Speaker 1: Expectations are very high for President Trump, pro growth policies,
cutting back on regulation, wanting to drive the price of
energy down by half, and so forth. The problem, I think, Carrie,
is that expectations are likely to be disappointed for a
period of time, because all those things may have great
value longer term, but it's going to take time to
actually make progress, get them to be operational, if you
will in the real world.
Speaker 2: You're listening to Carrie.
Speaker 3: Let'sa'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.
Speaker 2: And welcome. This is Financial Survival Network. You're listening to
your host here, Carrie Lutz, and we're at the be
first just the first week of the month, literally, and
we've got Jim Welshawan from macrotides dot com. Got a
question for Jim myself? Shoot me an email kl at
Carrie LUTs dot com. Jim, Hey, welcome back, Happy new year.
What can we look forward to in this new era? Well, Harry.
Speaker 4: Great to be joining you.
Speaker 1: A happy new Year to you and all your listeners,
and I'd like to offer the January issue of Macro Tides.
All they have to do is send me an email
Jim Welsh Macro at Gmail, and I'm happy to send
that out to them because it does address some of
the things we're going to be talking about. And more so,
I think there's a number of themes that I have
felt will play a role this year. Expectations are very
high for President Trump, pro growth policies, cutting back on regulation,
wanting to drive the price of energy down by half,
and so forth. The problem, I think, Carrie, is that
expectations are likely to be disappointed for a period of time,
because all those things may have great value longer term,
but it's going to take time to actually make progress
to get them to be operational, if you will, in
the real world, for those benefits to show up. So
I think one of the things early on this year
potentially is going to be disappointment at how quickly some
of the goals are going to be.
Speaker 4: Addressed.
Speaker 2: Yeah, well, some things can be done by executive action, though,
right they can.
Speaker 1: At the same time, you know, I'll take one of
the energy idea of cutting energy costs, and so President
Trump is going to try to encourage and incentivize oil
companies to produce more natural gas and oil. The problem
is that over the last five, seven, eight years, oil
companies have deviated from historically what they've done. Historically, you
go back to prior forty years, anytime oil prices were high,
they aggressively increased exploration. With that increased cash flow, and
the net result, oil supply increased pretty dramatically. Three to
five years later, oil prices came down. In the last
five years or so, the emphasis carry has been in
not spent doing as much exploration, saving that cash flow
and paying dividends and buying backstock. So shareholders were yelling
at oil executives for a long time, telling them, don't
be stupid, don't drill to drive the price of oil down,
and they in fact have been doing that. So I
think when President Trump asks them to increase exploration, I
think they will. I just don't know that it's going
to be to the extent that will bring oil prices
down by fifty percent. So that is again some of
the headwinds and just kind of a reality check that
you know, has to be faced, and that I think
is as he was campaigning, bringing energy prices down was
a big pitch to those who were most impacted by
the high cost of living, lower income families and so forth.
And I think they heard that pitch carry because that's
why we saw a lot of people who had never
voted for a Republican in their life voted for Trump
on the notion that, Okay, he's going to bring my
They don't think of it an cost of living, They're
just going to make He's just going to make my
life a little bit easier. My paychecko stretch, Maybe my
rent is going to come down, you know, food costs
are going to come down.
Speaker 4: And I think that's.
Speaker 1: Part of the latent problem in that it's very difficult
to accomplish that, especially in a two year window when
we have midterm elections and historically the party in power
loses seats, and right now the Republicans I think have
a majority in the House of four seats. So those
are some of the challenges that I think are kind
of going to, you know, come up during twenty twenty
five and.
Speaker 4: Encounter to where.
Speaker 1: The expectations are. I think that generates some disappointment.
Speaker 2: Okay, well, you know, normally I don't have any expectations
or any hopes. It's always the same thing.
Speaker 4: We're talking politicians, right, But we do.
Speaker 2: Have to confess that in twenty sixteen Trump's first term
things were quite different. Now, what about this concept of
the deep state as they seem to run everything. People
you think are like totally normal or embedded in the
deep state, and the idea of purging these people out.
They've kind of kept the game running since World War Two,
I would say, at least.
Speaker 4: For a long time.
Speaker 1: I mean, if you look at a lot of the
agencies and the people that are been run by President
Biden passed more economically significant rules than any other administration history.
And an economically significant rule is anything that's going to
cost over one hundred million dollars. And so, you know
what we have, to your point, are embedded people that
have been in these agencies for a long time.
Speaker 4: And so, yeah, you get rid of the top.
Speaker 5: Guy, but the philosophy of those who are working within
that agency doesn't necessarily change just because you change the
top one or two people.
Speaker 1: And so it really comes down to an embedded again,
philosophy or people government should be doing more. And so
one hallmark of the Biden administration was that the number
of his agencies that were taken to court and then
lost is extraordinary.
Speaker 4: So what we saw.
Speaker 1: Was in you know, Congress passes a rule on law,
the agencies have some latitude in interpretating that law, and
under President Biden, those agencies stretched the law so far
that they got the risk slapped in court. And so
just because President Trump is going to try to make
some of these changes, I just think the philosophy that
has been embedded in these agencies for a long time
is just going to be hard to completely eradicate. I mean,
I think for a lot of these folks it's like, well,
we'll just wait you out now. And I think that's
the risk here is that President Trump won a convincing
campaign and election, but he's got, in my mind a
two year window. Well, and if he loses the House
in two years, then all of a sudden, a lot
of the things that he wants to get accomplished Carrie
become that much more difficult.
Speaker 2: So two interesting points here. The court overruled the Chevron doctrine,
which that courts have to defer to agencies when they
pass new regulations and rules, and there's a presumption that
they're proper and correct, and basically that gives him the
right to dismantle virtually eighty percent of the administrative state
because Congress creates these agencies. But then they never really
never go away. Yeah, they passed, they passed the law
that creates the agency. Say eyes, you're on your own,
have fun right now. And normally the administration would have
to justify rolling back the rules, so they put it
out for public comment. Now they've got the basis to
get rid of eighty percent of these regulations in many
of these places because they were all based on regulatory creep,
the Chevron doctrine, and that that's gone, and man like,
of course, like the media doesn't report these is the
important stories the way they should.
Speaker 1: The other they're going to report that the Chevron reversal
was a huge loss for the American people.
Speaker 2: You know, So, like people think that countryes diminishing, we're weakening,
And I do think there's an argument to be made.
But I've printed out a chart here. Do you know
what the USA share of global GDP was in the
twenty eleven it's.
Speaker 1: A good I'm gonna guess twenty it was about twenty
one percent. Okay, do you know what it was in
twenty twenty four? Twenty seven percent.
Speaker 2: Oh, you're close, better than me, close to twenty six percent.
So the US's share of global GDP, and granted that
isn't the best market, right, but it's the only one
we really have, has gone up almost twenty five percent
in thirteen years years, right. Yeah, So what does that
tell you?
Speaker 1: Well, it tells us that the United States has the
capacity to innovate way more than Europe. As much as
we have regulation in the United States, Europe is like
in a class by themselves. And the net result is
many companies are able to come up with a great
idea and then turn it into reality that then creates jobs,
improves productivity, and so that's the energy that needs.
Speaker 4: To be retained.
Speaker 1: And again, that's a great statistic carrier because it tells
us more than one thing. Not only is us doing well,
but we're doing well in part because other countries have
fallen behind. I think the ECB came up about six
months ago, and I think it was Mario Draghi who
was involved with doing this. Project of what do we
need to change to become better? And one of the
issues was we need to be able to roll back regulation,
we need to open up markets and so forth.
Speaker 4: In other words, we.
Speaker 1: Need to follow the example of the US. So those
are our tremendous strings. The problem that I think is
very important is the amount of debt that we're running
every single year. So last year the deficit was six
point four percent of GDP and for a lot of people,
what does that actually mean. But to put it in perspective,
Carrie is you probably know the only time the deficit
has been above six percent of GDP was during World
War two, War two, Yeah, the financial crisis of two
thousand and eight and the pandemic. So you know, we
had a really bad recession in nineteen eighty two, seventy three,
seventy four long recessions. Guess what, we didn't even get close. Yes,
So that shows how extraordinary the amount of government spending
has been. And so the Treasury Secretary nominee the Cent
has said, well, we're going to cut that from six
to four down to three. That's one of our goals.
It's the right goal. It's important to get to accomplished.
But if you take away a trillion dollars worth of
spending that represents three percent of GDP, the economy is
going to slow as that is done. Now they're hoping
that by cutting regulation, improving incentives for investment and so forth,
that they can offset some of that. It's just that
I think the timing aspect is a little mismatched in
the sense that as they cut the deficit, the improvement
from regulation and so forth will take longer to completely manifest.
And the other issue is the economy has been growing
about two and a half percent or so if we
indeed slow, whether it's later this year next year, it's
going to be more difficult to get the deficit down.
So my point is the goal of cutting the deficit
is the right goal, except the economic repercussions are going
to be a political liability because you know what will
happen is if the economy starts to slow and starts
growing under two percent, we'll be fed NonStop by Democrats
in the media. Well, when President Biden was around that
GDP was two and a half percent, he handed all,
if there's wonderful economy, and that kind of stuff does
weigh on how.
Speaker 4: People perceive.
Speaker 2: The reality.
Speaker 1: So it's a you know, I hope he's more successful
than most people think he will be. I just think
the challenges are really significant.
Speaker 2: Well, if we pick up Canada, that should be a
big boots to the economy, right and there Greenland. I
think there's more to Greenland that they were really talking about.
There's something there that's way more important than rare earth
metals and you know whatever. I think there's something strategic
there and it is strategic for sure. You know.
Speaker 1: Now again the media is going to make fun of
them and all the rest of that for these ideas,
of course, but you know, we'll see, hopefully you can
pull some of that stuff off. But for a lot
of people who voted for President Trump, for them, it
all matters is is my rent, what's happening to my rent,
what's happening to my energy costs? What's happening when I
go to the grocery store and those That's where the
rubber meets the road carrier, and that's where I think.
I hope they focus on that. I'm sure they will,
But that's the key I think in terms of what
happens in two years with the midterm elections, and if
you need a longer runway to accomplish some of the
things that I think they're trying to accomplish so that
they last a generation, not just this little blip. And
I think so many companies have gone through the union
yang of democratic white House Republican white house philosophies go
back and forth, and they're trying to bridge that volatility
in terms of how they run their companies. So I
think they've learned is I'm not going to lean too
heavily one way or the other because in four years
this all can change, and you know, that's the reality
that they've been forced to live by over the last
ten fifteen years.
Speaker 2: I will buy it all, right, So, yeah, what's the
stock market going to do here, Jim, this is what
you got spot on. And what's inflation going to be?
Speaker 1: Yeah, well, I'll talk about inflation because right now, obviously
people are expecting inflation to go up be difficult to
come down because of the tariffs and so forth. The
thing about the tariffs is it is a negotiating tool
to get bring people to the table and hopefully come
to some kind of a compromise. So I don't think
the tariff inflation aspect is going to be as bad
as people are thinking. Number two, inflation is going to
come down in the next four months. As you remember,
in the first part of twenty twenty four, the first
four months of inflation were really bad numbers. In fact,
if you add up those four four months for the
CPI and the Personal Consumption Expenditure Index the PCE, it
was one hundred and forty basis points. So the way
they do the calculation on these things carry is they
take away what happened twelve months ago and they add
in what number comes now. So what we know is
these inflation metrics are going to have a takeaway values
of one hundred and forty basis points. So if each
of these average month to month inflation of point two five,
well that means you're taking away one forty and you're
adding one hundred, which means almost all these metrics. I
think by the time we get the last report in
May for April inflation, we're going to see them decline
by at least four tenths of a percent, and so
I think that's one of the Again the counterpoint too,
where perceptions are today, I don't think the inflation problem
is going to be.
Speaker 4: As big as people are worried about.
Speaker 1: In terms of the equity market, the problem is valuations
are incredibly stretched. Forty percent of the S and P's
value is just top the top ten stocks, and so
they've been pulling the market up. And I think at
some point in time in Nvidia and these other companies
that are at the forefront of artificial intelligence, the growth
rates are going to start to slow and those companies
are going to be vulnerable to fairly significant corrections. So
my take has been the last month that we're going
to see probably something close to a ten percent correction
come into play. And then it comes down to is
if the S and P takes out forty nine point fifty,
then we're probably in a new bear mark it So
I think based on valuations expectations, the advanced declin line
has been lagging historically that has been a really good
tell prior to significant correction and or bear market. So
I'm pretty cautious in the near term, Curry, because I
think the market has the you know, there's more downside
risk than upside potential at this point in time.
Speaker 2: Okay, all right, understand what you're saying so one thing, like,
I guess a lot of it depends upon sentiment, right,
so you basically think that the bullish sentiment's kind of
going to peter out, then huh yeah.
Speaker 1: I mean, in other words, it's just gotten excessive. And typically, again,
I think the table set for a retrenchment in that.
All right, when President Trump takes office, he's got to
get his cabinet through. There's going to be some bumps
along the way. The trade negotiations are not going to
go smoothly. I mean, think about it. If you're a
politician of another country and now you're sitting down at
the negotiating table with Trump, you need to have something
that you can take back to your people to say, hey.
Speaker 4: I didn't roll over for Trump. I got us this.
And I just think that's the reality.
Speaker 2: Now.
Speaker 1: Trump, I think is very good at understanding that, and
I go, okay, you give me this. I'm happy to
give you that. But it just takes time for all
that to take place. So again, I think expectations are
so high that that's a problem. The other thing that
I think could be very significant is the dollar. You know,
people are of the mind that Trump's pro growth policies
are going to be bullish for the dollar. And to me,
there are again a number of reasons why I take
the opposite side of that.
Speaker 4: One is, Trump is not in favor of a.
Speaker 1: Strong dollar, right if you look at when for right, well,
I would go against that. I mean Robert Rumin in
Clinton's administration was very sincere and consistent a strong dollar
is in the best interests of the United States, all right,
So there have been times when you know that has
been supported. But my point is President Trump wants to
strengthen the US. Well, if you have thirty percent of
the revenue of SMP companies comes from international sales, well,
a stronger dollar makes our prices less competitive with other
competitors around the world.
Speaker 4: So a weaker dollar helps that.
Speaker 1: And so I think somewhere in the not through distant future,
those sentiments are going to get expressed. You know, in
theory is strong dollar sounds good, but in.
Speaker 4: Reality not so good.
Speaker 1: The other thing from a chart analysis, and this I
go into the January macro time looking at the long
term picture of the dollar index. I think it's on
the cusp of a decline that will take it below
ninety five. So the dollars trading up around one oh
eight up to one oh nine. I think we're going
to see a decline of about fifteen points. And the reason,
in part is when the dollar hit its high in
October of twenty two at one fourteen and change, it
then quickly dropped fifteen points to ninety nine and change.
And so to me, I just think that the synergy
between a big decline followed by choppiness that we've seen
over the last two years, and then another leg down.
I think the fundamental story ties with what the technical
picture is. So as long as the dollar doesn't close
over let's say one ten, I think that's the outlook
for the dollar, and you know, I think that has
implications for obviously other markets. Historically, in the last handful
of years, there's been a strong correlation between treasure yields
and the dollars. So as yields went up, the dollar strengthened.
When the dollar has pulled back, yields came down. So
I think right now the consensus is we're going to
see yields keep going. I think there's a decent shot
that treasure yields are in the process of topping out
right now. And if I'm right about the economy three
six months from now showing more signs of slowing inflation
remaining more under control than people expect, I think you
can see a rally in treasury yields where they will
drop below where they were in December of last year.
In terms of tot which is the long bond ETF
it's got down below eighty five today. I think we're
near trading low and I think ultimately it's going to
rally close to one oh five. So there's a trading
opportunity I think developing there. And in goal last but
mount least, I think it's in a bull market. In October,
I turned kind of cautious negative in the sense of sentiment,
was very very bullish. Positioning reflected that sentiment, and I said,
I think we're going to see a decent sized pullback,
and I believe gold will trade below twenty five forty one,
which is the last low that it hit of any
significance in the last four to six weeks, and could
trade down as low as twenty four hundred once this
correction is over. No matter where it ends, gold I
believe will go to a new all time high. So
it's just a question of looking for an entry point after.
I think we see more weakness from the low and gold,
and I think it was in nineteen twenty twenty two.
Speaker 4: One up two down.
Speaker 1: Wave two lasted about four months, and then the high
at twenty seven eighty nine would be Wave three, and
way four and two have often a similarity in terms
of time. So my guess carry is that this correction
can last into mid February, maybe into mid March timely.
Speaker 2: So it's a correction, not a bear market.
Speaker 4: Absolutely. Yeah. I think again, if I'm right about the.
Speaker 1: Dollar working its way lower over the next twelve months
or so to ninety five, that would be a big
tail when I think for gold.
Speaker 2: Yeah, yeah, I could see that. And yeah, I tend
to agree that you're you're thinking right on this.
Speaker 1: So all right, hopefully two great minds burning in a
small circle.
Speaker 2: Yeah, wells baller the better, right, Yeah?
Speaker 4: Right, So we looked like a dot.
Speaker 2: Yeah no, no, I gotcha, I got you. So all right,
Well just at a macrotides dot com to Jim get
a free copy. Tell us your email address again.
Speaker 4: Jim, Jim Welsh macro at gmail.
Speaker 2: Okay, Jim Welsh macro at gmail dot com, and if
you got any questions comments for Jen myself, shoot me
an email kl at carrielots dot com. You find a
link to macrotides dot com in the show notes to
this interview on Financial Survival Network dot com. We just
ask while you're there, you please sign up for your
free email newsletters. It goes out roughly weekly. I've been
pretty faithful on it for years now, and like I said,
it's free. Sign up for it, join over sixty five
thousand other FSN community members who receive it, and amazingly enough,
over forty percent of you out there, nearly forty percent.
I think it was like thirty eight point nine. The
last one I sent out actually opened it and read
some of it, so it's good to know that reading
is not yet dead. Jim, A pleasure being a healthy
new year to you and yours. We'll talk to you
again real soon.
Speaker 4: Thanks Terry and enjoying our conversation.
Speaker 3: 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