And so we understand from at least an economic stampoid, or we should.
What this means for us is that either we're going to see significant increases in
taxation in this country. And I'm already anticipating that. You know, I
work with literally thousands of investors and retirees over the course of a year,
and I can't tell you the last time that I'm at a person that didn't
agree that taxes are going to be going up. So we know that that's
going to happen. You're listening to Carrie Let's Financial Survival Network, where you
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now more than ever, and welcome you are listening to watching the Financial Survival
Network. I'm yours carry Lutz. Today we get the long awaited GDP numbers,
two percent annualized to increase. Not so bad, maybe though maybe it
isn't as good as it seems. Maybe inflations higher than is acknowledged, and
maybe real economic growth is actually negative. Well, a good friend Matthew Johnson
is here to opine on the subject, and you find Matthew at Johnson with
an h wim dot com. And if you got a question for myself or
Matthew, shoot us an email kl at carry Lutz dot com. Matthew,
great to have you back. So, so we should all be popping the
champagne because annualized growth two percent, that's wonderful, right, we should be
celebrating, shouldn't we? Just not just yet, it's gonna be doing on
again. Thanks so much, Carrie. Sure, yeah, you know it's
optimistic. It's optimistic news. From the outside looking in, it sounds like,
gosh, it certainly beat the expectation of one point three percent. I
mean, how could you go wrong with a two percent GDP? But as
you said, I think that there's maybe a little bit of window addressing to
that, because when you really start to look at the numbers, you start
to realize that there's a lot of factors here that could be showing us kind
of a false positive. So we have to be somewhat I think, careful
of the numbers and what we're being told and what we think is actually happening.
You know, it's one of these things where we always have to address
what we're hearing with what the facts really are, and we have to unfortunately
do a lot of our own fact checking as individuals in today's society. You
know, I just think of the GDP number, it really isn't accurate because
it doesn't measure wealth. It incorporates debt into that number. So the more
debt you have, the faster the GDP goes up. You know, at
one time Bernie Madoff was a net positive to the GDP and we see how
that wound up. So the fact is that there's a lot more to the
number than meets the eye. I mean, look, when gasoline prices were
up, that lifted retail sales PG number. So, like you say,
you really got to look underneath the hood to really help you figure out what
exactly is going on. And mentioned earlier debt to GDP ratio. What's the
significance there, Well, I think it's very significant. In fact, I'm
very concerned with it, as most Americans should be, because if we look
at the debt to GDP ratio right now, carry we're in a position where
we are just under the debt to GDP ratios of World War Two. That
should be absolutely scary to us. And what does that mean to us?
Well, at number one, if we look at what spending has done,
you back in two thousand and twenty two, the debt of this country rose
by thirty five percent thirty five percent, and they're expecting that there could be
potentially another thirty to thirty five percent increase on top of that, just in
two and twenty three alone. Recently, I was reading an article from the
Peterson Foundation and they were suggesting that in the next ten years, if we
continue to stay on this trajectory that we're on right now as a nation,
we're going to be in a position where just to service the US debt alone,
just that debt service is going to be larger than all of Medicare and
all of national defense. I mean, think about it. Right now,
in two thousand and twenty three, we have service to this debt of over
four hundred and seventy five billion dollars. That's with a B. That is
a big number. And so we understand from at least an economic stampoid,
or we should what this means for us is that either we're going to see
significant increases in taxation in this country, and I'm already anticipating that. You
know, I work with literally thousands of investors and retirees over the course of
a year, and I can't tell you the last time that I met a
person that didn't agree that taxes are going to be going up. So we
know that that's going to happen. But we can't just see taxes go up
in order to fix this problem. We're also going to see or have to
see our government spend less and unfortunately carry I'm not optimistic. I don't know
about you, but I'm not optimistic that there's anyone in Washington that wants to
reduce spending. Well maybe a rampoll. Okay, well, I'm book they're
minority. But you know what they say, Thomas Jefferson said it to one
man with courage as a majority, right, could be let's hope, huh,
let's hope. Well, yeah, this situation the bleak. But I
think we've got the best best looking house in Baltimore. You know, the
rest of the world is so bad that the US looks good. Well,
and to say it a different way, we are the cleanest shirt in the
hamper. I get that, but we also want to be very cognizant of
today we are we are We're on the edge of the largest majority of human
beings in the United States today that are going to be retiring. I don't
know that it's absolutely precise, but they say, as of February of twenty
and twenty four, Carrier, we're going to have the peak of retirement from
the baby boover in generation. And we need to be thinking about that because
let's just put ourselves in their shoes. These are people that have spent the
last thirty plus years of their life and they've been on the accumulation stage.
Right. They've been saving, they've been working to save, they've been contributing
and compounding their money, and now they come to retirement, and they come
to retirement at an economic stage which is very uncertain. Right. We still
have inflation, we have the Federal Reserve that seems to be absolutely exacerbating the
defaults within banks. The FDIC just came out with a report that said where
they had only four problem banks on their watch list, now they have over
forty three banks on their watch list. They're coming to retirement during a stage
of life in which the majority of them do not have interests, they do
not have dividends. They are still stuck in this growth based investment mode because
that's what they've always been in. And you're asking a person that for the
last thirty years has done nothing but save to now start taking to start taking
withdrawals. That's a very scary time for them. This is something that's a
big transition for so many people. And the reason that we have to be
so sensitive to what's going on around us and how our money is invested,
where we're putting our money, and what our money is doing for us is
if we're the average retiree, we're still focused on, say, sitting in
growth based stocks that are paying us dividends, and all of a sudden,
the rope is being squeezed around the economic neck as the Feds are doing what
they're going to do and the government's continuing to spend more, and then that's
justifying a higher tax implication down the road. Think about what that's going to
do to potentially demonstate, just absolutely devastate the portfolios of this country. That's
a big concern for myself, that's a big concern for many Americans today.
Well, I have the solution. We got to get the old people to
spend more, you know, charge more on their credit cards. So it's
not what the country needs is a more flamboyant elderly class like myself. And
then we'll solve all the problems. We'll keep the be going, buy houses,
buy cars, you know, just go out there and spend. Don't
worry about leaving anything to your kids. Just leave them the leave them the
loan statements. Right there, you go, Lucian, Yeah, you know,
I found that older generations, and especially the generation you know, our
grandparents, they went through the Great Depression, right you you had a team
on, if you had a team of mules, you could not get them
to take and put their money back into the stock market because they learned how
in how important that principle was to them. Right. Well, the next
generation that came behind, they were definitely more in the spenders. But I
think we're going to see between required minimum distributions, where we have these mandatory
withdrawals out of the stock market, we see that there is most definitely a
bubble that is being created within AI. And I'm not saying that that's bad,
but we want to think back in time, right, we want to
think back to the tech bubble burst where they said, you know, this
is going to go to the moon, and it didn't. Eventually, these
things are going to wind down, and we have to be exactly, very
exacting with what our long term plan is. Is it really growth or is
it more or less income? Because if you do have income, like you
said, now, you can spend, right, you can spend more freely.
With more freedom, So true, I couldn't agree with you more.
You know, one of the things in the notes I have here, you
say, be patient, focus on dividends, collect them or spend them,
but be ready to buy as there's likely to be more Kmart blue light specials
coming. I think that's been it now because Kmart's light all but gone,
haven't they? Just? Okay, all right, well let's turn back the
clock to that Kmar blue light special when you walked into a Kmart, Jerry,
come on, when you saw that blue light flashing on the end of
the aisle, you knew where to go, right, you were trained,
man, you were gats right, that's right. The Bluvie in response,
you know that's right. You see a blue light and you immediately get your
credit card out. That's right. Well, the reason I say what I
say is because obviously, you know, when June the Federal Reserve gets together
and there was a very split consensus as to whether we were going to actually
get into the rate hike or if we were going to get a pause.
Now, what we saw a transpire was actually we didn't get a pause.
What we got was, oh, just joking, we're going to do a
skip. And so you know, just a minute ago you talked about we
need to be bigger spenders. Well, interestingly enough, when you actually dissect
the core PC and you're looking at where spending is actually taking place, we're
starting to see that there's slowed down in certain parts of the sector, but
there's also continued strength within home building and that sort of thing. Yeah,
what's with that? Well, that one to me, Matthew, Well,
we still very much have a shortage when we think about single family homes.
So when we think about the number of individuals that we have in this country
versus actual legitimate housing, we still very much have a shortage. And when
you think about what's happening, people have to be able to live someplace,
and people are getting more value from the resale of their home but we have
a lot of retirees that are still maintaining their big home that they had when
they were raising their kids, and now what are they wanting to do.
They're wanting to get into rand style homes or trying to downsize a little bit.
And so as a result, many of them have the capital, and
many of them are saying, you know what, this is not high inflation.
If you want high inflation, let's take you back to the nineteen eighties
and nineteen nineties. That was high inflation. So they're still looking at today's
interest rates saying this isn't bad, this is doable. We've got the capital
to do this. We want to build, and they're building to spec so
that they can enjoy their retirement and something that they want to spend the rest
of their years living in. All right, So I am looking at the
PHLX Housing index and I follow housing a lot because it's also it used to
be an analog for interest rates. All right, it's right now, it's
at a near all time high. I have it right. If you look
at Lenar Pulty Homes, KB homes and look at whatever it was, But
all of them are trading at five year highs. Those stocks probably Old Eyes.
The only one that isn't is Toll Brothers, which focuses more on the
luxury end. So what does this tell us here, Matthew, Well,
again, we have to look at what the trends are doing, and I'm
seeing an awful lot of MIC clients that are building in there. They're really
building into what they want to be able to have. I just had a
client that decided that he was going to live the great state of Lead,
the great state of Minnesota, and he was going to be going down to
Hilton Head and he said, you know, we looked around. We just
didn't find anything, but really, you know, tickled our fancy. It
was nothing that really fit the bill for us. So we just decided,
you know what, We've got the capital, we have accessibility to credit,
We've got a lot of credit and equity builds up in our home. We're
going to go ahead and we're going to build. Now. When it comes
to luxury homes, I think that we have a few more of the luxury
homes that are available for people to actually purchase, But many of the homes
that are being purchased today, or rather built today, I think are the
homes that are just below that luxury class, and that's the reason that we're
seeing the drive in that demand. And that's in the face of increasing interest
rates. And now you're starting to see builders actually get back into the credit
business. Remember after the big bust, oh eight No. Nine, Before
that, the builders, the homebuilders are making more money on their kickbacks from
financing to banks, etc. Some of them were even packaging their own mortgage
backed securities and that all fell by the wayside. They were like, no
incentives. But now they're looking to soften the blow. I think there's also
been some home builders, like in that middle tier, mid mid to upper
middle tier, they cut back on features as well, maybe made the houses
a little bit smaller to keep the affordability there. I just wonder how long
the show goes on. You know, go back to the eighties with double
digit interest rates. The first mortgage I ever got was on a co op,
paid a whopping one hundred and seventeen thousand dollars for it in Fort Lee,
New Jersey, had an eight and a half percent interest rate plus the
common charges. And this was like a struggle for a young newly married couple.
But now you know, housing prices are quadruple what they were in the
eighties. Rates aren't what they were in the eighties, but hey they're over
five percent. That's a nos bleed territory. Absolutely, And I think that
there's one other factor, though I know that this is not all encompassing,
but we see that there's several states now that are trying to become more attractive
to retirees, and they're starting to take and make adjustments to their income tax,
right, and so what this is doing is this is attracting those retirees
because they're saying, hey, if we don't have to pay income tax,
now we have more capital, we have more casual and now we can justify.
Isn't it interesting, Carrie? How as human beings were kind of our
own best attorneys, right, we justify in our light all we're able to
make something work. And so I see a lot of my clients that have
moved from other states into the state of Iowa. Why because we just got
done eliminating state income tax from any distribution from any retirement program. That's really
really nice. You look at other states like Florida, You look at states
and the Carolina is where they're reducing this these are the things that are going
to be attracting people to these states, and they're going to be hopefully seeing
a boom in building. That's pretty brilliant to get rid of all the passive
income taxes state income taxes, so basically, you're sixty five and over and
you can live state tax free. You'll let all the young people pay for
the costs of government. You're there, you said, well, I guess
you are spending some money. You got to live, right, They drive
a car. So that's really a kind of enlightened leadership in this day and
age because it's very difficult for a state, never heard of it, to
just dump an income tax. They've talked about it, but they've never there's
never been a state that's done it. So this is kind of like engineering
that tax to attract the people and make it more attractive to those retirees.
Who look at Florida, the states that have been attracting retirees, their GDP
is increasing way way faster than the states they're shedding retirees absolutely undred percent.
I think it's very clever and it's very forward thinking because when you think about
it, you know who's going to have more money the thirty five year old
or the sixty five year old that's already you know, all mass over the
course of time, and now they're hitting the distribution stage of their life where
they don't have a job to time down. Now they can go out and
they can consume, they can buy, they can be able to enjoy more
luxury items. This is really forward thinking and I'm very very pleased to be
seeing it because i think oftentimes there's too many things that get in the way
of economic growth when it comes to political agendas and so on and so forth.
You see the state of Minnesota, prime example. They've squandered so much
of the state income tax, they've squandered so much of the resources that they've
brought in from their citizens, and they're starting to drive people out. So
if they would just spend some time driving out the mosquitoes, they would probably
attract more people. But that's not going to happen because they got ten thousand
lakes. There. Felled states, So you know, these are failing states
three or four categories of states. They're states that are growing, mostly in
the south southwest. There are states that are more or less stable, and
really that's kind of like Iowa's and the Kansas is not really a lot of
growth there. And then there's states that are failing and would put in Minnesota
as one of them. And then there are failed states like California, New
York, New Jersey, an Etiqutte probably falls into that. So I find
it interesting that the state like Iowa, stable, you know, farm built
all that, really figured this out. They kind of unraveled the riddle.
You know, it used to be like states didn't tax their own state workers
pensions, but a lot of them do that now. Well, interesting,
interesting times here when we have this conversation in a year, what do you
think we're going to be seeing here, Matthew, Oh boy, that's the
sixty four thousand dollar question, isn't it. I think that there is some
potential that we can pull this off, But my biggest concern is that right
now we are getting very close to the edge of a potential recession. The
Federal Reserve seems absolutely resolved to continue to raise interest rates, to continue to
contract the economy. Part of the problem, a big part of the problem
is the government spending and it's working contrary to what they're trying to do,
and so they keep hammering on this, and if the Federal Reserve would just
back off and let things continue to calm down, I think that they would
work their way down. Now. I still think that a two percent inflation
factor is way unreasonable. I think it's still way too unachievable in the short
term. But in this case, if they keep pushing these interest rates higher,
it's going to be interesting. Are we going to have a full blown
recession? I'm not sure. I've been suggesting to many clients We're not going
to see any kind of a raycut for inflation until at least the end of
the first quarter of two and twenty four. But we shall see. We
shall see. There's going to be a lot of time between now and then.
All Right, well, I think that sums it up well. In
any event, I've got a question from Matthew myself k l at kryltz dot
com with ktch an answer quick and while you're at it, to just go
over to the show notes Financial Survival Network dot com. You'll find a link
to Matthew's site, Johnson with an hwim dot com and hey, well you're
there. Sign up for your free newsletter. Matthew always a pleasure thanks for
coming on. Thanks so much, Carrie, thanks for listening to Carrie Lets's
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