Speaker 1: So right now, the market I think is still of
the mind that we don't have to worry about a recession.
I mean, the risks are up a little bit, but
you know, things are all going to work out, deals
are going to be made, and everything's going to be
co pro setic. I'm just not in that camp. I
just think it's time to be a little bit more
skeptical of let's buy every dip and it's going to
be you know, Nirvana.
Speaker 2: You are listening to Carrie Let's's Financial Survival Network where
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Speaker 3: And welcome you are listening to and watching the Financial
Survival Network.
Speaker 1: I'm your os Kerrie Letz.
Speaker 3: Well, if you're surprised about what happened, what's happened to
the market over the past couple of months, you shouldn't be,
because you'd been watching this show. You would have heard
Jim Welsh sounding the clarion call that trouble was ahead.
For the market, and you would have at least been prepared.
Probably wouldn't have done anything like I didn't, but nonetheless
at least you would have known. So Jim like, what
was the real tip off here back earlier in the
year that made you realize that the markets were headed lower?
Speaker 1: Well, there was a combination of things. First was the perception.
And it's always great to join you, Carrie, and you're
going to be posting a piece on your website that
kind of covers some of the stuff that we're going
to talk about in greater details. I just wanted to
put that out there at the beginning. But at the
beginning of the years, you remember, everyone was pretty bold
up that President Trump was going to come in and
make a good economy even better, and most people thought
that in regards to tariffs, he was using the tariffs
as a negotiation ploy and that he would quickly roll
back as soon as he got some concessions. And Treasury
Secretary Bessen gave a speech in early February, and after
reading his comments, Carrie I came to the conclusion they
weren't going to be backing down. They were serious about
what they were going to do with the tariffs, the
trade negotiations, and that meant that the market wasn't prepared
for that event. And then technically what I had been
writing in January and February was as the SMP was
making new hides, the advanced Decline line was making a
lower peak. In fact, that peaked in November twenty ninth,
and historically Carrie actually going all the way back to
nineteen twenty eight. Divergence is between new highs and a
major average like the SMP or the Dow, whereas the
AD line making a lower high, that pretty much warned
of corrections. Now, if the reason to sell is minor,
then the correction is usually five to ten percent, but
the reason is somewhat more significant, and terrors fell into
that category. Declines of ten to twenty percent or even
bear markets showed up if indeed the economy ultimately went
into a recession. So though all those are all the reasons,
plus sentiment was really high and bullish in terms of
allocation to equities, and you know, when you add all
that off, it was the perfect cocktail, if you will,
for the market to be disappointed and then be vulnerable
to selling pressure, which is what we obviously saw especially
during the month of April.
Speaker 3: All right, so we had the selling pressure, we had
a pullback, wasn't it was dramatic, but it really wasn't
that severe in terms of pullbacks, was it.
Speaker 1: Well, twenty percent is pretty meaningful, and in terms of
the time impression, you know, that makes it even more meaningful.
At the same time the SMP then you know, off
that wall, I was expecting a rally and a couple
of weeks ago targeted fifty seven hundred to fifty seven
fifty for this rally, So you know the impact carry
when you have a sharp decline that is then reversed
relatively quickly. You know, the damage psychologically is obviously lessened.
But i've you and I have talked about this. The
bifurcation in the US economy is pretty extreme in the
sense the bottom fifty percent of people have been under
the gun from higher prices, higher cost of living, wages
not keeping up. And that's the part why President Trump
was elected. A lot of people who had never voted
for a Republican decided to do so because they remembered
back in twenty eighteen the economy was in better shape.
They were in better shape. The top ten percent now
account for fifty percent of consumer spending, so that has
been buttressed by the stock market doing well. Housing prices
gained fifty percent over the last four or five years.
So when we see acid prices start to falter, I
think that again is a warning that those at the
top who have been really carrying the spending load will
at some point in time start to become more cautious
and pull back. So, you know, I believe that we're
in a bear market and that the odds are we're
going to see the S and P go back down
to the loads that we saw on April seventh at
forty eight thirty five. And you know, I just think
that the repercussion from the terrafor the FED not doing anything,
the economy's going to slow. We're going to see unemployments
start to pick up. And you know, when you add
all that up together, it's the stock market priced for
all that. I don't think so.
Speaker 3: So you don't think the tariff war is ending quickly,
I don't think so.
Speaker 1: Again, Normally it takes eighteen months to come up with
a trade negotiated deal because they're an enormous amount of detail.
So what that suggests is what's going to happen in
the next few weeks is the administration will announce agreements
and principle well which we've agreed to a trade deal,
but now we're going to work out the details. And
as we all know, in any legal document which a
trade deal certainly qualifies, the devil is always in the details.
So I just think that, you know what that means
is down the road, there's hiccups that are going to happen.
So I just don't think that unless the tariffs. Right
now we're at a ten percent flat with obviously very
high tariffs against China, right ten percent tariff is up
from two percent. So if we even with the trade deals,
if we stay at ten percent, that is a significant
increase and the net result then I've written about this
a lot over the last year. You know, in nineteen
thirty Smooth Holly was passed and world trade dropped by
sixty five percent because everybody else, you know, started to
do the same thing. And we actually have seen carry
over the last five years more and more trade barriers
regulations being raised, not by just the US but globally.
So the ground is set, unfortunately to almost repeat some
of the experience of the nineteen thirties. Did you know
tariff's calls the Great Depression? Know, but they made the
global economy weaker than it otherwise would have been. And
I think they made that weakness be deeper and last longer.
So I'm not a big fan of terras. The longer
they persist, I think that is problematic for the economy. Yeah.
Speaker 3: Well, you know, I'm a free trader myself, but when China,
you know, basically weaponizes free trade, yep, then you got
to do something that maybe isn't for the short term
good of the country or the world, but it has
to stop. And you know, I've been reading about this
for decades already. They just ignore the wto, they ignore
all the rules. So it's got to be done. And
it's a big excrement sandwich. But we all got to
think a bite.
Speaker 1: I've ever heard that expression? Yeah, well, I agree with you.
To me, it all comes down to the manner in
which it's being done, you know, basically starting with a
punch to the jaw as opposed to you got thirty
days to come to the table and come up with
an agreement in principle to work out our trade difficence
and if you don't, this is what we're going to do.
So I agree entirely that since joining the World Trade
Organization since two thousand and one, and we urged that
Bill Clinton was very much in favor, both Democrats and
Republicans voted for that to take place. But China has
obviously capitalized on that and to the detriment and not
just US, but other training partners around the world.
Speaker 3: Everyone nobody is happy with him, and especially after COVID,
now that we have pretty good evidence that it came
from a lab league there, even though the United States
self funded, which is a story for another's dillionary.
Speaker 1: But you know, enough is.
Speaker 3: Enough already, Yeah, and you know it had to end,
and yeah, maybe there is a better way to do it.
But the difference is that you know, Trump knows g
and he worked on this before. And we're not even
mentioning the fentanyl, which for China is revenge for the
opium wars, you know.
Speaker 1: Yeah, yeah, well no, again, all this is warranted. It
just comes down to the manner which they're doing it.
At the same time, I think President Trump and his
administration to understand the clock is ticking. The midterm elections
are what eighteen twenty months away or something, you know,
not that far off, So they need to accomplish an
awful lot very very quickly, so that whatever fallout and
damage does happen, there's still a window of time where
the economy can recover and show improvement going into the
midterm elections.
Speaker 3: I totlly agree with you, Well, what about DOGE Now
that initially has a deflationary effect because all this money,
all the grifters aren't getting paid now, right, so they're
in a recession. And then the federal employees, who you know,
basically I always say a federal worker government worker is
a bit of an oxy moron. But you know, there's
a lot of them that are hitting the bricks, and
you know, in the long run that is the best thing,
because they're total parasites and unproductive and destructive, going against
the country's best interest.
Speaker 1: Right, yeah again. A year ago, in April last year,
the General Accountability Office, which was started in nineteen twenty
one nonpartisan entity, came out with report carry and said
somewhere between two hundred and thirty billion, hundred and five
hundred and twenty billion of waste and fraud is happening
every single year. President Biden did not do anything. And
the fact that Elon Musk Indulge are going after a
problem that was identified by a non partisan entity, to me,
should tell anyone who's objective everything we need to know.
There is a lot of waste in fraud. And so
I commend that because when you start saying, okay, oh,
maybe they only found one hundred and fifty billion, I
suspect it's going to war. But you multiplied that about
ten years. Yeah, so far you know, one and a
half trillion dollars. So it's very meaningful, and it does
to send a message to government workers and maybe to
politicians who supported some of this stuff and continue to
support some of.
Speaker 3: The both sides of the aisle.
Speaker 1: Are police trouble here, right, no question, no question. So
I you know, I support what Musk is doing. And
you know, sometimes the louder people squeal at something tells
you something about those people.
Speaker 3: Pigs always squeal, Jim, you know, when they're being led
off the slaughter. And how could any thinking politician, any
any citizen of the country have any issue with what's
being done there. They're finding, you know, billions and billions
and they haven't even hit their strudge yet. I mean
only get that he's only been there one hundred days,
so that maybe will be his greatest contribution this time
around that he put an end to it and said
no mos right.
Speaker 1: Right right, And you know what I mean. Last time
we've spoken before that you know, Besson has said the
goal is to get the deficit from over six percent
of GDP, which it was last year and the year before.
Has never happened in the history of our country where
you had a six percent plus on deficit during a
time when the economy's gone to and a half percent
and peace and peace piece at least. Yeah, not so.
But when you go from three six percent to three,
that's shaving a trillion dollars worth of government spending. So
as you said at the very beginning, was well, when
you cut back on spending, it does have deflationary effects
because the economy is going to grow more slowly when
you eliminate that kind of spending. So you know, again,
I think the economy is going to slow more than
maybe people expect. The other issue regarding everything that's going
on is uncertainty. So there was a survey of CEOs
over the last few months and in January carry sixty percent.
We're expecting to increase investment capital spending, We're expected to
add more hires and bring more people on work. In
March or part of the April survey, those were cut
in half. Like now it's thirty percent. So you have
a lot of people sitting on their hands, which again
isn't great for economic growth. And potentially, you know, if
everything gets resolved quickly, then some of that will come
on board. But those are all the reasons why again
I think the economy is going to slow. And the
one thing I want to touch on real quick. You know,
the employment report came out and everybody, well, look at
that one hundred and seventy seven thousand jobs rush. It
was a decent number, Okay, they actually there was I
think a reduction of seven thousand government workers. So as
opposed the last twenty months or so, were they all go,
I don't know, they're walking the brick somewhere. But my
point is underneath the surface, if you look at the
weekly claims report, the length of time that people are
on employment has continued to increase. So what does that
tell us is that companies aren't laying people off, but
they have in fact, as that CEO service yes all right,
and also continuing claims is up over one point nine million,
So it's just validating. What we're seeing is that slowly
but surely the labor market is weakening, and if the
economy slows, the next shooter drop will be companies laying
off workers. Unfortunately, the unemployment rate is a lagging in
the care and the FED is kind of like stuck. Well,
we're going to probably see higher prices at least for
some period of time from the tariffs, but we're waiting
on the unemployment rate to tick up, which I think
it will, and they said in the March Summary of
Economic Projections that they think the unemployment rate will get
up to four to four by the end of this year.
In April was four to two. So the point I've
been making is, yes, the FED is going to be
paying attention to inflation, they're going to pay more attention
to the unemployment rate, and if it gets above four
to four, then I think the FED will feel much
more comfortable in moving to cut rates because it'll be
clear that it's warranted. And not because President Trump criticized Paul,
but that economic data has shown them that Yep, it's
time to cut. So I think that's what's coming. It's
just a question of how soon is it going to arrive.
Speaker 3: Well, my guess is when you're dealing with Jerome Powell,
he's always late to the party, right.
Speaker 1: Well, that historically has been not just Powell, but almost
every FED president because they do wait for the unemployment
rate to tick higher and again by the time companies
are laying workers off, because that's the other reason, you know,
already too late. It's already too late. I mean, employers
will resist laying people off, the cut hours to do
all kinds of stuff because they don't want to let
an experienced workers leave and go especially So yeah, so
by the time it's like, I don't know the choice,
I got to let some people go. The economy obviously
already is weakening, their sales are dropping. They have to
do it. So, by its nature, monetary policy is conducted
by looking through the rear view mirror of our car.
And by the time the cars over the cliff, the
Feds say, oh my god, we're over the cliff. We
better cut rights. So they're always late.
Speaker 3: They're like Jimmy James Dean in Rebel without a Cause
right where they're having that little game.
Speaker 1: Is to see who's caress.
Speaker 3: Yeah, who can jump out of the car foot first?
Speaker 1: Yeah, well the last guy to go win. Yeah, unforsutly
that guy was the last guy, excepted it.
Speaker 3: Might be oriental, he wins.
Speaker 1: I think as it. Yeah, it's a great scene. It's
really great scene.
Speaker 3: So that's like something the Federal Reserve. Well, we always
date ourselves, you know that.
Speaker 1: People have to look at the screen.
Speaker 3: Experience is always about dating yourself. Yes, it's not our
first rodeo here, Jim, right.
Speaker 1: No, it isn't. And we have the bumps and bruises
to prove it.
Speaker 3: Yeah yeah, and the uh and the higher insurance premiums
as well.
Speaker 1: So I yes, yeah, so all right.
Speaker 3: So but the market, the market's going to take a hit,
but then it's going to it's a leading indicator. It's
going to see that uh, you know, it's going to
look ahead eighteen months.
Speaker 1: Right. Well, here's the thing. People always say the market's
a discounting mechanism, that it's looking ahead, and yes, it
does do that, but the reality is it often at
important junctures gets it wrong. I mean we just saw
one in January. People were looking ahead. Trump is going
to make the economy better. Oh yeah, tariffs are going
to make the dollar go up. And what happened. The
dollar dropped ten percent in a very quick period of time.
The SMB dropped by twenty percent. So for me, carry
the idea that markets somehow have more greater or greater
vision in knowledge than we do, I think it's a joke,
because that's why contrary opinion, my view is a much
more powerful thing. So when everyone was bullisht a dollar
in January, I'm looking at charts and just common sense saying, no,
I think the dollar is ready to drop below one hundred.
It was that one ten. Oh the market, Oh yeah,
everybody's bulled up on the market. I think Trump is
serious about the tariffs. They're not not expecting that that
gives them more reason to sell. So right now, the
market I think is still of the mind that we
don't have to worry about a recession. I mean, the
risks are up a little bit, but you know, things
are all going to work out. Deals are going to
be made, and everything's going to be copro setic. I'm
just not in that camp. I just think it's time
to be a little bit more skeptical of let's buy
every dip and it's going to be you know, Nirvana.
Speaker 3: Yeah, well, you know the miracle is central planning.
Speaker 1: Right, yeah, miracle with a small M.
Speaker 3: Yeah. Yeah, because we've been down this road before, we knew,
we totally knew.
Speaker 1: Yep. Yeah. And so one thing you touch on and
again you're going to be posting as peasy to sent you.
But one of the talking about the last two three
weeks is positioning in the Dollar index has gotten very extreme.
In other words, it's just dropped ten percent and people
are going short the dollar long other currencies, anticipation that
is going to keep going, and the level of bearish
positioning Carrie is more extreme now than it was in
October of twenty twenty three, and any other intermediate bottom
over the last year or so that the dollar has made. Plus,
the chart pattern as I described in that piece suggests
that after the dollar peaked at one fourteen seventy in
October of twenty twenty two, it went through a big
sideways type of correction down to one ten or one
hundred part meeting ninety nine up to one oh seven
down to ninety nine up to one ten. I think
it's completed this correction from that high in October of
twenty twenty two. There may be one more dip below
the low recently of ninety seven to ninety two, but
beyond that, I think the dollar is going to surprise
people carry in rap more.
Speaker 3: I agree with you one hundred percent. Uh, you know,
I'm just expecting it because it's right now hitting resistance.
That one hundred is yeah, massive resistance.
Speaker 1: Yeah, it was support so it makes sense that it's
overhead resistance. And so again the chart pens suggests it
could have one more drop because the RSI got extraordinarily
over sold when it dropped to that ninety seven ninety
two was down to like twenty one, So it wouldn't
you know, that's another reason why you get a bounce
to relieve how oversold it is, then go down, take
a make a lower low, and then register a higher
r side level, which then provides you know, a momentum
non confirmation, which in this case is supportive of the bottom.
Speaker 3: Yeah, short short covering rally.
Speaker 1: And that's how it all readys starts. You know, when
you have a lot of people betting against something and
they're short. The initial rally is maybe it's not going
to go down as much as we thought one hund percent?
Speaker 3: Right always, ohways the case?
Speaker 1: All right? Yeah? Yeah. Link.
Speaker 3: The link is in the show notes this interview on
Financial Survival Network and in the show notes on the
podcast everything else on YouTube. It'll be hooked into my dropbox.
Just tell tell everyone out there, Jim, how you how
you subscribe and what the deal is?
Speaker 1: Okay, okay? One of that's comment. If I'm right about
the dollar of you two or write about the dollar,
I don't think that's a positive for gold. So I
think gold has a pullback at least to thirty one hundred.
I think it possibly could get down towards twenty six hundred.
So that's you know again, remember in September October of
twenty two, gold bottom that sixteen hundred as the dollar
was topping. So remember it's yan yang I think is important.
All right, macrotides dot com. If you would like a
recent publication, Jim Welsh macro at gmail, I'm happy to
send out like the May issue of macro Tides or
one of my recent which I publish every Monday, weekly
technical reviews.
Speaker 3: Yeah, all right, excellent. Hey you got a question for
Jim or myself, shoot me an email kl at Carrie
LUTs dot com. We answer everything. Jim, appreciate you coming on,
been a while, and we'll talk to you again real soon.
Speaker 1: You got it, Thanks, Carrie, stay well.
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,