Latest / Financial Survival Network / Election Year Economics: The Fed, Rates, and Investment Strategies - David Stryzewski #6117

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Election Year Economics: The Fed, Rates, and Investment Strategies - David Stryzewski #6117 · Financial Survival Network

• 0:00
  Speaker 1: So they've ratcheted up these rates. And you know, obviously
• 0:04
  Speaker 1: we saw you know, our inflation go from like nine
• 0:07
  Speaker 1: point one to three point zero in June of twenty three,
• 0:13
  Speaker 1: so that was about a year ago that we saw
• 0:16
  Speaker 1: these rates come way way way down. So the Fed
• 0:18
  Speaker 1: basically thought that they were going to be you know,
• 0:21
  Speaker 1: able to just you know set back. They went from
• 0:23
  Speaker 1: nine to three, so going to two is not going
• 0:24
  Speaker 1: to be difficult, and ultimately we've stayed rage bound.
• 0:27
  Speaker 2: Here.
• 0:28
  Speaker 3: You are listening to Carrie Let's's Financial Survival Network, where
• 0:32
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• 0:35
  Speaker 3: to thrive in today's trying times. You need the Financial
• 0:39
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• 0:44
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• 0:48
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• 0:55
  Speaker 2: And welcome. You are listening to and watching the Financial
• 0:59
  Speaker 2: Survival Network. I'm your host, Carrie Lutz. Hey, guess what
• 1:03
  Speaker 2: the Fed didn't cut rates? What is wrong with the
• 1:06
  Speaker 2: world here? How can this be? Is this a tragedy
• 1:09
  Speaker 2: of biblical proportions? Is this as bad? Is the flooding
• 1:13
  Speaker 2: currently going on in China? Well, David Strazuski's with us now, David,
• 1:18
  Speaker 2: I'm cressfallen, and yet the market goes up.
• 1:21
  Speaker 1: What is going on here, Well, the you know, the
• 1:24
  Speaker 1: Fed has sort of got this idea in mind that
• 1:26
  Speaker 1: they reached what they call a terminal rate, so they've
• 1:30
  Speaker 1: they've ratcheted up these rates. And you know, obviously we
• 1:34
  Speaker 1: saw you know, our inflation go from like nine point
• 1:37
  Speaker 1: one to three point zero in June of twenty three,
• 1:42
  Speaker 1: so that was about a year ago that we saw
• 1:46
  Speaker 1: these rates come way way way down. So the Fed
• 1:48
  Speaker 1: basically thought that they were going to be you know,
• 1:50
  Speaker 1: able to just you know, set back. They went from
• 1:52
  Speaker 1: nine to three, so going to two is not going
• 1:54
  Speaker 1: to be difficult. And ultimately we've stayed rage bound here,
• 1:58
  Speaker 1: you know, somewhere between three to three point point nine
• 2:00
  Speaker 1: about an average about three point three in these numbers.
• 2:04
  Speaker 1: And so what's going on in the market right now, Well, hey,
• 2:07
  Speaker 1: you know what the market wants to rally. We've seen pullbacks,
• 2:10
  Speaker 1: We've seen you know, the bulls and the bears kind
• 2:13
  Speaker 1: of do their back and forth right now. And you
• 2:15
  Speaker 1: know it's easy to to to see that, you know,
• 2:17
  Speaker 1: whether it's political or financial commentators, we can we can
• 2:21
  Speaker 1: all say both positive and negative things about where we
• 2:24
  Speaker 1: are currently right now, and so I personally believe that
• 2:28
  Speaker 1: a lot of this data is deteriorating quickly. But you know,
• 2:33
  Speaker 1: July is the best month historically for the market. Uh,
• 2:37
  Speaker 1: and it looks like today is no exception to that.
• 2:41
  Speaker 2: It's pretty pretty amazing. I mean, just like, well, it
• 2:45
  Speaker 2: looks like this bump that the market god is quickly fading.
• 2:49
  Speaker 2: But inflation, you know, it ain't going away.
• 2:53
  Speaker 1: No, no, it's not going away.
• 2:55
  Speaker 4: You're right.
• 2:55
  Speaker 1: So, you know, we've we've had inflation that that's been
• 2:59
  Speaker 1: above you know, three and not below for thirteen months.
• 3:03
  Speaker 1: In fact, I think it's thirty eight months that we've
• 3:05
  Speaker 1: had inflation higher than three percent in general. So so
• 3:09
  Speaker 1: I don't see inflation going away. In fact, if you
• 3:11
  Speaker 1: think back to Milton Friedman, which I know that you're
• 3:14
  Speaker 1: a student of as well, you know, he would tell
• 3:16
  Speaker 1: you that, you know, printing is literally the cause of inflation.
• 3:21
  Speaker 1: Inflation is caught by central banks printing. And so this
• 3:24
  Speaker 1: is the tax of least resistance. And so it is
• 3:27
  Speaker 1: a tax. It's a tax on the world, it's a
• 3:29
  Speaker 1: tax on the American consumer. We're inflating our dollar right now.
• 3:32
  Speaker 1: And so you know, basically we haven't seen inflation moving
• 3:36
  Speaker 1: over a year. We have had all these false narratives
• 3:40
  Speaker 1: as far as you know, hey, the thread's going to
• 3:42
  Speaker 1: be cutting any day now. I mean last July it
• 3:45
  Speaker 1: was supposed to be cutting. Well, now we got the pause.
• 3:47
  Speaker 1: So it's been a year since everything's been paused, and
• 3:51
  Speaker 1: you know, and now we're looking for this rate cut.
• 3:54
  Speaker 1: But one thing to understand as well is that historically
• 3:57
  Speaker 1: when rate cuts occur, that's actually when the rec sessions happen.
• 4:01
  Speaker 1: Is just following that. So if we even get rate cuts,
• 4:04
  Speaker 1: it's not like a really great sign, because that means
• 4:07
  Speaker 1: that things have deteriorated in a way that are not
• 4:10
  Speaker 1: you know, exactly peachy and wonderful and great for the economy,
• 4:14
  Speaker 1: at least as far as the middle class is concerned.
• 4:17
  Speaker 2: Yeah. Yeah, well, you know, when rates start coming down,
• 4:21
  Speaker 2: that's when everything hits the fan. Hey, Actually, the rates now,
• 4:25
  Speaker 2: even though they don't look good because we've had nearly
• 4:29
  Speaker 2: twenty years of declining, interest rates are kind of normalized.
• 4:33
  Speaker 2: You know, five percent T bills, right, I mean, that's
• 4:37
  Speaker 2: what you want, that's the historic interest rate and the
• 4:40
  Speaker 2: fact is that over the past ten years we've had
• 4:45
  Speaker 2: these you know, since the Great Recession of eight nine,
• 4:49
  Speaker 2: we've had these sub normal rates, and they were heading
• 4:53
  Speaker 2: into the Great Recession. So what would happen if they
• 4:55
  Speaker 2: cut rates before there was a recession? David, Well, what.
• 4:58
  Speaker 1: You're going to see is inflate, get even deeper rooted
• 5:02
  Speaker 1: into our economy, and it's going to cause things to
• 5:04
  Speaker 1: just really you know, inflate. The stock market's going to
• 5:07
  Speaker 1: go up. And by the way, the stock market is
• 5:09
  Speaker 1: actually not a true barometer of what's going on in
• 5:11
  Speaker 1: the economy. It just happens to be a barometer of
• 5:14
  Speaker 1: economic health. You know, I personally believe that our economies
• 5:18
  Speaker 1: should be judged by how well the middle class is
• 5:20
  Speaker 1: doing or not doing. And in that case, we're a
• 5:24
  Speaker 1: big and challenging spot. You know, if you've cut interest
• 5:26
  Speaker 1: rates right now a quarter percent, does that lower the
• 5:29
  Speaker 1: mortgage interest rates in a meaningful way that people are
• 5:32
  Speaker 1: going to get back out and start buying things. Not
• 5:34
  Speaker 1: a chance. In fact, we're seeing inventories build right now.
• 5:37
  Speaker 1: And with interest rate level that we got to your point,
• 5:40
  Speaker 1: we had these low interest rates for about fifteen years
• 5:44
  Speaker 1: and then now they got ratcheted up at the fastest
• 5:47
  Speaker 1: pace that we've ever experienced here, at least in the
• 5:50
  Speaker 1: United States, and so that's significant. Change has flipped the
• 5:56
  Speaker 1: entire market, and the world runs on credit US dollar credit,
• 6:02
  Speaker 1: and so this effects and impacts everything. I mean, we
• 6:05
  Speaker 1: were talking a little bit before this. You know, the
• 6:07
  Speaker 1: impacts on China right now are massive, Japan massive. There's
• 6:12
  Speaker 1: a lot of change that's taking place all over the
• 6:15
  Speaker 1: earth right now as a.
• 6:16
  Speaker 2: Result of this.
• 6:18
  Speaker 1: But you know, I don't think that the FED is
• 6:21
  Speaker 1: going to be able to get these down in a
• 6:22
  Speaker 1: meaningful way, you know, just because we saw things trend
• 6:25
  Speaker 1: a little bit better right now. They're going to need
• 6:28
  Speaker 1: at least two months worth of data or two different
• 6:31
  Speaker 1: times that they sit down trending in the positive direction
• 6:34
  Speaker 1: or lower than wherever they are right now, and if
• 6:38
  Speaker 1: they're going to see anything. So I don't expect anything
• 6:40
  Speaker 1: even in September, even though I know that that's like
• 6:43
  Speaker 1: a guarantee right now according to Wall Street, you're not
• 6:46
  Speaker 1: going to see it happen unless there's a major crisis.
• 6:50
  Speaker 1: And then I think that they're going to turn on
• 6:51
  Speaker 1: the printing press, and that's basically their only option.
• 6:54
  Speaker 2: Hey, And I'm just surprised that they must think the
• 6:58
  Speaker 2: election is is such a lost cause that they're not
• 7:02
  Speaker 2: even bothering to monkey with the rates. Right.
• 7:05
  Speaker 1: Well, you know, it's an interesting thing. The you know,
• 7:10
  Speaker 1: the FED can do a lot of things. I believe
• 7:11
  Speaker 1: that they're very partisan. Actually, you know where they say, hey,
• 7:15
  Speaker 1: we don't comment on political things. Well, it's the politicians
• 7:18
  Speaker 1: can't lean on the FED and say lower rates so
• 7:20
  Speaker 1: I get elected, But the FED should say and I
• 7:23
  Speaker 1: believe it would be negligence to not say, hey, Congress,
• 7:27
  Speaker 1: this print and spend stuff that you're doing. This is
• 7:29
  Speaker 1: the cause of inflation, all the raises that we're doing.
• 7:33
  Speaker 1: You're doing the counterintuitive thing. You're making this worse for
• 7:36
  Speaker 1: the people that you quote unquote represent. And so one
• 7:39
  Speaker 1: of the things I'd like to be talking to people
• 7:41
  Speaker 1: about right now is I like to say, you know,
• 7:43
  Speaker 1: elections definitely matter, and it doesn't matter what side of
• 7:45
  Speaker 1: the aisle that you're on.
• 7:46
  Speaker 4: Right now.
• 7:47
  Speaker 1: You believe that this is one of the most important
• 7:50
  Speaker 1: elections in the United States history, and I believe that
• 7:53
  Speaker 1: that's true. The thing, though, that I want to point
• 7:56
  Speaker 1: out is that elections matter a lot less when we
• 8:01
  Speaker 1: have the right risk diversified approach to our investment strategy.
• 8:05
  Speaker 1: When we have the right strategy approach to this rate
• 8:10
  Speaker 1: changing environment as we're moving from more maybe more of
• 8:13
  Speaker 1: a growth situation with a values a type of an economy,
• 8:16
  Speaker 1: maybe individual stocks versus ets. Like, there's a lot of
• 8:19
  Speaker 1: different strategies that we can employ. And then the third
• 8:22
  Speaker 1: thing would be tax diversification strategies. And I really think
• 8:25
  Speaker 1: this is something that is not being discussed right now
• 8:27
  Speaker 1: very much. And you know, if we continue to print
• 8:30
  Speaker 1: like this, what's going to happen with taxes. We're going
• 8:32
  Speaker 1: to have to raise taxes in order to continue to
• 8:35
  Speaker 1: pay for everything, including you know deficits now that are
• 8:41
  Speaker 1: in excess of a trillion dollars every one hundred days.
• 8:44
  Speaker 1: So we're blowing our budget by a trillion dollars every
• 8:48
  Speaker 1: one hundred days today. And this is just in an
• 8:51
  Speaker 1: unsustainable way, trending backwards. So elections matter, they don't matter
• 8:56
  Speaker 1: as much when you get risk diversified strategy versus by
• 8:59
  Speaker 1: tax to versus.
• 9:00
  Speaker 2: I couldn't agree with you more. In the meantime, President
• 9:03
  Speaker 2: Trump is out there. First, he promised the waiters and
• 9:06
  Speaker 2: waitresses and bartenders, no tax on their tips, right, that's
• 9:10
  Speaker 2: inflationary today. Just heard that he's promising all the people
• 9:15
  Speaker 2: getting uh you know, government checks, social Security, no tax
• 9:19
  Speaker 2: on them. I mean there's going to be left to
• 9:21
  Speaker 2: pay taxes here.
• 9:23
  Speaker 1: Yeah, I mean perhaps that's a that's a that's an
• 9:25
  Speaker 1: appeal to sort of like that that mid and lower.
• 9:29
  Speaker 4: Mid Hansah, maybe a little tangerrating doesn't doesn't sound to
• 9:33
  Speaker 4: me specifically like a bribe like the you know, the
• 9:37
  Speaker 4: the college education stuff that the Supreme Court has been
• 9:41
  Speaker 4: saying that they're not going to be doing it right now.
• 9:43
  Speaker 1: So, uh, you know, I don't know. There's a lot
• 9:46
  Speaker 1: of going on, but these election years tend to have
• 9:48
  Speaker 1: a lot of promises. We'll see what ultimately gets to
• 9:51
  Speaker 1: live it. But ultimately, our economy does need to grow
• 9:55
  Speaker 1: and we we we have to be able to figure
• 9:57
  Speaker 1: out as as as a nation and who leads the world,
• 10:02
  Speaker 1: how are we going to lead forward? And so I
• 10:04
  Speaker 1: do think it's going to come down to supply side economics.
• 10:07
  Speaker 2: Well, you know, the problem is when Trump makes these promises,
• 10:11
  Speaker 2: he's actually a politician who keeps his promises. That's true.
• 10:15
  Speaker 2: What is he going to do? He's got to eviscerate
• 10:18
  Speaker 2: the federal government literally. I mean, look, do we need
• 10:22
  Speaker 2: to FED buying up mortgages now? Do we need Fanny
• 10:25
  Speaker 2: Freddy and the whole apparatus artificially supporting real estate?
• 10:30
  Speaker 3: You know?
• 10:30
  Speaker 2: Yeah, if we got rid of them back in two
• 10:33
  Speaker 2: thousand and eight nine, really structurally reorganized the entire financial sector,
• 10:40
  Speaker 2: we wouldn't be in a situation now, would we.
• 10:43
  Speaker 3: No?
• 10:44
  Speaker 1: And honestly, we continue to get ourselves into deeper places
• 10:48
  Speaker 1: when we don't address the problems that got us there,
• 10:51
  Speaker 1: you know, like when the banks are needing bailouts and
• 10:54
  Speaker 1: they're the ones that actually led us to these broken places,
• 10:57
  Speaker 1: no one goes to jail. And oh, by the way,
• 11:00
  Speaker 1: personally believed and can see that we're going to see
• 11:02
  Speaker 1: another banking crisis and it's just going to continue to
• 11:04
  Speaker 1: unfold right now. I think we're in the second half
• 11:06
  Speaker 1: of this, just starting nowt FED just told FGSC told
• 11:10
  Speaker 1: us we got sixty three banks that are insolvent right now.
• 11:13
  Speaker 1: All hundreds or a thousands, yeah exactly, are just right
• 11:16
  Speaker 1: behind that. So, uh, you know, the I think the
• 11:20
  Speaker 1: system needs reform. Hopefully the national debate and conversation can
• 11:24
  Speaker 1: happen as opposed to just by executive order doing everything
• 11:27
  Speaker 1: like we've seen with the border here in the last
• 11:29
  Speaker 1: few years, et cetera. So you know, this is this
• 11:33
  Speaker 1: is this is where real conversations with real adults need
• 11:36
  Speaker 1: to be happening. And I just wish and pray and
• 11:39
  Speaker 1: hope that we as a nation can can get to
• 11:42
  Speaker 1: the place of trying to come up with some solutions
• 11:45
  Speaker 1: as opposed to just pointing out problems, throwing stones and uh,
• 11:49
  Speaker 1: you know, going to our political corner, you know, blue,
• 11:51
  Speaker 1: no matter who or red, tell them dead.
• 11:53
  Speaker 2: Yeah. Well, you know, it's like it's got to stop.
• 11:57
  Speaker 2: And financial fiscal sanity has got reassert itself because we
• 12:03
  Speaker 2: can't go on this way unsustainable. David, just tell us
• 12:06
  Speaker 2: where do we find you? How do we connect with
• 12:08
  Speaker 2: you on the web?
• 12:09
  Speaker 1: Yeah, so website is my SPG for Sound Planning Group
• 12:14
  Speaker 1: dot com. I got a number of things that are
• 12:16
  Speaker 1: coming out here, courses, got a book that's been a
• 12:19
  Speaker 1: long time coming. It's getting out here, hey pretty soon.
• 12:21
  Speaker 1: Carrie Riding Bulls and Taming Bears. Investing for Retirement in
• 12:25
  Speaker 1: the twenty first century Fair.
• 12:27
  Speaker 2: It can't wait, Yes, Sarry, all right, Hey, it's got
• 12:30
  Speaker 2: a question for David myself kl at Carrie Leuts. That's
• 12:34
  Speaker 2: the email address. We'll get you an answer and to
• 12:38
  Speaker 2: get to David's site. The link is in the show
• 12:40
  Speaker 2: notes to this interview on Financial Survival Network dot com.
• 12:44
  Speaker 2: While you're there, sign up for your free newsletter. David
• 12:47
  Speaker 2: always a pleasure. Thanks for coming by.
• 12:49
  Speaker 1: Hey, Pleasures Mine Gary, look forward to Dog with Jon.
• 12:52
  Speaker 3: Thanks for listening to Carrie Letz's Financial Survival Network. Your
• 12:56
  Speaker 3: solution to today's trying times For the go to Financial
• 13:01
  Speaker 3: Survivalnetwork dot com. Financial Survival Network now more than ever