Speaker 1: And it's like with houses, where houses are just unaffordable
when you compare house prices to incomes. Same thing with cars.
I mean, if you have to have an eleven hundred
dollars car payment in order to get yourself into one
of these new vehicles, most people are going to say,
now that's what I pay on my house. I'm not
going to pay that much on my car. So we've
kind of reached the limit for that segment of the
consumer market too. So that's another recession indicator. And yeah,
we could go on and on about with recession indicators.
Just fill up the show with those things, because it
does feel like we're getting there.
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Speaker 3: And welcome you are listening to and watching the Financial
Survival Network. I'm your host, Carrie Lutz. It's the day
after voting Day in November November fifth, twenty twenty five. Well,
John Rabino's with us and John. If there's one theme
what's happening now is layoffs, layoffs, layoffs, right.
Speaker 1: Hey, carry Yeah, that's you know, that's kind of been
a low level thing for quite a while now. People
have been talking about mass layoffs and tech and things
like that, and now it's becoming a lot more broad
based though, starting with the cardboard box indicator. You know,
the guys who make cardboard boxes have a really good
sense of which way the economy's going, because when people
want a lot of boxes, that means they're selling a
lot of stuff, and the opposite's happening now. The demand
for cardboard boxes is tanking. And at the same time
that's happening, a lot of other big companies are announcing
massive layoffs. And remember we're heading into the holidays right now.
This is Christmas time coming up when companies usually add staff,
but they're laying off or at you know, at best
keeping their head count stable. But a lot of them
are just flat out laying off a lot of people,
and you don't normally see that this time of year.
So the question is is the economy just rolling over,
like are we finally going to get the recession that's
been overdue for a long time now, or is it
AI eating a lot of these jobs, So it doesn't
matter whether it's the Christmas shopping season or not. You know,
people are being laid off by ais that can do
their job better than them, and you know, it's probably
a little bit of both. But we'll see in the
coming year which one it is. But I think the
recession that flows from this will happen sooner rather than later.
You know, we won't necessarily know why the recession is happening,
will just know that companies are laying people off, and
you've got a lot of other things going to like
the whole debt metric thing where whatever kind of consumer
debt you want to look at, it's at record highs,
and the stress metrics like defaults and ninety days late
and things like that. But they're all going up too.
So we've got people being laid off, we've got debt
spiking and a lot of debt going bad at the
same time. So that's the portrait of an economy that's
rolling over into a recession. So yeah, let's see if
that turns out to be true. In twenty twenty six,
I think there's a decent chance that it does.
Speaker 3: Yeah, and it's interesting you mentioned that. So another indicator
generally of economic health is things like petroleum consumption, and
in a rising economy, gasoline prices generally are going up.
But here we see them sinking. And I think there's
two reasons for this. If we buy into your recession
premise that it's inevitable that they haven't figured out how
to eliminate the business cycle yet, and this time is
always different, we know that. But basically, if we have
demand going down because of layoffs impending recession, and then
there are now six point two million electric vehicles on
the road, that's out of just under one hundred million,
So that's six percent less gas being consumed. And I
presume that they're newer cars, the electrics. Therefore, newer cars
are driven more generally than older cars, because in your
older car mix you've got like all the classics everything else. Anyway,
meandering here, but the point is we got a double
barrel recession coming. It's less petroleum consumption and less employment,
which is driving that price of oil going down. It's
at sixty dollars a barrel. Trump heralds that as a
great accomplished, but it could be an indicator of something
that he doesn't want to think about. We know.
Speaker 1: The other thing regarding oil and cars and things like that,
is that the car market is starting to roll over. CarMax,
the big used car online dealer, just reported horrible numbers
in their stock tanked. And there are all these videos
online now where guys are walking around car dealerships and
going look to the horizon, it's Dodge pickup trucks. Nobody's
buying these things, you know, stuff like that. And the
consensus among those guys who are on the ground doing
their own research is that the used car market is
kind of imploding right now, and the new car market
is just way overpriced. You know, cars just got extremely
expensive because of all the bells and whistles, like for instance,
I have a Toyota Tacoma pickup truck and the newest version,
the twenty twenty four is they were completely redesigned and
they've got massive technology upgrades and everything, and they didn't
sell well at first at all because nobody wanted to
pay twenty extra thousand dollars for a pickup truck. They know,
they knew how much a pickup truck was supposed to
cost and here here the tacomas are coming out twenty
thousand dollars more or more, you know, more than twenty
thousand in some model configurations. And it's like with houses,
where houses are just unaffordable when you compare house prices
to incomes. Same thing with cars. I mean, if you
have to have an eleven hundred dollars car payment in
order to get yourself into one of these new vehicles,
most people are going to say, now that's what I
pay on my house. I'm not going to pay that
much on my car. So we've kind of reached the
limit for that segment of the consumer market too. So
that's another recession indicator. And yeah, we could go on
and on about with recession indicators. Just fill up the
show with those things, because it does feel like we're
getting there.
Speaker 3: Yeah, it certainly does. And it's about time because the
purpose or recessions get rid of excessive of speculation. Right
in the Austrian frame, that's why we have these things
because rates are too low, reckless investments and what happens
The chickens come home to roost and then we have
a recession to eliminate all that excess speculation. One thing
I want to point out. It's not on our list,
but I think it's really important. Vegas is in the pits.
No one's gone to the place because it's gotten like
twenty eight dollars for a bottle of water, and they say, well,
we're just catering to the exclusive crowd, the whales, the
people that could drop six figures and up on a
weekend and not think twice about it. I'm not buying it.
I think it used to be a great deal. You
could go in a great vacation in Vegas, spend hardly anything,
and whatever you lost at the tables, and if you
didn't play the tables, you came out ahead. You know,
you could feed the whole clan, you know, a family
of five for like fifty bucks and leave a generous
tip and still have money left in your pocket. Now
it's one hundred dollars apiece for a low level buffe
and there's just no value left in that town. And
as a result, that town's in a recession, and Vegas
is always a leading indicator for recessions throughout the rest
of the country because gambling is purely, you know, discretionary.
You don't have to gamble unless you're compulsive gambler, then
you can't stop. But that's not the visitor count. You know,
that's ten twenty percent of the total People gambling are
out of control, but the rest are just there to
have fun. So that is a troubling statistic. And I wonder,
I wonder what's doing with cardboard boxes in Vegas? Does
that mean there's less homeless people living in them? Is
that what's going on?
Speaker 1: Yeah, I was gonna say there would still be cardboard
blocks demand in Vegas because people need somewhere to sleep
if they get thrown out of their job as a
blackjack dealer or whatever. But yeah, Vegas priced itself out
of existence. It'll be interesting to see if it even
exists five years from now in its current form, because
that's another thing where you see a lot of videos
online if people walking around Vegas going look, look, there's
nobody on the street all the way to the horizon.
There's not a single person here and it's Saturday.
Speaker 3: Yeah.
Speaker 1: So yeah, but that was just a stupid marketing mistake
on Vegas's part, because you know, some casinos can cater
to Wales, but the whole town can't do it. So yeah,
And you know, the thing about Vegas is that its
water situation is really precarious. It's on the verge of
running out of water because the lake that feeds it,
the level water is dropping to below the pipe. You know,
that takes water out of Yeah, and so so that's
that's a yeah like me. And that's a separate thing.
You know, if water has to be has to be
what's that word where you you just let some people
have it and not other people rash anyhow, rash And
if water has to be rationed, Yeah, then that's that
means it's the farmers and versus the casinos.
Speaker 3: Yeah, well the casinos are going to win, you know that.
Speaker 1: Well, you know, I actually did a substack post on
the whole water in the Southwest thing, and that that
was kind of the conclusion that the research came to
is that you know a lot of these places where
the water is running out farm the desert, and you
know you should never be doing that in the first place,
but now the water's running out. So the question is
do the cities get starved or do the farmers just
have to go into other kinds of farming. And the demographics.
The political demographics make it really clear that there are
way more people in the cities, so they're going to
vote for the farmers to lose their water rights and
keep the water flowing for cities. And it works. The
math works. If you make the farmers stop farming, then
there's plenty of water leftover for the cities. Anyhow, this
is a big digression, but it's an interesting part of
the story.
Speaker 3: What you're describing is the movie Chinatown. Remember I've never
seen that movie. It's one of the greatest movies ever
made because it's all about Mulholland and basically stealing all
the water doing a pipeline from the farmers in the
north to feed growing Los Angeles. And if it hadn't
been done that way, Los Angeles would be a fraction
of itself because Los Angeles is desert. Oh my god,
you got to do that. You got to get on Netflix,
you got to watch it immediately. Plus the acting is
you know, it's Jack Nicholson, right, and it was his
breakthrough role. I think, yeah, one of them and yeah,
like that is an absolute must for all of you
out there if you haven't watched Chinatown, because it's the
water wars, but it's the water wars in the twenty
first century, and the farmers are going to lose just
like they lost last time, because even though they have
more political clout now, they don't have the clout that
the cities have. But you know, I guess the concept
of a city and why it originally came about and
why it exists now, I think that's something that we
really have to rethink. John.
Speaker 1: You know, Yeah, there's an awful lot about this society
that's been able to exist and to flourish because of
the easy money and really easily accessible natural resources. So
if the water's running out and the money's running out,
then things have to change in a big way.
Speaker 3: You know.
Speaker 1: James Howard Kunstler has written a lot of books about that.
I think he has one called World Made by Hand,
about how we're going to have to go back to
making our own stuff because mass production is just not
in suburbia, et cetera, et cetera. Those things won't survive
the next twenty years. That's probably overstating it, but conceptually,
I think that makes a lot of sense. That just
a lot of things that we think of as normal
now are going to turn out to be based on
unsustainable things and they'll have to change. So, you know,
there's a million investment theses in that process. So we
still make money while it's happening, you know, but for
a lot of people it's going to be really wrenching.
Actually it's in particular.
Speaker 3: I think it's actually easier to make money now using
AI et cetera than it's ever been before. You know,
I really think that in many ways. But you have
to know how to use it, and you can't just
ask it dumb questions and expect smart answers.
Speaker 1: Right well, Garry, the easiest money in AI right now
is shorting the whole industry. I'm talking Michael Burry's book here. Yeah,
you know, because he's a famous guy from The Big Short,
the movie on the book. It was just announced that
his hedge fund is majority short. In other words, most
of its assets are in put options against one AI
related company, Palanteer. So he's he's betting basically the farm
on the AI bubble bursting pretty soon. So and that
kind of spooch. In the last couple of days since
that came out, the the AI stocks have been really volatile.
So we'll see what that name. Maybe that is the
end of the bubble, because it is a bubble, you know,
and the question is how much money will it take
flowing into that sector to keep it going from here?
And with all the vendor financing they're already doing and
stuff where one of them gives a billion dollars to
another one who promises to buy a billion dollars worth
of the first one.
Speaker 3: Stuff. You know, that's that's.
Speaker 1: Kind of end of cycle activity, and it's happening big
time in AI. So well, you know, I haven't figured
out how I want to short that yet, but a
lot of other people seem to have figured out how
they want to do it.
Speaker 3: Yeah, it's a well need to be laughing. But we've
seen this movie before and the movie as never changes
and it always ends the same way, right always where
well there's a few winners and a lot of losers,
but you want to avoid shortening the winners. That's the
that's the tricky thing. Like like I shorted Tesla three
or four times on its I remember, and and and
made money in the first couple of times from the
fluctuations where they went up and they corrected and that
that was fine, But the last time around, I just
had to had to bail with a loss because it
didn't correct. Yeah, and you know, since that time, it's
gone way up. And I actually looked at how to
short Nvidia earlier in its process, and luckily you couldn't
use options to short it because the premiums on put
options on in video were just astronomical. You know, there
was no way to make that math work. So luckily
I never did short that. But you know, the NASDAC
right now just seems like a classic. You know, it
seems like a nineteen ninety nine dot com bubble kind
of market where the the leadership is so narrow. It
is what now seven companies that is they yeah, well
they true names for them. Yeah. Plus it's yeah, but
so's it's those companies supporting the entire local economy. And
last time that happened, and it was nineteen ninety nine
with the dot COM's, And this time some of those
companies have real sales and they're making real money, but
they're also doing have them do financing thing where they
owe each other insane amounts of money and you know, yeah,
well it only takes one AI companies. You know, a
builder of ais to go bankrupt and not pay in
video back, and then the whole show falls apart because
all of a sudden, everybody's watching this and going, oh,
I see what they were doing. Yeah, all right, I'm out,
you know, and that could happen. I've got the theme
what sets off the next recession depression is a huge
AI company. Everything's going great, the money's pouring in, but
then they get this huge electric bill that they can't afford.
The four company shuts off the lights and the data
warehouse goes dark, and then they're out of business. And
that's that's off a whole chain reaction, kind of like
what happened in Kuwait I think in the early nineties
where they were all giving each other post dated checks
to buy stock and then somebody actually tried to cash
one of those checks that came do And you know,
I think they've been on budget plan with the utilities,
and eventually they'll come off that budget billing, that level billing,
and then they'll get hit with the bill and that'll
be the end of the AI boom. Yeah.
Speaker 1: Yeah, that's that's a completely reasonable way for it to go.
I mean, you know, you look at open AI for instance,
they have obligations of hundreds of billions of dollars and
revenue of tens of billions of dollars, not even earnings,
just revenue. So their debt is ten times their revenue
and they're you know, it's not clear they're making any money.
Oh no, they're not making money. They're actually losing money.
So you've got a lot of profiles like that in
the AI space right now, any one of which can
blow up, so we'll see. On the other hand, it
can keep going for five more years and bankrupt all
the shorts before it finally blows up. So don't try
the Michael Burry strategy at home, folks. Okay, you know,
just because he did it doesn't mean he has lots
of other money he can survive that. But yeah, a
little bit of shorting, nibbling at some put options on
these things, not a bad idea at all.
Speaker 3: Yeah, don't go selling the miners short though, your silver
and your gold miners. This little correction, algorithmically induced correction,
it's not real. You just see premiums go up. You know,
silver was at fifty four now it's at forty eight,
close to forty eight. They knocked it down forty seven
looks like the floor now for silver.
Speaker 1: John Well, with precious metals, like with any bull market,
you need to watch the underlying circumstances that made it
a bull market in the first place. And in precious
metals case, it's government's borrowing way too much money, interest
costs on that debt going parabolic, and things like that,
you know, and as long as that's still happening, which
it is still happening, nobody has any way out of
the debt bubble that's going on right now. Then gold
and silver, which are the kinds of money that you
move into when people are moving out of the currencies
that are being inflated away, they will go up, or
at least they'll be solid and stable, and then the
mining stocks will do well too. So gold and silver,
physical really high quality mining stocks, and the physical ETFs
are all still great investments, even if they squiggle in
the short run. You know, even if they have a
little more of a corruption correction. The few occurrencies are
still dying. And you know, a way to look at
a potential high in the gold market is that if
the dollar goes to zero, gold when priced in dollars,
goes to infinity.
Speaker 3: So you're up saying yeah, yeah.
Speaker 1: There's your upside. You know that infinity in the currency
that you're using to make that measurement.
Speaker 3: So ride it for a while.
Speaker 1: You know, this is this is going to be an
epic bull market going forward, even starting from today's prices.
Speaker 3: I've been buying up and then we're gonna have to
cut it short. But I've been buying up forty percent
silver Kennedy half dollars. I was doing it three four
months ago. I was buying them at ten percent below
melt value. Now there's no discount to melt on eBay.
You're paying at melt or over and that's considered the
junkiest of the junk silver, and yet it is now
not so much junk. So that's something you've got to
be aware of. A government shutdown, we could talk about
that for a while. Have you been affected by the
government shutdown yet, John.
Speaker 1: No, I have not, you know, but it's it's it's
gone on longer than any previous shutdown has gone on.
So I assume those guys are feeling a lot of
pressure from, you know, the people who don't get their
food stamps anymore. And I guess the military is still
being paid. You can never not pay the military. That's
that's how revolutions happen when you try to stiff the soldiers, so.
Speaker 3: They're getting guarded, you know.
Speaker 1: So I'm not even sure who's not getting paid, probably
like the park rangers and such. Who you can't. You
can't stiff air traffic control doing that. Oh Jesus, Okay,
Well it's good. I haven't had to fly anywhere yet,
so I'm still alive, which means I haven't been affected
by that part of the shutdown anyhow that I think
they'll settle pretty soon. Your brump has some people around
him who would just love to let this thing go
on forever because it's their excuse for just firing everybody.
And you know he's hearing that at meetings and stuff
like that. I don't think he will consider that to
be the highest probability bet, so they'll probably settle. And
actually the Democrats are the ones who are keeping the
Clean Continuing Resolution from being passed because they see this
as an advantage that they can blame the guy in
charge for the trouble that flows from that kind of
an event. And you know they might be right. Trump's
positive polling is going down, you know, his favorability ratings
and everything.
Speaker 3: So we'll see. But I think the pressure builds and
they settle this pretty soon. Yeah. I tend to agree
with you. And if they got to reduce a filibuster
to fifty five votes, they'll do it because this can't
go on any longer. And it's just people are getting
upset food stamps. I mean, this is always our nightmare, John,
when you went to the supermarket, plugged in the EBT
cord and nothing happened, and we're almost there. Well, it's
going to be interesting to see. Make sure you go
over to on substack. It's Rabino dot substack dot com.
Ours work strictly substack. Now dump the website. It's khl
FSN dot substack dot com. John. We'll see you in
a couple of weeks. Be well, Thanks, Garrey, see you soon.
Speaker 2: 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