Latest / Financial Survival Network / Economic Outlook and Recession Prediction - Jim Welsh #6143

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Economic Outlook and Recession Prediction - Jim Welsh #6143 · Financial Survival Network

0:00
Speaker 1: And I believe a recession is going to take hold.
0:02
Speaker 1: You know, the slow down in the economy has been very,
0:05
Speaker 1: very gradual. I think it's going to persist. There's the
0:08
Speaker 1: next couple of charts just down below where we are.
0:11
Speaker 1: Carrie underscores this in terms of again looking at the
0:15
Speaker 1: labor market. You know, the savings rate now, for instance,
0:20
Speaker 1: is down to two point nine percent. Prior to the pandemic,
0:23
Speaker 1: it was about five and a half percent, between five
0:25
Speaker 1: and six percent. So the economy's still moving forward, but
0:29
Speaker 1: there's a whole lot of people that are spending, but
0:32
Speaker 1: they're not saving because they don't have the extra income
0:35
Speaker 1: to be able to do it.
0:36
Speaker 2: You're listening to Carrie.
0:37
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0:42
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0:46
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0:51
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0:54
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0:58
Speaker 2: Now more than ever, and welcome you are listening to
1:06
Speaker 2: and watching the Financial Survival Network. I'm your host, Carrie Lutz. Hey,
1:10
Speaker 2: Jim Wilsh of macrotides dot com is with us today,
1:14
Speaker 2: he's got some revised charts hot off the out off
1:19
Speaker 2: the Excel spreadsheet. However, he's doing it, and you're definitely
1:24
Speaker 2: going to want to look dealing with market with latest in,
1:30
Speaker 2: latest employment numbers, what it all means. Jim, welcome back.
1:35
Speaker 2: How are you. It's great to join you, Carrie.
1:38
Speaker 1: I'm doing well. I hope you are too. Okay, So
1:41
Speaker 1: let's get down and dirty. Here we got these charts.
1:44
Speaker 1: By the way, if you're listening on the podcast, there
1:46
Speaker 1: will be a link in the show notes so you
1:48
Speaker 1: can download his latest Jim's latest update here so you
1:56
Speaker 1: can take a look at it firsthand. So what am
1:59
Speaker 1: I looking at here? Well, basically, Carrie, you know the
2:03
Speaker 1: Fed meets on September eighteen. They're going to cut the
2:06
Speaker 1: funds rate. The open question is, well how much are
2:09
Speaker 1: they going to cut it? But I just thought for
2:12
Speaker 1: those listening in as well as if they go and
2:15
Speaker 1: I get the piece that can look at this, you
2:17
Speaker 1: know what is the debate going to center around as
2:21
Speaker 1: the hawks and the doves on the FMC discuss all
2:24
Speaker 1: this stuff. So the first one is a neutral rate,
2:27
Speaker 1: which is a theoretical concept of where is the fund
2:30
Speaker 1: where is the level of the funds rate that is
2:33
Speaker 1: neither restrictive nor accommodata. There's no exact formula, so this
2:38
Speaker 1: is a best guess thing, and right now the best
2:41
Speaker 1: guess is around two and a half percent. So what
2:44
Speaker 1: we can see is in the pandemic, the Fed lowered
2:47
Speaker 1: the funds rate way below the neutral rate to you know,
2:51
Speaker 1: support the economy and so forth. When inflation broke out,
2:55
Speaker 1: they raised it comfortably above the neutral rate, which is
2:58
Speaker 1: a measure of how restrict of the FMC is. What's
3:02
Speaker 1: interesting Carry is the Doves think it might be closer
3:05
Speaker 1: to two percent and the Hawks think the neutral rate
3:07
Speaker 1: could be closer to three. And the reason why that
3:10
Speaker 1: debate is important is you measure the difference between the
3:14
Speaker 1: current funds rate and the neutral rate to determine just
3:19
Speaker 1: how restrictive policy is. But the bottom line here is
3:22
Speaker 1: both the Hawks and the Doves Carry agree that the
3:26
Speaker 1: current level of the funds rate is a restrictive level,
3:30
Speaker 1: which is why both Camps, Buwks and Dove are on
3:34
Speaker 1: board to cutting the funds rate in coming meetings. So
3:38
Speaker 1: that's what they're going to be talking about. And then
3:42
Speaker 1: one of the things that they've talked about in prior meetings,
3:45
Speaker 1: and again this is more the doves fucking point, but
3:48
Speaker 1: the Hawks acknowledge it is that if you look at
3:51
Speaker 1: the core PCE, which is the Personal Consumption Expenditures Index,
3:57
Speaker 1: it excludes food and energy. That is the inflation metric
4:01
Speaker 1: that the FMC pays more attention to than just about
4:05
Speaker 1: any other metric like the CPI and so forth. So
4:09
Speaker 1: the point that they've made is that in July of
4:12
Speaker 1: last year, inflation was I think around four percent. It's
4:18
Speaker 1: dropped about one hundred and fifty basis points, and the
4:21
Speaker 1: idea is, okay, the fund rate hasn't been changed at
4:24
Speaker 1: five and three eighths, but as inflation declines, the real rate,
4:29
Speaker 1: how much the funds rate is above the core PC
4:33
Speaker 1: has increased, and that in a sense represents policy tightening.
4:37
Speaker 1: This is another point of agreement between the Doves and Hawks, like, okay,
4:42
Speaker 1: policy even though we haven't done anything with the funds
4:44
Speaker 1: rate since July of last year, has been tightening because
4:48
Speaker 1: the real fund rate is going up. So these are
4:50
Speaker 1: the reasons why Auks and Doves are both on board
4:54
Speaker 1: to lower the funds rate in not just in September,
5:00
Speaker 1: but incoming meetings. All right, let me ask you one
5:02
Speaker 1: question first. When you say the neutral rate, would that
5:06
Speaker 1: also be construed as the natural rate if they weren't
5:11
Speaker 1: messing around with interest rates in the first place, which
5:15
Speaker 1: maybe we would all be better off for Yeah, I
5:18
Speaker 1: agree with that point in terms of historically, the Fed
5:22
Speaker 1: really and its best efforts, has not done a wonderful
5:25
Speaker 1: job in terms of the outcomes that have generated the
5:31
Speaker 1: natural rate. Again, what it is is what's the level
5:35
Speaker 1: of the funds rate that is neither restrictive or accommodative.
5:42
Speaker 1: And to me, calling the natural rate makes sense too.
5:45
Speaker 2: Okay, So that would be if there was no federal reserve.
5:50
Speaker 2: This is what it would be. And so we think
5:54
Speaker 2: it's somewhere around.
5:57
Speaker 1: Two and a half percent. Yeah, now, for what it's worth,
6:01
Speaker 1: before the financial crisis, it was closer to four and
6:03
Speaker 1: a half. So this thing changes. Obviously, we went through
6:07
Speaker 1: after the financial crisis an extended period of really muted inflation,
6:12
Speaker 1: you know, sub two percent, and things like productivity would
6:17
Speaker 1: also enter into it, you know. So it isn't, like
6:20
Speaker 1: I said, there is no precise formula. This is the
6:24
Speaker 1: best guess estimate.
6:26
Speaker 2: Okay. So yeah, because you can't know that, because you
6:29
Speaker 2: would have to have a free market that would actually
6:31
Speaker 2: set it. So in other words, you're saying that the
6:34
Speaker 2: FED is like, according to this, it should be basically
6:40
Speaker 2: two point eight seven five percent.
6:43
Speaker 1: Well, two and a half would be the dead neutral
6:45
Speaker 1: if you believe two and a half is the natural
6:48
Speaker 1: or neutral rate, the funds rate would be down there.
6:50
Speaker 1: So that kind of tells us where is it going
6:53
Speaker 1: over the next twelve eighteen months as they reduced the
6:56
Speaker 1: level of restrictiveness, that would be an endpoint of where
7:01
Speaker 1: they might get to the speed with which they move
7:05
Speaker 1: from where they currently are down towards that two and
7:07
Speaker 1: a half is going to be dictated by how much
7:10
Speaker 1: the economy slows and whether or not it goes into
7:12
Speaker 1: a recession and.
7:14
Speaker 2: How much they panic. And you can't of course political
7:18
Speaker 2: considerations here. They got to do something because the only
7:22
Speaker 2: bright spot somewhat on the economic horizon has been the
7:26
Speaker 2: stock market. If it's going to start tanking, they're going
7:29
Speaker 2: to panic. We already have green Span on on on
7:34
Speaker 2: the audio saying that I'm not green Span I'm sorry,
7:38
Speaker 2: and I'm dating myself here. Powell Powell, Yes, Jerom Powell,
7:45
Speaker 2: I did know that so we already got Powell on
7:47
Speaker 2: the record in background, you know, somebody somebody talking to
7:54
Speaker 2: like Project Veritas or something saying that he hates Trump
7:59
Speaker 2: and do anything to stop them from getting elected. So
8:03
Speaker 2: when we take into consideration the political backdrop and that
8:09
Speaker 2: now they could really bring it the rate down to zero,
8:13
Speaker 2: but there isn't that much time before the election, only
8:16
Speaker 2: two months. Don't you think they got to go for
8:18
Speaker 2: the biggest bang for the buck. I'm not in that camp,
8:21
Speaker 2: in part because we've seen evidence like the employment report
8:24
Speaker 2: that came out today, Kerrie. You know, last week I
8:28
Speaker 2: wrote that, hey, we're going to see the unemployment rate
8:31
Speaker 2: probably chick down, job growth kick up. So job growth
8:34
Speaker 2: went from one hundred and fourteen thousand to one hundred
8:36
Speaker 2: and forty two. Oh wow, twenty eight thousand increased. Right, Well,
8:43
Speaker 2: they revised July.
8:44
Speaker 1: And June down by eighty six thousand, and I think
8:48
Speaker 1: the stock market is responding to that weakness that rule.
8:53
Speaker 1: Wait a second, that number headline looks fine, but underneath
8:56
Speaker 1: it not so good.
8:57
Speaker 2: So my point is is, if.
8:59
Speaker 1: The Fed moves, even if they go fifty basis points,
9:04
Speaker 1: I think they're gonna go twenty five. But even if
9:06
Speaker 1: they go fifty, some people might start to think, hmm,
9:10
Speaker 1: what does the FED see that we don't see? In
9:12
Speaker 1: other words, is the economy slower than expected? So it
9:16
Speaker 1: perversely if they went more aggressively at this point in time,
9:20
Speaker 1: I think the stock market would react more negatively, not positive.
9:25
Speaker 1: If they go twenty five, one interpretation can be okay,
9:28
Speaker 1: the Fed still thinks everything is okay, No need to
9:32
Speaker 1: go more than twenty five.
9:34
Speaker 2: So that's my tape.
9:36
Speaker 1: I really again, I play very close attention to the
9:41
Speaker 1: minutes of the FED and all the rest of it.
9:43
Speaker 1: I've been probably more right than most people in the country.
9:47
Speaker 2: I agree with that. Well' see no no argument. But
9:51
Speaker 2: you know, I'll just go back, and we've talked about
9:54
Speaker 2: this before to the late great Alan Abelson, who was
9:59
Speaker 2: a it was the chief editor at Baron's. I remember
10:04
Speaker 2: one's comments and saying, the FED is doing what it
10:07
Speaker 2: does best, which is getting a president reelected. And hey,
10:13
Speaker 2: everybody in Washington wants to increase their own power and
10:16
Speaker 2: be able to doever they want with minimal oversight, and
10:21
Speaker 2: you know their allegiances here are very obvious.
10:25
Speaker 1: Jim, I'm nuts, you know again, I'm pretty confident that
10:32
Speaker 1: each of the FED members has their own political bias.
10:36
Speaker 1: Maybe I'm naive enough to think that they're in a
10:40
Speaker 1: position where they're looking out over the next one to
10:43
Speaker 1: three years in terms of me and that they're going
10:46
Speaker 1: to try to do the right thing right now. The
10:48
Speaker 1: right thing is cutting by twenty five. If we get
10:51
Speaker 1: some more data, that is, we could than expect it.
10:54
Speaker 1: Maybe they go fifty. I just don't see. I will
10:58
Speaker 1: wrestle and the next meeting is until after is the
11:00
Speaker 1: day after the election, right, so.
11:02
Speaker 2: They got to do it now. They need that market
11:04
Speaker 2: to jump. I will bet you a latte, and my
11:09
Speaker 2: latte at Starbucks is currently five dollars and sixty two
11:13
Speaker 2: cents get his increat from around four bucks two years ago.
11:18
Speaker 2: And they've cut back on their rewards for their their
11:23
Speaker 2: customer disloyalty program. We're it's supposed to be loyal to them.
11:27
Speaker 2: They're disloyal to honest. Yeah, but that's business in America today, right,
11:32
Speaker 2: all right, it's trying to make your buck. You know, Hey,
11:35
Speaker 2: they got to do something here. Yeah, this is the
11:38
Speaker 2: only thing they got. Well, I guess they could just
11:41
Speaker 2: print up a couple of trillion dollars and just dump
11:44
Speaker 2: it into the market.
11:45
Speaker 1: Right, Well, that's coming, I mean during the next recession.
11:49
Speaker 1: And I believe a recession is going to take hold.
11:51
Speaker 1: You know, the slow down in the economy has been very,
11:54
Speaker 1: very gradual. I think it's going to persist. There's the
11:57
Speaker 1: next couple charts just down below. Over reard Carry underscores
12:02
Speaker 1: this in terms of again looking at the labor market.
12:07
Speaker 1: You know, the savings rate now, for instance, is down
12:09
Speaker 1: to two point nine percent. Prior to the pandemic, it
12:12
Speaker 1: was about five and a half percent, between five and
12:15
Speaker 1: six percent. So the economy is still moving forward, but
12:18
Speaker 1: there's a whole lot of people that are spending, but
12:21
Speaker 1: they're not saving because they don't have the extra income
12:24
Speaker 1: to be able to do it. So there are stresses
12:27
Speaker 1: building in the economy. And if you could just tick
12:30
Speaker 1: down to the next two charts, because you know this, okay,
12:36
Speaker 1: So the one on the left is diffusion index. It's
12:40
Speaker 1: kind of like, okay, how many sectors are really contributing
12:44
Speaker 1: to employment? Bro Well, it drop below fifty percent last month.
12:47
Speaker 1: I haven't seen the number for the most recent month.
12:50
Speaker 1: So again you look back in time when fewer and
12:55
Speaker 1: fewer industries are adding jobs. You're on the cusp of
13:01
Speaker 1: a recession. The monthly hours work you can see, you know,
13:06
Speaker 1: that's a that's slowing, and that is progressive. I think
13:10
Speaker 1: that's going to continue. So my point is irrespectable of
13:13
Speaker 1: today's number. If the die is cast as far as
13:17
Speaker 1: I'm concerned, Donald, then rate's going to tick up, and
13:20
Speaker 1: you know, the labor market's going to weekend and ultimately
13:23
Speaker 1: I think we go into a recession as we get
13:24
Speaker 1: into next year.
13:25
Speaker 2: Hey, well, don't worry about it, because AI is coming
13:29
Speaker 2: to save the day. Jam. We're all going to be saved.
13:32
Speaker 2: It will save the US economy, the global economy, because
13:36
Speaker 2: Elon Musk says, so right.
13:38
Speaker 1: I don't agree with that, but you know what, you
13:43
Speaker 1: know again, AI is going to make a difference. The
13:46
Speaker 1: problem is, and I wrote about this a couple of
13:48
Speaker 1: months ago and talking about the semiconductor stocks and Nvidia.
13:52
Speaker 1: That is, fifty billion dollars were spent on Nvidia chips
13:56
Speaker 1: so far companies employing have generated three billion in revenue.
14:02
Speaker 1: So that we're at a point where people are going
14:04
Speaker 1: to start to question, gee, we're spending all this money
14:08
Speaker 1: and we're not really seeing much bank for our book,
14:10
Speaker 1: which then begs less spending. I think that's the technology
14:14
Speaker 1: weakness we've seen carry is people are waking up to like, ooh,
14:19
Speaker 1: maybe we're not going to get the return on all
14:21
Speaker 1: this money as quickly as we thought.
14:23
Speaker 2: Well, one industry that is really cashing in on the
14:28
Speaker 2: AI boom is the energy industry, the electrical industry. Now,
14:34
Speaker 2: I don't usually tell people when I buy stocks when
14:37
Speaker 2: I sell them, because I'm not a financial advisor. I
14:40
Speaker 2: don't give advice, and you know I'm no expert on it.
14:45
Speaker 2: But I did happen to buy this stock a couple
14:47
Speaker 2: months ago, called Dominion Energy. And I didn't buy it
14:51
Speaker 2: because it's financials. It's a solid mid tier electrical utility
14:57
Speaker 2: that pays the divid end of I don't know, two
15:01
Speaker 2: point seven percent something like that. The reason I bought
15:05
Speaker 2: it is because all the government data centers are in
15:10
Speaker 2: like Langley, Virginia, in that CIA strip over there, and
15:16
Speaker 2: they are piling and they're probably buying more Nvidia chips
15:19
Speaker 2: than Tesla and Musk combined. And sure enough, I was
15:26
Speaker 2: starting to wonder, it's only up like ten percent and
15:29
Speaker 2: what the market's been doing. Plus I got paid to wait.
15:33
Speaker 2: Sure enough, there was a news release saying that, hey,
15:38
Speaker 2: if you want to build a data center here, you
15:40
Speaker 2: got to make a reservation because we're all booked up.
15:44
Speaker 2: You can't just build one because they use like five
15:46
Speaker 2: hundred megawatts, which is like enough to power the state
15:51
Speaker 2: of Rhode Island, you know, and they're cashing in on
15:56
Speaker 2: it obviously for intelligence and such. Hey just get rid
16:00
Speaker 2: of like all those analysts who just to take up
16:03
Speaker 2: space and right.
16:05
Speaker 1: But I was definitely at the goringsouch that people when
16:08
Speaker 1: they made money in the Gold Rush, for the people
16:10
Speaker 1: who sold the pickets and doubles, the troubles and all the.
16:13
Speaker 2: Rest and le stress. Don't forget Levi Strauss got to
16:17
Speaker 2: have some g's baby.
16:18
Speaker 1: So you know, the utility are seeing a huge ramp
16:22
Speaker 1: up in demand for energy and they should be beneficiaries
16:27
Speaker 1: and at least at the same time, if the economy
16:30
Speaker 1: does slow, the decrease in demand, because the economy slowing
16:35
Speaker 1: is going to be offset to some extent by the
16:38
Speaker 1: increase in demand to be able to power AI and
16:41
Speaker 1: everything associated with it. Well, that was a good camber
16:44
Speaker 1: you too.
16:45
Speaker 2: I mean, the robots are coming and I have no
16:48
Speaker 2: doubt those robots are going to be super useful, especially
16:52
Speaker 2: in Florida here. They Hey, I can't walk, but my
16:56
Speaker 2: robot can go like being a cigar, right, and lighten
17:00
Speaker 2: for me. Cut the tip. That's the that's the robot.
17:03
Speaker 2: I want the one that will pick out the cigar.
17:06
Speaker 2: Cut the tip, put it in my mouth. I lighten it.
17:09
Speaker 2: I can't do anything here, jemmy, you know, and then
17:12
Speaker 2: flick the ash. Yeah, to flick the ash, lean up
17:17
Speaker 2: after me, because of course I'm you know, infirmed, I
17:20
Speaker 2: can't like do everything. But seriously, those robots are common.
17:25
Speaker 2: There's the right question, and it's going to be revolutionary.
17:29
Speaker 2: You know, we're like, we're right when the dot com
17:32
Speaker 2: bust happened, right, nobody thought the after that the Internet's
17:37
Speaker 2: not going to amount to anything yet. You know, these
17:39
Speaker 2: trillion dollar companies all all came about as a result
17:43
Speaker 2: of that. That's where we're at now, where the return
17:47
Speaker 2: is going to lag the investment. But then when it
17:50
Speaker 2: kicks in, you know, I see it with the Tesla cars.
17:52
Speaker 2: You know, I have a Tesla, big Tesla fan. Not
17:55
Speaker 2: because I say it. I think I'm saving the planet.
17:58
Speaker 2: Uh furthest thing from my mind. But the tech and
18:01
Speaker 2: that thing basically ninety percent of the time. Jeff, it's
18:05
Speaker 2: driving itself. Sure, I'm monitoring it. I'm like the pilot,
18:09
Speaker 2: so that the pilot is the car and I'm the
18:12
Speaker 2: monitoring driver. And when it does something I don't like,
18:16
Speaker 2: I'd knock it off and I'd take the control. We're
18:20
Speaker 2: not that far here, and according to Musk, we're going
18:23
Speaker 2: to be having these things. Yeah. No, I mean all
18:26
Speaker 2: those things are coming.
18:27
Speaker 1: As you point out, I tell the story about RCA
18:31
Speaker 1: because I think it's applicable. You know, radio was a
18:35
Speaker 1: huge thing when it showed up, and RCA was at
18:38
Speaker 1: the forefront of radio at radio stations all over the country.
18:42
Speaker 1: In nineteen twenty one, OURCA stock was eight dollars a share.
18:45
Speaker 1: By nineteen twenty nine it was four hundred and sixty
18:50
Speaker 1: seven dollars a share, and it went up because people
18:52
Speaker 1: are like, oh God, they're going to be able to
18:54
Speaker 1: send pictures and you'll be able to see people talking,
18:56
Speaker 1: not just listen.
18:57
Speaker 2: I'm okay.
18:58
Speaker 1: In thirty nineteen thirty two fifteen dollars a share. Now,
19:02
Speaker 1: obviously the depression had little something to do with it.
19:04
Speaker 1: My point though, is did TV stations happen. Did rca
19:09
Speaker 1: fulfill if you will, the promise of the twenties in
19:12
Speaker 1: terms of what was coming next?
19:14
Speaker 2: They did.
19:15
Speaker 1: So what happens, though, is you get into these phases
19:18
Speaker 1: where people get so enamored about what might be coming
19:20
Speaker 1: down the road they're more than willing to overpay in
19:24
Speaker 1: the shortcot.
19:25
Speaker 2: And I'll just.
19:26
Speaker 1: Think that's where we've kind of been. And ultimately what
19:29
Speaker 1: you're talking about will like the Internet, you know, after
19:33
Speaker 1: the unwined between two thousand and two thousand and two,
19:36
Speaker 1: and then you flash forward twenty years and you've got
19:39
Speaker 1: several companies that are worth three trillion dollars.
19:42
Speaker 2: Okay, so, and that is so true because it's the
19:46
Speaker 2: lag between the promise and the delivery. And we'll buy
19:50
Speaker 2: the sizzle, not the steak. So Buffet's dumped seven billion
19:55
Speaker 2: dollars worth of boa, he sold off half his Apple holdings.
20:00
Speaker 2: You know, he's got two hundred and seventy seven billion
20:02
Speaker 2: dollars in cash right now. So you can basically buy
20:07
Speaker 2: elon Musk, you know, and put them on a raft
20:10
Speaker 2: out to Africa or whatever. Are we going to see
20:14
Speaker 2: a return to real value investing here? Yeah, it's going
20:19
Speaker 2: to take time.
20:20
Speaker 1: I mean at the beginning of the piece that you're
20:21
Speaker 1: posting on your side is I'm offering a special report
20:26
Speaker 1: the coming secular bear market. And in that piece, Terry,
20:30
Speaker 1: I go back through history and then look at what's
20:33
Speaker 1: going on in our economy that has been going on
20:38
Speaker 1: that is going to require, if you will, a big adjustment.
20:42
Speaker 1: And that adjustment is going to be valuations are going
20:44
Speaker 1: to drop from very very high levels from an historical
20:48
Speaker 1: standpoint to a much more reasonable level. And as we
20:54
Speaker 1: deal with these problems, the economy is going to grow
20:57
Speaker 1: more slowly. Well, that means earnings are going to be less,
21:00
Speaker 1: So you get a combination of factors that bring stock
21:03
Speaker 1: valuations down. The parallel I would make is between nineteen
21:06
Speaker 1: sixty six nineteen eighty two, the Dow got to one
21:10
Speaker 1: thousand in nineteen sixty six. In nineteen eighty two it
21:14
Speaker 1: was trading under one hundred, a party under eight hundred. Yeah,
21:19
Speaker 1: except years later at something I remember, yeah, yeah, you
21:22
Speaker 1: know so. But it took a long time, and there
21:24
Speaker 1: were a lot of ups and downs. Is that process
21:26
Speaker 1: got worked through. I think we're on a cusp over
21:29
Speaker 1: the next ten to fifteen years where we're going to
21:32
Speaker 1: see a secular bear market. There's no way the government
21:35
Speaker 1: can continue to spend and have a deficit seven percent
21:38
Speaker 1: a year while the economy's growing one hundred and twenty
21:43
Speaker 1: five percent of debt to GDP and it's going higher.
21:47
Speaker 1: Those things have to be addressed and will be addressed.
21:50
Speaker 1: And I think the outcome is that equity valuations are
21:52
Speaker 1: going to get compressed. Hey, So just to let you know, AI,
21:56
Speaker 1: I solved the budget problem, by the way, until at
22:00
Speaker 1: GPT to cut three trillion off the budget. And the
22:03
Speaker 1: first thing it does, because it has a certain leaning,
22:06
Speaker 1: is it doesn't say anything about budget cuts. It wants
22:10
Speaker 1: to raise the tax rate on business from twenty one
22:12
Speaker 1: to twenty eight percent. So I said, do not, under
22:15
Speaker 1: any circumstances.
22:17
Speaker 2: Raise taxes, all right, And then I said get rid
22:20
Speaker 2: of one hundred government agencies. And you know what, I
22:24
Speaker 2: save trillions of dollars here, man, and I didn't even
22:27
Speaker 2: have to look at it. Yeah.
22:30
Speaker 1: The reality is, Kerry, I mean to be serious about
22:32
Speaker 1: it in the sense is we got through this problem
22:35
Speaker 1: because of too much spending, no question about it, and
22:41
Speaker 1: tax levels are lower. I just think, if you want
22:45
Speaker 1: to get serious about bringing the deficit down, you have
22:48
Speaker 1: to curb spending and you need to increase some taxes.
22:52
Speaker 1: Of course, I mean it's painful ideologically surgery.
22:57
Speaker 2: It isn't. I mean, ideology a part of me.
23:00
Speaker 1: Ideologically, the Dems aren't going to go for the spending
23:03
Speaker 1: cuts and the republic Ms aren't going to go for
23:05
Speaker 1: the taxing creases, which is how we got to do
23:08
Speaker 1: so that if indeed that happens, you spend less money,
23:12
Speaker 1: you raise taxes, there is going to be slower economic growth.
23:15
Speaker 2: If we had cut spending twenty years ago by ten
23:18
Speaker 2: percent and just we wouldn't even have these deficits now,
23:24
Speaker 2: you know, yeah, no, I mean, you know it's called discipline.
23:27
Speaker 1: I think going to last fifty years, tax receipts have
23:30
Speaker 1: averaged about seventeen and a half percent of GDP. Spending
23:34
Speaker 1: is around twenty percent, so you still had a deficit.
23:37
Speaker 1: But we're at twenty three percent to twenty four percent
23:39
Speaker 1: of GDP in terms of spending. So if there was
23:44
Speaker 1: no thing we're disciplined on the spending side, the deficits
23:47
Speaker 1: would not have been or be now. And the sad
23:51
Speaker 1: thing is both candidates are not talking about.
23:54
Speaker 2: Reducing deficits whatsoever. Well, Trump is to the extent of
24:00
Speaker 2: wants to put Elon Musk in charge of Cost Savings Commission.
24:05
Speaker 2: But yeah, yeah, Like, I think there's a realization that's
24:09
Speaker 2: dawning that it's the deed's going to have to be done.
24:14
Speaker 2: And that's the problem when you like, don't discipline your
24:17
Speaker 2: child when they're six, when they're twenty and they're in
24:22
Speaker 2: college and they're not going to class, it becomes impossible. Anyways, Hey,
24:28
Speaker 2: let's just look at it, Charity. I want to look
24:31
Speaker 2: at the old gold.
24:32
Speaker 1: Yeah, gold all right, from the low of last year
24:36
Speaker 1: goal bottom of eighteen twelve. I think we're nearing the
24:40
Speaker 1: end of that big move up from eighteen twelve. I
24:44
Speaker 1: still think there's a potential for one more pop above
24:47
Speaker 1: the twenty five twenty nine high that happened a few weeks.
24:51
Speaker 2: Ago to complete this move.
24:54
Speaker 1: If gold trades bowl twenty four to seventy, that probably
24:59
Speaker 1: reduces the the chance for another pop. My guess is well,
25:03
Speaker 1: and part of this too, besides just the price pattern
25:06
Speaker 1: bullistes on gold is quite high positioning is you know,
25:10
Speaker 1: large speculators have a very big position long in gold.
25:14
Speaker 1: Because people who have been talking about gold going to
25:16
Speaker 1: three thousand. It may indeed go to three thousand. I
25:19
Speaker 1: just think in the short term people are over extended
25:22
Speaker 1: toward gold. I think we're going to see a pullback
25:25
Speaker 1: in gold twenty three hundred and twenty three fifty. Consolidation, yeah,
25:30
Speaker 1: more consolidation than oh, my goodness, the sky's falling. In
25:33
Speaker 1: terms of the dollar, I think the dollars headed toward
25:37
Speaker 1: the mid nineties. I think near term you might see
25:41
Speaker 1: a little bit more strength, but I think we're going
25:43
Speaker 1: to take out that recent low then they'll be into
25:45
Speaker 1: their bouts. But ultimately I think carry the dollar dropped
25:50
Speaker 1: about thirteen and a half dollars from one fourteen to
25:53
Speaker 1: one oh one. You take thirteen dollars from that high
25:55
Speaker 1: at one oh seven ninety four. So nowther words, two
25:59
Speaker 1: decline that are relatively equal, and that's how you get
26:02
Speaker 1: down towards ninety five. If I'm right about the economy
26:05
Speaker 1: slowing more going into recession, FED being forced to probably
26:09
Speaker 1: accelerate rate cuts. I think that's what is why I
26:13
Speaker 1: felt really for the last two three months the trend
26:15
Speaker 1: in the dollar was down. It was just how we
26:18
Speaker 1: were going to get towards the mid nineties. Okay, all right, hey,
26:23
Speaker 1: you got more charts.
26:24
Speaker 2: We're going to cook to just TLFT again.
26:27
Speaker 1: I put these charts together a couple hours ago and
26:31
Speaker 1: Waller made some comments he's an f OMC governor, so
26:35
Speaker 1: tlt rallied above. I think he got up to maybe
26:38
Speaker 1: one hundred point seventy. What I basically told my subscribers
26:43
Speaker 1: to a macrotites briefly texteds to review. We've been long
26:47
Speaker 1: since the spring at ninety one thirteen to sell a
26:50
Speaker 1: third of their position above that ninety nine ninety three
26:54
Speaker 1: because we're getting a little overextended in the short term
26:59
Speaker 1: onl and you know, sell the news. The Fed does
27:03
Speaker 1: cut the rates I did. Potentially if they only go
27:06
Speaker 1: twenty five not fifty, that gives people a reason to
27:09
Speaker 1: fell into the news, so to speak. A longer term,
27:12
Speaker 1: I still think one oh five, one oh nine, and
27:14
Speaker 1: the possibility is if we really do go into recession,
27:18
Speaker 1: one nineteen is possible. So I'm looking to be a
27:22
Speaker 1: buyer on a pullback over the next you know, a
27:25
Speaker 1: couple of months. Uh at that panel and finally the
27:28
Speaker 1: SMP once it dropped goal of fifty five sixty one,
27:33
Speaker 1: you can see that's important support that held it twice.
27:37
Speaker 1: There's still the chance that the SMP will be able
27:41
Speaker 1: to go up one more time to a new hot. Now,
27:44
Speaker 1: what I said in Monday's Weekly Technical Review is if
27:47
Speaker 1: we do get the rally above fifty seven hundred, that's
27:50
Speaker 1: going to set the stage for a decline to fifty
27:52
Speaker 1: one fifty to forty nine eighty. In other words, that
27:56
Speaker 1: while we saw in April, I think if we did
27:58
Speaker 1: get this pop, we're going going down there. We may
28:01
Speaker 1: not get the pop. We may be just going down
28:03
Speaker 1: there directly because people are realizing, you know, oh great,
28:07
Speaker 1: they may cut more if the economy is weak. And
28:09
Speaker 1: the premise of this rally the last two months or
28:12
Speaker 1: so Jerry was, hey, the economy's okay, we don't have
28:15
Speaker 1: to worry about intercession, and the Fed's going to cut rates. Well,
28:18
Speaker 1: now all of a sudden, the idea that the economy's fine,
28:21
Speaker 1: I think, is being called into question. And even if
28:24
Speaker 1: the Fed is going to cut rates, people are looking
28:26
Speaker 1: at that as like that glass looks half empty, not
28:29
Speaker 1: half full.
28:30
Speaker 2: So you know, okay, I'm buying. I think, all right, Jim,
28:34
Speaker 2: we got to run now, Matt, it's dot com. The
28:38
Speaker 2: link to these charts. If you're listening on the podcast
28:42
Speaker 2: is in the show notes. Just click it. You'll get
28:45
Speaker 2: it from my dropbox right to you and look go
28:49
Speaker 2: subscribe macro tides dot com. You can send me an
28:52
Speaker 2: email at kl at Carrie lets dot com if you
28:55
Speaker 2: got a question or comment. Very interesting conversation, Jim. As always,
29:00
Speaker 2: we appreciate your joining us here and we'll talk to
29:04
Speaker 2: you again when the fallout happens. If we're not all
29:07
Speaker 2: in our fallout shelters, well we'll see what the FED
29:10
Speaker 2: does on September eighteenth. This was a fun conversation, Carrie.
29:13
Speaker 2: I enjoyed it and I hopefully might rise listeners as well. Always. Hey,
29:18
Speaker 2: by the way, you'll find a link to macrotides dot
29:21
Speaker 2: com in the show notes to this interview on Financial
29:25
Speaker 2: Survival Network dot com. Hey, while you're there, please sign
29:28
Speaker 2: up for your free newsletter so you get information like this. Jim,
29:32
Speaker 2: you have been ahead of the curve. We've been talking
29:34
Speaker 2: about this for like a year and a half and
29:37
Speaker 2: it's all coming to fruition. Appreciate you. Thanks very much, Carrie,
29:40
Speaker 2: have a great weekend.
29:41
Speaker 3: Thanks for listening to Carrie Lets's Financial Survival Network. Your
29:46
Speaker 3: solution to today's trying times. For the latest, go to
29:50
Speaker 3: Financial Survivalnetwork dot com. Financial Survival Network now more than
29:56
Speaker 3: ever