Latest / Financial Survival Network / Tariffs, Inflation, and Recession Ahead? - Jim Welsh #6255

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Tariffs, Inflation, and Recession Ahead? - Jim Welsh #6255 · Financial Survival Network

• 0:00
  Speaker 1: Well, the shorthand is two consecutive quarters of negative GDP growth. However,
• 0:06
  Speaker 1: we had that in twenty twenty two and I wasn't
• 0:10
  Speaker 1: in the recession camp because and we just saw this
• 0:13
  Speaker 1: this week, the trade deficit for January exploded as companies
• 0:18
  Speaker 1: and consumers bought stuff.
• 0:19
  Speaker 2: Yeah, they're front end loaded.
• 0:21
  Speaker 3: You were listening to Carrie Letz's Financial Survival Network, where
• 0:24
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• 0:32
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• 0:41
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• 0:48
  Speaker 2: And welcome you are listening to and watching the Financial
• 0:51
  Speaker 2: Survival Network. I'm your host, Carrie Leutz. Well, what's doing
• 0:55
  Speaker 2: with these markets? Are we heading into a recession? And
• 1:00
  Speaker 2: are we in the midst of a nascent bear market?
• 1:04
  Speaker 2: Let's find out. Jim Welsh is with us macrotides dot
• 1:08
  Speaker 2: com And if you're listening to this on the podcast,
• 1:12
  Speaker 2: in the show notes, there's a link to his latest newsletter,
• 1:17
  Speaker 2: which we will be going over. Jim, great to have
• 1:19
  Speaker 2: you back. So what's the verdict? Is this the bear
• 1:23
  Speaker 2: market you were talking.
• 1:24
  Speaker 1: About, Well, we'll see. I think the danger and the
• 1:28
  Speaker 1: risk is there. As I've been writing over the last
• 1:31
  Speaker 1: number of weeks, one of the things that has provided
• 1:34
  Speaker 1: a cautionary signal is the scoop has been making new highs,
• 1:38
  Speaker 1: marginal new highs at that, but the Advance Decline line
• 1:42
  Speaker 1: has not confirmed. It made its high back in November
• 1:44
  Speaker 1: twenty ninth. And the reason why this is important, Carrie,
• 1:47
  Speaker 1: is going back to like nineteen twenty eight, every single
• 1:51
  Speaker 1: major bear market and declines of you know, ten to
• 1:55
  Speaker 1: fifteen percent have been preceded by a negative divergence between
• 2:01
  Speaker 1: the S and P making a higher high and the
• 2:04
  Speaker 1: ad line not making a new high. So to me,
• 2:07
  Speaker 1: that was a warning sign that the market was vulnerable.
• 2:11
  Speaker 1: And then it's just a question of does a reason
• 2:14
  Speaker 1: to sell materialize this because Wall Street is a kind
• 2:17
  Speaker 1: of long bias. Mutual funds, pension funds, financial advisors tell people,
• 2:23
  Speaker 1: hey buy and hold for the long term. So in
• 2:26
  Speaker 1: order to get people to sell, they have to be
• 2:28
  Speaker 1: given a pretty good reason. And I thought the tariff
• 2:31
  Speaker 1: stuff would provide a reason. A lot of people thought
• 2:35
  Speaker 1: that Trump was just yeah, it's going to be like
• 2:37
  Speaker 1: two thousand, as any team be a lot of bluster
• 2:41
  Speaker 1: but not really making you know, an impact. And my
• 2:44
  Speaker 1: belief has been is no, he and his team are
• 2:47
  Speaker 1: serious about terrorists and it is going to have economic
• 2:50
  Speaker 1: repercussions that could get us to the point of a recession.
• 2:55
  Speaker 1: We just obviously have to see it play out. How
• 2:59
  Speaker 1: far do they go, how far do other countries respond
• 3:02
  Speaker 1: with retaliatory terroriffts. But the bottom line is the uncertainty
• 3:06
  Speaker 1: alone is causing businesses and consumers to pull back a
• 3:09
  Speaker 1: little bit, Carrie, and consumers are worried about in fishing.
• 3:13
  Speaker 1: The recent University of Michigan confidence survey showed inflation expectations
• 3:19
  Speaker 1: over the last three four months have jumped from three
• 3:23
  Speaker 1: to three to four three. That's a big move, you know,
• 3:25
  Speaker 1: And so they actually that's an anticipation of terrence. When
• 3:28
  Speaker 1: we start to see price levels go up because of teriffs,
• 3:32
  Speaker 1: that's just going to think and.
• 3:33
  Speaker 2: Reinforce that, Hey, what's some tariffs among friends?
• 3:38
  Speaker 1: Though, well, the problem is that even friends aren't going
• 3:42
  Speaker 1: to appreciate it. And I get what President Trump is
• 3:46
  Speaker 1: trying to do in terms of created a more level
• 3:49
  Speaker 1: playing field between our trading partners and the United States
• 3:54
  Speaker 1: the problem and I've written about this extensively. Historically, terroriffs
• 3:58
  Speaker 1: have not worked out well. The last time we had
• 4:00
  Speaker 1: a big terror for was started and initiated by the
• 4:04
  Speaker 1: US back in nineteen thirty with the initiation of the
• 4:11
  Speaker 1: smoothhually spare of laws. And historically globalization has provided a
• 4:20
  Speaker 1: plus for global GDP growth, which has in turn raised
• 4:25
  Speaker 1: living standards. Yeah, for billions of people. It lifted a
• 4:32
  Speaker 1: lot of people out of poverty. So to me, I'm
• 4:36
  Speaker 1: not in favor of tariffs in twenty eighteen since we
• 4:38
  Speaker 1: have a recent example to go buy the Federal Reserve
• 4:41
  Speaker 1: of other entities have done in analysis and guess yeah what.
• 4:48
  Speaker 1: It didn't increase jobs, especially in manufacturing, which is one
• 4:51
  Speaker 1: of the stated goals, and inflation did go up, granted
• 4:54
  Speaker 1: it was out a very narrow basket of goods based
• 4:57
  Speaker 1: on the tariffs from twenty eighteen who stated goals were achieved.
• 5:01
  Speaker 1: So doing this in a much more broad way, I
• 5:06
  Speaker 1: don't see that it's going to generate the results that
• 5:11
  Speaker 1: President Trump is hoping for. But you know, this is
• 5:16
  Speaker 1: his belief system and he's going to run with it.
• 5:20
  Speaker 2: So but you know, when we look the government needs
• 5:25
  Speaker 2: more revenue, right yep. And in theory, you know, like
• 5:30
  Speaker 2: I remember when we had the so called voluntary auto
• 5:36
  Speaker 2: import restrictions from Japan, BA, Do you remember what the companies?
• 5:45
  Speaker 2: Remember what the car companies did? All they did, they
• 5:49
  Speaker 2: didn't increase their production. They just raised their prices and
• 5:53
  Speaker 2: increase their margins. So then they're going to be the
• 5:57
  Speaker 2: same thing. Back to the future here.
• 6:01
  Speaker 1: Well, again, it's a little bit more complicated relative to
• 6:04
  Speaker 1: nineteen eighty because about I think at least a quarter
• 6:09
  Speaker 1: of all cars sold in the US are manufactured primarily
• 6:13
  Speaker 1: in Mexico and some in Canada. And what happens Carrie is,
• 6:20
  Speaker 1: in a sense the parts go back and forth across
• 6:22
  Speaker 1: the border more than once as this production process is unfolded.
• 6:28
  Speaker 1: So it's a little, yeah, a little bit more complicated
• 6:33
  Speaker 1: than back in the nineteen eighties. But President Trump thinks,
• 6:37
  Speaker 1: I take two things, and Scott Bess, his Treasury secretary,
• 6:39
  Speaker 1: has kind of emphasized from their point of view, extending
• 6:43
  Speaker 1: the twenty seventeen tax cuts is critically important to generate
• 6:50
  Speaker 1: more growth. What you don't want is effectively a tax
• 6:55
  Speaker 1: increase between four and four and a half trillion that
• 6:58
  Speaker 1: would happen over the following ten years. But to your point,
• 7:03
  Speaker 1: tariffs provide revenue, and I think what they're hoping to
• 7:07
  Speaker 1: achieve is by increasing tariffs on just about everything that
• 7:12
  Speaker 1: comes in this country, it will generate close to the
• 7:17
  Speaker 1: four to four and a half trillion dollar tax cut,
• 7:20
  Speaker 1: so effectively, that's what they're going to pay for it.
• 7:23
  Speaker 1: But the reality is most companies I think are going
• 7:27
  Speaker 1: to be more inclined this time around than in twenty
• 7:31
  Speaker 1: eighteen to pass along a greater proportion for the increase
• 7:37
  Speaker 1: in the cost. In twenty eight years, remember we had
• 7:39
  Speaker 1: years you know, six seven years are very low inflation.
• 7:43
  Speaker 1: Companies were competing for market share, so the idea of
• 7:45
  Speaker 1: raising prices was like, oh, we don't want to do that.
• 7:47
  Speaker 1: But after the inflation experience we had and companies having
• 7:51
  Speaker 1: success in raising prices, I just think more of them
• 7:53
  Speaker 1: are going to be tempted to say, all right, we'll
• 7:57
  Speaker 1: absorb twenty percent, but we're going to pass along eighty percent.
• 8:00
  Speaker 1: So there is going to be a jump in inflation
• 8:03
  Speaker 1: from the tariffs, and that I think is a negative
• 8:07
  Speaker 1: for the economy because we're so bifurcated. The top ten
• 8:12
  Speaker 1: percent of Yeah, of wag jenners now making more than
• 8:15
  Speaker 1: two hundred and fifty thousand carry provide about fifty percent
• 8:19
  Speaker 1: of all spending. The other eighty percent have not been
• 8:23
  Speaker 1: increasing their spending at the same level. So they're under
• 8:26
  Speaker 1: the gun, and I think higher prices for whatever reason
• 8:29
  Speaker 1: is going to make their lives more difficult and they're
• 8:31
  Speaker 1: likely to pull back.
• 8:33
  Speaker 2: Yeah, I think so, huh, Well, I guess well, and
• 8:37
  Speaker 2: the real.
• 8:37
  Speaker 1: Risk is, you know what's keeping the economy going. I
• 8:40
  Speaker 1: think between September twenty three and September twenty four, that
• 8:44
  Speaker 1: top to ten percent of waggeners increase they're spending by
• 8:48
  Speaker 1: twelve percent. The bottom eighty percent that twelve month window
• 8:52
  Speaker 1: they're spending actually declined. So you know what's fueling the
• 8:56
  Speaker 1: spending of the top is ascidet values have gone off
• 8:59
  Speaker 1: a lot. So if you have a stock portfolio over
• 9:03
  Speaker 1: the last five years, you're in good shake. If you
• 9:05
  Speaker 1: own a home, that's going up forty fifty percent. But
• 9:07
  Speaker 1: if you're renting now you don't have a stock portfolio,
• 9:10
  Speaker 1: you're much more you know, paycheck to paycheck, and I
• 9:13
  Speaker 1: think that explains it. But the risk is that if
• 9:15
  Speaker 1: we see a significant decline in the stock market, some
• 9:18
  Speaker 1: of those top ten percent right vendors will also pull back.
• 9:22
  Speaker 1: So that's I think the risk for the second half
• 9:24
  Speaker 1: of this year in terms of the economy potentially going
• 9:26
  Speaker 1: into recession, is that you get this initial slow down
• 9:30
  Speaker 1: as a reaction to the tariff war, whatever it turns
• 9:32
  Speaker 1: out to be, and then if the markets react negatively,
• 9:37
  Speaker 1: you know, you see a cutback anybody, those who have
• 9:40
  Speaker 1: been spending most.
• 9:41
  Speaker 2: I gotcha, I gotcha. So effectively, though, you could make
• 9:45
  Speaker 2: the argument that a tariff is simply a consumption tax, right.
• 9:49
  Speaker 1: Yeah, someone's paying for it. Yeah, I mean it just
• 9:52
  Speaker 1: comes down to, all right, well, the originating exporting country
• 9:56
  Speaker 1: pay for some of it, Okay, and not a lot,
• 10:00
  Speaker 1: but they'll pay for some. The company that imported the
• 10:03
  Speaker 1: goods they pay for some. But twenty five percent is
• 10:06
  Speaker 1: a big number. So yeah, right, it's a consumption tax.
• 10:10
  Speaker 2: Right, So going under another name, Yeah, well all right,
• 10:16
  Speaker 2: so let's say this happens now. So, uh, is it
• 10:22
  Speaker 2: necessarily negative?
• 10:24
  Speaker 1: Well, the market stock market at least is priced for
• 10:29
  Speaker 1: economic growth. I mean, up until just the last few weeks,
• 10:32
  Speaker 1: people were on board with this is going to be
• 10:35
  Speaker 1: good for the economy. The economy's growing two and a
• 10:37
  Speaker 1: half three percent, might be a little speed bump from tariffs,
• 10:40
  Speaker 1: but no big deal. So the fact that all of
• 10:44
  Speaker 1: a sudden we're seeing economic gated come in before the
• 10:47
  Speaker 1: tariffs already showing signs of slowly, that's kind of challenged
• 10:52
  Speaker 1: that Sanwine outlook. And I think you know, in terms
• 10:56
  Speaker 1: of the stock market, it's selling at a very high
• 10:59
  Speaker 1: level in terms of P. All right, but Jen, look,
• 11:04
  Speaker 1: but other measures of evaluation, just so you know, well.
• 11:09
  Speaker 2: How do you how do you define a recession? What's
• 11:12
  Speaker 2: your definition?
• 11:13
  Speaker 1: Well, the shorthand is two consecutive quarters of negative GDP growth. However,
• 11:20
  Speaker 1: we had that in twenty twenty two, and I wasn't
• 11:23
  Speaker 1: in the recession camp because and we just saw this
• 11:27
  Speaker 1: this week, the trade deficit for January exploded as companies
• 11:31
  Speaker 1: and consumers bought stuff.
• 11:33
  Speaker 2: Yeah, they're front end loaded exactly.
• 11:35
  Speaker 1: And so you know the short run, what happens the
• 11:39
  Speaker 1: way they calculate GDP, it's gross domestic production, So everything
• 11:43
  Speaker 1: that we import, they actually subtract that from GDP. So
• 11:48
  Speaker 1: the Atlanta Fed has their GDP now thing, and it
• 11:51
  Speaker 1: was like two and a half percent, and then after
• 11:53
  Speaker 1: a Friday when the trade deficit was reported, they went
• 11:56
  Speaker 1: from two and a half to a minus one and
• 11:58
  Speaker 1: a half percent because of trade. Now, the point I've
• 12:02
  Speaker 1: made back in twenty twenty two and would make today
• 12:05
  Speaker 1: is that represents demand. In other words, the economy isn't
• 12:10
  Speaker 1: weakening because people are pulling back on spending. It's just
• 12:13
  Speaker 1: the opposite. They're increasing their spending and it's causing imports
• 12:18
  Speaker 1: to spike. Now what that means isn't coming months. I
• 12:23
  Speaker 1: think you'll see the trade deficit come down fairly significantly
• 12:27
  Speaker 1: because you had this burst of buying pulling demand forward,
• 12:31
  Speaker 1: and so we'll see GDP rebound as that takes place.
• 12:36
  Speaker 1: The other thing is that inventories are going to increase,
• 12:39
  Speaker 1: which adds to GDP. So you've got a lot of
• 12:43
  Speaker 1: noise going on, and that's what happened in twenty twenty two.
• 12:47
  Speaker 1: Carry is, in the first quarter, trade brought the GDP
• 12:51
  Speaker 1: to a negative. In the second quarter of twenty twenty two,
• 12:54
  Speaker 1: Walmart Target slashed inventories enough to cause the second quarter
• 12:59
  Speaker 1: GDP twenty twenty two to be negative. So one has
• 13:03
  Speaker 1: to kind of look beyond the headlines. When GDP movements
• 13:08
  Speaker 1: are the result of big swings in trade and or inventories.
• 13:12
  Speaker 1: As long as consumer spending, which I was holding up
• 13:15
  Speaker 1: in twenty twenty two, holds in there. But then you know,
• 13:19
  Speaker 1: we'll be okay for a little while. But I am
• 13:22
  Speaker 1: pretty cautious that I think if President Trump follows through
• 13:27
  Speaker 1: on what his stated plans are, economic growth is going
• 13:31
  Speaker 1: to slow more than most people are expecting.
• 13:36
  Speaker 2: All right, So but look, you agree that the actual
• 13:41
  Speaker 2: underlying inflation rate has been understated. Yeah, all right, So
• 13:47
  Speaker 2: if we actually were to apply the proper GDP deflator
• 13:52
  Speaker 2: and we've had und a recession for four years, what's
• 13:56
  Speaker 2: the difference here?
• 13:57
  Speaker 1: Yeah, Well, the difference is talking about is you know,
• 14:01
  Speaker 1: a significantly higher you know, amplifying inflation by at least
• 14:06
  Speaker 1: two and a half percent a year, since that's what
• 14:08
  Speaker 1: GDP has been kind of doing. I'm growing at two
• 14:11
  Speaker 1: and a half percent. I'm not willing to go that far.
• 14:14
  Speaker 1: But your main point is the economy has been struggling
• 14:18
  Speaker 1: and weaker than what the state of GDP numbers are.
• 14:21
  Speaker 1: I would agree with that, and again it's because of
• 14:23
  Speaker 1: two things. The government ran a deficit of six point
• 14:26
  Speaker 1: four percent last year of GDP. Okay, we grew two
• 14:30
  Speaker 1: and a half percent, will be but a lot of
• 14:32
  Speaker 1: it was because of government spending. One of the things
• 14:34
  Speaker 1: that Besson has said there goal is to cut the
• 14:37
  Speaker 1: deficit from two trillion to one trillion. Yeah, and then
• 14:41
  Speaker 1: the point I made is, hey, that's a worthy goal.
• 14:45
  Speaker 1: It's hopefully they will accomplish it. But when you cut
• 14:48
  Speaker 1: spending in the economy by three percent or more, I
• 14:53
  Speaker 1: guess what's going to happen to grow. It's going to slow.
• 14:56
  Speaker 1: So these are all the things that I think will
• 14:59
  Speaker 1: take time to play out. But the combination of cutting
• 15:02
  Speaker 1: government spending and uh, you know, consumers pulling back because
• 15:06
  Speaker 1: of higher prices, I think we're headed toward a soft
• 15:10
  Speaker 1: spot in the economy. Doesn't fulfill the official definition of
• 15:15
  Speaker 1: a recession. We'll see, but I don't think that the
• 15:19
  Speaker 1: equity market has been priced for, you know, a significant
• 15:25
  Speaker 1: slowdown in the economy, and potentially later this year people
• 15:29
  Speaker 1: beginning to worry about, oh my goodness, maybe we're going
• 15:31
  Speaker 1: into a recession. Historically, the average bear market during a
• 15:35
  Speaker 1: recession takes the SMP down thirty six percent. Mm.
• 15:40
  Speaker 2: Okay, well, so you're why vote you're unploded to elect
• 15:45
  Speaker 2: your mind old, all of a sudden, have a really
• 15:46
  Speaker 2: good reason to sell.
• 15:48
  Speaker 1: Well, hey, you got to be realistic, you know. I mean,
• 15:52
  Speaker 1: I you know, one of the things that I'll touch on,
• 15:55
  Speaker 1: because the Republican has passed a budget lasts through the
• 15:59
  Speaker 1: House last week, and immediately the Democrats said, oh my god,
• 16:03
  Speaker 1: they're slashing and burning medicaid spending. They're cutting eight hundred
• 16:06
  Speaker 1: and eighty billion dollars. It's going to be a catastrophe
• 16:10
  Speaker 1: for everybody, all right. And what you know, when you
• 16:13
  Speaker 1: and I talk, you know, you say, well, you know,
• 16:15
  Speaker 1: I spent a couple thousand dollars on meat last year.
• 16:18
  Speaker 1: I think I'm going to cut back. We would say, okay,
• 16:20
  Speaker 1: I mean I'll spend nineteen hundred or eighteen hundred dollars
• 16:23
  Speaker 1: this year. That's not how it works in Washington. They
• 16:25
  Speaker 1: develop a baseline of spending for the next seven years,
• 16:30
  Speaker 1: and so if they project medicaid spending to rise by
• 16:33
  Speaker 1: let's say five percent a year, and all of a sudden,
• 16:36
  Speaker 1: the Republicans said, well, no, let's only allow it to
• 16:40
  Speaker 1: rise by two percent. So spending on Medicaid in the
• 16:44
  Speaker 1: next decade will increase by one and a half trillion
• 16:49
  Speaker 1: but the Democrats are calling that, you know, a disastrous
• 16:52
  Speaker 1: cut because the baseline haded going up by two point
• 16:56
  Speaker 1: three tray in. But other words, spending is going up
• 17:00
  Speaker 1: one and a half troyon, and yet the Democrats are
• 17:02
  Speaker 1: calling that a cut of eight hundred billion. Welliot Washington,
• 17:07
  Speaker 1: can a spending increase be.
• 17:08
  Speaker 2: Termed a cop So back to their same old tricks.
• 17:12
  Speaker 1: Yeah, yeah, you know, tax cuts the other thing. Oh
• 17:16
  Speaker 1: my god, it's all for. They just want to give
• 17:18
  Speaker 1: the billionaires and they're rich at tax cut, and the
• 17:21
  Speaker 1: hell would everybody else? Well, here's the reality, and most
• 17:24
  Speaker 1: people don't know this. In last year, of the bottom
• 17:29
  Speaker 1: fifty percent of wagerners paid three percent of the total
• 17:34
  Speaker 1: income taxes collected. So that leans the top fifty percent
• 17:37
  Speaker 1: of wagerners pay ninety seven percent, with the bulk of
• 17:41
  Speaker 1: that going in the top twenty five. How can you
• 17:43
  Speaker 1: give a tax cut to people who haven't paid, that
• 17:46
  Speaker 1: aren't paying taxes. You know what.
• 17:48
  Speaker 2: That's called a negative tax cut, Jim. And that's called
• 17:52
  Speaker 2: a general whack.
• 17:53
  Speaker 1: That's called a giveaway.
• 17:55
  Speaker 2: But in all seriousness, they are raising taxes on the rich.
• 18:03
  Speaker 2: If you own a sports franchise, you know, you're not
• 18:06
  Speaker 2: going to be able to like depreciate your quarterback's arm,
• 18:09
  Speaker 2: or your pitcher's arm, or your kicker's foot, and carried
• 18:13
  Speaker 2: interest for hedge's Yeah, that's going to end, and a
• 18:18
  Speaker 2: couple of other things. So, I mean, it really doesn't
• 18:21
  Speaker 2: amount to a row of pins in the scheme of things.
• 18:24
  Speaker 2: But at least it's like, hey, the rich are paying
• 18:27
  Speaker 2: their quote unquote fair share. But what about Trump's desire
• 18:31
  Speaker 2: just to get rid of the irs. How if we
• 18:35
  Speaker 2: had a consumption tax of say fifteen or twenty percent national,
• 18:40
  Speaker 2: would that be enough to make up for it?
• 18:43
  Speaker 1: I don't know, but again that would be the argument
• 18:47
  Speaker 1: against it. Carry is that at fifty percent, if you
• 18:51
  Speaker 1: had a fifteen percent tax on someone who's making fifty
• 18:55
  Speaker 1: or sixty thousand dollars, that's a larger burden than oh,
• 19:02
  Speaker 1: a fifteen percent tax on somebody making a million. Yeah,
• 19:05
  Speaker 1: and they're spending a million, Okay, And I would quite
• 19:08
  Speaker 1: honestly agree with that. Our tax system as it is
• 19:11
  Speaker 1: today is really fairly aggressive. You just have people are
• 19:17
  Speaker 1: just not knowledgeable to know that in fact, it is progressive,
• 19:22
  Speaker 1: and it's.
• 19:24
  Speaker 2: Counter three percent of income tadgets, and it really doesn't
• 19:29
  Speaker 2: achieve its purpose.
• 19:30
  Speaker 1: It's like mushroom management, you know, mushroom management. Keep dark
• 19:34
  Speaker 1: in the dark, beat him a lot of fertilizer.
• 19:37
  Speaker 2: Yeah, then can them a lot of excrement. The more
• 19:40
  Speaker 2: excrement to.
• 19:41
  Speaker 1: Get, the better it is, right, decided to know the
• 19:45
  Speaker 1: higher road fertilizer. All right. So but we're at the
• 19:50
  Speaker 1: same place, right, So my only point is that you
• 19:52
  Speaker 1: have you know, the Democrats will do everything they possibly
• 19:55
  Speaker 1: can to undermine what President Trump is doing and some
• 19:59
  Speaker 1: of the things. You know that the thing I point
• 20:01
  Speaker 1: out in the March letter macrotized letter is the GAO.
• 20:06
  Speaker 1: Last April Kerry came out and said, you know what,
• 20:09
  Speaker 1: somewhere between two hundred and thirty and five hundred and
• 20:12
  Speaker 1: twenty billion dollars of fraud and waste exists every single
• 20:18
  Speaker 1: year in government spending. So all right, So here you
• 20:22
  Speaker 1: have Doze and Elon Musk trying to do some due
• 20:26
  Speaker 1: dilences and identify some of that fraud and waste. And
• 20:31
  Speaker 1: the Democrats are going out of their minds.
• 20:33
  Speaker 2: Yeah, because they're the recipients. Because they're the direct recipients
• 20:37
  Speaker 2: of that fraud which we've seen from USAID has sprinkled
• 20:42
  Speaker 2: all throughout the government, all over the place.
• 20:44
  Speaker 1: Right. So my point is, unfortunately, you know, must pulling
• 20:49
  Speaker 1: out a chainsaw not probably the right look. You know,
• 20:53
  Speaker 1: just take a serious be serious. Well I like it.
• 20:57
  Speaker 1: I laughed too. At the same time, you're giving political
• 21:00
  Speaker 1: fodder to the opposition to be able to say, look
• 21:04
  Speaker 1: at this guy, he's trying to take your Medicare, you're
• 21:07
  Speaker 1: social Security, you're Medicaid.
• 21:09
  Speaker 2: No one's buying that stuff, Jim.
• 21:11
  Speaker 1: Oh.
• 21:11
  Speaker 2: The Democrats are Oh, it's they're a minority, and you know,
• 21:16
  Speaker 2: they've viewed so many laws here. And not that the
• 21:20
  Speaker 2: Republicans are so innocent either, but they've controlled the government
• 21:26
  Speaker 2: for twelve out of the last sixteen years, and all
• 21:30
  Speaker 2: this fraud escalated. And one thing we learned from Doge
• 21:34
  Speaker 2: is that you always knew what was happening, but it's
• 21:37
  Speaker 2: way worse than you ever thought it could possibly be. Right,
• 21:42
  Speaker 2: you know, we see it. So they've lost their credibility,
• 21:46
  Speaker 2: they lost their moral high ground if they ever had
• 21:49
  Speaker 2: such a thing before. And now the fun begins because
• 21:53
  Speaker 2: we just scratched the surface here. The fraud is rampant.
• 21:58
  Speaker 2: And I don't know about you, but if I had
• 22:02
  Speaker 2: to take a guess at how much money the government
• 22:05
  Speaker 2: wastes every year and how much is stolen and whatever
• 22:09
  Speaker 2: that falls into the sinkhole. I think it's thirty five
• 22:13
  Speaker 2: or fifty percent. I think that's a reasonable guesstimate. And
• 22:18
  Speaker 2: nothing I've seen so far from Doge has convinced me otherwise.
• 22:22
  Speaker 1: You yeah, no, I mean again, I think the goal
• 22:27
  Speaker 1: of burning out waste and fraud is absolutely necessary, required,
• 22:32
  Speaker 1: and it's sacrilegious that it hasn't really happened. In yeah,
• 22:37
  Speaker 1: very very long waiting for the only thing I will say.
• 22:41
  Speaker 1: You say is though you say, okay, they lost credibility,
• 22:45
  Speaker 1: not with the Democrats, Okay. In other words, the Democrats,
• 22:49
  Speaker 1: I mean, get most of their information from the New
• 22:51
  Speaker 1: York Times. The New York Times is going to say
• 22:55
  Speaker 1: stuff that may not be attached to reality, but it's
• 22:58
  Speaker 1: the spoon feeding of the faithful that they're going to bleed.
• 23:01
  Speaker 1: Here's a pill. Gallup came out with a poll that
• 23:04
  Speaker 1: was taken on February nineteenth, asking people what kind of
• 23:08
  Speaker 1: job you think President trumb is doing so far? The
• 23:11
  Speaker 1: Republicans were ninety three percent approval, The Democrats were four percent.
• 23:17
  Speaker 1: So what I wrote about in the March Macro times.
• 23:21
  Speaker 1: But this shows me is there's a whole bunch of
• 23:23
  Speaker 1: people in the Republican Party who think, you know, Trump
• 23:27
  Speaker 1: is the second coming of the Messiah, They're gonna do
• 23:30
  Speaker 1: no wrong. And in the Democrats, he's the devil incarnate
• 23:34
  Speaker 1: who can only do evil.
• 23:35
  Speaker 2: Really no power. Now the Democrats co opted out.
• 23:43
  Speaker 1: Right.
• 23:44
  Speaker 2: What's the majority in the House for the Republicans. Yeah, well,
• 23:48
  Speaker 2: but then we get into voter fraud and other things.
• 23:51
  Speaker 1: Four seats. What do you think is going to happen
• 23:53
  Speaker 1: in remember of twenty six I think they're going to
• 23:56
  Speaker 1: lose those They're going to lose that majority, I lay
• 23:59
  Speaker 1: out if Again, my only point here is that you
• 24:05
  Speaker 1: have both camps or people in the Republican Party and
• 24:08
  Speaker 1: the Democratic Party that are incapable of critical thinking. Yeah,
• 24:13
  Speaker 1: so that's the problem. I think that. But so come
• 24:18
  Speaker 1: on the fraud.
• 24:19
  Speaker 2: It's not just the budget where the fraud's rampant. We
• 24:22
  Speaker 2: know it's rampant in the electoral process here too.
• 24:27
  Speaker 1: Again that has to be proven beyond the shadow of
• 24:30
  Speaker 1: it down there's no quote, you can get hardcore people
• 24:34
  Speaker 1: who are Dems to believe any of that. They're just again,
• 24:39
  Speaker 1: they're going to believe that, oh, they're just making all
• 24:41
  Speaker 1: this stuff up and they're hurting a lot of people
• 24:44
  Speaker 1: around the world. Yeah, I have I have relatives that
• 24:48
  Speaker 1: are really liberal, and that's what they tell me.
• 24:52
  Speaker 2: Yeah, they're not critical thinkers. I agree with all the happening,
• 24:56
  Speaker 2: but the mindset, yeah, you know, you know, I think
• 25:03
  Speaker 2: it's interesting that there's been no discussion at all of
• 25:08
  Speaker 2: voter fraud and cracking down on it, other than there's
• 25:11
  Speaker 2: a couple scattered cases, one in Florida, which actually details
• 25:15
  Speaker 2: how the fraud takes place by this voter registration cloning.
• 25:20
  Speaker 2: So it's too early to make predictions for twenty six,
• 25:24
  Speaker 2: but you know, recession, we've already we've already been there
• 25:29
  Speaker 2: and done it. So it'll get a little worse. But
• 25:32
  Speaker 2: people don't even understand it, you know, they they don't
• 25:35
  Speaker 2: understand Jim, that they're purchasing power and the dollar has
• 25:40
  Speaker 2: lost ninety eight percent since twenty thirteen, maybe ninety nine,
• 25:45
  Speaker 2: I mean since nineteen thirteen, rather in the one hundred
• 25:50
  Speaker 2: years of the Fan, twelve years of the FED. The
• 25:53
  Speaker 2: fact that they've carried it on as long as they
• 25:55
  Speaker 2: have is pretty remarkable. Okay, so the market, what do
• 26:02
  Speaker 2: you think the decline.
• 26:03
  Speaker 1: Is going to be here? I think we're gonna get
• 26:06
  Speaker 1: a bounce in the short term. The S and P
• 26:09
  Speaker 1: this morning got down near the two hundred day average.
• 26:12
  Speaker 1: That for some people like, Okay, this is the place
• 26:15
  Speaker 1: to buy. Yeah, I think right, and then some short
• 26:20
  Speaker 1: covering kicks in. But my take is whatever bounce that happens,
• 26:24
  Speaker 1: I think is going to be followed by another leg
• 26:27
  Speaker 1: down because I think Trump is serious about the tariffs
• 26:30
  Speaker 1: that they're going to enact on April second. So to me,
• 26:34
  Speaker 1: if the market got stretched, SMP dropped like two hundred
• 26:38
  Speaker 1: and fifty points from yesterday morning to this morning. That's
• 26:41
  Speaker 1: a heck of a move in a very short period
• 26:43
  Speaker 1: of time. So you get a snap back rally. I
• 26:46
  Speaker 1: think there's another leg down that's coming. And if you know,
• 26:51
  Speaker 1: things blow up into a full blown trade war, you know,
• 26:55
  Speaker 1: twenty percent. I think that's possible. So we're talking about
• 26:59
  Speaker 1: a move on a forty nine hundred, fifty one hundred
• 27:02
  Speaker 1: potentially on the S and P. So you know, I've
• 27:07
  Speaker 1: been cautioning my subscribers that, hey, things are weakening, we're
• 27:11
  Speaker 1: going to have a reason to sell. It's going to
• 27:13
  Speaker 1: get a little ugged. In terms of gold. I think
• 27:16
  Speaker 1: gold is near an important high.
• 27:19
  Speaker 2: Yeah, I was going to ask you about that. So
• 27:21
  Speaker 2: we're getting close to three thousand. Every time it gets
• 27:24
  Speaker 2: close it gets slammed, right.
• 27:27
  Speaker 1: Yeah, I mean just from the price pattern from the
• 27:29
  Speaker 1: low back in September of twenty twenty two at a
• 27:34
  Speaker 1: gold bottom up, I think one thy six hundred and twelve.
• 27:38
  Speaker 1: To me, price pattern wise, it looks like we're completing
• 27:41
  Speaker 1: the fifth leg of that rally. And we're in the
• 27:45
  Speaker 1: fifth leg, and there's one more pop to take gold
• 27:48
  Speaker 1: above twenty nine to fifty four. But I think that
• 27:51
  Speaker 1: sets the table for a pullback that could take it
• 27:55
  Speaker 1: under twenty six hundred. The first target would be the
• 27:58
  Speaker 1: most recent law at twenty five fourty one. So I
• 28:01
  Speaker 1: think this is a place to be lighting up on gold,
• 28:06
  Speaker 1: all right.
• 28:07
  Speaker 2: And so what do you invest in bitcoin?
• 28:12
  Speaker 1: I think you know, when Bidfoy was playing trading in
• 28:15
  Speaker 1: one hundred and three thousand, I basically said, I think
• 28:20
  Speaker 1: it's going to seventy three thousand. Haven't gotten there yet,
• 28:23
  Speaker 1: but I still think that's not an unreasonable target. So
• 28:28
  Speaker 1: I think bitcoin, like the SMP, we're working our way
• 28:33
  Speaker 1: down to a lower price, and so you get a hit,
• 28:36
  Speaker 1: you get a rebound. Okay, you get hit, you get
• 28:41
  Speaker 1: a rebound. I think it's called lower oil. The Saudi
• 28:46
  Speaker 1: Arabia and the Opex that they're going to increase production
• 28:50
  Speaker 1: a very very small amount. The main thing is that
• 28:53
  Speaker 1: the economy slows carry I think that means less demand
• 28:58
  Speaker 1: for oil might take is that oil as a shot
• 29:01
  Speaker 1: for sixty sixty two? Then I guess ready here on
• 29:05
  Speaker 1: sixty seven.
• 29:08
  Speaker 2: Oh geez, is anything going to go up besides inflation?
• 29:12
  Speaker 2: You know, this reminds me of Will Rogers investing inflation.
• 29:16
  Speaker 2: It's the only thing going up.
• 29:19
  Speaker 1: Well again, I think the thing is if we have
• 29:22
  Speaker 1: a full blown recession, what's going to happen is you're
• 29:25
  Speaker 1: going to get this pop in inflation from the tariffs.
• 29:30
  Speaker 1: But that's a one time adjustment. It's so of like, hey,
• 29:33
  Speaker 1: we're going to do all this again next year or
• 29:35
  Speaker 1: the year after. It's a one time adjustment. So I
• 29:38
  Speaker 1: think what happens You get to pop int of inflation,
• 29:40
  Speaker 1: and then as the economy slows, that inflation starts to
• 29:44
  Speaker 1: melt away because demand will drop as people pull back.
• 29:49
  Speaker 1: So you know, again I think near term, that's problematic.
• 29:55
  Speaker 1: I think the biggest risk is if the CPI gets
• 29:58
  Speaker 1: up in there, yeah or four percent, which it very
• 30:01
  Speaker 1: well might. As we get towards the summertime. You know
• 30:05
  Speaker 1: that Fed it has to make a decision. In twenty eighteen,
• 30:07
  Speaker 1: they decided to look through the terraffs eight they weren't
• 30:11
  Speaker 1: you know, the tariff increases were relatively small compared to
• 30:14
  Speaker 1: what we're talking about today, and at one time nature
• 30:17
  Speaker 1: of them, they thought, okay, it's going to pay right,
• 30:19
  Speaker 1: that's through. Plus, inflation expectations were really well controlled and
• 30:23
  Speaker 1: had been for years. So the Fed might have a
• 30:26
  Speaker 1: real tough decision. But I think I don't see them
• 30:31
  Speaker 1: raising rates carry It just comes down to delaying any
• 30:34
  Speaker 1: cuts for a while longer. Okay, So so.
• 30:42
  Speaker 2: Rate cuts they'll put off as long as they can
• 30:44
  Speaker 2: or what do you think?
• 30:45
  Speaker 1: Yeah? Yeah, I mean again, you're gonna need to see
• 30:49
  Speaker 1: the unemployment rate really took up. That's what will get
• 30:53
  Speaker 1: them and prompt them to make a decision to lower rates.
• 30:59
  Speaker 1: Plus at that point in time, they will have a
• 31:02
  Speaker 1: much better handle like all the rest of us. How
• 31:05
  Speaker 1: far are the tariffs going, what is the size? How
• 31:09
  Speaker 1: long are they going to remain in place and so
• 31:11
  Speaker 1: forth the FED. Then we'll be able to do some
• 31:14
  Speaker 1: modeling to guestimate, all right, how big of a pop
• 31:17
  Speaker 1: and inflation are we going to get? How long will
• 31:20
  Speaker 1: that potentially last? So you know, they're flying in the
• 31:24
  Speaker 1: dark like everyone else. You know, we have no noune knowns.
• 31:27
  Speaker 1: The problem is they're still unknown. So I think the
• 31:32
  Speaker 1: FED bias is to lower rates, but they're going to
• 31:36
  Speaker 1: need the kind of evidence, if you will, in justification
• 31:40
  Speaker 1: to do so, especially if we see inflation ticking up.
• 31:44
  Speaker 1: The only thing that can justify it. To me, it
• 31:47
  Speaker 1: would be the unemployment rate ticking up to four point three,
• 31:51
  Speaker 1: four point four, four point five. Then they're going to.
• 31:55
  Speaker 2: Act interesting interesting, all right, well so but then we
• 32:03
  Speaker 2: have the inflation right.
• 32:05
  Speaker 1: So well again, economic slowing in recessions historically always bring
• 32:13
  Speaker 1: inflation downe yeah, I mean that's the pain, that's the
• 32:17
  Speaker 1: trade off. That's painful. Okay, we got inflation, don't But
• 32:20
  Speaker 1: the unemployment rate went from four to five or whatever
• 32:23
  Speaker 1: the numbers are, you know, and the FED has been
• 32:26
  Speaker 1: trying to avoid that over the last three years, and
• 32:31
  Speaker 1: fortunately energy prices came down a lot. If we see
• 32:35
  Speaker 1: oil prices drop down towards sixty and stay there. That'll
• 32:40
  Speaker 1: help in terms of headline inflation. You know, President Trump
• 32:44
  Speaker 1: has said he wants oil companies to increase production and
• 32:48
  Speaker 1: so that the daily production level goes from thirteen to
• 32:52
  Speaker 1: sixteen million barrels a day. And the problem is that
• 32:56
  Speaker 1: oil companies have changed the way they do business in
• 32:59
  Speaker 1: the last three to five years. It used to be
• 33:01
  Speaker 1: people with high prices were high. Okay, let's drill like crazy.
• 33:04
  Speaker 1: Well Cheryl has gone mad and said no, no, no, no,
• 33:07
  Speaker 1: when prices are up, just you can keep drilling the
• 33:10
  Speaker 1: same amount, but pay us more in terms of shareolds
• 33:15
  Speaker 1: by buying backstock and dividends ivid ends. So will oil
• 33:19
  Speaker 1: companies respond to Presidents Trump asking hey, I want you
• 33:23
  Speaker 1: to increase you know, drilling, And yes they will. I
• 33:26
  Speaker 1: just don't think they're going to be aggressive to the
• 33:29
  Speaker 1: extent of causing production to go from thirteen to sixteen
• 33:32
  Speaker 1: million barrels.
• 33:33
  Speaker 2: Let's not forget, though, that most of the fracking revolution
• 33:39
  Speaker 2: did not come from the majors. All the majors aren't
• 33:43
  Speaker 2: going to be the ones that find the oil.
• 33:45
  Speaker 1: They don't.
• 33:46
  Speaker 2: It's the wildcatters and those hot, big, small ones to
• 33:53
  Speaker 2: small medium ones. Those are the ones. And we have
• 33:56
  Speaker 2: a new technology that hasn't been written about at all
• 34:00
  Speaker 2: because everyone knows about fracking, and we assume that the fracking.
• 34:04
  Speaker 1: Revolution was over.
• 34:05
  Speaker 2: But then they've got this new thing called refracking, right,
• 34:09
  Speaker 2: and that's bringing out even more oil than the initial
• 34:12
  Speaker 2: frack did. So what the problem has been is that
• 34:19
  Speaker 2: the capital was like choked off from these markets by
• 34:23
  Speaker 2: that's g and the yeah and whatever, you know, the
• 34:30
  Speaker 2: new grain deal. That's not going to be the case now.
• 34:34
  Speaker 2: And that's what I find kind of interesting is.
• 34:38
  Speaker 1: I had not heard about refracking. Thank you for mentioning that.
• 34:41
  Speaker 1: I'm going to look that up. You know, what thing
• 34:42
  Speaker 1: will tell you is over the last three to five years,
• 34:45
  Speaker 1: a lot of the major companies have bought some of
• 34:50
  Speaker 1: the wildcatters down in the program basin, you know, so
• 34:54
  Speaker 1: their impact is less than what it was four or
• 34:59
  Speaker 1: five years ago, but there's still some of them are
• 35:02
  Speaker 1: going to pursue an aggressive strategy. But obviously if a
• 35:04
  Speaker 1: new technology makes a difference in terms of producing more
• 35:08
  Speaker 1: out out of existing wells, that's a big deal.
• 35:11
  Speaker 2: Yeah, They're refracking is a big deal. They actually go
• 35:15
  Speaker 2: back into the well. That's you know, because the whole
• 35:17
  Speaker 2: thing was the production cycle was you know, real high,
• 35:22
  Speaker 2: and then it dips off and then eventually it's down
• 35:25
  Speaker 2: to like a stripper well doing you know, ten barrels
• 35:31
  Speaker 2: a day, and that's what they anticipated for all of
• 35:35
  Speaker 2: North Dakota. But refracking, and I will refracking it's kind
• 35:43
  Speaker 2: of the same as fracking, except they go back and
• 35:48
  Speaker 2: they fracked it, frack it again and it turns out
• 35:53
  Speaker 2: it you know, it winds up here. It can double
• 35:58
  Speaker 2: or triple the output of an existing way well cost
• 36:01
  Speaker 2: up to forty percent less than drilling a new will Yeah,
• 36:04
  Speaker 2: doesn't require additional state permits, less disruptive to the environment
• 36:09
  Speaker 2: because the environment's already been disrupted. You know, you're just
• 36:13
  Speaker 2: going back to the old wall.
• 36:14
  Speaker 1: Yeah, yeah. Yeah. So now it'll be interesting to see
• 36:17
  Speaker 1: the longevity of those wells. Okay, they can get a
• 36:21
  Speaker 1: boost of thirty to forty percent because it is it
• 36:24
  Speaker 1: maintained for three years or is it more like eighteen months?
• 36:27
  Speaker 1: You know, I mean that that'll be another factor. Okay,
• 36:30
  Speaker 1: well here here we have an answer for you. There, Jim,
• 36:34
  Speaker 1: I came to the right place. You got it?
• 36:36
  Speaker 2: Then, refracking can significantly extend its lifespan, potentially adding several
• 36:41
  Speaker 2: years of production to a will that would otherwise be
• 36:44
  Speaker 2: nearing the end of its productive life, allowing a longer
• 36:48
  Speaker 2: overall extraction period compared to single fracking. However, the exact
• 36:53
  Speaker 2: longevity depends on factors like initial well quality, reservoir and
• 36:59
  Speaker 2: the text.
• 37:00
  Speaker 1: Somewells may last three years to the eighteen months it compars.
• 37:04
  Speaker 2: And my guess is they will come up with something
• 37:07
  Speaker 2: else after refracking, because.
• 37:10
  Speaker 1: There's the holes correctly been the history.
• 37:12
  Speaker 2: Yeah, yeah, you know so, but it is interesting to
• 37:16
  Speaker 2: think about it. Yeah, all right, So macrotides dot com
• 37:22
  Speaker 2: side on correct Jim's service there. Make sure you click
• 37:26
  Speaker 2: the link in the show notes. If you're doing the
• 37:28
  Speaker 2: podcast or the video, you can view all of the
• 37:32
  Speaker 2: Jim's forecasts in one place. Appreciate you coming on, Jim.
• 37:37
  Speaker 2: You've got a question, shoot us an email kl at
• 37:40
  Speaker 2: Carrie Leuts dot com. We'll get you an answer and
• 37:44
  Speaker 2: the link to Jim's site in the show notes. This
• 37:47
  Speaker 2: interview on Financial Survival Network dot com.
• 37:50
  Speaker 1: Jim.
• 37:51
  Speaker 2: Appreciate you stopping by, so.
• 37:53
  Speaker 1: You carry any if you want. You can tell your
• 37:58
  Speaker 1: viewers and listeners that if they send me an email
• 38:01
  Speaker 1: Jim Welsh Macro at Gmail, I'll send them the March
• 38:04
  Speaker 1: Macro tides that just went out on Monday, even.
• 38:08
  Speaker 2: Though okay, even be all right, so great, great joining you,
• 38:12
  Speaker 2: all right, take care, we'll talk to you, so stay well.
• 38:15
  Speaker 3: Thanks for listening to Carrie Letz's Financial Survival Network, your
• 38:19
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• 38:23
  Speaker 3: Financial Survivalnetwork dot com. Financial Survival Network now more than ever,