Latest / Felix Nikolas Prehn's Podcast / Why the Debt Bubble is About to Pop + Stock Market News 01 April 2024

Transcript

Why the Debt Bubble is About to Pop + Stock Market News 01 April 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: And good morning to you.
• 0:02
  Speaker 1: I wish you a very, very happy Easter Monday.
• 0:04
  Speaker 1: I hope you enjoyed the week and we're going to look at debt, interest rates, feds, what's actually moving markets today, what's going up, what's going down.
• 0:14
  Speaker 1: Probably a slightly quieter Monday today because the Europeans are still on holiday, lazy bastards, and if you are dreading the end of this long weekend, then I've got just the thing for you, and that is make money from your money so you don't have to work as much.
• 0:31
  Speaker 1: That's really what it's all about.
• 0:32
  Speaker 1: If you want to come and learn how Winston and I made 126% RACE in 2020, 2 and 105% in 2023.
• 0:42
  Speaker 1: And this year I'm going to take some profits today, which will drive up our P&L quite nicely, but you know, we made almost 5k here on a $30,000 portfolio so far, winning 74% of our trades so far this year, and that's exactly what we did the last two years.
• 0:57
  Speaker 1: We started tracking this properly.
• 0:59
  Speaker 1: So come and learn with me our three step system.
• 1:02
  Speaker 1: It's really simple.
• 1:03
  Speaker 1: It works for beginners.
• 1:04
  Speaker 1: You don't need any knowledge or any experience.
• 1:07
  Speaker 1: I assume nothing.
• 1:09
  Speaker 1: Come and join me at fredericksfrontsorg slash webinar.
• 1:12
  Speaker 1: Is it here?
• 1:14
  Speaker 1: Yeah, there it is.
• 1:15
  Speaker 1: Links down below Also down below in the description and grab yourself a free seat.
• 1:19
  Speaker 1: It'll take about 90 minutes and we'll have some real fun and I'll walk you through exactly how I trade every single week and have done for many, many years.
• 1:26
  Speaker 1: But let's get into debt and this is not a doom and gloom video.
• 1:29
  Speaker 1: I always want to make that clear.
• 1:31
  Speaker 1: I might have an exciting headline, but it's important that we don't get caught up by that.
• 1:35
  Speaker 1: We want to actually look at how do we make money out of this right, what's the most likely outcome?
• 1:39
  Speaker 1: What's the highest potential profit, lowest risk path to take here?
• 1:44
  Speaker 1: And what you can see is that US Treasury interest payments have hit a staggering $1.1 trillion, which is baffling.
• 1:57
  Speaker 1: My defense budget is $800-something billion and we've had similar kind of catastrophes before 2008.
• 2:11
  Speaker 1: And then it declined.
• 2:12
  Speaker 1: How wide interest rates interest payments declined?
• 2:13
  Speaker 1: Well, I just gave it away.
• 2:13
  Speaker 1: The fed stepped in and cut interest rates 2022.
• 2:16
  Speaker 1: Same story, right, fed cuts interest rates to zero and suddenly government debt becomes affordable and the question therefore is how soon?
• 2:25
  Speaker 1: And the question therefore is how soon is the Fed going to do this?
• 2:28
  Speaker 1: Because if the Fed doesn't, it'll basically bankrupt the US.
• 2:32
  Speaker 1: Well, I blame politicians.
• 2:33
  Speaker 1: Actually, I blame voters.
• 2:35
  Speaker 1: I blame voters.
• 2:36
  Speaker 1: Don't elect people who promise you stuff.
• 2:38
  Speaker 1: Elect people who promise you nothing.
• 2:40
  Speaker 1: That's who you need to elect if you want to fix this problem, but I know that's a hard thing to do.
• 2:45
  Speaker 1: I've also all the charts for today's video are here for free.
• 2:49
  Speaker 1: You can download them.
• 2:50
  Speaker 1: Felixfriendsorg slash debt.
• 2:51
  Speaker 1: It's completely free.
• 2:52
  Speaker 1: Just type that in or it should be down below or even scan the QR code.
• 2:57
  Speaker 1: If you're that kind of a person, you know, get the phone out and start scanning things FelixFriendsorg slash and you get the full debt research here.
• 3:06
  Speaker 1: Now is it going to get better or is it going to get worse?
• 3:09
  Speaker 1: Well, right now, we are.
• 3:12
  Speaker 1: Well, you are.
• 3:13
  Speaker 1: I'm not not a US taxpayer.
• 3:15
  Speaker 1: Actually, I'm a US taxpayer.
• 3:16
  Speaker 1: I do.
• 3:17
  Speaker 1: I pay both commercial and personal tax in the US on certain income.
• 3:21
  Speaker 1: It's going to double every eight years right now.
• 3:26
  Speaker 1: So we're going to be at 40 trillion debt in 2025 and then 80 trillion probably early 2030, 3031 at the current rate.
• 3:38
  Speaker 1: That's kind of mad, isn't it?
• 3:40
  Speaker 1: So you're getting one trillion of debt every 100 days, which is just staggering.
• 3:52
  Speaker 1: I mean, I plan my whole life in six-week slots, which is 42 days.
• 3:57
  Speaker 1: To think that you can spend $1 trillion in 100 days is just just absolutely bafflingly insane.
• 4:05
  Speaker 1: And how do you finance this?
• 4:08
  Speaker 1: Well, they finance the debt through debt.
• 4:11
  Speaker 1: The interest payments are paid for by more debt, which is why this insane amount of T-builds has been issued Short-term T-builds and that means the government's hoping for lower interest rates.
• 4:25
  Speaker 1: Or maybe they have an inside track into the Fed and they're not actually issuing all that many bonds and all that many notes which are more longer term.
• 4:32
  Speaker 1: Why?
• 4:33
  Speaker 1: Because, again, they're hoping for lower interest rates, which is kind of smart if you think rates are going to come down, which I think they will.
• 4:39
  Speaker 1: So that's going to change quite a lot in the market here.
• 4:44
  Speaker 1: So this is from Bank of America, the scenarios If we have no rate cuts, interest rate payments are going to go to 1.6 trillion.
• 4:57
  Speaker 1: 1.6 trillion, double the defense budget.
• 4:59
  Speaker 1: Just on interest.
• 5:00
  Speaker 1: If we get 150 basis point cuts by the Fed which is what's that?
• 5:08
  Speaker 1: Six rate cuts then that will only be $1.1 trillion.
• 5:15
  Speaker 1: So the US government saves $500 billion.
• 5:19
  Speaker 1: We get six rate cuts.
• 5:22
  Speaker 1: So do you think there is some pressure on the Fed to cut rates from up above the people who appoint them?
• 5:27
  Speaker 1: Heck, yeah.
• 5:28
  Speaker 1: And I know they're independent and all of that, but you know, I don't really believe it.
• 5:32
  Speaker 1: Us budgets if you wanted to see what it looks like, social security was the biggest item.
• 5:40
  Speaker 1: Soon it'll be debt health $880 billion, medicare $850 billion, defense $820 billion, and net interest will shortly be $1.1 trillion, which is staggering, really, really staggering.
• 5:56
  Speaker 1: It's two and a half times all corporate taxes paid in the US.
• 6:01
  Speaker 1: But I think from our point of view, it's going to mean lower interest rates.
• 6:06
  Speaker 1: What happens when interest rates go down?
• 6:07
  Speaker 1: Stocks go up.
• 6:08
  Speaker 1: Right.
• 6:09
  Speaker 1: So you know.
• 6:09
  Speaker 1: Cheers, right.
• 6:11
  Speaker 1: Not really a big problem, right?
• 6:15
  Speaker 1: I mean, you know, what is a serious problem is the scarcity of likes on this particular video.
• 6:19
  Speaker 1: Nobody's pressed the button, nobody's found it yet.
• 6:22
  Speaker 1: So what is a little bit more concerning is the impact of, or how big the largest seven stocks are as part of the S&P 500.
• 6:37
  Speaker 1: The largest seven stocks are as part of the S&P 500.
• 6:44
  Speaker 1: And right now they are 30% of the market cap of the S&P.
• 6:46
  Speaker 1: Seven stocks are 30% of the market cap and that's higher than the 2021 everything to the moon, diamond, hand, hodler, bollocks rally.
• 6:57
  Speaker 1: So that's kind of concerning, but I'll show you a chart on that at the end, which I think might make you understand this a little bit better.
• 7:06
  Speaker 1: Now, of course, most of the growth in the top most of the MAG7 are basically tech stocks, right E-commerce stocks, which, funnily enough, have almost no US regulation, and it just means that it shows that the less regulation you have, stocks which, funnily enough, have almost no US regulation, and it just means that it shows that the less regulation you have, the less the government freaking interferes.
• 7:25
  Speaker 1: The more innovation you get, the more value you get, the more growth you get, whereas every other industry is kind of regulated to the nth degree.
• 7:33
  Speaker 1: Fed Chair Powell came in on Friday, easter Friday.
• 7:37
  Speaker 1: I don't know why they released important economic data on Easter Friday when the markets closed, but there you are, they have no pity.
• 7:46
  Speaker 1: But he said the fact that the US economy is growing at such a solid pace, the fact that the labor market is still very, very strong, gives us the chance just to be a little bit more confident about inflation coming down before we take the important step of cutting rates.
• 8:01
  Speaker 1: I don't really understand the sentence, to be honest with you.
• 8:03
  Speaker 1: He's saying strong economy, tight labor market means we're more confident inflation is coming down.
• 8:09
  Speaker 1: So the only way to interpret that, I think, is he's saying we're crushing the economy.
• 8:18
  Speaker 1: Think is he's saying we're crushing the economy, and he's basically saying that GDP growth will come down, that unemployment will go up, and therefore the fact that inflation has come down despite strong economic growth and despite low unemployment is kind of a miracle.
• 8:41
  Speaker 1: And he thinks well, the lack in effect of higher rates are going to kick in and inflation is really, truly beaten.
• 8:50
  Speaker 1: I think that's essentially what he's saying.
• 8:51
  Speaker 1: And then he says the fresh inflation data released earlier, which was higher than expected.
• 8:56
  Speaker 1: He says it's pretty much in line with our expectations.
• 8:59
  Speaker 1: So the dude is really chilled.
• 9:00
  Speaker 1: I mean, unless he, you know, snacked on some of those Californian Easter eggs which I understand are not entirely made of chocolate, but something that's probably cheaper than chocolate right now.
• 9:10
  Speaker 1: I'm going to show you that as well.
• 9:11
  Speaker 1: Chocolate, the squeeze of all squeezes, seriously.
• 9:14
  Speaker 1: But first of all, gold.
• 9:16
  Speaker 1: For all you gold nuts out there, the previous resistance to gold was here.
• 9:24
  Speaker 1: Why?
• 9:25
  Speaker 1: Because we had this high, that high, this high, this high and this high, sort of a triple five high.
• 9:32
  Speaker 1: And what have we done?
• 9:33
  Speaker 1: We have gone through the moon.
• 9:35
  Speaker 1: And then some today up, some more gapping up again.
• 9:38
  Speaker 1: So gold is truly, truly, truly on a tear.
• 9:42
  Speaker 1: And is that going to continue.
• 9:46
  Speaker 1: Well, it looks like it's got some legs, yeah, but I think also think that you're late to the party, if you.
• 9:53
  Speaker 1: If you are, I would say the time to buy this.
• 9:56
  Speaker 1: Where did my pen go?
• 9:57
  Speaker 1: I think the time to buy this was when we exceeded can we have a green pen when we exceeded these highs here?
• 10:06
  Speaker 1: I think that was the buy signal.
• 10:08
  Speaker 1: So, if you missed it, you're showing up at four in the morning with a bottle of vodka and going shall we party?
• 10:14
  Speaker 1: And everyone else is just falling asleep.
• 10:16
  Speaker 1: So I just be a little cautious with that.
• 10:18
  Speaker 1: But yeah, it looks that technically it looks very, very good.
• 10:21
  Speaker 1: Now, what looks better than anything is this Does anybody know what ticker CJ is?
• 10:26
  Speaker 1: Any takers?
• 10:28
  Speaker 1: Thanks for the extra 70 likes there.
• 10:31
  Speaker 1: I appreciate that.
• 10:32
  Speaker 1: Anybody know what CJ is.
• 10:37
  Speaker 1: It is what you've been nibbling on all weekend.
• 10:40
  Speaker 1: It is, of course, cocoa, cocoa and cocoa is an interesting industry.
• 10:44
  Speaker 1: How does it work?
• 10:46
  Speaker 1: There are no major large growers of the stuff.
• 10:50
  Speaker 1: It's lots of small, little family owned bits, mostly in west af like Ghana, ivory Coast, and the government sets a price at which the government essentially all this stuff sold from the farmers the little farmer with a couple of trees.
• 11:09
  Speaker 1: So the farmer has not benefited from this insane rally, which is a bigger rally than Nvidia.
• 11:16
  Speaker 1: I mean it's gone from like $2,000 all the way up to $9,766 right now and that means they have no real incentive to plant a lot because they haven't participated in the rally, because the whole fair trade thing is a load of labeling, bollocks and they've had pests, diseases, flooding, everything and the encouragement isn't really there to plant trees because they're not getting the money.
• 11:44
  Speaker 1: So unless you take out the middleman, the communism that's fixing the prices to the growers, this thing is going to keep going.
• 11:52
  Speaker 1: Now the second thing is that the people who buy the cocoa, they hedge, so they actually store cocoa to offset the physical inventory against the market.
• 12:04
  Speaker 1: Now, as the cocoa prices skyrocketed, they've had to close out of those hedges, because the hedges only work if the price goes sideways.
• 12:15
  Speaker 1: It doesn't have work on a thing like this.
• 12:17
  Speaker 1: And how do they close out of their hedges?
• 12:19
  Speaker 1: Well, they have to buy more cocoa futures.
• 12:21
  Speaker 1: So the thing just keeps going up and up, and up, and up and up.
• 12:24
  Speaker 1: And then, of course, all you lot eating all those chocolate eggs.
• 12:27
  Speaker 1: I know I'm talking to you.
• 12:28
  Speaker 1: That hasn't helped, has it.
• 12:30
  Speaker 1: You've just massively spiked demand, so it's an interesting one.
• 12:34
  Speaker 1: Cocoa One of the unsung short squeeze heroes of 2024.
• 12:42
  Speaker 1: Right, let's move a little bit more into the real world.
• 12:45
  Speaker 1: Would you short cocoa, mustafa?
• 12:48
  Speaker 1: No, no, because that's what everybody's done.
• 12:51
  Speaker 1: That's why it's a short squeeze.
• 12:52
  Speaker 1: So definitely I would not short cocoa, because the growers haven't planted anymore.
• 12:56
  Speaker 1: They haven't fixed any of the problems.
• 12:58
  Speaker 1: Demand is massively outstripping supply.
• 13:01
  Speaker 1: So, no, I would not be tempted to go against all market sentiment on some sort of whim.
• 13:07
  Speaker 1: Do you know this company?
• 13:08
  Speaker 1: Vornado Realty Trust?
• 13:10
  Speaker 1: Who are they?
• 13:11
  Speaker 1: They are an NYC REIT and they're trading below.
• 13:17
  Speaker 1: This was the COVID collapse, because everybody left.
• 13:23
  Speaker 1: They own commercial real estate.
• 13:25
  Speaker 1: Sorry, I should have mentioned that right, c-r-e commercial real estate.
• 13:28
  Speaker 1: This is the COVID collapse and we're trading well below the COVID collapse.
• 13:33
  Speaker 1: Has nobody returned to the office?
• 13:35
  Speaker 1: Apparently not.
• 13:37
  Speaker 1: No, they really haven't.
• 13:38
  Speaker 1: And this is the office vacancy in New York.
• 13:43
  Speaker 1: Not sure if that's NYC or if that's in New York state, doesn't really matter.
• 13:47
  Speaker 1: This year was 2008, when every banker worth a salt got fired and therefore there was massive vacancy.
• 13:57
  Speaker 1: We are way above that.
• 13:59
  Speaker 1: We're way above those 2008 levels and they've only been climbing up.
• 14:04
  Speaker 1: And this is a real thing.
• 14:05
  Speaker 1: This is a real problem.
• 14:06
  Speaker 1: It's going to hit banks, because all this regional and small idiotic banks with the daft management own all the mortgages and the mortgages are defaulting, and that means, once again, what does the Fed do to fix this?
• 14:22
  Speaker 1: Cut rates.
• 14:23
  Speaker 1: It's the only thing to fix this.
• 14:25
  Speaker 1: Cutting rates will reduce the expenditure on the mortgages, on these commercial real estate loans, and it will get the small banks out from.
• 14:36
  Speaker 1: You know, they basically have a sandbag on their head and a big fat developer sitting on top of it and they're drowning in their own stupidity and fairness.
• 14:44
  Speaker 1: But yeah, so rate cuts have to happen, otherwise the government's screwed commercial real estate's screwed banking is screwed, and I don't think that's the way Wall Street bribes its way to money, right?
• 14:57
  Speaker 1: So I doubt that's going to happen.
• 15:00
  Speaker 1: Now, I wanted to show you this.
• 15:01
  Speaker 1: I know a lot of people are index buyers.
• 15:05
  Speaker 1: You put all your money into an ETF and you think brilliant and it is a lot better than not putting it there.
• 15:11
  Speaker 1: Putting in a sock is the worst thing to do, right?
• 15:15
  Speaker 1: Really the worst thing to expectations.
• 15:21
  Speaker 1: Can I spell expectations?
• 15:26
  Speaker 1: Expectations on profits for analysts are what.
• 15:34
  Speaker 1: What have we got here?
• 15:35
  Speaker 1: You've got two lines.
• 15:36
  Speaker 1: You've got a blue line which is mega cap tech.
• 15:42
  Speaker 1: So this is your NVIDIA, this is your Microsoft, this is your Apple, this is your Amazon, that kind of stuff, and we're expecting all of the growth in profits to basically go to mega caps.
• 16:02
  Speaker 1: The growth in let me get a grayish pen here in the other 493 stocks is this little line down here.
• 16:14
  Speaker 1: So you have to ask yourself why do you want to own 493 duds that don't do anything?
• 16:23
  Speaker 1: It's maybe not all 493 of them, it's probably about 470 of them.
• 16:27
  Speaker 1: There'll be about 20 in there that are doing something half decent.
• 16:31
  Speaker 1: This is why I'm not a fan of index investing.
• 16:33
  Speaker 1: I just think it guarantees you average results, guarantees you an average life, an average retirement, average car, average, house, average everything.
• 16:41
  Speaker 1: An average retirement, average car, average house, average everything.
• 16:43
  Speaker 1: Who the heck wants average right Now?
• 16:45
  Speaker 1: I guess it's better than lowest 10% of the country.
• 16:50
  Speaker 1: Yeah, okay, I get that.
• 16:51
  Speaker 1: They don't invest anything, right.
• 16:53
  Speaker 1: They just, you know, put the money under the mattress hoping the one's going to nick it.
• 16:57
  Speaker 1: But I don't really get it.
• 16:59
  Speaker 1: And I'm not saying to you put all your money into the top seven stocks or whatever.
• 17:02
  Speaker 1: But I'm saying to you learning to become a stock picker is the most underrated skill imaginable, because the gap, the difference between returns is phenomenal, especially when you compound it.
• 17:16
  Speaker 1: So there we are, pounded.
• 17:25
  Speaker 1: So there we are.
• 17:25
  Speaker 1: I don't see your name, but a lady with long hair says I just registered for tomorrow's webinar.
• 17:27
  Speaker 1: I appreciate that you got no screen name.
• 17:28
  Speaker 1: I didn't know that was a thing.
• 17:29
  Speaker 1: That was not possible.
• 17:30
  Speaker 1: That's very nice of you.
• 17:32
  Speaker 1: I'll see you there tomorrow.
• 17:33
  Speaker 1: We'll have some fun.
• 17:34
  Speaker 1: So do exactly what Miss no Name said here, and that is sign up for tomorrow's live trading training felixfrenzorg slash webinar and you'll learn how I trade three rules, how any beginner can do the same thing, and by the end of the 90 minutes you'll know whether you might want to trade or maybe this is really just not for you, and at least you've eliminated the option right.
• 17:55
  Speaker 1: And then you can learn how to become a better investor on long-term stocks.
• 17:59
  Speaker 1: I've got tons of videos out on that as well.
• 18:01
  Speaker 1: In fact, I'm putting a video out on that, I think tomorrow or the day after.
• 18:04
  Speaker 1: I'm just working on it.
• 18:05
  Speaker 1: So that's where we are right now.