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I agree with many of his comments, but true inflation way higher than 3%. Many items aren’t included in CPI. Property taxes, auto and property insurance, water and electricity, consumer interest. These items have increased 20-50%. CPI is very selective.
and none of the things they say are going down, really are. the CPI is just a random snap shot of a small portion of the total. gasoline prices are going up, rent is still high and getting higher. normal every day items are beyond ridiculous. used cars are still high unless you get a crappy beater and even then you paying a couple grand more than they should. the feds manipulate because they don't report to anybody of substance
My auto insurance just went up 50%. Gas is still almost $4. Every time my wife and I go out to eat, it’s $140-150 at a moderately priced restaurant. That’s crazy.
Yes, same as the employment stats/ payrolls -- which don't count the homeless as unemployed. How much more unemployed can a guy get than living on the street with no means of securing a job.
@@michaelacton6246but but you don’t understand! Cheap trinkets from China aren’t inflating (because Temu is employing literal slave labor to make junk that won’t last three months, but nevermind that). That’s what really matters! -Fed economist
5% interest is absolutely crushing for any country with a 120% debt to GDP ratio. Our government cannot remain solvent with the kind of interest rates that were around in the 1980s. So much wealth and well-being has been borrowed from the future that now the only question is who is going to pay the bill. The choice is between 1) austerity and higher taxes for a decade to pay down the debt, or 2) negative real interest rates to inflate away the debt and push the losses onto anyone foolish enough to hold long-dated government bonds. Neither will be pleasant for a median income American family.
@@deseosuho They should have thought of that before the borrowed that much. They knew what they were doing. It was a scam to boost asset inflation so they could get free money. These people need to be prosecuted for fraud.
Exactly, and if these guys had their way they would bring rates down to 0 or negative and leave them there forever. Cheap money is fantastic for Wall Street and what do they care about the poor, the middle class and Americans being incentivized to save money.
@@Resmith18SR Inflation began to indicate signs of going up through world Commodity Prices increasing in 2015. The costs were climbing before Covid began. It appears like Covid was created to divert attention? Now they blame every economic effect on the "Supply Chain" being defective. Is the Inflation effect of most former Colonies defecting to the BRICS Trade Group something that is forbidden to mention? The Drama of a Election Industry presentation of distracting elements ? Is this another attempt to distract? Is it a new attempt to divert attention from the economic demise of the American Empires loss of the ability to use Colonial Exploitation to maintain the US Economy? Asking for a Friend.....
Really enjoy the thoughtful commentary of Mike Leibowitz. His analysis is always insightful and valuable. History shows it’s when the rate cuts start that the real fun begins. I won’t be surprised if it is the same this time around.
Exactly!!....and high prices are persistent because the Fed and Treasury keep flooding ample liquidity into the system which is keeping asset prices propped up. In other words they aren't allowing natural price discovery or for prices to correct. It's great for the wealthy! Sucks for everyone else!
@@MrSean03839 What the working masses always do when things get bad enough. Think 1796 France ,1917 Russia, 1948 China etc etc over and over all around the world. The root cause is always wealth inequality. Right now it is worse than the 1800s era of robber barons and monopolies. The elites always think it will never happen in their country.
And these Wall Street cronies like this guy think lowering rates back to 0 or negative rates will solve everything and inflation and costs of real estate, rent, food, insurance, everything will magically fall and we will achieve a Soft or No Landing.
@@MrSean03839 Earnings haven't gone up. If there was gouging, corporate earnings would have skyrocketed, which they haven't. Emotional rather than rational.
Rates should be high enough to give people who save a fair return on their savings. Bonds and CD's should give somewhere beteeen a 1 1/2 to 3 percent real return. Enough financial repression. Yes we can have rates high enough to do that. Rates that are too low create bubbles. Not sustainable. The government needs to get spending under control and quit creating so much fiat currency.
If the Fed is fearful I hope that fear won't cause them to do the most stupid thing they could do, and that is to take their eyes off of inflation itself and off of the terrible consequences of it over the last 4 years. Lowering rates will signal more stupidity. Prices for all things must come down for all people to be able to participate in the economy. Rates are not too high, prices are. Deflation is absolutely necessary to restore broad participation in the economy in the longer run. For now deflation of at least 50% is necessary and it will take a market crash, a recession , and a slash in government spending to accomplish that. Gross mismanagement of the markets, the economy, and the dollar have gotten us into this mess. It will get worse, much worse, if we just keep doing the same stupid, greedy, selfish, and cowardly things in response to this problem and kick the can further down the road. Resetting and rebuilding the total economy will require pain, but if sound minds prevail and the right thing is finally done now, it will be better down the road, and much better for our kids. I think that the US is probably already in recession but the Fed and the Congress won't let it play out properly because they are flooding the markets/economy/and people who don't deserve it with free dollars, bailing out poorly run companies, subsidizing companies with products people don't want, and other ways of propping up a system that needs to be flushed out.
And beyond all of that, the government over spends grossly with too much redundant government employees and their much loved military industrial complex towards the creation,enabling and policing of the never ending wars. And I can keep adding to that list all done on our backs. This dystopian world is not a conspiracy theory. Take care.
@@larryjoe1357 Don't know where you get your information, but Midian home prices rose from 221,000 to 337,000 from 2010 to 2020. Is that no inflation? the same thing happened to automobiles, in fact everything bought on time. Why, because the low rates allow the sellers to raise the prices on what they are selling. Go into a car dealership. First they they ask is what kind of payment are you looking to make? What a stupid question but the consumer falls for it. Home sellers and real estate agents do the same thing. Rates go down, prices go up, and vice versa.
What’s the inflation rate if you use the 1981 CPI? What’s the cost of financing relative to income. What is the new price level for virtually everything? The YOY unemployment increase is 14%. Nobody believes the headline numbers.
I thoroughly enjoy Mike as a guest.He doesn't use charts and his finance ideas are easily understood by the comman man.He also talks about the present and future for the market!
I live in San Diego. My rent has never gone up only 2%. Its always 4% or more. Last year it was 8%. This guy believes the government inflation rates. If I want to say how inflation is coming down I will go to CNBC. Its not coming down. Its still rising. OMG
@YourLifejacketFirst he has been asked that before. I believe his answer was that the markets only care about official numbers. Not reality. Actually, I think that was Lance that said that.
A year ago i bought onions for .38 a pound…today its $1.38. Anyone who tells me its really 1.8% is full of shit. Sure…anecdotal, but doesnt everyone have a hundred examples!
The market dropped dramatically in December of 2018 because the interest rates were going up to 3%, it was not sustainable then so they dropped the rates again even before the pandemic. The pandemic was a reason to get back to zero rates. I still remember Trump wanting to go to negative rates. We now have had interest rates above 5% for 2 years, what's different now compared to December 2018. Higher debt and higher for longer. It was free money given out to prop up the economy with these failed business start ups. Now bankruptcy is on the rise but the money is gone. You can justify the numbers are improving but you can't justify the overall prices are just astronomical compared to pre pandemic. 500K for a house now that was 250K 4 years ago. That's a 50% increase. The jobs report is not reporting accurately as I see more and more people being laid off. Food at the market especially beef, chicken and fish is much higher. Eggs are $3/dozen when they were $1/dozen. The only reason oil is staying low is because Biden is draining our reserves so bad that if a war breaks out we might run out. All for the election. There have been reported nuclear Russian submarines just off the coast of Florida!! Everyone thinks war is old thinking but Biden supporting Ukraine will give Putin an excuse to launch an attack on the US if he feels like it, and don't count China out on doing something to Tiawan if they see an opportunity. Russia and North Korea are collaborating, I'm not sure how true this is but supposedly Saudi Arabia is not exchanging with the petrodollar. Just a few things to be aware or nervous about and not get complacent that war won't happen.
Exactly. They are data driven. Everyone wants the cuts. Just not sure why these folks think the Fed is afraid of anything. Outside of 2008-2009 I don’t think the Fed has been fearful about anything since 2000. They do not care about the markets, they simply set policy and base lending rates. If they take action like QE, they are anticipating a good return on buying up that bad debt.
Great thesis. Question becomes, will people buy treasury bonds at 2 1/2% or will they instead buy gold or bitcoin? Also, what happens if bond interest rates go up when the federal reserve starts lowering the fed fund rates?
I respect Mike and Lance's bullish Bond thesis, BUT....the real problem I have with it is, a) future inflation, both govt inflationary policies AND commodity scarcity inflation due to geopolitical factors, and b) somewhat but not entirely related to A, I see net sellers, not buyers, of govt debt which is upward pressure on yields. These things seem inevitable regardless if we run into economic slowdown/recession or not.
Followed Mike’s advice re: bonds early. Didn’t go all in but grabbed a chunk of long-duration and way more on short end, while it is higher. Currently laddering into 2yr-10yr TIPs for a specific purpose that fits our long-range Plan goals. TALK TO RIA if you don’t have a documented plan. This is no time to take a lot of risk, especially if you are over 40!
Haha! Same but I stayed in just long enough to cover the losses I had from TLT. But while I didn’t make money this information saved me from a huge loss (because I was ready to abandon TLT last summer).
Great show Adam, and I'm sorry about your loss. Do you think you could do a show to talk about 401k? I'm trying to learn a lot and watch your show daily, so thank you for that.
*Texas without air conditioning?* _Different state, same principle:_ In a hot forge shop in the summer, we'd soak ourselves, clothes and all in a creek for working in the afternoons. We'd be dry and still alive by "knockoff."
Please have Michael on more often. His sober, thoughtful approach is appreciated, and his insites are enlightening. Great show! Thanks! P.s., Lance is great too!
The thing is all major economies have a massive debt problem so we are going to see a worldwide debt crisis in a way history has never seen before. I doubt its that far down the road at this - more than 2 years yes but I suspect this decade.
The recent rise in interest rates, I must say, doesn't seem to be effectively curbing inflation. Instead, it's creating additional financial challenges for individuals. Cutting interest rates might alleviate some of the pressure.
You're right on the money with that observation. The rising rates are definitely influenced by factors like increased imports and decreased exports. It's worth pondering whether the ongoing quantitative tightening and higher interest rates could result in unexpected outcomes. Do you think it might be wise to think about investing some of our savings in stocks at this point?
The economic landscape seems rather turbulent, doesn't it? First austerity, then Brexit, and now the specter of widespread bank failures. It's always a wise move to conduct thorough research and consult a licensed advisor before making any significant investments in these unpredictable markets.
I agree, Market predictions can be unreliable; we've seen that recently. It's been quite a downturn for some, while others have managed to navigate it successfully. Like myself, I'm semi-retired and have maintained a $2 million ROI after successive investments.
I've been fortunate to have the same money manager for nearly a decade. We entered the market early with a modest investment, and it grew exponentially over the years. We even saw substantial profits after the GameStop surge in 2020/2021. Though inflation has eroded some of our gains, we're lucky to have a diligent advisor like Desiree Ruth Hoffman overseeing our portfolio.
The real question is what happens next time they have to raise rates and they can't even raise them above 3% because it's too restrictive because of all the leverage in the system. And they try to go sell debt and no one wants to buy at 3 3.5% what then.
When it drops below 15k... yes. I think it goes to 10k before it goes to a million. But long term BTC is the future. Short term it is going to get its face ripped off just like all assets are. That is a buy event.
I was fortunate on Thursday, had a decent short position on qqq and a larger than normal position in iwm. Finally I got it right and on Friday I shorted the nasdaq and closed them out at the close. I had a terrible month before though but that made up a lot.
A decade of ZIRP destroyed cost of living affordability for most people, it’s not a topic you will never hear discussed in legacy media or by politicians. The only ones fairing well now are those who did well during ZIRP aka the people with heaps of hyperinflating financial assets. Globally, Central banks created the conditions for way too much liquidity to be created. I see it in my city, the affluent town on the escarpment has more and more people driving luxury vehicles and the city below has more people living in tents. The policymakers should be held accountable.
Congress gets most of their wealth from asset inflation. That's the game. That's how they game the system. You figured it out just like I did. They are defrauding the public.
Drop rates in small jumps. Tenth of a percent every 2 months. Also,practice neoRoman decimation on Congress when they run a debt over 2%. You list House and Senate members who voted for a greater than 2% budget. They are automatically prohibited from serving in any federal position for 10 years.
Almost 35.. and adding a trillion every 100 days. The amount of day it will take will decrease ... faster and faster. We are in serious trouble. How are we going to pay for all this?
All our discussions on economic fundamentals and financial markets reduce to what the Fed and UST will do to prevent sentiment from collapsing. So fundamental analysis reduces down to technocratic incentive structures. The trouble with long rates is that the Fed and UST need real interest rates to be lower than inflation, so long-duration bond returns rely on short-term capital gains countered by long-term declines.
The idea that things go back to a pre-lockdown environment is an option to have in mind but I would give it way less than 50% chance. Any deflationary episode would be answered with massive measures. You can’t have deflation in such a leveraged system. Things would spiral down extremely fast. We are approaching the end game. Keep an open mind. It all depends on policy choices. My sense is that things have to stay inflated. We may or may not get a deflationary episode in between.
I like Mike's insights, but if interest rates go down, RE transactions may increase, but so will prices. The only way to increase housing affordability is to build more in areas where inventory is low.
Bingo! It is not the cost of a Big Mac at McDonald's - it is the cost of rent which is wiping out saving 15% in your 457 plan. This effect will wreck retirement for millions as lost years of saving won't show up for several years.
I work in the hospital, there not enough nurses or MSW or MD, we have to close units because of lack or workers. I don't understand when u talk about hard times for job seekers. It's hard times to hire people in the health system
Talking about lack of RN's and MD's without context is simplistic and deceiving , there are many reasons why MD's had accelerated their retirements and the extreme state micro-managment of their profession is one of them!
What’s the inflation rate if you use the 1981 CPI? What’s the cost of financing relative to income. What is the new price level for virtually everything? The YOY unemployment increase is 14%. Nobody believes the headline numbers. It’s comical to hear discussions on inflation with absolutely no mention of the money supply. M2 increased from 15.5 trillion in 2020 to 21.5 trillion in 2022. It barely contracted and is rising again, currently standing at 21 trillion. And, now we need rate cuts with asset prices (homes and stocks) at record levels? With corporate profits and margins at records?
With this weekend’s events. Is the Fed more or less likely to ease in July? Two thoughts. If they perceive less political uncertainty (since the outcome of the election now seems less in doubt) will it mean higher for longer or if they perceive more uncertainty does Powell now want to support the economy and thus ease rates as soon as July.
It would be good for the market /economy /country to have more active management. But the way it would play out, is the active managers would hold equivalent to passive management with 80-90% of their portfolio, and then just actively manage only what they see as "high probability wins". The risk of losing to the passive index would exceed most manager's skills.
When the GDP is being driven by the massive debt it skews the comparison quite a lot as the government now has to keep spending at the same increased pace to keep that GDP high and if they stop suddenly that debt percentage spikes. I dont think you can call that flatlining comparatively
