So a lot of the market right now is expecting the interest rates to draw.
Why, because this is what the Fed has done, at least over
the last forty years. We get into financial trouble, they dropped the interest
rate. The challenge is is that Powell recognizes the vulgar mistake that was made.
The vulgars thought that the inflation was going down. He went down with
it, and then ultimately inflation took off and went through the roof and we
had to you know, Jack the tenure treasury up to almost sixteen percent back
in September nineteen eighty one. And so there's a big mistake that he's certainly
trying to ignore. You are listening to Carrie Letz's Financial Survival Network, where
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now more than ever, And welcome you are watching and listening to the Financial
Survival Network. I'm your host, Carrie Lutz is eleven twelve, twenty three
and hey, lot's happening will this be a crash month? Will October be
the nail in the coffin of the US and global stock markets? I'm beginning
to think not every day that goes by is another day the crash hasn't occurred.
But one thing that's happening is inflation. And it just reminds me of
a commercial from McDonald's where this little kid goes, daddy, what's inflation and
he says, well, son, inflation is when the price of everything goes
up and your daddy's salary stays the same and actually could be going down.
So, hey, inflation. We get a CPI print today, and well,
David Strzuski is with us now, David, so what do we make
of the latest CPI number? Well, as far as the CPI goes,
I think there's a few things that we should really be paying attention to right
now. Number one is that the CPI is not necessarily reflective of what the
average individual is experiencing with their purchasing power. So the example you just gave
was great, Hey, daddy, why is everything getting so expensive? Because
I'm making the same amount and we've got some challenges here, and so you
know what we have right now? Is a challenge with printing and spending that
the government's doing. I believe the FED has their thesis completely backwards. They
believe that there's so much money chasing too few of items out there. That
was certainly true under COVID when we had all that gridlock there in the supply
chain. But today, the average family is putting more on the credit card
right now just to afford day to day life because we've not necessarily had you
know, responsible fiscal policy modeled for us by the government or even the large
financial institutions. We just spent put more on the card and on we go.
And so as we're looking at our CPI numbers right now, numbers came
in hotter than expected, and so I was expecting that that would occur.
I thought it would actually be a little bit higher. And the reason why
it didn't actually go up as high as I thought it would be was actually
because the US dollar is stronger this month than it was last month. And
actually, if we have a stronger dollar, that means that our dollars go
further, at least on the producer side and with more international type of exposure.
But we have you know, a higher read Another thing to note about
CPI is that we're not going back to pre twenty twenty prices. This means
increases from this moment forward. That spells big problems right now for the average
family who's making fifty to seventy five thousand dollars a year. You're trying to
figure out, you know, how to make ends meet a long time ago.
And now we're experiencing higher oil prices and you know, really as well,
over three hundred union shutdowns this year alone, which is ultimately going to
you know, be resulting in higher prices. Why because the pricing power of
these companies has to raise the price to the consumer if they have to pay
more per hour, bigger benefits, less work hours, whatever the situation might
be. But there are workers striking all over the place because they do not
have enough pricing power. So I think that the CPI is going to continue
to go up. We've seen it actually since June. It started ticking back
up. July it was up, August was up, Septembers now up.
And so that's called a trend. And so when we see one happen,
it's not necessarily a trend. Four consecutive that would be a trend that's developed
in now. They will also say that, you know, when you you
know, get out at energy and food prices, you know that that came
down point one percent this last year or sorry, this last month, if
the end, and so exactly. And I again, they manipulate these figures
and they don't necessarily reflect the average person's personal CPI. What are they actually
spending on. No one's buying a house every month as an example. But
housing prices are the reason why you know the CPI is rising because you know,
it's never been more expensive to own a house. So anyway, this
is just new inflation that's that's being added because of the print and spend economics
that President Biden has has ultimately been authorizing and Congress has been allowing. And
you know, we find ourselves at a really weird place here today, Carrie,
which might we might go into, you know, talking about, you
know, what the Fed might do next, but also the fact that you
know, the House is in disarray, and we've got to November fifteenth to
you know, to not be on this you know, punted time frame for
the government shut down. We got to pass twelve budgets. We've got to
get a new Speaker of the House. And oh, by the way,
there's impeachment proceedings against President Biden that are going on that look quite nefigurious.
So you know, there's a lot that's that's taking place right now, and
I think that we're going to see a lot change here in the next forty
five days. Isn't that his son's name nefarious? I think that might be
his middle name, Hunter Nefarius Biden to have that, right, Yeah,
I think that might be right. All right, So most protected man in
the world, really, I mean, this guy's gotten away with so much.
I'll go back to Winston Churchill. He said God looks after children drunks
in the United States of America. Hey, well, and said, your
lips to God's ears. As long as he's still looking after us right now,
I need him, so I needed With what's going on, I think
he might have even given up on us. But hey, let's not get
religious here. There's enough economic things to make your head spin. Numbers coming
up, and what you're expecting here, David, Okay, Well, so
what I'm expecting next is that you know, the feed is going to be
meeting here again. So we've had eleven rate hikes. You know, are
they going to go up a quarter point more? I don't think so.
You know, the five point five you know, increases that they've done haven't
necessarily, you know, brought inflation down yet. And I believe that it's
actually the case could be made that we've actually lost the inflation battle. And
by the way, we didn't even get PCEE, you know, the Fed's
favorite indicator, didn't even get below four yet. You know, we're running
out of time for this lag effect to kick in. And it's a big
problem because Powell was eighteen months late essentially in acting on this inflation. Hey,
it's transitory, et cetera, et cetera. So I think that he's
had it wrong the whole time. And his biggest mistake is that he hasn't
even talked to Congress about their deficit spending and you know, and said to
them, you guys, you can't keep doing this. It's it's counterintuitive to
what I'm trying to do. So a lot of the market right now is
expecting the interest rates to draw why, because this is what the Fed has
done at least over the last forty years. We get into financial trouble,
they dropped the interest rate. The challenge is is that Powell recognizes the Vulcar
mistake that was made. You know, they Vulcars thought that, you know,
the inflation was going down. He went down with it, and then
ultimately inflation took off and went through the roof and we had to you know,
jack the tenure treasury up to almost sixteen percent back in September nineteen eighty
one. And so there's a big mistake that he's certainly trying to ignore.
And I don't think that he's going to move on further rate increases until,
you know, until we really see a trend developed. But you know,
we were supposed to be an easing already, Carrie, it was supposed to
happen back in July. So I listen, bring the higher for longer revelation.
Yeah, where's the Powell pivot when you need it? Yeah, there's
no more Powell pivot right now. That Powell pivot would be only as a
result of significant job losses, which if you can just give me two seconds
on that. I have some stats that I don't think many people are aware
of. One of those things is that if you just look at the raw
data and I don't have it in front of me right here, but you
can look this up if we don't use the seasonally adjust jobs numbers that just
came out, but we just look at the raw numbers. Do you know
that we lost over eight hundred thousand jobs just this last month. That was
the highest amount of losses that we had since April twenty twenty. April twenty
twenty was the middle of COVID, That's what all these job losses were occurring.
And so you know, so here we are with eight hundred thousand it's
like eight sixty maybe thousand losses, and then we had you know, one
point one million gains, but most of those were part time work. This
is people taking second or maybe even third jobs. That's not healthy a healthy
economy. It's also a lot easier to take a job than it is to
create a job. So if you're letting go of all these employees, I'm
telling you right now, we are not in a position as a nation just
say, man, this is a healthy place. We're going to see this
bull really come back here with strength. People are taking those second and third
jobs that they really don't want. I mean, no one wants to work
a second or third, but they're going to because they need to have for
their life. They don't want to foreclose their house, et cetera. So
the system's getting repriced right now with this, this this big credit change,
with interest rates raising and yet to David, you know, the real estate
market continuing, prices going up in most markets across the country, inventory being
at an all time low. Obviously, many of you in there are locked
into your three percent mortgages. Like imagine that a mortgage becomes an asset and
a millstone around your neck. So interesting. You know, we sit at
opposite sides of the table for a bank, you know, our liability,
the mortgage is their asset. That's it. Yeah, And so in twenty
twenty, twenty twenty one, fifty percent of homeowners in America refinanced at three
percent rates. Well, those three percent rates are far below what inflation is
running at right now and what you should be getting for longer term thirty year
investments of capital. I mean, we just saw the thirty year you know,
hit five percent, sixteen year high this last week, and so you
know, this is not good for the banks. Additionally, there's not a
lot of new money going into the banks right now. So not only do
I personally anticipate a recession that's going to begin, you know, probably first
maybe second quarter next year, but I'm also expecting that we're going to see
this simultaneously happen with a financial crisis in banking. Now, recessions come and
go, financial crisises, these are bigger shifts, and it really comes down
to the money supply and how this all works. But the banks can't compete
with the ten year treasury or with the Treasury in general. Why because the
Treasury is paying higher than point zero one to nothing. They ensure more than
two hundred and fifty thousand that a bank insurres. They ensure an indefinite amount
of money. The banks are just money's getting sucked out, and they've been
leveraging up ten to one. And so this is where I'm concerned. You
know, you're down in Florida and everything's still going up in the real estate
market. I'm in Washington State, where the real estate market was so hot.
I mean we literally led the nation, I believe through twenty and nineteen
as far as where I specifically live lived. But right right now we're seeing
a stalled out, you know, real estate market. I'm looking at houses
that are sitting there there in that one hundred days now, and the only
people that can really borrow are those who don't need to borrow. You know,
you got plenty of cash to maybe even buy it in cash, and
the banks are being just real picky eaters right now. I also talked to
by Bank of America loan guy here the other day and he said an average
rate that he was getting for his clients was better than eight percent, a
little bit higher than eight percent. And I said, how many out of
ten that you believe could qualify or should qualify are actually getting their mortgages?
He said, seven are probably not getting their mortgages. Only three or thirty
percent of applicants that he was specifically working with or getting mortgages today. So
even if you wanted about, it's really challenging to do. So this is
not a great moment in that. But real estate's a lagging indicator. It's
a slower mover because you know, it takes time to get a house to
market, it takes time people to find, it takes time to the finance,
et cetera. So it's a it takes a minute for that one to
show up. Yeah, the only point I'd make is the fact is the
migration which is fed the demand in the South. And we're not just talking
Florida, We're talking Texas, We're talking our Mississippian Georgia, the Carolina Tennessee,
all these Tennessee continue. Yeah, nobody really moves to Kentucky unless they
like bourbon a lot. But seriously, those people who are selling in the
in the failing states and cities don't care about the rate. They're willing to
pay eight percent mortgage rates to get out of Dodge. That's what's different than
any other market we've ever seen. So assuming they can call they got good
credit, you know, they sold their home. They're getting out of Dodge.
That's what's feeding the demand here. And honestly, David, I don't
see anything that's going to stop that trend unless these failed cities and states do
little things like prosecute to shoplifters and prosecute to criminals and have crackdowns. Right
I thought that's what our system was supposed to be doing. Anyway, right
now, we were this nation of rural law, and that's why we were
the helping stem. We have it own wusiness with you got it all wrong.
The criminals are victims, okay, and we need to make sure that
their needs are met. You know, So the criminals need to be coddled
and they need to be encouraged to continue their criminal pursuits. And that's exactly
the policies. And then they can't figure out why people are leaving, why
downtown San Francisco is a ghost city. You know what was encouraging David There
was just a law past that, uh that the erstwhile moronic governor of the
of California I won't I won't mention his name signed which forces people, uh
who are homeless or on drugs to either get treatment or go to jail.
Okay. So yeah, I think that we're there's a huge mental health pandemic
that's taking place right now, whether we're talking to oh wow, you know,
people that are confused about other areas or other things. We've got setting
all touring over our border right now, very powerful stuff. And so go
to rehab or go to jail. I mean, that's that's a you know,
we need to probably make ultimatums like that on some level. But at
the same time, how does that actually benefit somebody. I think there might
be some better approaches here in the twenty first century how to get I take
it to some of this. We need to treat these things for what they
are, mental health, crisis, addiction, whatever it is, whether it's
alcohol, drugs or whatever is that's right, is a mental health issue,
not a criminal issue. Okay, becomes criminal when you steal this support your
habit. But were they to treat it that way, that would mean the
price of illicit drugs would go way way down, and it would kill the
profit in the market. And I'm convinced the powers that beat don't want that
under any circumstances. David, Well, the other thing is that you know
Newsstem's got some law where you can steal up to one thousand dollars per occurrence.
Go do it several times per day. We're not even going to charge
you. So we're encouraging people right now with how we write the law I
just signed last night, you know the little deal outside the grocery store.
Washington State's done some weird stuff as well. We no longer allow our police
officers to pursue people that they've turned on the lights that pull over after a
mile they got to let them go. We're literally encouraging people, Well,
hey, just don't pull over and you won't get a ticket. Or if
you've got drugs in the car, you're doing whatever, just don't even don't
even do it. Ignore them. Yeah, have a card shop. How
is that going to help out? Have a car chase? Exactly? That's
called life imitating cops. Well, we got to let it go at that.
If you've got a question, Comma David or myself. The email address
is Kitty l at Kerrie Lutz dot com. David, tell us your website
where we find you. Link will be in the show notes of this interview
on Financial Survival Network dot com. Yeah, my organizations called Sound Planning Group
MYSPG dot com is is our website. We've got a lot of great resources
up there. I've got classes and different things that I teach about out of
the line of portfolio today given where we are right now, some of the
things we just discussed. But Carrie, it's always a pleasure to be with
you here and you know, looking forward to doing it again in the future.
Oh yeah, we'll probably talk to you next month when more numbers come
out and more depression sets in Hey, if we can manage to get through
October without a crash, yeah, I think we're doing pretty good. It
would be uh yeah, I mean, I think if we can get through
November fifteenth, which is when that you know, we've got to have a
House speaker, we got to get stuff passed or the government shuts down.
I think that's the big one. And you know, Moody's is now looking
at downgrading US as a nation. So those are my big you know,
kind of wave points here coming up in the next thirty days or so.
All right, Matt, Hey, be well, thanks a lot, all
right, you too, take care. Thanks for listening to carry Letz's Financial
Survival Network, your solution to today's trying times. For the latest, go
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