Latest / Financial Survival Network / Inflation will Return with a Vengeance -- David Wright #5992

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Inflation will Return with a Vengeance -- David Wright #5992 · Financial Survival Network

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  I don't think the bets can really raise a lot more. I mean,
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  the thought is that they're going to reverse, and I believe that one of
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  the things that's going to force their hand other than just demand destruction more Middle
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  Americans getting brushed by debt by an inflation that you and I talked about this
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  on your previous sure shows that that inflation is held at about twenty percent increase
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  over what it was three years ago. You were listening to Carrie Let's's Financial
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  Survival Network where you get valuable information. You just can't find anywhere else to
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  thrive in today's trying times. You need the Financial Survival Network now more than
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  Financial Survival Network now more than ever. Ed. Welcome, you are
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  listening to watching the Financial Survival Network. I'm your host, Carrie Lets.
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  Well, hey, we're in the third week of January. Here we got
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  good news on the consumer sentiment front. Consumer sentiment has got up last couple
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  of months, is not enough to combat the rising credit card to higher foreclosures,
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  weaker earnings by banks. David Wright is with us now financial expert and
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  David's great to have you back on the show. So what are you making
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  of all these rosy numbers here on consumer sentiment and spending and such? Is
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  it too little, too late? Kerry? Thanks for having me back,
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  appreciate it, toys great to talk with you. I think that the numbers
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  are indicative of consumer habits. Did they like to spend money? And I
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  think people as long as they have room in their credit card balances to continue
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  to use their credit to feel happy about the fact fact that they've that the
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  inflation picture, at least on paper, looks like it's coming down in the
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  right direction. The stock market has certainly exhibited those behaviors of the belief that
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  they think the Feds are going to start reducing higher interest rates, which is
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  going to reduce strain on banks, reduce credit card debt down the road,
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  perhaps open up the housing market. So from the last report Herey University of
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  Michigan consider where sentiment increase was thirteen percent. People viewing their own personal situation
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  an improvement of thirteen percent, going from sixty nine point seven on the index
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  up to seventy eight point eight percent on the index. People's opinion of outlook
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  on near term business conditions up thirteen percent on that as well. They're reading
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  however, on people's outlook on longer term business conditions was a point below that
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  well, plus twelve percent. So not quite as bullish on the longer term
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  outlook, because let's get real, this is an election year and there's still
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  a lot of variables out there with what's going on in our world, all
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  right, So where does that leave us? Here? Is the economy expanding
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  lower registrates, is it going to make any difference or we kind of locked
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  in here? I think for right now, the economy is basically going to
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  stay at a stalemate right now, as long as the Feds stay higher for
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  longer, which they of course have given different signals. The problem is with
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  this federal reserve system. With every Fed president having their day to talk to
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  the press, they each have their own opinions on how they believe they're going
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  to vote as far as increases, decreases, or staying the satine throughout the
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  rest of the year. I believe personally with the data that I've read,
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  we've gone from a first it was three rate reductions, then the market started
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  baking in five to six rate reductions by the end of the year, and
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  now Carrie, just in the last few days, I'm starting to read news
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  about perhaps a hold, if not wait till June or even third quarter before
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  they would even begin to reduce rates. I even't heard somebody bostic, I
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  think it was the FED President Bostick mentioned that there might even be a rate
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  hike this year. There's so many mixed signals out there, and I think
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  the reality is we just have the things that the FEDS look for. Low
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  unemployment. We have very low unemployment right now that continues at three point seven
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  percent. We certainly have stabilized inflation. It's gone down from nine point one
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  all the way back down to I think the core CPI carried he was in
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  the mid threes three one to three five ish, three point five ish.
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  And I know the Fed their target mandate is two percent, so they're not
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  quite there yet. My guess is, with still six trillion dollars of cash
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  sitting out there waiting to be spent, either by consumers or by corporations and
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  pension funds, that there's still going to be some chance of a robust market.
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  But where will the Where's the Fed going to go? Are they going
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  to devote political like they have in the past. Are they going to help
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  the stock market out by lowering rates, which we believe would definitely help the
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  market continue to show a rise in the new year. Or do they basically
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  say, hey, if we'ren't five and a quarter to five and a half
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  percent on the federal funds rate and the stock market had a record year last
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  year, now, yes, it was propped up by these mag seven stocks,
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  why would we reduce rates right now? If everything's looking of better,
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  lower unemployment, stock market's doing well, Maybe the Fed just says, you
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  know what, if it ain't broke, don't fix it. We're going to
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  hold higher for longer, and we're going to wait and see if we can
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  create more demand destruction of the middle class. And the reality is there is
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  demand destruction going on right now with middle class as far as credit card borrowing
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  amounts spiking in the last order revolving credit up nineteen point five billion last order.
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  Foreclosure activity on houses increases From twenty twenty two we had three hundred and
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  twenty four thousand forclosures in twenty two. In twenty twenty three we had three
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  hundred and fifty seven thousand so that number has increased more people for closing going
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  out of their mortgages. So I don't know. You tell me, well,
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  if I knew that, I would give up my computer, here,
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  my keyboard for a crystal ball. But certainly it looks like well, I
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  remember the late great Alan Abelson, editor in chief of Barons, used to
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  say, the Federal Reserve is doing what it does best, and that's elect
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  thing a president. Right for the more aesthetical on you, Yet there you
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  go. I never quote, but yeah, yeah, I don't think the
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  bets can really raise a lot more. I mean, the talk is that
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  they're going to reverse, and I believe that one of the things that's going
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  to force their hand other than just demand destruction more middle Americans getting brushed by
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  debt by an inflation that you and I talked about this on your previous Sure
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  shows that that inflation is held at about twenty percent increase over what it was
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  three years ago. The rate of acceleration has declined, but certainly inflation has
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  held the twenty percent. So the question that I think the Feds are going
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  to have to ask themselves is staying higher for longer is going to rear its
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  uplove the head with banking in our country. I think the larger banks,
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  all their eargenings were public last week. I believe a lot of the ease
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  the biggest kneing Jpmorium Chase, and the Bank of America a lot of their
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  earnings. But that's understandable because they all had to pay this fbiic settlement check
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  for the bailout last year, so they all got hit with that syrtax.
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  But still, even despite that, these larger banks that are kind of too
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  big to fail banks not as worried about them, but their earnings were kind
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  of lackluster. Most of them were a little lower. I think the FEDS
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  are going to think about it. The four thousand loss regional banks that are
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  out there that can't really take a lot more squeeze on their net interest margins,
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  the difference between what they pay their depositors and what they make on their
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  own loans. I don't think the Feds can squeeze a lot more on interest
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  rate heights or holding higher for a lot longer. I think at some point
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  they want the American consumers belief in the financial system to remain there long term,
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  so I think I think we'll get our array reductions, but I think
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  it's going to be more towards the middle to late later part of the year.
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  But depending upon political pressures. You you just pointed one out, I
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  think we'll see. So they're just going to put it off for as long
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  as they possibly can hunt I think so. I think that's what they'll do.
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  Personally, there's too much I don't have my dot plot up here to
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  take a look at it, but there's enough difference of opinions from one side
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  to the other side of the FED that it's tough to to really decide which
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  way they're going to go with it. At this point, it's hard to
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  read owls which way he's going to go with it. But for one thing
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  for sure, Carrie, it's definitely a tightrope walk between making the right and
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  the wrong move. And I don't even know if they're is a right or
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  wrong move. You create artificial money and stimulus, it's tough to walk that
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  stuff back without having consequences. Yeah, once you released the inflation genie from
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  the bottle, it's yes, it's hard to get it back in and clearly
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  they've done that. So what about the thirty five trillion in debt that we've
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  accumulated with no end in sight. Yeah, you tell me. I mean,
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  we just keep kicking that can down the road. I think the estimates
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  are a trillion per year of interest just to service that debt. And you
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  know you can't. You can't continually spend six point five trillion and only bring
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  in four point four four point five trillion in revenues. Now, I will
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  say this obviously in their assessment of the Trump presidency and the debt that was
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  created during his administration, when you look closer at the numbers, I think
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  recently I've been hearing a lot about the trillion he created during his time in
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  office. But when you really keep behind those numbers, carry four trillion of
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  that was COVID relief, and you know, his hand was forced in that
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  we needed help. Money was printed. The other half of that came from
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  his tax cut corporate America from thirty five percent down to twenty one percent,
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  which you know generated a lot less tax revenue for the federal government. They
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  were already spending that money, so that created part of the deficit during the
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  Trump administration. The question is moving forward, Well, you know, I
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  guess I'll interview you. What do you think they're going to do? Yeah,
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  well, way that data. My gut feel is they'll put off the
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  cut for longer than the markets expecting because they got big basically rates, the
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  hot long term rates have come down. They've got enough leeway between the two
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  year treasury and the Fed funds rate, so there's no impetus there. So
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  I think they'll just let it go maybe another month or two, who knows,
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  but they'll let it go another month or two then expected, but eventually
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  they'll cut if they see the market weakening. I think they'll just start cutting.
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  And they could say, well, we haven't changed anything. We told
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  you we were going to cut. And their initial forecast is for three cuts.
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  I've seen people say six cuts. Like you said, who knows what
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  it's going to be. You're dealing with the Federal Reserve, and even though
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  they try to tell you what they're going to do, it never quite works
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  out the way they say it's going to right right, I think if you
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  look at this, if you look at the notes after each of the Federal
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  Reserve meetings, you wonder where the market bakes in these future rate cuts from
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  reading the notes, because it Powell uses language like it's likely we will do
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  this. However, we're not going to, you know, reduce rates unless
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  blah blah blah blah. So it's all in interpretation. And I think if
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  the market it's sense that there's any chance of something, they're already bacon in
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  the stimulus and roll in the dice, knowing that it's an all eleuction year,
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  like you said, and rolling with the fact that the studs will fall
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  right in line. And then the root in the fear of that is we
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  might be right back where we were ten to twelve months out. Maybe not,
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  but it could reignite inflation if they do that. Now, I'm not
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  trying to be Debbie Downer. It boys sounds like I am, but yeah,
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  I'm just trying to say that, you know, if they they reduce
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  rates, yes, it'll help fuel the market even further, but it may
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  also fuel the consumer consumer who spends money they don't have on things they don't
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  need, and that might reignite inflation again. So if you do, damned
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  if you don't. I think that's what it comes down to, no matter
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  how you cut it. But at some point I think it's inevitable. I
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  guess we're going to see what happens next. Take David, just tell us
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  where we find you, how we connect with you on the web. You
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  can find me a right financial group that's spelled with a W wrighd Financialgroup dot
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  com. If you'd like access to more information and resources, you can reach
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  us that way. My book Bonfire the Sanities now out since December the thirteenth,
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  Bonfirevisanities dot com, having some good information in there about how to make
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  sure you're protecting yourself, your purpose for your money, moving into your bread
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  in post retirement. Hears, all right, excellent, Well, we always
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  appreciate you coming on. I've got a question for David myself. Shoot me
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  an email kl at Carrie LUTs dot com. The link to david site is
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  in the show notes of this interview on Financial Survival Network dot com. While
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  you're there, sign up for your free newsletter David. Always a pleasure.
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  Thanks for coming on, Harry, it's a pleasure. Thanks so much.
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  Thanks for listening to Carrie Letz's Financial Survival Network, your solution to today's trying
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  times. For the latest, go to Financial Survivalnetwork dot com. Financial Survival
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