The part that surprised actually was core inflation. And you not hear a lot
of people talking about this. This is the feeder reserve's most important indicator as
far as they're concerned, to what they continue to share with us. And
so this excludes food and energy prices and then their allocation of percentages of at
each cost and that actually went up here this month. You are listening to
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you are listening to the Financial Survival Network. Om Here, hos Kerrie Letz.
It's twelve twelve twenty three. David Struzzuski is with us, and we're
talking about the CPI numbers. Can you trust them? Can you trust any
government numbers? Well maybe they're not quite as bad as China's. But when
that's the best you can say about them, you got to think, David,
and welcome back. So CPI, what's the deal? Hey, great
to be with you here, Carrie. Yeah, you know. So first,
the consumer Price Index represents a basket of services that the government has ultimately
determined to be a gauge of expenses or costs that you know, people are
spending money on. And and so we'll talk about the fallacy of that in
just a minute. But we just saw reading that you know, saw that
you know, CPI came down from three point two to three point one this
month. Okay, so that's some movement, not huge movement, of course,
we're expecting you know, fluctuations. But the big reason for that lower
reading was that energy costs went down about six percent. So you know,
I think that we're all recognizing that here at the gas pump that whatever reason,
gas prices are you know, below seventy of barrel right now. The
part that surprised actually was core inflation. And you not hear a lot of
people talking about this. This is the set of Reserve's most important indicator as
far as they're concerned to what they continue to share with us. And so
this excludes food and energy prices, and then their allocation of percentages of at
each cost and that actually went up here this month. So that's now at
four percent year every year, which is a long way from two. But
you know, big expenses within that were as a result of transportation being up
over ten percent over the year and housing being up six and a half percent
year over year, you know, which, of course, housing right now
is basically at its most unaffordable time in US history. And so let me
just talk about CBI for two seconds, and just for your listeners, you
know, there's a couple of problems with how they measure CPI. So number
one, this is not a measurement into any specific consumer spending, let alone
what the average American spends. And you know that's that's kind of an interesting
thing because you know, the market's been rallying on this new news that you
know, hey, we got this lower number coming out, even though it's
not applicable to any individual. But the what CPI fails to recognize today in
a big way is the cumulative inflation that we've seen since January of twenty twenty.
And so if we actually look at the cumula inflation, we'll recognize twenty
three point two percent as of this morning on trueflation dot com, which I
personally ascribed to as a good indicator and a way to be tracking and watching
things. But twenty three percent. I mean, this is the reason why
we saw overs three hundred strikes this year from all these companies and unions.
It's because the wages that people are receiving today are not keeping up with the
prices of everything else. And now that we're negotiating these new deals with auto
workers, with eachures, with you know, the Hollywood et cetera, or
our price is going to go down or up if we have to play pay
higher wages, higher benefits. No, they're of course going to equate to
higher prices, which ultimately leads to higher inflation. So I think that the
inflation story right now is about as cool as it's going to get. And
from here it's going to continue to rise. And you know, even how
we measure this thing, it as I've just been noting most economists that that
actually study this stuff and are you know, maybe a little bit more critical
of the data. They refer to this as the cp lie and and you
know, it doesn't include taxes, it doesn't include any basket of things that
anyone's specifically buying here, So you know, don't don't put too much weight
into these numbers, but I would just recognize that they have not gone down,
and a big part of that is what they would refer to as the
lag effect. You know, it takes time for these rates to rise and
stuff to hit. I think things are about to hit right now, and
it doesn't really spell a grade twenty twenty four here as we're heading into that
new year. Okay, so so it's it's looking the pretty bleak. Huh.
Well, yeah, so if we look at, you know, some
of the indicators that would give us understanding for where we're headed next, we
need we should understand that our gross domestic product, what's the US produce?
What do we do? Seventy percent of all GDP in the United States has
been the consumer, as I know I'm talking about. But in twenty twenty
four, it's going to be much this consumer is going to be much weaker.
Why well, we've got over one point two trillion in credit card debt
at act record high aprs. I mean, let's just be honest here,
who's doing that and putting you know, payments under credit card at a twenty
three, twenty four, twenty five percent rate. No one would ever do
that and think this is a really good idea. They're worced to do it
because they don't not a budget. We've got student loan payment that just began
here in October, which is a big deal for those that you know hadn't
had those payments, and then you know, they took on more debt,
got a new car, got a different house, whatever, and then ultimately,
you know, housing, as I mentioned earlier, never been more unaffordable
as it is right now. So I personally think that housing is going to
go down. But if you look at the price to rent versus a mortgage,
and you don't even account for the down payment that it takes to buy
that mortgage, you've got a better deal right now renting than purchasing that mortgage.
It's nobody's market right now here in real estate in my opinion, other
than you know, places like Florida, like where you're at. You know,
there's still some opportunities that you know showing up. But if you look
at the consumer today, more and more people, if you look at these
jobs numbers, they're losing full time jobs and taking on second and third part
time jobs. And so this is not a good sign for the American consumer,
for the middle class. And then ultimately, you know, my opinion
of twenty twenty three is that, you know, this is the most anticipated
recession in our history, and we were expecting it here in twenty twenty three.
But you know, we were also expecting that, you know, they
were going to be cutting rates by July. That didn't happen. Now it's
supposed to be you know, sometime mid next year. But but the reason
that that things actually really didn't crash yet was because that they put one plenty
two trillion dollars in the consumer's hands. Who has the biggest prependent proponent uh
prependency to spend uh That would be business owners, so PPP and employee retention
and credit loans came in. We bought real estate, We bought lots of
stuff hopefully invested back into your companies. But this has delayed that lag effect.
And so you know, if we if we look at the employee retention
credit, which is the last you know, kind of giveaway here, that
all ended September of this year, So July was the biggest month of payments
and then it ended in September, and so we had this amazing you know
GDP number for Q three. Well, you know, I was taking a
walk here the other day. You know, it's a little bit cold here
in the Green Seattle area in comparison to what it was like in Q three
July. I think that we're in a different climate right now, and in
my opinion, Q four is likely going to be this time frame that we
recognize some of the bad data, some of the data that that that would
that would show that negative things are occurring. We're getting weaker, you know,
we're always looking in the rear room mirror. I think Q four is
when it's really going to be come out here. They're probably going to name
that the beginning of the recession, you think, so, I know,
it's a strong statement. Yeah, acession is going to be you know,
that's the million dollar question. You know. Recessions come and go. They're
they're normal, they're good for the market actually, to have you know,
things flush out than healthy things grow back in, just like pruning is a
good thing, you know. So so a global recession though, that is
more of a rare event, and we're seeing globally a shutdown right now.
I mean, Germany is in recession. Depends on the verge of recession Canada
is on the verge of a housing recession. China is in massive trouble right
now. Of course, they hardly report their their their information correctly, and
so you know, how bad is this recession going to be? You know,
I think that when we look at this thing objectively, we have to
recognize that in March this year, just nine months ago, we had a
banking crisis began. That banking crisis resulted in the most significant bank bailout in
the United States history. And so this is just nine months ago, and
and and you know, we if we understand, you know, kind of
what that looks like where that leads I personally am seeing that, you know,
March this next year is likely going to have a lot more of the
bank challenges, especially given the fact that these banks just don't have capital to
lend any longer. Because people move to treasury markets. You know, they
can get FDA c to one percent of their money, not just two hundred
and fifty thousand of it. But you know, here's the thing that that
most most people have not factored in them as well, and that is that
most CFOs their job is to cure low cost lines of credit. And so
if they could refin their debt in twenty eighteen, nineteen twenty twenty one,
then they could get in at you know, three four percent on loans.
That was a really awesome thing and it caused our economy to really grow.
But what happens is that that debt has to be remetabolized every five years.
So it's a thirty year amateurization schedule, but it usually resets every five Well,
what that means right now is that, you know, coming somewhere around
I don't know, twenty twenty four, twenty twenty five, twenty twenty six,
we have record levels of debt, trillions of dollars that are coming due,
and these these these dollars coming due are going to be having to either
be paid off in full or you know, recast at higher rates, and
ultimately that's going to triple these companies because their their margin, what they had
to operate on previously, was based upon a low cost debt, is plentiful,
high liquidity, you know, timeframes, and so I personally see a
financial crisis occurring at the same time as a recession. Now, if those
things coincide, and if this takes place over the time frame that we're expecting
here, you know, another lost decade is definitely not outside of the purview,
especially when we're about to hit thirty four trillion in debt here, you
know, by December twenty second this year, according to the numbers I was
looking at. So you know, that combined that with you know, China,
you know, and it's saddle rattling that's going on right now. You
got the United States dollar and the bricks paid, which is this new system
that comes out January one. I mean this is they haven't announced that bricks
pay's going out January. We're twenty one, but I can say this much.
The Saudis joined the bricks January of twenty one or twenty four. And
when the Saudis join, I personally believe that that is the end of the
petro dollar. Why if you Google or Wikipedia with bricks pay, it literally
talks about it aiment system that Brazil, Russia, India, China, South
Africa and the you know, the plus nations that are joining right now are
looking at creating a settling currency. This isn't for them to go buy milk
and eggs. This is to settle trade amongst nations. They're buying thousands of
tons of gold right now, trying to back up their currency and their financial
standings. They're not buying US dollars anymore. I believe that the US has
a real rival at a time when we have massive debt our bankings in crisis,
and ultimately our adversaries are becoming weaker and weaker, which tend to put
people and places where they could act erratically like WWS three type of activity,
which I pray and we all need to pray that this stuff doesn't really and
actually unfold, especially given the fact that we have an open border and millions
and millions of undocumented people now in our nation that never got fully vetted.
So I could lay out a really really nasty and bad scenario here, which
unfortunately seems more probable than not on every level. That's going to result in
bankruptcies and you know, a lot of pain and carnage here for stocks as
well as the bond market. Bond market's going to get hit really, really
really hard by this. Actually all right, well, you're a breath of
fresh air today. What are you supposed to do about all this? Since
most yeah, I was out of our control here, right, Well,
so that is the question my belief is that traditional buy and hold, park
and prey hope everything will be okay strategies. While they work when times are
normal and good, they do not work very well when times of disruption are
occurring. And so we need to allocate in a more specific way, and
we need to be looking at a higher amount of commodities today. You know,
gold and silver are going to for sure be the winners throughout this.
I think treasury bills look all right, but you know you're buying fewture promises
for US dollars, so I wouldn't get too long on that. But you
know, we look at oil producers. I think oil producers are actually going
to do really well. They paid really good dividends. They definitely won't stop
those if they can, if they can help it. We got some international
plays today that can be really valuable. Indias and examples of probably a multi
decade story. You know, they were just our backed office before. Now
they're becoming more of a manufacturer and they've got you know, these very educated
people that are graduating from from college. I think that as people are looking
at allocation strategies, they need to be very very very wise as they look
at their bond allocations or fixed allocations. And the reason for that is,
if you know, bonds can lose money in five ways, five different ways,
and so we've talked about this before, but these five specific ways are
actually all five raising warning signs right now, which causes you know, considerable
concern for me. So we need alternatives to bonds very specifically, because you
know, the ultimate uh you know form of loss here is default and you
get nothing back. So so that's the part that we really need to be
cautious about. So I think if people are looking at you know, more
fixed assets, you know, treasuries can can can work out short term very
specifically, or I actually believe that there's never been a better time to own
what's called a growth oriented fixed index annuity gives you essentially the ability to make
reasonable rates of return on the upside, but more importantly none of the downside
when the market corrects. And so we've been allocating people to these types of
products, which are actually insurance contracts, as alternatives to bonds, and they've
been working out exceptionally well, you know, when when you can get you
know, let's just say sixty percent of whenever the market does. But none
of the downside. You know that that surpasses what most people believe their fixed
portfolio is going to do, especially because there could be actual losses like we're
about to see here for the third year in a row as the year closes
out on bonds. So yes, sir, I do all right. Well,
hey, we always appreciate your take on things. You know, it's
difficult times for sure, and you need to do what is necessary. Do
you think any of these insurance companies writing these annuities are going to fail?
You know, it's a great question. How the insurance companies have to work
though, is that they must ensure and have dollars in reserve one for one
with the investments that are being made. And so in our nation's history,
we have not seen even one of these contracts somebody not get paid back.
There's only one stalure that's ever occurred, and it was because they were really
running their books. Funny. You know, insurance companies certainly could have challenges
because hey, they bought into the same long data treasuries that the banks did
in the pension companies, et cetera. But you know, the good news
is that the reserve requirements make them the most conservative places to be put in
money. And you know, here in a great state of Washington, which
I personally live in, we even have a five hundred thousand per account per
policy holder guarantee. That's kind of like FDIC, but it's you know,
the state of Washington actually backing it up. And hey, god forbid,
these these companies actually went out of business. Most people are not aware that
as a taxpayer of that state, you actually would be responsible to make those
people hold up to the guarantee issue levels that the state has the insurance commissioner
has created, and so it might have some more safety than people specifically are
looking at. But I also love the idea that we can dollar cost average
out of these accounts, you know, typically about ten percent of a year
back into the stock market when everything goes on sale. And so our strategy
is we're going to actually make a lot of money as the world changes.
We just need to be able to make money and sideways markets. So we
do that through what we call writing ball and tame and bears. All right,
So they sometimes the best way to tame a bear is just to avoid
it all together, right, yes, sir, that's exactly right, All
right, all right, David, where do we find you in these days?
Yeah? So my website is my SPG for Sound Planning Group dot com.
And I've actually got a new book that'll be coming out here and the
first part of the year called Writing Balls and Taming Bears. Got a new
class that will be coming out called a Federal Reserve Bubble here in twenty twenty
four, and so that's what I'm naming this next crisis. And I'm going
to lay all of that out here in a book and in that class.
And so people can find more information on my SPG dot com or they can
put their name in and say hey, love to connect and answer some questions.
But your viewers are incredibly intelligent, and you know, I think that
they would be wise to be taking heed to some of the cautions that I've
shared here today, because I hope I'm wrong, but the reality is,
if I write, those are game changer moments that ultimately affect somebody's outcome and
their ability to retire and stay retired. All right, Hey, we appreciate
if you've got a question for David or myself, you can always email me
kl Atcarrie LUTs dot com. The link to David's site is on our site
in the show notes to this interview Financial Survival Network dot com. Make sure
you sign up for your free newsletter. David always a pleasure, appreciate your
stopping by and we'll talk to you next month. Happy healthy holidays for lack
of a more politically correct term, and if you're ready, dear to you
and yours. He appreciate your cary, Blessings to you and your family,
and yeah, look forward to connecting with you. So take care. Thanks
for listening to Carrie Letz's Financial Survival Network, your solution to today's trying times.
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