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The Fed Hath Paused -- James Locke #5837 · Financial Survival Network

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  The NASDAC is parabolic now, and you want to talk about crazy volatility right
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  with last year straight down and this year is straight out. I mean,
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  you know, it's hard to maintain any sense of normalcy. You're listening to
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  Kerry Lets's Financial Survival Network, where you get valuable information. You just can't
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  find anywhere else to thrive in today's trying times. You need the Financial Survival
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  Network now more than ever. Go to Financial Survival Network dot com and get
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  your free newsletter in gift. Financial Survival Network now more than ever, And
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  welcome. You are listening to watching the Financial Survival Network. I'm your host,
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  Kerry Lutz. Well, we just today is June fourteenth, it's just
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  after two o'clock. We got word from the FED. James Locke is with
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  us and now from poollock dot com. That's Pool po O l E l
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  oc Kee dot com. James, welcome back. So the FED half spoken.
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  They did, and you know it's it seems that everyone was anticipating this
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  pause. And I know we've talked in the past, and you know I
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  agree that it makes sense to pause, And just as you would have imagined,
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  they came out with all kinds of tough talk in the in the kind
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  of the menace, saying we want to see what's going on. We're gonna
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  pause here, but hey, stock market, you should anticipate that we're coming
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  back full force with them now. They're talking about another two interest rate hikes
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  for the rest of the year. You know, I've heard various notes things
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  like that, so kind of I would say, at least from my reading
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  and understanding, this was kind of expected. We saw the CPI come out
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  yesterday and that was, you know, better than expected or at least in
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  line. So we're talking about four percent year over year inflation. It's moving
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  in the right direction. Producer price indexis came out today that was definitely better
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  than expected. So you know, it seems that the inflation piece is going
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  in the right direction, but the economy doesn't want to slow down right on.
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  Unemployment is at least reasonable, right and the stock market has had a
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  big recovery, We've had housing market recovery. Now it does seem that today
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  is a little bit of the old adage of you know, by the rumor,
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  sell the news. So ED came out with their tough talk, and
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  the market started down and then continued down. But you know, we had
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  a rally yesterday and I think basically what this leads to is more volatility,
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  and that's you know, we're not out of this is the bottom more right?
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  And inflation is not over either, is it now? And you know,
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  I think that while inflation is moving in the right direction, and uh,
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  you know everyone, you know, we liked it yesterday that kind of
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  CPI number. Um, it's it's one of those things like how you know,
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  if if the economy keeps spending right and unemployment stays low, then you
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  know that's that's gonna put pressure on inflation. And you know we're going to
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  see that. And I'm I'm always a proposed like I'm I'm never so much
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  against inflation. You know, it means things are happening, right, you
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  do have to keep it under control, that's for sure. Um. You
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  know, I wonder how much of this too, you know, when I'll
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  you know, because we're starting to see use car prices coming down things like
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  that. I wonder when that kind of supply chain piece that's back in force
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  will will kind of affect the economy in the market as well, and you
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  know that may hopefully the fellow Reserve doesn't overdo it. You know, when
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  that piece kind of is back to let's just call it pre pandemic levels.
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  Hmm. All right. So so look, inflation runs in cycles, and
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  it's not unusual to see a big spike and then it pulled. See it
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  pulled back to what's really changed here? Um, yeah, well that's in
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  That's what we're saying is is you know, the volatility at the end of
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  the day. And you know what's still crazy is you know, even if
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  we're saying inflation is moving in the right direction, uh, the ten year,
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  thirty year bonds are still lower than you know, there's still essentially negative
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  return on long term yet. So you know that's not good. No,
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  it's not. This crazy inverted yield curve is going to continue to kind of
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  be a problem, all right if we constantly have all this short term you
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  know, uh, you know, short term fields or so much higher.
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  I mean, you know, history just says it can't continue that way.
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  And the longer it stays that way, the more and more chance of their
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  not being this so called you know, soft landing. It's just a matter
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  of when it happens, and the trend is your friend until the end right,
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  that's right. I never saw a trader who didn't buy a top tick
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  if they're a trend trader. Right, So you know, it's it's one
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  of those things you keep going until it until it stops. But I do
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  think the pause was good, right, because you can't keep pounding the interest
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  rate up endlessly without turning around and looking and say, right, you know
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  what's happened, you know from what we've done already, right, I mean
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  there's a recession coming, right, most economists are predicting that. But it's
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  just a matter of when. You know when that recession is going to come,
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  whether it's the end of this year, it doesn't look like it right
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  now, but into next year, you know, seems likely. You know,
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  you can't sustain this kind of level of growth. I mean, the
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  NASDAK is parabolic now, you know that, And you want to talk about
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  crazy volatility, right with last year straight down and this year is straight up.
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  I mean, you know, it's it's hard to maintain any sense of
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  normalcy with with at least the NASDAC as a whole. H because now all
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  of a sudden, you know, AI is out of nowhere and is the
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  future of the world right, so true, you know that sort of thing.
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  So it's just h you know, it's hard to certainly it's hard to
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  predict. But there's no way that the FIT is going to stop raising rates.
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  And at the end of the day, it's just a matter of time
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  for you know, before they're going to have to look hard at cutting rates.
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  You know, if there is a recession and there's an election coming up,
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  let's not forget about that. And one of the things that FED does
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  best is, you know, one of the things that really go after is
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  reelecting their favorite president. Yeah, and who you know, who's ever who's
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  ever working well them or or that sort of thing. Yeah, exactly,
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  which the predecessor not so much, right the current one. Look, who's
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  the head of the treasury, the former head of the FED, and who
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  knows Powell might have a cabinet position in his future as well. Yeah,
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  yeah, And you know you see that all the time, and this is
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  you know, this is nothing new, those sort of like you know,
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  pat on the back kind of politic games. I do the right thing now
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  and then, like I said, I have a cabinet position later. And
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  it's hard to blame Powell, you know, I mean for that sort of
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  thing. You know, you'd like to think that they're doing things very altruistically,
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  but you know, life, life has its own the kind of way
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  of working things out. So and it's clear that the Fed is hell bend
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  on this two percent inflation, uh kind of situation. And so we're gonna
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  we're gonna see that, you know. And and you know, until it
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  gets there, you know, they're gonna they're gonna keep poking holes in the
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  bottom of the ship until it either sinks, you know, or or gets
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  down to that level. And like I said, I think at some point
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  it's going to sink. That's what history tells us. Yeah. Well,
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  you know, the only thing we learned from history is that we don't learn
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  from history, right, History repeats itself. That's why there's h you know,
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  stock market cycles and in thirty years, each generation has to make the
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  same mistakes of their parents, right kind of see those uh those being circular
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  kind of you know, stock marketing moves. Yeah. So sure, what
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  do you make of Yellin's comments on the reserve status of the dollar? Yeah,
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  I mean, I sometimes, you know, I think there's always a
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  big hub about, gosh, what if we the US dollars not the reserve
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  currency anymore. And the way I look at things is the United States is
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  essentially the cleanest dirty shirt in the hamper. You want to look at it
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  that way, right the it's the mansion in Baltimore. So I don't know,
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  and you know, maybe this is just me. I don't have a
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  fear about the US being the reserve currency. It's going to stay that way.
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  There's really no one out there that can you know, match in the
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  US. You know, for its stability is the bottom line now agree or
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  now, but not always. The great is that you know it is going
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  to disappear that you know that, that's for sure. You know, it's
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  just a matter of when. I mean, eck, you know, all
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  sorts of countries were super powerful across the globe for you know, periods of
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  time. And the Dutch, the Spanish, is the English, them go
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  down the list for sure, Rome, Greece. Yeah, yeah, I
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  mean bank in history, it keeps getting longer and longer. So you know,
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  you always think, you know, well China, uh and and you
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  know their economy and they can you know, drive to market that sort of
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  thing. You know, from an investment point of view. You know,
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  China is always dangerous, right, they're communist country. You can't you cannot
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  you know, Longe. It's like predictability, right, China is unpredictable.
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  They all tell you otherwise, but the fact is, you know, until
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  their government changes, I don't, you know, there's not going to be
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  enough trust over there, you know, to kind of challenge the reserve currency.
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  After that, I don't know, you know, India, like I
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  don't even know how that would play out. So you know, like,
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  at least I'll call it from a long, short term point of view,
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  the US dollar is going to remain the dominant world. Everything is going to
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  be traded in dollars and hedged back to dollars. Yeah, well until it
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  isn't until it isn't. Right, But is it imminent or is it a
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  sustained period of decline? I don't know the answer to that. I don't
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  think anybody does. But hey, so for the rest of the year,
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  how do you invest? How do you you know, if we get a
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  recession, we could conceivably see a quick rapid decline in stock markets. Yes,
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  yeah, so it's all about you know, the rich get richer because
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  they have cash on the sidelines, right, so you don't need to take
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  risk for the sake of taking risk. Right, There's there's lots of investments
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  out there that you can be in that you know, provide what's just call
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  it cash light or high high dividends and high you know, interest and that
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  sort of thing. So that if we do see you know, let's just
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  call it back to those COVID levels, uh, you know, then all
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  of a sudden things become much more sustainable to to reinvest. So, you
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  know, I like having a portion of the portfolio and what you know,
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  what I'll call cash. I mean, interest rates are pretty high in the
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  short term right now, it's hard to argue with that, you know,
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  to say I can get four or five percent guaranteed against risking. You know,
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  at the stock market goes up twenty percent, I mean I don't know,
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  you know, the majority of S and P stocks are still down,
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  right because it's all those tech stocks that are pulling it up, the average
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  up, so things I think things look rosier from an index point of view
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  than they actually are, right. So so I don't mind keeping you know,
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  a portion a portfolio in cash. I would be hesitant to you know,
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  start scooping with both hands here. I mean, I will say,
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  you know, it's crazy, it sounds it's an unusual point in life where
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  fixed think of investments actually have a potential of being a good, you know,
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  kind of purchase right now, because if we do see you know,
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  a market decline and a and a recession hit, they're going to cut interest
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  rates and you know, now you're gonna have all these higher yielding pieces which
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  you can now if you wanted to shift out of into into stocks. So
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  you know, it is a it is a difficult spot. I would say
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  a lot of it depends on your situation too. You know, if you're
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  retired and the only thing that matters is the income, and that's where a
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  lot of my clients are, well, then you actually want to minimize that
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  volatility risk at all, right, so that hey, if the marrit goes
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  down, that's all right, My income is still secure. The market goes
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  up, you know, great, ma, income is still secure. Right,
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  all right, makes sense. Well, we appreciate you coming on,
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  James. If you've got a question, James, shoot me an email k
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  l at Kerry Lutz dot com. There's a link to James's site in the
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  show notes this interview on Financial Survival Network dot com. Just click it,
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  take your right to a site. While you're there, sign up for a
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  free newsletter. James appreciate it. We'll talk to you in a couple of
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  months. Thanks Carry, Thanks for listening to Carry Lutz's Financial Survival Network,
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  your solution to today's trying times. For the latest, go to finance Inful
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  Survival Network dot com. Financial Survival Network now more than ever,