January 31, 2011
Host: Ted Simons
Gold Investment Risks
- The Arizona Corporation Commission wants to remind consumers of the risks associated in investing in gold. Wayne Stutzer, senior vice president of RBC Wealth Management, gives his take on gold as an investment.
- Wayne Stutzer - senior vice president, RBC Wealth Management
| Keywords: gold
Ted Simons: The Arizona corporation commission wants to remind consumers of the risks associated with investing in gold. Prices for the precious metal are down today, but in recent months they've been on the rise. That makes gold increasingly attractive to investors who see gold as a safer alternative to stocks. Here to give us his take on gold as an investment is Wayne Stutzer, senior vice-president and financial consultant for RBC Wealth Management. Good to see you again. Thanks for joining us.
Wayne Stutzer: I have to correct you, it's not only been good the last couple months, but let's talk about the last decade. This is a price that has gone from $220 an ounce back in 1999, 2000, to as high as over $1400 an ounce just a couple months ago. So it's a historic rise. Especially in light of the fact the stock market from the year 2000 to today has basically been flat with a lot of volatility. But if you draw a line from 2000 to today, it's pretty flat.
Ted Simons: It's big-time. So the corporation commission urging caution for those investing in gold. What do you make of that?
Wayne Stutzer: I think it's funny. Are they trying to get into the predicting of the market? I thought that was an interesting bulletin. Except for the fact of, be careful of calls during the nighttime about selling a gold mine, send us your money, we'll give you a certificate. You too can go out and dig away. That type of stuff, I haven't heard that, but if it's out there, yes, those are just pure scams.
Ted Simons: Those are those exploration deals, like we're on the way to exploring Nirvana somewhere, and you can get in if you're lucky.
Wayne Stutzer: That's right, strike it rich.
Ted Simons: What about the guy on the street corner with the sign saying "we buy gold." Is that something that is -- you should look twice at?
Wayne Stutzer: No, I think those are legitimate places. They basically buy it, melt it, and sell it. It's like a pawn shop. It's a modern day pawn shop.
Ted Simons: So you can buy the actual gold, work in that particular field, you have gold-related market investments, you can work in that particular medium, exchange trades and funds -- it makes sense of it all for us. Are there pitfalls other one spot than another?
Wayne Stutzer: Again, the scams that come in will sell you a gold mine. But there's two primary driving forces right now to gold. One is it's plain momentum. It's going up. Everybody is talking about it. And when I see and hear people say to me, I have to own this, one way or another, be it by buy can the bricks or buying the coins or a mutual fund or -- it can only go up. It will never go down. It reminds me very much of the condo craze or very much of the tech stocks back at the beginning of the last decade. So -- so you get the momentum chasers. And then you get another group of people buying gold that really believe that the currencies, paper currencies will be worthless. And eventually there will be no more cash registers, and so when you want to go shop, you either have to have your gold or silver coins or a brick that you can shave into a scale. Because of this fear that there will be no paper currencies, they will all be worthless and the dollar will be a non exchangeable way of buying goods and services. I think that's purely ridiculous, but there is that logic being portrayed.
Ted Simons: Why is that? That's been around for years. Why is it always there? Where does that come from?
Wayne Stutzer: Budget problems, printing of money, money will be worthless because it used to be backed by gold, but it's no longer backed by gold, you get what happened after the first world war in Germany, even in Russia, after the Soviet union fell, it went into hyper inflation. So it's the hyper inflationery scare where the dollar will be virtually worthless if not worthless.
Ted Simons: So when the corporation commission comes out, and says gold may not provide long-term returns, first of all, that's true, nothing can guarantee that. But why again is that warning out there? Is there something bubbling under the market here?
Wayne Stutzer: Well, I haven't seen it other than the fact this fear that the dollar is going to be worthless. But if you want to buy a gold brick, buy one. I haven't heard of any scams that have come to our attention, and on our radio show on Sundays on KATR, if somebody were to be scammed they would call and say I got a call about this, what do you think about it? I haven't heard anything about that. So it was sort of a surprising press release, I agree.
Ted Simons: It is the kind of thing maybe where the commission and others are concerned that folks who may not be as savvy as they should be are dabbling into something that could be and often is highly volatile, especially with a long-term -- or maybe they're looking at folks, maybe folks that are older and trying to look at a way to pad resources for family and that sort of thing, and they don't know what they're getting into?
Wayne Stutzer: Well, I think a lot of people don't know what they're getting into. Speaking of market volatility, you saw Friday's action, we went trough a stock market flash-crash. You and I talked about it. We went down a thousand points in 10 minutes. So anything in this marketplace is volatile. The one thing about buying precious metals though is that there doesn't really pay a dividend. You can't live on the returns. The only way to make money in my mind buying gold is eventually you gotta sell it. Most people never do sell it. They just hold it forever, and then your children inherit and it they sell it. They want to know why mom and dad had this stuff. But it's an interesting phenomenon, and again, I'm somewhat surprised by the press release.
Ted Simons: Last question, real quickly, you mentioned -- we've all seen bubbles, boy we've seen them recently as well. Does this look like a bubble to you?
Wayne Stutzer: To me it does, because again, when you get people saying, I don't care what the price is, I just want to own it because it's going to continue to go up, that's -- whatever you want to call it, there's a lot of momentum behind it, and any time something comes on in a commercial at 2:00 in the morning telling to you do it, I always get leery. My thinking here is, don't buy anything that shows up at 2:00 in the morning.
Ted Simons: All right.
Wayne Stutzer: You should be sleeping.
Ted Simons: Wayne, we'll take that advice. Thank you for joining us, we appreciate it.
Revised Medical Marijuana Rules
- The Arizona Department of Health Services released a set of revised rules regarding medical marijuana. The changes focus on a number of issues including doctor-patient relationships and the location of marijuana dispensaries. Will Humble, director of the Arizona Department of Health Services, discusses.
- Will Humble - director, Arizona Department of Health Services
| Keywords: marijuana
Ted Simons: The Arizona department of health services today released a set of revised rules regarding medical marijuana. The changes focus on a number of issues, including doctor-patient relationships and the location of marijuana dispensaries. Here to talk about all this is Will Humble, director of the Arizona department of health services. Good to see you again.
Will Humble: Good evening. Thanks.
Ted Simons: We've got a new set of draft rules. What changed?
Will Humble: Well, we changed several things, probably the biggest change is some criteria that we put into this new rule to sort of guide where the ultimate dispensaries will go across the state. We had a couple of objectives we wanted to accomplish. One is to get the rural parts of the state easier access to medical marijuana, and at the same time minimize the number of grow your own parts of the state. One of the things in the initiative is that if you live more than 25 miles from the nearest dispensary, the you get to grow your own. So by encouraging applications in the rural parts of the state, we expect to have fewer grow-your-own areas and at the same time, get folks in the rural parts of the state better access so they don't have to drive as far. One of the other things the geographic distribution did is it avoided urban clustering in the valley and in places like Tuscon, so you didn't get -- so we won't have a bunch of dispensaries right next to each other, it will be spread out throughout the valley.
Ted Simons: Now, correct me if I'm wrong, but wasn't there also a concern regarding multiple candidates for dispensaries in certain areas? Was that addressed as well?
Will Humble: One of the things we addressed in this draft is we said, look, here are the geographic boundaries. In Phoenix a lot of them look like the villages that the Phoenix -- that Phoenix has. When -- in each one of those components, if we get more than one application that's complete and they meet all the requirements, what we're proposing in this next draft is to take a random drawing of those applicants and then award a dispensary certification to one of those applicants. That doesn't mean they can -- that doesn't mean they can start dispensing right away. What it means is they have permission to proceed, get all the local permits that they'll need, get their certificate of occupancy for their jurisdiction, get their inventory control, their security, everything else they're going to need and at some point down the road probably in the fall, they could call us for their final inspection, we'll release that restriction and they can begin dispensing.
Ted Simons: OK That dynamic all long with what you mentioned earlier in terms of encouraging rural areas, encouraging dispensaries in rural areas, how does that work? I got a funny feeling certain parts of town there will be a lot of folks wanting to open dispensary, but when you talk about areas like a Kingman or Show Low or something, it might be hard to find some folks.
Will Humble: One of the things that we did in this rule -- in this draft, remember in the first draft we had a requirement that each dispensary grow 70% of its own inventory. We've removed that restriction, we included some additional inventory controls and by doing that we've opened the rural parts of the state up to -- so they could be a wholesale market of legitimate marijuana that can flow from, say, a less expensive cultivation facility in the rural part of the state, to the urban core where it's more expensive to cultivate. So by -- this would not have worked had we not removed that 70/30 restriction, so by removing that 70/30 we open that business up, and it also hinges on having good inventory controls. And during the comment period we got really good comments in from the public who gave us some exact language about how you track that marijuana from its seed to the dispensary. So we're happy about that.
Ted Simons: Interesting. Transportation of marijuana was also addressed. What are we got here?
Will Humble: We got some comments from cities and law enforcement during the first draft that said, hey look if we're on a traffic stop and we pull somebody over and the van is full of marijuana, we need to know if this is real legitimate marijuana as part after transfer from a cultivation facility to a dispensary or whether this is cartel stuff. So we got some really good public comment on that aspect as well, and we've got we think very well-defined criteria for transportation now that includes certification, essentially some paper that tracks the marijuana from the source to the dispensary.
Ted Simons: As far as a doctor attesting to a patient having a certain condition, making a certain diagnosis, and an in-person exam, was that in the original rule?
Will Humble: Right. That was in the original rule. We refined that a little bit in this next iteration of the draft. My -- this has been my top priority all along, to make sure we're holding physicians accountable for the recommendations that they write so that we can avoid certifications going to people for purely recreational purposes. And so in the initial draft we basically just had a definition of what that physician-patient relationship was. In this next iteration, what we did is we actually met with the four medical boards that license physicians in the state and we asked them, what do you need to hold physicians accountable, and what do you need to ensure that you can take action on a physician who appears to be acting unprofessionally? And so we took that information and we were actually in the recommendation, we're asking physicians to make a series of attestations about the purity of their medical records, that they have, about the fact they did a physical examination. So we've got a trail on paper to help establish that there was a true physician-patient relationship, that there was a true assessment of their physical condition, and that they've looked at the medical records and have them on hand.
Ted Simons: The public comments obviously driving a lot of this. Were you surprised how many comments were there and how effective they were?
Will Humble: I wasn't surprised at the number. We got 1500 comments in from the public. I was -- I have to say, pleasantly surprised with the quality. To be sure, many of the comments were just, you know, the voters have spoken, let recreational use be the norm, get out of my way Mr. Humble, who do you think you are? But we also got lots of constructive comments, especially from cities, law enforcement, fire, police organizations, various stakeholder groups, law firms, etc., so we -- and it's all post order our website so everyone can see the comments that we got. So I was really impressed with the quality of the public comment that we got and how effective those comments were at driving us to this next iteration.
Ted Simons: The process is back in the public hands now, correct?
Will Humble: Right. For the next couple of weeks it will be on up our website. We're asking folks to go to that website, everyone in Arizona, we're looking for comments from everybody, and send us electronic comments for what you think. Ways that we can improve the next version. Because on the 28th we expect -- of March we expect to have the final rules set forward, and this law takes effect on April 14th. So there's not much time left, and we really do need comments from everybody.
Ted Simons: If it takes effect April 14th you figure late summer, early fall, doors open?
Will Humble: Well, we'll be expecting to get applications in for qualified patient cards right away. We don't expect to see dispensaries up and running until late summer probably early fall.
Ted Simons: All right. Good to see you. Thanks for joining us.
State Budget Deficit: Raise Taxes or Reduce Spending?
- State lawmakers have two primary options to erase the State’s massive budget deficit: 1) raise taxes or, 2) cut government spending. Both have a negative impact on Arizona’s economy, but according to a new analysis by the L. William Seidman Research Institute at ASU’s W. P. Carey School of Business, one option is less economically harmful than the other. Tom R. Rex, associate director of the Center for Competitiveness and Prosperity Research, explains.
- Tom R. Rex - associate director of the Center for Competitiveness and Prosperity Research
| Keywords: taxes
Ted Simons: Arizona's budget shortfall for the rest of this year and fiscal year 2012 is estimated to be nearly $2 billion. Just about anything state lawmakers do to balance the budget will have a negative impact on Arizona's economy. But some choices are not as bad as others. That's according to analysis by the Seidman Research Institute, part of ASU's W.P. Carey School of Business. Here to talk about the research is Tom Rex, associate director of the school's center for competitiveness and prosperity research. Good to see you again. Thanks for joining us.
Tom Rex: Thank you.
Ted Simons: All right. Judging from what -- my impression of the research, what you're saying is that you've got a choice. You can cut a whole lot or you can raise revenue a whole lot, and you're saying that raising revenue a whole lot may be the better option?
Tom Rex: Well, it's always the better option. It's especially better in this particular situation because of the plan to cut the AHCCCS funding, which means you lose twice as much federal monies. That's going to be very damaging and it's going to be damaging to the private sector, not to government employees like me.
Ted Simons: So talk about the research. What you were looking for, what you were looking at, and what you found.
Tom Rex: Well, we have economic models that are designed to measure the impact of things like this. So we put in the numbers from the governor's plan to determine how much of a loss there would be. We put in the numbers for an alternative being let's raise revenues instead. That too is a negative. There's no way out of having a negative impact. For whatever you do, it's going to be negative. It's a matter of, do you want to try to minimize the negative impacts. And there's a difference of some 33,000 jobs or so between the two alternatives. Again, it's unusually large because we're going to lose so much federal funding, over a billion dollars of federal funds would be lost in on the to do a $540 million cut to AHCCCS with state money.
Ted Simons: We have lawmakers and legislative leaders on the program, and they say that they understand that spending $2 to make $3 or get back $3 from the federal government makes sense, but they say we don't have the $2 to spend in the first place.
Tom Rex: Well, we do. I mean, our tax burden in this state is the lowest it's ever been. It's dropped dramatically over the last 20 years. We don't have to put it back to where it used to be to come up with the billion dollars that we would need for next year. So it's an option. It's a matter of choice. It would seem that the political leaders are just choosing to off the cuff say, that is not an option to raise revenues. Obviously you don't want to do that during a recession. You never want to do that. But you're back in a corner. We backed ourselves into -- the state into a very deep corner by the actions that have been done over the last 20 years. We've benefited at the time, and now we have to pay the price.
Ted Simons: There are some, and some economists as well, most of the lawmakers on the show say it's not only a bad thing to raise taxes during a recession or something that resembles a recession, it's the worst thing you can do. Do you agree?
Tom Rex: No. Because -- basic economics tells you, no, that isn't case. We ran it through two models to prove that, no, that isn't the case. Yes, you don't want to raise revenues in a recession. There's a negative impact. But folks, the negative impact is even bigger if you reduce spending by the magnitudes we're talking about. Again, that's always going to be the case. In the short-term recession, it's always worse to cut spending.
Ted Simons: So you're saying when critics say the more taxes, less spending on goods and services, you agree with that , that but you also kind of mention, I thought it was interesting, that because we would be spending -- it's a little more distant as opposed to government cuts which is a little more immediate.
Tom Rex: Yes.
Ted Simons: Explain that.
Tom Rex: Well, what you really need to do is track the dollar. If you have spending cuts, what's being cut? Government employee jobs, they lose their salary, they live right here in Arizona, they spend their money in Arizona. Or in the case of this plan, you're going to be cutting money that goes directly to the health care providers. And again, same way. They live here, they spend their money here. That's gone right off the top, first step, it's gone. The alternative is -- in terms of raising revenue, is that if you increase taxes or fees, first there would be some people, those making quite a bit of money, they're not going to reduce their consumption. They've got plenty of savings, they’ve got plenty of income. So there's no negative economic impact from those folks. The rest of the people, yes, they do have to cut their spending, but so much of that spending is on consumer goods that aren't manufactured here in Arizona, and the money goes out of the state immediately, and that too then has a lesser impact than the spending reduction.
Ted Simons: It sounds like what you're saying here, and your study was focusing on the current situation, yet again, there are those, there's a line of thinking that what Arizona, the budget right now, the structural deficit, the whole nine yards, it's broken. And now is the time to fix it. Not only for now, but to fix it for upcoming years. We simply can't afterward to keep doing what we're doing.
Tom Rex: Absolutely. That would be the desire. We would argue that we need to do a complete revamp of the revenue system, and that's a part from deciding whether you want to raise or lower your revenues. You just need a revamp because our system is not working for the 21st century.
Ted Simons: Governor's office says we can't handle another tax hike after the one one-cent sales tax. The state simply can't handle that.
Tom Rex: And I'd argue, not just me, but simple economics argues that's not the case. The tax burden is so low today, compared to what it used to be, if people like us and a lot of people that are making reasonable amounts of money that have been hardly affected by the recession, and yet we're being asked to contribute far less than we ever did before to the state revenues. Why is that? Why is it that -- I can pay more taxes, I'm sure you can, I'm sure an awful lot of people could, yet the governor and others are saying that no, we can't do that. There's a lot of people that can pay this money -- if you're really concerned about that, then you want to be careful how you do your tax increases to minimize the impact on the lower income people, the people that are struggling, and there are ways to do that. The personal income tax is the one that's gotten cut most over the last 20 years. Lower income people pay almost nothing or nothing in income taxes once they get their refund check. So as the people making the higher wages, that can afford it, pay the tax.
Ted Simons: So when critics say it's better to create an environment to grow jobs as opposed to create an environment or keep an environment that is described by many as a welfare state as opposed to getting your fiscal house in order, how do you respond?
Tom Rex: Well, you certainly don't want to increase service taxes. I fully agree with that. We overtax businesses as it is in this state relative to individuals in particular. So passing a tax increase on individuals doesn't harm the economic climate at all. And in fact the extra money is then used to spare education. Education qualified work force is the most important single factor for businesses. They would be willing to pay, they are willing to pay if the money goes to something --
Ted Simons: This obviously, this report is opposite, quite opposite from a lot of what we hear coming out of the legislature, and the legislative leaders on the show. My question to you is, what kind of response are you getting on this? Because I gotta tell you, when we do interviews, this sounds like a nonstarter as far as the current make up of the legislature is concerned.
Tom Rex: Yes, it does seem like it, and I Frankly can't imagine a study like this that -- [inaudible] They -- have decided some years ago that further increases are simply not under consideration regardless. I would suggest to them that cutting thousands and thousands of private sector jobs, which is what they'll end up doing under this plan, might be something they should consider. I think they're probably hearing from the hospital association and other medical groups that, you know this, is going to really, really hurt.
Ted Simons: Last question, real quickly, if it means losing those jobs in the short term to increase the chance of getting exponentially more in the long-term, a gamble worth taking?
Tom Rex: I didn't follow that, I'm sorry.
Ted Simons: The idea is if you get the fiscal house in order, many more jobs will come down the pike as opposed to keep muddling along as we are.
Tom Rex: You need to get the fiscal house in order. It doesn't have to be done on the spending side. I would argue the severe cuts to education affect -- the fact K-12 is already near the bottom in spending, and you're now sending the Universities down that same route is not going to be a positive for economic development and it will probably to the higher wage jobs, the jobs that purportedly we'd like to have here, Arizona is not -- in consideration by those companies.
Ted Simons: Thanks for joining us.