WEBVTT

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Edition of the Chicks on the Right
podcast where we have on our friend and

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sponsor of the show, Zach Abraham
from Bulwark Capital Management, is with us

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once again, and just before we
started recording this, you gave us a

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term that we have not heard before
that we need an explanation of doom spending.

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What is it? Yeah? Yeah, it does well. I read

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the headline and I was like,
oh, I'm in right, Yeah,

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somebody tells me the world is ending, and I'm like, I'm going doom

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spending. Oh yeah, I'm doing
Yeah. It's like the guy that builds

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the bunker out in the back of
his yard, you know, on packs

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of full of ammunition and guns.
He's doom spending. That's what I was

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thinking. And you know, as
a kid growing up watching movies like Commando,

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I was sitting there thinking, hey, you know I could, I

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could, I could get into some
spending here, right. Is it basically

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just prepping? No, that's what
it sounds like. No, So I

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think it's another nonsensical term that the
media is made up to try to shield

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the Biden administration from any responsibility for
the economicsculation. We're just going to keep

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coining new terms and new phenomena,
right, So, but I do think

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it says something interesting culturally. So
what they're looking at is that they're talking

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about how despite the fact that credit
cards are maxed and you're seeing delinquencies sore

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that people are basically grabbing every level
or a or cash from any place that

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they possibly can't can So you see
loans against four oh one K balances shooting

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up through the roof to extraordinarily high
levels, and people are like, well,

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it's better than racking up debt.
And you're sitting there going, do

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you know what it costs you to
pull money out of a four to one

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K? It's your personal income tax
rate plus ten percent. Early, I

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used to be in HR and handle
benefits way back in the day, and

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when anybody would come to me asking
to take out a loan against their four

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oh one K, I judged them. Yeah, I like secretly judge them.

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Oh my god, they're like trying
to pay for their mother's surgery and

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stuff. And you're back there going
youth financial neanderthal. I mean I would

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never say anything, but like secretly
I was like, this is not smart,

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this is you shouldn't be doing this, This is not a good financial

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plan. Yeah, you're managing your
household like the Biden administration manages our country's

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finances. This is not good.
Yeah, so well, and then that's

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where the lesson would start, right
you start breaking them down a finance and

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civics lesson. But no, So
I think it's one of these things where

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they're they're contextualizing it, trying to
make it sound so, but it really

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is interesting because I think it's just
a product of the greatest handout of money

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in the history of mankind, and
that creates a sort of nihilism, right,

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like meaning, you're spending money you
don't have because somebody sent you a

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check. You're making more sitting at
home than you were working, by it

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all, and you get into a
mode, right, You get into a

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mode and you keep spending, and
you know this isn't new. People spending

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beyond their means in America? Oh
my, Like that's crazy. Right.

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So they're just talking about how basically
the people are trying to treat their nerves

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or cope with hardships of the day
to continue spending money they don't have.

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And I'm like, okay, well, you just described the peak of every

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economic cycle in history. Right,
like, that's that's what happens. So

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the crazy thing about it, though, and I don't really think people are

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seeing it the correct way. The
crazy thing about it is when you look

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what's happening with delinquencies and you look
what happens is happening with collections, the

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picture is changing a little bit right
now where you're sitting there going look,

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it's not so much you're going to
see a reduction in consumer spending. We're

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seeing that, right. It was
funny that they were touting around Costco numbers,

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which weren't bad, but Costco's sales
were up, you know, three

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and a half percent over the same
month last year. Well you've averaged five

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percent inflation over the last year,
so that means adjusted for inflation, it's

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going down already, right, So
I just don't think people are looking at

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all these things in context. But
anyway, getting back to the doom spending,

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one of the things again, consumer
spending is already going down. What

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I think people need to start thinking
about is those people who are doom spending

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are doing it on consumer credit.
A lot of that credit's going in delinquency

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and collections. Well, guess what's
going to happen, right, the bail

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out, right, Well, at
some point, right, yeah, no,

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but right those people's credit get dinged
and they're not able to access credit

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anyway. Right, So not only
do they run out of money, but

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they're also not there for the bounce
back and spending because they can't get any

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credit issuance, so you know,
and they can't after a while. But

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what I'm saying is, not only
are we exhausting current levels of consumer spending,

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but every time you see delinquency numbers
going higher, that's one less consumer

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that's going to be able to access
consumer credit. So I mean, it's

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just it's really funny to listen to
the narrative. And we've been talking about

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this for the last month and a
half, and you know, I've been

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telling you guys every week, I
don't know what the market's talking about.

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All we can do is look at
the data. The data's head headed the

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opposite way. Well, just all
of a sudden, now in the last

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week you're starting, the data is
so consistent. It's just it's not horrible

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yet, it's just all headed the
wrong way. And it's like, I

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know, I just not the same
thing. I'm like, he said,

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yet Well, like I've told you
guys, I look you you said it

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perfect, which was a bailout,
right. I don't think because of that

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reason, I don't think that this
is going to be really bad. Okay,

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what I do think is it's going
to be I think it's going to

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be shallower than a lot of the
you know, perma bear out there.

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People are saying, but you just
you keep adding these things together, and

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what it's all screaming to us is
it's not going to be that bad,

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but it's going to last longer to
people think. Right. And remember we've

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talked about these people losing access to
consumer credit, which is part of delinquencies

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and all that other kind of stuff. But remember the other thing is,

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unlike every other economic drawdown or every
recession we've had in the past, one

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of the first shots of life into
the economy's arms is the fact that interest

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rates go down in recessions. Well, when you think of the average mortgage

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in this country, the effective mortgage
rate is three point nine. How far

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in order to make that an attractive
source of capital, you've got to get

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rates far enough to where people can
refin, which means the thirty year needs

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to be sub three to nine.
Well you're above seven right now, right,

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So you start looking at it and
you're like, not only are rate

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cuts going to be less stimulative than
they ever have been before, but you're

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not going to be able to run. I mean, people will refive some

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debt here, like it's not going
to freeze, but you're just not going

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to get this. You know,
if you bought a house, if you

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mortgaged a house at six and a
half percent in two thousand and seven or

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two thousand and six and you were
able to refy it at three point seven

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in twenty eleven, that made a
material difference to your household budget. Right,

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yeah, for sure. Well you're
at three two five now you know

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where do rates got to go?
And three two five were mortgage rates when

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rates were at zero. So even
if you get back to zero, which

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I don't think the Fed's going to
cut that far, but you just you

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don't have that relief there, right, you don't. This will be the

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first recession in the last hundred years
where we do not have that that wind

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at our back. So you know, and then you look at peak employment,

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which is good right now, but
what is peak employment? Well,

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I mean the last time of employment
was this unemployment was this low was fifty

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five years ago. You know,
people always forget about this, right,

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stock market heights, valuations. It's
great when you're up here. The problem,

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the thing you need to understand is
you don't stay there. Right.

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The view is always greatest from the
top, you know. So and again

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not saying it's collapse, but it
just goes along to this doom spending and

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all of these things just add up. And I think people have really been

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in denial this year, based only
by the movement and the equity markets and

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just not paying attention to underlying data. And it's you just see it really

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picking up steam. We saw it
today in the jobless claim numbers that came

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out. The new jobless claims came
in as expected, but nobody's paying attention

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to continued continued jobless claims now are
higher than they were at any point over

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the last five years. Right,
So kay four? Right, and we're

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going to talk about, hey,
it's still stets a strong labor market and

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you're like, well, it's not
a weak labor market, but it's not

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as strong as it was six months
ago, not even most so, Yeah,

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it's it's shaping up to be a
great year, you know. And

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and well, if people are doom
spending, they're following the lead of our

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government, who constantly spends what they
don't have, So you can't hardly blame

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them. No, And here you
you brought up a really good point.

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If somebody asked me the other day
in an interview, they were like,

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well, Zach, you're saying all
these bad things. Why don't you think

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it's an absolute lock that we're going
to have a really nasty recession? This

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sounds really bad. I think this
will help your listeners. And it was

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kind of an eye opener to me
even the other day when I came to

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this realization. But in two thousand
and eight, two thousand and nine,

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we all remember how bad the financial
crisis was, right we had at that

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time our economy was sixteen trillion dollars
in size, okay, And the total

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economic contraction from the end of two
thousand and seven till the bottom in two

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thousand and nine, the economy contracted
about it was somewhere between three and a

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half to three point eight percent.
Okay. So you do the numbers on

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that, and it's right around on
a sixteen thousand, or a sixteen trillion

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dollar economy that equals about six hundred
billion. We'll call it. Okay,

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that means the economy contracted by six
hundred billion. We are running two point

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one trillion dollar deficits right now.
Okay. The one caveat that I give

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to perhaps there won't be a recession. And I still think it's a very

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very low possibility that you're not going
to go into recession. But it is

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tough to go into recession when you
are spending that much money. I mean,

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it's just crazy to me that people
aren't freaking out about a two point

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one trillion dollar deficit. It's just
mind blowing. It is mind blowing,

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it is. Okay, Well,
we'd learned a new word today and we

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have you to thank for it.
So thank you, Zach. Where can

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people learn more about you and about
Bullwark Capital Management? Yeah, well,

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if you guys can't tell, I
think there's some scary times, but if

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you love this industry, they're very
historic, interesting times. And we're watching

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this on a daily basis. So
we put out a show every single day

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that's about fifteen minutes long and summarizes
all the market action and all important economic

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00:10:52.200 --> 00:10:54.879
data that came out that day.
That's called their Daily Dots, and then

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we do our one hour weekly show
on Friday, usually with the one to

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one and a half hour interview with
any other professional in the industry. And

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you can get all of that.
There's no cost to start podcasts. Know

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00:11:05.360 --> 00:11:07.759
Your Risk Radio podcast. You can
just Google it or we're on any podcast

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00:11:07.799 --> 00:11:13.679
site and yeah, easy to find. And we've had some really great guests,

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including a couple of the real players
from The Big Short, the famous

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movie. And yeah, so trying
to trying to make it all clear to

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the folks and keep them up on
what's going on perfect well. As always,

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you always teach us Latin wad present
and all, thanks for as always.

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Investment advisory service is offered through Trek
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00:11:41.799 --> 00:11:43.639
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