Welcome to another edition of the Chicks on the Right Show, where we have
our BFF and sponsor of the show, Zach Abraham from Bulwart Capital Management,
join us to talk about all things finance and economy related. And we just
saw a big, fat headline today that says the FED is done hiking interest
rates, but they will only start to cut them mid twenty twenty four,
economists claim, Do you agree with that assessment? Yes and no, meaning
I think that I don't think that they're far off, but I just think
it's for a lot of different reasons than they think. So, first of
all, I do think the FED is done raising and I've said it before.
I think that, and it's weird to say because I've been an advocate
of them raising rates for a long time. But I do think that they've
raised them too far in the sense that they're going to get more things blowing
up than they want to. So I think that you will see them for
now. The FED themselves are claiming that they don't expect to be raising rates
till the end of twenty twenty four or to the middle of twenty twenty five.
I just don't. I just I don't see again You never want to
say never in this industry because you know, look at the last three years,
right Wait, they're not going to raise them, or they're gonna or
they're not going to Let has said they're not going to cut them. Yeah,
so they're saying that they're right because the theoretically the way what what those
economists that that that article is about are saying is that the economy is really
strong. You know, it's the CNBC line that you're going to hear from
anywhere else, and that the FED will ease interest rates as inflation pulls back
to target. Well, our whole thinking is if inflation still pulls back to
target, what that means is that prices will keep accelerating at the rate of
two to two and a half percent. Well, prices are too high right
home prices are at record in affordability. Now part of that is due to
rates, But what the Fed wants is prices to come down, and so
I think that they will be will be forced. See that the people in
that article think everything's going so great. The economy is going to stay strong,
inflation will continue to abate, and we're gonna get this nirvana like soft
landing right where the economy right to me, it seems like kind of a
nursery rhyme, nurserytail, you know, child's tale. But I think that
they're gonna start cutting next year. And the FED says they're not going to
cut until the very end or the beginning of twenty twenty five. I think
they're going to cut, but I think it's going to because things are starting
to blow up. And just since the last time we talked, we're seeing
more and more of this happening in commercial office space. So just this last
week, an office building in twenty eighteen that was purchased for sixty six million
dollars just got auctioned off for fifteen point five million dollars. Yeah, So
I mean for those keeping score at home, and that's like an eighty percent
right down right Yeah. And you know another one in two Toronto that just
a couple of weeks ago, one point two billion dollar property owner just handed
it back to the bank, just gave the keys back, right. So
yeah, And we're also starting to see now you're starting to see delinquencies,
especially in the forty years in younger category of economy, you're seeing delinquencies that
are rising to levels that we haven't seen since nine in twenty ten, meaning
people aren't paying their bills for obvious reasons. The alarming part of it is
that you're seeing delinquencies climb, and I wouldn't say that they're climbing at a
rate that would be like a flashing red light, but it's getting close to
there. What is a flashing red light? Or the size of the delinquencies
that is mind numbing because there's a big they're not normal, meaning people are
defaulting on much bigger loans or are not paying on much larger sized loans than
would be typical. That these are numbers in excess of what we saw in
eight oh nine. So I just think that the FED has done and I've
said this before, but I think it's kind of a classic FED mistake.
I think they waited way too long to raise I think that they have overcorrected
to the upside. I mean, you guys are out there in the real
I mean, you know, there's so many people out there that have money
that are in a decent place but aren't going to buy because of where rates
are right. And as people don't buy right, that slows down economic activity
that feeds back through the economy, and so we just think, yeah,
they're going to they're probably going to cut, but it's not for good reasons,
right, because things are going bad, And will it matter? Will
it? Will it? Probably not in the beginning, because like we're seeing
right now, they've been raising rates now for like eighteen months. Would they
start We started in January of twenty twenty two, right, And what you
see or people misunderstand this, and it happens going into every recession, they
start raising rates. Guys like me say, oh, here it comes,
and then for usually like a year to sixteen months, you don't really see
anything bad happen, and everybody's assumption is, oh, well, the economy
can handle it. Well, just think about it. Right, when you
raise rates, even if you do it really aggressively, there are a lot
of people that don't feel that. The only people that feel that pressure are
people that are forced to refinance, right, people that have to go purchase
a home. And so what we call it is a leg effect, meaning
anytime you're using monetary policy or interest rate adjustments, it takes time to feedback
through the economy. And like I said, what every single time happens is
those legs that time, it takes fools everybody into thinking there's no problem,
and I just don't see any evidence that it's any different this time. And
you're starting to see wages have stopped going up, and they're not moving down
sharply, but they've stopped going up. You've got eight the jobs numbers continue
to get revised lower. You saw a very weak jobs print. Now it
wasn't horrible, but it was considerably lower than expectations recently. And we just
think this is kind of the start of the process. And I think most
people are sleeping on it. So I mean, I know, the good
news I guess is that like when interest rates are high, that means like
savings accounts earn more, which is like the one bright spot I guess if
there's to be a break, Yes, and they're they're and they're this is
kind of what. There are so many things like that right now that I
actually think are really attractive because one of the things people don't realize. And
look, I'm not advocating for you to go out and buy a bunch of
bonds right now, as people have seen. And the reason I say that
is we think of bonds they're safe, right Well, if you look at
a lot of bond funds, the average bond funds since January one of last
year is down anywhere from you know, twenty to thirty percent, okay,
in value. You look at the thirty year US government bond since January one
of last year, it's down sixty three percent, okay, a government bond,
right the ten year is down. The ten year bond is down I
think like forty. So I'm not advising you can go out and lose them
a bunch of money in bonds. But I think everybody has been playing the
stock market game for so long, and you look at how expensive stocks are
right now in general, you know, like, for instance, if we
look at Apple like a bond. Right, Apple's a great company, not
say anything about about it, but it is very expensive even after four quarters
in a row of declining revenue and sales. Okay. So but if you
go look at their earnings. And the reason I point this out, think
of us owning the company Apple and not the stock. Right, if we
calculate that if we bought Apple right now, the three of us, the
price we pay right around three trillion dollars to buy the company, the amount
of profit we'd be getting off Apple would equal about a three and a quarter
percent return on our money per year. Okay, Well, we can go
buy a guaranteed, a completely risk free US government bond that pays five.
Right, it's supposed to be inverse. Right. The reason we're willing to
take stock market risk and risk on individual companies is because they will pay us
more, which justifies that greater level of risk. Well, you're looking at
it now and it's completely flipped. So I think there's a lot of benefits
out there that can be had by investors with higher rates. Like you mentioned,
you know, bonds. I think that again cautiously, because rates could
still go a little higher despite what people are saying. But I think a
lot of mortgages that have blown up. We just bought a real estate investment
trust that owns triple A rated mortgages and it's dropped so much that we're getting
a twenty percent dividend off of it per year. Yeah, and then as
rates lower, those mortgages will go up in price. So I think there
are a lot of attractive things out there to actually invest in. I just
think the average investor is looking at precisely the wrong like the stock market has
been on the biggest run in history, the biggest bull market in history.
Great, that's not where the value is right now. The value is in
that kind of stuff that we're talking about. And unfortunately, like other periods
of times in our past, when we've dealt with inflation, I think stock
market investors are going to be very disappointed, if not hurt badly. Interesting.
Okay, so, and I know that you're doing. We saw that
you've got one of your infamous free webinars coming up soon. Tell everybody how
they can take a listen and get more of your expertise. And how long
are those usually, Zach? How like when people get involved, when people
listen to one of those, how long are they? Funny enough, they're
scheduled to go about forty to forty five minutes, but we probably and some
people do, right, they just go to the end of our presentation explaining
what makes us different, how we're active managers and risk managers and all that
kind of stuff, so they'll log off right away. But a lot of
times the Q and A session goes for another forty five minutes to an hour,
so yeah, yeah, but the presentation itself is forty to forty five
minutes, and after listening to it, you're not going to know you can't
we can't describe every single thing we do in forty five minutes, but you're
going to have a really good understanding of what does make us different. How
we don't just slap you in mutual funds and ETFs and tell you to write
it out all the time. You know our active management, our risk management
strategies, and so you'll afterwards you're going to have a really good understanding of
who we are, what we do, and how we lower fees, increase
upside and drastically reduced risk. And that's kind of our calling card. And
you can get that. You can sign up for the it's completely free.
We don't track your information, we don't keep emailing you. You can sign
up at our website, Bowercapitalmanagement dot com. And yeah, that's coming up
next Thursday. So I think it's a great opportunity to kick the tires without
any obligations. And Thursday sixteen yep at three pm, three pm specific standard
time, Yeah, specific standard time. I'm on a global podcast here.
I got to I got to clarify these things, right. There's a lot
of people that are central and Eastern. We got to like make sure that
we're cognizant of that. Okay, everybody should check that, absolutely check.
Thanks once again, Zach. You always break it down in a way that
makes it just really a lot more palatable than any other of those wonky people
on TV do so we ladies, and thanks for having me on. I
enjoyed it. As always. Investment advisory services offered through Financial LLC and SEC
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