As crazy as it sounds like. I think inflation is going to get under
control. My problem is it going to get under control because they pushed it
too far and they broke the economy and pushed us into this recession which now
people don't believe is going to happen anymore. It's still going to happen.
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ever, And welcome you are listening to watching the Financial Survival Network. I'm
your host, Carrie Letts. Well, is the market getting too complacent?
Did in fact the economists blow it and we're not going to have a recession?
Imagine if they threw a recession and nobody came. Well, James luck
is with us now and James, great to have you back on. So
even the bears are throwing in the towel, Now, what are you seeing?
Well, uh, you know, just on that kind of point,
whether whether this recession is real or not. Um, you know, we'll
see. I'm always kind of looking at what you know, the professionals are
saying that sort of thing. And like I was saying, the famous Morgan
analyst named Mike Wilson, he's a huge bear market analyst, and he was
wrong from the SMP thirty five hundred, forty four hundred and finally kind of
came out and apologized and said, yeah, I got it wrong. You
know, maybe maybe the market isn't as bearish as I had thought. Well,
when the most bearish guy in a room turns bullish, does that mean
the markets do for a correction? Probably? Right, that means, you
know, maybe it's time to get short a little bit, or maybe it's
time to you know, no one, no one ever, you know they
from the trading enage, right, no one ever goes poor ring in the
cash register, right, So if you maybe take some money off the table.
But some of the other indications we saw last year, there were a
lot of people going into T bills. You saw a lot of that kind
of into that safety and now all of a sudden, no one cares about
T bills. You're seeing people coming out of T bills going into these tech
stocks, you know, as the market's going up into the hires. It's
almost like it's it's a Hollywood movie script, right, you can't you can't
do this any better. So between strategists saying maybe I was wrong that we're
going up and people exiting safe money and going into tech stocks and AI can
solve, you know, solve everything. Like I said, it's it's maybe
it's a little maybe it's an indication to book some games. That's kind of
where I'm getting that. You know, you don't think, James, you
don't think that I can solve all our problems. I think AI is going
to help our society. I don't know how yet, you know, but
you know it's going to help us in ways that we can't imagine yet.
Is it going to solve all all problems? I am very confident that it
will not do that, you know, and it needs to be integrated into
society and figured out how it can help, you know, without without the
terminator coming in. Right, That's that's the always fear alight. So what
are we going to say? You think that they're they're actually going to be
right, but they're just going to be right at the wrong time. Um
well, I mean in the short run, no one really knows what AI
is going to do right, and in the long run it's it's going to
be very profitable for a lot of people. So the thing is, is
it going to be profitable for everyone? You know? Who knows? You
know, can Nvidia keep this rally going? You know, at some point
reality has to set in, an AI has to actually do something right.
You know, Like I said, I when I say taking money off the
table, Like it's not like I'm sitting here saying there's a crash coming.
But you know, you could easily see a ten to fifteen percent correction in
the market and it'll take a lot of people by surprise. You know,
it always does, it always does. What about what about with rates where
they are here? You know, you got mortgage rates over seven percent for
a thirty year ye fixed mortgage, and you've got the Fed funds or trading
between five and a quarter and five and a half, and it just doesn't
seem like anybody cares. Right, And here's the thing, Right, we
can sit here and you know, talk about reality until we're blow in the
face. Right, rates Fed funds over five war in Europe, by the
way, people just forget about that. You know, there's a constant threat
of inflation. I mean, you know, we were just talking about how
inflation was unbeatable nine months ago, and now we're talking about you start hearing
about deflation. You know, we beat everything in nine months and that's it.
Um, So you know, we can talk about it. But I
don't know that that the everyday investor is really kind of believing that. And
that's you know, you hate to say it, but it's one of those
things. It's like, you want to know what the market's doing. Don't
follow the smart money, follow the dumb money, right right, that's that's
going to bounce it in their face kind of thing. But uh, you
know, nine months to go from hyperinflation to deflation seems awfully quick, right
to me. I don't I don't know that inflation is gone from that point
of view, you know, I don't believe it. But yeah, but
you know, perception is reality to these people until it's not right, right,
That's what I mean. That's why I said I think a lot of
a lot of people are going to get get kind of bitten in the cheek
meat a little bit here when when there's some sort of bounce back and it's
mony. I was, you know a lot of people in trading and in
markets like to talk about sports analogies and things like that. I was talking
with someone who said, you know, recently, the S and P five
hundred is more like the NBA than Major League Baseball. Right. If you
think of the NBA, you have you know, one or two stars,
and that carries a team to victory. Whereas in baseball, you know,
if you have one star, he only comes up to plate four times a
game or pitches every five games, right, so you can't rely on one
star. But it seems the S and P five hundred is a lot like
the NBA. Right. We have these kind of magnificent seven stocks and video
Facebook's Tesla, and right now that seems to be working. Right. You
hand the ball to your stars and off they go, and they pull everything
along with it. You know, but at some point someone's going to get
a torn acl or reality is going to comment or some other well balanced they
get arrested for drugs, dw lie or some heinous crime. Right, more
likely, you know than injuries, it seems these days. That's that's all
too true. But you know that's that's what we're saying, is that you
know right now, it's it's it's this like superstar and you've got to be
in this superstar to make any you know, real money, so to speak.
And you know, there's lots of opportunity out there. It doesn't have
to be you know, Facebook and Tesla and Nvidia, and don't get me
wrong, there's opportunity there. It's just now you're talking about a lot of
a lot of volatility. There's just not a lot of diversification, you know
anymore that that I'm not really I'm not really seeing that. So now,
are we going to get inflation under control? Probably? Um? Is the
Fed going to stop hiking rates? Probably not, whether inflation gets in control
or not. And you know, you've got international concerns going on. You
know, we've got the verted yield curve. I mean that will uninvert at
some point, and you know, short term rates are going to come down
a lot, right, and long term rates are going to come down too,
and then people are going to be you know, wishing they had,
you know, locked in better interest rates and you know, higher looking dividend
things rather than kind of the Magnificent seven. Now they can't all be in
one basket. So you really think inflation is over it's done. It's certainly
not done. But my fear is more the other way around. I think
it's going to be done because the Fed's going to break everything. I just
gosh, I hope I'm wrong, right, But they just have such a
track record of you know, pushing it until it's over the limit, or
not pushing it enough. Right. Yeah, So as crazy as it sounds
like, I think inflation is going to get under control, my problem is
is it going to get under control because they pushed it too far and they
broke the economy and pushed us into this recession which now people don't believe is
going to happen anymore. It's still going to happen. You can't keep you
know, this kind of rate up in the market and you know, not
have real returns. At some point, like I said, ay, it's
going to have to produce something. The economy is going to have to produce
something, and then you know, then you'll see which of the stock you're
going to hold their own? All right, So can AI pull a rabbit
out of the hat? It? Can I wouldn't bet on it, but
but it definitely can. You know, some of the AI world is going
to be, you know, extremely profitable. And I said, I don't
even I don't it's hard for me to even judge what it's going to do,
right, what it's going to automate. I mean, there's all kinds
of crazy thoughts. You know, everyone always talks about self driving cars and
things like that. We're still thinking very classically, well, the car is
gonna drive itself and you're sitting behind a steering wheel, Well it might be
that. Eventually, a self driving car means it's it's an office, right,
and you're sitting there doing work, right, and so there's more productive
you know, productivity going on. Ye, So you know, and that's
that's even a crazy like that, that's like the Jetsons, you know what
I mean, Like we don't really even know what what the opportunities are there.
So Kenna pull a rabbit out of the house. Pat Sure, I'm
not sure it's going to happen in the next nine months or you know,
by the end of twenty twenty four, and you know, and that's when
that's why I said, like I there's nothing wrong with with locking in some
some gains right up here near the top. You know that doesn't mean you
have to unload it back to truck up. But you know, we've had
a really good run. It might be an idea to say, you know,
do I need to double down? I don't know that. You know
that doesn't make sense from its rating point of view either. Now, so
yeah, well, like you said, you never go broke taking a profit
on Wall Street, right, That's right? Right? So, and you
know the other thing is that the numbers that keep coming out, uh,
you know, you got the manufacturing uh Purchasing Managers Index that's being that's it
every few weeks, it's being released tomorrow. All the indications are always of
slowing purchasing all right. Now, granted, some of the numbers recently have
been better than expected, but even the better than expected numbers are still on
the slowing purchasing side, right, So, you know that's telling us that
companies aren't expecting growth in the future. So how we're going to maintain this,
you know, market rally from thirty five hundred to forty five hundred,
forty five hundred, fifty five hundred with good questions, companies slowing down,
Like, all right, does that mean we're going back to thirty five hundred?
Well, not necessarily, but I find it hard to believe that,
you know, we're gonna be able to, you know, sustain this for
that length of time, especially if the FED keeps hammering, you know,
with interest rates. It makes everything that's a headwind on everything. How much
longer do you think the Fed's gonna keep raising for They're gonna I think they're
gonna raise at least another time, and like they even openly said that,
it's just we're gonna keep raising until we see inflation and essentially the economy in
a spot where it's going to stay that way for a length of time.
So you know, I see at least another quarter point raise and we'll see
from there. You know, it's it's good. Where are like twenty two
year high an interest rates? Like yeah, and it's never they've never been
raised this quickly before, either have That's that's the problem. We don't We
don't know, you know, if we've already broken our back because of the
quickness that we've done it, that's that's the real problem. And you unwinding
it just as quickly, which is certainly not good. But that's not going
to fix the problem that fast either. You know, these things take time.
Okay, I'll buy it all right, So what is Joe six pack
supposed to do here in the media. Well, so everything's waiting to melt
down on them. Yeah, you know, it kind of depends on where
you are in your phase in life, right. A lot of the people
that we're dealing with a couple of years away from retirement. The timing is
super critical. So you know, focusing on interest and dividends and income is
a much more important thing, which means, hey, whether the stock market
goes up or down, you don't want to have to worry about it.
That's more of our bread and butter. But if you have a little more
time in there, then there's nothing wrong with, like I said, taking
some off the table and having some ammunition, having some more you know,
bullets in the chamber to take advantage of corrections. The rich get richer because
they have cash on the sidelines to to grab when things go down, right,
right, you know, So from that medium range point of you,
if you got the time, that's why I said, lock in some game,
ring the catch register, and that doesn't mean, you need to close
your positions down and you know, see what happens over the next six eight
months. You know, your worst case scenario is you you locked in some
gains. Um, right, it may end up being a good trade.
All right, I'll buy it. So hey, uh so you know,
basically act, act while there's still time, don't wait. You know,
Bernard Baruk I'm always reminded, said, uh, you know, basically,
uh I got rich letting the other guy make the last ten percent, right,
yes, yeah, yeah, you don't need to buy the bottom and
you don't need to sell the top. Okay, So we got that out
of the way. So what do we do here? I mean, we
want to sell and sell sell in July and I hope we don't die.
Is that what to do? Is um? Yeah, yeah, well almost
August right. Yeah. Like I said, I think there's a lot of
complacency right now because of the summer. People aren't really looking at things hedging,
you know, like I said, if I'm looking at it, i'd
say in the next you know, I don't know, maybe as a few
as three months, then maybe a little short, but six to nine months,
you know, you could easily see the stock market back down under the
SMP five hung back under four thousand, and it wouldn't even you know,
it wouldn't even blink an eye to do that. So that's what I was
saying, is like, if you can, if you've done some things,
things that worked for you throughout the year, right we have you know,
big down the last year, If you've you know, move a little bit
into cash. You know these money markets are paying four or five percent,
there's nothing wrong with collecting some interest, right because then the markets, if
the markets do drop, right now, you can get out of those things
because interest rates potentially you could either hold steady or maybe drop. We'll see
if the Fed's going to break it, right, and then you have a
reason to get out and then kind of back in cause now you're buying things
at a discount. Is there a trade out there that you could make that's
going to cover you if the FIT breaks it or if they don't break it?
Um? Yeah, I mean if you really think the Fed's going to
break it, then then you know you want to you want to be in
as much kind of fixed income and cash as possible, um could. You
will be generating all that interest while you know, interest rates are plumbering,
and then you know you could you could exit it or keep collecting the income.
Like I said, that depends on your phase in life a little bit.
But you know, there's nothing wrong at this point in life. There's
actually another like you know, it's it's almost sacrilegious to say, right,
Like, imagine investing in fixed income as a trade. Uh, there seems
to be opportunity there. You know, if you're getting a good interest rate,
if things don't fall mart or they just go sideways, it's not a
bad trade. And then if that we do have a recession, then you're
gonna be glad you had that. You know, all right, I'm willing
to buy it, all right, James tell us best place to find you
poollock dot com. Poollock dot com. P O L E L O c
K E great and the link is in the show notes this interview on Financial
Survival Network dot com. If you got a question for James myself, email
is kl at carylots dot com. Make sure when you go to the site
you sign up for the free newsletter. James. Always enlightening, always thought
provoking. We'll catch up with you again soon. Thanks Gary, Thanks for
listening to Carry Lutz's Financial Survival Network, your solution to today's trying times.
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