¶ Financial Crisis
You and I are told increasingly we have to choose between a left or right . Well , I'd like to suggest there is no such thing as a left or right . There's only an up or down . This is the no Doubt About it . Podcast . No Doubt About it , and now your hosts Kristi and Mark Runcani . Happy Thursday .
Yeah , it's Thursday . It's Thursday , it feels like a Thursday .
It does . It feels like a Friday . It feels like a Friday , quite frankly .
I mean , not that we want to bore everybody , but we just want to give a quick update . We still have , do not ? We have ice cold bath showers .
Well , I do want to apologize to our guests today . Paul Horvath , first time you've been on the show and we have not showered in days . And we are . We have got you stuck .
They've just been freezing .
Well , yeah , there's a few body parts . You're just like you know what it's not happening on this shower .
It's a good thing I didn't have to take a shower because I don't do well with culture .
You would not enjoy what we are , what we are dealing with , but we want to thank you for coming out and we I want to have you on knowing you for a while and you're a guy who who founded Orchard Global , which we'll get into what Orchard Global is in a second , but you know you've got a serious company when at the beginning of the interview I have to say
the views of Paul Horvath do not necessarily represent Orchard Global , but I am used to that because Christy often says that my views do not represent the Ron Kedde family .
This is very true , yeah .
So this is we're so thankful you're here .
Well , I don't know how serious our company is , but we take ourselves pretty serious .
Yeah , no no well , I think , I think you should , and so let's , let's , let's get into a little bit about about your past , so people understand why we're talking here . You're a New Mexico guy who grew up here , has real ties to the state , ended up going out and founding a financial firm which which does a lot of different things which we'll get into here .
But I want to start by having you kind of explain your history in New Mexico and you know your daughter goes to school here now , so you so you're back pretty regularly Talk to me a little bit about you know where you are now and your connections to the state .
Well , first , of all , mark and Christy , thanks for thanks for having me on your podcast . Watch it often . It's always informative and it's usually pretty entertaining .
It's usually . We'll see . Well , it depends . I think it's a game today .
We'll see yeah we'll see . But yeah , you know , I , I grew up here , I went to Alvarado Elementary School , north Valley , proud member of the North Valley of Albuquerque , went to high school here and , like my daughter does now , and you know , after college I went and worked , did my government service at the Federal Reserve .
But I've always kept close ties to the state , my parents . They moved here , I don't know , 50 , 60 years ago . They're still here , bless them . My dad celebrated his 85th birthday last year and we got next month , we got my mom's 85th coming up .
Nice Now , and your dad was , was a Presbyterian forever right , and your mother's teacher , is that right ?
That's right . So my dad to the day . He literally retired 50 years to the day at Presbyterian healthcare systems . So I like to take I like to say that my dad has been taking care of New Mexicans for 50 years . My mom and you're going to have to let me brag about her .
No , no , go for it , let her rip .
So she was a teacher . She was a teacher at Taft Middle School , but actually both my parents are fluent in Spanish , so she actually finished her career at Valley High School , which is in our district , doing English as a second language and that's a pretty interesting way viewpoint to look at . Look at New Mexico through Sure and the bragging part comes in .
She did when teacher of the year once or twice .
Very cool , that's awesome , and so she's a great mom . Yes , absolutely . And so in part of what you do and first of all let's kind of establish one thing here what exactly does ? Well , first of all , your career history a little bit .
You go to the Fed to start things off , and then you end up finding some interesting things out at the Fed that led you to start Orchard Global . So I guess two things what's Orchard Global ? And then what a heck did you learn that made you want to start it ?
But , yeah , what I learned at the Fed and I look , by the way , I think everybody should do a couple years of of government service after they get out of college , because you learn things that you didn't think you were going to learn . But I started at the Fed at an interesting time and very relevant to New Mexico .
I started in the late 80s , early 90s , during what was called the savings and loan crisis , thrift you know mortgage banks .
They were going bankrupt here in New Mexico and Texas , oklahoma , all over , all over the Mountain West , and our job , job number one at the time , was making sure that we recapitalized those banks and those thrish and those savings and loans . Because what my bosses pointed out to me is , if you don't have banks , you don't have lending .
If you don't have lending , you don't have jobs , and if you don't have jobs , you got some pretty big problems .
So that's what I learned at the Fed and that's what we did , but that was , as you said , pretty foundational , because pretty much everything that I've been doing since then is working at banks , with banks , for banks , keeping banks capitalized so they can make loans , so people can have jobs and everybody can win .
I worked at some banks you probably would have heard of JP Morgan and Marilyn but I kind of saw we have this concept called winter is coming . I kind of stole that from Game of Thrones , but in 0607 , it looked to me like winter was coming for the banking system and I had a solution for the banking crisis .
I started Orchard Global and what we do is we work with the biggest banks and their regulators , like my former employer , the Fed , to make sure that they have the capital that they need so we can get those loans and those jobs for not only Americans but some of the biggest economies all over the world .
Yeah , I mean it was a little alarming to me . Some of these smaller banks , paul , that we're seeing kind of go under . I mean I was actually . I had accounts at First Republic and so when I heard a couple of days before it might be on shaky ground , I brought up to Mark . I'm like what's happening ? So can you explain a little bit about you ?
Know what's happening when we see smaller banks like that closing their doors , and is it something we need to be looking out for more ? What kind of tips can you give us on that ?
Well , christy , you are absolutely correct to be concerned , and I'm concerned too . You know we have something that we put out we're putting out soon . It's called the Great Divide and it applies not only to banks , it applies to consumers , it applies to corporates and it even applies to governments .
But there is a great divide in this country between the biggest banks . My former employer , jp Morgan they just had their best year ever . It's great to be JP Morgan right now . I think they made $50 billion in income , but not so good if you are a smaller bank . Unfortunately , sadly , silicon Valley Bank , first Republic and Signature these were not outliers .
They look a lot more like the tip of the iceberg than an outlier . So there is a . You talk about concerns and when we look at day-to-day at Orchard Global , we have a real concern that we could be we very well could be on the verge of a pretty significant regional and community banking crisis , and that's a problem not only for my former regulatory friends .
But people forget most of the loans to most of the companies that employ most of the people in states like New Mexico actually come from those regional and those community banks . So if we , my advice to my former employers is be on top of this , because if not , we got big problems nationwide , but we got big problems here in New Mexico .
Yeah . So as you look at that and where you guys are going , what do you tell people right now as far as what to look for it for your average person who's sitting there going okay , I've got my money Bank of Albuquerque , for example , right , I got it at Wells Fargo , or whatever they're doing ?
Are there things we can look for in a broader scale that you would say pay attention to this because it may eventually matter to you , even though it might feel like it might not matter right
¶ Debt, Politics, Economy, and Inflation
now ?
Well , yeah , well , first of all , just to put people at ease a little bit , there's something called FDIC insurance , right , and if you have , you know , up to $250,000 on deposit , which is like almost everybody , whether you're at a big bank or small , your deposits are insured . So you'll be okay .
So you don't , so you didn't have to worry about I'm assuming you're less than $250,000 .
Well , yeah , and I actually took that money out of the count . So when we started hearing a shaky ground , we we just kind of so you were part of the bank run .
way to go . I know I'm part of a bank run .
No , I well , honestly , I don't know enough about banking . I'm not going to act like I'm some sort of financial expert . I basically listen to Fox business or I'll read some things here and there about investing , and you know Mark's made fun of me on the show for my lack of stock investing knowledge .
I might have bought some shares back in the day just on a whim .
Yeah .
We've been a millionaires right now had I helped it in there but Mark talked me out of it . So , you know , I guess I think the real concern here is , paul , is , like Mark said , where do we , where are we lying and where are we lining up ?
You think , as you know , with the economy right now , where should people , people be , or should we be looking at saving more ? Are we panicking more ? Are we pulling money out of certain banks ? Are we just you know , or is this something that's not really going to bubble up for a while ? I mean , I think that's kind of what we're trying to figure out .
Well , it's a good question and and we can , you know , as we get into the , the component parts of the great divide , we can really drill down on some of these things .
But I think there's a principle here that's true for consumers , for people , for banks , for companies and our government , and something we all need to be doing is we all need to be borrowing a lot less , right , and that's the first thing , the first thing we need to do now . It's tough . It's tough .
It's tough because when we can talk about this a little later , because people having ends meet , but first and foremost , the party is over and it's time to start . And then again , this is household budgets and this is federal budgets . It's time to suck it up a little bit , and we got to spend less .
Well , so let's talk about that , because you know , for so long interest rates were so low and a lot of people think you know . You know we start making the argument about debt and if we're especially for us in a political sense , you start looking at things and people's eyes kind of glaze over . What do I care about the debt for ?
But when the interest rates started to explode , it really did affect a lot of different areas . Talk about , just from the government standpoint here , the kind of problem we have now in the respect to how much we're paying on that debt . It's really no different than if you're trying to finance debt at one number and all of a sudden that number skyrockets .
So where's the federal government right now as far as the money they're borrowing and how much it's costing ?
Yeah Well . So the good news , I guess , is the economy , measured in certain ways , is going okay . We can get into this later . It's not going okay for everybody . We can talk about the later . The good news is the economy for now is going okay . The bad news is we're going to talk about credit cards a little later on .
The government is kind of borrowing , it's kind of maxing out on its credit card . You know I'm going to throw some numbers around and these numbers you can get lost in these numbers . So you want to try to bring it , do what New Mexicans do bring it down to earth . We're borrowing right now $3 trillion a year .
It took 286 years for the government to get up to $10 trillion and we're doing a third of that every year . So the national debt is now at . You know , like I said , they know how to borrow and spend like drunken sailors in Washington . Well , they're really drunk right now . So what does that mean ? $34 , $35 trillion ? That's not really a tangible number .
What's more important for the day-to-day is what is the interest expense that the US government has to pay on that debt ? And , mark , because going back to three years , the interest rates were so low it kind of didn't matter how big the debt was , because if you're paying , not even 1% on it , or half a percent , it's okay . Here's the problem .
Interest rates started to go up . That was , you know , my former employer . The Fed started moving Right To deal with inflation . To deal with inflation we can get to that later . What it all meant is , in fiscal year 2022 , the interest on the debt was manageable . It was $120 billion . Last year , 23, . It was $900 billion .
If you believe the CBO estimates , it's going up to $1.5 trillion or to $1.8 trillion Now , to make that a number that we can all kind of get our arms around . $900 trillion that was the US defense budget . Billion , yeah , $900 billion . It's heading towards $900 trillion , yeah , we're getting there . Right now , it says drunken salient .
Yeah , right there .
But for now it's at $900 billion . So that's the US defense budget , which , by the way , is equal to number three through 27 defense budgets in the rest of the world combined . Now that's a concern , but I'll tell you what's a bigger concern and should be a concern for all Americans , all seniors and all New Mexicans .
If we start getting into the 1.2 , 1.5 , 1.8 trillion of debt service , we're not going to be able to pay our bills for Medicare and Social Security , and that's a real problem .
How , then , do so ? When you go to DC and you spend a lot of time talking to politicians because you got to understand policy , you got to understand all this , do they get this Like do they not care ? I mean , trump spent a ton of money , biden's just made that look like nothing , I mean .
So do politicians on either side understand the issues in the middle of the issues that we have ? How do they fully understand where we're at ?
Well , you know , look , I think a lot of them not all of them , not going to call out any names here , but not all of them understand I think they understand it . The question that I would ask if I were you is are they willing to take the tough decisions politically to do something about it ?
Now , orchard global is a business , and in business , what we try to do is we focus on those things we can control . Well , guess what ? This is not an insoluble problem . We're not , you know , some third world country here , although if we keep borrowing , we'll become one .
And so , excuse me , when I look at the things and maybe this is too much of a business approach to how they should run things in Washington let's focus on those things that we can control , because there are things we can do , there are policy things we can do to bring that data under control and to bring those interest rates under control , and they really
obviously spend less . But that's hard politically . But look , the root cause of this is the inflation . The inflation means higher rates and that means higher . So can we do things to bring down inflation ?
Well , so , hold on , you're breaking , yeah . So this is the real question , right , can we pull off the bring down interest rates and can we also bring down inflation ? I've always , you know , when you talk to people , you listen to them . They say it's really hard to do both , you know so .
You raise interest rates to bring down inflation , or inflation goes up because you lower interest rates . So are you saying we could do both ? Could we possibly bring down interest rates and bring down ? Issues as far as inflation goes .
Well , yeah , you know , mark , I think we can . But I want to turn this whole debate in its head a little bit , and that's what we try to do at Archer Global is rotate the axis . It doesn't have to be an either , or so what is inflation ? What is the root cause of a lot of the inflation ? It's energy .
I think there's two things that policymakers , both sides of the aisle , the state and the federal level can do , and it's deregulation and energy policy . And in New Mexico that's a real big deal . So let's look at energy , because oil is the root cause of most inflation . Right now , oil is up at 65 , 75 , $85 a barrel .
Well , guess what US can do something about it . We already are pumping more oil than Saudi Arabia ever has . But you know what ? We can do a lot more . If we can go from 13 and a half million barrels a day to say 15 , 17 , 18 million barrels a day , well , guess what Oil prices would go down .
Now , that may not be great for some of the big oil companies . They'll make a little bit , a few less billions . But if we could have oil go from $85 a barrel to $45 a barrel , we don't need to be talking about inflation . Everybody's getting all excited . Inflation's coming down . Inflation's coming down .
Actually , if you look at this morning's number , they're bouncing back . Yeah , if you look at the drug report .
Which is the headline from the drug report right now , as we have you on right now . Here it is inflation back , higher gas prices . Search .
Bingo , and that's a big part of the key . Well , here's something If oil went from $85 a barrel to $45 a barrel , we could talk not about how much inflation is reducing , but we could actually talk about prices going down , and it's not just at the pump and not just heating your homes .
When oil prices go down , manufacturing is cheaper , and that's something that people in Washington and here in the state can control , we need to adopt . I feel if inflation is what we need to tackle and I think it is then we need to have a more enlightened energy policy .
The other one , of course , is regulation , and that's regulation whether it comes to pipelines , whether it comes to tort reform , whether it comes to there's all kinds of things , and those are the things that , if I were given advice to those folks in Washington , that's what I'd be focusing on .
Well , one thing we've been talking a lot about here when it comes to energy and kind of our kind of a statewide conversation that's happening here , are these EV mandates that I'm sure you've heard of , that are coming down in , I think , 25 , 26 ?
27 is when they'll start .
Okay , well , they'll start so basically mandating a certain percentage of cars being sold here or EVs certain tax , I think , tax incentives if you do drive the EV . What are your thoughts on that ? Do you have an opinion on that ?
Do you think that's something , that number one that the state could handle , or do we have what it takes to do something like that , and will that actually help us economically ?
Yeah , look , christy , it's a really good question and I think , look , I think EVs are great and it's a great American . Elon Musk started it and others have copied it and I like American innovation and that's great .
¶ Challenges and Opportunities for New Mexico
I think there's a time and a place and a context for EVs . Big cities that want I don't know cleaner air and have big population densities , maybe that makes sense to have a certain percentage of be EVs . It's also big cities . People tend to have more money and they can afford them because they're a lot more expensive .
Now , anybody , as you guys know , anybody who knows anything about New Mexico , mexico's a big place .
It's a big state .
It's the size of it's bigger than Poland and it has 2.1 million people and an EV . You know , tell that rancher in Capitán , new Mexico , has to come to the state fair Right , yeah , he or she is running out of juice halfway Exactly . And I don't know . I think that between there's a place . What is it ? Vaughn , new Mexico .
I think it is the longest stretch of road in America without a turn . Yeah , okay .
We've been through Vaughn I don't know how many times , oh yeah absolutely Hundreds of times on the campaign .
And .
I don't know how many chargers you can put out there .
Well , yeah , there's a great diner in Vaughn actually , if you want to check it out . But no , it's true , right , so you're such a . So not only do you not have the infrastructure in place , but you'd have to put the infrastructure in place and then look , money will go where the money goes if they have what you want .
For example , what the case we make on this issue is . And what concerns me the most is one of the things you mentioned , which is the price of your average EV is $55,000 a year . Your average Mexican makes 30 . Right , okay , so there's number one .
Number two if you go and you say 43% of all cars on lots must be EVs , what does that do to the price of a gasoline powered engine car ? It drives it up . So , and if it doesn't drive it up , you're driving people out of state to spend that money .
Well , yeah , I mean , I think that's the issue is that any business or political decision you have to be made you have to make needs to be grounded in reality , cause if it's not , it's not sustainable and it won't happen . You probably , you guys probably know the statistic . If it's , 42 is where we need to get to in two years . Well , where are we now ?
It's like less than a percent , 1% .
Right .
And there's a reason for that . It's not that people here don't like EVs . A it isn't practical . B you kind of nailed it we're a poor state . Now we have some rich resources . Right , we'll get to that in a second , but we're a poor state and median income is around 30,000 and EV is 10 , 11 , 12,000 more than a gas powered car .
We just can't afford it and it's just not practical . So what's gonna happen is if we don't make some changes in this state , you know , forget about the people going out of state , the dealers , right , they're gonna leave . They're gonna line up on the .
Arizona border and the Texas border . If I was a car dealer in New Mexico right now I'd be furious . I would be absolutely furious saying what are you trying to do to us ? And you know Arizona , colorado and Texas will be like , yeah , sure , we'll take your business .
Well , the problem is , first of all , you know , I know some of those car dealers . I went to high school with them and you're right , they're pretty angry , but again trying to think as a policy and thinking for the state . You know , we don't need to change the EV mandate to keep them happy .
We need to change the EV mandate to keep them here , to generate more of jobs here and tax revenues . I don't wanna I mean , you know I love our neighboring states , but I don't wanna see all those you know tax revenues going over there . Let's keep them right here in New Mexico .
I wanna jump into something here and it's a little off topic from what we're talking about , but there's a through line and that is that certain policies can drive people out of the state that we desperately need . You were just talking about car dealers .
We talk all the time about the medical industry and hospitals and , given your dad's history , we can't keep doctors . Paul , if you go in and try to get an appointment to get an MRI , to get something looked at , you're talking about six plus months , because we made it hard to be a doctor in New Mexico .
Yeah , let me jump in here and let me just add this right before this I was on the phone with my doctor and they're trying to get me into a specialist and there is no way I can do it in this state right now . And so they're sitting here saying , Christy , what are the odds that you can leave the state to go find the specialist ?
And we obviously don't want that . And my father and his 50 years here wouldn't , at Presbyterian , wouldn't want that . So very personal story . So my wife she's taller , she's 5'11" Like , she played basketball , volleyball so on . So like a lot of taller people , she has some back issues and so in January she signed up for an MRI .
In April and they called her last week to say sorry , the doctors left the state . Here's your new appointment in August .
Yeah .
And I went to my dad and I went to other of his friends I said what's going on here and they said well , it's a sad state of affairs .
First of all , you have to kind of beg doctors to come here to begin with because we , you know New Mexico , we pay less than other places but some come anyways because they love New Mexico like we do , with all the natural beauty and sunsets and green chili .
But here's a real problem , this amazing stat I found out about specialists , especially because of some of the over-regulation and lack of tort reform in this state . In certain specialties malpractice insurance in New Mexico is three times what it is in California and California is not known as a low-regulation state .
So if again , policy matters , if we don't change the way we do things , you know we're not only gonna drive the car dealers out of the state , we're gonna drive the doctors out of the state and we already are .
Yeah , we are saying that and you talked about that a lot on the campaign . Yeah , there's no doubt .
It was a key and in fact the legislature literally passed a law that made you know that made tort reform so far from you know , whatever gonna do it , they raised the prices so much on being able to ensure yourself as a doctor . They literally had to roll the law back because it was that bad .
So when you see that sort of thing , in knowing how much time you spend other places , there's a variety of things we can do . Number one I think we should pay for education for doctors to come to the state you know , if you wanna come to the state of New Mexico , we'll pay to educate you .
You give us five years and I bet you you give us your career because we create an environment here that people wanna be in .
Well , you know , I think it's a really good idea . And the US , you know , after the war we had something you know called the GI Bill .
Right .
And that was an investment in Americans post-war , and you know what ? It was the best thing that America ever did invest in their people . Well , as you both know , we have a $50 billion sovereign wealth fund and growing , and we have a $3.5 billion budget surplus .
And so I think what we should do and we can tie it to the state , we can say , hey , we got a great medical school here by the way , my father was on faculty there and maybe in research it's not top 10 or top 20 , but in clinical , which is taking care of patients , it bounces around , but it's right up there 8 , 10 , 12 .
So it's a really good school . So you don't have to beg people to come here . You can say , hey , you know what ? Why don't you come to UNM , go to medical school here , we'll pay for it , full ride , make it alone , and if you stay here for five years afterwards or seven years afterwards , we'll forgive the loan . That's right .
I think that's a fantastic thing , cause look , that's the other thing , new Mexico . We're talking about all the problems , but New Mexico has such great resources . It's beautiful , we love it . It has great natural resources , not only oil and gas . We should talk about some of the other alternatives that are here .
But you know I don't know if you guys know this New Mexico has more PhDs per capita than any other state in the union . Now , a lot of that is nuclear scientists is at Los Alamos and Sandia , but a lot of it is is the good and great at Presbyterian St Joseph's .
And so , yes , but what I like about your idea , Mark , is these are not pie in the sky ideas and , by the way , this doesn't have to be political .
No , exactly this is just good common sense stuff . Everybody needs a good doctor . Everybody needs a specialist from time to time , and especially as a state that a lot of folks want to retire in .
Well , we should be the retiring , you know , we should be that state Right along with other like .
We've been talking about lots of shows about our energy sources here and then we should be developing those
¶ Family Budget in New Mexico
. But I want to get back a little bit , if we can , to talking about the economy , the setup of the economy . People are kind of all over the map . Some people , I think , are tuning out because it's either something they don't understand or they don't want to understand .
There's other folks who are saying , hey , is this a good time to sell my house and move and change things up ? And I just think what's your advice ? For we have a lot of moms that listen to this show a lot . So they're usually no offense , mark , but they're usually in charge of the family budget , which that's what I do , right ?
And so sometimes , when we're trying to figure out , like , hey , this is a good time to buy a new car , this is a good time to sell a car , this is a good time to pay off credit card debt , this is a good you know , what advice would you give to the people out there in New Mexico who are in charge of the family planning ?
You see a real interesting dichotomy going on , not only in the state but nationwide . You have some folks saying the economy is great , it's the best it's ever been , but that's kind of out of touch with all the polling that says , well , wait a second .
No , we don't think it's that's ever been , and this is the essence of the consumer version of the Great Divide . So by traditional measures , the economy is doing okay Growth , growth at over 3% , inflation maybe going back up at under 4% and unemployment under 44% . That sounds pretty good On paper On paper . Now there's a problem .
It's all on borrowed time , but for now it's pretty good . The problem is , the problem is is that too much of the fruits of the benefits of this economy are accruing to the top . You know one or 10 or 20% .
It really , really stinks to be in the bottom 60 or 70 percent of income earners in this country , and we have a disproportionately large share here in New Mexico . Now , the source of this is pretty simple . It's what we were talking about earlier . It's that inflation , everything , no matter what the national statistics say about GDP or whatever .
We all know this , every mom knows this , everybody who runs a budget . Everything is that matters Food , energy , housing is 20 to 30 percent more expensive than it was three years ago , and wages haven't kept pace . Now I don't need to go to the National Bureau of Economic Statistics and know that .
There's one thing and I don't know you might have a slide on this , but there's one thing that tells me all we need to know about how badly households are hurting , and that is credit card debt . Right Now , credit card debt last year alone went up by four . There it is . It went up by four hundred . It went up by four hundred billion dollars .
Yeah , you can see it , we've got it . We've got it . Just for those of you who are listening , got a graph up just showing the credit card debt across the country is skyrocketed , in fact , and is it levels now that , well , this is the scary part .
Four hundred billion dollars . What does that mean ? It's a four . It was a 42 percent increase , and the problem is is the rate on that ? With these higher rates , it's above 20 percent . Now I've never met a consumer , a company or a country that can handle a 25 percent interest rate . But let's talk about why that's happening .
And maybe I'm a little bit of an econ geek so I pay closer attention to this , but I was at the grocery store . Cardin of eggs used to be two dollars , fifty Right , and it's four dollars . Yeah , Okay . A gallon of milk used to be three dollars and now it's four dollars . That's a huge increase in a year or two . And you know , you , I've seen it .
It was a terrible story . Mom with her two kids standing there , she had to make a decision Do I feed my kids or do I put on more credit card debt ? Well , guess what ? She's putting on more credit card debt .
So let's get , let's tie that into your point . And why this benefits the top income earner so much is because when you don't have the money to pay for it right on the spot , you're then getting hit with rates that keep you down Right , I mean in all reality .
And people we , sometimes us in the business world and even some politicians do this we talk about rates , and what does it all mean ? What it means is that mom , instead of paying a hundred dollars for those groceries , well , she's going to borrow a hundred dollars and you know , let's say she borrows her for a year .
A 25% rate means she didn't pay a hundred dollars , which is already , you know , too high .
Too high , it was 70, .
you know , what she just did without realizing it is she just paid a hundred and 25 dollars for that . So actually what , what ? What most consumers are facing is not things being 20 or 30% more . After you put in that credit card debt , the actual cost to that mom is , in the last two or three years , their grocery bill has doubled .
That's why you can have two things can be true . The aggregate statistics can look good , but the polling around what people think of the economy is not good and , going back to my policy maker days at the Fed , that is not sustainable and that is is not good for the people in New Mexico .
Right , and so . So then you start looking at okay , what can can happen in the state . So if you look at the numbers in this state , the tax burden of the people of the state of New Mexico is incredibly high , especially given the income that we have in the state of New Mexico .
It's basically a flat tax . Now , right , well , yeah .
So if you're looking at an income tax , if you make I believe it's $24,000 or more , you're at a 5% income tax rate . If you make 5 million , you're at like 5.9 . So basically , you have a flat tax right Across the board here .
So when you look at those numbers and you realize that we have some certain issues and you mentioned it all the time there are certain things you can affect , there are certain things you cannot . Well , one thing you could do as a state is you could say wait a minute , let's bring down that income tax . I would say you'd bring it down to zero .
But all right , you can bring it down , maybe not even that low . Could that be a way to help put more money in people's pockets ?
Yeah , absolutely . Again , you always have to put yourself . When I'm sitting there , either when I'm watching a sports game I used to play soccer or instead of kind of bitching and moaning and saying you should do this , I always think what would I do for in that position ? Well , I think the same thing is . I think we should do the same thing with politics .
We can't just bitch and moan . We have to come up with solutions . So I'll tell you what if I were a political leader in this state or in this country , I would do exactly what you just said , mark . I'd focus on those things that we can control . Now there's two things . There's two concepts you brought up in that taxation , and I wanna hit both of them .
One is that it's kind of a flat tax . Right , federal income tax and other taxes are graduated so wealthy people may pay more . Because you don't wanna overburden the middle class , the first thing you could do is you could graduate it . However , christy , you mentioned something retirees .
Well , I can think of a lot of good reasons why people would wanna retire here . Tax code is not one of them . To that point , it would be great and , given the oil and gas revenues , we probably could go to a zero tax rate . But I have a different idea . Let's walk before we crawl .
We don't have to compete against Texas , but look what Arizona's done All but the highest earners . What they've said is and that is retirement , big time retirement committee they brought it down to manageable levels . Sorry , they brought it down to 2.5% . Now here's the deal , and I think you could get both sides of the aisle on this .
What if I could tell you that if you brought the tax no matter how much you made from 5% down to 2.5% , but the actual tax revenues for the states would go up , so that we would have more money to spend on services ? Well , what's wrong with that idea ?
It's a great idea , but I totally disagree with it . With the , you posit the theory that we could get both sides to agree to it , because I think too often we have legislators in Santa Fe , unfortunately , that look at things and they look at the tax code as a measure of fairness for some reason , versus lifting everybody up .
I think it's very hard to get them to agree to anything . Paul , we have a three and a half billion dollar surplus this year . Did we see one tax cut ?
No , no , you know , Mark , you're a lot closer to politics than I am , but I'm a businessman and I like to live in the world of reality .
Right well what .
Here's what I would do if I were calling the shots , and I would try to appeal to everybody , not just one side or the other . I would say , like , let's bring down that tax burden to help the middle class and in so doing we can get more retirees to come here than Arizona or Texas or whatever , and in so doing our tax revenues would go up .
And I'm sorry if and maybe I'm being naive , but I think if you educate , but I love it .
I hope it's true .
You know if you , I have advice for you . If you're gonna start a company and have it successful , you always have to be a half folk , or actually ? My business partner says that I'm seven aceful . So you know what I'm seven aceful on this one . I think that we can get our folks up in Santa Fe to understand that .
Bringing taxes down for everybody , but especially the middle class , and increasing revenues who's against that ?
Nobody's against that , it just this is one of my biggest arguments in the state is we have created a wildly wealthy government where that benefit has not been shared with the people . I mean , it's just that simple .
It was part of Mark's campaign and I agree with everything you're saying .
I really do , and I think where we end up you know , maybe on two different roads is you definitely are logical about it and you're optimistic about it Now , as that's been borne out , and looking at the legislature , maybe maybe not . I know that's not what you're in the middle of , but it is an interesting idea . And I wanna hit one other thing here .
Maybe we could have some financial advice from somebody like Paul to talk to our legislators , to like say hey , here's the brass tacks .
Yeah , we'll lock you in a room with them and we're not gonna open the door until you're finished with them . That's right .
Well , you joke , but I , I in high school I actually did youth in government and we went up into the roundhouse , Nice and our governor , because we had a governor we couldn't get along . I was in the Senate and other folks in the house oh , that's fine . You know what she did . She locked us in the roundhouse until we got it done .
Yeah , she does . That's a cute , you know what ?
Call me an optimist , but if I did it in high school in that roundhouse I'm sure we could do it All right , all right , I love it , I love it .
I love the thought on it . Let's talk a little bit about , I think , politics a little bit , in the respect that we were watching the state of the union and watching Biden work his way through the state and we won't get into what we thought of Biden's state of the union address , but he didn't go out of promises . Yeah .
So what's interesting is , from a guy like you who looks at the movement of bigger money and banks in a broader sense , when you see where we're going and I know , having followed you on Twitter and having spoken to you about these things there's real concern that 25 , 26 down the road , we could be looking at some significant economic headwinds .
If that is the case , and then you sit there and listen to Biden say I wanna raise taxes , at the same time that the Trump tax cuts would come off the board , how seriously do you take that ? Do you look at it and you say , oh boy , let's start reallocating what we're doing ?
Or do you say , well , he may be saying this , but he may not be able to pull it off . So how do you balance those two ?
Well , yeah , I mean what intelligent business does , and I like to think that at Orchard Global , we do intelligent business versus the not . We don't take sides , we don't get wrapped up in the emotion of the politics .
We recognize that politicians feel the need to say what they think their base or their people want , and I suppose that's probably what he was doing there , but no , I don't think inherent in any business decision
¶ Tax Policies and Financial Advice
. You are playing the odds , and so certainly most folks that I talk to and look at it this way in order for significant tax increases to happen , you would have to have a Democratic president Could happen . I think that's kind of a toss up . It pulls the ball over the place You'd need to have a Democratic house .
Again could happen , but you would also need to have a Democratic seat . So you would need to have a Democratic Senate . Now it's possible , but I don't think it's very likely and most of my friends , democrats and Republicans in the business world , don't think it's likely . And you guys know the numbers , but maybe not all of your listeners do .
Right now there are 49 Republican senators with mansion retiring . It's pretty much 50 . So if the president goes , trump wins , then you're done , you got your Senate . There are really 10 competitive races out there .
We all know the Pennsylvania is pretty competitive , ohio's pretty competitive and Montana's pretty competitive and that's interesting because that's where Trump won by 20 points .
So I know Senator Tester's pretty popular there , but there's some competitive races out there and there's more , and you got to think that at least one of those , if not more , could go Republican .
So if that happens , there's a lot of , if you have a Republican Senate and a Democrat House and president , there's a lot of things that are gonna happen , but taxes going up isn't one of them . So for right now , the business community isn't sort of freaking out on big taxes . I'll tell you what they are focused on and what we are focused on .
There's something a little bit more subtle . The tax reform of 2017 , like yeah , the Trump tax cuts . The Trump tax cuts . Some call it the Paul Ryan tax cuts , some call it the Mitch McConnell the tax reform of 2017 , the way they got that passed is those were not forever tax cuts . They go away , and they go away at the end of 2025 .
People call it the fiscal cliff in Washington . Yeah , now raising taxes in the middle of a recession is a bad idea , and for that and that would be effectively a tax raise .
Bingo , if it's on sense .
If you get a divided Congress , those tax cuts are unlikely to be continued . Now , to show that this isn't always have to be as quite as political as some people make it , President Obama came in and he came in in one of the first things he did .
He said he got Bill Clinton , he got President by his side and he went to everybody and he said you know what we need to do ? We're in the middle of a financial crisis . And he continued . He led his party in continuing . He extended the so-called Bush tax cuts by two years . So that's good tax policy .
And so if the no matter who's president or Congress , what probably needs to happen is , if we wanna have the soft landing that everybody's really talking about , we need to extend those tax cuts , Cause what we don't wanna do is we don't wanna raise taxes when things are getting worse , Cause that could be a thing that could take what would be a recession or a
soft landing and turn it into a very hard landing , and nobody on either side of the aisle wants that .
Yeah , okay , and just going back a little bit , 2008 obviously was pretty hard on , say , the housing market , as we experienced personally on that situation , you're saying , if I'm hearing you correctly , 25 and 26 are something we definitely need to keep our eyes on . You're keeping an eye on it .
As far as being in business and being in banking , what advice do you give to the everyday person looking at where do we invest ? Where should we keep our money ? Where should we be concerned or just have our eyes open ?
Yeah , signs of trouble is always one of those things too .
Yeah , like is there a red flag ?
Yeah , cause we always we came close to being able to go to ATMs and nothing coming out , right , I mean . So is there anything you're looking ? You could tell exactly what Chris was saying , like that , that one person , he'd look at this stuff . Keep an eye on this stuff .
Well , yeah , I mean , you know , or my lawyers tell me , be careful giving out advice . But there's a couple of things . What I like to do is I watch really closely and , by the way , we're not stock people , we're more kind of lender bank people , right , right , but you're still a businessman , so yeah , I mean the people who know the most .
What are they doing ? I noticed that Jamie Dimon just sold 150 million a stock and Elon Musk was selling stock and Zuckerberg is selling stock Right .
Bezos is selling stock .
Bezos is selling stock . By the way , you know , he's from here , yeah , yeah . What do they know that we don't know ? Right , you know we don't call the stock market , we're definitely not giving advice on it . But if they're selling , maybe it's time to take some profits . Now what do you do with those profits ?
You asked a question and if I'm that homemaker , I'm that woman who's running the budgets yeah , any debt that you can pay down at these high rates . If you're locked into a 30 year mortgage that you got from First Republic at 2.5% , that's a good thing . Just keep that out there , okay , good Cause . You're borrowing at 2% and you got inflation going at 49% .
That's a good financial situation . Here's what's not a good financial situation . If you have any money on a credit card at 10 , 15 , 20 , 25% , pay it down immediately . That you should do , no matter if there's any cash out there . That's what you should do .
So if you have a home equity line , for example , and you know you've got that home equity line at a lower number , would you advise that paying that down Like , say , pay down a credit card with a home equity line with a number significantly lower ?
Yeah , and you know , obviously if you borrow against your house , you put your house at risk , cause you gotta be careful there . However , if you can borrow on a home equity line at four or five or 6% and pay down a credit card at 24 or 25 , 26% , that's something that even the lawyers will be able to get behind that .
We can get behind that , yeah .
So obviously I think it's . The question is is try not to add debt . Would you say that Like stay away from adding bad debt ?
This is the wrong time to add any debt . You know , if you could go back in time and borrow two or three years ago a 2.5% . That would be great , but unless you have a time machine , and you know it could be .
In this it looks like a time machine , but , in all seriousness , to the extent that you have high interest debt out there , you know , wait another year or two to buy that car , wait another year or two to go on that vacation .
Keep the liquidity , pay down the high interest at that now , and that's the best thing , it's the best piece of advice that , well , first of all , you know we should all take as consumers . But you know what ? Those drunken sailors in Washington ? They need to start paying that as well , right , right .
You talk to all different sorts of people . You end up in rooms with people where you're trying to convince somebody sitting across hey , invest with us . And it's funny , it reminds me a little bit of campaigning . And when you sit down with people you wanna get their support . Some meetings you get into and you're off to the races .
You know you're in , they wanna invest with you , you wanna help them . And then other meetings you're in the middle of it and you're like man , this is not going like I thought it was gonna go .
When you end up in those meetings and again I'm looking for advice here that maybe can go across a bunch of different platforms when you're in the middle of a meeting , going this isn't working , I gotta change direction . Do you ever go to approach that you use to try to change the trajectory of something that isn't going your way ?
Yes , it is , and it ties right back to New Mexico .
So I grew up right on the rebrand , right in the banks of the Rio Grande , and one of the things I love about this part of the country , in this state , is , in addition to that green chili and those sunset and that fresh air , we've got a lot of beautiful open spaces here and when I was growing up here and high school is a tough time- I got three
daughters , it's even tougher for them . But I had my fair share of kind of things I had to get through in high school , like all of us , and whenever I had any kind of problem that I couldn't solve , I'd take a walk right there on the banks of the Rio Grande and somehow those problems would get solved .
And , mark and Christy , I'll tell you , you go out back out into the big bad world of New York or London or Tokyo and you see all that competition and there's some excitement out there . You see a bunch of people .
I kind of feel like I have an advantage over them because I'm from New Mexico and they're getting confused and they're like what's my person's , the left doing and the right doing ?
If you're out here in this open space , and whether you're religious and you speak or meditate on God , or if you live in New Mexico , you don't have to be religious to see God and the beauty out there and that puller north , if you will , that meditation , if I'm in a tough situation I can't get myself out of .
I just kind of go back to those walks that I still take on the banks of the Rio Grande . So that's number one and that's my New Mexico edge and I take that into battle with me .
But I think the other thing and I think this is good advice that gets far outside of New Mexico , us politics we tend I tend to surround myself with people who you know , feed on the ground , know who they are , know who they're not , and whether it's in a family situation , your choice of partner in a company situation and I'd argued we should do this at the
political level but surround yourself with people who feel comfortable telling you when you're getting it wrong , because the families that do that , the people that do that and the companies that do that , well , a , those are the people I wanna be around , but those are some of the most successful and fulfilling , happy families out there .
And again , I think that here in New Mexico we do a lot more of that than in a lot of other places .
Yeah , good communication , yeah , yeah , we call ourselves the great communicators , don't we ? Mark ?
One of us is , the other just screams at the clouds .
Yeah , it's okay . I forgive you when you start screaming , it's okay .
That's her version of meditation . For me it's the real grand for her . It's screaming and you guys got a pretty good view of the mountains . No , it's okay .
So let's
¶ Challenges and Opportunities in New Mexico
wrap with that . One other thing that when you go around to everywhere that you see , and you go all over the world , when I've spoken to you in various times , and it's always weird your guys end up calling you . You're like , oh , it's six or it's 3 am and I'm calling you at two in the afternoon . I don't know where you are .
And it's like two days later . Yeah well , that's a good point . That's a good point .
You're like , oh , how was New Year's ? It was four days ago where you are . But anyway . So when you talk to people about this state and then when you look at what this state is versus what it could be , all the things going for us , where do you think we are and do you have ? You're an optimistic guy , as you say . So where do you think we are ?
And , in your ideal world , where could we go if we do things right ?
Well , there is a good news and a bad news story . I am my partner's right , I am seven ace full and I'm always gonna be an optimist for New Mexico's because we have so much going for us . And I have been coming back here a lot , well , always .
But now that my daughter is going to actually the same high school I went to , so I've been coming here a lot more and I'll tell you guys , you can tell I'm all raw , raw New Mexico and , as much as I love this day , in the last two years , spending more time here makes me sad . Something's happened here .
It's like a dark cloud has descended upon the state and I , you know , and it , you know , I'm so proud of New Mexico and I kind of tell people how much I love the place and they're like , really Like , how's that crime going ? And you know it pains me .
It pains me with everything that we have going for us as a state the people , the natural resources , the beauty , the balance sheet . You know the budget surplus you talked about . You guys know these statistics , but we're number 51 . By the way , 51 , I thought there was 50 states .
We're number 51 . We had a DC in Paul . Yeah , a DC got out of it in there . If we're worse than DC .
We got a lot of improvement If we're 51 in education . We're top three , top five in unemployment . We're top three in crime too , I have three daughters . Albuquerque should not be one of the three rape capitals of the country . That's wrong . And I'll tell you what's even worse . My mom's a teacher and , again , she did English as a second language .
She saw it all . Unbelievable statistic 24% of all students in New Mexico are living in poverty , and you know what ? If we were some other state , maybe we would just have to live with that , but we have the resources , we have the budget surplus , we have the sovereign wealth fund .
You know , maybe it takes lateral thinking , ideas like we're talking with the doctors . You know we need more people like my father coming here and staying your specialists . I'll tell you what , though we need more people in this state like my mother , who , whether it's in Espanol or in English or whatever language that they speak , we've got to get those 24% .
I want to see 0% kids living in poverty , and I think that it gets back to it . In business , you focus on those things you can control and you can't , and some stuff you can't , but I think that we've got to find a way to pull together and not make it super political Left , right , center , all ages . We can do this .
We have the resources to it , we have the people to do it and , with the right kind of political and business will , we can make this place more enchanted . Yeah , yeah yeah .
No doubt . Okay , well , thanks for coming in . I appreciate it . I mean , you know .
Thank you guys . I'm just glad that your dog scout didn't attack us . No , no , no yeah .
She gave you the business . I do have to say it one more time that all your views here are not what Gord True Global thinks I have to . Hey , I did it . I did my part .
You did the disclaimer . Yeah , we did the disclaimer .
And I'm glad that you're taking us as seriously as we take ourselves .
Well , don't look at Mark to do that for you .
I don't take much seriously .
Yeah , I know , paul , we appreciate it .
And if you want to check out their website , wordtruglobal , if you want to see what you guys do , you know , hey , check it out . There you go . But thanks for taking the time . We appreciate it . We'll catch up with you again as we go down the road .
Talk more about the economy , talk more about what's going on here in New Mexico , but you're one of those people I just wanted to have on because you're somebody who gets out there and is built something really cool and , being from New Mexico , I just think it's a tribute to what you've done , what your family's done , and this is the kind of thing the more
opportunity we can provide for people , the better off we're all gonna be . So we appreciate you coming in . No thanks , you both for having me . Of course , all right , and we'll catch you on Monday next episode , or you're not gonna believe what I've got coming up in the next episode .
Oh geez , are you gonna promise things and deliver , or are you gonna be ?
invited . No , I usually don't deliver .
Sorry , oh easy , we're not getting political in this episode Christy Okay , sorry , paul , is not at all in line with what I think , so I'm sorry .
I'm sorry about that . All right , we'll see you next time .
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