Washington, DC -- (ReleaseWire) -- 03/14/2016 --DAWN BENNETT: Jordan Goodman has worked as a journalist at Money Magazine for the last 18 years. He has also authored 14 books, some of which you've probably seen. The Ultimate Guide to Student Loans, which came out in 2014; Master Your Debt, from 2010; Fast Profits in Hard Times from 2008. They are good books. He has a masters from Columbia University School of Journalism. Jordan, welcome to Financial Myth Busting.
JORDAN GOODMAN: Great to be with you, Dawn.
BENNETT: Donald Trump is going to make America great again; at least, that's what he tells us every day.
GOODMAN: Yes, he does.
BENNETT: And how he plans to do that is slightly less clear. Can you walk the Financial Myth Busting listeners through the main components of his economic platform, and also any policy specifics that you might pick up on?
GOODMAN: Well, there's on the domestic side and the international side. On the domestic side, clearly he wants to cut taxes, particularly corporate tax. We have the highest corporate tax rate, at 35 percent, around the world, and he wants to get that down to maybe 20 percent, which I think would make us more competitive. All these companies that are going overseas and these tax inversions might not do that if the tax rates were lower. He wants to lower individual tax rates in various brackets, which, by the way, is completely opposite to the Democrats. Bernie Sanders is talking about raising the top margin rate to 73 percent. So lower tax rates. In general, lower regulation, streamlined government. He wants to get rid of waste, fraud, and abuse, which sounds good to everybody. Reagan talked about that too; remember the welfare queens and all that?
BENNETT: That's right.
GOODMAN: And eliminate—I think he talks about the Department of Education, and in general, downsize government even more. I think some of that's good. I think you do need the Department of Education; some of these you just can't kind of disappear. The EPA he's talking about getting rid of, as well. I think that's a little extreme. But I think in general, getting taxes down, getting regulations down would help the economy do well. It's been amazing that we've created as many jobs as we have with the amount of regulations we put on the economy in the last few years, between ObamaCare, between Dodd-Frank, environmental regulations, labor regulations, financial regulations, I mean, you name it. There's been a lot of regulations, and that slows the economy, when people have to meet those regulations. I mean, just to give you one example; in the banking industry, there's been a lot of mergers and banks closing. They can't keep up with the huge amount of regulations from Dodd-Frank. So that's kind of on the domestic front, kind of what he's talking about doing.
BENNETT: But what about some of his bad ideas? I mean, that sounds like things that are possible.
GOODMAN: I think his bad ideas are more on the international side. So here he's talking about bringing jobs back from Japan, China, Mexico. It sounds good, but the way he wants to do that is punitive tariffs of 40 percent, 50 percent, whatever it may be. Well, what happens is immediately, if you do that, they retaliate with their own tariffs. And this is what's called a trade war, which is what's called a worldwide depression, okay? We've done this before. In the early 1930s, after the stock market fell in 1929 and the economy was going down, the way the Americans responded was doing what's called the Smoot–Hawley tariff bill, which put our tariffs up. Immediately around the world they raised their tariffs, global trade collapsed, and that's one of the things that brought on the Depression. Now, we have a much more interconnected global world than we had back in 1931, so it would have an ever bigger impact. So that, I think, would be quite disastrous. Already our exports are down, because the dollar has been very strong. If we put tariffs up, it would make global trade go even lower. And so yes, we have a big deficit with China and Japan and so on, but there are reasons for that, like they make good quality stuff a lot cheaper than we can here. And it's kind of the natural forces of supply and demand that make that kind of thing happen. You just can't kind of legislate it away or say "Fortress America" and all those kind of things. So that's the part I'm most concerned about, because we do not need a trade war right now.
BENNETT: You know, he did say that was going to force American companies manufacturing products abroad, like Apple and Ford, to bring their jobs back to the United States. I wonder if that's even possible. But even if he honestly means that, in Thursday night's debate, Trump was asked if he could bring back the options he's offshored for his Trump line of fashion products, and he ducked that question.
GOODMAN: Well, he said, 'It's uncompetitive, it's unwell.' Yeah, that's the reality. Business people do things because it makes economic sense. We haven't made a television in the United States in, what, 30 years? When did Zenith close? I mean, a long, long time. So it's a combination of labor, environmental regulations. I mean, if every place in the world was like the United States, it would be wonderful, but it isn't, okay? They've got much cheaper labor, much fewer labor regulations, much fewer environmental regulations. Now, for example, what's called the TPP—which is the Trans-Pacific Partnership, which is a deal with 12 major countries around the Pacific—would in theory raise labor regulations, environmental regulations, and so on, and allow much more trade. Trump's against it. So, I mean, there's something that's kind of going the direction he wants it to go, in theory, and he's against it. So that's where my big concern is, Dawn, is the trend I see in the world right now is deflation. We have a global deflationary trend, and a trade war would just exacerbate that dramatically.
BENNETT: Trump's platform, to me, seems to be mostly silly and misguided, but at least it isn't the same stuff that's been fed to us on the menu that Washington DC likes to give us.
GOODMAN: Which is what the voters are reacting against, and Cruz is the same, both Cruz and Trump.
BENNETT: Well, I think Cruz is picking up on Trump and borrowing from him. But it does seem to be ripping the soul of America apart. Do you actually believe that the Trump candidacy is almost a happy accident?
GOODMAN: In a certain way. I think shaking things up is a good thing, I mean, the Republican establishment is just in fright over this thing. I think Trump's going to win the Republican nomination, and depending on what happens with the FBI and Hilary, I think he could become president. I really do.
BENNETT: Do you think that's the rationale behind Trump supporters, that Americans believe that almost we need some type of disaster in order to shed our apathy?
GOODMAN: That's a good way to put it. But I don't think you want to bring on a disaster to stop apathy. There's got to be a way to do it. It's kind of like the Federal Reserve has to raise interest rates, in order to lower them. It's like, 'Oh, well let's destroy the economy, so we can save it.' I don't believe that one either. So it's kind of similar; you have to make things worse to make them better.
BENNETT: Speaking about the Federal Reserve, you just said that we're currently in a global deflationary environment. Can you talk a little bit more about what that means to investors?
GOODMAN: A lot.
BENNETT: Most Americans read about endless rounds of quantitative easing and assume we're in some type of inflationary environment, especially as the middle-class standard of living seems to get increasingly unaffordable, right?
GOODMAN: Normally if the Federal Reserve just created $4 trillion out of thin air on its balance sheet, you would think that would be inflationary and so on, but it's been the exact opposite. Deflation means prices are falling. They're falling for oil, they're falling for copper, they're falling for wood, for soybeans, for all kinds of different things, because there's a supply-demand imbalance; too much supply, not enough demand. I mean, oil's dropped from well over $100 a barrel down to about $35, something like that. It was as low as $25; I think it could go back into the 20s again. This is just devastating. But there's about eight states in the United States that are big oil producers, Oklahoma, Texas, Alaska, North Dakota, places like that. It's really, really devastating them.
BENNETT: You could say that they're almost in a depression.
GOODMAN: Yes, actually a week ago I was giving a speech in Odessa, Texas. And just to give you a story or two, two years ago the population of Midland-Odessa, which they call the Petroplex there, was 300,000, and it's now 250,000. They've lost 50,000 people in two years. They had these so-called man camps, where there's no place to put people. The same thing was true in North Dakota. They were telling a story down there. They said the Motel 6 was charging $150 a night, and the Holiday Inn Express was $300 a night two years ago; now it's $20 a night. So that's a personal experience there. And when you go in from the airport to the main town of Odessa, there's this huge field of unused drilling rigs, and people were telling me each of those drilling rigs is about $50 million, and there was at least 100 of them out there. So I saw it with my own eyes a week ago. So that's very deflationary; when prices are falling, it brings down activity and it means things are slower. The reason we don't have inflation is what economists call velocity, meaning how money turns over. In a deflationary environment, people are very cautious and they don't turn their money over very much; they hold onto it. And that's why you don't have inflation there. So you have to, as an investor, react to that. A lot of people are still thinking, 'Oh, inflation's coming,' and all that, so they put money into gold and real estate, maybe. That's not where you want to be. I'll tell you what I'm doing, if that's helpful, Dawn. What I'm doing with my money, as a deflationary hedge, are what are called commercial mortgage bridge loans. There's a website related to that; commercialmortgagebridgeloans.com. And that's a way of earning 6 percent super safely over one year. You get monthly checks, you get your money back at the end of the year, and there's no fees or commissions at all to that.
BENNETT: So what do you mean by super safely? Because you've got a lot of defaults going on in the bond and the mortgage industry, so what are you meaning by super safely?
GOODMAN: Correct. The loan originators that create the commercial mortgage bridge loans, first of all, do very conservative appraisals of the buildings. And these are commercial buildings; apartments, hotels, offices, shopping centers, things like that. They do two appraisals and they lend against the lower one. The maximum they lend against the lower appraisal is 65 percent of the value of the property, so it's called loan to value, or LTV, so it's a big what I call equity cushion. And it's over a one year time frame. And the reason people are borrowing it in the first place is in order to improve the property. I'll just give you a recent example. One that I did was a Hawaiian hotel resort, appraised at 14 million. He borrowed 3 million to fix up the rooms and put in a new restaurant. His cash flow's going to be better after the renovation's done, and he couldn't get a loan from a local Hawaiian bank. That's what's driving this whole thing, is because of the Dodd-Frank regulations, people can't get loans, in the business sector and in the individual sector, so instead, they get a bridge loan. They may pay a total of 10 percent. The loan originator's going to keep 4 percent; you, as the investor, get 6 percent. But that way, that's why there's no fees, because all the fees, in effect, of doing this are paid for by the borrower. So there's a way for you, in a 0 percent environment to get 6 percent super safely over one year. And that's what I've been doing with my money, as the market's been wildly volatile, the stock market. It may be boring, but sometimes boring is not a bad thing. What I would say, the cash and bond part of your portfolio—stock is a different deal—but if you've got cash sitting there earning nothing, a bridge loan's a better way to go. So again, that's a website that could help people: commercialmortgagebridgeloans.com.
BENNETT: When you look at, though, traditional asset classes, stocks aren't really doing that well, and neither are bonds, but commodities are. As we all know, gold's up about 18.81 percent. Silver, platinum.
GOODMAN: Precious metals are up; all the other commodities are not. I mean, oil went from 25 to 35, but it's still down. And copper, natural gas is at an all-time low. I mean, most commodities, other than the precious metals, are depressed by too much supply and not enough demand. Oil's the big one. That's kind of what drives the other ones. We've got Saudi Arabia's pumping like crazy. Even though it doesn't make economic sense, a lot of the US shale projects continue to pump, just to make enough interest to keep to service their loans.
BENNETT: You know what's interesting, though, I did read some research that they think oil—even though it's at 35 right now and it has been at 25—could go as low as 16; did you see that?
GOODMAN: Yes, I've seen somebody saying as low as 10.
GOODMAN: Yeah, but it could-- it did back in-- it has done that in the past. In 1986, it went down to 10. And the big new factor now is that Iran, which had been embargoed, is now bringing oil on, currently about 500,000 barrels a day. They're going to have to invest in their fields a lot, but once they get them going, that could be 2 or 3 million barrels a day, on top of an already glutted market. Literally, there is no place to store oil. All the oil storage tanks are completely filled. The new place to store oil is in tankers, so there's tankers - whatever, 100 of them - of the port of Houston and other places, just literally sitting there with oil, because there's no place to offload it these days. That is a big glut of oil.
BENNETT: Economist Jim Rogers said there's 100 percent chance of a recession here in the United States for 2016, as well as worldwide. What's your forecast?
GOODMAN: I wouldn't say—a recession means an official decline in gross domestic product, and I don't think that's happening. We did have a pretty strong employment report on Friday; 242,000 jobs. So that was pretty good. I mean, the consumer economy's doing decently. It's these eight oil-producing states and so on; those are the ones getting hurt. So I don't think we're going to have a recession in the United States, but I think growth is going to be quite slow. And the political process is part of it; such tremendous uncertainty now, as to what's going to happen on the political front, not only at the presidential level, but how that's going to translate into congress. I think it's highly likely that the Republicans will continue to control the house, no matter what. But there's all kinds of scenarios. I mean, the senate could become more Republican or it could become Democratic. And depending on who gets elected, how are they going to get along with them? For the moment, Dawn, let's just say Trump wins and has a Republican congress. Are they going to cooperate with him? It's a big question, as far as I'm concerned. He's going to be elected over the heads of the Republican Party, and not with their cooperation. It's a very strange situation.
BENNETT: That's right. Jordan, can you tell my Financial Myth Busting listeners how to learn more about what you're up to?
GOODMAN: Sure. So my website is moneyanswers.com. That's what many people call me, America's Money Answers Man. So on that website, first of all, I have a little place you can email me, and I take questions. But I've got a lot of links and websites, videos on about 60 different financial topics, getting out of debt, getting your mortgages paid off, insurance, all kinds of things, and like the commercial mortgage bridge loans I talked about, as well. There's a lot of things that people have not learned about, in school or any place else, and this is what I've been doing for 35 years, at Money Magazine and NBC and all these books and so on. So I love to help people with their personal financial questions. I'm glad to take them at moneyanswers.com.
BENNETT: Jordan Goodman, thanks for being on Financial Myth Busting.
GOODMAN: Thanks so much, Dawn. I appreciate it.
For over a quarter century, the experienced advisors of Bennett Group Financial Services, LLC have been successfully guiding clients through the complexities of wealth management. Bennett Group Financial Services provides individual investors, corporations and foundations with holistic investment strategies using unique portfolio solutions across a breadth of asset classes. Our unique vision and insight into market trends makes Bennett Group Financial Services a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to our highly regarded weekly talk radio program - Financial Mythbusting. Through attentive service and prudent, thoughtful advice, Bennett Group Financial Services, LLC strives to consistently provide its clients with the highest quality of guidance and personalized service available.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.