Welcome to another episode of the Chicks on the Right podcast where we feature our
friend and sponsor of the show, Zach Abraham, who is the chief investment
officer at Bulwark Capital Management and he is who we go to when we have
questions about finances, the economy, markets, interest rates, all the things.
Thank you Zach for being with us, and we have promised our audience
that we would get an answer to a question that has been nagging us for
a couple of weeks, and that is something that Trump posted on his truth
social I don't know week two weeks ago where he said or he was interviewed
and said that the reason that the stock market is doing well is because of
his lead in the polls. Is that a thing? Go? And also
well wait, and also I think that it's more than just Trump. Do
presidents in general do they dictate how the markets are so? Generally speaking and
all kind of hit that last part. First, generally speaking, I don't
think that there is a role in the global economy that is more overhyped than
the president of the United States. I think that they can have an impact
as it relates to tax policy. So for instance, when Trump got elected,
the market sold off right overnight, which seemed ridiculous to us because I
was, like, the guy's promising tax cuts, like profit margins are going
to go up, you know, here we go, right, so they
can have they can have impacts on the marginal side of it. But I
mean literally, and I'm just stating this is not a political statement. It's
a fact. Trump taking credit for the stock market doing well because he's leading
in the polls is the equivalent of Bidenomics. It's complete nonsense. Okay.
The stock market's doing well because the Federal Reserve, despite the fact they say
they're cutting interest rates, keeps cannot help themselves from hemorrhaging money into the economy.
The federal government's running a two point one trillion dollar deficit, and consumers
are still high from the greatest monetary handout of all time, a full stop.
That's what. So if he wins, like say he wins in November,
do you think that that I mean, obviously it's gonna have some effect.
Don't you think it don't have some effect on the market. Yeah,
I think it will initially. Meaning one thing you typically see is usually you
see markets stabilize and become more serene after a president is elected, you don't
typically see a plunge just because market's like certainty. So just even if they're
not nuts about the president, the fact that the issue is over resolved and
it's behind us is kind of a pressure alleviator for markets, if you will.
But I think it's really important that we talk about, you know,
the difference between the economy and the stock market, because I don't think the
two have ever been more disconnected. So I think I think sort of put
it. I think the president, you know, the president can have an
impact on markets the same way the Federal Reserve does, Meaning they can go
out and speak soothingly, but what do they really impact as far as the
economy goes. There are moments in time where FDR I think had a huge
impact on the economy. I think Reagan at his period of time had a
big impact on the economy. So I think presidents, if they meet the
right set of circumstances with the right policies, I think they can have a
big impact. Those just don't come along very often, right, Like a
lot of times we give the man credit, but probably any man in his
position would have done the same, you know, or similar to it.
So anyway my whole thing say just it's you know, and this to me
is like the tough part about Trump, right, Like, you know,
you hear a couple of things, You're like, hey, you know what
I can get with that, and then he says something like that, You're
just like, dude, calm on, come on, you can't take credit
for all of that. Yeah, I mean, everything in the world is
not a referendum on you. Okay, it's just not yeah, okay.
But in his defense, I mean, and I don't know anything about anything,
as you know, when it comes to the markets or finances. But
isn't it true? I mean, I do think he's wrong about I think
it's ridiculous for him to say that the market is doing what it's doing because
of his lead in the polls, Like that's insane. But isn't it true
that if he wins the presidency that the market could react to that because he
is so historically business friendly, and that companies would be like, Yay,
he's going to decrease regulations. Everything is going to be doing really well for
us. I mean, isn't there some isn't there some truth to that?
Yeah? There is some truth. And for instance, I think that quite
honestly, and again I can't read the tea leaves, but quite honestly,
I think that anybody, assuming that they're a functional adult, I think is
going to have somewhat I mean, we'll see what the conditions of the market
and the economy are a aut election time. But but honestly, I think
anybody that is a full functioning adult that gets elected is going to have a
positive impact. Is because markets know what's or the lack of what's running the
show right now, right like, you know, market participants know this is
a joke, that this is a he's a you know, this is a
paper tiger that you know, he's got people pulling the strings. Markets know
that. But but it again, I think that I think looking at the
so the other part of it is, I don't think markets do the same
thing. So to answer your question, I think prior to eighth nine,
I think much of what you're talking about makes a lot more sense. Meaning
I think markets would care about presidential policy all that kind of stuff. But
at the end of the day, that is not why we're sitting at twenty
six times earnings on the S and P. Five hundred. That is not
why markets have done what they've done. They have done what they've done because
of a orgy of government spending. Okay, like period, and if that
level of spending keeps up, it's going to be really hard for markets to
fall meaningfully. Could they pull back twenty to thirty Yeah, I think if
you pull back twenty to thirty percent from here, you'd actually have a pretty
decently priced market. It would make some sense. It doesn't make any sense
right here. So I think that, yes, the president can have an
impact. It's not as big as people think, but you know, and
I think that his impact is less so like he may come up with right
the market will interpret him as being more business or more stock market friendly if
he gets elect they will. Okay, The question is is what's happening on
the federal spending side of it, Because that money being pumped into the system.
At the end of the day, that is rubber meeting the road,
right, So regardless of whether he does the right thing or the wrong thing,
or says the right thing and the wrong thing, if they keep pouring
money into the system like this, it's got to go somewhere, and it's
going to keep elevating. Asset prices and the day the day is right wingers
too. They're spending just like Democrats are spending people on our side of the
aisle. Yeah, yeah, no, we've joked about it on the show
before with you guys. Right, It's one of the things that drives me
nuts about Republicans in general. And then hardcore hard line Republican only like and
why stand for fiscal discipline? And I'm like, the only time the Republican
party ever cares about fiscal discipline is when the Democrats in the White House.
That's the only time you ever even hear it brought up, right, and
everybody goes, you know, O'biden's going to double the debt and Obama double
the debt, And I'm like, Trump was on target to double the debt.
Bush doubled the debt in eight years. Obama doubled the debt in eight
years. Trump was on his way to doubling the debt in eight years.
Like, you know, the one thing that the one thing that doesn't change
is the elected officials in d C continue to get wealthier and wealthier and wealthier,
and the rest of us keep paying a bigger and bigger bill. M
hm. It's true. The other question I think that we have is about
the fact that inflation, I guess unexpectedly according to some headlines I've seen,
rose a little bit in December of last year. And so now the expected
rate decrease that was supposed to happen in March that everybody's been anticipating, and
then the decreases beyond that, Now there's some doubt about whether or not the
Fed is going to reduce interest rates in March. What say you, It's
a mess, and it's a mess that the FED has made. So remember
us telling you We had this conversation it probably about two or three months ago
where we're like, hey, buckle up, it's going to get even more
weird, right, and you're going to see we're expecting a data bounce on
economic activity. We just got retail spending in hotter than expected, we had
a solid jobs report relatively speaking, and then you see inflation ticking up.
It was just it was kind of just like what we saw on the team
leaves, you know, And so that's all playing out. And the reason
we believe it's playing out that way is because the FED continues to be the
biggest idiot they meaning they they will not. They're so academic and they're so
tied to their books and their models, they don't realize every time it's not
just rates. Right, For fifteen years, you had zero percent interest rates
and quantitative easing run okay. So what that was doing effectively was it was
building in this input of cash into the market that the market in the economy
became dependent on. Right. And so what you did every single time of
financial stress was you just flooded the system with more and more liquidity, just
like, hey, this patient's bleeding from six different spots. As long as
we're pumping in more blood than's going out, we're going to be okay,
Right, And so that's the way approach everything. Well, so then inflation
becomes an issue and they step on rates, right, But they don't.
They actually, while they're stepping on rates, they're push up liquidity on the
other end, because they don't think liquidity and inflation are tied to each other,
which is ridiculous, right, It's ridiculous. The more liquid and market
you have, the more accurate pricing, the less market you have, the
more gaps you have, and the more choppy it is. Meaning a more
liquid market always generates higher prices in the long run, right, And so
we were saying, look, just the easing of financial conditions and the rally
in the stock market is going to spraw on more retail spending. And every
single day, we believe that correlation is going to get bigger and bigger and
bigger, because why is that every single day you've got more and more people.
I believe it's about to the tune of about twelve thousand baby boomers a
day are retiring. And then how do they live? Where do they get
their income? Right? They live off the productivity of their assets. Well,
if your asset base, your income jumps twenty percent a year, are
you more or less likely to go spend more money? Well, you're more
likely of course. Right. What they've done is they want to have it
both ways. They want to cool the economy while they're keeping they want to
while they're keeping asset prices elevated. We don't think you can do it.
We think that the two or two intert lined, meaning the market that the
economy has become financialized, meaning the quickest way to increase consumer spending is push
up stock prices. Quickest way to come into drop drop stock prices and it
really starts making sense. I think there's a behavioral aspect involved there, there's
a psychological aspect involved in that, but there's also a real aspect, which
is the biggest generation also happens to have the vast majority of the nation's wealth.
That money is all in mind the stock market. So as the market
goes up, that's going to be an inflationary pressure. And we were saying
this two years ago, telling the FED, Look, you guys are going
to screw this up. You're going to play heavy handed with rates, but
you're not going to address the liquidity issue. And as soon as liquidity starts
pumping again, you're going to jack rates up, and inflation is going to
reaccelerate. Here we are, so I think that I think that they will
be forced to cut at some point this year. I don't think the market
right now is pricing in seven cuts, which is one hundred and seventy five
basis points. That's insane. The only way that happens if this economy runs
into a brick wall. So I think the FED isn't going to cut in
the first quarter because of this hot data. And I think that, ironically,
because they're getting that hotter data, it's going to keep them from cutting.
And yet every single day the things that are blowing up because of higher
interest rates, they're getting more acute. Right, every single day that goes
by at these rates are higher, those issues become more acute. So this
is the exact problem that we were thinking the FED was going to back themselves
into. Here we are and just buckle up. This is going to be
a very wild year, and I think you're going to see some really insane
market books as long as they get you just wanted to be cut by the
end of the year, right, Mary, Right, she's buying us?
Yes, please, she's getting a house. Yeah, I think the odds
of that are pretty good. But you know, you just saw it again.
They let the back end of rates pop up, and mortgage applications just
jumped to the highest level they've been at in the last eight months. And
we do saying this like the FED refuses to get tough, and they're not
going to be able to fix this unless they do. So you have a
webinar coming up, tell people how they can sign up for that, what
you're going to cover and yeah, yeah, so that heads up on that.
Yeah, So it's not an infomercial in a sales pitch. It's about
a forty five minutes free charge. And we just get in there and walk
you through our process. Right, how do we increase subside while drastically reducing
your risk? How did we get through the COVID crash with you know,
five to six percent drops when the market was down thirty six How are our
clients down low single digits last year when the market was down twenty plus.
We just show you how we do it and show you the results and say
here you go and kicks about forty five minutes, and that gives you kind
of the whole layout of how we do things. Get you an old landscape.
And then if you want to talk to us further about it, you
can schedule a meeting with me or one of our advisors. We can run
you through it. If not, hopefully, if nothing else, should leave
more informed and more educated. Yeah, and we won't call you and bug
you. Do you want to meet with us? Great? If not,
you don't wish you all lot? And that's January twenty fifth, Yes,
twenty fifth, at three point thirty pm Pacific time, specific time, Yes,
okay, And people, people can sign up where go to Bordcapitalmanagement dot
com. As soon as you get there, a pop up list should come
up on the website and you can stick in your name and your email and
we'll email you a link. The day of the presentation, you can offer
it on and join us on on the web. Awesome, perfect, Thank
you so much, sir. Thanks all that. We appreciate it all right,
Thank you, ladies. Having investment advisory service is offered through Trek Financial
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