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Niagara University's Ed Hutton- On The Economy

Aug 24, 2014|

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Talk about the economy. And yet you can get stuck advice on a lot of different places on this radio. Station. That's not exactly what I wanna do I wanna look specifically at politics -- able to specifically. At the issues coming up in the mid term elections the house and the senate. And I would bet that about a month ago maybe even two months ago. If you were to ask people what the number one issue was driving those elections it would have been the economy. There might have been some people talking a little bit about the debt ceiling some of those issues. That matters overseas has kinda pushed that to the back burner but at Hutton is here to turn the heat up just a little bit. -- is a chartered financial analyst he's a professor at Niagara University. He has their financial services laboratory he's he's my one of my favorite explainer as. When we need things broken down into basic simple English that is a good -- to turn to thanks for being here -- what are some of the issues. That we still. And I kind of have to underline that with an -- race still. Might see effecting the upcoming elections. Right now it sort of looks like we've. We're a very very quiet period right now talking about the economy and and I think it's almost too quiet because sometimes we think it when we don't hear about things in the news. That they really aren't what types of our way today they just got away and all the problems have been south net effect debt. When I was. Looking at the Wall Street Journal before I came here I went online and I said. What are the most commented stories now on the in the Wall Street Journal to try to get an idea of what's on people's mind. Now the number one common its story was about the new recipe for -- -- charity breakfast it on the Wall Street Journal so maybe that's the summer. But maybe it's just that people have put this out of their mind right now but that doesn't mean that the issues -- -- -- no not at all as matter of fact. The way the the way things are working right now where in a period. Really it's unsurpassed it's never happened before when we had interest rates has -- law always they've been for has long statement. Really we're still dealing with an effective interest rates that's just about zero. The Federal Reserve met this weekend in Jackson Hole and and it basically says stay the course eight they said we're gonna stay. Where we are right now we're not going to raise interest rates. And corporations are taking advantage of that in what they're doing is that there issuing massive amounts of debt. So in addition to the federal budget deficit which. Continues to grow. What we're getting now something I think is just as important in May be more important in and is it. Corporations are issuing more debt than they've ever issued before at the beginning of August we surpass the trillion dollars in new corporate debt. And what is the so what factor there OK some companies have bigger debt load their stock price rises along the way this is all great good thing isn't it. It is until it's time to pay it back. What companies have been doing has been borrow they've been borrowing money they've been buying back their stock what that does is that when that company goes out and they can borrow money. It's at such a low interest rate right now so it's in effect free money they can go out and borrow money. And and they take that money and instead of investing that money into. New capital projects instead of using that to expand. What they're doing it to their borrowing money and buying back their stock now that raises their stock price which is great. Great -- stockholder it's great if you're getting compensated getting a bonus based upon where your stock prices going. But it's bad in the sense that you don't end up with -- any more productive capacity so bring it bring it home in terms of recovery are we doing better. We've week in every way we're doing better for some people. We have be we have a recovery going on were -- a unemployment rate of six point 3% housing starts are up. But what we're seeing is that the recovery that we're in right now is not affecting everyone equally. And that's one of the things I think it's going to really play out certainly in the mid terms but in a presidential. Elections coming up on out. This income inequality gap is getting bigger and bigger. So so you see the politicians we just had that guy running for right govern yet as a critical weapon you see politicians talking about income inequality here. Kinda came off this whole idea that the recession has reached -- Bet that that's right the recovery that's right yet it's not everybody's recovery. Some people are doing better the people that are doing better are doing much much better. The people there were most effective where most -- still have not seen the benefits of the recovery and why is that. Partly it's a structural change in the US economy it's just that what happens is that. When we have big changes in the economy tend not to be gradual but they tend to be very sharp and area. Very catastrophic for certain -- we had. A big change in the way we do business in the united states international. The current computer. Revolution all of these things have affected people on equally. Manufacturing. Has become less important in all of that is meant that some people have done very well in other people haven't gone as well. So addressed the elections how do you see these things in the economy. Playing out on the campaign trail again we'll have more guys calling for I get a minimum wage absolutely absolutely things like. Should the minimum wage be much higher. Knows what should be that the the extent of subsidies. What should be what kind of the concrete steps can people take to improve improve the labor force participation rate when I look at long term trends things that are affecting the economy in the long term. One of the things it's affecting the economy -- has been the number of people that are dropping out of the workforce. We've gone from 70% to 68% to 65%. 63%. Of people who could work are working right now which is an all time low so. Being able to address they get more people back into the workforce is going to be important. 8030930s. And number at Hutton is with us from Niagara University W -- for the next half hour to after the news spread enough time to squeeze in a couple of calls along the way. We're talking about the intersection today between politics and the economy. Which sort of a recovery underway does that then take away some of the issues off the campaign trail that we would otherwise have there. 8030930s. Number maybe you've got just a basic question on. You know why is this happening this way -- really good at that sort of thing to. Let's -- quickly before the news break bring in John in Rochester 8030930. Hi John thanks for calling. They gave -- K you know and I think he hit it right and had our our economy needs well bullied by area. I'll run up by her initial bet our initial that almost eighteen trillion dollar -- it's it's it's going up there and -- at some point we're talking about and solvency but but I gotta say I think the real solution I think. Republicans. Should come out with do it take control the congress and eventually the presidency. It they got to go back to Reagan economics. People are -- or no treatment. Whom there -- accurate as you've got to get the resources. In the hands of a private sector to Marshal the resources. They had gone to the government sector in the last 77. Years and that's the real problem right now I'm -- -- example. The sequester. The sequester it's will also launch. And shortly there's so what -- really well I saw some great economic indicators they came up well. Because that's a cluster and Netscape -- let's give. The other resources out of the hands of the government and in the hands of the private sector what are your thoughts. The might whoa angry with you I agree with you this is one of the biggest impediment here where I think we're gonna see it and -- were starting to see it the most now. He comes about not so much in internal business in the United States but basically tell the United States is being able to compete against. Companies worldwide. And that's something that is going to be. It's bad -- it's been a huge trend right now 50% of the earnings of American corporations are coming from outside the United States and in order for. Us to have be thriving US we have to be able to compete internationally. And you see that being an issue he was putting it certainly within. Framework of the political discussion absolutely correct direction of the -- -- -- all of that right. And yet not a lot of politicians even the Republicans are going that way and. Well what what we're seeing is that more and more companies are choosing to do business outside the United States so win we. When we put in the wrong kinds of regulations were put in regulations that did hurt competition what happens is that companies. Can they can move their capital they can move their capital they can go to our markets and AR and they can go to other markets. And they set up shop in different countries. And so what happens is that we don't get any -- -- look at the tax benefits and we look at the employment benefits because the companies that let the united. All right enough time before the break squeeze one more rain and then if you're with us stay on hold will take more calls after the news break. At Hutton is here from financial services lab and I read receipt and another ad is on the line and in buffalo high. I. Yeah. Everything there is mostly made in China and -- -- Korea and Iran and I think probably in the country. Did. Excellent. Read. A big time. They want to look at that -- -- taxes. And they want to make a profit. If you want to repair forty treatments and Oregon improve. That they that's great but I mean what -- -- very -- corporations in this country -- I don't understand -- it's gonna. Their mind that they actually. Picked apart an addiction. Political with the least amount of money and cryptic comments definitely and thank -- As I don't think when you're talking corporations you can even saying morals because that's not their job and I don't mean that as a criticism. But their job especially if their public company is to make money for stockholders. I agree with you and I disagree with OK I disagree you one of the things -- to get that you have to have to -- so. I think dead one of the things is. And I'll go back to I'll go back to a company that a lot of us know apple could. All right Apple Computer very popular company. Great stock price great stock price run up. We saw what happened win there were. There were controversies about how they were building their stuff overseas. All right and we'll pick it up on the other side of the news break more about apple more about the US economy more about how it interfaces with politics too and Hutton is here from Niagara University. Sylvia with us for a whole other half hour after the news its heartland and his radio 930 WB yen at Hutton is here from Niagara University. He's the director of their financial services lab he's chartered financial analyst is well. A guy that knows a lot about the economy and before the break and what it calls in the second by the -- 803 and 930. But the room for the break you were telling a story about apple let's pick it up right there. You know one of the one of the things sit down people are starting to realize it's important in terms of their stock prices the way the company's conduct their operations in the business. Now I'm not gonna I'm not stick -- say that that's the thing it's has replaced profitability but it is getting to be more and more on the radar screens of big corporations. And with apple they saw that when they. Ran into this trouble with their Foxconn subsidiary it hurt their stock price and they did something about it. Wasn't because of activists agitating or was -- grassroots do you think it's reached the level where the average. Stock holder will look at something and say you know. I don't wanna be in this company because of X or Y beyond the financial. I don't know if it's the average stop cold there just yet because most of the stockholders are going to be invested through things like their pension plans. Two things like their union funds through things like. Their mutual funds their 401 Qaeda for three B and those of people that this is starting to put the pressure on. And in a related note before we get too far afield I did Jos talks on this that the whole idea of people. Making their buying decisions based on that kind of company more so or at least the brand. More so these days. Then just the the finances of at all how I'll -- at a cheaper can of beans no maybe not I'm one that can of beans the taste better. This is one of the things that. It's from my generation I'm I'm the 58 years old so it you know I'm. I grew up today in a generation and it was an investor for a long time. It was profitability now we've got a new generation with nickel millennial generation people be born between 1980 and 2000. They care a lot about that company that's making the goods whether or not they have clean environmental records and social records whether or not there. Activist investors that's starting to mean a lot more then it's also developed into kind of relationship marketing you have a lot of companies looking at. Really touching their people take a look at a company like there was mention any lessening in chipotle. Or a company like Starbucks or company like Trader Joe's our company like wegmans. What these companies are doing is they're realizing that there's a real benefit. Not just socially but also financially to being identified that way all right. We got a little far field there but I thought that was worthy of of touching on. At -- and is talking primarily about the economy and also we're we're gonna trying to hone in obviously. I'm what it means for the mid term elections 8030930. Chris in -- Wanda banks wading through the break you with us now. Vehicle yeah I'd like to make -- comment as far as they could about you know if you're trying to intertwine. How the economy's doing and with politics. The small businessman. I have been -- complete since all the late ninety's. And I tell you what I don't wanna put a penny out there for much of anything unless it's absolutely necessary because of the political atmosphere. I don't you know yeah I feel like I have a government that just want to put up or down on -- my neck. And control every aspect of my life. And and I'm sorry I just won't invest in the atmosphere I think that's why you have the lowest labor participation rate. You have a lot of employers out there that are conservative. That just don't wanna invest in in in a economy where they feel the government's trying to take over everything and -- and when you're talking about apple. Oh my gosh when needed when the CEO of apple comes out those that conservatives. Don't need to be concerned about only -- stopped. Much will much the same way that almost that conservatives are not welcome in New York well. It's okay I'll bury my money in the bank -- in making them. You can do it before I give it any of these people they think that Google aren't sure. And that and that's about all say. All right but you called that comment and what you think. You know like I said in situations right now. We have we -- a in a need for incredible investments in in really. Now what I would call the you know the infrastructure of the people that we have the worker infrastructure that we have and that is not that. That's the traditional source of that has been through employees and employers you know and if they're not willing to invest that does hurt is the traditional. And I almost hesitate to act and during the got to ask this without yelling. And obviously in question here. And I just put the premise out and get you reassure. Is government anti business. I don't think it means to be anti business the problem is that I think -- in government that everybody gets to write a rule but nobody has the job to undo any of the rules. So people come in it's easy to come in and to set up a new set of regulations. Somebody else comes in and there's a problem has to be addressed this they set up a new -- variations but it's nobody's job. To look at the regulations that are there and decide that hey that's not needed anymore or that's duplicate duplicative that's. That is has the last caller said that's keeping people from wanting to start businesses. All right -- members thanks for joining us -- All hi you're on the -- Alia. I just -- this is -- A good summer -- who have come here. Yup yup if you're listening to us on the radio might be a little confusing so -- turn that down -- pop back on the phone with us -- Yeah. Two companies are talking about like Starbucks. And Tim Hortons penalties. Property -- -- payment memorial. Don't bail have been worried you can't overburden them minimum wage. And there everybody everybody is called Ron Burkle say never -- school and so unemployment rate is to. Yes it's very. So you want you want someone to address the idea under employment instead of just unemployment. So I want to address so wages there. I have I was gonna make as saying. And man walked it up and down the street concerns. I'm not this is a work for a living wage. Yeah we need to living wage has just been. One of the things it -- I do some studies long term trends long term trends in the economy what's driving businesses what's driving stock prices one of the things that I've been looking at. And it's turning out to be one of the things that is going to be the I think of them but a major forces driving our economy the next five to ten years is going to be the shortage of workers. We're going through a period right now where are always talk about and we seem to focuses on unemployment that we have people that don't have jobs. And I think it's going to be changing it was starting to see it right now Dave and I were talking about this which started here right now is that. We're going through -- period with people retiring and with the fewer baby boomers that we're going to be having a shortage of wages in the only way to get people back into the workforce. And get them to. Work for you the best people is going to be to pay them a decent wage. And you're saying then that the bigger manufacturer is not just the fast food jobs and they can put a sign out saying help wanted all they want. And they can go on paying minimum wage and and they will -- school people ready to take those kind of jobs. A lot of the argument against the minimum wage is that those are supposed to be starter jobs anyway you're not talking about those group of people you're talking about. Than the mid level manufacturers. Those guys having a harder time finding trained. Workers absolutely absolutely it's one of the things right now of the -- is 1 of the central factors in US competitiveness. Has compared to the rest of the world and that is being able to. Have the right people for the jobs that are existing right on the jobs that are coming up in the future and so. That is one of the things as we get back to the politics side. That's one of the areas that government can get involved in can be effective is helping to train people for those jobs and helping to meet those that need. And and you see the need not just locally and nationwide for more job training programs absolutely absolutely -- job training programs and job matching programs to make sure that with the people that we -- in the work force are able to -- to meet the needs of the manufactures and other industry. It's kind of like driving a street in the lights change and announcing he'd just get going and any gotta stop we had to take another break. On the other side more with that -- after this it's hard line on news radio 930 WB yen. It's hard line and news radio 930 WB and this is Dave Devo part of the reason we're having this discussion today and he might have heard -- mentioned this earlier. At Hutton is here from Niagara University there financial services lab it used to be when you talk politics it was jobs jobs jobs. But it was saying earlier in the program he looked at the most commented story. And the Wall Street -- right now and it's something about there a recipe for -- -- French heroes believe it or not. So we're trying to talk about some of the issues there will be affecting the elections coming up the mid term elections especially in terms of the economy and enough time here left to squeeze in at least one phone call Stan thanks for waiting high here with us now. Good morning gentlemen. By moving out of the political and keep obviously you're changing drastically. Priority they're treating. Nothing is predictable. What I mean that it is. And my kid -- media traced to the site people whether it's a big guys you. Are scheduled and so forth. All people landlord -- for separately yet until we want to move the bills to travel there to ground -- and that you know tornado hit. So occasionally -- coming from things got going on the back -- being nice things are coming up front. And most important election 2000 trials failed to get to vote out Obama was reelected easily. The conservative -- seats in the house and the senate have complete -- that we don't know what's gonna happen. Stand do you think there were not passionate enough about the things that we need to be passionate about. Yes yes yes because what is happening to the left has an agenda that they're biased -- the right that is immediate agenda the problem is. Especially with the right doesn't -- the little people are left out. Think rusty. 47% they've lost the women. They've lost a minority they glossy seniors. The game got back -- line is that yes there is no contact anymore. What you say it. Its bid to you know going back to. -- -- so much of politics in the -- if you do people feel about politics this has got to do with their own economic situation and that's something that has been ongoing for a long time and it's something that's not changing. Based on way you see the economy yet. And based on some of the things even that -- -- -- raising the idea that that the economy isn't necessarily front burner anymore even though the underlying issues might still be there. And give me a prediction. In terms of anywhere the economy goes and B how you see that touching the mid terms. We are going to. I'd been around I've been involved with the stock market now for close to forty years soul IE I can tell you without. Oh without any hesitation we're going to go through a period of declining stock prices we always will we always go where it's going going to do through so that's something that's not gonna change I don't know when that's going to happen. But we're -- -- really critical period right now. And that is that the way that we act in the next year or two especially with what happens now with interest rates. And it's something it's it's not sexy it says the last caller said it doesn't attract a lot of headlines. And that sort of thing but the way that the Federal Reserve. Deals with raising interest rates getting off that this is Euro base is going to be one of the most important thing it's gonna determine a way that we. Feel about the economy for the next -- and the way we feel about the economy obviously. That's where that the exactly if it's the politics that's right yeah we are we're in a very very critical situation right now you know a lot of people don't sort of are not sensitive to. Great stuff this was fun and thanks for so excited. At heightened Niagara university's financial services --