1
00:00:05,160 --> 00:00:08,919
Edition of the Chicks on the Right
podcast where we have on our friend and

2
00:00:08,960 --> 00:00:12,640
sponsor of the show, Zach Abraham
from Bulwark Capital Management, is with us

3
00:00:12,679 --> 00:00:18,000
once again, and just before we
started recording this, you gave us a

4
00:00:18,120 --> 00:00:23,440
term that we have not heard before
that we need an explanation of doom spending.

5
00:00:23,559 --> 00:00:29,920
What is it? Yeah? Yeah, it does well. I read

6
00:00:29,960 --> 00:00:33,399
the headline and I was like,
oh, I'm in right, Yeah,

7
00:00:33,439 --> 00:00:35,960
somebody tells me the world is ending, and I'm like, I'm going doom

8
00:00:35,960 --> 00:00:40,840
spending. Oh yeah, I'm doing
Yeah. It's like the guy that builds

9
00:00:40,880 --> 00:00:43,840
the bunker out in the back of
his yard, you know, on packs

10
00:00:43,840 --> 00:00:47,799
of full of ammunition and guns.
He's doom spending. That's what I was

11
00:00:47,840 --> 00:00:50,520
thinking. And you know, as
a kid growing up watching movies like Commando,

12
00:00:50,560 --> 00:00:52,960
I was sitting there thinking, hey, you know I could, I

13
00:00:53,000 --> 00:00:56,479
could, I could get into some
spending here, right. Is it basically

14
00:00:56,520 --> 00:01:00,840
just prepping? No, that's what
it sounds like. No, So I

15
00:01:00,840 --> 00:01:03,159
think it's another nonsensical term that the
media is made up to try to shield

16
00:01:03,159 --> 00:01:10,000
the Biden administration from any responsibility for
the economicsculation. We're just going to keep

17
00:01:10,000 --> 00:01:15,840
coining new terms and new phenomena,
right, So, but I do think

18
00:01:15,879 --> 00:01:21,439
it says something interesting culturally. So
what they're looking at is that they're talking

19
00:01:21,439 --> 00:01:27,319
about how despite the fact that credit
cards are maxed and you're seeing delinquencies sore

20
00:01:29,120 --> 00:01:34,480
that people are basically grabbing every level
or a or cash from any place that

21
00:01:34,519 --> 00:01:38,799
they possibly can't can So you see
loans against four oh one K balances shooting

22
00:01:38,840 --> 00:01:44,040
up through the roof to extraordinarily high
levels, and people are like, well,

23
00:01:44,040 --> 00:01:45,959
it's better than racking up debt.
And you're sitting there going, do

24
00:01:46,000 --> 00:01:48,400
you know what it costs you to
pull money out of a four to one

25
00:01:48,480 --> 00:01:52,920
K? It's your personal income tax
rate plus ten percent. Early, I

26
00:01:53,000 --> 00:01:57,560
used to be in HR and handle
benefits way back in the day, and

27
00:01:57,599 --> 00:02:00,719
when anybody would come to me asking
to take out a loan against their four

28
00:02:00,719 --> 00:02:05,359
oh one K, I judged them. Yeah, I like secretly judge them.

29
00:02:05,480 --> 00:02:09,360
Oh my god, they're like trying
to pay for their mother's surgery and

30
00:02:09,400 --> 00:02:15,520
stuff. And you're back there going
youth financial neanderthal. I mean I would

31
00:02:15,599 --> 00:02:20,479
never say anything, but like secretly
I was like, this is not smart,

32
00:02:20,919 --> 00:02:23,080
this is you shouldn't be doing this, This is not a good financial

33
00:02:23,120 --> 00:02:29,719
plan. Yeah, you're managing your
household like the Biden administration manages our country's

34
00:02:29,719 --> 00:02:31,919
finances. This is not good.
Yeah, so well, and then that's

35
00:02:31,919 --> 00:02:35,919
where the lesson would start, right
you start breaking them down a finance and

36
00:02:35,919 --> 00:02:39,080
civics lesson. But no, So
I think it's one of these things where

37
00:02:39,080 --> 00:02:44,400
they're they're contextualizing it, trying to
make it sound so, but it really

38
00:02:44,439 --> 00:02:49,719
is interesting because I think it's just
a product of the greatest handout of money

39
00:02:49,800 --> 00:02:54,439
in the history of mankind, and
that creates a sort of nihilism, right,

40
00:02:54,599 --> 00:02:59,680
like meaning, you're spending money you
don't have because somebody sent you a

41
00:02:59,759 --> 00:03:02,199
check. You're making more sitting at
home than you were working, by it

42
00:03:02,280 --> 00:03:06,400
all, and you get into a
mode, right, You get into a

43
00:03:06,400 --> 00:03:10,479
mode and you keep spending, and
you know this isn't new. People spending

44
00:03:10,520 --> 00:03:14,719
beyond their means in America? Oh
my, Like that's crazy. Right.

45
00:03:15,199 --> 00:03:20,240
So they're just talking about how basically
the people are trying to treat their nerves

46
00:03:20,960 --> 00:03:23,960
or cope with hardships of the day
to continue spending money they don't have.

47
00:03:24,400 --> 00:03:29,280
And I'm like, okay, well, you just described the peak of every

48
00:03:29,280 --> 00:03:34,000
economic cycle in history. Right,
like, that's that's what happens. So

49
00:03:36,120 --> 00:03:38,080
the crazy thing about it, though, and I don't really think people are

50
00:03:38,120 --> 00:03:44,240
seeing it the correct way. The
crazy thing about it is when you look

51
00:03:44,280 --> 00:03:50,159
what's happening with delinquencies and you look
what happens is happening with collections, the

52
00:03:50,479 --> 00:03:53,240
picture is changing a little bit right
now where you're sitting there going look,

53
00:03:53,400 --> 00:03:55,879
it's not so much you're going to
see a reduction in consumer spending. We're

54
00:03:55,919 --> 00:04:00,840
seeing that, right. It was
funny that they were touting around Costco numbers,

55
00:04:00,840 --> 00:04:02,759
which weren't bad, but Costco's sales
were up, you know, three

56
00:04:02,840 --> 00:04:08,840
and a half percent over the same
month last year. Well you've averaged five

57
00:04:08,879 --> 00:04:13,120
percent inflation over the last year,
so that means adjusted for inflation, it's

58
00:04:13,159 --> 00:04:16,279
going down already, right, So
I just don't think people are looking at

59
00:04:16,319 --> 00:04:19,839
all these things in context. But
anyway, getting back to the doom spending,

60
00:04:20,800 --> 00:04:25,519
one of the things again, consumer
spending is already going down. What

61
00:04:25,600 --> 00:04:30,160
I think people need to start thinking
about is those people who are doom spending

62
00:04:30,160 --> 00:04:32,279
are doing it on consumer credit.
A lot of that credit's going in delinquency

63
00:04:32,319 --> 00:04:35,720
and collections. Well, guess what's
going to happen, right, the bail

64
00:04:35,759 --> 00:04:40,839
out, right, Well, at
some point, right, yeah, no,

65
00:04:40,920 --> 00:04:44,399
but right those people's credit get dinged
and they're not able to access credit

66
00:04:44,399 --> 00:04:46,920
anyway. Right, So not only
do they run out of money, but

67
00:04:47,040 --> 00:04:50,639
they're also not there for the bounce
back and spending because they can't get any

68
00:04:50,639 --> 00:04:55,439
credit issuance, so you know,
and they can't after a while. But

69
00:04:55,519 --> 00:04:59,480
what I'm saying is, not only
are we exhausting current levels of consumer spending,

70
00:04:59,480 --> 00:05:02,399
but every time you see delinquency numbers
going higher, that's one less consumer

71
00:05:02,439 --> 00:05:06,199
that's going to be able to access
consumer credit. So I mean, it's

72
00:05:06,240 --> 00:05:10,600
just it's really funny to listen to
the narrative. And we've been talking about

73
00:05:10,600 --> 00:05:13,240
this for the last month and a
half, and you know, I've been

74
00:05:13,279 --> 00:05:15,399
telling you guys every week, I
don't know what the market's talking about.

75
00:05:15,480 --> 00:05:17,800
All we can do is look at
the data. The data's head headed the

76
00:05:17,800 --> 00:05:20,720
opposite way. Well, just all
of a sudden, now in the last

77
00:05:20,720 --> 00:05:26,560
week you're starting, the data is
so consistent. It's just it's not horrible

78
00:05:26,639 --> 00:05:30,120
yet, it's just all headed the
wrong way. And it's like, I

79
00:05:30,160 --> 00:05:32,439
know, I just not the same
thing. I'm like, he said,

80
00:05:32,519 --> 00:05:38,160
yet Well, like I've told you
guys, I look you you said it

81
00:05:38,199 --> 00:05:43,120
perfect, which was a bailout,
right. I don't think because of that

82
00:05:43,319 --> 00:05:46,279
reason, I don't think that this
is going to be really bad. Okay,

83
00:05:46,560 --> 00:05:50,319
what I do think is it's going
to be I think it's going to

84
00:05:50,360 --> 00:05:54,560
be shallower than a lot of the
you know, perma bear out there.

85
00:05:54,600 --> 00:05:58,560
People are saying, but you just
you keep adding these things together, and

86
00:05:58,600 --> 00:06:01,639
what it's all screaming to us is
it's not going to be that bad,

87
00:06:01,680 --> 00:06:04,879
but it's going to last longer to
people think. Right. And remember we've

88
00:06:04,879 --> 00:06:10,120
talked about these people losing access to
consumer credit, which is part of delinquencies

89
00:06:10,519 --> 00:06:13,920
and all that other kind of stuff. But remember the other thing is,

90
00:06:14,040 --> 00:06:18,480
unlike every other economic drawdown or every
recession we've had in the past, one

91
00:06:18,519 --> 00:06:25,000
of the first shots of life into
the economy's arms is the fact that interest

92
00:06:25,079 --> 00:06:29,399
rates go down in recessions. Well, when you think of the average mortgage

93
00:06:29,439 --> 00:06:32,879
in this country, the effective mortgage
rate is three point nine. How far

94
00:06:33,560 --> 00:06:39,160
in order to make that an attractive
source of capital, you've got to get

95
00:06:39,199 --> 00:06:43,240
rates far enough to where people can
refin, which means the thirty year needs

96
00:06:43,240 --> 00:06:46,399
to be sub three to nine.
Well you're above seven right now, right,

97
00:06:46,439 --> 00:06:50,639
So you start looking at it and
you're like, not only are rate

98
00:06:50,720 --> 00:06:56,720
cuts going to be less stimulative than
they ever have been before, but you're

99
00:06:56,720 --> 00:06:59,360
not going to be able to run. I mean, people will refive some

100
00:06:59,439 --> 00:07:01,519
debt here, like it's not going
to freeze, but you're just not going

101
00:07:01,600 --> 00:07:04,920
to get this. You know,
if you bought a house, if you

102
00:07:04,959 --> 00:07:10,319
mortgaged a house at six and a
half percent in two thousand and seven or

103
00:07:10,360 --> 00:07:14,800
two thousand and six and you were
able to refy it at three point seven

104
00:07:15,199 --> 00:07:18,600
in twenty eleven, that made a
material difference to your household budget. Right,

105
00:07:19,120 --> 00:07:24,240
yeah, for sure. Well you're
at three two five now you know

106
00:07:24,240 --> 00:07:27,959
where do rates got to go?
And three two five were mortgage rates when

107
00:07:28,160 --> 00:07:30,839
rates were at zero. So even
if you get back to zero, which

108
00:07:30,879 --> 00:07:33,800
I don't think the Fed's going to
cut that far, but you just you

109
00:07:33,839 --> 00:07:36,519
don't have that relief there, right, you don't. This will be the

110
00:07:36,560 --> 00:07:42,120
first recession in the last hundred years
where we do not have that that wind

111
00:07:42,160 --> 00:07:46,000
at our back. So you know, and then you look at peak employment,

112
00:07:46,199 --> 00:07:48,480
which is good right now, but
what is peak employment? Well,

113
00:07:48,519 --> 00:07:53,319
I mean the last time of employment
was this unemployment was this low was fifty

114
00:07:53,319 --> 00:07:56,480
five years ago. You know,
people always forget about this, right,

115
00:07:56,639 --> 00:08:00,920
stock market heights, valuations. It's
great when you're up here. The problem,

116
00:08:01,199 --> 00:08:05,600
the thing you need to understand is
you don't stay there. Right.

117
00:08:05,120 --> 00:08:09,879
The view is always greatest from the
top, you know. So and again

118
00:08:09,000 --> 00:08:13,720
not saying it's collapse, but it
just goes along to this doom spending and

119
00:08:13,800 --> 00:08:16,720
all of these things just add up. And I think people have really been

120
00:08:16,759 --> 00:08:20,399
in denial this year, based only
by the movement and the equity markets and

121
00:08:20,480 --> 00:08:26,319
just not paying attention to underlying data. And it's you just see it really

122
00:08:26,360 --> 00:08:28,240
picking up steam. We saw it
today in the jobless claim numbers that came

123
00:08:28,279 --> 00:08:33,159
out. The new jobless claims came
in as expected, but nobody's paying attention

124
00:08:33,240 --> 00:08:37,120
to continued continued jobless claims now are
higher than they were at any point over

125
00:08:37,120 --> 00:08:41,159
the last five years. Right,
So kay four? Right, and we're

126
00:08:41,159 --> 00:08:43,840
going to talk about, hey,
it's still stets a strong labor market and

127
00:08:43,919 --> 00:08:46,879
you're like, well, it's not
a weak labor market, but it's not

128
00:08:46,919 --> 00:08:52,399
as strong as it was six months
ago, not even most so, Yeah,

129
00:08:52,399 --> 00:08:56,279
it's it's shaping up to be a
great year, you know. And

130
00:08:56,279 --> 00:09:00,480
and well, if people are doom
spending, they're following the lead of our

131
00:09:00,600 --> 00:09:03,159
government, who constantly spends what they
don't have, So you can't hardly blame

132
00:09:03,200 --> 00:09:05,720
them. No, And here you
you brought up a really good point.

133
00:09:07,200 --> 00:09:09,759
If somebody asked me the other day
in an interview, they were like,

134
00:09:09,799 --> 00:09:13,200
well, Zach, you're saying all
these bad things. Why don't you think

135
00:09:13,240 --> 00:09:16,840
it's an absolute lock that we're going
to have a really nasty recession? This

136
00:09:16,919 --> 00:09:20,360
sounds really bad. I think this
will help your listeners. And it was

137
00:09:20,399 --> 00:09:22,240
kind of an eye opener to me
even the other day when I came to

138
00:09:22,279 --> 00:09:26,600
this realization. But in two thousand
and eight, two thousand and nine,

139
00:09:26,639 --> 00:09:31,320
we all remember how bad the financial
crisis was, right we had at that

140
00:09:31,399 --> 00:09:35,159
time our economy was sixteen trillion dollars
in size, okay, And the total

141
00:09:35,240 --> 00:09:39,039
economic contraction from the end of two
thousand and seven till the bottom in two

142
00:09:39,080 --> 00:09:43,240
thousand and nine, the economy contracted
about it was somewhere between three and a

143
00:09:43,279 --> 00:09:48,240
half to three point eight percent.
Okay. So you do the numbers on

144
00:09:48,360 --> 00:09:50,879
that, and it's right around on
a sixteen thousand, or a sixteen trillion

145
00:09:50,919 --> 00:09:54,519
dollar economy that equals about six hundred
billion. We'll call it. Okay,

146
00:09:54,679 --> 00:10:00,639
that means the economy contracted by six
hundred billion. We are running two point

147
00:10:00,679 --> 00:10:05,639
one trillion dollar deficits right now.
Okay. The one caveat that I give

148
00:10:05,759 --> 00:10:09,519
to perhaps there won't be a recession. And I still think it's a very

149
00:10:09,639 --> 00:10:15,240
very low possibility that you're not going
to go into recession. But it is

150
00:10:15,399 --> 00:10:18,600
tough to go into recession when you
are spending that much money. I mean,

151
00:10:20,399 --> 00:10:22,720
it's just crazy to me that people
aren't freaking out about a two point

152
00:10:22,720 --> 00:10:26,559
one trillion dollar deficit. It's just
mind blowing. It is mind blowing,

153
00:10:26,799 --> 00:10:31,519
it is. Okay, Well,
we'd learned a new word today and we

154
00:10:31,600 --> 00:10:33,240
have you to thank for it.
So thank you, Zach. Where can

155
00:10:33,279 --> 00:10:37,919
people learn more about you and about
Bullwark Capital Management? Yeah, well,

156
00:10:37,919 --> 00:10:41,080
if you guys can't tell, I
think there's some scary times, but if

157
00:10:41,559 --> 00:10:45,600
you love this industry, they're very
historic, interesting times. And we're watching

158
00:10:45,600 --> 00:10:48,480
this on a daily basis. So
we put out a show every single day

159
00:10:48,519 --> 00:10:52,159
that's about fifteen minutes long and summarizes
all the market action and all important economic

160
00:10:52,200 --> 00:10:54,879
data that came out that day.
That's called their Daily Dots, and then

161
00:10:54,879 --> 00:10:58,639
we do our one hour weekly show
on Friday, usually with the one to

162
00:10:58,679 --> 00:11:01,200
one and a half hour interview with
any other professional in the industry. And

163
00:11:01,720 --> 00:11:05,279
you can get all of that.
There's no cost to start podcasts. Know

164
00:11:05,360 --> 00:11:07,759
Your Risk Radio podcast. You can
just Google it or we're on any podcast

165
00:11:07,799 --> 00:11:13,679
site and yeah, easy to find. And we've had some really great guests,

166
00:11:13,679 --> 00:11:16,600
including a couple of the real players
from The Big Short, the famous

167
00:11:16,600 --> 00:11:20,919
movie. And yeah, so trying
to trying to make it all clear to

168
00:11:20,960 --> 00:11:24,039
the folks and keep them up on
what's going on perfect well. As always,

169
00:11:24,159 --> 00:11:28,399
you always teach us Latin wad present
and all, thanks for as always.

170
00:11:30,600 --> 00:11:33,879
Investment advisory service is offered through Trek
Financial LLC and SEC Registered Investment Advisor.

171
00:11:33,960 --> 00:11:37,159
Information presentative is for educational purposes only. It should not be considered specific.

172
00:11:37,240 --> 00:11:41,759
Investment advice does not take into consideration
your specific situation and does not intend

173
00:11:41,799 --> 00:11:43,639
to make an offer or solicitation for
the sale or purchase of any securities or

174
00:11:43,679 --> 00:11:48,240
investment strategies. Investments involve risk and
are not guaranteed, and past performance is

175
00:11:48,279 --> 00:11:50,480
no guarantee of future results. For
specific tax advice on strategy, consult with

176
00:11:50,519 --> 00:11:54,519
a qualified tax professional before implementing any
strategy discussed herein