I don't think the bets can really raise a lot more. I mean,
the thought is that they're going to reverse, and I believe that one of
the things that's going to force their hand other than just demand destruction more Middle
Americans getting brushed by debt by an inflation that you and I talked about this
on your previous sure shows that that inflation is held at about twenty percent increase
over what it was three years ago. You were listening to Carrie Let's's Financial
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Financial Survival Network now more than ever. Ed. Welcome, you are
listening to watching the Financial Survival Network. I'm your host, Carrie Lets.
Well, hey, we're in the third week of January. Here we got
good news on the consumer sentiment front. Consumer sentiment has got up last couple
of months, is not enough to combat the rising credit card to higher foreclosures,
weaker earnings by banks. David Wright is with us now financial expert and
David's great to have you back on the show. So what are you making
of all these rosy numbers here on consumer sentiment and spending and such? Is
it too little, too late? Kerry? Thanks for having me back,
appreciate it, toys great to talk with you. I think that the numbers
are indicative of consumer habits. Did they like to spend money? And I
think people as long as they have room in their credit card balances to continue
to use their credit to feel happy about the fact fact that they've that the
inflation picture, at least on paper, looks like it's coming down in the
right direction. The stock market has certainly exhibited those behaviors of the belief that
they think the Feds are going to start reducing higher interest rates, which is
going to reduce strain on banks, reduce credit card debt down the road,
perhaps open up the housing market. So from the last report Herey University of
Michigan consider where sentiment increase was thirteen percent. People viewing their own personal situation
an improvement of thirteen percent, going from sixty nine point seven on the index
up to seventy eight point eight percent on the index. People's opinion of outlook
on near term business conditions up thirteen percent on that as well. They're reading
however, on people's outlook on longer term business conditions was a point below that
well, plus twelve percent. So not quite as bullish on the longer term
outlook, because let's get real, this is an election year and there's still
a lot of variables out there with what's going on in our world, all
right, So where does that leave us? Here? Is the economy expanding
lower registrates, is it going to make any difference or we kind of locked
in here? I think for right now, the economy is basically going to
stay at a stalemate right now, as long as the Feds stay higher for
longer, which they of course have given different signals. The problem is with
this federal reserve system. With every Fed president having their day to talk to
the press, they each have their own opinions on how they believe they're going
to vote as far as increases, decreases, or staying the satine throughout the
rest of the year. I believe personally with the data that I've read,
we've gone from a first it was three rate reductions, then the market started
baking in five to six rate reductions by the end of the year, and
now Carrie, just in the last few days, I'm starting to read news
about perhaps a hold, if not wait till June or even third quarter before
they would even begin to reduce rates. I even't heard somebody bostic, I
think it was the FED President Bostick mentioned that there might even be a rate
hike this year. There's so many mixed signals out there, and I think
the reality is we just have the things that the FEDS look for. Low
unemployment. We have very low unemployment right now that continues at three point seven
percent. We certainly have stabilized inflation. It's gone down from nine point one
all the way back down to I think the core CPI carried he was in
the mid threes three one to three five ish, three point five ish.
And I know the Fed their target mandate is two percent, so they're not
quite there yet. My guess is, with still six trillion dollars of cash
sitting out there waiting to be spent, either by consumers or by corporations and
pension funds, that there's still going to be some chance of a robust market.
But where will the Where's the Fed going to go? Are they going
to devote political like they have in the past. Are they going to help
the stock market out by lowering rates, which we believe would definitely help the
market continue to show a rise in the new year. Or do they basically
say, hey, if we'ren't five and a quarter to five and a half
percent on the federal funds rate and the stock market had a record year last
year, now, yes, it was propped up by these mag seven stocks,
why would we reduce rates right now? If everything's looking of better,
lower unemployment, stock market's doing well, Maybe the Fed just says, you
know what, if it ain't broke, don't fix it. We're going to
hold higher for longer, and we're going to wait and see if we can
create more demand destruction of the middle class. And the reality is there is
demand destruction going on right now with middle class as far as credit card borrowing
amounts spiking in the last order revolving credit up nineteen point five billion last order.
Foreclosure activity on houses increases From twenty twenty two we had three hundred and
twenty four thousand forclosures in twenty two. In twenty twenty three we had three
hundred and fifty seven thousand so that number has increased more people for closing going
out of their mortgages. So I don't know. You tell me, well,
if I knew that, I would give up my computer, here,
my keyboard for a crystal ball. But certainly it looks like well, I
remember the late great Alan Abelson, editor in chief of Barons, used to
say, the Federal Reserve is doing what it does best, and that's elect
thing a president. Right for the more aesthetical on you, Yet there you
go. I never quote, but yeah, yeah, I don't think the
bets can really raise a lot more. I mean, the talk is that
they're going to reverse, and I believe that one of the things that's going
to force their hand other than just demand destruction more middle Americans getting brushed by
debt by an inflation that you and I talked about this on your previous Sure
shows that that inflation is held at about twenty percent increase over what it was
three years ago. The rate of acceleration has declined, but certainly inflation has
held the twenty percent. So the question that I think the Feds are going
to have to ask themselves is staying higher for longer is going to rear its
uplove the head with banking in our country. I think the larger banks,
all their eargenings were public last week. I believe a lot of the ease
the biggest kneing Jpmorium Chase, and the Bank of America a lot of their
earnings. But that's understandable because they all had to pay this fbiic settlement check
for the bailout last year, so they all got hit with that syrtax.
But still, even despite that, these larger banks that are kind of too
big to fail banks not as worried about them, but their earnings were kind
of lackluster. Most of them were a little lower. I think the FEDS
are going to think about it. The four thousand loss regional banks that are
out there that can't really take a lot more squeeze on their net interest margins,
the difference between what they pay their depositors and what they make on their
own loans. I don't think the Feds can squeeze a lot more on interest
rate heights or holding higher for a lot longer. I think at some point
they want the American consumers belief in the financial system to remain there long term,
so I think I think we'll get our array reductions, but I think
it's going to be more towards the middle to late later part of the year.
But depending upon political pressures. You you just pointed one out, I
think we'll see. So they're just going to put it off for as long
as they possibly can hunt I think so. I think that's what they'll do.
Personally, there's too much I don't have my dot plot up here to
take a look at it, but there's enough difference of opinions from one side
to the other side of the FED that it's tough to to really decide which
way they're going to go with it. At this point, it's hard to
read owls which way he's going to go with it. But for one thing
for sure, Carrie, it's definitely a tightrope walk between making the right and
the wrong move. And I don't even know if they're is a right or
wrong move. You create artificial money and stimulus, it's tough to walk that
stuff back without having consequences. Yeah, once you released the inflation genie from
the bottle, it's yes, it's hard to get it back in and clearly
they've done that. So what about the thirty five trillion in debt that we've
accumulated with no end in sight. Yeah, you tell me. I mean,
we just keep kicking that can down the road. I think the estimates
are a trillion per year of interest just to service that debt. And you
know you can't. You can't continually spend six point five trillion and only bring
in four point four four point five trillion in revenues. Now, I will
say this obviously in their assessment of the Trump presidency and the debt that was
created during his administration, when you look closer at the numbers, I think
recently I've been hearing a lot about the trillion he created during his time in
office. But when you really keep behind those numbers, carry four trillion of
that was COVID relief, and you know, his hand was forced in that
we needed help. Money was printed. The other half of that came from
his tax cut corporate America from thirty five percent down to twenty one percent,
which you know generated a lot less tax revenue for the federal government. They
were already spending that money, so that created part of the deficit during the
Trump administration. The question is moving forward, Well, you know, I
guess I'll interview you. What do you think they're going to do? Yeah,
well, way that data. My gut feel is they'll put off the
cut for longer than the markets expecting because they got big basically rates, the
hot long term rates have come down. They've got enough leeway between the two
year treasury and the Fed funds rate, so there's no impetus there. So
I think they'll just let it go maybe another month or two, who knows,
but they'll let it go another month or two then expected, but eventually
they'll cut if they see the market weakening. I think they'll just start cutting.
And they could say, well, we haven't changed anything. We told
you we were going to cut. And their initial forecast is for three cuts.
I've seen people say six cuts. Like you said, who knows what
it's going to be. You're dealing with the Federal Reserve, and even though
they try to tell you what they're going to do, it never quite works
out the way they say it's going to right right, I think if you
look at this, if you look at the notes after each of the Federal
Reserve meetings, you wonder where the market bakes in these future rate cuts from
reading the notes, because it Powell uses language like it's likely we will do
this. However, we're not going to, you know, reduce rates unless
blah blah blah blah. So it's all in interpretation. And I think if
the market it's sense that there's any chance of something, they're already bacon in
the stimulus and roll in the dice, knowing that it's an all eleuction year,
like you said, and rolling with the fact that the studs will fall
right in line. And then the root in the fear of that is we
might be right back where we were ten to twelve months out. Maybe not,
but it could reignite inflation if they do that. Now, I'm not
trying to be Debbie Downer. It boys sounds like I am, but yeah,
I'm just trying to say that, you know, if they they reduce
rates, yes, it'll help fuel the market even further, but it may
also fuel the consumer consumer who spends money they don't have on things they don't
need, and that might reignite inflation again. So if you do, damned
if you don't. I think that's what it comes down to, no matter
how you cut it. But at some point I think it's inevitable. I
guess we're going to see what happens next. Take David, just tell us
where we find you, how we connect with you on the web. You
can find me a right financial group that's spelled with a W wrighd Financialgroup dot
com. If you'd like access to more information and resources, you can reach
us that way. My book Bonfire the Sanities now out since December the thirteenth,
Bonfirevisanities dot com, having some good information in there about how to make
sure you're protecting yourself, your purpose for your money, moving into your bread
in post retirement. Hears, all right, excellent, Well, we always
appreciate you coming on. I've got a question for David myself. Shoot me
an email kl at Carrie LUTs dot com. The link to david site is
in the show notes of this interview on Financial Survival Network dot com. While
you're there, sign up for your free newsletter David. Always a pleasure.
Thanks for coming on, Harry, it's a pleasure. Thanks so much.
Thanks for listening to Carrie Letz's Financial Survival Network, your solution to today's trying
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