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The leverage that monetary policy has had
over the economy over the last sixty years

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has been weakening, and it implies
that at some point in time there's a

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real risk that won't reach an economic
malaise or recessionary period where the Fed monetary

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policy won't be as effective as in
the past, and that will imply that

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economic growth will stay weaker for a
longer period of time. And that's really

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why I expectation. I think we're
close to a secular bear market in the

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stock market as well. It may
have already begun with the high end January

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00:00:39,560 --> 00:00:44,520
of last year. You were listening
to Carrie Letz's Financial Survival Network, where

9
00:00:44,560 --> 00:00:50,039
you get valuable information you just can't
find anywhere else to thrive in today's trying

10
00:00:50,119 --> 00:00:55,719
times. You need the Financial Survival
Network now more than ever. Go to

11
00:00:55,759 --> 00:01:02,479
Financial Survivalnetwork dot com and get your
free newsletter and gift. Financial Survival Network

12
00:01:03,000 --> 00:01:11,239
now more than ever, And welcome
you are listening to and watching the Financial

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00:01:11,319 --> 00:01:15,319
Survival Network. I'm your host,
Carrie Lutz, and hey it's mid October,

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October seventeenth. Well, we got
good news for you and bad is

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Jim wilt Is back on the show. That's the good news, but what

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he's about to tell you is really
the bad news. Jim, it's great

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to have you back. So basically, well, you're going to explain three

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the world to us in three charts, and I think that will pretty much

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clear up everything, won't it.
Absolutely. I mean, we're two weeks

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ahead of Halloween. Why wait?
Why wait? All right, So I'm

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going to share the screen with you, share those charts with us. Please

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tell us what's going on here?
Well, let me get this up here,

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all right. So the upper left
chart that my arrow is pointing to,

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and you'll be able to go to
Carry's a website and maybe blow these

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things up to see them blink.
Well, yeah, does for you,

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and you'll look at them all all
right. So the first chart is the

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long term chart of treasury bond prices. So, as we most people know,

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bond yields peaked back in nineteen eighty
one, and as they've come down,

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treasury prices went up. And so
you can see this forty year up

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trend has been broken in the last
eighteen months or so. And the implication

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carry is that we're beginning, I
believe a new secular bear market in bonds.

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Now, what many people may not
know is that from nineteen forty six

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to nineteen eighty one we had a
thirty five year window time where treasure yields

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just worked their way higher, which
was then followed by this forty year period

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were rates came down. So the
implications here are fairly significant in the sense

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that cheaper money in terms of borrowing
costs for businesses and consumers over the last

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twenty thirty years has obviously spurred economic
growth and demand. And if indeed a

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secular bear market has begun in the
bond market, on balance, treasury yields,

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corporate fields, borrowing costs in general
are going to be higher, and

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that has implications for the economy because
one of the things that helped the economy

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grow faster was indeed lower borrowing costs. And the chart right to the right

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of it is the correlation between bond
prices and the stock market over the last

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twenty years. A lot of financial
advisors and a lot of investors were really

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bailed out in two thousand and one
and two in the financial crisis two thousand

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and eight because bond prices rallied as
the stock market went down. So if

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you had an allocation of forty percent
to bond sixty percent to equities. The

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bond allocation really helped minimize and reduce
the total loss to your portfolio. And

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I wrote a piece in June of
twenty twenty one basically saying, I think

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this negative correlation window is going to
be ending, and we're going to see

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bonds and stocks revert back to the
pattern that existed for most of the time

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from nineteen forty five to two thousand
and In that window of time, carry,

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bond prices and stock prices moved up
and down together, so that in

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the seventy three seventy four bear market, bond prices were going down just as

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much as the stock market was going
down. And what we saw last year

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is that sixty to forty portfolio had
its worst performance ever. We're seeing bond

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prices dropped significantly last year in addition
to equity prices falling. So the combination

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of these two charts carry suggests to
me that the formula that financial advisors and

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most investors have users in terms of
a sixty forty or something close to that

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allocation to stocks and bonds is going
to be very problematic. If we've entered

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a window of a secular bear market
in bonds, and what we've seen even

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this year, when rates have gone
up noticeably, equities have sold off,

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and so that correlation continues to hold. So that to me is the longer

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term big picture that I think investors
really need to understand and respect. And

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it'll be higher because everybody's been living
in a world the last twenty plus years

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where most of the time bond yields
and having them in your portfolio really help

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balance what was going on in the
equity side of the equation, right,

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So that's that's kind of profound because
it basically throws water on the whole investment

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philosophy for the past forty years.
And it was valid for the most part

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for the past forty years because the
FED could always cut rates further and we

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had a downtrend in rates, so
that would kind of bail everybody out.

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Yeah, yep, they could exercise
the Yeah, and again from a bigger

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picture standpoint, if you think about
it, for most of the last sixty

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years or so, whenever the economy
slowed, the FED would cut rates to

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stimulate growth. And what we started
to see in two thousand and one is

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the FED decided, oh well,
now we have to push the real rate

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to minus okay, So the FED
funds rate are out at one percent for

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a number of years, even though
inflation was above one percent. And then

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in response to the financial crisis,
not only did they drive the funds rate

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down to zero, they also expanded
their portfolio, the balance sheet of the

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FED from seven hundred billion in two
thousand and seven to almost nine trillion a

81
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year ago. So to me,
what it implies, Kerrie, is that

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the efficacy, the leverage that monetary
policy has had over the economy over the

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last sixty years has been weakening,
and it implies that at some point in

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time there is a real risk that
won't reach an economic malaise or recessionary period

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where the Fed monetary policy won't be
as effective as in the past, and

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that will imply that economic growth will
stay weaker for a longer period of time.

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And that's really why I expectation.
I think we're close to a secular

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bear market in the stock market as
well. It may have already begun with

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the high end January of last year, but all these pieces are starting to

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come together. That implies that equity
investors are going to struggle for the next

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ten to fifteen years in a secular
bear market. Wow, all right,

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ten to fifteen years, which is
longer than the average person on Wall Street

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has been in their job, right
probably. And again, you know this

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may sound like, oh my god, this is kind of extreme. Well,

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if you go back one two hundred
years in terms of looking at the

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dol Jos industry average, there have
been other windows a time where you had

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these secular bar markets, the most
recent nineteen sixty six to eighteen eighty two.

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You know, So it's not like
I'm talking about something that's never happened

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before, or oh my god,
here's a guy just trying to be negative

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to grab a headline. No,
I'm just trying to do economic analysis and

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keep my eyes open so that you
know, I don't get run over and

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my subscribers don't get run over either. Right. Hey, what about the

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concept here that you know, if
you had invested a dollar in nineteen twenty

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nine, all right to become whole
again. I think you weren't whole again

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until nineteen fifty eight. Fifty great, I think with nineteen fifty four that's

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a really pong nine. Yeah,
and you know that because to get you

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to invest in the market, they're
always saying, oh, you know,

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over time, you've made money ten
percent a year or whatever. But there

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was a period of time in those
protracted bear markets where you didn't make any

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money, right right. I think
the dobbles that were facing carried in terms

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of comparing what might happen in the
next ten to fifteen years to what happened

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in sixty six to nineteen eighty two, I think some of the problems we're

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facing are more significant. I mean, back in that window of time sixty

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six to eighty two, that to
GDP ratio is like thirty percent. Were

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at one hundred and twenty percent.
And so we've spent a lot of fiscal

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bullets, if you will, again, trying to get the economy to grow.

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In the nineteen sixties, for every
one dollar of debt, it generated

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about ninety cents of GDP. Now
it's less than fifty cents. So my

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00:10:15,559 --> 00:10:24,279
point is that fiscal stimulus is having
less of a impact on generating economic growth

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because we have so much debt already
and the amount of debt service which has

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been suppressed for the last you know, fifteen to twenty years via monetary policy

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that has obviously changed. That debt
service, you know, is a dread

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an economic growth along with a number
of other things. You know. We

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don't have time to go in the
third chart on the lad because we'll talk

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about the economy and inflation. So
a lot of economists, all I got

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inflation is behind is Paul Kruman said, yeah, you know, it was

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transitory after all, and so forth. And the thing I've written about recent

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00:11:01,360 --> 00:11:07,600
months that I think most economists and
maybe many politicians are overlooking is that prices

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went up for many things that people
live on and day to day needs by

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00:11:13,080 --> 00:11:18,720
forty percent. Needs, not wants
exactly, up forty percent, and wages

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during the last twenty months are up
about eighteen percent. So yes, the

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consumer price index has come down.
It's important to understand the math on how

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that is calculated. It's a twelve
month ready change. So price is something

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goes from a dollar to a dollar
forty and then stays at a dollar forty

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00:11:37,159 --> 00:11:41,679
for the next twelve months. The
rate of change is going to slow onto

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it zero. But the reality is
I'm still spending a buck forty for something

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00:11:46,000 --> 00:11:50,399
that used to cost a dollar three
years ago, and my wages have only

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00:11:50,399 --> 00:11:54,360
gone up eighteen percent. This is
why I think a lot of consumer sentiment

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surveys show that people are less optimistic
about the future will because they're struggling to

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00:12:03,759 --> 00:12:09,000
make ends meet, even though supposedly
inflation has come down. And the other

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the next chart, the fourth chart, there is a chart of excess savings.

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So, as we know, the
government sent out trillions of dollars to

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consumers. Consumers weren't able to spend
while things were shut down. They amassed

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over two trillion dollars worth of savings. The San Francisco Fed has estimated that

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that will, basically for eighty percent
of consumers be gone at the end of

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September. Now I've seen other estimates
carrying They're like, well, there's still

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00:12:35,639 --> 00:12:41,799
this much and so forth. The
point being is that consumers, especially the

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00:12:41,840 --> 00:12:46,360
lower income folks, have probably burned
through most of the savings they accumulated,

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and that's why this squeeze on their
incomes because of higher inflation is most pronounced.

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And this is another reason why the
economy has held up better than many

151
00:13:00,039 --> 00:13:03,480
people expected. You remember last year
everyone was talking about a recession. I

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00:13:03,600 --> 00:13:07,559
was not in the camp. I
said no recession in twenty twenty two,

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00:13:07,159 --> 00:13:11,279
no recession in the first half of
twenty twenty three. My take is as

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00:13:11,360 --> 00:13:16,720
things like the excess savings it's worn
down, the increase in student loan payments,

155
00:13:16,919 --> 00:13:22,519
and the impact from rising lending standards
which have gone up most aggressively in

156
00:13:22,679 --> 00:13:26,519
forty years, all that's coming to
bear in the next six months. So

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I think we're going to see the
economy slow more markedly than most people are

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00:13:35,240 --> 00:13:39,120
at this point in time expecting.
Because now most economists on Wall Street think

159
00:13:39,159 --> 00:13:43,399
we're not going to have a recession. It's like the perfect setup, you

160
00:13:43,440 --> 00:13:48,759
know, where you know last year
everyone thought of recession was coming. They

161
00:13:48,759 --> 00:13:52,559
were wrong. Now they think a
recession isn't going to happen. I think

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00:13:52,600 --> 00:13:54,360
there's a good chance they're going to
be wrong. Yeah, imagine if they

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00:13:54,720 --> 00:14:00,919
threw recession Jim and nobody came.
Well, they couldn't afford hey, I

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00:14:00,919 --> 00:14:05,480
mean, they'd be struggling depending on
the ticket price. Right, what's that?

165
00:14:05,039 --> 00:14:09,720
What's that old saw? You know
economists have called the five out of

166
00:14:09,720 --> 00:14:16,080
the last two recessions. It's close
to that something like that. But again,

167
00:14:16,120 --> 00:14:18,960
you know, when they were all
talking about recession last year. It

168
00:14:20,120 --> 00:14:24,120
was because there were two negative quarters
of GDP first and second quarter of last

169
00:14:24,159 --> 00:14:28,600
year. Historically, whenever there's been
two consecutive quarters of negative GDP, there

170
00:14:28,600 --> 00:14:35,000
has been a recession. But there's
so many unique and remarkable features to this

171
00:14:35,200 --> 00:14:39,759
recovery because of the pandemic and the
fiscal and monetary response that they took that

172
00:14:39,919 --> 00:14:43,440
formula with like blinders. Well,
wait a second, if we're in a

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00:14:43,480 --> 00:14:48,799
recession, why are we generating three
hundred and fifty to four hundred thousand jobs

174
00:14:48,799 --> 00:14:52,200
every month in the first half of
twenty twenty two. Yeah, it didn't

175
00:14:52,240 --> 00:14:54,200
add up. It was just kind
of okay, this is what the formula.

176
00:14:54,200 --> 00:14:58,759
The other thing is I like to
say there's always a bull market and

177
00:14:58,919 --> 00:15:03,919
heard mantel on Wall Street because the
advice, you know what Paul said in

178
00:15:03,919 --> 00:15:07,480
the place was going to be transitory
in June twenty twenty one. And I

179
00:15:07,559 --> 00:15:11,840
disagree with them, and I'm wrong. That could be a career problem if

180
00:15:11,879 --> 00:15:16,600
I agree with Chair Powell and everybody's
wrong. There's you know, I guess

181
00:15:16,639 --> 00:15:22,240
safety and numbers. So h Anyway, So the fifth chart is a chart

182
00:15:22,279 --> 00:15:28,200
of the dollar. I turned bullish
on the dollar in July as it was

183
00:15:28,240 --> 00:15:31,960
trading under one hundred, I thought
a rally to one oh four was coming,

184
00:15:31,000 --> 00:15:33,240
and if it got about one oh
four, then it would run up

185
00:15:33,279 --> 00:15:37,960
to one oh five eighty eight.
It got to about one oh seven thirty

186
00:15:37,960 --> 00:15:43,159
four. I think the dollar's near
a high, and trading the dollar has

187
00:15:43,200 --> 00:15:50,000
been very important because last year,
as the stock market went down, treasureyals

188
00:15:50,039 --> 00:15:54,320
went down, the dollar rally into
October. My view last October was the

189
00:15:54,360 --> 00:15:58,000
dollar was topping, and if that
proved correct, I thought it would drop

190
00:15:58,039 --> 00:16:03,279
from around one four team to one
oh five. We would see rallies then

191
00:16:03,320 --> 00:16:07,159
all the things that went down,
namely stocks and bonds and gold. So

192
00:16:07,639 --> 00:16:11,039
you know, the correlation between that
a strong dollar and weakness and all the

193
00:16:11,039 --> 00:16:15,159
other markets has been really really high. Doesn't always last that way, you

194
00:16:15,159 --> 00:16:19,000
know, forever, but it has
been in the last two years. So

195
00:16:19,200 --> 00:16:26,559
the point being is if the dollar
pulls back, that should take some of

196
00:16:26,600 --> 00:16:33,639
the pressure downside, pressure off of
other markets and the next charges of gold.

197
00:16:34,600 --> 00:16:41,600
In May, I thought gold would
pull back to under eighteen fifty,

198
00:16:41,639 --> 00:16:45,120
and I guess the bigger picture was
And you and I have done interviews back

199
00:16:45,120 --> 00:16:47,840
in July. I said, hey, you got five waves up in gold.

200
00:16:48,360 --> 00:16:52,039
That suggests that an important major bottom
has been made when gold traded down

201
00:16:52,080 --> 00:16:57,080
around sixteen sixteen in September of last
year. But then five wave up meant

202
00:16:57,159 --> 00:17:00,200
Carrie, we're going to have a
pullback for a wave too. I think

203
00:17:00,240 --> 00:17:04,920
that completed last week, and we've
begun wave three, which I believe will

204
00:17:04,960 --> 00:17:10,039
take gold to twenty three hundred,
maybe even higher. It sounds like an

205
00:17:10,039 --> 00:17:15,640
Elliot wave THEORISTR. Jim Well I
used Elli waves theory. I mean,

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I've been doing it since nineteen eighty
one. I started off in nineteen eighty

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one carry doing hand or drawn charts
of the doll every how, okay,

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it is my memory only goes back. I remember very well what it is,

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but most of you out there don't
because so you don't even know what

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a bear market is. Yeah.
So it just a pattern analysis. Certain

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patterns show up and they can provide
information, you know, to me.

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I try to tie all this happy
stuff in with economic analysis, the fundamental

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side of the equation. I have
a much higher conviction of what I think

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is going to happen when the two
sides come together. So I think the

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dollar going to pull back. I
think fundamentally the FED isn't going to be

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raising rates in the near term anymore. That should cause a pullback. I

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think your presenter recession. That means
the euro is going to be I think,

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on balance weaker, and it's fifty
seven percent of the dollar index.

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So going back to gold, I
think what we've seen is the beginning of

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this wave three rally to higher prices. There's resistance at nineteen eighty that's that

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horizontal line, and then obviously up
near the twenty and fifty. So typically

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you're going to have a move up, then you're going to have a pullback,

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and then the takeoff. And so
my guess is gold we'll rally up

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at least to nineteen eighty, maybe
get up to the twenty twenty five,

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then have a pullback, and then
I think in the first half of next

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year Gold's going to really make a
big move to the upside. As the

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economy weakens. The dollar is going
to weekend because people will start to anticipate

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when the Fed is going to be
cutting rays. That I think is going

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to be very supportive for goal.
Okay, all right, next truck he

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charged the bottom left one. Now
is the Treasury yields. On July twenty

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seventh, the Bank of Japan said, you know, we're going to raise

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the ceiling on our ten year treasury
note from fifty bases points to one percent.

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And when that happened, Carrie,
I'm like, this is going to

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raise global interest rates across the board. Now, what we've also seen,

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obviously is all of a sudden people
are waking up to, oh my goodness,

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we have a two trillion dollar deficit
that has never happened during a period

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of time when the economy was growing, only in times when gee, we

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got a recession. Let's spend a
bunch of money. Marproof we've really been

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in a recession. When you take
into effect real rates of growth rather than

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these fake numbers that are inflated by
inflation. Well, I mean, at

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the same time, I got to
take the numbers that are being showed.

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I don't disagree with you. At
the same time, you know, again

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you still see a lot of staticts
of showing spendings up and even after inflation,

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because inflation has come down, some
of these number, I mean,

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nominal GDP growth I think is probably
six to seven percent. In inflation by

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the PCE is around four, maybe
a touch under, so you know,

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there was a window of time where
real incomes are declining. Real GDP was

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negative because of the big surgeon inflation, because inflation has come down and am

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of those numbers are positive. But
besides that, to me, the thing

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here is that the supply issued at
a time where the FED was buying sixty

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five billion dollars of treasury paper every
single month, So you had this huge

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shift in the balance between supply and
demand. Supply is ratcheting higher and the

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demand is coming down because the FED
isn't buying anymore. Countries like China has

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actually been a net seller, Japan
isn't buying as much, so and you've

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got this outlook regarding inflation. It
isn't Fed going to be cutting rates and

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so forth. So I think pension
funds insurance companies have been a little reluctant

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to buy last year or last week. It was a ten and thirty year

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auction that went very poorly. Added
to the spike we've seen in treasury will

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sell when a chart analysis that blue
trend line shows a breakout. To me,

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the first sign that treasure yields have
peaked is when the ten and thirty

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years get below that blue line,
and then the red horizontal line is like

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we've seen higher hides and yields and
higher lows. That's the definition of an

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uptrent. So we need to see
in my view, the dollar reverse lower.

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I think we'll see treasure yields come
down, especially over the next six

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months or so when data starts to
show the economy is indeed lowing. But

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in the near turn, they can
still continue to spike higher. And you

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know, the trend is your friend
until prove another rise until I don't stand

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it high until the end, until
the end, you know. And lastly,

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the S and P five hundred,
it peaked in early late July early

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August. I was looking for a
five to seven percent pullback. The decline

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was seven point nine percent in the
S and P. You can see there's

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a down trend still in place.
I thought that, you know, yesterday's

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weekly technical review, I thought the
S and P would rally to forty four

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oh one. There's a gap there
that normally gets closed, right, and

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some rather retracements up around forty four
to twenty five. So to me,

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we're at an interesting juncture here,
Carrie, because as long as the economy

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shows signs that is doing okay.
That's a positive for the stock market because

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Wall Street has this idea no recession
means are going to go up next year

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and in twenty twenty five, and
that's what's kept them bullsh So I think

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there's a chance the SMP could have
one more rally that a gets above forty

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six oh seven, the high that
we fall in late July. But if

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I'm right about the economy slowing materially
next year, I think the SMP is

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going to have a very very difficult
year next year. Declined back towards the

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thirty five hundred or possibly lower I
think would set up. Once we have

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definitive signs the economy slowing down,
Ernie's estimates will get cut, pe ratio

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00:23:37,680 --> 00:23:45,519
will compress. So again, as
I said at the very beginning, a

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buy and holds strategy using sixty forty, I think is not going to be

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very successful over the next ten to
fifteen years as we deal with a lot

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of these big problems. All Right, well, I think you summed it

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00:23:59,759 --> 00:24:03,920
upright. Will tough times ahead?
You really could, And I might write

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00:24:03,920 --> 00:24:07,319
an article about this and I will
totally credit you. Six charts that prove

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that we're heading for an economic bust. And I mean the kislay is very

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clear. It's firy, Yeah,
I know, I know, you know,

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so you know, there's demographic problems, you know, in terms of

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00:24:22,920 --> 00:24:26,119
the birth rate is the lowest in
a couple of years ago, since nineteen

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00:24:26,240 --> 00:24:30,240
thirty seven. Well, what that
tells us carry is that the number of

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00:24:30,279 --> 00:24:33,200
people entering the labor market twenty twenty
five years from now is going to be

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less than what we've seen over the
last twenty twenty five years. Like penns

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00:24:37,440 --> 00:24:41,720
China exactly, like what I'm not
as bad as China. China is horrific,

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00:24:41,880 --> 00:24:44,759
all right, yeah, because they're
one child policy. But the point

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00:24:44,799 --> 00:24:48,920
being is one of the drivers of
economic growth over the long term is how

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00:24:48,960 --> 00:24:52,559
many people are entering the labor market. And given our birth rate, you

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00:24:52,599 --> 00:24:57,640
know, that suggests that that will
add maybe point three percent to GDP growth

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00:24:57,720 --> 00:25:03,039
over the next twenty years. So
we're in a window time where GDP growth

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00:25:03,079 --> 00:25:08,920
will likely be less than two percent
at a time when we have enormous debt

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00:25:10,000 --> 00:25:15,079
needs, a higher interest expense consuming
more of the federal budget, wrestling with

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00:25:15,240 --> 00:25:19,680
what do we do with entitlement,
spending, social security, Medicare and soulting

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00:25:19,839 --> 00:25:25,319
question. It's not going to be
easy from a society standpoint, and good

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00:25:25,400 --> 00:25:30,599
questions questions. Hey, appreciate you
coming on macro tides dot com and I

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00:25:30,680 --> 00:25:33,799
suggest you go there. The link
will be in the show notes this interview.

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00:25:34,720 --> 00:25:38,160
Well, we will give you a
link for these six charts so you

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00:25:38,200 --> 00:25:44,559
can follow along whether you're on video
or audio. And Jim really appreciate you

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00:25:44,599 --> 00:25:48,119
coming on. Question for Jim myself
kl at Kerrie Leeds dot com. That's

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00:25:48,119 --> 00:25:53,799
the email address, and hey,
you can find all this info in the

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00:25:53,799 --> 00:26:00,680
show. That's this interview on Financial
Survival Network dot com. Just click that

316
00:26:00,759 --> 00:26:03,759
you want to sign up for the
newsletter. Jim, we'll be talking to

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00:26:03,759 --> 00:26:07,160
you again soon. Thanks so much
for coming on. As always, Carrie,

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00:26:07,240 --> 00:26:10,799
thanks very much like having our conversations. We covered a lot of ground

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00:26:10,799 --> 00:26:15,759
today certainly did and it's appreciated.
You're welcome. Thanks for listening to Carrie

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00:26:15,839 --> 00:26:22,000
Letz's Financial Survival Network, your solution
to today's trying times. For the latest,

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00:26:22,079 --> 00:26:27,759
go to Financial Survivalnetwork dot com.
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