1
00:00:05,400 --> 00:00:08,599
Episode of the Chicks on the Right
podcast where we talked to our BFF and

2
00:00:08,599 --> 00:00:12,759
sponsor of the show, Zach Abraham, who is the chief investment officer at

3
00:00:12,759 --> 00:00:20,640
Bulwart Capital Management, and he always
helps us understand weird, complicated financial monetary

4
00:00:20,760 --> 00:00:24,719
concepts and he breaks them down into
little tidbits that we can understand. And

5
00:00:24,760 --> 00:00:32,880
it's good timing, Zach, because
apparently the GDP has soared unexpectedly to new

6
00:00:32,960 --> 00:00:38,600
heights that were not foreseen, and
so that begs the question, what the

7
00:00:38,640 --> 00:00:43,719
hell is that and what does that
really mean? Is that? Yeah,

8
00:00:43,759 --> 00:00:48,520
okay, so GDP stands for gross
domestic product. Okay, So what it

9
00:00:48,640 --> 00:00:55,039
basically is looking at is trying to
and to add on to what you said.

10
00:00:55,320 --> 00:00:58,079
We try to do this all the
time. But it's not about breaking

11
00:00:58,079 --> 00:01:02,280
it into little pieces. It's just
about out putting it in layman's terms,

12
00:01:02,320 --> 00:01:04,000
right, Like one of the things
you learn about in the world of finances,

13
00:01:04,400 --> 00:01:07,760
everybody knows more than they think they
do. They just don't know the

14
00:01:07,879 --> 00:01:14,319
lingo, right like, well,
like you people know the concepts and I

15
00:01:14,599 --> 00:01:18,000
and I am convinced to this day
that the reason that there's so much of

16
00:01:18,000 --> 00:01:23,959
this esoteric vernacular used is just so
we sound smart, right, Like you

17
00:01:23,439 --> 00:01:26,079
know what I mean, because you'll
hear these people say this big elaborate thing

18
00:01:26,120 --> 00:01:30,239
and you're like, so what you're
saying is we've got too much debt?

19
00:01:30,480 --> 00:01:34,599
Right? And it literally and you
literally it took like a paragraph in five

20
00:01:34,599 --> 00:01:38,879
minutes to say it, you know. So, so gross domestic product is

21
00:01:38,879 --> 00:01:44,680
is just basically it's it's a very
rudimentary, very inaccurate kind of think of

22
00:01:44,719 --> 00:01:49,439
it like a sledgehammer way to measure
the output of an economy. So this

23
00:01:49,560 --> 00:01:53,319
is way over simplistic, but it
really does. You don't need to dig

24
00:01:53,359 --> 00:01:57,719
into it deep to really understand it. Basically is looking at the sums or

25
00:01:57,000 --> 00:02:04,640
the additions and subtractions and and basically
adding up all transactions, right and saying,

26
00:02:05,239 --> 00:02:08,599
okay, that's some of that transaction
that is an output, right,

27
00:02:08,719 --> 00:02:16,159
Apple sold? You know it's thirty
million phones internationally that goes on our gross

28
00:02:16,159 --> 00:02:20,800
domestic product. Right, So it's
just how they pick, like how does

29
00:02:20,840 --> 00:02:24,000
it who? Well, how do
you pick what goes into the measurement and

30
00:02:24,080 --> 00:02:29,000
who's responsible for doing the tallying?
Yes? And like is there like a

31
00:02:29,080 --> 00:02:35,560
gdpsre like who does that? It's
it's it's it's done different yeah, different

32
00:02:35,560 --> 00:02:39,280
people, different people, different industries, taboo or excuse me, different departments

33
00:02:40,000 --> 00:02:43,960
tabulated. Everybody kind of keeps track
of it on their own. The Federal

34
00:02:43,960 --> 00:02:47,360
Reserve tabulates it on their own.
I believe the BLS, the Bureau of

35
00:02:47,439 --> 00:02:52,080
Labor Statistics, I believe they tabulate
GDP on their own. But it comes

36
00:02:52,159 --> 00:02:57,479
from but the but the official numbers
come from FRED. And I forget what

37
00:02:57,520 --> 00:03:01,000
the acronym stands for, but it's
the Federal and it's like the Federal Data

38
00:03:01,080 --> 00:03:05,960
Department. Basically, it's FRED,
the Federal something economic department, the Federal

39
00:03:07,599 --> 00:03:13,000
or something might the Federal Reserve economic
departments. We're gonna go with the exact

40
00:03:13,080 --> 00:03:15,919
data. I've looked at it so
long. I just see FRED on the

41
00:03:15,000 --> 00:03:20,319
charts and that's why. Yeah.
So, but here's the tricky part about

42
00:03:20,360 --> 00:03:22,759
it, right, And here's one
of the things that I think is going

43
00:03:22,800 --> 00:03:27,439
on. And I don't think it's
conspiratorial. I just we've talked about before

44
00:03:27,479 --> 00:03:32,800
about the tricky Inflation is a very
tricky thing that most people know far less

45
00:03:32,800 --> 00:03:37,759
about than they think they do.
Right, It's there's just different forms of

46
00:03:37,759 --> 00:03:42,319
inflation. There's different causes of inflation. So one of the tricky things about

47
00:03:42,400 --> 00:03:47,319
GDP is that GDP there's two different
ways to tabulate it. There's what we

48
00:03:47,360 --> 00:03:53,039
call nominal GDP, which is literally
just the addition. An easy way to

49
00:03:53,039 --> 00:03:57,159
put it is an addition of all
transactions made in an economy over any given

50
00:03:57,159 --> 00:04:00,719
period of time. Okay, so
totalnomic output, just adding all of it

51
00:04:00,800 --> 00:04:04,919
up together. How many widgets did
the entire economy sell, how many buildings

52
00:04:04,919 --> 00:04:06,840
they are build? Adding it all
up together, putting it out there,

53
00:04:08,039 --> 00:04:12,680
that's the nominal number. And then
what we look at in the business and

54
00:04:12,719 --> 00:04:16,399
what Fred the Federal Reserve Economics Department
and all these guys, what they put

55
00:04:16,439 --> 00:04:23,279
out is something called real GDP,
so that is the nominal growth number less

56
00:04:23,319 --> 00:04:27,600
the inflation rate. So one of
the things that I have been saying is,

57
00:04:28,079 --> 00:04:30,720
you know, and you talk to
people out there, Yeah, you

58
00:04:30,759 --> 00:04:35,000
see these economic prints, does it
feel like you're in an economy that's growing

59
00:04:35,079 --> 00:04:41,399
at three to five percent? And
everybody's answer is unequivocally no. Right Now,

60
00:04:41,959 --> 00:04:46,040
I could be wrong about this,
but I think the easy explanation for

61
00:04:46,160 --> 00:04:51,839
all of it is that inflation is
understated. Because if inflation is understated.

62
00:04:53,319 --> 00:04:57,920
That will make GDP look bigger,
right because we take the nominal number less

63
00:04:57,920 --> 00:05:00,839
the inflation rate. So if if
we had five and a half to six

64
00:05:00,920 --> 00:05:04,879
percent inflation right now, I think
that that would make a lot more sense.

65
00:05:05,360 --> 00:05:10,000
That would imply that the economy was
growing at like more zero point five

66
00:05:10,079 --> 00:05:14,639
to one percent, or or in
other words, just hanging off the edge

67
00:05:14,639 --> 00:05:19,160
of recession. And I think that's
actually what's going on. So and again,

68
00:05:19,199 --> 00:05:23,839
I don't think it's conspiratorial. I
don't think anybody's trying to do it.

69
00:05:24,160 --> 00:05:29,199
I think that there are things that
the Federal Reserve does that makes them

70
00:05:29,319 --> 00:05:32,439
prone to understate inflation. I think
that there are things that have you know,

71
00:05:32,480 --> 00:05:35,920
you've had a lot of one off
crazy things occur economically in the last

72
00:05:35,959 --> 00:05:40,560
three years. I think that's kind
of clouding the issue to some degree.

73
00:05:40,680 --> 00:05:45,079
But you look at all this data, it looks all conflicting, like it

74
00:05:45,120 --> 00:05:48,519
doesn't make sense. Then you look
at the Then if you assume that the

75
00:05:48,560 --> 00:05:53,199
inflation rate is understated, bump it
up to five and a half to six.

76
00:05:53,759 --> 00:05:57,560
Now everything makes a lot more sense. So that's kind of why we

77
00:05:57,639 --> 00:06:00,839
think that what's going on and what's
really confused using people, is inflation is

78
00:06:00,879 --> 00:06:05,199
being structurally understated, which is making
growth look stronger than it really is.

79
00:06:05,600 --> 00:06:11,079
So again, but not on purpose. You're saying inflation is not being it's

80
00:06:11,120 --> 00:06:15,120
being understated, but not on purpose. Yes and no, okay, but

81
00:06:15,720 --> 00:06:18,480
except by the Biden administration, because
they're going to understate it on purpose with

82
00:06:18,920 --> 00:06:21,879
well, I mean, he's already
going to tell you there's no inflation and

83
00:06:21,879 --> 00:06:28,040
we've beat it, right transitory?
Yeah right, yeah, yeah, you

84
00:06:28,120 --> 00:06:30,199
gotta love that word. So so
the answer, the answer is yes and

85
00:06:30,240 --> 00:06:34,279
no. Okay. So if you
go back and look at over the years,

86
00:06:34,720 --> 00:06:41,680
the Federal Reserve has made several tweaks
to how it how it measures inflation.

87
00:06:42,040 --> 00:06:46,480
Okay, Now, I think it's
impossible not to observe that every one

88
00:06:46,519 --> 00:06:54,120
of those tweaks made inflation lower,
not higher. Okay. So now I

89
00:06:54,199 --> 00:07:01,439
think it's also impossible to not observe
the fact that understating inflation structurally is beneficial

90
00:07:01,519 --> 00:07:06,439
to both elected officials and the Federal
Reserve. So is there a part of

91
00:07:06,480 --> 00:07:11,439
that at play? Yes, I'm
sure. Then there's also, though a

92
00:07:11,439 --> 00:07:14,399
part of it that's not and it's
something that they do, and I think

93
00:07:14,399 --> 00:07:17,000
we've talked about this before, but
it's something that the FED does called hedonic

94
00:07:17,079 --> 00:07:24,920
adjustments. So what a hedonic adjustment
is and I've got two really good examples

95
00:07:24,959 --> 00:07:27,839
for what it is and what it
isn't. Okay, So and the FED.

96
00:07:28,000 --> 00:07:30,399
Here's the problem. The FED does
this to both things. If we

97
00:07:30,480 --> 00:07:34,759
look at automobiles, and I can't
remember the I can't remember the date.

98
00:07:35,040 --> 00:07:39,680
But if you look at the Fed's
data, the FED will tell you that

99
00:07:39,720 --> 00:07:43,519
the cost of automobiles and again I
don't remember the exact dates, but it's

100
00:07:43,519 --> 00:07:46,720
over a twenty five year period of
time. So let's say nineteen eighty to

101
00:07:46,759 --> 00:07:51,120
two thousand and five, the FED
will tell you that there was zero automobile

102
00:07:51,160 --> 00:07:56,680
inflation. Okay. Now, if
you look at the price of automobiles over

103
00:07:56,720 --> 00:07:59,839
that period of time, they went
from like thirty five hundred to like thirty

104
00:07:59,839 --> 00:08:05,160
five five thousands. Okay, Now
what the FEDS now, the Fed's argument

105
00:08:05,360 --> 00:08:09,279
is this, their argument is now
okay, at the same time, now,

106
00:08:09,639 --> 00:08:13,199
now keep that in your mind.
What we're talking about with automobiles.

107
00:08:13,519 --> 00:08:16,680
Now think about cell phones. Let's
go back and look at what the average

108
00:08:16,720 --> 00:08:22,519
family was paying for telephone bills in
nineteen eighty, and look what they're paying

109
00:08:22,560 --> 00:08:28,519
now. Okay, cell phones are
why the Fed does hedonic adjustments. If

110
00:08:28,560 --> 00:08:31,720
you look at what people were paying
for a telephone bill in nineteen eighty compared

111
00:08:31,759 --> 00:08:37,360
to what families are paying today,
it's mind blowingly more. Right, But

112
00:08:37,480 --> 00:08:41,840
think about what use we get out
of that telephone bill that we didn't then.

113
00:08:41,159 --> 00:08:46,240
We're using it for GPS, We're
using it to GPS locate our kids.

114
00:08:46,399 --> 00:08:50,879
We're using it to email and conference
call and FaceTime and take pictures and

115
00:08:50,000 --> 00:08:54,840
videos and all these other things.
Right, So to say that the cell

116
00:08:54,960 --> 00:09:01,360
phone the cost of phones inflated one
thousand percent, it wouldn't be accurate because

117
00:09:01,399 --> 00:09:05,879
phones are serving so many more purposes
today than they were in nineteen eighty.

118
00:09:05,240 --> 00:09:11,240
Okay, but flip back to the
automobile. Okay, the automobile isn't giving

119
00:09:11,320 --> 00:09:15,840
us a service today that it wasn't
in nineteen eighty. What is the primary

120
00:09:15,840 --> 00:09:18,639
function of the automobile. It's to
get you from one place to the other.

121
00:09:18,840 --> 00:09:20,240
Well, guess what, cars aren't
any better at doing that today than

122
00:09:20,240 --> 00:09:24,279
they were in nineteen eighty. Yeah, Well, you could certainly, you

123
00:09:24,320 --> 00:09:28,960
could certainly make that argument, especially
if you drive an electric vehicle, specifically

124
00:09:30,000 --> 00:09:33,799
one made by Tesla. But no, but no, but I agree with

125
00:09:33,840 --> 00:09:41,679
you. But so that's a classic
example though, of bureaucratic you know,

126
00:09:41,799 --> 00:09:46,639
oversights where they don't think about unintended
consequences, right where you're like, yeah,

127
00:09:46,919 --> 00:09:50,320
I can see how a donic adjusting
would would would deal with cell phones

128
00:09:50,320 --> 00:09:54,399
and that gives you a more accurate
picture. But on the other hand,

129
00:09:54,720 --> 00:09:58,240
you're doing that same thing to a
bunch of and their argument is, well,

130
00:09:58,279 --> 00:10:01,480
but look at all the things.
You've got c heater or seat heaters,

131
00:10:01,480 --> 00:10:05,279
and you've got stereo systems and moon
roofs, and I go, yeah,

132
00:10:05,440 --> 00:10:09,519
but that doesn't improve the underlying intended
function of the car. It doesn't

133
00:10:09,559 --> 00:10:15,799
get to work faster, it doesn't
improve my margins. I'm just spend Yes,

134
00:10:16,519 --> 00:10:18,840
it doesn't allow me to spend more
time with my family. So that

135
00:10:20,000 --> 00:10:22,759
is just pure inflation, right,
It's just pure inflation. So when you

136
00:10:22,799 --> 00:10:26,120
look at that side of it,
I think it's really hard to argue that

137
00:10:26,240 --> 00:10:31,919
inflation is not materially understated because of
things like that. And like I said,

138
00:10:33,240 --> 00:10:37,720
when you see a GDP print like
that that everybody's like, oh,

139
00:10:37,720 --> 00:10:39,399
it's growing, and you're like,
Hey, find me anybody out there that

140
00:10:39,440 --> 00:10:43,879
would say that they feel like the
economy is growing at that pace. Nobody

141
00:10:43,919 --> 00:10:46,720
does, right, So then you
look at it and go kind of Awkham's

142
00:10:46,799 --> 00:10:50,600
razor, You go, hey,
of all these things, what makes sense.

143
00:10:50,679 --> 00:10:54,720
Well, if inflation is materially understated, that would mean growth is materially

144
00:10:54,759 --> 00:11:00,440
overstated. That seems to fit,
right, So that's kind of I didn't

145
00:11:00,440 --> 00:11:03,440
give you guys more questions and answers
on that, but I just I think

146
00:11:03,480 --> 00:11:07,360
that that's what's happening. And I
think that there's a real danger in that

147
00:11:07,559 --> 00:11:13,360
as far as the economy is concerned, because it's gonna make the economy appear

148
00:11:13,519 --> 00:11:18,799
much stronger than it actually is.
And I think, I am not sure,

149
00:11:18,200 --> 00:11:24,519
but I think that is starting to
unravel as we speak, meaning you're

150
00:11:24,559 --> 00:11:28,159
not there yet, but you see
all of the things lined up for a

151
00:11:28,279 --> 00:11:33,679
lot of job losses in a relatively
short period of time. We guys this

152
00:11:33,840 --> 00:11:39,200
and to be to be fair,
though, this environment is extraordinarily complex and

153
00:11:39,200 --> 00:11:43,360
there's so many cross currents that you
can't be the only thing I'm sure of

154
00:11:43,480 --> 00:11:46,320
really in this environment is that the
guy that can tell that tells you that

155
00:11:46,399 --> 00:11:50,399
he knows exactly how it's gonna play
out. The only thing I'm sure of

156
00:11:50,480 --> 00:11:54,519
is he's a complete idiot or a
liar, right it really, I just

157
00:11:54,639 --> 00:11:58,279
I just know that it's a it's
an environment where the market is telling you

158
00:11:58,320 --> 00:12:03,320
there's no risk, there's tons of
right, and it's just an environment that

159
00:12:03,399 --> 00:12:07,600
requires a lot of caution because there's
just so many false flags and there's so

160
00:12:07,720 --> 00:12:11,320
much conflicting data, so much confusion. But the underlying health of things is

161
00:12:11,320 --> 00:12:16,480
not good. You know, every
single day interest rates stay up. Here,

162
00:12:16,720 --> 00:12:18,679
you're going to see Remember we told
you guys a couple months ago,

163
00:12:18,720 --> 00:12:20,919
We're like, wait, things are
gonna get really weird. You're gonna start

164
00:12:20,919 --> 00:12:24,360
seeing the market do really well,
and you're going to see data start picking

165
00:12:24,440 --> 00:12:26,759
up a little bit, and everybody's
gonna be like, oh, it's great,

166
00:12:26,960 --> 00:12:30,720
here, we are right. This
is exactly what we were looking for.

167
00:12:31,039 --> 00:12:35,080
So it's it's going to be a
complicated environment. But man, these

168
00:12:35,120 --> 00:12:39,919
commercial we've just heard about Blackrock had
a big property default. It was worth

169
00:12:39,960 --> 00:12:45,120
one hundred and seventy five million bucks. So those those commercial office space defaults

170
00:12:45,120 --> 00:12:48,240
are coming. Oh my gosh,
my god. Well, okay, so

171
00:12:48,360 --> 00:12:52,480
that's helpful. And this is exactly
why you do the seminars that you do,

172
00:12:52,559 --> 00:12:56,320
why you do your little short radio
bits all the time, and this

173
00:12:56,399 --> 00:12:58,320
is why people should connect with you. How can they do that? Yeah?

174
00:12:58,440 --> 00:13:03,519
So well, shoot, the easiest
way today is we've got our live

175
00:13:03,679 --> 00:13:09,039
roadshow webinar deal today at three thirty
Pacific standard time. If you want to

176
00:13:09,039 --> 00:13:11,360
go for that, or if you
want to get a link to that,

177
00:13:11,399 --> 00:13:13,240
it's on zoom. You don't have
to participate. You just sit back,

178
00:13:13,279 --> 00:13:16,399
We run you through who we are, what we do, how we do

179
00:13:16,440 --> 00:13:18,279
it for about forty five minutes,
and then do a Q and A session

180
00:13:18,320 --> 00:13:22,399
at the end. You can ask
me anything from you know, stocks,

181
00:13:22,399 --> 00:13:26,120
to currency questions to bitcoin whatever,
whatever the deal is, and you do

182
00:13:26,559 --> 00:13:30,120
you do those seminars monthly? How
often do you do those? We do

183
00:13:30,159 --> 00:13:35,000
them every six weeks every week.
Yeah, yeah, so yeah, free

184
00:13:35,000 --> 00:13:39,360
of charge. Just go to Bullwardcapitalmanagement
dot com or know your Risk Radio dot

185
00:13:39,360 --> 00:13:41,320
com and little prompt comes right up. You just sign up for it.

186
00:13:41,360 --> 00:13:45,279
We'll email you the link right before
the webinar starts, and if you're interested,

187
00:13:45,799 --> 00:13:48,159
you can sign up to talk to
one of our advisors or talk to

188
00:13:48,200 --> 00:13:50,840
me afterwards. If not, hopefully
you'll leave with more information. So awesome,

189
00:13:52,200 --> 00:13:56,919
fantastic, thank you, thanks about
and they're always so helpful, all

190
00:13:56,000 --> 00:14:03,919
right, thank you ladies. Investment
advisory service is offered through Track Financial LLC

191
00:14:03,039 --> 00:14:07,080
and SEC Registered Investment Advisor Information presentatives
for educational purposes only. It should not

192
00:14:07,120 --> 00:14:11,799
be considered specific investment advice, does
not take into consideration your specific situation,

193
00:14:11,879 --> 00:14:13,600
and does not intend to make an
offer or solicitation for the sale or purchase

194
00:14:13,600 --> 00:14:18,159
of any securities or investment strategies.
Investments involve risk and are not guaranteed,

195
00:14:18,159 --> 00:14:20,360
and past performance is no guarantee of
future results. For specific tax advice on

196
00:14:20,399 --> 00:14:24,279
strategy, consult with a qualified tax
professional before implementing any strategy discussed herein