I think we need to understand, Okay, where have we been, where
are we today? Where are we going? What worked yesterday is not necessarily
going to be working today, you know. But we've been looking at the
big fang stocks and so you know, there's been this saying that there is
no alternative to like these seven or eight different stocks that just continue to lead
everything. You're listening to Carrie Lets's Financial Survival Network, where you get valuable
information you just can't find anywhere else to thrive in today's trying times. You
need the Financial Survival Network now more than ever. Go to Financial Survival and
Network dot com and get your free newsletter in gift Financial Survival Network now more
than ever, and welcome. This is Financial Survival Network. I'm your host,
Carry Lets. Well, we got job numbers, conflicting job numbers that
came out last week. Does that mean that rates are going higher? And
we've got the PPI the CPI coming out this week. David Drzuski is with
us now to help us make sense of these numbers. David, what do
you make of the job numbers? What do you make of the upcoming CPI
and PPI numbers? Will great to be with you here, Kerry. You
know a couple things. So in my opinion, the latest jobs report,
you know, shows very conflicting information if you're looking at the difference between the
jolts and the household surveys. So just for your your viewers information. You
know, an ADP, this organization that just does pay rolls for all these
different organizations. When they come out and say, hey, there's five hundred
thousand new people that are working. What that's doing is it's interviewing different organizations
and that's saying, do you have new employees now that could be full time
employees, part time employees. As we look at the household survey, that's
actually just contacting a household. They may have two different jobs working part time
at different places, so they might count as two on the JOLT survey.
But when you call a household and they say, hey, I only I
have a work I'm working, there was only two hundred and nine thousand.
So I think that we're getting a slowing system here today, and we're transitioning
right now just to a slower cruising speed as we look at our economy right
now. But you know, worker hoarding is something that that happens here with
basic economies as we you know, find ourselves in new places. Right now,
you know, everyone's trying to wonder, hey, are we going to
be in another bull market that's just going to continue to go up forever.
I'm not personally of that perspective. I think the macro picture is very negative,
even though we're seeing you know, positive increases and certain parts of the
market if you will, here in the short term. But you know,
the last part of an economy to go is the employment portion, because no
one wants to fire anybody. And right now it's very difficult to find really
good labor and so you know, people are holding on. But this this
definitely shows a slowing for sure, uh in in specifically you know, getting
new workers and a lot of that's just gone through, you know, the
services side of the world kind of getting into CPI right now. Um.
You know, I think that we're we're actually probably you know, we're seeing
uh, you know, CPI numbers come down, PC numbers come down.
Um. I think that it's gonna you know, we're a long ways off
from from this two percent number though that the Fed really wants us to be
at. And uh and so I think that we're probably actually going to see
things, uh, you know, begin to become more inflationary, which I
understand I'm an outlier in that statement, but but there's a number of things
that are important for us to understand from from that thought process. One Milton
Freeman taught us that we're printing is not taking place, inflation is not occurring.
Well, we're seeing printing take place at rapid rates right now. Ten
trillion dollars just went into our our our our debt here in just less than
four years. We just committed to four trillion more over the next year and
a half. That's very inflationary. Uh. You know. Additionally, we're
looking at right now a lot of things that that are also inflationary. Just
understanding the supplying demand dynamics here, and of course, if you affect demand,
which is basically what the FEDS doing, which is what you know,
reducing our ability to pump more oil here in the United States, find new
minerals and copper and gold and silver and all those things that have just really
restrained things here. Those actually cause bubbles to be in our system and hiccups,
if you will, that that caused supplying demand factors and challenges. But
of course, if the demand continues to rise like we see and copper as
a result of you know, all this green energy stuff, demand rises,
but we can't explore and we can't keep up with this trajectory of the need.
Well, guess what's going to have with the price there's stewer dollar,
there's more dollars station, fewer ounces that are out there, the prices going
to go up. Now, we're also looking at reshoring different parts of our
economy. You know, we don't even make any antibiotics here in the United
States. You know, I'm a type one diabetic and I was told from
my pharmacists that we're low on insulin as a nation. Now it's pretty concerning
stuff, given the fact that type one diabetics can't live without insulin. And
so I think we're bringing a lot of these industries back here to the United
States, or we're friend shoring them. Uh, you know with other nations
that you know, can hopefully do things, you know, lower costs than
the United States. Good potentially, But all that transition, all this reshoring,
those are inflationary ideas. So if we see a different inflation, it
is definitely going to be going up, which adds to our thesis of we
believe that you know, Fed's going to be higher for longer. We are
not out of this this winter yet. I think we're actually more like about
to really be facing some of the real challenges as the numbers continue to unfold
ahead of us here, right, and you can't eventually have to pay the
piper. So you think inflation numbers are going to be up and interest rates?
Are you heading? Hired David? Is that the final conclusion? Yeah?
I do. I think I think inflation is going I mean there's five
things that move markets. We've got inflation, it's not under control. We
are seeing things come down, but it's going to rise again. We've got
interest rate environment. There's a lag effect that's taken place. We just raised
rates faster than ever before in history. I know your viewers know all about
this, but you know it takes twelve to eighteen months for those interest rates
to get priced in. You know, one year ago we're looking at less
than one percent of the five percent that the FED brought in. I mean,
this is not even close to being priced into our market here today.
And so I think that then we see, you know what the Fed is
ultimately done. Hey, they're radical, they're raising rates. Who knows what
power is ultimately going to do. I think this guy's actually a lot more
dubbish than he claims to be at this moment, and so we're seeing a
lot of hawkish speak, if you will, as he's talking about raising rates
more. Again. Hey, we'll find out what ends up happening. It
looks like it's priced in to occur here on July twenty fourth. But you
know, I think that we're more looking at a pause right now, and
we're not going to be looking at a pivot to a lower rate though.
That's the part that the market has dead wrong. And then that gets into
corporate earnings as the force factor that moves markets. I think that it's really
important for us to understand today that corporations have to borrow at a much higher
price today than they did before. Whether we're talking about the office of real
estate, which is very expensive and there's trillions of dollars coming due here over
the next eighteen months, or we're looking at just corporate America right now and
so many zombie companies today that require more cap all to run than they actually
produce. Those organizations are gonna have a very difficult time making it in this
new economy where you know, again it's it's it's more pricey to borrow,
and therefore their margins are going to be compressed. The whole reason why we
purchase stocks is because of the profitability or the margin that they're going to make.
I've seen margins coming down significantly as the consumers is getting tighter. Right
now, we're seeing just even the credit report that came out yesterday, UH
indicate that it was about a third of what expectations were as far as new
borrowing was supposed to go over a month. So you know, that is
the lowest level we saw since November of twenty twenty. So that's a big
deals we're seeing that begin to subside. And then the fifth thing is geopolitical
offense. So I don't care whether we're talking about COVID was the biggest geopolitical
event in the last you know, several decades or centuries. You know,
now we're looking at wars, we're looking at you know a number of challenges
here. You know with China now you know very likely leading a new bricks
currency, Brazil, Russia, any Chinese, Saudi Arabia, South Africa,
Iran, these organizations are these nations are looking to gather together and rival the
US dollar today and you know it's not good for the US dollar at all,
but yet we're seeing, you know, some strength today. So you
know, there's a lot of people that are looking at stuff right now and
they feel like, you know, maybe the climate inside the house feels pretty
good. But if we examine things a little closer, the windows are broken
up and all as we did was just crank up the heat. So we
can't continue to print and price this thing. We will eventually have to pay
the piper. We are looking at tremendous debt as a nation that ultimately leads
to taxes. Taxes are demand suppressor, and so again supply and demand are
are these really big factors that are going to be playing in here for our
future and we cannot get past basic economics. It's just a matter of time.
So basic economic is eventually going to catch up with us. That's right,
most anticipated recession in history. Okay, so what are you doing with
your portfolio your clients? Where are you like looking for opportunities or are you
just battening down the hatches and going into full scale defensive mode. You know,
it's a very important question. I think that how we answer that question,
you know, is also very important. So I think we need to
understand, Okay, where have we been, where are we today? Where
are we going? What worked yesterday is not necessarily going to be working today.
Um, you know, but we've been looking at the big fang stocks
and so you know, there's been this saying that there is no alternative to
like these seven or eight different stocks that just continue to lead everything. Well,
I think right now that there's it's not a tina, there is no
alternative. It's now a tea. There are reasonable alternatives at this point.
Um, you know, you're getting paid right now, at least at the
treasury for short term commitments and money. You know, you can get paid
five percent now, your personal inflation might be higher than five percents, so
you can still be going backwards on that. So it's not going to solve
all of our problems here in life. I think that the biggest place that
we need to be paying attention to as far as allocation goes, is,
yes, the risk return assets. We need to be very strategic in the
things that we're doing and I think that we can find out where we are
in cycles. I think that there's ways of playing this that are more defensive
and hedged. But I want to just draw specific attention to protected assets where
we would primarily be looking at bonds. You know, most people here today
are either trying to beat inflation that's going to be a risk on strategy,
welling to accept whatever the downside is, or they're going to be trying to
be protected today and you know they're going to be allocating to higher percentages of
things like bonds. Okay, big caution though, So bonds can lose money
in five different ways. The one that we've seen so significantly this year is
that with all these interest rate rises that we just discuss, there's a seesaw
fact between the value of bonds and in the interest rate environment that we find
ourselves in. So this is the reason why Selicon Valley Bank went out of
business in two days. They had a run on the bank. They didn't
have to mark to the market what their true value was of their assets.
So they have a billion dollars of treasuries. Well, actually it's thirty to
forty percent less than what you thought. You just didn't have to market to
the market because of some obscure law that happened in two thousand and eight and
two thousand nine with the Dodd Frank Act. Okay, well, there's a
number of things that are not priced in today that we're ultimately seen. But
these protected assets, in my opinion, all five of these areas and reasons
why bonds can lose money are on the table, and that's really concerning for
people that are trying to be protected today. They're trying to be more conservative,
they're trying to allay this next whatever comes, but they also need to
understand that the sixty forty portfolio last year had its worst year since O eight,
and the reason for that is because of the challenges that interest rates bring
to bonds. But could you imagine our bond market here today, just one
year ago, when junk bonds could trade at four percent interest, we could
lend to junk bonds less credit worthy organizations. How can you not make it
at four percent? But you're somehow going to make it at ten percent today,
It's just not going to happen. I think we're going to see tremendous
defaults. I think we're going to see Chapter eleven's very specifically, which are
not full bankruptcies, but bankruptcies that say, hey, debtors, we make
commitments to you, we can pay sixty percent of that just help us to
reduce it. We've got a viable business who get paid something versus nothing,
and so that's a real big concern. So where do we go for protected
assets today? I have this very simple idea that also sounds pretty obscure probably
the most listeners, and that is a growth oriented fixed indexenuity. I can
tell you right now, based upon math and science, I cannot prove more
specifically that there is a better time in history to own a growth oriented fix
indexinuity than the present moment that we have right now. And what's amazing is
that these this insurance industry is actually growing at a faster rate this year than
it has in any other previous year. And so you know, I'm somebody
that's fallowing the trend. I'm financially agnostic. I don't care the whole goal
here, just like the theme of year, So it's financial survival. You
know, this is a journey that we're trying to get someplace, and so
you know, how do we ride bowls? And tame bears. Well,
here's the deal. We've got to be able to play defense. When it's
time to put defense on the field. We all know how to play offense.
And I hope that you know, the market could go up ten percent
more, that'd be nice. It probably wouldn't change most people's retirement. We
get to drop a thirty forty fifty percent, which is what I believe is
coming here in the next quarters, then you know that will definitely change people's
retirement. Hey, and it could very well be a buying opportunity for the
so called value investor if fingo she has not to infect extinct at this point.
Well, David, interesting thing to chew over here. Your view,
your take on the market certainly not what you expect from a traditional financial planning
outfit. Hey, tell us, how do we find you? How do
we connect with you on the web? Again? Sure? So, my
website is myspg dot com. People can follow us up. There got a
lot of different things going on. We do a lot of educational events.
You know, we work with retirees and pre retirees. So this is all
about making plans for the next thirty plus years. Taxes are one of the
most important ways that we can be doing that planning today. Do not miss
out on the Tax Cuts and Jobs Act. We got three D ten forties
to be able to file three more years of tax returns to take advantage of
here it so, yes, we are not traditional. We actually work on
behalf of the families that we represent. We're here to try to help to
make sure that they can ride bulls, tame bears, know what accounts of
what amounts are going to be drawn from in order to create the most tax
opp and lend complants for the rest of their life. So all right,
so I find us We appreciate that. And if you've got a question for
David myself, kl at Kerry Lutz dot com is the email address, and
of course you can find a link to David's site right on our site,
Financial Survival Network dot com in the show notes to this interview. Just click
through. While you're there, sign up for your free newsletter. David always
a pleasure, Thanks for coming on. He appreciate you. Carry, thank
you, thanks for listening to carry Letts's Financial Survival Network your solution to today's
trying times. For the latest, go to Financial Survival Network dot com.
Financial survival Network now more than ever