The other thing, I thought that was pretty interesting that Larry said after the
last month's reading in the inflation and PPI numbers for the month of April.
Was it the way he saw another hike was as likely as a decrease.
Now, he was certainly in the minority opinion there, But I think in
its truest sense, if the Fed was doing its job just by the analytical
data, just by the numbers themselves. You are listening to Carrie Lutz's Financial
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Financial Survival Network now more than ever. Ed, Welcome, you are
watching and listening to the Financial Survival Network. I'm your host, Carrie Letz.
Well, Hey, got PPI numbers out? Inflation is lessening? Perhaps?
What does it all mean? What does it mean to rate cuts?
What does it mean to Jerome Powell? Ted Thatcher is with us now,
and Ted, it's great to have you back on the show. And Ted's
site is a brightlinkwealth dot com. Hey, you got a question for Ted
or myself, shoot me at email kl at Carrie LUTs dot com. So
happy days are here again, Ted. I think Jerome Powell was smiling I
think maybe behind the press meeting yesterday, coming away from the said meeting,
because I think he got the air cover that he wanted. The CPI came
in at break even, which was welcomed I think by the said after the
real spike that was seen the previous month in April, and then of course
this morning we had the PPI numbers come out. There was a large spike
in that last month, that being the April print as well, up half
a percent. Actually, of course this morning's reading was down negative two tenths
of a percent. And so ultimately those things are going hand in hand.
They're kind of singing the same tune. And as we've talked about Jerome Powell,
I think despite his desire to be in the driver's seat, hasn't been
because of the inflation rate very much. I think the inflation rate has been
the informant carry on FED policy in the last eighteen months, not the other
way around that like of course Jerome Powell would prefer, and going into election
season, these are the kind of numbers he's looking for to give him.
I think the air cover they're looking for. Who have an excuse to consider
a rate reduction sometime later this year. Well, you know, the late
great Alan Abelson, chief editor of Barons many years ago, once said,
the Fed is doing what it does best, which is re electing a president.
That's their intent here. They got to cut sooner rather than later,
right, Yeah. So, and the late great Charlie Munger would say,
if you show me your incentives, I'll show you your results. And I
think from a president's seat, if he can prop up the value of the
financial markets and financial assets, that creates an incentive. And I think that
Jerome Powell, i mean, for better or worse, does feel the political
pressure from DC to see some rate cut this year. I think a lot
of the smart money right now is betting on that happening sometime in September.
But I think the other side of this carry too, is just ultimately how
it affects the average American. Because we can see an inflation print that says,
hey, you know, we're not seeing additional price in reachys, But
that says nothing about the strain that we all feel, you know, in
our pocketbooks on a daily, weekly and monthly basis. Yeah, exactly,
So they couldn't be more detached from the average person's existence, the average person's
reality, right, absolutely, and they don't really care to find out,
do they. Well, the way I see it is, there's really been
this huge discrepancy between what's happening on Wall Street and what's happening on Main Street,
and in my belief, those two things can only be so far apart
for so long. You know. I think we have often thought about the
changes in the trends of the financial markets, and it's almost like nothing happens,
nothing happens, then everything happens all at once, and so we'll see,
you know, when those start to come back to earth together. But
at the end of the day, you know, costs aren't going down,
maybe they're not going up as much exactly, or maybe they're just lying and
nothing has changed, right Ted. Isn't that a possibility? I think that
there is. And maybe we talked about this the last time we were together,
but I've found it very interesting, and that is, you know what
Larry Summers has come out now a little bit virally or famously and said Larry,
of course, being the previous Perisury Secretary, published a really fascinating thread
on Twitter outlining the way he has tracked the way the CPI used to be
measured. As we know, the CPI and the way it has been calculated
has changed drastically over time. Now it allows for proxies. You know,
if the price of steak went up too much, we'll replace it with burger
meat, and price of burger meat went up too much, we'll replace it
with chicken. And I think now if the price of chicken goes up too
much, they might even be replace it with tofu or but spam, yeah,
yeah, spam, bam le will they to do? You know,
it's all right, you'd like eggs and milk, right, you can live
off of the spam. That's what they say, right. But the problem
is, of course, is you know that's not what we have sound out
how I would measure infleetion if I went to the grocery store as certainly not
if you would. And so it comes back to not only these proxies being
allowed, but also the way they have changed what even goes into this CPI.
Now the CPI does not even include the cost of borrowing, which,
as we both know, because of the amount of the average American has,
is a tremendous player in you know, what we experience on a month's month
basis, just in our standard of living. And so at least the way
Larry Summer has calculated it, he anticipated the peak CPI rate not at that
still notably high nine percent number, but by his measure, it was closer
to twenty percent, if not even potentially a little higher. And so you
know, when I see that, I just see, well, that squares
a lot more with the conversations I have with folks on a day to day
basis. Hey, h see, you know, like there's a lies,
damn lies, and then there's statistics, right, So well, I was
actually going to say that next, which was at the end of the day.
I think that a lot of these statistics, they can measure them in
a way where they can tell whatever story ultimately that they want. And I
think some of that has happened. You know. Obviously, I think it
is simply the case that prices didn't go up so much in the month of
May, but that doesn't mean that the average American is in a very different
situation than they were in April, and you know, we started to see
the cooling in the jobs market, but then we got another roaring jobs report,
and so again we could come back to another statistic that they use a
lot of different ways of calculating now, of course than they used to.
But I still come back to that tale of two cities. What's happening on
Wall Street versus what happening what's happening on Main Street? And how far and
how long those two can be actually stretched apart before we see something happen.
That's a good question. And because of this, if you talk to people
on the coastal areas, people in the financial sector, they think everything's fine.
And you talk to people in Florida, the economy is booming, they
think everything is fine. I don't think many of them really have a glimpse
of how precarious things really are here. It's ed. Yeah, it's almost
like there's at times that turn it up nose toward what they call the flyover
states. Right. I grew up in Indiana. There's nothing but cornfields for
miles and miles, and you know, those are the average hardworking American,
which I think too often has been overlooked. The last really couple decades,
and they're in a tough spot. And just to come back to that point,
do statistics the other thing, I thought that was pretty interesting that Larry
said after the last month's reading and the inflation and PPI numbers for the month
of April, was it the way he saw another hike was as likely as
a decrease. Now, he was certainly in the minority opinion there, But
I think in its truest sense, if the Fed was doing its job just
by the analytical data, just by the numbers themselves, that would really be
the conversation talking point, not the I think conversation that is a little bit
being driven by the political environment, like we discussed right, and you can
never discount the political when you're dealing with government policies. Of course, Hey,
so where does this lead us to? What can you do once you
realize what they're really up to here? Ted? I think it's a really
good question. Ultimately. I think when I look at the financial markets,
what I'm thinking is, Okay, well, how much risk can I afford
to take right now? My cash is paying me a very reasonable rate of
return now. And I say that simply to say when I think about,
you know, positions wise, I'm thinking, hey, I want to have
a good amount of safe money, mammally cash money market, maybe short term
seeds, just because the rates are really good right now. Now. I
will say, at the end of the day, the reason we've talked to
time and time again about Jerome Powell is because the lever that he has,
the sort of weight that he can put on the financial markets, is just
so heavy that it's impossible to ignore. And so because I think it is
quite likely that the battle in DC will win out as it typically does,
it gets what it wants, and I think that for better or worse,
it is reasonably likely we'll get some kind of decrease later this year. And
I'd be surprised if we didn't see a little bit more of a discrepancy even
between what's happening on Molla Street and Main Street. And so if there's a
chance to capitalize on that, and you see this some equities go up,
maybe specifically even small cap equities, there could be an opportunity there too,
all right, So basically your advice is keep your powder dry. Huh.
I think that you know there is a good measure to be taken where some
powder and some dry powder on the side makes some sense, Yes, sir,
okay, Hey, appreciate you coming on and sharing your insights with us.
Ted, I tend to agree with you greatly here. I think the
situation is much more precarious than anyone cares to think about. All the attention
is on, you know, criminal prosecutions of various public figures, the election,
the you know war is taking place. Really it's a distraction away from
what the real real world is happening. In the word real world tear ted.
Hey. So in any event, well, we'll touch base with you
probably in another month or so and see what the world is is showing us
and when the political situation onlines, which it will keep in November, then
we're going to know what's really happening. Everything is sugarcoated and everything is you
know raw rah. Well, the cheerleaders are out. So in any of
that, we find Ted at Brightlinkwealth dot com. Link is in the show
notes, questions comments kl at Carrie LUTs dot com. When you're at the
site Financial Survival Network dot com, make sure you sign up for your free
newsletter. Ted always a pleasure. Thanks for stopping by. Thank you sir,
look forward to next time. Thanks for listening to Carrie Letz's Financial Survival
Network, your solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network now more than ever contro