In this week’s episode of Retire in Texas, Darryl Lyons, CEO and Co-Founder of PAX Financial Group, tackles the growing complexity of today’s world and its impact on the global economy, investment strategies, and everyday decisions. Drawing comparisons to the simplicity of the 1950s, Darryl examines how technological advancements, trade policies, and consumer behaviors have evolved and how embracing complexity can lead to better financial outcomes.
Key highlights of the episode include:
- The importance of developing tolerance for complexity in a rapidly changing world.
- How tariffs, global trade, and interconnected supply chains shape economic trends.
- Insights into the Consumer Confidence Index and what declining numbers signal about the economy.
- Why diversification remains crucial in managing risk during uncertain times.
- Opportunities for innovation and strategic investment in a complex global market.
- Practical advice for overcoming fear and making sound financial decisions in a multifaceted environment.
To learn more and explore how PAX Financial Group can help you navigate economic challenges, visit http://www.PAXFinancialGroup.com. If you found this episode helpful, share it with someone who might benefit!
Transcript:
Hey, this is Darryl Lyons, Co-Founder of PAX Financial Group, and you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. Okay, so I’m asking myself a question and it’s a little deep, so hang with me.
But do I have an intolerance for the complex? Do we have an intolerance for the complex. So let me explain. And I’m actually going to make it relevant to what’s going on in the world today. Like, we kind of yearn for this 1950s, which I love, the 1950s. If you know me, I enjoy that era like the cars were cool.
The music is cool. The sports, I think of Johnny Unitas and just that whole era was just kind of special. I know, I told a friend that, how much I was endeared to the 1950s, and he’s like, well, it wasn’t good for everyone. And so, but, you know, there is this aura of the 1950s that we yearn for in entertainment.
It’s just gotten more complex, you know, think about it like no longer Jackie Gleason. Now we’ve got Facebook and Instagram Reels. Who would have thought our automobiles are certainly more complex. I used to work on my car. I remember in high school I had a truck; I think it was an 82 GMC truck, an awesome single cab. And I worked on it because I blew the engine and I took the whole thing apart, tagged all the components to put it back together.
And I looked at it. I go, I have no idea how to put this thing back together. Ended up selling as is and moved on. But you know, to a certain degree I could work on cars now. Like, I don’t have a clue. Like the computers that are associated with these vehicles are very difficult. And even our food, our food is more complex now.
It’s like organic. You do that. What do you call that? Hydroponic is where, you know, they grow, vegetables and just water. They’ve got a whole facility down at Brook City Base now and a bunch of choices. Of course, food has got more complex. Everything’s gotten more complex. And that does not exclude the global economy in in the way we trade with each other and the stuff that we buy from China or Mexico and the stuff that they sell back to us.
And, you know, it’s just not as clean anymore. So, you think, okay, I’m going to buy a car from Germany. But the components of those vehicles might be, some of them might be manufactured in the United States, and that could include chips that are in Taiwan or whatever. It’s just all interconnected. So, it is more complex. And so, whenever we see this complexity, oftentimes we get very nervous and it’s fine to get nervous.
I mean, that’s just like kind of a normal reaction. It’s when we respond to that nervousness on the very basis of complexity alone that is problematic. So, for example, right now, here’s a quote. This might put it in perspective. The president of a brokerage and logistics advisory firm, Krieger Worldwide in Los Angeles, Robert Krieger, he told Bloomberg.
This is a quote that I think reflects the sentiment right now. We’re still in the freak out period. We’re still in the freakout period. And it’s because the global trade is becoming a little bit more complex with the new administration, specifically with tariffs. And that’s not just, you know, Robert Krieger saying this. And of course, he’s a global logistics firm, so he’s got more skin in the game.
But in general, the consumer has gotten a little bit nervous too. And that’s reflected by something called the Consumer Confidence Index. So on December 23rd of 2024, the Conference board, came out with their index and it declined. And it was a pretty significant decline. It went down to 81.1. And when it hits at about 80, that is supposed to be, you know, those these things are always never 100% certainty, but about 80 signals a recession, like the consumer is just starting to get nervous.
And at that level of nervousness, they start to make some decisions that constrict the economy, like, you know, I’m not going to buy that house because I want to wait to see how things settle out. Those types of things start to happen. And they say about that 80 mark on the consumer confidence index is when people start to react, to their butterflies in the stomach.
They’re less optimistic about business. They, they’re concerned about their employment. It’s concerned about fewer jobs, of course, politics. And then we do talk a lot now about tariffs. And about half of the people in the world believe that tariffs are just going to make things more expensive. Like we’re not dealing with enough with health care. And, you know, the food inflation we’ve been dealing with and insurance and everything else.
So, there’s legitimate concerns. And I don’t discount those. Of course, when it comes to investing, many people think the stock market is going to struggle to be higher. The fed chair Powell you’ve heard of him before. I’ve talked about him. He used some this word and it’s interesting. Whenever they listen to these guys, the fed chairman, they actually go through the transcripts and identify words that might, lead them to believe, that the Federal Reserve might do something down the road.
So, they’re looking for clues. And one of the clues, they always look when the Federal Reserve chairman is talking, is the word uncertain or some version of the word uncertain. And so, they looked at, Chairman Powell’s message just recently, and there was a lot of uncertain, a lot of times that the word uncertain was used quite a bit.
He even used the phrase, he said this. So, this is not implicit. This was explicit. He said, it feels like we’re walking into a dark room full of furniture right now. So, there is a lot of uncertainty. And I get that, and the uncertainty is usually there’s a lot of reasons, but I really want to focus in on the uncertainty.
That’s associated with complexity. And the reality is, oftentimes when we hit this and I kind of like to tease out this idea of, these cognitive challenges that we have and making sure that we’re not, making decisions based on some of these things that exist in our marketplace specifically, this time, I want to talk about the complexity and how sometimes just the idea of complexity can cause us to make a decision or not make a decision.
And what I’m suggesting to you today is that we can’t we live in a world of complexity today. And so, that to a certain degree has to be embraced and that risk has to be managed. And we have a bias. We long for this simplicity. We long for those 1950s. Oz Guinness in his book, he wrote a book called Fit Bodies, Fat Minds, it is a good book. He calls this primitivism. The love of making America great again. And I’m with you. I want to make America great again. But there’s something about maybe some people believe that is, you know, going back to the 50s and that’s just not possible anymore.
Simple is, you know, some somewhat of an illusion. And as much as I’d love it, the reality is here we are. And we’re going to remain multifaceted and complex and often misunderstood in all of this. And we have to find a way to avoid this impatience and manage all of our, even our own expectations and develop a degree of tolerance for the complex.
We have to develop a degree of tolerance for the complex. The idea, though, is that maybe we don’t understand everything in that, and we can accept that. But the idea and this goes back to basic principles, is that how do we, in the degree of complexity, how do we reduce maybe the catastrophic risk. We often call that tail risk or something that might blow up in our face.
And believe it or not, that’s just diversification. So, if I go back to Robert Krieger, he said, that he’s in a freakout period. Well, that’s because his business is in logistics, buying and selling stuff. Internationally, rightfully so. He’s in a concentrated business that is going to have some significant uncertainty in the near future. But if you had invested all your money in logistics, then you have a lot of reason to be nervous.
But most of us diversified, so we’re going to have when we look at this, when we navigate through this economy as people are freaking out, we’re going to look at our portfolios and we’re going to see some winners and some losers. But generally speaking, this is par for the course. That’s how the whole world works. There’s going to be ebbs and flows of businesses that are going to navigate through this.
And so I’m confident that through diversification, we’ll get on the other side of this complexity. We just have to continue. And I know you hear me saying this all the time, staying focused on the long term and the tariff revenue or the tariff rhetoric is going to continue to elevate. You know, we’re going to have 10% on tariff on Chinese products, or 60%, 25% from Canada and Mexico.
What’s the retaliation? What’s the impact on currencies? What are the indirect consequences? A lot of these companies are already thinking about how to resolve these challenges. Like how do I move factories, reduce price, increase volume? I mean, if I’m thinking, like, okay, I want to be, I want to make money off of this complexity, I’m going to, you know, maybe invest in software business that can manage the compliance and logistical issues of this.
What I’m saying is there’s opportunistic people in, in this complexity that are going to win, and there’s going to be some people that are going to be challenged, but they’re already thinking deeply about this. And so, what I’ve seen, what I know to be true is that as we navigate the global complexities that exist, we have a pretty good way of and I say we, the collective markets, have a good way of finding their way through this and working through this.
If you’re not familiar with tariffs, there’s a lot of history here. Some of them and I’m not going to get into all of that. But you can look at plenty of there’s plenty of talk right now on tariffs and interesting history and of course, bias in a lot of the dialog and perspectives. And I really don’t have a right or wrong here.
I think in certain scenarios I can definitely see the merits of tariffs. And I definitely where what I do know is that we’ve gotten a raw deal on a lot of these, a lot of these trade agreements. I know that, for example, there’s 138 countries that charge higher tariffs on US goods than we charge them.
And so it’s like, what, who made these deals and why do we have them? And I believe that they are rooted in maybe a not make America great agenda. And, you know, kind of a global agenda versus, you know, make America great. So, there’s a lot of raw deals out there that need to be gotten right.
So, I could see the merit for that. And to what degree, and who I’m not sure there’s they also say protectionism is a is an element of that like protecting our manufacturing. I get some of that. And just getting a fair shake in an economy and resetting the negotiations, I think is extremely healthy. But again, tariffs are you know, there’s complexity to it.
There was an article in the Hill, and I’ll put a link to this that that’s a pretty good example. It says suppose China offers a tractor that is equal in quality to US made tractors and is 1% cheaper after shipping costs with no tariff. US tractor factories will close. I mean, people won’t buy them. And so, then the workers will lose their jobs, right.
And some of these workers will require government assistance, unemployment insurance payments, welfare payments, even maybe section eight housing vouchers and other social services. And so, what you look at is you go, okay, is it cheaper to provide all this assistance to the manufacturers or, you know, apply a tariff? So, we can keep this business here and keep people employed.
And so that’s kind of a simple example. But again, there’s going to be some short-term implications. But if we go in don’t have a fear of the complex and just really kind of think long term and stay diversified. Again, I know this is kind of repeating myself, but it’s the same solution but just a different angle.
I think we just have to acknowledge that sometimes we just get frightened about the complex. And I want to suggest to you that we just live in a world of complex, and having a certain fear and a longing for simple is all fair. It’s how we make decisions out of that fear. I think we have to ask ourselves the question because money.
We’ve heard this phrase before. Money is transferred from the impatient to the patient, but money is also transferred. Hear me out from those who have an intolerance of the complex to those that are complexity tolerant, money is transfer those that have an intolerance to the complex. No, that’s too complex. I just too many things going on.
I just I’m out of here and it’s transferred to those that say, okay, I accept complete complexity. I’m going to manage that risk by diversifying, and I’m not going to make a decision rooted in fear. So, we have to accept tolerance with our food. I get it. It’s more confusing to even buy toothpaste now. I have to accept tolerance with my car.
I trust it, I just don’t know how it works right now. It’s kind of overwhelming. I, you know, I long for father’s know father knows best or leave it to Beaver or some of those, you know, classics. But here we are. Facebook Reels and YouTube and everything else. And so, we’ve acknowledged the tolerance for complexity in many parts of the world.
And so, we’ve got to have this recognition that the global economy is complex, and we don’t fully understand it. And we can, you know, try to digest as much as possible. There’s plenty of data out there to help you nerd out on this stuff. But at the end of the day, staying true to our principles of thinking long term and staying diversified, is my conviction that we will all navigate through this.
Now, that doesn’t mean that it’s not going to be choppy in the interim. And so just recognize that we got to get these things sorted out. And so, some people are going to be in freakout mode. That’s going to cause the market to go up and down a little bit more. And you know, for some of us, we’re going to be buying in those windows and some of us are just going to stay the course.
But what I’m suggesting to you, as always, is you think different when you think long term. Have a great day.
Resources:
Opinion: Trump is right on tariffs, here’s why
Americans Are Less Confident About Where The US Economy Is Headed | The WealthAdvisor
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