How the Forbes legacy began, to the Fed and AI – Our interview with Steve Forbes Ep#123

It’s Episode 123 and we are in a classic bull market. The market’s been climbing the wall of worry all the way since October. Meanwhile, the Fed finally skips, pauses, stops raising interest rates. I’m not sure if they’ll raise again, but we know inflation continues to come down, dropping like a rock. Meanwhile, wages continue to stay strong as unemployment stays at record lows. Folks, this doesn’t look like a recession.

We’ve got two special guests today. We have our colleague, certified financial planner at Payne Capital Management, and contributor on CNBC, Courtney Garcia. And we’ve got Steve Forbes today talking about his life, his view of the markets and the economy.

The Fed Skips, or Pauses

We had the Federal Reserve’s much-awaited meeting:

• The markets had been assuming they were going to pause, which they did, and that’s great news
• They were pretty definite in saying there’s nothing set for next month
• They say they’re data-dependent and inflation keeps coming down – hopefully, they won’t raise rates
• They raised their forecast on GDP to 1%. Anything positive is not recessionary. So it seems they’re calling for a soft landing.

Economic growth will pick up this year

The economy is in a better place than people realize.

• People thought earnings were going to fall off a cliff this earnings season, they didn’t
• Unemployment is still really low. There are still a lot more jobs than people to fill them, which is keeping wages sustainable
• We’re finally seeing the rest of the market rally beyond the big 8 tech stocks
• The Baby Boomer generation is mostly retired and spending their money
• Millennials are starting families and starting to reach the peak of their careers and they too are spending – which is probably holding up the housing market right now

Productivity is going up

The economy is in a better place than people realize.

• Companies are requiring people to come back to the office which is going to be a boost to productivity
• Productivity is disinflationary and good for company margins.
• AI will benefit companies and increase productivity

Capital spending is at a record high

• A lot of manufacturing is coming back to the U.S.
• Although the housing industry has slowed, construction workers are busy building offices, and plants and companies are buying equipment
• That’s going to impact earnings and profit margins. If you look at construction for manufacturing in place this year, it’s up 67%

The Tipping Point

Our interview with
Steve Forbes

On this episode, we’re happy to have Steve Forbes. Steve’s the Editor-in-Chief of Forbes Media. He ran as a candidate for the Republican Party back in 1996 and 2000. Steve attended Princeton while he founded BusinessToday, a magazine that survives to this day. He’s also the host of the podcast, What’s Ahead? and the author of a number of books, the most recent he coauthored with Nathan Lewis and Elizabeth Ames called Inflation. We talked about a wide range of things:

Steve’s grandfather, Bertie Forbes, came to America from Scotland

Steve was around 7 when his grandfather died back in 1954. But he does remember his Scottish brogue. Bertie was an immigrant from Scotland who came to America and wanted to be a business writer. From a young age, he exhibited real entrepreneurship. But when he came to the US in the early 1900s and got off the boat in New York no one would hire him. So he went to an editor one day and made him an offer to work for free for several weeks with the expectation that when they saw his work they would hire him. He got the job. But he was so full of energy and ambition he went to another editor using a different name and got a job there too. In 1917, he started Forbes Magazine.

Understand where your bread is buttered

One of the things Steve’s father did when they were growing up was he took them to business events with the idea of being that even if you don’t want to go in the business, understand where your bread is buttered, understand that it just doesn’t happen to grow on trees. And then as they got a little older, they were expected to contribute to these meetings by taking note of things like; Who was there? Why was that person there? What should you do to help nurture a future Forbes customer? He wanted them to understand it’s like a garden. You don’t tend to the weeds, you’re not going to have much of a garden.

Free market lessons from people who have made it

One of the things Steve’s involved in is a series on achievement. Steve Forbes On Achievement, three-minute videos, biographies of people who made the world that we live in whose names aren’t much recognized today. These videos are not only interesting but also have a free market lesson. Some examples include Malcolm McClain who created the box, as they call it, shipping container, which revolutionized trade, or others like Lane Bryant, who created maternity dresses 100 years ago, and Annie Malone, the daughter of former slaves, who became the first African-American millionaire creating hair products for women. Today, she’d be a billionaire. Learn more about the project at www.izzit.org/forbes/

The Fed should leave it alone

You don’t cure inflation by trashing the economy

The Fed should have two purposes, one is to keep a stable value of the dollar and to deal with the occasional panics. Crises do happen. So you go and do it and then you get out. But after 2008, they started suppressing their own rate and loading their balance sheets. We’re going to be digging out of that mess for a long time. That doesn’t mean we can’t grow. In the 80s inflation was brought under control, and the economy boomed, but energy was in a depression. Agriculture was in a depression. Even as the rest of the economy did well. So you can have pieces of it readjusting with the economy as a whole, doing well.

After 2008, they decided to have zero interest rates which distorted the financial market. And the prime example is Apple. Apple, the greatest money machine ever. Why would Apple take on over $100 billion of debt? Because the money was free with a tax deduction.