Latest / Financial Survival Network / Navigating Economic Challenges: Insights with Gordon T. Long #5942

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Navigating Economic Challenges: Insights with Gordon T. Long #5942 · Financial Survival Network

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  The stock market stuff because there's so many games going on. But when you
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  get into the credit market, the dollar, and in the bond market,
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  the currency market and bond market, that they are longer term trends and when
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  these trends shift change, you can see them setting up and then they stay
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  in those trends. They don't have the volatility, and that's Frankly, my
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  advice to people listening is you're listening to Carrie Lutz'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
• 0:30
  times. You need the Financial Survival Network now more than ever. Go to
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  Financial Survivalnetwork dot com and get your free newsletter and gift. Financial Survival Network
• 0:42
  now more than ever, and welcome you are listening to the Financial Survival Network
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  on your host Carrie Lutz. Well, hey, we're in the first week
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  of November twenty twenty three credit enclosion, regional bank disaster. The Federal Reserve
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  is increasing the emergency facility to keep the banks afloat weekly. So is that
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  the sign of a great economy? Well, let's talk with our good friend
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  Gordont Loong Mattis dot com. Gordon. It's great to have you back on.
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  Hey. If you got a question for Gordon myself, the email is
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  kl at kerrie Let's dot com. Gordon's been a while, Hey, we
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  were talking for years how the subprime auto market was going to implode, and
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  basically that's happened now. Repos at near all time highs, credit card defaults
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  going up, foreclosures, mortgage foreclosures going up. What is an investor supposed
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  to do here? Gordon? Well, I can tell you if anybody who's
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  got debt right now certainly got a problem, as you just just point out,
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  you know, on the cars I'm seeing people. It's stunned me that.
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  And I can remember when you and I first started talking a lot about
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  credit over paying over one thousand dollars a month for these f one to fifty
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  trucks, et cetera. And and it's because they've been rolling over their cars
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  and trading them in a little sooner and now all of a sudden the crunch
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  is there. But in many cases they're somewhat protected if they can afford that
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  payment, because if they're out to seventy two months, it's the new guys
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  that are trying to get the credit. They can't can't get it, and
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  it's spelling carry over into the end of the small business sector. The big
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  the big corporations, and the big players. You know, they locked in
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  their money. That's why this recession hasn't come faster. People bought their houses
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  locked in their mortgage long term. So a vast majority of people are not
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  really feeling that that was increase in rates. But as you go down the
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  food chain, you get down into the lower fifty percent of the S and
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  P five hundred, you start to see it, and it gets worse when
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  you get down to the Russell two thousand. Then you get down to the
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  next level where they're not a listed company, and a moment pause there.
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  It is a serious issue because you know, they barely got out of the
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  COVID vices. They were broke, they barely hung on. All sorts of
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  issues for parents is in many cases that they had to suck in. So
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  then they get out of it and I have to buy borrow money, and
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  one they can't get it, and if they can get it, they got
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  to pay, they're going to pay through the roof. So they're just getting
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  absolutely crushed. So the only direct to answer your question what should you do
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  about it? One is this is not the day to have any debt,
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  and you should have been getting ready for this one because we could see it
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  coming. You know, debt is when you have debt in these kind of
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  markets, you're in tough times, a really serious and the rates will come
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  down marginally. We can expect that at some point. But what we people
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  are not fully appreciation we're in a new era. The great moderation of forty
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  years of low rates is gone. We're going to be in sustain higher rates
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  on the longer term money for the I would say for the least the next
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  decade. And the reason for it is, and you and I were just
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  talking about this, is because the thirty or more the thirty year bond is
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  tracking exactly to the United States credit defaults uprate. That's never I've never seen
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  that before. What's that say? It says that money is now starting to
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  price on the worry of the US size of debt. It's not that it's
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  going to default, but that they're going to the debasement's now a bigger warrior
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  worry. So you can see it in the auctions. Some of these auctions
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  are a complete disaster because we're so dependent on foreign money. So rates are
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  up. So if you have to borrow now and you're not one of these
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  protected ones, I've said, you've got your real problem, and it's not
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  going away quickly. Yeah. Yeah, So so you know this is going
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  to be with us maybe for decade. Inflation you know, inflationary cycles last.
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  You know, they don't just go away because the FED raises rates a
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  few times, right, I mean they go on and on and on until
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  whatever the forces were that started it, uh subside right exactly. Curious.
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  Yeah, you know, I lived through the seventies and it was a t
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  and it goes in waves and you and it's and once the genie is out
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  of the bottle, we all know how difficulty and that big mistake that's going
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  on right now having and remember how we got out of it. We had
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  to the Japanese carry trade was one. We had to go to the petrol
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  dollar to solve the energy issue. And by the way, we broke the
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  petrol dollars Saudi Arabia, and then we're not transacting go oil anymore in the
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  world. Market's ah solely in dollars, it's in anything. The Japanese carry
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  trade is a huge issue because our funding our debt now is the only one
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  buying our debt is Japan And it's an issue. So things that helped solve
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  it back in the seventies are here today and getting worse. But the bigger
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  issue, in spite of what I just said there, is how we got
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  out of that seventies crisis when when it came in ways was it wasn't that
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  Paul Volker drove rates up to sixteen percent. We know he did that,
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  but people forget that a year and a half before that, he was actually
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  a kind of a bum to use that expression, because he had had to
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  jack up. He jacked up the rates that were in a recession. He
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  had to take him down again and it was such a debacle. And then
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  eventually a little later he drove them right up through the roof, and everybody
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  says and that solved it. But people forget was before he was chairman of
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  the Federal Reserve. He was President of the New York Federal Reserve. And
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  that's where the power isn't the Fed, and heast certainly was in the seventies,
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  that's where the decisions were made close to the Wall Street. Washington was
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  a figurehead. But what he did when he was president of New York FED
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  he tightened liquidity. He really it wasn't rated. He just got credit cards
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  down. They were on you know, they were lowering. Uh yeah,
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  I remember all that. Yeah, you see that. And that's so it's
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  liquidity, liquidity, liquidity. And then when he rose rates, it was
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  it was between the two. And I've got I've got charts that I've put
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  together that show that we kept the liquidity numbers all the way through since his
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  era at relatively low ratios or or the boundary conditions, and since since in
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  the last three years we've driven him. We're just right through that and up.
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  So we've had we all know the story of the amount of liquidity.
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  And even though we've been trying to you know, quantitative tightening, we're tightening
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  with lending standards, there is massive amounts of liquidity that have been out there
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  for at least the last years while since COVID, and part of that is
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  because Bidenomics is effectively training the money out of the reverse repos I don't want
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  to get technical, if you'd like, but it's they're pulling it out of
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  the reverse repos and it's going through the federal through General TGA and then out
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  into the open market. So it's just it's it's what it is is modern
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  monetary theory MMT with a different version shoe bidnomics. But that's coming to an
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  end because the reverse repos have dropped from two point six trillion down to one
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  trillion in falling, so that that's suddenly drying up. I didn't need to
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  get a long window. But these are the mechanics that people are just not
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  talking about. But it's gott to live through the seventies to remember them.
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  Yeah, well nobody, you know, very few people on Wall Street have
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  been through a through a bear market, let alone inflationary rout up right,
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  exactly exactly. They're going to learn the lessons of a lifetime. That's what's
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  going to amp. You know, it'll be tough times, but that's that's
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  that's actually a healthy process. The world's not coming to an end credit.
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  It's when we, you know, we get rid of the mal investment,
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  the better businesses survive, the ones that shouldn't be in business fail. This
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  is good, you know, you know, it's all right to have a
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  bad hair day. You know they but we're in a we're in a world
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  where we don't do that anymore. And it's it can it you know,
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  constructive? You need this in a capitalist systems to be vibrant. Yeah,
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  but the problem is these kids have learned that recessions are bad and you can't
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  have recessions, God forbid, because you know, we just need to print
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  more money because you know, recessions are bad, right, but they're really
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  a purifying kind of thing, like you know they are. That's exactly.
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  It needs to be flushed periodically. Put it that way, right, That's
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  that's that's what makes capitalism work. And it's it's it's hard, but it's
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  healthy. It's like taking your kids off their credit credit they're overspending. It
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  just have to do it. It changes behavior. And we went so long
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  with bad behavior knowing the credit there was a safety and enter credit was just
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  there. The malinvestment is has went to an extreme that it's actually jeopardizing our
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  entire financial system. That is that is the biggest There is so much leverage
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  that we all know and we got so used to it, and the games
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  that are going on behind the scenes within the credit market is so underestimated because
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  if you give you know, the dot com area carry you remember how we
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  learned about credit defaults ops and clos and nobody knew with our CEOs. And
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  then during the financial credit Great financial Crisis, people learned about mortgage backed securities
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  and clos and all those and it's all so this it's exploded, and now
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  we're into what collateralized loan, not just alles loan, but collateralized swaps.
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  Get swaps collateralized to protect the value of collateral it's being paid or being pledged
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  because of something called re re hype rehype of hYP hyper hypothegation, right exactly,
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  that's a that's a multiple. I guess they created that word so people
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  wouldn't say it. But but I didn't mean to get again get negative on
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  this part. But there's just so much that you have to understand. They
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  even be a minor investment investor today or you're you're going to get hood wink
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  here. Yeah, well, hey, the retail always gets it linked.
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  Right at the end of the day, the taxpayer and the retail. The
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  consumer always pays the bill because that's where the money is. And you know,
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  and one of the things that is that bothers me the most, and
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  we're you know, we started here with this small business, and you know,
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  the small business has been the basis of our country. It has built
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  the country. I was looking the other day at the at the ten richest
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  people in America. Every single one of them started as a small businessman and
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  now are massive conglomerates. We can talk about the best best so as we
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  best what we can talk about Microsoft, we can talk about soccer, berget
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  Facebook, we can talk about Larry Ellison an oracle, we can talk about
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  Warren Buffet with Berkshire Hat, the way that they reside Bloomberg. We need
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  I just every one of them. And so what's happening now is there's the
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  rates that they're at and will be higher, is really impeding the small businessman
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  making a goal that once or even getting started. And so we're so dependent
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  on these corporations and I spent a vast majority of my years in corporate life
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  that that aren't delivering to the GDP that it should be delivering, and and
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  and jobs that go with it. And when artificial intelligence really comes into swing,
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  you're going to see the corporations take full advantage of it. And there's
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  going to be problems with it. Say it's a given, right, So
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  but this this sounds negative, but it's actually healthy. I'm more optimistic out
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  over the next five years where we could be if we could get through and
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  get some cleansing going on here, because as bad as it seems in this
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  kind, it's worse around the world. The United States is economy is the
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  best economy. And I just got back from Europe and I was I was
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  glad to get back in the in the US from what I was seeing over
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  there. And I talk regularly to friends in Japan and people a deal out
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  of China, no our economy, so there will be a flight to safety
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  I see coming in the US doll or two. So it's not dealing with
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  gloom and it's opportunity right now. Yeah, well, you know danger opportunity
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  right to exactly the Asian Chinese thing. There's two characters in the word crisis,
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  two Chinese characters. One is danger, the other's opportunity. So where
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  wise men fear to go, fools dare to travel, right, that is
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  the era with that we're in. So do your homework and do when there's
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  these kind of changes like last week, we saw the ten year bond just
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  to do a drop. We we just never see something, you know,
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  watching the bond markets like watching paint dry, but you could see it coming.
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  It was like classic technical analysis for sure. And it has spillovers,
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  you know, the stock market stuff because there's so many games going on.
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  But when you get into the credit market, the dollar, and the in
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  the bond market. The currency market and bond market, they are longer term
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  trends and when these trends shift to change, you can see them setting up,
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  and then they stay in those trends. They don't have the volatility,
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  and then that's prankically. My advice to people listening is, you know,
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  don't lock all your money into playing the stock market. There's a lot of
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  different ways to invest today that are just really over overlooked. And it's because
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  it's because of these negative comments that I've made, are actually presenting these opportunities
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  to investors. But you got to just stop playing just looking at the stock
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  market. It's like this infatuation that swept over America in the last i don't
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  know twenty five years, maybe because it was easy money. It was pretty
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  hard not to make money in the stock market last twenty years, you can
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  always buy anything and you made money on the surface, yeah, surface,
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  So do you make the money then for the coming ten years here, I
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  think there's going to be a lot of money made. As I said in
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  the in the bond, in the credit market, the bond market, if
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  you invest properly. You know, the whole game of going to hard assets
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  is a all trodden game. You know, you and I were talking about
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  years ago, and I can remember farmland was a big deal in two thousand
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  and two, and then and and that got drove through the roof, and
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  then we were into forests and you know, and then the goal was always
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  right from the dot com a big investment silver. I still think there's big
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  room in gold and silver as a precious metal. But you know, all
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  the hard asks, but most of them are really well overbought. And if
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  we have a tough credit market and liquidity squeeze, they're going to be problematic
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  at the levels that they're at. But they are always you know, good
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  protection of real value, but they may not give you a real return.
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  At least they'll give you a return on you a return of your money,
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  right, So but it really it's it's a time to be looking at value
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  rather than growth. And you know that we've been talking about that coming and
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  I think we've turned that corner. I think we're now in that era.
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  All right. So all right, so we're in a new era kind of
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  and you've got to adjust your strategies. It's not your father's stock market or
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  your grandfather's stock market. Hey, Gordon, just tell us where do we
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  find you these days? How do we connect with you on the web.
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  Yeah, I post any work that I do at Matassi dot com, m
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  A t A SII dot com exclusive for there week, I put out free
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  newsletters and videos. The only thing I ask is is give me some input
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  on what you see because I get tremendous input that helps my investment because we're
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  primarily investors. All right, all right, Well, hey, if you
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  got a question for Gordon or myself, just shoot me an email KL at
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  Carrie Lutts dot com. And hey, you're at the site, just click
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  the link. It'll take your right to Gordon's site, and while you're there,
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  sign up for your free newsletter. Gordon, always a pleasure, Thanks
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  for stopping, Thank you, curious, talk to you again. Thanks for
• 18:02
  listening to Carrie Letz's Financial Survival Network your solution to today's trying times. For
• 18:08
  the latest, go to Financial Survivalnetwork dot com. Financial Survival Network now more
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  than ever,