Latest / Financial Survival Network / GDP up 2%, Break Out the Champagne — Matthew Johnson #5846

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GDP up 2%, Break Out the Champagne — Matthew Johnson #5846 · Financial Survival Network

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And so we understand from at least an economic stampoid, or we should.
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What this means for us is that either we're going to see significant increases in
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taxation in this country. And I'm already anticipating that. You know, I
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work with literally thousands of investors and retirees over the course of a year,
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and I can't tell you the last time that I'm at a person that didn't
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agree that taxes are going to be going up. So we know that that's
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going to happen. You're listening to Carrie Let's Financial Survival Network, where you
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get valuable information you just can't find anywhere else to thrive in today's trying times.
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You need the Financial Survival Network now more than ever. Go to Financial
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Survival Network dot com and get your free newsletter and gift. Financial Survival Network
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now more than ever, and welcome you are listening to watching the Financial Survival
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Network. I'm yours carry Lutz. Today we get the long awaited GDP numbers,
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two percent annualized to increase. Not so bad, maybe though maybe it
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isn't as good as it seems. Maybe inflations higher than is acknowledged, and
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maybe real economic growth is actually negative. Well, a good friend Matthew Johnson
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is here to opine on the subject, and you find Matthew at Johnson with
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an h wim dot com. And if you got a question for myself or
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Matthew, shoot us an email kl at carry Lutz dot com. Matthew,
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great to have you back. So, so we should all be popping the
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champagne because annualized growth two percent, that's wonderful, right, we should be
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celebrating, shouldn't we? Just not just yet, it's gonna be doing on
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again. Thanks so much, Carrie. Sure, yeah, you know it's
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optimistic. It's optimistic news. From the outside looking in, it sounds like,
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gosh, it certainly beat the expectation of one point three percent. I
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mean, how could you go wrong with a two percent GDP? But as
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you said, I think that there's maybe a little bit of window addressing to
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that, because when you really start to look at the numbers, you start
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to realize that there's a lot of factors here that could be showing us kind
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of a false positive. So we have to be somewhat I think, careful
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of the numbers and what we're being told and what we think is actually happening.
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You know, it's one of these things where we always have to address
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what we're hearing with what the facts really are, and we have to unfortunately
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do a lot of our own fact checking as individuals in today's society. You
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know, I just think of the GDP number, it really isn't accurate because
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it doesn't measure wealth. It incorporates debt into that number. So the more
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debt you have, the faster the GDP goes up. You know, at
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one time Bernie Madoff was a net positive to the GDP and we see how
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that wound up. So the fact is that there's a lot more to the
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number than meets the eye. I mean, look, when gasoline prices were
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up, that lifted retail sales PG number. So, like you say,
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you really got to look underneath the hood to really help you figure out what
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exactly is going on. And mentioned earlier debt to GDP ratio. What's the
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significance there, Well, I think it's very significant. In fact, I'm
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very concerned with it, as most Americans should be, because if we look
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at the debt to GDP ratio right now, carry we're in a position where
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we are just under the debt to GDP ratios of World War Two. That
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should be absolutely scary to us. And what does that mean to us?
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Well, at number one, if we look at what spending has done,
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you back in two thousand and twenty two, the debt of this country rose
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by thirty five percent thirty five percent, and they're expecting that there could be
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potentially another thirty to thirty five percent increase on top of that, just in
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two and twenty three alone. Recently, I was reading an article from the
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Peterson Foundation and they were suggesting that in the next ten years, if we
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continue to stay on this trajectory that we're on right now as a nation,
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we're going to be in a position where just to service the US debt alone,
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just that debt service is going to be larger than all of Medicare and
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all of national defense. I mean, think about it. Right now,
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in two thousand and twenty three, we have service to this debt of over
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four hundred and seventy five billion dollars. That's with a B. That is
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a big number. And so we understand from at least an economic stampoid,
5:13
or we should what this means for us is that either we're going to see
5:17
significant increases in taxation in this country, and I'm already anticipating that. You
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know, I work with literally thousands of investors and retirees over the course of
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a year, and I can't tell you the last time that I met a
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person that didn't agree that taxes are going to be going up. So we
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know that that's going to happen. But we can't just see taxes go up
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in order to fix this problem. We're also going to see or have to
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see our government spend less and unfortunately carry I'm not optimistic. I don't know
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about you, but I'm not optimistic that there's anyone in Washington that wants to
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reduce spending. Well maybe a rampoll. Okay, well, I'm book they're
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minority. But you know what they say, Thomas Jefferson said it to one
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man with courage as a majority, right, could be let's hope, huh,
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let's hope. Well, yeah, this situation the bleak. But I
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think we've got the best best looking house in Baltimore. You know, the
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rest of the world is so bad that the US looks good. Well,
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and to say it a different way, we are the cleanest shirt in the
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hamper. I get that, but we also want to be very cognizant of
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today we are we are We're on the edge of the largest majority of human
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beings in the United States today that are going to be retiring. I don't
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know that it's absolutely precise, but they say, as of February of twenty
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and twenty four, Carrier, we're going to have the peak of retirement from
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the baby boover in generation. And we need to be thinking about that because
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let's just put ourselves in their shoes. These are people that have spent the
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last thirty plus years of their life and they've been on the accumulation stage.
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Right. They've been saving, they've been working to save, they've been contributing
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and compounding their money, and now they come to retirement, and they come
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to retirement at an economic stage which is very uncertain. Right. We still
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have inflation, we have the Federal Reserve that seems to be absolutely exacerbating the
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defaults within banks. The FDIC just came out with a report that said where
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they had only four problem banks on their watch list, now they have over
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forty three banks on their watch list. They're coming to retirement during a stage
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of life in which the majority of them do not have interests, they do
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not have dividends. They are still stuck in this growth based investment mode because
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that's what they've always been in. And you're asking a person that for the
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last thirty years has done nothing but save to now start taking to start taking
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withdrawals. That's a very scary time for them. This is something that's a
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big transition for so many people. And the reason that we have to be
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so sensitive to what's going on around us and how our money is invested,
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where we're putting our money, and what our money is doing for us is
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if we're the average retiree, we're still focused on, say, sitting in
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growth based stocks that are paying us dividends, and all of a sudden,
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the rope is being squeezed around the economic neck as the Feds are doing what
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they're going to do and the government's continuing to spend more, and then that's
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justifying a higher tax implication down the road. Think about what that's going to
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do to potentially demonstate, just absolutely devastate the portfolios of this country. That's
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a big concern for myself, that's a big concern for many Americans today.
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Well, I have the solution. We got to get the old people to
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spend more, you know, charge more on their credit cards. So it's
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not what the country needs is a more flamboyant elderly class like myself. And
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then we'll solve all the problems. We'll keep the be going, buy houses,
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buy cars, you know, just go out there and spend. Don't
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worry about leaving anything to your kids. Just leave them the leave them the
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loan statements. Right there, you go, Lucian, Yeah, you know,
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I found that older generations, and especially the generation you know, our
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grandparents, they went through the Great Depression, right you you had a team
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on, if you had a team of mules, you could not get them
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to take and put their money back into the stock market because they learned how
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in how important that principle was to them. Right. Well, the next
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generation that came behind, they were definitely more in the spenders. But I
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think we're going to see between required minimum distributions, where we have these mandatory
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withdrawals out of the stock market, we see that there is most definitely a
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bubble that is being created within AI. And I'm not saying that that's bad,
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but we want to think back in time, right, we want to
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think back to the tech bubble burst where they said, you know, this
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is going to go to the moon, and it didn't. Eventually, these
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things are going to wind down, and we have to be exactly, very
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exacting with what our long term plan is. Is it really growth or is
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it more or less income? Because if you do have income, like you
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said, now, you can spend, right, you can spend more freely.
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With more freedom, So true, I couldn't agree with you more.
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You know, one of the things in the notes I have here, you
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say, be patient, focus on dividends, collect them or spend them,
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but be ready to buy as there's likely to be more Kmart blue light specials
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coming. I think that's been it now because Kmart's light all but gone,
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haven't they? Just? Okay, all right, well let's turn back the
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clock to that Kmar blue light special when you walked into a Kmart, Jerry,
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come on, when you saw that blue light flashing on the end of
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the aisle, you knew where to go, right, you were trained,
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man, you were gats right, that's right. The Bluvie in response,
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you know that's right. You see a blue light and you immediately get your
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credit card out. That's right. Well, the reason I say what I
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say is because obviously, you know, when June the Federal Reserve gets together
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and there was a very split consensus as to whether we were going to actually
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get into the rate hike or if we were going to get a pause.
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Now, what we saw a transpire was actually we didn't get a pause.
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What we got was, oh, just joking, we're going to do a
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skip. And so you know, just a minute ago you talked about we
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need to be bigger spenders. Well, interestingly enough, when you actually dissect
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the core PC and you're looking at where spending is actually taking place, we're
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starting to see that there's slowed down in certain parts of the sector, but
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there's also continued strength within home building and that sort of thing. Yeah,
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what's with that? Well, that one to me, Matthew, Well,
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we still very much have a shortage when we think about single family homes.
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So when we think about the number of individuals that we have in this country
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versus actual legitimate housing, we still very much have a shortage. And when
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you think about what's happening, people have to be able to live someplace,
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and people are getting more value from the resale of their home but we have
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a lot of retirees that are still maintaining their big home that they had when
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they were raising their kids, and now what are they wanting to do.
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They're wanting to get into rand style homes or trying to downsize a little bit.
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And so as a result, many of them have the capital, and
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many of them are saying, you know what, this is not high inflation.
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If you want high inflation, let's take you back to the nineteen eighties
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and nineteen nineties. That was high inflation. So they're still looking at today's
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interest rates saying this isn't bad, this is doable. We've got the capital
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to do this. We want to build, and they're building to spec so
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that they can enjoy their retirement and something that they want to spend the rest
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of their years living in. All right, So I am looking at the
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PHLX Housing index and I follow housing a lot because it's also it used to
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be an analog for interest rates. All right, it's right now, it's
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at a near all time high. I have it right. If you look
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at Lenar Pulty Homes, KB homes and look at whatever it was, But
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all of them are trading at five year highs. Those stocks probably Old Eyes.
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The only one that isn't is Toll Brothers, which focuses more on the
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luxury end. So what does this tell us here, Matthew, Well,
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again, we have to look at what the trends are doing, and I'm
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seeing an awful lot of MIC clients that are building in there. They're really
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building into what they want to be able to have. I just had a
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client that decided that he was going to live the great state of Lead,
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the great state of Minnesota, and he was going to be going down to
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Hilton Head and he said, you know, we looked around. We just
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didn't find anything, but really, you know, tickled our fancy. It
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was nothing that really fit the bill for us. So we just decided,
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you know what, We've got the capital, we have accessibility to credit,
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We've got a lot of credit and equity builds up in our home. We're
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going to go ahead and we're going to build. Now. When it comes
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to luxury homes, I think that we have a few more of the luxury
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homes that are available for people to actually purchase, But many of the homes
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that are being purchased today, or rather built today, I think are the
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homes that are just below that luxury class, and that's the reason that we're
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seeing the drive in that demand. And that's in the face of increasing interest
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rates. And now you're starting to see builders actually get back into the credit
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business. Remember after the big bust, oh eight No. Nine, Before
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that, the builders, the homebuilders are making more money on their kickbacks from
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financing to banks, etc. Some of them were even packaging their own mortgage
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backed securities and that all fell by the wayside. They were like, no
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incentives. But now they're looking to soften the blow. I think there's also
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been some home builders, like in that middle tier, mid mid to upper
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middle tier, they cut back on features as well, maybe made the houses
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a little bit smaller to keep the affordability there. I just wonder how long
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the show goes on. You know, go back to the eighties with double
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digit interest rates. The first mortgage I ever got was on a co op,
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paid a whopping one hundred and seventeen thousand dollars for it in Fort Lee,
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New Jersey, had an eight and a half percent interest rate plus the
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common charges. And this was like a struggle for a young newly married couple.
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But now you know, housing prices are quadruple what they were in the
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eighties. Rates aren't what they were in the eighties, but hey they're over
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five percent. That's a nos bleed territory. Absolutely, And I think that
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there's one other factor, though I know that this is not all encompassing,
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but we see that there's several states now that are trying to become more attractive
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to retirees, and they're starting to take and make adjustments to their income tax,
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right, and so what this is doing is this is attracting those retirees
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because they're saying, hey, if we don't have to pay income tax,
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now we have more capital, we have more casual and now we can justify.
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Isn't it interesting, Carrie? How as human beings were kind of our
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own best attorneys, right, we justify in our light all we're able to
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make something work. And so I see a lot of my clients that have
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moved from other states into the state of Iowa. Why because we just got
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done eliminating state income tax from any distribution from any retirement program. That's really
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really nice. You look at other states like Florida, You look at states
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and the Carolina is where they're reducing this these are the things that are going
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to be attracting people to these states, and they're going to be hopefully seeing
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a boom in building. That's pretty brilliant to get rid of all the passive
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income taxes state income taxes, so basically, you're sixty five and over and
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you can live state tax free. You'll let all the young people pay for
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the costs of government. You're there, you said, well, I guess
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you are spending some money. You got to live, right, They drive
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a car. So that's really a kind of enlightened leadership in this day and
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age because it's very difficult for a state, never heard of it, to
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just dump an income tax. They've talked about it, but they've never there's
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never been a state that's done it. So this is kind of like engineering
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that tax to attract the people and make it more attractive to those retirees.
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Who look at Florida, the states that have been attracting retirees, their GDP
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is increasing way way faster than the states they're shedding retirees absolutely undred percent.
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I think it's very clever and it's very forward thinking because when you think about
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it, you know who's going to have more money the thirty five year old
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or the sixty five year old that's already you know, all mass over the
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course of time, and now they're hitting the distribution stage of their life where
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they don't have a job to time down. Now they can go out and
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they can consume, they can buy, they can be able to enjoy more
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luxury items. This is really forward thinking and I'm very very pleased to be
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seeing it because i think oftentimes there's too many things that get in the way
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of economic growth when it comes to political agendas and so on and so forth.
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You see the state of Minnesota, prime example. They've squandered so much
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of the state income tax, they've squandered so much of the resources that they've
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brought in from their citizens, and they're starting to drive people out. So
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if they would just spend some time driving out the mosquitoes, they would probably
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attract more people. But that's not going to happen because they got ten thousand
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lakes. There. Felled states, So you know, these are failing states
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three or four categories of states. They're states that are growing, mostly in
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the south southwest. There are states that are more or less stable, and
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really that's kind of like Iowa's and the Kansas is not really a lot of
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growth there. And then there's states that are failing and would put in Minnesota
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as one of them. And then there are failed states like California, New
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York, New Jersey, an Etiqutte probably falls into that. So I find
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it interesting that the state like Iowa, stable, you know, farm built
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all that, really figured this out. They kind of unraveled the riddle.
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You know, it used to be like states didn't tax their own state workers
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pensions, but a lot of them do that now. Well, interesting,
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interesting times here when we have this conversation in a year, what do you
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think we're going to be seeing here, Matthew, Oh boy, that's the
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sixty four thousand dollar question, isn't it. I think that there is some
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potential that we can pull this off, But my biggest concern is that right
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now we are getting very close to the edge of a potential recession. The
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Federal Reserve seems absolutely resolved to continue to raise interest rates, to continue to
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contract the economy. Part of the problem, a big part of the problem
21:30
is the government spending and it's working contrary to what they're trying to do,
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and so they keep hammering on this, and if the Federal Reserve would just
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back off and let things continue to calm down, I think that they would
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work their way down. Now. I still think that a two percent inflation
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factor is way unreasonable. I think it's still way too unachievable in the short
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term. But in this case, if they keep pushing these interest rates higher,
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it's going to be interesting. Are we going to have a full blown
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recession? I'm not sure. I've been suggesting to many clients We're not going
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to see any kind of a raycut for inflation until at least the end of
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the first quarter of two and twenty four. But we shall see. We
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shall see. There's going to be a lot of time between now and then.
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All Right, well, I think that sums it up well. In
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any event, I've got a question from Matthew myself k l at kryltz dot
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com with ktch an answer quick and while you're at it, to just go
22:32
over to the show notes Financial Survival Network dot com. You'll find a link
22:37
to Matthew's site, Johnson with an hwim dot com and hey, well you're
22:44
there. Sign up for your free newsletter. Matthew always a pleasure thanks for
22:47
coming on. Thanks so much, Carrie, thanks for listening to Carrie Lets's
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Financial Survival Network, your solution to today's trying times. For the latest,
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go to Financial Survival Network. Financial Survival Network now more than ever,