Now. I don't know why the non from pay reports constantly have to be
revised to the downside, but you can you imagine maybe it looks good for
certain people to purport that X number of jobs were created, and then you
know when they do the revisions. Who really looks at the revisions. It's
the headline. It's the headlines like, well, much better than expected that
they're really going for now in there, let's just look underneath the report.
Other than just the revisions. Government hiring accounted for fifty two thousand people.
That's a tremendous amount of unproductive people being hired. You are listening to Carrie
Let's'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 Survivalnetwork dot com and get your free newsletter
and gift. Financial Survival Network now more than ever. Ed. Welcome you
are listening to in watching the Financial Survival Network. I'm your host, Carrie
Lutz. It's one five twenty four. Happy New year to all. We've
been a little bit slow lately, taking it easy. Family visiting from out
of town and just saving things up. So we're starting off the year right
with our good friend Michael pentopentoport dot com and hey, Michael, great news
today, non farm payroll report stronger than experts expected. I don't know who
those experts were. I don't know what they've been smoking. I have no
idea what they did for the past four New years, but I guess whatever
it was they ingested is carrying out for a week now. Happy new Year
to you, Carrie, and I wish you the best of luck, prospery,
and health for twenty twenty four. Did ye? Let's just start the
CNBC headline, The non far bearer report was much better than expected, much
better than expected. Go and look at the c NBC's website, say yes
that you're fine. So the number came in at two hundred and sixteen thousand
thousand versus one hundred and seventy five thousand new net new Hire estimate. Now
would they don't really well, let's just say obfuscated or they left out of
the headline was the revisions were negative seventy one thousand for October and November,
and he had those two months together. There was a seventy one thousand person
revision to the downside. Now, I don't know why the non and front
pay reports constantly have to be revised to the downside, but you can,
you know, imagine, maybe it looks good for certain people to purport that
X number of jobs were created, and then you know when they do the
revisions. Who really looks at the revisions. It's the headline. It's the
headlines like, well, much better than expected that they're really going for now
in there, let's just look underneath the report. Other than just the revisions.
Government hiring accounted for fifty two thousand people. That's a tremendous amount of
unproductive people being hired, worst, the non productive. A lot of the
times they're like destructive of the productive people, right of course, of course,
So what they do is they tax the productive part of the economy and
then they employ people to what I call productivity killers is what they really are.
Now let's go deep into that. There was a six hundred and seventy
six thousand person decline in the labor force. And if you look at the
two surveys, so there's the establishment survey in the household survey. As you
know, the establishment survey sowed it was much better than expected, but the
household survey showed there were six hundred and eighty three thousand fewer people employed from
December to November. I said that right, six eighty three thousand fewer people.
The average work week fell, the index of aggregate hours work dropped as
well. And then we look at the the ISM Institute for Supply Managements Manufacturing
and Service sector survey, very key, very very predominant measures of how the
economy is really doing. Both those surveys showed that there was a decline in
hiring, in other words, a net shedding of jobs in both the household
I'm sorry, and the manufacturing and the service sector. So if you look
through that better than expected bs that donkey dung that they that they like to
and concentrate on the jobs market is rich, is deteriorating, and it's deteriorating
quickly. So that's the time. Those are the facts. Those are the
facts. Things are not always what they seem to be or are they like
No, no, not at all, and not the way the mainstream financial
media and Wall Street purports them. Bate. Yeah, don't forget. You
know, if you look at CNBC and every other major financial media outlet,
not yours and not the I call the alternative financial media that do we get
real facts and real analysis. They're they're paid by their advertisers. And those
advertisers are who the major Wall Street banks and big Pharma, right, Big
Pharma and the banks and not many others left. Yeah. Yes, So
if you're if your major sponsors are the ones that are trying to pedal stocks,
IPOs, corporate bonds, that they get paid to pervade this myth of
a perpetual bull market and that you always should be invested in no matter what
you do, And they tend to ignore the big h you know, pullbacks
in the market like two thousand, two thousand and eight, two eighteen,
My team twenty twenty, twenty twenty two lips. Yeah, Kerrie, if
you're preparing for a retirement, what's the one thing you imagine worked hard your
whole life, you save a few million dollars or maybe more or less in
some cases, and you say to yourself, what's the number one thing I
can't have happen. I can't have another thirty, forty, fifty or eighty
percent decline in the stock market. That's the number one thing you should be
thinking about. War Muffett said, it best just don't lose money, just
all those money. And here's the thing. The construct of the economy and
the markets are so artificial it's absolutely susceptible to these massive air pockets in valuation
and prices. Sure, sure, hey, you know when we last spoke,
you said basically that the bond market was broken, wasn't functioning properly,
and that bad things were going to happen here. Can you just follow up
on that as far as a lot of people wanted to know, how is
the bond market broke and what is it not doing or that it should be
or doing that it shouldn't be. Well, what it shouldn't be doing,
Carrie, is trading like a Nasdaq small cap pink sheet stock that goes up
and down, you know, thirty percent a day. The bond market is
trading like a very ill liquid pink sheet stock on some days. I mean
you see to even today we had the announcement of the better than expected jobs
report and yields shot up way above four percent on the benchmark Treasury, and
then the ism service sector data came out and yields plunged to a huge drop
and they're back up again. As the core of this interview, this is
just on Friday of the non front pailwall announcement. So there's a lot of
illiquidity in the bond market. That's why it's broken. I mean it's broken
because dealers have a lot of regulations now, they can't keep a lot of
inventory, you know Basel three. It's broken because of the Fed's reverse repol
facility, which is running dry. It used to be two and a half
trillion now it's only seven hundred billion dollars. So when that easy liquidity,
the bar marker is already a liquid When the reverse repol facility goes to two
hundred billion or around that number, that's when the easy liquidity is gone from
banks to buy bonds, and then you just stuck with. The Treasury has
a thirty four trillion dollar debt. Annual deficits are two trillion dollars. They
have to roll over five trillion dollars because you know, bond's mature, you
got to roll them over to somebody. So the Jerseury has to refinance seven
trillion dollars in twenty twenty four, and who the hell is going to buy
it if the Fed selling too. The FED is still in the midst of
twenty native tightening, and that doesn't really bite because it's being offset by the
reverse rebel facility. That's money that's parked at the Federal reserve. Banks are
parking their reserves at the Central Bank. But now the Central Bank says,
okay, you know, yields are probably going to go down. They're saying
that they're going to lower interest rates. So people are taking money from the
universe rebel facility in buying bonds, so that's offsetting QT. But in March
that goes away. So QT is really going to start to sharply bite into
whatever liquidity is left from the bond market. So you see, you'll see
the bond market trade even more erratically than it already is, even more huh,
So where is that going to leave us here? Like, you know,
you've been pretty spot on about calling what it said was going to do.
You know, supposedly everyone's celebrating there's a pivot going on. Obviously rates
have fallen dramatically over the past month. Is the pivot real or is it
fake? Well, the wolves so I believe that Wall Street takes a pivot,
you know, a whiff in the air of a pivot, and then
runs with it. So the FED said that they weren't going to discuss rate
cuts. They said it if that Powell said it about three weeks before the
last THAD meeting, and then ittures out that was a complete lie because the
dot plot shows that they not only discussed it, they have three rate cuts
in the dot plot for twenty twenty four. Wall Street took those three rate
hikes and doubled it and said it's going to be six. I say hikes,
three rate cuts, rate cuts, yes, right cuts. Wall Street
took that and ran and doubled it, and now it's six rate cuts that
are going to be supposedly taken in twenty twenty four. And then you see,
you know, better and expected non farm Paylery report, the unemployment rate
stays the same, employee compensation was increased in employee costs index rows. So
now they're saying, okay, uh, there's a not going to be six,
maybe they'll just be three. And but but the pivot is all a
rumor right now. I mean, the FED is not right now cutting interest
rates and they are still doing QT and as I said in March, March
is a key month, Kerry for investors in the economy, the market.
It's just huge. Not only does the reverse rebail facility run dry around that
time, but the bank term funding program that facility is supposed to expire in
March. That is good that you believe it. No, I don't,
I really don't, because see Powell. Powell bailed out the entire regional banking
system in this country right in March of twenty twenty four. He printed for
this is a fact, he printed four hundred billion dollars in two weeks,
Kerry. Just so you know, from nineteen thirteen, the formation of this
horrific organization until two thousand and seven, the fends Ballashie was seven hundred billion
dollars, around seven hundred and fifty billion dollars, right they printed. So
it took all those years to get to an asset balance sheet of seven hundred
and fifty billion dollars. And it took two weeks to double it. The
double that size two Pikes New Eggs in two weeks. Scary two weeks.
Come on, man, let's they should be shocked at that, all right,
two weeks to double it that size, and they bailed out the entire
banking system with that. And they're still one hundred and thirty three billion dollars
of banks. So this is what they did. Banks said I I banks
are failing left and right. There was four banks that failed in March.
The regional banking system plunge in value. The KRE you can look it up.
And they did it because their assets mortgage backed securities and bonds were way
under water because of what the Fed did had to catch up to hiking interest
rates, and these no one wanted, you know, nobody wanted to buy
and more hold a mortgage bond that was yielding three percent when mortgagees went yielding
eight percent. No one wanted. No one wanted to own a treasury it
was yielding a hand on percent when they can get five percent on a zebo.
So these banks were insolvent. They went back. They're going bankrupt left
and right. So Pal says, I will take your assets at one hundred
cents on the dollar, and I will take them off your balance sheet for
one year and then and this is March. March is coming very quickly,
Karen, March, you're supposed to give me back. I'm gonna be handing
you your assets that are still severely underwater and in some cases much more severely
underwater than they were in March of twenty three, and you're going to give
me back one hundred cents on the dollar, all that credit plus interest.
Now, if that happens, you're going to see the flushing sound of the
stock market down the toilet. Now, some people say that he has to
do this because he has to stop the speculation and he'll never get to two
percent inflation. I happened to think, and you know, it's hard to
read this schizophrenic, effectless and sometimes sometimes mendacious Fed. It's hard to read
what they're going to do. But I believe he has to err on the
side of inflation. So he's going to let he's going to expand and extend.
OK, we agree on that. So what is that going to do
to our inflation rate? I mean, let's assume that right now, and
I'm not buying it, that inflation's totally under control. Prices are stable,
they're not going any higher for right now. But now the Fed's gonna going
to step on the gas pedal and ease up off the brake pedal all at
once. What does that do to our inflation here? Well, you asked
the most salient question that there possibly is good for you. So so prices
for most Americans, sixty percent of Americans have virtually no savings paycheck to paycheck
unfortunately, carry Those are the people that can't for groceries any longer. Those
are the people that are ranging up massive credit card debts so they can make
ends meet. For those people, prices aren't coming down like they have to.
Prices are going up more slowly than they were. Right so they're going
up at three three point five, three point seven percent year of year,
just still tremendous salts on a wound because they were going up twenty percent officially
nine but in reality twenty percent post COVID for a few years. And now
they're only going up. They're going up more slowly from an already unffordable level.
So you ask the great question, what if Hallell was to what I
think he's going to do, stop QT and maybe even go back into QE,
extend the bank term funding program, and cut interest rates. He's going
to be doing that when an inflation is already wiping out and eviscerating the middle
class. And when inflation, record high inflation in this country is still fresh
in the minds, that sting of record high inflation is still very salient in
the minds right Americans. So what that means, I think inflation has the
risk of running intractable at that point. If he's gonna if he's gonna stop
the bank turn you know, stop the the the quantitative tightening, extend the
bank term funding program, cut interest rates to try to boost Wall Street and
keep big banks in a solvent condition and stop the debt inflation and keep asset
by bubbles boiling on the boil. Then he risks obliterating, obliterating the confidence
whatever's left in the US dollar and in our treasury market. And that could
have deadly ramifications because if you have a slow economy, a stagflating economy,
one that's marked by you know, a stagnant growth and very high prices,
and you go back into those you know, do those things I just mentioned,
you risk having long term interest rates rise instead of full Now normally,
when the Fed, when you see your recession, that's the that's the cathartic
effect of the market at work. So you see debt to folds, acid
doubbles, pop, interest rates plunge, and that begins the shield. That's
the beginning of the healing process. But the healing process can't take place if
the bond market it goes babilistic and people lose confidence in the purchasing power of
the dollar. In US treasuries, you can see yield skyrocket, and then
there is no solve. There is no healing process. It's just a massive
debacle where you see a bear market in treasuries, prices go down, you'll
goes up, and stocks to tumble. Well, that's that could happen.
That's not just a that's not a fat tail risk. That's very probable because
you haven't cured the problem. You you're gonna you're gonna you're gonna resort to
the same playbook that you have since nineteen eighty seven, which was, Hey,
there's a hiccup in the economy, there's a blip in the stock market,
We're going to print money. We're going to monetize that. That works
in deflation and disinflation. It does not work in inflation. You know,
it's interesting, Michael, You and I remember the last inflationary cycle in the
sixties, seventies, and eighties, But most people alive today don't know anything
about it. They don't remember it. They weren't alive then, and basically
they believe whatever bs the Federal Reserve dishes out to them. That I find
like kind of shocking kerry. Most people don't even remember when we're alive,
we're at least alive to a point where they actually managing money, when when
the FED wasn't able to just ride to the rescue. I mean, think
about just mentioned the history. What happened in two thousand, What happened Let's
go back even further in the eighty seven crash. How about when the Tibot
collapse and the Russian debt default. How about when the Nasdak collapse. How
about two thousand and eight in the real estate crisis. How about well we
had an outbreak of or before that with the REPO crisis of twenty eighteen,
how about the COVID outbreak, how about the twenty twenty two Everything is met
with the same every Yeah, every crisis is met with the same prescription.
We're going to cut interest rates and we're going to print a lot of money
and monetize a lot of debt now in post covid is and they've unleashed the
helicopter money squadron. You know, people get checks in the mail and instead
of borrowing the money from the private sector, yeah, central bank just prints
it. Yeah, it's that's true. We've we've crossed the rubicon on this.
This is the shark has been jumped. Jump. You could use any
kind of metaphor you like. But if they try that donkey dung again,
if they try that BS again, they'll fool nobody. Don't tell, don't
you. Powell can't come back and say, you know, we're really behind
on the inflation ball and we're going to tighten interest rates, and no you're
not, because what you really are in place to do, mister Powell.
And this has been the case since, you know, for decades. The
central bank is created, was created to protect banks. They are the banker
back and when banks get in trouble, they go to the federal Reserve and
they a little The little consequence, a little small consequence of that, is
that the purchasing power of the middle class and the US dollar is wiped out.
I'm not just talking about against the Euro. I'm talking about the purchasing
power of the dollar against gold, the actual value of the dollar. Look,
gold used to be thirty three dollars an ounce, it's two thousand an
Now. Didn't happen because gold, you know, it became more valuable.
It's because the dollar loss it's value. It's it's the your stick and which
you measure the purchasing power of your currency. And it's crap. It's crap.
The currency is crap. That she is, that she is, all
right. So now the question is what do you do about it? How
do you protect yourself? How do you how do you hide from this onslaught?
Can you? Is there anything you can possibly do well? We have
seventy percent of our portfolio in short duration treasuries, the shortest duration that you
can find outside of tea bills. So we think, I think, in
particular, the next big thing, the next next shooting drop, is going
to be the manifestation of recessionary data. You're going to see some really bad
economic data, which of course is going to cause the padloli in response of
people rushing into the bond market. That's why we're at one to three year
treasuries right now. We left, we left the safety of te bills which
cannot participate participate in an increase in a recessionary environment because there's no duration there,
there's no convexity. So I went out a little further. I do
own gold, I do own some minors. I don't have any direct shorts
other than high yield right now. High yield is definitely a short that remains
as short for me. I think the next step will be this manifestation of
the recessionary data. You'll see the Fed react to that. It'll be too
little, too late, You'll have a recession. Depends on how much they
do. I mean, there's a range of outcomes here. I mean,
what if Powell and Yellen, the head of the Treasury, once again,
once again combined forces to say, hey, let's just this is what they
did. Let's just launch a helicopter money squadron of six trillion dollars of checks
into the man and I'll have the FED monetize form and a half trillion dollars
of it. That's exactly what happened, Carrie. What do you think is
going to happen to the deficit that's already we have a peacetime deficit. I
get the vomit in my mouth. The odject of this coming as I speak.
We've got two trillion dollar annual deficit in peacetime and prospect and supposedly goldilocks
prosperity. That deficit is going to go to six trillion dollars if we have
a recession. That's what I think. That's my that's my prediction. So
who the heck is gonna buy it? And at what price? That's the
reality. That's to check me. People tell me all the time, this
aggravates me a couple of things. Many things aggravate me, but two of
the things that aggrevate Well, don't you know. The reason why we had
such great growth is because the the defend and treasury, particularly the treasury,
they they had, they ran these huge deficits, and deficits are very stimulid
and stimilated to it. The deficits are what deficits do in the long run.
They may let me they made in a short term boost maybe, but
what they what they do in the long run is they they they create a
condition of stagflation. And so they they they are they are productivity killers and
inflation engenderers. That's that's what they do. That's what eppisit is doing the
way. Yeah, exactly. So if they do it, if they do
it now, if they're gonna, if they're gonna try, then if they
go to the usual playbook, watch what happens in long duration bond yields ten
years, twenty years, thirty years, zero coupon bonds, if those yields
rise instead of fall out below yep. So, so they'll actually we already
see that when they just print money. Now, it doesn't really grow the
economy any right, economy doesn't grow from it, No, exactly exactly correct.
And then if we see when they cut rates, rates actually go up.
Wow, what is that going to say? Well, you'll get you'll
you'll you'll finally get the resteepening of the yield curve. But it's not the
kind that you like. I mean usually usually what you want to see is
that, you know, bond yields on the short end fall because they're following
the said that's gonna happen. But long term yields come down a lit little
bit in response to the recession. But if that yield curve steepens, because
the confidence in the bond market goes into the crapper. You know you're going
to see we're going to be in a debt spiral well where they have to
keep issuing debt and no one wants to buy it unless they interest rates go
to the moon, So that Fed prints money to keep interest rates down,
which causes more of a deficit and deficit and you just go into this vicious
death spiral in the bond market. That's that's a very unfortunately, this is
what which you get when you have artificial markets. That's a real risk right
out there. It's not the it's not the base case scenario, but it's
a definite risk. So the pivot is on, although maybe not on as
much as Wall Street was hoping, right, but depends definitely on That's going
to be the big surprise. What are Powell pivots and and the bond market
doesn't respond in the Pavlolian response that the reflexive response as always, so keep
an eye out for that. It might happen. I think it could.
It's going to happen initially. You'll see that reflexive reaction into the bond market
as the recessionary data manifests. But boy, it's going to be bad news
if that's not if that doesn't have a protracted nature to it, watch out
for that. But that's the kind of thing I monitor here. I have
an inflation, deflation and economic cycle model. It's twenty point model. Ten
components for inflation and inflation, ten for recession and growth, and that keeps
you on the right side of the trade. You know, last year I
was predicting that we would have a recession, but the model signaled after what
Powell did in March that hey, wait, credit spreads are essen and financial
conditions are actually loose, are actually loosening instead of tightening. So that kept
me from shorting the market. I'm watching those indicators very assiduously and I will
react accordingly. And that's your early warning sign to what's going to happen in
the broader stock market. All right, so, uh, gold, Obviously
it's a nice run up, but nowhere near where it should be under all
the circumstances. Situation you're talking about here, Well gold, You know,
gold just reached a record high recently, and it did so under an an
interest rate regime that went from virtually zero percent to five and a quarter percent.
That's pretty good. That shows you how much central bank buying there is
how much the supply demand dynamic has gone in favor of gold. I have
to wonder what's going to happen when the confidence in the and this happened.
By the way, gold in an all time high while the dollar also was
surging for the past couple of years. I mean, we were long a
dollar before we sold it a few months ago. It was a very good
trade for us. So what's going to happen when with the gold if the
confidence in the bond market and the dollar get oubliterated. What do you think
is going to happen to the price of goal? Oh boy? I mean
gold follows real interest rates, and if real interest rates falling, then gold
is going to skyrocket. And that very well could be the case. Okay,
all right, all right, Michael, giving us a lot to chew
over here, And hey, I'm sticking with the gold silver. We haven't
seen that big, big boost jet and silver, but I think it's inevitable
down the road. On a note, I guess the best thing we can
do is check in with you in a couple of months and see what's happening.
All right, I'll look forward to that, Kerry, all right,
just tell us. Best place to find you connect with you on the web.
So the website is pentoport dot com. Pentchoport dot com. You'll find
a link to the Midweek reality Check. So I record that every Wednesday evening.
It gives me, the gives my audience, the salients and important and
real takeaway from data that you don't see on the Carousel of fools financial media.
Yeah, it's fifty dollars. It's just fifty dollars a year. If
you like the free trial that ends in five weeks. And if you are
a US citizen, you have one hundred thousand dollars to invest, I'll invest
the money for you in the I deck portfolio directly. All right. But
the link to michael site is in the show notes this interview on Financial Survival
Network dot com. If you've got a question for Michael myself, Klatcarrie LUTs
dot com is the email address to use. And when you're on the site,
sign up for the free newsletter. You'll find it really helpful. We
got thought leaders like Michael and everybody else here and Michael, in anticipation of
the powellpivot, we're starting a news site called the inflation cafe. It's inflation
dot cafe because I was at a undisclosed cafe recently that we all know and
hate, and they gave me half a cup half a cup of lots and
it was you was a few years ago, and I said, you guys
don't sell coffee. You're in the inflation business. And thus was hatched the
inflation cafe. Well, even air has become more expensive. I'll leave you
at this one thought. You know what consumers need desperately, And if Powell
had any integrity, he would say, I need to get prices down to
where they where. I need to get home prices down so that first time
homebriers can buy them. I don't need to talk about reflating asset bubbles at
an economy when inflation is rising at fifty percent or more above his acidine two
percent target. Yeah, exactly. Could not agree more. All right,
Michael, thanks for stopping by. We'll talk to you in a month or
two. Let's see how this pivot unfolds. Looking forward to it. Take
care of Kerry. Thanks for listening to carry 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,