Alan Beaulieu - Prepare to Prosper Before the Next Great Depression (J2417)

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Welcome to the Exit Coach Radio show, the show for baby boomer business owners who are looking for cutting edge information as they plan their 3 to 10 year business succession and exit. Every week we interview top professional advisors for their best tips, strategies, and precautions so you can be well planned. And don't miss our one minute exit coach tip of the day on Exitcoachradio. And now here's your host, the exit coach Bill Black. Welcome to the show. Thanks so much for listening today. My next guest is Alan Bolio from ITR Economics in Manchester. We're going to talk about the international economic forecasting and consulting that his firm does and the coming Great Depression and how we can prosper by knowing about this information. Alan, thanks very much for joining us and welcome to the show. Thanks, Bill. It's great to be here with you. It's my pleasure to have you on. Doug. Tell us a little bit about ITR Economics and your background. OK, I'd be happy to. ITR Economics is the oldest privately owned economic consulting firm in the US Our founder is long gone, but he started the business in 1948. My twin brother and I, Brian, are the current principals of ITR Economics. We have 32 folks on. Staff with operations here and in Europe and clients around the world. We look at what's happening around the world so people can reduce risk and make decisions that will enhance their profitability, including when is a good time to leave the business. And it sounds like you have some projections that don't look too rosy for the US, so let's get into that. What, what are your current projections and what's your outlook now and why do you think a Great Depression is coming to the US? Um, good questions, and, and it's not just the US either. Uh, this is going to be a global event, but let's start with the US if it's all right with you, Bill, and, and to the short term, uh, I'm an optimistic, uh, individual, when it comes to the US economy. There's so much right going on now. I want to make sure that we don't gloss over that. Um, you know, there's a, there's a recent poll out that shows that 65% of America still thinks we're in recession. They're missing the point entirely. We're not in recession, we're growing. Record high GDP, record high employment, record high retail sales, industrial production is at record highs. Manufacturing's on the on the rise. People are coming to this country to make things, but most of America doesn't know. And therefore they're going to miss out on opportunities. So knowing the positive things allows you to make money going forward so that you're ready for when it all hits a fan. And if you don't mind, I'd like to go through some of those positive things, and I hit upon one of them and manufacturing, you know, we're not hiring as many people to work in manufacturing as we used to, but firms from around the world are coming to the US because we're stable, because we have an educated labor force. We have a high regulatory environment, but that's not scaring them off. We have a very high tax environment, but that's not scaring them off either. Those are outweighed by the fact that we are the world's largest market, and we have a very stable, low cost energy base. If we start playing. with those things, well then we're going to lose some forward momentum. But at the moment we're looking good and we're going to continue to see businesses come. That creates jobs, opportunities, wealth, growth, I mean all kinds of good things. And on top of that, consumers are in really good shape right now. We may not understand what's going on in the world, but we're handling our debt really well. We're not adding a lot of debt. Our delinquency rates are really low. Add to the energy independence that we're knocking on the door of right now, and you have to feel good. About the future bill, there's there's no way that the US is going to do anything but grow for the next few years, and any recession that's coming, and we think there's a mild one in 2019, it's going to be a normal consumer-led led easy to fix kind of recession, not a financial meltdown, not a Ron Paul kind of crisis, just a run of the mill downturn. So everybody listening to the show, whether the services or manufacturing, distribution, they should be enthusiastic in spending money on themselves and And looking to borrow while rates are so low because they're going to pay back with inflated dollars, which is, you know, as well as anybody an economic win, and it's just a fantastic time to be in America. And you know what's funny to me that as I travel around outside the country, outside the country, people know that it's only here that we doubt ourselves. We seem to be freakishly down on our on being American while the rest of the world. was going gosh, wouldn't it be great to have that? Do you think that's because of, you know, how difficult this recovery was from this last recession where it seemed like year after year we'd start off with optimism and then by mid-year it seemed like the winds were out of those sails for several years in a row and do people just really still not believe that things are better? Well, you know, it's, there's a lot of things going on there, and, and part of it is certainly that they kept hearing that things were not good. We heard it from our political leaders as they were bickering over policy and we heard it from Hollywood on TV shows, you know, we just keep getting told that things weren't good, and most of the folks who make up to 65%, they're not heavily. in the market, so they weren't getting the really big returns and as they're not getting really big returns, they're not feeling well. Their homes had not gone above the peak levels of of the bubble, so they're still thinking they're they're somehow being cheated and they're behind, forgetting that a bubble is just that. It's not normal. It's not to be expected. It's a bubble. You really don't want those things on a regular basis, so. Managed expectations and being said things that weren't true. For instance, I take 30 seconds of your time. I just heard a newly elected senator speak in January, and he stouted 5 economic facts at the pack dinner I was at, and 4 of them were wrong. He just was flat out wrong, but he just got elected on the strength of being down on you can't get a job, is what he said, and incomes aren't going up and things like that, none of which is true, but it's popular and America believes it. If you really know what's going on, that's when you can make some money. Good point. Good point. Now, others are saying that this, this recovery, especially in the stock market, has been basically government orchestrated and, and we're still, I mean, one of the indicators I think people look to, and maybe you can dispel this myth, is that if things are so good, the feds would be raising rates instead of continually holding down rates artificially and making the stock market look attractive while continuing to say, well, we need to keep priming the pump. I mean, every farmer knows once the pump is primed, you stop priming the pump. Yeah, you're right. There's a lot of wisdom on farms, isn't there? There is. I agree the government and the Fed has kept the stock market happy and kept them well fed. And by the way, that's also why high income people have done much better, much, much better than low income people in this time period, because they had access to that wealth creating machine and with that access to borrowing to invest. And with the stock market, they made a killing and their incomes went up much faster than we've seen in the past with the top 1% we're talking about. They're keeping interest rates low because there are currency wars going on around the world, and we have to be careful. Fear has driven up the cost of the US dollar up until recently, and that that fear that drove up the cost, you know, would only be exacerbated if interest rates went up because then people would be even more attracted to the US dollar. So there's some of that mix and also because the inflation they look at the. Price index on the surface made it look like there's absolutely no inflation going on. When you dig a little deeper, you find there are some inflationary pressures, and the Fed will have to respond to that in the second half this year. It may be December, but they will respond. They're signaling in no uncertain terms that we should expect some interest rate rise this year, even with all the softness that they see around them at the moment. They still know they're going to have to raise rates and you know, the, the big concern is what's going to be the lash back from the stock. Market and what's it going to do to financial markets when they do raise rates. It seems to be that's all the fear that's written about in the paper on a daily basis about the feds will raise, they won't raise, they're afraid to raise. Is that is part of that backlash anticipated to create this this recessionary period that you're talking about? No, I think a lot of that's actually factored in. The Fed has done an exceptionally good job of broadcasting what kind of rate rise they're anticipating. for this year, for the year after and the year after that, they've been very transparent and I think in doing so they've taken a lot of that out of the market. In the old days what you described would be, but I think now it's factored in, and any backlash is likely to be very temporary and very muted. I'm not looking for anything large to come. There's still a lot of capital out there in the world and so even if interest rates go up 25 to 50 basis points, you know, the trillions of dollars sloshing around the world looking for a place to earn. Money will still be happy to be invested in the US stock market. So now I don't think there's a big problem coming there. The Great Depression scenarios really, it was born many years ago, but it takes time to mature. In the meantime, we're going to have some prosperity. Oddly enough, if you remember the roaring 1920s, that was a good time of prosperity until the late 20s. We're going to do that again. It's going to be fun until it's all gone, OK. And what's going to cause What are some of the factors that go into the timing and the cause of a Great Depression? The timing is mathematical and it's fairly predictable because of that, and it's multifactorial, as I'm sure you surmise, and it is global, as we have mentioned. Let's begin with some obvious things. Japan's not in good shape at all. They have a declining demographic trend. The fertility rate's been terrible for too long. So they're losing workforce and factories will go offshore. There are pension off people and as a pension off people they need to sell US Treasuries. They're the second largest holder of US Treasuries, and as they begin to sell treasuries in a few years. A next decade as they begin to sell, it puts downward pressure on the dollar, which creates inflationary pressure in the US and demands interest rate rise because we're a debtor nation. We have to sell, so they may be the first trigger, they may not, but they're early on in this process. You're going to watch Japan and when they really begin to have some difficulties piling on them, you know, we're getting close. That same debt situation exists to a lesser extent in Europe, but it exists very noticeably in Great Britain. And as they struggle with their growing debt problem, we can easily look at the United States. We rank 3rd in our in our ranking, which is in our book Prosperity in the Age of Decline Why We rank US 3rd. We have a tremendous debt problem despite our wealth, despite all of our potential, we have just blown it, and both parties are guilty of just adding on debt after debt. The Congressional Budget Office estimates that eventually that the US debt will require 25% of the federal budget just to make interest payments, and that year is 2035, which is only 20 years away. I mean, we're going to be there before we know it, Bill. So we have Japan and their debt. We have debt elsewhere. We also have factor number 2 is demographics. Aging of America. Everybody knows about it. Everybody can do the math. 10,000 of us retiring a day into a system we can't afford. There's no secret. Social Security is going bankrupt in the early 2030s. The math is unassailable and the other costs are obviously health care related, Medicare and. drugs we can't afford it. There aren't enough workers that will be able to support the amount of retired people, which either means incredible tax increases or incredible reductions in the plan. And politically that's unassailable. We can't raise enough taxes. We're going to have to keep borrowing because nobody's going to change the plan significantly. And that just exacerbates the whole debt interest rate problem. Europe's got the same problem. Russia's got a worse problem. Japan's got, they don't like to reproduce, by the way, in Russia, no idea why, but they don't. The Japanese forgot to. The world's fubart because of that, we are, we are in a terrible position because of the aging population in the industrialized debt ridden world. So some real problems, real problems ahead, as you're mentioning, and some of these problems are, they're they're built, they're baked in and some of these, these programs are, are, as the government might call them, too big to fail. They can't afford politically to let go of some of these programs. And so it sounds like we're skating on thin ice here. Yes, it would come sooner except for Dr. Bernanke did a great job of low cost financing for the US for this decade. He switched to 10 year Treasury financing at, you know, record low rates. He did us all over and bought us a bunch of time, but that's all he did was buy time. The only thing they can, well, there are things that can change this, obviously, and I'm sure you're already thinking of some of them, but we could change the plan. We could some people say, Well, we'll just default on the debt. The United States doesn't get to do that. If we do, we're only going to do it once. And because we're a debtor nation wholly out of balance on our budget, you know, we're wrecked after that. It's just unimaginable. People think that we can just inflate our way out of it. No nation has successfully done that. There's no reason to expect that we could pull it off when no other nation has been able to do that in history. There's, you know, just mind blowing. There's the whole Congress, both parties, meet in the aisle, joining arms, sing kumbaya, and solve all of our problems. I don't think so. What do you think, Bill? Do you think that's going to happen anytime soon? I think that's a pipe dream. Yeah, that's not going to happen. Yeah, I think it's right up there with getting hit by a comet. I mean, it's, it's potential. It's not likely. Right, that's unfortunate. That's an unfortunate truism, isn't it? Uh, so yes, taxing our way out of it is gonna be difficult at because of the the the statistics are that, uh, we're we're not gonna have enough workers supporting the huge. Number of retirees and their costs and their needs. So yeah, it's a very, very difficult scenario. uh, so as an individual, what can you do to position yourself to uh to protect and maybe even profit from this uh coming trends? If you're over 50, uh, literally over 55, you're a baby boomer, so if you're a baby boomer, um, all you have to do is continue to save, invest, and plan for your retirement like there's no tomorrow. This is not a time to pull back on investing, invest in everything from real estate to the stock market, be be aggressive. Do not go conservative now. It's way too early if you're 55. If you're nearer to retirement, go conservative, but this will be a time where those of us in this age bracket over 55, as we punch out in the 2020s, late 2020s, we're going to have a high fixed income. We, we're going to see good investment vehicles designed for us. We're going to get our 89, 10% fixed, uh, and we're going to really escape this unscathed, this 2030s, because it begins around the year 2030. Great Depression because we'll have fixed income. It's our kids that we're going to be bailing out and our grandchildren who are going to need a place to live. So it's for us baby boomers, it's a matter of saving and figuring out how we're going to save our companies, which is probably the much harder thing. Personally, you know, we'll take cash out of our businesses because we're at that age and we're going to put the cash in places where it can be protected and give us good return on investment. But how do we keep our company alive and the hundreds of employees that you may have, or in my case, you know, the 32 that we have, how do we make sure that they're OK? That's a bigger challenge. You have to figure out how you're going to scale the business down quickly when it when it needs to, and what niche markets are going to do well despite the Great Depression, like things like. Security, personal, financial, corporate, national security, education should continue to do well. We have to, we have a whole list of them in the book that you're going to have to look at those industries and see how do I get my company into that space or those spaces which countries will do better? How do I invest in those countries? We have those listed too. That's, I think, the bigger challenge and that in teaching our kids what life is like in inflation because that's coming, it's beginning now with wages and the Fed is beginning to sniff them out, otherwise they wouldn't be talking about increasing rates, so. You know, Bill, you and I are probably about the same age. We've seen inflation. We remember the 70s into the early 80s and you know, you can do fine. It's not going to be the end of your, of your existence, but it's a challenge and you look at life differently. We haven't had that kind of inflation in 35 years, so there's a whole generation that doesn't know a thing about it, and I'm worried for them because they're going to make mistakes that'll be costly. They have to figure that out if they're going to be ready for the Great Depression. It's our job to teach them. If we don't, nobody else will. So tell us and and that's uh that's what we're trying to do with this show is to help people understand that there are things that we can't ignore. There are things ahead and people that are researching those so Alan Bolio at ITR Economics are doing that. Tell us a little bit more about your book. What I, I don't have the title of it in front of me. What's the title of it again? It's called Prosperity in the Age of Decline. My brother and I wrote it with that idea that we want to help pass the word along. that was consistent with our founder Chapin Hoskins, what he wanted to do in life. ITR was born out of the Great Depression. He thought there must have been a way to see that coming, so Chapin dedicated his life to it, and Brian and I are just continuing that goal, warning people, trying to help people, given the inevitability of what's coming. Um, it's available to Amazon. It's also available at Barnes and Noble as an ebook from Amazon and C, which is not that far away. It'll be available also as an audiobook. Oh wonderful. OK, yeah, and if can people access current information on your website? Do you have anything that they would find there at your website? Yes, they certainly would. It's ITeconomics.com is our website. It's the ITR and then the word economics.com, and there is information about what we've talked about. There are blogs that we've written about these and other subjects, information on our book, all that's available on our website and books to go there. Our first book is there as well, as well as a children's book we wrote, which is the profits from the children's. economically based, but it all goes to charity. Brian and I want to give something back so my wife, my brother, and I wrote a book that we hope to raise lots of money for charity. Well, that's fantastic. Good, good work there. And so when a lot of our listeners might be a head of a business group like Visage International or other groups out there, are you available to speak to groups as well? We do. We have 5 of us in the company that do speaking, my brother and I and 3 others. We do that all over and do it a lot, and we love doing it, so sure. And we also have consulting work with corporations where we help guide them into the future, what will be, how they will be impacted, things that they want to be thinking about. It's not just economic input. It's also there's a psychology to all this and what you're going to be going through and what people will be going through. It's all wrapped up into that risk reduction profit planning scenario. Alan, fascinating information well delivered. Thanks so much for coming on the show and sharing and again, uh, this is a trend that we'd love to keep our listeners informed on. So hopefully we'll have you on again at a future time and we can get deeper into uh some of the trends and how our listeners can help prepare. Again, the name of the book is Prosperity in the Age of Decline. You'll find it on Amazon and Barnes and Noble, and it's coming out soon as an ebook. So Alan Boglio, thanks so much for joining us today. My pleasure. Thank you, Bill. We're going to take a short break and be right back with another guest, so please stay with us. Just thinking about what will happen to your business if you're gone keep you awake at night? Will you get the price you need from your business to carry you through retirement? The BEI Network of Exit Planning Professions is the world's leading advisor network with the power to help business owners transition out of business on their own timeline and terms. Ask your most trusted advisor to create a BEI plan for you, or visit us at exitlannning.com. That's exitlannning.com. You're listening to Exit Coachradio.com, the information station for age 50 plus business owners, where we're interviewing top advisors for their best tips, ideas, and precautions so you can be well planned. We upload new one minute tips every day. Exitcoachradio.com. Come listen for a minute. Thank you for listening to Exit Coach Radio. Hey friend, I know how this feels. Waking up exhausted after multiple trips to the bathroom and feeling embarrassed by sudden leaks. I used to be constantly on edge, searching for a restroom whenever I was out. Then I discovered better woman. I was skeptical at first, but two months in, everything changed. I experienced improved bladder control. No more heart-stopping moments when I laugh or sneeze. Less urged to go, deeper and more restful sleep. I finally felt like myself again, confident and in control. Better Woman is natural, effective, clinically tested, and trusted by women for over 25 years. Ready to take back your control? Head over to Bebetternow.com to order your supply today. That's Bebetternow.com. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease. Uses directed individual results may vary.