Another edition of the Chicks on the Right podcast where we invite our good friend
and sponsor of the show, Zach Abraham, chief investment officer at Bulwart Capital
Management, to come in and weigh in on some important financial issues of the
day. And Wow, as we record this podcast today, there's a lot
of stuff going on, and by the time we get done with this recording,
the we got to talk first of all about Jerome Powell earlier this week
and interest rates. You know, this is a personal issue for me.
I'm going to be doing a mortgage later this year. You promised me,
Zach, the interest rates were going to come down. And then we got
Powell coming out and saying, hold everything, what are they coming down or
what? Oh? Well, yeah, so that's not that's not really what
he said. So what he said was he's not hiking at this meeting.
But most importantly what he said is he still expected to cut three times times
this year. Three times okay, so which would probably correlate. And it's
not it's no exact science because the way they get to a thirty year mortgage
rate is pretty complicated. But I think in your mind you can sit there
and go if they cut three times, which is seventy five basis points.
So that would take the Fed funds rate from five and a half to four
seven five. I would think that that would drop a thirty year mortgage somewhere
between one percent and one and a half percent. That's fine, that's fine.
Yeah, yeah, Well, hey, if we're sub six, right,
that's it feels painful because we came from you know, two seven five
is what my house is totally, and I just sold it and so we're
going to be eating at a larger interest rate as well. As a matter
of fact, I think we just took an offer on Monday. So but
but he so he promised the three rate cuts. But in and of itself,
that is really historic, okay, because he sat there and said we're
going to get rid of inflation over time, and that we've made a lot
of progress on inflation. Okay, Well, here's the deal. Inflation has
been flat or up for the last eight months. It's been up the last
three months. How that qualifies as making progress, I don't know. But
remember, I remember we were talking to you guys about the fact that we
were expecting economic indicators to pick up at the beginning of the year because the
stock market rallied so hard it's pumping money into the system, and then we
think the FED is going to be forced to cut to keep the game going
this year, and so they are going to be cutting rates into an accelerating
inflationary picture and an accelerating economy because of the inflationary picture. And this really
bring I'm not test saying that people should count on this, but this is
bringing back the scenario that we were afraid of, which is I'm not worried
about a crash right now. What I'm worried about is a skyrocketing stock market.
Right now, You're not worried about it because the stock market, so
it reached forty k earlier in the week and that so that's real. That's
how that happened. And then so when is the crash going to happen?
Well, who knows? So right now, it basically is I think the
easiest way to look at the economy right now is that there is a hole
in the bathtub. Okay, so we've talked about this before. There's water
getting out all over the floor, but you've got a really high flow faucet
and they just keep cranking that bad boy up. So the water level stay
in pat right. So everybody's like, everything's fine. It's a great analogy.
Yeah, you know, so we came up with that because they never
fixed any problems. The answer is just permanently, right, So we're not
going to patch up the bathtub or it's going to get a higher flul foster.
Right. So, and that's literally what we're doing. And so you're
going to be cutting rates into an environment where you've got three point eight percent
unemployment, which is full employment, you've got supposedly you've got rising inflation,
you've got houses at or record in affordability, and you have stock markets approaching
thirty times earnings and hitting new record hives. And you're going to cut rates
into that environment. And people go, why are you afraid of a stock
market going parabolic? Why are you afraid of a stock market? Because whatever
shoots up like that crashes on the other side time in the past, right,
And so that's a real threat. But but hey, this is where
risk management comes in because on the not on the more sanguine side of it,
if you're not an idiot and you're not getting too exposed to risk,
there's going to be a lot of money you made over the next year to
year and a half to two years. And it's not for the right reasons.
But they're pumping so much money into this system right now, and now
they're going to cut rates on top of it. It's it's really hard to
imagine a scenario where anything goes down. Yeah, that's I don't like any
of the things that you just said. I have a super serious question for
you, So, Jerome Power, do you think that he looks like he
just like was told by his kid that his kid wants to be like a
professional artist or a hamster dealer or something, because his face always looks like
he's always disappointed, you know, Is it just me? Yeah? No,
I think that I think that he is. No, he's he seemed
especially like that, honestly in the last few years. And I think I
think that the reason for it is, and this is kind of us reading
the tea leaves, but he's a private equity guy, so he came from
private equity, and private equity is getting killed right now. And because you
know, private equity is not the stock market. It like people actually have
to go in and spend hard dollars on those companies, right, some interest
rates really matter, and so I think he's fighting internal wars. He does,
though he seems frustrated. He's very frustrated. Yeah, he's really frustrated.
I think he's really frustrated by the fact that inflation isn't further down considering
what they've done on the interest rate side of it. As we all are.
We're all we were screaming into the computer last year, you know,
going or not the computer but the microphones in the show and just saying you
hear my dog behind me. Your dog is frustrated. Yeah, she's ticked.
Well, she's not a Biden fan. Yeah, no, dogs are
No dogs are Biden fans. She hates she hates the Fed. Right,
it is getting crazy out there, and it's I think the thing that's really
scary about this environment is it's going to seem really exciting, it's going to
suck a lot of people in, but it's it sets up a really nasty
situation. So well, and this is kind of stuff, yeah, right,
exactly, This is the kind of stuff that we can always count on
you to break down for us. And you do this on the regular for
people who listen into your own show. How can people find it yeah,
so just Google Know Your Risk radio podcast. We do a daily fifteen to
twenty five minute summation of everything important to happen in the economy of the markets,
and then we do a We do a one hour radio show every week,
and then we do an interview that this week is really interesting. We're
interviewing a really well known, really sharp young guy that he's a short seller,
so he bets against what he thinks are fraudyle in companies, and he's
got a really good track record and he's releasing his new short vet and so
we're gonna we're gonna have him on the show and he's gonna walk us through
it. So awesome. Cool. You will see again in a couple of
weeks. All right, ladies, wish we wish Hollow Dog the best hope
she can. Thanks for recovery and see you next week. Thank you.
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