The stock market stuff because there's so many games going on. But when you
get into the credit market, the dollar, and in the bond market,
the currency market and bond market, that they are longer term trends and when
these trends shift change, you can see them setting up and then they stay
in those trends. They don't have the volatility, and that's Frankly, my
advice to people listening is you're listening to Carrie Lutz's Financial Survival Network where you
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now more than ever, and welcome you are listening to the Financial Survival Network
on your host Carrie Lutz. Well, hey, we're in the first week
of November twenty twenty three credit enclosion, regional bank disaster. The Federal Reserve
is increasing the emergency facility to keep the banks afloat weekly. So is that
the sign of a great economy? Well, let's talk with our good friend
Gordont Loong Mattis dot com. Gordon. It's great to have you back on.
Hey. If you got a question for Gordon myself, the email is
kl at kerrie Let's dot com. Gordon's been a while, Hey, we
were talking for years how the subprime auto market was going to implode, and
basically that's happened now. Repos at near all time highs, credit card defaults
going up, foreclosures, mortgage foreclosures going up. What is an investor supposed
to do here? Gordon? Well, I can tell you if anybody who's
got debt right now certainly got a problem, as you just just point out,
you know, on the cars I'm seeing people. It's stunned me that.
And I can remember when you and I first started talking a lot about
credit over paying over one thousand dollars a month for these f one to fifty
trucks, et cetera. And and it's because they've been rolling over their cars
and trading them in a little sooner and now all of a sudden the crunch
is there. But in many cases they're somewhat protected if they can afford that
payment, because if they're out to seventy two months, it's the new guys
that are trying to get the credit. They can't can't get it, and
it's spelling carry over into the end of the small business sector. The big
the big corporations, and the big players. You know, they locked in
their money. That's why this recession hasn't come faster. People bought their houses
locked in their mortgage long term. So a vast majority of people are not
really feeling that that was increase in rates. But as you go down the
food chain, you get down into the lower fifty percent of the S and
P five hundred, you start to see it, and it gets worse when
you get down to the Russell two thousand. Then you get down to the
next level where they're not a listed company, and a moment pause there.
It is a serious issue because you know, they barely got out of the
COVID vices. They were broke, they barely hung on. All sorts of
issues for parents is in many cases that they had to suck in. So
then they get out of it and I have to buy borrow money, and
one they can't get it, and if they can get it, they got
to pay, they're going to pay through the roof. So they're just getting
absolutely crushed. So the only direct to answer your question what should you do
about it? One is this is not the day to have any debt,
and you should have been getting ready for this one because we could see it
coming. You know, debt is when you have debt in these kind of
markets, you're in tough times, a really serious and the rates will come
down marginally. We can expect that at some point. But what we people
are not fully appreciation we're in a new era. The great moderation of forty
years of low rates is gone. We're going to be in sustain higher rates
on the longer term money for the I would say for the least the next
decade. And the reason for it is, and you and I were just
talking about this, is because the thirty or more the thirty year bond is
tracking exactly to the United States credit defaults uprate. That's never I've never seen
that before. What's that say? It says that money is now starting to
price on the worry of the US size of debt. It's not that it's
going to default, but that they're going to the debasement's now a bigger warrior
worry. So you can see it in the auctions. Some of these auctions
are a complete disaster because we're so dependent on foreign money. So rates are
up. So if you have to borrow now and you're not one of these
protected ones, I've said, you've got your real problem, and it's not
going away quickly. Yeah. Yeah, So so you know this is going
to be with us maybe for decade. Inflation you know, inflationary cycles last.
You know, they don't just go away because the FED raises rates a
few times, right, I mean they go on and on and on until
whatever the forces were that started it, uh subside right exactly. Curious.
Yeah, you know, I lived through the seventies and it was a t
and it goes in waves and you and it's and once the genie is out
of the bottle, we all know how difficulty and that big mistake that's going
on right now having and remember how we got out of it. We had
to the Japanese carry trade was one. We had to go to the petrol
dollar to solve the energy issue. And by the way, we broke the
petrol dollars Saudi Arabia, and then we're not transacting go oil anymore in the
world. Market's ah solely in dollars, it's in anything. The Japanese carry
trade is a huge issue because our funding our debt now is the only one
buying our debt is Japan And it's an issue. So things that helped solve
it back in the seventies are here today and getting worse. But the bigger
issue, in spite of what I just said there, is how we got
out of that seventies crisis when when it came in ways was it wasn't that
Paul Volker drove rates up to sixteen percent. We know he did that,
but people forget that a year and a half before that, he was actually
a kind of a bum to use that expression, because he had had to
jack up. He jacked up the rates that were in a recession. He
had to take him down again and it was such a debacle. And then
eventually a little later he drove them right up through the roof, and everybody
says and that solved it. But people forget was before he was chairman of
the Federal Reserve. He was President of the New York Federal Reserve. And
that's where the power isn't the Fed, and heast certainly was in the seventies,
that's where the decisions were made close to the Wall Street. Washington was
a figurehead. But what he did when he was president of New York FED
he tightened liquidity. He really it wasn't rated. He just got credit cards
down. They were on you know, they were lowering. Uh yeah,
I remember all that. Yeah, you see that. And that's so it's
liquidity, liquidity, liquidity. And then when he rose rates, it was
it was between the two. And I've got I've got charts that I've put
together that show that we kept the liquidity numbers all the way through since his
era at relatively low ratios or or the boundary conditions, and since since in
the last three years we've driven him. We're just right through that and up.
So we've had we all know the story of the amount of liquidity.
And even though we've been trying to you know, quantitative tightening, we're tightening
with lending standards, there is massive amounts of liquidity that have been out there
for at least the last years while since COVID, and part of that is
because Bidenomics is effectively training the money out of the reverse repos I don't want
to get technical, if you'd like, but it's they're pulling it out of
the reverse repos and it's going through the federal through General TGA and then out
into the open market. So it's just it's it's what it is is modern
monetary theory MMT with a different version shoe bidnomics. But that's coming to an
end because the reverse repos have dropped from two point six trillion down to one
trillion in falling, so that that's suddenly drying up. I didn't need to
get a long window. But these are the mechanics that people are just not
talking about. But it's gott to live through the seventies to remember them.
Yeah, well nobody, you know, very few people on Wall Street have
been through a through a bear market, let alone inflationary rout up right,
exactly exactly. They're going to learn the lessons of a lifetime. That's what's
going to amp. You know, it'll be tough times, but that's that's
that's actually a healthy process. The world's not coming to an end credit.
It's when we, you know, we get rid of the mal investment,
the better businesses survive, the ones that shouldn't be in business fail. This
is good, you know, you know, it's all right to have a
bad hair day. You know they but we're in a we're in a world
where we don't do that anymore. And it's it can it you know,
constructive? You need this in a capitalist systems to be vibrant. Yeah,
but the problem is these kids have learned that recessions are bad and you can't
have recessions, God forbid, because you know, we just need to print
more money because you know, recessions are bad, right, but they're really
a purifying kind of thing, like you know they are. That's exactly.
It needs to be flushed periodically. Put it that way, right, That's
that's that's what makes capitalism work. And it's it's it's hard, but it's
healthy. It's like taking your kids off their credit credit they're overspending. It
just have to do it. It changes behavior. And we went so long
with bad behavior knowing the credit there was a safety and enter credit was just
there. The malinvestment is has went to an extreme that it's actually jeopardizing our
entire financial system. That is that is the biggest There is so much leverage
that we all know and we got so used to it, and the games
that are going on behind the scenes within the credit market is so underestimated because
if you give you know, the dot com area carry you remember how we
learned about credit defaults ops and clos and nobody knew with our CEOs. And
then during the financial credit Great financial Crisis, people learned about mortgage backed securities
and clos and all those and it's all so this it's exploded, and now
we're into what collateralized loan, not just alles loan, but collateralized swaps.
Get swaps collateralized to protect the value of collateral it's being paid or being pledged
because of something called re re hype rehype of hYP hyper hypothegation, right exactly,
that's a that's a multiple. I guess they created that word so people
wouldn't say it. But but I didn't mean to get again get negative on
this part. But there's just so much that you have to understand. They
even be a minor investment investor today or you're you're going to get hood wink
here. Yeah, well, hey, the retail always gets it linked.
Right at the end of the day, the taxpayer and the retail. The
consumer always pays the bill because that's where the money is. And you know,
and one of the things that is that bothers me the most, and
we're you know, we started here with this small business, and you know,
the small business has been the basis of our country. It has built
the country. I was looking the other day at the at the ten richest
people in America. Every single one of them started as a small businessman and
now are massive conglomerates. We can talk about the best best so as we
best what we can talk about Microsoft, we can talk about soccer, berget
Facebook, we can talk about Larry Ellison an oracle, we can talk about
Warren Buffet with Berkshire Hat, the way that they reside Bloomberg. We need
I just every one of them. And so what's happening now is there's the
rates that they're at and will be higher, is really impeding the small businessman
making a goal that once or even getting started. And so we're so dependent
on these corporations and I spent a vast majority of my years in corporate life
that that aren't delivering to the GDP that it should be delivering, and and
and jobs that go with it. And when artificial intelligence really comes into swing,
you're going to see the corporations take full advantage of it. And there's
going to be problems with it. Say it's a given, right, So
but this this sounds negative, but it's actually healthy. I'm more optimistic out
over the next five years where we could be if we could get through and
get some cleansing going on here, because as bad as it seems in this
kind, it's worse around the world. The United States is economy is the
best economy. And I just got back from Europe and I was I was
glad to get back in the in the US from what I was seeing over
there. And I talk regularly to friends in Japan and people a deal out
of China, no our economy, so there will be a flight to safety
I see coming in the US doll or two. So it's not dealing with
gloom and it's opportunity right now. Yeah, well, you know danger opportunity
right to exactly the Asian Chinese thing. There's two characters in the word crisis,
two Chinese characters. One is danger, the other's opportunity. So where
wise men fear to go, fools dare to travel, right, that is
the era with that we're in. So do your homework and do when there's
these kind of changes like last week, we saw the ten year bond just
to do a drop. We we just never see something, you know,
watching the bond markets like watching paint dry, but you could see it coming.
It was like classic technical analysis for sure. And it has spillovers,
you know, the stock market stuff because there's so many games going on.
But when you get into the credit market, the dollar, and the in
the bond market. The currency market and bond market, they are longer term
trends and when these trends shift to change, you can see them setting up,
and then they stay in those trends. They don't have the volatility,
and then that's prankically. My advice to people listening is, you know,
don't lock all your money into playing the stock market. There's a lot of
different ways to invest today that are just really over overlooked. And it's because
it's because of these negative comments that I've made, are actually presenting these opportunities
to investors. But you got to just stop playing just looking at the stock
market. It's like this infatuation that swept over America in the last i don't
know twenty five years, maybe because it was easy money. It was pretty
hard not to make money in the stock market last twenty years, you can
always buy anything and you made money on the surface, yeah, surface,
So do you make the money then for the coming ten years here, I
think there's going to be a lot of money made. As I said in
the in the bond, in the credit market, the bond market, if
you invest properly. You know, the whole game of going to hard assets
is a all trodden game. You know, you and I were talking about
years ago, and I can remember farmland was a big deal in two thousand
and two, and then and and that got drove through the roof, and
then we were into forests and you know, and then the goal was always
right from the dot com a big investment silver. I still think there's big
room in gold and silver as a precious metal. But you know, all
the hard asks, but most of them are really well overbought. And if
we have a tough credit market and liquidity squeeze, they're going to be problematic
at the levels that they're at. But they are always you know, good
protection of real value, but they may not give you a real return.
At least they'll give you a return on you a return of your money,
right, So but it really it's it's a time to be looking at value
rather than growth. And you know that we've been talking about that coming and
I think we've turned that corner. I think we're now in that era.
All right. So all right, so we're in a new era kind of
and you've got to adjust your strategies. It's not your father's stock market or
your grandfather's stock market. Hey, Gordon, just tell us where do we
find you these days? How do we connect with you on the web.
Yeah, I post any work that I do at Matassi dot com, m
A t A SII dot com exclusive for there week, I put out free
newsletters and videos. The only thing I ask is is give me some input
on what you see because I get tremendous input that helps my investment because we're
primarily investors. All right, all right, Well, hey, if you
got a question for Gordon or myself, just shoot me an email KL at
Carrie Lutts dot com. And hey, you're at the site, just click
the link. It'll take your right to Gordon's site, and while you're there,
sign up for your free newsletter. Gordon, always a pleasure, Thanks
for stopping, Thank you, curious, talk to you again. Thanks for
listening to Carrie Letz's Financial Survival Network your solution to today's trying times. For
the latest, go to Financial Survivalnetwork dot com. Financial Survival Network now more
than ever,