Spending growth asked to Inflation is not as strong as it was, but it's
still there. You know, it's still growing and it's growing at rates of
worth similarly before the pandemic. And yeah, so the consumers hanging in there
though it's other parts of the economy that are hiving will problems. You're listening
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Carrie Lutts. Well, hey, economy, it looks like it's imploding,
or maybe it's a slow ocean implosion right before area is housing down in many
areas, auto sales, economy, interest rates. We got Wolf Richter with
us now from wolf street dot com. Wolf great to have you back on.
So what do you make of the economy now? Hi, Kerry,
Yeah, I mean it's it's an interesting economy. Economy and um, I've
never seen anything like this. Yeah, the consumer is still hanging in there
like a server, is still swimming in money, and uh so they're still
spending, which is a problem for the fit because you know, they're trying
to get inflation down and so they're raising interest rates and the consumers are not
cooperating. So now we've got high interest rates that are really harding the banks.
Uh we've got you know, we've got there. We already had a
handful of them inpload and and there's stressed many other banks of stress. So
that's that's an issue we've got. Uh And so that's the financial system that
is now struggling. And then on top of that, of course, we
we have this uncertainty about the US default. So meanwhile the consumers just blowing
it all off and just spending money handle a fast. So that's the Alfred
E. Newman economy, remember him, what me worry? That's that's that.
Yeah. Yeah, So how long does this go on for it till
till the consumer starts, uh facing reality. Well, we we've seen some
layoffs, but these people that have gotten layoff laid off in the techn social
media uh sector, stuff got to rehigh end pretty quickly and uh, sometimes
outside of tech and social media and lots of other companies that look for talenter
this type. And so we really haven't seen, uh in the big increases
and unemployed people, you know, so that that's not happening yet, and
it's going to eventually happen maybe you know, but it's not. It hasn't
happened yet. So that's the incomes stream of many Americans and that's still holding
up. They've gotten the biggest pay raises in for decades and they're working and
so you know, that's that's doing pretty good. And then you know,
you have all these other people, the retirees and others that live off their
fixed incomes and yeah, you're talking about twenty twllion dollars in in UH treasury
bills and money market funds and in savings products and they're now making five percent
income yet on their money and they made zero but send essentially a year and
a half ago. So they're starting to spend this money and this is propping
up spending. Two. So we've got all the stuff going on on the
spending side, uh in terms of consumers, and we haven't seen any disruption
to that yet. Yeah, that's it's it's i mean, spending growth after
inflation is not as strong as it was, but it's still there. You
know, it's still growing and uh it's growing at rates and worth similar before
the pandemic. And um, yeah, so the consumers hanging in there.
There's other parts of the economy that that are having real problems. Yeah,
the banks, we're talking about that from a minute ago. Companies are having
trouble, uh, you know, with with risk here, companies are having
trouble refinancing their loans. We've got the whole sect of commercial real estate,
particularly office and now apartments and some other parts. You know, they're getting
into serious trouble. Retail and commercial real estate has been in trouble for years.
So yeah, there's other parts of the economy they're really struggling. Yeah,
so it's kind of interesting phenomena. And then there's sections of the country
that are struggling more than others, right, Yeah, And it's it really
depends on where you are and uh, and the economy is always local and
and uh, real estate is always local, and small businesses are always local.
So I mean the big companies are global, you know, so when
they talk about the layoffs they're talking about global layoffs. A lot of them
don't even happen. Then, I it states that definitely impact us here.
Uh yeah, so that's a global thing. And but your small businesses,
you know, they're local and they have local customers and restaurants at local customers
and and so they're depending on the local economies and and on some places.
When I live in San Francisco and the place is hopping, you know,
I just find it all the layout announcements and all the empty offices and all
the stuff. You know, people are spending a disillion tons of money here,
and it's tourists and from all over the place, and and uh so
you know that part is still there. And in other parts of the country
you see some bigger weakness. This car cropping up. Some places never had
any growth to begin with. I mean that that's just how it is.
Right Well, in Miami, in Florida, it's exactly the same. It's
blooming. Houses are still selling, but housing is definitely taking a hit in
large swaths of the economy. And what's your take on that. Yeah,
it's regional to you. I mean, like you said, Miami, Uh,
it's probably that in Florida, generally probably much better shape in terms of
housing, are further behind, let's say, uh than the West Coast,
the entire West Coast, particularly California and Seattle, Portland. Yeah, big
coastal cities there are gating hit very hard on housing and they've been overpriced for
years. Uh. Here in San Francisco, we've lost a good part of
the population, and uh, there's all kinds of stuff on the market.
Now. Prices have come down substantially in the entire Bay Area. They're starting
to come down inside in California that have come down a lot. In Seattle,
Oh, these are big price declines. We're looking at double digit price
declines. Um. And now I've got spring selling seas at the moment,
and everybody's got into this. Okay, Uh, prices are going up,
but they're going up seasonally. Yeah, they always go up. They'll wind
up during housing Dutch one during this time of the year, and so the
other parts. Yeah, some other markets have gotten hit pretty hard too,
and so we're and it's just sort of spreading from there. I mean,
mortgage trades on Friday or so, the daily measures we have for backhouse to
seven percent, so for the average thirty you fixed. That's six point nine
percent. And yeah, these home prices in a lot of places don't don't
make sense at six point nine percent. It's just, yeah, it's just
too expensive and for details to happen. Yeah, the prices have to come
down. Hey what about the commercial real estate. You got empty skyscrapers all
over the country. I mean, my kids have embraced at the hybrid workplace.
They go to work two three days a week. The rest of the
time they work from home. If you're raising a family and you're a single
mom or father or to working parents, this is the greatest thing that ever
happened to you. But but not so much for commercial real estate. It
looks like we're looking at trillions of dollars of commercial real estate that will have
to be repurposed in some way or form. Perhaps they'll will become tesla factories.
Yeah, that will be interesting. You know, I'm kind of long
term. You know, I'm pretty positive about this because these uh downtowns that
are full of business buildings that you know, they're empty out after hours and
then it become yeah, just devoid of people and they're not fund to be
in the end, doesn't matter, war or when Yeah, these these financial
centers are really not a good place, uh in a sense. And uh
so cities that have embraced mixing office buildings with residential buildings. Yeah, these
these central business districts that would become pretty lively and uh and so I think
that that's the future. You know, they're going to have to convert some
of those office towers that can be converted, you know, talking to older
buildings, a lot of them cannot be converted. You know, there will
be sold in the foreclosure sale for land value essentially and be torn down and
replaced by residential tower. And yeah, this is is all very slow moving.
And we were talking years, you know, and so this is not
happening today. I mean they're talking about it, they're starting some some conversions,
and they've conversion has been going on for years. But it's just hard
to convert a nineteen eighties office tower into residential. It's almost impossible. It's
just cheap but to tear it down. But there's some buildings where that works.
And so but it's you know, tearing down the building and building a
new one that's good for the economy. Yeah, it's a lot of investment,
a lot of spending and so that that when that starts to happen,
that would be a good thing. Meanwhile, we've got investors or equity investors
in these buildings, and we've got lenders in these buildings, and they're going
to lose their shirts. And there's just no way around it. It is
spread all over the places. Uh. So far the big defaults that we
have that I've looked at that these big towers, you know, there will
all investors in banks that we're on the hooks and these a commercial war dispatch
securities, mortgage speeds and private equity farms and other especially unders life insurance companies
you know that that are on the hook for them so far, and um,
yeah, that and the investors, equity investors lose their their portion first.
So then so far that too has gotten hidden. It's spread all around.
It's global on these a global investment funds, he's a global bond continential
funds that that have invested in the equity and in the depth of these uh,
these office towers, and you know, there's just no way around it.
These an old office tower is worth the land value essentially. You know.
That's that's what we're learning and one of them solding in San Francisco.
You know, we finally had the first post pandemic sale going through of an
office tower, and I cut the prize by seventy five percent. And it's
old. You know, that's that's what you have to do. You know,
this out on an old office down. It was a usable office down.
It had an attended that's Albna. It was at least after the arrangement
the bank sold. There was no lenders involved. They didn't involve any losses
for Lendus. And in that kind of set of market price, seventy five
percent off and and uh you know, and that will probably uh I would
be working model and going forward. Okay, so you know I can see
that. I remember reading the story of the of Massachusetts Mutual for closing on
the Chrysler building. I don't remember the exact dates, and they sold it
for hundreds of millions of dollars at some point in the future. I was
in an office building in Manhattan that they foreclosed on and I never saw it
if they sold it again, but they foreclosed for like twelve million. Building
is probably worth a couple hundred million. It was a historic high rise.
So definitely opportunities are there. They found that, like in Lower Manhattan,
a lot of these older buildings that were office buildings were actually really perfect for
conversion because of the dimensions or so than new buildings because they were a set
number of feet from the elevator corps, so there was very little internal space.
And these buildings, the newer ones that have like hundred thousand square foot
floors, not really that suitable for or residential because you've got all this interior
space that won't have windows, and that just it's good if you're an artist
an art studio, or you have a sound studio in your house like me,
but otherwise not so good. But I guess it's going to get digested.
As your point, a lot of institutional investors hold them orgages and they'll
be the proud owners of this property at some point or another. What about
the auto industry now, it looks like sales have been heading downward for everybody
but Tesla and a few ev makers in in China. But one analyst I
talked to recently forecast that the Tesla will not be able to withstand the flood
of Chinese imports. I'm not buying it being a Tesla owner myself, I
just don't see the driving experience being equal in the Chinese cars. I could
be wrong. What's your take on what's happening there and and interest rates and
repos and all of that. Yeah, so in terms of the thing,
yeah, we have Ford come out today and say that prices will have to
come down by about five percent in part because of Tesla's price cuts. And
Tesla has is very uncommon in the auto industry. You know, Tesla has
build and it's continuing to build production capacity and in large amounts. I mean,
they're just opened plant in Texas, they opened one in Europe. They're
looking at new plants that have got this huge plant in China and got the
plant in California. They're looking at opening new plants in Mexico and in other
places in Asia. And so they're continuing to ramp up the capacity. And
in order to make the work, they have to sell a lot of vehicles
and uh and they had the largest profit margin of the main automakers, you
know, so they can't afford to cut prices. And they're going out there
and they're trampling all over these legacy automakers. And I think that's great.
Now I'm not a huge fan of Tesla, but but I think the strategy
is just amazing. I have come to hate the legacy automakers for the stupid
decisions they have made over the years, and you know, they have ignored
e for decades. So now Tesla it's a decade ahead of them. They
can't get the supply chains together, you know. For it's got a couple
of models out, but you can't build them in large quantities because it doesn't
have the supply chains to do that. And yeah, they're going through all
the problems Tesla went through ten years ago, five years ago, you know,
So now they're trying to catch up. GM doesn't have anything really,
you know, it's talking about what it's gonna have, and the one vehicle
that had the boat it's it's shutting down. So there are other eb meakers
out there, like Volkswagen and the Koreans you know, that are doing a
much better job, and they're providing some pretty stifferent competition. Of course,
in challenge that, Like you said, there are hundreds of eBay because and
some of the big ones, some of the big companies are are being very
competitive and they have to compete on price, So they cannot compete on cool
factor with Tesla, and they'll have to compete on the price. And that's
what it comes down to. The United States. Now we have this for
the first time in many, many years. We've got a new entrant,
essentially a Tesla shaking ogopulistic behavior of the legacy automakers. And I think that
is great. And the auto prices have gone up so much, so fast
that the average American came no longer a forty V a new vehicle, So
that's something seriously wrong with that strategy. Everybody has gone up scale. Uh
that the average Sun's actual prices for new vehicle is now forty seven thousand dollars,
which is just ridiculous, you know when you look at average incomes.
Yeah, and so uh yeah, something needs to happen. It. Tesla
came along and it is now shaking them up and that it's good and it's
having a big impact. Um. You know, that's why EV says and
a lot of other ev evmakers have followed suit. So they've cut their prices
and in California and we're looking already at an EV market share of twenty percent.
So I mean Nasi from I don't know or really you know, And
it's not just destolating more now it does forty models on the market. And
and so even though Tesla is number one and the model of hy and Model
of three are now the number one and number of best sellers in the statement
blowing away Camry and other models. And uh, you know, so the
automakers are going to have to react after this story that doesn't have anything really
to speak off from the EV field completely drop the ball. And so that's
that's the biggest movement in the auto industry I've ever seen. It's a shake
up. You know. It's really good for industrial America, I think because
a lot of these evs and the technology is is being built in the United
States. Uh. Yeah, I think this is a great thing to happen
from an industrial point of view, from an American industrial point of view.
And uh and I think the price cuts are a great thing to happen.
From a consumer point of view. I think it will be tough going for
for the legacy automakers. You know, a fight like that, it's it's
tough to deal with. And so that's that's one aspect that's really working and
I'm I'm I'm surprised with how suddenly it took off, you know, and
it was just gradually going and now starting we've got this this sort of massive
momentum behind and that we're going to get some imports from China that we're going
to shake up the pricing situation further. So I think that's a good thing.
The bad thing is for consumers. Interest rates have doubled for autos.
You know, that's just that's just how it is. And and uh so
that's getting a lot more expensive to type with these expensive vehicles and uh you
know, there's a huge amount of paint up supply out there. There's like
four or five six million vehicles that haven't been bought over the last three years
because of the supply s religious people have inventory. Now we've got inventory.
Now there's pickups, and there's SUVs and alternids of stuff everywhere. Uh except
some of the import makers don't have a lot of ivagory. But the domestic
brands all have a plenty inventory and deals are being made. Uh yeah.
Automaxis subsidizing the interest rates on the car loans, so for credit offering three
point nine percent of pickups and that kind of stuff. So, uh,
yeah, they're they're going to they're going to have to fight to get get
their internal compulsion engine vehicle sales up the way down the levels of the nineteen
seventies. You know, we we haven't seen those kinds of sales figures and
in many decades except during the peak of the financial crisis and and uh during
the lockdown. Yeah, so these are really bad sales figures on on ice
vehicles and uh, you know it market just being eaten up by these evs.
So you know, the industry hands is being really shaken up by business,
right, So yeah, I just see it. They're totally caught flat
footed, like merry embarrassment there over who runs a gm uh saying that they're
going to overtake Tesla by two twenty five. And you know she said that
a couple of years ago and everyone left. But it was ridiculous on its
face. The charging infrastructure that Tesla has constructed, they just opened one literally
down the street from house here. That's the demand. Like I don't use
it that much because I charge at home, which is another nice thing.
Whether the grid can handle the increased demands of the evs at something I guess
we'll find out in the next few years they'll have to build. So when
you charge up your vehicle, I charge it in my garage, you know,
a midnight right, yeah, And so to see that's the thing.
You know, most people that own evs charge at midnight. That's when the
electricity is cheaper if you have time of use building. And that's one of
those huge excess capacity in the grid. And so these evs that are being
charged at home at night are just using up excess capacity, you know,
and and idle capacity. You know, that's just sitting there and it's expensive.
And the electric utilities they're loving you it's they're absolutely exciting about this because
now they can sell electricity at night, but when the really people hadn't been
buying electricity, And so I think the strain on the grid will be a
lot worse because of that, because it's just it will it will even out
the loan and uh, it won't be all yeah, it won't be in
dcvs won't be charging in the middle of the afternoon when the acis kicking,
you know, they'll be charging when the electricity is cheaper, which is in
the middle of the night. Moost of them and so um, you know,
I think the strength on the grid will be manageable. Also, all
the electric utilities, when they see that they have growth in revenue, that
can invest in the equipment and infrastructure in which yeah, which they really couldn't
before because they couldn't justify to investors because the sales weren't going up. And
so now that sales are going up electricity sales, you know that they can
invest if she long term bonds to build equipment. That's how the model works.
And they're back on the growth models. And I think, I mean
twenty twenty two was the first year in the United States broke out of its
electricity consumption pattern. It's stuck in for fifteen years. So for the first
time we have a nature increases in electricity sales in fifteen years, you know,
and that's that's a good day in anyway. Yeah, for utilities,
they're not scared of that. Well, the fact is that a kilowat to
produced at high and noon pass the electric company about five times more than a
kilowat produced at midnight, assuming it's not air conditioning season and you don't have
this massive heat wave going on. And the fact is that when you're in
time of use billing, they charge you five times more for that day kilowater.
Maybe in Florida it's four times more, and they don't you know,
it costs them three cents to produce a kilowat at midnight and they charge you
seven or eight cents, So they're really like not passing that savings on to
the consumer. I mean one thing, having an EV, I've learned to
geek out over my electric bill to figure out like how I do things as
cheap as possible using time of use billing. But so summing up, things
are bleak for the legacy auto of manufacturers, but for the up and coming
ones Tesla in particular, a select few of the Chinese, because they're not
going to be able to build service organizations. Globally, only a few will
be able to do that. You know, your x y Z electric car
company that's in the you know, shen Zen province is just not going to
be able to have a service network. Cars regardless still require a lot of
service, so only certain companies can really do that right, right, But
there's also hancidentia among American consumers to buy unknown brands with little representations. She
ended up with a vehicle or the carmaker then pulls out and eat retail value
crash value crashes, and you can't get it sort of, you can't get
parts of stuff, you know. So, I mean that's a problem a
lot of startups have once a cool factor vanishes. You know, most people,
like they look at a vehicle as transportation that needs to be reliable,
and they need to be able to sell it when they want to, and
they need to be able to get it fixed when they need to, and
and and so I think a lot of these startups will just not make it.
Yeah, there'll be a big shakeout and a lot of these smaller companies
will vanish, and the big legacy automakers will eventually get the stuff together.
But yeah, they're just ds behind and they just handed Tesla the market and
say, oh go go run with it. Yeah, it's like basically owning
one of these Chinese no name, we used to call them bastard brand cars
will be like owning a Saab. After they shut the company down, you're
out a few years there, maybe if nothing bad goes wrong, and you
hope that you'll be able to find the parts from a scrapyard, but it's
not exactly confidence inspiring for sure. So and Tesla says they're going to build
by the end of the decade twenty million cars a year, which is a
feat that has never been accomplished even by the lakes of GM or Toyota.
That's going to be interesting to see. Yeah, it'll be interesting to see
if they can actually sell them. I'm pretty sure they can build them,
but selling them that's another thing. You know, once you get to these
numbers and a few Ustan glod, you know that there are some automakers that
are starting to make a lot of progress, you know, like like Kia
and yeah and die in one and another she has some Europeans and um,
yeah, they're going to eventually fight back, and so then it will come
down to price. Now, I mean, this is this is why I'm
so excited the Buddy beans, because we finally have a disruptively company here that
will shake up that pricing on Agapuli we've had, yeah, and they've just
been screwing us, you know, the guaranteed price. Look what they did
during the pandemic. Prices of pickup trucks or one hundred thousand dollars and more
and they didn't get that much better in the maybe even a little worse during
the pandemic. You know what about this full autonomy. I mean, I
love the FST, but it's like, basically, you're driving with your sixteen
year old who just got their license, except that Tesla has a lot more
confidence than that sixteen year old. And I'm telling you, if you just
let it steer you in the direction it wants all the time, you'll be
in an accident, there's no question. On the other hand, I've had
two instances. One where it's pitch black at night. I'm going on the
road. There's street lights, but not very they're really spread apart, and
it's a divided highway. The car hits the brakes and I'm thinking, oh,
okay, great phantom breaking again. And then I see a bicycle shoot
across right across where I was going, basically save that person's life. The
other time it happened almost the exact same situation, but pedestrians in an unlighted
area ran across the street. The car hit the brakes like not quite panic
stop, but it hit it well before I even recognize those pedestrians were crossing.
Do you think this is like the the unobtainable full self driving automated autonomous
driving. Yeah, so the things that you mentioned are widely available now and
they I mean even heavy trucks have those emergency braking systems now and they're working.
You know, you have adaptive cruise control, you have all kinds of
things that regular cars and I have that are actually far from driverless autonomous driving.
You know. And we in San Francisco half now cars driving around robotax
is driving around with out drive or picking up people. Yeah, and on
an experimental basis by by the automakers, and um, you know, and
you know there's yeah, there's a fun stories to read where where you know,
a bunch of these crews rubbo taxes suddenly passed up into an intersection stop
and pop traffic for hours, you know, and and um, those kinds
of things. You know, I'm a base how well they are doing.
I'm a what amazed that anybody can come up with a vehicle that that drives
on its own to the chaotic traffic of San Francisco and uh, and they're
doing it. Yeah, So this come a long way. Obviously we're like
ten years behind schedule, but um uh eventually this technology will probably work and
I I am personally looking forward to having you know, not even holding a
vehicle anymore, just just subscribing to something that that that picks me up when
I needs, you know, right, you know, And um, uh
yeah, I've been looking forward to this forever and it's going to be many
more years probably before this is a functional technology that's widely available by the reasonable
price. Uh yeah. Human drivers are really bad and so you know it
the thing you know that robot drivers only have to be better than human drivers,
but that's not how the human equation works. We think the first person
that gets killed by a robotaxis like the natural catastrophe and we're killing thirty five
thousand people and traffic mentality here, So you know, human drivers are horrible
and yet you know or h self driving photonos driving to take off commercially,
it needs to be near perfect. That's a high bar to pass. And
and um and I agree with that. You know, I don't want to
get run over by a driver list vehicual who would just be really embarrassing.
Who are you going to sue? That's right exactly, that's a problem.
So but interest thing I mean Yeah. Every time there's a Tesla crash with
the autopilot, which is amazing. I have to tell you there is.
It's adaptive cruise control on steroids, steers the car. It really it's like
nothing. You get to a place, you're relaxed. It takes a lot
of the burden of driving off. I have to say, you know,
drive to Miami, they're relaxed, eighty miles away, relaxed. So I
think it's it's going to take a while though, because we're aways from fully
autonomous, because the thing has to be programmed to recognize a situation. It
doesn't think ahead, like hopefully if you're a if you're a defensive driver,
you're always thinking ahead. What's going to happen here? All autonomous can do
at this point is react, right, It doesn't predict. Yeah, I'm
doomed to look forward to the technology where many more years probably before wildly available
available. All right, So hey, interest rates in the economy in general,
like you said, it's a tale of two cities, if you will.
But as the Federal Reserve gotten to the point now where the system's broken
and they're going to have to cut rates, and if that's the case,
how much impact will it have. Yeah, so the system, meaning the
financial system, it's struggling with these higher rates, and it's struggling with them
because these managers back then made some really stupid decisions in buying these long term
pressure securities and mortgage backed securities going to rate too really low, and you
know, they the bond market was in complete denial about this, and they
know we started getting bigger inflation in late two twenty early twenty twenty one.
I kept buying these long eagest right securities. And so now they've got the
stuff that you know who whose market value has now dropped and then that will
be that'll be worth face value and they mature. But until that, let's
yeah, maybe ten years or twenty years from now, until then they have
to deal with market value and then has dropped a lot. And so for
banks, you know, this is a tough environment. There was a long
time, you know, there's this notion that are asking interest rates would be
good for banks because they the banks would still not paying any interest on the
deposits, so they would get this free money and they could charge higher interest
rates on their loans, so their their interest rate margin would would become wider
and that would make more money, and that has turned out to be a
fallacy that has turned out to be complete bs that's been been been spreading,
resuing spread for years. That in fact, deposits are leaving when banks are
not paying any interest on right, they're leaving to money market funds, they're
leaving to treasury security, they're going somewhere else. And when the deposits are
leaving, uh, you know, banks run out of funding and they collapse,
and so you know that part of the equation has turned out to be
wrong and the other part got misjudged, and you know that's so now we've
got this issue and the banks are going to get it through it, uh
mostly, and it'll be something that won't and they'll have crime earnings, Yeah,
because the interest rate margin will be squeezed as the deposits are leaving,
and especially the regional banks and the smaller banks, they have to offer I
two strakes on their deposits and that that brings the costs up and uh so
the earnings will be squeezed. There will be bad for investors, you know,
and they'll be we always lost some banks, but every year, yes,
and it's not unusual for for the piece of bank collapses. Um,
and there will be more. Uh. In terms of the rest of the
system being arts, it's really doing fine, you know. I mean they're
economy being a little with five percent interest rations. That's fine. We'll see
that, you know, we'll see inflation come down a little bit. Maybe
it has come out a little bit, but it's getting st key around that,
right and uh, you know consumers are still spending. Business are some
of the risks you alone will start to pick up again, you know.
So I after period of adjustment to five percent interest rates, you know,
uh, the economy will model through it this this, and and that's a
bad time for inflation, yeah, because now we've got this inflation that said
in that column is still generating demands and that's still you know, feeling inflation,
and there's the excess money. Ut. So I don't see I just
don't see a rate cut right this year, you know the short term bond
markets. I'm not saying it either. You know, when you look at
the six month yield, it's it's figuring in another rate height. Uh.
And no rate cut is yeah the majority of the year, and um,
you know that would have to be a significant decline in an inflation before the
FED would cut of interest rates. So it also this gets completely out of
control, you know, and then there were that we went through that in
the seventies and eighties were it completely got out of control and you know,
the dollar got hammered and all connects of problems. We're going and nobody wants
to think about the housing market with eighteen percent mortgage rates. So uh so,
I think the economy right now is adjusted, is adjusting to these higher
interest rates, and um, you know, in terms of stocks, in
terms of bank stocks particularly, I think this is tough sledding real estate stocks.
I think it's really bad. I mean, there's a lot of other
stocks out there that they're going to have a problem. But the financial markets
really are in the economic system, you know, they're they're just kind of
doing the own thing. And we've had really crummy economies with moving stock markets.
And we can get you know, a pretty you know model through economy
with a stock market that's a really bad shape, and that that could burn
will be a possibility given the valuations we now have. All Right, Well,
I think it's interesting what we're going through here and hopefully we're not going
to see double digit interest rates again in the near future, perhaps with Europe's
Europe's banks are in worshiped in the US as banks. One thing I find
interesting is Jamie Diamond said, we're not taking over these failing banks, and
that's going to last about five minutes till the next one comes, because it's
going to be like Merrill Lynch and Bank of America, where Ken Lewis said,
we don't want Merrill Lynch and the Treasury the FED say hey, mister
Lewis, you are now the proud owner of Merrill Lynch, but we don't
want it. No, you didn't hear us, right, you're a now
owner. And that's what's going to happen. The big banks will have these
failing regionals cram down their throats, whether they like it or not. On
a very attractive terms, I might add, they're gonna wind up with them,
so they might as well just bite the bullet now whichever one's fail.
Further consolidation, right, yeah, and I think there will be some pressure
on the other big bank. Bigger banks, I mean, even some regional
banks steps orb another regional bank. If it's not that big, you out.
There's some pressure on the banks that are not JP mortgage, you know,
to provide competitive bits, and they just you know, and they have
to provide competitive bits and and uh and then they get the bank, you
know. And but it's you know, I mean looking at a bank or
a weekend and deciding whether you want to buy it or not. I mean
that's a gamble. Well, yeah, they always get a backstop though,
from the Fed and from the Treasury. We take all the bad stuff,
you get all the good stuff as of this cutoff date. And you're off
to the races, but going to be interesting. So hey, go over
to Wolf's site, wolf street dot com. It's must reading. You get
insights into these types of issues you're just not gonna find anywhere else. And
Hey, you've got a question for Wolf or myself, shoot me an email
k l at carry Lutz dot com and you can click right through to wolf
site on the show notes to this interview at Financial Survival Network dot com.
Just click sign up for a free newsletter WELF. Always a pleasure. We'll
talk to you again soon. Thank you, Kerry, thanks for listening to
carry Lutz's Financial Survival Network. Your solution to today's trying times For the latest,
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