you shouldn't technically be an employee if you're running everything efficient. So. Yep. And I, I think last thing, I'm pretty sure they're targeting people especially with like under a year of seniority because we talked about it all last year on, you know, all these jobs reports and the huge number of government jobs that were being added for basically no reason. Like everyone knew it. It wasn't, it wasn't, you know, a conspiracy. That was what they were doing. It was helping the ADP jobs numbers everywhere. That's why they're, that's why they come back and re revised like 20% in the downward direction every week. But no one actually even talked about the revisions. Yeah, exactly. Mark Tepper here from SWP Investment Management. It's time to elevate your portfolio with the SWP Growth and Income etf, a diversified basket of high quality growth companies that pay dividends. SWP stands out from the pack because total returns matter. Don't just Invest. Thrive with SWP. Visit investswp.com for more information. Disclosures apply. It's crazy. Anyway, all right, any final. Yeah. Warren Buffett. Yeah. So Warren Buffett's sitting on, you know, roughly three net three, you know, $350 billion in cash. Now is that a, is that a big deal or not? Right. Because 35 of a trillion dollar company. Right, right. Yeah. So he's a trillion dollar company, you know, with holdings and things like that. But he's, you know, through my lens, I mean he's a value investor. Yeah. He doesn't own Nvidia. See much value. Yeah, well, exactly. But I mean, they're like a lot of, there's probably a lot of inflated valuations out there. But he's also looking for like companies that have been around a little while and have some experience on growing their balance sheet and they're, and growing their, you know, net cash flow. And think of the, think of the companies that he owns. 25% in Apple, 10 in bank of America, 15% in American Express and 10% in Coca Cola. You know, we add that up and that's 60% of his portfolio. Are those five stocks. Those are staples. Right? And he doesn't own Nvidia. That's so different investing style. He's a value investor. So value has been underperforming growth for such a long time, or I'll say two years, which isn't necessarily a long time, but it's been the last few years where 10 stocks, all mega tech, have been driving the market. I don't think, I don't think this is someone like, oh my God, guys, we need to, you know, we need to panic because Warren Buffett, the best investor ever is, is sitting in so much cash. I think it's doing it because he's a different type of investor. Could he go invest in Tesla and Nvidia and Palantir? Yeah, but he won't, I think. Yeah. It just has to do with the fact that cash is still earning close to 5% and he doesn't see more than 5% of value anywhere else. I mean, it's as simple as that. It goes with long with what you said, Tony, but also the fact that when interest rates go down to one or two, he's going to deploy some of that cash just because he's not going as much return on the cash free portion, essentially. So I mean, it's all the hurdle rate. And if we get a 10, 20% correction, I think that's when he will deploy it. I mean, I think a 20% correction from here you'll probably see a lot of that cash get to work because then you'll start to see things, some things find some value. It's a simple, he's just, you know, he's at the point in his career and it's probably not just all him. He's got probably you know, thousand people underneath him making some of these decisions. You know, if you wait, you know, a year and the market doesn't go up 10%, you just made, you know, 5% risk free. That replaces all the returns you would have made by taking on risk. I think that he Just doesn't see much too much return from here, at least over the next year or so. I think they look in one year time horizons essentially. I just looked it up. The current PE ratio is almost 30 on the S P500. Yeah. It's usually 16. Yeah. It's normally about. No, well, no, no. So I, the, the current PE ratio. I was looking at this the other day because J.P. morgan came out with their annual. They're annual like here's every metric you can possibly look at. And the top 10 stocks have a PE ratio of 30. That was what I read. Maybe it's, maybe things have changed since, you know, the last month and a half or two. But the average PE ratio somewhere around like the low 20s where historically it's around 17. But it's the top 10 stocks that have a PE ratio of 30. And that's a problem. And we're watching that right now. We're watching a lot of steam come out of these high valuation stocks and everything else is really not losing too much steam, to be honest. Yeah. Because if you like, if you take a look at our value portfolio, it's beating the S&P 500 because we're not loaded up on high tech stocks. We're seeing a big rotation this year. Yeah. And I think it's going to continue. I mean like yesterday the NASDAQ was down like 2%. I know like our growth and income strategy or like our ETF SWP was down like 20 basis points 0.2%. Yeah. So like, you know, it's totally. Tech's getting hammered even though. And I think a lot of investors frankly are not too happy with the investment we talked about. We go full circle with this. The first topic we talked about is the trillion dollars these big tech firms are investing. Like if Deep Seek News, remember when Deep Seek News came out, like technically all this investment wasn't needed if AI's is sufficient already essentially. So you know, I think a lot of investors are taking that like saying, hey, if you're investing all this money, there's a chance that you're not actually going to get return on capital. We don't like this. It's kind of similar to like Metaverse with Meta and Facebook when they announced that investors didn't like it. Yeah. So I looked it up again. It's anywhere between 28 and 29.8. The whole s P S P crazy. So yeah, that's, I would say that's, that's, you know, the simplistic reason for why buffets in so much cash because there's, there's not really many values out there. Sometimes simple works best. You know, if you use PE ratios to value stocks for 50 years, that's what, you know, I mean, sometimes it, you know, over long term, it probably works because it's going to revert to the mean eventually. Yeah. Question is, is it now or 20 years down the road when they revert, when they grow into their earnings? Last year I said this, I'm like, 2025 is going to be one of two things. I'll either all the top 10 stocks come back down from cloud nine, back to earth, or everything else catches up. Yep. And we're seeing the high inflated stocks come down. Yep. So fun stuff, guys. Yeah, good stuff. All right. All right. Well, hey, thanks everyone out there for listening. If you guys have any questions, comments, show ideas, hit us up@infowpconnect.com and we'll talk to you next week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or, or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.